EX-99 2 mailerex99_1.htm CEO MESSAGE AND FINANCIAL INFORMATION FIRST COMMONWEALTH

Exhibit 99.1  -  First Commonwealth Financial Corporation - President and CEO's Letter to Shareholders
                         mailed August 19, 2004

   First
Commonwealth         

Banking
Insurance
Trust
Financial Management
Investments

 

 

 

First Commonwealth

 

 

Financial Corporation

 

 

22 N. 6thStreet

 

 

Indiana, Pennsylvania 15701

 

 

724-349-7220 Phone

 

 

724-349-6427 Fax

 

 

 

Joseph E. O'Dell

 

www.fcbanking.com

President  and Chief  Executive Officer

 

 

 

 

 

 

 

 

August 9, 2004

 

 



Dear Shareholder:

    First Commonwealth Financial Corporation (NYSE:FCF) reported net income of $11.6 million for the second quarter of 2004 that translates into $0.18 basic and diluted earnings per share, compared to net income of $13.4 million and $0.23 basic and diluted earnings per share for the comparable period in 2003.  The 2003 period contained securities gains in excess of the 2004 period, and the 2004 period included merger and integration costs that were not present in the 2003 period.  The 2004 period incorporates the results of operations for GA Financial, Inc. since May 24, 2004, as well as the results of Pittsburgh Financial Corp. for the entire reporting period.

    Net income for the six months ended June 30, 2004 was $24.9 million, or $0.40 basic and $0.39 diluted earnings per share compared to net income of $26.7 million and $0.46 basic and $0.45 diluted earnings per share for the related period in 2003.  Return on equity was 10.90% and return on assets was 0.92% for the six months of 2004 compared to 13.07% and 1.17% respectively for the six-month period of 2003.

    Net interest income for the second quarter of 2004 increased by $3.0 million over the related period of 2003 as earning assets increased.  This increase was partially offset by a decline in net interest margin of 34 basis points (0.34%) as the earning asset yields declined faster than funding costs.  Net interest margin was 3.21% in the six months of 2004 compared to 3.63% in the first six months of 2003 reflecting a reduction of 42 basis points (0.42%).

    Credit quality continued to show strong improvement as non-performing loans decreased $11.2 million (31.4%) and the net charge-offs were $1.5 million (25.7%) less than in the six-month period of 2003.  This improvement is particularly significant as total loans increased by $847 million (32.3%) during this same period.

    The GA Financial, Inc. acquisition was consummated on May 24, 2004, adding $892 million in assets and twelve community offices to the Pittsburgh Region of First Commonwealth Bank.  The Pittsburgh Region will be further strengthened with the addition of four de novo offices, with two to be located in northern Washington County and two offices in southern Butler County.  Our Network Optimization Plan also includes relocation or expansion of the Clearfield Mall, Downtown Huntingdon, Ames Plaza, Ebensburg, Salem 22 Plaza and Somerset Mall community offices in the near future.

    At its regular meeting in July, the Board of Directors authorized management to restructure certain of its Federal Home Loan Bank (FHLB) advances.  As a result, First Commonwealth has prepaid $440 million of advances with maturities primarily in 2008, with a weighted average borrowing rate of 5.43%.  This transaction resulted in a one-time charge for a prepayment penalty of approximately $29.5 million ($19.2 million after tax) or approximately $0.28 per share in the third quarter of 2004.  The prepaid advances were replaced with other borrowings having maturities ranging from overnight to 2010, with an initial average interest rate of approximately 2.50%.

    This transaction expands the maturity distribution of the company's borrowings to minimize the interest rate risk in any one year.  The Corporation expects that the transaction will result in an increase in net interest income over the remaining term of the original advances in excess of the prepayment penalties.  The improvement in net interest income is expected to increase earnings per share by approximately $0.02 to $0.03 each quarter over the next eighteen months, with an assumed increase in short-term interest rates of 225 basis points (2.25%) during that period.

    While the one-time charge for the prepayment penalty will cause the Corporation to report an operating loss for the third quarter, this will not affect the Corporation's current dividend payment policy.  Investment Banking firms that have issued updated reports subsequent to the restructuring have been positive as follows:  Cohen Bros. & Company (OUTPERFORM); Ferris, Baker Watts, Incorporated (BUY) and Janney Montgomery Scott LLC (BUY).

    In addition to adding many new shareholders as a result of the GA Financial acquisition, the Corporation also gained an experienced new board member.  In July, Mr. Robert J. Ventura, a former GA Financial director, joined the First Commonwealth Financial Corporation Board of Directors as stipulated in the merger agreement. Mr. Ventura was also appointed to the First Commonwealth Audit Committee.

    The significant actions recently undertaken are setting First Commonwealth up for future positive progress.  The continued confidence and support of the First Commonwealth shareholders in greatly appreciated.


