Growth in Loans and Net Interest Income/Margin Expansion Continues
Core Net Income Increases 12.9% Year over Year
INDIANA, Pa., Jan. 26 /PRNewswire-FirstCall/ -- First Commonwealth Financial Corporation (NYSE: FCF), the holding company for First Commonwealth Bank, announced today financial results for the fourth quarter and year ended December 31, 2008.
(Logo: http://www.newscom.com/cgi-bin/prnh/20030416/FIRSTLOGO )
Fourth Quarter Results
Developments during the fourth quarter included:
- First Commonwealth raised $115 million of common stock through a public stock offering.
- First Commonwealth elected not to participate in the Capital Purchase Program, which is part of the federal government's Troubled Asset Relief Program.
- Total loans increased $234 million.
- Net interest income increased 9.9% and net interest margin increased 29 basis points.
- Impairment charges of $3.3 million after tax were recorded relating to bank equity securities, trust preferred collateralized debt obligations and low income housing partnerships.
- First Commonwealth Bank opened a new community banking office in Green Tree, which was the third de novo office opened in the Pittsburgh market during 2008.
First Commonwealth reported fourth quarter 2008 core net income, or net income excluding securities gains and losses and asset impairment charges, of $12.2 million or $0.15 per diluted share, a 6.9% increase as compared to the same period in 2007. GAAP net income for the fourth quarter 2008 was $8.9 million or $0.11 per diluted share, as compared to $11.6 million or $0.16 per diluted share for the same period in 2007. Average diluted shares in the fourth quarter 2008 were 10.6% greater than the comparable quarter in 2007 primarily due to the issuance of 11.5 million shares from our capital raise completed on November 5, 2008.
Fourth quarter 2008 net income as compared to the same period in 2007 was negatively impacted by the increase in the provision for credit losses of $5.4 million after tax or $0.07 per share, non-cash charges of $2.5 million after tax or $0.03 per share for other-than-temporary impairment on certain investment securities and a non-cash impairment charge on low income housing partnerships of $784 thousand after tax or $0.01 per share. The increase in the provision for credit losses was primarily due to an additional allowance for three commercial real estate loans and normal increases in the allowance related to the growth in the loan portfolio. The increase in the other-than-temporary impairment charges included $1.6 million after tax primarily from two Pennsylvania-based financial institutions and $871 thousand after tax for a trust preferred collateralized debt obligation.
Fourth quarter of 2008 annualized core return on average equity and average assets were 7.93% and 0.77%, respectively, compared to 7.90% and 0.79% for the same period last year. Fourth quarter 2008 annualized GAAP return on average equity and average assets were 5.79% and 0.56%, respectively, compared to 8.08% and 0.80% for the prior year period.
'We experienced strong growth in loans and low cost deposits during the fourth quarter. We are capitalizing on significant opportunities within our footprint and we expect to continue our loan and deposit growth into 2009,' said John J. Dolan, President and CEO.
'We did experience some fallout from weaknesses in the commercial real estate market on three out-of-market shared national credit participation loans. We have limited exposure to out-of-market shared national credit loans as they represent 3.2% of our loan portfolio. Despite significant economic and industry headwinds, we are cautiously optimistic about 2009 as we build upon the momentum in our core banking business through a continued focus on personalized service and solid execution.'
Net Interest Income and Margin
Net interest income increased $4.7 million, or 9.9% from the third quarter of 2008, representing six consecutive quarters of growth. Additionally, net interest income increased $12.5 million, or 31.1% compared to the fourth quarter of 2007.
The net interest margin on a tax equivalent basis for the fourth quarter 2008 increased 55 basis points to 3.87% compared with 3.32% in the corresponding period last year. The increase in our net interest margin can be attributed to increased loan volume and declines in the cost of interest-bearing liabilities exceeding the decrease in yields on total interest-earning assets. The decrease in the cost of interest-bearing liabilities can be attributed to lower interest rates combined with increases in low cost deposits and short-term borrowings. Management continued its strategy of supplementing deposit growth with wholesale borrowing due to the significant spread between wholesale borrowing costs and rates paid on time deposits. In the fourth quarter of 2008 compared to the fourth quarter of 2007, average time deposits decreased $346.8 million or 15.7% but were offset with a $739.3 million increase in average short-term borrowings at lower rates. In the fourth quarter of 2008 compared to the same period last year, average noninterest-bearing demand deposits increased $54.0 million, or 10.5%, average interest-bearing demand deposits increased $10.0 million, or 1.7%, and average savings deposits increased $199.5 million, or 18.7%.
Average interest-earning assets were $501.1 million, or 9.6%, higher in the fourth quarter of 2008 compared to the fourth quarter of 2007 driven by an increase in average loans of $636.0 million, or 17.3%. Average borrowings increased $581.0 million in the fourth quarter of 2008 compared to the same period in 2007 to fund the loan growth. Despite fourth quarter loan growth, average borrowings decreased $18.1 million compared to the third quarter of 2008 as a result of proceeds from our recent capital raise and an increase in deposits.
Non-Interest Income
GAAP non-interest income for the fourth quarter of 2008 decreased $2.8 million or 22.0% from the fourth quarter of 2007. This decrease was primarily due to increased net securities losses of $4.2 million related to other-than-temporary impairment charges on bank equity securities and trust preferred collateralized debt obligations partially offset by the $1.5 million increase in swap fee income. Core non-interest income, or non-interest income excluding net securities gains and losses and other-than-temporary impairment charges, increased $1.4 million, or 11.4%, in the fourth quarter of 2008 compared to the same period last year. This increase was primarily due to higher swap fee income of $1.5 million.
