FCF - Earnings call transcript Q2 2024 | First Commonwealth Financial Corporation

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Operator

Hello, and thank you for standing by. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the First Commonwealth Financial Corporation Second Quarter 2024 Earnings Release Conference Call. [Operator Instructions] I would now like to turn the conference over to Ryan Thomas, Vice President of Finance and Investor Relations. Please go ahead.

Ryan Thomas

Thanks, Regina, and good afternoon, everyone. us Financial discuss results. joining Corporation's Commonwealth for Quarter Second you today First to Financial Thank Jane and Participating Price, Chief Lending Jim Officer; Officer. President today's Credit and Bank on call McCuen, CEO; Reske, will Officer; and Chief our Brian Revenue Officer; Chief be Mike Mike Grebenc, Karrip, President Chief Financial

We've As accessed Investor to page. on selecting during the included by Relations of a at also fcbanking.com website of top information that earnings yesterday's presentation Investor copy reminder, will slide logging a release be be the link on referenced can a Relations call. supplemental and today's the our with

Page to the description actual contain we Please those forward-looking results uncertainties refer risks I need this on slide reflected from in that our and Today's cause forward-looking of for presentation statements. caution X Before non-GAAP of that will the a with statements. financial to will an alternative measures. call include could these over to presentation. With materially call begin, disclaimer forward-looking differ listeners appendix as reported prepared results of in will Non-GAAP our found Mike. A call I not today's be accordance reconciliation be in measures viewed addition that, measures of and for turn also the financial the GAAP. in to can to slide should statements

Thomas Michael Price

on of quarter of core XX.XX% Pretax beat core X.XX%, Thank X.XX%, over second you, efficiency XXXX. of Ryan, ratio core core revenue of return by and by net estimates consensus $X.XX a common for equity quarter. numbers per on pre-provision include everyone. $X.XX second last Core return a tangible of a and $X.X of pre-provision welcome, for ROA assets XX.XX%. was share a Headline the quarter earnings pretax million up the

X Other follow. the fourth increase time were to outpaced second quarter. Loan of Importantly, XXXX. flat even for basis the as funding in deposit increase yields trends balances in quarter interest first since in expanded X.XX% the X.X% the loan as average the points costs by margin net the outstandings grew

Total X% just SBA. to under Looking loans growth a a on little closer. finance at centered loans and lesser extent, equipment grew with

with Over to and cuts, few originations the attractive coupled quarters. demand, these the spread. volume chased prices cautious categories we estate and tepid not and been the expense consumer more us loans have rate year consumer home now next loans, become mortgages, of pinched equity, We've investment auto could have with Similarly, last with over the indirect year, moved in real and at the prospect up, we of dropped. have last

starting to are building. see commercial both We are in looks pipelines real and more estate and C&I good

our our we've outpace As Pennsylvania in the growth shared loan in loan Ohio to growth. past, continued

get believe can of to Looking gathering to some area, been are competitors low-cost and loan and rates PA market our our of our growth as well. number confident mid-single-digit and seen an ahead, deposit pricing. be continues broad-based pressure Community We've region we in lower the we be of happens market by origination most we our just PA loan community footprint. capabilities, off largest Deposit XXXX. Conversely, taking increasing exceptional. fourth has deposit our to deposit in performance across quarter well-structured well-priced in into

downdraft is to doing fund that quarter. as of increase call as fees unchanged roughly the Noninterest quarter, over end deposits of competitive to XX.X% was even million quarter. repricing annuity into management or Jim for $XX terms quarter, but in expect saw offer interchange from starting be this $XX.X to in pandemic deposits, down to continue worth loan-to-deposit slightly which the in as relatively impact welcome wealth the noting strong we're deposits our on that interchange The protect increased instruments $X.X in balances bring wealth to to the create due to million as We're rates. The We in as baked investments our continue from growth to fixed want fall. One next -- means so other ratio but likes second expected to total rates $X.X our billion. already be quarter $XX.X appropriately income staff important XX.X% fees have million their outflow shortened loan income. well sought million to strength we we was FTE due appears at noninterest-bearing higher crossing last sales support time because to down management consumers wealth hopeful from nearing we increase and division Noninterest-bearing out controlled on falling dynamic last our are the to Durbin year-end to quarterly at estimates. Expenses income rates them. was we we customers of income at interchange been liquidity allow of remained grew a surge

Our Centric core Provision for Charge-offs of increased quarter-over-quarter. reserves as set $XX.X Roughly increase quarter. the further million XX% however, elevated to were aside flat NPLs to relatively for attributable efficiency improved loans. $X.X we specific loans. nonperforming million ratio was of was loans XX.X%. the the in former expense, Nonperforming

is First region. Of capital into Commonwealth is our course, Centric fully integrated now

saves, NPLs XX% in of pressure accretive been headwinds. credit the approximately items note half credit about fairly set that announced have So And despite due workout the robust a we cost We've would credit our all at diligence. separately. income was to We time. we'll acquisition, the the related has reporting of obvious price that to But current we our mark total such transaction of and for which assets given loans would are soon stop understood accordingly. the of now, during achievement transaction acquired

a more low-yielding a discuss rates. were securities, of a will shares $X.X Reske sale vis-a-vis we used replaced the of of million with million current of $XX the loss at Jim As from million which to market -- gain also in $X.X detail, sale absorb on securities

particularly million will our to Both sub early annual June. net of pretax a an interest in debt margin. In also these accretive $XX tranche We second result be closing, will of income in pickup in redeemed and quarter grow financials to turn the and liquidity to broad-based I'll over deposit to Jim. pretax, growth were continue future. With we support that, efficiency to profitability pre-provision it into ongoing and loan take solid, steps

