EX-99 2 earnings_ex99.htm FCFC EARNINGS RELEASE DATED APRIL 20, 2006

Exhibit 99 - First Commonwealth Financial Corporation Press Release dated April 20, 2006


*** 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:

April 20, 2006

(724) 349-7220

 


First Commonwealth Announces First Quarter 2006 Financial Results
Continues Branch Construction and Renovations in Pittsburgh Region;
Expands Home Mortgage Service Offerings through Joint Venture


INDIANA, PENNSYLVANIA - April 20, 2006 - First Commonwealth Financial Corporation (NYSE: FCF) reported net income of $12.9 million for the first quarter of 2006 compared to net income of $15.2 million for the first quarter of 2005.  Basic and diluted earnings per share were $0.19 for the first quarter of 2006 compared to $0.22 for the comparable period of 2005.  Return on equity was 9.95% and return on assets was 0.88% for the first quarter of 2006 compared to 11.48% and 1.00%, respectively for the 2005 period.  The decline in net income was primarily the result of the decrease in net interest income.

During the first quarter of 2006, First Commonwealth (the Company) made the following fundamental improvements that are expected to help strengthen its future financial performance and market position:

  •  

Continued its branch expansion plans into higher growth markets as it began construction on two new branch offices in  Pittsburgh-area market  as well as completing two significant renovations on existing branches.

 

 
  •  

Entered into a joint venture with Wells Fargo Ventures, LLC to form First Commonwealth Home Mortgage, LLC, that will offer a full array of home financing products and will provide our clients with multi-state lending capabilities.


Net Interest Income

Net interest income for the first quarter of 2006 decreased $3.5 million, or 7.8%, to $41.4 million from $44.9 million in the first quarter of 2005.  First quarter net interest margin (net interest



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income as a percentage of average earning assets on a fully tax-equivalent basis) declined 10 basis points to 3.31%, compared with 3.41% 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.  The first quarter yield on earning assets (on a fully tax-equivalent basis) increased 55 basis points to 6.13% from 5.58% in the same period last year, while the cost of funds increased 74 basis points to 3.15% from 2.41% in last year's first quarter. 

Due to the relatively flat yield curve the Company has limited the amount reinvested in investment securities that have matured or have been paid down resulting in a decrease of 4.0% or $227.8 million in average interest earning assets.  Average total loans and average total deposits increased 3.1% and 2.8%, respectively, in the first three months of 2006 when compared to first quarter of 2005.  On another positive note, the net interest margin increased 11 basis points in the first quarter of 2006 compared to the 3.20% net interest margin reported in the fourth quarter of 2005, due to the previously disclosed balance sheet changes occurring in the fourth quarter of 2005.

Other Income

Total other income for the first quarter of 2006 declined 10.0% to $10.3 million from $11.4 million in the same period last year as a result of the decrease in security gains coupled with the absence of income from merchant services business which was sold in the second quarter of 2005.

Service charges on deposits increased 9.3% due to the new fee schedules and the Company's continued success with its High Performance Checking product.

Other Expenses

Total other expenses for the first quarter of 2006 increased only 0.6% to $35.6 million from $35.4 million in the corresponding period last year.  Salaries and employee benefits rose $1.1 million or 5.8% primarily from the $0.7 million rise in employee benefits.  Unemployment compensation insurance grew which was related to the organizational restructuring and related personnel changes.  Salaries, adjusted for $0.4 million in severance charges, for the first quarter of 2006 were slightly less than the amount reported in the comparable period last year.  Unemployment compensation rates have been affected by the large number of employees terminated during 2004 and 2005, as part of the Company's organizational restructuring, realignment initiatives and cost containment efforts.

First quarter 2006 net occupancy expense increased $0.4 million or 13.7% from $3.0 million in the first quarter of 2005 to $3.4 million.  The increase was primarily the result of an adjustment to building rental expense due to an ongoing monitoring of leases.

Credit Quality and Provision for Credit Losses

As of March 31, 2006, total nonperforming loans (including loans past due 90 days but still accruing) increased to $29.1 million from the $28.2 million at March 31, 2005.  Past due loans declined $2.5 million, but were offset by a $3.4 million increase in nonaccrual loans.  The


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change in nonaccrual loans resulted primarily from one commercial credit relationship.  The remaining recorded balance of that relationship is believed to be well secured, and includes a partial government agency guarantee.  Nonperforming loans as a percent of total loans increased only one basis point from 0.79% at March 31, 2005, to 0.80% at March 31, 2006. 

First quarter 2006 provision for credit losses decreased to $0.9 million from $1.7 million in the same period last year.  The analysis of the Adequacy for the Allowance of Loan Loss as of March 31, 2006, showed continuing improvement in the credit quality of classified loans on the primary watch list.  The Company believes that the allowance for credit losses is adequate at the present time.

