-----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, IG010ZfSJJfq4jkNrJZCBviD/ESwiDcZfGw+1zG1bQroAVfRNmnjOPmNr4h8x16X 4uiPqnOeR48+chMf+bah2w== 0000712537-99-000014.txt : 19990518 0000712537-99-000014.hdr.sgml : 19990518 ACCESSION NUMBER: 0000712537-99-000014 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990517 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST COMMONWEALTH FINANCIAL CORP /PA/ CENTRAL INDEX KEY: 0000712537 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 251428528 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-11138 FILM NUMBER: 99627216 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. BOX 400 CITY: INDIANA STATE: PA ZIP: 15701 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C 20549 ( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1999 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to 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 of (I.R.S. Employer incorporation or organization) Identification No.) 22 North Sixth Street Indiana, PA 15701 (Address of principal executive offices) (Zip Code) 724-349-7220 (Registrant's telephone number, including area code) N/A (Former name, former address and former fiscal year, if changed since last report.) Indicate a check mark 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 X No . Number of shares outstanding of issuer's common stock, $1.00 Par Value as of May 11, 1999 was 30,967,352. FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Included in Part I of this report: PAGE First Commonwealth Financial Corporation and Subsidiaries Consolidated Balance Sheets . . . . . 3 Consolidated Statements of Income. . . . . . . . . 4 Consolidated Statements of Changes in Shareholders' Equity . . . . . . . . . . . . . . 5 Consolidated Statements of Cash Flows. . . . . . . 6 Notes to Consolidated Financial Statements . . . . 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS . . . . . . . . 9 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK . . . . . . . . . . . . . . . . . . . . . . . . 23 PART II - OTHER INFORMATION Other Information . . . . . . . . . . . . . . . . . . . . . . 24 Signatures . . . . . . . . . . . . . . . . . . . . Signature Page FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Dollars in thousands) March 31, December 31, 1999 1998 ASSETS Cash and due from banks on demand.... $ 79,886 $ 96,615 Interest-bearing deposits with banks. 1,859 1,914 Federal funds sold .................. 1,100 1,000 Securities available for sale, at market.............................. 1,123,255 1,042,636 Securities held to maturity, at cost, (market value $483,784 in 1999 and $486,185 in 1998).................. 481,348 482,696 Loans................................ 2,366,833 2,382,229 Unearned income.................... (6,139) (7,379) Allowance for possible credit losses (33,106) (32,304) Net loans....................... 2,327,588 2,342,546 Property and equipment............... 41,757 41,929 Other real estate owned.............. 2,053 2,370 Other assets......................... 114,547 85,083 TOTAL ASSETS.................... $4,173,393 $4,096,789 LIABILITIES Deposits (all domestic): Noninterest-bearing................ $ 240,090 $ 264,082 Interest-bearing................... 2,665,000 2,667,049 Total deposits.................. 2,905,090 2,931,131 Short-term borrowings................ 238,455 140,547 Other liabilities.................... 43,094 38,856 Long-term debt....................... 630,082 630,850 Total liabilities............... 3,816,721 3,741,384 SHAREHOLDERS' EQUITY Preferred stock, $1 par value per share, 3,000,000 shares authorized, none issued........................ -0- -0- Common stock $1 par value per share, 100,000,000 shares authorized; 31,262,706 shares issued; 30,941,973 and 30,937,973 shares outstanding in 1999 and 1998, respectively........ 31,263 31,263 Additional paid-in capital........... 100,062 100,240 Retained earnings.................... 240,511 235,623 Accumulated other comprehensive income (2,027) 2,199 Treasury stock (320,733 shares at March 31, 1999 and 324,733 at December 31, 1998, at cost)........ (5,840) (5,913) Unearned ESOP shares................. (7,297) (8,007) Total shareholders' equity......... 356,672 355,405 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.......... $4,173,393 $4,096,789 The accompanying notes are an integral part of these consolidated financial statements. 3 FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (Dollars in thousands except per share data) For the 3 Months Ended March 31, 1999 1998 Interest Income Interest and fees on loans......... $48,273 $50,957 Interest and dividends on investments: Taxable interest................. 20,465 15,290 Interest exempt from Federal income taxes.................... 2,249 1,374 Dividends........................ 704 371 Interest on Federal funds sold..... 49 428 Interest on bank deposits.......... 61 30 Total interest income........... 71,801 68,450 Interest Expense Interest on deposits............... 25,867 28,385 Interest on short-term borrowings 2,429 2,892 Interest on long-term debt......... 8,444 3,924 Total interest expense.......... 36,740 35,201 Net Interest Income.................. 35,061 33,249 Provision for possible credit losses............................ 2,213 2,475 Net interest income after provision for possible credit losses......... 32,848 30,774 Other Income Securities gains................... 563 982 Trust income....................... 1,814 1,274 Service charges on deposit accounts 2,058 1,961 Other income....................... 3,447 1,821 Total other income.............. 7,882 6,038 Other Expenses Salaries and employee benefits..... 13,078 12,463 Net occupancy expense.............. 1,756 1,761 Furniture and equipment expense.... 1,491 1,458 Data processing expense............ 848 751 Pennsylvania shares tax expense.... 847 783 Other operating expenses........... 6,171 5,714 Total other expenses............ 24,191 22,930 Income before income taxes........... 16,539 13,882 Applicable income taxes............ 4,534 3,900 Net income........................... $12,005 $ 9,982 Average Shares Outstanding...........30,576,354 30,803,977 Average Shares Outstanding Assuming Dilution..................30,716,285 31,011,647 Per Share Data: Basic earnings per share........... $ 0.39 $ 0.32 Diluted earnings per share......... $ 0.39 $ 0.32 Cash dividends per share........... $ 0.23 $ 0.22 The accompanying notes are an integral part of these consolidated financial statements. 4 FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited) (Dollars in thousands)
