From the Wires
First Commonwealth Announces Third Quarter 2008 Financial Results
Core Net Income Increases 24.3%; Growth in Loans and Net Interest Income/Margin Expansion Continues
Oct. 23, 2008 08:10 AM
INDIANA, Pa., Oct. 23 /PRNewswire-FirstCall/ -- First Commonwealth
Financial Corporation (NYSE: FCF), the holding company for First Commonwealth
Bank, announced today financial results for the third quarter of 2008.
(Logo: http://www.newscom.com/cgi-bin/prnh/20030416/FIRSTLOGO )
Third Quarter Results
First Commonwealth reported third quarter 2008 core net income, or net
income excluding securities gains and losses and other-than-temporary
impairment charges, of $15.2 million or $0.21 per diluted share, a 24.3%
increase as compared to the same period in 2007. When compared to the second
quarter of 2008, core net income increased $2.0 million or 14.9%.
GAAP net income for the third quarter 2008 was $10.2 million or $0.14 per
diluted share compared to $12.2 million or $0.17 per diluted share in the same
period last year and $12.9 million or $0.18 per diluted share for the second
quarter of 2008.
Third quarter 2008 net income was impacted by non-cash charges of $8.6
million, $5.6 million after tax, or $0.08 per share, for other-than-temporary
impairment charges. The charges included $7.7 million, $5.0 million after tax,
for one trust preferred collateralized debt obligation and $947 thousand, $615
thousand after tax, for equity securities issued by two Pennsylvania-based
financial institutions. Partially offsetting these charges were gains of $910
thousand, $592 thousand after tax, from the sale of equity securities.
Third quarter 2008 return on average equity and average assets was 7.38%
and 0.65%, respectively, compared to 8.59% and 0.85% for the prior year period
and 9.03% and 0.84% for the second quarter of 2008.
Developments during the third quarter included:
-- Total loans increased 14.3% and commercial loans increased 29.0% year
over year.
-- Net interest income increased 19.4% year over year.
-- Net interest margin, on a tax equivalent basis, improved 22 basis
points year over year.
-- First Commonwealth Bank opened a new community banking office
(McCandless Township), which was the second de novo office opened in
the Pittsburgh market during 2008.
-- Credit quality improved over second quarter.
"Our core operating results were solid across all lines of business
despite challenging conditions, and I am pleased with the loan growth as well
as the improvement in credit quality over the second quarter," said John J.
Dolan, President and CEO. "We remain a well-capitalized institution with
significant liquidity and we are making loans in the communities we serve at a
time when credit markets have seized up and the balance sheets of many of our
larger competitors are shrinking."
Net Interest Income and Margin
Net interest income increased $1.0 million, or 2.1% from the second
quarter of 2008, representing five consecutive quarters of growth.
Additionally, net interest income increased $7.8 million, or 19.4% compared to
the third quarter of 2007. This improvement is primarily due to increased
levels of interest earning assets, particularly in commercial loans. Total
loans increased $524.5 million, or 14.3% year over year and increased $71.2
million, or 1.7% compared to the prior quarter. Investment securities
decreased $74.6 million, or 4.9% year over year and decreased $123.9 million,
or 7.8% compared to the prior quarter.
The net interest margin on a tax equivalent basis for the third quarter
2008 increased 22 basis points to 3.58% compared with 3.36% in the
corresponding period last year and increased four basis points from the second
quarter of 2008. In the second quarter, net loan prepayment fees of $1.6
million contributed 12 basis points to the net interest margin. The increase
in our net interest margin for both periods can be attributed to increased
loan volume and declines in the cost of interest-bearing liabilities exceeding
the decrease in yields on total interest-earning assets. The decrease in the
cost of interest-bearing liabilities can be attributed to lower interest rates
as well as a change in the mix of our deposits. In the third quarter of 2008
compared to the same period last year, average noninterest-bearing demand
deposits increased $36.4 million, or 7.0%, average interest-bearing demand
deposits increased $25.1 million, or 4.2%, and average savings deposits
increased $68.2 million, or 6.2%. Average higher costing time deposits
decreased $182.6 million or 8.6%.
Average interest-earning assets were $505.7 million, or 9.8%, higher in
the third quarter of 2008 compared to the third quarter of 2007 driven by an
increase in average loans of $496.0 million. Average interest-earning assets
remained stable from the second quarter of 2008 as the average loans increased
$101.0 million but was offset by the $108.8 million decrease in average
investment securities. Average borrowings increased $592.1 million in the
third quarter of 2008 compared to the same period in 2007 and increased $57.4
million compared to the second quarter of 2008 primarily to fund the loan
growth.
Non-Interest Income
Core non-interest income, or non-interest income excluding net securities
gains (losses), in the third quarter of 2008 increased $1.8 million, or 14.6%,
from the same period last year and $443 thousand, or 3.3%, from the second
quarter of 2008. The increase in the year to year comparison was primarily due
to higher insurance commissions, increased card related interchange income and
greater letter of credit fees. Higher sales, additional producers and an
enhanced calling program resulted in increased insurance commissions. Card
related interchange income increased primarily due to growth in usage of debit
cards and larger dollar transactions. The increase in core non-interest income
for the third quarter of 2008 compared to the second quarter of 2008 can be
attributed to higher letter of credit fees. GAAP non-interest income for the
third quarter of 2008 decreased $5.9 million, or 48.6%, from the third quarter
of 2007 and decreased $6.8 million, or 52.1%, from the second quarter of 2008.
