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First Commonwealth Reports Fourth Quarter and Full Year 2019 Earnings; Increases Quarterly Dividend 10.0%

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First Commonwealth Reports Fourth Quarter and Full Year 2019 Earnings; Increases Quarterly Dividend 10.0%

INDIANA, Pa., Jan. 28, 2020 (GLOBE NEWSWIRE) -- First Commonwealth Financial Corporation (FCF) today announced financial results for the fourth quarter and full year 2019.

Financial Summary

(dollars in thousands,

For the Three Months Ended

For the Years Ended

except per share data)

December 31,

September 30,

December 31,

December 31,

December 31,

2019

2019

2018

2019

2018

Reported Results

Net income

$

26,820

$

26,644

$

26,998

$

105,333

$

107,498

Diluted earnings per share

$

0.27

$

0.27

$

0.27

$

1.07

$

1.08

Return on average assets

1.30

%

1.31

%

1.39

%

1.31

%

1.42

%

Return on average equity

10.13

%

10.22

%

11.06

%

10.32

%

11.41

%

Operating Results (non-GAAP)(1)

Core net income

$

26,634

$

29,597

$

27,000

$

108,126

$

108,791

Core diluted earnings per share

$

0.27

$

0.30

$

0.27

$

1.10

$

1.10

Core return on average assets

1.29

%

1.46

%

1.39

%

1.35

%

1.44

%

Return on average tangible common equity

14.99

%

14.62

%

16.09

%

14.92

%

16.67

%

Core return on average tangible common equity

14.89

%

16.20

%

16.09

%

15.30

%

16.87

%

Core efficiency ratio

57.23

%

55.73

%

57.45

%

56.97

%

57.15

%

Net interest margin (FTE)

3.73

%

3.76

%

3.70

%

3.75

%

3.71

%

(1)

Core operating results are a non-GAAP measure used by management to measure performance in operating the business that management believes enhances investors' ability to better understand the underlying business performance and trends related to core business activities. A full reconciliation of non-GAAP financial measures can be found at the end of the financial statements which accompany this release.

Full Year 2019 Highlights

Franchise Growth

The company successfully completed its acquisition of 14 former Santander branches located in Central Pennsylvania on September 6, 2019, which included $471 million in deposits and $100 million in loans at close.

Total loans grew $419 million, or 7.2% compared to the prior year including $319 million, or 5.5% in organic loan growth (excluding loans acquired in the branch acquisition).

Average deposits grew $500 million, or 8.6% compared to the prior year including $351 million, or 6.0% in organic deposit growth (excluding deposits acquired in the branch acquisition).

Tangible book value per share grew 7.3% year-over-year.

Earnings

For the year ended December 31, 2019, net income was $105.3 million (or $1.07 diluted earnings per share). Core net income (non-GAAP)(1), which excludes acquisition expenses, was $108.1 million, or $1.10 diluted earnings per share.

Core earnings per share (non-GAAP)(1) in 2018 totaled $1.10, but included net security gains of $0.06 per share.

Total revenue (excluding net security gains) (non-GAAP)(1) grew $22.3 million, or 6.7% from the prior year.

Net interest income (on a fully tax-equivalent (FTE) basis) (non-GAAP)(1) increased $17.4 million, or 6.9%, from the prior year.

Noninterest income (excluding net security gains) (non-GAAP)(1) grew $4.9 million, or 6.1%, from the prior year.

Total noninterest expense decreased $14.4 million, or 7.4% from the prior year.

Noninterest expense (excluding acquisition expenses) (non-GAAP)(1) increased $12.5 million, or 6.5%, from the prior year.

Profitability

The net interest margin improved four basis points to 3.75% compared to the prior year.

The efficiency ratio improved 18 basis points to 56.97% compared to the prior year.

The return on average assets (ROA) for the year ended December 31, 2019 was 1.31%.

Core ROA (non-GAAP)(1) for the year ended December 31, 2019 was 1.35% as compared to 1.44% in the prior year, which included 0.08% attributable to securities gains.

