First Commonwealth Financial Corporation

At this time, all lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question at that time, simply press star followed by the number one on your telephone keypad. If you'd like to withdraw your question, again, press star one. Thank you. It is now my pleasure to turn today's call over to Mr. Ryan Thomas, Vice President of Finance and Investor Relations. Sir, please go ahead.

Thank you, Brent, and good afternoon, everyone. Thank you for joining us today to discuss First Commonwealth Financial Corporation's third quarter financial results. Participating on today's call will be Mike Price, President and CEO, Jim Reske, Chief Financial Officer, Jane Rabentz, 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've 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 the forward-looking statements disclaimer on page 3 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 could 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 will turn the call over to Mike.

Hey, thank you, Ryan, and good afternoon, everyone. For the third quarter of 2023, we are pleased to report core net income of $39.6 million, which translates to $0.39 of earnings per share, an ROA of 1.38%, an efficiency ratio of 53.42%. The NIM compressed nine basis points quarter to quarter, to 3.76%. The rate of deposit cost increases is slowing, and we believe that the NIM will stabilize going into the end of the year and continue to hold up in 2024. In a higher for longer environment, we believe that improvement in loan yields would likely outstrip growth in deposit costs. Operating expenses were up $1 million from the prior quarter, driven by costs associated with debit cards. Basically, we had a one-time recognition of $900,000 in losses identified as part of a new automated system for processing debit card disputes. In addition, we had a $600,000 increase in FDIC insurance compared to last quarter due to the acquisition of Centric and the associated deposit balances. This was somewhat offset by $1.1 million in decreases in salaries and benefits due in part to lower hospitalization expenses. Total loans grew some $102 million in the quarter, or 4.6% annualized. Our northern Ohio and Pittsburgh regions led the way geographically. From a line of business perspective, commercial banking and equipment finance were the key categories driving growth. We've metered loan growth commensurate with deposit growth each of the last three quarters. We have also strategically exited some non-relationship borrowers. End of period deposits grew $94.8 million, or 4.2% annualized in the third quarter, which is just short of the loan growth in the quarter. Average deposits increased by 2.1% from last quarter. Strong regional contributors included Central Ohio and Community PA. This led to the loan-to-deposit ratio rising slightly from 96.4% to 96.7% in the quarter. We ended the quarter with solid credit metrics. Total delinquency was 25 basis points, and non-performing loans as a percentage of total loans were flat at 54 basis points. Reserve coverage was a healthy 280%. Criticized loans and classified loans both improved. Net charge-offs annualized as a percentage of average loans were $4 million or 18 basis points, of which approximately $1.2 million was related to the centric acquisition. Provision expense for the third quarter totaled $5.9 million, driven by loan growth, and an additional $4.1 million in specific reserves, reflecting an updated appraisal on a non-accrual commercial loan. The allowance for credit losses at quarter end totaled $134.3 million, and the allowance as a percentage of loans was a healthy 1.51%, which screens well, we believe, relative to our peers. On the digital front, Adoption of a credit score manager tool in online banking has grown faster than expectations since launch in late April. We now have 30,000 users taking advantage of this robust financial wellness tool we believe is a best-in-class solution. The focus on our digital account openings has yielded expected growth so far in 2023 especially for checking accounts, with an increase of over 190% in openings compared to the same period last year. We are now opening approximately one of every five accounts via the digital channel versus in-person. In closing, we've built enough strong revenue engines and have sufficient risk appetite to grow constructively, provided we fund the asset growth with organic deposit growth. With that, I'll turn it over to Jim Reske, our CFO. Jim?