During the third quarter of 2008, the company recorded other-than-
temporary impairment charges of $7.7 million on a trust preferred
collateralized debt obligation and $947 thousand on equity securities issued
by two Pennsylvania-based financial institutions. These were partially offset
by the $910 thousand in net securities gains recorded in the third quarter of
2008. In the second quarter of 2008, $541 thousand in other-than-temporary
impairment charges were recorded on equity securities issued by two other
local financial institutions.
Non-Interest Expense
Non-interest expense for the third quarter of 2008 increased $2.5 million,
or 6.9%, compared to the third quarter of 2007 and remained relatively stable
from the second quarter of 2008. This increase can be largely attributed to
the rise in incentive compensation expense related to the growth in loans,
insurance sales and core net income, as well as annual merit increases.
Income Tax
The provision for income taxes decreased $225 thousand for the third
quarter of 2008 compared to the same period in 2007. First Commonwealth's
effective tax rate was 10.0% in both the third quarter of 2008 and 2007 and
18.1% in the second quarter of 2008. Nontaxable income and tax credits had a
greater impact on the effective tax rate during both the third quarter of 2008
and 2007 due to lower pretax income in those periods compared to the second
quarter of 2008.
Credit Quality and Provision for Credit Losses
Credit quality has remained stable despite worsening economic conditions.
Total nonperforming loans and the ratio of nonperforming loans as a percentage
of total loans have declined in the third quarter of 2008 from both the
comparable period last year and from the second quarter of 2008. First
Commonwealth is not a participant or underwriter in the sub-prime mortgage
loan or sub-prime collateralized debt marketplace and therefore does not have
any direct exposure to risks associated with these activities. All mortgage
backed securities in First Commonwealth's portfolio are AAA-rated and backed
by U.S. Government agencies.
For the quarter ending September 30, 2008, non-accrual loans decreased
$1.2 million from the second quarter of 2008 due primarily to the successful
settlement of the Equipment Finance, LLC loan portfolio. Non-accrual loans
decreased slightly from the comparable period last year. Non-accrual loans at
September 30, 2008 include a $31.2 million commercial credit relationship that
has been monitored since the second quarter of 2006 and was placed on non-
accrual during the second quarter of 2007. This credit is collateralized by
real estate and equipment and a reserve has been allocated, primarily during
2006, to cover the expected losses. The payment of principal and interest on
this credit has been deferred pursuant to a loan forbearance agreement that
was extended to December 31, 2008. Management continues to monitor the
borrower closely and is presently evaluating options with respect to the
collection or resolution of this credit.
Loans past due in excess of 90 days and still accruing at September 30,
2008 were flat compared to September 30, 2007 and decreased $491 thousand from
June 30, 2008. The provision for credit losses for the third quarter of 2008
increased $1.6 million compared to the third quarter of 2007 and decreased
$1.4 million from the second quarter of 2008. The increase from the third
quarter of 2007 was primarily attributable to growth in the portfolio as well
as an additional provision for a $5.0 million construction loan collateralized
with real estate that was placed on non-accrual during the second quarter of
2008.
Management believes that the allowance for credit losses is at a level
deemed sufficient to absorb losses inherent in the loan portfolio at September
30, 2008.
Trust Preferred Collateralized Debt Obligations
First Commonwealth's portfolio of trust preferred collateralized debt
obligations and subordinated notes consists of 15 pooled issues and 21 single-
issue securities. The single issues are primarily from money center and large
regional banks. The pooled instruments consist of securities issued by 376
banks and other financial institutions. Two of our pooled securities are
senior tranches and the remainder are mezzanine tranches. The senior and
mezzanine tranches of trust preferred collateralized debt obligations
generally are protected from defaults by over-collateralization and cash flow
default protection provided by subordinated tranches, with senior tranches
having the greatest protection and mezzanine tranches subordinated to the
senior tranches. At the time of initial issue, the tranches subordinated to
our senior and mezzanine tranches ranged in size from approximately 7.3% to
35.4% of the total principal amount of the respective securities and no single
issuer comprised more than 5% of the principal of the total principal of the
pool.
As of September 30, 2008, our single issue securities had a book value of
$24.0 million and an estimated fair value of $19.1 million, while the book
value of the pooled securities totaled $98.7 million with an estimated fair
value of $56.3 million. In the third quarter of 2008, a $7.7 million
other-than-temporary impairment charge was recorded on a $13.0 million
investment in one trust preferred collateralized debt obligation. This
obligation, which includes 20 issuers, one of which is in default and two of
which have deferred interest payments, is expected to experience a principal
shortfall at maturity. Based on management's analysis as of September 30,
2008, all of the single issues and the remainder of the trust preferred
collateralized debt obligations are expected to return 100% of their principal
and interest.
Year-to-Date Results
First Commonwealth recorded core net income year to date September 30,
2008 of $39.2 million, or $0.54 per diluted share. Return on average equity
and average assets was 9.22% and 0.85%. Core net income year to date September
30, 2008 increased 14.9% from the comparable period in 2007.
