-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UWigb5j9cC8XBykSXTjMB2IoYMkC5DtXA5kL3Sf1l/vAKi2uEQgXUOT2HPUZVBKD Fa1/3St2Na6G3yrnIMeyxA== 0000712537-97-000007.txt : 19970329 0000712537-97-000007.hdr.sgml : 19970329 ACCESSION NUMBER: 0000712537-97-000007 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970328 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST COMMONWEALTH FINANCIAL CORP /PA/ CENTRAL INDEX KEY: 0000712537 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 241428528 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-11138 FILM NUMBER: 97566613 BUSINESS ADDRESS: STREET 1: OLD COURTHOUSE SQUARE STREET 2: 22 N SIXTH ST CITY: INDIANA STATE: PA ZIP: 15701 BUSINESS PHONE: 4123497220 MAIL ADDRESS: STREET 1: 22 NORTH SIXTH STREET STREET 2: P.O. BOS 400 CITY: INDIANA STATE: PA ZIP: 15701 10-K 1 FORM 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C 20549 Annual Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 1996 commission file number 0-11242 FIRST COMMONWEALTH FINANCIAL CORPORATION (Exact name of registrant as specified in its charter) PENNSYLVANIA 25-1428528 (State or other jurisdiction (I.R.S. Employer Identification No.) of incorporation or organization) 22 NORTH SIXTH STREET INDIANA, PA 15701 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (412) 349-7220 Securities registered pursuant to Section 12(b) of the Act: TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED COMMON STOCK, $1 PAR VALUE NEW YORK STOCK EXCHANGE Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes XX No . Indicate the number of shares outstanding of each of the issuer's classes of common stock. TITLE OF CLASS OUTSTANDING AT March 24, 1997 Common Stock, $1 Par Value 22,173,921 Shares The aggregate market value of the voting common stock, par value $1 per share, held by non-affiliates of the registrant (Based upon the closing sale price on March 24, 1997), was approximately $368,111,268. DOCUMENTS INCORPORATED BY REFERENCE Portions of the definitive Proxy Statement related to the annual meeting of security holders to be held April 28, 1997 are incorporated by reference into Part III. FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES First Commonwealth Financial Corporation FORM 10-K INDEX PART I PAGE ITEM 1. Business Description of business.......................... 2 Competition...................................... 4 Supervision and regulation....................... 4 ITEM 2. Properties....................................... 7 ITEM 3. Legal Proceedings................................ 7 ITEM 4. Submission of Matters to a Vote of Security Holders......................................... 7 PART II ITEM 5. Market for Registrant's Common Stock and Related Security Holder Matters......................... 8 ITEM 6. Selected Financial Data.......................... 9 ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operation.............. 10 ITEM 8. Financial Statements and Supplementary Data...... 26 ITEM 9. Disagreements on Accounting and Financial Disclosures..................................... 56 PART III ITEM 10. Directors and Executive Officers of the Registrant..................................... 56 ITEM 11. Management Renumeration and Transactions........ 57 ITEM 12. Security Ownership of Certain Beneficial Owners and Management................................. 57 ITEM 13. Certain Relationships and Related Transactions.. 57 PART IV ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K............................ 58 Signatures..................................... 60 FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES ITEM 1. Business Description of Business First Commonwealth Financial Corporation (the "Corporation") was incorporated as a Pennsylvania business corporation on November 15, 1982 and is registered as a bank holding company under the Bank Holding Company Act of 1956, as amended. After its incorporation it became affiliated as a result of statutory mergers with the following: On April 29, 1983 it affiliated with National Bank of the Commonwealth ("NBOC"), a national bank in Indiana, Indiana County; on March 19, 1984 with Deposit Bank ("Deposit"), a Pennsylvania-chartered bank and trust company in DuBois, Clearfield County; on August 16, 1985 with Dale, a national bank in Dale (Johnstown), Cambria County; and on December 14, 1985 with the First National Bank of Leechburg ("Leechburg"), a national bank in Leechburg, Armstrong County; December 31, 1986 with CNB CORP, Inc. ("CNB"), a one-bank holding company and its wholly-owned subsidiary, Citizens National Bank in Windber ("Citizens"). CNB was then combined with the Corporation. Immediately thereafter, and on the same day, Citizens was combined with Dale and the resulting entity was named Cenwest National Bank ("Cenwest"). On May 31, 1990 the Corporation affiliated with Peoples Bank and Trust Company ("PBT"), a Pennsylvania-chartered bank and trust company in Jennerstown, Somerset County. On April 30, 1992 the Corporation affiliated with Central Bank ("Central"), a Pennsylvania-chartered bank in Hollidaysburg, Blair County. On December 31, 1993 the Corporation affiliated with Peoples Bank of Western Pennsylvania ("PBWPA"), a Pennsylvania-chartered commercial bank in New Castle, Lawrence County. On September 27, 1994 the Corporation affiliated with United National Bancorporation, ("United"), a bank holding company, and its wholly-owned subsidiaries. Unitas National Bank ("Unitas Bank") a national bank headquartered in Chambersburg, Franklin County, Pennsylvania and Unitas Mortgage Corporation ("Unitas Mortgage") were the only active subsidiaries of United. Unitas Mortgage engaged in the origination of mortgages for sale in the secondary mortgage market and is headquartered in Carlisle, Pennsylvania. Upon merger, United was combined with the Corporation and its subsidiaries became subsidiaries of the Corporation. On September 29, 1994 the Corporation affiliated with Reliable Financial Corporation ("RFC"), a savings and loan holding company and its wholly-owned subsidiary, Reliable Savings Bank, PaSA ("RSB"), a state-chartered, federally insured savings bank headquartered in Bridgeville, Pennsylvania. As a result of the merger, RFC became a wholly-owned subsidiary of the Corporation, with its principal places of business in Allegheny and Washington Counties in western Pennsylvania. Effective at the close of business November 13, 1995 seven wholly-owned subsidiary banks of the Corporation including NBOC, Cenwest, Leechburg, PBT, Central, PBWPA and Unitas Bank merged into Deposit, also a wholly-owned subsidiary, under the Deposit charter. The name of the surviving bank was immediately changed to First Commonwealth Bank ("FCB"); and the principal place of business was moved to Indiana, Indiana County, Pennsylvania. The subsidiary banks continue to operate in their local communities in central and western Pennsylvania, as divisions of First Commonwealth Bank, doing business under the following names: NBOC Bank, Deposit Bank, Cenwest Bank, First Bank of Leechburg, Peoples Bank, Central Bank, Peoples Bank of Western Pennsylvania and Unitas Bank. Commonwealth Systems Corporation ("CSC") was incorporated as a Pennsylvania business corporation in 1984 by the Corporation to function as its data processing subsidiary and it has its principal place of business in Indiana, Pennsylvania. Before August 1984, it had operated as the data processing department of NBOC. First Commonwealth Trust Company ("FCTC") was incorporated on January 18, 1991 as a Pennsylvania chartered trust company to render general trust services. The trust departments of Subsidiary Banks were combined to form FCTC, and the corporate headquarters are located in Indiana, Pennsylvania. On April 1, 1996 the Corporation affiliated with BSI Financial Services Inc. ("BSI") a Pennsylvania business corporation headquartered in Titusville, Crawford County. BSI provides mortgage banking loan servicing and collection services to the Corporation's subsidiary banks as well as unaffiliated organizations. The Corporation and its subsidiaries employed approximately 1,154 persons (full-time equivalents) at December 31, 1996. 2 FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES ITEM 1. Business (Continued) Through FCB, the Corporation traces its banking origins to 1866. FCB and RSB conduct their business through 83 community banking offices in 52 communities in the counties of Adams (1 office), Allegheny (2), Armstrong (3), Beaver (1), Bedford (4), Blair (8), Cambria (11), Centre (4), Clearfield (6), Elk (3), Franklin (2), Huntingdon (7), Indiana (9), Jefferson (4), Lawrence (6), Somerset (5), Washington (1) and Westmoreland (6). FCB engages in general banking business and offers a full range of financial services. FCB offers such general retail banking services as demand, savings and time deposits; mortgage, consumer installment and commercial loans; and credit card loans through MasterCard and VISA. RSB is a full service savings association. Although approximately 80% of its loan portfolio consists of loans secured by mortgages on 1-4 family residences, it offers various loan services, including secured and unsecured, commercial and consumer loans, construction and commercial mortgages and lease financing. RSB also offers a full range of deposit products. FCB and RSB (Banks) operate a network of 65 automated teller machines ("ATMs") which permit their customers to conduct routine banking transactions 24 hours a day. Of the ATMS, 51 are located on the premises of their main or branch offices and 14 are in remote locations. All the ATMs are part of the MAC network which consist of over 23,000 ATMs owned by numerous banks, savings and loan associations and credit unions located throughout 45 states. The ATM's operated by the Banks are also part of the global MasterCard/Cirrus network which is comprised of more than 300,000 ATMs located in the United States, Canada and 58 other countries and territories, which services over 365 million card holders. Such networks allow the Bank's customers to withdraw cash and in certain cases conduct other banking transactions from ATMs of all participating financial institutions. In addition to funds access through the use of ATMs, the MAC debit card offered to the Banks deposit customers may be used at 300,000 point of sale terminals on the MAC system as well as being used on the global MasterCard system for the purchase of goods and services. The MAC debit card provides customers with the almost universal acceptability of a credit card combined with the convenience of direct debit to the customers checking account. CSC is the data processing subsidiary of the Corporation. It provides on- line general ledger accounting services and bookkeeping services for deposit and loan accounts to the Corporation, the Subsidiary Banks and two other nonbank subsidiaries. CSC also acts as a centralized purchasing agent for the purchase of computer hardware and software products by the Corporation and subsidiaries as well as providing technical support for the installation and use of these products. It competes, principally with data processing subsidiaries of other, mostly larger, banks, on the basis of the price and quality of its services and the speed with which such services are delivered. FCTC has five branch offices in the service areas of the Banks and offers personal and corporate trust services, including administration of estates and trusts, individual and corporate investment management and custody services and employee benefit trust services. On June 1, 1989 Commonwealth Trust Credit Life Insurance Company began operations. The Corporation owns 50% of the voting common stock of the new company. The Commonwealth Trust provides reinsurance for credit life and credit and health insurance activities sold by the subsidiaries of the two unrelated holding companies under a joint venture arrangement whereby the net income derived from such reinsurance inures proportionally to the benefit of the holding company selling the underlying insurance to its banks' customers. 3 FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES ITEM 1. Business (Continued) The Corporation does not engage in any significant business activities other than holding the stock of its subsidiaries. The Corporation does not at present have any plans to expand or modify its business or that of its subsidiaries, other than as described herein. Nevertheless, it will be receptive to and may actively seek out mergers and acquisitions in the event opportunities which management considers advantageous to the development of the Corporation's business arise, and may otherwise expand or modify its business as management deems necessary to respond to changing market conditions or the laws and regulations affecting the business of banking. Competition The Banks, FCTC and BSI face intense competition, both from within and without their service areas, in all aspects of business. The Banks compete for deposits, in such forms as checking, savings and NOW (negotiable order of withdrawal) accounts, MMDA (money market deposit accounts) and certificates of deposit, and in making consumer loans and loans to smaller businesses, with numerous other commercial banks and savings banks doing business within their service areas. With respect to loans to larger businesses the Banks also complete with much larger banks located outside of their service areas. They also compete, primarily in making consumer loans and for deposits, with state and federally chartered savings and loan associations and with credit unions. In recent years they have encountered significant competition for deposits from money market funds and institutions that offer annuities located throughout the United States. Money market funds pay dividends to their shareholders (which are the equivalent are the equivalent of the interest paid by banks on deposits) and they are able to offer services and conveniences similar to those offered by the Subsidiary Banks. Annuities accumulate interest on the amounts deposited over a predetermined time period. The depositor is then entitled to withdraw his funds for a fixed period of time or until death. The effect of such competition has been to increase the costs of the rest of deposits, which provide the funds with which loans are made. In addition to savings and loan associations and credit unions, the Banks also compete for consumer loans with local offices of national finance companies and finance subsidiaries of automobile manufacturers and with national credit card companies such as MasterCard and VISA, whose cards, issued through financial institutions, are held by consumers throughout their service areas. The Banks believe that the principal means by which they compete for deposits and consumer and smaller commercial loans are the number and desirability of the locations of their offices and ATMs, the sophistication and quality of their services and the prices (primarily interest rates) of their services. Additionally, the Banks intend to remain competitive by offering financial services that target specific customer needs. Examples of such specialized products include the "Sentry CD Watch" which provides certificate of deposit rates of competitors to members of the Banks' "Senior Accent" club, available to customers age 50 or better, and introduction of the "Too Good To Be True" mortgage product, available to first time home buyers. Specific customer needs are also met through an enhanced customer delivery system that includes telephone banking, which provides convenient access to financial services and hours of operation that extend past those of the Banks' branch offices. Supervision and Regulation The Corporation is a bank holding company within the meaning of the Bank Holding Company Act of 1956, as amended ("the Bank Holding Company Act") and is registered such with the Federal Reserve Board. As a registered bank holding company, it is required to file with the Federal Reserve Board an annual report and other information. The Federal Reserve Board is also empowered to make examinations and inspections of the Corporation and its subsidiaries. 4 FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES ITEM 1. Business (Continued) Supervision and Regulation (Continued) The Bank Holding Company Act and Regulation Y of the Federal Reserve Board require every bank holding company to obtain the prior approval of the Federal Reserve Board before it may acquire direct or indirect ownership or control of more than 5% of the outstanding voting shares or substantially all of the assets of a bank or merge or consolidate with another bank holding company. The Federal Reserve Board may not approve acquisitions by FCFC of such percentage of voting shares or substantially all the assets of any bank located in any state other than Pennsylvania unless the laws of such state specifically authorize such an acquisition. The Bank Holding Company Act generally prohibits a bank holding company from engaging in a non-banking business or acquiring direct or indirect ownership or control of more that 5% of the outstanding voting shares of any non- banking corporation subject to certain exceptions, the principal exception being where the business activity in question is determined by the Federal Reserve Board to be closely related to banking or to managing or controlling banks to be a proper incident thereto. The Bank Holding Company Act does not place territorial restrictions on the activities of such banking related subsidiaries of bank holding companies. Under the Federal Reserve Act, subsidiary banks of a bank holding company are subject to certain restrictions on extensions of credit to the bank holding company or any of its subsidiaries, investments in the stock or other securities thereof, or acceptance of such stock or securities as collateral for loans to any one borrower. A bank holding company and its subsidiaries are prohibited from engaging in certain tie-in arrangements in connection with the extension of credit or the furnishing of property or services. Under the Pennsylvania Banking Code, there is no limit on the number of Pennsylvania banks that may be owned or controlled by a Pennsylvania bank holding company. Upon the acquisition of RFC, the Corporation also became a savings and loan holding company subject to regulation and supervision of the Office of Thrift Supervision ("OTS") under the Savings and Loan Holding Company Act, and by the Pennsylvania Department of Banking under the Pennsylvania Savings Association Code of 1967, as amended. While the regulation and supervision of multiple regulators increase the Corporation's cost of compliance with federal and state banking laws and regulations, it is not expected to have a significant adverse effect on its operations or financial condition. RFC is a unitary savings and loan holding company. Its only subsidiary, RSB is a Qualified Thrift Lender ("QTL") because more than 65% of its portfolio assets (as defined by law) are invested in residential mortgages, and certain mortgage backed and housing related assets such as Federal Home Loan Bank stock and stock issued by the Federal National Mortgage Association. As a unitary savings and loan holding company, RFC and any subsidiary it might create are not restricted to the statutorily prescribed list of permissible activities found in the Savings and Loan Holding Company Act and in certain regulations of the predecessor of the OTS, and the Savings and Loan Holding Company Act imposes no limits on their direct or indirect non- savings institutions operations. If RFC were to acquire a second savings association and operate it as a separate subsidiary, it would become a multiple savings and loan holding company and its activities would be confined to a statutorily prescribed list of activities regarded as closely related. If RSB were to lose its QTL status, thereafter RFC would be regulated and supervised by the OTS as a bank holding company, as described above for the Corporation, with each savings institution subsidiary being treated as a bank for this purpose. 5 FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES ITEM 1. Business (Continued) First Commonwealth Bank and Reliable Savings Bank FCB is a Pennsylvania-chartered bank and is not a member of the Federal Reserve System. FCB is subject to the supervision of and regularly examined by the Pennsylvania Department of Banking and the Federal Deposit Insurance Corporation ("FDIC"), and subject to certain regulations of the Federal Reserve Board. RSB is a Pennsylvania-chartered savings association and is subject to the supervision of and is regularly examined by the Pennsylvania Department of Banking and the OTS. FCB is a member of the FDIC while RSB is a member of the Savings and Loan Insurance Fund of the FDIC. As such, both FCB and RSB are subject to examination by the FDIC. The areas of operation subject to regulation by Federal and Pennsylvania laws, regulations and regulatory agencies include reserves against deposits, maximum interest rates for specific classes of loans, truth-in-lending disclosures, permissible types of loans and investments, trust operations, mergers and acquisitions, issuance of securities, payment of dividends. Community Reinvestment Act evaluations, mandatory external audits, establishment of branches and other aspects of operations. Under the Pennsylvania Banking Code, a state or national bank or a savings association located in Pennsylvania may establish branches anywhere in the state. Reciprocal Regional Interstate Banking As already noted, a bank holding company located in one state cannot acquire a bank or a bank holding company located in another state unless the law of such other state specifically permits such acquisition. On June 25, 1986, Pennsylvania passed a law (Act No. 1986-69) which provides that a bank holding company located in any state or the District of Columbia can acquire a Pennsylvania bank or bank holding company if the jurisdiction where the acquiring bank holding company is located has passed an enabling law that permits a Pennsylvania bank holding company to acquire a bank or a bank holding company in such jurisdiction. As of December 31, 1996 enabling laws have been passed so that the required reciprocity presently exists with approximately 34 states, of which the following 18 are east of the Mississippi River: Connecticut, Delaware, Illinois, Indiana, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, New Hampshire, New Jersey, New York, Ohio, Rhode Island, Tennessee, Vermont and West Virginia. A similar law is applicable to savings associations and savings and loan holding companies. It is difficult to determine the precise effects that reciprocal regional interstate banking will have on the Corporation, but the law has increased, and as reciprocity becomes effective will increase further, the number of potential buyers for Pennsylvania banks and bank holding companies. The law also will permit Pennsylvania bank holding companies and Pennsylvania savings and loan holding companies that desire to expand outside Pennsylvania to acquire banks, savings institutions and bank holding companies located in jurisdictions with which Pennsylvania has reciprocity. Effects of Governmental Policies The business and earnings of the Corporation are affected not only by general economic conditions, but also by the monetary and fiscal policies of the United States Government and its agencies, including the Federal Reserve Board. An important function of the Federal Reserve Board is to regulate the national supply of bank credit. Among the instruments of monetary 6 FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES ITEM 1. Business (Continued) Effects of Governmental Policies (Continued) policy used by the Federal Reserve Board to implement these objectives are open market operations in United States government securities, changes in the discount rate on borrowings by member banks and savings institutions from the Federal Reserve System and changes in reserve requirements against bank and savings institution deposits. These instruments, together with fiscal and economic policies of various governmental entities, influence overall growth of bank loans, investments and deposits and may also affect interest rates charged on loans, received on investments or paid for deposits. The monetary policies of the Federal Reserve Board have had a significant effect on the operating results of bank holding companies and their subsidiary banks in the past and are expected to continue to do so in the future. In view of changing conditions in the national and Pennsylvania economies and in the money markets, as well as the effect of actions by monetary and fiscal authorities, including the Federal Reserve Board, no prediction can be made as to possible future changes in interest rates, deposit levels and loan demand or the effect of such changes on the business and earnings the Corporation or its subsidiaries. ITEM 2. PROPERTIES The Corporation's principal office is located in the old Indiana county Courthouse complex. This certified Pennsylvania and national historic landmark was built in 1870 and restored by NBOC in the early 1970s. The Corporation, NBOC and CSC occupy this grand structure, which provides 32,000 square feet of floor space, under a 25-year restoration lease agreement with Indiana County, which NBOC entered into in 1973 and which contains a renewal option. Under the lease, NBOC is obligated to pay all taxes, maintenance and insurance on the building and to restore it in conformity with historic guidelines. In order to support future expansion needs and centralization of various functional areas such as loan processing, marketing, and accounting, the Corporation also owns two additional structures, free of all liens and encumbrances. These facilities currently provide office space for the Corporation, CSC, FCTC and FCB. The Banks have 83 banking facilities of which 26 are leased and 57 are owned in fee, free of all liens and encumbrances. All of the facilities utilized by the Corporation and its subsidiaries are used primarily for banking activities. Management believes all such facilities to be in good repair and well suited to their uses. Management presently expects that such facilities will be adequate to meet the anticipated needs of the Corporation and its subsidiaries for the immediate future. ITEM 3. LEGAL PROCEEDINGS The information appearing in NOTE 18 of the Notes to the Consolidated Financial Statements included in Item 8 of this filing is incorporated by reference. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable 7 FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES Part II ITEM 5. Market for Registrant's Common Stock and Related Security Holder Matters First Commonwealth Financial Corporation (the "Corporation") is listed on the New York Stock Exchange under the symbol "FCF". The approximate number of holders of record of the Corporation's common stock is 9,500. The table below sets forth the high and low sales prices per share and cash dividends declared per share for common stock of the Corporation. Cash Dividends Period High Sale Low Sale Per Share 1996 First Quarter $19.500 $17.750 $0.180 Second Quarter $19.625 $17.750 $0.180 Third Quarter $19.125 $17.000 $0.180 Fourth Quarter $19.000 $17.500 $0.200 Cash Dividends Period High Sale Low Sale Per Share 1995 First Quarter $14.750 $13.250 $0.160 Second Quarter $15.875 $13.875 $0.160 Third Quarter $16.375 $14.500 $0.160 Fourth Quarter $17.875 $15.750 $0.180 8 FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES ITEM 6. Selected Financial Data (Dollar Amounts in Thousands, except per share data) The following selected financial data is not covered by the auditor's report and should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations, which follows, and with the consolidated financial statements and related notes. All amounts have been restated to reflect the poolings of interests.
