EX-99 3 earnrel2q2003.htm SECOND QTR EARNINGS RELEASE *** News Release ***

 

*** News Release ***


To: All Area News Agencies

From: First Commonwealth Financial Corporation

Date: July 17, 2003

For More Information Contact: John Dolan, Executive Vice President and Chief Financial Officer, First Commonwealth Financial Corporation, 724-349-7220

FIRST COMMONWEALTH ANNOUNCES SECOND QUARTER EARNINGS


INDIANA, PA - First Commonwealth Financial Corporation (NYSE:FCF) reported net income of $13.4 million for the second quarter of 2003 which translates into $0.23 basic and diluted earnings per share and compared to $11.0 million net income and $0.19 basic and diluted earnings per share for the comparable period in 2002. 

The 2002 quarter results included the effects of a $3.1 million (pre-tax) restructuring charge related to employee separation pay and costs related to merging its two subsidiary banks into one charter.  These items, net of tax, decreased net income in the 2002 period by $2.0 million.   Return on equity was 12.99% and return on assets was 1.15% for the second quarter of 2003 compared to 11.43% and 0.96%, respectively in the 2002 period.

Net income for the six months ended June 30, 2003 was $26.7 million, or $0.46 basic and $0.45 diluted earnings per share compared to $18.6 million net income and $0.32 basic and diluted earnings per share for the related period in 2002.

The six month period of 2002 included the effects of a previously disclosed $8.0 million (pre-tax) settlement of litigation and the 2003 period reflects a partial recovery from insurance for that claim in the amount of $610 thousand (pre-tax).  Additionally, the 2002 period reflects the above described $3.1 million (pre-tax) accrual for the restructuring charge.  These items, net of tax, increased income in 2003 by $397 thousand and reduced net income by $7.2 million in the 2002 period.  Return on equity was 13.07% and return on assets was 1.17% in the six-month period of 2003 compared to 9.77% and 0.82% for the 2002 period.

 

Net Interest Income

Net interest income declined $2.5 million in second quarter of 2003, primarily as the earning asset yields declined faster than funding costs.  Net interest income, on a fully tax-equivalent basis, as a percentage of average earning assets ("net interest margin") was 3.49% in the 2003 quarter compared to 3.77% in the second quarter of 2002. 

Net interest income for the six months of 2003 declined $3.7 million from the same period of 2002 while net interest margin was 3.63% for the 2003 period and compared to 3.79% for the 2002 period.  The reduction of short-term interest rates tends to reduce rates on loan categories and time deposits, but the non-maturity deposits (savings and NOW accounts) are already at very low levels.  Continued low or declining interest rates would tend to continue to strain net interest income.  The Corporation continues to explore strategies to help mitigate any negative impact of low interest rate.

Noninterest Income

Net securities gains were $3.2 million in the second quarter of 2003 compared to $576 thousand in the 2002 quarter while net securities gains were $5.5 million in the first six months of 2003 compared to $615 thousand in the 2002 period.  The Corporation sold a combination of debt and equity securities.  Gains in the second quarter of both years presented were primarily from the sale of equity securities.  The debt securities sold in the six month period of 2003 were securities available for sale and had an average remaining life of one year and proceeds were reinvested in securities with an average life of three years to partially mitigate the Corporation's exposure to low and declining interest rates. 

Noninterest income, excluding the net securities gains described above, increased $616 thousand in the second quarter of 2003 when compared to the same quarter of 2002 and increased $1.1 million in the corresponding six-month periods.  These increases were primarily driven by deposit fee increases.

Noninterest Expense

Noninterest expenses decreased $3.2 million during the 2003 quarter when compared to the second quarter of 2002, while noninterest expense for the six months of 2003 decreased $10.9 million when compared to the 2002 period, primarily reflecting the effects of the above mentioned litigation settlement and restructuring charges.  The most significant other noninterest expense item that increased was employee benefit costs with hospitalization costs increasing 23%.

Provision for Credit Losses

The provision for credit losses increased $457 thousand in the second quarter of 2003 when compared to the 2002 related quarter and increased $1.0 million for the six months of 2003 when compared to the comparable 2002 period, reflecting management's assessment of its portfolio.  The second quarter of 2003 reflected an increase of  $398 thousand in net charge-offs when compared to the 2002 quarter but net charge-offs for both six month periods were comparable.

