First Commonwealth Financial Q1 2025 Earnings: A Steady Hand Amid Shifting Winds

First Commonwealth Financial Corporation (FCFC) reported first-quarter 2025 earnings that met consensus expectations, with diluted EPS of $0.32, aligning with analyst forecasts. While net income declined year-over-year and sequentially—falling to $32.7 million from $37.5 million in Q1 2024 and $35.8 million in Q4 2024—the results underscored a mix of challenges and opportunities. The company’s focus on strategic growth, deposit management, and capital returns positions it to navigate a volatile economic landscape, but persistent cost pressures and regulatory headwinds remain hurdles.

Financial Performance: A Delicate Balance

The quarter’s headline metrics were shaped by opposing forces: strength in balance sheet growth and weakness in noninterest income and expenses.

Net Interest Income (NII) Expanded Modestly
NII rose to $95.9 million, up $0.4 million sequentially and $3.2 million year-over-year, driven by a 4.4% annualized increase in average loans and a 10-basis-point expansion in the net interest margin (NIM) to 3.62%. The NIM benefited from a 10-basis-point decline in deposit costs (to 1.99%) and the gradual expiration of interest rate swaps, which management expects to boost margins further in 2025.

Noninterest Income Declined Significantly
Noninterest income fell to $22.5 million, a $2.8 million drop from Q4 2024. The decline stemmed from reduced gains on SBA loan sales ($1.0 million) and the absence of one-time items like a $1.4 million gain on a limited partnership and branch facility donation. Seasonal factors, such as fewer days in the quarter, also contributed. Management noted that fee income should stabilize in subsequent quarters, with Q2 projections of $23–$24 million.

Expenses Rose Faster Than Revenue
Noninterest expenses increased to $71.1 million, a $2.1 million sequential rise, driven by higher salaries ($2.4 million, including incentive payments) and unexpected costs like snow removal. This pushed the core efficiency ratio to 59.08%, up 301 basis points from Q4 2024. The elevated ratio highlights pressure to control costs, especially as the Durbin Amendment’s impact on interchange fees (a $3.5 million annualized drag) persists.

Strengths: Growth and Capital

Despite earnings headwinds, two pillars of First Commonwealth’s strategy—balance sheet growth and capital strength—shone through.

Loan and Deposit Momentum
Loans grew at a 4.4% annualized rate, fueled by a $121.4 million increase in commercial lending. Deposits surged 7.7% annualized, with savings accounts up $214.8 million, improving the loan-to-deposit ratio to 92.6%. This liquidity buffer, combined with a total capital ratio of 14.7% (well above regulatory requirements), provides a solid foundation for future acquisitions and organic expansion.

Strategic Acquisitions Pay Off
The $1.1 billion acquisition of CenterGroup Financial, closing in April 2025, expands First Commonwealth’s footprint in Cincinnati and adds $3.2 billion in deposits and $2.4 billion in loans. CEO T. Michael Price emphasized that the deal strengthens the bank’s market share and cross-selling opportunities, with synergies expected to offset integration costs.

Risks and Challenges

While the quarter’s results were in line with expectations, risks loom large.

Cost Discipline Under Scrutiny
The efficiency ratio’s rise to nearly 60% underscores the need for better expense management. With salaries and occupancy costs elevated, management must balance investments in commercial lending teams with cost containment.

Economic Uncertainty
The company noted mixed borrower sentiment due to trade tariffs and inflation. While loan pipelines remain robust, potential credit deterioration in sectors like manufacturing or real estate could strain the $59.4 million in nonperforming loans (NPLs), though the ACL at 1.32% of loans suggests adequate reserves.

Outlook and Valuation

First Commonwealth’s dividend was raised 3.9% to $0.135 per share, yielding ~3.5% at the April 28 closing price of $15.31. Management’s capital priorities—dividends over buybacks—reflect confidence in steady earnings and regulatory compliance.

Conclusion: Steady as She Goes

First Commonwealth’s Q1 2025 results affirm its ability to navigate a challenging environment. While net income dipped, the company’s deposit growth, strong capital position, and strategic acquisitions provide a stable base for future expansion. The NIM’s upward trajectory and loan momentum suggest potential to outperform in coming quarters—if management can rein in expenses and the macroeconomic climate stabilizes.

Investors should note the dividend yield and tangible book value growth (+16.3% annualized to $10.44), but remain cautious about expense trends and the efficiency ratio’s climb. At current valuations, First Commonwealth appears fairly priced for a regional bank with solid fundamentals, but its success hinges on executing cost controls and leveraging its expanded scale post-CenterGroup.

In a sector where margin pressures are widespread, First Commonwealth’s disciplined strategy and regional focus may offer resilience—but only if its cost discipline matches its growth ambitions.