Years Ended December 31, 1996 1995 1994 1993 1992 Interest income....................... $182,329 $175,701 $159,644 $154,990 $155,606 Interest expense...................... 88,325 82,418 69,102 67,164 73,295 Net interest income................. 94,004 93,283 90,542 87,826 82,311 Provision for possible credit losses.. 4,501 4,125 2,896 2,920 3,744 Net interest income after provision for possible credit losses........ 89,503 89,158 87,646 84,906 78,567 Securities gains (losses)............. 1,403 (603) 5,536 3,528 955 Other operating income................ 12,338 11,007 10,635 10,960 9,362 Other operating expenses.............. 63,589 62,062 60,855 59,405 54,957 Income before taxes and cumulative effect of change in accounting method......................... 39,655 37,500 42,962 39,989 33,927 Applicable income taxes............... 12,072 11,974 14,226 12,444 9,393 Income before cumulative effect of change in accounting method. 27,583 25,526 28,736 27,545 24,534 Cumulative effect of change in accounting method................... -0- -0- -0- 865 -0- Net income............................ $ 27,583 $ 25,526 $ 28,736 $ 28,410 $ 24,534 Per Share Data Net income before cumulative effect of change in accounting method..... $1.26 $1.16 $1.28 $1.23 $1.12 Cumulative effect of change in accounting method.................. 0.00 0.00 0.00 0.04 0.00 Net income.......................... $1.26 $1.16 $1.28 $1.27 $1.12 Dividends declared.................. $0.74 $0.66 $0.58 $0.51 $0.55 Average shares outstanding.......... 21,954,111 22,005,427 22,432,062 22,416,360 21,983,845 At End of Period Total assets........................ $2,584,638 $2,364,307 $2,334,921 $2,252,836 $2,077,824 Investment securities............... 704,161 748,702 813,687 909,166 703,227 Loans and leases, net of unearned income............................ 1,747,335 1,487,542 1,377,794 1,211,109 1,165,494 Allowance for possible credit losses 19,324 18,152 17,337 16,483 15,828 Deposits............................ 2,104,783 1,962,760 1,881,060 1,822,085 1,788,226 Long-term debt...................... 40,880 5,261 7,596 7,363 8,130 Shareholders' equity................ 261,358 252,276 225,135 228,910 210,687 Key Ratios Return on average assets............ 1.12% 1.10% 1.26% 1.32% 1.26% Return on average equity............ 10.69% 10.55% 12.55% 12.86% 12.30% Net loans to deposit ratio.......... 82.10% 74.86% 72.32% 65.56% 64.29% Dividends per share as a percent of net income per share.............. 58.73% 56.90% 45.31% 40.16% 49.11% Average equity to average assets ratio............................. 10.47% 10.39% 10.01% 10.23% 10.26%
9 FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Introduction This discussion and the related financial data are presented to assist in the understanding and evaluation of the consolidated financial condition and the results of operations of First Commonwealth Financial Corporation (the "Corporation") including its subsidiaries for the years ended December 31, 1996, 1995 and 1994 and are intended to supplement, and should be read in conjunction with, the consolidated financial statements and related footnotes. In addition to historical information, this discussion and analysis contains forward-looking statements. The forward-looking statements contained herein are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. Important factors that might cause such a difference include, but are not limited to, those discussed in the "Management's Discussion and Analysis of Financial Condition and Results of Operations." Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect managements' analysis only as of the date hereof. The Corporation undertakes no obligation to publicly revise or update these forward-looking statements to reflect events or circumstances that arise after the date hereof. The Corporation acquired BSI Financial Services Inc. ("BSI") effective April 1, 1996. The BSI merger was accounted for as a purchase transaction, whereby the results of operations of BSI from the date of acquisition are included in the Corporation's financial statements. The Corporation acquired United National Bancorporation and its subsidiaries ("United") and Reliable Financial Corporation and its subsidiary ("Reliable") effective September 27, 1994 and September 29, 1994, respectively. The United and Reliable mergers were accounted for as poolings of interests and accordingly, all financial statements have been restated as though the mergers had occurred at the beginning of the earliest period presented. Results of Operations Net income in 1996 was $27.6 million, an increase of $2.1 million from the 1995 level of $25.5 million and compared to $28.7 million reported in 1994. Earnings per share increased $0.10 per share in 1996 to $1.26. The impact of net securities transactions increased earnings per share $0.09 in 1996 while the impact of net securities transactions decreased earnings per share by $0.27 in 1995. Changes in net interest income increased earnings by $0.04 per share during 1996 and $0.20 per share during 1995. The inclusion of BSI income for 1996 increased earnings per share and other income by $0.02 per share. Also included in other income for 1996 were increases in charge card user fees representing $0.02 per share. Included in the salary and benefits costs in 1995 were early retirement costs and other benefit adjustments resulting in a $0.05 per share adjustment. Included in FDIC expenses for 1996 was a $0.03 per share adjustment representing the Corporation's share of the industry-wide assessment to recapitalize the Savings Association Insurance Fund, while FDIC expenses for 1995 included a rebate of deposit insurance costs to the Corporation's commercial banking subsidiaries representing $0.05 per share. Excluding the impact of the SAIF assessment, FDIC rebate and securities transactions, earnings per share would have been $1.24 for 1996 and $1.15 for 1995 representing an increase of $0.09 per share. Return on average assets was 1.12% and return on average equity was 10.69% during 1996 compared to 1.10% and 10.55%, respectively for 1995. Return on average assets was 1.26% during 1994 while return on average equity was 12.55%. 10 FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The following is an analysis of the impact of changes in net income on earnings per share: 1996 1995 vs. vs. 1995 1994 Net income per share, prior year $1.16 $1.28 Increase (decrease) from changes in: Net interest income 0.04 0.20 Provision for possible credit losses (0.02) (0.06) Security transactions 0.09 (0.27) Other income 0.06 0.02 Salaries and employee benefits (0.01) (0.16) Occupancy and equipment costs (0.04) (0.02) Merger expenses 0.00 0.07 FDIC expense 0.06 0.08 Other expenses (0.07) (0.07) Provision for income taxes (0.01) 0.09 Net income per share $1.26 $1.16 Net interest income, the most significant component of earnings, is the amount by which interest generated from earning assets exceeds interest expense on liabilities. Net interest income was $94.0 million in 1996 compared to $93.3 million in 1995 and $90.5 million in 1994. The following is an analysis of the average balance sheets and net interest income for each of the three years in the period ended December 31, 1996. 11 FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES ITEM 7. Management's Discussion and Analysis
Average Balance Sheets and Net Interest Analysis (Dollar Amounts in Thousands) 1996 1995 1994 Average Income/ Yield or Average Income/ Yield or Average Income/ Yield or Balance Expense Rate(a) Balance Expense Rate(a) Balance Expense Rate(a) Assets Interest-earning assets: Time deposits with banks $ 7,378 $ 413 5.59% $ 8,552 $ 486 5.69% $ 14,677 $ 600 4.09% Investment securities 738,916 43,177 6.10 769,006 45,600 6.12 870,656 48,645 5.80 Federal funds sold 1,712 85 4.97 17,712 1,033 5.83 4,138 186 4.49 Loans (b) (c), net of unearned income 1,601,747 138,654 8.74 1,421,004 128,582 9.11 1,283,866 110,213 8.66 Total interest- earning assets 2,349,753 182,329 7.89 2,216,274 175,701 8.04 2,173,337 159,644 7.48 Noninterest-earning assets: Cash 57,717 53,752 54,542 Allowance for credit losses (18,951) (17,584) (17,120) Other assets 75,156 77,843 77,498 Total noninterest- earning assets 113,922 114,011 114,920 Total Assets $2,463,675 $2,330,285 $2,288,257 Liabilities and Shareholders' Equity Interest-bearing liabilities: Interest-bearing demand deposits $ 212,269 3,434 1.62% $ 208,330 3,108 1.49% $ 226,824 3,764 1.66% Savings deposits 481,608 13,392 2.78 464,021 11,858 2.56 503,327 11,520 2.29 Time deposits 1,145,592 63,886 5.58 1,060,070 58,855 5.55 948,804 45,901 4.84 Short-term borrowings 127,150 6,550 5.15 141,474 8,013 5.66 168,929 7,394 4.38 Long-term debt 18,170 1,063 5.85 7,010 584 8.33 7,744 523 6.75 Total interest- bearing liabilities 1,984,789 88,325 4.45 1,880,905 82,418 4.38 1,855,628 69,102 3.72 Noninterest-bearing liabilities and capital: Noninterest-bearing demand deposits 197,899 185,889 185,058 Other liabilities 23,033 21,429 18,576 Shareholders' equity 257,954 242,062 228,995 Total noninterest- bearing funding sources 478,886 449,380 432,629 Total Liabilities and Shareholders' Equity $2,463,675 $2,330,285 $2,288,257 Net Interest Income and Net Yield On Interest- earning Assets $ 94,004 4.14% $ 93,283 4.32% $ 90,542 4.30% (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.
12 FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES ITEM 7. Management's Discussion and Analysis Both interest income and interest expense increased over 1995 levels as volumes increased. Average interest-earning assets increased $133.5 million in 1996. Average loans increased $180.7 million in 1996 and were supported by deposit growth and maturities of investment securities. Average investment securities decreased $30.1 million during 1996. Asset yields, on a tax-equivalent basis, decreased 15 basis points (0.15%) during 1996 while the cost of funds increased 7 basis points (0.07%). Both asset yields and the cost of funds increased in 1995. Asset yields, on a tax-equivalent basis, increased 56 basis points (0.56%) during 1995 while the cost of funds increased 66 basis points (0.66%). The decline in loan yields which began in the fourth quarter of 1995 has continued throughout 1996. Loan yields declined 37 basis points (0.37%) during 1996 as yields on mortgage loans and time and demand loans decreased by 39 basis points (0.39%) and 34 basis points (0.34%), respectively. The mortgage portfolio was impacted by declining interest rates and innovative loan product offerings which bear lower introductory interest rates. These loan products are designed to initiate relationships in the early stages of a customer's financial life cycle so they may be developed thereafter with more traditional banking products and services. Any initial earnings reduction related to new products are expected to produce long-term profitable relationships and loan yields. Loan yields on new products are expected to begin improving in the fourth quarter of 1997. The decline in time and demand loan yields can mainly be attributed to the repricing of prime and other variable rate loans at lower rates during 1996 than the rates for the corresponding 1995 period. Prepayments of mortgage backed securities ("MBS") remained steady during 1996 and have not yet been impacted by declining interest rates. The primary risk of owning MBS relates to the uncertainty of prepayments of the underlying mortgages. Interest rate changes have a direct impact on prepayment speeds. As interest rates increase, prepayment speeds generally decline, resulting in a longer average life of a MBS. Conversely as interest rates decline, prepayment speeds increase, resulting in a shorter average life of a MBS. Using computer simulation models, the Corporation tests the average life and yield volatility of all MBSs under various interest rate scenarios on a continuing basis to insure that volatility falls within acceptable limits. The Corporation holds no "high risk" securities nor does the Corporation own any securities of a single issuer exceeding 10% of shareholders' equity other than U.S. Government and Agency securities. Interest expense increased $5.9 million during 1996 and included increases due to volume of $5.4 million and increases due to rate of $533 thousand. The total cost of funds increased 7 basis points (0.07%) during 1996 and reflected deposit cost increases of 11 basis points (0.11%) combined with declines in short-term and long-term borrowing rates of 51 basis points (0.51%) and 248 basis points (2.48%) respectively. Average interest-bearing deposits increased $107.0 million during 1996 and included increases of $21.5 million in interest-bearing demand deposits and savings accounts combined with increases of $85.5 million in time deposits. Time deposits increased primarily in the 12 to 23 month maturity range as deposits in this maturity range increased by $72.9 million compared to 1995 averages. Deposit cost increases of 11 basis points (0.11%) during 1996 can be compared to increases of 57 basis points (0.57%) during 1995. Cost increases of 22 basis points (0.22%) during 1996 for savings deposits can primarily be attributed to new savings products which in addition to an attractive base interest rate include interest adjustments based on the number and amounts of various accounts a customer has in addition to a savings account. Net interest margin (net interest income, on a tax-equivalent basis as a percentage of average earning assets), was 4.14% during 1996 compared to 4.32% in 1995 and 4.30% in 1994. The Corporation's use of computer modeling to manage interest rate risk is described in the "Interest Sensitivity" section of this discussion herein. 13 FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES ITEM 7. Management's Discussion and Analysis The following table shows the effect of changes in volumes and rates on interest income and interest expense.
