First Commonwealth Announces First Quarter 2013 Financial Results; Declares Increased Second Quarter Dividend
INDIANA, Pa., April 23, 2013 /PRNewswire/ -- First Commonwealth Financial Corporation (NYSE: FCF) today reported net income of $10.6 million, or $0.11 diluted earnings per share, for the first quarter ended March 31, 2013, as compared to net income of $11.1 million, or $0.11 diluted earnings per share, in the first quarter of 2012. The slight decrease in net income was primarily the result of reduced net interest and noninterest income, slightly higher provision expense, partially offset by a $5.3 million reduction in noninterest expense. Returns on average assets and average equity for the first quarter 2013 were 0.71% and 5.73%, respectively, as compared to 0.75% and 5.81% for the first quarter 2012.
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T. Michael Price, President and Chief Executive Officer, stated, "I am pleased with the continued improvement in our credit quality metrics, our efficiency, and the competitiveness of our retail and corporate banking businesses. Loan growth of $14 million in the first quarter included the effects of about $29 million in reductions to nonperforming loans. We are excited about the future of our company."
Net Interest Income and Net Interest Margin
First quarter 2013 net interest income, on a fully taxable equivalent basis, decreased $2.9 million, or 6%, to $46.4 million as compared to the first quarter of 2012. The decrease was the result of a 30 basis point decline in net interest margin, partially offset by a $107.1 million increase in average loans and a $55.0 million increase in average investment securities. First quarter 2012 net interest income included the recognition of $1.0 million of interest on a troubled commercial loan relationship that paid off, adding 8 basis points to the first quarter 2012 net interest margin. Net interest margin was 3.45%, 3.57% and 3.75% for the three-month periods ended March 31, 2013, December 31, 2012 and March 31, 2012, respectively.
Average deposits increased $52.7 million over the past 12 months, including an $84.3 million, or 11%, increase in noninterest-bearing demand checking accounts. Demand accounts now comprise 18% of total average deposits. First quarter 2013 average deposit mix changes also include $102.2 million of purchased wholesale deposits that represented an alternative to borrowed funds and an opportunity to extend funding terms at more favorable rates.
Credit Quality
The provision for credit losses totaled $4.5 million for the quarter ended March 31, 2013, as compared to $3.8 million in the prior-year period. The first quarter 2013 provision for credit losses included $3.1 million for a $17.2 million nonperforming loan relationship that was sold.
At March 31, 2013, nonperforming loans were $78.3 million, a decrease of $29.3 million from December 31, 2012. The significant reductions in nonperforming loans in the first quarter 2013 included the sale of two troubled commercial real estate loan relationships of $17.2 million and $2.5 million. Other reductions to nonperforming loans included a $3.8 million loan that returned to accrual status and $5.3 million of charge-offs. New additions to nonperforming loan status totaled $3.6 million for the first quarter of 2013. Nonperforming loans as a percentage of total loans were 1.86%, 2.56% and 2.17% for the periods ended March 31, 2013, December 31, 2012 and March 31, 2012, respectively.
During the first quarter of 2013, net charge-offs were $9.4 million compared to $4.3 million in the first quarter of 2012. Included in the charge-offs for the first quarter 2013 is $5.3 million previously reserved for at December 31, 2012, and $3.1 million related to the aforementioned loan sales. As a percentage of average loans on an annualized basis, net charge-offs were 0.90%, 0.25% and 0.42% for the periods ended March 31, 2013, December 31, 2012 and March 31, 2012. The allowance for credit losses as a percentage of total loans outstanding was 1.48%, 1.60% and 1.47% for March 31, 2013, December 31, 2012 and March 31, 2012, respectively.
Other Real Estate Owned ("OREO") acquired through foreclosure was $10.9 million at March 31, 2013, which represented a decrease of $0.3 million from December 31, 2012 and a $10.4 million decrease from March 31, 2012.
Noninterest Income
Noninterest income decreased $2.5 million, or 14%, in the first quarter of 2013 compared to the same period last year. This decrease is primarily the result of a $1.7 million gain from the sale of a commercial loan held-for-sale in 2012 and $1.0 million in rental revenue from an OREO property in 2012, offset by a $0.4 million improvement for credit risk on commercial loan interest rate swaps.
