Finance

First Commonwealth's Provision Expense Rises as Net Charge-Offs Fall

The Tip Desk · November 2, 2026 · 4 min read

Credit-loss provision was $14.2 million as net interest income (FTE) reached $116.7 million and the margin expanded 10 bps to 4.11%.

First Commonwealth Financial Corporation (FCF), a community-bank holding company with offices across western and central Pennsylvania and Ohio, reported third-quarter 2026 net interest income (FTE) of $116.7 million, up $3.9 million from the prior quarter, as the net interest margin expanded 10 bps to 4.11% from 4.01%.

The company said the sequential increase was primarily due to that 10 bps margin expansion and one additional day in the quarter. Average loans rose $104.8 million and average cash balances fell $106.7 million. The cost of deposits declined 7 bps and the loan yield rose 2 bps to 6.09%, which the company attributed primarily to higher yields on variable and adjustable loans and the upward repricing of fixed-rate loans. Total cost of funds was 1.74%.

Average deposits decreased $87.1 million, or 3.3% annualized. Average time deposits fell $163.8 million and average noninterest-bearing deposits increased $72.4 million. End-of-period deposits rose $13.8 million, or 0.5% annualized. Total loans increased $63.4 million, or 2.6% annualized, lifting the loan-to-deposit ratio to 93.2% from 92.7%.

Noninterest income excluding securities gains was $26.7 million, unchanged from the second quarter. Swap fee income, trust income and gains on sale of mortgage loans increased $0.3 million, $0.3 million and $0.2 million, respectively, offset by an $0.8 million decrease in gains on the redemption of subordinated debt recognized in the prior quarter.

Noninterest expense excluding merger-related items was $78.1 million, up $4.0 million from the second quarter. The company cited a $1.6 million increase in salaries and benefits, an $0.8 million loss on sale or write-down of assets tied to terminating a sale-leaseback agreement, and $0.7 million increases each in furniture and equipment and in FDIC insurance after a lower prior-quarter assessment rate. The core efficiency ratio rose 91 bps to 53.15% from 52.24%.

Credit costs moved the other way. Provision for credit losses was $14.2 million, up $5.3 million from $8.9 million in the second quarter. The company said the increase reflected a $3.5 million rise in reserves for unfunded commitments and a $6.7 million increase primarily for three individually analyzed commercial credits, two of which were transferred to nonaccrual status in the third quarter.

Net charge-offs were $4.6 million, down $6.9 million from $11.4 million, and the annualized net charge-off rate fell to 0.19% from 0.49%. The company said the decline was primarily due to the resolution of six commercial credits with an aggregate balance of $6.9 million in the prior quarter.

Nonperforming loans totaled $95.2 million, or 0.99% of loans, up $13.6 million from 0.86% at June 30, 2026. The company said the increase was primarily due to two commercial credits with an aggregate balance of $21.0 million migrating to nonaccrual. The allowance for credit losses as a percentage of period-end loans rose 5 bps to 1.40% from 1.35%.

GAAP net income was $44.9 million, or $0.45 a share, compared with $44.6 million, or $0.44 a share, in the second quarter. Core net income was $45.4 million, or $0.45 a share. Core pre-tax pre-provision net revenue was $65.5 million. Core return on average assets was 1.48%. Core return on average tangible common equity was 15.90%.

The company purchased $54.7 million in renewable energy tax credits at a discount, a process that began in the second quarter, and said it intends to apply the credits toward its federal tax liability for 2025 and prior years. The purchase reduced taxes payable by $4.7 million in the third quarter.

Common Equity Tier I capital was 11.9% at September 30, 2026, down from 12.6% at June 30, 2026, after the company repurchased 4,156,764 shares at a weighted average price of $21.18. On October 27, 2026, the board authorized an additional $25 million share repurchase program. The company declared a quarterly dividend of $0.14 a share, a 3.7% increase from the third quarter of 2025.

President and Chief Executive Officer T. Michael Price said third-quarter results reflected higher revenue, net interest margin expansion and modest loan growth, alongside a higher provision expense and operating expenses, and that near-term priorities include continuing to improve credit performance, generating profitable growth and controlling expenses to create positive operating leverage.

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