EX-99 2 earnings8k_ex99.htm PRESS RELEASE DATED OCTOBER 20, 2005

Exhibit 99 - First Commonwealth Financial Corporation Press Release dated October 20, 2005

 

 

 

*** NEWS RELEASE ***

 

TO:

All Area News Agencies

 

For More Information Contact:

 

 

 

 

FROM:

First Commonwealth

 

John Dolan, Executive Vice President and

 

Financial Corporation

 

Chief Financial Officer

 

 

 

First Commonwealth Financial Corporation

DATE:

October 20, 2005

 

(724) 349-7220




First Commonwealth Reports 2005 Third Quarter Financial Results
Deposit and Loan Growth Continues


INDIANA, PENNSYLVANIA - October 20, 2005 - First Commonwealth Financial Corporation (NYSE: FCF) reported financial results for the third quarter ended September 30, 2005. 

Third-Quarter Results

The Corporation reported third quarter 2005 net income of $13.0 million, or $0.19 per diluted share, compared to a net loss of $2.8 million, or $(0.04) per diluted share, in the same period last year.  The third-quarter results included a restructuring charge of $2.7 million ($1.8 million after tax, or $0.03 per diluted share) related to the previously disclosed restructuring of the Corporation's organizational structure and related personnel changes.  The $2.7 million included $0.7 million in expenses related to the execution of a management contract, which was previously disclosed.  The Corporation expects to record additional restructuring charges during the fourth quarter of 2005.  The amount of the additional restructuring charges has not yet been quantified.  The reorganization is expected to result in prospective annual pretax cost savings of approximately $2.8 million.  Last year's third quarter results included a non-recurring charge of $29.5 million ($19.2 million after tax, or $0.28 per diluted share) representing a penalty for the prepayment of Federal Home Loan Bank (FHLB) long-term borrowings.  The third quarter of 2005 included the operations of three new branch offices (including the Corporation's newest branch opened in July at Pittsburgh Mills, western Pennsylvania's newest and largest commercial retail real estate development project) that were not included in the third quarter of last year.  Third-quarter return on average equity was 9.62% and return on average assets was 0.83% compared with (2.13%) and (0.18%), respectively in the corresponding period last year. 

During the third quarter, in addition to the reorganization, the company also announced numerous management changes, including the appointment of Gerard M. Thomchick as President and Chief Executive Officer of First Commonwealth Bank. 


Year-to-Date Results

Net income for the nine months ended September 30, 2005 was $46.1 million, or $0.66 per diluted share, compared with $22.1 million, or $0.34 per diluted share, in the corresponding period last year.  Included in the nine month results are the previously mentioned restructuring charge this year and last year's prepayment penalty.  Return on average equity for the nine-month period was 11.53% and return on average assets was 0.99% compared with 6.14% and 0.52%, respectively for the same period last year. 

Net Interest Income

Net interest income for the third quarter of 2005 decreased $3.1 million, or 6.6%, to $43.0 million from $46.1 million in last year's third quarter.  Third-quarter net interest margin (net interest income as a percentage of average earning assets on a fully tax-equivalent basis) declined 16 basis points to 3.22%, compared with 3.38% in the corresponding period last year.  The decline in net interest margin was due primarily to funding costs increasing at a faster rate than yields on earning assets.  Average earning assets for the third quarter were comparable to the same period last year. 

Year-to-date, net interest margin increased three basis points to 3.30% compared with 3.27% in last year's nine month period.  Yields on earnings assets (on a fully tax-equivalent basis) for the nine month period increased 34 basis points to 5.64%, while cost of funds increased 33 basis points to 2.61%. 

As of September 30, 2005, net loans and deposits increased 2.8% and 5.6%, respectively, from the balances at year end 2004. 

Other Income

Total other income for the third quarter of 2005 declined 2.1% to $11.6 million from $11.8 million in the same period last year due primarily to the decrease in income related to the previously disclosed sale of the Corporation's merchant services business, partially offset by increases in deposit service charges and card related interchange income. 

