First Commonwealth Financial Corporation

ask a question during the session, you will need to press star 1 on your telephone. If you require any further assistance, please press star 0. I would now like to hand the conference over to Ryan Thomas, Vice President and Finance, Investor Relations. Thank you. Please go ahead, sir.

Thank you, operator, 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 today will be Mike Price, President and CEO, Jim Reske, Chief Financial Officer, Brian Karup, Chief Credit Officer, and Ginger Bentz, our Bank President and Chief Revenue Officer. As a reminder, a copy of today's earnings release can be accessed by logging on to stbanking.com and selecting the Investor Relations link at the top of the page. We've also included a slide presentation on our Investor Relations website with supplemental financial 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 two 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 statement. 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. And with that, I will turn the call over to Mike.

Hey, thank you, Ryan, and welcome to those on the call today. I'll start with several first quarter headlines for First Commonwealth's financial performance. All in all, a very good quarter. Net income of $39.8 million yielded 41 cents in earnings per share, both quarterly records for our company. ROA was 1.77%. And regardless of credit tailwinds, our core pre-tax, pre-provision ROA was 2%. Net interest income was up $1.9 million to $69.4 million as our borrowers received forgiveness of the 2020-21 PPP loans. This PPP forgiveness helped buoy margin to 3.4%. Our consumer lending categories were all strong, with several delivering record originations. Commercial lending originations had some first quarter momentum, but could not outrun liquidity-induced payoffs, PPP forgiveness, and lower line utilization from our business customers. Geographically, our Ohio markets continue to lead the way in growth. The team did a nice job of further reducing our already low-cost deposit funding to help strengthen the margin as well. We expect excess deposits to start to slowly burn down as spending increases. Non-interest income of $27.4 million comprised 28.2% of revenue and represents the third consecutive quarter of outstanding non-interest income performance. Comparing the current quarter to the first quarter of 2020, our debit card interchange income was up 22%. Our mortgage gain on sale income doubled versus last year's level. Our SBA gain on sale income was up 170%, and our wealth business was up 18.7%. Low first quarter charge-offs of $3.3 million, coupled with an improving economic outlook in our CECL model, led to a negative provision of $4.4 million. The associated reserve release represented 4.5% of our December 31st loan loss reserves, leaving a healthy reserve of $96.8 million, or 1.55% of total loans ex-PPP, as of the quarter end. Our gross level of non-performing assets fell in the first quarter by $3.7 million as well to 0.48% or 58 basis points of total XPPP loans. Expenses of $51.9 million were down $2.7 million over the fourth quarter as our core efficiency ratio fell to 53.2%. In short, we saw improvement in net interest income, non-interest income, credit, expenses, and deposits. Only commercial loan growth lagged our targeted growth rate. We expect commercial loan growth to remain somewhat muted and take a bit longer to pick up given higher levels of liquidity and the overall strength of the permanent market. Pipelines have started to build in both CNI and investment real estate, and we also expect to see strong consumer and small business loan growth in the second half of 2021 as spending has started to pick up. As a result, we believe that we can achieve the upper end of our mid-single-digit loan growth target for the remainder of this year. As an aside, in round two of PPP lending, the team has helped 2,500 small business and mid-sized businesses secure roughly $255 million in funding. If you recall, in round one in 2020, the team made roughly 6,000 loans for $500 million. In the first quarter, we also received over $326 million in stimulus payments for approximately 95,000 households who bank with us, further increasing the bank's excess cash. We continue to see very strong adoption of our new digital platform with first quarter growth rates of 7.5% in active mobile users. In addition, our customers have displayed strong demand for Zelle, our person-to-person payment solution, as new Zelle token enrollments are averaging $2,400 a month. during the quarter our digital account opening is up significantly year over year as well overall we're very pleased with with the response from our markets to our new digital platform and solutions lastly on our corporate governance culture the team and i are grateful for the leadership and counsel of david dolman over the past 15 years as chairman of our board of directors David has created a strong independent board and a strong corporate governance culture that creates appropriate accountability with the management team. It's a privilege also to welcome John Gorney into the position of board chair. John's 37-year banking career at two top 10 U.S. banks includes C-suite leadership roles in technology, digital, and operations, alongside integrating over one dozen banks in a payment processing acquisition. John's background makes him uniquely positioned to lead our company at this time. Now I will turn it over to Jim. Jim? Thanks, Mike.