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Edited Transcript of FCF earnings conference call or presentation 24-Apr-19 6:00pm GMT

Q1 2019 First Commonwealth Financial Corp Earnings Call

INDIANA Apr 26, 2019 (Thomson StreetEvents) -- Edited Transcript of First Commonwealth Financial Corp earnings conference call or presentation Wednesday, April 24, 2019 at 6:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* James R. Reske

First Commonwealth Financial Corporation - Executive VP, CFO & Treasurer

* Ryan M. Thomas

First Commonwealth Financial Corporation - VP / Finance and IR

* Thomas Michael Price

First Commonwealth Financial Corporation - President, CEO & Director

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Conference Call Participants

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* Collyn Bement Gilbert

Keefe, Bruyette, & Woods, Inc., Research Division - MD and Analyst

* Daniel Edward Cardenas

Raymond James & Associates, Inc., Research Division - Research Analyst

* Frank Joseph Schiraldi

Sandler O'Neill + Partners, L.P., Research Division - MD of Equity Research

* Russell Elliott Teasdale Gunther

D.A. Davidson & Co., Research Division - VP & Senior Research Analyst

* Stephen M. Moss

B. Riley FBR, Inc., Research Division - Analyst

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Presentation

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Operator [1]

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Good afternoon, and welcome to the First Commonwealth Financial Corporation First Quarter 2019 Earnings Conference Call. (Operator Instructions) Please note, this event is being recorded.

I would now like to turn the conference over to Ryan Thomas, Vice President Finance and Investor Relations. Please, go ahead.

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Ryan M. Thomas, First Commonwealth Financial Corporation - VP / Finance and IR [2]

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Thank you, Gary. As a reminder, a copy of today's earnings release can be accessed by logging on to fcbanking.com and selecting the Investor Relations link at the top of the page.

We've also included a slide presentation on our Investor Relations page with supplemental financial information that may be referenced throughout today's call.

With me in the room today are: Mike Price, President and CEO of First Commonwealth Financial Corporation; and Jim Reske, Executive Vice President and Chief Financial Officer.

After brief comments from management, we will open the phone call to your questions. For that portion of the call we will be joined by: Jane Grebenc, Chief Revenue Officer and President of First Commonwealth Bank; Brian Karrip, our Chief Credit Officer; and Mark Lopushansky, Chief Treasury Officer.

Before we begin, we'd like to caution listeners that this conference call will contain forward-looking statements. Please refer to our forward-looking statements disclaimer on Page 2 of the slide presentation for a description of risks and uncertainties that could cause actual results to differ materially from those reflected in the forward-looking statement.

Today's call will also include non-GAAP financial measures. Non-GAAP financial measures should be viewed in addition to and not as an alternative for our reported results prepared in accordance with Generally Accepted Accounting Principles.

A reconciliation of GAAP to non-GAAP operating measures can be found on Page 13 of today's slide presentation.

And now, I would like to turn the call over to Mike Price.

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Thomas Michael Price, First Commonwealth Financial Corporation - President, CEO & Director [3]

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Hey, thanks, Ryan, and before I turn to first quarter results, let me say a word or 2 about our recently announced transaction.

On Monday, we announced the acquisition of 14 branches from Santander Bank along with $525 million in deposits and $120 million in loans. This strategic opportunity will extend our footprint into contiguous markets and central Pennsylvania, markets we know quite well and with similar demographics to our existing Western Pennsylvania footprint.

These branches also come with strong local leadership that will help us hit the ground running.

Through this acquisition, we're acquiring approximately 22,000 new retail and small business households, representing an expansion of our customer base by approximately 10%. We believe that these customers will embrace being part of a local Pennsylvania bank. This opportunity comes on the heels of 4 successfully executed acquisitions in as many years for our bank.

Looking back at these opportunities, taken as a whole, we've grown deposits post acquisition. We acquired a total of $1.3 billion in deposits in those acquisitions, and deposits in those regions now total $1.5 billion.

In each of those transactions, we've been able to quickly layer on a commercial chassis to the acquired retail franchise which has been a recipe for success for us.

