Market Overview

First Commonwealth Announces Third Quarter 2012 Financial Results and Declares Third Quarter Dividend

Share:

INDIANA, Pa., Oct. 24, 2012 /PRNewswire/ -- First Commonwealth Financial Corporation (NYSE: FCF) today reported net income of $9.8 million, or $0.09 diluted earnings per share, for the third quarter ended September 30, 2012, as compared to net income of $8.3 million, or $0.08 diluted earnings per share, in the third quarter of 2011. The increase in net income was primarily the result of higher noninterest income partially offset by decreased net interest income and higher noninterest expense. For the nine months ended September 30, 2012, net income was $33.2 million, or $0.32 diluted earnings per share, compared to net income of $21.0 million, or $0.20 diluted earnings per share, for the comparable period in 2011. Contributing to the increase in net income was a lower provision for credit losses and higher noninterest income, partially offset by lower net interest income and increased noninterest expense.

(Logo: http://photos.prnewswire.com/prnh/20030416/FIRSTLOGO)

T. Michael Price, President and Chief Executive Officer, stated, "While a prolonged low interest rate environment continues to put pressure on the net interest margin, trends in our credit quality, noninterest income and noninterest expense indicate significant opportunities ahead.  Importantly, our team has achieved four consecutive quarters of loan growth, which is a crucial counterbalance to the margin pressure facing the industry."

Net Interest Income and Net Interest Margin

Third quarter 2012 net interest income, on a fully taxable equivalent basis, decreased $1.1 million to $47.7 million as compared to the third quarter of 2011. The decrease was the result of a 27 basis point decline in the net interest margin. The net interest margin was 3.54%, 3.61% and 3.81% for the three-month periods ended September 30, 2012, June 30, 2012 and September 30, 2011, respectively. For the nine months ended September 30, 2012 net interest income, on a fully taxable equivalent basis, decreased $1.4 million to $145.1 million. The decrease was primarily due to a decline of 18 basis points in the net interest margin.  The net interest margin for the nine months ended September 30, 2012 and 2011 was 3.63% and 3.81%, respectively. As the low interest rate environment continues to cause net interest margin compression, the impact of lower interest rates has been partially offset by loan growth of $240.6 million, a 6% increase, over the twelve-month period. 

Credit Quality

The provision for credit losses was $6.8 million and $14.8 million for the three and nine months ended September 30, 2012, respectively, as compared to $7.0 million and $29.9 million in the prior-year periods.

For the quarter ended September 30, 2012, nonperforming loans were $93.9 million, an increase of $9.0 million from June 30, 2012 and a $68.0 million decrease from September 30, 2011.  The $9.0 million increase for the third quarter of 2012 is primarily related to two commercial credits totaling $9.5 million that were placed into nonperforming status and an increase of $4.8 million for residential mortgages previously classified as 90 days and still accruing, partially offset by $5.3 million of commercial loans that were resolved. 

During the third quarter of 2012, net charge-offs were $4.3 million compared to $10.0 million in the third quarter of 2011. For the nine months ended September 30, 2012, net charge-offs were $12.0 million, or 0.38% of average loans on an annualized basis, compared to $29.0 million, or 0.95% of average loans on an annualized basis, for the same period in 2011. 

The allowance for credit losses as a percentage of total loans outstanding was 1.52%, 1.48% and 1.81% for September 30, 2012, June 30, 2012 and September 30, 2011, respectively.

Other Real Estate Owned ("OREO") acquired through foreclosure was $16.0 million at September 30, 2012 and is primarily comprised of four properties, including land and commercial buildings in Pennsylvania.

Noninterest Income

Noninterest income, excluding net security gains, increased $6.9 million in the third quarter of 2012 compared to the same period last year. The increase is primarily the result of a $1.9 million termination fee for a joint venture with another financial institution, and a $3.8 million charge recorded in the third quarter of 2011 for an adverse interest rate swap mark-to-market adjustment due to the credit deterioration of a commercial customer. Also affecting third quarter 2012 and 2011 comparisons is an additional $1.7 million related to improved credit risk on the overall commercial loan interest rate swap portfolio.

