First Commonwealth Announces First Quarter 2012 Financial Results and Dividend Increase

News provided by

First Commonwealth Financial Corporation

Apr 24, 2012, 08:30 ET

INDIANA, Pa., April 24, 2012 /PRNewswire/ -- First Commonwealth Financial Corporation (NYSE: FCF) today reported net income of $11.1 million, or $0.11 diluted earnings per share, for the first quarter ended March 31, 2012, as compared to net income of $5.2 million, or $0.05 diluted earnings per share, in the first quarter of 2011. The increase in net income was primarily the result of a lower provision for credit losses and an increase in noninterest income.

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

Annualized return on average assets for the first quarter 2012 was 0.75% as compared to 0.37% for the same period last year. Return on average shareholders' equity was 5.81% and 2.82% for the periods ended March 31, 2012 and March 31, 2011, respectively.

T. Michael Price, President and Chief Executive Officer, stated, "Our priority remains working to ensure that credit uncertainty is behind us. We are pleased with the results this quarter regarding loan loss provisions, nonperforming assets and criticized loan levels. There is always more to be done, but I believe the evolution and strengthening of our credit culture will ultimately provide us with a sustainable competitive advantage."

Net Interest Income and Net Interest Margin

First quarter 2012 net interest income, on a fully taxable equivalent basis, was unchanged at $49.4 million as compared to the first quarter of 2011. Interest-earning assets increased $252.3 million, or 5%, from March 31, 2011 to March 31, 2012, which was offset by a 12 basis point drop in the net interest margin. Net interest margin was 3.75%, 3.78% and 3.87% for the three-month periods ended March 31, 2012, December 31, 2011 and March 31, 2011, respectively.

Significant changes to First Commonwealth's balance sheet during the first quarter of 2012, as compared to December 31, 2011 include: 

  • A $62.2 million increase in investment securities.
  • A $79.6 million increase in loans included a mix of consumer home equity, commercial and indirect auto loans, partially offset by a decrease in residential mortgage loans.
  • Continued growth and mix improvements in deposits. Overall deposits increased $129.1 million, or 3%; $103.8 million of that growth was lower costing transaction and savings deposits.
  • Long-term and short-term borrowings decreased $4.1 million.

"We are committed at every level of the organization to achieving operating excellence that drives earnings," said Mr. Price.  "Noteworthy to accomplishing this will be our ability to generate core asset and low-cost deposit growth as efficiently as possible, while purposefully managing our funding costs, loan spreads and overall business mix. This quarter's balance sheet growth is indicative that our strategies along these lines continue to gain traction."

Credit Quality

The provision for credit losses was $3.8 million for the first quarter of 2012 as compared to $13.8 million for the comparable quarter in 2011. During the first quarter of 2012, net charge-offs were $4.3 million, or 0.42% of average loans, annualized, compared to $8.3 million, or 0.80% of average loans, annualized, in the first quarter of 2011. The most substantial loan charge-offs for the first quarter of 2012 included $1.2 million on a nonperforming commercial credit. The allowance for credit losses as a percentage of total loans outstanding was 1.47%, 1.51% and 1.88% for March 31, 2012, December 31, 2011 and March 31, 2011, respectively.

At March 31, 2012, nonperforming loans were $89.7 million, a decrease of $22.5 million, or 20%, from December 31, 2011. The major loans that were placed into nonperforming status during the first quarter of 2012 included $3.0 million for two Pennsylvania commercial relationships and one large consumer mortgage loan. That increase was offset by an $11.3 million commercial loan that was paid off; $5.3 million for a commercial real estate loan which was transferred to the Held-for-Sale classification in the fourth quarter of 2011 and sold in the first quarter of 2012; $1.2 million for the charge-off of a commercial credit and $1.2 million for a commercial real estate loan transferred to Other Real Estate Owned (OREO). Nonperforming loans as a percentage of total loans were 2.17%, 2.76% and 3.45% for the periods ended March 31, 2012, December 31, 2011 and March 31, 2011, respectively. Subsequent to March 31, 2012, an additional loan, totaling $4.1 million in the Held-for-Sale classification, was sold in the first week of April 2012. This sale resulted in a gain of $1.2 million and will be reflected in the financial results as of and for the quarter ending June 30, 2012.

OREO acquired through foreclosure was $21.3 million at March 31, 2012 which represented a decrease of $8.7 million from December 31, 2011. During the first quarter of 2012, a $1.2 million commercial loan was transferred to OREO from nonperforming status as we moved toward resolving this troubled credit. Offsetting this increase was a $2.8 million write-down associated with one commercial OREO property, based upon an updated appraisal, which currently has a remaining book value of $1.2 million, and $6.8 million from the sale of one commercial property.