Accumulated Additional Other Unearned Total Common Paid-in Retained Comprehensive Treasury ESOP Shareholders' Stock Capital Earnings Income Stock Shares Equity Balance at December 31, 1997......$31,661 $106,659 $228,230 $ 2,156 $(11,947) $(2,436) $354,323 Comprehensive income Net income...................... -0- -0- 9,982 -0- -0- -0- 9,982 Other comprehensive income, net of tax: Unrealized holding gains (losses) on securities arising during the period............ -0- -0- -0- (135) -0- -0- (135) Less: reclassification adjust- ment for gains on securities included in net income....... -0- -0- -0- (622) -0- -0- (622) Total other comprehensive income....................... -0- -0- -0- (757) -0- -0- (757) Total comprehensive income...... -0- -0- 9,982 (757) -0- -0- 9,225 Cash dividends declared......... -0- -0- (5,934) -0- -0- -0- (5,934) Decrease in unearned ESOP shares -0- -0- -0- -0- -0- 143 143 Discount on dividend reinvestment plan purchases................ -0- (262) -0- -0- -0- -0- (262) Treasury stock acquired......... -0- -0- -0- -0- (105) -0- (105) Treasury stock reissued......... -0- (55) -0- -0- 887 -0- 832 Balance at March 31, 1998.........$31,661 $106,342 $232,278 $ 1,399 $(11,165) $(2,293) $358,222 Balance at December 31, 1998......$31,263 $100,240 $235,623 $ 2,199 $ (5,913) $(8,007) $355,405 Comprehensive income Net income...................... -0- -0- 12,005 -0- -0- -0- 12,005 Other comprehensive income, net of tax: Unrealized holding gains (losses) on securities arising during the period............ -0- -0- -0- (3,860) -0- -0- (3,860) Less: reclassification adjust- ment for gains on securities included in net income....... -0- -0- -0- (366) -0- -0- (366) Total other comprehensive income....................... -0- -0- -0- (4,226) -0- -0- (4,226) Total comprehensive income...... -0- -0- 12,005 (4,226) -0- -0- 7,779 Cash dividends declared......... -0- -0- (7,117) -0- -0- -0- (7,117) Decrease in unearned ESOP shares -0- -0- -0- -0- -0- 710 710 Discount on dividend reinvestment plan purchases................ -0- (179) -0- -0- -0- -0- (179) Treasury stock acquired......... -0- -0- -0- -0- -0- -0- -0- Treasury stock reissued......... -0- 1 -0- -0- 73 -0- 74 Balance at March 31, 1999.........$31,263 $100,062 $240,511 $(2,027) $(5,840) $(7,297) $356,672
The accompanying notes are an integral part of these consolidated financial statements. 5 FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in thousands) For the 3 Months Ended March 31, 1999 1998 Operating Activities Net income....................................... $12,005 $ 9,982 Adjustments to reconcile net income to net cash provided by operating activities: Provision for possible loan losses............ 2,213 2,475 Depreciation and amortization................. 2,217 1,727 Net gains on sales of assets.................. (1,389) (1,004) Income from increase in cash surrender value of bank owned life insurance................. (519) (323) Decrease (Increase) in interest receivable.... 92 (810) Increase (Decrease) in interest payable....... (1,071) 342 Increase in income taxes payable.............. 5,363 3,712 Change in deferred taxes...................... (1,819) 203 Other-net..................................... (7,856) (2,948) Net cash provided by operating activities... 9,236 13,356 Investing Activities Transactions with securities held to maturity: Proceeds from sales........................... -0- -0- Proceeds from maturities and redemptions...... 33,134 40,409 Purchases..................................... (31,768) (23,090) Transactions with securities available for sale: Proceeds from sales........................... 38,085 59,058 Proceeds from maturities and redemptions...... 68,668 26,754 Purchases..................................... (193,328) (300,836) Proceeds from sales of loans and other assets.... 56,257 5,685 Investment in bank owned life insurance......... (20,000) -0- Net decrease (increase) in time deposits with banks........................................... 55 (1,350) Net increase in loans............................ (42,454) (39,988) Purchases of premises and equipment.............. (1,134) (2,149) Net cash used by investing activities....... (92,485) (235,507) Financing Activities Repayments of long-term debt..................... (57) (18,507) Proceeds from issuance of long-term debt......... -0- 200,000 Discount on dividend reinvestment plan purchases. (178) (262) Dividends paid................................... (5,086) (5,923) Net increase in Federal funds purchased.......... 64,900 64,600 Net increase (decrease) in other short-term borrowings...................................... 33,008 (15,176) Net increase (decrease) in deposits.............. (26,041) 10,026 Purchase of treasury stock....................... -0- (105) Proceeds from sale of treasury stock............. 74 832 Net cash provided by financing activities... 66,620 235,485 Net increase (decrease) in cash and cash equivalents................................ (16,629) 13,334 Cash and cash equivalents at January 1............. 97,615 112,380 Cash and cash equivalents at March 31.............. $80,986 $125,714 The accompanying notes are an integral part of these consolidated financial statements. 