About First Commonwealth Financial Corporation

First Commonwealth Financial Corporation is a $5.9 billion bank holding company headquartered in Indiana, Pennsylvania.  It operates 100 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 Financial Advisors, Inc., and First Commonwealth Insurance Agency.



Forward-Looking Statements

This release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995.  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:

  •  

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.
  •  

Adverse changes in the economy or business conditions, either nationally or in First Commonwealth's market areas, could increase credit-related losses and expenses and/or limit growth.
  •  

Increases in defaults by borrowers and other delinquencies could result in increases in First Commonwealth's provision for losses on loans and related expenses.
  •  

Fluctuations in interest rates and market prices could reduce net interest margin and asset valuations and increase expenses.
  •  

Changes in legislative or regulatory requirements applicable to First Commonwealth and its subsidiaries could increase costs, limit certain operations and adversely affect results of operations.

 

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FIRST COMMONWEALTH FINANCIAL CORPORATION

 

 

CONSOLIDATED SELECTED FINANCIAL DATA

                      

                     

(Dollar Amounts in Thousands, except per share data)

 

 

 

 

 

 

For the Quarter Ended

 

March 31,

 

2006

2005

Interest income

$79,781

$75,637

Interest expense

38,334

30,705

     Net interest income

41,447

44,932

Provision for credit losses

908

1,744

     Net interest income after provision for credit losses

40,539

43,188

 

 

 

Net securities gains

63

485

Trust income

1,394

1,325

Service charges on deposits

3,869

3,540

Insurance commissions

719

840

Income from bank owned life insurance

1,375

1,321

Merchant discount income

0

839

Card related interchange income

1,298

1,087

Other income

1,578

2,003

     Total other income

10,296

11,440

 

 

 

Salaries and employee benefits

19,357

18,298

Net occupancy expense

3,402

2,992

Furniture and equipment expense

2,767

2,870

Data processing expense

795

939

Pennsylvania shares tax expense

1,350

1,266

Intangible amortization

565

565

Other operating expense

7,357

8,463

     Total other expenses

35,593

35,393

Income before income taxes

15,242

19,235

Applicable income taxes

2,304

4,016

     Net income

$12,938

$15,219

 

 

 

Average shares outstanding

69,469,709

69,346,722

Average shares outstanding assuming dilution

69,918,151

70,024,400

 

 

 

Per Share Data:

 

 

Basic earnings per share

$0.19

$0.22

Diluted earnings per share

$0.19

$0.22

Cash dividends per share

$0.170

$0.165

 

 

 

 

FIRST COMMONWEALTH FINANCIAL CORPORATION

 

 

CONSOLIDATED SELECTED FINANCIAL DATA

                                       

                                      

(Dollar Amounts in Thousands, except per share data)

 

 

 

 

 

 

March 31,

December 31,

 

2006

2005

Assets

 

 

  Cash and due from banks on demand

$84,627

$84,555

  Interest-bearing bank deposits

391

473

  Federal funds sold

0

1,575

  Securities available for sale, at market

1,737,899

1,851,986

  Securities held to maturity, at amortized cost

 

 

    (Market value $86,986 in 2006 and $89,804 in 2005)

85,673

87,757

 

 

 

  Loans held for sale

553

1,276

 

 

 

  Loans:

 

 

    Portfolio loans

3,651,632

3,623,102

    Unearned income

(98)

(119)

    Allowance for credit losses

(38,017)

(39,492)

        Net loans

3,613,517

3,583,491

 

 

 

  Premises and equipment

61,230

60,860

  Other real estate owned

1,499

1,655

  Goodwill

122,702

122,702

  Amortizing intangibles, net

14,686

15,251

  Other assets

221,733

214,739

        Total assets

$5,944,510

$6,026,320

 

 

 

Liabilities

 

 

  Deposits (all domestic):

 

 

    Noninterest-bearing

$499,161

$491,644

    Interest-bearing

3,496,577

3,504,908

      Total deposits

3,995,738

3,996,552

 

 

 

  Short-term borrowings

601,426

665,665

  Other liabilities

37,952

43,314

 

 

 

  Subordinated debentures

108,250

108,250

  Other long-term debt

685,395

691,494

 

 

 

      Total long-term debt

793,645

799,744

        Total liabilities

5,428,761

5,505,275

 

 

 

Shareholders' Equity

 

 

  Common stock $1 par value per share

71,978

71,978

  Additional paid-in capital

173,369

173,967

  Retained earnings

319,523

318,569

  Accumulated other comprehensive income (loss)

(17,349)

(9,655)

  Treasury stock

(18,672)

(20,214)

  Unearned ESOP shares

(13,100)

(13,600)

        Total shareholders' equity

515,749

521,045

          Total liabilities and shareholders' equity

$5,944,510

$6,026,320

 

 

 