For the nine months ended September 30, 2012, noninterest income, excluding net security gains, increased $11.2 million when compared to the same period of 2011, primarily attributable to the aforementioned $1.9 million termination fee for a discontinued joint venture, $2.9 million in gains on loans held-for-sale which were sold in the first and second quarters of 2012, the aforementioned swap charge on a troubled commercial loan relationship in 2011 and $0.8 million in card-related income. Also affecting the year-over-year comparisons were a $1.1 million gain on the exiting of a private equity investment in 2011, a $0.7 million decrease in letter of credit fees, a decrease of $0.3 million of revenue from an OREO property that was sold in the first quarter of 2012 and a $0.2 million decline in revenue from wealth management. The swap-related increase was comprised of $0.5 million of increased fees and $6.8 million due to an improved swap portfolio credit profile that was primarily related to the aforementioned commercial credit relationship.

There were $0.2 million of net security gains for the three and nine months ending September 30, 2012 compared to $2.2 million for the nine-month period ending September 30, 2011.  The 2011 gains were primarily the result of a $1.5 million realized gain from the sale of an equity security.

Noninterest Expense

Noninterest expense increased $3.6 million, or 9%, in the third quarter of 2012 from the third quarter of 2011.  The increase is primarily related to a $3.5 million charge recorded in connection with a loss pertaining to an external fraud. Collection efforts related to the fraud are ongoing and the charge represents the full amount of the loss and does not include the impact of any recovery. Recoveries, if they were to occur, would be recorded in the period when the recovery is received.

Staff expense increased $0.9 million due to higher incentives on new business and normal merit increases.  Data processing costs pertaining to the development of new systems increased $0.5 million. Loan collection and repossession expense decreased $0.7 million and professional consulting expense decreased $0.7 million during the period.

For the nine months ended September 30, 2012, as compared to the same period last year, noninterest expense increased $5.1 million, or 4%.  The increase was primarily attributable to the aforementioned fraud of $3.5 million, an increase of $2.3 million in salaries and employee benefits primarily a result of increasing the number of positions within business development areas and expanded incentive programs to encourage new business production, which were partially offset by efficiencies and refinements in our support and retail distribution areas, a $1.2 million increase in the expense for unfunded commitments and a $0.9 million increase in data processing for the development of new systems.  Also affecting the year-over-year comparisons were decreases of $0.8 million in professional consulting, $0.4 million in collection and repossession expense, $0.5 million in FDIC insurance and $0.8 million in occupancy expense.

Full-time equivalent staff was 1,412 and 1,479 for the periods ended September 30, 2012 and 2011, respectively. The efficiency ratio, calculated as total noninterest expense as a percentage of total revenue (total revenue consists of net interest income, on a fully taxable equivalent basis, plus total noninterest income, excluding net impairment losses and net security gains), was 68% for the nine months ended September 30, 2012 as compared to 69% during the same period in 2011.  

Dividend/Buybacks

First Commonwealth Financial Corporation declared a common stock quarterly dividend of $0.05 per share on October 24, 2012 which is payable on November 16, 2012 to shareholders of record as of November 5, 2012. This dividend represents a 3% projected annual yield utilizing the September 30, 2012 closing market price of $7.05 and a 67% increase from last year.

On June 19, 2012, First Commonwealth announced a $50.0 million common stock repurchase program effective until December 31, 2012. As of September 30, 2012, First Commonwealth has purchased 1,341,900 shares at an average price of $6.79 per share.

First Commonwealth's capital ratios for leverage, Total and Tier I were 11.7%, 14.9% and 13.7%, respectively on September 30, 2012.

