Earnings call transcript Q4 2022

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Operator

Good morning. My name is Devin, and I will be your conference operator today. At this time, I would like to welcome everyone to the First Commonwealth Financial Corporation Q4 2022 Earnings Release Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. instructions] [Operator

your Relations, Thomas, conference. you for Finance President Mr. Investor and may patience. you Vice Ryan of Thank begin the

Ryan Thomas

Chief you, Brian President First Grebenc, Chief afternoon, Officer. us good on Officer; today’s Credit quarter Devin, Jane you be Participating Karrip, Jim Thank joining Mike Revenue Reske, will for Financial Price, financial everyone. results. and today CEO; Financial Officer; Bank Commonwealth Thank discuss our President call and Corporation’s and fourth to and Chief

As on selecting earnings the by Relations a of can release yesterday’s at page. reminder, a to copy be accessed top link the logging of the and fcbanking.com Investor

today’s also supplemental call. Relations a included on presentation website have financial our will with that Investor during We information slide referenced be

caution on results cause page description of for reflected in I this Please of uncertainties the Before that forward-looking risks statements. statements. forward-looking presentation could materially to call three disclaimer to actual contain we our statements and to those a refer differ begin, listeners from the slide forward-looking will need that

measures will financial financial presentation. prepared alternative of our accordance measures these results also non-GAAP Reconciliation viewed slide can and GAAP. be as of measures. with include the for reported addition Non-GAAP accessed be an in in call not today’s in Today’s to should appendix

I will Mike. that, With turn the to call over

Mike Price

year good quarter. a very and you, Thank productive had We Hey. another Ryan.

to third the $X.XX fourth million. increased was quarter the over well. per million fourth quarter $X.XX share as third $XX.X Our quarter, core income EPS up net In over quarter core of $X.X

mostly than a in $X.X the loan virtually and a quarter. growth, for $X.X trends non-interest on all in net in million $X.X due fronts expense with million fourth credit year to higher provision a million to combined For decline the non-interest $X.X the quarter, despite provisioning increase and income increase a decrease improved expense, million offset in more income interest

core core X.XX%, the ROA ROA was efficiency exactly common ROA company. records return quarter pre-tax was equity was of and was In X.XX%, XX.XX%, XXXX, the both also X.XX% on XX%, fourth pre-provision core core tangible was for

million XX% the Core pre-tax pre-provision approximately it increase million net by higher was now $X.X of of last quarter an and than XX% revenue before is the in from quarter, last was pandemic. up $XX.X

results these to thoughtfully really grow business to few speak the our years. Now last culmination the over

In regional business we have a few. have offerings, a an just like a name couple added auto, enhanced of there, strategies finance, equipment developed we things indirect customer to model,

our teams, key leadership, we really have We increased relevance. talent we commercial have and digital and lending added grown have our

So success a of there. lot

record margin expanding profitability, hikes our asset-sensitive we by our rate and rate the higher earnings As loan reflect lower on balance benefited to loans. it’s expanded growth. strong and Fed The to points X.XX% an basis replace new run-off clear loans responded XX of that rate as sheet margin from

half in About see will rate quarters. we so of hikes ensuing and variable, any rate still December our the of some January is Fed’s loan portfolio benefits

expand We in quarter, or basis XX give X points our margin first the interest take, to points. net expect another basis

the and to XX.X% growing third evenly contributed by loan growth The increase income million commercial annualized. quarter. growth in annualized as up in loan fairly XX.X% X% quarter, loans between Our the an growing categories $X.X and to spread $XX.X or strong split was compared million loans by with commercial fourth to by consumer consumer

will with which lead leverage. operating approximately up in interest ended equipment we year positive with balances XX% in net margin finance should our to to strong to at income XXXX, loan million, together growth the $XX produce net expanding be around speed, growth Equipment expect finance getting that

this announce of XX, for and the morning. shareholder are approval transaction in pleased we Centric acquisition to approval on XXXX, we After November Centric regulatory August announcing the Bank received received that

a close is January the As XXst. place scheduled legal on to take result,

is a Centric oriented in markets. good franchise commercially

commercial increase saves of to and and more exceed deposit product the like targeted meet earnings lending or branch We we per cost push expect XXXX their chassis, through consumer We gathering $X.XX share. and accretion achieve requisite that activity. will their the believe

With XXXX another back for books, performance we First of year in strong history look Commonwealth. the can on

mentioned, a and billion the I As we with the terrific Pennsylvania partner can $XX Centric in we Central threshold. market over found enter which leap

PPP grew income, but our income $XX.X income that million. that reduction ex-PPP, $XX.X million spread XXXX, $XX.X million includes over spread grew which by We by a of means in

in due measures Equipment increased to our improved, Finance leverage our were quality SBA offset that but continue mostly inflationary Expenses mortgage achieved build helped up was that activity Asset income gains, fee somewhat pressures to expected operating wage ratio originations and positive slowdown efficiency swap we and the and and with as down momentum. SBA fell.