Analysis of Year-to-Year Changes in Net Interest Income (Dollar Amounts in Thousands) 1996 Change from 1995 1995 Change from 1994 Total Change Due Change Due Total Change Due Change Due Change to Volume to Rate Change to Volume to Rate Interest-earning assets: Time deposits with banks $ (73) $ (67) $ (6) $ (114) $ (251) $ 137 Securities (2,423) (1,843) (580) (3,045) (5,896) 2,851 Federal funds sold (948) (933) (15) 847 609 238 Loans 10,072 16,473 (6,401) 18,369 11,876 6,493 Total interest income 6,628 13,630 (7,002) 16,057 6,338 9,719 Interest-bearing liabilities: Deposits 6,891 5,256 1,635 12,636 4,176 8,460 Short-term borrowings (1,463) (811) (652) 619 (1,202) 1,821 Long-term debt 479 929 (450) 61 (50) 111 Total interest expense 5,907 5,374 533 13,316 2,924 10,392 Net interest income $ 721 $ 8,256 $(7,535) $ 2,741 $ 3,414 $ (673)
The provision for possible credit losses is an amount added to the allowance against which credit losses are charged. The amount of the provision is determined by management based upon its assessment of the size and quality of the loan portfolio and the adequacy of the allowance in relation to the risks inherent within the loan portfolio. The provision for possible credit losses was $4.5 million in 1996 compared to $4.1 million in 1995 and $2.9 million in 1994. The provision for possible credit losses increased in 1996 as a result of growth in the portfolio as a whole, combined with an increase in charge-offs and delinquencies of consumer installment and revolving credit loans. Net charge-offs against the allowance for possible credit losses were $3.3 million, or 0.21% of average total loans in 1996. This compared to $3.3 million in 1995 and $2.0 million in 1994. Net charge-offs were 0.23% and 0.16% of average total loans in 1995 and 1994, respectively. Although the allowance for possible credit losses as a percentage of average loans outstanding is below peer averages, net charge-offs as a percentage of average loans outstanding is also below peer averages. For an analysis of credit quality, see the "Credit Review" section of this discussion. 14 FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES ITEM 7. Management's Discussion and Analysis The following table presents an analysis of the consolidated allowance for possible credit losses for the five years ended December 31, 1996 (dollars in thousands):
Summary of Loan Loss Experience 1996 1995 1994 1993 1992 Loans outstanding at end of year $1,747,335 $1,487,542 $1,377,794 $1,211,109 $1,165,494 Average loans outstanding $1,601,747 $1,421,004 $1,283,866 $1,187,236 $1,094,197 Allowance for possible credit losses: Balance, beginning of year $ 18,152 $ 17,337 $ 16,483 $ 15,828 $ 10,681 Addition as result of acquisition -0- -0- -0- -0- 4,501 Loans charged off: Commercial, financial and agricultural 571 1,161 1,246 774 860 Loans to individuals 3,023 2,316 1,676 1,825 1,906 Real estate-construction -0- -0- -0- -0- -0- Real estate-commercial 440 218 23 791 706 Real estate-residential 174 423 179 357 650 Lease financing receivables 26 52 52 106 127 Total loans charged off 4,234 4,170 3,176 3,853 4,249 Recoveries of loans previously charged off: Commercial, financial and agricultural 254 132 254 563 371 Loans to individuals 482 518 563 565 397 Real estate-construction -0- -0- -0- -0- -0- Real estate-commercial 83 56 249 276 317 Real estate-residential 81 55 61 177 47 Lease financing receivables 5 99 7 7 19 Total recoveries 905 860 1,134 1,588 1,151 Net loans charged off 3,329 3,310 2,042 2,265 3,098 Provision charged to expense 4,501 4,125 2,896 2,920 3,744 Balance, end of year $ 19,324 $ 18,152 $ 17,337 $ 16,483 $ 15,828 Ratios: Net charge-offs as a percentage of average loans outstanding 0.21% 0.23% 0.16% 0.19% 0.28% Allowance for possible credit losses as a percentage of average loans outstanding 1.21% 1.28% 1.35% 1.39% 1.45%
Total other operating income increased $3.3 million in 1996 to $13.7 million from $10.4 million reported in 1995 and can be compared to $16.2 million in 1994. Net securities gains of $1.4 million in 1996 compared to securities losses of $603 thousand in 1995 resulted in an increase of $2.0 million. The securities gains during 1996 resulted from the sale of investments in Pennsylvania bank stocks classified as equity securities "available for sale". These equity securities had a book value of $6.8 million and were sold for a gain of $1.5 million. The securities losses during 1995 resulted from the sale of $77.6 million of securities, primarily U.S. Treasury securities classified as "available for sale" having an average yield of 4.91% and an average remaining life of about 17 months. The proceeds from the sale of these U.S. Treasury securities were used to pay off short-term borrowings costing 6.00%. This transaction resulted in a net improvement in net interest income over the remaining life of the securities in excess of the net loss on the sale. During 1994 $7.5 million of securities classified as "held-to-maturity" were sold at a net gain of $16 thousand. All but one security were called and were sold within three months of the call date. The remaining security was sold because of a significant deterioration of the issuer's creditworthiness. Also during 1994, the Corporation sold 115,000 shares of Federal Home Loan Mortgage Corporation common stock with a book value of $970 thousand for a gain of $5.3 million in anticipation of a market value decline if interest rates continued to rise. 15 FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES ITEM 7. Management's Discussion and Analysis Service charges on deposits increased over all periods reported, primarily as a result of increased average total deposits. Other income increased $1.1 million in 1996 to $4.4 million from $3.2 million reported in 1995 and can be compared to $3.0 million in 1994. The inclusion of BSI income on loan origination and servicing for 1996 increased other income by $527 thousand. Other revenue for 1996 also reflected increases in charge card user fees of $607 thousand as the introduction of redesigned charge card products generated over a fifty percent increase in the number of accounts and balances outstanding compared to year end 1995. Total other operating expenses increased $1.5 million to $63.6 million in 1996 and compared to $62.1 million and $60.9 million in 1995 and 1994, respectively. Results for the 1994 period included merger costs of $1.7 million. Employee costs during 1996 were $33.3 million, an increase of $253 thousand over the 1995 level of $33.0 million. Included in employee costs for 1995 were early retirement settlements and other benefit adjustments of $1.3 million. Excluding early retirement settlements and other benefit adjustments, employee costs increased $1.5 million or 4.76% during 1996. Inclusion of BSI in the 1996 period increased employee costs by $602 thousand. Also reflected in the 1996 period is a $228 thousand increase in the employer's matching contribution for the Corporation's 401(k) plan at 80% of the amount contributed by the employee, up from 60% in 1995. Excluding BSI from the 1996 period, hospitalization expense for 1996 reflected a decrease of $375 thousand primarily a result of converting to a managed health care plan effective January 1, 1996. Employee costs as a percentage of average assets was 1.35% in 1996 and compares to 1.42% in 1995 and 1.31% in 1994. Salary levels are generally maintained through attrition management programs. Net occupancy expense and furniture and equipment increased $786 thousand during 1996. The inclusion of BSI represented $98 thousand of the 1996 increase while the cost of equipment maintenance contracts and equipment repairs increased $485 thousand during 1996. Net occupancy expense and furniture and equipment increased $360 thousand in 1995 as a result of increased utilization of leased equipment during the redesign of various operational areas of the organization such as loan processing. Net occupancy expense and furniture and equipment increased in 1994 as the costs of maintenance and repairs decreased and depreciation increased as the process of automating loan documentation and the branch network progressed. This upgrade is expected to improve platform productivity and reduce loan documentation risks. Both the 1996 and 1995 periods include adjustments to the Corporation's Federal Deposit Insurance costs. The 1996 period includes an additional one-time assessment against the Corporation's thrift deposits of $768 thousand to replenish the Savings and Loan Insurance Fund (SAIF). The 1995 related period includes a rebate of $1.1 million of deposit insurance costs to the Corporation's commercial banking subsidiaries as a result of the Federal Deposit Insurance Corporation's Bank Insurance Fund (BIF) reaching its regulatory cap. These adjustments have been made to enable banks and thrifts to pay equal deposit insurance rates in the future. BIF insured institutions will pay an annual rate of approximately 1.29 cents per $100 of deposits while SAIF insured institutions will pay approximately 6.44 cents per $100 annually for the years 1997 through 1999. It is anticipated that beginning in the year 2000 banks and thrifts will pay an equal rate of 2.43 cents per $100 of deposits. 16 FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES ITEM 7. Management's Discussion and Analysis Other operating expenses increased $1.8 million in 1996 to $20.0 million and can be compared to $18.2 million in 1995 and $18.6 million in 1994. The inclusion of BSI for the 1996 period represented $296 thousand of the 1996 increase. Telephone cost increases of $392 thousand during 1996 reflected usage increases for both voice and data lines partially offset by rate decreases. Aggressive marketing of innovative new products and services resulted in increases of $274 thousand in advertising expenses during 1996. Additional cost increases during 1996 occurred in stationery and supplies, filing and recording fees and Pennsylvania shares tax expenses which incurred increases of $187 thousand, $226 thousand, and $337 thousand respectively. Other professional fees increased $277 for 1996 compared to 1995 primarily as a result of the use of outside consultants to help analyze and implement standardized fee schedules. The 1994 period contained merger related expenses in the amount of $1.7 million. After adjusting the 1994 total for the $1.7 million of merger costs deducted, other operating expenses really increased by $1.3 million in 1995 and decreased by $835 thousand in 1994. The amortization of core deposit intangibles decreased $210 thousand in 1995 and $484 in 1994 as the intangibles related to mergers which occurred in 1984 and 1985 became fully amortized in 1995. The primary cost increases which occurred in 1995 included the collection of loans or the disposition of real estate acquired in lieu of loan repayment. Additional expenses of $129 thousand were also incurred during 1995 as a result of the conversion of computer systems of recently acquired subsidiaries to those of the Corporation and conversion to a new trust processing system by the Corporation's trust subsidiary. Stationery and supplies expense increased by $196 thousand during 1995 primarily as a result of the merger of eight commercial bank subsidiaries which caused some supplies to become obsolete. Aggressive marketing of innovative products and specialized customer services during 1995 caused increases in advertising, promotions and printing expenses totalling $299 thousand. Postage costs increased $131 thousand in 1995 as a result of rate increases. Restructuring costs had an impact on legal and professional fees which increased by $296 thousand during 1995 as organizational changes were evaluated and implemented. Income tax expense was $12.1 million during 1996 representing an increase of $98 thousand over the 1995 total of $12.0 million and compared to $14.2 million in 1994. Taxable income increased $772 thousand during 1996 while taxable income decreased $6.4 million during 1995 and increased $5.3 million in 1994. The Corporation's effective tax rate decreased to 30.4% in 1996 from 31.9% in 1995 and compares to 33.1% in 1994. The most significant factor for the decrease in the 1996 effective rate compared to 1995 is an increase in tax-free income, while the decrease in the 1995 effective rate compared to 1994 is related to the nondeductibility of merger expenses incurred in 1994 for income tax purposes. Liquidity Liquidity is a measure of the Corporation's ability to efficiently meet normal cash flow requirements of both borrowers and depositors. In the ordinary course of business, funds are generated from deposits (primary source) and the maturity or repayment of earning assets, such as securities and loans. As an additional secondary source, short-term liquidity needs may be provided through the use of overnight Federal funds purchased, borrowings through the use of lines available for repurchase agreements, and borrowings from the Federal Reserve Bank. Additionally, all of the banking subsidiaries are members of the Federal Home Loan Bank and may borrow up to ten percent of their total assets at any one time. The sale of earning assets may also provide an additional source of liquidity. 17 FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES ITEM 7. Management's Discussion and Analysis The Corporation's long-term liquidity source is a large core deposit base and a strong capital position. Core deposits are the most stable source of liquidity a bank can have due to the long-term relationship with a deposit customer. Increased competition from nonbanking sources such as mutual funds may require banks to shift to alternative funding from other borrowings. Although this is not significant at the end of 1996, it could become more consequential in the future. Deposits increased $142.0 million in 1996 and included $48.6 million in core deposits. Non-core deposits, which are time deposits in denominations of $100 thousand or more represented 12.39% of total deposits, up from 8.52% of total deposits at December 31, 1995. Non-core deposits increased by $93.4 million in 1996 and $39.4 million in 1995 primarily as a result of an increase in public funds. Time deposits of $100 thousand or more at December 31, 1996, 1995 and 1994 had remaining maturities as follows:
Maturity Distribution of Large Certificates of Deposit (Dollar Amounts in Thousands) 1996 1995 1994 Amount Percent Amount Percent Amount Percent Remaining Maturity: 3 months or less $ 87,467 33% $ 40,377 24% $ 37,968 30% Over 3 months through 6 months 38,714 15 26,331 16 10,191 8 Over 6 months through 12 months 43,115 17 32,357 19 17,885 14 Over 12 months 91,447 35 68,241 41 61,841 48 Total $260,743 100% $167,306 100% $127,885 100%
Net loans increased $258.6 million during 1996 primarily in the categories of consumer loans and leases and real estate loans secured by residential properties. In combination these categories represented over 73% of the loan growth during 1996, reflecting a strengthening of consumer loan demand. The growth in consumer loans and leases during 1996 can partially be attributed to strong growth in the Corporation's Dealer Service Program which began in May and offers in addition to indirect loans, a new FlexLease product. The majority of the growth in residential real estate loans resulted from the success of an innovative mortgage product. Below is a schedule of loans by classification for the five years ended December 31, 1996.
Loans by Classification (Dollar Amounts in Thousands) 1996 1995 1994 1993 1992 Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent Commercial, financial, agricultural and other $ 252,798 14% $ 192,530 13% $ 180,373 13% $ 179,227 14% 216,183 18% Real estate-construction 24,111 2 22,969 1 23,131 2 12,980 1 17,007 1 Real estate-commercial 287,318 16 293,095 19 268,417 19 238,864 19 204,853 17 Real estate-residential 752,562 42 616,661 40 587,734 41 511,889 41 484,218 40 Loans to individuals 425,012 24 381,729 25 332,167 23 279,357 23 259,419 22 Net leases 36,329 2 24,190 2 30,498 2 26,617 2 23,521 2 Gross loans and leases 1,778,130 100% 1,531,174 100% 1,422,320 100% 1,248,934 100% 1,205,201 100% Unearned income (30,795) (43,632) (44,526) (37,825) (39,707) Total loans, and leases net of unearned income $1,747,335 $1,487,542 $1,377,794 $1,211,109 $1,165,494
An additional source of liquidity are marketable securities that the Corporation holds in its investment portfolio. These securities are classified as "securities available for sale". While the Corporation does not have specific intentions to sell these securities, they have been designated as "available for sale" because they may be sold for the purpose of obtaining future liquidity, for management of interest rate risk or as part of the implementation of tax management strategies. As of December 31, 1996, securities available for sale had an amortized cost of $242.1 million 18 FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES ITEM 7. Management's Discussion and Analysis and a market value of $244.4 million. Gross unrealized gains were $3.3 million and gross unrealized losses were $915 thousand. Based upon the Corporation's historical ability to fund liquidity needs from other sources, the current available for sale portfolio is deemed more than adequate, as the Corporation does not anticipate a need to liquidate the investments until maturity. Below is a schedule of the maturity distribution of securities held to maturity and securities available for sale at December 31, 1996.
Maturity Distribution of Securities Held to Maturity (Dollar Amounts in Thousands) States and Total Weighted U.S. Government Agencies Political Other Amortized Average and Corporations Subdivisions Securities Cost Yield* Within 1 year $ 82,589 $ 4,683 $ 5,110 $ 92,382 5.60% After 1 but within 5 years 285,653 35,977 1,618 323,248 5.96 After 5 but within 10 years 5,240 25,507 107 30,854 7.44 After 10 years -0- 13,262 -0- 13,262 7.30 Total $373,482 $79,429 $ 6,835 $459,746 6.03%
Maturity Distribution of Securities Available for Sale At Amortized Cost (Dollar Amounts in Thousands) U.S. Treasury, and other States and Total Weighted U.S. Government Agencies Political Other Amortized Average and Corporations Subdivisions Securities Cost Yield* Within 1 year $ 50,273 $ 2 $ 730 $ 51,005 5.71% After 1 but within 5 years 77,698 -0- 1,390 79,088 6.37 After 5 but within 10 years 2,723 -0- 574 3,297 4.38 After 10 years 78,295 -0- 30,394 108,689 6.38 Total $208,989 $ 2 $33,088 $242,079 6.21% *Yields are calculated on a tax-equivalent basis.
