Hello and thank you for standing by. My name is Regina and I will be your conference operator today. At this time, I'd like to welcome everyone to the First Commonwealth Financial Corporation First Quarter 2025 Earnings Release Conference Call. 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'd like to ask a question during this time, simply press star and the number one on your telephone keypad. To withdraw your question, press star 1 again. I'd now like to turn the conference over to Ryan Thomas, Vice President of Finance and Investor Relations. Please go ahead.

Thank you, Regina, and good afternoon, everyone. Thank you for joining us today to discuss First Commonwealth Financial Corporation's first quarter financial results. Participating on today's call will be Mike Price, President and CEO, Jim Reske, Chief Financial Officer, Jane Grebentz, Bank President and Chief Revenue Officer, Brian Sahaki, Chief Credit Officer, and Mike McEwen, Chief Lending 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 have also included a slide presentation on our Investor Relations website with supplemental 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 three of the slide presentation for a description of risks and uncertainties that could cause actual results and differ materially from those reflected in the forward-looking statement today's call will also include non-GAAP financial measures non-GAAP financial measures should be viewed in addition 2, and not as an alternative 4, are reported results prepared in accordance with GAAP. A 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. First Commonwealth met consensus estimates with $0.32 of core earnings per share in the first quarter of 2025. Our return on assets of 1.14 percent in the first quarter was down from 1.23 percent in the fourth quarter as expenses rose and fee income fell. Loans grew at an annualized rate of 4.4 percent or $99 million in total. Commercial loans accounted for 63 million or 64 percent of the overall quarterly increase. Equipment finance and indirect auto lending both contributed meaningfully. The pipeline and growth momentum continue into April. Net interest margin at 3.62 percent rose eight basis points with good fundamentals. Deposit costs fell to 1.99 percent. Interestingly, deposit costs continue their downward marks even as we grew deposits at an annualized rate of 7.7% using end-of-period figures. As a team, we have remained focused on improving our liquidity as our loan-to-deposit ratio has decreased from 97% to 92% over the last two years. And as Jim will further describe, the NIMS should benefit from macro swaps that are coming off throughout the remainder of 2025. Credit is expected to continue to improve, assuming stable economic conditions. Key trends are good, including NPLs, WATCH, OAEM, substandard, and criticized categories, all of which peaked in the second or third quarter of last year. But they've fallen as we've resolved problem credits throughout the last two quarters. The team continues to closely watch the financial health of consumers, which comprise roughly 68 to 70 percent of U.S. GDP, about 40 percent of our lending business. At this time, the first Commonwealth consumers appear to be in good shape. The tariff uncertainty and the prospect of a resurgence of inflation have roiled financial markets over the last several weeks. Importantly, the return of inflation would also further weaken consumers and business households. Fee income was down $1.5 million in the first quarter of 2025. We are encouraged that the $3.5 million hit each quarter to interchange income due to the Durbin Amendment after crossing $10 billion in total assets has largely been absorbed by good momentum with other fee businesses, namely service charges, gain-on-sale businesses, trust, insurance brokerage, and swap income. Our efficiency ratio rose to 59.08%, up from 56.07% in the fourth quarter. Expenses increased $2.1 million to $71.1 million in the first quarter. Salaries and wages were the primary cause, and more specifically, incentive compensation. Total FTE has also drifted upward as we continue to invest in our regional banking teams alongside our equipment finance group. We view these investments as critical components of becoming the best bank for business. Center Bank will legally close at the end of April and could provide a boost to efficiency and margin. We've picked up some good talent and are genuinely excited about the strategic fit that Center Bank brings to a market that is already well-led and ripe for growth. The Board of Directors approved a dividend increase of one-half of one cent per share consistent with prior years, bringing our dividend yield and payout ratio to approximately 3.5 percent and 40 percent respectively. The announcement of tariffs on almost every country has led to uncertainty and the concern that a trade war, if sustained, could lead to disruptions of global supply chains, renewed inflation, and an economic slowdown. We saw initial signs of this strain with the preliminary GDP figures this morning. Our bankers have actively reached out to clients over the last several months to gauge the impact of tariffs on their businesses and identify early signs of stress. Generally, our clients have been less phased by the administration's actions than we might have initially expected. On balance, while most commercial clients would prefer a more tailored approach, many believe that tariffs may ultimately benefit their businesses. For example, the steel sector has been a vocal supporter of the tariffs and believes they are necessary to remain competitive on the flip side other sectors have expressed concern over the tariffs these include polymers manufacturing aluminum coal production and chemical a positive reflection is that many businesses have taken steps to secure supply chains and can pass on increased costs through price escalators because of their experience gained during the pandemic Although tariff uncertainty could create loan growth headwinds, our pipelines remain strong and we have not identified any specific credit impacts yet. On the regional lending front, our northern Ohio, Pittsburgh, central Ohio, Cincinnati, and community PA markets are off the terrific starts. An interesting aside, the country's largest natural gas power plant alongside an AI data center is being constructed in Indiana County, our home county in western Pennsylvania. At 4.5 gigawatts, the plant could power Manhattan and is expected to cost more than $10 billion. And this is from a Wall Street Journal article on April 2nd. These types of projects are springing up throughout our markets, not all $10 billion, but they're creating jobs and revitalizing economies. Good sign and good for our home county. Anyway, with that, I'll turn it over to Jim.