Year-to-date total other income increased 10.0% to $40.1 million from $36.5 million in the same period last year.  The increase was due primarily to gains from the previously disclosed sale of branch offices and merchant processing operation, higher deposit service charges and card related interchange income, partially offset by lower net securities gains and the previously mentioned decline in merchant processing income. 

Other Expenses

Other expenses for the third quarter of 2005 declined to $36.3 million from $64.1 million in the corresponding period last year.  The third quarter included the previously mentioned $2.7 million restructuring charge this year and $29.5 million charge for the penalty on prepayment of FHLB borrowings last year.  Higher third-quarter salaries and employee benefit costs were offset by


lower other operating expenses related in part to the sale of the Corporation's merchant processing operations.

Year-to-date, other expenses declined to $106.8 million, or 17.4%, from $129.3 million in the same period last year.  This year's nine month period included the previously mentioned restructuring charge and last year's period included the FHLB prepayment penalty and merger and integration costs.  During the first nine months of 2005, the Corporation experienced increases in salaries and employee benefit costs, occupancy expense, Pennsylvania shares taxes, and intangible amortization costs. 

Credit Quality and Provision for Credit Losses

As of September 30, 2005, total nonperforming loans (including loans past due 90 days but still accruing) increased to $25.8 million compared with $24.7 million at September 30, 2004.  Loans past due 90 days but still accruing increased $1.8 million to $14.6 million, but were partially offset by a $0.7 million decrease in nonaccrual loans to $11.0 million.  Nonperforming loans as a percentage of total loans were 0.71% at September 30, 2005 compared with 0.70% at September 30, 2004.  The Corporation believes that the allowance for credit losses is adequate at the present time. 

Third-quarter 2005 provision for credit losses increased to $2.9 million from $2.7 million in the same period last year.  Net charge offs increased for the quarter to $2.7 million compared with $2.2 million in the third quarter last year. 

Year-to-date provision for credit losses increased to $7.6 million from $7.3 million in the same period last year.  Net charge offs for the period increased to $7.1 million from $6.5 million in the corresponding period last year. 

About First Commonwealth Financial Corporation

First Commonwealth Financial Corporation is a $6.2 billion bank holding company headquartered in Indiana, Pennsylvania.  It operates in 16 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 Insurance Agency, First Commonwealth Trust Company, and First Commonwealth Financial Advisors, Inc.  The company also operates First Commonwealth Systems Corporation, a data processing subsidiary, First Commonwealth Professional Resources, a support services subsidiary, FraMal Holdings Corporation, an investment services company, and jointly owns Commonwealth Trust Credit Life Insurance Company, a credit life reinsurance company.

Forward-Looking Statements

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 estimated 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 Ended

For the 9 Months

 

September 30,

Ended September 30,

 

2005

2004

2005

2004

Interest income

$79,248

$74,940

$232,425

$202,410

Interest expense

36,214

28,881

100,819

81,109

     Net interest income

43,034

46,059

131,606

121,301

Provision for credit losses

2,850

2,675

7,594

7,295

     Net interest income after provision for credit losses

40,184

43,384

124,012

114,006

 

 

 

 

 

Net securities gains

34

51

519

4,046

Trust income

1,417

1,413

4,198

4,123

Service charges on deposits

4,226

4,059

11,775

11,019

Gain on sale of branch

0

0

3,090

0

Gain on sale of merchant services business

0

0

1,991

0

Insurance commissions

1,089

1,046

2,832

2,715

Income from bank owned life insurance

1,359

1,333

4,035

3,847

Merchant discount income

353

988

2,074

2,723

Card related interchange income

1,265

986

3,568

2,496

Other income

1,817

1,927

6,067

5,514

     Total other income

11,560

11,803

40,149

36,483

 

 

 

 

 