We expect to do the same thing in these markets. From an execution standpoint, this acquisition is very similar to the branch acquisition we successfully completed in 2016 in Northern Ohio. In fact, it's smaller and less complicated, in part because the seller will not be actively competing with us in the market. In a broader sense, this transaction is consistent with our previously articulated acquisition strategy. For some time now, we've publicly expressed an interest in acquiring institutions with low loan-to-deposit ratios in overlapping or contiguous markets.

This is essentially a cash acquisition of a local $0.5 billion bank with a 20% loan-to-deposit ratio and no social issues, at a purchase premium that is less than what we would have had to pay for any whole bank to meet our criteria.

From a financial point of view, the acquired deposits provide low cost, stable funding that will immediately improve our profitability and allow us to continue the steady pace of our loan growth.

We're seeing continued strong lending opportunities in both our Pennsylvania and Ohio markets, which, of course, presents the challenge of funding our loan growth with a similar amount of deposit growth to keep our loan-to-deposit ratio at or below 100%.

This acquisition provides considerable breathing room by bringing our loan-to-deposit ratio down to 90%.

Now, let me say a word or 2 about our quarterly results before I turn it over to Jim. First, this is the best start to a year that we've seen in a long time. Strong loan growth of $94.7 million or 6.5% annualized and even stronger average deposit growth of $107.6 million or 7.3% annualized growth should set us up well for the rest of the year.

Our loan growth was distributed across the Board with direct C&I lending leading the way. Over 2/3 of our loan growth and a large portion of our deposit growth came from our newer markets in Ohio.

Also encouraging, our net interest margin expended 5 basis points from last quarter to 3.75%, and our underlying fee income trends are promising.

Fee income was down from last quarter, but I would caution against reading too much into the quarter-over-quarter change as the large part of that was because of last quarter had a benefit of approximately $1 million in one-time items, including an insurance recovery. Along those lines, a lot of our fee income comes from deposit service charges and debit card interchange income, which is directly correlated with the number of processing days that are in a given quarter. And in the first quarter, we had 6 fewer processing days than last quarter, but our dedicated fee businesses of insurance and wealth management are off to a strong start this year, and the contribution that our SBA and mortgage businesses are making to fee income continue to build momentum, so we continue to believe that fee income will make a steadily growing contribution to earnings in 2019.

We've had a very intense focus on small business recently and particularly, deposit gathering. So I'd like to end by highlighting some of the progress on that front, focusing a little bit on the lending side.

First, the first quarter of 2019 saw a 36% increase year-over-year in booked small business loans, improved talent in the branch manager ranks and better training coaching, and coaching coupled with better calling discipline are the primary enablers. Second, we continue to streamline both our product and credit approval process for lines of credit, term loans and credit cards.

We're excited about all of these improvements because they will help us better serve our small business customers, both in our home markets in Western PA and Ohio and in our new central PA markets. And with that, I'll turn it over to Jim.

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James R. Reske, First Commonwealth Financial Corporation - Executive VP, CFO & Treasurer [4]

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Thanks, Mike. Earnings per share of $0.25 in the first quarter resulted in core ROA and core return on tangible common equity figures of 1.27% and 14.59%, respectively.

Our efficiency ratio improved ever so slightly to 58.18%, as noninterest expense was essentially flat from last quarter.

The trend in asset quality ratios remains positive. For example, at the end of the first quarter, nonperforming loans totaled $31.3 million, a decrease of $26 million from a year ago and the lowest level in over a decade. Nonperforming loans as a percentage of total loans were 0.53% at March 31, exactly half of the 1.06% level of a year ago.

And reserve coverage of nonperforming loans improved to 159% compared with 94% a year ago.

The 5 basis point expansion of the margin is at the high end of our expected range, reflecting the benefits of December's rate hike on earning assets, even while deposit costs remained under control.

Part of the margin expansion was continuing positive replacement yields, reflecting the lingering effect of last year's rate hikes.

Deposit growth was strong, even while deposit costs remained in check, as growth was centered on transaction accounts.

