EX-99 2 mailerex99.htm LETTER FROM CEO FIRST COMMONWEALTH

Exhibit 99   -  First Commonwealth Financial Corporation - President and CEO's Letter to Shareholders
                      May 18, 2005

   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

 

 

 

 

 

 

May 9, 2005

Dear Shareholder:

     First Commonwealth Financial Corporation (NYSE:FCF) reported net income of $15.2 million for the first quarter of 2005, compared to net income of $13.3 million for the first quarter of 2004.  Basic and diluted earnings per share were $0.22 for the first quarter of 2005 as well as for the comparable period of 2004.  Return on equity was 11.48% and return on assets was 1.00% for the first quarter of 2005, compared to 12.12% and 1.04% respectively in the 2004 period.  Increases in net income were generated primarily by increases in average earning assets and improvement in net interest margin.  Both periods contain securities gains while the 2004 period includes some costs of integration and certain employee separation expenses related to First Commonwealth's acquisition of Pittsburgh Financial Corp. completed in December 2003.  Increases in average earning assets for the first quarter of 2005 compared to the 2004 period can largely be attributed to the inclusion of the balances of GA Financial, Inc. (acquired in May 2004) in the 2005 quarter.

     Net interest income for the first quarter of 2005 was $8.1 million more than that of the related period of 2004 as average earning assets increased by $852 million or 17% compared to 2004 averages.  Loans and deposits continued to display strong growth during the first quarter of 2005, resulting in increases of nearly 5% (on an annualized basis) since December 31, 2004.  Yield on earning assets, on a fully tax-equivalent basis, increased 24 basis points (0.24%) for the first quarter of 2005 compared to the corresponding period of 2004, while the cost of funds increased 6 basis points (0.06%) over the same period.  The costs of funds for the first quarter of 2005 compared to the corresponding period of 2004 was favorably impacted by First Commonwealth's repositioning of borrowings after the prepayment of Federal Home Loan Bank borrowings during the third quarter of 2004.

     Total nonperforming loans increased by $4.1 million as of March 31, 2005 compared to March 31, 2004 levels and included increases in loans past due 90 days but still accruing of $5.2 million which were partially offset by decreases in nonaccrual loans of $1.1 million.  Nonperforming loans as a percentage of total loans were 0.79% at March 31, 2005 compared to 0.83% at March 31, 2004.

     The provision for credit losses decreased $356 thousand in the first quarter of 2005 when compared to the comparable period of 2004 reflecting the improved quality of primary watch list credits.  Although net charge-offs increased by $40 thousand for the 2005 quarter compared to 2004 levels, net charge-offs as a percentage of average loans (annualized) improved to 0.23% for the first quarter of 2005 from 0.28% for the first quarter of 2004.  Management believes that the allowance for credit losses is adequate at this time.

     At the First Commonwealth Annual Meeting, John Glass updated the shareholders about the progress of various growth strategies.  He reported that the expansion of the Pittsburgh Region is continuing with three new community office openings this summer, including a new office at the entrance to the new Pittsburgh Mills Shopping Mall.  A number of other offices are scheduled to open or reopen within the next several years resulting in a total of 30% of the First Commonwealth Bank community offices being less than five years old.

     First Commonwealth recently announced the sale of a community office in Centre County.  Approximately $16.5 million of deposit liabilities are associated with the office.  The transaction is expected to generate a pre-tax gain of $2.8 million that includes the deposit premium and the gain on the sale of premises and equipment.  The transaction is subject to regulatory approvals and is expected to settle in the second quarter of 2005.

     First Commonwealth also announced entering into an asset sale and merchant processing alliance with First Data Corporation.  Under the terms of the agreement First Data Corporation will acquire certain assets of First Commonwealth's merchant processing business and provide merchant payment processing services on behalf of First Commonwealth Bank.  First Commonwealth Bank will participate in future revenue related to both the existing book of merchant business as well as new business generated.   First Commonwealth is expected to share in approximately 14% of the future revenue stream.   The transaction is expected to generate a pre-tax gain of approximately $2.0 million that will increase second quarter 2005 after-tax earnings by $1.3 million.  Merchant discount and other related merchant income for the full year of 2004 was $4.0 million, while associated costs were $3.3 million.

     As you can see, the Corporation remains very active and continues to make progress in executing our strategic plan.  The employees remain dedicated and enthusiastic.  As always, I thank you for your continued support and confidence.