6 FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 1999 (Unaudited) NOTE 1 Management Representation In the opinion of management, the unaudited interim consolidated financial statements include all adjustments (consisting of only normal recurring adjustments) necessary for a fair statement of financial position as of March 31, 1999 and the results of operations for the three month periods ended March 31, 1999 and 1998, and statements of cash flows and changes in shareholders' equity for the three month periods ended March 31, 1999 and 1998. The results of the three months ended March 31, 1999 and 1998 are not necessarily indicative of the results to be expected for the entire year. The interim consolidated financial statements should be read in conjunction with the annual consolidated financial statements of First Commonwealth Financial Corporation and Subsidiaries, including the notes thereto. NOTE 2 Cash Flow Disclosures (dollar amounts in thousands) 1999 1998 Cash paid during the first three months of the year for: Interest $37,811 $32,799 Income Taxes $ 950 $ -0- Noncash investing and financing activities: ESOP loan reductions $ 711 $ 143 Loans transferred to other real estate owned and repossessed assets $ 1,446 $ 1,605 NOTE 3 Comprehensive Income Disclosures The following table identifies the related tax effects allocated to each component of other comprehensive income in the Statements of Changes in Shareholders' Equity: (dollar amounts in thousands)
March 31, 1999 March 31, 1998 Tax Net of Tax Net of Pre-tax (Expense) Tax Pre-tax (Expense) Tax Amount Benefit Amount Amount Benefit Amount Unrealized gains (losses) on securities: Unrealized holding gains (losses) arising during the period $(5,939) $2,079 $(3,860) $ (206) $ 71 $(135) Less: reclassification adjustment for gains realized in net income (563) 197 (366) (957) 335 (622) Net unrealized gains (6,502) 2,276 (4,226) (1,163) 406 (757) Other comprehensive income $(6,502) $2,276 $(4,226) $(1,163) $406 $(757)
7 FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 1999 (Unaudited) NOTE 4 New Accounting Pronouncements Effective January 1, 1999, the Corporation adopted the Financial Accounting Standards Board Statement No. 134, "Accounting for Mortgage-Backed Securities Retained after the Securitization of Mortgage Loans Held for Sale by a Mortgage Banking Enterprise" ("FAS No. 134"). FAS No. 134 amends FAS No. 65 "Accounting for Certain Mortgage Banking Activities". FAS No. 65 requires that after the securitization of mortgage loans held for sale, an entity engaged in mortgage banking activities classify the resulting mortgage-backed securities as trading securities while FAS No. 134 requires the resulting mortgage-backed securities or other retained interests be classified based on the entity's ability and intent to sell or hold those investments. On the date FAS No. 134 is initially applied, an enterprise may reclassify mortgage backed securities and other beneficial interests retained after the securitization of mortgage loans held for sale from the trading category, except for those with sales commitments in place. The Corporation currently holds no mortgage backed securities or other beneficial interests retained after the securitization of mortgage loans held for sale. The adoption of FAS No. 134 did not have a material impact on the Corporation's financial condition or results of operations. In June 1998, the Financial Accounting Standards Board ("FASB") issued statement No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("FAS No. 133") which is effective for the first quarter of years beginning after June 15, 1999. FAS No. 133 establishes accounting and reporting standards for derivative instruments and for hedging activities which require that an entity recognize all derivatives as either assets or liabilities in a balance sheet and measure those instruments at fair value. Management believes that adoption of FAS No. 133 will not have a material impact on the Corporation's financial condition or results of operations. NOTE 5 Subsequent Event Effective April 1, 1999 the Corporation sold all of the outstanding common stock of BSI Financial Services Inc. ("BSI"), a wholly-owned subsidiary of the Corporation, to First Bank Richmond headquartered in Richmond, Indiana. Cash proceeds in the amount of $1.7 million were received, resulting in a loss on sale of $167 thousand which will be reflected in the financial statements for the second quarter of 1999. BSI provided mortgage banking, loan servicing and collection services to the Corporation's subsidiary banks and unaffiliated organizations. Services performed by BSI for the subsidiary banks will be transferred to the subsidiary banks or other nonbank subsidiaries of the Corporation. 8 ITEM 2. FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS First Three Months of 1999 as Compared to the First Three Months of 1998 This discussion and the related financial data are presented to assist in the understanding and evaluation of the consolidated financial condition and results of operations of First Commonwealth Financial Corporation (the "Corporation") including its subsidiaries. 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 this "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 management's 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. Net income in the three months of 1999 was $12.0 million reflecting an increase of $2.0 million over 1998 results of $10.0 million. Net income excluding the impact of securities transactions and mortgage sales reflected an increase of $1.7 million or 18% when comparing the three months of 1999 to the same period of 1998. Basic earnings per share of $0.39 for the three months of 1999 increase $0.07 per share over basic earnings per share of $0.32 for the three months of 1998. Changes in net interest income increased earnings by $0.07 per share during 1999 while the impact of mortgage sales increased earnings per share $0.03 during 1999. Mortgage loans with a book value of $42.2 million were sold during the first quarter of 1999 resulting in a gain on sale of $890 thousand. Return on average assets was 1.18% and return on average equity was 13.45% during the 1999 period, compared to 1.07% and 11.25%, respectively during the same period of 1998. 