Noninterest Income

Noninterest income, excluding net security gains (losses), increased $3.6 million, or 26%, in the first quarter of 2012 compared to the same period last year. This increase is primarily the result of a $1.7 million gain from the sale of a loan that was placed in the Held-for-Sale classification in the fourth quarter of 2011, $1.0 million in rental revenue from an OREO property that was sold during the first quarter of 2012 and $0.8 million in swap-related income. There were no other-than-temporary impairment charges for the first quarter of 2012 or the first quarter of 2011 and there were no net securities gains recorded in the first quarter of 2012, as compared to $0.6 million of net securities gains during the first quarter of 2011.

Noninterest Expense

Noninterest expense increased $5.3 million, or 13%, in the first quarter of 2012, as compared to the first quarter of 2011, primarily from the $2.8 million write-down to current fair value for an OREO property; $1.3 million increase in the reserve for unfunded loan commitments and $1.2 million of operating expenses related to an OREO property that was sold during the first quarter of 2012.

Staff expense increased $0.6 million compared to the first quarter of 2011 primarily as a result of increasing the lending and other business relationship staffs and expanded incentive programs to encourage new business production. These increases were partially offset by restructurings and refinements in our support and retail distribution areas. Full time equivalent staff was 1,426 and 1,519 for the periods ended March 31, 2012 and 2011, respectively. Other meaningful changes in noninterest expense include a $0.6 million reduction in FDIC insurance premiums.

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 securities gains), was 70% for the quarter ended March 31, 2012 as compared to 66% for the comparable period in 2011. The increase in the efficiency ratio was primarily the result of higher loan collection costs for troubled loans and the aforementioned write-down of an OREO property.

Dividends and Capital

First Commonwealth Financial Corporation declared a common stock quarterly dividend of $0.05 per share on April 24, 2012 which is payable on May 18, 2012 to shareholders of record as of May 4, 2012. This dividend represents a 67% increase over the previous quarterly dividend of $0.03 per share and a 3% projected annual yield utilizing the March 31, 2012 closing market price of $6.12.

First Commonwealth's capital ratios for Leverage, Total and Tier I at March 31, 2012 were 11.74%, 14.77% and 13.52%, respectively.

Conference Call

First Commonwealth will host a quarterly conference call to discuss its financial results for the first quarter of 2012 on Wednesday, April 25, 2012 at 2:00 PM (ET). The call can be accessed by dialing (toll free) 1-877-317-6789 or through our web page, http://www.fcbanking.com via our "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.  Global and domestic economies could fail to recover from the recent economic downturn or could experience another severe contraction, which could adversely affect our revenues, increase credit-related costs and reduce the values of our assets and liabilities. Global financial markets could experience a recurrence of significant turbulence, which could reduce the availability of funding to certain financial institutions and lead to a tightening of credit, a reduction of business activity, and increased market volatility. Continued stress in the commercial real estate markets, as well as a delay or failure of recovery in the residential real estate markets, could cause additional credit losses and deterioration in asset values. In addition, our business and financial performance is likely to be negatively impacted by effects of recently enacted and future legislation and regulation.  Our results could also be adversely affected by 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; legal and regulatory developments; 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; and management's ability to effectively manage credit risk, market risk, operational risk, compliance and legal risk, interest rate risk, and liquidity risk. 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


March 31,

December 31,

March 31,


2012

2011

2011

SUMMARY RESULTS OF OPERATIONS














Net interest income (FTE)(1)

$49,387

$48,906

$49,399

Provision for credit losses

3,787

25,912

13,817

Noninterest income

17,380

15,478

14,328

Noninterest expense

46,752

48,576

41,429

Net income (loss)

11,051

(5,717)

5,246








Earnings (losses) per common share (diluted)

$0.11

($0.05)

$0.05








KEY FINANCIAL RATIOS














Return on average assets

0.75%

-0.40%

0.37%

Return on average shareholders' equity

5.81%

-2.94%

2.82%

Efficiency ratio(2)

70.02%

75.45%

65.60%

Net interest margin (FTE)(1)

3.75%

3.78%

3.87%








Book value per common share

$7.30

$7.23

$7.17

Tangible book value per common share(4)

5.75

5.67

5.60

Market value per common share

6.12

5.26

6.85

Cash dividends declared per common share

0.03

0.03

0.03








ASSET QUALITY RATIOS














Allowance for credit losses as a percent of end-of-period loans(6)

1.47%

1.51%

1.88%

Allowance for credit losses as a percent of nonperforming loans(6)

