Exhibit 99 - First Commonwealth Financial Corporation Press Release dated January 25, 2006
*** NEWS RELEASE ***
TO: | All Area News Agencies | For More Information Contact: |
| | |
FROM: | First Commonwealth | John Dolan, Executive Vice President and |
| Financial Corporation | Chief Financial Officer |
| | First Commonwealth Financial Corporation |
DATE: | January 25, 2006 | (724) 349-7220 |
First Commonwealth Reports 2005 Fourth Quarter and Year-End Financial Results
Total Loans and Deposits Increase
INDIANA, PENNSYLVANIA - January 25, 2006 - First Commonwealth Financial Corporation (NYSE: FCF) today reported financial results for the fourth quarter and year ended December 31, 2005.
Fourth-Quarter Results
The Company reported fourth quarter 2005 net income of $11.8 million, or $0.17 per diluted share, compared with net income of $16.6 million, or $0.24 per diluted share, in the same period last year. The 2005 fourth-quarter results included net securities losses of $8.2 million ($5.3 million after tax, or $(0.08) per diluted share), which consisted of securities losses of $2.7 million ($1.7 million after tax) resulting from the sale of $100 million of U.S. Agency securities to provide funding for the deposits associated with the previously disclosed sale of five branch offices and additional securities losses of $5.5 million ($3.6 million after tax). The branch office sale was a component of the Company's branch optimization initiative to focus operations in higher growth markets and generated a pre-tax gain of $8.7 million ($5.7 million after tax, or $0.08 per diluted share). The fourth quarter of 2005 also included additional restructuring charges of $2.7 million ($1.8 million after tax, or $0.03 per diluted share) related to the organizational restructuring and related personnel changes. Fourth-quarter return on average equity was 8.93% and return on average assets was 0.77% compared with 12.31% and 1.06%, respectively in the corresponding period last year.
Full Year 2005 Results
Net income for the 12 months ended December 31, 2005 was $57.8 million, or $0.83 per diluted share, compared with $38.7 million, or $0.58 per diluted share, in the corresponding period last year. The 2005 results included net securities losses of $7.7 million ( $5.0 million after tax, or $(0.07) per diluted share) compared to net securities gains of $4.1 million ($2.7 million after tax, or $0.04 per diluted share) for 2004. The 2005 period also included gains from the sale of
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branch offices of $11.8 million ($7.7 million after tax, or $0.11 per diluted share), a gain from the sale of the Company's merchant services business of $2.0 million ($1.3 million after tax, or $0.02 per diluted share) and restructuring charges totaling $5.4 million ($3.5 million after tax, or $0.05 per diluted share). The restructuring and other management changes are expected to result in prospective annual pretax cost savings of approximately $3.4 million. Last year's results included a non-recurring charge of $29.5 million ($19.2 million after tax, or $0.29 per diluted share) representing a penalty for the prepayment of Federal Home Loan Bank (FHLB) long-term borrowings. Return on average equity for the twelve-month period was 10.89% and return on average assets was 0.94% compared with 7.82% and 0.66%, respectively for the same period last year.
During 2005, the Company made the following fundamental improvements that are expected to help strengthen its future financial performance and market position:
- | Constructed a total of four new branch offices in higher growth Pittsburgh-area markets as well as renovating or relocating four existing branches. |
- | Sold six branch offices and one drive-thru location, generally in slower growth markets of central Pennsylvania. |
- | Sold its merchant processing services operation. |
- | Appointed Gerard (Jerry) M. Thomchick as the new President and CEO of First Commonwealth Bank and promoted key executive management at First Commonwealth Bank. |
- | Reorganized and streamlined its operations under First Commonwealth Bank. |
Net Interest Income
Net interest income for the fourth quarter of 2005 decreased $4.2 million, or 9.1%, to $41.8 million from $46.0 million in last year's fourth quarter. Fourth-quarter net interest margin (net interest income as a percentage of average earning assets on a fully tax-equivalent basis) declined 19 basis points to 3.20%, compared with 3.39% in the corresponding period last year. The decline in net interest margin was due primarily to funding costs increasing at a faster rate than yields on earning assets. Average earning assets for the fourth quarter of 2005 were $174.4 million lower than average earning assets for the fourth quarter of 2004 partially as a result of funding the branch sale. Additionally, due to the relatively flat yield curve the Company has limited the reinvestment of investment securities that have matured or have been paid down.
For 2005, net interest margin decreased two basis points to 3.28% compared with 3.30% in last year's twelve month period. Yields on earnings assets (on a fully tax-equivalent basis) for the year increased 36 basis points to 5.70%, while cost of funds increased 42 basis points to 2.70%.
