Q1 2024 First Commonwealth Financial Corp Earnings Call

Participants

Ryan Thomas; IR Contact Officer; First Commonwealth Financial Corp

Mike Price; President, CEO & Director; First Commonwealth Financial Corp

James Reske; Chief Financial Officer, Executive Vice President, Treasurer; First Commonwealth Financial Corp

Jane Grebenc; Executive Vice President, Chief Revenue Officer, Director, President of First Commonwealth Bank; First Commonwealth Financial Corp

Brian Karrip; Executive Vice President, Chief Credit Officer of First Commonwealth Bank; First Commonwealth Financial Corp

Daniel Tamayo; Analyst; Raymond James

Karl Shepherd; Analyst; RBC Capital Markets

Kelly Motta; Analyst; Keefe, Bruyette & Woods, Inc.

Matthew Breese; Analyst; Stephens Inc.

Manuel Navas; Analyst; D.A. Davidson & Co.

Frank Schiraldi; Analyst; Piper Sandler & Co.

Presentation

Operator

Ladies and gentlemen, thank you for standing by. My name is Desiree, and I will be your conference operator for today. At this time, I would like to welcome everyone to the First Commonwealth Financial Corporation First Quarter 2024 earnings release conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone queue. If you would like to withdraw your question and then press star one. I would now like to turn the conference over to Ryan Thomas, Vice President of Finance and Investor Relations.
Please go ahead.

Ryan Thomas

Desiree, and good afternoon, everyone. Thank you for joining us today to discuss First Commonwealth Financial Corporation's First Quarter Financial Results. Participating on today's call will be Mike Price, President and CEO, Jim Reske, the Chief Financial Officer, Jane Grebenc, Bank President and Chief Revenue Officer, Brian Karrip, our Chief Revenue Officer, and Mike McClellan, our corporate banking executive.
And as a reminder, a copy of yesterday's earnings release can be accessed by logging on to FC banking.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 3 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. 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.

Mike Price

Hey. Thank you, Ryan, and welcome, everyone. Despite pressure on the net interest margin through higher depository costs. First, Commonwealth beat consensus earnings estimates by one penny was $0.37 per share in the first quarter of 2024, core ROA and the efficiency ratio were 1.31% and 55.05%, respectively. The bank set a number of earnings records in 2023 and had a particularly strong fourth quarter that was certainly worth celebrating, but it affects most of the period-over-period comparisons. For example, in the fourth quarter of 2023, we had negative provision expense of $1.9 million due to the release of reserves this quarter. Provision expense was a more typical $4.2 million. That swing strongly affected quarter over quarter comparisons of financial metrics like core EPS, return on assets and return on tangible common equity, which, in addition, interest expense increased by $4.6 million over the last quarter, overwhelming the $1.2 million increase in interest income and resulting in a $3.4 million decline in net interest income as a result, the core non-GAAP measures that we report on a pre-provision basis such as core pretax, pre-provision net revenue and core pretax, pre-provision ROA and ROA. They also declined from last quarter. Importantly, balance sheet liquidity strengthened as our loan to deposit ratio fell from 97.9% at year end to 95.6% at the end of the first quarter, end-of-period deposits increased over $254 million or 11.1% annualized, while loans increased just 1.5% annualized or $33 million. Consumer CDs constituted the bulk of deposit growth, primarily from our core consumer customers. While business deposits fell due to seasonal factors, we have begun to taper CD pricing based on first quarter growth and market conditions, and we'll continue to watch competitor rates and consumer behavior. Loan growth for the quarter may appear to be on the low side for us but it's very much in line with our long-term plan to tilt the balance sheet more towards commercial lending.
Commercial loans grew at an annualized rate of 5.24% right in line with our long term, mid single digits guidance that commercial growth offset declines in consumer real estate balances in the movement in consumer balances business price, we're now selling over 90%, of our mortgage originations, including mortgage construction loans and in fact, mortgage gain on sale fee income increased over last quarter. Second Lien products like he locks and he loans are naturally down because of the rate environment. And also because a lot of those balances were driven by refi activity during the pandemic in the auto book is replacing runoff in nicely pricing upward exactly as planned. Overall, we see the diversification of our loan portfolio as one of our key strengths and slow growth or even modest declines in consumer balances in any given quarter, provide us with the liquidity and capital to grow commercial loans and maintain our current mid-single digits guidance as we execute regionally and profitably grow core deposits and loans fee income, then we will grow meaningful meaningfully in the years ahead, becoming the best bank for businesses and their owners will be a big part of that growth the capital, Columbus and Cincinnati regions presents significant opportunities for growth at First Commonwealth, our branch and business space. Deposit-gathering efforts have also led to our low cost funding advantage with mild loan growth. It might appear from the outside like this was an uneventful quarter for us, but nothing could be further from the truth. We've made a number of internal management changes to maintain our momentum and ensure our success since hiring a new Chief Lending Officer.
Last September, we have made a concerted effort to upgrade regional leadership, create more enduring operational scalability and improve our G & i expertise. Some recent recent actions include naming new regional presidents in Pittsburgh and Cincinnati, new leadership in the Harrisburg region and a new head of Corporate Banking portfolio management and commercial loan documentation. We've also hired five new commercial bankers during the same period. As we like to say, we always keep our feet moving. In other words, we actively cultivate a culture of continual transformation improvement so that we can produce steadily improving financial results year in year out.
And with that, I'll turn it over to Jim, Our CFO up here.