Looking forward. We are extremely pleased to have announced on Monday the acquisition of over $0.5 billion of deposits and $120 million in consumer and small business loans. These new deposits and loans will result in an immediate pick-up of 5 to 10 basis points in our margin and the first full quarter after close.

This is our fifth acquisition in the last 4 years and our second branch acquisition in the last 3 years. And our experience has taught us that these branch acquisitions have low execution risk, since the majority of the revenue stream comes from the ability to pay down more expensive borrowings with complete certainty on day 1.

The fact that debit card interchange income is more valuable in our hands versus the seller because we are under $10 billion in total assets helps as well.

In fact, it is the low-risk nature of this acquisition and the certainty of the earnings accretion that leads us comfortable with the earn-back period implied in the transaction. And while we don't see any evidence of an economic downturn in our local markets, the transaction leaves us with an even stronger balance sheet that is better prepared for any eventual downturn, since the deal presents very little capital pressure, no funding contingencies and improves our liquidity position.

Finally, to date, we have purchased 176,000 shares under our share buyback program or about $2.3 million of a current $25 million authorization.

In view of the superior use of capital represented by this transaction, we expect that we will soon be suspending buybacks for the time being. And with that, we'll take any questions you may have.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from Frank Schiraldi with Sandler O'Neill.

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Frank Joseph Schiraldi, Sandler O'Neill + Partners, L.P., Research Division - MD of Equity Research [2]

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Just a couple of questions. First on the efficiency ratio. I think you guys have talked about target of 55% by year-end. Just wondering your updated thoughts on that front?

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Thomas Michael Price, First Commonwealth Financial Corporation - President, CEO & Director [3]

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We were -- we'd like to get to a 55% efficiency ratio for a quarter by year-end. We've been good -- having good operating leverage over the years and keeping our costs flat. We feel like we have good momentum in our lines of business, particularly with some of the newer lines, mortgage and SBA. And our regional banking model have deep pipelines on the commercial side in Northern Ohio, Columbus, Cincinnati and Western PA. So that's the goal.

Jim, anything you want to add?

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James R. Reske, First Commonwealth Financial Corporation - Executive VP, CFO & Treasurer [4]

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No, I would say that still is the goal. And we still think we're on track for that. And the fact that this acquisition should close before that so we should have the full operating results in the -- reflected in the fourth quarter. On an operating basis we should still be able to hit that goal, getting to a 55% efficiency ratio.

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Frank Joseph Schiraldi, Sandler O'Neill + Partners, L.P., Research Division - MD of Equity Research [5]

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Okay, great. And then Jim, you mentioned on the NIM, obviously you got a benefit from the deal, but if we just were to think about the NIM, excluding that, just the core NIM here, what are your thoughts on, given your -- the neutral nature of the balance sheet at this point, your thoughts on holding the NIM at these levels?

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James R. Reske, First Commonwealth Financial Corporation - Executive VP, CFO & Treasurer [6]

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Yes, thanks, Frank, and I'm happy to address that and give you our thoughts on the NIM as best as we can see going forward. I know there's a lot of concern in the industry about NIM compression and everything you see really does not show that at this point. We -- our guidance consistently in the recent quarters has been for slow gradual NIM compression. We are still getting the benefit of positive replacement yields on the asset side of the balance sheet and still able to hold the line going to cost of funding. So we think that we will still get some margin expansion from here, but within the next several quarters that will flatten out. We see generally NIM flattening, but really not seeing the NIM compression. Probably right around the time that happens, this deal will close and kick in and that will give us lift to the margin.

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Frank Joseph Schiraldi, Sandler O'Neill + Partners, L.P., Research Division - MD of Equity Research [7]

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Great. And then just finally on loan growth, it's pretty healthy in the quarter. Wondering if that's -- as you think about it versus previous periods, if that's more a function of reduced pay downs or more a function of stronger origination?

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Thomas Michael Price, First Commonwealth Financial Corporation - President, CEO & Director [8]

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It's a little bit of both but mostly stronger originations. Our pipelines in -- on the consumer side and also on the commercial side are really as deep as they've been for several years.

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Operator [9]

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The next question comes from Steve Moss with B. Riley FBR.