For the nine months ended September 30, 2008, GAAP net income was $34.2
million, or $0.47 per diluted share, compared to the $34.6 million, or $0.47
per diluted share, reported for the same period of 2007. Year to date results
for 2008 were unfavorably impacted by other-than-temporary impairment charges
of $5.9 million after tax, or $0.08 per share, as described above. Return on
average equity and average assets for the nine months ended September 30, 2008
was 8.05% and 0.74%, respectively, compared to 8.08% and 0.80% for the first
nine months of 2007.
Net interest income for the nine months ended September 30, 2008 was 12.1%
higher than the comparable period last year, reflecting growth in average
loans of 8.6%. The net interest margin for the first nine months of 2008
increased to 3.47% from 3.35% for the same period in 2007 as the cost of
interest-bearing liabilities declined faster than the yield on total interest-
earning assets. Net loan prepayment fees of $1.6 million recorded in 2008 had
a positive effect on the net interest margin of four basis points.
The provision for credit losses increased $4.8 million for the year to
date ending September 30, 2008 compared to the same period last year primarily
from the $524 million increase in loans as well as the addition of the
aforementioned $5.0 million commercial construction loan to non-accrual
Core non-interest income for the nine months ending September 30, 2008
increased $5.2 million, or 14.8%, from the same period last year due to a $712
thousand increase in service charges on deposit accounts, $1.4 million rise in
insurance commissions, $880 thousand increase in card related interchange
income, $1.3 million rise in letter of credit fees and the $1.0 million
increase in other income. Service charges on deposit accounts increased as a
result of increased activity and growth in accounts. The increase in insurance
commissions was the result of higher sales driven by additional producers and
an enhanced calling program. The increase in card related interchange income
was due to more usage in debit cards. Other income increased due to higher
interest rate swap fees.
Non-interest expense year-to-date September 30, 2008 increased $5.6
million, or 5.0%, from the comparable period in 2007 due to the $4.6 million
increase in salaries and employee benefits and the $1.0 million increase in
net occupancy expense. Salaries and employee benefits increased primarily as a
result of higher incentive compensation expense related to the loan growth,
greater insurance sales and higher core net income, as well as annual merit
increases. The increase in net occupancy expense was the result of higher
rental expense, utilities and building repairs and maintenance.
The provision for income taxes for the nine months ended September 30,
2008 increased $1.5 million, to $5.4 million, from the same period last year
due to the $1.1 million rise in income before income taxes and a decrease in
tax-free income and tax credits. First Commonwealth's effective tax rate was
13.6% for the first nine months of 2008 compared to 10.0% for the same period
in 2007.
Use of Non-GAAP Financial Measure
This release includes core net income, which is a non-GAAP (Generally
Accepted Accounting Principles) financial measure that is calculated by
excluding securities gains and losses and other-than-temporary impairment
charges from GAAP net income. Management believes that core net income is
useful to the investment community in analyzing financial results and trends
of First Commonwealth. This information facilitates comparisons with prior
periods and reflects the principal basis on which our management internally
monitors financial performance. The table in the financial section reconciles
GAAP financial measures to non-GAAP financial measures for the periods
presented.
About First Commonwealth Financial Corporation
First Commonwealth Financial Corporation is a $6.2 billion bank holding
company headquartered in Indiana, Pennsylvania. It operates 113 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" within the meaning of
the Private Securities Litigation Reform Act of 1995, including statements
regarding the adequacy of First Commonwealth's allowance for credit losses,
expectations of continued growth and the impact of recent organizational
changes and strategic initiatives on future results. Forward-looking
statements describe First Commonwealth's future plans, strategies and
expectations and are based on assumptions and involve risks and uncertainties,
many of which are beyond the control of First Commonwealth and which may cause
actual results, performance or achievements to differ materially from the
results, performance or achievements contemplated by the forward-looking
statements. Forward-looking statements can be identified by the fact that
they do not relate strictly to historical or current facts. They 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." Forward-looking statements speak
only as of the date they are made. Such risks and uncertainties include among
other things:
-- adverse changes in the economy or business conditions, either
nationally or in First Commonwealth's market areas, which could increase
credit-related losses and expenses and/or limit growth;
-- further declines in market value of investment securities that are
considered to be other-than-temporary, which would negatively impact our
earnings and capital levels;
-- increases in defaults by borrowers and other delinquencies, which could
result in an increased provision for credit losses on loans and related
expenses;
-- fluctuations in interest rates and market prices, which could reduce
net interest margin and asset valuations and increase expenses;
-- changes in legislative or regulatory requirements applicable to First
Commonwealth and its subsidiaries, which could increase costs, limit certain
operations and adversely affect results of operations;
-- the inability to successfully execute First Commonwealth's strategic
growth initiatives, which could limit future revenue and earnings growth; and
-- other risks and uncertainties described in First Commonwealth's reports
filed with the Securities and Exchange Commission, including its most recent
Annual Report on Form 10-K.