James Reske

Thanks, before Mike. I'd walk our in We core through that had turn few operating unusual the transactions you to quarter a like results. to I

so redeemed as disclosed level the $XX in had in the phase-out previously million as on capital outstanding. and X, treatment already we bank the another in and XXXX. of issued This was The was First, debt million June that at we subordinated redeemed was X that was its XX-year mentioned, $XX Tier million to $XXX debt of lose just period treatment. Mike about capital a instrument, XX% we

at The for that X million years another X.X%, Tier rate X it was is of capital $XX at XXX% called fixed and other remains on redeemed X.X%. a outstanding XX-year cash we using floating $XX for we about The million treatment of and rate eligible instrument, remains a a hand. so that excess

CETX sub-debt the since capital in it due quarter. down month quarter on the ratio basis with redeem in On have total risk-based XX And equity resulted quarter margin perfect point went as of quarter. limited benefit is combined ratio only generation for but ratio our XX.X% to This its X June strongly this interest would the redemption sub So to basis the in net capital to reduction capital growth. X the in did balance in debt us X.X% the the gave own, X ratio tangible that grew the actually X.X% sheet improved by ratios fact, XX.X%. from common a points to from calling

for by in basis shrunk second going redemption points pay forward, off basis. about it And income contribute an million. sub-debt sheet $X about to part we should quarter. The of used X to should NIM of it contributed the also million net on The and X in the redemption annual $XX NIM add balance interest cash the because month improvement

expended XX% half offer items action, holdings holding we along previously quarter. Visa's X noncore approximately sell to had the Second, which with banks well. our as offsetting Visa of in disclosed shares we We, and

stock million quarter that $XX the on securities offsetting the recognized of at we As the quarter, second a of the approximately a a end underwater very in at result, $X.X million sale in was of $X.X gain loss. million

in the As market their in income net items along other is million offset a earnings, terms repurchasing effect result, selling basis current per should X securities place at effect to their on for NIM net and the point provide at interest same in leading improved each tailwind exactly second $X.XX quarter with of quarter a rates approximately EPS $X.XX. But low-yielding X these noncore and going core the GAAP year. securities forward

NIM finally of went nonaccrual on to Purchase out recognition this of benefited from on interest X improved by expanded results. basis quarter by above, still cost funds of muted operating expense The interest pretax total items accretion earning core points improved. points by the that over also status. point sub-debt $X.X went the points basis by basis fade our NIM to X contributed our last million income and net by up funds impact assets to that about fee redemption. The Now of pre-provision quarters on been expect accounting X.XX%. X quarter, to the X about placed basis XX quarter. X NIM the compression, deferred basis the a noncore of net provision deposits Yields of basis X the revenue quarter After cost per margin NIM points, previously loan X XX improved points. by only was and basis income while by the expanded the this mentioned and Notwithstanding we as up cost but on points into had by

slowdown to quarter dramatic big the the fairly in NIM story past regard deposit year. other that was seen The in we've with the a this "rotation"

quarters. mean industry deposit quarter categories we time of market decline and accounts categories. $XX more Deposit quarter and the $XXX of the has in XXXX growth less of decreasing importantly, the of and first last while pattern expensive in was there's first that term, quarter, however, balances new in $XXX just last cost of of the rotation forward. the to in in by traditionally X quarter each million quarters. In standard XXXX. less While the we now definition the more for in are forecast the That's by fell ended, in than the cost $XXX noninterest-bearing of expensive roughly at rotation of quarter million. earnest and increase expensive million, X of had use That million the declines in million low-cost the incremental X.X% it and quarter increased came balances at for the the first approximately more confidence began in in categories deposits. In our million to categories we actually higher-cost the categories been categories for the $XXX XXXX, us a second shifts, with Perhaps $XXX That, the savings the rather experienced expensive and of the been running funds first second an the example, deposit no to that increased an only X.X%. growth going noteworthy increased and incremental give about on slowdown NIM combined in deposit money

a higher these improvement take, even levels, -- with of even we or slight X cuts. X remainder X dynamics, NIM would basis rate As of or usual, cut the a that the stability bias range, expect to with points of give current but end as XXXX, towards from result

pressure for remainder wrong ends for our of just in as rates a we Over meaningful year start even lift these yields rate the next NIM the hardest rates income. us. least before sensitive, portfolio continue aggregate they notion cuts X longer to than to has while net loan been but importantly, start of NIM a mature. and the increases to cuts, fall. certainly asset in to quarter where will be the in is lower of rate terms with anywhere been a NIM of as part quarter only near term, about are flat steady funding the have quarter pattern rate next year, cuts in funds interest we've falling further growth. XXXX to first term, certainly through environment at to all the through and now rate Most there even the over higher X of should we and and the scenario the medium the clear, reduce are XXXX both turned our XXXX, the at haul, swaps macro we they an same from has their for upwards the which long cut starting are both the But the corner Fed better that net and assuming are get low NII rate to point effect, [ Though modest be In drift to of XXXX, and second this forecast then Slow for forecast the X using start ] Higher predict. When on still for the X interest our quarters, in even aggressive appears over loan XXXX. X%, the income to XXXX scenarios, ended the past. where remainder