James Reske

Thanks, Mike. Before I break down the margin and other elements of the income statement, I'd like to highlight a few balance sheet items. Regulatory capital ratios improved due to strong retained earnings and the absence of any buyback activity in the quarter, combined with modest balance sheet expansion, strong deposit growth, coupled with modest loan growth, improved our liquidity as well, not only did it bring down a loan to deposit ratio, as Mike mentioned, but it also left us with $223 million of excess cash at the end of the quarter. The strength of our internal capital generation and our improved liquidity position has allowed us to announce two actions with first quarter earnings. First, a regular increase in the dividend of $0.02 per year in keeping with prior year in keeping with prior years. And our long term goal of smooth and steady increases in the dividend for our shareholders. And secondly, the redemption of $50 million of our $100 million in outstanding subordinated debentures on June first. The timing of this redemption was right for several reasons. First, the sub-debt would have lost another 20% of its Tier two capital treatment on June first and refinancing options operatively expenses.
Second, the consolidated total risk-based capital ratio improved organically by 34 basis points in the quarter, -- 34 basis points that mostly offset feed 44 basis point impact of colleagues sub debt in the second quarter. And we have modeled further organic growth in our capital ratios in the second quarter as well.
Third, the excess cash at quarter end provided liquidity with which to fund the repurchase without taking on any additional borrowings.
Finally, the coupon of this tranche of the stock that was currently about 7.45%, and we're paying it off in funds that are currently sitting at the Fed earning 5.4%. So its redemption will save the Company approximately $1 million in pretax expense per year and improve the net interest margin.
RNIM. by about two basis points. Our strong deposit build in the first quarter came at the expense of the net interest margin as our name compressed by 13 basis points in the quarter, we had expected that the yield on earning assets would improve by approximately 10 basis points to 15 basis points, matching a 10 to 15 basis point anticipated increase in the cost of funds producing them stability. It didn't turn out that way. Instead the yield on earning assets only improved by five basis points and the cost of funds went up 19 basis points in the aggregate, we originated new loans at just over 8% in the first quarter. But the old ones that are running off and were in the aggregate about 7% resulting in relatively modest replacing yields. On top of that, the loan portfolio yield was negatively impacted in Q1 by the continued effect of received fixed macro swaps that we entered into several years ago. Fortunately, $25 million of those swaps run off on June 30th of this year and another $50 million run off in December. Those are only had a one basis point benefit to the NIM in 2024, but a further $250 million one-off in 2025, which we expect to produce a cumulative benefit of a benefit to the NIM. of eight to 11 basis points, depending on the trajectory of rates. If rates stay higher for longer and the benefit of the macro swap roll-off will be on the high side of that range.
On the liability side, deposit costs increased by 25 basis points as we saw a $233 million decline in low cost deposit categories, combined with a $283 million increase in the more expensive categories. Despite the movements in balances, we saw net gains in consumer households in the quarter. In fact, our deposit pricing strategies have been effective, not just in retaining our deposits from attracting new dollars to the bank. While the cost of deposits went up 25 basis points. The cost of funds only went up by 19 basis points because we benefited from participation in the Federal Reserve Bank term funding program in the quarter we got in the program and borrowed just over $500 million, while the Fed was still pricing the borrowings on the forward curve. So we are grandfathered in so to speak at 4.76% on those borrowings until next March. We didn't enter the program with the intent to arbitrage the rate recently borrow that much because that's what we needed at the time and the Fed's rate was less than the FHLB. Ordinarily, we would use the excess cash generation from the strong deposit growth we enjoyed in the first quarter to pay off borrowings. But given the rate differential, we prefer to stay in the BTFP. program for now, which is why we ended the quarter with $242 million on deposit at the Fed at 5.4% was obviously accretive to income to the tune of about a penny a share 2024. It did have a three basis points of pressure. The effect on the NIM in the first quarter. Fee income and noninterest expense were both little changed slightly unfavorable to last quarter. Back-to-back swap fees were nonexistent as customers have little desire to lock in fixed rates and interchange was down seasonably weak compared to the fourth quarter. With holiday spending, we were pleased, however, to see mortgage and SBA gain on sale income pickup from last quarter. That was because the noninterest expense comparison to last quarter was also affected by a tax accrual reversal that benefited the fourth quarter and by higher occupancy expense in the first quarter.
And with that, I'll turn it back over to Mike.