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 March 31, 2005.  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, 2004, and its quarterly report on Form 10-Q for the quarter ended March 31, 2005, 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 Ended

 

March 31,

 

2005

2004

Interest income

$ 75,637 

$ 61,972 

Interest expense

  30,705 

  25,165 

     Net interest income

44,932 

36,807 

Provision for credit losses

    1,744 

    2,100 

     Net interest income after provision for credit losses

43,188 

34,707 

Net securities gains

485 

3,850 

Trust income

1,325 

1,268 

Service charges on deposits

3,540 

3,200 

Insurance commissions

840 

804 

Income from bank owned life insurance

1,321 

1,263 

Merchant discount income

839 

828 

Card related interchange income

1,087 

620 

Other income

    2,003 

    1,750 

     Total other income

11,440 

13,583 

 

 

 

Salaries and employee benefits

18,298 

16,703 

Net occupancy expense

2,992 

2,189 

Furniture and equipment expense

2,870 

2,521 

Data processing expense

939 

813 

Pennsylvania shares tax expense

1,266 

1,134 

Intangible amortization

565 

74 

Merger and integration charges

0 

1,291 

Other operating expense

    8,463 

    6,992 

     Total other expenses

  35,393 

  31,717 

Income before income taxes

19,235 

16,573 

Applicable income taxes

    4,016 

    3,250 

     Net income

$15,219 

$13,323 

 

 

 

Average shares outstanding

69,346,722 

60,772,824 

Average shares outstanding assuming dilution

70,024,400 

61,289,672 

 

 

 

Per Share Data:

 

 

Basic earnings per share

$0.22 

$0.22 

Diluted earnings per share

$0.22 

$0.22 

Cash dividends per share

$0.165 

$0.160 

 

 

 

 

March 31,

December 31,

 

2005

2004

Assets

 

 

  Cash and due from banks

$     77,909 

$     79,591 

  Interest-bearing bank deposits

735 

2,403 

  Securities available for sale, at market

2,107,360 

2,162,313 

  Securities held to maturity, at amortized cost

 

 

     (Market value $85,894 in 2005 and $81,886 in 2004)

83,418 

78,164 

 

 

 

  Loans

 

 

    Portfolio loans

3,552,374 

3,512,774 

    Loans held for sale

2,259 

2,311 

      Unearned income

(192)

(252)

      Allowance for credit losses

    (40,794)

    (41,063)

        Net loans

3,513,647 

3,473,770 

 

 

 

  Premises and equipment

58,854 

56,965 

  Other real estate owned

1,463 

1,814 

  Goodwill

123,551 

123,607 

  Amortizing intangibles, net

16,948 

17,513 

  Other assets

    216,705 

    202,338 

        Total assets

$6,200,590 

$6,198,478 

 

FIRST COMMONWEALTH FINANCIAL CORPORATION

 

 

CONSOLIDATED SELECTED FINANCIAL DATA

 

 

(Dollar Amounts in Thousands, except per share data)

 

 

 

March 31,

December 31,

 

2005

2004

Liabilities

 

 

  Deposits (all domestic):

 

 

    Noninterest-bearing

$   486,158 

$   480,843 

    Interest-bearing

 3,405,524 

 3,363,632 

      Total deposits

3,891,682 

3,844,475 

 

 

 

  Short-term borrowings

919,636 

946,474 

  Other liabilities

38,272 

35,977 

  Subordinated debentures

108,250 

108,250 

  Other long-term debt

    729,613 

    731,324 

 

 

 

      Total long-term debt

    837,863 

    839,574 

        Total liabilities

5,687,453 

5,666,500 

 

 

 

Shareholders' Equity

 

 

  Common stock $1 par value per share

71,978 

71,978 

  Additional paid-in capital

175,067 

175,453 

  Retained earnings

311,047 

307,363 

  Accumulated other comprehensive income (loss)

(8,901)

10,002 

  Treasury stock

(26,093)

(26,643)

  Unearned ESOP shares

     (9,961)

(6,175)

        Total shareholders' equity

    513,137 

531,978 

          Total liabilities and shareholders' equity

$6,200,590 

$6,198,478 

 

 

 

Shares issued

71,978,568 

71,978,568 

Shares outstanding

69,912,501 

69,868,908 

Treasury shares

2,066,067 

2,109,660 

Book value per share

$7.34 

$7.61 

Market value per share

$13.70 

$15.39 

 

 

 

Asset Quality Data At March 31,

 

 

 

2005

2004

Loans on nonaccrual basis

$ 11,200 

$ 12,292 

Past due loans

16,846 

11,627 

Renegotiated loans

      182 

      192 

     Total nonperforming loans

$28,228 

$24,111 

Loans outstanding at end of period

$3,554,441 

$2,888,349 

Average loans outstanding (year-to-date)

$3,542,655 

$2,843,976 

Allowance for credit losses

$40,794 

$37,512 

Nonperforming loans as percent of total loans

0.79%

0.83%

Net charge-offs (year-to-date)

$2,013 

$1,973 

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

0.23%

0.28%

Allowance for credit losses as percent of average loans

 

 

   Outstanding

1.15%

1.32%

Allowance for credit losses as percent of nonperforming

 

 

   loans

144.52%

155.58%

Other real estate owned

$1,463 

$2,233 

 

 

 

Profitability Ratios

 

 

 

For the Quarter Ended

 

March 31,

 

2005

2004

Return on average assets

1.00%

1.04%

Return on average equity

11.48%

12.12%

Efficiency ratio (FTE) (a)

59.35%

59.49%

Fully tax equivalent adjustment

$3,267 

$2,924 

 

 

 

(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 shareholder accounts directly held 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 Form10-K report and other documents filed with the Securities and Exchange Commission.



First

              Commonwealth

 

                         First Commonwealth

                           Financial Corporation