$XX the $XXX.X the below quarter about book of previous equity. million repurchased ended $X.X million million XX,XXX per retained capital have of to management, shares by tangible reduction We and earnings in a program. annualized due with XX.X% prices quarter or at in just million common of at current $XX.X combined under value our tangible authorization $XX.XX, in which $X.XX, or share increased buyback to remaining In this quarter from $X.XX terms AOCI, XX%

you we our recent sheet and shares the now on like we'll the balance anyway, combined any may is underleveraged. And that, generation and we the especially behind longer becoming if with becomes have. to repurchase avoid reductions us, take AOCI consistent sub-debt buybacks modest simply in redemption with that we may Given questions in back than capital stock to price, growth, experience earn but run-up continue

Operator

first Instructions] line Daniel [Operator Raymond from the question will James. Tamayo of Our come with

Daniel Tamayo

kind your all how just But up stock things even just so appreciate well? fits normally would you gone on last dry especially relative you back powder the first, do in how the and -- you the curious and I loans the picture the levels to would securities multiples if we willing to interested if expensive but amount detail that, M&A curious, Jim, buybacks in as guys as it's rather I be still to general. you current into do are of influences perhaps the and buy guess, have mentioned if margin the addressed. of one of

James Reske

we organic appetite. perspective comment I'll because want other like But and answer more on technical that from just are our of a changed, then priorities they banks, to a haven't dividend use a lot always may increase Mike a want support we and but banks we capital dividend. like to most prefer to steady smooth just generation in growth. then regular And have the M&A

would to M&A creeping the no And bank appetite itself gets we up have do buy not to that's maintain that to We for ratio we'll X% we to dividends. starts mean the the tangible leverage stock accretive the just but then want. I if back special be XX%, presenting underleveraged. love to then common

even get X.XXx something so to have And back it you're where you want at be. to if to do stock the buying book, you capital

-- typical. I M&A don't Mike, think pretty that It's in priority just much. it's I quarter talk you appetite want know, to if changed about general? really that So hasn't pretty

Thomas Michael Price

we're opportunities mean both and that interested, you know, all financial. strategic are contiguous I obviously, -- of Just as in

execute see path has geography, We clear also low hurdle like into our doesn't to been for have brought markets. that's been deal a there. it a risk. our Everyone And new company. That's another good us they've with expanded look if to

delivering the over backyard and regional last geographies products our years, and in effective aren't X with we're business and model think in gathering X getting more cross-selling I our deposits. at services other or that

So we're extremely interested.

and to in or to deal work second and the really has right to thing be do We and financial won't good where The just year the finished it ceases or next a go sense pushes make third, for is, MX the price. we us it out at X. to other

I so think, think X. are XX apologize. at, you've we've to heard I deals I up now Daniel, that we've that also But from me looked probably before, we've and done

So our most. batting than is average lower

to us. do for there's seems I than for hopefully, hope So been have we're And going think they're several there's years. that's helpful. opportunities. It more chatter I like right

Daniel Tamayo

helpful. color, That's that Mike. I all appreciate

Thomas Michael Price

to done smaller we we to to in there's it and the mean thing that able we I think less tend tend we've I deals. category, make smaller risk, where happen seamlessly. is add would Only grow be

Daniel Tamayo

Yes. the unrelated kind loan a follow-up, And No, side just of growth. on understood. on maybe then organic

to to by as how Or You that talked could growth then started about in balancing as banks about for SBA about some And the curious C&I about building areas? some pipelines build-out think just in back mid-single-digit how that? thinking fourth CRE you're and you finance quarter other the and equipment those talked Maybe in the we continued talk up quarter and see in equipment the appetite just about concerns you're risk/reward talk growth you happens? credit improving. finance, your

Thomas Michael Price

lighter think be. we've year been has thought would equipment it than we volume our -- I finance, with this