Mike Price

Thanks, Jim. And operator, if we could pause for some questions.

Question and Answer Session

Operator

Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again, if you are called upon to ask your question and are listening via speaker phone on your device. Please pick up your handset to ensure that your phone is not on mute. When asking your question again, press star one to join the queue.
Okay.
Your first question comes from the line of Daniel Tamayo with Raymond James. Your line is open.

Daniel Tamayo

All right. Thank you.
Good afternoon, guys.
Maybe, Jim, I appreciate all the detail on the puts and takes of the margin in there first quarter as well as with what's coming in the next item rest of the year and even into 25 with those swaps. But maybe you can kind of fill us in on how you're thinking about the core margin in the and the total margin path for the rest of the year?

James Reske

Kelly, I think you may have noticed it from Amazon from my prepared remarks as any kind of forecast of demand, and that was conscious. But just to be clear that can be we're very cognizant of the fact that the last three quarters in a row, we were forecasting instability and yet the margin compressed by about 10 basis points every quarter. I would tell you that the forecast that we have suggests the same thing, I mean, stability going forward. So that is our our forecast and those forecasts actually take into account a falling rate environment and those are the rate environment forecast and take our progression of those forecasts.
A project the Fed funds down to 4.3% by the end of the year, about four rate cuts. If there is a slowdown recapture and a higher longer providing an environment that will benefit them. And that will be even better even better. I will say we have sharpened our pencils and gotten better at forecasting deposit movements. That's something I think we were a cashing I caught out on in the last couple of quarters and last year, we've gotten better at that. So we're trying to understand where deposits are going. And we've also in light of the disparity between loan growth and deposit growth this quarter fell back the aggressiveness of the deposit rates a little bit. So we still have decent specials out there, but they're not top of market specials and that's probably going to bring deposit current Morinda in line with the loan growth and help them achieve that kind of stability target. That's how we're thinking about it now.

Daniel Tamayo

Okay.
That's that's very helpful. And just to be clear, the the one basis point benefit from swaps in 2024 and then the three basis point negative impact, I mean, it was from the funds at the window at the Fed. I know that's all baked into your assumption there.

