FCF Q1 2026 Earnings Transcript

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Date

Wednesday, April 29, 2026 at 2 p.m. ET

Call participants

• President and Chief Executive Officer — Thomas Michael Price
• Chief Financial Officer — James R. Reske
• Chief Credit Officer — Brian J. Sohocki
• Chief Lending Officer — Michael P. McCuen

Takeaways

• Net income -- $37.5 million, translating to $0.37 earnings per share with GAAP basis specified; this was below the consensus estimate of $0.40 per share.
• Net interest income -- $109.3 million, down $4.2 million sequentially, due to the sale of $210 million in Eastern Pennsylvania commercial loans and $74.2 million of heightened loan payoffs.
• Commercial loan repayments -- $630 million, representing a $150 million increase year over year, with $240 million attributed to payoffs from 18 refinanced or sold commercial real estate projects.
• Net interest margin (NIM) -- 3.92%, a decrease from 3.98% sequentially, in line with company guidance; management highlighted a 54 basis point higher yield on new fixed-rate loans.
• Deposit growth -- 6.3% end-to-end annualized for the quarter, driven by money market promotions and new consumer checking accounts.
• Efficiency ratio -- 55.4%, reflecting a $1.2 million increase in expenses mainly from higher salaries, incentives, and $500 thousand in debt prepayment fees.
• Provision for loan losses -- $10.7 million, increasing by $3.7 million on a linked-quarter basis, with $9.6 million in reserves on three large credits, including one from Eastern Pennsylvania.
• Nonperforming loans (NPLs) ratio -- 0.98%, with $28.1 million (30.4%) of the $92.3 million NPL balance guaranteed by the SBA.
• Loan-to-deposit ratio -- 91% at quarter-end, lowered by payoff of nearly all borrowings and deposit growth, supporting management's flexibility to test lower deposit rates.
• Tangible book value per share -- Increased 4.3% quarter over quarter, from $11.22 to $11.34, during continued share repurchases.
• Share repurchases -- $20.7 million in buybacks executed at a weighted average price of $17.67 per share; $25 million repurchase authorization remains.
• Dividend increase -- Quarterly dividend raised by $0.02, representing the eleventh consecutive annual increase.
• Common equity tier 1 (CET1) ratio -- Improved from 12.1% to 12.5% sequentially; tangible common equity (TCE) ratio steady at 9.7%.
• Noninterest expense (NIE) -- $75.5 million, up $1.2 million from the prior quarter, with guidance for $74 million to $76 million per quarter for the full year.
• Fee income -- Approximately $24 million to $25 million per quarter expected for 2026, with current quarter including $435 thousand from payoffs of held-for-sale loans.
• CenterBank acquisition -- Management stated it "exceeded financial expectations" and drove company-leading loan and deposit growth in Cincinnati.
• Loan portfolio mix -- Currently 61% commercial and 39% consumer; commercial composition has increased by one percent over two quarters.
• Expiring swaps -- $150 million of macro swaps to expire in the second quarter, with management anticipating NIM expansion as a result.
• Guidance update -- NIM is now expected to rise by 3-5 basis points per quarter, potentially exceeding 4% by year-end, tied to deposit cost reductions and a base case of one late-summer rate cut.
• Dividend and buyback payout -- Nearly 100% of internal capital generation returned to shareholders through dividends and share repurchases last quarter.
• Loan growth outlook -- Management reaffirmed a mid-single-digit loan growth target, citing steady pipeline activity and fewer large payoff names remaining.
• Consumer credit trends -- Delinquency rates on consumer loans improved, which was noted as a positive offset to total delinquency levels.
• Equipment finance -- Expected to show continued growth through the coming year, with a portfolio shift toward end-market leases, as per management commentary.
• Granularity of deposits -- Core deposit base remains evenly split between consumer and commercial accounts, supporting resilience and flexibility according to leadership statements.
• Asset quality resolution -- Charge-offs above the long-term target but sequentially improved, with isolated credit events as main driver and "no indicators of systematic stress across the portfolio."
• Office portfolio maturities -- Upcoming maturities of $35 million, $17 million, and $13 million over the next three quarters are actively managed, with risk flagged as manageable by the credit team.
• Leadership transition -- Ryan Gorny named Chief Information Officer, replacing retiring long-tenured executive Norm Montgomery.

