FCF - Earnings call transcript Q1 2019 | First Commonwealth Financial Corporation

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Operator

Good afternoon, and welcome to the First Commonwealth Financial Corporation First Quarter 2019 Earnings Conference Call. All participants will be in 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, Finance and Investor Relations. ahead. go Please

Ryan Thomas

Gary. Thank you,

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

by First Revenue and and Officer. For that portion Bank; of Commonwealth Mark Treasury the Chief joined Grebenc, President Lopushansky, Officer Jane call, Credit of Karrip, be we our Brian Chief Officer; our Chief will

caution refer risks Today's would to the Mike Before to would viewed to call financial forward-looking from Generally the that And conference Please materially now, with Accepted as be Non-GAAP statements. X operating of our measures. turn slide for XX Page Price. like presentation. financial to and we slide actual can prepared measures cause reconciliation to statements. the of measures on could in accordance in call uncertainties I Page Accounting GAAP in not those reported differ forward-looking call of to addition non-GAAP should of presentation listeners I forward-looking be a over will begin, an today's A results alternative to found include also for disclaimer non-GAAP reflected that on description contain this and like statements results our will Principles.

Michael Price

announced bank. quite loans. me word with These the help Through in say Hey, to extend thanks, approximately On with existing and contiguous strong XX,XXX similar we $XXX Central will branches of our footprint Bank, let us by Monday, years acquisition, in XX%. into two that turn approximately We customers our come in million successfully This retail recently comes business an of This leadership bank. and will quarter believe million markets Ryan, first the Western or announced acquisition of executed on for being from hit we're our also a this ground know Pennsylvania Santander our will demographics the the many households, of embrace expansion as in strategic along local about $XXX before that new deposits I well we these part results, running. four with to and heels opportunity local footprint. base markets Pennsylvania small XX opportunity our customer transaction. acquisitions branches representing acquiring Pennsylvania, and

whole, as at a in $X.X back a acquired when recipe a total acquisitions, franchise, billion which to for chassis those these commercial $X.X Looking acquired of taken post billion. each and we've been deposits we've deposits able those now In in those grown for acquisition. to the deposits total regions been on We opportunities has quickly a of retail us. success transactions layer in

to Northern Ohio. markets. thing do in standpoint, XXXX acquisition an acquisition these same in We the completed From very is expect successfully the to this execution we similar in branch

would with time funding because $X.X for is acquisition we've In no consistent seller billion articulated is breathing Ohio with or growth bank profitability provide some the of to the both bringing ratio transaction a allow growth the any actively ratio fact, have room immediately which This course meet not similar at in XX%. sense, stable that deposits whole loan lending social improve loan-to-deposit what this will point-of-view, purchase continued pay of opportunities our below less local low ratio market. down strategy had criteria. In to or our of it's continue provides that institutions and and and We're overlapping part our our in essentially to us and the a acquisition us a From issues challenge to expressed a we to an XX% loan ratios premium our now with XXX%. loan-to-deposit Pennsylvania a of steady cash of loan-to-deposit strong our with a This in markets, competing our markets. at bank deposit for presents contiguous seeing funding a publicly will cost less smaller be interest the loan-to-deposit keep acquisition with low financial pace amount our than is previously considerable broader growth. in acquiring complicated, by in acquired

before let results quarterly a Now, say or to me turn about Jim. word I our over two it

a in the set growth First, Strong growth annualized well for X.X% and the that loan year. stronger up year X.X% start or a rest us million $XX.X $XXX.X long this even average is deposit the best should of growth of we've annualized, or time. seen million to of

approximately this our Fee our a basis fee across an income into Our lending but caution large income, I our in would X fewer are build steady benefit a lines, we believe highlighting with newer a quarter loan front, is on million margin the deposit in business was small fee income comes and last recovery. Along charges by deposit of to so direct growth XXXX. C&I there insurance from down loan and of Ohio. a continue the because distributed first our processing steadily strong interchange to processing debit dedicated the contribution fee in I'd of than making year, particularly days last bit our off and wealth a of points start to And of of businesses little and part are the service days focusing on change from a of interest are much against management leading contribution from any But and deposit so continue income and make expanded those promising. lending number – quarter-over-quarter large growth Over two-thirds net of items to focus earnings progress lot to last our quarter. six quarter in Also that that the was given to fee like our the we growing a board portion intense X.XX%, mortgage on markets a momentum, SBA that came trends with our will are as growth in insurance income to that and income businesses including some card the had too fee the had encouraging, was quarter. correlated way. of end directly very We've from $X reading a quarter, one-time which recently last side. had quarter, gathering, underlying

saw talent First, year-over-year coupled discipline in training better branch quarter of in the increase coaching, are first and the and a manager business better coaching loans, enablers. XXXX primary XX% improved ranks book small with the calling

