Financial Data and Key Metrics Changes - The company reported net investment income of $34.8 million, a 30% increase compared to Q2 of the previous year [4] - Total investment income reached $69.5 million, reflecting a 27% increase year-over-year [14] - Net asset value (NAV) grew 11% quarter-over-quarter to a record $924 million, with NAV per share increasing to $13.27 [5][15] - The effective yield on the portfolio for Q2 was 15.7% [14] - The company maintained a strong return on average equity of 15.9%, among the top in the BDC space [15] Business Line Data and Key Metrics Changes - The portfolio composition included approximately 76% secured loans, 17% equipment financings, 4% equity, and 2% warrants [20] - The equipment finance business saw a significant uptick in requests, with over 20% growth year-to-date [67] - The company funded $585 million in the first half of the year, exceeding last year's record by more than 20% [11] Market Data and Key Metrics Changes - The company has a strong investment pipeline with $849 million in unfunded commitments as of the end of Q2 [11] - Approximately 99.1% of the portfolio was performing on a fair value basis, indicating strong credit quality [21] - The average internal credit rating for the portfolio stood at 2.9 on a scale of 1 to 5, consistent with prior quarters [21] Company Strategy and Development Direction - The company aims to be the top-performing BDC, leveraging its differentiated structure and disciplined underwriting [7] - Plans to launch an SBIC fund with potential investable capital of $275 million, which will generate new management and incentive fees [5][39] - The company is focused on late-stage venture-backed companies in the lower middle market, positioning itself well in the private credit market [13] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about future rate cuts benefiting the company, as most deals are at full rates [13] - The company is experiencing strong momentum heading into 2025, with expectations for continued portfolio growth [11] - Management emphasized the importance of credit quality and disciplined portfolio management as top priorities [23] Other Important Information - The company raised $82 million of equity through the ATM program at an average premium to NAV of 11% [10] - The net leverage ratio decreased to 1.12 times, indicating improved financial stability [19] - The company has no debt maturities until August 2026, enhancing its liquidity position [18] Q&A Session Summary Question: Equipment finance interest due to tariffs - Management indicated that the increase in equipment finance is more of a timing issue and expects continued growth in that area [25][26] Question: Increase in watch list at fair value - Management noted that the watch list includes companies needing additional capital and those underperforming, with ongoing negotiations for support [28][30] Question: Expected pacing of raising third-party capital - Management discussed the groundwork laid for managed accounts and the anticipated growth of that capital pool [33][35] Question: Characteristics of SBIC fund assets - The SBIC fund will have a low cost of capital and will co-invest alongside the BDC, enhancing returns for shareholders [42][47] Question: Impact of interest rates on prepayments - Management stated that lower rates could lead to refinancing opportunities, generating additional fee income [49][51] Question: Seasonality in originations or repayments - Management expects strong deployment in Q3, driven by signed term sheets and manufacturing lines needing additional capital [53][54] Question: NexCAR and space perspective - Management confirmed ongoing discussions regarding loan modifications for NexCAR and expects to finalize transactions in Q3 [59][60] Question: Tax changes and equipment financing - Management noted a significant uptick in equipment financing requests, attributed partly to tax changes allowing accelerated depreciation [67][68]

Financial Performance - First Commonwealth Financial Corporation reported GAAP net income of $33.4 million for Q2 2025, an increase of $0.7 million from Q1 2025 but a decrease of $3.7 million from Q2 2024 [3][8] - Core net income for the same period was $39.5 million, reflecting an increase of $6.7 million from the previous quarter and $2.4 million from the same quarter last year [3][9] - Net interest income (FTE) reached $106.6 million, up $10.7 million from Q1 2025 and $11.3 million from Q2 2024 [3][10] Profitability Metrics - The diluted earnings per share remained stable at $0.32 compared to Q1 2025, while core diluted earnings per share increased to $0.38 from $0.32 in the previous quarter [3][9] - Return on average assets (ROA) was 1.11%, a slight decrease from 1.14% in the previous quarter, while core ROA improved to 1.31% [3][4] - The net interest margin improved to 3.83%, an increase of 21 basis points from the previous quarter and 26 basis points from the same quarter last year [3][11] Asset Quality - The provision for credit losses was $8.9 million, up from $5.7 million in the previous quarter, primarily due to an increase in specific reserves related to a commercial floorplan relationship [6][14] - Total nonperforming loans increased to $99.5 million, up $40.1 million from the previous quarter, largely due to the aforementioned commercial relationship [6][17] - The allowance for credit losses as a percentage of end-of-period loans was 1.39%, an increase from 1.32% in the previous quarter [6][15] Capital and Liquidity - Total shareholder's equity increased by $70.7 million from the previous quarter, driven by equity issued for the CenterGroup acquisition and an increase in retained earnings [6][16] - The Bank-level Total Capital ratio stood at 13.4%, indicating a strong capital position above regulatory requirements [6][16] - The company declared a quarterly dividend of $0.135 per share, representing a 3.9% increase from the same quarter last year [6][24] Growth and Strategic Initiatives - Average deposits (excluding acquired balances) increased by $91.6 million, or 3.8% annualized, compared to the prior quarter [6][12] - Total loans (excluding acquired balances) grew by $183.7 million, or 8.1% annualized, from the previous quarter [6][13] - The company has been recognized by Forbes as one of the World's Best Banks for 2025, marking its fourth consecutive year of recognition [6][6]