FCF - Earnings call transcript Q4 2017 | First Commonwealth Financial Corporation

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Operator

Good day and welcome to the First Commonwealth Financial Corporation Fourth Quarter and Full-Year Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Ryan Thomas, Vice President of Finance and Investor Relations. ahead. go Please

Ryan Thomas

Ted. Thank you,

page. and reminder, Commonwealth phone financial be be a selecting earnings Chief a Relations of will of Investor Executive presentation a President on and our Price, today are that referenced throughout copy by logging Mike may can brief Investor the top Reske, accessed the After and today's Officer. open with link your Jim call. release of also Financial With Financial on included First comments Relations slide supplemental As me page Vice at today's We've we and information to the President in call the room management, questions. Corporation; CEO from to the fcbanking.com

be Credit Officer. our Brian For that joined portion by Officer; Chief Treasury Mark of Chief Lopushansky, our will Karrip, the and we call,

Before this the I on First prospects. that statements our to conference Price. statements caution slide its of forward-looking call Please now, results businesses, reflected we over risks listeners actual that about would cause the forward-looking and from could materially to differ Mike to X of the description strategies to Commonwealth, for like turn would forward-looking contain to begin, like refer Page statements. in a will disclaimer I and And uncertainties presentation call those

Mike Price

where passage in and take by the call, Thanks, affected minutes Hey. XXXX Reform joining Fourth of for going to we’ve Ryan. quarter Tax Legislation. And year welcome, a ahead. few I’ll been were on thanks On today’s in everyone. recent us. results And reflect the where we’re

Adjusting ratio the expense, write-down to $X.XX, efficiency a the XX.X%. required DTA of and disclosed, of of and quarter law share ROA core deferred income of core per previously $XX.X net fourth us X.XX% as merger-related of take million earnings a First, core tax core for $XX.X a million for produced asset. new

to of one-time yet all This comes provide HSA costs benefit law keeping down Second, on in we decided and of tax of each payment premium the another adding in response employees. change, bonus to healthcare roughly to heels account. $X,XXX flat a to the or $XXX employees’ respective our year our for

We of the marked of of quarter is million our mortgage publicly A momentum, in gain a until in fourth of numbers. $X.X consumer material our since one-time quarter trust to the core had expense offset real $X.X branch performance financial in Company million and $X.X X.X% other that loan metrics, provide disclosed the partially holdings in now, based traction resulted redemption have elements of by commercial muted reflective for a published and loan $X,XXX for financial following. X.X% is Modest growth securities credit adjusted as bonus preferred growth strong been detail more key commercial estate results. bonus expense any the which of from in not the crisis. which was million fourth and Jim underlying down will our not but provision ever growth included This lending.

Similarly, which included X.XX% prior the income X.XX%, banks bank. year $X.XX of the with full expense were increase enabled of earnings core expense the over more beat of year. gains Full mean and of than our credit XXXX, adjusting up in lower of offset running following. both the and non-interest securities progression and prior million Core billion of and charge, two a XX impart from core in significantly ROA the year. the and X on the showed was improved I pure of with year-over-year. boost income earnings by and total XXXX per the DTA Looking $X.XX billion the $XX.X XXXX share, and combined between per of year in variances regions share median XX% income again that merger bank came spread back XX a over fee new pure net from regional core expense one-time Major assets for tailwinds favorable ROA

First, net revenue, successfully up to net as million X.XX% predominantly pricing quarter. part nice interest discipline a line also by banking was and propel biggest interest two top income the deposits $XXX Two rate our Ohio growth of in estate good real commercial the year-over-year interest acquisitions of margin trajectory commercial helped in hikes the continued fourth XX% were and integrated.

and contribute $XX.X Second, to had XX% of income mortgage, strong Ohio wealth insurance years. began acquisitions and fee million grew our year-over-year as

well. business and nice continued debit card to progression show as Our contributed meaningfully

family. build Delaware acquired the Bank to Foundation Foundation the to story the through of of in Cincinnati, We of FirstMerit County originated expense part XXXX Two year become This figure large our will Finally, our indicators each core remained acquisition were our provision improve. million was country. loans Pennsylvania in and short, charged-off line prior and provide the big a of the the was Commonwealth pleased figures to Despite loans year XXXX acquisition also In the from the for Cincinnati and million X.X of with integration credit a demonstrates with recoveries nicely the a areas a loss ended to below aided continued and First Ohio XXXX provision provision, XX and platform X.X leading loan allowance of well our welcome we Ohio. desire a our of complementing points First of further out matching recently extremely in growth us A previously XX.X major expense. a performing the very metropolitan community Bank branches franchise top announced in bank. and three was year Ohio’s of totaling the million low at presence for in will leave run and banks of peers. Commonwealth of profitable ratio trajectory a as footprint. coverage are one They well acquisition good for basis community led the

the those above organically acquisition, in With X Northern I difficult we $XXX and have was are acquisitions to approximately will in beyond Ohio branch $X. typically what deposits coming acquisitions. loans million branch over and the particular, to point loans would regard billion with acquired similar Ohio out execute. the through in Following that amount acquisition of