Total loans and deposits increased 3.1% and 4.0%, respectively, from the balances at year-end 2004.
Other Income
Total other income for the fourth quarter of 2005 declined 9.8% to $10.1 million from $11.2 million in the same period last year as net securities losses and a decrease in income related to
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final settlement of the previously disclosed sale of the Company's merchant services business were partially offset by gains on the sale of branch offices.
Total other income for 2005 increased 5.4% to $50.2 million from $47.6 million in the same period last year. The increase was due primarily to gains from the previously disclosed sale of branch offices and merchant processing operation, higher deposit service charges and card related interchange income, partially offset by net securities losses and the previously mentioned decline in merchant processing income.
Other Expenses
Other expenses for the fourth quarter of 2005 increased to $37.2 million from $35.2 million in the corresponding period last year, primarily as a result of the previously mentioned restructuring charges of $2.7 million. Higher fourth-quarter salaries and employee benefit costs were offset by lower other operating expenses related in part to the sale of the Company's merchant processing operations, net of additional expense related to final settlement. Fourth quarter salaries and employee benefits costs included $958 thousand related to a previously disclosed separation agreement executed upon the retirement of the Company's chairman. Salaries and employee benefit costs in the fourth quarter of 2005 also included $784 thousand related to supplemental life insurance provided to certain individuals through coverage under bank owned life insurance.
For 2005, other expenses declined to $144.0 million, or 12.5%, from $164.6 million in 2004. This year's results included the previously mentioned restructuring charges of $5.4 million and last year's results included the FHLB prepayment penalty of $29.5 million and merger and integration costs of $2.1 million. During 2005, the Company experienced increases in salaries and employee benefit costs, occupancy expense, Pennsylvania shares taxes, and intangible amortization costs.
Credit Quality and Provision for Credit Losses
As of December 31, 2005, total nonperforming loans (including loans past due 90 days but still accruing) remained stable at $25.5 million compared with $25.6 million at December 31, 2004. Loans past due 90 days but still accruing decreased $694 thousand to $14.0 million, but were offset by a $659 thousand increase in nonaccrual loans to $11.4 million. Nonperforming loans as a percentage of total loans were 0.70% at December 31, 2005 compared with 0.73% at December 31, 2004.
Fourth-quarter 2005 provision for credit losses increased to $1.0 million from $775 thousand in the same period last year. Net charge offs increased for the quarter to $3.1 million compared with $2.9 million in the fourth quarter last year.
For all of 2005, the provision for credit losses increased to $8.6 million from $8.1 million in the same period last year. Net charge offs for the period increased to $10.2 million from $9.4 million in the corresponding period last year. The Corporation believes that the allowance for credit losses is adequate at the present time.
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About First Commonwealth Financial Corporation
First Commonwealth Financial Corporation is a $6.0 billion bank holding company headquartered in Indiana, Pennsylvania. It operates 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. Forward-looking statements describe First Commonwealth's future plans, strategies and expectations and 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. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They 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 speak only as of the date they are made. Such risks and uncertainties include, among other things:
- | 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. |