has low recent that I just occurred Lastly, well and majority has would growth loan add the long source stable of the as cost been our while Pennsylvania of now market our is growing Ohio, funding. in

turn And that, will our with it to Jim over Reske, CFO. I

Jim Reske

quarter points costs remained to XX from in up last financial the points, fourth deposit cost the Since basis the and dive Mike fees, Mike. quarter. results, overview as X trends, high total a provided deposits Thanks, expected, of a but expenses has did The rise then basis on touch little will quarter’s Deposit I low deeper level quarter. credit. already of fourth into in only our

We calculate through through our the at beta cumulative only fourth the X.X%. quarter cycle

beta a quarter the in by expectations through was our in disclosed our zero third We those was last line near have expectations. beta quarter previously betas which XX%, and of informed the of year, with end fourth XX% incremental of fact,

our XX% just historical to the revising cumulative to more long-term be consistent cycle beta through the end estimate are, with by of however, beta. our XXXX, We

fourth a to stay positive The in us through quarter assets below by total year-end. picture in the conscious for our strategy $XX bit clouded billion was

that. were mark $XX December our the While assets deposits manage, push a concern and was manage influx billion are on we of easy to us that successfully to inadvertently might XXst over sudden able

as will So mid-XXXX our planned. be Durbin impact

through quarter to continue the to introduce quarter impact pull ended, balances. we just in a did deposit strategies and have as tangible that progressed several real have deposit Midway started the

of last Fee income feel $X.X fee under We $X.X down pressure million in some remain macroeconomic X% about in the SBA -- housing market, XXXX over due to to income. under expect quarter, businesses, was Nevertheless, income drop and still by XXXX, due a be will variables values remain our almost up income asset but we pressure to like by in good about premiums. inclusive fee Centric. XXXX entirely swap million fee

we quarter $X.X in in that by quarter, identified from Non-interest due $XXX,XXX expenses to previously disclosed present had fourth and quarter. last that expense part about the weren’t improved of million third

While expect items the to announced be first hit Centric the quarter we save still noisy will cost one-time XX% figure. of previously the acquisition, to with XXXX due associated

Now operating in we between the material. amortization expense more intangible we because likely the post past, will acquisition. But out difference total parsed non-interest carefully have wasn’t figures break expense, not in our and out comments that these

probably X% disclose which add XXXX, our For to close quarter last $XXX.X expense however, expect then will to and by without intangible include from expense total standalone full it with will intangible million, will we to non-interest in and was our have year up operating amortization. include the course, of that results. we X%. will we Centric, the up XXXX, figure to XXXX, X% In another new XXXX calculate be get amortization expense, That operating by at will first acquisition, Centric the total from and

year. provision half provision Provision charge-offs, deterioration, fact credit reflected million expense is At All expense XX the are quality last credit was changes in improved, lower basis loan metrics for remain quarter, last and remaining lower the strong. in for net up also quarter, which or million lower because $X.X but roughly came was points, the to million plus not net than economic fourth in due $X of measures than in quarter The our forecast. about in charge-offs any asset growth. about charge-offs $X.X full

a basis from end to to points and does loans to non-performing last XX balances down to points and have Non-performing are points basis good to very dollar non-performing, total XX non-accrual, are of all XX%. and XX it criticized Compared starting we loans come, recession we a are it down looming, yet position. down points If loans, from credit total to of from assets the of feel XX basis loans the if are year, XX% classified is

strong different note, common by comprehensive tangible book share a reduction grew equity ratio but per $X.X our basis million in reflecting capacity, points On tangible other also XX earnings and our $X.XX due value accumulated to income. $X.XX mostly our by to X.XX% a improved to

Finally, was our XX.XX%. tax effective rate

you with that, may have. we any take questions will And

Operator

Instructions] Tamayo [Operator with Daniel Raymond next Our comes question James. from

Daniel Tamayo

the guidance further the for first, Thanks guys. just the quarter on margin. appreciate Maybe and my expansion. Good questions. afternoon, I first taking the for

that’s that Just include with coming the accretion a deal? clarification, does accounting purchase

Mike Price

does, great can question, based on time it. It the A at our deal and the again it include clarify we for announced. so was thanks does that asking assumptions that

-- all those was it those different So a rate -- environment.

change. will that So

question downward will That So rise on The thing produce just could thought why minus give points. X pressure. costs your be -- we a plus I as we pressure costs. is that’s broad estimate or a guidance bit. you will that NIM will tell some that downward that deposit some within Deposit basis

we different provide disclosed are that ago. we to answer you going we might read and number a marks a or some minute the rate where to to that you for have it’s would but upside give it you, likely closing the we yet in all But at don’t environment that we

Daniel Tamayo

guide sense just marks? in Do first quarter would Okay. a a you be what core have or the for excluding the margin those

Mike Price

calculated further once as we now points it to the about side. we guide and on the or have Well, go. provide XX and will have so the we X it will the revise best just is guidance deal either final minus are plus close basis we and X.XX, are X.XX, be now we market That’s you give giving and we can X.XX up, guidance

Daniel Tamayo

the No. That’s cumulative that. you rest we deposit your about to great. with assumption think I the of beta then of year up XX%. revised appreciate as kind back And

playing other course rest think hikes rate assuming you the maybe quarter, year? do of over margin the throughout the moving no out how we As of year envision after the first about the that, the

Mike Price

Go ahead, Jim.

