Karl Shepard

Karl Shepard from RBC Capital Markets asked about First Commonwealth Financial Corporation's loan growth expectations for 2026, considering recent production and payoff headwinds, and inquired about the health of current loan pipelines. He also sought clarification on the company's share buyback strategy given the recent authorization and stock price movements.

Answer

President and CEO Mike Price projected loan growth similar to the 5% achieved in 2025 (excluding CenterBank), despite elevated payoffs, citing strong commercial pipelines and expected construction portfolio build. CFO Jim Reske explained the buyback strategy is driven by excess capital generation, with price sensitivity, and the company aims to use the authorized $25 million-$30 million per quarter, but actual execution depends on stock price.

Karl Shepard asked about First Commonwealth Financial Corporation's loan growth expectations for 2026, including insights into pipeline health and market conditions. He also inquired about the company's share buyback strategy, considering the current authorization and the stock price being higher than in Q4.

Answer

President and CEO Mike Price indicated an expectation for loan growth similar to the 5% (excluding CenterBank) achieved in 2025, despite elevated payoffs exceeding $200 million. He highlighted strong commercial pipelines and an anticipated build-up in the construction portfolio with $20+ million in monthly drawdowns. CFO Jim Reske explained that the buyback strategy is driven by capital deployment, with price sensitivity, and that the company generates more capital than needed for mid-single-digit loan growth, thus planning to continue buybacks.

Karl Shepard from RBC Capital Markets asked for an update on loan replacement yield trends into July and questioned the company's current M&A priorities and strategy.

Answer

CFO James Reske stated that the positive loan replacement yield spread (42 bps in Q2) should persist as long as the Fed does not cut rates, highlighting that fixed-rate loan repricing was a significant driver at 115 bps positive. CEO Thomas Michael Price added that commercial fixed and indirect installment loans were key contributors. On M&A, Price reiterated a disciplined approach, favoring smaller, low-risk deals in existing markets where the company can leverage its business verticals and ensure deposit growth keeps pace with loan growth.

Karl Shepard sought further detail on the deposit cost assumptions within the NIM guidance, suggesting they appeared conservative. He also asked about the outlook for FTE headcount growth and other potential expense pressures for the remainder of the year.

Answer

CFO James Reske acknowledged the deposit cost assumption is conservative, noting that macro swaps account for about half the guided NIM expansion, with the rest from asset repricing. He indicated the assumption would be revisited. President and CEO Thomas Michael Price explained the FTE increase was a strategic investment in the commercial banking team and filling vacancies, but added that the company will look closely at controlling costs in Q2.

Karl Shepard inquired about the drivers of the projected 2025 net interest margin (NIM) expansion beyond the impact of swaps, and asked about the strategic rationale and key attractions of the Center Bank acquisition.

Answer

CFO James Reske explained that about half the NIM expansion comes from swaps, with the remainder driven by positive asset repricing. He noted the forecast is conservative on deposit cost reductions but projects the overall loan portfolio yield will increase by about 25 basis points due to positive replacement yields. President and CEO Thomas Michael Price detailed his long-standing relationship with Center Bank's leadership and highlighted the deal's strategic fit, stating it complements their existing Cincinnati presence and accelerates growth plans in that key market by 'half a decade'.

Karl Shepard asked about the expected loss content from the two legacy credits with new reserves, the timeline for the Centric portfolio's credit metrics to converge with the core bank, and the drivers of confidence in a reacceleration of loan growth.

Answer

An executive, likely Chief Credit Officer Brian Taake, indicated that short-term charge-offs would be driven by existing specific reserves with minimal further provisioning expected. President and CEO Mike Price and the executive noted that Centric's criticized loans are decreasing and the credit headwind should dissipate in 2025. Mr. Price attributed loan growth confidence to strong production, new talent, and ample liquidity.

Karl Shepard followed up on the net interest margin (NIM) outlook, asking if the 3-5 basis point improvement burns out later in the year and if the high 3.60% range is a sustainable longer-term expectation. He also inquired about the maturity of WesBanco's Loan Production Office (LPO) strategy, including how LPOs mature into financial centers and opportunities for further expansion or talent acquisition in new markets.

Answer

Daniel Weiss (Senior EVP and CFO, WesBanco) clarified that while the 3-5 basis point improvement is guided for Q2, the back half of 2026 depends on various factors like loan/deposit pricing and competition, but they are comfortable reaching the high 3.60s. Jeffrey Jackson (President and CEO, WesBanco) expressed excitement about LPOs, noting the Chattanooga LPO will open its first branch in April after generating over $500 million in loans. He explained the strategy involves starting with LPOs, building loan and fee businesses, and then adding a branch once they reach around $500 million in assets, with plans to expand into other Southeastern markets like Atlanta. He also highlighted opportunities to acquire talented bankers.

Karl Shepard asked for clarification on the net interest margin (NIM) outlook, specifically if the 3-5 basis points of improvement would diminish later in the year and if the high 3.60% range is a sustainable longer-term expectation. He also inquired about the maturity of WesBanco's Loan Production Office (LPO) strategy, including opportunities for new LPOs or strengthening existing markets with additional talent and branches.

Answer

Daniel Weiss, Senior EVP and CFO, reiterated the expectation for 3-5 basis points of NIM benefit in Q2, noting that the back half of the year's trajectory depends on various factors like loan and deposit pricing and competition. However, he expressed comfort with reaching the high 3.60% range in the second half of 2026 due to the upward repricing of assets. Jeffrey Jackson, President and CEO, expressed enthusiasm for the LPO strategy, citing the Chattanooga team's success in generating over $500 million in loans and full relationships, which will lead to the opening of a new financial center. He plans to replicate this model in Knoxville and Nashville, and actively seeks opportunities for new LPOs in the Southeast, typically starting with LPOs to build loan and fee businesses before adding a branch.