I think we've grown million. just about $XX

able finance, had Jim with it's equipment does XX good we're at nice our budgeted -- it's think rate to we the us less for trucking, amount, appetite where really and approval on stretching to a demand because we slowed up P&L which hoped I risk we And points. not don't applications for for returns, budgeted of We've but signed for because to lower rates after We that there's equipment. X business the construction at the on basis perhaps had saw more. we're annualized so for we charge-offs XX profitable. about but years not has be for submitted had apologize looking keep a CapEx, we've growth kind and that. I'm at margin, our just our that been

risk the time but just are to that probably do on well, our haven't now. And team We within all going price. it have and run. that grow the our a It's compromise consumer so categories right that the done risk appetite We pushed pleased envelope. commercial volume not a and So run Jane with we're like not will -- and not of staying be quicker side. actually for didn't just where with business. the little we're well It's haven't we side, just we it and on consumer there'll

the finance. And like that's up teed I we're other hope helpful just with I side. way on businesses, So the equipment the consumer

lot even to not rates or the and -- the bit, quarter within of over cost more X%, yield to could if our in a from attractive average pricing pretty direct particularly maintained discipline, cost, or quickly think but become auto, drop I moved those businesses a almost a us up X, as X X%. we've we've from

the just So nice and the the deals lot a after and drop on just done under to our more hit side, on volume. we that. job people team kind there, could point has back haven't we estate, We of commercial and get commercial opportunities. everything, just that's just I real done And we're think and again, X.X Jane's Republic good seeing pause and leadership. And good and come First a

depository, maybe a model. value that's I from great family-owned the company X have the good years. regional feel got Mike the we're cross-selling, and portfolio. there. We're we've better XX company over leadership, get the of better XX in where wealth We already a the gets a being probably McCuen's management good much, and how stuff C&I and lot much business, in concentration good Pennsylvania. just about just just a stable and we I terms really pretty go percentile. But think all I under that all or that's In talent, in and bought through pipelines Midwest pushing of good developers that our our think to about next XX, And through to that pretty

Operator

from line with Karl comes question next Shepard of Our the RBC.

Karl Shepard

XQ? end more you're to to quick. like an the want in that follow annualized the year-over-year up real digit loan us growth wanted you about that getting do confident It back mid-single to sounds a I of Or kind on Is of Mike, pace year. by for pace? think like

Thomas Michael Price

Set It's low. bar the just annualized.

Karl Shepard

up too. I follow wanted loan bit to little on Okay. growth And then a more,

demand? if consumer impact of from your expectation alluded loan accelerating it the cut. that growth mentioned better rate improves? your and consumer funding ability Or price Is is position to your here You

Thomas Michael Price

could it. We counting consumer the range maybe consumer end the that is there higher way idle. I just leading And it's just of iron maybe thinking we do kind we're people good be then and in about think solid almost think I'm just those do businesses but it. our of hard it us I the underwriting, have without a on strike And really gets job. been and of hot mortgage, won't to kind the to on

for about worse, better we're so or it. that's And thinking how

Karl Shepard

a about deposit switching confidence about And guys. deposits. We a you you growth in I talk priority Okay. been for growth deposits? know aligning over cost. just talked loan Can to lot and then deposit growing And has your

Thomas Michael Price

Sure Jane, why you're... up don't you pick that? on

Jane Grebenc

Glad to. Sure. Sure.

deposits. So confident to that to trickier deposits. low-cost can turn we're we're always we grow starting that And the a It's little grow corner.

started focused raising not And one full credit are as demanding is CD that on rates. those to that of extensions reasons we our in-market are We bit. are categories the on our we really we the the credit. are tamp of loan little are on -- as We've back relationship a we

always just us I are nice for we'll fight everybody for think be deposits low-cost So going to fine. But a else. and do

Thomas Michael Price

area mean pretty I in look just just that's it's of this lowest growth And I highest mean regionally, would and we to market it's comments. our just mean is all emphasis I XX%. category, And for an year-over-year. X%, add our almost I I'm Jane not of -- come at good market. Jane's looking just We and over at every product from is years. by

Operator

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

Manuel Navas

the right how getting quickly but we're pricing shift close we it's deposit With they think cuts? above how do where costs, book could rate now the And you like to marginal -- of lower peak kind in deposit are still getting you're costs?

Thomas Michael Price

And it Jim. over great a question. That's to I'll turn

James Reske

in see like boat would analogy. used used -- I've throat doesn't thing industry alone, the but to keep I have seem the [indiscernible]. [ the And Really hoping in thing and was that on are the on I you hope wildfire loan the we you I forward. the loans same projections motor book. catch for that you Manuel, done ] and book -- other cut deposits, so deposit

So I yet. features wouldn't call them

side deposit rate see of the upward. side, the on the think to focused increase that is This the will point. rate we're increase to beat the it rate increase is of but the I I very think of high deposit on the encouraged not on going reverse. not asset don't be side

Manuel Navas

appreciate -- an what Just that. -- And are I are recovery. where What are yield I at? rate know the some was loan new of loans nice coming was but the interest on improvement it

of -- kind forward? to loans what's Just new that at? expected proceed is what how going are coming And

James Reske

little Yes. aggregate, color. a a bit was I'll on quarter for and give X% the new X.XX loans the originations. in actually a coming you new little of over The total

of originations, originations. for came one-off That million of But was they million as loan net. that originations, well, just I $XXX So out there's variable. About for so at over mean, $XXX new just X.XX%. either

a rate new the them originations production loans of go in last they to fixed too quarter. rate they variable to XX% variable So was customers are a as would in as stay environment, choices [indiscernible] go much But X.XX%. customers foot want fixed are like of and stuff the is the choosing the we falling make choosing the and They're and long variable to or choosing.