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 $35.1 million for the three months of 1999 compared to $33.2 million for the same period of 1998. Net interest margin (net interest income, on a tax-equivalent basis, as a percentage of average earning assets) for the 1999 period was 3.81%, reflecting a decrease of 10 basis points (0.10%) from 3.91% reported in 1998. 9 ITEM 2. FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) RESULTS OF OPERATIONS (Continued) First Three Months of 1999 as Compared to the First Three Months of 1998 (Continued) Interest and fees on loans decreased $2.7 million for 1999 over 1998 levels including a decrease due to volume of $1.3 million and a decrease due to rate of $1.4 million. Average loans for the first quarter of 1999 decreased $67.8 million compared to averages for the first quarter of 1998, primarily in residential mortgage loans and indirect auto loans. The total yield on loans decreased 20 basis points (0.20%) for the three months of 1999 compared to the three months of 1998. Loan yields on innovative loan products introduced in previous years which bear lower introductory interest rates continue to increase during 1999 as these products aged and introductory interest rates were no longer offered on aged loans, but since many of these loans are still at introductory rates these products continue to generate lower yields than the mortgage loan portfolio as a whole. Interest income on investments increased $6.4 million for the three months of 1999 compared to the corresponding period of 1998 primarily as result of increases due to volume of $5.9 million and decreases due to rate of $398 thousand in U.S. government agency securities. Average balances of U.S. government agency securities for the three months of 1999 increased $367.0 million over 1998 averages as part of a capital management leveraging strategy whereby borrowings from the Federal Home Loan Bank classified as long-term debt were invested in U.S. government agency securities. Investment income on state and municipal bonds and asset backed securities also reflected increases during 1999 compared to the 1998 period of $885 thousand and $727 thousand respectively. Yields on investments for the 1999 period reflected a decrease of 5 basis points (0.05%) over 1998 yields. Interest on deposits decreased $2.5 million for the 1999 period compared to 1998, and included decreases in interest on time deposits of $2.0 million and decreases in interest on total savings deposits of $546 thousand. The decrease in interest on total savings deposits included decreases due to rate of $1.1 million which were partially offset by increases due to volume of $554 thousand. Interest expense on time deposits for the first quarter of 1999 compared to the first quarter of 1998 reflected decreases due to volume of $898 thousand and decreases due to rate of $1.1 million. Cost of total savings deposits decreased 38 basis points (0.38%) and cost of time deposits decreased 30 basis points (0.30%) for the three months of 1999 compared to the three months of 1998. 10 ITEM 2. FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) RESULTS OF OPERATIONS (Continued) First Three Months of 1999 as Compared to the First Three Months of 1998 (Continued) Interest expense on short-term borrowings decreased $463 thousand for the first three months of 1999 compared to the first three months of 1998 as average Federal Funds purchased decreased $46.5 million over 1998 averages. Interest expense on Federal Funds purchased decreased $799 thousand including decreases due to volume of $653 thousand and decreases due to rate of $146 thousand. Interest expense on long-term debt increased $4.5 million compared to the 1998 period as average long-term debt for the three months of 1999 increased $348.0 million over 1998 averages. The long-term debt increase for 1999 was a result of borrowings from the Federal Home Loan Bank with maturities of up to 10 years to be utilized as part of the above mentioned capital management leveraging strategy. The average spread of this leverage strategy was 1.19% during the 1999 period. The provision for possible credit losses was $2.2 million for the three month period of 1999 compared to $2.5 million during the 1998 period. Net charge-offs against the allowance for possible credit losses were $1.4 million in the 1999 period and $2.2 million in the 1998 period. The 1999 decrease in net charge-offs included decreases in net charge-offs for credit card loans, loans to individuals and leases of $161 thousand, $507 thousand and $228 thousand respectively compared to 1998 charge-offs. The decreases in net charge-offs for the three months of 1999 were partially offset by increases in net charge-offs of commercial loans secured by real estate and loans secured by residential real estate. See the "Credit Review" section for an analysis of the quality of the loan portfolio. 11 ITEM 2. FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) RESULTS OF OPERATIONS (Continued) First Three Months of 1999 as Compared to the First Three Months of 1998 (Continued) Below is an analysis of the consolidated allowance for possible credit losses for the three month periods ended March 31, 1999 and 1998. 