First Commonwealth Q3 Core EPS Rises as Net Interest Margin Widens

First Commonwealth Financial (NYSE: FCF) reported higher third-quarter 2026 core earnings as a wider net interest margin supported revenue, while increased operating costs, a larger credit provision and higher nonperforming loans tempered the quarter’s performance.

GAAP net income was $44.9 million, compared with $44.6 million in the second quarter and $41.3 million a year earlier. Non-GAAP core net income rose to $45.4 million from $44.4 million in the prior quarter and $41.2 million in the year-ago period. Core earnings per diluted share were $0.45, up from $0.44 sequentially and $0.39 a year earlier.

The bank’s fully taxable-equivalent net interest income increased to $116.7 million, up $3.9 million from the second quarter and $5.2 million year over year. Net interest margin reached 4.11%, expanding 10 basis points sequentially and 19 basis points from the prior-year quarter. Deposit costs declined to 1.67% from 1.74% in the second quarter, while the overall cost of funds fell five basis points to 1.74%.

Core pre-tax, pre-provision income was $65.0 million, unchanged from the prior quarter and above $62.9 million a year earlier. The non-GAAP core return on average tangible common equity increased to 15.9% from 15.7% sequentially, while core return on average assets was 1.48%. The quarter’s income tax provision included $4.7 million of federal income tax credits, equivalent to $6.0 million of pre-tax earnings.

Loan Growth Led by Equipment Finance

Period-end loans increased $63.4 million from the second quarter, representing 2.6% annualized growth. Equipment finance balances rose $42.8 million, auto and recreational-vehicle loans increased $25.3 million, and home-equity lines of credit grew $14.8 million. Those gains were partly offset by a $40.1 million decline in commercial real estate loans.

Average loans increased $104.8 million sequentially but were $88.3 million below the year-earlier level, reflecting the sale of $210.4 million of held-for-sale commercial loans in the first quarter. About $4.8 billion, or half of the bank’s $9.6 billion loan portfolio, carried variable rates, and the portfolio had an average duration of 2.5 years.

Period-end deposits edged up $13.8 million, or 0.5% annualized, from the prior quarter. Noninterest-bearing deposits increased $55.9 million, savings balances rose $42.8 million and interest-bearing demand deposits added $42.5 million. Noninterest-bearing balances represented 24% of total deposits. Average deposits declined $87.1 million sequentially, largely as average time deposits fell $163.8 million, but remained $104.2 million above the prior-year quarter.

Fee Income Holds Steady as Expenses Rise

Fee income excluding securities transactions was unchanged from the second quarter at $26.6 million and increased $2.1 million year over year. Higher trust, mortgage-sale, SBA-loan-sale and swap revenue helped offset declines in insurance, asset-sale and other fees. Mortgage originations rose by $25.6 million sequentially to $133.4 million. Fee income accounted for 18.6% of operating revenue.

Operating expenses increased $4.0 million from the previous quarter and $5.7 million from a year earlier to $76.8 million. Salaries and benefits rose $1.7 million sequentially, while FDIC insurance expense increased $700,000 because of a higher assessment rate. The bank also recorded a $600,000 loss tied to the termination of a sale-leaseback transaction. Its non-GAAP core efficiency ratio increased to 53.6% from 52.2% in the second quarter.

Credit Provision and Nonperforming Loans Increase

Provision expense rose $5.3 million sequentially to $14.2 million. Nonperforming loans increased $13.6 million to $95.2 million, although approximately $18.4 million, or 19%, carried government guarantees. The allowance for credit losses reached 1.40% of period-end loans, up from 1.35% in the previous quarter. Net charge-offs declined by $6.9 million to $4.6 million.

Commercial real estate totaled about $3.04 billion, or 31.8% of loans. The office portfolio stood at $377.3 million as of September 30, with an average loan size of $1.8 million; approximately 16% was located in central business districts and about 58% was recourse. First Commonwealth characterized the portfolio as diversified and granular, with larger office credits subject to annual review.

Capital Returns and Liquidity

First Commonwealth repurchased approximately 4.16 million shares for an aggregate $88.0 million during the quarter. On October 27, its board authorized an additional $25 million share-repurchase program. The tangible common equity ratio was 9.2%, compared with 9.9% in the second quarter, and the company reported $539.4 million of capital above the 6.5% holding-company common equity Tier 1 threshold it used for its excess-capital calculation.

Available liquidity totaled approximately $5.5 billion at September 30, including unused capacity from the Federal Home Loan Bank, Federal Reserve, brokered deposits and other sources. The bank also held a $1.7 billion securities portfolio, 94% of which consisted of agency securities, collateralized mortgage obligations and mortgage-backed securities.

The presentation did not provide a formal earnings outlook. It cautioned that results remain subject to changes in interest rates, inflation, financial markets, regulation, borrower performance and deposit behavior, as well as acquisition integration, competition, technology, vendor reliability and legal or regulatory developments.