There were no significant recognized net securities gains or other-than-temporary impairment charges for the first quarter of 2013 or 2012. First Commonwealth also did not incur any other-than-temporary impairment charges for 2012 or 2011.
Noninterest Expense
Noninterest expense decreased $5.3 million, or 11%, in the first quarter of 2013 compared to the first quarter of 2012. The decrease is primarily attributable to $3.1 million less in OREO write-downs to current fair value, a $1.5 million reduction in loan collection costs and OREO operating expenses and a $1.0 million decrease in the reserve for unfunded loan commitments. Also affecting the first quarter 2013 noninterest expense comparisons are decreases of $0.2 million in FDIC insurance, $0.2 million in professional fees and services, offset by a $0.2 million increase in occupancy expense and a $0.4 million contingency accrual for client tax reporting.
Full time equivalent staff was 1,383 and 1,426 for the periods ended March 31, 2013 and 2012, respectively. Salaries and employee benefits for the quarter ended March 31, 2013 and 2012 were relatively flat at $21.8 million.
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 68% for the quarter ended March 31, 2013 as compared to 70% for 2012.
Dividends and Capital
First Commonwealth Financial Corporation declared a common stock quarterly dividend of $0.06 per share, which is payable on May 17, 2013 to shareholders of record as of May 3, 2013. This dividend represents a 3.5% projected annual yield utilizing the April 22, 2013 closing market price of $6.86.
On January 29, 2013, First Commonwealth's Board of Directors authorized a $25.0 million common stock repurchase program in addition to the $50.0 million common stock repurchase program announced on June 19, 2012. Under these programs, management is authorized to repurchase shares through Rule 10b5-1 plans, open market purchases, privately negotiated transactions, block purchases or otherwise in accordance with applicable federal securities laws, including Rule 10b-18 of the Securities Exchange Act of 1934. Depending on market conditions and other factors, repurchases may be made at any time or from time to time, without prior notice. First Commonwealth may suspend or discontinue the programs at any time. As of March 31, 2013, First Commonwealth has purchased 5,984,775 shares at an average price of $6.65 per share under these programs.
First Commonwealth's Board of Directors also authorized the redemption of approximately $32.5 million in issued and outstanding 9.50% mandatorily redeemable capital securities issued by First Commonwealth Capital Trust I. First Commonwealth completed the redemption of these securities on April 1, 2013.
First Commonwealth's capital ratios for Total, Tier I and Leverage at March 31, 2013 were 14.5%, 13.3% and 11.2%, respectively.
Conference Call
First Commonwealth will host a quarterly conference call to discuss its financial results for the first quarter 2013 on Wednesday, April 24, 2013 at 2:00 PM (ET). The call can be accessed by dialing (toll free) 1-888-317-6016 or through the company'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 $6.1 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, |
||||
| 2013 |
2012 |
2012 |
||||
| SUMMARY RESULTS OF OPERATIONS |
||||||
| Net interest income (FTE)(1) |
$46,447 |
$48,223 |
$49,387 |
|||
| Provision for credit losses |
4,497 |
5,706 |
3,787 |
|||
| Noninterest income |
14,885 |
14,103 |
