First Commonwealth Announces First Quarter 2012 Financial Results and Dividend Increase

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