Exhibit 99 - First Commonwealth Financial Corporation - President and CEO's Letter to Shareholders mailed
November 24, 2004
First
Commonwealth | Banking
Insurance
Trust
Financial Management
Investments | |
| | First Commonwealth |
| | Financial Corporation |
| | 22 N. 6thStreet |
| | Indiana, Pennsylvania 15701 |
| | 724-349-7220 Phone |
| | 724-349-6427 Fax |
| | |
Joseph E. O'Dell | | www.fcbanking.com |
President and Chief Executive Officer | | |
| | |
November 9, 2004
Dear Shareholder:
First Commonwealth Financial Corporation (NYSE:FCF) reported a net loss of $2.8 million for the third quarter of 2004. The quarter included a previously announced charge of $29.5 million ($19.2 million after tax) representing a penalty for the prepayment of Federal Home Loan Bank (FHLB) long-term borrowings. This transaction expands the maturity distribution of the company's FHLB advances to minimize the impact of maturities in any one year. It also reduced the initial interest cost on the $440 million FHLB advances by 292 basis points (2.92%). First Commonwealth expects that the transaction will result in an increase in net interest income over the remaining term of the original advances in excess of the prepayment penalty. The effect of the prepayment penalty, after tax, on the quarter's earnings per share was a reduction of $0.28; consequently, the third quarter results in a $0.04 loss per share (basic and diluted). This is compared to $13.8 million in net income and basic and diluted earnings per share of $0.23 for the third quarter of 2003. Net income for the 2003 quarter also included a $3.1 million gain (pre-tax) on the sale of two community offices. This gain on an after-tax basis added $2.0 million, or $0.03 per share in the third quarter of 2003.
Return on equity was (2.13%) and return on assets was (0.18%) for the third quarter of 2004, compared to 13.63% and 1.14% respectively for the related 2003 period. Net income for the nine months ended September 30, 2004 was $22.1 million, or $0.34 basic and diluted earnings per share, compared to $40.6 million and $0.69 basic and diluted earnings per share for the related period in 2003. Return on equity was 6.14% and return on assets was 0.52% for the nine months of 2004, compared to 13.26% and 1.16% respectively for the nine-month period of 2003.
Net income, excluding the charge for the FHLB prepayment penalty, was $16.4 million for the third quarter of 2004, or basic and diluted earnings per share of $0.24 and $0.23 respectively, compared to $13.8 million for the third quarter 2003, or basic and diluted earnings of $0.23 per share. For the nine month period ended September 30, 2004 net income, excluding the FHLB prepayment penalty, was $41.3 million, or basic and diluted earnings per share of $0.64 and $0.63, compared to $40.6 million for the nine months of 2003, or $0.69 basic and diluted earnings per share.
The 2004 third quarter and year-to-date totals incorporate results of two acquisitions: Pittsburgh Financial Corp., acquired on December 5, 2003, and GA Financial, Inc., acquired on May 24, 2004. The operations of both institutions are included from the dates of acquisition.
The combined nineteen community offices from these two acquisitions have greatly improved First Commonwealth's presence in the Pittsburgh market. All the system conversions and office branding steps have been completed, resulting in 105 community offices now operating under the First Commonwealth Bank banner. The Bank has recently held grand opening ceremonies for the newly constructed Salem-22, Clearfield and Somerset Crossing Mall locations. Work is continuing on the relocation of the Ebensburg Office and the substantial expansion of the Ames Plaza Office in Huntingdon.
First Commonwealth continues to aggressively pursue expansion projects in new markets. Construction on two offices in Washington County has just started, while a new location at the Pittsburgh Mills Mall on Route 28 has been announced. The Pittsburgh Mills Mall is currently under construction and will be the largest shopping mall in the Greater Pittsburgh area when completed in the summer of 2005.
The stock market has responded favorably to the recent actions undertaken by the Corporation, with current stock prices moving First Commonwealth to over $1 billion dollars in total market capitalization. Meanwhile, the cash dividend continues to provide an excellent yield for our many value-oriented shareholders. The continued support and confidence of all the First Commonwealth shareholders is greatly appreciated.
Sincerely,
/s/JOSEPH E. O'DELL
The following tables provide you with consolidated selected financial data of First Commonwealth at and for the quarter ended September 30, 2004. You should read this information along with the consolidated financial statements of First Commonwealth and the accompanying notes included in its annual report on Form 10-K for the year ended December 31, 2003, and its quarterly report on Form 10-Q for the quarter ended September 30, 2004, which are available to the public over the Internet at the Corporation's website at http://www.fcbanking.com or from the company upon request to the attention of the Corporate Secretary.
