First Commonwealth Financial Corporation (FCF) Q4 2025 Earnings Report, Transcript and Summary

Thank you for standing by. My name is Jordan, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the First Commonwealth Financial Corporation Fourth Quarter 2025 Earnings Release Conference Call. [Operator Instructions] Thank you. I'd now like to turn the call over to Ryan Thomas, Vice President of Finance and Investor Relations. Please go ahead.

Thank you, Jordan, and good afternoon, everyone. Thanks for joining us today to discuss First Commonwealth Financial Corporation's fourth quarter financial results. Participating on today's call will be Mike Price, President and CEO; Jim Reske, Chief Financial Officer; Jane Grebenc, Bank President and Chief Revenue Officer; Brian Sohocki, Chief Credit Officer; and Mike McCuen, Chief Lending Officer. As a reminder, a copy of yesterday's earnings release can be accessed by logging on to fcbanking.com and selecting the Investor Relations link at the top of the page. We have also included a slide presentation on our Investor Relations website with supplemental information that will be referenced during today's call. Before we begin, I need to caution listeners that this call will contain forward-looking statements. Please refer to our forward-looking statements disclaimer on Page 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. A reconciliation of these measures can be found in the appendix of today's slide presentation. With that, I will turn the call over to Mike.

Thank you, Ryan, and welcome, everyone. Headline performance numbers for the fourth quarter include core EPS of $0.43 per share, which beat consensus earnings estimates alongside a net interest margin that expanded to 3.98%, a core ROA of 1.45% and a core efficiency ratio of 52.8%. During the fourth quarter, average deposits and total loans grew modestly at 2.8% and 1.2%, respectively, due to seasonal headwinds and several larger commercial loan payoffs. Net interest income grew as the margin expanded on the heels of healthy new commercial loan volume at good rates. Deposit costs fell 1 basis point to 1.83%. Fee income was flat, as gains in SBA were offset by seasonal declines in wealth and mortgage. Our fee income at 18% of total revenue compares favorably to peers, and we have a concerted effort and long-term focus on growing fee income through our regional banking model. Wages and incentives remained pressured due to market conditions. The provision for credit losses decreased by $4.3 million compared to last quarter to $7 million. The elevated prior quarter provision was reflective of the continued resolution of a previously disclosed dealer floor plan credit. The credit required no further reserve in the fourth quarter. While NPLs increased 4 basis points to 94 basis points versus the prior quarter, we are appropriately reserved for these loans and did not experience a provision impact like the third quarter. Nonperforming loans include both the unguaranteed portion of SBA loans and the government-guaranteed portion of any SBA loan, which is owned by the bank. As of December 31, 2025, $98 million of nonperforming loans included $39.2 million of total SBA loans, of which $31.2 million was government guaranteed. As a result of our 94 basis points of NPLs, 32 basis points is guaranteed. In the fourth quarter, we repurchased $23.1 million of our stock or 1.4 million shares at $15.94 per share. We repurchased 2.1 million shares in total in 2025, which incidentally is roughly 2/3 of the 3 million shares we issued in the Center Bank acquisition. For the year, core EPS of $1.53 compares favorably to the consensus earnings estimates of $1.40 that was in place in December of 2024 as well as the highest revised midyear consensus estimate of $1.54. Net interest income of $427.5 million in 2025 was up an impressive $47.2 million year-over-year, while net interest income benefited in general from higher for longer interest rates, more specifically, net interest income was driven by better loan yields, good loan volumes, lower deposit costs and a better commercial business mix. All this mixed together drove the NIM markedly higher over last year. Loan growth was 8.2% annualized and 5% without the Center Bank acquisition as commercial banking, equipment finance and indirect led the way. Average deposit growth of 6.1% for the year largely kept pace with loan growth and was approximately 4.2% without Center Bank. Here, money market and CDs accounted for over $534 million in growth, while noninterest-bearing DDA added another $116 million to a now $10.3 billion depository. For the year, noninterest income fell only $3 million year-over-year, despite another $6.3 million in Durbin amendment debit card headwinds that resulted from crossing $10 billion in assets. In short, our fee businesses are filling the gap. In sum, 2025 was a year in which strong growth in spread and fee income more than offset the impact of higher expenses and lost Durbin interchange income, resulting in year-over-year improvements in PPNR, core EPS, core ROA and efficiency. During the year, and oh, by the way, the team completed the acquisition of Center Bank and grew deposits 3% annually for the year. Before I turn the call over to Jim, I wanted to take a moment to recognize Jane Grebenc, who will be retiring at the end of March. Jane has been a friend and a mentor to me and many other leaders throughout her distinguished career, and she has left an indelible mark on First Commonwealth. Jane's dedication, leadership and wisdom have played a pivotal role in the strategic transformations that have helped position First Commonwealth as a top quartile performer. Thank you, Jane. And with that, I will turn it over to Jim Reske, our CFO.