Conference Call

First Commonwealth will host a quarterly conference call to discuss its financial results for the third quarter of 2012 on Wednesday, October 24, 2012 at 2:00 PM (ET). The call can be accessed by dialing (toll free) 1-877-317-6789 or through First Commonwealth's web page, http://www.fcbanking.com via the "Investor Relations" link. A replay of the call will be available approximately one hour following the conclusion of the conference. A link to the call replay will be accessible at this web page for 30 days.

About First Commonwealth Financial Corporation

First Commonwealth Financial Corporation is a $6.0 billion financial holding company headquartered in Indiana, Pennsylvania.  It operates 112 retail branch offices in 15 counties in western and central Pennsylvania through First Commonwealth Bank, a Pennsylvania chartered bank and trust company.  Financial services and insurance products are also provided through First Commonwealth Insurance Agency and First Commonwealth Financial Advisors, Inc.

Forward-Looking Statements

This release contains forward-looking statements about First Commonwealth's future plans, strategies and financial performance.  These statements can be identified by the fact that they do not relate strictly to historical or current facts and often include words such as "believe," "expect," "anticipate," "intend," "plan," "estimate" or words of similar meaning, or future or conditional verbs such as "will," "would," "should," "could" or "may."  Such statements are based on assumptions and involve risks and uncertainties, many of which are beyond our control and may cause actual results, performance or achievements to differ materially from the results, performance or achievements contemplated by the forward-looking statements.  These risks and uncertainties include, among other things, the following: continued deterioration in general business and economic conditions; changes in interest rates; deterioration in the credit quality of our loan portfolios or in the value of the collateral securing those loans; deterioration in the value of securities held in our investment securities portfolio; the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Law and other legal and regulatory changes; increased competition from both banks and non-banks; changes in customer behavior and preferences; effects of mergers and acquisitions and related integration; effects of critical accounting policies and judgments; management's ability to effectively manage credit risk, market risk, operational risk, legal risk, and regulatory and compliance risk; and other risks and uncertainties described in our reports filed with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K.  Forward-looking statements speak only as of the date on which they are made. First Commonwealth undertakes no obligation to update any forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made.

 

FIRST COMMONWEALTH FINANCIAL CORPORATION

CONSOLIDATED FINANCIAL DATA 

Unaudited

(dollars in thousands, except per share data)












For the Three Months Ended


For the Nine Months Ended



September 30,


June 30,


September 30,


September 30,

September 30,



2012


2012


2011


2012

2011

SUMMARY RESULTS OF OPERATIONS




















Net interest income (FTE)(1)


$47,704


$48,008


$48,768


$145,099

$146,461

Provision for credit losses


6,754


4,297


6,975


14,838

29,904

Noninterest income


17,855


16,096


10,799


51,331

42,191

Noninterest expense


44,765


41,848


41,121


133,365

128,250

Net income


9,847


12,321


8,326


33,219

20,991











Earnings per common share (diluted)


$0.09


$0.12


$0.08


$0.32

$0.20











KEY FINANCIAL RATIOS




















Return on average assets


0.66%


0.83%


0.58%


0.75%

0.49%

Return on average shareholders' equity


5.07%


6.41%


4.29%


5.76%

3.69%

Efficiency ratio(2)


68.45%


65.28%


69.03%


67.95%

68.78%

Net interest margin (FTE)(1)


3.54%


3.61%


3.81%


3.63%

3.81%











Book value per common share


$7.45


$7.38


$7.33




Tangible book value per common share(4)


5.88


5.82


5.77




Market value per common share


7.05


6.73


3.70




Cash dividends declared per common share


0.05


0.05


0.03


$0.13

$0.09











ASSET QUALITY RATIOS




















Allowance for credit losses as a percent of end-of-period loans


1.52%


1.48%


1.81%




Allowance for credit losses as a percent of nonperforming loans


68.27%


72.61%


44.55%




Nonperforming loans as a percent of end-of-period loans


2.23%


2.04%


4.07%




Nonperforming assets as a percent of total assets


1.85%


1.76%


3.47%




Net charge-offs as a percent of average loans (annualized)