Great. Thank you, Mike. Mike already mentioned the expansion of our NIM, so let me start there. Our previous guidance was for NIM to be relatively flat in Q1, followed by expansion in the remaining three quarters of 2025. So we were quite pleased to see eight basis points of expansion last quarter. We had thought that the need to grow deposits to fund our loan growth would hinder our ability to bring deposit costs down, but that wasn't the case. Deposit costs fell by eight basis points even as we grew deposits. On the asset side of the balance sheet, fourth quarter Fed rate cuts continued to be felt in the first quarter in our variable rate loan portfolio, but that was blunted somewhat by the fact that new loans were coming on in the low sevens, while loans that ran also in the high sixes. That's why our loan yield was only down five basis points last quarter. By contrast, the yield on the securities portfolio was up 15 basis points, partly as a result of a small securities restructuring that we did in January using the gains from the sale of our remaining visa stock as we had previously disclosed. Purchase accounting marks from the Centric Acquisition added five basis points to the NIM in the first quarter unchanged from last quarter. We expect that will continue to fade by about one basis point per quarter. In terms of forward NIM guidance, our new baseline forecast contemplates three Fed rate cuts, up from two in last quarter's forecast. And in that scenario, we'd expect our NIM to expand to the high 370s by the end of the year, give or take a few basis points as always. If there are no cuts at all, we'd expect the NIM to expand another 10 basis points from there to the high 380s by the end of the year. And that gives you a sense of the impact of the rate cuts. About seven basis points of the NIM expansion that we expect comes from the expiration of macro swaps, with $150 million expiring tomorrow, an additional $25 million expiring in the third quarter, and $75 million in the fourth quarter of this year, and then finally, an additional $175 million expiring in 2026. Moving on to loan growth, our previous guidance for mid-single-digit loan growth in remains unchanged. Now to fee income. Fee income is down from last quarter by $2.6 million. We had about $1.4 million of unusual gains last quarter, along with a decline of about $600,000 in the first quarter related to the fewer number of days in the quarter, which we expected. So that combination of $2 million, that swing of $2 million was fully expected. More fundamentally, our SBA gain on sale income was down by about $1 million from last quarter, offset somewhat by a $500,000 increase in our insurance and wealth income. Our fee income of $22.5 million actually came in right in the middle of our previous guidance of $22 to $23 million for the quarter. We expect that second quarter fee income should be roughly, should be better than the first quarter, about $1 million better than the first quarter, or roughly $23 to $24 million, growing another $1 million in the third quarter, and then coming down by about $1 million in the fourth quarter, which we attribute to seasonality in fee businesses like mortgage. Expenses increased by $2.1 million over last quarter, and at $71.1 million, we're well in excess of our previous guidance of $68 to $69 million for the quarter. As disclosed in our earnings release, First quarter results included about $1.5 million in expense for finalizing incentive payments related to the prior year. We also had a $700,000 increase in snow removal costs, which were higher than expected. Salary expense was up slightly more than expected on higher headcounts. Taking all of this into account, we believe that, including the pending acquisition of Center Bank, which closes today, non-interest expense should be in the $71 to $73 million range for the rest of the year. Capital ratios benefited from a reduction in AOCI from $102 million to $81.2 million, as well as retained earnings. Our tangible book value per share grew 16.3% annualized from the previous quarter, and 7% annualized even without the AOCI. There was no buyback activity in the first quarter, timing the closing of the center bank acquisition.