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FIRST COMMONWEALTH FINANCIAL CORPORATION | | | | |
CONSOLIDATED SELECTED FINANCIAL DATA | | | | |
(Dollar Amounts in Thousands, except per share data) | | | | |
| | | | |
| For the Quarter | For the 9 Months |
| Ended September 30, | Ended September 30, |
| 2004 | 2003 | 2004 | 2003 |
Interest income | $74,940 | $59,605 | $202,410 | $183,108 |
Interest expense | 28,881 | 24,616 | 81,109 | 75,832 |
Net interest income | 46,059 | 34,989 | 121,301 | 107,276 |
Provision for credit losses | 2,675 | 3,495 | 7,295 | 10,420 |
Net interest income after provision for credit losses | 43,384 | 31,494 | 114,006 | 96,856 |
| | | | |
Securities gains | 51 | 166 | 4,046 | 5,621 |
Trust income | 1,413 | 1,342 | 4,123 | 3,811 |
Service charges on deposits | 4,059 | 3,447 | 11,019 | 9,551 |
Gain on sale of branches | 0 | 3,062 | 0 | 3,062 |
Insurance commissions | 1,046 | 910 | 2,715 | 2,555 |
Income from bank owned life insurance | 1,333 | 1,136 | 3,847 | 3,234 |
Merchant discount income | 988 | 959 | 2,723 | 2,666 |
Card related interchange income | 986 | 634 | 2,496 | 1,933 |
Other income | 1,927 | 2,201 | 5,514 | 5,693 |
Total other income | 11,803 | 13,857 | 36,483 | 38,126 |
| | | | |
Salaries and employee benefits | 17,303 | 15,163 | 51,147 | 45,644 |
Net occupancy expense | 2,540 | 2,023 | 6,894 | 5,768 |
Furniture and equipment expense | 3,064 | 2,522 | 8,290 | 7,618 |
Data processing expense | 1,079 | 688 | 2,805 | 1,836 |
Pennsylvania shares tax expense | 1,140 | 1,075 | 3,414 | 3,216 |
Intangible amortization | 565 | 3 | 877 | 16 |
Litigation settlement (recovery) | 0 | 0 | 0 | (610) |
Merger and integration charges | (39) | 0 | 2,125 | 0 |
Debt prepayment fees | 29,495 | 0 | 29,495 | 0 |
Other operating expense | 8,906 | 6,531 | 24,267 | 20,671 |
Total other expenses | 64,053 | 28,005 | 129,314 | 84,159 |
Income (loss) before income taxes | (8,866) | 17,346 | 21,175 | 50,823 |
Applicable income taxes (benefit) | (6,071) | 3,511 | (913) | 10,257 |
Net income (loss) | ($2,795) | $13,835 | $22,088 | $40,566 |
Average shares outstanding | 69,077,293 | 58,950,258 | 64,784,404 | 58,808,464 |
Average shares outstanding assuming dilution | 69,701,327 | 59,376,716 | 65,328,753 | 59,139,101 |
| | | | |
Per Share Data: | | | | |
Basic earnings per share | ($0.04) | $0.23 | $0.34 | $0.69 |
Diluted earnings per share | ($0.04) | $0.23 | $0.34 | $0.69 |
Cash dividends per share | $0.160 | $0.155 | $0.480 | $0.465 |
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| | | | |
Asset Quality Data At September 30, | | | | |
| 2004 | 2003 | | |
Loans on nonaccrual basis | $11,784 | $18,430 | | |
Past due loans | 12,779 | 13,949 | | |
Renegotiated loans | 185 | 198 | | |
Total nonperforming loans | $24,748 | $32,577 | | |
Loans outstanding at end of period | $3,533,509 | $2,597,443 | | |
Average loans outstanding (year-to-date) | $3,159,920 | $2,630,009 | | |
Allowance for credit losses | $43,162 | $36,183 | | |
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FIRST COMMONWEALTH FINANCIAL CORPORATION | | | | |
CONSOLIDATED SELECTED FINANCIAL DATA | | | | |
(Dollar Amounts in Thousands, except per share data) | | | | |
| | | | |
Asset Quality Data At September 30, (Continued) | 2004 | 2003 | | |
Nonperforming loans as percent of total loans | 0.70% | 1.25% | | |
Net charge-offs (year-to-date) | $6,501 | $8,733 | | |
Net charge-offs as percent of average loans (annualized) | 0.27% | 0.44% | | |
Allowance for credit losses as percent of average loans outstanding | 1.37% | 1.38% | | |
Allowance for credit losses as percent of nonperforming loans | 174.41% | 111.07% | | |
Other real estate owned | $2,295 | $1,698 | | |
| | | | |
End of Period Data At September 30, | | | | |
| 2004 | 2003 | | |
Assets | $6,258,777 | $4,820,190 | | |
Earning assets | $5,814,561 | $4,588,504 | | |
Securities | $2,272,760 | $1,990,261 | | |
Loans, net of unearned income | $3,533,509 | $2,597,443 | | |
Total deposits | $3,851,351 | $3,150,790 | | |
Non-interest bearing deposits | $475,183 | $393,070 | | |
NOW, Moneymarket & Savings | $1,817,386 | $1,292,168 | | |
Time deposits | $1,558,782 | $1,465,552 | | |
Short-term borrowings | $976,873 | $655,357 | | |
Long-term debt | $864,876 | $577,578 | | |
Other liabilities | $38,655 | $26,472 | | |
Shareholders' equity | $527,022 | $409,993 | | |
Shares outstanding | 69,568,513 | 59,290,575 | | |
Book value per share | $7.58 | $6.91 | | |
Market value per share | $13.61 | $13.16 | | |
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Quarter To Date Average Balances At September 30, | | | | |
| 2004 | 2003 | | |
Assets | $6,270,212 | $4,812,119 | | |
Earning assets | $5,803,925 | $4,542,210 | | |
Securities | $2,287,826 | $1,938,626 | | |