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Risks

• NPL movement -- Management acknowledged that three large relationships totaling $20.5 million were moved to nonperforming status, with $9.6 million in specific reserves, offsetting positive asset resolution.
• Efficiency ratio and expense growth -- Efficiency ratio increased to 55.4%, with executives stating intent to slow expense growth after recent increases in salaries, incentives, and prepayment fees.
• Commercial loan payoffs -- CEO Price noted "commercial loan repayments swelled to $630 million in the first quarter, up $150 million," placing pressure on loan growth despite production.
• Charge-offs above target -- Chief Credit Officer Sohocki indicated, "we remain above our long-term target," for charge-offs, with improvement expected to be gradual as problem credits are resolved.

Summary

First Commonwealth Financial Corporation (NYSE:FCF) reported sequential declines in net interest income and margin, linked to the sale of commercial loans and elevated commercial loan payoffs, yet affirmed expectations for improved net interest margin through lower deposit costs and expiring swaps. Management revised net interest margin guidance upward for the remainder of the year and declared that nearly 100% of internal capital generation was returned to shareholders via buybacks and increased dividends. The CenterBank acquisition led to notable loan and deposit growth in Cincinnati, while ongoing initiatives in efficiency and technology integration were highlighted as strategic priorities. Improvement in consumer credit delinquencies partially offset elevated charge-offs concentrated in a few large relationships, and the leadership transition in the information technology function was announced.

• The company expects future deposit cost reductions due to a lower loan-to-deposit ratio and continued consumer account growth, with management specifying flexibility in testing deposit rate decreases.
• Executives confirmed no geographical concentration in nonperforming loans and emphasized the benefit of $28.1 million in SBA guarantees within the NPL balance.
• A quarterly tax rate of 22.26% was confirmed for modeling purposes, with management indicating future rates should stay near 20%.
• Net commercial loan growth remains an operational challenge because payoffs have outpaced new production, but pipelines across key Pennsylvania and Ohio markets are described as "deep," with increased business banker hiring and sector diversification.
• Fee income stability was affirmed, with modest contributions from mortgage, wealth, and SBA lines, and management expects fee revenue to range between $24 million and $25 million per quarter for 2026.
• Cash positions were elevated due in part to loan sales and anticipated public funds outflows, with a plan to incrementally increase securities purchases if deposit flows remain solid.
• Management stated the equipment finance segment will continue expanding toward an end-market leasing focus, anticipating a full business maturation cycle in the coming year.

Industry glossary

• SBA: The U.S. Small Business Administration, which guarantees loans, reducing credit risk for the bank on qualifying portfolios.
• Net interest margin (NIM): The difference between interest income generated and interest paid out, relative to average earning assets, indicating core banking profitability.
• Nonperforming loans (NPLs): Loans where the borrower is not making scheduled payments, posing a heightened risk of loss to the bank.
• Efficiency ratio: Noninterest expense divided by net revenue, assessing how efficiently the bank turns revenue into profit.
• CenterBank acquisition: The 2025 purchase of CenterBank, referenced as exceeding growth expectations, relevant to Cincinnati expansion.
• CET1 ratio: Common Equity Tier 1 capital divided by risk-weighted assets, a regulatory capital adequacy metric.
• TCE ratio: Tangible Common Equity divided by tangible assets, reflecting capital strength excluding intangible assets.

Full Conference Call Transcript

Thomas Michael Price, President and CEO; James R. Reske, Chief Financial Officer; Brian J. Sohocki, Chief Credit Officer; and Michael P. McCuen, 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 our forward-looking statements disclaimer on page three of the slide presentation for a description of risks and uncertainties that could cause actual results to differ materially from those reflected in the forward-looking statements. Today's call will also include non-GAAP financial measures. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, our 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.

Thomas Michael Price: Thank you, Ryan. Good afternoon, everyone. Several headlines for 2026 follow. Net income of $37.5 million resulted in $0.37 of earnings per share as compared to our consensus earning estimate of $0.40. Net interest income was down $4.2 million for the quarter to $109.3 million, as we sold $210 million of Eastern PA commercial loans and loan balances fell another $74.2 million due to heightened payoffs. Our commercial loan repayments swelled to $630 million in the first quarter, up $150 million over 2025. In the first quarter, we had 18 successful CRE projects that were refinanced or sold, representing a payoff of approximately $240 million in loan outstandings. Net interest margin, or NIM, fell as expected to 3.92%.