James Reske

It is on the cash on hand at the Fed right now that 3%, three basis points. Suppressant effect that I talked about on the recent have a little bit of optimism that cash has come down a little bit here in the first quarter in the second quarter so far. So without telling tales out of school or right, about $150 million right now, if it stayed at two 50 for the full quarter, it would have about a six or seven basis points at Christmas. Back to the average for the first quarter was only $112 million, even though we ended the quarter 200, 23 of excess cash. The average excess cash for the quarter is $112 million. That's why it was only achieved three base points suppressive effect if it stayed at two 50 for the full second quarter, that's like a six or seven basis points of Tesla effect, but it's come down. And I see a little hopeful. And I would just add the thin margin balance sheet leverage business is generally not something you find attractive and don't pursue. But now we've got it. We are going to say the program because we make a little money off that and we would hate to paper borrowings and then find that we had great loan growth in the second half of the year, we were borrowing again from the FHLB of 5.4%, felt that clarifies things a little bit of the excess cash question anyway.

Daniel Tamayo

It does, yes, it does.
Thank you. I guess. And then just lastly, what are your thoughts on accretion, what the contribution was in the first quarter and then where that may go?

James Reske

The rest of the year, your EPS accretion or

Daniel Tamayo

I'm sorry, redeeming I'm sorry, discount accretion purchase accounting.

James Reske

Oh, I think it was seven basis points in the quarter is going to be fading out about one basis point every quarter. Is it based on for the first quarter and fading out five basis point each quarter?

Daniel Tamayo

All right.
Well, thanks for taking my questions. Appreciate it.

Ryan Thomas

Thanks, Dan.

James Reske

You bet.

Operator

Our next question comes from the line of Karl Shepherd with RBC Capital Markets. Your line is open.

Karl Shepherd

Hey, good afternoon guys.

James Reske

Hey, Karl

Karl Shepherd

Jim, I wanted to pick up on the margin discussion a little bit from that. When you talk about the swaps on slide 14, should that should the message that we should take away? Is that the overall margin Kintera higher for the next couple of quarters and into '25, everything near term stability in those in those kind of fall off? Is that a fair way for us to think about it?

James Reske

It could, if rates stay high and replacing yields tick up a little bit and we can bring the deposit cost center. Can you control the growth or what have you if we are getting closer and closer to the your questions about those macro swaps, risk enclosure maturities, we thought we'd provide some helpful disclosure this quarter to kind of spell out the effect of those that roll off of those swaps of the.
There's a page in our supplement that we put on the PowerPoint presentations. I can call it an earnings presentation supplement that is on the Investor Relations portion of our website.
It's page 14 that kind of has a bar chart that spells out the dollar volume of the swap, our maturities, the macrocell maturities and then the cumulative impact for all those, the real benefit of that until next year. But maybe you could think about it this way to answer your question directly, that will help produce the stability that we're looking for prices that supports from those things rolling off, but that can only help them stay at a higher rate higher for longer rate environment. We'll just keep repricing of the fixed rate loan portfolio and those macro seltzer will often it worked out really well.

Ryan Thomas

Again, Jim, Jim, your team modeled really in a baseline scenario or falling to about eight basis points of cumulative impact accreting to the margin and the flat rate scenario, 11 basis points to attract such material that's through 2025 call.

Karl Shepherd

Okay. And then on loan growth, so we've got deposits outstripping loans this quarter. I know you guys are trying to be very measured awaiting the two, but should we think about this quarter's performance is giving you a little bit of runway for the rest of the year? Or do you think on this pace on loan growth is a fair assumption?

Ryan Thomas

I think it does give us runway. I think that we've proven was 7.5% loan growth last year, notwithstanding our acquisition of centric in the new capital region and that we can generate deposits. And then through this fourth quarter, even if it cost us a little some some. And so we're excited about that and we've also grown deposits of the deposit households, as Jim mentioned. And so we're going to taper and dial that in better and better each quarter. But we're also excited about growing the Corporate Bank on maybe a real estate deal or two this year and turning that back on a bit, but more importantly, growing C&I, small business SBA, which will become the core of the Company over the next five plus years and so on, we're optimistic about the future and our ability to grow.