FIRST COMMONWEALTH FINANCIAL CORPORATION
CONSOLIDATED SELECTED FINANCIAL DATA
(dollars in thousands, except share data)
For the Quarter Ended
September 30, June 30, March 31,
2008 2008 2008
Interest Income
Interest and fees on loans $62,285 $62,614 $62,067
Interest and dividends on investments:
Taxable interest 15,013 15,578 15,531
Interest exempt from Federal income
taxes 3,176 3,347 3,595
Dividends 663 678 609
Interest on Federal funds sold 0 2 0
Interest on bank deposits 2 2 5
Total interest income 81,139 82,221 81,807
Interest Expense
Interest on deposits 23,069 25,370 31,033
Interest on short-term borrowings 4,634 4,251 3,705
Interest on subordinated debentures 1,870 1,878 1,911
Interest on other long-term debt 3,639 3,791 4,074
Total interest on long-term debt 5,509 5,669 5,985
Total interest expense 33,212 35,290 40,723
Net Interest Income 47,927 46,931 41,084
Provision for credit losses 3,913 5,361 3,179
Net Interest Income after provision
for credit losses 44,014 41,570 37,905
Non-Interest Income
Net securities (losses) gains (7,709) (451) 501
Trust income 1,444 1,538 1,532
Service charges on deposit accounts 4,792 4,786 4,425
Insurance commissions 1,390 1,394 1,277
Income from bank owned life insurance 1,435 1,446 1,487
Card related interchange income 1,950 1,950 1,753
Letter of credit fees 982 337 230
Other income 1,990 2,089 2,251
Total non-interest income 6,274 13,089 13,456
Non-Interest Expense
Salaries and employee benefits 21,091 20,428 20,330
Net occupancy expense 3,613 3,728 3,907
Furniture and equipment expense 2,995 3,058 3,078
Advertising expense 550 401 628
Data processing expense 1,075 996 1,051
Pennsylvania shares tax expense 1,342 1,339 1,271
Intangible amortization 802 832 831
Other expenses 7,529 8,103 7,760
Total non-interest expense 38,997 38,885 38,856
Income before income taxes 11,291 15,774 12,505
Provision for income taxes 1,127 2,861 1,384
Net Income $10,164 $12,913 $11,121
Average Shares Outstanding 72,715,709 72,624,053 72,452,875
Average Shares Outstanding Assuming
Dilution 72,817,216 72,734,711 72,559,668
Per Share Data:
Basic Earnings Per Share $0.14 $0.18 $0.15
Diluted Earnings Per Share $0.14 $0.18 $0.15
Cash Dividends Declared per Common
Share $0.17 $0.17 $0.17
For the Quarter Ended
December 31, September 30,
2007 2007
Interest Income
Interest and fees on loans $63,488 $63,737
Interest and dividends on
investments:
Taxable interest 14,967 14,259
Interest exempt from Federal income
taxes 3,510 3,424
Dividends 752 753
Interest on Federal funds sold 74 57
Interest on bank deposits 8 8
Total interest income 82,799 82,238
Interest Expense
Interest on deposits 34,527 33,786
Interest on short-term borrowings 1,819 1,977
Interest on subordinated debentures 2,156 2,130
Interest on other long-term debt 4,139 4,211
Total interest on long-term debt 6,295 6,341
Total interest expense 42,641 42,104
Net Interest Income 40,158 40,134
Provision for credit losses 2,352 2,296
Net Interest Income after provision
for credit losses 37,806 37,838
Non-Interest Income
Net securities (losses) gains 403 16
Trust income 1,428 1,517
Service charges on deposit accounts 4,690 4,609
Insurance commissions 909 1,064
Income from bank owned life insurance 1,557 1,534
Card related interchange income 1,791 1,654
Letter of credit fees 207 149
Other income 1,845 1,670
Total non-interest income 12,830 12,213
Non-Interest Expense
Salaries and employee benefits 18,859 18,401
Net occupancy expense 3,484 3,475
Furniture and equipment expense 3,126 3,243
Advertising expense 957 475
Data processing expense 987 942
Pennsylvania shares tax expense 1,446 1,439
Intangible amortization 831 857
Other expenses 7,185 7,648
Total non-interest expense 36,875 36,480
Income before income taxes 13,761 13,571
Provision for income taxes 2,113 1,352
Net Income $11,648 $12,219
Average Shares Outstanding 72,391,577 72,589,329
Average Shares Outstanding Assuming
Dilution 72,513,962 72,705,753
Per Share Data:
Basic Earnings Per Share $0.16 $0.17
Diluted Earnings Per Share $0.16 $0.17
Cash Dividends Declared per Common
Share $0.17 $0.17
For the Nine Months Ended
September 30, September 30,
2008 2007
Interest Income
Interest and fees on loans $186,966 $190,463
Interest and dividends on
investments:
Taxable interest 46,122 45,293
Interest exempt from Federal income
taxes 10,118 10,222
Dividends 1,950 2,206
Interest on Federal funds sold 2 83
Interest on bank deposits 9 29
Total interest income 245,167 248,296
Interest Expense
Interest on deposits 79,472 98,243
Interest on short-term borrowings 12,590 9,623
Interest on subordinated debentures 5,659 6,370
Interest on other long-term debt 11,504 12,836
Total interest on long-term debt 17,163 19,206
Total interest expense 109,225 127,072
