FCF
FCF
Hold 2026-03-24
Model
DDM
Price at Report
$17.11
Base IV
$16.39
Bear IV
$8.96
Bull IV
$22.68
Entry Zone: 9-15 · Sell Above: 19
Bore Family Office
Valuation Report — First Commonwealth Financial (FCF) • March 24, 2026
3-Stage DDM (Ke) • Discount Rate: 8.70% • Current Price: $17.11
Prepared by Lurch • Bore Family Office • Data: Finnhub, StockAnalysis.com, S&P Global Market Intelligence
🏢 Business Overview
First Commonwealth Financial Corporation is a $12.5B-asset regional bank holding company headquartered in Indiana, Pennsylvania, operating through its wholly-owned subsidiary First Commonwealth Bank. Founded in 1934, the company serves communities across western and central Pennsylvania and Ohio with a full suite of consumer and commercial banking products including deposit accounts, mortgage loans, commercial lending, wealth management, and digital banking services through approximately 115 branch offices.
FY2025 was a strong year with net income of $152.3M (EPS $1.47, +5.8% YoY) driven by net interest income growth of 12.5% to $426M on NIM expansion to ~3.98%. The bank has demonstrated consistent profitability with ROE of 10.1% and an efficiency ratio of ~53%. Total loans of $9.6B grew 8% annualized in Q4 2025, though credit quality bears watching with nonperforming loans rising to 1.04% of total loans in Q4 due to a single commercial floorplan loan.
| Business Segment | Revenue | % of Total | YoY Growth | Margin | Notes |
|---|---|---|---|---|---|
| Net Interest Income | $426M | 87% | +12.5% | — | Core banking spread income; NIM ~3.98% in Q4 2025; loan book $9.6B |
| Non-Interest Income | $97M | 13% | -2.4% | — | Fee income: wealth management, service charges, card fees, insurance |
| Blended Growth Rate | — | 100% | +10.6% | — | Weighted avg across segments |
🔍 Quality Scorecard
| Metric | Value | Assessment |
|---|---|---|
| ROIC | 10.1% | 8–12% adequate |
| FCF Margin | 31.1% | ≥10% strong |
| Debt / EBITDA | 0.0x | ≤2x conservative |
| Revenue Trend | Growing 3yr | 3-year directional trend |
| FCF Margin Trend | Expanding | Directional margin trajectory |
| Analyst Revisions | Upward revisions | Last 90 days consensus direction |
✅ Quality profile supports the valuation
📊 Financial Snapshot
| Metric | 2021 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|
| Revenue ($M) | $387 | $390 | $478 | $449 | $490 |
| EBITDA ($M) | $174 | $160 | $208 | $178 | $195 |
| Operating Income ($M) | $174 | $160 | $208 | $178 | $195 |
| Net Income ($M) | $138 | $128 | $157 | $143 | $152 |
| EPS (diluted) | $1.44 | $1.37 | $1.54 | $1.39 | $1.47 |
| Free Cash Flow ($M) | $164 | $154 | $129 | $115 | $33 |
| Annual DPS | $0.460 | $0.480 | $0.500 | $0.520 | $0.540 |
| Total Debt ($M) | $300 | $280 | $260 | $250 | $240 |
| Rev YoY Growth | — | +0.8% | +22.6% | -6.1% | +9.1% |
| Gross Margin | 100.3% | 94.6% | 99.2% | 93.5% | 93.3% |
| EBITDA Margin | 45.0% | 41.0% | 43.5% | 39.6% | 39.8% |
| Operating Margin | 45.0% | 41.0% | 43.5% | 39.6% | 39.8% |
| Net Margin | 35.7% | 32.8% | 32.8% | 31.8% | 31.0% |
⚙️ Ke (DDM)
| Input | Value | Notes |
|---|---|---|
