Yahoo Finance

Thomas Price

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% in the first quarter was down from 1.23% in the fourth quarter as expenses rose and fee income fell.
Loans grew at an annualized rate of 4.4% or $99 million in total. Commercial loans accounted for $63 million or 64% 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% rose e8 basis points with good fundamentals. Deposit costs fell to 1.99%. Interestingly, deposit costs continued 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 2% over the last two years, and as Jim will further describe, the NIM 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% of US GDP, and about 40% 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 dollar hit each quarter to interchange income due to the Durban 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 FTTE 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 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 the dividend increase of $0.01 per share consistent with prior years, bringing our dividend yield and payout ratio to approximately 3.5% and 40% 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 client, our clients have been less fazed 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. 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 on certainly certainty could create loan growth headwinds, our pipelines remain strong, and we have not identified any specific credit impacts yet. On the regional lending front are northern Ohio, Pittsburgh, Central Ohio, Cincinnati, and community PA markets are off the terrific starts.
And interesting aside, the country's largest natural gas power plant alongside an AI data center is being constructed in in Indiana County, our home county in 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 2. 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 off turn it over to Jeff -- to Jim.

James Reske

Great. Thank you, Mike. Mike already mentioned the expansion of our NIMs, 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 8 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 8 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 1st quarter in our variable rate loan portfolio, but that was blunted somewhat by the fact that new loans were coming out at the low 7, while loans that ran off in the high 6s.
That's why our loan yield was only down 5 basis points last quarter. By contrast, the yield on the securities portfolio was up 15 basis points, partly as a result of a 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 5 basis points to the NIM in the 1st quarter, unchanged from last quarter. We expect that will continue to fade by about 1 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 cut.
About 7 basis points of the new 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 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 remains unchanged not a fee. Thecom is down from last quarter by $2.6 million. We had about $1.4 million of unusual gains last quarter, along with the 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 million to $23 million for the quarter. We expect that second quarter fee income should be roughly should be better than the first quarter, about a million dollars better than the first quarter, or roughly $23 million to $24 million growing another $1 million in the third quarter and then coming down by about a million dollars in the fourth quarter, which we attribute to seasonality and fee businesses like mortgage.
Expenses increased by $2.1 million over the last quarter and at $71.1 million we're well in excess of our previous guidance of $60 million 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 headcount. Taking all of this into account, we believe that including the pending acquisition of Central Bank, which closes today.
Non-interest expense should be in the $71 million to $73 million dollar 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 pending the closing of the Center bank acquisition, and we have $6.7 million of remaining capacity under our previously authorized by that program. And with that We'll take any questions you may have.

Question and Answer Session

Operator

(Operator Instructions) Daniel Tamayo, Raymond James.

Daniel Tamayo

Hey good afternoon guys, how are you? Good. 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 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.

Thomas Price

So 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 I actually I have Mike McEwen on the phone who is our Chief Lending Officer. Mike, what would you add?

Mike McCuen

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.

Thomas Price

Is that helpful, Dan?

Daniel Tamayo

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

Thomas Price

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.
I think 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 build 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, TM professionals, so that feels really good. Mike, what would you add?

Mike McCuen

Yeah, I would just add that the 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 lot of the real estate developers have a little bit better view on cost. Rates were slightly down, and so some projects that were deferred are now being put in place.
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 based on these what happens with the tariffs and so forth, but I haven't seen a lot of yet, so I feel pretty good.

Thomas Price

Hey Dan, the only thing I would add that we didn't mention is just Jane, Benz, 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 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, they almost, it's not that they anticipated it or wouldn't hurt, but they just seemed to be dealing with it in the normal course, despite the headlines of the last month.

Daniel Tamayo

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. Urious if there was anything unusual happening there if you guys that there is any color on that and, what kind of rates that, the kind of new rates on the savings deposits that you're seeing.

Thomas Price

Yeah, I mean, I'll turn up 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 have given up a little bit on rate and could have taken our deposit cost 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?

James Reske

Jane, go ahead.

Jane Grebenc

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 banks, 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. But we're it's moving around a little bit.

Daniel Tamayo

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

Operator

Frank Schiraldi, Piper Sandler.

Frank Schiraldi

Hey, good afternoon. Just in terms of, Jim, just in terms of the NIM guide, can you share what that assumes for, do you anticipate, deposit costs move lower from here without additional rate cuts, or is that continued kind of steady state given that you expect or or trying to grow the deposit box?