Karl Shepherd

Okay. Thank you. Both.

Ryan Thomas

Hey, before next question, if I could circle back, I said seven basis points of accretion is actually [7.6 billion], eight of purchase accounting accretion for the first quarter just ended just for the record.

Operator

Next question comes from the line of Kelly Motta with KBW. Your line is open.

Kelly Motta

Thanks so much for the question. Picking up on on loan growth. I'm picking up on that question there.
If you could talk a bit about your pipeline where you're seeing opportunities and the best opportunities and where you're seeing the most demand from your clients?

James Reske

Yes, Crown right now on the consumer side, we have pinched the volume there really across the board and we're just replacing what is running off at best on the commercial side our SBA business has pretty good pipeline. Some C&I, the pipelines are building somewhat dependent on the region and commercial real estate. The demand there is still tamped down and we come in a bit, there will be a deal or two there. So it's not fulsome like we were growing maybe two years ago where it seemed like each year, we would guide in the high single digits, and we would eclipse that. And now our guidance is probably more like mid-single digits.

Kelly Motta

Got it. That's super helpful. Sorry, I mean to cut you off

Ryan Thomas

No worries.
I just have ginger Benson, our President and Mike, the Qunar Executive Vice bright Vice President of Corporate Banking. Anything that the 2B would add? This is an important consideration on loan growth?

Sure. Couple of things. We are bullish on SBA and it's important to know that only 25% of them fix the balance sheet. The other 75% ultimately get sold and we get the gain on sale income in lieu of the balanced growth. So we're seeing good SBA business. And Brian has reminded me that the SBA business that we are booking now is probably the best we'll see because it's it some it's able to be approved under today's interest rate environment. So this is all good stuff most of that SBA business acquisition. And so we do like the SBA business a lot. And then as Mike said, the commercial business is a little bit more muted, but we are seeing pipelines growing and on. I think I think customers and prospects are starting to finally, I think maybe the recession isn't right around the corner and they're starting to work and a little bit.

Kelly Motta

Got it. That's That's super helpful. Thank you so much. And then and maybe actually then switching switching to fees at mortgage. You had a nice quarter for mortgage. And in your prepared remarks, you mentioned selling more production there and you just mentioned SBA and I have heard and from some other banks that the premiums have come back a bit and in that line item, just wondering if you know a gain on sale in both lines for us pretty strong this quarter. This is a good run rate for those that those items and any sort of puts or takes off of Q1 levels to be correct?

Ryan Thomas

Yes, Jane, any thoughts?

Jane Grebenc

Well, we feel good about the volumes and you're right the premiums have come down in both businesses. Some it just means we have to work harder for each or each dollar, but I think the run rates in both businesses are Aram, you know, I don't I don't want to I'm over promise, but I think we're about where we're going to be.

Kelly Motta

Got it. That's helpful. I will step back. Thank you som much.

Ryan Thomas

Thank you.

Operator

Next question comes from the line of Matthew Breese with Stephens. Your line is open.

Matthew Breese

Hey, good afternoon, everybody. In that, Mike, just a point of clarification.
So traditionally when we talk about kind of mid-single-digit loan growth, it's usually all inclusive, but we've definitely made a difference this quarter.
And you're talking about commercial versus consumer growth when you point to mid-single digits growth for the rest of the year. Are you implying all in loan growth or just commercial growth and that means we'll probably see loan growth similar to what we saw this quarter.

Ryan Thomas

I'd like to see it all in, which means we would get maybe a little tailwind from the consumer side and maybe a little back. We've done a nice job of pricing our consumer and maintaining some volumes, particularly in the indirect auto, which is an end market business. And so we could maybe get a tipping point there. And maybe some tailwinds. And so it but maybe be more, it will be have to be commercially driven, but that is for the whole year and we would have to do a lot more in the second half of the year, undoubtedly.

Matthew Breese

Okay.
So all in loan growth is probably more than likely to be on the lower side of mid-single digit growth with commercial being kind of the factor.