Jim Reske

Yeah.

up. we rates is we peaking see from and disclosed and before, this then -- disclosed catch is peak margin What still it, see -- at coming had see margin before a second in we the deposit the eventually we in have of we this down quarter do which we So year way probably but there.

to start Now that rates on down is X.X%, are only rate weighted of forecast EBIT forecast, not on based and are we kind is forecast, Moody’s And based upside downside. baseline and an now much some average the a than second far the peak our rate which the and our half. of come rate in of the higher

in the But growing the might informs estimate with that cause stay and key the higher go peak. be industry to costs higher am you. I inevitably, that going everyone delayed. else So the rates giving keep If peak eventually the deposit are that catch-up in that

Mike Price

Yeah.

that the of can was we charts XX% our Jim’s we Jim feel not if Dan, $XX Let billion gathering I the really plus trip business. in where before me really the deposits like to non-interest-bearing commercial our to play have prior comment, add quarter. can. we seen over gin was we you afford That that some we could -- like fourth we deposit did of just years machine mentioned a pie and in are

our strategic focus. And goals be so of incentives. and be that’s going really and will a It focus to point

specials our XX% not that a a recession, to fund getting of good tests pressure the loan week-to-week. feeling those same. might the we we funding little XXXX have just a we We or accomplish bump off at a mild and can and monitor are can point -- what if a We that’s where growth and running be about because

Jim Reske

Right.

Daniel Tamayo

That’s great. on to the finally, just, margin stay And here. Okay.

Mike Price

Yeah.

Daniel Tamayo

the assuming beta, you have I a that sense you could in the do contract quarter? you margin point deposit how think peak -- your from be, cumulative Do how the much basis are might first compression much of XX% mean, potentially XX

Jim Reske

what the year know on is the so the peak see still active But peak we in Well, the where the we in the first continue X%, in over -- we quarter, will so it the based back then to ending expansion. is second now, quarter. is not giving second on continuing see we one, expand

am than I higher little we are now. a So

Probably, year, the of marks think that hasn’t final I and because Centric are we calculate go And over costs to as how to the far I course. this out, of marks course course, this manage affect of deposit the going could we number, the that, on and change.

the as as number So now, have see see above end to of we go right by But it will we the update X% staying that we this ahead. we year.

Daniel Tamayo

to Terrific. know especially with All at very That’s helpful. a appreciate I it. number right. it’s marks. get tough I the

I questions. appreciate So answering the you

Mike Price

Yeah. Thank Dan. you,

Operator

comes Our Schiraldi with Piper question Frank next from Sandler.

Frank Schiraldi

guys. Hey,

Mike Price

afternoon. Good

Frank Schiraldi

XX% on XXXX thinking the efficiency the at ratio Centric. positive base and the and about cost for right the Just the operating quarter leverage in in

place that I So about given that you understand sub-XX% you be you a kind bank the think as you Just of efficiencies? of mid-XXXX? where efficiency an you term from think maybe impact medium-term in the on imply think can a more terms ratio, you obviously offset that is from Durbin or bank operate your think, can operate will in longer thoughts wondering the you

Mike Price

years. which we two And with we bank. because midterm, would term I plan one to or comfortable to are think me think used year grow XXs the I apply low you the

seen engines to kind put those a together revenue going are and of diversified us up. lot have ramp to we methodically of You continue

will would have we we the and And to So we in make course, Pennsylvania like territory the of the have two new -- -- Central bank the we last and we in investments. way that the years grow in have continue of MSA. Philadelphia outskirts to

so And the out to the want I bank. doing see sub-XX we right don’t of away think side build bank revenue the us grow and and I

Frank Schiraldi

as an maybe continues to the drop you the time. the we environment said in of of some Fed -- hikes get rate next could NIM a to that feel here I were like go am I more at, to likely trying to is you Okay. to X% But end and the -- And ask figure. area Jim, could then because, above is of out level the rate then you NIM hesitant that to it what think Do picture about search think be talk you Fed, couple little NIM a year. bank rate see you that’s hesitant about if the more am there? a that X% guess you I a plateaus static static more and is lot above a interest for more out in if normalized normalized it’s the where level? a could operate Are thinking that XXXX, you