Thanks, Mike. Core operating results for the fourth quarter of 2025 continued the momentum of the third quarter. Core ROA improved 11 basis points to 1.45% and core ROTCE improved 93 basis points to 15.83%. Spread income increased $2.1 million from the previous quarter, primarily due to a 6 basis point increase in the net interest margin. The yield on earning assets increased 3 basis points, while the cost of funds decreased 3 basis points. Looking ahead, our NIM guidance has little changed from last quarter, a near-term dip as our margin to our variable rate loans fully reflects fourth quarter rate cuts, followed by gradual improvement each quarter, ending the year 2026 at around 4%. At year-end, we designated a portfolio of approximately $225 million in commercial loans as held for sale. These loans represent a pool of commercial loans that were originated primarily in our Philadelphia MSA, which the bank had previously decided to exit in order to focus the bank's resources on customers in other areas. Subsequent to that decision and communication to borrowers, a bank approached us with an offer to purchase the portfolio. Since discussions regarding that sale are ongoing, we moved the portfolio to held for sale as of year-end. The ongoing effect in 2026 should the sale be consummated, would be to reinvest the cash proceeds from the sale of $225 million in loans into lower-yielding securities at a rate differential of approximately 1.5%. The sale is consummated, will also have the ancillary benefits of improving our liquidity and our capital ratios. As Mike mentioned, total average deposits increased $72 million or 2.8% annualized over last quarter. Seasonal outflows in public funds were more than offset by growth in consumer checking and time deposits, along with growth in small business and corporate money market deposits. Core noninterest income of $24.3 million decreased $200,000 from the previous quarter. SBA gain on sale income increased by $800,000, but this was more than offset by a $700,000 decrease in wealth advisory fees and a $200,000 decrease in swap fees. In 2026, we expect noninterest income to be relatively flat over 2025. Though longer term, as Mike mentioned, we would expect our regional model to improve fee income results. Core noninterest expense of $74.3 million increased $1.7 million from the previous quarter, mostly due to increases in salaries and benefits as we filled a number of open positions in the fourth quarter. The bank, however, was able to achieve positive operating leverage over last quarter. The core efficiency ratio remained below 53%, and we expect to be able to limit operating cost increases to approximately 3% year-over-year looking ahead. Mike mentioned our buyback activity in the fourth quarter. I would add that remaining repurchase capacity under the current program was $22.7 million as of December 31, 2025. On top of that, an additional $25 million of share repurchase authority was authorized by our Board yesterday. Of course, we only repurchased shares using excess capital generation in any given quarter, which effectively caps repurchase activity at approximately $25 million to $30 million per quarter. And with that, we'll take any questions you may have.

[Operator Instructions] Your first question comes from the line of Daniel Tamayo from Raymond James.

Congratulations to Jane on your retirement. I guess, first on the -- on the credit side, and I apologize, I don't think I heard anything, but if I did, I apologize if I missed it. But just curious, you did, Mike, touch on the impact of the SBA guaranteed in the NPLs. But just thoughts on where the net charge-offs and provision might go in 2026? And then if you have any update on the floor plan loan that had been given you guys some issues where that stands at the end of the quarter as well.

Yes. The charge-off guidance we normally give is 25 to 30 basis points. And the floor plan credit, we have maybe $1.5 million left to resolve. Is that right, Brian?

Yes, I'll jump in there. Thanks, Mike. First, I'll just start in the fourth quarter for the dealer floor plan loan. We ended the year with a $2.5 million outstanding balance. So we're nearing resolution with just a number of [ cards ] left in the liquidation process. There was no additional reserve as noted previously, and we have just a small release, about $80,000 in the quarter. Since you mentioned the net charge-offs, there was a $2.1 million charge in the fourth quarter related to the dealer floor plan loan and also within that 47 basis points that was reported on an annualized basis. And I concur with Mike's guidance on the forecast moving forward.

Okay. Great. And as it relates to the provision or reserves, with the reserves coming out over the last couple of quarters, does this feel like a pretty good run rate for stability, just over 130, or do you think that still can trickle down?