Among other items, positive replacement yields on new fixed-rate loans in the first quarter were 54 basis points higher, and coupled with $150 million of swaps falling off in the second quarter, this should provide the impetus for further NIM expansion. Deposits grew 6.3% end-to-end annualized in the first quarter, and our money market promotions have resulted in new consumer checking accounts. Heretofore, we have been reticent to aggressively drop rates, but given the elevated loan payoffs and a markedly lower loan-to-deposit ratio, we are well positioned to test lower deposit rates in the next several quarters.

Expenses were up $1.2 million to $75.5 million in the quarter as salaries and incentives increased alongside $500 thousand of prepayment fees for the repurchase of long-term debt. Our efficiency ratio climbed to 55.4%, and we intend to slow down our expense growth rate. The provision for loan losses increased $3.7 million to $10.7 million on a linked-quarter basis as we had $9.6 million in specific reserves for three larger credits, one of which was from Eastern Pennsylvania. Our nonperforming loans, or NPLs, to loans remain stubbornly high at 0.98% in the first quarter. Specifically, three previously discussed relationships totaling $20.5 million moved to nonperforming status during the quarter with $9.6 million of associated specific reserves.

These downgrades offset otherwise positive asset resolution during the quarter, and please recall that of our $92.3 million in NPLs, $28.1 million, or 30.4%, is guaranteed by the SBA. The balance sheet and liquidity continued to strengthen in the first quarter as we paid off virtually all borrowings, lowered our loan-to-deposit ratio to 91%, and grew tangible book value per share by 4.3% while at the same time repurchasing our stock. Other notable first quarter items include our CenterBank acquisition, which has exceeded financial expectations and helped lead Cincinnati to company-leading loan and deposit growth in the second quarter. Residential mortgage had a strong first quarter with both loan volumes and gain-on-sale income.

The small business and business banking segment volumes were brisk, as we have added new bankers and enhanced credit processes. Also, our retail bank had the highest net promoter and customer satisfaction scores since we began tracking. As we think about the ensuing quarters and future, it will be important that we focus on the basics: namely, live our mission, grow the bank, get better. As we grow the bank, we must do so steadily and ensure our credit costs converge and surpass peers. Getting better will necessitate new approaches and technologies to both make it easier for customers to do business with First Commonwealth Financial Corporation while simplifying internal processes.

Given our adoption of fintech over the years and our current AI usage, we have important tools to continue to evolve our company. Simultaneously, we must become more efficient as we scale the bank. Our first strategic initiative—live our mission to improve the financial lives of our neighbors and businesses—remains the cornerstone of our brand and is what sets us apart as a community bank. With that, I will turn it over to James R. Reske, our CFO.

James R. Reske: Thanks, Mike. Mike has already provided an overview of financial results, so I will drill down a bit on spread income and the margin. Spread income was down from last quarter by $4.2 million. Approximately $2.6 million of this decline can be attributed to having fewer days in the quarter. The remainder stems from the lower level of earning assets and the impact of last quarter's Fed rate cuts on the variable-rate loan portfolio. The Fed cuts resulted in a 9 basis point contraction in the yield on earning assets, somewhat offset by a 5 basis point decrease in the cost of funds.

The decline in earning assets is largely the result of the disposition of $210 million in loans that were moved to held for sale at the end of the fourth quarter. This quarter's net interest margin, or NIM, of 3.92% is in line with our previous guidance. While it is down from last quarter's 3.98%, the NIM in the fourth quarter benefited by about 3 basis points from several unique items that we talked about last quarter, including the recognition of accrued interest from the payoff of several loans that had previously been placed on nonaccrual status.

Looking ahead, the NIM should benefit from fewer-than-expected rate cuts to keep the variable-rate loans from repricing downward, while continuing to allow the fixed-rate loans and securities to reprice upward. And the expiration of $150 million of macro swaps on May 1—this Friday—is even more valuable in a higher-rate environment, as it will allow those loans to flow to higher rates than expected. Based on our new one-cut base case, we are revising our previous NIM guidance upwards slightly—about 3 to 5 basis points higher each quarter than before—drifting upwards to the low 4% range by the fourth quarter of this year. First quarter noninterest expense, or NIE, increased by $1.2 million from last quarter.