0.41%


0.33%


1.00%














CAPITAL RATIOS




















Shareholders' equity as a percent of total assets


12.98%


12.99%


13.59%




Tangible common equity as a percent of tangible assets(3)


10.54%


10.54%


11.01%




Leverage Ratio


11.69%


11.76%


12.18%




Risk Based Capital - Tier I


13.68%


13.91%


13.85%




Risk Based Capital - Total


14.93%


15.16%


15.11%














 

FIRST COMMONWEALTH FINANCIAL CORPORATION










CONSOLIDATED FINANCIAL DATA 










Unaudited










(dollars in thousands, except share data)





















For the Three Months Ended


For the Nine Months Ended



September 30,


June 30,


September 30,


September 30,

September 30,



2012


2012


2011


2012

2011











INCOME STATEMENT 










   Interest income


$53,880


$54,712


$57,600


$165,208

$175,058

   Interest expense


7,230


7,794


10,120


23,470

32,824

    Net Interest Income


46,650


46,918


47,480


141,738

142,234

Taxable equivalent adjustment(1)


1,054


1,090


1,288


3,361

4,227

    Net Interest Income  (FTE)


47,704


48,008


48,768


145,099

146,461











Provision for credit losses


6,754


4,297


6,975


14,838

29,904

    Net Interest Income after Provision for Credit Losses (FTE)


40,950


43,711


41,793


130,261

116,557











Changes in fair value on impaired securities


1,374


(1,323)


(2,535)


1,549

(218)

Non-credit related (gains) losses on securities not expected to










be sold (recognized in other comprehensive income)


(1,374)


1,323


2,535


(1,549)

218

Net Impairment Losses


0


0


0


0

0











Net securities gains


163


0


0


163

2,185

Trust income


1,631


1,607


1,603


4,780

5,085

Service charges on deposit accounts


3,736


3,737


3,836


10,975

11,010

Insurance and retail brokerage commissions 


1,844


1,670


1,698


4,938

4,876

Income from bank owned life insurance


1,465


1,459


1,411


4,369

4,158

Gain on sale of assets


757


1,444


790


4,316

2,272

Card related interchange income 


3,260


3,285


3,053


9,659

8,895

Other income


4,999


2,894


(1,592)


12,131

3,710

Total Noninterest Income


17,855


16,096


10,799


51,331

42,191











Salaries and employee benefits


21,280


22,363


20,418


65,401

63,092

Net occupancy expense


3,235


3,303


3,506


9,942

10,733

Furniture and equipment expense


3,118


3,024


3,092


9,326

9,407

Data processing expense


1,987


1,796


1,533


5,346

4,482

Pennsylvania shares tax expense


1,510


1,510


1,434


4,203

4,046

Intangible amortization


367


371


384


1,109

1,163

Collection and repossession expense


1,281


670


1,961


4,650

5,003

Other professional fees and services


1,028


940


1,706


3,167

3,930

FDIC insurance


1,258


1,262


1,177


3,757

4,260

Loss on sale or write-down of assets


426


500


159


4,215

4,674

Operational losses


3,657


250


186


4,033

408

Other operating expenses


5,618


5,859


5,565


18,216

17,052

Total Noninterest Expense


44,765


41,848


41,121


133,365

128,250











Income before Income Taxes


14,040


17,959


11,471


48,227

30,498

Taxable equivalent adjustment(1)


1,054


1,090


1,288


3,361

4,227

Income tax provision


3,139


4,548


1,857


11,647

5,280

Net Income


$9,847


$12,321


$8,326


$33,219

$20,991











Shares Outstanding at End of Period


103,890,029


104,728,846


104,906,994


103,890,029

104,906,994

Average Shares Outstanding Assuming Dilution 


104,098,383


104,901,239


104,728,915


104,595,396

104,678,436











 