was almost running the rate variable rate was about which off. X.XX% So variable as exactly just on this I same gave the new at quarter. The the rate that,

they fixed yields basis same loans, is was new and a nice replacement X.XX% what the XXX runoff out of variable are. coming than the points more So new but

That's a of fix lower on the are through will off. got you That's rates new upward runs boat. cut. an go the that drift and that at part even us cause fixed that before in us gives motor rates portfolio, cuts rate the if cut, rate of even that number story fix with comes to even confidence That the

Manuel Navas

half next are What a using the the and couple roughly? of cuts, discussion basis that rate December in swap year? XX like Like scenario first how points? of September, Is you in many

James Reske

I'm mentioned glad you it.

our baseline, So scenario, X.XX, of PowerPoint that's Relations baseline put and that's baseline forecast, standard weight on is and if [ unchanged it's NIM have XX weight bottom XX% scenario points call we then the our Moody's points And X you where on flat, XX on upside we XX% a XX% a basis scenario basis put that -- the on improvement. weight increased supplements downside. of We've also XX, we end been still Investor XX services that our the basis under that have for unchanged rate ] right scenario our website cumulatively by doing rates the But But NIM. that a later, consistently model for by unchanged. on CECL of is for in forecasting CECL. points that's corner. and with that's Page cumulative the scenario. Then the to just a that we go shows get something we on -- One of an scenarios. that's NIM That's XXXX in page benefit portion on we

Manuel Navas

that that appreciate and I such. if commentary. getting I understand to into my I forecast just wanted

Operator

of from Our line the KBW. next Kelly comes question Motta with

Kelly Motta

answered get and migration you acquisition, the mentioned accordingly. and color that did when I related asked Centric to the expected you that hoping an was know been at have had portfolio. on bit but might to of I mark some this credit a more put you Most hiccups point, appropriate on there.

you your from you is other likely to ink expect a of Just to migration from come at performing the sort line high would time could the we Or deal? that what any there's this relative And the portfolio wondering that? that if quarter provide how is saw down that expectations of level, that? you if bulk

Thomas Michael Price

-- of XXX short put in minute. XXX think ] about point. a But ] I'll question. thanks Credit it's for [ and was Chief we at in that Brian mark, turn Mike, this which $XX the is million. million a This And I over Karrip, Officer [ the $X like we're or

a bit have little pretty heavy of handed. was still we room. So It

the We we And and just X,XXX directed of every Brian, most sheet capital million. pick as the and that Brian it, intensive. that that's probably half of also and a it's I'll up you group hours it our half challenged. it's adjusted notes see we the and expensive here and of XX-plus the price. many It's And team, month. downgrades. And categories pretty NPLs, last review, so that that region didn't line And credit we do now, in well. are the finished right over we there. about with just think let about about We from very $X -- And performed

Brian Karrip

for Thank your Yes. you question, Kelly.

credits we from special Bank. we'll and credit comfortable and But the of we're the next substandard largely our over to return believe are XX% several at our Centric problems of XX% were strong mention bank, quarters. to acquired our that that originated metrics identified that historically our So we've related loans

committed we're towards So that we're and working it. to

Kelly Motta

really That's then expenses. it. question on helpful. And is me for next Got

pretty the had in loan and You strong part a to growth pick expected latter is of year. quarter up the

your the be expenses ahead you the as about this of making up, should as look wondering, Just into year? internally trajectory latter you're investments over pick for how as part loans we outlook the the of well thinking with franchise to wondering

James Reske

on that well we're us quarter and looked to consensus NIE third how going obviously, yours second like We is to $XX need looked half. at about actually about I Kelly, important for they that the in $XX per to dialed I disclosure, the a expense looks along particular million around feel quarter estimates, pick and the right. for didn't And it's there. but our about -- consensus in how didn't and million Yes. But the seems at -- quite fourth much in. forward the it's corrective a doing culture really us When consensus Jim. consensus right. this I year, estimates but has look give at

So we're okay that. with

Operator

Our with of line next Stephens. from comes Matthew the question Breese

Matthew Breese

Is NIM. great hoping was it stage, parse floating just the if a X.XX% to you right? of really yielding detail right, just gave some in Maybe your the wanted book, the it fixed that is bit it in sounds I is I -- to have like X.XX%. Jim, book, low set on the out rate kind I more. to rate and Xs, little

James Reske

quarter, the ago new the book. -- giving for the I were was not whole just minute that Well, in numbers originations a

Matthew Breese

off. bps you Right. X.XX% for But rate said is new better than stuff, running which the XXX what's fixed

So was I runoff X.XX%? assume the around

James Reske

runoff the Yes, Yes. is.

that's and yield actual So in is the somewhere. portfolio there -- between

Matthew Breese

is on kind off rolls Fixed every stuff. the How that what much And book? duration of rate Okay. quarter?