Loans, net of unearned income | $3,508,856 | $2,602,367 | | |
Deposits | $3,875,294 | $3,197,403 | | |
Shareholders' Equity | $522,173 | $402,608 | | |
| | | | |
Year To Date Average Balances At September 30, | | | | |
| 2004 | 2003 | | |
Assets | $5,705,600 | $4,677,114 | | |
Earning assets | $5,329,223 | $4,413,244 | | |
Securities | $2,163,506 | $1,781,828 | | |
Loans, net of unearned income | $3,159,920 | $2,630,009 | | |
Deposits | $3,565,542 | $3,152,897 | | |
Shareholders' Equity | $480,399 | $409,063 | | |
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Profitability Ratios | | | | |
| For the Quarter | For the 9 Months |
| Ended September 30, | Ended September 30, |
| 2004 | 2003 | 2004 | 2003 |
Return on average assets | -0.18% | 1.14% | 0.52% | 1.16% |
Return on average equity | -2.13% | 13.63% | 6.14% | 13.26% |
Yield on earning assets (FTE) | 5.37% | 5.49% | 5.29% | 5.81% |
Total cost of funds | 2.18% | 2.44% | 2.28% | 2.62% |
Net interest margin (FTE) | 3.38% | 3.31% | 3.27% | 3.52% |
Efficiency ratio (FTE) (a) | 104.86% | 54.06% | 77.47% | 54.54% |
Fully tax equivalent adjustment | $3,222 | $2,953 | $9,134 | $8,913 |
| | | | |
(a) Efficiency ratio is "total other expenses" as a percentage of total revenue. Total revenue consists of "net interest income, |
on a fully tax-equivalent basis," plus "total other income." |
First Commonwealth Financial Corporation | | Mail Address: |
Old Courthouse Square | | P.O. Box 400 |
22 North Sixth Street | | Indiana PA 15701-0400 |
Indiana PA 15701 | | |
Telephone: 724-349-7220 | | Website: www.fcbanking.com |
INVESTOR INFORMATION
STOCK LISTING: First Commonwealth Financial Corporation common stock is listed on The New York Stock Exchange and is traded under the symbol FCF.
For assistance regarding a change in registration of stock certificates, replacing lost certificates/dividend checks, or an address change, please contact First Commonwealth's transfer agent listed below (for directly registered accounts only). If you hold shares through a brokerage firm (street name accounts), please contact your broker regarding changes to your account.
THE BANK OF NEW YORK | Shareholder Relations | Toll Free: 1-800-524-4458 |
| Church Street Station | Website: www.stockbny.com |
| P.O. Box 11258 | |
| New York, NY 10286-1258 | |
DIVIDEND REINVESTMENT PLAN: First Commonwealth Financial Corporation offers a direct purchase and dividend reinvestment plan, First Commonwealth Stock Direct, administered by The Bank of New York. The plan allows both directly registered shareholders and interested first-time investors to purchase First Commonwealth common stock without the customary brokerage expenses and also to automatically reinvest cash dividends paid on the common stock. Purchases made through the Plan with reinvested dividends receive a 10% discount on the fair market price (on shareholder accounts directly held with the Bank of New York). For more information, please visit our website at www.fcbanking.com (click on "Investor Relations"). You can also download a copy of the plan prospectus and enrollment form through The Bank of New York's website, noted above (click on "Company List", then "First Commonwealth"). Copies may also be requested from The Bank of New York by phone or mail (phone number and address above).
DIRECT DEPOSIT OF DIVIDENDS: Direct deposit of dividend payments to a checking or savings account is also available. To enroll, please call The Bank of New York for an Authorization Form (completed forms must be received by The Bank of New York 30 days prior to the dividend payment date).
INVESTOR/SHAREHOLDER INQUIRIES: Request for information or assistance regarding the Corporation should be directed to the attention of Shareholder Relations at the Corporate Office in Indiana, PA 1-800-331-4107.
FORWARD LOOKING STATEMENTS: The enclosed shareholder communication contains "forward-looking statements," within the meaning of the Private Securities Litigation Reform Act of 1995, that involve significant risks and uncertainties. Actual results could differ materially from those contained in or implied by such statements for a variety of reasons including, but not limited to: the timing and magnitude of changes in interest rates; changes in accounting principles, policies, or guidelines: changes in regional, national and global economic conditions; changes in regulatory requirements, and significant changes in the securities markets. Consequently, all forward-looking statements made in this shareholder communication are qualified by these cautionary statements and the cautionary language in First Commonwealth's most recent Form 10-K report and other documents filed with the Securities and Exchange Commission.
First
Commonwealth
First Commonwealth
Financial Corporation