The first quarter NIE included about $1.3 million in expense to finalize the incentive payments related to prior-year volumes and performance, similar to the first quarter last year, along with the $500 thousand FHLB prepayment penalty that Mike mentioned. We expect NIE per quarter to hover in the $74 million to $76 million range this year. Fee income is little changed from last quarter. First quarter fee income included approximately $435 thousand from the payoff of several loans that had been included in the held-for-sale portfolio at year-end; where they paid off at par, the difference between par and the mark was recognized as fee income.

Wealth, mortgage, and SBA are all up significantly from the same quarter a year ago. Fee income should range from $24 million to $25 million per quarter this year. We repurchased approximately $20.7 million in stock last quarter at a weighted average price of $17.67. We have $25 million remaining in repurchase authorization—not the $18.4 million figure that was in the earnings release. We announced a $0.02 increase in the dividend yesterday, marking the eleventh straight year of dividend increases. Combined with the dividend, we returned nearly 100% of internal capital generation to our shareholders last quarter, and yet tangible book value per share grew from $11.22 to $11.34. We intend to continue share repurchase activity in the second quarter.

Our CET1 ratio improved from 12.1% to 12.5%. Our TCE ratio was unchanged at 9.7%. And with that, we will take any questions you may have.

Operator: Thank you. We will now open the call for questions. If you dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 a second time. If you are called upon to ask your question and are listening via speakerphone on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Again, it is star 1 to join the queue. Our first question comes from the line of Daniel Tamayo with Raymond James. Your line is open.

Daniel Tamayo: Thank you. Good afternoon to everybody. Maybe starting just on the increase in the charge-offs. I appreciate the comments on the loans that were paid down or sold in the second quarter early on. Maybe just a clarification on that. First of all, were there any charge-offs associated with those credits that were sold or paid off? And then, James, if you had any thoughts on provision or net charge-offs for the rest of the year?

Thomas Michael Price: Thanks. Brian, go ahead.

Brian J. Sohocki: Yes, Daniel, I can jump in. The charge-offs from the portfolio—we recorded $2.8 million during the fourth quarter when we moved them to held for sale. Then there was approximately $400 thousand that had paid off at par that were reversed and run through the income statement in the first quarter. As you look at the other charge-off activity, my comment would be that we remain above our long-term target, but we did improve sequentially, and the level continues to be driven by a limited number of isolated credits. We are not seeing any indicators of systematic stress across the portfolio. Overall, the performance has been remaining consistent outside of those isolated numbers.

I think your last part of the question was related to the activity in the press release post quarter-end. There were two names that were in nonperforming at the end of the first quarter. One, we ultimately exited via a loan sale and incurred a charge-off outside of our reserved amount of just under $150 thousand. The second was an exit—full payoff—at par.

Daniel Tamayo: Okay. Very helpful. I appreciate that detail on the second quarter. So I think what you are saying is—and correct me if I am wrong—you were a little bit above your long-term target in the first quarter, so that should drift down towards that range as the year plays out. Is there a ramp down from here, or are we moving quickly back into that range?

Brian J. Sohocki: We will continue to work through the resolution. Specifically, as you saw in the release, the one item which was moved to NPL during the first quarter will support a second quarter charge-off. So more of a slow ramp down to the historical level as we resolve those credits that moved into NPL.

Daniel Tamayo: Okay. Great. That is helpful. Thanks. And then maybe, James or Mike, on loan growth—what did paydown activity look like in the first quarter, how are you forecasting that to trend for the rest of the year, and how does that offset against origination activity?

Thomas Michael Price: Yes. In the first quarter, we had more production—over $900 million in 2026. Our payoff activity was heightened. It went from about $480 million to about $630 million—up $150 million—so we felt that, and we felt that on top of the loan sale. Last year, we grew modestly; we grew about $95 million in the first quarter—about 4.4%. Notwithstanding those payoffs, our activity was steady. It was good. HELOC/HELOAN was a bright spot. I would say small business and business banking, and we are still trying to get the commercial real estate construction portfolio to overtake the payoffs and some of the originations there.