Ryan Thomas

So I suspect you're right, but we're going to hold our feet to the fire in terms of space kind of 5%.

Matthew Breese

Fair enough.

Jane Grebenc

Mike, we could turn up consumer loan volume. So we would have to blink on price and we'd have to blink a little bit more than we're comfortable blinking right this minute on the auto business is softening a little bit. So if we wanted to if we wanted to turn it up, we would have to we have to compete on price.

Matthew Breese

I've got it right. And then, Jim, maybe just a couple for you. You know, you pointed out in your opening comments that we do have a bit more liquidity on the balance sheet today. Securities also grew a little bit. I was hoping for hoping for some more color on those two items strategy around securities at this point and liquidity deployment to point?

James Reske

Thanks for asking. We'll take some of the excess cash and deployed in liquidities, but not not aggressively really on what in security right now. We can maybe get in the high fives. We're getting 5.4 overnight at the Fed. Obviously, the securities has some duration. And whenever we buy, we're always looking at four to five year duration. So that helps a little bit in a falling rate environment, but the yield pickup is not tremendous and securities. Right now, we've gotten securities were probably up a little bit from last year. When it got a little uncomfortably low just in terms of on-balance sheet, liquidity is back up a little bit now, but we just always would rather be making loans. My securities so if we have a loan growth opportunity, we just rather deploy it there from here, we will not we don't want to put all in securities and find that we're borrowing overnight to fund loan growth, we just ready to put a longer so for a keep our eyes on it. But for the moment, my thought is some securities growth will take some of that cash. I mean, if we have already disclosed, if we have [$150 million] today, we'll take $50 million to pay off the sub-debt on June first. So maybe we'll whatever's left half of that securities growth and we'll see what happens with loan growth going forward.

Matthew Breese

Okay.
Appreciate that. And then, Jim, historically, you do provide some update on what kind of the forward outlook is for total fee income and expenses?
Expenses came in actually better than expected this quarter, and I appreciate some update there.

James Reske

Yeah and our guidance really isn't changing those things. I think the fee income and the expenses will be consistent with the guidance we've previously given so on. And I think that was on the fee side $67 million to $68 million and $67 million to $69 million for the quarter. But I don't mean to change the guidance because I thought actually both PM and analyst consensus and those in our previous guidance because of the need to be updated.

Matthew Breese

Understood.
Okay. And then just an update on Avon overall credit. All eyes are on office and some you have some great disclosures. But I'd love to hear a little bit more about kind of your top exposures in office, what's the typical sizes of the biggest loans and how they're performing and if anything is keeping me up at night?

Ryan Thomas

Yes, there's always a two. I get comfortable from the fact that in office we only have 11 loans over $10 million and probably [18] between [5] and [10]. So we're pretty granular. We worked down our exposure somewhat over the course of the last year, and we're pretty thin on central business district. I think we have just $73 million there.
I have Brian Karrip, our Chief Credit Officer with us. Brian, do you want to add some other other color?

Brian Karrip

Sure, and thanks for your question, and we have two deals that are above $20 million.
Both are performing well. Both have low LTVs, strong debt yields, strong DSCR one, what maturities we saw in the slide number 18, third quarter of '24, $22 million will mature. We're extending that loan for six months. We gave you the maturity ladder, so you could see it with with greater clarity and emphasizes who we are and how we think about our portfolio.
It emphasizes how we think about the granularity in our portfolio, how we break it out how we stratify it and how we think about our overall office business.
The slide is fairly complete. I'd be happy to answer any questions.

Matthew Breese

What is the I'm sorry, what's the nature of the extension?

Brian Karrip

Yes, you're looking at a property and so we have agreed. So we have a proactive approach with each one of our borrowers, in fact that we went out and did a physical inspection of each one of our office properties that will mature between '24 and '25. We wanted to better understand physical occupancy versus economic tenancy. And in doing so, we meet with our clients and we say what is the next step of what are your thoughts with this borrower? They said our plan is to sell the property and we went to them and have the discussion about let's do a six month extension to can you have an orderly exit.