Credit Quality 

Nonperforming loan levels continue to show improvement at June 30, 2003 when compared to June 30, 2002.  Nonaccrual loans contained two significant credits that were described in the 2002 Form 10K and Annual Report.  The largest credit ($6.1 million) carries an 80% guaranty of a U.S. government agency.  While a sale of the underlying assets is pending, delays with the bankruptcy court would result in a delay of the final sale and resolution of the remaining balance.  The second credit, which was $3.0 million at June 30, 2003, continues to be resolved through the liquidation of collateral and exercising other remedies.  While the final resolution of this credit is uncertain, the potential loss on this credit is reserved.  The Corporation believes that the allowance for credit losses is adequate at this time.  Other significant credits are monitored closely.  The uncertain economic conditions present a risk to the company and the industry but management feels that its risk management process is thorough and serves as an early warning system so that an appropriate response will be promptly implemented.

First Commonwealth Financial Corporation is a $4.8 billion bank holding company headquartered in Indiana, PA.  It operates in 18 counties in western and central Pennsylvania through First Commonwealth Bank, a Pennsylvania chartered bank.  Financial services and insurance products are also provided through First Commonwealth Trust Company, First Commonwealth Financial Advisors, Inc. and First Commonwealth Insurance Agency.  The Corporation also operates First Commonwealth Systems Corporation, a data processing subsidiary, First Commonwealth Professional Resources, Inc., a support services subsidiary, and jointly owns Commonwealth Trust Credit Life Insurance Company, a credit life reinsurance company.

Statements contained in this press release that are not historical facts are forward looking statements as that item is defined in the Private Securities Litigation Reform Act of 1995.  Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from estimates results.  Such risks and uncertainties are detailed in the Corporation's filings with the Securities and Exchange Commission.

 

 

FIRST COMMONWEALTH FINANCIAL CORPORATION

 

 

 

 

CONSOLIDATED SELECTED FINANCIAL DATA

 

 

 

 

(Dollar Amounts in Thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

                                For the Quarter

                                For the 6 Months

 

                                Ended June 30,

                                Ended June 30,

 

2003

2002

2003

2002

Interest income

$61,186

$69,878

$123,503

$140,401

Interest expense

25,745

31,945

51,216

64,426

     Net interest income

35,441

37,933

72,287

75,975

Provision for credit losses

3,465

3,008

6,925

5,925

     Net interest income after provision for credit losses

31,976

34,925

65,362

70,050

 

 

 

 

 

Securities gains

3,221

576

5,455

615

Trust income

1,284

1,342

2,469

2,555

Service charges on deposits

3,255

2,746

6,104

5,439

Insurance commissions

848

951

1,645

1,807

Income from bank owned life insurance

1,052

1,173

2,098

2,242

Other income

3,538

3,149

6,498

5,668

     Total other income

13,198

9,937

24,269

18,326

 

 

 

 

 

Salaries and employee benefits

15,146

14,767

30,481

29,410

Net occupancy expense

1,771

1,613

3,745

3,299

Furniture and equipment expense

2,544

2,568

5,096

4,966

Data processing expense

621

484

1,148

926

Pennsylvania shares tax expense

1,081

996

2,141

1,991

Intangible amortization

6

68

13

188

Litigation settlement

0

0

(610)

8,000

Restructuring charges

0

3,116

0

3,116

Other operating expense

7,213

8,003

14,140

15,162

     Total other expenses

28,382

31,615

56,154

67,058

Income before income taxes

16,792

13,247

33,477

21,318

Applicable income taxes

3,365

2,290

6,746

2,723

     Net income

$13,427

$10,957

$26,731

$18,595

 

 

 

 

 

Average shares outstanding

58,769,160

58,359,322

58,736,392

58,251,440

Average shares outstanding assuming dilution

59,101,475

58,851,264

59,018,324

58,669,047

 

 

 

 

 

Per Share Data:

 

 

 

 

Basic earnings per share

$0.23

$0.19

$0.46

$0.32

Diluted earnings per share

$0.23

$0.19

$0.45

$0.32

Cash dividends per share

$0.155

$0.150

$0.310

$0.300

 

 

 

 

 

FIRST COMMONWEALTH FINANCIAL CORPORATION

 

 

 

 

CONSOLIDATED SELECTED FINANCIAL DATA

 

 

 

 

(Dollar Amounts in Thousands, except per share data)

 

 