Non-Interest Expense
GAAP non-interest expense for the fourth quarter of 2008 increased $5.0 million or 13.6% from the fourth quarter of 2007 primarily from the $2.8 million increase in salaries and employee benefits, a $1.2 million low income housing partnership impairment charge and a $790 thousand increase in other expenses. The increase in salaries and benefits are mainly due to increases in incentive accruals related to our strong loan and deposit growth in addition to higher payroll costs for annual merit increases and new branch offices. The low income housing partnership impairment was recorded to write down the value of underlying real estate. The increase in other expenses was due to higher telephone and data line costs as well as increased loan processing fees related to loan growth.
Core non-interest expense, or non-interest expense excluding low income housing partnership impairment charges, for the fourth quarter of 2008 increased $3.8 million, or 10.3%, compared to the fourth quarter of 2007. The reasons for these increases are noted in the preceding paragraph.
Income Tax
The provision for income taxes decreased $853 thousand for the fourth quarter of 2008 compared to the same period in 2007 primarily due to a decline in income before income taxes. First Commonwealth's effective tax rate was 12.4% in the fourth quarter of 2008 compared to 15.4% in the fourth quarter of 2007. Nontaxable income and tax credits had a greater impact on the effective tax rate during the fourth quarter of 2008 due to lower pretax income compared to the fourth quarter of 2007.
Credit Quality and Provision for Credit Losses
First Commonwealth is not a participant or underwriter in the sub-prime mortgage loan or sub-prime collateralized debt marketplace and therefore does not have any direct exposure to risks associated with these activities. All mortgage backed securities in First Commonwealth's portfolio are AAA-rated and backed by U.S. Government agencies.
For the quarter ending December 31, 2008, non-accrual loans increased $6.2 million to $55.9 million from the third quarter of 2008 primarily due to one out-of-market participation loan of $4.3 million and one in-market commercial loan of $1.5 million. Non-accrual loans increased $1.8 million, or 3.3% from the comparable period last year. Non-accrual loans at December 31, 2008 include a $31.2 million commercial credit relationship that has been monitored since the second quarter of 2006 and was placed on non-accrual during the second quarter of 2007. This credit is collateralized by real estate and equipment and a reserve has been allocated, primarily during 2006, to cover the expected loss. The payment of principal and interest on this credit was deferred pursuant to a loan forbearance agreement that expired on December 31, 2008. Management is presently evaluating options with respect to the collection or resolution of this credit.
Loans past due in excess of 90 days and still accruing at December 31, 2008 increased $3.3 million compared to December 31, 2007 and increased $2.5 million from September 30, 2008. The increase for the current quarter is related to increased delinquency of $1.9 million in commercial loans and $600 thousand in consumer loans. The provision for credit losses for the fourth quarter of 2008 increased $8.3 million compared to the fourth quarter of 2007 and increased $6.7 million from the third quarter of 2008. The increase for both periods was primarily attributable to three out-of-market commercial real estate loans in our shared national credit participation portfolio and the growth in the portfolio.
Management believes that the allowance for credit losses is at a level deemed sufficient to absorb losses inherent in the loan portfolio at December 31, 2008.
Single Issue Trust Preferred Securities and Trust Preferred Collateralized Debt Obligations
First Commonwealth's portfolio of single issue trust preferred securities and trust preferred collateralized debt obligations consists of 15 pooled issues and 21 single-issue securities. The single issues are primarily from money center and large regional banks. The pooled instruments consist of securities issued by 376 banks and other financial institutions. Two of our pooled securities are senior tranches and the remainder are mezzanine tranches. The senior and mezzanine tranches of trust preferred collateralized debt obligations generally are protected from defaults by over-collateralization and cash flow default protection provided by subordinated tranches, with senior tranches having the greatest protection and mezzanine tranches subordinated to the senior tranches. At the time of initial issue, the tranches subordinated to our senior and mezzanine tranches ranged in size from approximately 7.3% to 35.4% of the total principal amount of the respective securities and no single issuer comprised more than 5% of the principal of the total principal of the pool.
As of December 31, 2008, our single issue securities had a book value of $24.0 million and an estimated fair value of $19.8 million, while the book value of the pooled securities totaled $97.1 million with an estimated fair value of $47.1 million. During the fourth quarter, all of the pooled instruments were downgraded by Moody's Investor Services. Thirteen of the fifteen pooled issues representing $84.5 million of the $97.1 million of book value were downgraded below investment grade. In the fourth quarter of 2008, an additional $1.3 million other-than-temporary impairment charge was recorded on a trust preferred collateralized debt obligation that was also written down $7.7 million during the third quarter of 2008. This obligation, which includes 20 issuers, one of which is in default and three of which have deferred interest payments, is expected to experience a principal shortfall at maturity. Based on management's analysis as of December 31, 2008, all of the single issues and the remainder of the trust preferred collateralized debt obligations are expected to return 100% of their principal and interest.
Year-to-Date Results
First Commonwealth recorded 2008 core net income of $51.3 million, or $0.69 per diluted share compared to $45.5 million, or $0.62 per diluted share in 2007. This represents an increase of $5.9 million, or 12.9% in core net income and $0.07, or 11.3% in per share results. These increases were the result of higher net interest income and core non-interest income, partially offset by increases in the provision for credit losses, core non-interest expense and the provision for income taxes. Average diluted shares for the year 2008 were 2.2% higher than 2007 primarily due to the capital raise.