And we have $6.7 million of remaining capacity under our previously authorized buyback program and with that we'll take any questions you may have at this time i'd like to remind everyone in order to ask a question press star followed by the number one on your telephone keypad we'll take our first question from the line of daniel to mail with raymond james please go ahead hey good afternoon guys how are you good um i guess first on the on the loan growth guide.

Sounds like things are still kind of moving in the right direction. I mean, even more than that, it was a good quarter. Zeroing in, I guess, specifically on the equipment finance portfolio, just curious the momentum that you've been seeing there, if you think that continues from here. And if we did go into some kind of slowdown, just curious how you think that portfolio would react from a growth and also from a credit perspective.

So far so good on credit. We might have seen some pull through just because of the anticipation of tariffs and perhaps that has increased the volume in the first three to four months of the year. We'll see. But we're seeing pretty healthy application volume now well into April. And actually I have Mike McEwen on the phone who is our Chief Lending Officer. Mike, what would you add?

I would just add that part of the investment you referenced, Mike, was additional talent in the equipment finance group. And we've also benefited a little bit. Some of the larger foreign finance teams groups have pulled back from the market. And so that's probably helped us a bit, too. But we've not seen a let-up yet in the application growth. It's still pretty strong.

Is that helpful, Dan?

It is, Mike. Thanks. Yeah. Maybe on a similar vein, but just different book, the commercial books, the, you know, the CRE, as well as the traditional commercial, just curious, you know, if you, you gave some color on, on a borrower sentiment in your comments, but it's curious if you had anything else in terms of, you know, what you're seeing from them in terms of pull through rates and, you know, how they're reacting to the whole uncertainty in Washington and tariffs and everything else and kind of your expectation for near term versus back half if there's a difference in terms of where loan growth could land.

Yeah, I'll hand it off to Mike, but I would say we have seen some pull through there on equipment. We're seeing commercial real estate more active than it certainly was this time last year. And so the pipeline there is pretty good. The construction book in commercial real estate is starting to build. I mean, we've been very intentional about wanting to grow the CNI book, and we feel like we're starting to have some success there with even larger credits. And we've built out our talent in the regional teams with two new presidents within the last 12 months or so, and probably at least half a dozen to a dozen additional lenders, PM professionals. So that feels really good. Mike, what would you add?

Yeah, I would just add that really the momentum started to feel good in the fourth quarter, the mood swing, the pipelines were building. So we're benefiting from activity that was generated in the fourth quarter, but we haven't seen a let up. The real estate developers have a bit better view on cost rates were slightly down and so some projects that were deferred are now being put in place uh these are long-time customers of ours in our markets that we know extremely well so that part of it we feel pretty good about and again i think the mood hasn't totally changed on the future but our eyes are wide open uh based on these uh what happens uh with the tariffs and so forth. But I haven't seen a lot of yet, so I feel pretty good.