However, our that County Northern Ohio acquisition branches retained also actually Delaware through deposits add of we the of over XX% balances. Bank. would I grew and integration deposit

positive Cleveland has One M&A Ohio. and in two with has note and The recent to by Like we final best Ohio substantially our process as oriented commercially how separate mortgage the forward look effective Dublin after XXXX, activity production income. Columbus companies, we’re loan obviously, resonates in to Our our customers. the deploy increase is investment unfolding all in considering as downtown well Hudson been the rate. offices brand in lowered story loan commercial tax to tax production offices legislation downtown supplemented as and Ohio tax

The give our first some the to employees productive benefit on of step was busy to the year. tax particularly of heels the back

the growth to need beyond to with rebuild capital that, and And our over levels replace that in ways on our I’ll from digital a turn the to also shareholders DTA company to with invest to We to it evaluate need other. our ongoing to transformation write-down continue due Jim. rewarding capital we balance loss the

Jim Reske

our some additional on guidance limited headed in performance think term. provide near some our Thanks providing Mike. all where while I’ll color results, we as to is financial the to try

nature try we The quarter. net you better you our growth sheet. annualized is interest for As understand commercial we of balances benefited to The quarter know, going. our hopefully margin by essentially in helpful balance explicit a to last provide guidance driven X% average margin in that the EPS in you earnings flat as approximately was all don’t the but our can non-interest trajectory is of where company describe way from

competition cost due our fourth competition in funds, increased of time will in to mostly form and XXXX. that the the the CD trend However, specials public for deposits continue which quarter we think, is for in a deposits to

went to also replacement deposit leaving the at the towards hike unchanged yields up throughout of of to rates quarter yields fourth the the and quarter asset last the end fed X.XX%. due in Fortunately, from response margins the quarter,

continue Looking slightly progression outpace next that range even to NIM believe steady within without rate loan the our We hike. forward, that will until a yields XXX increases XXX possible to is we expect cost replacement the range that in of positive rate our in as increase, funds.

the In exclusive in primarily fixed mid non-interest addition, we of single-digit swap saw driven gains of our fee lock is guidance surge loan continue to reiterate commercial income customers quarter to by of Fourth growth. securities as rates. income

expense credit of our experienced in of and our quality income, wealth, we steady million swap quarter reflects million XXXX fourth fee we historical favorably SBA averages below years. in nice expense a income that mortgage, contribution improving steadily offering. impart to metrics. show the compares service Provision insurance This growing Beyond from the to long-term trajectory because of the was the well over $X.X average our quarter last provision three per $X.X expect

by variability only driven we in cost sheet that credit from in the expense by growth provision our probably our more than some expect our there in average, is to continued be balance long-term run, will costs. While quarter-to-quarter, credit long closer legacy

is expense one-time as expense, unfunded $XXX,XXX not the related helpful expenses the number employee including $X.X unusual growth in in disclose loan a non-interest release, to our Unfunded separately. an it non-interest volatile, item fourth quarter to number and outlined expense to the for we Turning loan for is but impacted of expense press commitment and in think it’s us of million commitments. bonus

these notably a In a in million if expense to change. management total at non-interest addition, individually employ more of security you added approximately fee in of fourth in idea $XXX,XXX take aggregate but good quarter rate advantage offset the able also our adjusted quarter forward. than of run cases law expense tax the the the which I mentioned, you material, was the we Thankfully, and pretty few limited $X.X fourth None items But items. were expense to quarter going expense. in strategy get fourth look the for

back to to we of core to importantly, should More continue in in growth our ratio be and income believe XXs we continue spread as expenses. the XXXX that mindful into fee efficiency be

figure year three up is progresses. but the we figure DTA for quarter that, XXXX, the write-down as tax for year through will approximately XX.XX% to tax last more XX.XX%. any And take current rate that rate questions our first may year, which meaningful of XX%, tax full our effective have. the although the of effective the brought is will The obviously update Our quarters we the was fourth estimate in rate with effective you

Operator

Thank you.