Yes. I wouldn't say there's any change in our philosophy. Credit costs remain manageable. Reserve levels remain strong, consistent with peers, slightly ahead in some cases at the 132. Where we've seen emerging stress, we've already responded, whether that's through the specific reserves in prior quarters. We've kept our qualitative overlays in place. And overall, comfortable that the reserve is just appropriate, reflecting where the risk is in the portfolio.

Okay. And maybe just changing gears here, but just as it relates to the loan sale that you're expecting here probably near term, is that something you could see happening more in 2026 in terms of additional loans being moved off the balance sheet? Or is this kind of a one-off situation that you don't see recurring?

It's more of a one-off. We really withdrew from that market, our branches and kind of our C&I commercial banking depository ground game. And about 2 years ago, we sent customers letters, and this is kind of really one of the last acts of the play. Mike McCuen is our Chief Banking Officer. He's on the line. Do you want to add anything for Daniel, Michael?

No, I think you covered it, Mike. Taking those resources that Jim alluded to, investing in the other markets that we have retail locations makes all the sense in the world for our business model.

Okay. Terrific. Appreciate it.

Thank you.

Your next question comes from the line of Karl Shepard from RBC Capital Markets.

Congrats, Jane. I guess I wanted to start on your loan growth expectations. It looks like you had pretty good production in some of the segments maybe you're targeting, and then you had the payoff headwind. So I guess just kind of what's the buildup for loan growth in '26, and just kind of just talk about maybe health of the pipelines and what you're seeing in your markets?

Yes. I think -- last year, we grew 8%, 5% without Center Bank. And I would expect that kind of loan growth to continue, although we really had elevated payoffs probably in excess of over $200 million from the second half of the year to the first half of the year. So that created some palpable headwinds. We feel like our business banking, mortgage could have a good year, although we'll sell that. And really, we just feel good about our commercial pipelines, commercial real estate and elsewhere. We had really let our construction portfolio attrite, and we feel that is going to build and add probably $20-plus million of drawdowns a month. We feel like we're well positioned. Typically, the first and the fourth quarter are a little slower for us than the second or third, and that's where we get most of our loan growth in a given year. But the payoffs are indeed a little elevated. And -- but I suspect just like we were here last year, I think we probably guided to maybe 5% to 7% and we've got to 5%. And that's, again, without the center bank. And I think we're well positioned. And our teams are maturing, and we're just -- I think we get a little better every year.

Okay. And then I guess maybe one for Jim. Just on the buyback, quite a bit of authorization out there now and the stock is a little bit higher than maybe where it was in 4Q when you're active. Just how do you want us to think about that?

Yes. It's really more about capital deployment right now. There is a price sensitivity to it. We always operate on a grid so that we can -- and we use the same words every time. We want to keep a little bit of dry powder available if prices dip. That's kind of why if you look back in calendar year 2025, for a good part of the year, we weren't buying back anything. And then the later part of the year, we stepped up the buyback. So right now, the capital ratios, we're just generating so much capital to easily self-capitalize loan growth at the level we wanted. So if our future guidance is mid-single digits. We're generating far more capital than it takes to capitalize that kind of loan growth. And so we don't want to -- and I'll repeat myself because I know we said this before, but we don't want to accelerate loan growth beyond what we think we can organically do. We do it at the right pace for our region, for our credit appetite, for our demographics based on the rate environment. For all those reasons, the loan growth rate is where we want it to be. And then we still generate a ton of capital. And so we have to do something with that other than just let the capital ratios go up, up, up. So that's why we are doing the buyback, and we'll continue to do more this year.

Your next question comes from the line of Kelly Motta from KBW.

Congrats, Jane, on your retirement. Just to start off, I'd love to kick it off on margin. It came in quite a bit above where I had been expecting. You guys noted you had some payoffs. I'm just wondering if there was any loan fees in there or if that's a good run rate to go off of. And as we look ahead, I appreciate the commentary about the reinvestment from the HFS portfolio when that closes, but how we should be thinking about these dynamics here?