James Reske

Yeah, thanks, Frank, for asking, because we talked about this on last quarter's call, so I appreciate the question. It gives me a chance to clarify a little bit.
Last quarter we talked about how we took a very conservative line with our ability to drop deposits because we thought we really want to grow deposits. We want to keep the 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, a kind of pricing strategies are following that. So last quarter of the call you were saying we're not assuming rates are going to fall and deposits and lo and behold in the first quarter we were able to lower deposit costs by 8 basis points, which is great.
But looking for their forecasts for the rest of the year that that I just, I reiterate the guidance from the first quarter we're rate 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 N can get to the high 370s.
That doesn't assume an ability to do it by dropping deposit costs. And if you could drop deposit costs, well, it could be even better than that. There'd be upside to that. I would just say one more thought of that. Some of those assumptions are deposit costs when we're looking at their historical betas and ability to draw deposits, we need to fund it.
We're done before we saw a lot of competitors dropping rates, and what we see in our local market, what we see when we look at the P/E reports for the quarter, this quarters 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 see these 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 it just gives it a little more upside than in forecast. Hope that's thing.

Frank Schiraldi

Yeah. That's great, but just on that, just, does that n guidance you gave or outlook that that includes the center deal.

James Reske

Yes, the center deal, and I'll tell you we're working on a 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 with a 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 in forecast, but.
It's just not going to be that. It's helped with additives and overall look we're very excited about the acquisition for lots of fundamental reasons, but in terms of the NM guidance, it's not. That big enough to move the needle that much.

Frank Schiraldi

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

James Reske

Yeah, so I was watching the. Crisis of the 14th, we thought this would be a great opportunity, but we're on the market and now it's back up and we're going to come out of blackout here in a little bit and 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 we 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 the buyback, but we would look at all those factors in the second quarter to see if it's appropriate to do so.

Frank Schiraldi

Okay. All right, I appreciate the call. Thank you.

James Reske

Thank you.

Operator

Karl Shepard, RBC Capital Markets.

Karl Shepard

Hey, good afternoon guys. Jim, just to pick at the deposit cost guidance one more time, I just want to get it straight, the high 370s assumes a couple of cuts. And you're saying stable deposit cost 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.

James Reske

It is, and so look, the whole bank are redo a refocast exercise actually this month for the rest of the year, so that guidance might change for the next quarter.
There's a couple of things going on. I think the macro swaps alone get you halfway there to the guidance and the rest of it is coming from positive replacement yields even as in a falling rate environment. So, yeah, I agree with you that that assumption on the deposit cost might be conservative.
You start to get on this avenue of the different categories. There's obviously mixed shifts going on within those categories, so I'm not, 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 and not just sparing staying stable. So we'll revisit that assumption here and update guidance as the year goes on.

Karl Shepard

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

James Reske

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

Karl Shepard

Kind of moving over to expenses. The FTEs, kind of ticked up a little bit over the course of the quarter, I guess. Is there any more planned for the rest 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?

Thomas Price

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 perhaps. In the next quarter or so with some opportunities there. Jim, what do you want to add? No.

James Reske

It's just we're happy to be able to pick up town 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 people, like to work here and stay here, so that helps the FTE count as well. That affects the FTE as well.

Karl Shepard

Okay. Thank you both.

Operator

Thank you. Kelly Motta, KBW.

Kelly Motta

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

Thomas Price

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, or gain on sale businesses, the staffing we have there in wealth management, and they're contributing nicely.
Mortgage is probably up year over year in terms of originations and volume, but probably not at that point or inflection point where you would consider adding to some of those consumer lending businesses. So I think we're pretty good.
I, 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 and you know we will become more efficient than we were this quarter.

Kelly Motta

Got it. That's helpful. And then on the the SBA front, those gain on 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 is it would you anticipate this quarter to be a good run rate in the near term?

Thomas Price

That we're a little perplexed perplexed by that. The SBA was going along pretty well. I think perhaps the just the longevity of higher rates now on those borrowers that have just slightly more leveraged perhaps as part of the answer. I guess I'll turn it over to Mike or Jane who are closer to the business. Your your thoughts.

Mike McCuen

Yeah, sure, go ahead.

Jane Grebenc

So a couple of 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's some construction, there are some construction deals in there that need to 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.

Kelly Motta

Got it, that's help helpful, maybe last question for me on the expense guidance, just want to clarify if that that includes the impact of the run rate of the acquisition and the timing of the conversion on that.

James Reske

Yes, it does.

Thomas Price

Conversion is slated for the first weekend in June.

James Reske

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

Kelly Motta

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

Thomas Price

Thanks, Kelly. Thank you.

Operator

Matthew Breese, Stephens.

Matthew Breese

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

James Reske

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 206. It keeps going. It so it gets to 380 and stays in the 380s and it actually hovers in the mid through the 380s in 2026.
But in 2026 in the high 380s, so, if we have this baseline forecast is the three cuts, then it stays in the, right around 380 if the 379 stays around 380 next year.
So it depends on that, but it's a good, thanks for the question. It's a good opportunity to say there are other assumptions in there as well. There's no recession forecasts 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 that we put them on, and that it'll replace the runoff that we assume they're going to have the lower rate loans, so you get the nice benefit of that pick up and replacement.
So, but there's not, there's no constant slow down any of that. So there are other assumptions in there, that are affecting them.