Net Interest Income 135,942 121,224
Provision for credit losses 12,453 7,690
Net Interest Income after provision
for credit losses 123,489 113,534
Non-Interest Income
Net securities (losses) gains (7,659) 771
Trust income 4,514 4,453
Service charges on deposit accounts 14,003 13,291
Insurance commissions 4,061 2,651
Income from bank owned life insurance 4,368 4,544
Card related interchange income 5,653 4,773
Letter of credit fees 1,549 260
Other income 6,330 5,297
Total non-interest income 32,819 36,040
Non-Interest Expense
Salaries and employee benefits 61,849 57,273
Net occupancy expense 11,248 10,226
Furniture and equipment expense 9,131 8,874
Advertising expense 1,579 1,910
Data processing expense 3,122 2,821
Pennsylvania shares tax expense 3,952 4,323
Intangible amortization 2,465 2,597
Other expenses 23,392 23,108
Total non-interest expense 116,738 111,132
Income before income taxes 39,570 38,442
Provision for income taxes 5,372 3,840
Net Income $34,198 $34,602
Average Shares Outstanding 72,597,977 72,959,307
Average Shares Outstanding Assuming
Dilution 72,704,279 73,128,040
Per Share Data:
Basic Earnings Per Share $0.47 $0.47
Diluted Earnings Per Share $0.47 $0.47
Cash Dividends Declared per Common
Share $0.51 $0.51
FIRST COMMONWEALTH FINANCIAL CORPORATION
CONSOLIDATED SELECTED FINANCIAL DATA
(dollars in thousands, except share data)
September 30, June 30, March 31,
2008 2008 2008
Assets
Cash and due from banks $93,327 $101,860 $92,554
Interest-bearing bank deposits 267 347 219
Securities available for sale, at
market value 1,402,528 1,524,106 1,623,788
Securities held to maturity, at
amortized cost,(Market value
$55,775 at September 30, 2008
and $72,928 at December 31, 2007) 56,839 59,200 65,935
Loans:
Portfolio loans, net of unearned
income 4,184,600 4,113,423 3,893,183
Allowance for credit losses (45,482) (44,505) (41,613)
Net loans 4,139,118 4,068,918 3,851,570
Premises and equipment, net 71,141 69,890 69,191
Other real estate owned 3,718 3,271 3,280
Goodwill 159,956 159,956 159,956
Amortizing intangibles, net 10,976 11,778 12,609
Other assets 265,920 252,086 239,877
Total assets $6,203,790 $6,251,412 $6,118,979
Liabilities
Deposits (all domestic):
Noninterest-bearing $564,443 $568,158 $542,331
Interest-bearing 3,696,687 3,744,311 3,778,337
Total deposits 4,261,130 4,312,469 4,320,668
Short-term borrowings 875,424 834,226 642,869
Other liabilities 43,385 47,805 48,259
Subordinated debentures 105,750 105,750 105,750
Other long-term debt 386,288 404,464 426,955
Total long-term debt 492,038 510,214 532,705
Total liabilities 5,671,977 5,704,714 5,544,501
Shareholders' Equity
Preferred stock, $1 par value per
share, 3,000,000 shares authorized,
none issued 0 0 0
Common stock, $1 par value per share,
200,000,000 shares authorized,
75,100,431 shares issued and
73,509,724 shares outstanding
at September 30, 2008;
100,000,000 shares authorized,
75,100,431 shares issued and
73,128,612 shares outstanding at
December 31, 2007 75,100 75,100 75,100
Additional paid-in capital 205,953 206,245 206,498
Retained earnings 315,404 317,611 317,058
Accumulated other comprehensive (loss)
income, net (38,133) (22,604) 7,215
Treasury stock (1,590,707 and
1,971,819 shares at September 30,
2008 and December 31, 2007,
respectively, at cost) (18,411) (21,054) (22,293)
Unearned ESOP shares (8,100) (8,600) (9,100)
Total shareholders' equity 531,813 546,698 574,478
Total liabilities and
shareholders' equity $6,203,790 $6,251,412 $6,118,979
Book value per share $7.23 $7.46 $7.85
Market value per share $13.47 $9.33 $11.59
December 31, September 30,
2007 2007
Assets
Cash and due from banks $100,791 $86,499
Interest-bearing bank deposits 1,719 1,060
Securities available for sale, at
market value 1,574,217 1,460,909
Securities held to maturity, at
amortized cost,(Market value
$55,775 at September 30, 2008 and
$72,928 at December 31, 2007) 71,497 73,024
Loans:
Portfolio loans, net of unearned
income 3,697,819 3,660,123
Allowance for credit losses (42,396) (43,210)
Net loans 3,655,423 3,616,913
Premises and equipment, net 69,487 70,133
Other real estate owned 2,172 1,803
Goodwill 159,956 159,956
Amortizing intangibles, net 13,441 14,272
Other assets 234,915 237,527
Total assets $5,883,618 $5,722,096
Liabilities
Deposits (all domestic):
Noninterest-bearing $523,203 $522,810
Interest-bearing 3,824,016 3,811,133
Total deposits 4,347,219 4,333,943
Short-term borrowings 354,201 237,734
Other liabilities 65,464 44,156
Subordinated debentures 105,750 108,250
Other long-term debt 442,196 435,781
Total long-term debt 547,946 544,031
Total liabilities 5,314,830 5,159,864
Shareholders' Equity
Preferred stock, $1 par value per
share, 3,000,000 shares authorized,
none issued 0 0
Common stock, $1 par value per share,