Salaries and employee benefits

18,320

17,303

54,482

51,147

Net occupancy expense

2,671

2,540

8,378

6,894

Furniture and equipment expense

2,844

3,064

8,473

8,290

Data processing expense

818

1,079

2,738

2,805

Pennsylvania shares tax expense

1,236

1,140

3,739

3,414

Intangible amortization

565

565

1,696

877

Merger and integration charges

0

(39)

0

2,125

Restructuring charges

2,704

0

2,704

0

Debt prepayment fees

0

29,495

0

29,495

Other operating expense

7,145

8,906

24,558

24,267

     Total other expenses

36,303

64,053

106,768

129,314

Income (loss) before income taxes

15,441

(8,866)

57,393

21,175

Applicable income taxes (benefit)

2,445

(6,071)

11,340

(913)

     Net income (loss)

$12,996

($2,795)

$46,053

$22,088

 

 

 

 

 

Average shares outstanding

69,242,056

69,077,293

69,239,005

64,784,404

Average shares outstanding assuming dilution

69,787,884

69,701,327

69,834,460

65,328,753

 

 

 

 

 

Per Share Data:

 

 

 

 

Basic earnings per share

$0.19

($0.04)

$0.67

$0.34

Diluted earnings per share

$0.19

($0.04)

$0.66

$0.34

Cash dividends per share

$0.165

$0.160

$0.495

$0.480

 

 

 

 

 

 

 

 

 

FIRST COMMONWEALTH FINANCIAL CORPORATION

 

 

CONSOLIDATED SELECTED FINANCIAL DATA

 

 

(Dollar Amounts in Thousands, except per share data)

 

 

 

 

 

 

September 30,

December 31,

 

2005

2004

Assets

 

 

  Cash and due from banks on demand

$90,139

$79,591

  Interest-bearing bank deposits

87

2,403

  Securities available for sale, at market

1,990,929

2,162,313

  Securities held to maturity, at amortized cost

 

 

    (Market value $93,344 in 2005 and $81,886 in 2004)

90,639

78,164

 

 

 

  Loans:

 

 

    Portfolio loans

3,611,535

3,512,774

    Loans held for sale

1,744

2,311

    Unearned income

(142)

(252)

    Allowance for credit losses

(41,537)

(41,063)

        Net loans

3,571,600

3,473,770

 

 

 

  Premises and equipment

62,185

56,965

  Other real estate owned

1,520

1,814

  Goodwill

122,702

123,607

  Amortizing intangibles, net

15,817

17,513

  Other assets

215,423

202,338

        Total assets

$6,161,041

$6,198,478

 

 

 

Liabilities

 

 

  Deposits (all domestic):

 

 

    Noninterest-bearing

$500,834

$480,843

    Interest-bearing

3,558,849

3,363,632

      Total deposits

4,059,683

3,844,475

 

 

 

  Short-term borrowings

738,233

946,474

  Other liabilities

37,390

35,977

 

 

 

  Subordinated debentures

108,250

108,250

  Other long-term debt

696,580

731,324

 

 

 

      Total long-term debt

804,830

839,574

        Total liabilities

5,640,136

5,666,500

 

 

 

Shareholders' Equity

 

 

  Common stock $1 par value per share

71,978

71,978

  Additional paid-in capital

174,015

175,453

  Retained earnings

318,751

307,363

  Accumulated other comprehensive income (loss)

(10,195)

10,002

  Treasury stock

(22,116)

(26,643)

  Unearned ESOP shares

(11,528)

(6,175)

        Total shareholders' equity

520,905

531,978

          Total liabilities and shareholders' equity

$6,161,041

$6,198,478

 

 

 

Shares issued

71,978,568

71,978,568

Shares outstanding

70,227,342

69,868,908

Treasury shares

1,751,226

2,109,660

Book value per share

$7.42

$7.61

Market value per share

$13.33

$15.39

 

 

 

 

 

 

 

 

 

 

 

 

FIRST COMMONWEALTH FINANCIAL CORPORATION

 