Fourth Quarter 2019 Highlights

Franchise Growth

Total gross loans (including loans held for sale) grew $85 million, or 5.6% (annualized), compared to the prior quarter.

Average noninterest bearing deposits grew $113 million, or 28.9% (annualized) compared to the prior quarter including $49 million, or 12.7% (annualized) in organic noninterest bearing deposit growth (excluding acquired deposits).

Earnings

For the quarter ended December 31, 2019, net income was $26.8 million (or $0.27 diluted earnings per share), resulting in an ROA of 1.30% and an ROE of 10.13%.

Total revenue grew $5.7 million, or 6.6%, from the prior year quarter and $0.7 million, or 3.0% (annualized), from the third quarter of 2019.

Net interest income (FTE) increased $3.7 million, or 5.6% from the prior year quarter and increased $0.3 million, or 2.0% (annualized), from the third quarter of 2019.

Noninterest income (excluding security gains) grew $2.0 million, or 9.7% from the prior year quarter and $0.4 million, or 6.3% (annualized), from the third quarter of 2019.

Total noninterest expense increased $3.1 million, or 6.2%, from the prior year quarter and decreased $1.8 million, or 3.3%, from the third quarter of 2019.

Noninterest expense (excluding acquisition expenses) increased $2.1 million from the prior quarter.

Provision for credit losses totaled $4.9 million, an increase of $2.2 million from the previous quarter.

Nonperforming loans as a percentage of total loans decreased six basis points from the prior quarter and currently total 0.52% of loans outstanding. This represents a 10-year low in this metric.

“2019 was another busy and productive year for our company,” stated T. Michael Price, President and Chief Executive Officer, “We expanded our footprint into the nearby Central Pennsylvania market with the acquisition of 14 former Santander branches, our fee income businesses continued to grow and expenses remained well controlled despite strategic investments in talent and technology. Additionally, our migration to a regional leadership model produced mid-single digit organic loan growth which mirrored our deposits gathering. We expect headwinds from the lower interest rate environment going into 2020 but I have confidence in our team’s ability to continue to produce positive long-term performance for our shareholders.”

Earnings

Net income for the fourth quarter of 2019 was $26.8 million, as compared to $26.6 million and $27.0 million in the prior quarter and fourth quarter of 2018, respectively.

Net income for the year ended December 31, 2019 was $105.3 million, as compared to $107.5 million for the year ended December 31, 2018. Core net income, which excludes merger-related expenses of $1.6 million (pretax) in 2018 and merger-related expenses of $3.5 million (pre-tax) in 2019, was $108.1 million and $108.8 million for the years ended December 31, 2019 and 2018, respectively. However, the results for the prior year were impacted by an $8.1 million (pre-tax) gain on the sale of the company’s remaining pooled trust preferred securities. Excluding securities gains, adjusted core net income (non-GAAP) for the year ended December 31, 2019 was $108.1 million, an increase of $5.7 million, or 5.6%, from the previous year.

Net Interest Margin and Net Interest Income

The net interest margin for the fourth quarter of 2019 was 3.73%, a decrease of three basis points from the previous quarter and an increase of three basis points from the fourth quarter of 2018. Loan yields decreased 17 basis points from the previous quarter due to the repricing of variable and adjustable rate loans and lower replacement yields on new loans. Average loans increased $99 million, or 6.5% (annualized) from the previous quarter, including $25 million of average organic loan growth (excluding acquired loans).

The total cost of interest-bearing demand and savings deposits decreased six basis points from the previous quarter. Average noninterest bearing deposits grew $113 million, or 28.9% (annualized) from the previous quarter, including $49 million of average organic noninterest bearing deposit growth (excluding acquired deposits).

The increase in the net interest margin from the prior year quarter was primarily due to a seven basis point decrease in total funding costs due to an improved funding mix, as the company was able to pay down higher cost short-term borrowings with acquired deposits.

The net interest margin for the year ended December 31, 2019 was 3.75%, an increase of four basis points from the previous year. The increase from the prior year was due to a $399 million increase in average interest earning assets and a $115 million increase in average noninterest bearing deposits. The yield on interest-earning assets increased 21 basis points, which was partially offset by a 25 basis point increase in the cost of interest-bearing liabilities. The yield on total loans increased by 26 basis points compared to the prior year, while the cost of deposits increased by 21 basis points.