| Risk-Free Rate (Rf) | 4.30% | 10-yr US Treasury yield |
| Beta (β) | 0.800 | Market beta (Finnhub) |
| Equity Risk Premium (ERP) | 5.5% | Damodaran US ERP |
| Cost of Equity (Ke) | 8.70% | Ke = Rf + β × ERP |
📈 DDM Scenarios
$9
🔴 Bear
$16
📊 Base
$23
🚀 Bull
$17.11
Current Price
$20
Analyst Avg PT
| Scenario | Stage 1 (Yrs 1–5) | Stage 2 (Yrs 6–10) | Terminal g | Ke | Intrinsic Value | vs Price |
|---|---|---|---|---|---|---|
| 🔴 Bear | 4.0% | 2.0% | 2.0% | 8.70% | $9 | ▼47.6% |
| 📊 Base | 15.0% | 5.0% | 2.5% | 8.70% | $16 | ▼4.2% |
| 🚀 Bull | 20.0% | 7.0% | 3.0% | 8.70% | $23 | ▲32.5% |
📋 Full 10-Year Projection Tables
Bear Scenario
Stage 1: 4.0% | Stage 2: 2.0% | Terminal: 2.0%
| Period | Stage | DPS / Dist. | PV of DPS | Cumulative IV |
|---|---|---|---|---|
| Year 1 | Stage 1 | $0.562 | $0.517 | $0.52 |
| Year 2 | Stage 1 | $0.584 | $0.494 | $1.01 |
| Year 3 | Stage 1 | $0.607 | $0.473 | $1.48 |
| Year 4 | Stage 1 | $0.632 | $0.452 | $1.94 |
| Year 5 | Stage 1 | $0.657 | $0.433 | $2.37 |
| Year 6 | Stage 2 | $0.670 | $0.406 | $2.78 |
| Year 7 | Stage 2 | $0.684 | $0.381 | $3.16 |
| Year 8 | Stage 2 | $0.697 | $0.358 | $3.51 |
| Year 9 | Stage 2 | $0.711 | $0.336 | $3.85 |
| Year 10 | Stage 2 | $0.725 | $0.315 | $4.17 |
| Terminal | — | TV=$11.04 | PV(TV)=$4.80 (54% of IV) | $8.96 |
| Intrinsic Value | — | — | PV(Divs) $4.17 + PV(TV) $4.80 | $8.96 |
How the price per share is derived: Each year's projected dividend is discounted back at Ke (8.70%) to get its present value. After Year 10, dividends are assumed to grow at the terminal rate (2.0%) in perpetuity — the Gordon Growth formula gives a terminal value of DPS11 / (Ke − gT) = $11.04. That terminal value is then discounted back 10 years to today's dollars (PV of TV = $4.80). Intrinsic value = PV of all dividends ($4.17) + PV of terminal value ($4.80) = $8.96 per share.
Base Scenario
Stage 1: 15.0% | Stage 2: 5.0% | Terminal: 2.5%
| Period | Stage | DPS / Dist. | PV of DPS | Cumulative IV |
|---|---|---|---|---|
| Year 1 | Stage 1 | $0.621 | $0.571 | $0.57 |
| Year 2 | Stage 1 | $0.714 | $0.604 | $1.18 |
| Year 3 | Stage 1 | $0.821 | $0.639 | $1.82 |
| Year 4 | Stage 1 | $0.944 | $0.676 | $2.49 |
| Year 5 | Stage 1 | $1.086 | $0.716 | $3.21 |
| Year 6 | Stage 2 | $1.140 | $0.691 | $3.90 |
| Year 7 | Stage 2 | $1.197 | $0.668 | $4.57 |
| Year 8 | Stage 2 | $1.257 | $0.645 | $5.21 |
| Year 9 | Stage 2 | $1.320 | $0.623 | $5.83 |
| Year 10 | Stage 2 | $1.386 | $0.602 | $6.44 |
| Terminal | — | TV=$22.92 | PV(TV)=$9.95 (61% of IV) | $16.39 |
| Intrinsic Value | — | — | PV(Divs) $6.44 + PV(TV) $9.95 | $16.39 |
How the price per share is derived: Each year's projected dividend is discounted back at Ke (8.70%) to get its present value. After Year 10, dividends are assumed to grow at the terminal rate (2.5%) in perpetuity — the Gordon Growth formula gives a terminal value of DPS11 / (Ke − gT) = $22.92. That terminal value is then discounted back 10 years to today's dollars (PV of TV = $9.95). Intrinsic value = PV of all dividends ($6.44) + PV of terminal value ($9.95) = $16.39 per share.