200,000,000 shares authorized,
75,100,431 shares issued and
73,509,724 shares outstanding
at September 30, 2008;
100,000,000 shares authorized,
75,100,431 shares issued and
73,128,612 shares outstanding at
December 31, 2007 75,100 75,100
Additional paid-in capital 206,889 207,310
Retained earnings 319,246 319,472
Accumulated other comprehensive
(loss) income, net (147) (6,736)
Treasury stock (1,590,707 and
1,971,819 shares at September 30,
2008 and December 31, 2007, respectively,
at cost) (22,700) (22,814)
Unearned ESOP shares (9,600) (10,100)
Total shareholders' equity 568,788 562,232
Total liabilities and shareholders'
equity $5,883,618 $5,722,096
Book value per share $7.78 $7.69
Market value per share $10.65 $11.06
FIRST COMMONWEALTH FINANCIAL CORPORATION
CONSOLIDATED SELECTED FINANCIAL DATA
Loans by Categories
(dollars in thousands)
September 30, June 30, March 31,
2008 2008 2008
Commercial, financial, agricultural
and other $1,148,666 $1,115,536 $1,052,971
Real estate - construction 338,303 307,278 241,114
Real estate - residential 1,227,225 1,235,334 1,230,928
Real estate - commercial 978,287 988,186 909,613
Loans to individuals 492,119 467,089 458,557
Leases, net of unearned income 0 0 0
Total loans and leases, net of
unearned income $4,184,600 $4,113,423 $3,893,183
December 31, September 30,
2007 2007
Commercial, financial, agricultural
and other $926,904 $901,679
Real estate - construction 207,708 143,680
Real estate - residential 1,237,986 1,268,313
Real estate - commercial 861,077 865,389
Loans to individuals 464,082 480,926
Leases, net of unearned income 62 136
Total loans and leases, net of
unearned income $3,697,819 $3,660,123
FIRST COMMONWEALTH FINANCIAL CORPORATION
CONSOLIDATED SELECTED FINANCIAL DATA
Quarter To Date Average Balance Sheets and
Net Interest Analysis at September 30,
(dollars in thousands)
2008
Average Income/ Yield or
Balance Expense Rate (a)
Assets
Interest-earning assets:
Interest-bearing deposits with banks $355 $2 1.94%
Tax-free investment securities 279,792 3,176 6.95%
Taxable investment securities 1,246,144 15,676 5.01%
Federal funds sold 48 0 1.90%
Loans, net of unearned income (b)( c ) 4,149,186 62,285 6.11%
Total interest-earning assets 5,675,525 81,139 5.91%
Noninterest-earning assets:
Cash 80,393
Allowance for credit losses (44,621)
Other assets 512,996
Total noninterest-earning assets 548,768
Total Assets $6,224,293
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing demand deposits (d) $623,686 $1,225 0.78%
Savings deposits (d) 1,165,568 4,348 1.48%
Time deposits 1,938,709 17,496 3.59%
Short-term borrowings 858,165 4,634 2.15%
Long-term debt 495,170 5,509 4.43%
Total interest-bearing liabilities 5,081,298 33,212 2.60%
Noninterest-bearing liabilities and
capital:
Noninterest-bearing demand deposits(d) 558,373
Other liabilities 36,527
Shareholders' equity 548,095
Total noninterest-bearing funding
sources 1,142,995
Total Liabilities and Shareholders'
Equity $6,224,293
Net Interest Income and Net Yield on
Interest-Earning Assets $47,927 3.58%
2007
Average Income/ Yield or
Balance Expense Rate (a)
Assets
Interest-earning assets:
Interest-bearing deposits with banks $526 $8 5.62%
Tax-free investment securities 301,648 3,424 6.93%
Taxable investment securities 1,210,048 15,012 4.92%
Federal funds sold 4,412 57 5.20%
Loans, net of unearned income (b)( c ) 3,653,196 63,737 7.12%
Total interest-earning assets 5,169,830 82,238 6.59%
Noninterest-earning assets:
Cash 79,514
Allowance for credit losses (44,248)
Other assets 492,612
Total noninterest-earning assets 527,878
Total Assets $5,697,708
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing demand deposits (d) $598,571 $2,705 1.79%
Savings deposits (d) 1,097,321 6,459 2.34%
Time deposits 2,121,318 24,622 4.61%
Short-term borrowings 208,046 1,977 3.77%
Long-term debt 553,158 6,341 4.55%
Total interest-bearing liabilities 4,578,414 42,104 3.65%
Noninterest-bearing liabilities and
capital:
Noninterest-bearing demand deposits(d) 521,935
Other liabilities 32,763
Shareholders' equity 564,596
Total noninterest-bearing funding
sources 1,119,294
Total Liabilities and Shareholders'
Equity $5,697,708
Net Interest Income and Net Yield on
Interest-Earning Assets $40,134 3.36%
(a) Yields on interest-earning assets have been computed on a tax
equivalent basis using the 35% Federal income tax statutory rate.
(b) Income on nonaccrual loans is accounted for on the cash basis, and
the loan balances are included in interest-earning assets.
( c ) Loan income includes loan fees.
(d) Average balances do not include reallocations from noninterest-
bearing demand deposits and interest-bearing demand deposits into
savings deposits which were made for regulatory purposes.