Interest Sensitivity The objective of interest rate sensitivity management is to maintain an appropriate balance between the stable growth of income and the risks associated with maximizing income through interest sensitivity imbalances. While no single number can accurately describe the impact of changes in interest rates on net interest income, interest rate sensitivity positions, or "gaps" when measured over a variety of time periods may be helpful. An asset or liability is considered to be interest-sensitive if the rate it yields or bears is subject to change within a predetermined time period. If interest-sensitive assets ("ISA") exceeds interest-sensitive liabilities ("ISL") during a prescribed time period, a positive gap results. Conversely, when ISL exceeds ISA during a time period, a negative gap results. A positive gap tends to indicate that earnings will be impacted favorably if interest rates rise during the period and negatively when interest rates fall during the period. A negative gap tends to indicate that earnings will be affected inversely to interest rate changes. In other words, as interest rates fall, a negative gap should tend to produce a positive effect on earnings and when interest rates rise, a negative gap should tend to affect earnings negatively. The primary components of ISA include adjustable rate loans and investments, loan repayments, investment maturities and money market investments. The primary components of ISL include maturing certificates of deposit, money market deposits, savings deposits, NOW accounts and short-term borrowings. 19 FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES ITEM 7. Management's Discussion and Analysis Interest Sensitivity (Continued) The following table lists the amounts and ratios of assets and liabilities with rates or yields subject to change within the periods indicated as of December 31, 1996 and 1995 (Dollar Amounts in Thousands):
1996 Cumulative 0-90 Days 91-180 Days 181-365 Days 0-365 Days Loans $ 669,043 $102,628 $190,064 $ 961,735 Investments 17,574 37,133 84,794 139,501 Other interest-earning assets 97,201 7,346 11,361 115,908 Total interest-sensitive assets 783,818 147,107 286,219 1,217,144 Certificates of deposit 269,090 154,045 227,381 650,516 Other deposits 700,445 -0- -0- 700,445 Borrowings 179,308 5,621 4,946 189,875 Total interest-sensitive liabilities 1,148,843 159,666 232,327 1,540,836 Gap $ (365,025) $(12,559) $ 53,892 $ (323,692) ISA/ISL 0.68 0.92 1.23 0.79 Gap/Total assets 14.12% 0.49% 2.09% 12.52%
1995 Cumulative 0-90 Days 91-180 Days 181-365 Days 0-365 Days Loans $ 515,833 $ 82,754 $167,780 $ 766,367 Investments 18,351 33,319 42,960 94,630 Other interest-earning assets 91,408 6,698 6,272 104,378 Total interest-sensitive assets 625,592 122,771 217,012 965,375 Certificates of deposit 223,659 130,053 257,833 611,545 Other deposits 680,303 -0- -0- 680,303 Borrowings 102,527 10,164 6,838 119,529 Total interest-sensitive liabilities 1,006,489 140,217 264,671 1,411,377 Gap $ (380,897) $(17,446) $(47,659) $ (446,002) ISA/ISL 0.62 0.88 0.82 0.68 Gap/Total assets 16.11% 0.74% 2.02% 18.86%
20 FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES ITEM 7. Management's Discussion and Analysis Final loan maturities and rate sensitivity of the loan portfolio excluding consumer installment and mortgage loans and before unearned income at December 31, 1996 were as follows (Dollar Amounts in Thousands): Within One One to After Year 5 Years 5 Years Total Commercial and industrial $ 87,008 $ 53,668 $ 51,728 $192,404 Financial institutions 4 110 -0- 114 Real estate-construction 20,930 307 2,874 24,111 Real estate-commercial 39,360 44,345 203,613 287,318 Other 19,551 12,845 27,884 60,280 Totals $166,853 $111,275 $286,099 $564,227 Loans at fixed interest rates 79,179 173,972 Loans at variable interest rates 32,096 112,127 Totals $111,275 $286,099 The Corporation has not experienced the kind of earnings volatility indicated from the gap analysis. This is because assets and liabilities with similar contractual repricing characteristics may not reprice at the same time or to the same degree. Therefore, to more precisely measure the impact of interest rate changes on the Corporation's net interest margin, management simulates the potential effects of changing interest rates through computer modeling. Assumptions regarding the replacement of maturing assets and liabilities are made to simulate the impact of future changes in rates and/or changes in balance sheet composition. The Corporation is then better able to implement strategies which would include an acceleration of a deposit rate reduction or a lag in a deposit rate increase. The repricing strategies for loans would be inversely related. The effect of changes in future interest rates on the mix of assets and liabilities may cause actual results to differ from simulated results. In addition, certain financial instruments provide customers with a certain degree of flexibility to respond to economic changes. This flexibility would enable customers to shift from lower cost deposit products to higher cost products or to refinance loans as interest rates decrease. While the Corporation's simulation analysis considers these factors, the extent to which customers utilize their investment and borrowing options may cause actual results to differ from the simulation. The analysis at December 31, 1996 indicated that a 300 basis point movement in interest rates in either direction would not have a significant impact on the Corporation's anticipated net interest income over the next twelve months. Credit Review Maintaining a high quality loan portfolio is of great importance to the Corporation. The Corporation manages the risk characteristics of the loan portfolio through the use of prudent lending policies and procedures and monitors risk through a periodic review process provided by external auditors, internal auditors, regulatory authorities and our loan review staff. These reviews include the analysis of credit quality, diversification of industry, compliance to policies and procedures, and an analysis of current economic conditions. In the management of its credit portfolio, the Corporation emphasizes the importance of the collectibility of loans and leases as well as asset and earnings diversification. The Corporation immediately recognizes as a loss all credits judged to be uncollectible and has established an allowance for possible credit losses that may exist in the portfolio at a point in time, but have not been specifically identified. 21 FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES ITEM 7. Management's Discussion and Analysis The Corporation's written lending policy requires certain underwriting standards to be met prior to funding any loan, including requirements for credit analysis, collateral value coverage, documentation, and terms. The principal factor used to determine potential borrowers' creditworthiness is business cash flows or consumer income available to service debt payments. Secondary sources of repayment, including collateral or guarantees, are frequently obtained. The lending policy provides limits for individual and bank committees lending authorities. In addition to the bank loan approval process, requests for borrowing relationships which will exceed one million dollars must also be approved by the Corporation's Credit Committee. This Committee consists of a minimum of three members of the Corporation's board of directors. Commercial and industrial loans are generally granted to small and middle market customers for operating, expansion or asset acquisition purposes. Operating cash flows of the business enterprise are identified as the principal source of repayment, with business assets held as collateral. Collateral margins and loan terms are based upon the purpose and structure of the transaction as set forth in loan policy. Commercial real estate loans are granted for the acquisition or improvement of real property. Generally, commercial real estate loans do not exceed 75% of the appraised value of property pledged to secure the transaction. Repayment of such loans are expected from the operations of the subject real estate and are carefully analyzed prior to approval. Real estate construction loans are granted for the purposes of constructing improvements to real property, both commercial and residential. On-site inspections are conducted by qualified individuals prior to periodic permanent project financing, which is generally committed prior to the commencement of construction financing. Real estate loans secured by 1-4 family residential housing properties are granted subject to statutory limits in effect for each bank regarding the maximum percentage of appraised value of the mortgaged property. Residential loan terms are normally established in compliance with secondary market requirements. Residential mortgage portfolio interest rate risk is controlled by secondary market sales, variable interest rate loans and balloon maturities. Loans to individuals represent financing extended to consumers for personal or household purposes, including automobile financing, education, home improvement, and personal expenditures. These loans are granted in the form of installment, credit card, or revolving credit transactions. Consumer creditworthiness is evaluated on the basis of ability to repay, stability of income sources, and past credit history. 22 FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES ITEM 7. Management's Discussion and Analysis Since all identified losses are immediately charged off, no portion of the allowance for possible credit losses is restricted to any individual credit or groups of credits, and the entire allowance is available to absorb any and all credit losses. However, for analytical purposes, the following table sets forth an allocation of the allowance for possible credit losses at December 31 according to the categories indicated:
Allocation of the Allowance for Possible Credit Losses (Dollar Amounts in Thousands) 1996 1995 1994 1993 1992 Commercial, industrial, financial, agricultural and other $ 2,901 $ 1,800 $ 2,443 $ 2,541 $ 5,488 Real estate-construction 290 220 215 146 98 Real estate-commercial 3,747 3,253 3,328 3,389 1,750 Real estate-residential 5,972 4,334 4,532 4,151 3,186 Loans to individuals 3,188 2,377 2,417 1,978 1,991 Lease financing receivables 285 162 243 552 182 Unallocated 2,941 6,006 4,159 3,726 3,133 Total $19,324 $18,152 $17,337 $16,483 $15,828 Allowance as percentage of average total loans 1.21% 1.28% 1.35% 1.39% 1.45%
The unallocated portion of the allowance for possible credit losses decreased during 1996 in both total dollars and as a percentage of the total allowance. Various factors impacted this decrease but most notably were an amount set aside to provide for loan growth and to adjust the allowance for possible credit losses based on comparative peer analysis. The Corporation has defined an adequate base allowance for possible credit losses by comparing the Corporation's allowance for possible credit losses as a percentage of average loans outstanding to the peer average and has allocated a portion of the allowance to reduce the variance to peer. Although the Corporation's historic net charge-offs as a percentage of average loans remain lower than peer averages, management has deemed it appropriate to allocate a portion of the allowance for possible credit losses to provide for a potential change in the Corporation's trend in credit loss experience equal to peers, rather than continuation of the historic trend which has been favorable in comparison to peers. Other than those described below, there are no material credits that management has serious doubts as to the borrower's ability to comply with the present loan repayment terms. The following table identifies nonperforming loans at December 31. A loan is placed in a nonaccrual status at the time when ultimate collectibility of principal or interest, wholly or partially, is in doubt. Past due loans are those which were contractually past due 90 days or more as to interest or principal payments but are well secured and in the process of collection. Renegotiated loans are those loans which terms have been renegotiated to provide a reduction or deferral of principal or interest as a result of the deteriorating financial position of the borrower. 23 FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES ITEM 7. Management's Discussion and Analysis
Nonperforming and Impaired Assets and Effect on Interest Income Due to Nonaccrual (Dollar Amounts in Thousands) 1996 1995 1994 1993 1992 Loans on nonaccrual basis $ 7,906 $ 7,419 $ 9,575 $ 9,672 $ 9,328 Past due loans 12,044 7,881 6,936 9,106 7,578 Renegotiated loans 280 803 733 1,413 1,229 Total nonperforming loans $20,230 $16,103 $17,244 $20,191 $18,135 Nonperforming loans as a percentage of total loans 1.16% 1.08% 1.25% 1.67% 1.56% Allowance as percentage of nonperforming loans 95.52% 112.72% 100.54% 81.64% 87.28% Other real estate owned $ 1,647 $ 1,408 $ 2,269 $ 5,590 $ 4,894 Gross income that would have been recorded at original rates $ 726 $ 857 $ 1,085 $ 929 $ 1,080 Interest that was reflected in income 112 161 164 204 139 Net reduction to interest income due to nonaccrual $ 614 $ 696 $ 921 $ 725 $ 941
The reduction of income due to renegotiated loans was less than $50 thousand in any year presented. At December 31, 1996 the ratio of the allowance for possible credit losses as a percentage of nonperforming loans remains lower than the Corporation's peers and although this ratio is an indicator of the strength of the allowance for possible credit losses it does not in itself measure loan loss allowance adequacy. Other factors to be considered include historical loan losses and nonperforming loan levels. These measurements were favorable when compared to peer group levels over the past five years. Although the dollar amount of nonperforming loans has increased, nonperforming loans as a percentage of total loans has not increased above historic levels. Management believes that the allowance for possible credit losses and nonperforming loans remained safely within acceptable levels. Effective January 1, 1995 the Corporation adopted Financial Accounting Standards Board Statement No. 114 "Accounting by Creditors for Impairment of a Loan" ("FAS No. 114"), as amended by Statement No. 118 "Accounting by Creditors for Impairment of a Loan Income Recognition and Disclosures" ("FAS No. 118"). This statement addresses the accounting by creditors for impairment of a loan by specifying how allowances for credit losses related to certain loans should be determined. For an analysis of the impact of implementation of FAS No. 118 see NOTE 7 to the consolidated financial statements. 24 FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES ITEM 7. Management's Discussion and Analysis Capital Resources Equity capital increased $9.1 million in 1996 to $261.4 million. Dividends declared decreased equity by $16.4 million, an increase over the 1995 period as the dividend rate was increased. The retained net income remains in permanent capital to fund future growth and expansion. Payments by the Corporation's Employee Stock Ownership Plan ("ESOP") to reduce debt it incurred to acquire the Corporation's common stock for future distribution as employee compensation, net of additional advances, and fair value adjustments to unearned ESOP shares, increased equity capital by $1.2 million. The market value adjustment to securities available for sale increased capital by $798 thousand. Amounts paid to fund the discount on reinvested dividends and optional cash payments reduced equity by $529 thousand. The cost of purchasing treasury shares decreased equity by $4.1 million while proceeds from the reissuance of treasury shares to provide for stock options exercised increased equity capital by $552 thousand during 1996. A capital base can be considered adequate when it enables the Corporation to intermediate funds responsibly and provide related services while protecting against future uncertainties. The evaluation of capital adequacy depends on a variety of factors, including asset quality, liquidity, earnings history and prospects, internal controls and management caliber. In consideration of these factors, management's primary emphasis with respect to the Corporation's capital position is to maintain an adequate and stable ratio of equity to assets. See NOTE 20 for an analysis of regulatory capital guidelines and the Corporation's capital ratios relative to these measurement standards. Inflation and Changing Prices Management is aware of the impact inflation has on interest rates and therefore the impact it can have on a bank's performance. The ability of a financial institution to cope with inflation can only be determined by analysis and monitoring of its asset and liability structure. The Corporation monitors its asset and liability position with particular emphasis on the mix of interest-sensitive assets and liabilities in order to reduce the effect of inflation upon its performance. However, it must be remembered that the asset and liability structure of a financial institution is substantially different from an industrial corporation in that virtually all assets and liabilities are monetary in nature, meaning that they have been or will be converted into a fixed number of dollars regardless of changes in general price levels. Examples of monetary items include cash, loans and deposits. Nonmonetary items are those assets and liabilities which do not gain or lose purchasing power solely as a result of general price level changes. Examples of nonmonetary items are premises and equipment. Inflation can have a more direct impact on categories of noninterest expenses such as salaries and wages, supplies and employee benefit costs. These expenses are very closely monitored by management for both the effects of inflation and increases relating to such items as staffing levels, usage of supplies and occupancy costs. 25 FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES ITEM 8. Financial Statements and Supplementary Data Consolidated Balance Sheets (Dollar Amounts in Thousands) December 31, 1996 1995 Assets Cash and due from banks.....................$ 69,406 $ 62,381 Interest-bearing bank deposits.............. 4,199 8,288 Federal funds sold.......................... -0- 4,800 Securities available for sale, at market.... 244,415 244,193 Securities held to maturity, at cost, (market value $457,189 in 1996 and $503,568 in 1995) 459,746 504,509 Loans....................................... 1,778,130 1,531,174 Unearned income........................... (30,795) (43,632) Allowance for possible credit losses...... (19,324) (18,152) Net loans............................ 1,728,011 1,469,390 Property and equipment...................... 32,590 29,435 Other real estate owned..................... 1,647 1,408 Other assets................................ 44,624 39,903 Total assets.........................$2,584,638 $2,364,307 Liabilities Deposits (All Domestic): Noninterest-bearing.......................$ 200,473 $ 200,939 Interest-bearing.......................... 1,904,310 1,761,821 Total deposits....................... 2,104,783 1,962,760 Short-term borrowings....................... 150,330 120,774 Other liabilities........................... 27,287 23,236 Long-term debt.............................. 40,880 5,261 Total liabilities.................... 2,323,280 2,112,031 Shareholders' Equity Preferred stock, $1 par value per share, 3,000,000 shares authorized and unissued.............................. -0- -0- Common stock, $1 par value per share, 100,000,000 shares authorized, 22,436,628 shares issued and 22,194,426 shares outstanding in 1996; 22,436,628 shares issued and 22,371,626 shares outstanding in 1995................................... 22,437 22,437 Additional paid-in capital.................. 76,664 77,226 Retained earnings........................... 168,711 157,576 Unrealized gain on securities available for for sale, net of taxes.................... 1,309 511 Treasury stock (242,202 and 65,002 shares at December 31, 1996 and 1995, respectively at cost).................................. (4,289) (929) Unearned ESOP shares........................ (3,474) (4,545) Total shareholders' equity........... 261,358 252,276 Total liabilities and shareholders' equity..........$2,584,638 $2,364,307 The accompanying notes are an integral part of these consolidated financial statements. 26 FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES ITEM 8. Financial Statements and Supplementary Data Consolidated Statements of Income (Dollar Amounts in Thousands, except per share data)
Years Ended December 31, 1996 1995 1994 Interest Income Interest and fees on loans................ $138,654 $128,582 $110,213 Interest and dividends on investments: Taxable interest........................ 38,240 41,775 44,187 Interest exempt from Federal income taxes.......................... 3,530 2,785 3,430 Dividends............................... 1,407 1,040 1,028 Interest on Federal funds sold............ 85 1,033 186 Interest on bank deposits................. 413 486 600 Total interest income................. 182,329 175,701 159,644 Interest Expense Interest on deposits..................... 80,712 73,821 61,185 Interest on short-term borrowings........ 6,549 8,013 7,394 Interest on long-term debt............... 1,064 584 523 Total interest expense............... 88,325 82,418 69,102 Net interest income........................ 94,004 93,283 90,542 Provision for possible credit losses....... 4,501 4,125 2,896 Net interest income after provision for possible credit losses................... 89,503 89,158 87,646 Other Income Securities gains (losses)................ 1,403 (603) 5,536 Trust income............................. 2,192 2,173 2,226 Service charges on deposits.............. 5,772 5,601 5,382 Other income............................. 4,374 3,233 3,027 Total other income................... 13,741 10,404 16,171 Other Expenses Salaries and employee benefits........... 33,287 33,034 30,035 Net occupancy expense.................... 4,528 4,347 4,238 Furniture and equipment expense.......... 4,715 4,110 3,859 FDIC expense............................. 1,062 2,373 4,151 Other operating expenses................. 19,997 18,198 18,572 Total other expenses................. 63,589 62,062 60,855 Income before taxes........................ 39,655 37,500 42,962 Applicable income taxes.................... 12,072 11,974 14,226 Net Income................................. $27,583 $25,526 $28,736 Average Shares Outstanding................. 21,954,111 22,005,427 22,432,062 Per share data: Net income............................... $1.26 $1.16 $1.28
The accompanying notes are an integral part of these consolidated financial statements. 27 FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES ITEM 8. Financial Statements and Supplementary Data Consolidated Statements of Changes in Shareholders' Equity (Dollar Amounts in Thousands)
Unrealized Gain (Loss) on Additional Securities Unearned Total Common Paid-in Retained Available ESOP Treasury Shareholders' Stock Capital Earnings For Sale Shares Stock Equity Balance at December 31, 1993........... $22,517 $79,094 $131,380 $ 1,584 $(4,449) $(1,216) $228,910 Net income............................ -0- -0- 28,736 -0- -0- -0- 28,736 Cash dividends declared............... -0- -0- (11,950) -0- -0- -0- (11,950) Cash dividends declared by pooled subsidiaries prior to merger......... -0- -0- (1,328) -0- -0- -0- (1,328) Change in market value of securities available for sale, net of tax effect -0- -0- -0- (18,386) -0- -0- (18,386) Tax benefit on ESOP dividends......... -0- -0- 81 -0- -0- -0- 81 Increase in unearned ESOP shares...... -0- -0- -0- -0- (747) -0- (747) Discount on dividend reinvestment plan purchases....................... -0- (212) -0- -0- -0- -0- (212) Treasury stock acquired............... -0- -0- -0- -0- -0- (82) (82) Treasury stock reissued by pooled subsidiary........................... -0- -0- (105) -0- -0- 218 113 Treasury stock cancelled in merger.... (80) (918) -0- -0- -0- 998 -0- Balance at December 31, 1994........... 22,437 77,964 146,814 (16,802) (5,196) (82) 225,135 Net income............................ -0- -0- 25,526 -0- -0- -0- 25,526 Cash dividends declared............... -0- -0- (14,764) -0- -0- -0- (14,764) Change in market value of securities available for sale, net of tax effect -0- -0- -0- 17,313 -0- -0- 17,313 Decrease in unearned ESOP shares...... -0- 24 -0- -0- 651 -0- 675 Discount on dividend reinvestment plan purchases....................... -0- (342) -0- -0- -0- -0- (342) Treasury stock acquired............... -0- -0- -0- -0- -0- (1,583) (1,583) Treasury stock reissued............... -0- (420) -0- -0- -0- 736 316 Balance at December 31, 1995........... 22,437 77,226 157,576 511 (4,545) (929) 252,276 Net income............................ -0- -0- 27,583 -0- -0- -0- 27,583 Cash dividends declared............... -0- -0- (16,448) -0- -0- -0- (16,448) Change in market value of securities available for sale, net of tax effect.............................. -0- -0- -0- 798 -0- -0- 798 Decrease in unearned ESOP shares...... -0- 105 -0- -0- 1,071 -0- 1,176 Discount on dividend reinvestment plan purchases....................... -0- (529) -0- -0- -0- -0- (529) Treasury stock acquired............... -0- -0- -0- -0- -0- (4,050) (4,050) Treasury stock reissued............... -0- (138) -0- -0- -0- 690 552 Balance at December 31, 1996........... $22,437 $76,664 $168,711 $ 1,309 $(3,474) $(4,289) $261,358 The accompanying notes are an integral part of these consolidated financial statements.