Matthew Breese

Okay, that makes sense. And you feel like there's any loss content you're well reserved for that.

Brian Karrip

So I absolutely know it's performing performing.

Matthew Breese

Great.
I appreciate all the answers there and the color.
Thank you.

Ryan Thomas

Thank you.

Operator

Again, if you would like to ask a question, Brett star then the number one on your telephone. We have another question coming in comes from the line of Manuel Navas with D.A. Davidson. Your line is open.

Manuel Navas

Hey, good afternoon.
Good afternoon.
Most of my questions have been answered, but I just wanted to I was wondering some of the marginal rates of things and what was the marginal deposit rates for what came on? And I'm going to ask about different loan yields as well.

James Reske

Yes. So the current We have numerous different specials like the current short term, similar fee pressure, 5.05%, and then the money market specials, 4.5%. If you blend the volume, the overall deal volume rate on deposits coming in around about 4.8% for new new new deposits coming in. So that was 4.48% last quarter and it's coming down a little bit, right, you could be able to price down a little bit. We are flat with last quarter that CD special events, you would have been 5.1 actually five and a quarter now it's 5.05 for the bulk. I don't yet know, Adam, I don't. And I'm sorry. If I said the overall blended rate should be down from last quarter for us, I mean to say this quarter's 4.8% of segment sentiment should be down from last quarter. And then on new loan yields, you had strong equipment finance. You have to remind me the yields there an interim order.
Yes, and write off of in the high seven vessels net of dealer reserves and the I and we get it for you on the equipment finance, I think was right around 8% for the quarter. And I think you said earlier, commercial is roughly around 8% in general, we are cautious a little bit higher, a little lower. The current finance average of 7.98% [0.8%] and in direct 7.6% new money yields for the quarter. Selling direct, for example, bets 7.6% for the quarter, $110 million came on at [7.6%] to $109 million rolled off at Slide 24. So just the way we like it are kind of 9%, but I want to ask a question about better OpEx. I think you called out a little bit of a hospitalization expense didn't didn't kind of and improved linked quarter, and it's just going to just kind of kind of bounce back up a little bit?
Yes, yes. Yes, that's fair. That's fair to say we don't get too hopeful and aspirations like for a given quarter because it bounces around so much of the year just based on our experience, we self insure we talked about before publicly we layoff we have a reinsurance for a layer of Taiwan. We reinsure layer of costs once it gets reviewed at a certain level. But if we have good experience in a given quarter of the hospitalization, especially low, but it does bounce around.

Manuel Navas

Okay. So stay staying as previously expected I appreciate it.
Thank you.

James Reske

You bet.

Operator

Next question comes from the line of Frank Schiraldi with Piper Sandler. Your line is open.

Frank Schiraldi

Good afternoon. Frank, just in terms of you guys talked obviously about the tapering the CD rates here and seems like your commentary was also that on your not higher in autumn at the high end of the market, but you're still competitive? And just kind of curious what you're seeing so far is the idea that given the kind of loan growth expectations you laid out on that you can be competitive enough on the deposit side to kind of grow the deposits in line with that and hold the loan to deposit ratio kind of kind of flattish through the year. What's left because Lincoln?

Ryan Thomas

Yes, I think that's right is we watch that daily daily everyday in terms of what the flows in and out are, and it does impact how we think about consumer lending to start with and whether we continue to meter it or not. And but the replacement yields and some of the portfolios like indirect auto, that's not where we started a year ago and the team has done a great job getting our rates up there. John, do you want to ask any commentary you want to provide in terms of the sparkling water of liquidity in place to help us grow loans.

Jane Grebenc

And, you know, Mike, I think, Frank, it sounds so simple when you say it, Frank, but that's exactly what we're trying to do.

Frank Schiraldi

and in terms of just curious like you have the pressure now in the existing portfolio it is and that obviously in terms of deposit costs moving higher, is that just mostly new money at this point on has the existing stuff on sort of stabilized to a degree?

James Reske

Can I have some thoughts?