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Stephen M. Moss, B. Riley FBR, Inc., Research Division - Analyst [10]

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Just following up on the origination yields, just kind of wondering any given number exactly kind of where they are relative to what's running off the portfolio, Jim?

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James R. Reske, First Commonwealth Financial Corporation - Executive VP, CFO & Treasurer [11]

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Yes. We -- like I said, the net replacement yields are still positive. So I can give you just the ballpark figures for the first quarter. The new loans are coming on just a hair under 5%, that's in the aggregate. So the portfolios -- the originations are coming out over 5%. So the aggregate, the new originations coming out at 4.98%, the runoff was 4.49%. So still healthy replacement yields. Now without rate hikes and the flat rate environment, that's going to taper off eventually but for now it's still positive.

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Thomas Michael Price, First Commonwealth Financial Corporation - President, CEO & Director [12]

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What also helps us is just the mix of our loans, getting a little bit more commercial and center where the spreads are still pretty good.

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James R. Reske, First Commonwealth Financial Corporation - Executive VP, CFO & Treasurer [13]

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That's right.

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Stephen M. Moss, B. Riley FBR, Inc., Research Division - Analyst [14]

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Right. And in terms of the -- I hear you guys in terms of the better production. What were the underlying drivers with regard to C&I and construction loan growth this quarter? Any particular industries or geographies?

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Thomas Michael Price, First Commonwealth Financial Corporation - President, CEO & Director [15]

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Yes. The geography was probably about 2/3 of the growth occurred in Ohio on the loan side and probably a good portion of about half on the deposit side. And it's -- those are really -- we've moved to a regional banking model with a president in each market and really trying to coordinate things more geographically as opposed by line of business. And we just -- I just think it gives us a better ground game. Before we did the -- we extended the franchise into Ohio, it was easy to do that in your backyard of Western PA and Pittsburgh. But I think it's really given us some nice momentum on the backs of these acquisitions in Canton-Massillon, Northern Ohio and Cincinnati and Columbus and Delaware County there.

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Stephen M. Moss, B. Riley FBR, Inc., Research Division - Analyst [16]

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Okay, that's helpful. And in terms of the construction loans, so those are just existing drawn down -- or just draw downs on existing lines or is that new originations?

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Thomas Michael Price, First Commonwealth Financial Corporation - President, CEO & Director [17]

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It's a little bit of both. We have a pretty good portfolio that has a natural amount of draws. And just projects and everything. Mixed use projects, again, I think more of the projects have been in Central Ohio than in Western PA.

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Operator [18]

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The next question comes from Russell Gunther with D.A. Davidson.

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Russell Elliott Teasdale Gunther, D.A. Davidson & Co., Research Division - VP & Senior Research Analyst [19]

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So circling back to the loan growth conversation, really good start to the year as you said. I think previously we've spoken about a kind of mid-single-digit outlook. So given comments about the favorable pipelines, is there a shot for you guys to outperform that mid-single digits and put something up closer to the 7% annualized you saw in the start to the year?

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Thomas Michael Price, First Commonwealth Financial Corporation - President, CEO & Director [20]

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We hope so. I think we've been pretty conservative and really thought through opening leverage and keeping our costs flat. And then really we've had double-digit earnings per share growth for I think 5 to 6 years, with very modest growth of probably about 4% all in notwithstanding the acquisition. But I think that now with a more regional business model and some other business lines beginning to kick in, we had a better consumer side of the equation this past quarter. I think we're just hitting on a few more cylinders. And without -- and by the way, I think we're taking less credit risk than we did 3 to 5 years ago, certainly. And so I think we're in a good place, and just -- we're starting to hit our stride.

Jim, anything you want to add?

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James R. Reske, First Commonwealth Financial Corporation - Executive VP, CFO & Treasurer [21]

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No, I just think it's -- that's exactly right. I like the fact that it's a fully diversified growth, balancing consumer and commercial and the geographic diversity as well.

