First Commonwealth Announces Second Quarter 2012 Financial Results

INDIANA, Pa., July 25, 2012 /PRNewswire/ -- First Commonwealth Financial Corporation (NYSE: FCF) today reported net income of $12.3 million, or $0.12 diluted earnings per share, for the second quarter ended June 30, 2012, as compared to net income of $7.4 million, or $0.07 diluted earnings per share, in the second quarter of 2011. The increase in net income was primarily the result of a lower provision for credit losses, a decrease in noninterest expense, offset by a decrease in noninterest income. For the six months ended June 30, 2012, net income was $23.4 million, or $0.22 diluted earnings per share, compared to net income of $12.7 million, or $0.12 diluted earnings per share, for the comparable period in 2011. The increase in net income was primarily the result of a lower provision for credit losses, an increase in noninterest income, offset by an increase in noninterest expense.

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T. Michael Price, President and Chief Executive Officer, stated, "One of our primary strategic focuses for 2012 is to clearly put legacy credit issues behind us. Our second quarter and year-to-date results evidence that progress and reflect the solid improvement in our credit quality metrics."

Net Interest Income and Net Interest Margin

Second quarter 2012 net interest income, on a fully taxable equivalent basis, decreased $0.3 million, or 1%, compared to the second quarter of 2011 to $48.0 million. The decrease was a result of a 15 basis point decline in the net interest margin. Net interest margin was 3.61%, 3.75% and 3.76% for the three-month periods ended June 30, 2012, March 31, 2012 and June 30, 2011, respectively. For the six months ended June 30, 2012 net interest income, on a fully taxable equivalent basis, decreased $0.3 million to $97.4 million. The decrease was primarily due to a decrease of 13 basis points in the net interest margin.  The year-to-date net interest income included $1.0 million of delinquent interest recognized in the first quarter of 2012 for one commercial loan which resulted in an increase of 4 basis points in net interest margin. The net interest margin for the six-months ended June 30, 2012 and 2011 was 3.68% and 3.81%, respectively. The current low interest rate environment is causing net interest margin compression. The negative effects of this interest rate environment were partially offset by a $259.9 million, or 5%, increase in interest-earning assets over the twelve-month period. 

Price noted, "Another area of strategic focus was loan growth. The quarter ending June 30, 2012 represented our third consecutive quarter of growth, with $102.5 million in loan growth year-to-date. Our lenders continue to do a commendable job in a difficult economic environment."

Credit Quality

The provision for credit losses was $4.3 million and $8.1 million for the three and six months ended June 30, 2012, respectively, as compared to $9.1 million and $22.9 million in the prior-year periods.

For the quarter ended June 30, 2012, nonperforming loans were $84.9 million, a decrease of $4.7 million from March 31, 2012 and $62.8 million from June 30, 2011.

During the second quarter of 2012, net charge-offs were $3.4 million compared to $10.7 million in the second quarter of 2011. For the six months ended June 30, 2012, net charge-offs were $7.6 million, or 0.37% of average loans on an annualized basis, compared to $19.0 million, or 0.93% 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 1.48%, 1.47% and 1.88% for June 30, 2012, March 31, 2012 and June 30, 2011, respectively.

Other Real Estate Owned ("OREO") acquired through foreclosure was $19.1 million at June 30, 2012. During the first half of 2012, three troubled credits classified as held for sale in the fourth quarter of 2011, totaling $13.4 million, were sold for $2.9 million in excess of carrying value.

Noninterest Income

Noninterest income, excluding net security gains, increased $0.6 million, or 4%, in the second quarter of 2012 compared to the same period last year. The increase is primarily a result of $1.0 million of commercial loan swap-related income and increased card-related interchange income of $0.2 million.  Negatively affecting year-to-year quarterly comparisons was a decrease of $0.5 million in letter of credit fees.  The swap related increase was related to higher credit losses during 2011 primarily attributable to one commercial credit relationship.

For the six months ended June 30, 2012, noninterest income, excluding net security gains, increased $4.3 million, or 15%, when compared to the same period of 2011, primarily attributable to the aforementioned gain on loans held for sale. Also contributing to the increase was $1.8 million of swap-related activities, $0.7 million of revenue from an OREO property that was sold in the first quarter of 2012 and $0.6 million in card-related income. Also affecting the year-over-year comparisons was a $0.6 million decrease in letter of credit fees and a $0.4 million decline in revenue from wealth management. The swap related increase was comprised of $0.5 million of increased fees and $1.3 million primarily due to an improved credit profile related to the aforementioned commercial credit relationship.

There were no net security gains for the three and six months ending June 30, 2012 compared to $1.6 million and $2.2 million for the same periods in 2011.  The 2011 gains were primarily the result of a $1.5 million realized gain from the sale of an equity security. First Commonwealth has not incurred any other-than-temporary impairment charges in the investment portfolio for the past six quarters.