Yes. Kelly, it's Jim. Great question. Thanks. Yes, we were really pleased with the margin performance this quarter as well. We -- you recall last quarter, we were giving guidance that we expected a dip. And first thought when we saw the margin coming in so strongly was is the dip actually happening the way we thought it was going to happen. And it did. It did. So the rate cuts hit the variable rate loan portfolio, the SOFR-based loan portfolio took that down. But you nailed it. We had some other things that offset that. And the part you nailed is we had some payoffs; we had some paydowns in loans that were previously on nonaccrual status. And when we did that, some of the previously -- we recognized interest on those loans that have been on nonaccrual. And so that -- and some other factors together work together to offset that hit we took in the variable portfolio and kept the margin performance really strong in the fourth quarter. But looking ahead, we think that the Fed cut rates a couple of times here in the fourth quarter in December. That's not fully reflected yet. We're going to feel that in the variable -- in the SOFR-based loan portfolio, the variable portfolio. So that's going to hit in the first quarter, dip it down a little bit. But then all the other factors that have been working to keep it going strong, the continued upward repricing of the fixed rate loans, the macro swaps coming off the book here, the remainder of that in 2026, including a big chunk in May, that will really help keep the margin up. And so that's why we kind of have this forecast of drifting upward to around the 4% level in 2026. So I hope that gives you some additional color.

No, that's super helpful. Maybe turning to the expenses. Q4 it was up about $1.5 million, I think. Just wondering if that was just kind of year-end true ups. And then as we think ahead, how you guys are -- it seems like you're calling for pretty strong margin here, solid loan growth. So as we look ahead, your expectation for expenses, any places you're hiring and how we should think about that run rate?

Just the efficiency was certainly on the back of the revenue side. We're normally very, very good at the expense side and maintaining operating leverage, and we have a nice little chart in our investor deck that shows that we're pretty good at putting our shoulder to the wheel. And we'll need to do that in hustle this year, watch our FTE count closely. That being said, we've invested pretty heavily in our commercial bank, our equipment finance group. And we expect more production there, and we expect for those investments to pay off for us. But we can do a little better job on the expense side as well. And we've invested pretty heavily, quite frankly, the last 2 years, I think, yes, $25 million or so...

Yes.

Up over 2 years. And we were a little higher than we thought we would be, but that's just a matter of discipline, and we're a pretty disciplined group.

And Kelly, you mentioned the word true ups. There were a couple of things that were one-offs that hit us in the fourth quarter that are not part of our thinking going forward. So we have some contract terminations and some other things in addition to what we said in our prepared remarks about filling open positions that what Mike talked about, about the staffing increases. So a couple of those one-offs are not in our future forecast for operating expense going forward.

Your next question comes from the line of Matthew Breese from Stephens Inc.

I had a couple of questions. Maybe first starting with the NIM. It sounds like the guidance is calling for around a 4% NIM by the end of the year. And I'm usually just a bit skeptical of the sustainability of 4% NIMs. And one thing we've been hearing a lot about this quarter is spread compression, both on the C&I and CRE front. And so I guess I had a 2-part question, which is, one, how does the pipeline yield look? And what are you getting for spreads on new C&I and commercial real estate business? And then maybe just touch on expectations around deposit costs for 2026?

Yes. I'll hand it over to Mike McCuen in a minute for the loan expectations. But I mean when I look at our commercial variable and the new stuff we're putting on, it's 7.3% in the last quarter and commercial fixed is in the high 6s, even our indirect is in the high 6s. So -- and that's like kind of at that 2.5-year point on the shoulder of the yield curve, and we like that. And so I don't know, replacement rates still look good. Even with rates down this past quarter, our commercial variable, the replacement rate was low, but nevertheless, it was still positive.

Yes. I think just I'll interject quickly, and then Mike McCuen and turn it over to you for just thoughts on the market and the spread and the spread compression to give that kind of real-time color. But in the fourth quarter, we didn't see a real differential on the rates that were for the variable rate portfolio, the ones that are coming on and coming off. So that said like from -- in the aggregate, there wasn't an evidence of a lot of spread compression in that portfolio. As Mike was talking about is all the fixed rate loans still nicely repricing upward. And because those are all repricing towards the middle of the curve, if the yield curve inflects a little bit, that drop at the short end, won't affect that dynamic a whole lot. And I think, Matt, we talked about that before. So -- but that -- just the variable rate portfolio, the ones that came on, came off, it was like a 1 basis point differential in the fourth quarter. So not a lot of evidence on that macro level of spread compression, but I'll turn it over to Mike for [indiscernible].