Jim Reske

getting using gets XXXX, my you stressed to an to actually when -- but realize of the cloudy old we we My this. the are that question. using tough a rate It’s Yeah. it use for have joke, are because crystal kind forecast -- ball start we we consistently out with we scenario talking about,

Our on XX% that model downside, using overstated. that they upside baseline, do our with CECL we way, as forecast laid be might rate XX% the the it, approach under that

can aggressively the while you generally tell for is it, is if and happens The what happens little we us I a So rates to stress rates what better. it’s say, answer And try for NIM more rates it’s if -- well, wrong, better. a up that longer. here raises Fed stay and the

is longer, margin better the higher but and pattern the is much same. stays pretty for So the it

then You down. get comes it and to a peak

I Now end in that what now. would tell pretty that, know up you world, based I we

downward up rates for and up but costs You two in or play have if margin that, continue go eventually it going are deposits years -- XXXX, that to above sell year to there I it have keep ends to if three years would going be deposit rates out, deposit if and because don’t X%, up. What a it, and would actually stay that guess the drift to my goes X%. downward well

Frank Schiraldi

it. Got

consumer as be I of as loan continues of strong then to of just And terms -- was as been in lastly, partial driver growth. surprised has the as a it that the Okay. kind a driver

the with are going Sorry into in missed in that XXXX? a but are just you to forward if it I things, expecting see pickup macro a slowdown remarks, you given your commercial or side environment slow starting of down of a more prepared on

Mike Price

if in XX%. mortgage. -- mean mean, XX% softer we were in I probably XX% I at really first HELOAN the X.XX did we in not at are. might focus year, next We on less in or business but but people we we might this HELOC, do be mortgage good under think branches calling and customers, got to pressure, our is small much have and customers. and also on we we deposits business X.XX,

getting very that The managed. business our spreads business. looks indirect has auto team good in job nice the of It’s done well a up and

And so that and be lot the high maybe probably doing less that’s business mortgage be maybe from Xs not will mid and a HELOC out low HELOAN some and help us, the some actually doing branches, will we we of or Xs. to a can but

also customer business checking cross because long-term And but so get like sell. Jane, get we a that for us. anything business, something consumer cornerstone I the and is a you add? that’s account is business that We that, we important the think we would to a households, life

Jane Grebenc

Mike. really, Not

I covered is think the think it. you We healthy. consumer

Frank Schiraldi

the I appreciate Great. Okay. you. color. Thank

Operator

Our Shepard Markets. Karl next from with question Capital RBC comes

Karl Shepard

the and afternoon Good thanks Hey. questions. taking for

Mike Price

bet. You

Karl Shepard

I ask know about I the core but trying in of get you guess sense to trajectory, all am I bank. are the we a momentum to feel margin how kind curious for

your look you finance equipment have in Centric and pretty numbers coming ramping. good I think

the how and priorities? XXXX do you overall bank kind as positioning go So feel of strategic of just of about kind you into the

Mike Price

consumer positioned a Yeah. are lending the really lending through businesses, SBA Even fee bit our feel and believe branches. like I as that just good, mortgage businesses of speed our bump good. longer we in well. feel we in robust mean really we are We term, like business our a hitting

our out platform finance building or really are SBA. equipment We

feel our talent in new We company. lending. good about got have We C&I

us do we have points, basis from get thing X of mean I we every better for those a a XX years, number ROA one march for bank better of the is every has year. year. think I points you a And we get covered been this who and XX-basis-point basis

We in our are leverage budget -- operate of principle every we with part in every of operating bank. the

future see clients company, with We it’s value we like new of a the we our and about to are think are deposits just And funding we core can about much we do funding, just deliver. going but back at how pretty feel proposition We year excited the and that always to our excited we to focus this fun. difference been make turning we it’s well our and have the are we gather. we fun be good can and markets how

for then model we regional at there’s our discrete And feel We Central a Pittsburgh, region. Ohio, like just left Northern, are playbook six starting asking. our the more bank just capital least. couple of in about this to and are future we knit I Southern, and And plays now markets, in our we thanks know, -- company together think don’t Community of excited the the PA

Karl Shepard

color. for are ask, kind me, Thanks the what guidance. wanted a excuse follow-up economy in And of you to too growth loan your as as assuming a, I

but want kind couple view, all over a kind you of and we have to think you what to need what see be? get of next where to of I today quarters different trends see you do do the

Mike Price

of $XX we in million we on -- course, to think our second XX% have of and add. and for I we good the equipment year finance the higher newer in year, then, half Yeah. just growth, downdraft I have might business a goes been commercial everything a right a of some adds is growth And spread that probably little places, X%, mean trick. but higher this some because

or you And so, Jim, anything add would Jane?