17,380 |
|||
| Noninterest expense |
41,454 |
43,842 |
46,752 |
|||
| Net income |
10,553 |
8,735 |
11,051 |
|||
| Earnings per common share (diluted) |
$0.11 |
$0.09 |
$0.11 |
|||
| KEY FINANCIAL RATIOS |
||||||
| Return on average assets |
0.71% |
0.58% |
0.75% |
|||
| Return on average shareholders' equity |
5.73% |
4.55% |
5.81% |
|||
| Efficiency ratio(2) |
67.59% |
70.38% |
70.02% |
|||
| Net interest margin (FTE)(1) |
3.45% |
3.57% |
3.75% |
|||
| Book value per common share |
$7.53 |
$7.49 |
$7.30 |
|||
| Tangible book value per common share(4) |
5.90 |
5.86 |
5.75 |
|||
| Market value per common share |
7.46 |
6.82 |
6.12 |
|||
| Cash dividends declared per common share |
0.05 |
0.05 |
0.03 |
|||
| ASSET QUALITY RATIOS |
||||||
| Allowance for credit losses as a percent of end-of-period loans(6) |
1.48% |
1.60% |
1.47% |
|||
| Allowance for credit losses as a percent of nonperforming loans(6) |
79.54% |
62.47% |
74.45% |
|||
| Nonperforming loans as a percent of end-of-period loans(5) |
1.86% |
2.56% |
2.17% |
|||
| Nonperforming assets as a percent of total assets(5) |
1.47% |
1.99% |
1.87% |
|||
| Net charge-offs as a percent of average loans (annualized) |
0.90% |
0.25% |
0.42% |
|||
| CAPITAL RATIOS |
||||||
| Shareholders' equity as a percent of total assets |
12.26% |
12.44% |
12.86% |
|||
| Tangible common equity as a percent of tangible assets(3) |
9.87% |
10.01% |
10.40% |
|||
| Leverage Ratio |
11.15% |
11.24% |
11.74% |
|||
| Risk Based Capital - Tier I |
13.27% |
13.28% |
13.52% |
|||
| Risk Based Capital - Total |
14.52% |
14.53% |
14.77% |
|||
| (5)- Includes held for sale loans. |
||||||
| (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, |
||||
| 2013 |
2012 |
2012 |
||||
| INCOME STATEMENT |
||||||
| Interest income |
$51,761 |
$53,867 |
$56,616 |
|||
| Interest expense |
6,343 |
6,676 |
8,446 |
|||
| Net Interest Income |
45,418 |
47,191 |
48,170 |
|||
| Taxable equivalent adjustment(1) |
1,029 |
1,032 |
1,217 |
|||
| Net Interest Income (FTE) |
46,447 |
48,223 |
49,387 |
|||
| Provision for credit losses |
4,497 |
5,706 |
3,787 |
|||
| Net Interest Income after Provision for Credit Losses (FTE) |
41,950 |
42,517 |
45,600 |
|||
| Changes in fair value on impaired securities |
1,864 |
644 |
1,498 |
|||
| Non-credit related gains on securities not expected to |
||||||
| be sold (recognized in other comprehensive income) |
(1,864) |
(644) |
(1,498) |
|||
| Net Impairment Losses |
0 |
0 |
0 |
|||
| Net securities gains |
4 |
29 |
0 |
|||
| Trust income |
1,663 |
1,426 |
1,542 |
|||
| Service charges on deposit accounts |
3,401 |
3,768 |
3,502 |
|||
| Insurance and retail brokerage commissions |
1,417 |
1,334 |
1,424 |
|||
| Income from bank owned life insurance |
1,428 |
1,481 |
1,445 |
|||
| Gain on sale of assets |
275 |
291 |
2,115 |
|||
| Card related interchange income |
3,188 |
3,540 |
3,114 |
|||
| Credit risk on interest rate swaps |
989 |
(371) |
606 |
|||
| Other income |
2,520 |
2,605 |
3,632 |
|||
| Total Noninterest Income |
14,885 |
14,103 |
17,380 |
|||
| Salaries and employee benefits |
21,793 |
20,668 |
21,758 |
|||
| Net occupancy expense |
3,635 |
3,313 |
3,404 |
|||
| Furniture and equipment expense |
3,272 |
3,134 |
3,184 |
|||
| Data processing expense |
1,516 |
1,708 |
1,563 |
|||
| Pennsylvania shares tax expense |
1,190 |
1,503 |
1,183 |
|||
| Intangible amortization |
358 |
358 |
371 |
|||
| Collection and repossession expense |
1,151 |
1,106 |
2,699 |
|||