 

 

 

 

 

 

CONSOLIDATED SELECTED FINANCIAL DATA

 

 

 

 

 

 

 

(Dollar Amounts in Thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter To Date Average Balance Sheets and

 

 

 

 

 

 

 

Net Interest Analysis At September 30,

 

 

 

 

 

 

 

 

 

2005

 

 

 

2004

 

 

Average Balance

Income/Expense

Yield or Rate (a)

 

Average Balance

Income/Expense

Yield or Rate (a)

Assets

 

 

 

 

 

 

 

Interest-earning assets:

 

 

 

 

 

 

 

  Time deposits with banks

$706

$8

4.70%

 

$6,822

$8

0.46%

  Tax free investment securities

284,993

3,244

6.95%

 

267,378

3,048

6.98%

  Taxable investment securities

1,830,229

19,057

4.13%

 

2,020,448

20,410

4.02%

  Federal funds sold

1,456

12

3.41%

 

421

2

1.34%

  Loans, net of unearned income (b)(c)

3,633,852

56,927

6.42%

 

3,508,856

51,472

6.02%

      Total interest-earning assets

5,751,236

79,248

5.72%

 

5,803,925

74,940

5.36%

 

 

 

 

 

 

 

 

Noninterest-earning assets:

 

 

 

 

 

 

 

  Cash

82,298

 

 

 

79,522

 

 

  Allowance for credit losses

(42,036)

 

 

 

(43,239)

 

 

  Other assets

429,738

 

 

 

430,004

 

 

      Total noninterest-earning assets

470,000

 

 

 

466,287

 

 

        Total Assets

$6,221,236

 

 

 

$6,270,212

 

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders' Equity

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

  Interest-bearing demand deposits (d)

$571,916

$1,456

1.01%

 

$569,966

$620

0.43%

  Savings deposits (d)

1,334,392

5,164

1.54%

 

1,256,362

3,265

1.03%

  Time deposits

1,656,868

14,265

3.42%

 

1,572,795

11,536

2.92%

  Short-term borrowings

768,281

6,437

3.32%

 

936,304

3,639

1.55%

  Long-term debt

831,864

8,892

4.24%

 

914,805

9,821

4.27%

    Total interest-bearing liabilities

5,163,321

36,214

2.78%

 

5,250,232

28,881

2.19%

 

 

 

 

 

 

 

 

Noninterest-bearing liabilities and capital:

 

 

 

 

 

 

 

  Noninterest-bearing demand deposits (d)

497,754

 

 

 

476,171

 

 

  Other liabilities

24,201

 

 

 

21,636

 

 

  Shareholders' equity

535,960

 

 

 

522,173

 

 

      Total noninterest-bearing funding sources

1,057,915

 

 

 

1,019,980

 

 

         Total Liabilities and Shareholders' Equity

$6,221,236

 

 

 

$6,270,212

 

 

 

 

 

 

 

 

 

 

Net Interest Income and Net Yield on Interest-Earning Assets

 

$43,034

3.22%

 

 

$46,059

3.38%

 

 

 

 

 

 

 

 

(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 net 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 forregulatory purposes.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FIRST COMMONWEALTH FINANCIAL CORPORATION

 

 

 

 

 

 

 

CONSOLIDATED SELECTED FINANCIAL DATA

 

 

 

 

 

 

 

(Dollar Amounts in Thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year To Date Average Balance Sheets and

 

 

 

 

 

 

 

Net Interest Analysis At September 30,

 

 

 

 

 

 

 

 

 

2005

 

 

 

2004

 

 

Average Balance

Income/Expense

Yield or Rate (a)

 

Average Balance

Income/Expense

Yield or Rate (a)

Assets

 

 

 

 

 

 

 

Interest-earning assets:

 

 

 

 

 

 

 

  Time deposits with banks

$804

$22

3.67%

 

$5,299

$23

0.59%

  Tax free investment securities

277,829

9,426

6.98%

 