Jane Grebenc

Sure we see we still see new money coming in and any given special, we see about about 50% new money and 50% of our existing book potentially repricing and John, we've been pretty gracious about that because we'd rather keep the deposits and up. But we are seeing the rate of repricing slowing down six months ago. It was bad nine months ago, it felt horrible today it feels like it's starting to normalize and pricing is, is it really slowing down?

Ryan Thomas

Is that helpful, Frank?

Frank Schiraldi

Yes, yes. And Doug, and then just lastly on.
Yes, just thinking about reserve to loan levels, I mean, it seems like some of the smaller banks are trying to build reserves a bit here, just given where some of the bigger banks are on reserve coverage of the total booking and for you guys, just kind of curious, how do you think about that? I mean, just given that commercial is going to be the driver here on what does that alone kind of say about the reserve-to-loan ratio? Should we at the end of the day, I just expect continued increase a modest increase in that quarter over quarter as you grow the commercial book?

Ryan Thomas

Yes. I mean, we obviously fund reserves and we have growth and that's a key part and a component of building the reserve and that's what build it in the past. And Brian, what would you add to that?

Brian Karrip

Is that we have about $3.3 million in specific reserves from the acquisition, we have about $2.9 million in PCD. reserves. So we did grow from [$131 million] to [$132 million] and our reserve ratio, but we've got adequate reserves to support our business and potentially to support some growth.
Can I just add? I think our approach is very thorough. It's a bottoms up approach. In other words, rather than just some thinking about.
I wanted to quickly ask a question. You know, tonic, we say, well, let's do this separation and find a way to solve for that ratio.
You know, anecdotally you might your bankers, like you mentioned small banks talking about that and thinking that way. But ours is very far from the bottom up. So if we say, hey, you know, those economic conditions are changing that our quantitative reserve would be changed to reflect that. If we see GDP or unemployment factors changing and then some of the qualitative factors we look at changes in underwriting standards or staff all the factors. We look at that if you made some changes this quarter as well as loan growth, yes, right.
As well as loan growth. So then we do all that work. And they say, oh, it turns out that given the way the portfolio grew or didn't grow that much. And so the ratio is 1.32 rather than saying, let's find a way to get it to 1.32. So anyway, I don't know if that helps or not. But that's kind of how we're thinking about it from.

Frank Schiraldi

Yes. No, I guess I'm just thinking through like as you build that book, what the reserves are in the commercial book, I guess versus reserves of consumables on a percentage of total loans. I don't know if you have that handy.

Ryan Thomas

I don't, but I could we could get it back to you. We can we've had our reserve. We've had our reserve higher than our peers generally, and that's with some it's a pretty good mix between a probably heavier consumer than than our commercial end, almost 50 50. And really, that could switch to a more of a 60, 60 plus percent commercial just because that's where the spread is and that's where the customer relationships, the more robust cross-sell and the fulsome depository is.

Frank Schiraldi

Okay, and I appreciate all the color.
Thanks.

Ryan Thomas

Thank you.

Operator

There are no further questions at this time. Mr. Mike Price, I'll turn the call back over to you.

Mike Price

Yes. Thank you, operator. And as always, we appreciate your engagement and interest in First Commonwealth. As we think about our 2024 strategic themes. We've shared these with you before, and they really don't change as much from year to year. But we think about an organization living our mission every day that is to improve the financial lives of our neighbors and their businesses who do that well and then growing our business and we think we can improve our loan pricing, we can improve partner introductions in the regional teams. We can grow our C&I lending each year going forward, particularly given the team that we've put together. And then we also think a lot about getting better. So live, the mission grow, get better and not just basically been in every region, every line of business, every business support unit. And we're trying to become digital in every facet of our business. And so those that's where our heads are. At those of you who know us, we talk about these things and that we expect to get better every year even as we cross $10 billion. And we have a little wind taken out of our sails with Durbin this year and just stay after it. And this is a fund business. We make a difference in the lives of our consumers and small business in our respective communities. And it's a great business to be in Thank you.

Operator

This concludes today's conference call. You may now disconnect.