- | Adverse changes in the economy or business conditions, either nationally or in First Commonwealth's market areas, could increase credit-related losses and expenses and/or limit growth. |
- | Increases in defaults by borrowers and other delinquencies could result in increases in First Commonwealth's provision for losses on loans and related expenses. |
- | Fluctuations in interest rates and market prices could reduce net interest margin and asset valuations and increase expenses. |
- | Changes in legislative or regulatory requirements applicable to First Commonwealth and its subsidiaries could increase costs, limit certain operations and adversely affect results of operations. |
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FIRST COMMONWEALTH FINANCIAL CORPORATION | | | | |
CONSOLIDATED SELECTED FINANCIAL DATA | | | | |
(Dollar Amounts in Thousands, except per share data) | | | | |
| | | | |
| For the Quarter Ended | For the 12 Months |
| December 31, | Ended December 31, |
| 2005 | 2004 | 2005 | 2004 |
Interest income | $79,643 | $75,615 | $312,068 | $278,025 |
Interest expense | 37,799 | 29,581 | 138,618 | 110,690 |
Net interest income | 41,844 | 46,034 | 173,450 | 167,335 |
Provision for credit losses | 1,034 | 775 | 8,628 | 8,070 |
Net interest income after provision for credit losses | 40,810 | 45,259 | 164,822 | 159,265 |
| | | | |
Net securities gains (losses) | (8,192) | 31 | (7,673) | 4,077 |
Trust income | 1,328 | 1,131 | 5,526 | 5,254 |
Service charges on deposits | 3,935 | 3,956 | 15,710 | 14,975 |
Gain on sale of branches | 8,742 | 0 | 11,832 | 0 |
Gain on sale of merchant services business | 0 | 0 | 1,991 | 0 |
Insurance commissions | 591 | 672 | 3,423 | 3,387 |
Income from bank owned life insurance | 1,356 | 1,310 | 5,391 | 5,157 |
Merchant discount income (loss) | (725) | 915 | 1,349 | 3,638 |
Card related interchange income | 1,313 | 1,083 | 4,881 | 3,579 |
Other income | 1,728 | 2,068 | 7,795 | 7,582 |
Total other income | 10,076 | 11,166 | 50,225 | 47,649 |
| | | | |
Salaries and employee benefits | 19,040 | 17,769 | 73,522 | 68,916 |
Net occupancy expense | 2,610 | 2,762 | 10,988 | 9,656 |
Furniture and equipment expense | 3,105 | 3,398 | 11,578 | 11,688 |
Data processing expense | 797 | 1,003 | 3,535 | 3,808 |
Pennsylvania shares tax expense | 1,137 | 1,118 | 4,876 | 4,532 |
Intangible amortization | 566 | 566 | 2,262 | 1,443 |
Merger and integration charges | 0 | 0 | 0 | 2,125 |
Restructuring charges | 2,733 | 0 | 5,437 | 0 |
Debt prepayment fees | 0 | 0 | 0 | 29,495 |
Other operating expense | 7,198 | 8,625 | 31,756 | 32,892 |
Total other expenses | 37,186 | 35,241 | 143,954 | 164,555 |
Income before income taxes | 13,700 | 21,184 | 71,093 | 42,359 |
Applicable income taxes | 1,917 | 4,620 | 13,257 | 3,707 |
Net income | $11,783 | $16,564 | $57,836 | $38,652 |
| | | | |
Average shares outstanding | 69,386,338 | 69,173,249 | 69,276,141 | 65,887,611 |
Average shares outstanding assuming dilution | 69,837,737 | 69,938,616 | 69,835,285 | 66,487,516 |
| | | | |
Per Share Data: | | | | |
Basic earnings per share | $0.17 | $0.24 | $0.83 | $0.59 |
Diluted earnings per share | $0.17 | $0.24 | $0.83 | $0.58 |
Cash dividends per share | $0.170 | $0.165 | $0.665 | $0.645 |
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FIRST COMMONWEALTH FINANCIAL CORPORATION | | |
CONSOLIDATED SELECTED FINANCIAL DATA | | |
(Dollar Amounts in Thousands, except per share data) | | |
| | |
| December 31, | December 31, |
| 2005 | 2004 |
Assets | | |
Cash and due from banks on demand | $84,555 | $79,591 |
Interest-bearing bank deposits | 473 | 2,403 |
Federal funds sold | 1,575 | 0 |
Securities available for sale, at market | 1,851,986 | 2,162,313 |
Securities held to maturity, at amortized cost | | |
(Market value $89,804 in 2005 and $81,886 in 2004) | 87,757 | 78,164 |
| | |
Loans: | | |
Portfolio loans | 3,623,102 | 3,512,774 |
Loans held for sale | 1,276 | 2,311 |
Unearned income | (119) | (252) |
Allowance for credit losses | (39,492) | (41,063) |
Net loans | 3,584,767 | 3,473,770 |
| | |
Premises and equipment | 60,860 | 56,965 |
Other real estate owned | 1,655 | 1,814 |
Goodwill | 122,702 | 123,607 |
Amortizing intangibles, net | 15,251 | 17,513 |