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Russell Elliott Teasdale Gunther, D.A. Davidson & Co., Research Division - VP & Senior Research Analyst [22]

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It's very helpful guys, I appreciate it. And then last question for me is on capital deployment. So I hear you about the buyback likely suspended from here. But as you integrate the branch purchase, would you consider or are you still open to whole bank deals in 2019? Or is that something that you would similarly push out as you focus on this integration?

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Thomas Michael Price, First Commonwealth Financial Corporation - President, CEO & Director [23]

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This integration is very important to us. We've really focused on executing and retaining the deposits. Jane Grebenc, our President, is in the room with me today. We'll be out over the course of the next few days in the market, meeting all the branch managers, meeting with employees. It's -- these are important to us. We need to retain the deposits, get a good commercial lending team on top of that and make sure they work. That being said, we've been pretty sequential. We've done about 1 a year. If something else came along that was really attractive, we certainly would be interested. But we've looked at over 25 deals just to do 5. So they have to work for us strategically and then also financially is a pretty important screen as well. So it's probably unlikely, I hope we have a -- that being said, I hope we have a nice opportunity but it has to work. And we look at a lot of things but just do a few.

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Operator [24]

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(Operator Instructions) The next question comes from Collyn Gilbert with KBW.

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Collyn Bement Gilbert, Keefe, Bruyette, & Woods, Inc., Research Division - MD and Analyst [25]

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If I could just start on the branch acquisition, just a couple of questions there. So first was, what was the reasoning for why Santander was selling their -- these branches?

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Thomas Michael Price, First Commonwealth Financial Corporation - President, CEO & Director [26]

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I think I'm speculating and that's -- I just think it was a little detached from their core markets perhaps. And certainly an opportunity for us.

Jim, any other color you would add?

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James R. Reske, First Commonwealth Financial Corporation - Executive VP, CFO & Treasurer [27]

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Yes, I mean it's a relatively immaterial transaction for Santander, given the size of the banks to global bank. But if you look at the map that we republished along with our earnings release, these are really kind of noncore markets for them. They're really great markets for us. They're very similar in tech -- sort of the markets we're in already contiguous to us, so they make a lot of sense for us. But I just think looking at the map for them, it really wasn't core from their perspective.

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Thomas Michael Price, First Commonwealth Financial Corporation - President, CEO & Director [28]

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Collyn, just as an aside, and I think I've shared this with you before, we probably have 44%, 45% of our core depository, comes out of our community PA markets, which are these smaller towns and more rural areas of Pennsylvania and this is contiguous to that. So this -- it's just -- they're very attractive to us quite frankly.

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Collyn Bement Gilbert, Keefe, Bruyette, & Woods, Inc., Research Division - MD and Analyst [29]

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Okay. And to your point, Mike, you had said the difference here or one of the advantages here is that Santander is exiting the market, so they will not -- is that correct? They're not going to be a competitor of yours? So it's not like the customers still have an option. Okay.

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Thomas Michael Price, First Commonwealth Financial Corporation - President, CEO & Director [30]

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That's right.

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Collyn Bement Gilbert, Keefe, Bruyette, & Woods, Inc., Research Division - MD and Analyst [31]

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Okay. And then just, a couple more questions on the deal. So Jim, I know you had indicated NIM accretive 5 to 10 basis points. And I'm sorry, did you say that was right out of the gates, right? In the first quarter?

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James R. Reske, First Commonwealth Financial Corporation - Executive VP, CFO & Treasurer [32]

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Yes, it should be in the first full quarter after close.

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Collyn Bement Gilbert, Keefe, Bruyette, & Woods, Inc., Research Division - MD and Analyst [33]

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Okay. And so then can you just, again, tell us what the intention -- the potential use of the proceeds are? Because I guess I was thinking it was going to be actually more NIM-dilutive just because it was going to go into cash. So is that right out of the gates too? You're going to -- you intend to use some of this to pay down borrowings? And just what is the relative math on that?

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James R. Reske, First Commonwealth Financial Corporation - Executive VP, CFO & Treasurer [34]

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No problem at all. I'm happy to give you the -- as many numbers as we can to make it as clear as possible. We thought we've given a lot of the figures with the transaction terms of the supplement that we had published, but happy to go through some of the income statement items.