For the year ended December 31, 2019, total average loans grew $405 million, or 7.3% and includes $373 million of average organic loan growth (excluding acquired loans) from the prior year. For the year ended December 31, 2019, total average deposits grew $500 million, or 8.6% and includes $351 million of average organic loan growth (excluding acquired deposits) from the prior year.

Credit Quality

At December 31, 2019, nonperforming loans were $32.2 million, a decrease of $3.1 million from the prior quarter and relatively unchanged from the fourth quarter of 2018. Nonperforming loans as a percentage of total loans were 0.52%, 0.58% and 0.55% for the periods ended December 31, 2019, September 30, 2019 and December 31, 2018, respectively.

The provision for credit losses totaled $4.9 million in the fourth quarter of 2019, an increase of $2.2 million from the previous quarter. The increase from the prior quarter was partially due to provision expense associated with organic loan growth and the resolution and chargeoff of two commercial credits.

Total provision for credit losses totaled $14.5 million for the year ended December 31, 2019 as compared to $12.5 million in the prior year. For the year ended December 31, 2019, net charge-offs were $10.7 million, or 0.18% of average loans, compared to $13.1 million in the prior year period, a decrease of $2.4 million.

For the originated loan portfolio at December 31, 2019, the general allowance for credit losses to total originated loans was 0.86%, compared to 0.87% at September 30, 2019 and 0.87% at December 31, 2018.

Noninterest Income and Noninterest Expense

Noninterest income (excluding net security gains) totaled $22.5 million for the fourth quarter of 2019 as compared to $22.2 million for the third quarter of 2019 and $20.5 million for the fourth quarter of 2018. Swap fee income increased $1.3 million from the prior quarter, and was partially offset by a $0.9 million decrease in the gain on sale of mortgage loans.

For the year ended December 31, 2019, noninterest income (excluding security gains) totaled $85.5 million, an increase of $4.9 million from the year ended December 31, 2018. The increase from the prior year was due to a $2.3 million increase in gain on sale of mortgage loans, a $1.5 million increase in card related interchange income and a $1.5 million increase in swap fee income, partially offset by a $1.1 million decrease in derivative mark-to-market.

There were no material security gains during 2019; however, the company recognized an $8.1 million gain during the prior year following the successful auction call and sale of the company’s remaining pooled trust preferred securities.

Noninterest expense (excluding merger-related expenses) totaled $53.3 million for the fourth quarter of 2019, as compared to $51.2 million for the third quarter of 2019 and $50.0 million for the fourth quarter of 2018. The $2.1 million increase from the previous quarter was primarily the result of a $0.9 million increase in other professional fees, as well as a $0.5 million increase in occupancy expense and a $0.4 million increase in salaries and benefits due to a full quarterly impact of the aforementioned branch acquisition. This was partially offset by a $0.5 million decrease in advertising and promotion expense.

The $3.3 million increase compared to the prior year quarter was primarily due to higher operating expenses following the completion of the company’s aforementioned branch acquisition, partially offset by a $0.4 million decrease in FDIC insurance due to a quarterly assessment credit and a $0.2 million decrease in collection and repossession expense.

Full time equivalent staff was 1,484 at December 31, 2019, as compared to 1,511 at September 30, 2019 and 1,426 at December 31, 2018. The increase from the prior year is the result of the addition of employees from acquisitions and the continued expansion of the mortgage, SBA and commercial banking businesses.

Dividends and Capital

First Commonwealth Financial Corporation declared a quarterly common stock dividend of $0.11 per share, which is payable on February 21, 2020 to shareholders of record as of February 7, 2020. This dividend represents a 10.0% increase over the previous quarter and a 3.2% projected annual yield utilizing the January 27, 2020 closing market price of $13.82.

First Commonwealth’s capital ratios for Total, Tier I, Leverage and Common Equity Tier I at December 31, 2019 were 14.3%, 12.0%, 10.2% and 10.9%, respectively. First Commonwealth’s current capital levels exceed the fully phased-in Basel III capital requirements issued by U.S. bank regulators.

