First Commonwealth Financial (FCF)

Regional banking company First Commonwealth Financial (NYSE:FCF) met Wall Street’s revenue expectations in Q3 CY2025, with sales up 12.2% year on year to $136 million. Its non-GAAP profit of $0.39 per share was 4.9% below analysts’ consensus estimates.

Company Overview

Tracing its roots back to the Great Depression era of 1934, First Commonwealth Financial (NYSE:FCF) is a financial holding company that provides consumer and commercial banking, wealth management, and insurance services across Pennsylvania and Ohio.

Regional banks, financial institutions operating within specific geographic areas, serve as intermediaries between local depositors and borrowers. They benefit from rising interest rates that improve net interest margins (the difference between loan yields and deposit costs), digital transformation reducing operational expenses, and local economic growth driving loan demand. However, these banks face headwinds from fintech competition, deposit outflows to higher-yielding alternatives, credit deterioration (increasing loan defaults) during economic slowdowns, and regulatory compliance costs. Recent concerns about regional bank stability following high-profile failures and significant commercial real estate exposure present additional challenges.

First Commonwealth Financial competes with other regional banks operating in Pennsylvania and Ohio such as PNC Financial Services (NYSE:PNC), KeyCorp (NYSE:KEY), Huntington Bancshares (NASDAQ:HBAN), and S&T Bancorp (NASDAQ:STBA), as well as national banks and credit unions serving the same markets.

In general, banks make money from two primary sources. The first is net interest income, which is interest earned on loans, mortgages, and investments in securities minus interest paid out on deposits. The second source is non-interest income, which can come from bank account, credit card, wealth management, investing banking, and trading fees. Luckily, First Commonwealth Financial’s revenue grew at a solid 7% compounded annual growth rate over the last five years. Its growth surpassed the average banking company and shows its offerings resonate with customers, a great starting point for our analysis.

Long-term growth is the most important, but within financials, a half-decade historical view may miss recent interest rate changes and market returns. First Commonwealth Financial’s recent performance shows its demand has slowed as its annualized revenue growth of 3.2% over the last two years was below its five-year trend. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, First Commonwealth Financial’s year-on-year revenue growth was 12.2%, and its $136 million of revenue was in line with Wall Street’s estimates.

Net interest income made up 77.2% of the company’s total revenue during the last five years, meaning lending operations are First Commonwealth Financial’s largest source of revenue.

Markets consistently prioritize net interest income growth over fee-based revenue, recognizing its superior quality and recurring nature compared to the more unpredictable non-interest income streams.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

First Commonwealth Financial’s EPS grew at an astounding 12.5% compounded annual growth rate over the last five years, higher than its 7% annualized revenue growth. However, we take this with a grain of salt because its efficiency ratio didn’t improve and it didn’t repurchase its shares, meaning the delta came from factors we consider non-core or less sustainable over the long term.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

First Commonwealth Financial’s two-year annual EPS declines of 6.6% were mediocre and lower than its 3.2% two-year revenue growth.

We can take a deeper look into First Commonwealth Financial’s earnings to better understand the drivers of its performance. A two-year view shows First Commonwealth Financial has diluted its shareholders, growing its share count by 2.3%. This has led to lower per share earnings. Taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

In Q3, First Commonwealth Financial reported adjusted EPS of $0.39, up from $0.31 in the same quarter last year. Despite growing year on year, this print missed analysts’ estimates, but we care more about long-term adjusted EPS growth than short-term movements. Over the next 12 months, Wall Street expects First Commonwealth Financial’s full-year EPS of $1.44 to grow 19.5%.

The balance sheet drives banking profitability since earnings flow from the spread between borrowing and lending rates. As such, valuations for these companies concentrate on capital strength and sustainable equity accumulation potential.

When analyzing banks, tangible book value per share (TBVPS) takes precedence over many other metrics. This measure isolates genuine per-share value by removing intangible assets of debatable liquidation worth. Traditional metrics like EPS are helpful but face distortion from M&A activity and loan loss accounting rules.

First Commonwealth Financial’s TBVPS grew at a solid 7% annual clip over the last five years. TBVPS growth has also accelerated recently, growing by 14.3% annually over the last two years from $8.38 to $10.94 per share.

Over the next 12 months, Consensus estimates call for First Commonwealth Financial’s TBVPS to grow by 11.9% to $12.24, top-notch growth rate.

Leverage is core to a financial firm’s business model (loans funded by deposits). To ensure economic stability and avoid a repeat of the 2008 GFC, regulators require certain levels of capital and liquidity, focusing on the Tier 1 capital ratio.

Tier 1 capital is the highest-quality capital that a firm holds, consisting primarily of common stock and retained earnings, but also physical gold. It serves as the primary cushion against losses and is the first line of defense in times of financial distress.

This capital is divided by risk-weighted assets to derive the Tier 1 capital ratio. Risk-weighted means that cash and US treasury securities are assigned little risk while unsecured consumer loans and equity investments get much higher risk weights, for example.

New regulation after the 2008 financial crisis requires that all firms must maintain a Tier 1 capital ratio greater than 4.5%. On top of this, there are additional buffers based on scale, risk profile, and other regulatory classifications, so that at the end of the day, firms generally must maintain a 7-10% ratio at minimum.

Over the last two years, First Commonwealth Financial has averaged a Tier 1 capital ratio of 11.8%, which is considered safe and well capitalized in the event that macro or market conditions suddenly deteriorate.

Return on equity (ROE) measures how effectively banks generate profit from each dollar of shareholder equity - a critical funding source. High-ROE institutions typically compound shareholder wealth faster over time through retained earnings, share repurchases, and dividend payments.

Over the last five years, First Commonwealth Financial has averaged an ROE of 11.5%, impressive for a company operating in a sector where the average shakes out around 7.5% and those putting up 15%+ are greatly admired. This shows First Commonwealth Financial has a strong competitive moat.

We struggled to find many positives in these results. Its EPS missed and its net interest income fell slightly short of Wall Street’s estimates. Overall, this was a softer quarter. The stock traded down 2.2% to $16.05 immediately following the results.

Updated: December 4, 2025 at 11:32 PM EST

When considering an investment in First Commonwealth Financial, investors should account for its valuation and business qualities as well as what’s happened in the latest quarter.

First Commonwealth Financial isn’t a terrible business, but it doesn’t pass our quality test. To begin with, its revenue growth was uninspiring over the last five years. And while its projected EPS for the next year implies the company’s fundamentals will improve, the downside is its net interest income growth was mediocre over the last five years. On top of that, its estimated sales for the next 12 months are weak.

First Commonwealth Financial’s P/B ratio based on the next 12 months is 1.1x. While this valuation is reasonable, we don’t really see a big opportunity at the moment. We're fairly confident there are better investments elsewhere.

Wall Street analysts have a consensus one-year price target of $18.50 on the company (compared to the current share price of $16.62).