The total cash proceeds from the deal will be the amount of -- the dollar amount of deposits, less the premium, less the loans, less the fixed assets received, that'll be about $390 million, and we use that cash to pay down short-term borrowings, which are relatively expensive right now. And that'll produce a needed effect, a needed pick up in spread income. You get spread income from the loans that we're purchasing as well, and then of course we have to pay for the deposits that we're picking up. All those together, all told, will get -- will result in an increase in spread income -- pretax spread income of about $12.9 million in the first year, then of course, there's fee income as well. So deposits have fee income, and not just regular deposit fee income but interchange income as well, and I try to point it out. One of the advantages here is a purchaser under $10 billion, the interchanging income is more valuable in our hands than it is in the hands of Santander.

But the total amount of fee income is about $3.8 million and that'll give a pretax income pick-up of over $16 million, but of course, there's the expense of operating of branches, there's intangible amortization, which is not free either but it's a noncash expense. All that results in a pretax pick-up of around $7 million in the first full year. Take that divided by our share count, that's where you get the 5% accretion to earning per share. Of course the cash accretion is little higher than that because if you back out the intangible amortizations and noncash expense, and that's -- the cash amortization actually is higher than that and that's what builds book value -- tangible book value back up and gets to the calculation of the earn back period. So hopefully, that's some detail that's helpful.

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Collyn Bement Gilbert, Keefe, Bruyette, & Woods, Inc., Research Division - MD and Analyst [35]

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Yes. Okay. I apologize if you had -- if it's been in a slide deck, subsequent to the deal slide deck I guess, and I didn't see that.

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James R. Reske, First Commonwealth Financial Corporation - Executive VP, CFO & Treasurer [36]

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No, not at all. We did have that slide deck, but the one piece of that, we try to be as explicit as we could, but the one piece that was not made explicit was the fee income. And it's just a nice fee income opportunity for us as well. It's not -- there's no increase in fees for the customers as we already -- we always kind of tread very lightly through an acquisition which is the normal fee income plus what was the interchange being more valuable.

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Collyn Bement Gilbert, Keefe, Bruyette, & Woods, Inc., Research Division - MD and Analyst [37]

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Got it. Okay. And then -- and again, if you had this somewhere and I missed it, I apologize, but the deposit runoff that you're assuming? Or are you assuming any deposit runoff?

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James R. Reske, First Commonwealth Financial Corporation - Executive VP, CFO & Treasurer [38]

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We are assuming some deposit runoff. I think we're looking at the -- in the immediate time after close.

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Thomas Michael Price, First Commonwealth Financial Corporation - President, CEO & Director [39]

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I think it's in the first 6 months, we're assuming that 10%, and then we go from there.

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James R. Reske, First Commonwealth Financial Corporation - Executive VP, CFO & Treasurer [40]

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Yes, 10% annualized rate, but for a short period of time.

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Thomas Michael Price, First Commonwealth Financial Corporation - President, CEO & Director [41]

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That's right. Hey, Collyn, just 2 other things. I mean we do feel that in the 4 previous deals, and you've seen the impact on profitability over the last 3 or 4 years, they're pretty conservatively stated. We're going to put a commercial bank in on top of this. And then another thing is, is with a lower loan-to-deposit ratio that's at 90%, I mean we had already budgeted in a number of, how should I say, specials with deposits to grow our deposits and fund our balance sheet at the requisite pace. I think this gives us some optionality as it relates to that and that's not quantified in our model but will invariably have impact on our own internal budget. And so this deal sets up pretty nicely for us like with the others, hopefully, to outperform the projections.

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Collyn Bement Gilbert, Keefe, Bruyette, & Woods, Inc., Research Division - MD and Analyst [42]

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That's great. Okay. That's really, really helpful. And then just one final question. You guys are seeing some good -- you saw it this quarter and it sounds like in your outlook too some good consumer activity, which is a little bit different, I feel like -- than what we're seeing from some of our peers. Anything in particular that's driving that? I mean maybe to your point, Mike, is it the newer markets of Ohio and you're just getting more households? But I'm just -- you seem to be doing better than your peers on that, and I'm just curious if you had more color as to what's driving that?