28 FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES ITEM 8. Financial Statements and Supplementary Data Consolidated Statements of Cash Flows (Dollar Amounts in Thousands)
Years Ended December 31, 1996 1995 1994 Operating Activities Net income............................................ $27,583 $25,526 $28,736 Adjustments to reconcile net income to net cash provided by operating activities: Provision for possible credit losses............... 4,501 4,125 2,896 Depreciation and amortization...................... 5,155 5,126 5,126 Net (gains) losses on sales of assets.............. (2,030) 427 (5,555) Increase in interest receivable.................... (1,448) (765) (1,123) Increase in interest payable....................... 2,523 3,349 631 Increase (decrease) in income taxes payable........ 2,021 (2,168) 135 Change in deferred taxes........................... (683) 863 849 Other - net........................................ (4,082) 544 (3,917) Net cash provided by operating activities....... 33,540 37,027 27,778 Investing Activities Transactions with securities held to maturity: Sales.............................................. -0- -0- 7,476 Maturities and redemptions......................... 87,684 49,859 104,915 Purchases of investment securities................. (42,576) (38,462) (70,246) Transactions with securities available for sale: Sales.............................................. 20,240 76,999 51,427 Maturities and redemptions......................... 46,448 46,965 73,296 Purchases of investment securities................. (64,562) (44,342) (94,197) Proceeds from sales of loans and other assets......... 21,974 21,180 13,488 Acquisition of affiliate and branch, net of cash received............................................. 7,836 -0- -0- Changes net of acquisitions: Net decrease in time deposits with banks.............. 4,090 5,398 6,848 Net increase in loans................................. (285,160) (132,610) (178,299) Purchases of premises and equipment................... (6,757) (4,095) (5,578) Net cash used by investing activities............... (210,783) (19,108) (90,870) Financing Activities Proceeds from issuance of long-term debt.............. 33,000 -0- -0- Repayments of long-term debt.......................... (8,509) (1,684) (515) Tax benefit of ESOP dividend.......................... -0- -0- 81 Discount on dividend reinvestment plan purchases...... (529) (342) (212) Dividends paid........................................ (16,037) (14,326) (12,206) Net increase (decrease) in Federal funds purchased.... 23,740 (34,940) 20,220 Net increase (decrease) in other short-term borrowings 18,015 (45,993) 5,302 Changes net of acquisitions: Acquisition of treasury stock....................... (4,050) (1,583) (82) Reissuance of treasury stock........................ 108 316 113 Net increase in deposits............................ 133,730 81,759 59,079 Net cash provided (used) by financing activities 179,468 (16,793) 71,780 Net increase in cash and cash equivalents....... 2,225 1,126 8,688 Cash and cash equivalents at January 1.................. 67,181 66,055 57,367 Cash and cash equivalents at December 31................ $69,406 $67,181 $66,055
The accompanying notes are an integral part of these consolidated financial statements. 29 FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES ITEM 8. Financial Statements and Supplementary Data Notes to Consolidated Financial Statements Years Ended December 31, 1996, 1995 and 1994 NOTE 1--Statement of Accounting Policies General The following summary of accounting and reporting policies is presented to aid the reader in obtaining a better understanding of the financial statements and related financial data of First Commonwealth Financial Corporation (the "Corporation") and its subsidiaries contained in this report. The financial information is presented in accordance with generally accepted accounting principles and general practice for financial institutions. In preparing financial statements management is required to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. In addition, these estimates and assumptions affect revenues and expenses in the financial statements and as such, actual results could differ from those estimates. Through its subsidiaries which include a commercial bank, savings bank and nondepository trust company, the Corporation provides a full range of loan, deposit and trust services primarily to individuals and small to middle- market businesses in eighteen counties in central and western Pennsylvania. The Corporation and subsidiaries are subject to regulations of certain state and federal agencies. These regulatory agencies periodically examine the Corporation and its subsidiaries for adherence to laws and regulations. As a consequence the cost of doing business may be affected. Basis of Presentation The accompanying consolidated financial statements include the accounts of the Corporation and its wholly-owned subsidiaries. All material intercompany transactions have been eliminated in consolidation. As part of the Corporation's long-term strategic plan, eight commercial banking subsidiaries began operating under a single banking charter during the fourth quarter of 1995. The merger was accounted for in a manner similar to a pooling of interests and accordingly the combined entity was recorded at historic cost. Investments of 20 to 50 percent of the outstanding common stock of investees are accounted for using the equity method of accounting. Securities Debt securities that the Corporation has the positive intent and ability to hold to maturity are classified as securities held-to-maturity and are reported at amortized cost. Debt and equity securities that are bought and held principally for the purpose of selling them in the near term are to be classified as trading securities and reported at fair value, with unrealized gains and losses included in earnings. Debt and equity securities not classified as either held-to-maturity securities or trading securities are classified as securities available-for-sale and are reported at fair value, with unrealized gains and losses excluded from earnings and reported as a separate component of shareholders' equity, net of deferred taxes. The Corporation had securities classified as either held-to-maturity or available-for-sale. The Corporation does not engage in trading activities. Net gain or loss on the sale of securities was determined by using the specific identification method. 30 FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES ITEM 8. Financial Statements and Supplementary Data Notes to Consolidated Financial Statements Years Ended December 31, 1996, 1995 and 1994 (Dollar Amounts in Thousands) NOTE 1--Statement of Accounting Policies (Continued) Loans Loans are carried at the principal amount outstanding. Unearned income on installment loans is taken into income on a declining basis which results in an approximately level rate of return over the life of the loan. Interest is accrued as earned on nondiscounted loans. Effective January 1, 1995 the Corporation adopted Financial Accounting Standards Board Statement No. 114 "Accounting by Creditors for Impairment of a Loan", as amended by Statement No. 118 "Accounting By Creditors for Impairment of a Loan-Income Recognition and Disclosures", ("FAS No. 118"). These statements address the accounting by creditors, such as banks, for the impairment of certain loans. The Corporation considers a loan to be impaired when, based on current information and events, it is probable that a creditor will be unable to collect principal or interest due according to the contractual terms of the loan. Loan impairment is measured based on the present value of expected cash flows discounted at the loan's effective interest rate or, as a practical expedient, at the loans observable market price or the fair value of the collateral if the loan is collateral dependent. Payments received on impaired loans are applied against the recorded investment in the loan. For loans other than those that the Corporation expects repayment through liquidation of the collateral, when the remaining recorded investment in the impaired loan is less than or equal to the present value of the expected cash flows, income is recorded on a cash basis. The adoption of FAS No. 118 did not have a material impact on the Corporation's financial condition or results of operations. Mortgage Servicing Rights Effective January 1, 1996 the Corporation adopted the Financial Accounting Standards Board Statement No. 122 "Accounting for Mortgage Servicing Rights an amendment of FASB Statement No. 65" (FAS No. 122). When a mortgage banking enterprise purchases or originates mortgage loans with a definitive plan to sell or securitize those loans and retain the mortgage servicing rights, the Corporation must measure the mortgage servicing rights at cost by allocating the cost of the mortgage loans between the mortgage servicing rights and the mortgage loans (without the mortgage servicing rights) based on their relative fair values at the date of purchase or origination. When the mortgage banking enterprise does not have a definitive plan at the purchase or origination date and later sells or securitizes the mortgage loans and retains the mortgage servicing rights, the Corporation must allocate the amortized cost of the mortgage loans between the mortgage servicing rights and the mortgage loans (without mortgage servicing rights) based on their relative fair values at the date of sale. The amount capitalized as the right to service mortgage loans is recognized as a separate asset and amortized in proportion to, and over the period of, estimated net servicing income (servicing revenue in excess of servicing cost). FAS No. 122 also requires mortgage servicing rights to be periodically evaluated for impairment based on fair values. The adoption of FAS No. 122 did not have a material impact on the Corporation's financial condition or results of operations. 31 FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES ITEM 8. Financial Statements and Supplementary Data Notes to Consolidated Financial Statements Years Ended December 31, 1996, 1995 and 1994 (Dollar Amounts in Thousands) NOTE 1--Statement of Accounting Policies (Continued) Loan Fees Loan origination and commitment fees, net of associated direct costs, are deferred and the net amount is amortized as an adjustment to the related loan yield on the interest method, generally over the contractual life of the related loans or commitments. Other Real Estate Owned Real estate, other than bank premises, is recorded at the lower of cost or fair value less selling costs at the time of acquisition. Expenses related to holding the property, net of rental income, are generally charged against earnings in the current period. Allowance for Possible Credit Losses The allowance for possible credit losses represents management's estimate of an amount adequate to provide for losses which may be incurred on loans currently held. Management determines the adequacy of the allowance based on historical patterns of loan charge-offs and recoveries, the relationship of the allowance to outstanding loans, industry experience, current economic trends and other factors relevant to the collectibility of loans currently in the portfolio. Premises and Equipment Premises and equipment are carried at cost less accumulated depreciation and amortization. Depreciation is computed on the straight-line and accelerated methods over the estimated useful life of the asset. Charges for maintenance and repairs are expensed as incurred. Where a lease is involved, amortization is charged over the term of the lease or the estimated useful life of the improvement, whichever is shorter. Accounting for the Impairment of Long-Lived Assets The Corporation adopted the Financial Accounting Standards Board Statement No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long- Lived Assets to be Disposed of" (FAS No. 121) effective January 1, 1996. This statement requires long-lived assets, such as premises and equipment and intangibles to be reviewed for impairment whenever events or changes in circumstances, such as a significant decrease in the market value of an asset or the extent or manner in which an asset is used indicate that the carrying amount of an asset may not be recoverable. If there is an indication that the carrying amount of an asset may not be recoverable, future discounted cash flows expected to result from the use of the asset are estimated. If the sum of the expected cash flows is less than the carrying value of the asset a loss is recognized for the difference between the carrying value and fair market value of the asset. Adoption of this statement did not have a material impact on the Corporation's financial condition or results of operations. Income Taxes The Corporation records taxes in accordance with the asset and liability method utilized by Statement of Financial Accounting Standards No. 109 ("FAS No. 109"), whereby deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amount of existing assets and liabilities and their respective tax bases given the provisions of the enacted tax laws. Deferred tax assets are reduced, if necessary, by the amount of such benefits that are not expected to be realized based upon available evidence. 32 FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES ITEM 8. Financial Statements and Supplementary Data Notes to Consolidated Financial Statements Years Ended December 31, 1996, 1995 and 1994 (Dollar Amounts in Thousands) NOTE 1--Statement of Accounting Policies (Continued) Cash Flow Statement Cash and Cash Equivalents For purposes of reporting cash flows, cash and cash equivalents include cash on hand, amounts due from banks, and Federal funds sold. Generally, Federal funds are sold for one-day periods. Supplemental Disclosures 1996 1995 1994 Cash paid during the year for: Interest $85,802 $79,069 $68,576 Income taxes $10,604 $13,266 $13,234 Noncash investing and financing activities: ESOP borrowings $ -0- $ 500 $ 1,730 ESOP loan reductions $ 1,071 $ 1,151 $ 983 Gross increase (decrease) in Market Value adjustment to securities available for sale pursuant to FAS No. 115 $ 1,228 $ 26,635 $(28,285) Net securities available for sale transferred to securities held to maturity $ -0- $145,723 $ -0- Net securities held to maturity transferred to securities available for sale upon implementation of FAS No. 115 $ -0- $ -0- $ 31,011 Loans transferred to other real estate owned and repossessed assets $ 2,964 $ 2,733 $ 1,775 Earnings Per Common Share Earnings per share have been calculated on the weighted average number of common shares outstanding during each year, restated to reflect poolings of interests. Average number of shares for prior periods reflect the two-for- one stock split effected in the form of a 100% stock dividend declared on January 18, 1994. 33 FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES ITEM 8. Financial Statements and Supplementary Data Notes to Consolidated Financial Statements Years Ended December 31, 1996, 1995 and 1994 (Dollar Amounts in Thousands) NOTE 1--Statement of Accounting Policies (Continued) Employee Stock Ownership Plan In November 1993 the Accounting Standards Division of the American Institute of Certified Public Accountants issued Statement of Position 93-6 ("SOP 93-6") "Employers' Accounting for Employee Stock Ownership Plans". This statement affects the accounting treatment of the Corporation's Employee Stock Ownership Plan ("ESOP") described in NOTE 15. The Corporation prospectively adopted SOP 93-6 for ESOP shares acquired after December 31, 1992 (new shares). As permitted by the Statement of Position the Corporation has elected not to adopt this statement for ESOP shares acquired on or before December 31, 1992 (old shares). ESOP shares purchased subject to debt guaranteed by the Corporation are recorded as a reduction of common shareholders' equity by charging unearned ESOP shares. As shares are committed to be released to the ESOP trust for allocation to plan participants unearned ESOP shares is credited for the cost of the shares to the ESOP. Compensation cost recognized for new shares in accordance with the provisions of SOP 93-6 is based upon the fair market value of the shares committed to be released. Additional paid-in capital is charged or credited for the difference between the fair value of the shares committed to be released and the cost of those shares to the ESOP. Compensation cost recognized for old shares committed to be released is recorded at the cost of those shares to the ESOP. Dividends on both old and new unallocated ESOP shares are used for debt service and are reported as a reduction of debt and accrued interest payable. Dividends on allocated ESOP shares are charged to retained earnings and allocated to the plan participants accounts. The average number of common shares outstanding used in calculating earnings per share excludes all unallocated ESOP shares. Employee Stock Option Plan The Corporation adopted the Financial Accounting Standards Board Statement No. 123 "Accounting for Stock Based Compensation" (FAS No. 123) effective January 1, 1996. This statement defines a method of measuring stock based compensation, such as stock options granted, at an estimated fair value. FAS No. 123 also permits the continued measurement of stock based compensation under provisions of the Accounting Practice Board Opinion No. 25 "Accounting for Stock Issued to Employees" ("APB 25"). As permitted under FAS No. 123 the Corporation has elected to use the intrinsic value method to measure stock based compensation under APB 25 and to disclose in a footnote to the financial statements, net income and earnings per share determined as if the fair value methodology of FAS No. 123 was implemented (see NOTE 17). The adoption of FAS No. 123 did not have a material impact on the Corporation's financial condition or results of operations. NOTE 2--Business Combinations Effective April 1, 1996 the Corporation acquired all of the outstanding common stock of BSI Financial Services Inc. ("BSI"), headquartered in Titusville, PA for cash and stock consideration aggregating $1.2 million. BSI provides mortgage banking, loan servicing and collection services to the Corporation's subsidiary banks as well as unaffiliated organizations. The acquisition was accounted for as a purchase transaction, whereby the identifiable tangible and intangible assets and liabilities of BSI were recorded at their fair values at the acquisition date. Under the purchase method of accounting, the results of operations of BSI from the date of acquisition are included in the Corporation's financial statements. 34 FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES ITEM 8. Financial Statements and Supplementary Data Notes to Consolidated Financial Statements Years Ended December 31, 1996, 1995 and 1994 (Dollar Amounts in Thousands) NOTE 2--Business Combinations (Continued) Effective September 29, 1994 the Corporation acquired all of the outstanding common shares of Reliable Financial Corporation ("Reliable"), a savings and loan holding company headquartered in Bridgeville, Pennsylvania. Each of the 1,410,194 outstanding shares were exchanged for 1.6 shares of the Corporation's common stock. Effective September 27, 1994 the Corporation acquired all of the outstanding common shares of United National Bancorporation ("United"), a bank holding company headquartered in Chambersburg, Pennsylvania. Each of the 769,147 outstanding shares were exchanged for two shares of the Corporation's common stock. The Reliable and United mergers were accounted for as poolings of interests, and accordingly, all financial statements were restated as though the mergers had occurred at the beginning of the earliest period presented. NOTE 3--Cash and Due From Banks on Demand Regulations of the Board of Governors of the Federal Reserve System impose uniform reserve requirements on all depository institutions with transaction accounts (checking accounts, NOW accounts, etc.). Reserves are maintained in the form of vault cash or a noninterest-bearing balance held with the Federal Reserve Bank. The subsidiary banks maintained with the Federal Reserve Bank average balances of $12,119 during 1996 and $6,827 during 1995. 35 FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES ITEM 8. Financial Statements and Supplementary Data Notes to Consolidated Financial Statements Years Ended December 31, 1996, 1995 and 1994 (Dollar Amounts in Thousands) NOTE 4--Securities Available For Sale Below is an analysis of the amortized cost and approximate fair values of securities available for sale at December 31, 1996 and 1995:
1996 1995 Gross Gross Approximate Gross Gross Approximate Amortized Unrealized Unrealized Fair Amortized Unrealized Unrealized Fair Cost Gains Losses Value Cost Gains Losses Value U.S. Treasury Securities $ 57,706 $ 97 $ -0- $ 57,803 $ 66,052 $ 472 $ (226) $ 66,298 Obligations of U.S. Government Corporations and Agencies: Mortgage Backed Securities 105,656 231 (81) 105,806 79,540 747 (109) 80,178 Other 45,627 17 (358) 45,286 67,441 264 (399) 67,306 Obligations of States and Political Subdivisions 2 -0- -0- 2 272 -0- -0- 272 Debt Securities Issued by Foreign Governments 710 -0- -0- 710 710 -0- -0- 710 Corporate Securities 1,984 -0- (32) 1,952 2,763 3 (1) 2,765 Other Mortgage Backed Securities -0- -0- -0- -0- 2,429 2 (3) 2,428 Total Debt Securities 211,685 345 (471) 211,559 219,207 1,488 (738) 219,957 Equities 30,394 2,906 (444) 32,856 23,719 829 (312) 24,236 Total Securities Available for Sale $242,079 $3,251 $(915) $244,415 $242,926 $2,317 $(1,050) $244,193
Mortgage backed securities include mortgage backed obligations of the U.S. Government agencies and corporations, mortgage backed securities issued by other organizations and other asset backed securities. These obligations have contractual maturities ranging from less than one year to 29 years and have an anticipated average life to maturity ranging from less than one year to 24 years. All mortgage backed securities contain a certain amount of risk related to the uncertainty of prepayments of the underlying mortgages. Interest rate changes have a direct impact upon prepayment speeds, therefore the Corporation uses computer simulation models to test the average life and yield volatility of all mortgage backed securities under various interest rate scenarios to insure that volatility falls within acceptable limits. At December 31, 1996 and 1995 the Corporation owned no high risk mortgage backed securities as defined by the Federal Financial Institutions Examination Council's Supervisory Policy Statement on Securities Activities. 36 FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES ITEM 8. Financial Statements and Supplementary Data Notes to Consolidated Financial Statements Years Ended December 31, 1996, 1995 and 1994 (Dollar Amounts in Thousands) NOTE 4--Securities Available For Sale (Continued) The amortized cost and estimated market value of debt securities at December 31, 1996, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or repay obligations with or without call or prepayment penalties. Approximate Amortized Fair Cost Value Due within 1 year $ 50,961 $ 50,950 Due after 1 but within 5 years 54,394 54,138 Due after 5 but within 10 years 674 665 Due after 10 years -0- -0- 106,029 105,753 Mortgage backed securities 105,656 105,806 Total debt securities $211,685 $211,559 Proceeds from the sales of securities available for sale were $20,240, $76,999 and $51,427 during 1996, 1995 and 1994 respectively. Gross gains of $1,624, $136 and $5,610 and gross losses of $239, $739 and $90 were realized on those sales during 1996, 1995 and 1994 respectively. In November of 1995 the Financial Accounting Standards Board issued implementation guidance for FAS No. 115 which permitted organizations to reassess the appropriateness of the classifications of all securities currently held. During the fourth quarter of 1995 the Corporation transferred securities with amortized cost of $19,803 from the held to maturity portfolio to the available for sale portfolio and securities with an amortized cost of $165,526 from the available for sale portfolio to the held to maturity portfolio. Gross unrealized gains of $285 and gross unrealized losses of $38 related to these transferred securities are included in securities available for sale at December 31, 1995. Gross unrealized gains of $628 and gross unrealized losses of $1,041 related to these transferred securities are included in securities held to maturity at December 31, 1995 and will be amortized over the remaining life of the securities. Securities available for sale with a book value of $88,649 and $69,097 were pledged at December 31, 1996 and 1995, respectively to secure public deposits and for other purposes required or permitted by law. 37 FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES ITEM 8. Financial Statements and Supplementary Data Notes to Consolidated Financial Statements Years Ended December 31, 1996, 1995 and 1994 (Dollar Amounts in Thousands) NOTE 5--Securities Held to Maturity Below is an analysis of the amortized cost and approximate fair values of debt securities held to maturity at December 31:
1996 1995 Gross Gross Approximate Gross Gross Approximate Amortized Unrealized Unrealized Fair Amortized Unrealized Unrealized Fair Cost Gains Losses Value Cost Gains Losses Value Obligations of U.S. Government Corporations and Agencies: Mortgage Backed Securities $285,576 $-0- $(1,720) $283,856 $324,355 $ 188 $(1,297) $323,246 Other 87,906 -0- (478) 87,428 101,465 288 (689) 101,064 Obligations of States and Political Subdivisions 79,429 9 (390) 79,048 61,681 754 (241) 62,194 Debt Securities Issued By Foreign Governments 113 -0- -0- 113 15 -0- (1) 14 Corporate Securities 1,490 4 -0- 1,494 6,196 19 (4) 6,211 Other Mortgage Backed Securities 5,232 18 -0- 5,250 10,797 47 (5) 10,839 Total Debt Securities $459,746 $ 31 $(2,588) $457,189 $504,509 $1,296 $(2,237) $503,568
The amortized cost and estimated market value of debt securities at December 31, 1996, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or repay obligations with or without call or prepayment penalties. Approximate Amortized Fair Cost Value Due within 1 year $ 28,402 $ 28,413 Due after 1 but within 5 years 98,278 97,556 Due after 5 but within 10 years 28,996 28,933 Due after 10 years 13,262 13,181 168,938 168,083 Mortgage backed securities 290,808 289,106 Total debt securities $459,746 $457,189 38 FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES ITEM 8. Financial Statements and Supplementary Data Notes to Consolidated Financial Statements Years Ended December 31, 1996, 1995 and 1994 (Dollar Amounts in Thousands) NOTE 5--Securities Held to Maturity (Continued) There were no sales of securities held to maturity in 1996 and 1995. Proceeds from the sales of securities held to maturity were $7,476 in 1994. Gross gains of $42 and gross losses of $26 were recognized during 1994. Most of these securities were called and sold within three months of the call date. One security was sold because of a significant deterioration of the issuer's creditworthiness. Securities held to maturity with a book value of $232,648 and $228,443 were pledged at December 31, 1996 and 1995, respectively, to secure public deposits and for other purposes required or permitted by law. NOTE 6--Loans (all domestic) Loans at year end were divided among these general categories: December 31, 1996 1995 Commercial, financial, agricultural and other $ 252,798 $ 192,530 Real estate loans: Construction and land development 24,111 22,969 1-4 Family dwellings 752,562 616,661 Other real estate loans 287,318 293,095 Loans to individuals for household, family and other personal expenditures 425,012 381,729 Leases, net of unearned income 36,329 24,190 Subtotal 1,778,130 1,531,174 Unearned income (30,795) (43,632) Total loans and leases $1,747,335 $1,487,542 Most of the Corporation's business activity was with customers located within Pennsylvania. The portfolio is well diversified, and as of December 31, 1996 and 1995, there were no significant concentrations of credit. The Federal Home Loan Bank had a security interest in qualifying residential mortgage loans with an aggregate estimated fair value of $45,862 at December 31, 1996 as collateral for long-term debt and $15,155 at December 31, 1995 as collateral for short-term borrowings by the Corporation's banking subsidiaries. NOTE 7--Allowance for Possible Credit Losses Description of changes: 1996 1995 1994 Allowance at January 1 $18,152 $17,337 $16,483 Additions: Recoveries of previously charged off loans 905 860 1,134 Provision charged to operating expense 4,501 4,125 2,896 Deductions: Loans charged off 4,234 4,170 3,176 Allowance at December 31 $19,324 $18,152 $17,337 39 FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES ITEM 8. Financial Statements and Supplementary Data Notes to Consolidated Financial Statements Years Ended December 31, 1996, 1995 and 1994 (Dollar Amounts in Thousands) NOTE 7--Allowance for Possible Credit Losses (Continued) 1996 1995 Recorded investment in impaired loans at end of period $8,186 $8,222 Average balance of impaired loans for the year $6,123 $8,192 Allowance for possible credit losses related to impaired loans $1,639 $ 591 Impaired loans with an allocation of the allowance for possible credit losses $4,485 $3,858 Impaired loans with no allocation of the allowance for possible credit losses $3,701 $4,364 Income recorded on impaired loans on a cash basis $ 112 $ 161 NOTE 8--Financial Instruments with Off-Balance-Sheet Risk The Corporation is a party to financial instruments with off-balance- sheet risk in the normal course of business to meet the financial needs of its customers. These financial instruments include commitments to extend credit, standby letters of credit and commercial letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheet. The contract or notional amount of those instruments reflects the extent of involvement the Corporation has in particular classes of financial instruments. As of December 31, 1996 and 1995 the Corporation did not own or trade any other financial instruments with significant off-balance-sheet risk including derivatives such as futures, forwards, interest rate swaps, option contracts and the like, although such instruments may be appropriate to use in the future to manage interest rate risk. The Corporation's exposure to credit loss in the event of nonperformance by the other party of the financial instrument for commitments to extend credit, standby letters of credit and commercial letters of credit written is represented by the contract or notional amount of those instruments. The Corporation uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments. The following table identifies the notional amount of those instruments at December 31, 1996 and 1995. 1996 1995 Financial instruments whose contract amounts represent credit risk: Commitments to extend credit $305,744 $236,929 Standby letters of credit $ 20,747 $ 8,027 Commercial letters of credit $ 483 $ 55 Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Corporation evaluates each customer's creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Corporation upon extension of credit, is based on management's credit evaluation of the counter-party. Collateral held varies but may include accounts receivable, inventory, property, plant and equipment, residential and income-producing commercial properties. 40 FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES ITEM 8. Financial Statements and Supplementary Data Notes to Consolidated Financial Statements Years Ended December 31, 1996, 1995 and 1994 (Dollar Amounts in Thousands) NOTE 8--Financial Instruments with Off-Balance-Sheet Risk (Continued) Standby letters of credit and commercial letters of credit written are conditional commitments issued by the Corporation to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. NOTE 9--Premises and Equipment Premises and equipment are described as follows: Estimated Useful Life 1996 1995 Land Indefinite $ 4,378 $ 4,373 Buildings and improvements 5 - 50 Years 31,555 28,781 Leasehold improvements 4 - 39 Years 5,371 4,567 Furniture and equipment 3 - 25 Years 30,072 27,232 Subtotal 71,376 64,953 Less accumulated depreciation and amortization 38,786 35,518 Total premises and equipment $32,590 $29,435 Depreciation and amortization related to premises and equipment was $3,657 in 1996, $3,536 and $3,499 in 1995 and 1994, respectively. NOTE 10--Interest-Bearing Deposits Components of interest-bearing deposits at December 31 were as follows: 1996 1995 NOW and Super NOW accounts $ 205,090 $ 216,811 Savings and MMDA accounts 495,355 463,492 Time deposits 1,203,865 1,081,518 Total interest-bearing deposits $1,904,310 $1,761,821 Included in time deposits at December 31, 1996 and 1995 were certificates of deposit in denominations of $100 or more of $260,743 and $167,306 respetively. Interest expense related to $100 or greater certificates of deposit amounted to $11,040 in 1996, $9,643 in 1995, and $6,148 in 1994. Included in time deposits at December 31, 1996 were certificates of deposit with the following scheduled maturities: 1997 $ 646,837 1998 257,764 1999 188,356 2000 43,375 2001 and thereafter 66,502 $1,202,834 41 FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES ITEM 8. Financial Statements and Supplementary Data Notes to Consolidated Financial Statements Years Ended December 31, 1996, 1995 and 1994 (Dollar Amounts in Thousands) NOTE 11--Short-term Borrowings Short-term borrowings at December 31 were as follows:
1996 1995 Ending Average Average Ending Average Average Balance Balance Rate Balance Balance Rate Federal funds purchased $ 54,975 $ 34,536 5.54% $ 31,235 $ 37,261 6.06% Borrowings from FHLB -0- 6,832 5.48% 12,198 26,369 6.00% Securities sold under agreements to repurchase 79,023 73,766 4.91% 75,109 69,054 5.29% Treasury, tax and loan note option 16,332 12,015 5.31% 2,232 8,790 5.89% Total $150,330 $127,149 5.15% $120,774 $141,474 5.66% Maximum total at any month-end $188,232 $212,342
At December 31, 1996 the Corporation had approved but unused borrowing capacity with the FHLB of $173,217. Interest expense on short-term borrowings for the years ended December 31 is detailed below:
1996 1995 1994 Federal funds purchased $1,915 $2,259 $2,381 Borrowings from FHLB 374 1,583 2,646 Securities sold under agreements to repurchase 3,622 3,653 2,062 Treasury, tax and loan note option 638 518 305 Total interest on short-term borrowings $6,549 $8,013 $7,394
NOTE 12--Long-Term Debt Long-term debt at December 31, follows:
1996 1995 Amount Rate Amount Rate Bank subordinated notes due September, 1997 $ 716 8.38% $ 716 8.38% Borrowings from FHLB due March, 1998 165 7.22% -0- Borrowings from FHLB due March, 1998 8,000 7.22% -0- Borrowings from FHLB due August, 1998 425 6.43% -0- ESOP loan due September, 1997 -0- 1,250 80% of Prime ESOP loan due March, 2001 -0- 1,875 Prime ESOP loan due March, 2004 -0- 1,420 Prime ESOP loan due March, 2004 3,474 Libor+1% -0- Borrowings from FHLB due December, 2001 25,000 4.92% -0- Borrowings from FHLB due January, 2009 3,100 6.18% -0- Total long-term debt $40,880 $5,261
At June 30, 1996 ESOP loans due September 1997, March 2001 and March 2004 were refinanced by one ESOP loan due March 2004. 42 FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES ITEM 8. Financial Statements and Supplementary Data Notes to Consolidated Financial Statements Years Ended December 31, 1996, 1995 and 1994 (Dollar Amounts in Thousands except per share data) NOTE 12--Long-Term Debt (Continued) All subordinated notes are unsecured and equally subordinated in right of payment to depositors and other creditors. The notes are redeemable at 102% of principal until maturity, at the bank's option. The subordinated notes do not provide for sinking fund obligations. Scheduled loan payments and subordinated note maturities are summarized below: 1997 1998 1999 2000 2001 Thereafter Loan payments $1,658 $9,137 $906 $921 $25,654 $1,888 Note maturities 716 -0- -0- -0- -0- -0- Total $2,374 $9,137 $906 $921 $25,654 $1,888 NOTE 13--Common Share Commitments At December 31, 1996 the Corporation had 100,000,000 common shares authorized and 22,194,426 shares outstanding. Outstanding shares were reduced by 242,202 shares of treasury stock at December 31, 1996 and 65,002 shares at December 31, 1995. The Corporation may be required to issue additional shares to satisfy common share purchases related to the employee stock ownership plan described in NOTE 15. During 1996 and 1995, 217,294 and 111,522 shares of treasury stock were acquired at an average price per share of $18.64 and $14.19 respectively, for the purpose of funding stock options upon exercise. Treasury shares consisting of 16,694 and 52,420 were reissued during 1996 and 1995 upon exercise of various stock option plans assumed by the Corporation in the merger transactions with Reliable and United. In addition 23,400 treasury shares were reissued during 1996 to fund the BSI acquisition. NOTE 14--Income Taxes The income tax provision consists of: 1996 1995 1994 Current tax provision for income exclusive of securities transactions: Federal $12,129 $11,309 $10,599 State 135 15 455 Securities transactions 491 (213) 2,323 Total current tax provision 12,755 11,111 13,377 Deferred tax provision (benefit) (683) 863 849 Total tax provision $12,072 $11,974 $14,226 43 FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES ITEM 8. Financial Statements and Supplementary Data Notes to Consolidated Financial Statements Years Ended December 31, 1996, 1995 and 1994 (Dollar Amounts in Thousands) NOTE 14--Income Taxes (Continued) Temporary differences between financial statement carrying amounts and tax bases of assets and liabilities that represent significant portions of the deferred tax assets (liabilities) at December 31, 1996 and 1995 were as follows: 1996 1995 Deferred tax assets: Allowance for possible credit losses $ 6,136 $ 5,491 Alternative minimum tax carryforward 116 -0- Other 290 332 Deferred tax liabilities: Accumulated accretion of bond discount (440) (365) Unrealized gain on securities available for sale (705) (275) Lease financing deduction (3,837) (2,784) Loan origination fees and costs (756) (360) Accumulated depreciation (238) (333) Basis difference in assets acquired (1,561) (1,635) Other (167) (120) Net deferred tax liability $(1,162) $ (49) The total tax provision for financial reporting purposes differs from the amount computed by applying the statutory income tax rate to income before income taxes. The differences are as follows:
1996 1995 1994 % of % of % of Pretax Pretax Pretax Amount Income Amount Income Amount Income Tax at statutory rate $13,879 35.0 $13,125 35.0 $15,037 35.0 Increase (decrease) resulting from: Effect of nontaxable interest (1,924) (4.9) (1,408) (3.8) (1,643) (3.8) Merger expenses -0- 0.0 -0- 0.0 590 1.4 State income taxes 135 0.3 13 0.0 566 1.3 Other (18) 0.0 244 0.7 (324) (0.8) Total tax provision $12,072 30.4 $11,974 31.9 $14,226 33.1
The Corporation has not recognized a deferred tax liability for differences resulting from the bad debt reserve for tax purposes prior to January 1, 1988 of Reliable, its savings bank subsidiary. These bad debt reserves for tax purposes would have created a potential tax liability if the thrift changed its charter. Congress passed legislation during the third quarter of 1996 which removes the potential liability related to thrift charter conversions. 44 FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES ITEM 8. Financial Statements and Supplementary Data Notes to Consolidated Financial Statements Years Ended December 31, 1996, 1995 and 1994 (Dollar Amounts in Thousands) NOTE 15--Retirement Plans All employees with at least one year of service are eligible to participate in the employee stock ownership plan ("ESOP"). Contributions to the plan are determined by the board of directors, and are based upon a prescribed percentage of the annual compensation of all participants. The ESOP acquired 36,880 shares of the Corporation's common stock in 1995, at a corresponding cost of $500, which the Corporation borrowed and concurrently loaned these amounts to the ESOP. These amounts represent leveraged and unallocated shares, and accordingly have been recorded as long-term debt and the offset as a reduction of the common shareholders' equity. Compensation cost related to the plan was $1,224 in 1996, $1,908 in 1995 and $1,070 in 1994. (See NOTE 16). The Corporation also has a savings plan pursuant to the provisions of section 401(k) of the Internal Revenue Code. Under the terms of the plan, each participant will receive an automatic employer contribution to the plan in an amount equal to 3% of compensation. Each participating employee may contribute up to 5% of compensation to the plan which is matched by the employer's contribution equal to 80% of the employee's contribution. Prior to January 1, 1996 the employer's matching contribution was 60% of the employee's contribution. The 401(k) plan expense was $1,638 in 1996, $1,294 in 1995 and $1,137 in 1994. NOTE 16--Unearned ESOP Shares The Corporation had borrowed amounts which were concurrently loaned to the First Commonwealth Financial Corporation Employee Stock Ownership Plan Trust ("ESOP") on the same terms. The combined balances of the ESOP related loans were $3,474 at December 31, 1996 and $4,545 at December 31, 1995. The loans have been recorded as long-term debt on the Corporation's consolidated balance sheets. A like amount of unearned ESOP shares was recorded as a reduction of common shareholders' equity. Unearned ESOP shares, included as a component of shareholders' equity, represents the Corporation's prepayment of future compensation expense. The shares acquired by the ESOP are held in a suspense account and will be released to the ESOP for allocation to the plan participants as the loan is reduced. Repayment of the loans are scheduled to occur over a nine year period from contributions to the ESOP by the Corporation and dividends on unallocated ESOP shares. The following is an analysis of ESOP shares held in suspense: (See NOTE 1 for the definition of "old" and "new shares"). Old New Total Shares Shares Shares in suspense December 31, 1994 395,902 278,996 116,906 Shares acquired during 1995 36,880 -0- 36,880 Shares allocated during 1995 (103,714) (84,537) (19,177) Shares in suspense December 31, 1995 329,068 194,459 134,609 Shares acquired during 1996 -0- -0- -0- Shares allocated during 1996 (82,980) (49,036) (33,944) Shares in suspense December 31, 1996 246,088 145,423 100,665 The fair market value of the new shares remaining in suspense was approximately $1,875 and $2,356 at December 31, 1996 and 1995 respectively. Interest on ESOP loans was $313 in 1996, $434 in 1995 and $312 in 1994. During 1996 and 1995 dividends on unallocated shares in the amount of $256 and $285 respectively were used for debt service while all dividends on allocated shares were allocated to the participants. Dividends on common shares held in the ESOP used for debt service were $478 in 1994. 45 FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES ITEM 8. Financial Statements and Supplementary Data Notes to Consolidated Financial Statements Years Ended December 31, 1996, 1995 and 1994 (Dollar Amounts in Thousands) NOTE 17--Stock Option Plans At December 31, 1996, the Corporation had a stock-based compensation plan, which is described below. The plan permits the executive compensation committee to grant options for up to one million shares of the Corporation's common stock through October 15, 2005. Although the vesting requirements and term of future options granted are at the discretion of the executive compensation committee, all options granted during 1996 require a three year vesting period and expire ten years from the grant date. The Corporation has elected, as permitted by FASB Statement 123, to apply APB Opinion 25 and related Interpretations in accounting for its plan. Accordingly, no compensation cost has been recognized for it stock options outstanding. Had compensation cost for the Corporation's stock option plan been determined based upon the fair value at the grant dates for awards under the plan consistent with the method of FASB Statement 123, the Corporation's net income and earnings per share would have been reduced to the pro forma amounts shown below: Net Income As reported $27,583 Pro forma $27,548 Earnings per share As reported $1.26 Pro forma $1.25 The fair value of each option granted is estimated on the date of the grant using the Black-Scholes options pricing model with the following weighted average assumptions used: dividend yield of 3% per annum, expected volatility of 10%, risk free interest rate of 6.7% and expected option life of 9.3 years. Under the Corporation's 1995 Stock Option Plan, the Corporation may grant options to its executives for up to one million shares of common stock. The Corporation also assumed the Stock Options of United National Bank Corporation ("Unitas") upon the merger of Unitas into the Corporation in 1994. There were no options granted under the plan during 1995. Options for 48,308 shares of the Corporation's common stock assumed from mergers were unexercised at December 31, 1996. A summary of the status of the Corporation's outstanding stock options as of December 31, 1996 and changes for the year ending on that date is presented below: Weighted-Average Exercise Shares Price Per Share Outstanding 1/1/96 58,134 $ 6.47 Granted 195,048 $18.375 Exercised (9,140) $ 6.44 Forfeited (10,734) $13.38 Outstanding 12/31/96 233,308 $16.10 46 FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES ITEM 8. Financial Statements and Supplementary Data Notes to Consolidated Financial Statements Years Ended December 31, 1996, 1995 and 1994 (Dollar Amounts in Thousands) NOTE 17--Stock Option Plans (Continued) The following table summarizes information about the stock options outstanding at December 31, 1996.
Options Outstanding Options Exercisable Weighted-Average Range of Number Outstanding Remaining Contract Weighted-Average Number Exercisable Weighted-Average Exercise Prices at 12/31/96 Life Exercise Price at 12/31/96 Exercise Price $5.00-5.99 27,874 4.8 $5.53 27,874 $5.53 $8.00-8.99 16,500 6.2 $8.07 16,500 $8.07 $18.375 188,934 9.3 $18.375 -0- -0- 233,308 44,374
NOTE 18--Commitments and Contingent Liabilities There are no material legal proceedings to which the Corporation or its subsidiaries are a party, or of which any of their property is the subject, except proceedings which arise in the normal course of business and, in the opinion of management, will not have any material adverse effect on the consolidated operations or financial position of the Corporation and its subsidiaries. NOTE 19--Related Party Transactions Some of the Corporation's or its subsidiaries' directors, executive officers, principal shareholders and their related interests, had transactions with the subsidiary banks in the ordinary course of business. All loans and commitments to loans in such transactions were made on substantially the same terms, including collateral and interest rates, as those prevailing at the time for comparable transactions. In the opinion of management, these transactions do not involve more than the normal risk of collectibility nor do they present other unfavorable features. It is anticipated that further such extensions of credit will be made in the future. The following is an analysis of loans to those parties whose aggregate loan balances exceeded $60 during 1996. Balances December 31, 1995 $ 9,285 Advances 10,458 Repayments (9,680) Other 1,050 Balances December 31, 1996 $11,113 "Other" primarily reflects the change in those classified as a "related party" as a result of mergers, resignations and retirements. NOTE 20--Regulatory Restrictions and Capital Adequacy The amount of funds available to the parent from its subsidiary banks is limited by restrictions imposed on all financial institutions by banking regulators. During 1996, dividends from subsidiary banks were restricted not to exceed $63,829. These restrictions have not had, and are not expected to have, a significant impact on the Corporation's ability to meet its cash obligations. 47 FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES ITEM 8. Financial Statements and Supplementary Data Notes to Consolidated Financial Statements Years Ended December 31, 1996, 1995 and 1994 (Dollar Amounts in Thousands) NOTE 20--Regulatory Restrictions and Capital Adequacy (Continued) The Corporation is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Corproration's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Corporation and its banking subsidiaries must meet specific capital guidelines that involve quantitative measures of the Corporation's assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Corporation's capital amounts and classification are also subject to qualitative judgements by the regulators about components, risk weighting, and other factors. Quantitative measures established by regulation to ensure capital adequacy require the Corporation to maintain minimum amounts and ratios of total and Tier I capital (common and certain other "core" equity capital) to risk weighted assets, and of Tier I capital to average assets. As of December 31, 1996, the Corporation and its banking subsidiaries meet all capital adequacy requirements to which they are subject. As of December 31, 1996, the most recent notifications from the Federal Reserve Board and Federal Deposit Insurance Corporation categorized the Corporation and First Commonwealth Bank as well capitalized under the regulatory framework for prompt corrective action. To be considered as well capitalized the Corporation and its banking subsidiaries must maintain minimum total risk-based capital, Tier I risk-based capital and Tier I leverage ratios as set forth in the table below. There are no conditions or events since that notification that management believes have changed the institution's category.
To Be Well Capitalized Under Prompt Corrective Actual Regulatory Minimum Action Provisions Amount Ratio Amount Ratio Amount Ratio As of December 31, 1996 Total Capital to Risk Weighted Assets First Commonwealth Financial Corporation $266,999 15.3% $139,303 8.0% First Commonwealth Bank $225,903 13.7% $131,642 8.0% $164,553 10.0% Tier I Capital to Risk Weighted Assets First Commonwealth Financial Corporation $247,531 14.2% $ 69,651 4.0% First Commonwealth Bank $207,437 12.6% $ 65,821 4.0% $ 98,732 6.0% Tier I Capital to Average Assets First Commonwealth Financial Corporation $247,531 9.7% $102,061 4.0% First Commonwealth Bank $207,437 8.7% $ 95,067 4.0% $118,833 5.0% As of December 31, 1995 Total Capital to Risk Weighted Assets First Commonwealth Financial Corporation $256,331 17.8% $115,214 8.0% First Commonwealth Bank $217,689 16.0% $108,832 8.0% $136,040 10.0% Tier I Capital to Risk Weighted Assets First Commonwealth Financial Corporation $238,186 16.5% $ 57,607 4.0% First Commonwealth Bank $200,541 14.7% $ 54,416 4.0% $ 81,624 6.0% Tier I Capital to Average Assets First Commonwealth Financial Corporation $238,186 10.2% $ 93,369 4.0% First Commonwealth Bank $200,541 9.2% $ 86,926 4.0% $108,657 5.0%
48 FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES ITEM 8. Financial Statements and Supplementary Data Notes to Consolidated Financial Statements Years Ended December 31, 1996, 1995 and 1994 (Dollar Amounts in Thousands) NOTE 21--Condensed Financial Information of First Commonwealth Financial Corporation (parent company only) Balance Sheets December 31, 1996 1995 Assets Cash $ 5,546 $ 7,730 Securities available for sale 2,148 3,918 Loans to affiliated parties 517 281 Investment in subsidiaries 250,242 239,834 Investment in jointly-owned company 2,214 1,768 Premises and equipment 4,050 2,835 Dividends receivable from subsidiaries 3,571 4,443 Receivable from related parties 922 237 Other assets 1,552 1,164 Total assets $270,762 $262,210 Liabilities and Shareholders' Equity Accrued expenses and other liabilities $ 1,491 $ 1,362 Dividends payable 4,439 4,027 Loans payable 3,474 4,545 Shareholders' equity 261,358 252,276 Total liabilities and shareholders' equity $270,762 $262,210 Statements of Income Years Ended December 31, 1996 1995 1994 Interest and dividends $ 104 $ 53 $ -0- Dividends from subsidiaries 24,433 31,194 17,260 Net securities (losses) (169) -0- -0- Other revenue 92 -0- -0- Operating expenses (8,510) (8,929) (7,561) Income before taxes and equity in undistributed earnings of subsidiaries 15,950 22,318 9,699 Applicable income tax benefits 2,845 2,781 2,673 Income before equity in undistributed earnings of subsidiaries 18,795 25,099 12,372 Equity in undistributed earnings of subsidiaries 8,788 427 16,364 Net income $27,583 $25,526 $28,736 49 FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES ITEM 8. Financial Statements and Supplementary Data Notes to Consolidated Financial Statements Years Ended December 31, 1996, 1995 and 1994 (Dollar Amounts in Thousands) NOTE 21--Condensed Financial Information of First Commonwealth Financial Corporation (parent company only) (Continued) Statements of Cash Flows Years Ended December 31, 1996 1995 1994 Operating Activities Net income $ 27,583 $ 25,526 $ 28,736 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,198 1,223 1,001 Net losses on sale of assets 167 -0- -0- Decrease (Increase) in prepaid income taxes 69 (156) (112) Undistributed equity in subsidiaries (8,788) (427) (16,364) Other - net (1,055) 224 (935) Net cash provided by operating activities 19,174 26,390 12,326 Investing Activities Transactions with securities available for sale: Purchases of investment securities (317) (2,133) -0- Sales of investment securities 3,331 -0- -0- Net change in loans to affiliated parties (236) (281) -0- Purchases of premises and equipment (1,714) (931) (1,372) Acquisition of and additional investment in subsidiary, net of cash received (1,913) -0- 186 Net cash used by investing activities (849) (3,345) (1,186) Financing Activities Repayment of long-term debt -0- (1,500) (500) Tax benefit of ESOP dividend -0- -0- 81 Discount on dividend reinvestment plan purchases (530) (342) (212) Treasury stock acquired (4,050) (1,583) (82) Treasury stock reissued 108 316 -0- Cash dividends paid (16,037) (14,326) (10,878) Net cash used by financing activities (20,509) (17,435) (11,591) Net (decrease) increase in cash (2,184) 5,610 (451) Cash at beginning of year 7,730 2,120 2,571 Cash at end of year $ 5,546 $ 7,730 $ 2,120 50 FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES ITEM 8. Financial Statements and Supplementary Data Notes to Consolidated Financial Statements Years Ended December 31, 1996, 1995 and 1994 (Dollar Amounts in Thousands) NOTE 21--Condensed Financial Information of First Commonwealth Financial Corporation (parent company only) (Continued) Supplemental schedule of noncash investing and financing activities The Corporation borrowed $500 in 1995, $1,730 in 1994 and concurrently loaned these amounts to the ESOP on identical terms. The loans were recorded as long-term debt and the offset was recorded as a reduction of the common shareholders' equity. Loan payments in the amount of $1,071 in 1996, $1,151 in 1995 and $983 in 1994 were made by the ESOP thereby reducing the outstanding amount related to unearned ESOP shares to $3,474 at December 31, 1996. Dividends from subsidiaries for 1996 include a special dividend in the amount of $12,000 received from First Commonwealth Bank ("FCB"), a wholly- owned subsidiary. After distribution of the special dividend, which was within guidelines established by the banking regulators, FCB remains classified as a well capitalized institution. Included in this special dividend was a dividend-in-kind from FCB in the amount of $1,654, which was received in the form of securities available for sale. This amount was recorded as a reduction of investment in subsidiary and is included in securities available for sale at December 31, 1996. Dividends from subsidiaries for 1995 include a special dividend in the amount of $12,415 received from Reliable Savings Bank, a wholly-owned subsidiary. After distribution of the special dividend, which was within guidelines established by the banking regulators, Reliable remains classified as a well capitalized institution. Included in this special dividend was a dividend- in-kind from Reliable in the amount of $1,259, which was received in the form of securities available for sale. This amount was recorded as a reduction of investment in subsidiary and is included in securities available for sale at December 31, 1995. NOTE 22--Fair Values of Financial Instruments Below are various estimated fair values at December 31, 1996 and 1995, as required by Statement of Financial Accounting Standards No. 107 ("FAS No. 107"). Such information, which pertains to the Corporation's financial instruments, is based on the requirements set forth in FAS No. 107 and does not purport to represent the aggregate net fair value of the Corporation. It is the Corporation's general practice and intent to hold its financial instruments to maturity, except for certain securities designated as securities available for sale, and not to engage in trading activities. Many of the financial instruments lack an available trading market, as characterized by a willing buyer and seller engaging in an exchange transaction. Therefore, the Corporation had to use significant estimations and present value calculations to prepare this disclosure. Changes in the assumptions or methodologies used to estimate fair values may materially affect the estimated amounts. Also, management is concerned that there may not be reasonable comparability between institutions due to the wide range of permitted assumptions and the methodologies in absence of active markets. This lack of uniformity gives rise to a high degree of subjectivity in estimating financial instrument fair values. The following methods and assumptions were used by the Corporation in estimating financial instrument fair values: Cash and short-term instruments: The balance sheet carrying amounts for cash and short-term instruments approximate the estimated fair values of such assets. 