Noninterest Expense

Noninterest expense decreased $3.9 million, or 8%, in the second quarter of 2012 from the second quarter of 2011.  The decrease is primarily related to a $4.1 million write-down to current fair value for an OREO property in the second quarter of 2011 and decreased collection costs of $1.1 million for troubled loans and OREO properties in the second quarter of 2012. The decreases were partially offset by a $0.8 million increase in salaries and benefits.  The increase in staff and benefits was primarily a result of increasing positions within the lending and other business development areas and expanded incentive programs to encourage new business production, which were partially offset by restructurings and refinements in our support and retail distribution areas.

For the six-months ended June 30, 2012, as compared to the same period last year, noninterest expense increased $1.5 million or 2%.  The increase was primarily attributable to an increase of $1.4 million in salaries and employee benefits due to the aforementioned organizational restructurings and normal merit increases.  Also affecting the year-over-year comparisons were decreases of $0.6 million in FDIC insurance and $0.5 million in occupancy expense.

Full-time equivalent staff was 1,432 and 1,512 for the periods ended June 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 securities gains), was 68% for the six months ended June 30, 2012 as compared to 69% during the same period in 2011.  

"Improved efficiency is the focus of a number of our strategic initiatives this year," commented Price. "The cost of resolving troubled credits has certainly had a significant impact on our noninterest expense over the past two years.  And while the level of our noninterest expense continues to improve, many more efficiency opportunities remain.  Our entire organization is engaged in this effort, and we believe these process improvements are essential to exceeding our customers' expectations.  We find this particularly true as we navigate a new operating environment of increased cost of regulatory compliance.  Ultimately, efficiency is key to sustaining a competitive advantage."

Dividend/Buybacks

First Commonwealth Financial Corporation declared a common stock quarterly dividend of $0.05 per share on July 24, 2012 which is payable on August 17, 2012 to shareholders of record as of August 3, 2012. This dividend represents a 3% projected annual yield utilizing the June 30, 2012 closing market price of $6.73 and signifying a 67% increase from last year.

On June 19, 2012, First Commonwealth announced a $50 million common stock repurchase program effective until December 31, 2012. Through June 30, 2012, 469,700 shares were purchased at an average price of $6.45 per share.

First Commonwealth's capital ratios for leverage, Total and Tier I were 11.8%, 15.2% and 13.9%, respectively on June 30, 2012.

Conference Call

First Commonwealth will host a quarterly conference call to discuss its financial results for the second quarter of 2012 on Wednesday, July 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 $5.9 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 Six Months Ended



June 30,


March 31,


June 30,


June 30,

June 30,



2012


2012


2011


2012

2011

SUMMARY RESULTS OF OPERATIONS




















Net interest income (FTE)(1)


$48,008


$49,387


$48,294


$97,395

$97,693

Provision for credit losses


4,297


3,787


9,112


8,084

22,929

Noninterest income


16,096


17,380


17,064


33,476

31,392

Noninterest expense


41,848


46,752


45,700


88,600

87,129

Net income


12,321


11,051


7,419


23,372

12,665











Earnings per common share (diluted)


$0.12


$0.11


$0.07


$0.22

$0.12











KEY FINANCIAL RATIOS




















Return on average assets


0.83%


0.75%


0.52%


0.79%

0.44%

Return on average shareholders' equity


6.41%


5.81%


3.92%


6.11%

3.37%

Efficiency ratio(2)


65.28%


70.02%


71.69%


67.70%

68.66%

Net interest margin (FTE)(1)


3.61%


3.75%


3.76%


3.68%

3.81%











Book value per common share


$7.38


$7.30


$7.26




Tangible book value per common share(4)


5.82


5.75


5.70




Market value per common share


6.73


6.12


5.74




Cash dividends declared per common share


0.05


0.03


0.03


$0.08

$0.06











ASSET QUALITY RATIOS




















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


1.48%


1.47%


1.88%




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


72.61%


74.45%


51.18%




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


2.04%


2.17%


3.70%




Nonperforming assets as a percent of total assets(5)


1.75%


1.86%


3.24%




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


0.33%


0.42%


1.06%














CAPITAL RATIOS




















Shareholders' equity as a percent of total assets


12.99%


12.86%


13.39%




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


10.54%


10.40%


10.81%




Leverage Ratio


11.76%


11.74%


11.95%




Risk Based Capital - Tier I


13.91%


13.52%


13.87%




Risk Based Capital - Total


15.16%


14.77%


15.12%














(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


For the Six Months Ended



June 30,


March 31,


June 30,


June 30,

June 30,



2012


2012


2011


2012

2011











INCOME STATEMENT 










   Interest income


$54,712


$56,616


$57,989


$111,328

$117,458

   Interest expense


7,794


8,446


11,104


16,240

22,704

    Net Interest Income


46,918


48,170


46,885


95,088

94,754

Taxable equivalent adjustment(1)