GAAP net income was $43.1 million, or $0.58 per diluted share for the year ended December 31, 2008, compared to the $46.3 million, or $0.63 per diluted share reported in 2007. Year to date results for 2008 were unfavorably impacted by charges of $8.5 million after tax, or $0.11 per share, for other-than-temporary impairment on certain investment securities in addition to the $8.5 million after tax, or $0.11 per share, increase in the provision for credit losses. Return on average equity and average assets were 7.45% and 0.70%, respectively, compared to 8.08% and 0.80% for the year 2007.
Net interest income for the year ended December 31, 2008 was 16.9% higher than 2007, primarily due to an 86 basis point decrease in the cost of interest-bearing liabilities. The net interest margin for the year 2008 increased 23 basis points to 3.57% from 3.34% for the same period in 2007 as the cost of interest-bearing liabilities declined faster than the yield on total interest-earning assets, which decreased 52 basis points.
The provision for credit losses increased $13.1 million for the year 2008 compared to the same period last year primarily as a result of $6.3 million provision added for the aforementioned three commercial real estate loans and $2.5 million added in the second quarter of 2008 on a previously disclosed construction loan. Loan growth of $720.6 million also contributed to the increase in the provision.
Core non-interest income for the year ended December 31, 2008 increased $6.6 million, or 13.9%, from the same period last year primarily due to the $1.7 million increase in insurance and retail brokerage commissions, and additional $1.0 million in card related interchange income, higher letter of credit fees of $1.7 million and a $2.2 million increase in swap fee income. The increase in insurance and retail brokerage commissions was the result of higher sales due to additional producers and an enhanced calling program. Card related interchange income increased primarily due to growth in usage of debit cards and larger dollar transactions. Increased volume resulted in higher letter of credit fees and swap fee income.
Core non-interest expense for the year 2008 increased $9.4 million, or 6.4%, from 2007 due to the $7.4 million increase in salaries and employee benefits, $1.3 million rise in net occupancy expense and $843 thousand increase in other expenses. Salaries and employee benefits increased primarily as a result of higher incentive compensation expense of $2.7 million related to the strong loan and deposit growth and $1.1 million due to greater insurance and retail brokerage sales, as well as annual merit increases and additional personnel expenses related to our new branch offices. The increase in net occupancy expense was the result of higher rental expense, utilities, and building repairs and maintenance. The increase in other expenses was the result of higher telephone and data line costs as well as loan fees related to the increase in loan volume.
The provision for income taxes for the year ended December 31, 2008 increased $679 thousand over 2007 due to decreases in tax free income and tax credits. First Commonwealth's effective tax rate was 13.3% for the year 2008 compared to 11.4% for the year 2007.
Use of Non-GAAP Financial Measure
This release includes core net income, core non-interest income and core non-interest expense which are non-GAAP (Generally Accepted Accounting Principles) financial measures that are calculated by excluding securities gains and losses and asset impairment charges from GAAP net income, GAAP non-interest income and GAAP non-interest expense. Management believes that these core measures are useful to the investment community in analyzing financial results and trends of First Commonwealth. This information facilitates comparisons with prior periods and reflects the principal basis on which our management internally monitors financial performance. The table in the financial section reconciles GAAP financial measures to non-GAAP financial measures for the periods presented.
About First Commonwealth Financial Corporation
First Commonwealth Financial Corporation is a $6.4 billion bank holding company headquartered in Indiana, Pennsylvania. It operates 114 retail branch offices in 15 counties in western and central Pennsylvania through First Commonwealth Bank, a Pennsylvania chartered bank and trust company. Financial services and insurance products are also provided through First Commonwealth Insurance Agency and First Commonwealth Financial Advisors, Inc.
Forward-Looking Statements
This release contains 'forward-looking statements' within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding the adequacy of First Commonwealth's allowance for credit losses, liquidity and capital; expectations of continued growth in loans and deposits and fair values and expected future cash flows from investments in trust preferred collateralized debt obligations. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts and often include words such as 'believe,' 'expect,' 'anticipate,' 'intend,' 'plan,' 'estimate' or words of similar meaning, or future or conditional verbs such as 'will,' 'would,' 'should,' 'could' or 'may.' Forward-looking statements describe First Commonwealth's future plans, strategies and expectations. These plans, strategies and expectations are based on assumptions and involve risks and uncertainties, many of which are beyond the control of First Commonwealth and which may cause actual results, performance or achievements to differ materially from the results, performance or achievements contemplated by the forward-looking statements. Such risks and uncertainties include, among other things:
- Deepened or prolonged weakness in economic and business conditions, nationally and in First Commonwealth's market areas, which could increase credit-related losses and expenses and limit growth;
- Further declines in the market value of investment securities that are considered to be other-than-temporary, which would negatively impact First Commonwealth's earnings and capital levels;
- Increases in defaults by borrowers and other delinquencies, which could result in an increased provision for credit losses on loans and related expenses;
- Reduced wholesale funding capacity or higher borrowing costs due to capital constraints at the Federal Home Loan Bank, which would reduce First Commonwealth's liquidity and negatively impact earnings and net interest margin;
- Fluctuations in interest rates and market prices, which could reduce net interest margin and asset valuations and increase expenses;
- Changes in legislative or regulatory requirements applicable to First Commonwealth and its subsidiaries, which could increase costs, limit certain operations and adversely affect results of operations;
- The inability to successfully execute First Commonwealth's strategic growth initiatives, which could limit future revenue and earnings growth; and
- Other risks and uncertainties described in First Commonwealth's reports filed with the Securities and Exchange Commission, including its most recent Annual Report on Form 10-K.