Other assets | 214,739 | 202,338 |
Total assets | $6,026,320 | $6,198,478 |
| | |
Liabilities | | |
Deposits (all domestic): | | |
Noninterest-bearing | $491,644 | $480,843 |
Interest-bearing | 3,504,908 | 3,363,632 |
Total deposits | 3,996,552 | 3,844,475 |
| | |
Short-term borrowings | 665,665 | 946,474 |
Other liabilities | 43,314 | 35,977 |
| | |
Subordinated debentures | 108,250 | 108,250 |
Other long-term debt | 691,494 | 731,324 |
| | |
Total long-term debt | 799,744 | 839,574 |
Total liabilities | 5,505,275 | 5,666,500 |
| | |
Shareholders' Equity | | |
Common stock $1 par value per share | 71,978 | 71,978 |
Additional paid-in capital | 173,967 | 175,453 |
Retained earnings | 318,569 | 307,363 |
Accumulated other comprehensive income (loss) | (9,655) | 10,002 |
Treasury stock | (20,214) | (26,643) |
Unearned ESOP shares | (13,600) | (6,175) |
Total shareholders' equity | 521,045 | 531,978 |
Total liabilities and shareholders' equity | $6,026,320 | $6,198,478 |
| | |
Shares issued | 71,978,568 | 71,978,568 |
Shares outstanding | 70,377,916 | 69,868,908 |
Treasury shares | 1,600,652 | 2,109,660 |
Book value per share | $7.40 | $7.61 |
Market value per share | $12.93 | $15.39 |
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FIRST COMMONWEALTH FINANCIAL CORPORATION | | | | | | | |
CONSOLIDATED SELECTED FINANCIAL DATA | | | | | | | |
(Dollar Amounts in Thousands) | | | | | | | |
| | | | | | | |
| | | | | | | |
Quarter To Date Average Balance Sheets and | | | | | | | |
Net Interest Analysis At December 31, | | | | | | | |
| | 2005 | | | | 2004 | |
| Average
Balance | Income/
Expense | Yield or
Rate (a) | | Average
Balance | Income/
Expense | Yield or
Rate (a) |
Assets | | | | | | | |
Interest-earning assets: | | | | | | | |
Time deposits with banks | $817 | $7 | 3.42% | | $3,964 | $11 | 1.09% |
Tax free investment securities | 283,818 | 3,273 | 7.04% | | 268,392 | 3,025 | 6.89% |
Taxable investment securities | 1,692,717 | 18,464 | 4.33% | | 1,975,562 | 19,885 | 4.00% |
Federal funds sold | 2,377 | 25 | 4.12% | | 554 | 2 | 1.73% |
Loans, net of unearned income (b)(c) | 3,619,142 | 57,874 | 6.52% | | 3,524,828 | 52,692 | 6.12% |
Total interest-earning assets | 5,598,871 | 79,643 | 5.88% | | 5,773,300 | 75,615 | 5.44% |
| | | | | | | |
Noninterest-earning assets: | | | | | | | |
Cash | 80,444 | | | | 79,377 | | |
Allowance for credit losses | (41,857) | | | | (43,460) | | |
Other assets | 434,187 | | | | 424,301 | | |
Total noninterest-earning assets | 472,774 | | | | 460,218 | | |
Total Assets | $6,071,645 | | | | $6,233,518 | | |
| | | | | | | |
Liabilities and Shareholders' Equity | | | | | | | |
Interest-bearing liabilities: | | | | | | | |
Interest-bearing demand deposits (d) | $558,573 | $1,707 | 1.21% | | $553,298 | $788 | 0.57% |
Savings deposits (d) | 1,257,698 | 5,182 | 1.63% | | 1,284,072 | 3,525 | 1.09% |
Time deposits | 1,726,513 | 15,715 | 3.61% | | 1,568,395 | 11,695 | 2.97% |
Short-term borrowings | 685,683 | 6,443 | 3.73% | | 933,083 | 4,725 | 2.01% |
Long-term debt | 802,539 | 8,752 | 4.33% | | 852,069 | 8,848 | 4.13% |
Total interest-bearing liabilities | 5,031,006 | 37,799 | 2.98% | | 5,190,917 | 29,581 | 2.26% |
| | | | | | | |
Noninterest-bearing liabilities and capital: | | | | | | | |
Noninterest-bearing demand deposits (d) | 488,873 | | | | 480,237 | | |
Other liabilities | 28,012 | | | | 26,990 | | |
Shareholders' equity | 523,754 | | | | 535,374 | | |
Total noninterest-bearing funding sources | 1,040,639 | | | | 1,042,601 | | |
Total Liabilities and Shareholders' Equity | $6,071,645 | | | | $6,233,518 | | |
| | | | | | | |
Net Interest Income and Net Yield on Interest-Earning Assets | | $41,844 | 3.20% | | | $46,034 | 3.39% |
| | | | | | | |
(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 net 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. | | | | | | | |
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FIRST COMMONWEALTH FINANCIAL CORPORATION | | | | | | | |
CONSOLIDATED SELECTED FINANCIAL DATA | | | | | | | |
(Dollar Amounts in Thousands) | | | | | | | |
| | | | | | | |
| | | | | | | |
Year To Date Average Balance Sheets and | | | | | | | |