1999 1998 (Amounts in thousands) Balance January 1, $32,304 $25,932 Loans charged off: Commercial, financial and agricultural 100 200 Real estate-construction -0- -0- Real estate-commercial 11 301 Real estate-residential 288 63 Loans to individuals 1,329 1,993 Lease financing receivables -0- 229 Total loans charged off 1,728 2,786 Recoveries of previously charged off loans: Commercial, financial and agricultural 25 308 Real estate-construction -0- -0- Real estate-commercial -0- 26 Real estate-residential 14 4 Loans to individuals 278 274 Lease financing receivables -0- 1 Total recoveries 317 613 Net charge offs 1,411 2,173 Provision charged to operations 2,213 2,475 Balance March 31, $33,106 $26,234 Net securities gains decreased $419 thousand during the 1999 period from $982 thousand reported in 1998. The security gains during 1999 resulted in part from the sales of fixed rate U.S. government agency securities and U.S. Treasury securities classified as securities "available for sale" having book values of $15.0 million and $21.9 million, respectively, which resulted in security gains of $167 thousand and $317 thousand, respectively. The securities gains during 1998 resulted primarily from the sale of U.S. Treasury securities classified as "available for sale" having a book value of $45.8 million with the proceeds being reinvested in mortgage backed and other U.S. government agency securities with similar average expected maturities. 12 ITEM 2. FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) RESULTS OF OPERATIONS (Continued) First Three Months of 1999 as Compared to the First Three Months of 1998 (Continued) Total other operating income, excluding securities gains increased $2.3 million during the first quarter of 1999 compared to the first quarter of 1998. Trust income reflected an increase for the 1999 period of $540 thousand. Other income for the first three months of 1999 increased $1.6 million compared to the first three months of 1998. Included in other income for the 1999 period was the sale of mortgage loans with a book value of $42.2 million which resulted in a gain of $890 thousand. Other income for the first quarter of 1999 compared to the first quarter of 1998 also reflected increases in the cash surrender value of bank owned life insurance of $196 thousand and insurance commissions of $164 thousand. Additional increases included in other income for the three months of 1999 over the 1998 period occurred in merchant discount and loan servicing income. Noninterest expense was $24.2 million for the three months of 1999 reflecting an increase of $1.3 million over the 1998 level of $22.9 million. Although total noninterest expense for 1999 increased over 1998 levels, total noninterest expense as a percent of average assets declined from 2.43% for the three months of 1998 to 2.34% for the same period of 1999. Employee costs were $13.1 million in 1999, representing 1.28% of average assets on an annualized basis compared to $12.5 million and 1.34% of average assets on an annualized basis for 1998. Salary and benefit costs increased 4.9% for 1999 over the corresponding period of 1998 but will be favorably impacted during the second half of 1999 by the early retirement plan offered to employees during the fourth quarter of 1998. The success of the early retirement plan accelerated the process of right-sizing the Corporation beyond normal attrition management by adjusting employment levels quickly while continuing the Corporation's tradition of not laying off employees due to merger activity. Pennsylvania shares tax expense increased $64 thousand for the first quarter of 1999 compared to the first quarter of 1998 and is expected to continue to increase as shareholders' equity of the subsidiary banks increases. Outside data processing expenses for the first three months of 1999 increased $97 thousand over the first three months of 1998 and will continue to be controlled in future periods through centralized management by the Corporation's data processing subsidiary. Other operating expenses increased $457 thousand in 1999 to $6.2 million. Other operating expenses for the first quarter of 1999 included an increase in the amortization of mortgage servicing rights in the amount of $354 thousand related to the disposition of BSI. 13 ITEM 2. FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) RESULTS OF OPERATIONS (Continued) First Three Months of 1999 as Compared to the First Three Months of 1998 (Continued) Advertising, filing and recording fees and printing costs reflected increases for the first three months of 1999 compared to the 1998 period. Legal fees and other professional fees for the first quarter of 1999 decreased compared to 1998 levels. Outside professionals contracted during 1998 under limited engagements to review the Corporation's asset/liability management model, analyze fee structures, and provide research and consulting services for marketing, customer profitability analysis and branch automation initiatives were not extended into the 1999 period. Income tax expense was $4.5 million for the three months of 1999 compared to $3.9 million for the same period of 1998. The Corporation's effective tax rate was 27.4% for the 1999 period compared to 28.1% for 1998, reflecting an increase in tax-free income. 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, the banking subsidiaries are members of the Federal Home Loan Bank and may borrow under overnight and term borrowing arrangements. The sale of earning assets may also provide an additional source of liquidity. Net loans decreased by $15.0 million in the first three months of 1999 as decreases in loans secured by residential real estate of $129.8 million were partially offset by increases in loans to individuals of $79.4 million. The reduction in residential mortgage loans was primarily the result of the sale of $42.2 million of residential mortgages in March of 1999. The mortgage loans were sold to reduce the Corporation's prepayment risk and to shorten the average life of the fixed rate loan portfolio. 