Hey, Dan, the only thing I would add that we didn't mention is just Jane Grabenz, Mike, and I are out on a number of calls. And we just thought customers seem to be way ahead of us in terms of their supply chain. Perhaps if they're getting tungsten from China or this product from Europe, they've already thought of of how to deflect it to another country or to a domestic supplier. And I think a lot of that came from the challenges that came with COVID. So even if it was a smaller family-owned business, it's not that they anticipated it or wouldn't hurt, but they just seem to be dealing with it in the normal course, despite the headlines of the last month.

That's great color, Mike. Thanks for that. And maybe just a last one here on deposits. It looks like the growth in the quarter is really driven by the savings segment there. Curious if there was anything unusual happening there. If you guys had any color on that and what kind of rates that – the kind of new rates on the savings deposits that you're seeing.

Yeah, I mean, I'll turn it to Jim and Jane, but it just seems like we've given up a little on the beta. because we want to keep growing deposits. And if you remember in the last cycle, we used the beta in the later stages to drive down our deposit costs. And we just haven't gotten there yet. We still want to grow deposits and be more liquid. So we've probably given up a little bit on rate and could have taken our deposit costs down a little quicker. It's also just a culture of deposit gathering, where that's a big part of the goals and incentives of everybody from a branch manager to a corporate banker. Jane or Jim, what would you add? Jane, go ahead.

I would guess that much of the growth that you're seeing in savings is almost a substitute product to CDs. As we've been bringing down the rates on CDs, customers aren't taking the money out of the bank, but they might be parking it in some money markets while they wait and see what happens here. So I think we still have much of it in the house, but it's moving around a little bit.

All right. That makes sense. Thanks, Jane. Thanks, Mike. Appreciate the color today.

Our next question comes from the line of Frank Chiraldi with Piper Sandler. Please go ahead.

Hey, good afternoon. Jim, just in terms of the NIM guide can you share what that assumes for um you know do you do you anticipate uh deposit costs move lower from here without additional rate cuts um or is that continued kind of steady state given that you expect or trying to grow the deposit book yeah thanks frank for asking because we talked about this on last quarter's call so appreciate the question that gives me a chance to clarify a little bit um last quarter we talked about how we took a very conservative line with our ability to drop deposits because we thought we really, really want to grow deposits.

We want to keep a loan-to-deposit ratio of where it is in the low 90s. We want to fund that growth with the deposits, and Mike just hinted at this a moment ago, our kind of pricing strategies are following that. So last quarter of the call, we were saying we're not assuming rates are going to fall in deposits, and lo and behold, in the first quarter, we were able to lower deposit costs by eight basis points, which is great. But looking for their forecast for the rest of the year, I just reiterate the guidance from the first quarter, we're not having an ability to drop the deposit rates. In other words, if I look at the $199 of the total cost of deposits right now, the assumption is that holds fairly steady by the end of the year. So when I say our NIM can get to the high $370s, that doesn't assume an ability to do it by dropping deposit costs. since it could drop deposit costs, well, it could be even better than that. There'd be upside to that. I would, I just had one more thought to that. Some of those assumptions on deposit costs, when we're looking at their historical betas and ability to drop deposits and need to fund it, were done before we saw a lot of competitors dropping rates. And what we've seen in our local market, what we see when we look at the peer reports for the quarter, this quarter, last quarter, everybody's dropping rates. And that's part of our story too in the first quarter. And Jane was alluding to it a moment ago, and CD's mature money markets are mature, we're able to present the customers with lower rates than they had, and people are staying. So we have done well to keep all this maturity short, and that rollover process is benefiting us out, just like everybody else. And so that assumption of not taking deposit rates down is probably very conservative, but to the extent it's conservative, and we're able to do better, then that just gives it a little more upside to that end forecast. Hopefully that's enough for you to think.

Yeah, that's great. But just on that, just does that NIM guidance you gave or outlook, that includes the center deal?