Jim. because our Ohio, loans of excited in I'll in over PA with Second, process both our all product our these better that, customers, Western We're they credit improvements markets home And help credit will we term small it and streamline approval and about and our business us continue cards. to turn credit, in PA new for and serve of markets. lines to both Central

James Reske

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

quality XX.XX% slightly non-interest so efficiency as quarter. ratio remains ratios last from flat to in improved asset ever trend Our was essentially positive. expense The

coverage For percentage lowest of a of non-performing $XX.X X.XX% of of a our Non-performing earning rate end level basis deposit were million year X.XX% in compared ago, over even total the loans yields, decade. reflecting improved ago. example, as the under of growth was high deposit loans at of decrease first December's XXst, as ago. the the XXX% X of to lingering $XX at expansion on And of at quarter, with March hike accounts. was of The of million, costs end non-performing and year Deposit range, XX% check exactly assets a year loans continuing of Part level growth from a was point totaled loans the effect hikes. the rate margin margins in a year's positive strong half remained a the transaction costs on while expected expansion replacement centered even control. last benefits the is remained reflecting while reserve the

our day certainty loans. pleased the loans branch first billion deposits And the in experience forward, $XXX to the we of one. fifth the three the revenue small will card after valuable as years assets total complete expensive stream second the hands over more with full of of interchange margin ability XX million execution are consumer taught and down $XX fact have has pickup because and to deposits on basis This pay to us immediate are from our last four X in Monday $X.X is These an acquisition seller these in versus majority in helped under extremely comes The in points we that have acquisition acquisition acquisitions in that new the billion on in points branch Looking and and our result well. years. risk, is business announced close. basis in more last income in borrowings since low the debit our our quarter

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

million our soon the by have you use will suspending buybacks time million view have. represented take buyback $XX Finally, under we that, share of being. to-date, $X.X any that we we XXX,XXX or with the the of current we'll of shares may be for In expect transaction, program capital questions purchased superior this authorization. And about

Operator

[Operator now Instructions] Our from We question-and-answer question Schiraldi go O'Neill. Frank Please the begin Sandler session. comes first with ahead. will

Frank Schiraldi

Good afternoon.

first on Just a of couple ratio. efficiency the questions,

target by your wondering of about have guys thoughts XX% you a a think, front. updated just year-end, on talked that I

James Reske

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

Michael Price

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

Frank Schiraldi

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

James Reske

NIM And we address I that NIM in lot we that as of Thanks, thoughts concern you the best I'm see the show to there's everything can our see not compression on as this forward. point. Frank. give know about really a does going and and industry at Yes. happy

consistently in NIM slow guidance has been quarters Our gradual for recent compression.

the getting benefit of still balance on asset replacement still positive funding. the the of growing are sheet the to able of the cost hold and on line yields We side

compression. the still that several and we But really time Probably think a in, deal quarters not flattening, we right that will and this the lift happens, So some out, close margin generally will flatten us will get NIM here. NIM around the within next seeing we that'll to the see give kick expansion from that but margin.

Frank Schiraldi

on if previous it loan reduced more healthy or finally paydowns And quarter, function the great. periods of more of about if just then a origination? that's Thanks. as think stronger pretty in wondering it's that's a versus you growth, function Okay,

Michael Price

stronger originations. It's a little bit mostly of but both,

Our pipelines as also they've in on commercial the are years. consumer side for the as been really deep and several side

Frank Schiraldi

for all Okay. the Thanks color.

Michael Price

Thank you.

Operator

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

Stephen Moss

afternoon, Good guys.

Michael Price

Good afternoon.

Stephen Moss

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

James Reske

replacement first the certain can coming in originations X.XX%, and figures runoff the X%, was are still under you Like just positive new and new the the down net over a the I yields X%, originations that's for out where the Yes. X.XX%. ballpark are coming just give and the here the I aggregate said, coming loans aggregate, at portfolios of out quarter,

So still healthy replacement yields.

hikes that's to now taper but still Now, going and eventually, that positive. without for rate rate it's environment if off

Michael Price

But also are just our loans little they're commercial helps where center still the of is mix bit – getting pretty the more spreads good. decided a in

James Reske

right. That's

Stephen Moss

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

Michael Price

regional a more us to the of in good by of and model growth half president each better – really the on about on ground banking business. only two a loan doesn't think Yes. coordinate about market the line as in game. occurred And portion really just The geographically side it we've to probably – geography moved deposit a Ohio thirds probably trying opposed with was it the side. gives And and we things

Delaware the Columbus do given Pittsburgh, Western did but some Ohio. these extended of we and think, really into us franchise in backyard Northern and momentum and acquisitions of it's Ohio, It Cincinnati to easy your in – there. the Canton-Massillon we on Before I nice backs in the and was County PA that

Stephen Moss

that loans, just drawndown are existing so in And is originations? existing drawdowns just Okay, those construction that's on – or were of the new terms lines helpful.