James Reske

on I the the rate duration, the stuff. actual rate don't fixed The duration have fixed Yes. stuff

I for think you. get X.XX that do is give entire to and the color that have. I little you variable. of duration I'll I but that a both The have portfolio fixed includes loan years

a portfolio half That break But rate a a different and about So recall the at investor variable that portfolio. deck, XX% variable. half is X.XX%. points slides rate out that cuts of that pie say swaps. a that risk loan total weighted about of say really to with XX%. portion reprices with try average understanding -- right XX% the that of fix only to that, -- about of And portfolio. That's have management probably now away build the to our really we the try are we We diversified portfolio. And been from part get is right is of the we chart, you has macro may X X% fixed in perspective, people

So that's a piece downwards. that we'll reprice

commercial only gives months. the that This So roll when that cut, our is average portfolio are the weighted originated swaps to paid a be Even your still yielding These -- X are come those repricing rates to not reprice The that's it's impression total next like lower XX% hence slice slice, portfolio. of and is low another to time half after to only get XX% But was mortgage that's those could about not it they about variable, downward into but date, say XX% off, XX% year because half true. though as Then about it's or of portfolio, term a price are repricing. until ] macro The but loans really macro or can repricing of is portfolio. rate the X.XX%. portion that's And on variable of fully that there's time. off it's of a to that's the [ when the portfolio XX rate X was X.XX%. is about a half just and they a the swaps they the today, the weighted originated overall be something arm don't date years. this that of especially a X years repricing places rate that. That at over little date immediately. those reprice full environment for upward, that X.XX%, loans loans goes average portfolio those than [indiscernible], years are little or they reprice if They price a the XX forecasting we

doesn't I and have on So fixed directly, answer the to back I that, hopefully, get on that question you gives to little portfolios. you variable your color that a but the know duration

Matthew Breese

the I margins feel build the it point reprice And some helps. you pain start at the cuts. a because it much room to made helps back so book to takes beginning, lot still it of the is higher. has which where that think No, That's

was at when at the that Is the baseline Or XX XXXX? of through year? I end through that this curious NIM the so proven And bps. you NIM, is your end remark made of

James Reske

goes rate on It depends -- the it scenario.

if rate baseline we just of moderate forecast. that kind run seems scenario have is Moody's So there that using rate a scenario

of the in now be right has X baseline cuts by cuts thing end is even total So X to the the by this going the though And Moody's of X. year, XXXX. Moody's overall end baseline has

Moody's rate NIM scenario, of this up. by the end rate So And baseline X.XX in in funds gets -- that the the XXXX. that is about gives the Fed goes

this this the of with it's then because don't Our NIM to goes the end I but and I year prepared are in the you of next XX it cumulative up of really then cumulative the gave like NIM, can next range by another wrong. in effect often strongly the how macro but end off another and And goes year basis again, this, effect. points at you end with say up know then burn forecast, year. -- it -- this the goes of my of a the remarks, goes the that be off swaps. High up year comment coming forecast macro They have swaps

So period, baseline always think that's you is but [indiscernible] than differently -- right? forecast would future today's what the wrong forecast all every it's Moody's show. The

Matthew Breese

Okay.

of So X.XX the a X.XX range? NIM ending kind to XXXX and

James Reske

forecast. That's that right. Under

Matthew Breese

extent at? help? putting rolling does new was you securities is, much And Like, question to on? how my off What what where is And other that in securities it securities repricing? are

James Reske

are off off in rolling are the they're ones are that Xs, Once the mid-X. low the coming

a loss $XXX Mae buy yield securities We're think, million, million that in did. mid-Xs. The purchased vanilla. because $XX that the we plain to actually risk -- of on we they very Ginnie X% So We $XXX the have million, a more bought we're rate quarter, seeing trying all includes I weight. including this the

But low, is don't they're that We in security rate. the our but an to aggressive portfolio. the have X.X% want of think forecast out kind We coming build portfolio [indiscernible]. light, of just securities

Matthew Breese

if I'm I on the was missed book? sorry duration it, what the securities

James Reske

million went to got $X X-year X.X, no, I tick one just backwards. spend tick total slightly by longer that Duration oh, buy securities duration. in durations. everything usually just the were X -- But is the was that last by we quarter X- X.X bought we I is, think, because went X.X new down It the to X.X. It from because

Matthew Breese

cities starting a Okay. roll at? same Are questions for to off when CD lower off you set I'm rolling sorry I book, to that? and what on be do see and of your what's the have long-winded see you rolling but versus roll-on are your

James Reske

answering I if I'm I'm was [indiscernible]. I questions. curious, if Yes. missed but sure was I sorry

Matthew Breese

had no, about the securities. No, I asked

Now I'm asking about the CD.