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Thomas Michael Price, First Commonwealth Financial Corporation - President, CEO & Director [43]

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Yes. And our -- I hate to say this, in our indirect auto business with an inverted yield curve, it gets a little more attractive on the spreads. It's kind of a nuance of the business. We've been in the business for 20 years. It's been a pretty consistent performer for us on the credit side, so it's never nicked us there. We know the dealer as well, a lot of times we floor plan them. And that business, as we've moved into Ohio, we've grown with our kinds of dealers there. And again, I know it's a business that can cause some concern, but nevertheless, it's one that we've been pretty good at for a number of years. So we don't feel like we have credit risk there, we just -- we need to get appropriate returns and those returns are getting a little better. And so that's -- that was like a bit of a shot in the arm. But it's pretty broad-based from C&I to construction to commercial real estate to the branches that are doing a better job. Jane and the team on the small business side are getting after it for now. I think the #2 in dollars SBA lender in Cleveland and the #2 at the end of last fiscal year-end in Pittsburgh. So we just made good strides in the core businesses.

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Operator [44]

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The next question comes from Daniel Cardenas with Raymond James.

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Daniel Edward Cardenas, Raymond James & Associates, Inc., Research Division - Research Analyst [45]

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So congrats on a good quarter and on the deal. As we talk a little bit more about your expectations on the loan growth side. Could maybe give us a little bit of color as to whether or not you're seeing a pullback on competitive factors? Is that kind of -- is that what's giving you some encouragement that you can see loan growth kind of where you expected to see for 2019?

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Thomas Michael Price, First Commonwealth Financial Corporation - President, CEO & Director [46]

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I wish I could say that but I'm not sure we see that. We think it's pretty tough. We -- probably like a lot of people we're -- we were preparing for maybe tougher economic times. And we want to perform well through the next cycle. So we're very mindful of credit, and how this bank will do through the next credit cycle. But hey, as long as we can get some good GDP growth, that benefits us all. Although, that has been dampened a bit just over the last quarter or 2. So it's tough, and I think we're just doing a better job of finding, quite frankly, we have more salespeople. I mean we've invested a lot in corporate banking, FTE is probably up 10 to 12 FTE just in the last year, 1.5 year. So we have more producers, too.

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Daniel Edward Cardenas, Raymond James & Associates, Inc., Research Division - Research Analyst [47]

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Good. And then how about on the deposit side? Are you starting to see competitive factors abate? Or is that not necessarily the case?

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Thomas Michael Price, First Commonwealth Financial Corporation - President, CEO & Director [48]

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It's -- I don't know that they've abated. I would say our sales culture under Jane and others' leadership has just continued to grow and the importance of gathering deposits. And our talent in the branches, I think, has gotten stronger. And our branch model, we have our branch managers go out and really call on small-end business customers. When you look at our deposit book, we're about 25% noninterest-bearing and 2/3 or 66% of that noninterest-bearing is business. And you're just going out, calling on people and getting the business.

Jim, you want to anything there?

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James R. Reske, First Commonwealth Financial Corporation - Executive VP, CFO & Treasurer [49]

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Yes, I don't think -- Daniel, going right to your question about deposit pressures. You may have seen a little bit on the edge as some people are pulling back some of the crazier specials. But still the competition for the next incremental deposit dollar remains intense. And so that's -- that is something that we're -- we watch very closely.

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Daniel Edward Cardenas, Raymond James & Associates, Inc., Research Division - Research Analyst [50]

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Good. And then just one quick model question here. How should I be thinking about your tax rate for the remainder of 2019?

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James R. Reske, First Commonwealth Financial Corporation - Executive VP, CFO & Treasurer [51]

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19.1%.

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Operator [52]

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This concludes our question-and-answer session. I would like to turn the conference back over to Mike Price for any closing remarks.

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Thomas Michael Price, First Commonwealth Financial Corporation - President, CEO & Director [53]

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And just thank you. As always, we appreciate your interest in our company. I know we'll be with a number of you over the course of the next quarter or 2 and really look forward to that. Thank you, again.

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Operator [54]

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The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.