14 ITEM 2. FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) LIQUIDITY (Continued) Total deposits decreased $26.0 million during the first quarter of 1999 and included decreases in noninterest bearing demand deposits of $24.0 million and decreases in total savings deposits of $10.1 million. All savings categories reflected decreases for the first quarter of 1999 except for the Corporation's American Dream Savings product. Customers continue to reinvest traditional savings dollars in this product which offers higher interest rates than traditional savings accounts. This product was designed to build long-term customer relationships and is intended to produce a favorable impact on the Corporation's net interest margin over the long-term. Time deposits increased $8.1 million since December 31 and included increases in time deposits in denominations greater than $100 thousand of $27.1 million since year-end. Marketable securities that the Corporation holds in its investment portfolio are an additional source of liquidity. These securities are classified as "securities available for sale" and 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 March 31, 1999 securities available for sale had an amortized cost of $1,126.3 million and an approximate fair value of $1,123.3 million. Growth of the available for sale portfolio during the first three months of 1999 in the amount of $80.6 million was funded primarily by short-term borrowings. The investment of $20.0 million in the bank owned life insurance during the first quarter of 1999 was funded primarily from the liquidation of U.S. government agencies and U.S. treasury securities. 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") exceed interest-sensitive liabilities ("ISL") during the prescribed time period, a positive gap results. Conversely, when ISL exceeds ISA during a time period, a negative gap results. 15 ITEM 2. FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Interest Sensitivity (Continued) 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 time 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. 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 March 31, 1999 and December 31, 1998 (Dollar amounts in thousands): March 31, 1999 0-90 91-180 181-365 Cumulative Days Days Days 0-365 Days Loans....................$ 769,019 $139,379 $250,879 $1,159,277 Investments.............. 88,846 78,865 142,605 310,316 Other interest-earning assets.................. 13,985 5,232 3,932 23,149 Total interest-sensitive assets................ 871,850 223,476 397,416 1,492,742 Certificates of deposits. 510,286 242,324 316,424 1,069,034 Other deposits........... 1,080,051 -0- -0- 1,080,051 Borrowings............... 205,307 5,139 26,380 236,826 Total interest-sensitive liabilities........... 1,795,644 247,463 342,804 2,385,911 GAP....................$ (923,794) $(23,987) $ 54,612 $ (893,169) ISA/ISL.................. 0.49 0.90 1.16 0.63 Gap/Total assets......... 22.14% 0.57% 1.31% 21.40% December 31, 1998 0-90 91-180 181-365 Cumulative Days Days Days 0-365 Days Loans....................$ 765,948 $168,297 $293,082 $1,227,327 Investments.............. 59,942 87,042 149,497 296,481 Other interest-earning assets.................. 38,048 4,120 6,207 48,375 Total interest-sensitive assets................ 863,938 259,459 448,786 1,572,183 Certificates of deposits. 359,487 323,760 318,282 1,001,529 Other deposits........... 1,094,125 -0- -0- 1,094,125 Borrowings............... 142,509 1,085 2,413 146,007 Total interest-sensitive liabilities........... 1,596,121 324,845 320,695 2,241,661 GAP....................$ (732,183) $(65,386) $128,091 $ (669,478) ISA/ISL.................. 0.54 0.80 1.40 0.70 Gap/Total assets......... 17.87% 1.60% 3.13% 16.34% 16 ITEM 2. FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Interest Sensitivity (continued) Although the periodic gap analysis provides management with a method of measuring current interest rate risk, it only measures rate sensitivity at a specific point in time. Therefore, to more precisely measure the impact of interest rate changes on the Corporation's net interest income, management simulates the potential effects of changing interest rates through computer modeling. The income simulation model used by the Corporation captures all assets, liabilities, and off-balance sheet financial instruments, accounting for significant variables that are believed to be affected by interest rates. These variables include prepayment speeds on mortgage loans and mortgage backed securities, cash flows from loans, deposits and investments and balance sheet growth assumptions. The model also captures embedded options, such as interest rate caps/floors or call options, and accounts for changes in rate relationships as various rate indices lead or lag changes in market rates. The Corporation is then better able to implement strategies which would include an acceleration of a deposit rate reduction or lag in a deposit rate increase. The repricing strategies for loans would be inversely related. The Corporation's asset/liability management policy guidelines limit interest rate risk exposure for the succeeding twenty-four month period. Simulations are prepared under the base case where interest rates remain flat and most likely case where interest rates are defined using projections of economic factors. Additional simulations are produced estimating the impact on net interest income of a 300 basis point (3.00%) movement upward or downward from the base case scenario. The Corporation's current asset/liability management policy indicates that a 300 basis point (3.00%) change in interest rates up or down cannot result in more than a 7.5% change in net interest income when compared to a base case, without Board approval and a strategy in place to reduce interest rate risk below the established maximum level. The analysis at March 31, 1999, indicated that a 300 basis point (3.00%) movement in interest rates in either direction over the next twelve months would not have a significant impact on the Corporation's anticipated net interest income over that time frame nor over the next twenty-four months and the Corporation's position would remain well within current policy guidelines. The Corporation's "Asset/Liability Management Committee" ("ALCO") is responsible for the identification, assessment and management of interest rate risk exposure, liquidity, capital adequacy and investment portfolio position. The primary objective of the ALCO process is to ensure that the Corporation's balance sheet structure maintains prudent levels of risk within the context of currently known and forecasted economic conditions and to establish strategies which provide the Corporation with appropriate compensation for the assumption of those risks. The ALCO attempts to mitigate interest rate risk through the use of strategies such as asset disposition, asset and liability pricing and matched maturity funding. The ALCO strategies are established by the Corporation's senior management and are approved by the Corporation's board of directors. 