Jim Reske

in on requires we a are start the I of pullback -- consumers environment would is. to unemployment or not it’s kind lending those not a predicating were recessionary it that expectations say

are tell and pullback that’s in year. referencing you the the actually in the X% forecast, saying the loan using rate forecast this going in of can over our call, weighted end not be unemployment to that I But average just officially result volumes. I keep in we goes to by

little recessionary are some we bit if goes slow those mix. will of see on then release there what that and that is pressure together, fact, we some expectations will working loan into because pressure our the In volumes kind be from funding down things fine a

Mike Price

would you this world. anything your is Jane, add,

Jane Grebenc

delays challenged, we mortgage The The also residential in only still business is are the longer still issues, of thing add, and in that finance the Mike, SBA be I our supply equipment equipment issues. seeing couple of is businesses to we loans. a and are seeing car is chain supply chain some construction would taking business still delivered seeing

We economy, just it’s the but of see the in COVID still the So some it’s still frictionless. friction. economy completely isn’t not friction recessionary,

Mike Price

point. Great Is helpful? that

Karl Shepard

Yeah. Thanks color. for all the

Operator

question KBW. next with Michael Our Perito comes from

Michael Perito

taking my Good guys. questions. for Hey. afternoon, Thanks

Mike Price

Michael. Hi,

Michael Perito

close, of A pretty One, two lot addressed, of have most is just but bank are M&A peers Centric Mike, been quiet. about them the quick saying your ones. on is to

curious the you where this year? hearing your and are are Just for of start into that thoughts at what heading

Mike Price

We highest wake growth company use the organic up every that’s day and and we our and our think grow capital. we of and how about best

to fundamentally be we and have So that’s we there where year-in year-out. and successful start

And then in be we Centric, with six. Cincinnati, to say, like Jim at great opportunities do XX And they Foundation looked to always things likes have we right. to have with have when

have and a financially. if be to be And us strategically So not for activity. right would seeing we right we were, it it then are have even to for of lot us would

company pretty don’t -- win-win is of picky our itself plan. And if that’s key we our counting but really it not a way so on and I strategic we presents and not positive for anyway, a that great, are are it’s a and in part

Michael Perito

Great. on challenging. Thanks. -- income, the obviously, just then any mortgage the everything non-interest environment and And and investments are within

less upside basis? or line to excited the about on forecast, or you any cautious that have Just curious relative more if about there’s anything might areas are particular your more item

Mike Price

markets. we Jane are there couple because on start in a one SBA a That’s frustrated, key brand. follow little lender just of volume will of and our we on piece, I are SBA let number Jim. our a the part Yeah. really But good we and have

materialized for around fee are our we has bank a volume for and customers into business will, it and and good has like the been but time. feel but that income, doing We long

it So it’s even we kind though very now. on still down tamped of bullish right are

have that nicely volume. pretty business grown We the in

indirect our off I little card and mortgage. is a spoke about to And speak bit indirect auto that or will probably business too one. to not that’s XX% not for money else swiping our spending often, consumers in as you much fee and as outlook in of part vineyard. least what at businesses? terms their the Jane, of but would I auto, cards add obviously, just

Jane Grebenc

couple friend. and Mike, blip. There like none little soft, would we good. the a things we asset of brokerage and business Management against feels are is are a prolonged, like are all business values is I Investment our volatility, priced add, The because feels and that market looks it’s bit that paid the the not Trust volatility it a of -- But of

XXXX completed stopped to haven’t And in early the are just have they Mike’s in the a and I pipeline, and They which progressing. couple progressing slowly. I point loans, have started will. just construction just they loans They close. yet counting are still on, know will But and we of they days

Mike Price

helpful? that Is

Michael Perito

Mike. have. you, I all it. Thank Appreciate Yeah. That’s

Mike Price

Thank you.

Operator

with question next comes Navas D.A. Davidson. from Our Manuel

Manuel Navas

afternoon. Good Hey.

Mike Price

Good afternoon, Manuel.

Manuel Navas

finance the into will bit talk second. and explain Can about about dive I in loan you equipment the more growth a kind a the and target of mix little group then

Mike Price

it about do say line, on loan we Pittsburgh. more would we running then The our that And two Ohio geographically. in is I there in XX% company and Yeah. do we it by do and the ways. tear, and product geographically has growth several of are a average probably, mix and last years it more been just -- We with

oil bit. our mean year. quite number years about And improved they think or last Pennsylvania I X% Community a have PA grew were in leaking really markets I of a community we X% and or for

is one geographically. really dimension we closely are that at delivering that’s how we look So

to actual And auto kind good we then lines off of you Jim, our is And of and our this indirect to also of the by then are carry day the at again be looking at year really and business, a the kind forefront start. commercial numbers expect

Jim Reske

Yeah.

things just one -- choosing our the single-digit, see upper that. single a will talking about talk We with for built digits to about previous things time saying one business. out speed. long calls. in equipment about But It’s like because We kind business kind out talked I coming us once confidence on getting mid shifted and of that’s that the guidance, going just are that’s a finance while giving that into speed. of really of about really the lot a Just is really there we to on XX% of --

business. of the moderate issues there is pretty about but equipment growth equipment our so Jane finance we XX% expected and to other business As still all together or loan but year then, growth in even that even the loans a only are right mentioned, areas, that not gets XX%. loans affect that and modest, with chunk leases, that’s next But good business, modest now. XX% of And technically, our probably interest should in say combined

Mike Price

we mention and I those commercial this commercial on side, beginning calls And the already backlog forgot in that year are to occur. to business and construction have Yeah. delayered in the the will construction just

Jane, driver. missing nice another are that’s we So anything?