74.45%

62.01%

54.67%

Nonperforming loans as a percent of end-of-period loans(5)

2.17%

2.76%

3.45%

Nonperforming assets as a percent of total assets(5)

1.86%

2.43%

3.24%

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

0.42%

3.63%

0.80%








CAPITAL RATIOS














Shareholders' equity as a percent of total assets

12.86%

12.99%

13.05%

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

10.40%

10.48%

10.49%

Leverage Ratio

11.74%

11.91%

11.78%

Risk Based Capital - Tier I

13.52%

13.46%

13.38%

Risk Based Capital - Total

14.77%

14.71%

14.64%








(6)Excludes held for sale loans.






























FIRST COMMONWEALTH FINANCIAL CORPORATION






CONSOLIDATED FINANCIAL DATA 






Unaudited






(dollars in thousands, except share data)
















For the Three Months Ended


March 31,

December 31,

March 31,


2012

2011

2011








INCOME STATEMENT 






   Interest income

$56,616

$56,487

$59,469

   Interest expense

8,446

8,854

11,600

    Net Interest Income

48,170

47,633

47,869

Taxable equivalent adjustment(1)

1,217

1,273

1,530

    Net Interest Income  (FTE)

49,387

48,906

49,399








Provision for credit losses

3,787

25,912

13,817

    Net Interest Income after Provision for Credit Losses (FTE)

45,600

22,994

35,582








Changes in fair value on impaired securities

1,498

(207)

1,869

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






be sold (recognized in other comprehensive income)

(1,498)

207

(1,869)

Net Impairment Losses

0

0

0








Net securities gains

0

0

577

Trust income

1,542

1,413

1,718

Service charges on deposit accounts

3,502

3,765

3,426

Insurance and retail brokerage commissions 

1,424

1,500

1,562

Income from bank owned life insurance

1,445

1,438

1,357

Income from other real estate owned

964

1,021

0

Gain on sale of assets

2,115

1,883

231

Card related interchange income 

3,114

3,073

2,800

Other income

3,274

1,385

2,657

Total Noninterest Income

17,380

15,478

14,328








Salaries and employee benefits

21,758

21,577

21,128

Net occupancy expense

3,404

3,336

3,732

Furniture and equipment expense

3,184

3,110

3,180

Data processing expense

1,563

1,545

1,424

Pennsylvania shares tax expense

1,183

1,434

1,178

Intangible amortization

371

371

390

Collection and repossession expense

2,699

2,580

1,316

Other professional fees and services

1,199

1,367

1,125

FDIC insurance

1,237

1,230

1,835

Loss on sale or write-down of assets

3,289

4,754

301

Unfunded commitments reserve

913

681

(357)

Other operating expenses

5,952

6,591

6,177

Total Noninterest Expense

46,752

48,576

41,429








Income (Loss) before Income Taxes

16,228

(10,104)

8,481

Taxable equivalent adjustment(1)

1,217

1,273

1,530

Income tax provision (benefit)

3,960

(5,660)

1,705

Net Income (Loss)

$11,051

($5,717)

$5,246








Shares Outstanding at End of Period

105,050,018

104,916,994

104,859,954

Average Shares Outstanding Assuming Dilution 

104,816,442

104,765,492

104,623,518




























FIRST COMMONWEALTH FINANCIAL CORPORATION






CONSOLIDATED FINANCIAL DATA






Unaudited






(dollars in thousands)












March 31,

December 31,

March 31,


2012

2011

2011

BALANCE SHEET (Period End)






Assets






Cash and due from banks

$81,552

$78,478

$133,319

Securities

1,244,749

1,182,572

1,054,869

Loans held for sale

8,076

13,412

0








Loans

4,128,588

4,043,643

4,074,270

Allowance for credit losses

(60,732)

(61,234)

(76,792)

Net loans

4,067,856

3,982,409

3,997,478








Goodwill and other intangibles

163,428

163,799

164,943

Other assets

402,983

420,452

411,757

Total Assets

$5,968,644

$5,841,122

$5,762,366








Liabilities and Shareholders' Equity






Noninterest-bearing demand deposits

$818,896

$780,377

$733,731








Interest-bearing demand deposits

122,320

95,945

90,554

Savings deposits

2,469,736

2,430,802

2,354,288

Time deposits

1,222,879

1,197,560

1,451,395

Total interest-bearing deposits

3,814,935

3,724,307

3,896,237








Total deposits

4,633,831

4,504,684

4,629,968








Short-term borrowings

309,373

312,777

155,342

Long-term borrowings

206,768

207,414

179,743

Total borrowings

516,141

520,191

335,085








Other liabilities

51,314

57,704

45,181

Shareholders' equity

767,358

758,543

752,132

Total Liabilities and Shareholders' Equity

$5,968,644

$5,841,122

$5,762,366


























For the Three Months Ended


March 31,

Yield/

December 31,

Yield/

March 31,

Yield/


2012

Rate

2011

Rate

2011

Rate

NET INTEREST MARGIN (Quarterly Averages)