We feel the year sets up pretty well, notwithstanding $150 million more of payoffs from a year ago. In the ensuing quarters since the first quarter of last year, the payoffs went up every single quarter. We feel with rates maybe cresting here that activity has slowed somewhat in the last 30 days or so, and we do not have that many big names left to pay off. That is the calculus, and we feel good about the level of activity and that we can hit the guidance that we have given historically of mid-single-digit loan growth.

Operator: Our next question comes from the line of Charles Driscoll with KBW.

Charles Driscoll: Hi, thanks for taking the questions. This is Charlie on for Kelly Motta. Just one clarifying question on the margin. I appreciate the comments on the 3 to 5 basis points expansion from here, but drilling down on that exit margin, do you expect to exit the year near 4% or a bit above that level? If you could help us with how you are thinking about some of the pieces here, or what could cause you to exceed that exit rate or reach the high or low end of that guide?

James R. Reske: Thanks for the question. We think the fourth quarter should be a little over 4%. There is variability—the big variability over the last few years has been deposit behavior. I think we are in a really good spot now. The loan-to-deposit ratio is now 90.9%, so we have room to bring down deposit costs because the balance sheet is so liquid. That gives us a little more freedom to be a bit more aggressive on deposit rates and bring that down. That is the big variable factor in our NIM forecast. All else being equal, we expect to end the year a little over 4%.

Thomas Michael Price: I would just add that in bringing down the cost, we will balance that with our promos. We have gathered a lot of core deposits as well as interest-bearing deposits, and it has been a terrific way to gain new checking accounts. The team has done a nice job. We will pick our spots as we decrease rates, perhaps a little bit more on CDs. We are going to test this, and we are going to be cautious because household growth and the granularity of our deposit base are tied to lending opportunities. When we get a new consumer customer, that is a good thing.

Our deposit base is about 50/50 consumer, which makes it very granular, and we sailed through events like Silicon Valley three years ago. You can see our string of deposit growth pretty steadily over the last three years or so.

Charles Driscoll: I appreciate the commentary there. On deposit gathering activity, you saw a nice quarter here. Do you expect that to keep up with the mid-single-digit loan growth you are targeting, just to get the right side of the balance sheet keeping up?

James R. Reske: Long term, yes. Maybe shorter term, we are going to test some things. We have a good team.

Charles Driscoll: Great. Thank you. And then last one for me, just on expenses. Is this a core run rate to build off of in 2026? Maybe provide some color on the investments you are making and where you are exercising more discipline on the expense front?

James R. Reske: I think the guidance we gave—we talked about NIE hovering in the $74 million to $76 million range. I wish I could give you a tighter range, but those just vary a little bit quarter to quarter. We are committed to keeping expenses under control.

Thomas Michael Price: We have been good stewards of expenses over the years, and we like efficiency ratios that are less than 55%. We have been pretty good at operating leverage through the years, and as we scale the bank, we have to stay true to that culture. At the same time, we are getting stretched on expenses and talent. We have to find the right mix and have lots of good discussion—just like other management teams.

Operator: Our next question comes from the line of Karl Robert Shepard with RBC.

Karl Robert Shepard: Hey, good afternoon, guys. Jim, just one quick one on the NIM guidance. I think you said you moved from two cuts to one cut. Is that later in the year, or is it earlier and might have a little bit of impact?

James R. Reske: I think it is a little later in the year—late summer. I can verify that. If there is one cut—if the rate environment is down a little bit—it gives us an opportunity to take deposit costs down even further. Generally, we say we are not a sensitive balance sheet, but in a falling rate environment, there is a little more opportunity on the deposit side than it costs us in the variable-rate loan portfolio. One cut versus zero cuts—the delta for us is not all that big. The one cut in our base case forecast is, as I said, late summer—about September, actually.

For context, the base case last fall when we were doing the budget, based on a purchased vendor forecast most banks use, was four cuts for the year. It is quite dramatically different now.

Karl Robert Shepard: That is helpful. I wanted to pick up a little bit on the credit discussion. I know the provision will be an output of what is sitting there at quarter-end, but if I put all your comments together and the specific reserves for the credit that was resolved after quarter-end, it seems like there is room for the provision to drift back down a little bit. With no stress in the portfolio and a stable reserve, is that a fair way for us to think about this?

James R. Reske: I think so, yes.

Karl Robert Shepard: Great. Those are the two for me. Thank you.

James R. Reske: Thank you.

Operator: Our next question comes from the line of Manuel Antonio Navas with Piper Sandler.