Jane Grebenc

at expected No. I looking so. If every am expectations, every grow business everybody to is think moderately. to don’t -- geography expected I line grow and is modestly

another And and can up somebody be geography business up. or it a down pick little line so the or combination bit means will

good I don’t see any feel I weakness. about I good. the expectations real for feel So growth.

Jim Reske

one point. thought or follow add could I If just Yeah. more

pre-pandemic. up is a runway little where to still gone was more utilization little but it bit, there’s up line Our not It’s a there. still maybe

Mike Price

clear. Too Yeah.

Manuel Navas

helpful. really That’s No.

that kind what currently? kind what the of this end year of yields finance then a Now as getting two expectations by of next equipment alone, the are years are in the grow of you percentage portfolio where kind to that and loans of can

Mike Price

let don’t why Jane, we that you Yeah. one? take

Jane Grebenc

where start would Jim, start I then and will with he up. back Let’s yields, with, Mike, clean

Jim Reske

Yeah.

kind be yields didn’t be. over the like business to X% it trucks nice. So very double-digit kind overall where of equipment that yields. to butter and NIM bank right strong, in that The to on yields and we are really the now as don’t really take and to that bread really build our We like equipment that’s to nice additive want and mostly We But of business and growing things are that really like is risk. a whole. the

probably like next loan your I our loan the growth think was it’s XX% year. terms like In to next of growth of question proportion a of year, XX%

year. going number to a draw this expect big picture are additive. we what We We booking all be to couldn’t of really it’s finance,

say. can we what that’s So

moderate at The growth picture together if so growing Jane, finance stayed historical build can you to other the and whole rates the -- to the that? and build are are equipment businesses picture. top, want they whole put on growing add

Jane Grebenc

Sure.

We heard to see salespeople. loan our XX% bank than it more portion said, a this we And XX% thought it’s be it’s big as I asked are I probably growth the -- and going Jim loan never you ultimately of I year. to And add portfolio. continuing whether ask to of

Manuel Navas

That’s your in the footprint many How you employee on perfect. is helpful. this much division? have How people base That’s added?

Jane Grebenc

and have a the because careful we add have group, Rob been very, It’s time, now. we in out primarily dozen Boyer, employees a we, been very been very few salespeople about small. collection have The of probably, and right leader has of at adding onboarding. the And a people group careful. couple We

Manuel Navas

helpful. really guys. you, That’s Okay. Thank

Mike Price

Thank you.

Operator

Montgomery Cardenas next with comes Scott. Our Daniel Janney question from

Daniel Cardenas

you? afternoon, How are Good guys.

Mike Price

Good.

Daniel Cardenas

duration that size? of the equipment portfolio and the quick average what’s Just finance, loan a follow-up the on

Mike Price

but our from Average the just was up a little XX business, because a projection to the of down or correct the on earliest way really months unlike that. It One business from prepays. one market is XX think, of months of the about might Duration -- is I that. features Jane $XXX,XXX. come bit it was bit it little could moving, loan size that me you was, auto

So the duration of stated is very to similar the kind life.

Jane Grebenc

Yeah.

about years. Just five

Daniel Cardenas

Okay.

you safe So there? that up going growth now, assume you foresee that size the then to is do stay that projecting of or average you to kind help right get to will are get you within in to of kind it

Jane Grebenc

we like the we a like plans yields We any have don’t space to the the We immediate increase collateral. the and like size. lot because

probably will are, we we the least where future. about So for foreseeable stay at

Daniel Cardenas

into of your Okay. finance? rate And kind the equipment are loss for model building you what

Jane Grebenc

Jim, to that? do want you take me

Jim Reske

Yeah.

it please. If at have you your fingertips,

Jane Grebenc

assumed points. XX We initially do. basis I

to nothing. you As imagine, it’s next can

So far zero. losses have actual the been

Daniel Cardenas

in as All borrowings, right. go-forward quarter jump. over should we pretty Can basis? give saw a Congrats jumping a you on then maybe some us we color that. borrowings about on just to maybe substantial think how And this to

Mike Price

we have make and large to our we goal loan given fund like tap borrowings, we we have a long-term that, are have growth. that But we able been any sure quarter, growth we amount Well, in to want when saying, very so into deposit liquidity. that is don’t our of