244,936

8,421

7.07%

  Taxable investment securities

1,875,527

58,625

4.18%

 

1,918,570

57,025

3.97%

  Federal funds sold

5,964

136

3.05%

 

498

4

1.03%

  Loans, net of unearned income (b)(c)

3,590,481

164,216

6.31%

 

3,159,920

136,937

5.98%

      Total interest-earning assets

5,750,605

232,425

5.64%

 

5,329,223

202,410

5.30%

 

 

 

 

 

 

 

 

Noninterest-earning assets:

 

 

 

 

 

 

 

  Cash

80,807

 

 

 

72,941

 

 

  Allowance for credit losses

(41,826)

 

 

 

(40,440)

 

 

  Other assets

428,829

 

 

 

343,876

 

 

      Total noninterest-earning assets

467,810

 

 

 

376,377

 

 

        Total Assets

$6,218,415

 

 

 

$5,705,600

 

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders' Equity

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

  Interest-bearing demand deposits (d)

$564,832

$3,554

0.84%

 

$533,762

$1,442

0.36%

  Savings deposits (d)

1,312,897

13,703

1.40%

 

1,093,040

7,966

0.97%

  Time deposits

1,615,324

39,209

3.25%

 

1,495,284

33,474

2.99%

  Short-term borrowings

834,712

17,862

2.86%

 

750,761

7,264

1.29%

  Long-term debt

843,265

26,491

4.20%

 

874,397

30,963

4.73%

    Total interest-bearing liabilities

5,171,030

100,819

2.61%

 

4,747,244

81,109

2.28%

 

 

 

 

 

 

 

 

Noninterest-bearing liabilities and capital:

 

 

 

 

 

 

 

  Noninterest-bearing demand deposits (d)

488,113

 

 

 

443,456

 

 

  Other liabilities

25,406

 

 

 

34,501

 

 

  Shareholders' equity

533,866

 

 

 

480,399

 

 

      Total noninterest-bearing funding sources

1,047,385

 

 

 

958,356

 

 

        Total Liabilities and Shareholders' Equity

$6,218,415

 

 

 

$5,705,600

 

 

 

 

 

 

 

 

 

 

Net Interest Income and Net Yield on Interest-Earning Assets

 

$131,606

3.30%

 

 

$121,301

3.27%

 

 

 

 

 

 

 

 

(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 net 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

 

 

 

 

(Dollar Amounts in Thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asset Quality Data At September 30,

 

 

 

 

 

2005

2004

 

 

Loans on nonaccrual basis

$11,039

$11,784

 

 

Past due loans

14,608

12,779

 

 

Renegotiated loans

176

185

 

 

     Total nonperforming loans

$25,823

$24,748

 

 

Loans outstanding at end of period

$3,613,137

$3,533,509

 

 

Average loans outstanding(year-to-date)

$3,590,481

$3,159,920

 

 

Allowance for credit losses

$41,537

$43,162

 

 

Nonperforming loans as percent of total loans

0.71%

0.70%

 

 

Net charge-offs(year-to-date)

$7,120

$6,501

 

 

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

0.27%

0.27%

 

 

Allowance for credit losses as percent of average loans

 

 

 

 

   outstanding

1.16%

1.37%

 

 

Allowance for  credit losses as percent of nonperforming

 

 

 

 

   loans

160.85%

174.41%

 

 

Other real estate owned

$1,520

$2,295

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profitability Ratios

 

 

 

 

 

For the Quarter Ended

For the 9 Months

 

September 30,

Ended September 30,

 

2005

2004

2005

2004

Return on average assets

0.83%

-0.18%

0.99%

0.52%

Return on average equity

9.62%

-2.13%

11.53%

6.14%

Efficiency ratio (FTE) (a)

62.35%

104.86%

58.64%

77.47%

Fully tax equivalent adjustment

$3,634

$3,222

$10,305

$9,134

 

 

 

 

 

(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."