Manuel Antonio Navas: Can you speak a little bit more on the buyback pace? Is it impacted at all with any potential shifts in loan growth? I know you reiterated the guide, but if loan growth comes in at different parts of the range, would you buy back more? Is that part of the calculus?

James R. Reske: Great question, Manuel. It is not really driven or leveraged by loan growth. We have plenty of capital to capitalize for loan growth. If we went gangbusters, we would not be pushing the capital ratios into any place where we would be concerned. It is really more driven by just a dollar amount of capital generation. We are operating under Fed guidance that says you are allowed to return to shareholders—between the dividend and the buyback—up to the dollar amount of capital generation in any given quarter, but not beyond that. That is what we have been operating on. There are peers that go beyond that, but that requires a full-blown application for the Fed.

We just have not done that. Last quarter, there is a chart in the supplement on the investor relations website that shows we returned about 95%—close to 100%. I think we came within $1.7 million. Your question is fair because we always say the primary use of capital is organic loan growth and capitalizing as we go, but the cap is really driven by the dollar amount of capital generation.

Manuel Antonio Navas: Shifting over to loan growth for a moment. Any shift to the mix, or because the production is pretty solid, are you going to keep the same mix? Specifically, could you comment a little bit on the equipment finance growth? Are we approaching a cap, or does that still have a year or so left to run? That was a nice positive area of growth for the quarter.

Thomas Michael Price: The mix is probably a percent more commercial—probably 61/39 now commercial/consumer. To move it a percent or so even in two quarters takes a lot more production on one side than the other, so we are becoming more commercial. We actually talked about that this morning because we love the consumer households and deposits and the granularity of that, and we want to have good balance there. On the equipment finance side, I think there is room to run there for another year or so. Knock on wood, it has really met our credit projections, and that portfolio will begin to mature in the next year or so.

We will see how those credit costs come through and how that matures, but I feel good about that business. The team has been very nimble and creative. We had a goal to, once we got that up and running, really switch that to an end-market true leasing business, and they are already pivoting there in a meaningful way that will result in a good portion of that business being end-market leases to our commercial clients. It is a talented team, and we are delighted with how that has unfolded.

Manuel Antonio Navas: That is great. Thank you. I appreciate it. I will step back into the queue.

Operator: As a reminder, it is star 1 if you would like to ask a question. Our next question comes from the line of Matthew M. Breese with Stephens. Your line is open.

Matthew M. Breese: A few questions. First one—towards the back of your presentation, it looks like you have $35 million maturing in office next quarter, $17 million in the third quarter, and $13 million in the fourth quarter. Given we are not totally out of the woods on office yet, have you looked at the maturities and any credit worries as we come upon those dates?

Thomas Michael Price: Yes. We have looked at it going out through the end of next year, actually. Brian, do you want to comment on that?

Brian J. Sohocki: I will jump in. We continue to actively manage the portfolio. We have seen exposures continue to trend lower. My comment on the maturities is that part of that is also managed purposely through shortening maturities and extending into a certain period in order to facilitate a refinance or sale of the property. One of our biggest successes in 2025 was just that, where we had a large reduction in the second half of the year through an asset sale as a result of that strategy. We evaluate maturity by maturity throughout the whole portfolio and focus over the next 24 months, and we are actively pursuing excess debt reduction where it makes sense for the portfolio.

Matthew M. Breese: That is helpful. Jim, it looks like the cash position is up a little bit—maybe in excess of $100 million to $150 million. What is the near-term deployment for that?

James R. Reske: A couple things. The cash position is up in part because of the execution of the sale of the loans that were held for sale. We saw that cash or paid down. As Mike mentioned, we paid down some FHLB borrowing with swaps and securities, and with the loan book shrinking a little bit in the first quarter, we have that excess cash position. We can foresee the pattern of some of our deposits from our large deposits that are in the public funds category. A lot of those come out in the second quarter, so we will make sure we have cash around for that.

We do not want to invest that money and then find ourselves having to borrow because we have those outflows. Knowing those are coming, we are already holding some cash for that and for excess fund growth. To the extent it does not materialize, we can probably be buying more securities. We are buying a little bit now—growing the securities portfolio a little bit. That is one of the issues at the moment.