So funding our book loan a problem. is not

want have quarter, dynamic the didn’t so flexible. of influx an just the of that fourth are assets deposits, there. inflexibility We In to because we had deposits, of

the pay same gotten $XX if to down overnight December can the last of you a borrowings, very portfolio the avoid mark, very we So we and year to had day and are billion end quickly of quickly. trying loan sell

that because back. them it do if to in can’t with then was funded and can’t their depositors you give money and envelopes back it money stuff deposits, You

us gave end of balance flexibility into sheet going that we this like So really last year. the

I all over raising borrowings. cost we like The are that plenty kinds of net CD our even available. money and said, with of in other of specials specials Now money below market the there’s incremental is

us better is the borrowings the flowing all for in that’s to money and So response in those specials. in really

we it. So how manage we that’s look kind of how at and

Daniel Cardenas

as of in terms And any at me Okay. you in your right Good. now? look portfolio then deposits have guys for do question I brokered deposits, last --

Mike Price

No.

Jim Reske

No.

Mike Price

None.

Daniel Cardenas

That’s have. guys. Great. I Thanks, all Okay.

Mike Price

Dan. you, Thank

Operator

comes [Operator Inc. Instructions] question from Stephens, next Breese with Matthew Our

Matthew Breese

afternoon, Good everybody.

Mike Price

Matt. Hi,

Matthew Breese

discussion. I say I heard accurate? So that growth I loan like think, would loan-to-deposit that -- fund deposit stay to to equally Jim, with ratio you back the can is you that to I go sub-XXX%, implying wanted deposits the

Jim Reske

Yeah. the Look long-term. over

long-term our the that’s Over goal. definitely

Matthew Breese

non-interest-bearing maybe really, that non-interest-bearing time. expect different pre-COVID? XX%, deposit or from And where it that very closer structurally about to in today to am the that elevated curious is should funds different this we leads levels -- to are level was just composition we that what point to my it stay I versus Okay. pre-COVID obviously is at I question is standing Fed which with deposits think XX% next compares

Mike Price

stay will it certainly year. to think this an elevated level I at compared

an at certainly the will level between consumer. stay I think elevated composition it with and business

a base have business more broad customer gather an to I leverage opportunity and think deposits. clearly we

of does deposits and do do core only go and through but lot that manager rewarded are grow. and businesses bring business network. branch And to we that A out that, to not in unusually on small branch our banks the make bank calls in not our they

certainly that? you, your add get this than I need different and little that it’s and you or has a for forte want to been years. to customers fundamentally that’s and five our bank Jane. think you years than rather last your from four mean, the Do I borrow to sisters not just bigger customers drumbeat So

Jane Grebenc

that five only it’s overwhelmingly ago. all than today the commercial The loan I relationships add with and years, and clients in our is, relationship looks portfolio, six portfolio have made side, years clients depository particularly it four The expect we very loan years, direct on thing the world. the direct different is difference whom would we those a did with

Mike Price

Does that Matt? help,

Matthew Breese

Very Got follow-up. as helpful. just it. a Yeah. Maybe

look today more pre-COVID are capturing granularity, but at more as point. Are wallet we As over you versus similar seeing share a book client or you the accounts? reference just

Jane Grebenc

are We better capturing wallet…

Mike Price

No.

are we think capturing… I

Jane Grebenc

I am sorry, Continue, I you. follow Mike. will

Mike Price

go no, no, No, ahead.

Jane Grebenc

say both. would I

share. are We wallet more capturing much

that spent be and We deliver. management have our to money treasury to some product on need we we and infrastructure able know

ask we operating the set so allows for that for have ask a that to when relationship us we got it. And product

Mike Price

business them, personal retail help lines, to on to much business other our more model, the we would wealth lending whether much President closely particularly it’s more a partners also regional lender management, and just the really I are senior mortgage, likely client to it add to wealth opportunities. bring through opportunities and management or out on side, banking other that and consumer talk have

of ago. are we than five we years, better probably a getting the years six were wallet share So

Matthew Breese

detail. loan the blended what I could roll-on sheet, Understood. you flipping provide point? of at Maybe rolling the off side that balance to the other all this appreciate yields are what’s versus

Mike Price

Yeah.

Jim Reske

Yeah. pull out. Give me Give let a that me second, me a second.

Matthew Breese

Yeah.