| Other professional fees and services |
969 |
1,162 |
1,199 |
|||
| FDIC insurance |
1,050 |
1,275 |
1,237 |
|||
| Other operating expenses |
6,520 |
9,615 |
10,154 |
|||
| Total Noninterest Expense |
41,454 |
43,842 |
46,752 |
|||
| Income before Income Taxes |
15,381 |
12,778 |
16,228 |
|||
| Taxable equivalent adjustment(1) |
1,029 |
1,032 |
1,217 |
|||
| Income tax provision |
3,799 |
3,011 |
3,960 |
|||
| Net Income |
$10,553 |
$8,735 |
$11,051 |
|||
| Shares Outstanding at End of Period |
99,298,120 |
99,629,494 |
105,050,018 |
|||
| Average Shares Outstanding Assuming Dilution |
99,305,414 |
101,787,103 |
104,816,442 |
|||
| FIRST COMMONWEALTH FINANCIAL CORPORATION |
|||||||
| CONSOLIDATED FINANCIAL DATA |
|||||||
| Unaudited |
|||||||
| (dollars in thousands) |
|||||||
| March 31, |
December 31, |
March 31, |
|||||
| 2013 |
2012 |
2012 |
|||||
| BALANCE SHEET (Period End) |
|||||||
| Assets |
|||||||
| Cash and due from banks |
$53,991 |
$98,724 |
$74,889 |
||||
| Interest-bearing bank deposits |
1,780 |
4,258 |
6,663 |
||||
| Securities |
1,325,560 |
1,199,531 |
1,244,749 |
||||
| Loans held for sale |
0 |
0 |
8,076 |
||||
| Loans |
4,218,810 |
4,204,704 |
4,128,588 |
||||
| Allowance for credit losses |
(62,262) |
(67,187) |
(60,732) |
||||
| Net loans |
4,156,548 |
4,137,517 |
4,067,856 |
||||
| Goodwill and other intangibles |
161,973 |
162,331 |
163,428 |
||||
| Other assets |
399,187 |
393,029 |
402,983 |
||||
| Total Assets |
$6,099,039 |
$5,995,390 |
$5,968,644 |
||||
| Liabilities and Shareholders' Equity |
|||||||
| Noninterest-bearing demand deposits |
$883,307 |
$883,269 |
$818,896 |
||||
| Interest-bearing demand deposits |
90,276 |
97,963 |
122,320 |
||||
| Savings deposits |
2,510,615 |
2,543,990 |
2,469,736 |
||||
| Time deposits |
1,227,380 |
1,032,659 |
1,222,879 |
||||
| Total interest-bearing deposits |
3,828,271 |
3,674,612 |
3,814,935 |
||||
| Total deposits |
4,711,578 |
4,557,881 |
4,633,831 |
||||
| Short-term borrowings |
308,100 |
356,227 |
309,373 |
||||
| Long-term borrowings |
280,068 |
280,221 |
206,768 |
||||
| Total borrowings |
588,168 |
636,448 |
516,141 |
||||
| Other liabilities |
51,565 |
55,054 |
51,314 |
||||
| Shareholders' equity |
747,728 |
746,007 |
767,358 |
||||
| Total Liabilities and Shareholders' Equity |
$6,099,039 |
$5,995,390 |
$5,968,644 |
||||
| For the Three Months Ended |
|||||||
| March 31, |
Yield/ |
December 31, |
Yield/ |
March 31, |
Yield/ |
||
| 2013 |
Rate |
2012 |
Rate |
2012 |
Rate |
||
| NET INTEREST MARGIN (Quarterly Averages) |
|||||||
| Assets |
|||||||
| Loans (FTE)(1)(5) |
$4,222,606 |
4.38% |
$4,214,000 |
4.48% |
$4,115,483 |
4.81% |
|
| Securities and interest bearing bank deposits (FTE)(1) |
1,238,020 |
2.34% |
1,165,991 |
2.52% |
1,183,007 |
2.92% |
|
| Total Interest-Earning Assets (FTE)(1) |
5,460,626 |
3.92% |
5,379,991 |
4.06% |
5,298,490 |
4.39% |
|
| Noninterest-earning assets |
569,277 |
582,755 |
602,863 |
||||
| Total Assets |
$6,029,903 |
$5,962,746 |
$5,901,353 |
||||
| Liabilities and Shareholders' Equity |
|||||||
| Interest-bearing demand and savings deposits |
$2,606,695 |
0.15% |
$2,609,722 |
0.16% |
$2,576,259 |
0.22% |
|
| Time deposits |
1,141,576 |
1.14% |
1,082,785 |
1.28% |
1,203,668 |
1.62% |
|
| Short-term borrowings |
355,912 |
0.25% |
365,697 |
0.28% |
334,454 |
0.27% |
|
| Long-term borrowings |
280,152 |
2.80% |
237,975 |
3.20% |
207,338 |
3.83% |
|
| Total Interest-Bearing Liabilities |
4,384,335 |
0.59% |
4,296,179 |
0.62% |