Forward-looking statements speak only as of the date on which they are made. First Commonwealth undertakes no obligation to update any forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made.
FIRST COMMONWEALTH FINANCIAL CORPORATION
CONSOLIDATED SELECTED FINANCIAL DATA
(dollars in thousands, except share data)
For the Quarter Ended
December September June March December
31, 30, 30, 31, 31,
2008 2008 2008 2008 2007
Interest Income
Interest and
fees on loans $64,580 $62,285 $62,614 $62,067 $63,488
Interest and
dividends on
investments:
Taxable interest 14,434 15,013 15,578 15,531 14,967
Interest exempt
from Federal
income taxes 3,025 3,176 3,347 3,595 3,510
Dividends 389 663 678 609 752
Interest on
Federal funds sold 0 0 2 0 74
Interest on
bank deposits 1 2 2 5 8
Total interest
income 82,429 81,139 82,221 81,807 82,799
Interest Expense
Interest on
deposits 22,045 23,069 25,370 31,033 34,527
Interest on
short-term
borrowings 2,238 4,634 4,251 3,705 1,819
Interest on
subordinated
debentures 1,908 1,870 1,878 1,911 2,156
Interest on
other long-
term debt 3,582 3,639 3,791 4,074 4,139
Total interest
on long-term
debt 5,490 5,509 5,669 5,985 6,295
Total interest
expense 29,773 33,212 35,290 40,723 42,641
Net Interest
Income 52,656 47,927 46,931 41,084 40,158
Provision For
credit losses 10,642 3,913 5,361 3,179 2,352
Net Interest
Income after
provision for
credit losses 42,014 44,014 41,570 37,905 37,806
Non-Interest Income
Net securities
(losses) gains (3,835) (7,709) (451) 501 403
Trust income 1,125 1,444 1,538 1,532 1,428
Service charges on
deposit accounts 4,555 4,792 4,786 4,425 4,690
Insurance and
Retail brokerage
commissions 1,236 1,390 1,394 1,277 909
Income from
bank owned life
insurance 1,155 1,435 1,446 1,487 1,557
Card related
interchange
income 1,956 1,950 1,950 1,753 1,791
Letter of
credit fees 643 982 337 230 207
Swap fee income 1,532 27 174 457 14
Other income 1,645 1,963 1,915 1,794 1,831
Total non-interest
income 10,012 6,274 13,089 13,456 12,830
Non-Interest Expense
Salaries and
employee
benefits 21,658 21,091 20,428 20,330 18,859
Net occupancy
expense 3,807 3,613 3,728 3,907 3,484
Furniture and
Equipment expense 2,845 2,995 3,058 3,078 3,126
Advertising
expense 724 550 401 628 957
Data processing
expense 1,161 1,075 996 1,051 987
Pennsylvania
shares tax
expense 1,357 1,342 1,339 1,271 1,446
Intangible
amortization 743 802 832 831 831
Low income
Housing partnership
impairment 1,206 0 0 0 0
Other professional
fees and services 966 754 934 750 565
Other expenses 7,410 6,775 7,169 7,010 6,620
Total non-
interest
expense 41,877 38,997 38,885 38,856 36,875
Income before
income taxes 10,149 11,291 15,774 12,505 13,761
Provision for
income taxes 1,260 1,127 2,861 1,384 2,113
Net Income $8,889 $10,164 $12,913 $11,121 $11,648
Average Shares
Outstanding 80,076,383 72,715,709 72,624,053 72,452,875 72,391,577
Average Shares
Outstanding
Assuming
Dilution 80,179,260 72,817,216 72,734,711 72,559,668 72,513,962
Per Share Data:
Basic Earnings
Per Share $0.11 $0.14 $0.18 $0.15 $0.16
Diluted
Earnings Per
Share $0.11 $0.14 $0.18 $0.15 $0.16
Cash Dividends
Declared per Common
Share $0.17 $0.17 $0.17 $0.17 $0.17
For the Year Ended
December 31, December 31,
2008 2007
Interest Income
Interest and fees on loans $251,546 $253,951
Interest and dividends on investments:
Taxable interest 60,556 60,260
Interest exempt from Federal income taxes 13,143 13,732
Dividends 2,339 2,958
Interest on Federal funds sold 2 157
Interest on bank deposits 10 37
Total interest income 327,596 331,095
Interest Expense
Interest on deposits 101,517 132,770
Interest on short-term borrowings 14,828 11,442
Interest on subordinated debentures 7,567 8,526
Interest on other long-term debt 15,086 16,975
Total interest on long-term debt 22,653 25,501
Total interest expense 138,998 169,713
Net Interest Income 188,598 161,382
Provision for credit losses 23,095 10,042
Net Interest Income after provision for
credit losses 165,503 151,340
Non-Interest Income
Net securities (losses) gains (11,494) 1,174
Trust income 5,639 5,881
Service charges on deposit accounts 18,558 17,981
Insurance and retail brokerage commissions 5,297 3,560
Income from bank owned life insurance 5,523 6,101
Card related interchange income 7,609 6,564
Letter of credit fees 2,192 467
Swap fee income 2,190 14
Other income 7,317 7,128
Total non-interest income 42,831 48,870
Non-Interest Expense
Salaries and employee benefits 83,507 76,132
Net occupancy expense 15,055 13,710
Furniture and equipment expense 11,976 12,000
Advertising expense 2,303 2,867
Data processing expense 4,283 3,808
Pennsylvania shares tax expense 5,309 5,769
Intangible amortization 3,208 3,428
Low income housing partnership impairment 1,206 0
Other professional fees and services 3,404 2,772