Yes, that includes the center deal. And I'll tell you, we're working on the marks of the center deal right now. We are closing. We're going to get final numbers from them and then do the final work of the third party to do the marks. It's just not that significant to move the needle that much. It might be one or two basis points of that NIM forecast, but it's just not going to be that. It's helped with additive, and overall, look, we're very excited about the acquisition for lots of fundamental reasons, but in terms of the NIM guidance, it's not that big enough to move the needle that much.

Okay, and then just lastly on buybacks, obviously, now that you've got the deal closed, it could change things. And so just curious your appetite or just thoughts, given the pullback in shares on the use of buybacks as capital return here and any thoughts, I guess, around sizing that as well.

So I was watching the stock crisis in the 14s. We thought this would be a great opportunity, but we have the market and now it's all back up and we're going to come out of blackout here in a little bit of an opportunity. But so our capital priorities haven't changed. we want to make sure we can capitalize growth and loan for organic growth. That's become the first priority. Increase the dividend, steady rate, which we did this year again, and then look for these buybacks later return capital to shareholders. We generated excess capital after the dividend of $20 million last quarter, plus another $20 million of AOCI, which you can't count on every quarter, but there's plenty of capital generation.

So, we have not made any official decision to turn on buyback but we would look at all those factors in the second quarter to see if it's appropriate to do so okay all right appreciate the color thank you thank you our next question comes from the line of carl shepherd with rbc capital markets please go ahead okay good afternoon guys good afternoon um jim just to pick at the deposit cross guidance one more time yeah sure i just want to get it straight um the high 370s assumes a couple of cuts and you're you're saying stable deposit costs even in buckets like savings or interest-bearing demand in that scenario that seems

very conservative to me so that's what i just want to make sure it's not pricing or go ahead it is it is and so look the whole bank we're doing our reforking has to exercise actually this month for the rest of the year so that guidance might change for the next quarter there's a couple things going on I think the macro swaps alone get you halfway there to the NIM guidance and the rest of it is coming from positive replacement yields even in a falling rate environment so I agree with you that the assumption on the deposit cost might be conservative you started it on this avenue of the different categories there's obviously mixed shifts going on within those categories So we're not saying that it's stable in every category across the board, but that's the aggregate cost of deposits, which includes time and interest bearing, staying stable. So we'll revisit that assumption here and update guidance as the year goes on.

Okay. Sorry to pick at it. I know it's not the easiest thing to forecast, and you do your best every quarter.

Yes, I anticipated the question, so thank you very much, Carl.

Can I move over to expenses? the FTE kind of ticked up a little bit over the course of the quarter I guess is there any more planned for this of the year and then just anything else going on besides stripping out the incentive comp from last quarter and adding back center that you want to flag for us yeah the FTE is really an investment on probably half of it on the commercial side of the bank and pretty pleased with the prospects of return there I think part of it is also just filling vacancies in our financial solutions network.

And we're also going to look closely at costs here in the second quarter. Feels like the run rate is a little higher than it should be. And we'll probably be back to you perhaps in the next quarter or so with some opportunities there. Jim, what do you want to add?

No, it's just, you know, we're happy to be able to pick up talent where we can. We're able to do that in some select pockets in a commercial bank, so that's a good addition to FTE. We've done some measures as well to make sure that our turnover rate is under control in our branch network and that people like to work here and stay here. So that helps the FTE count as well, that affects the FTE count as well.

Okay. Thank you both. Thank you.

Our next question comes from the line of Kelly Mata with KBW. you. Please go ahead.

Hi, good afternoon. Thanks for the question. And congrats on getting the deal to close so quickly. Following up on the expense question, maybe framing it in another way, you talked about, you know, the new talent you've hired to new presidents and treasury management, wondering, you know, acknowledging that you are paying close attention to expenses, If there's any other areas where, you know, you think you might be opportunistic with adding talent.

With adding talent, I think we've added to and bolstered our equipment finance group and our commercial banking teams. Not at the time. I think that we're pretty pleased with our fee businesses, our gain-on-sale businesses, the staffing we have there, and wealth management. they're contributing nicely. Mortgage is probably up year over year in terms of originations and volume. They're probably not at that point or inflection point where you would consider adding to some of those consumer lending businesses. I think we're pretty good. We're going to be off-site on Monday, and we're going to talk about getting better processes and how we improve the flow through our bank and our operations areas. And we will become more efficient than we were this quarter.