Michael Price

A projects, been Ohio everything PA. again Western of in has projects, of have pretty of that have Central think, we amount the And mixed in little I a And bit both. natural good projects portfolio just more a use than draws.

Stephen Moss

All right. you very Thank much.

Operator

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

Russell Gunther

Good guys. afternoon, Hey.

Michael Price

afternoon. Good

Russell Gunther

the as year you circling long said. So really good a back conversation, to growth the to start

spoken mid-single about I think, we've outlook. kind previously digit of a –

that you've given about the for the a closer the you favorable digits put the X% comments shot we saw and mid-single start outperform annualized year? in to So to is pipelines, there something up to guys

Michael Price

We so. hope

business very really flat. to through think, growth growth, operating digit probably a we've costs think, conservative consumer six years notwithstanding in more I think, been all-in, model had and X% kick thought pretty really beginning about to But of the the I per then signs acquisition. we and in regional for business that past share earnings double a now in, five leverage And other some keeping quarter. equation with we've had better our side of this I with modest –

just five less with the on credit did I we're by than – a cylinders. risk And certainly. think, taking ago more to way, I three and few that years think, we're we hitting

want And to so I add? think, anything starting Jim, good to a stride. we're and you just in place we're our hit

James Reske

balancing diversity as consumer, Yes. diversified growth it's I it's that the and like commercial well. right. fully just a I think fact exactly geographic

Russell Gunther

me on helpful, it. capital guys. appreciate And for I deployment. question is very last then It's

the hear the still buyback but that XXXX, as about focus would would this as branch push to bank integrate here, integration? something whole out similarly you you suspended are I So from consider or that likely in you open deals you you purchase, is on or you

Michael Price

Grebenc, Jane important need employees. team being room one out meeting on the we've next be good important the we've us. said, very sequential, about we course attractive, focused be pretty sure make done retain five. to just to else This meeting would deals the year. something they deposits, do the We've the us. integration today, deposits. we'll her market, few and all the managers, that XX we've retaining lending That was of But over on These to executing me certainly top If with days the along in been We work. and came are at looked a of a really commercial is get that interested. branch with really in to presence over

strategically work a financially they to So and well. have then as screen us it's important for also pretty

we probably it of we to that just at said, work. have So unlikely. things a opportunity, a do few. to hope a I we look – And being lot have but yes, has hope nice I it's a

Russell Gunther

for it. you. it Thank All That's right. me. Got

Michael Price

You bet.

Operator

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

Collyn Gilbert

If Good start a I just there. guys. could afternoon, Thanks. acquisition, the on just of questions branch couple

first selling So for was was, branches? what reasoning the was why Santander these

Michael Price

from you would a I was their detached markets speculating, any and think I just color – other and I'm core perhaps, little us. add? opportunity that's right certainly it for an Jim, think

James Reske

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

Collyn Gilbert

Okay.

Michael Price

is Collyn, our think of out just probably of sign, rural before, smaller are as our depository these we an and areas XX%, this shared community you towns more have and contiguous XX% comes with which markets, to Pennsylvania, PA of core and I've that. this I

it's frankly. just quite that very So us they're attractive to

Collyn Gilbert

you difference market. have is And to the that here your is Okay. here Santander of exiting advantages one the or Mike, said point the

They're will not competitor So a yours? going that of correct? not, they is be to

Michael Price

Yes.

Collyn Gilbert

an like still have customers your sounds it So option.

Okay.

Michael Price

right. That's Yes.

Collyn Gilbert

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

James Reske

full after be first quarter in It the close. Yes. should

Collyn Gilbert

Okay.

again then intention of be more us was so can the And actually I NIM was – it into going you going thinking was cash. potential are because proceeds guess, use because to just what it just the tell to I go dilutive

– So what to that? of use is some you're pay of on going gates right the borrowings to intend math this you to just out direct the that to down to and

