First Commonwealth's Q2 2025: Unpacking Contradictions in Deposit Growth, M&A Strategy, and Loan Expectations

Deposit growth strategy, M&A strategy and size, loan growth strategy and expectations, expenses and noninterest income trends, and deposit growth and strategy are the key contradictions discussed in First Commonwealth Financial Corporation's latest 2025Q2 earnings call.



Financial Performance and Margin Expansion:
- First Commonwealth Financial Corporation reported core earnings per share of $0.38, surpassing consensus estimates by $0.03 and improving from the $0.32 reported in Q1 2025.
- The bank's net interest margin expanded significantly from 3.62% in Q1 to 3.83% in Q2, driven by improved loan yields and lower deposit costs.

Loan and Deposit Growth:
- The bank experienced strong loan growth of 8.1% annualized, with notable contributions from Equipment Finance, small business, commercial, indirect, and branch lending.
- Total deposits grew by 9% year-to-date, reaching $10.1 billion, with the Community Pennsylvania region accounting for 37% of the deposit funding.

Credit Metrics and Provisions:
- The second quarter provision expense was $12.6 million, with $3.8 million attributed to a day 1 CECL provision for CenterBank.
- The increase in nonperforming loans, which rose by $40.1 million from the prior quarter, was primarily due to the floorplan credit and the acquisition of CenterBank.

Fee Income and Noninterest Revenue:
- Fee income increased by $2.1 million over the previous quarter to $24.7 million, with strong contributions from mortgage, SBA, interchange, wealth management, and other service charges.
- This growth reflects ongoing efforts to deepen customer relationships and expand noninterest income streams.