FIRST COMMONWEALTH FINANCIAL CORPORATION

CONSOLIDATED FINANCIAL DATA

Unaudited

(dollars in thousands)







September 30,


June 30,


September 30,




2012


2012


2011


BALANCE SHEET (Period End)








Assets








Cash and due from banks


$85,183


$82,659


$84,810


Interest-bearing bank deposits


3,881


3,839


5,036


Securities


1,163,301


1,195,118


1,077,091










Loans


4,214,299


4,159,531


3,973,723


Allowance for credit losses


(64,114)


(61,676)


(72,117)


Net loans


4,150,185


4,097,855


3,901,606










Goodwill and other intangibles


162,690


163,057


164,170


Other assets


398,398


404,288


425,349


Total Assets


$5,963,638


$5,946,816


$5,658,062










Liabilities and Shareholders' Equity








Noninterest-bearing demand deposits


$858,003


$823,880


$769,178










Interest-bearing demand deposits


97,834


98,937


96,122


Savings deposits


2,433,065


2,415,860


2,383,288


Time deposits


1,105,532


1,123,285


1,236,290


Total interest-bearing deposits


3,636,431


3,638,082


3,715,700










Total deposits


4,494,434


4,461,962


4,484,878










Short-term borrowings


461,770


474,264


173,779


Long-term borrowings


180,471


181,120


178,459


Total borrowings


642,241


655,384


352,238










Other liabilities


53,072


56,980


51,954


Shareholders' equity


773,891


772,490


768,992


Total Liabilities and Shareholders' Equity


$5,963,638


$5,946,816


$5,658,062












For the Three Months Ended



For the Nine Months Ended


September 30,

Yield/

June 30,

Yield/

September 30,

Yield/


September 30,

Yield/

September 30,

Yield/


2012

Rate

2012

Rate

2011

Rate


2012

Rate

2011

Rate

NET INTEREST MARGIN (Quarterly and Year-to-Date Averages)
























Assets












Loans (FTE)(1)

$4,186,446

4.50%

$4,144,470

4.61%

$3,993,225

5.01%


$4,148,937

4.64%

$4,073,871

5.04%

Securities and interest bearing bank deposits (FTE)(1)

1,175,476

2.55%

1,210,889

2.76%

1,079,761

3.12%


1,189,739

2.74%

1,062,186

3.25%

Total Interest-Earning Assets (FTE)(1)

5,361,922

4.08%

5,355,359

4.19%

5,072,986

4.61%


5,338,676

4.22%

5,136,057

4.67%

Noninterest-earning assets

588,954


589,888


598,314



593,883


588,971


Total Assets

$5,950,876


$5,945,247


$5,671,300



$5,932,559


$5,725,028














Liabilities and Shareholders' Equity












Interest-bearing demand and savings deposits

$2,530,100

0.16%

$2,553,412

0.17%

$2,479,455

0.31%


$2,553,173

0.18%

$2,471,953

0.33%

Time deposits

1,101,991

1.45%

1,165,009

1.58%

1,296,831

1.89%


1,156,689

1.55%

1,385,857

1.99%

Short-term borrowings

485,754

0.25%

422,361

0.27%

167,969

0.44%


414,451

0.26%

166,094

0.44%

Long-term borrowings

181,038

4.10%

183,890

4.09%

179,033

4.07%


190,720

4.00%

181,261

4.09%

Total Interest-Bearing Liabilities

4,298,883

0.67%

4,324,672

0.72%

4,123,288

0.97%


4,315,033

0.73%

4,205,165

1.04%

Noninterest-bearing deposits

824,784


796,555


726,895



795,443


709,536


Other liabilities

53,823


50,724


51,667



51,627


48,775


Shareholders' equity

773,386


773,296


769,450



770,456


761,552


Total Noninterest-Bearing Funding Sources

1,651,993


1,620,575


1,548,012



1,617,526


1,519,863


Total Liabilities and Shareholders' Equity

$5,950,876


$5,945,247


$5,671,300



$5,932,559


$5,725,028


























Net Interest Margin (FTE) (annualized)(1)