Net Interest Analysis At December 31, | | | | | | | |
| | 2005 | | | | 2004 | |
| Average
Balance | Income/
Expense | Yield or
Rate (a) | | Average
Balance | Income/
Expense | Yield or
Rate (a) |
Assets | | | | | | | |
Interest-earning assets: | | | | | | | |
Time deposits with banks | $807 | $29 | 3.61% | | $4,964 | $34 | 0.69% |
Tax free investment securities | 279,339 | 12,699 | 6.99% | | 250,832 | 11,447 | 7.02% |
Taxable investment securities | 1,829,449 | 77,089 | 4.21% | | 1,932,896 | 76,909 | 3.98% |
Federal funds sold | 5,060 | 161 | 3.18% | | 512 | 6 | 1.22% |
Loans, net of unearned income (b)(c) | 3,597,705 | 222,090 | 6.36% | | 3,251,645 | 189,629 | 6.02% |
Total interest-earning assets | 5,712,360 | 312,068 | 5.70% | | 5,440,849 | 278,025 | 5.34% |
| | | | | | | |
Noninterest-earning assets: | | | | | | | |
Cash | 80,716 | | | | 74,559 | | |
Allowance for credit losses | (41,834) | | | | (41,199) | | |
Other assets | 430,179 | | | | 364,092 | | |
Total noninterest-earning assets | 469,061 | | | | 397,452 | | |
Total Assets | $6,181,421 | | | | $5,838,301 | | |
| | | | | | | |
Liabilities and Shareholders' Equity | | | | | | | |
Interest-bearing liabilities: | | | | | | | |
Interest-bearing demand deposits (d) | $563,254 | $5,262 | 0.93% | | $538,672 | $2,229 | 0.41% |
Savings deposits (d) | 1,298,984 | 18,885 | 1.45% | | 1,141,059 | 11,491 | 1.01% |
Time deposits | 1,643,350 | 54,923 | 3.34% | | 1,513,663 | 45,170 | 2.98% |
Short-term borrowings | 797,148 | 24,305 | 3.05% | | 796,591 | 11,989 | 1.51% |
Long-term debt | 833,000 | 35,243 | 4.23% | | 868,784 | 39,811 | 4.58% |
Total interest-bearing liabilities | 5,135,736 | 138,618 | 2.70% | | 4,858,769 | 110,690 | 2.28% |
| | | | | | | |
Noninterest-bearing liabilities and capital: | | | | | | | |
Noninterest-bearing demand deposits (d) | 488,305 | | | | 452,701 | | |
Other liabilities | 26,062 | | | | 32,614 | | |
Shareholders' equity | 531,318 | | | | 494,217 | | |
Total noninterest-bearing funding sources | 1,045,685 | | | | 979,532 | | |
Total Liabilities and Shareholders' Equity | $6,181,421 | | | | $5,838,301 | | |
| | | | | | | |
Net Interest Income and Net Yield on Interest-Earning Assets | | $173,450 | 3.28% | | | $167,335 | 3.30% |
| | | | | | | |
(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 net 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. | | | | | | | |
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FIRST COMMONWEALTH FINANCIAL CORPORATION | | | | | |
CONSOLIDATED SELECTED FINANCIAL DATA | | | | | |
(Dollar Amounts in Thousands) | | | | | |
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Asset Quality Data At December 31, | | | | | |
| 2005 | 2004 | | | |
Loans on nonaccrual basis | $11,391 | $10,732 | | | |
Past due loans | 13,977 | 14,671 | | | |
Renegotiated loans | 173 | 183 | | | |
Total nonperforming loans | $25,541 | $25,586 | | | |
Loans outstanding at end of period | $3,624,259 | $3,514,833 | | | |
Average loans outstanding(year-to-date) | $3,597,705 | $3,251,645 | | | |
Allowance for credit losses | $39,492 | $41,063 | | | |
Nonperforming loans as percent of total loans | 0.70% | 0.73% | | | |
Net charge-offs(year-to-date) | $10,199 | $9,375 | | | |
Net charge-offs as percent of average loans (annualized) | 0.28% | 0.29% | | | |
Allowance for credit losses as percent of average loans | | | | | |
outstanding | 1.10% | 1.26% | | | |
Allowance for credit losses as percent of nonperforming | | | | | |
loans | 154.62% | 160.49% | | | |
Other real estate owned | $1,655 | $1,814 | | | |
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Profitability Ratios | | | | | |
| For the Quarter Ended | For the 12 Months | |
| December 31, | Ended December 31, | |
| 2005 | 2004 | 2005 | 2004 | |
Return on average assets | 0.77% | 1.06% | 0.94% | 0.66% | |
Return on average equity | 8.93% | 12.31% | 10.89% | 7.82% | |
Efficiency ratio (FTE) (a) | 67.29% | 58.37% | 60.66% | 72.40% | |
Fully tax equivalent adjustment | $3,343 | $3,171 | $13,649 | $12,305 | |
| | | | | |
(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." | |
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