Got it. That's helpful. And then on the SBA front, that gain on sale came in a bit this quarter. We've seen that at a couple other banks. Wondering if you could share the drivers of that if it was just pipeline there or gain on sale margins and your outlook for this business is Q4 more of a normalized level or would you anticipate this quarter to be a good run rate in the near term?

You know, we're a little perplexed by that. The SBA was uh going along pretty well i think uh perhaps the just the longevity of higher rates now on those borrowers that have just slightly more leveraged uh perhaps as part of the answer i guess i'll i'll turn it over to mike or um jane who are closer to the business your your thoughts Mike, do you want me to go first?

Yeah, sure, go ahead.

So, a couple things. We think that SBA gain on sale will be a bit frothier as the year progresses because of pipeline and the mix of deals that are in there. There are some construction deals in there that need to close before we can do anything with them, and we've got some larger projects in there that are just taking a bit longer to complete. But it's not a question of margin. The gain-on-sale margin is right around where we expected it to be so far.

Got it. That's helpful. Maybe last question for me on the expense guidance. Just want to clarify that that includes the impact of the run rate of the acquisition and the timing of the conversion on that.

Yes, yes, it does.

And the conversion is slated for the first weekend in June.

Yeah, Kelly, and actually, you know, we gave some of that guidance on last quarter's call. I think you all reflected it. I saw it reflected in the consensus pretty well for the expense run rate.

Great. Thank you so much. I will step back.

Thanks, Kelly.

Our next question comes from the line of Matthew Breeze with Stevens. Please go ahead.

Hey, good afternoon. Sorry to beat a dead horse here, but the NIMM outlook just sounds really robust. And, you know, Jim, I was hoping you could maybe extend that outlook a little bit. Granted, there's more factors as we get into 2026. 2026, but is the outlook for the NIM into 2026 still kind of up until the right?

Well, it depends a little bit on the forecast. In the flat rate forecast, which we do kind of bracket, what if there are no rate cuts at all? It just stays where it is. Yeah, it's great in 26. It keeps going. It gets to 380 and stays in the 380s. It actually hovers through the 380s in 2026. but ends 2026 in the high 380s. So if we have this baseline forecast here with three cuts, then it stays in the right around 380. If the 370, it stays around 380 next year. So it depends on that. But thanks for the question. It's a good opportunity to say there are other assumptions in there as well. There's no recession forecast in that. So part of the assumption in all these forecasts is that we're able to continue to grow loans, continue to put on new loans that the rates that we assume are willing to put them on and that will replace the runoff that we assume they're going to have at a lower rate loan. So, you get the nice benefit of that pickup and replacement yield. So, but there's not, there's no constant slowdown on any of that. So, there are other assumptions in there that have affected them.

There is, yeah, there's only, you go ahead, Mike. Yeah, just let me use for a moment. I mean, if rates come down quicker than that, we're pretty broad based in our offerings with consumer products that are on the sidelines, particularly consumer lending out of our branches, of good mortgage capability that we haven't dismantled. And, you know, those businesses could really turn on in an environment like that. And, you know, I think our mortgage business made 10 plus million dollars a year for us. So it just, I think we're hedged that if rates go down and certain kinds of businesses pick up, we just don't feel like it would be a train wreck. In fact, we think if rates went down a little bit and the yield curve was upward sloping and it just sprues demand a little bit, we can have the best of both worlds in the consumer and the commercial banking side.

I appreciate that. I mean, in my career, a handful of times you've seen a 4% NIM, usually not for very long. I'm curious if you think you start to see kind of competition of road margins as you hover in the 380s there.