4,321,719 |
0.79% |
|
| Noninterest-bearing deposits |
849,007 |
853,520 |
764,667 |
||||
| Other liabilities |
49,295 |
48,565 |
50,312 |
||||
| Shareholders' equity |
747,266 |
764,482 |
764,655 |
||||
| Total Noninterest-Bearing Funding Sources |
1,645,568 |
1,666,567 |
1,579,634 |
||||
| Total Liabilities and Shareholders' Equity |
$6,029,903 |
$5,962,746 |
$5,901,353 |
||||
| Net Interest Margin (FTE) (annualized)(1) |
3.45% |
3.57% |
3.75% |
||||
| FIRST COMMONWEALTH FINANCIAL CORPORATION |
||||||
| CONSOLIDATED FINANCIAL DATA |
||||||
| Unaudited |
||||||
| (dollars in thousands, except per share data) |
||||||
| March 31, |
December 31, |
March 31, |
||||
| 2013 |
2012 |
2012 |
||||
| ASSET QUALITY DETAIL |
||||||
| Nonperforming Loans: |
||||||
| Loans on nonaccrual basis |
$31,576 |
$43,539 |
$36,405 |
|||
| Loans on nonaccrual basis held for sale |
0 |
0 |
8,076 |
|||
| Troubled debt restructured loans on nonaccrual basis |
32,565 |
50,979 |
41,690 |
|||
| Troubled debt restructured loans on accrual basis |
14,140 |
13,037 |
3,482 |
|||
| Total Nonperforming Loans |
$78,281 |
$107,555 |
$89,653 |
|||
| Other real estate owned ("OREO") |
10,933 |
11,262 |
21,335 |
|||
| Repossessions ("Repo") |
742 |
575 |
757 |
|||
| Total Nonperforming Assets |
$89,956 |
$119,392 |
$111,745 |
|||
| Loans past due in excess of 90 days and still accruing |
$3,927 |
$2,447 |
$8,126 |
|||
| Criticized loans |
254,866 |
288,502 |
265,526 |
|||
| Nonperforming assets as a percentage |
||||||
| of total loans, plus OREO and Repos |
2.13% |
2.83% |
2.69% |
|||
| Allowance for credit losses |
$62,262 |
$67,187 |
$60,732 |
|||
| For the Three Months Ended |
||||||
| March 31, |
December 31, |
March 31, |
||||
| 2013 |
2012 |
2012 |
||||
| Net Charge-offs (Recoveries): |
||||||
| Commercial, financial, agricultural and other |
$410 |
$174 |
$1,676 |
|||
| Real estate construction |
72 |
784 |
134 |
|||
| Commercial real estate |
8,447 |
59 |
77 |
|||
| Residential real estate |
(401) |
753 |
1,579 |
|||
| Loans to individuals |
894 |
863 |
823 |
|||
| Net Charge-offs |
$9,422 |
$2,633 |
$4,289 |
|||
| Net charge-offs as a percentage of average loans |
||||||
| outstanding (annualized) |
0.90% |
0.25% |
0.42% |
|||
| Provision for credit losses as a percentage of net charge-offs |
47.73% |
216.71% |
88.30% |
|||
| Provision for credit losses |
$4,497 |
$5,706 |
$3,787 |
|||
| 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, |
||||
| 2013 |
2012 |
2012 |
||||
| Tangible Equity: |
||||||
| Total shareholders' equity |
$747,728 |
$746,007 |
$767,358 |
|||
| Less: intangible assets |
161,973 |
162,331 |
163,428 |
|||
| Tangible Equity |
585,755 |
583,676 |
603,930 |
|||
| Less: preferred stock |
0 |
0 |
0 |
|||
| Tangible Common Equity |
$585,755 |
$583,676 |
$603,930 |
|||
| Tangible Assets: |
||||||
| Total assets |
$6,099,039 |
$5,995,390 |
$5,968,644 |
|||
| Less: intangible assets |
161,973 |
162,331 |
163,428 |
|||
| Tangible Assets |
$5,937,066 |
$5,833,059 |
$5,805,216 |
|||
| (3)Tangible Common Equity as a percentage of Tangible Assets |
9.87% |
10.01% |
10.40% |
|||
| Shares Outstanding at End of Period |
99,298,120 |
99,629,494 |
105,050,018 |
|||
| (4)Tangible Book Value Per Common Share |
$5.90 |
$5.86 |
$5.75 |
|||
| 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. |
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SOURCE First Commonwealth Financial Corporation
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