1,090


1,217


1,409


2,307

2,939

    Net Interest Income  (FTE)


48,008


49,387


48,294


97,395

97,693











Provision for credit losses


4,297


3,787


9,112


8,084

22,929

    Net Interest Income after Provision for Credit Losses (FTE)


43,711


45,600


39,182


89,311

74,764











Changes in fair value on impaired securities


(1,323)


1,498


448


175

2,317

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










be sold (recognized in other comprehensive income)


1,323


(1,498)


(448)


(175)

(2,317)

Net Impairment Losses


0


0


0


0

0











Net securities gains


0


0


1,608


0

2,185

Trust income


1,607


1,542


1,764


3,149

3,482

Service charges on deposit accounts


3,737


3,502


3,748


7,239

7,174

Insurance and retail brokerage commissions 


1,670


1,424


1,616


3,094

3,178

Income from bank owned life insurance


1,459


1,445


1,390


2,904

2,747

Gain on sale of assets


1,444


2,115


1,251


3,559

1,482

Card related interchange income 


3,285


3,114


3,042


6,399

5,842

Other income


2,894


4,238


2,645


7,132

5,302

Total Noninterest Income


16,096


17,380


17,064


33,476

31,392











Salaries and employee benefits


22,363


21,758


21,546


44,121

42,674

Net occupancy expense


3,303


3,404


3,495


6,707

7,227

Furniture and equipment expense


3,024


3,184


3,135


6,208

6,315

Data processing expense


1,796


1,563


1,525


3,359

2,949

Pennsylvania shares tax expense


1,510


1,183


1,434


2,693

2,612

Intangible amortization


371


371


389


742

779

Collection and repossession expense


670


2,699


1,726


3,369

3,042

Other professional fees and services


940


1,199


1,099


2,139

2,224

FDIC insurance


1,262


1,237


1,248


2,499

3,083

Loss on sale or write-down of assets


500


3,289


4,214


3,789

4,515

Other operating expenses


6,109


6,865


5,889


12,974

11,709

Total Noninterest Expense


41,848


46,752


45,700


88,600

87,129











Income before Income Taxes


17,959


16,228


10,546


34,187

19,027

Taxable equivalent adjustment(1)


1,090


1,217


1,409


2,307

2,939

Income tax provision


4,548


3,960


1,718


8,508

3,423

Net Income


$12,321


$11,051


$7,419


$23,372

$12,665











Shares Outstanding at End of Period


104,728,846


105,050,018


104,906,994


104,728,846

104,906,994

Average Shares Outstanding Assuming Dilution 


104,901,239


104,816,442


104,686,072


104,855,543

104,653,604

FIRST COMMONWEALTH FINANCIAL CORPORATION













CONSOLIDATED FINANCIAL DATA













Unaudited













(dollars in thousands)
























June 30,


March 31,


June 30,









2012


2012


2011







BALANCE SHEET (Period End)













Assets













Cash and due from banks


$82,659


$74,889


$78,187







Interest-bearing bank deposits


3,839


6,663


52,320







Securities


1,195,118


1,244,749


1,053,427







Loans held for sale


0


8,076


823




















Loans


4,159,531


4,128,588


3,992,058







Allowance for credit losses


(61,676)


(60,732)


(75,166)







Net loans


4,097,855


4,067,856


3,916,892




















Goodwill and other intangibles


163,057


163,428


164,553







Other assets


404,288


402,983


425,100







Total Assets


$5,946,816


$5,968,644


$5,691,302




















Liabilities and Shareholders' Equity













Noninterest-bearing demand deposits


$823,880


$818,896


$730,049




















Interest-bearing demand deposits


98,937


122,320


91,362







Savings deposits


2,415,860


2,469,736


2,375,349







Time deposits


1,123,285


1,222,879


1,339,388







Total interest-bearing deposits


3,638,082


3,814,935


3,806,099




















Total deposits


4,461,962


4,633,831


4,536,148




















Short-term borrowings


474,264


309,373


161,935







Long-term borrowings


181,120


206,768


179,102







Total borrowings


655,384


516,141


341,037




















Other liabilities


56,980


51,314


52,041







Shareholders' equity


772,490


767,358


762,076







Total Liabilities and Shareholders' Equity


$5,946,816


$5,968,644


$5,691,302
















































For the Three Months Ended



For the Six Months Ended



June 30,

Yield/

March 31,

Yield/

June 30,

Yield/


June 30,

Yield/

June 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)(5)