I suspect. I think, you know, we're a bank also that, I mean, we're about 19.5% fee income. Our peers are about 16.5%. Our top quartile is probably, you know, two percentage points better than that. We really need to get there. I mean, we've come a long way in a decade, but we really need to be a better fee income bank. And we've got to drive that through our regional business model, which we put in place, and we have good product offerings and wealth management to gain on sale businesses, insurance, and other places. And we just feel like we can get there and get that fee income up as well over time. And that's just all blood, sweat, and tears and what Jane and Mike McEwen are good at and the teams. and that's just execution.

Understood. Could you help me out with new loan yields? What are you pricing or what is the blended rate on the pipeline? Are you starting to see competition erode margins anywhere, if so, to what extent?

Yeah, I'll turn it over to Mike McKeown on that. I'd love to hear your response, Mike.

I mean, the loan yields, as Jim alluded to, are coming in around seven today. I will say that competitively, it feels like there's more competitive pressure today as folks are looking to grow loans. So we have seen some slight moves down in margin and bids. Still pretty healthy overall, but you can anticipate, I think, that as folks are looking for more to grow their portfolios, a little more pressure on that yield. But it's still at a somewhat elevated level from where it has historically. We're just watching that closely as we select the right deals and the right clients.

Got it. Okay. How much SBA exposure do you have on the balance sheet? And are you seeing anything notable credit trend-wise there over the last bunch of weeks, particularly post-tariffs? And then any notable exposures that might be more consumer-oriented? I'm thinking franchises and restaurants and things like that.

Yeah. I'm going to turn it over to Brian Sohaki for that one. Great question.

And I apologize. Can you just repeat the first part of it? You referenced a specific industry, and I didn't catch the wording.

Yeah, I was looking for SBA exposure that's on the balance sheet, notable credit trends overall, and then, you know, specifically if there's exposure to some of the more consumer-oriented categories, and I'm thinking, you know, franchises and restaurants.

Sure. No, thank you. Thank you for repeating it. Yeah, the SBA portfolio is quite diverse. We do have one individual that focuses on franchise lending. We've had a number of parameters, a box built around that business to, you know, ensure that it's franchises with, you know, a broad depth of locations and experience. We've built boxes around it to ensure that there's additional liquidity on the balance sheet of the individual as they... So we feel pretty good about the business that we have in SBA for franchises. Beyond that, I wouldn't highlight any concentrations, retail or otherwise. We sell our business, and those that are on the books came via acquisition, or as I think Jane highlighted earlier, we do do a fair number of business expansion loans and those construction loans. So I'm feeling pretty good about the…

Yeah. And upstate, we have that for SBA footings on the balance sheet. We could probably get that for you by the end of the call.

Yeah.

Okay. And then just last one for me, Jim. As the swaps expire, what part of the average balance sheet are going to be affected by that? I'm sorry for the JV question, but I'm just trying to figure out the average balance sheet with that rolling off.

Well, the average balance sheet, the size won't change. I mean, either the asset's there or the asset stays there. So right now, let's give you an example. The one that's expiring tomorrow, counting down the days, $150 million. That is right now we have a received fixed swap. So we're getting the spread plus 0.595%. That's the received fixed. We're receiving 0.595%. The day after tomorrow, we'll receive one month so far. We'll get a spread, whatever the spread is, plus one month so far, 4.327%. So that $150 million is still in the books. So it'll stay there. It's just going to pop up by the difference between 4.327 and 0.595.

Okay. So is that loan yields will be affected by that? Is that what you're saying?

Correct. Okay. Correct. Loan yields. So yeah, I mean, that one swap alone is enough to add what, $5.26 million a year in income, spread income.

That's all I have. Thanks for taking my questions. You bet. Thank you so much.

Again, for any questions, press star one. And our next question comes from the line of Manuel Navas with DA Davidson. Please go ahead.