Bull Scenario
Stage 1: 20.0% | Stage 2: 7.0% | Terminal: 3.0%
| Period | Stage | DPS / Dist. | PV of DPS | Cumulative IV |
|---|---|---|---|---|
| Year 1 | Stage 1 | $0.648 | $0.596 | $0.60 |
| Year 2 | Stage 1 | $0.778 | $0.658 | $1.25 |
| Year 3 | Stage 1 | $0.933 | $0.727 | $1.98 |
| Year 4 | Stage 1 | $1.120 | $0.802 | $2.78 |
| Year 5 | Stage 1 | $1.344 | $0.885 | $3.67 |
| Year 6 | Stage 2 | $1.438 | $0.872 | $4.54 |
| Year 7 | Stage 2 | $1.538 | $0.858 | $5.40 |
| Year 8 | Stage 2 | $1.646 | $0.845 | $6.24 |
| Year 9 | Stage 2 | $1.761 | $0.831 | $7.07 |
| Year 10 | Stage 2 | $1.885 | $0.818 | $7.89 |
| Terminal | — | TV=$34.06 | PV(TV)=$14.79 (65% of IV) | $22.68 |
| Intrinsic Value | — | — | PV(Divs) $7.89 + PV(TV) $14.79 | $22.68 |
How the price per share is derived: Each year's projected dividend is discounted back at Ke (8.70%) to get its present value. After Year 10, dividends are assumed to grow at the terminal rate (3.0%) in perpetuity — the Gordon Growth formula gives a terminal value of DPS11 / (Ke − gT) = $34.06. That terminal value is then discounted back 10 years to today's dollars (PV of TV = $14.79). Intrinsic value = PV of all dividends ($7.89) + PV of terminal value ($14.79) = $22.68 per share.
🔲 Sensitivity Table
| Ke \ gT | 1.5% | 2.0% | 2.5% | 3.0% | 3.5% |
|---|---|---|---|---|---|
| 6.7% | $21 | $23 | $25 | $27 | $31 |
| 7.2% | $19 | $21 | $22 | $24 | $26 |
| 7.7% | $18 | $19 | $20 | $21 | $23 |
| 8.2% | $16 | $17 | $18 | $19 | $20 |
| 8.7% | $15 | $16 | $16 | $17 | $18 |
| 9.2% | $14 | $14 | $15 | $16 | $17 |
| 9.7% | $13 | $13 | $14 | $15 | $15 |
| 10.2% | $12 | $12 | $13 | $13 | $14 |
| 10.7% | $11 | $12 | $12 | $13 | $13 |
Green = >10% above current price. Red = >10% below. Gold = within ±10%.
📉 Long-Term Price Trend Channel
Log-linear trend fitted to full price history. ±1.5σ bands. Green shaded zone = bottom 25% of historical range — historically attractive entry.