Conference Call

First Commonwealth will host a quarterly conference call to discuss its financial results for the quarter and year ended December 31, 2019 on Wednesday, January 29, 2020 at 2:00 PM (ET). The call can be accessed by dialing (toll free) 1-844-792-3645 or through the company’s web page, http://www.fcbanking.com/InvestorRelations. A replay of the call will be available approximately one hour following the conclusion of the conference by dialing 1-877-344-7529 and entering the access code #10138059. A link to the webcast replay will also be accessible on the company’s web page for 30 days.

About First Commonwealth Financial Corporation

First Commonwealth Financial Corporation (FCF), headquartered in Indiana, Pennsylvania, is a financial services company with 147 community banking offices in 28 counties throughout western and central Pennsylvania and throughout Ohio, as well as business banking operations in Pittsburgh, Pennsylvania, and Canton, Cleveland, Columbus and Cincinnati, Ohio. The company also operates mortgage offices in Wexford, Pennsylvania, as well as Hudson and Lewis Center, Ohio. First Commonwealth provides a full range of commercial banking, consumer banking, mortgage, wealth management and insurance products and services through its subsidiaries First Commonwealth Bank and First Commonwealth Insurance Agency. For more information about First Commonwealth or to open an account today, please visit www.fcbanking.com.

Forward-Looking Statements

This release contains forward-looking statements about First Commonwealth’s future plans, strategies and financial performance. These 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." Such statements are based on assumptions and involve risks and uncertainties, many of which are beyond First Commonwealth’s control. Factors that could cause actual results, performance or achievements to differ from those discussed in the forward-looking statements include, but are not limited to: (1) local, regional, national and international economic conditions and the impact they may have on First Commonwealth and its customers; (2) volatility and disruption in national and international financial markets; (3) the effects of and changes in trade and monetary and fiscal policies and laws, including the interest rate policies of the Federal Reserve Board; (4) inflation, interest rate, commodity price, securities market and monetary fluctuations; (5) the effect of changes in laws and regulations (including laws and regulations concerning taxes, banking, securities and insurance); (6) the soundness of other financial institutions; (7) political instability; (8) impairment of First Commonwealth’s goodwill or other intangible assets; (9) acts of God or of war or terrorism; (10) the timely development and acceptance of new products and services and perceived overall value of these products and services by users; (11) changes in consumer spending, borrowings and savings habits; (12) changes in the financial performance and/or condition of First Commonwealth’s borrowers; (13) technological changes; (14) acquisitions and integration of acquired businesses; (15) First Commonwealth’s ability to attract and retain qualified employees; (16) changes in the competitive environment in First Commonwealth’s markets and among banking organizations and other financial service providers; (17) the ability to increase market share and control expenses; (18) the effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board and other accounting standard setters; (19) the reliability of First Commonwealth’s vendors, internal control systems or information systems; (20) the costs and effects of legal and regulatory developments, the resolution of legal proceedings or regulatory or other governmental inquiries, the results of regulatory examinations or reviews and the ability to obtain required regulatory approvals; and (21) other risks and uncertainties described in the reports that First Commonwealth files 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.

Media Relations:
Jonathan E. Longwill
Vice President / Communications and Media Relations
Phone: 724-463-6806
E-mail: JLongwill@fcbanking.com

Investor Relations:
Ryan M. Thomas
Vice President / Finance and Investor Relations
Phone: 724-463-1690
E-mail: RThomas1@fcbanking.com

FIRST COMMONWEALTH FINANCIAL CORPORATION

CONSOLIDATED FINANCIAL DATA

Unaudited

(dollars in thousands, except per share data)

For the Three Months Ended

For the Years Ended

December 31,

September 30,

December 31,

December 31,

December 31,

2019

2019

2018

2019

2018

SUMMARY RESULTS OF OPERATIONS

Net interest income (FTE) (1)