Jim Reske

Yeah.

off a high rolling XXX as quarter at the XXX. in the what and we for whole, putting was loans were on Xs, So

So XX point was basis differential. a it

Matthew Breese

all Okay. yield pipeline And you in? have the

Jim Reske

me I the in. of like quarter But all month are the am I over could looking the yields have tell that consistently don’t looking just every at quarter. just in we for include pipeline front I historically ended, speaking -- what you in those numbers

yield loan quarter new up, up up, is the end. So every going

Matthew Breese

X% hoping the or at that... pipeline quarter at Understood. a was waiting is I either was -- Yeah. I was number end, there

Jim Reske

yeah, Well, there are. -- are there

for like, bit So like different. a historically example,

So some businesses have longer tails than others.

and example, is it low rate nine a on eight house the term for in So, That’s months books ago. the And for for loan yield. particular, brings low a locked will construction power business or be rate. down a mortgage in a is in who current building to then someone period the really a That gets in rate. the the it’s period, months

XXX. example, $XXX commercial for were variable where fourth of categories, quarter the in high But loans, money one Xs, new million. adjustable in yields our biggest for we originated Those the

going yield loan up brings and that been that’s very So the portfolio really nicely.

you are So talking the about. depends on story what portfolio

Mike Price

$XXX in And the almost of terms our million. fourth volume that throughput, and quarter in category category was largest

Jim Reske

re-priced a and and in existing all Yeah. Half also origination. helping with that’s Fed -- really increases. the the new portfolio originations The that category of rate

for So that’s helpful the really bank. been

Matthew Breese

and like color no classified. are notable on Maybe on credit to I deterioration criticized in give book, us indirect I at to get you of a sense it. heard an more you the just hone duration? we book onset. questions. for bit the which I FICOs just auto, in and really turning Got mean, want indirect a there’s Could the the additional health of update getting maybe auto, of did It that sounds little delinquencies,

Mike Price

Yeah.

before with duration and Jane, last tends brushed and bit call. two up be ticket payment Average us, is or have is the about do it that? $XXX. this a $XX about as you shared FICO, that, over shorter over just the than six-year duration, XX, And so. up average we on year years little half Just contracted we to The to

Jim Reske

get on Yeah. more Over but that. I me XXX, refined let if see can

Mike Price

to there. Good. add the Jane, Jim’s on that’s finding anything report want know Yeah. do while the I FICO. you

Jane Grebenc

Yeah. There’s degradation. really been no

market it for to there waiting because is staying there’s keep very the but been none. You very, healthy, in market. used car the happen, still shortages used And are car

been So far, anymore car few beautifully, values We are it’s are used magical. holding underwrote... customers and leasing so that

Jim Reske

XX...

Jane Grebenc

ahead. Go

Jim Reske

finish. No. Go and ahead. I am sorry, Jane. Go ahead

Jane Grebenc

are haven’t a to going are underwriting say I standards, was paper we to shop. holding just our we and we blinked

don’t any what a than other see buy We capture bit might by skinnier, just -- lower banks. rate little So our bit you little we everything is don’t stretch. a in

Jim Reske

production over is of FICO. XX% our Yeah. XXX

Matthew Breese

of buybacks I one any be AOCI just kind major where stock where impact that? me the hopefully, how would is to us. curious, in you there’s think worst the level management, of is and am of Last any just is for about Okay. around if interested sort and more capital given behind you

Mike Price

Jim?

Jim Reske

Yeah.

obviously, Actually, Anyway, the previously authorization market was Board. million blackout their earnings the through we in a to back few out through we the into could in shareholder had that the market of today authorized with remaining We $X.X under we Centric market. technically acquisition our but authorization. meeting, of -- with the go days from stay out pending. So have while our had in to stay

that’s far is generating are capital using as view though, Generally, we capital capital. that of in primary big of for picture and the purpose it organic the and our generating growth

excess we fund organic that So there’s want that buybacks. loan we to growth. to capital use for our If capital use

I think a of have, that look million authorization today, with opportunity. example, the completes if $X.X we reaction for at we price buying

market. in the be will We

generation continue buying equally least kinds use so the dips. will organic remaining anyway, from to rest of the can’t go market But, fund opportunity capital going large, to at growth. be by those and that days three are the loan to on a authorization we today year’s that buying would that of to they for for use We the and

Matthew Breese

Great. you. all Thank my questions. That’s all had. appreciate taking I I

Mike Price

Thanks, Matt.

Jane Grebenc

average for minute. than The auto the to Hey, portfolio Back for XXX. hate XX% If XXX. FICO but retread, is the rec to that it’s for score, do score average XXX, okay, just the break can want even we Mike. I I is more be to a precise or FICO greater

Mike Price

Matt that. I am heard Thanks, Jane. sure

Matthew Breese

Okay.

Mike Price

other Operator, Hey, questions? any

Operator

question final Davidson. Manuel Our comes with Navas from D.A.

Mike Price

good. Manuel? Pretty

Operator

time. will I Price. further President call are no CEO, now to I back over see this there turn at the and Mike questions

Mike Price

interest you. really say this always story analysts business the and appreciate share covering the questions of the with and our for I we that opportunity to just our

the about passionate are lot. XX next you. care and And shows We with of We results I the it number hope you pretty a course it. over forward being to of days. a Thank the look

Operator

That concludes for attending presentation. today’s you today’s conference. Thank

now disconnect. may You

First Commonwealth Financial (FCF) 25 Jan 232022 Q4 Earnings call transcript