🏦 Comparable Valuation
| Company | P/E | P/B | Div Yield | ROE | Note |
|---|---|---|---|---|---|
| FCF (current) | 11.6x | 1.13x | 3.16% | 10.1% | Western PA community bank |
| CATY (Cathay) | 10.4x | 1.12x | 3.20% | 10.8% | Asian-American niche bank |
| BANR (Banner) | 12.1x | 1.35x | 2.90% | 11.2% | Pacific NW community bank |
| COLB (Columbia) | 12.8x | 1.30x | 3.40% | 10.5% | Pacific NW regional |
| NWBI (Northwest) | 13.8x | 1.05x | 5.80% | 7.6% | Lower ROE; higher yield |
💰 Dividend / Distribution Analysis
| Metric | Value |
|---|---|
| Annual DPS | $0.540 |
| Current Yield | 3.16% |
| Consecutive Growth Years | 9 |
| 1-yr DPS CAGR | +3.9% |
| 3-yr DPS CAGR | +4.0% |
| 5-yr DPS CAGR | +3.3% |
| 10-yr DPS CAGR | +3.5% |
| Payout Ratio (DPS/EPS) | 36.7% |
| FCF Payout Ratio | 169.0% ⚠️ |
| Sustainability Verdict | Safe |
FCF's dividend is well-covered on an earnings basis at a 36.7% payout ratio ($0.54 DPS / $1.47 EPS). The bank has raised its dividend for 9 consecutive years. The FCF payout ratio is temporarily elevated (169%) due to an anomalous FY2025 free cash flow figure of $33M driven by working capital timing in the loan book — for banks, net income is the better coverage metric. With ROE of 10.1% and a low 37% payout ratio, FCF has substantial room for continued dividend increases. The payout ratio could expand to 50%+ before reaching peer median levels, unlocking years of above-average DPS growth.
🔮 Analyst Forecast Section
(a) EPS Consensus
| Year | Low / Actual | Avg | High | # Analysts | Type |
|---|---|---|---|---|---|
| 2021 | $1.44 | — | — | — | Actual |
| 2022 | $1.37 | — | — | — | Actual |
| 2023 | $1.54 | — | — | — | Actual |
| 2024 | $1.39 | — | — | — | Actual |
| 2025 | $1.47 | — | — | — | Actual |
| 2026 | $1.67 | $1.77 | $1.89 | 7 | Estimate |
| 2027 | $1.77 | $1.96 | $2.10 | 7 | Estimate |
(b) Revenue Consensus
| Year | Low / Actual | Avg | High | # Analysts | Type |
|---|---|---|---|---|---|
| 2021 | $0.4B | — | — | — | Actual |
| 2022 | $0.4B | — | — | — | Actual |
| 2023 | $0.5B | — | — | — | Actual |
| 2024 | $0.4B | — | — | — | Actual |
| 2025 | $0.5B | — | — | — | Actual |
| 2026 | $0.5B | $0.6B | $0.6B | 6 | Estimate |
| 2027 | $0.6B | $0.6B | $0.6B | 6 | Estimate |
(c) Individual Analyst Price Targets
| Analyst | Firm | Rating | PT | Upside |
|---|---|---|---|---|
| Manuel Navas | Piper Sandler | Buy | $21 | +22.7% |
| Kelly Motta | KBW | Hold | $20 | +16.9% |
| David Feaster | Raymond James | Buy | $20 | +16.9% |
| Unknown | Consensus | Buy | $18 | +5.2% |
💡 Investment Thesis
- NIM Expansion Momentum: Net interest margin expanded to 3.98% in Q4 2025, up from 3.62% a year ago, driving 12.5% net interest income growth. Continued NIM stability above 3.9% supports robust earnings growth even in a lower-rate environment.
- Attractive Valuation: At 11.6x trailing earnings, 9.7x forward P/E, 1.13x book value, and 3.16% dividend yield, FCF offers a compelling entry point for a bank with 10%+ ROE and consistent profitability. Trading at 65% of its 52-week range.
- Dividend Growth Runway: With a 37% payout ratio and 9 consecutive years of dividend increases, FCF has significant room for accelerated dividend growth. Payout ratio expansion toward the 45-50% peer median would meaningfully boost DPS even with modest EPS growth.
- Strong Analyst Consensus: All 4 covering analysts rate FCF a Buy with a consensus PT of $19.75, implying 15.4% upside from current levels. FY2026 EPS consensus of $1.77 represents 20% growth, supported by NIM tailwinds and loan book expansion.