FIRST COMMONWEALTH FINANCIAL CORPORATION
CONSOLIDATED SELECTED FINANCIAL DATA
Year To Date Average Balance Sheets and Net
Interest Analysis at September 30,
(dollars in thousands)
2008
Average Income/ Yield or
Balance Expense Rate (a)
Assets
Interest-earning assets:
Interest-bearing deposits with banks $416 $9 2.74%
Tax-free investment securities 300,125 10,118 6.93%
Taxable investment securities 1,300,267 48,072 4.94%
Federal funds sold 125 2 2.49%
Loans, net of unearned income (b)( c ) 4,011,476 186,966 6.37%
Total interest-earning assets 5,612,409 245,167 6.07%
Noninterest-earning assets:
Cash 76,386
Allowance for credit losses (43,003)
Other assets 499,632
Total noninterest-earning assets 533,015
Total Assets $6,145,424
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing demand deposits (d) $602,340 $4,213 0.93%
Savings deposits (d) 1,128,539 13,845 1.64%
Time deposits 2,043,109 61,414 4.02%
Short-term borrowings 709,586 12,590 2.37%
Long-term debt 521,543 17,163 4.40%
Total interest-bearing liabilities 5,005,117 109,225 2.91%
Noninterest-bearing liabilities and
capital:
Noninterest-bearing demand deposits(d) 536,837
Other liabilities 36,201
Shareholders' equity 567,269
Total noninterest-bearing funding
sources 1,140,307
Total Liabilities and Shareholders'
Equity $6,145,424
Net Interest Income and Net Yield on
Interest-Earning Assets $135,942 3.47%
2007
Average Income/ Yield or
Balance Expense Rate (a)
Assets
Interest-earning assets:
Interest-bearing deposits with banks $568 $29 6.68%
Tax-free investment securities 302,037 10,222 6.96%
Taxable investment securities 1,289,083 47,499 4.93%
Federal funds sold 2,128 83 5.23%
Loans, net of unearned income (b)(c) 3,694,124 190,463 7.10%
Total interest-earning assets 5,287,940 248,296 6.56%
Noninterest-earning assets:
Cash 82,229
Allowance for credit losses (43,882)
Other assets 490,087
Total noninterest-earning assets 528,434
Total Assets $5,816,374
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing demand deposits (d) $594,752 $7,980 1.79%
Savings deposits (d) 1,117,308 19,013 2.28%
Time deposits 2,112,628 71,250 4.51%
Short-term borrowings 302,405 9,623 4.25%
Long-term debt 570,439 19,206 4.50%
Total interest-bearing liabilities 4,697,532 127,072 3.62%
Noninterest-bearing liabilities and
capital:
Noninterest-bearing demand deposits(d) 514,242
Other liabilities 31,719
Shareholders' equity 572,881
Total noninterest-bearing funding
sources 1,118,842
Total Liabilities and Shareholders'
Equity $5,816,374
Net Interest Income and Net Yield on
Interest-Earning Assets $121,224 3.35%
(a) Yields on interest-earning assets have been computed on a tax
equivalent basis using the 35% Federal income tax statutory rate.
(b) Income on nonaccrual loans is accounted for on the cash basis, and the
loan balances are included in interest-earning assets.
(c) Loan income includes loan fees.
(d) Average balances do not include reallocations from noninterest-bearing
demand deposits and interest-bearing demand deposits into savings
deposits which were made for regulatory purposes.
FIRST COMMONWEALTH FINANCIAL CORPORATION
CONSOLIDATED SELECTED FINANCIAL DATA
Asset Quality Data
(dollars in thousands)
September 30, June 30, March 31,
2008 2008 2008
Loans on non-accrual basis $49,692 $50,910 $48,799
Troubled debt restructured loans 135 139 143
Total nonperforming loans $49,827 $51,049 $48,942
Loans past due in excess of 90 days
and still accruing $13,719 $14,210 $20,066
Loans outstanding at end of period $4,184,600 $4,113,423 $3,893,183
Average loans outstanding $4,011,476 $3,941,864 $3,835,587
Allowance for credit losses $45,482 $44,505 $41,613
Nonperforming loans as a percentage of
total loans 1.19% 1.24% 1.26%
Provision for credit losses $12,453 $8,540 $3,179
Net credit losses $9,367 $6,431 $3,962
Net credit losses as a percentage of
average loans
outstanding (annualized) 0.31% 0.33% 0.42%
Allowance for credit losses as a
percentage of average loans
outstanding 1.13% 1.13% 1.08%
Allowance for credit losses as a
percentage of nonperforming
loans 91.28% 87.18% 85.03%
Other real estate owned $3,718 $3,271 $3,280
Asset Quality Data
(dollars in thousands)
December 31, September 30,
2007 2007
Loans on non-accrual basis $54,119 $50,161
Troubled debt restructured loans 147 150
Total nonperforming loans $54,266 $50,311
Loans past due in excess of 90 days
and still accruing $12,853 $13,677
Loans outstanding at end of period $3,697,819 $3,660,123
Average loans outstanding $3,687,037 $3,694,124
Allowance for credit losses $42,396 $43,210
Nonperforming loans as a percentage
of total loans 1.47% 1.37%
Provision for credit losses $10,042 $7,690
Net credit losses $10,294 $7,128
Net credit losses as a percentage of
average loans
outstanding (annualized) 0.28% 0.26%
Allowance for credit losses as a
percentage of average loans
outstanding 1.15% 1.17%
Allowance for credit losses as a
percentage of nonperforming
loans 78.13% 85.89%
Other real estate owned $2,172 $1,803
Profitability Ratios
(dollars in thousands)
For the Quarter Ended
September June March December September
30, 30, 31, 31, 30,
2008 2008 2008 2007 2007
Return on average assets 0.65% 0.84% 0.75% 0.80% 0.85%
Return on average equity 7.38% 9.03% 7.73% 8.08% 8.59%
Net interest margin (a) 3.58% 3.54% 3.28% 3.32% 3.36%
Efficiency ratio (b) 67.94% 61.63% 66.78% 65.15% 65.17%
Fully tax equivalent adjustment $3,202 $3,078 $3,648 $3,614 $3,633
For the Nine Months Ended
September 30, September 30,
2008 2007
Return on average assets 0.74% 0.80%
Return on average equity 8.05% 8.08%
Net interest margin (a) 3.47% 3.35%
Efficiency ratio (b) 65.33% 66.01%
Fully tax equivalent adjustment $9,928 $11,093
(a) Net interest margin has been computed on a tax equivalent basis using
the 35% Federal income tax statutory rate.