$4,144,470

4.61%

$4,115,483

4.81%

$4,059,259

5.02%


$4,129,977

4.71%

$4,114,862

5.05%

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


1,210,889

2.76%

1,183,007

2.92%

1,091,590

3.17%


1,196,948

2.84%

1,051,952

3.32%

Total Interest-Earning Assets (FTE)(1)


5,355,359

4.19%

5,298,490

4.39%

5,150,849

4.63%


5,326,925

4.29%

5,166,814

4.70%

Noninterest-earning assets


589,888


602,863


581,998



596,375


585,523


Total Assets


$5,945,247


$5,901,353


$5,732,847



$5,923,300


$5,752,337















Liabilities and Shareholders' Equity













Interest-bearing demand and savings deposits


$2,553,412

0.17%

$2,576,259

0.22%

$2,484,141

0.34%


$2,564,836

0.19%

$2,468,140

0.34%

Time deposits


1,165,009

1.58%

1,203,668

1.62%

1,391,168

2.02%


1,184,338

1.60%

1,431,108

2.03%

Short-term borrowings


422,361

0.27%

334,454

0.27%

157,922

0.45%


378,407

0.27%

165,141

0.44%

Long-term borrowings


183,890

4.09%

207,338

3.83%

179,675

4.09%


195,614

3.95%

182,393

4.10%

Total Interest-Bearing Liabilities


4,324,672

0.72%

4,321,719

0.79%

4,212,906

1.06%


4,323,195

0.76%

4,246,782

1.08%

Noninterest-bearing deposits


796,555


764,667


714,234



780,611


700,713


Other liabilities


50,724


50,312


46,036



50,519


47,304


Shareholders' equity


773,296


764,655


759,671



768,975


757,538


Total Noninterest-Bearing Funding Sources


1,620,575


1,579,634


1,519,941



1,600,105


1,505,555


Total Liabilities and Shareholders' Equity


$5,945,247


$5,901,353


$5,732,847



$5,923,300


$5,752,337




























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



3.61%


3.75%


3.76%



3.68%


3.81%

(5) Includes held for sale loans.













 

FIRST COMMONWEALTH FINANCIAL CORPORATION










CONSOLIDATED FINANCIAL DATA






Unaudited










(dollars in thousands, except per share data)


















June 30,


March 31,


June 30,






2012


2012


2011




ASSET QUALITY DETAIL










Nonperforming Loans:




















Loans on nonaccrual basis


$33,457


$36,405


$89,974




Loans held for sale on nonaccrual basis


0


8,076


823




Troubled debt restructured loans on nonaccrual basis


45,235


41,690


22,693




Troubled debt restructured loans on accrual basis


6,251


3,482


34,208




Total Nonperforming Loans


$84,943


$89,653


$147,698




Other real estate owned ("OREO")


19,140


21,335


36,507




Total Nonperforming Assets


$104,083


$110,988


$184,205




Loans past due in excess of 90 days and still accruing


$10,587


$8,126


$12,960




Criticized loans


272,517


265,526


460,663




Nonperforming loans, plus OREO as a percentage 










of total loans, plus OREO (5)


2.49%


2.67%


4.57%




Allowance for credit losses


$61,676


$60,732


$75,166


























For the Three Months Ended


For the Six Months Ended



June 30,


March 31,


June 30,


June 30,

June 30,



2012


2012


2011


2012

2011

Net Charge-offs:




















Commercial, financial, agricultural and other


$1,717


$1,676


$1,840


$3,393

$2,696

Real estate construction


114


134


3,049


248

8,048

Commercial real estate


278


77


4,721


355

5,411

Residential real estate


593


1,579


519


2,172

1,604

Loans to individuals


651


823


609


1,474

1,233

Net Charge-offs


$3,353


$4,289


$10,738


$7,642

$18,992

Net charge-offs as a percentage of average loans 










outstanding (annualized)


0.33%


0.42%


1.06%


0.37%

0.93%

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


128.15%


88.30%


84.86%


105.78%

120.73%

Provision for credit losses


$4,297


$3,787


$9,112


$8,084

$22,929

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."


















June 30,


March 31,


June 30,





2012


2012


2011



Tangible Equity:









Total shareholders' equity


$772,490


$767,358


$762,076



Less: intangible assets


163,057


163,428


164,553



Tangible Equity


609,433


603,930


597,523



Less: preferred stock


0


0


0



Tangible Common Equity


$609,433


$603,930


$597,523












Tangible Assets:









Total assets


$5,946,816


$5,968,644


$5,691,302



Less: intangible assets


163,057


163,428


164,553



Tangible Assets


$5,783,759


$5,805,216


$5,526,749












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


10.54%


10.40%


10.81%












Shares Outstanding at End of Period


104,728,846


105,050,018


104,906,994



(4)Tangible Book Value Per Common Share


$5.82


$5.75


$5.70



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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