Shares issued

71,978,568

71,978,568

Shares outstanding

70,500,069

70,377,916

Treasury shares

1,478,499

1,600,652

Book value per share

$7.32

$7.40

Market value per share

$14.66

$12.93

 

 

 

 

FIRST COMMONWEALTH FINANCIAL CORPORATION

 

 

 

 

 

 

 

CONSOLIDATED SELECTED FINANCIAL DATA

 

 

 

 

 

 

 

(Dollar Amounts in Thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter To Date Average Balance Sheets and

 

 

 

 

 

 

 

Net Interest Analysis At March 31,

 

 

 

 

 

 

 

 

 

2006

 

 

 

2005

 

 

Average
Balance

Income/
Expense

Yield or
Rate (a)

 

Average
Balance

Income/
Expense

Yield or
Rate (a)

Assets

 

 

 

 

 

 

 

Interest-earning assets:

 

 

 

 

 

 

 

  Time deposits with banks

$1,041

$14

5.31%

 

$964

$7

3.08%

  Tax free investment securities

280,673

3,219

7.16%

 

270,945

3,053

7.03%

  Taxable investment securities

1,574,530

18,188

4.68%

 

1,923,907

19,982

4.21%

  Federal funds sold

4,162

46

4.53%

 

659

4

2.46%

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

3,650,953

58,314

6.68%

 

3,542,655

52,591

6.21%

      Total interest-earning assets

5,511,359

79,781

6.13%

 

5,739,130

75,637

5.58%

 

 

 

 

 

 

 

 

Noninterest-earning assets:

 

 

 

 

 

 

 

  Cash

77,807

 

 

 

78,997

 

 

  Allowance for credit losses

(40,282)

 

 

 

(42,024)

 

 

  Other assets

426,722

 

 

 

422,736

 

 

      Total noninterest-earning assets

464,247

 

 

 

459,709

 

 

        Total Assets

$5,975,606

 

 

 

$6,198,839

 

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders' Equity

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

  Interest-bearing demand deposits (e)

$558,100

$1,913

1.39%

 

$562,152

$949

0.68%

  Savings deposits (e)

1,179,984

4,982

1.71%

 

1,261,576

3,647

1.17%

  Time deposits

1,773,440

16,489

3.77%

 

1,580,456

11,906

3.06%

  Short-term borrowings

630,035

6,364

4.10%

 

916,021

5,558

2.46%

  Long-term debt

796,961

8,586

4.37%

 

838,378

8,645

4.18%

    Total interest-bearing liabilities

4,938,520

38,334

3.15%

 

5,158,583

30,705

2.41%

 

 

 

 

 

 

 

 

Noninterest-bearing liabilities and capital:

 

 

 

 

 

 

 

  Noninterest-bearing demand deposits (e)

480,733

 

 

 

478,653

 

 

  Other liabilities

28,770

 

 

 

24,158

 

 

  Shareholders' equity

527,583

 

 

 

537,445

 

 

      Total noninterest-bearing funding sources

1,037,086

 

 

 

1,040,256

 

 

        Total Liabilities and Shareholders' Equity

$5,975,606

 

 

 

$6,198,839

 

 

 

 

 

 

 

 

 

 

Net Interest Income and Net Yield on Interest-Earning Assets

 

$41,447

3.31%

 

 

$44,932

3.41%

 

                            

                          

                       

                          

                           

                          

                        

(a) Yields on interest-earning assets have been computed on a tax equivalent basis using the 35% Federal income tax statutory rate.

(b) Average balance includes loans held for sale.

(c) Income on nonaccrual loans is accounted for on the cash basis, and the loan balances are included in interest-earning assets.

(d) Loan income includes net loan fees.

(e) 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 March 31,

 

 

 

2006

2005

Loans on nonaccrual basis

$14,599

$11,200

Past due loans

14,305

16,846

Renegotiated loans

170

182

     Total nonperforming loans

$29,074

$28,228

Loans outstanding at end of period (a)

$3,652,087

$3,554,441

Average loans outstanding(year-to-date) (a)

$3,650,953

$3,542,655

Allowance for credit losses

$38,017

$40,794

Nonperforming loans as percent of total loans

0.80%

0.79%

Net charge-offs(year-to-date)

$2,383

$2,013

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

0.26%

0.23%

Allowance for credit losses as percent of average loans

 

 

   outstanding

1.04%

1.15%

Allowance for  credit losses as percent of nonperforming

 

 

   loans

130.76%

144.52%

Other real estate owned

$1,499

$1,463

 

 

 

(a) Includes loans held for sale

 

 

 

 

 

 

 

 

Profitability Ratios

 

 

 

For the Quarter Ended

 

March 31,

 

2006

2005

Return on average assets

0.88%

1.00%

Return on average equity

9.95%

11.48%

Efficiency ratio (FTE) (a)

64.35%

59.35%

Fully tax equivalent adjustment

$3,570

$3,267

 

 

 

(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."