Karl Shepard with RBC Capital Markets inquired about WesBanco's loan production and pipeline strength, particularly in light of commercial real estate (CRE) paydown headwinds, and the expected path for paydowns to normalize. He also asked about the outlook for net interest margin expansion and potential disruptions in 2026.

Answer

Jeff Jackson, President and Chief Executive Officer, expressed satisfaction with strong production and pipelines, noting a significant increase in new production year-over-year and a robust $1.5 billion pipeline. He indicated that CRE paydowns, some of which were strategic, might reach $800-$900 million this year, with an expected normalization to $400-$700 million annually. Daniel Weiss, Senior Executive Vice President and Chief Financial Officer, affirmed the expectation of 3-5 basis points of core margin improvement quarterly, even with anticipated Fed rate cuts, and discussed the impact of FHLB borrowings and capital actions on the balance sheet.

Karl Shepard inquired about WesBanco's loan production and pipelines, seeking clarity on the path for commercial real estate (CRE) paydowns to normalize and contribute to stronger overall loan growth.

Answer

President and CEO Jeff Jackson highlighted strong loan production, with $2.3 billion year-to-date compared to $1.7 billion last year, and a robust $1.5 billion pipeline. He noted that some Q3 CRE paydowns were strategic, contributing to a 50 basis point reduction in criticized and classified loans. Jackson projected Q4 paydowns around $200 million, with an annualized normalized range of $400-$700 million, though 2025 might reach $800-$900 million. He expressed confidence in achieving mid-single-digit loan growth for 2025 and mid to upper single-digit growth for 2026. Senior Executive Vice President and CFO Daniel Weiss confirmed expectations for 3-5 basis points of core net interest margin expansion for the next couple of quarters, factoring in anticipated Fed rate cuts. He also detailed the impact of capital actions on Federal Home Loan Bank borrowings.

Karl Shepard from RBC Capital Markets sought clarity on the sustainable level of purchase accounting accretion into 2026 and asked about the next steps for the Premier integration now that systems are converted.

Answer

Senior EVP & CFO Daniel Weiss projected that purchase accounting accretion would drop to the high 20s basis points in Q3, mid-20s in Q4, and then decline by approximately one basis point per quarter thereafter. President and CEO Jeffrey Jackson stated that with the smooth systems conversion complete, the focus is now entirely on driving growth, cross-selling products, and fully integrating the new Premier associates into WesBanco's culture and processes.

Karl Shepard inquired about the bank's capital adequacy for organic growth, its current CRE concentration levels, and the strategic opportunities presented by its newly enlarged balance sheet. He also asked if the pro forma EPS of $3.59 from the merger presentation was still achievable.

Answer

Daniel Weiss, Senior Executive Vice President and CFO, affirmed that capital is sufficient for organic growth and reported the CRE concentration at approximately 298% of risk-based capital at the bank level, which is below regulatory guidelines. Jeffrey Jackson, President and CEO, noted the larger balance sheet enables larger loans to key clients and the exploration of new business lines. Weiss concluded that the $3.59 pro forma EPS, excluding merger costs, should be 'within range' based on current guidance.

Karl Shepard inquired about the outlook for deposit growth for the full year 2025 and the expected evolution of the deposit mix, particularly the concentration of certificate of deposits (CDs).

Answer

CFO Daniel Weiss stated that the bank's primary assumption is that deposit growth will fully fund its mid-to-upper single-digit loan growth target for the year. He also anticipates that the deposit mix in 2025 will see less concentration in CD growth compared to 2024, with a more balanced profile across deposit categories.

Karl Shepard inquired about the drivers of management's optimism for continued loan growth outperformance into next year. He also asked about the balance sheet's sensitivity to different rate cut scenarios and if any balance sheet adjustments were planned ahead of the Premier Financial closing.

Answer

CEO Jeffrey Jackson expressed strong optimism for future loan growth, citing talent management, LPO success, and a favorable rate environment. CFO Daniel Weiss noted the balance sheet is largely neutral to the size of short-term rate cuts. Weiss also stated there are no specific balance sheet actions planned before the deal closes but mentioned potential post-close restructuring opportunities.

Karl Shepard from RBC Capital Markets asked for clarification on loan growth expectations for businesses outside of commercial real estate and inquired about the timing impact of potential rate cuts on asset yields versus deposit costs.

Answer

CFO & COO Jamie Anderson detailed that C&I and consumer loans are expected to grow at the lower end of a 5-7% range, while specialty lines could grow at 10-12%. President & CEO Archie Brown added that Summit's volume typically strengthens in the second half. Anderson also confirmed there is a lag in deposit cost adjustments following rate cuts, with loan yields reacting faster, which contributes to margin dynamics.

Karl Shepard inquired if client conversations about tariffs revealed any surprising or optimistic viewpoints and asked whether macroeconomic uncertainty was driving increased volatility or demand in the foreign exchange business.

Answer

President and CEO Archie Brown responded that despite economic 'noise,' business pipelines remain surprisingly strong for the near term, though uncertainty persists for the second half of the year. He confirmed that volatility is generally beneficial for the foreign exchange business and that the team expects continued activity driven by the current environment.