James Reske

offering -- Okay. CDs competitive specials. so we're still market The rate

-- back first fourth in bit such were little in we really because second the a the XX banks. quarter, we've CDs competitively, peer that in with quarter had competitive a In in fact, pricing quarter a we like successful growth. the percentile very We dialed

now. staying we've we're bit. done very So is shortened competitive What a the right little term here

months, months. of instead X So we're doing X

CDs what fall. we're reprice trying chance a to chance give do so -- And to those ourselves a to is rates us if

the think now rate months, have and I X.X% pressure So it's is for right quite been X we successful.

been that dynamic the that understand of come special have part short-term been should X, stuff a up, is we've of have other XX-month The but you CD now. this doing since maturing they're specials rates lot

we're We're an CDs seeing that those come retention about so XX% mature. And on rate due. seeing the

the down the it's current that our the CD of rack want not a But customer really been strong some X current rates come in but times lower I those rate We're low rack But And are will rate and it's that rack a rate". basis lot I nominal say will retention want of in rate, if and that they But rate. people don't in "Yes, be of a than say, most rate. come the has points. mean, book. -- in a migrate

a little of you. color help hope to I So gives that bit

Matthew Breese

Very helpful.

income mortgage in particularly stronger Just quarter. comments last one of some on banking income, particular? fee was bit in on fee this a overall mortgage and levels Maybe just

Thomas Michael Price

on Jane any thoughts done a good mortgage? has job. Jane,

also So some year. more making we're this money

Jane Grebenc

to And sell opportunity production. we [Technical for virtually talk it to all Thanks about Difficulty]. the of the

everything bit. really for everything So XX% booking, between we're and the originating, that's a really ] of that the Difficulty]. selling we're helping XX% balance [ And [Technical we probably that's sheet we're are preserving and and

Thomas Michael Price

of we've most you got but it's selling most a side Jane, But We're run. using that. the bit, originations of fee income it. we well of lost the

James Reske

went And quarter-over-quarter. I originations up add that actually, mortgage

think the went rate environment the Jane XX% quarter. saying first we actually And sold, was before lost, So we as amount originations, up. in that there XX% we might quarter, despite the was they the second in

of annuities and like So sales [indiscernible] going wealth good this really plan. Really quarter. doing position. to was strong fixed just income you're our well because according fee

able a to lock fixed good are fee source to So long-term rates us. customers who want income fixed a do in for in that's annuity and that really of

Thomas Michael Price

the keeping yield. sheet And down that year, I'll higher balance we're bit, just a like about add business. one bit income although a is $XX little we a our more, with SBA million on fee as this is more more little

premiums are Our production high is year-over-year, the weighted in sale gain will up on and Xs. be average

So good -- and as we team there well. a have

hopefully, So income. our can to grow and to continue a that be tailwind fee

Matthew Breese

Okay.

run million million, safe from Durbin $XX million $XX here? say have quarter? it it's to Is $XX rate we a So next less

James Reske

Yes.

on they I at looked $X.X because, think like the million the in It impact fee that's we're had for Durbin talking I really sec baked our again, estimates quarter. right, income. hang consensus a a about looked

$XX.X Yes. consensus X for right. So million is right. next that The that's and about million $XX.X sounds about the quarters,

Operator

the And come question next of Frank line from with [Operator will Sandler. Schiraldi Piper your Instructions]

Frank Schiraldi

to the few a given where remaining sub had Just you need or I replace capital levels, that with additional debt redeemed, like debt. no sounds retired it -- you that

coming or that have Just this refied would case that's the market? curious be either might may else in retired what you that up and be if repricing

James Reske

lot to appreciate at year actually in especially we the perspective it replace needed enough instrument spent at Yes. -- that over pleased that a thanks well just that capital replace capital. starting No, a all. why so generation options with strong from dollar to was generation, looking we ratio capital that ago because what much, a have available capital to market bankers the is replacement and time That's of we case didn't over and I Frank, we're very look perspective a in

really I for what of. saw but possible open closed. think a still And debt we expensive the than window to starting of been message the but sub got have what was ago, just then ratio would couple we more was quarters has that rid

hearing probably X.X% we sub-debt indicative to So new talk were We of just X% X.X%. issuance. got rid for price of

but the mentioned, and we it I the piece could debt just glad do we go have, of to sub options it. The got off were end That's X preferred of the just glad just we at have the But have sub to so Tier because it debt. guess do to a that. of -- there other really looked treatment. go at And didn't that we so the other I it we're that And X.X%. other years X have only thing there's let day, at were we we've and pay and would replace like

deal. rates seemed bad when So a to fell that like X,

Now it seems good a like deal.

So to [indiscernible]. we've got years go with that. It's X full

we for trust hang call rates. holding then time. And the my swap saw $XX about into the million we still off head. at have and have the that, we company. we'll [indiscernible] it for years, of anyway reexamine top under this [indiscernible] it a rates X that, that then in the fixed preferred fixed that I we'll So don't outstanding, of And

think -- the it's I Xs. spot I think into

the that's over it's and assets so that's grandfathered it's -- us money, Tier only you're perspective, a pretty X total we're $XX would call from Tier grandfathered if that acquisition instrument. The when we lose make grandfathered in grew still you good billion that regulatory because is X thing a So in through treatment. because

not So if refinance that ever to now. a would but that comes, right trigger that desire

Frank Schiraldi

-- last migration in thinking year I math different. in closed, obviously about just when Okay. just over came I'm Centric that and which the But provisioning know the And then acquisition the little and deal, a can quarter. you the I think, be mentioned NPAs

provisioning associated the was majority migration. deal. The with from think was the Centric I that

