First Commonwealth Financial Corporation

Ladies and gentlemen, thank you for standing by and welcome to the First Commonwealth Financial Corporation second quarter 23 earnings release conference call. I would now like to turn the call over to Ryan Thomas, Vice President of Finance and Investor Relations. Please go ahead.

Thank you, Bundeep, and good afternoon, everyone. Thank you for joining us today to discuss First Commonwealth Financial Corporation second quarter financial results. Participating on today's call will be Mike Price, President and CEO. Jim Reske, Chief Financial Officer, Jane Gerbentz, Bank President and Chief Revenue Officer, and Brian Karup, our Chief Credit Officer. As a reminder, a copy of yesterday's earnings release can be accessed by logging on to FCBanking.com and selecting the Investor Relations link at the top of the page. We have also included a slide presentation on our Investor Relations website with supplemental financial information that will be referenced during today's call. Before we begin, I need to caution listeners that this call will contain forward-looking statements. Please refer to our forward-looking statements disclaimer on page three of the slide presentation for a description of risks and uncertainties that could cause actual results to differ materially from those reflected in the forward-looking statement. Today's call will also include non-GAAP financial measures. Non-GAAP financial measures should be viewed in addition to and not as an alternative for our reported results prepared in accordance with GAAP. Reconciliation of these measures can be found in the appendix of today's slide presentation. With that, I'll turn it over to Mike.

Hey, thank you, Ryan, and welcome, everyone. Net income of $42.8 million translated to 42 cents of earnings per share, which beat consensus estimate by a penny. Other headline figures include a 1.45% core ROA, a 52.8% efficiency ratio, and a net interest margin of 3.85%. On a linked quarter basis, our net interest income was up $3.5 million to $98.1 million. Despite some NIMH contraction, as a full quarter of the Centric Acquisition hit the income statement, loans grew and average deposits increased. Our provision expense was up compared to last quarter, but remained low. at $2.8 million with a fairly healthy reserve of 1.52%. Net charge-offs were 8.7 million, but 7.1 million or 82% was reserved for through purchase accounting marks with the centric acquisition and thus did not hit the income statement. Our non-interest or fee income was up some $1.6 million to $24.5 million for the quarter due to increased mortgage gain on sale income and debit card tailwinds. Not only were mortgage originations up seasonally over last quarter, but the proportion that we sold grew to 72%. Momentum in spread in fee income was offset by non-interest expense, which rose $3.2 million to $66 million, primarily due to increases in hospitalization expense, incentive expense, and costs associated with the mailing, a revised deposit agreement to our customers. Loan growth of $148 million, or 6.9% annualized, was at the high end of our guidance and was led by the commercial categories of construction, equipment finance, and commercial real estate. For the quarter, average deposits from March to June were up over 10%, excluding centric balances. We consciously, actively manage our loan growth to match our deposit funding capabilities. In our new capital region, formerly Centric Bank, we are tracking to our retention as well as our expense targets. Recall that we announced the Centric acquisition late last August, had regulatory approval in less than 90 days, and closed and converted the bank in the first quarter. Regionally, Northern Ohio, Pittsburgh, and community PA led the way for us with second quarter deposit and loan growth. Some further reflections on the second quarter follow. Our deposit gathering activities and focus continues to improve on top of an already strong depository that is both granular and diversified. In the second quarter, we became less aggressive than competitors with our savings and CD pricing and still saw growth in those categories. Our online deposit account opening continues to improve with more than 20% of our recent personal checking accounts originated through the channel. This has more than doubled from the same period last year. This has been no overnight success story. And just to be clear, this is an in-market checking account acquisition strategy that we've worked on for several years. We're pleased with the progress in our equipment finance and the type of assets and spreads that we're beginning to add to our portfolio. Also, our gain on sale mortgage and SBA businesses, coupled with other indirect business, our indirect business have subdued volumes, but we continue to improve our efficiency in those businesses while requiring better pricing. For example, new indirect loans came on the books at 145 basis points higher than than those that ran off in the second quarter. Lastly, for the fifth year in a row, we are proud to have earned the recognition by Forbes as one of the world's best banks and also as one of the best in-state banks in Pennsylvania. With that, I'll turn it over to Jim Refke, our CFO.