Sincerely,


/s/JOSEPH E. O'DELL


                                                               The following tables provide you with consolidated selected financial data of First Commonwealth at and for the quarter ended June 30, 2004.  You should read this information along with the consolidated financial statements of First Commonwealth and the accompanying notes included in its annual report on Form 10-K for the year ended December 31, 2003, and its quarterly report on Form 10-Q for the quarter ended June 30, 2004, which are available to the public over the Internet at the Corporation's website at http://www.fcbanking.com or from the company upon request to the attention of the Corporate Secretary.

 

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,

 

2004

2003

2004

2003

Interest income

$65,498

$61,186

$127,470

$123,503

Interest expense

27,063

25,745

52,228

51,216

     Net interest income

38,435

35,441

75,242

72,287

Provision for credit losses

2,520

3,465

4,620

6,925

     Net interest income after provision for credit losses

35,915

31,976

70,622

65,362

 

 

 

 

 

Securities gains

145

3,221

3,995

5,455

Trust income

1,442

1,284

2,710

2,469

Service charges on deposits

3,760

3,255

6,960

6,104

Insurance commissions

865

848

1,669

1,645

Income from bank owned life insurance

1,251

1,052

2,514

2,098

Merchant discount income

907

895

1,735

1,707

Card related interchange income

890

695

1,510

1,299

Other income

1,837

1,948

3,587

3,492

     Total other income

11,097

13,198

24,680

24,269

 

 

 

 

 

Salaries and employee benefits

17,141

15,146

33,844

30,481

Net occupancy expense

2,165

1,771

4,354

3,745

Furniture and equipment expense

2,705

2,544

5,226

5,096

Data processing expense

913

621

1,726

1,148

Pennsylvania shares tax expense

1,140

1,081

2,274

2,141

Intangible amortization

238

6

312

13

Litigation settlement

0

0

0

(610)

Merger and integration charges

873

0

2,164

0

Other operating expense

8,369

7,213

15,361

14,140

     Total other expenses

33,544

28,382

65,261

56,154

Income before income taxes

13,468

16,792

30,041

33,477

Applicable income taxes

1,908

3,365

5,158

6,746

     Net income

$11,560

$13,427

$24,883

$26,731

 

 

 

 

 

Average shares outstanding

64,455,920

58,769,160

62,614,372

58,736,392

Average shares outstanding assuming dilution

64,947,209

59,101,475

63,118,440

59,018,324

 

 

 

 

 

Per Share Data:

 

 

 

 

Basic earnings per share

$0.18

$0.23

$0.40

$0.46

Diluted earnings per share

$0.18

$0.23

$0.39

$0.45

Cash dividends per share

$0.160

$0.155

$0.320

$0.310

 

 

 

 

 

 

 

 

 

 

 

 

Asset Quality Data At June 30,

 

 

 

 

 

2004

2003

 

 

Loans on nonaccrual basis

$13,285

$20,810

 

 

Past due loans

11,085

14,778

 

 

Renegotiated loans

189

201

 

 

     Total nonperforming loans

$24,559

$35,789

 

 

Loans outstanding at end of period

$3,468,152

$2,621,569

 

 

Average loans outstanding(year-to-date)

$2,983,534

$2,644,059

 

 

Allowance for credit losses

$42,664

$35,604

 

 

Nonperforming loans as percent of total loans

0.71%

1.37%

 

 

 

FIRST COMMONWEALTH FINANCIAL CORPORATION

 

 

 

 

CONSOLIDATED SELECTED FINANCIAL DATA

 

 

 

 

(Dollar Amounts in Thousands, except per share data)

 

 

 

 

 

2004

2003

 

 

Asset Quality Data At June 30 (Continued),

 

 

 

 

Net charge-offs(year-to-date)

$4,324

$5,817

 

 

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

0.29%

0.44%

 

 

Allowance for credit losses as percent of average loans

 

 

 

 

   outstanding

1.43%

1.35%

 

 

Allowance for  credit losses as percent of nonperforming

 

 

 

 

   loans

173.72%

99.48%

 

 

Other real estate owned

$2,421

$1,714

 

 

 

 

 

 

 

End of Period Data At June 30,

 

 

 

 

 

2004

2003

 

 

Assets

$6,260,984

$4,830,764

 

 

Earning assets

$5,812,053

$4,586,430

 

 

Securities

$2,336,663

$1,963,624

 

 

Loans,net of unearned income

$3,468,152

$2,621,569

 

 

Total deposits

$3,894,074

$3,219,809

 

 

     Non-interest bearing deposits

$478,749

$396,794

 

 

     NOW, Moneymarket & Savings

$1,823,170

$1,256,014

 

 

     Time deposits

$1,592,155

$1,567,001

 

 

Short-term borrowings

$727,698

$594,210

 

 

Long-term debt

$1,074,676

$578,408

 

 

Other liabilities

$40,363

$26,875

 

 

Shareholders' equity

$524,173

$411,462

 

 