Other expenses 28,364 27,521
Total non-interest expense 158,615 148,007
Income before income taxes 49,719 52,203
Provision for income taxes 6,632 5,953
Net Income $43,087 $46,250
Average Shares Outstanding 74,477,795 72,816,208
Average Shares Outstanding Assuming
Dilution 74,583,236 72,973,259
Per Share Data:
Basic Earnings Per Share $0.58 $0.64
Diluted Earnings Per Share $0.58 $0.63
Cash Dividends Declared per Common Share $0.68 $0.68
FIRST COMMONWEALTH FINANCIAL CORPORATION
CONSOLIDATED SELECTED FINANCIAL DATA
(dollars in thousands, except share data)
December September June March December
31, 30, 30, 31, 31,
2008 2008 2008 2008 2007
Assets
Cash and due
from banks $88,277 $93,327 $101,860 $92,554 $100,791
Interest-
bearing bank
deposits 289 267 347 219 1,719
Securities
available for
sale, at market
value 1,401,351 1,402,528 1,524,106 1,623,788 1,574,217
Securities held to
maturity, at
amortized cost,
(Market value
$50,558 at
December 31, 2008
And $72,928 at
December 31,
2007) 50,840 56,839 59,200 65,935 71,497
Loans:
Portfolio loans,
net of unearned
income 4,418,377 4,184,600 4,113,423 3,893,183 3,697,819
Allowance for
credit
losses (52,759) (45,482) (44,505) (41,613) (42,396)
Net
loans 4,365,618 4,139,118 4,068,918 3,851,570 3,655,423
Premises and
equipment, net 72,636 71,141 69,890 69,191 69,487
Other real
estate owned 3,262 3,718 3,271 3,280 2,172
Goodwill 159,956 159,956 159,956 159,956 159,956
Amortizing
intangibles,
net 10,233 10,976 11,778 12,609 13,441
Other assets 273,418 265,920 252,086 239,877 234,915
Total
assets $6,425,880 $6,203,790 $6,251,412 $6,118,979 $5,883,618
Liabilities
Deposits (all
domestic):
Noninterest-
bearing $566,845 $564,443 $568,158 $542,331 $523,203
Interest-
bearing 3,713,498 3,696,687 3,744,311 3,778,337 3,824,016
Total
deposits 4,280,343 4,261,130 4,312,469 4,320,668 4,347,219
Short-term
borrowings 1,152,700 875,424 834,226 642,869 354,201
Other
liabilities 63,778 43,385 47,805 48,259 65,464
Subordinated
debentures 105,750 105,750 105,750 105,750 105,750
Other long-
term debt 170,530 386,288 404,464 426,955 442,196
Total
long-term
debt 276,280 492,038 510,214 532,705 547,946
Total
liabilities 5,773,101 5,671,977 5,704,714 5,544,501 5,314,830
Shareholders' Equity
Preferred stock, $1 par value
per share, 3,000,000
Shares authorized,
none issued 0 0 0 0 0
Common stock, $1 par value
per share, 200,000,000
Shares authorized,
86,600,431 shares issued
and 85,050,744 shares
outstanding at December
31, 2008;
100,000,000 shares
authorized, 75,100,431
shares issued and
73,128,612 shares
outstanding
at December
31, 2007 86,600 75,100 75,100 75,100 75,100
Additional
paid-in
capital 303,008 205,953 206,245 206,498 206,889
Retained
earnings 309,947 315,404 317,611 317,058 319,246
Accumulated other
comprehensive
(loss) income,
net (21,269) (38,133) (22,604) 7,215 (147)
Treasury stock
(1,549,687 and
1,971,819 shares at
December 31,
2008 and
December 31, 2007,
respectively,
at cost) (17,907) (18,411) (21,054) (22,293) (22,700)
Unearned ESOP
shares (7,600) (8,100) (8,600) (9,100) (9,600)
Total
shareholders'
equity 652,779 531,813 546,698 574,478 568,788
Total liabilities
and shareholders'
equity $6,425,880 $6,203,790 $6,251,412 $6,118,979 $5,883,618
Book value per
share $7.68 $7.23 $7.46 $7.85 $7.78
Market value
per share $12.38 $13.47 $9.33 $11.59 $10.65
FIRST COMMONWEALTH FINANCIAL CORPORATION
CONSOLIDATED SELECTED FINANCIAL DATA
Loans by Categories
(dollars in thousands)
December September June March December
31, 30, 30, 31, 31,
2008 2008 2008 2008 2007
---- ---- ---- ---- ----
Commercial,
financial,
agricultural and
other $1,272,094 $1,148,666 $1,115,536 $1,052,971 $926,904
Real estate -
construction 418,639 338,303 307,278 241,114 207,708
Real estate -
residential 1,215,193 1,227,225 1,235,334 1,230,928 1,237,986
Real estate -
commercial 1,016,651 978,287 988,186 909,613 861,077
Loans to
individuals 495,800 492,119 467,089 458,557 464,082
Leases, net of
unearned income 0 0 0 0 62
Total loans and leases,
net of unearned
income $4,418,377 $4,184,600 $4,113,423 $3,893,183 $3,697,819
FIRST COMMONWEALTH FINANCIAL CORPORATION
CONSOLIDATED SELECTED FINANCIAL DATA
Quarter To Date Average Balance Sheets and Net Interest Analysis at
December 31,
(dollars in thousands)
2008
Average Balance Income/Expense Yield or Rate (a)
Assets
Interest-earning assets:
Interest-bearing deposits
with banks $538 $1 1.42%
Tax-free investment
securities 262,211 3,025 7.06%
Taxable investment
securities 1,169,700 14,823 5.04%
Federal funds sold 0 0 0.00%
Loans, net of unearned income
(b)(c) 4,302,009 64,580 6.11%
Total interest-earning
assets 5,734,458 82,429 5.94%
Noninterest-earning assets:
Cash 79,659
Allowance for credit losses (45,653)
Other assets 524,130
Total noninterest-earning
assets 558,136