[Operator now ahead. James. Raymond now with our will Cardenas Daniel from first Instructions] begin Please come question-and-answer session. will The We go question

Daniel Cardenas

A quick question.

impact what lower If of your on you size portfolio would what’s you think net rate the could And the and remind and have your yields interest portfolio? do us, margins? muni securities tax

Mike Price

actually We here. Treasury have Mark that. our Comment on Chief Officer Lopushansky,

Mark Lopushansky

different Okay, have right we it million portfolio total the now, the municipals. municipal be two the XX would pieces, about positions in for basically,

the actually sold terms We As overall have obviously, ago. to a far years a a larger the as it’s going of portfolio taxable few negative the impact of yield. in business impact, portion

So again, is. our million position XX its is what current

Mike Price

portfolio of that’s securities about billion. total And X.X of kind

Mark Lopushansky

That’s correct.

Daniel Cardenas

on have little What So color XXXX? And margins deposit margins, have of impact minimal negative the a to the guess hikes do basis, bit and base maybe okay. then and forward go you a sticking going betas. not passing forward on baked then on go going hike customer you a to many I with forward onto really how of on or into anticipate rate percentage rate December your your

Mike Price

rate And consistently federal couple year Yes, that. deposit cycle the is sense on deposit comment far change, were holder that deposit betas were betas projecting a the to just more changes to deposit point words, other deposits market other dynamic and several that. were. projecting the than the that every been by betas or year. two more and what and general sensitive. have people then with based than the the reality, interest a over an that was more think that are things like last happy internal perhaps following of to bank. years, In there, the in The We going looking the back had rate other where on consumers we betas less several but in start we’re actual A to hikes we In now reserve rate next model be will of coming

two are rate -- specific our and betas with plan assuming And converge purposes so, and planning we are increase September. the think in deposits we our probably models that later in hikes the one telling our for going in to To us. in March your be to one next response question, forwards then are really year,

Daniel Cardenas

a for contribution. course clarification evenly contribution question spread Is be last maybe Or HSA in throughout going the is $XXX,XXX out sum the then that QX? to purposes for that just And the year? of lump

Mike Price

for be course will out of each year. spread the That employee evenly the over

Operator

next Moss The Riley. Please with from B. question go will Steve be ahead.

Steve Moss

Just my And bit there that expenses, in thinking may answered year question on next about perhaps course contemplating? of over the you rate. with but change Are the this you’re see or investments tax new a kind you and little the in expenditures year? of CapEx any

Mike Price

group. quite two few in call LPOs Ohio. a in investments two center an a built in Yes, banks, Columbus, Ohio, offices I mean two mortgage we've out We’ve SBA made loan

also be our with in a invested digital. We’re there’ll as Cincinnati Obviously, there in years. now and Foundation president investing Bank. model in more well the in come We’ve Ohio market regional markets in to in ensuing

important I markets. the investment that we realize think those in it’s

a year. here some foundation we terrific operating ensuing have in We use really and leverage

Steve Moss

Okay. had good C&I growth And this quarter then pretty in and real here. you estate commercial

Just wondering, of spread your start year looking pipelines thoughts that? how the here the to at the are and

Mike Price

Mortgage stronger business growth construction on frankly, is year-over-year in year really a pipeline commercial in the of quite and direct, And prior that nicely. few pipeline. related. pipelines. C&I been little years. it’s soft have then several and a with nice pipeline pipeline years. And consistent the our a couple just real really is things had we SBA estate, built Yes, that’s really really we there is last The in In good weather than is

of lot across the there, good that out a markets the build is So, the looks pipeline board. new and very but the

Steve Moss

the the you up to Okay. a you're And at funding loan where your are that point Wondering putting joint exceeding yields yields regard basically, drift this money just with books? new on margin, costs. mentioned, lastly the in

Jim Reske

give It overall at. category me an in you which number depends moment. looking probably on aggregate you're one on second yields Give a I can loan

Mike Price

going about yes, X Page loans book also shows just I XX%, X.XX variable. the the commercial, think, X.XX year have fourth the oriented it of XXXX. last of from commercially recall which our yields XX% quarter were a And are loan on we deck, supplemental of to most about of in average of

nicely we are as do So rates going up.