Yes. Just to answer specifically on the segments. I would start with our business lending to the family-owned owner-operated business. We put a real focus on that about a year ago. And we're seeing healthy growth in that segment. I would say that's a prime, the prime plus based business. I don't see that changing from a spread perspective. Secondly, the equipment finance group, if they're doing mostly fixed rate loans. Their yields are holding up pretty well. And then thirdly, I would say the commercial real estate business, that's a little trickier because as probably you've heard from others, the agency markets, the insurance markets are very aggressive these days. We have a pretty healthy pipeline, and we have a number of construction loans that are converting to permanent markets. The balancing act is those spreads are compressed, and we're trying to maintain our discipline around the real estate business, not just from a rate perspective, but also from a structure, term, recourse, all those things that go into those decisions, as our construction loans roll off, we have every chance to match those rates. We, in many cases, choose not to and let those move on, and then grow the construction loan portfolio, which, by the way, is up around $120 million over the last year, and that will lead to future funding. So that's a quick snapshot of why we're a little more comfortable based on the segments that we play in versus large corporate investment grade, things like that.

Got it. Okay. So it still sounds like you're putting on loans accretive to where the average yield is, and I'm assuming there's still some room to reprice deposits down. I guess, Jim, as we look to 4Q '26 and beyond, do you feel like there's momentum to carry the NIM above 4% as we get into 2027, all else equal?

Yes. But -- I'll borrow the phrase everyone says that the crystal ball gets fuzzy that far out. And we usually don't give guidance that far out anyway. But I know we've talked about this before. If we look ahead in the projections, and again, it's really funny. So I'll hedge that again. The NIM would hover in the low 4s in 2027 in the current projection. So it depends on lots of factors and lots of things could change by between here and then. By then, our macro swaps will be fully off, and so we'll have the benefit of that. We think there's room to drop the deposit rates a little more. We've been pretty thoughtful about that, watching the rates in the market that have been around us. We -- in 2025, that was a big issue. We thought it would be very difficult to fund the loan growth with deposit growth and drop rates at the same time. And yet we did it very successfully in 2025. So we kind of think there's -- we think we can continue that in 2026 as well. That will help the margin as well.

Got it. Okay. And then last one before I'll hop back in the queue. I feel like you laid a few breadcrumbs on the stock buyback front. At least in the very near term, the next 1 or 2 quarters, should we be penciling in $25 million, $30 million in buybacks per quarter?

It's hard for me to definitively say it in the next 2 quarters because it's not entirely dependent on the stock price, but it's sensitive to the stock price. So if the price shoots up, we'll slow the buyback down and it would not all be in the first half. If the price stays where it goes lower, then it -- a lot of it will be in the first half. Even then, though, it may not all be in the first half. It will be -- we intend to use the authority and be fairly aggressive with it overall, but there's still price sensitivity to it.

[Operator Instructions] Your next question comes from the line of Manuel Navas from Piper Sandler.

On the NIM, how big of a dip are we looking at this first quarter? Did you discuss how much the -- I might have missed it, how much the NPLs benefited the NIM this quarter, like a dollar amount or basis point in the NIM? Just trying to quantify what's going to come out of the NIM next quarter?

Yes. The NPLs were uphold was about 3 basis points of total impact on the NIM. It was a little bit bigger. I just say the impact on that one portfolio because we spent a lot of time looking at the variable rate portfolio in the fourth quarter to say why didn't it -- the yield on that portfolio dropped the way we thought it was going to drop. And the answer is what I said before, it did drop for the effect on SOFR, but it was offset, I think, by the nonaccruals and a couple of other factors, too. But the overall effect on the total NIM for the nonaccruals coming back was about 3 basis points for the fourth quarter. [indiscernible] what was the other part of your question?

And then from there, how big of a dip that we are looking at in the first quarter?

Yes. The amount of the dip, we think is anywhere from 5 to 10. And I'm hedging that way because we always hedge our forecast because they're always within 5 or 10. I think -- yes, on the model going forward. And then it drifts upward around 5 basis points a quarter. It ends up not quite 5 basis points a quarter, but it drifts upward enough to end the year at around 4%.

And as those loans are sold, your loan-to-deposit ratio ex those loans is like in the low 90s, you could be a little more aggressive on deposits, right?

Yes, and yes. Thank you for [indiscernible] that. That's a big part of our thinking actually. We're happy to see that loan-to-deposit ratio. And then these were securities we buy will be current rates; they won't be underwater. So they're perfectly available to sell as liquidity to fund loan growth we wanted to, of course, we have ample borrowing capacity. So it's not -- liquidity is not an issue, but it does give us a little more liquidity, a little more dry powder to fund future loan growth, and then also not be so aggressive at the margin on deposit rates to fund the loan growth.

We're probably 2/3...

Are there some other -- go ahead.