51 FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES ITEM 8. Financial Statements and Supplementary Data Notes to Consolidated Financial Statements Years Ended December 31, 1996, 1995 and 1994 (Dollar Amounts in Thousands) NOTE 22--Fair Values of Financial Instruments (Continued) Securities: Fair values for securities held to maturity and securities available for sale are based on quoted market prices, if available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments. The carrying value of nonmarketable equity securities, such as Federal Reserve Bank stock and Federal Home Loan Bank stock, is considered a reasonable estimate of fair value. Loans receivable: Fair values of variable rate loans subject to frequent repricing and which entail no significant credit risk are based on the carrying values. The estimated fair values of other loans are estimated by discounting the future cash flows using interest rates currently offered for loans with similar terms to borrowers of similar credit quality. The carrying amount of accrued interest is considered a reasonable estimate of fair value. Off-balance-sheet instruments: Many of the Corporation's off-balance-sheet instruments, primarily loan commitments and standby letters of credit, are expected to expire without being drawn upon, therefore the commitment amounts do not necessarily represent future cash requirements. Management has determined that due to the uncertainties of cash flows and difficulty in predicting the timing of such cash flows, fair values were not estimated for these instruments. Deposit liabilities: For deposits which are payable on demand at the reporting date, representing all deposits other than time deposits, management estimates that the carrying value of such deposits is a reasonable estimate of fair value. The carrying amounts of variable rate time deposit accounts and certificates of deposit approximate their fair values at the report date. Fair values of fixed rate time deposits are estimated by discounting the future cash flows using interest rates currently being offered and a schedule of aggregated expected maturities. The carrying amount of accrued interest approximates its fair value. Short-term borrowings: The carrying amounts of short-term borrowings such as Federal funds purchased, securities sold under agreements to repurchase, borrowings from the Federal Home Loan Bank and treasury, tax and loan notes approximate their fair values. Long-term debt: The carrying amounts of variable rate debt approximate their fair values at the report date. Fair values of fixed rate debt are estimated by discounting the future cash flows using the Corporation's estimated incremental borrowing rate for similar types of borrowing arrangements. 52 FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES ITEM 8. Financial Statements and Supplementary Data Notes to Consolidated Financial Statements Years Ended December 31, 1996, 1995 and 1994 (Dollar Amounts in Thousands) The following table presents carrying amounts and estimated fair values of the Corporation's financial instruments at December 31, 1996 and 1995. 1996 1995 Estimated Estimated Carrying Fair Carrying Fair Amount Value Amount Value Financial assets Cash and due from banks $ 69,406 $ 69,406 $ 62,381 $ 62,381 Interest-bearing deposits with banks 4,199 4,199 8,288 8,288 Federal funds sold -0- -0- 4,800 4,800 Securities available for sale 244,415 244,415 244,193 244,193 Investments held to maturity 459,746 457,189 504,509 503,568 Loans, net of allowance 1,728,011 1,766,390 1,469,390 1,509,057 Financial liabilities Deposits 2,104,783 2,114,561 1,962,760 1,972,313 Short-term borrowings 150,330 150,330 120,774 120,774 Long-term debt 40,880 39,022 5,261 5,296 53 FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES ITEM 8. Financial Statements and Supplementary Data REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Board of Directors First Commonwealth Financial Corporation We have audited the consolidated balance sheets of First Commonwealth Financial Corporation and subsidiaries (the Corporation) as of December 31, 1996 and 1995, and the related consolidated statements of income, changes in shareholders' equity and cash flows for each of the three years in the period ended December 31, 1996. These financial statements are the responsibility of the Corporation's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of First Commonwealth Financial Corporation and subsidiaries as of December 31, 1996 and 1995, and the consolidated results of their operations and their consolidated cash flows for each of the three years in the period then ended in conformity with generally accepted accounting principles. /S/GRANT THORNTON LLP Philadelphia, Pennsylvania January 17, 1997 54 FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES ITEM 8. Financial Statements and Supplementary Data Quarterly Summary of Financial Data - Unaudited (Dollar Amounts in Thousands, except per share data) The unaudited quarterly results of operations for the years ended December 31, 1996 and 1995 are as follows.
1996 First Second Third Fourth Quarter Quarter Quarter Quarter Interest income.............................. $44,270 $44,694 $45,550 $47,815 Interest expense............................. 20,845 21,281 22,653 23,546 Net interest income..................... 23,425 23,413 22,897 24,269 Provision for possible credit losses......... 900 1,050 1,200 1,351 Net interest income after provision for possible credit losses..................... 22,525 22,363 21,697 22,918 Securities gains (losses).................... 8 (57) 1 1,451 Other operating income....................... 2,933 2,992 3,267 3,146 Other operating expenses..................... 14,993 15,428 16,734 16,434 Income before taxes..................... 10,473 9,870 8,231 11,081 Applicable income taxes...................... 3,360 2,982 2,369 3,361 Net income.............................. $ 7,113 $ 6,888 $ 5,862 $ 7,720 Earnings per share........................... $ 0.32 $ 0.31 $ 0.27 $ 0.35
1995 First Second Third Fourth Quarter Quarter Quarter Quarter Interest income.............................. $42,918 $43,819 $44,244 $44,720 Interest expense............................. 19,948 20,665 20,594 21,211 Net interest income..................... 22,970 23,154 23,650 23,509 Provision for possible credit losses......... 793 837 815 1,680 Net interest income after provision for possible credit losses..................... 22,177 22,317 22,835 21,829 Securities gains (losses).................... 24 (628) -0- 1 Other operating income....................... 2,517 2,909 2,730 2,851 Other operating expenses..................... 15,417 15,705 14,381 16,559 Income before taxes..................... 9,301 8,893 11,184 8,122 Applicable income taxes...................... 3,011 2,898 3,729 2,336 Net income.............................. $ 6,290 $ 5,995 $ 7,455 $ 5,786 Earnings per share........................... $ 0.29 $ 0.27 $ 0.34 $ 0.26
55 FIRST COMMONWEALTH FINANCIAL CORPORATION ITEM 9 - DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information appearing in the definitive Proxy Statement related to the annual meeting of security holders to be held April 28, 1997 is incorporated herein by reference in response to the listing of directors. The table below lists the current executive officers of the Corporation. Name Age Positions Held During the Past Five Years E. James Trimarchi 74 Chairman of the Board of the Corporation, Chairman of the Board of FCTC, CSC, and FCB; Director of CTCLIC and New Mexico Banquest Investors Corp.; Former President and Chief Executive Officer of the Corporation Joseph E. O'Dell 51 President and Chief Executive Officer of the Corporation, Director of FCB and FCTC, Vice Chairman of the Board of CSC; Former Senior Executive Vice President and Chief Operating Officer of the Corporation; former President and Chief Executive Officer of FCB Gerard M. Thomchick 41 Senior Executive Vice President and Chief Operating Officer of the Corporation; President, Chief Executive Officer and Director of CTCLIC; Director of FCB and FCTC David R. Tomb, Jr. 65 Senior Vice President, Secretary and Treasurer of the Corporation; Secretary and Cashier of FCB; Director of FCB, CSC, FCTC and CTCLIC John J. Dolan 40 Senior Vice President, Comptroller and Chief Financial Officer of the Corporation; Comptroller and Chief Financial Officer of FCB; Chief Financial Officer, Comptroller of CTCLIC;, Treasurer and Assistant Secretary of FCTC; Comptroller and Chief Financial Officer of BSI William R. Jarrett 62 Senior Vice President of the Corporation, Director of RSB, Former managing partner of Jarrett Stokes & Co. Certified Public Accountants, until his employment by the Corporation on April 15, 1994. R. John Previte 47 Senior Vice President, Investments of the Corporation Rosemary Krolick 43 Senior Vice President and Chief Information Officer of the Corporation; President and Chief Executive Officer of CSC George E. Dash 46 Senior Executive Vice President and Chief Operating Officer of FCB; former Senior Vice President, Sales and Marketing of the Corporation 56 FIRST COMMONWEALTH FINANCIAL CORPORATION ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (Continued) Each of the officers identified above has held the position indicated above or other executive positions with the same entity (or a subsidiary thereof) for at least the past five years except where noted. Executive officers of the Corporation serve at the pleasure of the Board of Directors of the Corporation and for a term of office extending through the election and qualification of their successors. ITEM 11 - MANAGEMENT RENUMERATION Information appearing in the definitive Proxy Statement related to the annual meeting of security holders to be held April 28, 1997 is incorporated herein by reference in response to this item. ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information appearing in the definitive Proxy Statement related to the annual meeting of security holders to be held April 28, 1997 is incorporated herein by reference in response to this item. ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information appearing in the definitive Proxy Statement related to the annual meeting of security holders to be held April 28, 1997 is incorporated herein by reference in response to this item. 57 FIRST COMMONWEALTH FINANCIAL CORPORATION PART IV ITEM 14 - EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM 8-K (A) Documents Filed as Part of this Report 1) Financial Statements All financial statements of the registrant as set forth under Item 8 of this Report on Form 10-K. 2) Financial Statement Schedules Schedule Number Description Page I Indebtedness to Related Parties N/A II Guarantees of Securities of Other Issuers N/A Page Number or Exhibit Incorporated by 3) Number Description Reference to 3.1 Articles of Incorporation Exhibit 3(i) to the Corporation's quarterly report on Form 10Q for the quarter ended March 31, 1994 3.2 By-Laws of Registrant Exhibit 3.2 to Form S-4 filed October 15, 1993 10.1 Employment Contract Exhibit 10.2 to Form S-4 Sumner E. Brumbaugh Filed October 15, 1993 10.2 Employment Contract Exhibit 10.3 to Form S-4 Robert F. Koslow filed October 15, 1993 10.3 Employment Contract Exhibit 10.4 to Form S-4 Robert C. Williams filed June 17, 1994 10.4 Change in Control Exhibit 10.4 to Form 10-K Agreement dated filed March 21, 1996 October 27, 1995 Joseph E. O'Dell 10.5 Change in Control Exhibit 10.5 to Form 10-K Agreement dated filed March 21, 1996 October 27, 1995 Gerard M. Thomchick 10.6 Change in Control Exhibit 10.6 to Form 10-K Agreement dated filed March 21, 1996 October 30, 1995, entered into between First Commonwealth Financial Corporation and John J. Dolan, together with a schedule listing substantially identical Change in Control Agreements with the following individuals: George E. Dash, William R. Jarrett, R. John Previte, David L. Dawson, Johnston A. Glass, Rosemary Krolick, William Miksich, Domenic P. Rocco, Timothy P. Sissler, Ronald R. Stacy, Robert C. Wagner and C. Dean Wingard. 21.1 Subsidiaries of the Registrant 58 FIRST COMMONWEALTH FINANCIAL CORPORATION ITEM 14 - EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM 8-K PART IV (Continued) 23.1 Consent of Grant Thornton LLP Certified Public Accountants 24.1 Power of Attorney (B) Report on Form 8-K None 59 FIRST COMMONWEALTH FINANCIAL CORPORATION SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934 the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in Indiana, Pennsylvania, on the 25th day of March 1997. FIRST COMMONWEALTH FINANCIAL CORPORATION (Registrant) /S/JOSEPH E. O'DELL Joseph E. O'Dell, President and Chief Executive Officer 60 EX-21 2 FIRST COMMONWEALTH FINANCIAL CORPORATION Exhibit 21.1 - SUBSIDIARIES OF FIRST COMMONWEALTH FINANCIAL CORPORATION Percent Ownership By Registrant First Commonwealth Bank 100% 22 North Sixth Street Indiana, PA 15701 Reliable Financial Corporation 100% 428 Station Street Bridgeville, PA 15017 Unitas Mortgage Corporation 100% 17 East High Street Carlisle, PA 17013 Unitas Financial Corporation 100% PO Box 777 Chambersburg, PA 17201 Commonwealth Systems Corporation 100% 22 North Sixth Street Indiana, PA 15701 Incorporated under the laws of Pennsylvania First Commonwealth Trust Company 100% 614 Philadelphia Street Indiana, PA 15701 Incorporated under the laws of Pennsylvania BSI Financial Services Inc. 100% 101 North Second Street Titusville, PA 16354 Commonwealth Trust Credit Life Insurance Company 50% 100 West Clarendon, Suite 800 Phoenix, AZ 85013 EX-23 3 FIRST COMMONWEALTH FINANCIAL CORPORATION Exhibit 23.1 - CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS We have issued our report dated January 17, 1997, accompanying the consolidated financial statements incorporated by reference of First Commonwealth Financial Corporation and subsidiaries on Form 10K for the year ended December 31, 1996. We hereby consent to the incorporation by reference of said reports in the Registration Statement of First Commonwealth Financial Corporation and subsidiaries on Form S-8 (File No. 33-55687) effective September 29, 1994. /S/Grant Thornton LLP Philadelphia, Pennsylvania March 28, 1997 EX-24 4 FIRST COMMONWEALTH FINANCIAL CORPORATION Exhibit 24.1 - POWER OF ATTORNEY KNOWN ALL ME BY THESE PRESENT - that each person whose signature appears below constitutes and appoints Joseph E. O'Dell and David R. Tomb, Jr., and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to do done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or either of them, or their or his substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1934, this report has been signed by the following persons in the capacities and on the dates indicated. SIGNATURE AND CAPACITY DATE /S/JOSEPH E. O'DELL March 18, 1997 Joseph E. O'Dell, President and CEO and Director /S/DAVID R. TOMB, JR. March 18, 1997 David R. Tomb, Jr., Senior Vice President, Secretary and Treasurer and Director /S/JOHN J. DOLAN March 18, 1997 John J. Dolan, Sr. Vice President and Comptroller & CFO (1) /S/CHARLES J. SHEFTIC March 18, 1997 Charles J. Sheftic, Director /S/RONALD C. GEISER March 18, 1997 Ronald C. Geiser, Director /S/SUMNER E. BRUMBAUGH March 18, 1997 Sumner E. Brumbaugh, Director /S/JOHNSTON A. GLASS March 18, 1997 Johnston A. Glass, Director /S/E. H. BRUBAKER March 18, 1997 E. H. Brubaker, Director /S/HARVEY H. HEILMAN March 18, 1997 Harvey H. Heilman, Director /S/DAVID F. IRVIN March 20, 1997 David F. Irvin, Director /S/DAVID L. JOHNSON March 20, 1997 David L. Johnson, Director /S/EDWARD T. COTE March 20, 1997 Edward T. Cote , Director (1) Also Chief Accounting Officer EX-27 5
9 1,000 YEAR DEC-31-1996 JAN-01-1996 DEC-31-1996 69,406 4,199 0 0 244,415 459,746 457,189 1,778,130 19,324 2,584,638 2,104,783 15,030 27,287 40,880 0 0 22,437 238,921 2,584,638 138,654 43,177 498 182,329 80,712 88,325 94,004 4,501 1,403 63,589 39,655 27,583 0 0 27,583 1.26 1.26 7.89 7,906 12,044 280 0 18,152 4,234 905 19,324 16,383 0 2,941
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