Hey, I appreciate that the peak in kind of some of the credit issues was last year. uh could you just kind of speak to the trend in provisioning from here and reserving yeah um i'll hand it over to brian in a minute we're we're about uh 132 reserve i think about last year um we had about 30 million in charge offs and 29.1 in provisioning so as you would expect it kind of matched our charge offs uh you know the first quarter is pretty good Our charge-offs are down, provisioning stayed high a little bit, and ideally, over the course of the year, they would match. And we're already in a pretty good position. We're probably seven basis points higher than our $10 to $100 billion peers on the reserve. So we're in a good position there. And we also feel like, you know, some of the acquired loans, that we can see the tail, the watch list, and everything starting to dissipate. And we didn't really feel a lot from our legacy portfolio or as much over the last few years. Brian, what would you add?

I wouldn't add too much to the reserve outlook. I mean, I'd anticipate it to remain relatively stable. You know, we experienced loan growth in the first quarter, both on the, you know, funded side and the unfunded construction side. We'll continue to, you know, show, you know, in the reserve based on that. And, you know, pending macro, you know, we'll see changes in our, but I think Mike covered That's helpful.

With the – just shifting topic for a second, with center bank closing, is there any kind of updated metrics with that one? I know it adds density to your Cincinnati footprint. Anything to update there? It's already in your guidance, but just maybe more qualitative how it helps with loan growth. And then any further thoughts on the next transaction? kind of what would you consider going forward if any of your interests have shifted or just stayed on the same disciplined process?

I would just add on Center Bank, we've gotten some unexpected good talent from that organization. It's already integrated with our regional president there who are in the same space, and that's really positive in terms of cohesion and culture we get several good lenders that will hit the ground running and add to the team so pretty excited about that we've also felt like we got to the expense targets that we pretty easily and added some talent even added some corporate talent to fill open positions throughout first Commonwealth. We're excited about that. I think that, I think that we can, Jim, you'll have to coach me here. If memory serves, it's kind of outsized accretive for the size. It was almost like two and a half, three percent accretive in 2026 for a bank that was pretty small. So we're pretty high on it. And we also think that market is just ripe for growth. We have a number of our senior executives now that live in Cincinnati and have terrific brands there personally. And I just really believe we could easily, over the next few years, rapidly increase our deposit and loan footings there. And we just already have quality relationships with developers and other businesses. So that's a great place to start. Regarding M&A, I mean, it's the full gamut. We've done smaller deals. They've tended to do very well for us. And we've been very conservative, as you know, in terms of being pretty picky. And almost all of our deals have been strategic and really added to our geography, primarily Ohio, where, you know, a decade ago, we hardly had anything. And those markets have been the lion's share of our growth over the last five or six years, or last 10 years. So I don't know that our appetite has changed much. I think there might be more conversations in the offing the last six months or so. Jim, what am I missing?

Nothing to add, Mike.

Hey, Mike. One thing to add with Center Bank. I thought you captured it all beautifully, but the one really nice surprise, you know, we expected all of the good stuff that we're going to get, but the one really nice surprise was the caliber of the mortgage operation. And so we think that'll help us deliver the mission in Cincinnati. We think it'll help us grow the residential mortgage business as well as the home equity business and consumer businesses generally.

Great comment, Jane. Thank you for that.

Hey, Mike, if I might just go back for a moment, the SBA balances on the book is about $165 million.

I appreciate all the commentary. Thank you, guys.

And that will conclude our question and answer session. I'll turn the call back to Mike Price for any closing comments.

Hey, as always, we appreciate your interest in our company. We're excited about the future. growing our C&I businesses in our regions alongside what we feel like are great offerings in CRE, equipment finance, consumer offerings, mortgage. We also are a bank that has a granular depository, lots of households. And we're anxious to grow our fee businesses as a percentage of our overall revenue. Again, leveraging the regional model and our local teams and the relationships that we already have with clients. We also will be intentional and vigilant about our costs and continuing to perform there as we have in the past. So, thank you for your interest and look forward to seeing a number of you over the course of the second quarter.

That will conclude today's call. Thank you all for joining. Thank you by now.