First Commonwealth misses Q3 profit estimates on higher costs and credit reserves

what happened

Regional bank First Commonwealth Financial reported third-quarter results below what analysts had penciled in. Adjusted earnings per share came in at $0.45 against a consensus of $0.46, while adjusted net income reached $45.44 million versus $45.92 million expected. Reuters reports the figures based on LSEG data and the company's own release.

Net interest margin widened, helped by cheaper funding, higher loan yields and the repricing of fixed-rate loans. Provisions for credit losses climbed, however, partly to cover unfunded commitments and three commercial credits, two of which were moved to nonaccrual status. Operating expenses also rose on higher salaries, asset write-downs, equipment costs and FDIC insurance.

The board approved an extra $25 million share repurchase program. The company gave no specific guidance for future periods.

why it matters

The key detail for markets is the mix behind the miss: it was not weaker interest income but bigger loan-loss reserves and costs, which tends to weigh on investors in regional lenders. According to Reuters, the median 12-month price target from Wall Street stands at $24.00, about 14.2% above the October 27 close of $21.02. Of the seven analysts covering the stock, four rate it buy or strong buy and three hold, with no sell ratings.

market impact

First Commonwealth shares: profit miss and bigger loan reserves pressure the stock

• ▼First Commonwealth Financial shares pressure down — profit miss and higher credit loss reserves weigh on sentiment

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