- Key Risk — Credit Quality: Nonperforming loans rose to 1.04% of total loans in Q4 2025 from 0.62% in Q3, driven by a single commercial floorplan loan. While management has characterized this as idiosyncratic, broader CRE/commercial deterioration could compress earnings. Provision for credit losses was $33M in FY2025 vs $29M in FY2024.
⚖️ DDM Verdict: Hold — First Commonwealth Financial (FCF)
Current price: $17.11 | Analyst Avg PT: $19.75
$9
🔴 Bear
$16
📊 Base
$23
🚀 Bull
| Tier | Price | Action |
|---|---|---|
| Tier 1 — Starter | ≤$15 | Begin position |
| Tier 2 — Add | ≤$13 | Add on weakness |
| Tier 3 — Full | ≤$9 | Full allocation |
| Sell Alert | ≥$19 | Above fair value — consider trimming |
How tiers are set: Tier 1 = Base IV × 0.92 (8% discount to base case). Tier 2 = midpoint of Bear & Base IV (building on meaningful weakness). Tier 3 = Bear IV × 1.05 (just above worst-case — maximum margin of safety). Sell alert = Bull IV × 0.85 (15% discount to bull case — above fair value range).
FCF at $17.11 is an Accumulate with a Base DDM target of ~$19. The stock trades at a meaningful discount to analyst consensus ($19.75), offering ~15% upside plus a 3.16% dividend yield. The low payout ratio (37%) provides significant dividend growth runway as payout ratio expands toward peer median. At 9.7x forward earnings and 1.13x book, risk/reward is attractive for a community bank with stable 10%+ ROE.
Action: Accumulate below $18. Add aggressively on pullbacks to $15-16 (near book value). Trim above $21 (analyst high PT). Becomes a Hold above $20.
🔧 Model Notes & Calibration
| Assumption | Rationale / Notes |
|---|---|
| DDM Base — Cash DPS with Payout Ratio Expansion | Base = $0.54/share cash DPS ($0.135/qtr). Payout ratio currently 36.7% vs peer median ~45-50%. Stage 1 growth of 15% (Base) models both EPS growth (~10%/yr after FY2026 catch-up) and payout ratio expansion from 37% to ~50% over 5 years. Buyback yield is negative (-1.29%, indicating net share issuance), so Shareholder Yield DDM is not appropriate — cash DPS is the correct base. |
| Ke | Beta 0.80 (Finnhub). Rf=4.30% (10yr UST Mar 2026), ERP=5.5%. Ke=4.30% + 0.80 × 5.5% = 8.70%. No additional premium — FCF is a well-established community bank with nearly 90 years of operating history. |
| Bank-Specific Considerations | For banks, debt is part of the operating model. DDM with Ke is the standard approach. FCF/share ($0.32 in FY2025) is not meaningful for bank valuation due to working capital volatility in the loan book — net income ($1.47 EPS) is the correct profitability measure. P/B of 1.13x implies ROE ≈ Ke (10.1% ROE vs 8.70% Ke), confirming modest value creation. |
| Sanity Check | Base IV should be ~$18-19, within ±20% of analyst consensus PT $19.75. Cross-check: forward P/E of $19.75 / $1.77 = 11.2x is reasonable for a community bank with 10%+ ROE. P/B-implied fair value: 1.25x × $15.11 BV = $18.89 (peer avg P/B × BV). |
| Credit Quality Watch | NPLs jumped from 0.62% to 1.04% in Q4 2025 due to a single commercial floorplan loan. Management characterized this as idiosyncratic, but the Bear case models broader commercial credit deterioration. Provision for credit losses was $33M in FY2025 vs $29M in FY2024 and $4M in FY2023 — the normalization from the ultra-low 2023 provision is a headwind to near-term earnings. |
Bore Family Office • Analysis generated by Lurch • Not investment advice.