Shares outstanding

69,446,220

59,071,871

 

 

Book value per share

$7.55

$6.97

 

 

Market value per share

$12.97

$12.96

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter To Date Average Balances At June 30,

 

 

 

 

 

2004

2003

 

 

Assets

$5,667,865

$4,686,742

 

 

Earning assets

$5,291,477

$4,424,688

 

 

Securities

$2,163,400

$1,768,458

 

 

Loans,net of unearned income

$3,123,093

$2,654,956

 

 

Deposits

$3,537,360

$3,194,329

 

 

Shareholders' Equity

$476,543

$414,484

 

 

 

 

 

 

 

YearTo Date Average Balances At June 30,

 

 

 

 

 

2004

2003

 

 

Assets

$5,420,192

$4,608,493

 

 

Earning assets

$5,089,264

$4,347,692

 

 

Securities

$2,100,664

$1,702,130

 

 

Loans,net of unearned income

$2,983,534

$2,644,059

 

 

Deposits

$3,408,964

$3,130,275

 

 

Shareholders' Equity

$459,282

$412,344

 

 

 

 

 

 

 

 

 

 

 

 

Profitability Ratios

 

 

 

 

 

For the Quarter

For the 6 Months

 

Ended June 30,

Ended June 30,

 

2004

2003

2004

2003

Return on average assets

0.82%

1.15%

0.92%

1.17%

Return on average equity

9.76%

12.99%

10.90%

13.07%

Yield on earning assets (FTE)

5.19%

5.81%

5.25%

5.98%

Total cost of funds

2.32%

2.66%

2.34%

2.72%

Net interest margin (FTE)

3.15%

3.49%

3.21%

3.63%

Efficiency ratio (FTE) (a)

63.87%

54.95%

61.66%

54.78%

Fully tax equivalent adjustment

$2,988

$3,013

$5,912

$5,959

 

 

 

 

 

(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".

 

First Commonwealth Financial Corporation

                                          

Mail Address:

Old Courthouse Square

 

P.O. Box 400

22 North Sixth Street

 

Indiana PA  15701-0400

Indiana PA   15701

 

 

Telephone:  724-349-7220

 

Website:  www.fcbanking.com




INVESTOR INFORMATION


STOCK LISTING:  First Commonwealth Financial Corporation common stock is listed on The New York Stock Exchange and is traded under the symbol FCF.

For assistance regarding a change in registration of stock certificates, replacing lost certificates/dividend checks, or an address change, please contact First Commonwealth's transfer agent listed below (for directly registered accounts only).  If you hold shares through a brokerage firm (street name accounts), please contact your broker regarding changes to your account.



THE BANK OF NEW YORK

Shareholder Relations

Toll Free:  1-800-524-4458

 

Church Street Station

Website:   www.stockbny.com

 

P.O. Box 11258

 

 

New York, NY   10286-1258

 




DIVIDEND REINVESTMENT PLAN:  First Commonwealth Financial Corporation offers a direct purchase and dividend reinvestment plan, First Commonwealth Stock Direct, administered by The Bank of New York.  The plan allows both directly registered shareholders and interested first-time investors to purchase First Commonwealth common stock without the customary brokerage expenses and also to automatically reinvest cash dividends paid on the common stock.  Purchases made through the Plan with reinvested dividends receive a 10% discount on the fair market price (on accounts directly registered with the Bank of New York).  For more information, please visit our website at www.fcbanking.com (click on "Investor Relations").  You can also download a copy of the plan prospectus and enrollment form through The Bank of New York's website, noted above (click on "Company List", then "First Commonwealth").  Copies may also be requested from The Bank of New York by phone or mail (phone number and address above).

DIRECT DEPOSIT OF DIVIDENDS:  Direct deposit of dividend payments to a checking or savings account is also available. To enroll, please call The Bank of New York for an Authorization Form (completed forms must be received by The Bank of New York 30 days prior to the dividend payment date). 

INVESTOR/SHAREHOLDER INQUIRIES:  Request for information or assistance regarding the Corporation should be directed to the attention of Shareholder Relations at the Corporate Office in Indiana, PA 1-800-331-4107.

FORWARD LOOKING STATEMENTS:  The enclosed shareholder communication contains "forward-looking statements," within the meaning of the Private Securities Litigation Reform Act of 1995,  that involve significant risks and uncertainties.  Actual results could differ materially from those contained in or implied by such statements for a variety of reasons including, but not limited to:  the timing and magnitude of changes in interest rates; changes in accounting principles, policies, or guidelines:  changes in regional, national and global economic conditions; changes in regulatory requirements, and significant changes in the securities markets.  Consequently, all forward-looking statements made in this shareholder communication are qualified by these cautionary statements and the cautionary language in First Commonwealth's most recent Form 10-K  report and other documents filed with the Securities and Exchange Commission.



First

              Commonwealth

 

                         First Commonwealth

                           Financial Corporation