3.54%


3.61%


3.81%



3.63%


3.81%

 

FIRST COMMONWEALTH FINANCIAL CORPORATION

CONSOLIDATED FINANCIAL DATA

Unaudited

(dollars in thousands, except per share data)









September 30,


June 30,


September 30,






2012


2012


2011




ASSET QUALITY DETAIL










Nonperforming Loans:




















Loans on nonaccrual basis


$40,704


$33,457


$105,721




Troubled debt restructured loans on nonaccrual basis


46,026


45,235


21,663




Troubled debt restructured loans on accrual basis


7,176


6,251


34,500




Total Nonperforming Loans


$93,906


$84,943


$161,884




Other real estate owned ("OREO")


16,016


19,140


33,254




Repossessions ("Repo")


617


663


1,109




Total Nonperforming Assets


$110,539


$104,746


$196,247




Loans past due in excess of 90 days and still accruing


$2,998


$10,587


$12,566




Criticized loans


269,041


272,517


400,063




Nonperforming assets as a percentage 










of total loans, plus OREO and Repos


2.61%


2.51%


4.90%




Allowance for credit losses


$64,114


$61,676


$72,117


























For the Three Months Ended


For the Nine Months Ended



September 30,


June 30,


September 30,


September 30,

September 30,



2012


2012


2011


2012

2011

Net Charge-offs:




















  Commercial, financial, agricultural and other


$1,197


$1,717


$611


$4,590

$3,307

  Real estate construction


1,987


114


6,522


2,235

14,570

  Commercial real estate


27


278


1,268


382

6,679

  Residential real estate


481


593


964


2,653

2,568

  Loans to individuals


624


651


659


2,098

1,892

Net Charge-offs


$4,316


$3,353


$10,024


$11,958

$29,016

Net charge-offs as a percentage of average loans 










outstanding (annualized)


0.41%


0.33%


1.00%


0.38%

0.95%

Provision for credit losses as a percentage of net charge-offs


156.49%


128.15%


69.58%


124.08%

103.06%

Provision for credit losses


$6,754


$4,297


$6,975


$14,838

$29,904





















RECONCILIATION OF NON-GAAP MEASURES




















(1) Net interest income has been computed on a fully taxable equivalent basis ("FTE") using the 35% federal income tax statutory rate.

(2) Efficiency ratio is "total noninterest expense" as a percentage of total revenue. Total revenue consists of "net interest income, on a fully taxable equivalent basis," plus "total noninterest income," excluding "net impairment losses" and "net securities gains."




















September 30,


June 30,


September 30,






2012


2012


2011




Tangible Equity:










  Total shareholders' equity


$773,891


$772,490


$768,992




  Less: intangible assets


162,690


163,057


164,170




Tangible Equity


611,201


609,433


604,822




  Less: preferred stock


0


0


0




Tangible Common Equity


$611,201


$609,433


$604,822














Tangible Assets:










  Total assets


$5,963,638


$5,946,816


$5,658,062




  Less: intangible assets


162,690


163,057


164,170




Tangible Assets


$5,800,948


$5,783,759


$5,493,892














(3)Tangible Common Equity as a percentage of Tangible Assets


10.54%


10.54%


11.01%














Shares Outstanding at End of Period


103,890,029


104,728,846


104,906,994




(4)Tangible Book Value Per Common Share


$5.88


$5.82


$5.77




Note: Management believes that it is a standard practice in the banking industry to present these non-gaap measures.  These measures provide useful information 

to management and investors by allowing them to make peer comparisons.  

 

SOURCE First Commonwealth Financial Corporation

View Comments and Join the Discussion!