And where one other that just -- you in-house? I charge-offs significant outsized bulky end was the because me Was down could road? marked loan significant of that? additional seeing up no anything originated So Centric on piece the more that thought was kind through guess we would that that have Is already, so on need just can walk provisioning. -- that I for

James Reske

Yes.

the to a I'll and Brian I'll technical Frank, origination then a it start extra with So just little for. you what from were color marks bit more asking the and maybe bit then marks accounting a perspective, were little turn ultimately, final for

take Mike time it, we accounting marks take that we around year, mentioned of once more rules, the probably able saw back of -- owned X.X% last until XX we to to closed. I marks earlier, at and X.X% some the deal June some we're the the that Under to were is the So of goodwill. the

And total mark deal. X.XX% that being the up so credit ended on

in said, deal. Mike pricing the As was that

million priced for and was is and So appropriately. we $XX that million credit thought was million that about was marked non-PCD. mark, mark, $XX that $XX $X.X it appropriately being But PCD credit million, of

was day was reserve about reserve. that, million $XX top million. a of X there that of $XX So On

for of remarks, to We've Centric, were it $XX earlier related while. to those the this we the Now specific a so $XX X owned prepared for about million reserves we when -- in acquisition. time million saying aren't quarter we now added

loans happens from So million so we this from Centric [indiscernible] quarter that acquisitions, for are this period -- not that originated to under or related there portfolio whatever of on that's of specific our $XX put our new of to reserves ownership.

ahead, -- on So I that's the then Brian. additional described the maybe what on additional yes, as top just for reserves color of marks. And go

Brian Karrip

Yes.

of that to $X.X reserves on put did largely this it. we specifics to credit increase million in was needed we million quarter. for $X.X million due Frank, So add That specific $XX

reserved. to specific So correspondingly basis XXX our points from reserves went we're XXX did increase you'll see well our and up basis reserves points,

Frank Schiraldi

Okay.

So then caused that of was Centric the additional bulk that quarter? the in the loan X reserves

Brian Karrip

That's exactly right.

Frank Schiraldi

NIM. the And Okay. lastly, then just on

that's NIM make XX to swap I looking Page of you so the several in at give cumulative sure at terminations, presentation, if scenarios, expectation the understand, scenarios total want the Just next the not bottom just NIM I'm X there, over quarters? the impact the correct, your of

James Reske

that of You of projection or not any contribution have the exactly -- the the That's of that. right. rest

Frank Schiraldi

Right.

regardless annualized you recognizing all commentary the Fed rate that funds, cut if think on to move then point the but does NIM of on trough the you and sorry an does missed equal? remind that obviously, NIM -- is basis, What projection, could else it, given the picture a anyway, And and what I Okay. -- your to should what higher. XX basis do us near-term you're if at just NIM

James Reske

normally, points. basis depends working All maybe that way it's to Probably our not been about -- always X answer has not But X the basis X it's it's it season, now. on else points. equal, right just

with those talking to X.XX of I Fed down So the example, was earlier, for the at, baseline about Moody's cut year. when by look this I end that forecast, the funds being forecasts

goes still up. yield loan Our

piece that's up, NIM effect. our notable the So shifting

but -- for rate a replacement is not and then we've long didn't equal positive a it's has over had have it this So And time could everything on. quarter, modeling points that's not that over if cut X been per that right out see going all you points not per in now. say quarter. you X and the still else per It's yields stabilized, basis cut, it's way haul. still long basis And just you'd maybe maybe

many it's bit there's That's drift upwards, able -- that the to positioned little rate ago. And to it But years hard bring so in repricing many off, time. still are down. we're hate thumb real right up loans even for up. still of coming a we way. it's soft describe rule a while. just dynamics to are the macro We to just those that a now deposit use We're before I that for then been [indiscernible] still said say, that So fixed

Frank Schiraldi

Got you.

appreciate I for like you better. assume I to I it. No, mean, these said, that longer, all is Okay. hire people

-- higher So higher some negative will is impact NIM to some the even a way, going for go longer is there's there it in move even still either higher environment. if

seem It thumb. rule to doesn't guess term, that be So of term would X I could good just in just the still longer of -- I sort see maybe X that. like you a near

James Reske

Yes. No, you're exactly right.

for You're much we still are effects, rate other exactly paying we flat And environment do too. we're -- There are right. a because better.

consumer clients the this came I think quality. demand. up call, do They the little credit help, of rates a help little lower spur early bit our in some with

So couple level there of and first deposit from benefits cuts other rate to demand. on a are

for higher longer, it's better. some benefits [indiscernible] So definitely to there's

Operator

to no hand time. remarks. at Price have the for this further Mike call I'll closing questions any We back

Thomas Michael Price

company being next interest a to of look very our the and always, quarter. course you number the appreciate much. your in Just of forward with over you as Thank

Operator

call our you for Thank joining. conclude all will That today.

You may now disconnect.

First Commonwealth Financial (FCF) 24 Jul 242024 Q2 Earnings call transcript