Total Assets $6,292,594
Liabilities and Shareholders'
Equity
Interest-bearing liabilities:
Interest-bearing demand
deposits (d) $605,986 $1,089 0.71%
Savings deposits (d) 1,267,157 5,015 1.57%
Time deposits 1,867,689 15,941 3.40%
Short-term borrowings 949,017 2,238 0.94%
Long-term debt 386,245 5,490 5.65%
Total interest-bearing
liabilities 5,076,094 29,773 2.33%
Noninterest-bearing liabilities
and capital:
Noninterest-bearing demand
deposits (d) 568,289
Other liabilities 37,720
Shareholders' equity 610,491
Total noninterest-bearing
Funding sources 1,216,500
Total Liabilities and
Shareholders' Equity $6,292,594
Net Interest Income and Net
Yield on Interest-Earning
Assets $52,656 3.87%
2007
Average Balance Income/Expense Yield or Rate (a)
Assets
Interest-earning assets:
Interest-bearing deposits
with banks $848 $8 4.11%
Tax-free investment
securities 313,165 3,510 6.84%
Taxable investment
securities 1,246,973 15,719 5.00%
Federal funds sold 6,398 74 4.56%
Loans, net of unearned income
(b)(c) 3,666,006 63,488 7.06%
Total interest-earning
assets 5,233,390 82,799 6.55%
Noninterest-earning assets:
Cash 75,184
Allowance for credit
losses (43,600)
Other assets 487,765
Total noninterest-earning
assets 519,349
Total Assets $5,752,739
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing demand
deposits (d) $595,956 $2,557 1.70%
Savings deposits (d) 1,067,639 5,995 2.23%
Time deposits 2,214,463 25,975 4.65%
Short-term borrowings 209,726 1,819 3.44%
Long-term debt 544,569 6,295 4.59%
Total interest-bearing
liabilities 4,632,353 42,641 3.65%
Noninterest-bearing liabilities
and capital:
Noninterest-bearing demand
deposits (d) 514,299
Other liabilities 34,163
Shareholders' equity 571,924
Total noninterest-bearing
Funding sources 1,120,386
Total Liabilities and
Shareholders' Equity $5,752,739
Net Interest Income and Net
Yield on Interest-Earning
Assets $40,158 3.32%
(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 loan fees.
(d) Average balances do not include reallocations from noninterest-bearing
demand deposits and interest-bearing demand deposits into savings
deposits which were made for regulatory purposes.
FIRST COMMONWEALTH FINANCIAL CORPORATION
CONSOLIDATED SELECTED FINANCIAL DATA
Year To Date Average Balance Sheets and Net Interest Analysis at
December 31,
(dollars in thousands)
2008
Average Balance Income/Expense Yield or Rate (a)
Assets
Interest-earning assets:
Interest-bearing deposits
with banks $447 $10 2.34%
Tax-free investment
securities 290,595 13,143 6.96%
Taxable investment
securities 1,267,446 62,895 4.96%
Federal funds sold 94 2 2.49%
Loans, net of unearned income
(b)(c) 4,084,506 251,546 6.31%
Total interest-earning
assets 5,643,088 327,596 6.04%
Noninterest-earning assets:
Cash 77,208
Allowance for credit losses (43,669)
Other assets 505,790
Total noninterest-earning
assets 539,329
Total Assets $6,182,417
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing demand
deposits (d) $603,256 $5,302 0.88%
Savings deposits (d) 1,163,383 18,860 1.62%
Time deposits 1,999,016 77,355 3.87%
Short-term borrowings 769,770 14,828 1.93%
Long-term debt 487,533 22,653 4.65%
Total interest-bearing
liabilities 5,022,958 138,998 2.77%
Noninterest-bearing liabilities
and capital:
Noninterest-bearing demand
deposits (d) 544,743
Other liabilities 36,582
Shareholders' equity 578,134
Total noninterest-bearing funding
sources 1,159,459
Total Liabilities and
Shareholders' Equity $6,182,417
Net Interest Income and Net
Yield on Interest-Earning
Assets $188,598 3.57%
2007
Average Balance Income/Expense Yield or Rate (a)
Assets
Interest-earning assets:
Interest-bearing deposits
with banks $639 $37 5.82%
Tax-free investment
securities 304,842 13,732 6.93%
Taxable investment
securities 1,278,469 63,218 4.94%
Federal funds sold 3,204 157 4.89%
Loans, net of unearned income
(b)(c) 3,687,037 253,951 7.09%
Total interest-earning
assets 5,274,191 331,095 6.56%
Noninterest-earning assets:
Cash 80,453
Allowance for credit losses (43,811)
Other assets 489,502
Total noninterest-earning
assets 526,144
Total Assets $5,800,335
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing demand
deposits (d) $595,055 $10,538 1.77%
Savings deposits (d) 1,104,789 25,008 2.26%
Time deposits 2,138,296 97,224 4.55%
Short-term borrowings 279,045 11,442 4.10%
Long-term debt 563,919 25,501 4.52%
Total interest-bearing
liabilities 4,681,104 169,713 3.63%
Noninterest-bearing liabilities
and capital:
Noninterest-bearing demand
deposits (d) 514,256
Other liabilities 32,335
Shareholders' equity 572,640
Total noninterest-bearing funding
sources 1,119,231
Total Liabilities and
Shareholders'
Equity $5,800,335
Net Interest Income and Net
Yield on Interest-Earning
Assets $161,382 3.34%
(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 loan fees.