Matthew M. Breese: I did want to touch on some of the categories outside of equipment finance. Traditional C&I ex-equipment has been down for three quarters. It looks like commercial real estate has been down for two quarters, and we talked about prepays and payoffs. For the larger segments—C&I and commercial real estate—when do you think we will start to see some net growth there? Is that a 2Q event?

Thomas Michael Price: It will definitely be this year. We have added some business bankers. We are seeing it more on the small, more granular end. The payoffs are happening on a little larger credits, and that is a tough swap because you have to do four loans for a big one that is paying off. I like that long term. The team—we have added a lot of business bankers over two years, and they seem very productive. In the C&I segment on the smaller end—small business and business banking—we actually grew that in the first quarter by $30 million to $40 million. We really have not done that on that bottom $600 million to $800 million of that space.

That is good news, and we feel good about that. That is granular and comes with more deposits, but we still have had some payment headwinds, no doubt. We do think we will grow it.

Matthew M. Breese: Last one—between Ohio and Pennsylvania, there is a ton of activity between chip manufacturing, AI, data centers, power plant build-outs. Hoping for your comments around all that and how much of it you can say has had or could have an impact on the pipeline or loan growth to date?

Thomas Michael Price: It might already be having an impact. We have a really deep pipeline—after Cincinnati had a great first quarter, our deepest pipeline is probably in our $4.5 billion community PA market, particularly in small business up through the business banking segment. I was with a contractor for dinner on Monday night who is doing a lot of power generation—gas powered, including one in Homer City. It is having a real impact, and it is good to see. Ohio has really grown the last few years and helped lead growth. I expect that to continue.

Community PA has always generated a lot of deposits, and now it looks like they are setting up for a good year on HELOC, HELOAN, and small business and business banking. We like the business, and we feel like we make a difference, and it looks good.

Operator: Our next question comes from the line of Daniel Edward Cardenas with Brean Capital. Your line is open.

Daniel Edward Cardenas: Hey. Good afternoon, guys. Just a couple of questions. Have you noticed any change in customer sentiment given the current economic environment right now?

Thomas Michael Price: It might be too early to tell. I did notice that our interchange income on debit card was off a couple hundred thousand dollars. We had a holiday in the fourth quarter, too, but activity in swipes was off a bit—that is probably a first quarter effect as well. We have been watching our consumer books like a hawk—our HELOC/HELOAN, our mortgage, and our indirect auto—and we are seeing some pretty solid performance. It kind of belies that gas I just filled up in Pennsylvania was $4.47 a gallon. We are watching that closely.

Brian J. Sohocki: I would confirm that. One of the positives in the first quarter is consumer delinquency trends improved and were somewhat of an offset that helped our overall total delinquency level for the period. We are monitoring everything that is touching energy and potential inflation impacts as we go through the quarter.

Thomas Michael Price: I would add, we have 300 thousand customers in the bank, plus indirect auto, so we have a lot of clients and a pretty good sample size.

Daniel Edward Cardenas: Jumping quickly back to credit. Within your level of nonperformers, is there any geographic concentration—any particular market where some of these credits are housed versus others?

Brian J. Sohocki: No, nothing from a geographic standpoint. As you look through it, it has been isolated credit events that have driven the overall dollar amount of NPLs. One point to add—Mike made this in his opening statement—it is important to distinguish between the guaranteed and unguaranteed exposure within the SBA portfolio. Those are all very granular. From a concentration standpoint, there are $28 million of guaranteed NPLs in that portfolio.

Daniel Edward Cardenas: Alright. And then just one quick modeling question on the tax rate. Is a 20% tax rate a good run rate for you?

James R. Reske: Yes, very close. I think we are at 20.26%.

Daniel Edward Cardenas: Okay.

James R. Reske: 22.26% for the first quarter.

Operator: We have no additional questions at this time. I will now turn the conference back over to Mr. Thomas Michael Price for closing remarks.

Thomas Michael Price: Thank you for your interest in our company. I did want to mention, lastly and importantly, after 37 years at our company, Norm Montgomery, our Chief Information Officer, is retiring, and we will miss him. We have hired Ryan Gorny to replace Norm, and we have a talented team at our company. We are excited for Norm in his retirement, and welcome to Ryan Gorny.

Operator: Ladies and gentlemen, this concludes today's call, and we thank you for your participation. You may now disconnect.

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