 

 

 

 

 

 

 

Asset Quality Data At  June 30,

 

 

 

 

 

2003

2002

 

 

Loans on nonaccrual basis

$20,810

$25,705

 

 

Past due loans

14,778

14,987

 

 

Renegotiated loans

209

828

 

 

     Total nonperforming loans

$35,797

$41,520

 

 

Loans outstanding at end of period

$2,621,569

$2,612,965

 

 

Average loans outstanding (year-to-date)

$2,644,059

$2,588,873

 

 

Allowance for credit losses

$35,604

$34,302

 

 

Nonperforming loans as percent of total loans

1.37%

1.59%

 

 

Net charge-offs (year-to-date)

$5,817

$5,780

 

 

Net charge-offs as percent of average loans

0.22%

0.22%

 

 

Allowance for credit losses as percent of average loans

 

 

 

 

   Outstanding

1.35%

1.32%

 

 

Allowance for credit losses as percent of nonperforming

 

 

 

 

   Loans

99.46%

82.62%

 

 

Other real estate owned

$1,714

$1,468

 

 

 

 

 

 

 

End of Period Data At  June 30,

 

 

 

 

 

2003

2002

 

 

Assets

$4,830,764

$4,584,972

 

 

Earning assets

$4,586,430

$4,347,675

 

 

Securities

$1,963,624

$1,733,966

 

 

Loans, net of unearned income

$2,621,569

$2,612,965

 

 

Total deposits

$3,219,809

$3,183,634

 

 

     Non-interest bearing deposits

$396,794

$394,071

 

 

     NOW, Moneymarket & Savings

$1,256,014

$1,165,686

 

 

    Time deposits

$1,567,001

$1,623,877

 

 

Short-term borrowings

$594,210

$305,647

 

 

Long-term debt

$578,408

$681,215

 

 

Other liabilities

$26,875

$26,958

 

 

Shareholders' equity

$411,462

$387,518

 

 

Shares outstanding

59,071,871

58,779,955

 

 

Book value per share

$6.97

$6.59

 

 

Market value per share

$12.96

$13.49

 

 

 

 

 

 

 

 

 

 

 

 

FIRST COMMONWEALTH FINANCIAL CORPORATION

 

 

 

 

CONSOLIDATED SELECTED FINANCIAL DATA

 

 

 

 

(Dollar Amounts in Thousands, except per share data)

 

 

 

 

 

 

 

 

 

Quarter To Date Average Balances At  June 30,

 

 

 

 

 

2003

2002

 

 

Assets

$4,686,742

$4,560,665

 

 

Earning assets

$4,424,688

$4,315,192

 

 

Securities

$1,768,458

$1,704,638

 

 

Loans, net of unearned income

$2,654,956

$2,608,616

 

 

Deposits

$3,194,329

$3,149,251

 

 

Shareholders' Equity

$414,484

$384,492

 

 

 

 

 

 

 

Year To Date Average Balances At  June 30,

 

 

 

 

 

2003

2002

 

 

Assets

$4,608,493

$4,550,514

 

 

Earning assets

$4,347,692

$4,305,643

 

 

Securities

$1,702,130

$1,714,545

 

 

Loans, net of unearned income

$2,644,059

$2,588,873

 

 

Deposits

$3,130,275

$3,117,399

 

 

Shareholders' Equity

$412,344

$383,725

 

 

 

 

 

 

 

 

 

 

 

 

Profitability Ratios

 

 

 

 

 

                                 For the Quarter

                                 For the 6 Months

 

                                 Ended June 30,

                                 Ended June 30,

 

2003

2002

2003

2002

Return on average assets

1.15%

0.96%

1.17%

0.82%

Return on average equity

12.99%

11.43%

13.07%

9.77%

Yield on earning assets (FTE)

5.81%

6.73%

5.98%

6.78%

Total cost of funds

2.66%

3.39%

2.72%

3.45%

Net interest margin (FTE)

3.49%

3.77%

3.63%

3.79%

Efficiency ratio (FTE) (a)

54.95%

62.63%

54.78%

67.50%

Fully tax equivalent adjustment

$3,013

$2,608

$5,959

$5,049

 

 

 

 

 

(a) Efficiency ratio is "total other expenses" as a percentage of total revenue.

 

 

 

     Total revenue consists of "net interest income, on a fully tax-equivalent basis", plus "total other income".