(d) Average balances do not include reallocations from noninterest-bearing
demand deposits and interest-bearing demand deposits into savings
deposits which were made for regulatory purposes.
FIRST COMMONWEALTH FINANCIAL CORPORATION
CONSOLIDATED SELECTED FINANCIAL DATA
Asset Quality Data
(dollars in thousands)
December September June March December
31, 30, 30, 31, 31,
2008 2008 2008 2008 2007
Loans on non-
Accrual basis $55,922 $49,692 $50,910 $48,799 $54,119
Troubled debt
restructured loans 132 135 139 143 147
Total nonperforming
loans $56,054 $49,827 $51,049 $48,942 $54,266
Loans past due in
excess of 90 days and
still accruing $16,189 $13,719 $14,210 $20,066 $12,853
Loans outstanding at
end of period $4,418,377 $4,184,600 $4,113,423 $3,893,183 $3,697,819
Average loans
outstanding $4,084,506 $4,011,476 $3,941,864 $3,835,587 $3,687,037
Allowance for credit
losses $52,759 $45,482 $44,505 $41,613 $42,396
Nonperforming loans
as a percentage of
total loans 1.27% 1.19% 1.24% 1.26% 1.47%
Provision for credit
losses $23,095 $12,453 $8,540 $3,179 $10,042
Net credit losses $12,732 $9,367 $6,431 $3,962 $10,294
Net credit losses
as a percentage
of average loans
outstanding
(annualized) 0.31% 0.31% 0.33% 0.42% 0.28%
Allowance for credit
losses as a
percentage of
average loans
outstanding 1.29% 1.13% 1.13% 1.08% 1.15%
Allowance for credit
losses as a
percentage of
nonperforming
loans 94.12% 91.28% 87.18% 85.03% 78.13%
Other real estate
owned $3,262 $3,718 $3,271 $3,280 $2,172
Profitability Ratios
(dollars in thousands)
For the Quarter Ended
December 31, September 30, June 30, March 31, December 31,
2008 2008 2008 2008 2007
Return on
average
assets 0.56% 0.65% 0.84% 0.75% 0.80%
Return on
average
equity 5.79% 7.38% 9.03% 7.73% 8.08%
Net interest
margin (a) 3.87% 3.58% 3.54% 3.28% 3.32%
Efficiency
ratio (b) 63.61% 67.94% 61.63% 66.78% 65.15%
Fully tax
equivalent
adjustment $3,166 $3,202 $3,078 $3,648 $3,614
For the Year Ended
December 31, December 31,
2008 2007
Return on average assets 0.70% 0.80%
Return on average equity 7.45% 8.08%
Net interest margin (a) 3.57% 3.34%
Efficiency ratio (b) 64.87% 65.79%
Fully tax equivalent adjustment $13,094 $14,707
(a) Net interest margin has been computed on a tax equivalent basis using
the 35% Federal income tax statutory rate.
(b) Efficiency ratio is 'total non-interest expense' as a percentage of
total revenue.
Total revenue consists of 'net interest income, on a fully tax
equivalent basis,' plus 'total non-interest income.'