(b) Efficiency ratio is "total non-interest expense" as a percentage of
total revenue.
Total revenue consists of "net interest income, on a fully tax-
equivalent basis," plus "total non-interest income."
FIRST COMMONWEALTH FINANCIAL CORPORATION
CONSOLIDATED SELECTED FINANCIAL DATA
Reconciliation of GAAP to Non-GAAP (a)
(dollars in thousands, except share data)
For the Nine
For the Quarter Ended Months Ended
September June September September September
30, 30, 30, 30, 30,
2008 2008 2007 2008 2007
GAAP non-interest income $6,274 $13,089 $12,213 $32,819 $36,040
Less: net securities (losses)
gains (7,709) (451) 16 (7,659) 771
Core non-interst income $13,983 $13,540 $12,197 $40,478 $35,269
GAAP net income $10,164 $12,913 $12,219 $34,198 $34,602
Less: net securities (losses)
gains, net of tax (5,011) (293) 10 (4,978) 501
Core net income $15,175 $13,206 $12,209 $39,176 $34,101
GAAP diluted earnings per
share $0.14 $0.18 $0.17 $0.47 $0.47
Less: net securities (losses)
gains per diluted share ($0.07) $0.00 $0.00 ($0.07) $0.00
Core diluted earnings per
share $0.21 $0.18 $0.17 $0.54 $0.47
GAAP return on average assets 0.65% 0.84% 0.85% 0.74% 0.80%
Less: net securities (losses)
gains as a percentage of
average assets -0.32% -0.01% 0.00% -0.11% 0.02%
Core return on average assets 0.97% 0.85% 0.85% 0.85% 0.78%
GAAP return on average equity 7.38% 9.03% 8.59% 8.05% 8.08%
Less: net securities (losses)
gains as a percentage of
average equity -3.63% -0.21% 0.01% -1.17% 0.12%
Core return on average equity 11.01% 9.24% 8.58% 9.22% 7.96%
(a) This release includes core net income, which is a non-GAAP (Generally
Accepted Accounting Principles) financial measure that is calculated
by excluding securities gains and losses and other-than-temporary
impairment charges from GAAP net income. Management believes that core
net income is useful to the investment community in analyzing
financial results and trends of First Commonwealth. This information
facilitates comparisons with prior periods and reflects the principal
basis on which our management internally monitors financial
performance. The table in the financial section reconciles GAAP
financial measures to non-GAAP financial measures for the periods
presented.
Pooled Trust Preferred Security Detail
(dollars in thousands)
Book Fair Unrealized Moody's/Fitch
Deal Class Value Value Loss Ratings
Pre TSL I Senior $3,841 $2,350 $(1,491) Aaa(n)/AAA
Pre TSL IV Mezzanine 1,830 1,092 (738) A3/A+(n)
Pre TSL V Mezzanine 620 349 (271) Aa3/A
Pre TSL VI Mezzanine 418 290 (128) A1/A+
Pre TSL VII Mezzanine 5,327 5,327 - Baa3(n)/A+(n)
Pre TSL VIII Mezzanine 5,978 2,886 (3,092) Baa3(n)/A(n)
Pre TSL IX Mezzanine 3,000 1,544 (1,456) A2(n)/A(n)
Pre TSL X Mezzanine 4,000 2,026 (1,974) A2(n)/A(n)
Pre TSL XII Mezzanine 10,000 5,004 (4,996) A2(n)/A(n)
Pre TSL XIII Mezzanine 17,582 8,983 (8,599) A2(n)/A(n)
Pre TSL XIV Mezzanine 16,072 7,926 (8,146) A2(n)/A(n)
MMCap I Senior 8,939 7,604 (1,335) Aaa(n)/AAA
MMCap I Mezzanine 1,068 598 (470) Baa2(n)/BBB(n)
MM Cap IX Mezzanine 20,000 10,354 (9,646) A2(n)/A-(n)
Total $98,675 $56,333 $(42,342)
SOURCE First Commonwealth Financial Corporation
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