17 ITEM 2. FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) CREDIT REVIEW The following table identifies amounts of loan losses and nonperforming loans. 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 and are in compliance with the restructured terms. At March 31, 1999 1998 (amounts in thousands) Nonperforming Loans: Loans on nonaccrual basis $ 10,649 $ 12,009 Past due loans 13,013 14,496 Renegotiated loans 64 55 Total Nonperforming Loans $ 23,726 $ 26,560 Other real estate owned $ 2,053 $ 2,076 Loans outstanding at end of period $2,360,694 $2,468,320 Average loans outstanding (year-to-date) $2,384,385 $2,452,218 Nonperforming loans as percent of total loans 1.01% 1.08% Provision for possible credit losses $ 2,213 $ 2,475 Net charge-offs $ 1,411 $ 2,173 Net charge-offs as percent of average loans 0.06% 0.09% Provision for possible credit losses as percent of net charge-offs 156.84% 113.90% Allowance for possible credit losses as percent of average loans outstanding 1.39% 1.07% Allowance for possible credit losses as percent of end-of-period loans outstanding 1.40% 1.06% Allowance for possible credit losses as percent of nonperforming loans 139.53% 98.77% 18 ITEM 2. FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) CREDIT REVIEW (Continued) The Corporation considers a loan to be impaired when, based on current information and events, it is probable that the Corporation 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 loan's 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. Impaired loans include loans on a nonaccrual basis and renegotiated loans. The following table identifies impaired loans, and information regarding the relationship of impaired loans to the reserve for possible credit losses at March 31, 1999 and March 31, 1998. 1999 1998 (amounts in thousands) Recorded investment in impaired loans at end of period $10,713 $12,064 Year to date average balance of impaired loans $10,373 $11,763 Allowance for possible credit losses related to impaired loans $ 2,431 $ 2,064 Impaired loans with an allocation of the allowance for possible credit losses $ 5,180 $ 6,306 Impaired loans with no allocation of the allowance for possible credit losses $ 5,533 $ 5,758 Year to date income recorded on impaired loans on a cash basis $ 159 $ 129 Other than those described above, there are no material credits that management has serious doubts as to the borrower's ability to comply with the present loan repayment terms. Additionally, the portfolio is well diversified and as of March 31, 1999, there were no significant concentrations of credit. Nonperforming loans at March 31, 1999 decreased $2.8 million compared to 1998 levels and included decreases in past due loans of $1.5 million and decreases in nonaccrual loans of $1.3 million. Past due loans reflected decreases in commercial loans secured by real estate of $1.4 million, and commercial loans not secured by real estate of $310 thousand which were partially offset by increases in past due auto leases of $351 thousand. Nonaccrual loans reflected decreases in commercial loans not secured by real estate of $1.4 million, loans secured by residential real estate of $737 thousand and auto leases of 19 ITEM 2. FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) CREDIT REVIEW (Continued) $313 thousand. Nonaccrual construction loans increased $1.1 million at March 31, 1999 compared to March 31, 1998. Nonperforming loans as a percent of total loans were 1.01% at March 31, 1999 compared to 1.08% at March 31, 1998. The allowance for possible credit losses as a percent of nonperforming loans at March 31, 1999 has increased over both March 31, 1998 and year-end 1998 levels. Net charge-offs in both dollars and as a percentage of average loans at March 31, 1999 have decreased over 1998 levels. The Corporation's loan portfolio continues to be monitored by senior management to identify potential portfolio risks and detect potential credit deterioration in the early stages. Credit risk is mitigated through the use of sound underwriting policies and collateral requirements. Management attempts to minimize loan losses by analyzing and modifying collection techniques on a periodic basis. Management believes that the allowance for possible credit losses and nonperforming loans remain safely within acceptable levels. CAPITAL RESOURCES Equity capital increased $1.3 million in the first three months of 1999. Dividends declared reduced equity by $7.1 million during the 1999 period, while earnings retention was $4.9 million, representing an earnings retention rate of 40.7%. 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 fair value adjustments to Unearned ESOP shares, increased equity by $710 thousand. Amounts paid to fund the discount on reinvested dividends and optional cash payments reduced equity by $179 thousand. The market value adjustment to securities available for sale decreased equity by $4.2 million. Proceeds from the reissuance of treasury shares to provide for stock options exercised increased equity by $74 thousand. 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. 