No, we're probably 2/3 of our peers in terms of the deposit beta over the last year in terms of cost of deposits. So if they're down 33%, we're down about 22%. And we've done that on purpose, and we've really -- probably kept them a little higher than we could because we wanted the growth, and we didn't want the borrowings. And so we achieved both. And that's kind of the balance. But I think there's probably in the long run, if rates go down, more downward opportunity. But we'll keep trying to grow the deposits. The other thing is it also has to be a game of acquiring new accounts, noninterest-bearing, new checking, and we're trying to -- and we have a sales force that under Jane's leadership and Mike's leadership has really delivered that for us. And we'll continue to beat that, [ down ].

Are there other impacts from the sale of these loans across OpEx, across -- you're more focused away from the filling area? Are there other impacts in the loan loss reserve? Anything that -- in those areas that we can start to plan for now?

I'll give a financial answer. The impacts on loan loss reserve that marks, all that was felt in the fourth quarter. That's all reflected in the financials already. Just in terms of operational expenses there's not much. We've already -- we have a couple of physical locations that we exited a while ago. So there's nothing further from a facilities expense standpoint to come. But it does allow management bandwidth to refocus on other areas. And Mike, I'm in the queue, and I don't know if you want to comment on that more, that's more of -- how we run the business of...

No, we -- I mean, Philadelphia is a great market. It's also very greatly competitive, and we would not be -- the investment to really compete the way we would like be too great, and that money can be used in other markets for producers, physical locations where we already have really good presence, and we want to grow those. So it's just a trade-off we made. And I think we'll see more profitable growth in some of those markets than we otherwise would. But nothing against Philadelphia. It's a great market. It's just there's a lot of competitors there.

And Manuel....

Sorry. Go ahead. Go ahead.

Yes. Just from a financial effect, these were already in relationships, so we were deciding to exit it. So it was kind of a slow bleed on the loan growth. It was a net against other loan growth. So that will be removed now that we've moved them into held for sale.

I appreciate some of the extra commentary.

You bet.

Your next question comes from the line of Matthew Breese from Stephens Inc.

Again, I just had one more, but I want to be cognizant of everybody. The securities book has been in this kind of 3.50% to 3.65% range, but yields have been down for the last couple of quarters. Jim, you had mentioned buying some at-the-market type securities with the HFS portfolio. So I'm assuming that's like a 4.75% pickup. And then -- so I was hoping for maybe securities yields outlook for the first quarter. And then cash flow estimates for the year, I would think at some point here, either late this year or next year, we start to see a more aggressive pickup in securities yields, but was hoping for some help there.

Yes. No, it's a great point. The portfolio has a duration of between 4 and 5 years. So that right now, the philosophy is just replace the runoff. And the opportunities we get, the number I gave a moment ago when I talked about reinvestment, the reinvestment of the HFS loans upon a sale of consummated into securities was assuming a repurchase rate of about 4.5%. But you're right, we just looked at the other day, we see some opportunities like more in the high 4s. It depends day to day, but I was using a 4.5% rate just as a rule of thumb right now. But you see some pickup and [indiscernible] some opportunities for some [indiscernible] no investments that are more like 4.75% right now. So that will naturally allow the securities portfolio to drift upward as well. It's -- we're not -- the position it holds in the balance sheet right now is not where we want it. And so we're not really expanding it. We're just replacing it well. Does that help?

Yes. I'm just curious, is that 4- to 5-year duration, is that good to use for 2026? I haven't quite done the math yet on what that means for quarterly cash flows, but...

Yes. And I don't -- yes, I don't have any...

It could be lumpy sometimes.

Yes. Yes, it can be. And obviously, a lot of those are mortgage-backed securities. So a couple of years ago, rates fell that duration is all extended. Let me see if I have the duration of the securities portfolio right now. Right now, the duration of the securities portfolio is actually only 4.28%, 4.28% in the fourth quarter. So there should be some repricing opportunities as that rolls over.

Okay.

That concludes the question-and-answer session. I will now turn the call back over to Mike Price, President and CEO, for closing remarks.

Thank you, as always, for your interest in our company. Great questions. I look forward to being with a number of you over the course of the next quarter. And we're excited about the future of our company. We're excited to grow it, maintain operating leverage, add to our fee businesses. That's a big goal. In our regional model, really deliver good low-cost deposit growth in each of our markets to fund. I think our -- we have enough diversity of lending businesses, I think we're less worried about growing the loans long-term than funding them with low-cost core deposits. So thank you for your time today, and stay warm.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may disconnect.