Thomas Price

There is, yeah, there's --

Matthew Breese

Go ahead, Mike.

Thomas Price

Yeah, just let me muse 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, a good mortgage capability that we haven't dismantled. And you know those businesses could really turn on in an environment like that and I think our mortgage business made 10+ 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 Spruce demand a little bit we can have the best of both worlds in the consumer and the commercial banking side.

Matthew Breese

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?

Thomas Price

I suspect, I think, we're a bank also that, I mean we're about 19.5% of the income, peers of about 16.5% or top quartile is probably 2 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 and come back, 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 that's just execution.

Matthew Breese

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 or margins anywhere? If so, to what extent?

Thomas Price

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

Mike McCuen

I mean, the loan yields, as Jim alluded to, are coming in around 7 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 is 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 is historically. We're just watching that closely as we select the right deals and the right clients.

James Reske

Got it. Okay.

Matthew Breese

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.

Thomas Price

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

Brian Sohock

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

Matthew Breese

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

Brian Sohock

Sure, no, 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, ensure that it's franchises with. 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 start that franchise, 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, that, bring any concern, we sell the predominant share of 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 projects stay on the books until they're constructed and occupied. So feeling pretty good about the diversity of the book. Hopefully that helps.

Thomas Price

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

Matthew Breese

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, sorry for the JV question, but I'm just trying to figure out the average balance sheet with that rolling off.

James Reske

Well, the average balance, the size won't change. I mean, the assets there, the asset stays there. So right now, let's give an example, the one that's expiring tomorrow and count on counting down the days $150 million. That is right now we have received fixed swaps, so we're getting the spread, excuse me, plus 0.595%. That's the received fix. We're receiving 0.595%. The day after tomorrow we'll see one month so far. We'll get a spread.
Whatever the spread is plus one month so for 4.327%. So that $150 million is still on the books, it'll stay there, it's going to pop up by the difference between 4.327% and 0.595%.

Matthew Breese

Okay, so is that loan yields will be affected by that, is that what you're saying?

James Reske

Correct. Correct, you, so, yeah, I mean that one swap alone is enough to add about $5.6 million in a year in income income.

Matthew Breese

That's all I have. Thanks for taking my questions. Thank you.

James Reske

Thank you so much.

Operator

(Operator Instructions) Manuel Navas, D.A. Davidson. Please go ahead.

Manuel Navas

Hey, I appreciate that the, peak in kind of, some of the credit issues was last year, can you just kind of speak to the trend in provisioning from here and reserving?

Thomas Price

Yeah, I'll hand it over to Brian in a minute we're about 132 reserve I think about last year, 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. 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 7 basis points higher than our $10 billion to $100 billion dollar peers on the reserve, so we're in a good position there and we also feel like some of the acquired loans that 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?

Brian Sohock

I wouldn't add too much to the reserve outlook. I mean, I'd anticipate to remain relatively stable, we experienced loan growth in the first quarter, both on the, funded side and the unfunded construction side. We'll continue to, show growth, in the reserve based on that. And, pending macroeconomic environment, we'll see changes in our, kind of qualitative side, but I think might covered most of it there.

Manuel Navas

That's helpful. With the shifting topic for a second with 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.

Thomas Price

I would just add on CenterBank. We've gotten some unexpected good talent from that organization. It's already integrated with our regional President there who are, they're 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 we can, Jim, you'll have to coach me here if memory serves, it's kind of outsized the creative for the sides. It was almost like.
2.53% of creative in 2026 for a bank that was pretty small. So we're 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 out regarding M&A. I mean, it's the full gamut. We We've done smaller deals. They've tended to do very well for us and we've been very conservative, as in terms of being pretty picky and almost all our deals have been strategic and really added to our geography, primarily Ohio, where, a decade ago we had, we hardly had anything, and those markets have been a lion's share of our growth over the last 5 or 6 years or last 10 years, so. I don't know their appetite has changed much. I think, there might be more conversations in the offing the last 6 months or so. Jim, what am I missing?

James Reske

Nothing. I mean it. Nothing to add, Mike.

Jane Grebenc

Hey Mike, one thing to add with CenterBank, I thought you captured it all beautifully, but, the one really nice surprise, 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.

Thomas Price

Great comment, Jane. Thank you for that.

Brian Sohock

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

Manuel Navas

I appreciate all the commentary. Thank you guys.

Operator

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

Thomas Price

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 we feel like our 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 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.

Operator

That will conclude today's call. Thank you all for joining. You've been now disconnect.