Assets






Loans (FTE)(1)(5)

$4,115,483

4.81%

$4,026,069

4.86%

$4,171,083

5.09%

Securities (FTE)(1)

1,183,007

2.92%

1,113,525

2.99%

1,011,873

3.48%

Total Interest-Earning Assets (FTE)(1)

5,298,490

4.39%

5,139,594

4.46%

5,182,956

4.77%

Noninterest-earning assets

602,863

599,025

589,088

Total Assets

$5,901,353

$5,738,619

$5,772,044








Liabilities and Shareholders' Equity






Interest-bearing demand and savings deposits

$2,576,259

0.22%

$2,524,019

0.26%

$2,451,962

0.35%

Time deposits

1,203,668

1.62%

1,216,941

1.67%

1,471,492

2.05%

Short-term borrowings

334,454

0.27%

232,629

0.30%

172,440

0.43%

Long-term borrowings

207,338

3.83%

192,862

3.92%

185,142

4.12%

Total Interest-Bearing Liabilities

4,321,719

0.79%

4,166,451

0.84%

4,281,036

1.10%

Noninterest-bearing deposits

764,667

751,072

687,041

Other liabilities

50,312

50,312

48,587

Shareholders' equity

764,655

770,784

755,380

Total Noninterest-Bearing Funding Sources

1,579,634

1,572,168

1,491,008

Total Liabilities and Shareholders' Equity

$5,901,353

$5,738,619

$5,772,044
















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

3.75%

3.78%

3.87%

(5) Includes held for sale loans.






























FIRST COMMONWEALTH FINANCIAL CORPORATION






CONSOLIDATED FINANCIAL DATA


Unaudited






(dollars in thousands, except per share data)












March 31,

December 31,

March 31,


2012

2011

2011

ASSET QUALITY DETAIL






Nonperforming Loans:














Loans on nonaccrual basis

$36,405

$33,635

$94,896

Loans held for sale on nonaccrual basis

8,076

13,412

0

Troubled debt restructured loans on nonaccrual basis

41,690

44,841

33,844

Troubled debt restructured loans on accrual basis

3,482

20,276

11,724

Total Nonperforming Loans

$89,653

$112,164

$140,464

Other real estate owned ("OREO")

21,335

30,035

28,768

Nonaccrual securities at fair value

0

0

17,214

Total Nonperforming Assets

$110,988

$142,199

$186,446

Loans past due in excess of 90 days and still accruing

$8,126

$11,015

$15,202

Criticized loans

265,526

292,023

501,310

Nonperforming loans, plus OREO as a percentage 






of total loans, plus OREO (5)

2.67%

3.48%

4.12%

Allowance for credit losses

$60,732

$61,234

$76,792


















For the Three Months Ended


March 31,

December 31,

March 31,


2012

2011

2011

Net Charge-offs:














Commercial, financial, agricultural and other

$1,676

$3,334

$856

Real estate construction

134

13,361

4,999

Commercial real estate

77

17,833

690

Residential real estate

1,579

1,407

1,085

Loans to individuals

823

860

624

Net Charge-offs

$4,289

$36,795

$8,254

Net charge-offs as a percentage of average loans 






outstanding (annualized)

0.42%

3.63%

0.80%

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

88.30%

70.42%

167.40%

Provision for credit losses

$3,787

$25,912

$13,817
















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."




















March 31,

December 31,

March 31,


2012

2011

2011

Tangible Equity:






Total shareholders' equity

$767,358

$758,543

$752,132

Less: intangible assets

163,428

163,799

164,943

Tangible Equity

603,930

594,744

587,189

Less: preferred stock

0

0

0

Tangible Common Equity

$603,930

$594,744

$587,189








Tangible Assets:






Total assets

$5,968,644

$5,841,122

$5,762,366

Less: intangible assets

163,428

163,799

164,943

Tangible Assets

$5,805,216

$5,677,323

$5,597,423








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

10.40%

10.48%

10.49%








Shares Outstanding at End of Period

105,050,018

104,916,994

104,859,954

(4)Tangible Book Value Per Common Share

$5.75

$5.67

$5.60

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

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