Operator

ahead. Collyn [Operator Gilbert with Please KBW. question Instructions] next from The comes go

Collyn Gilbert

of to The you’ve color of trying could in relief. that assuming that sort you tax made XXX,XXX little what to obviously tied if going bit a I I out? here? thinking Jim, we rate just add to bill the more -- be the -- on of X.X about Is backing but thinking expenses. indicated you’ve investments I that should that’s from run million going mean expenses or the bonus be get a we just forward about how sense know should

Jim Reske

We of tax about once advantage implying to the can making gives do, looking fourth or office thing equipment, the rate accelerating shift year some at figure. they discretion decisions the early change. very we're almost the that quarter. GAAP suspect is going equipments are Yes, actually, can take there to in were of kind period-to-period. rates, we you I'll disclose be sort you for kind limited of and things purchasing of to number that And But too from moving companies in of for to few purchasing those And generation expenses try hesitant thinking tax minor and or terms generational in example, just to revenue next soon we that little in honest, they're that as be strategy give as even Nothing material. color. many

which that several money I'll of spent material. to the is non-interest material reduce that’s a but types combination across to be it’s we will things. next then going fact that not of turn year. we forward expense Again, aggregate going effect The that -- now, number. none of be So the But those in periods slightly spread honest

Collyn Gilbert

Okay.

looks year. now it -- for just million, was I than XX quite it run next expenses guess is are I XX little million, that which projecting almost think I because what So about -- rate higher

understanding to just make So I sure want I am that?

Jim Reske

account, Yes. bouncing bonus about that one-time you we again, one-time a disclosed. the think bonus -- the the into about account, always Thinking number adjustments, the into bit. into million around unfunded credit we’ll little account, have But XXX,XXX taking X.X expense, if that

You're probably million going between to adjust $XX the million. figure and $XX

Collyn Gilbert

anticipate And and then good. relates to is broadly growth side, as are do pipeline did it the sorry, of construction am you -- seeing construction loan there, Mike, sort just I to opportunities there? growth maybe pipeline on you mention be that commercial growth you Where more

Mike Price

general, in single-digits. the mid is we’ve the portfolio guidance In given

I up a that have a and not portfolio we than us that I have now off, against think it engines think give lined in past tailwind. we the little have more running mortgage we is

haven’t we’ll construction, And It expect have year will more will I tailwind categories, few probably C&I, other a pick a be that and robust the up. I segment. but be years. think estate I had will that most that’s this we the suspect which been muted than it commercial a real and across bit, for

the The and leaking momentum quarter other the we saw had consumer last half thing really the online. of over we was more couple small in --- and year, just last we new of fourth business second throughout markets with and years, in production oil came as just

Collyn Gilbert

And the Okay. seeing demand? of types you what construction are

Mike Price

one in multifamily. and some families to Just metropolitan regional areas four from mostly office projects in to to the office metropolitan and everything housing areas

Collyn Gilbert

XXXX XX were million in I used comments normalizing, sort forward. compared you XX rates the X of because million. XX that going in term million the about Okay. and and alluded And million to think I I or right, provisioning mean like you've Jim this your loss to believe 'XX

in number $X us because and charge somewhere do Or accordingly. we’re that that offs benign in think net this of you normal? charge providing are between the So, maybe off while is we that right in should net maybe you be million cycle suggesting that more

Jim Reske

I to our think as to volatile say out think going years has converge number bounce the normalized consistent am going trying sheet just around credit not a -- more following you’ve been And view balance to reflect with of us the as of ago was but of And to with been it provision sometime is is provision it charge-off for approximate growth. going couple cost, I that part it forward. I you quarter-to-quarter. some be expense the know because and overall just expense

We’re thinking just as rate to as be can, trying you subtle be. run would what about long-term

Collyn Gilbert

Yes.

Jim Reske

So on and count down XXXX, in some obviously we in quarters that number those large and had brought quarter-to-quarter even. recoveries can't we the

Mike Price

The really criticized past figures year is, categories standards. strong were charge-offs The positive historical well. this would loan I thing only your add by year in Collyn non-performers migration for was to our the really as year-end

granular in more Our commercial the loan last year. portfolio became

like we away. I four trying we the think of whether year also or are for or at a the prepared around next probably organizations three that, to credit more about hopefully quarter looking years that’s think how lot away and a cycle

I years this the guidance past think where are So, several might be where were maybe we between we and ago year. somewhere

Operator

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

Mike Price

we the much. two. interest next with in in Just you you your many forward appreciate of Thank sincere quarter being and or our company we are very as look to always

Operator

now you today’s is presentation. for conference concluded. The Thank attending

may now You disconnect.

First Commonwealth Financial (FCF) 24 Jan 182017 Q4 Earnings call transcript