$

69,212

$

68,875

$

65,514

$

271,610

$

254,196

Provision for credit losses

4,895

2,708

1,499

14,533

12,531

Noninterest income

22,528

22,179

20,529

85,485

88,637

Noninterest expense

53,109

54,897

50,024

209,965

195,556

Net income

26,820

26,644

26,998

105,333

107,498

Core net income (5)

26,634

29,597

27,000

108,126

108,791

Earnings per common share (diluted)

$

0.27

$

0.27

$

0.27

$

1.07

$

1.08

Core earnings per common share (diluted) (6)

$

0.27

$

0.30

$

0.27

$

1.10

$

1.10

KEY FINANCIAL RATIOS

Return on average assets

1.30

%

1.31

%

1.39

%

1.31

%

1.42

%

Core return on average assets (7)

1.29

%

1.46

%

1.39

%

1.35

%

1.44

%

Return on average shareholders' equity

10.13

%

10.22

%

11.06

%

10.32

%

11.41

%

Return on average tangible common equity (8)

14.99

%

14.62

%

16.09

%

14.92

%

16.67

%

Core return on average tangible common equity (9)

14.89

%

16.20

%

16.09

%

15.30

%

16.87

%

Core efficiency ratio (2)(10)

57.23

%

55.73

%

57.45

%

56.97

%

57.15

%

Net interest margin (FTE) (1)

3.73

%

3.76

%

3.70

%

3.75

%

3.71

%

Book value per common share

$

10.74

$

10.57

$

9.90

Tangible book value per common share (11)

7.49

7.31

6.98

Market value per common share

14.51

13.28

12.08

Cash dividends declared per common share

0.10

0.10

0.09

$

0.40

$

0.35

ASSET QUALITY RATIOS

Nonperforming loans as a percent of end-of-period loans (3)

0.52

%

0.58

%

0.55

%

Nonperforming assets as a percent of total assets (3)

0.42

%

0.46

%

0.46

%

Net charge-offs as a percent of average loans (annualized) (4)

0.21

%

0.25

%

0.31

%

Allowance for credit losses as a percent of nonperforming loans (4)

160.28

%

141.64

%

149.14

%

Allowance for credit losses as a percent of end-of-period loans (4)

0.83

%

0.82

%

0.83

%

Allowance for credit losses (originated loans and leases) as a percent of total originated loans and leases

0.90

%

0.91

%

0.90

%

CAPITAL RATIOS

Shareholders' equity as a percent of total assets

12.7

%

12.7

%

12.5

%

Tangible common equity as a percent of tangible assets (12)

9.2

%

9.2

%

9.1

%

Leverage Ratio

10.2

%

10.1

%

10.3

%

Risk Based Capital - Tier I

12.0

%

11.8

%

12.3

%

Risk Based Capital - Total

14.3

%

14.1

%

14.7

%

Common Equity - Tier I

10.9

%

10.7

%

11.1

%


FIRST COMMONWEALTH FINANCIAL CORPORATION

CONSOLIDATED FINANCIAL DATA

Unaudited

(dollars in thousands, except per share data)

For the Three Months Ended

For the Years Ended

December 31,

September 30,

December 31,

December 31,

December 31,

2019

2019

2018

2019

2018

INCOME STATEMENT

Interest income

$

81,038

$

82,575

$

77,945

$

325,264

$

292,257

Interest expense

12,233

14,130

12,896

55,402

40,035

Net Interest Income

68,805

68,445

65,049

269,862

252,222

Taxable equivalent adjustment (1)

407

430

465

1,748

1,974

Net Interest Income (FTE)

69,212

68,875

65,514

271,610

254,196

Provision for credit losses

4,895

2,708

1,499

14,533

12,531

Net Interest Income after Provision for Credit Losses (FTE)

64,317

66,167

64,015

257,077

241,665

Net securities gains

7

9

22

8,102

Trust income

2,100

2,325

1,887

8,321

7,901

Service charges on deposit accounts

5,134

4,954

4,757

18,926

18,175

Insurance and retail brokerage commissions

1,696

1,912

1,866

7,583

7,426

Income from bank owned life insurance

1,594

1,540

1,445

6,002

6,686

Gain on sale of mortgage loans

1,664

2,599

1,169

7,765

5,436

Gain on sale of other loans and assets

962

970

1,725

4,793

5,273

Card-related interchange income

5,877

5,629

5,258

21,677

20,187

Derivative mark-to-market

(181

)