FIRST COMMONWEALTH FINANCIAL CORPORATION
CONSOLIDATED SELECTED FINANCIAL DATA
Reconciliation of GAAP to Non-GAAP (a)
(dollars in thousands, except share data)
For the Quarter Ended
December 31, September 30, December 31,
2008 2008 2007
GAAP non-interest income $10,012 $6,274 $12,830
Less: net securities (losses)
gains (3,835) (7,709) 403
Core non-interest income $13,847 $13,983 $12,427
GAAP non-interest expense $41,877 $38,997 $36,875
Less: low income housing
partnership impairment 1,206 0 0
Core non-interest expense $40,671 $38,997 $36,875
GAAP net income $8,889 $10,164 $11,648
Less: net securities (losses)
gains, net of tax (2,493) (5,011) 262
Plus: low income housing
partnership impairment,
net of tax 784 0 0
Core net income $12,166 $15,175 $11,386
GAAP diluted earnings per share $0.11 $0.14 $0.16
Less: net securities (losses) gains
per diluted share ($0.03) ($0.07) $0.00
Plus: low income housing partnership
impairment per diluted share $0.01 $0.00 $0.00
Core diluted earnings per share $0.15 $0.21 $0.16
GAAP return on average assets 0.56% 0.65% 0.80%
Less: net securities (losses) gains
as a percentage of average
assets -0.16% -0.32% 0.01%
Plus: low income housing partnership
impairment as a percentage of
average assets 0.05% 0.00% 0.00%
Core return on average assets 0.77% 0.97% 0.79%
GAAP return on average equity 5.79% 7.38% 8.08%
Less: net securities (losses) gains
as a percentage of average
equity -1.62% -3.63% 0.18%
Plus: low income housing partnership
impairment as a percentage of
average equity 0.52% 0.00% 0.00%
Core return on average equity 7.93% 11.01% 7.90%
For the Year Ended
December 31, December 31,
2008 2007
GAAP non-interest income $42,831 $48,870
Less: net securities (losses) gains (11,494) 1,174
Core non-interest income $54,325 $47,696
GAAP non-interest expense $158,615 $148,007
Less: low income housing partnership
impairment 1,206 0
Core non-interest expense $157,409 $148,007
GAAP net income $43,087 $46,250
Less: net securities (losses) gains,
net of tax (7,471) 763
Plus: low income housing partnership
impairment, net of tax 784 0
Core net income $51,342 $45,487
GAAP diluted earnings per share $0.58 $0.63
Less: net securities (losses) gains per
diluted share ($0.10) $0.01
Plus: low income housing partnership
impairment per diluted share $0.01 $0.00
Core diluted earnings per share $0.69 $0.62
GAAP return on average assets 0.70% 0.80%
Less: net securities (losses) gains
as a percentage of average assets -0.12% 0.02%
Plus: low income housing partnership
impairment as a percentage of average
assets 0.01% 0.00%
Core return on average assets 0.83% 0.78%
GAAP return on average equity 7.45% 8.08%
Less: net securities (losses) gains as a
percentage of average equity -1.29% 0.14%
Plus: low income housing partnership
impairment as a percentage of average
equity 0.14% 0.00%
Core return on average equity 8.88% 7.94%
(a) This release includes core net income, core non-interest income and core non-interest expense, which are non-GAAP (Generally Accepted Accounting Principles) financial measures that are calculated by excluding securities gains and losses and asset impairment charges from GAAP net income, GAAP non-interest income and GAAP non-interest expense. Management believes that these core measures
are useful to the investment community in analyzing financial results
and trends of First Commonwealth. This information facilitates
comparisons with prior periods and reflects the principal basis on which our management internally monitors financial performance.
FIRST COMMONWEALTH FINANCIAL CORPORATION
CONSOLIDATED SELECTED FINANCIAL DATA
Pooled Trust Preferred Security Detail
(dollars in thousands)
Book Fair Unrealized Moody's/Fitch
Deal Class Value Value (Gain) Loss Ratings
Pre TSL I Senior $3,841 $4,212 $371 Aa1/AAA
Pre TSL IV Mezzanine 1,830 905 (925) Ba3/A+(n)
Pre TSL V Mezzanine 620 289 (331) B3/A(n)
Pre TSL VI Mezzanine 388 207 (181) B3/A(n)
Pre TSL VII Mezzanine 3,987 3,987 0 Caa2/A+(n)
Pre TSL VIII Mezzanine 5,980 2,272 (3,708) B3/A(n)
Pre TSL IX Mezzanine 3,000 1,194 (1,806) Ba3/A(n)
Pre TSL X Mezzanine 4,000 1,572 (2,428) B3/A(n)
Pre TSL XII Mezzanine 10,000 3,878 (6,122) B3/A(n)
Pre TSL XIII Mezzanine 17,540 6,881 (10,659) B3/A(n)
Pre TSL XIV Mezzanine 16,047 6,112 (9,935) Ba3/A(n)
MMCap I Senior 8,838 7,010 (1,828) Aa1/AAA
MMCap I Mezzanine 1,065 541 (524) B1/BBB
MM Cap IX Mezzanine 20,000 8,020 (11,980) B3/A-(n)
Total $97,136 $47,080 $(50,056)
FIRST COMMONWEALTH FINANCIAL CORPORATION
CONSOLIDATED SELECTED FINANCIAL DATA
Shared National Credit (SNC)
The Shared National Credit Program was established by the bank regulators
to provide an efficient and consistent review and classification of any
large syndicated loan. The Program covers any loan or loan commitment of
at least $20 million that is shared by three or more supervised
institutions. The following table provides information related to SNCs
held by First Commonwealth.
Balance* Non-Performing
(dollars in thousands)
Pennsylvania
Real Estate-Commercial $0 $0
Real Estate-Construction 0 0
Other Secured 147,183 0
Unsecured 71,516 0
Total $218,699 $0
Florida
Real Estate-Commercial $0 $0
Real Estate-Construction 24,277 6,800
Other Secured 0 0
Unsecured 19,119 0
Total $43,396 $6,800
Other
Real Estate-Commercial $5,000 $0
Real Estate-Construction 36,880 5,015
Other Secured 43,955 0
Unsecured 10,000 0
Total $95,835 $5,015
Grand Total $357,930 $11,815
Reserves of approximately 65% have been allocated for the nonperforming credits
SOURCE First Commonwealth Financial Corporation