20 ITEM 2. FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) CAPITAL RESOURCES (Continued) The Federal Reserve Board has issued risk-based capital adequacy guidelines which are designed principally as a measure of credit risk. These guidelines require: (1) at least 50% of a banking organization's total capital be common and other "core" equity capital ("Tier I Capital"); (2) assets and off-balance-sheet items be weighted according to risk; (3) the total capital to risk-weighted assets ratio be at least 8%; and (4) a minimum leverage ratio of Tier I capital to average total assets. The minimum leverage ratio is not specifically defined, but is generally expected to be 3-5 percent for all but the most highly rated banks, as determined by a regulatory rating system. The table below presents the Corporation's capital position at March 31, 1999: Percent Amount of Adjusted (in thousands) Assets Tier I Capital $348,812 14.2% Risk-Based Requirement 98,094 4.0 Total Capital 379,467 15.5 Risk-Based Requirement 196,188 8.0 Minimum Leverage Capital 348,812 8.5 Minimum Leverage Requirement 123,803 3.0 At March 31, 1999 the Corporation and its banking subsidiaries are considered well capitalized as defined by the Federal Deposit Insurance Corporation Improvement Act of 1991. YEAR 2000 UPDATE The Corporation's data processing subsidiary, Commonwealth Systems Corporation continued to address year 2000 issues during the first quarter of 1999. Renovation whereby code enhancements, hardware and software upgrades and system replacements are implemented is near completion for mission critical systems. An application is considered mission critical if it is vital to the successful continuation of a core business activity. Validation or testing of all changes to hardware and software components, including connections with other systems is 95% complete, while implementation of mission critical systems is currently 90% complete. All mission critical systems are scheduled for implementation by June 30, 1999 which places the Corporation within guidelines established by federal regulatory agencies. As per the regulatory agencies schedule they will continue to perform quarterly year 2000 status reviews at financial institutions throughout 1999. Outside professionals engaged by the Corporation during 1998 to provide additional independent verification and validation processes and to assure the reliability of internal risk and cost estimates continue their engagement during 1999. 21 ITEM 2. FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Corporation will continue to strengthen its remediation contingency plan for year 2000 events during the remainder of 1999. Additional alternative processes in event that a system fails will be identified and tested and third party vendors and outside sources will continue to be tested as these outside sources make testing available to the Corporation. Contingency planning will continue throughout 1999 and although all possible problems can not possibly be anticipated, management believes that potential difficulties associated with implementation are likely to result in only minor delays in transaction or information availability. The Corporation utilized internal resources to evaluate, reprogram and test software and hardware for year 2000 issues to the extent possible. Salary and benefit costs related to year 2000 activities were expensed as incurred. External year 2000 expenditures included amounts for capitalized hardware and software which will be amortized over three years for software and five years for hardware. Year 2000 expenditures which were expensed as incurred included the cost of leased off-site testing of mainframe systems, outside professionals utilized for independent verification, travel and lodging during off-site testing and vendor testing. The Corporation's estimates of additional year 2000 expenditures to be incurred during 1999 are based on presently available information and estimates. Cash outlays were funded through operating cash flows. Due to the Corporation's commitment to mitigate year 2000 risks where possible, management does not believe the year 2000 problem will have a material impact on the Corporation's financial condition or results of operations. 22 ITEM 2. FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS YEAR 2000 UPDATE The following table summarizes year 2000 expenditures incurred through the first quarter of 1999 and estimated amounts to be incurred throughout the remainder of 1999. (Dollar amounts in thousands)
3 Months 12 Months 12 Months Estimate Ended Ended Ended for Remainder 3/31/99 12/31/98 12/31/97 of 1999 Capitalized hardware and software $ 3 $ 250 $106 $ 92 Nonemployee expenses including testing 17 152 20 131 Employee related costs 262 1,003 163 158 Subtotal 282 1,405 289 381 Capitalized hardware and software replaced without acceleration due to year 2000 459 2,043 70 200 Total expenditures $741 $3,448 $359 $581
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Information appearing in Item 2 of this report under the caption "Interest Sensitivity" is incorporated herein by reference in response to this item. 23 FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS There were 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 a material adverse effect on the consolidated operations or financial position of the Corporation and its subsidiaries. ITEM 2. CHANGES IN SECURITIES Not applicable. ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. ITEM 5. OTHER INFORMATION Not applicable. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits None (b) Reports on Form 8-K None 24 SIGNATURES Pursuant to the requirements 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. FIRST COMMONWEALTH FINANCIAL CORPORATION (Registrant) DATED: MAY 14, 1999 /S/ Joseph E. O'Dell Joseph E. O'Dell, President and Chief Executive Officer DATED: MAY 14, 1999 /S/ John J. Dolan John J. Dolan, Sr. Vice President and Chief Financial Officer 25 EX-27 2
9 1,000 3-MOS DEC-31-1999 JAN-01-1999 MAR-31-1999 79,886 1,859 1,100 0 1,123,255 481,348 483,784 2,366,833 33,106 4,173,393 2,905,090 238,455 43,094 630,082 0 0 31,263 325,409 4,173,393 48,273 23,418 110 71,801 25,768 36,740 35,061 2,213 563 24,191 16,539 12,005 0 0 12,005 0.39 0.39 7.60 10,649 13,013 64 0 32,304 1,728 317 33,106 0 0 0
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