(45

)

(2

)

(269

)

787

Swap fee income

1,763

421

759

3,397

1,874

Other income

1,912

1,865

1,665

7,268

6,790

Total Noninterest Income

22,528

22,179

20,529

85,485

88,637

Salaries and employee benefits

29,032

28,674

27,535

112,237

105,115

Net occupancy

5,045

4,521

4,287

18,923

17,219

Furniture and equipment

3,764

3,904

3,636

15,160

14,247

Data processing

2,704

2,825

2,706

10,692

10,470

Pennsylvania shares tax

1,237

1,189

1,477

4,602

4,875

Advertising and promotion

639

1,140

771

4,250

3,956

Intangible amortization

980

865

787

3,344

3,217

Collection and repossession

548

649

702

2,204

2,762

Other professional fees and services

1,876

969

1,473

4,631

4,473

FDIC insurance

55

35

417

1,219

2,007

Litigation and operational losses

423

308

351

1,687

1,162

Loss on sale or write-down of assets

326

152

205

1,724

1,080

Merger and acquisition related

(236

)

3,738

3

3,536

1,637

Other operating expenses

6,716

5,928

5,674

25,756

23,336

Total Noninterest Expense

53,109

54,897

50,024

209,965

195,556

Income before Income Taxes

33,736

33,449

34,520

132,597

134,746

Taxable equivalent adjustment (1)

407

430

465

1,748

1,974

Income tax provision

6,509

6,375

7,057

25,516

25,274

Net Income

$

26,820

$

26,644

$

26,998

$

105,333

$

107,498

Shares Outstanding at End of Period

98,311,840

98,319,081

98,518,668

98,311,840

98,518,668

Average Shares Outstanding Assuming Dilution

98,508,219

98,547,898

99,358,759

98,588,164

99,223,513


FIRST COMMONWEALTH FINANCIAL CORPORATION

CONSOLIDATED FINANCIAL DATA

Unaudited

(dollars in thousands)

December 31,

September 30,

December 31,

2019

2019

2018

BALANCE SHEET (Period End)

Assets

Cash and due from banks

$

102,346

$

112,241

$

95,934

Interest-bearing bank deposits

19,510

16,408

3,013

Securities available for sale, at fair value

919,053

823,944

941,373

Securities held to maturity, at amortized cost

337,123

357,890

393,855

Loans held for sale

15,989

20,288

11,881

Loans

6,189,148

6,099,561

5,774,139

Allowance for credit losses

(51,637

)

(50,035

)

(47,764

)

Net loans

6,137,511

6,049,526

5,726,375

Goodwill and other intangibles

319,694

320,505

287,240

Other assets

457,547

451,225

368,584

Total Assets

$

8,308,773

$

8,152,027

$

7,828,255

Liabilities and Shareholders' Equity

Noninterest-bearing demand deposits

$

1,690,247

$

1,657,507

$

1,466,213

Interest-bearing demand deposits

254,981

263,312

180,209

Savings deposits

3,896,536

3,867,034

3,401,354

Time deposits

835,851

890,143

850,216

Total interest-bearing deposits

4,987,368

5,020,489

4,431,779

Total deposits

6,677,615

6,677,996

5,897,992

Short-term borrowings

201,853

83,735

721,823

Long-term borrowings

234,182

234,404

185,056

Total borrowings

436,035

318,139

906,879

Other liabilities

139,458

116,862

47,995

Shareholders' equity

1,055,665

1,039,030

975,389

Total Liabilities and Shareholders' Equity

$

8,308,773

$

8,152,027

$

7,828,255


FIRST COMMONWEALTH FINANCIAL CORPORATION

CONSOLIDATED FINANCIAL DATA

Unaudited

(dollars in thousands)

For the Three Months Ended

For the Years Ended

December 31,

Yield/

September 30,

Yield/

December 31,