James Reske

income use that picking have in borrowings, down to spread spread $XX.X we're in many pay I'm give that for in together, We some resulting will proceeds then get as will short-term be total statement deposits expensive we supplementary of income from given spread we'll immediate I'm make spread less of terms of possible. about amount as received. can figures deal million all to which the income transaction through now, of pick dollar as clear million thought we've We premium, cash of pay No about right immediate numbers from the year, get as income lot the deposits a and all. published. of the of then the the cash that increase of $XXX up at the to an first items. go are well, assets But income, All relatively to the to loans it this pre-tax you up. those fixed will told, problem in be the effect fee less in The happy and the we produce course with very and we're well. happy – purchasing as loans, the amount less we'll That as that income. course

income, a The is deposit in just in try that hands is the not $XX as out regular So valuable advantages fee of to it And one than but our here more of interchange income, interchange under as deposits well. income have billion. Santander. hands producer income fee the and pointed I

of take a of in share of X% million, divided that's give But is income, amount either, million a there's branches. fee to the $X.X but around share. $XX by is our not get about total that where per the accretion you it's a which operating $X count, results a randomization, first pre-tax non-cash and of pickup over expense. free that in that'll pickup the the intangible income full-year, in course So expense earnings All pre-tax million. There's

that's accretion is the and to earn cash little value, that cash calculation the builds expense, than in higher because a gets what back book back that you the the book amortizations back course, tied the a of up intangible and and Of and that's non-cash value period. amortization out tangible actually

verify. So hopefully that's some detail that

Collyn Gilbert

Yes.

the deck, if in I – you. Thank been didn't I slide see deck Okay. to subsequent had the you that. has this apologize slide guess, deal I

James Reske

but not that the explicit, the there We made that explicit did of No was – one income. piece be we but was and all. fee at not have the slide deck, piece one to try that

Collyn Gilbert

Okay.

James Reske

income And being increase very fee course fee no not it's just the always lightly we more normal the in there's little of a is the kind acquisition, income for opportunity for valuable. It's interchange as nice customers as us well. in a fees – plus which of tread

Collyn Gilbert

Got it.

Okay. and are and deposit assuming And – again you missed runoff that you're deposit runoffs? somewhere the you I assuming it, I if any then this or had apologize. But

James Reske

We seeing runoff. are deposit some

close. I looking the time after at we're in think immediate that

Michael Price

in it's then we assuming first think, there. and we're I from go about XX%, six months the

Collyn Gilbert

Okay.

James Reske

annualized short of Yes, time. percent period a XX% for rate

Michael Price

another Collyn, they're we're over in That's going of specials of pretty bank previous balance sheet on we lower a other four mean right. XX%, with the thing or do this. a deposits impact ratio deals with I budgeted to grow and loan conservatively say three deposits and put I feel just last fund pace. seen on to in – four had years, the stated, the Hey, the top requisite then the you've our that should commercial profitability And already that's number we a our and to deposit is two at in things,

that relates budget. it own But impact our this on quantified will some not and think in to us model. as have I invariably our that's gives optionality internal

sets – like is outperform the projections. up the us this hopefully pretty others so to deal nicely with And for this

Collyn Gilbert

great. That's

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

Michael Price

say Yes. I hate to this.

are but business there. auto on well, some we into years. we've pretty a It's I we've lot never the at can business, that number there. been concern, side, know been so have for indirect times of on credit that Our a cause don't with pretty make there. our for little nuance it's kind know appropriate one dealers get a performer And business. credit an with been grown a as and inverted like XX us before we've it's feel moved we more need yield them. little gets plan this of a Ohio, consistent of We of that returns business the the good those curve, the to it And We've kinds nevertheless it's It's for business spreads. We attractive the in better. so a returns of years, getting a risk dealers again,

based the chain. getting broad And job to doing branches better are side bit Jim are estate and the it's the after. business a small commercial was But from that to shot a construction of C&I so the to a real team pretty in on arm.

Dallas, we For end last now, good fiscal in number core the I at and think, two Pittsburgh, strides businesses. in SBA just year-end of lender the the in in the number so Cleveland, two made

Collyn Gilbert

That's very will helpful. guys. great. That's I it Thanks there. Okay. leave

Michael Price

Thank you.

Operator

Daniel question next from Please go James. comes The Cardenas Raymond with ahead.

Daniel Cardenas

guys. afternoon, good Hey,

Michael Price

Hi, Dan.

Daniel Cardenas

a congrats on good quarter So deal. and the on

that expected where bit us factors about encouragement the we competitive As given to see can expectations little a you Could side. give on maybe for pullback XXXX? you a growth or color not loan loan to what’s more kind see you're your of growth whether bit on you as some of is seeing little that a you talk

Michael Price

could tough. And I want tougher not this good economic cycle, although next that. a cycle. as long mindful to were We some so people. the well We bank pretty probably we're two. how sure very GDP say of we next but see I'm quarter we But credit maybe preparing benefits will like can think perform that wish as I it's growth, all, that, get times. or bit dampened that lot last been through We the through for the has just do we us and over credit a of

I we more corporate producers FTEs, So doing invested Quite think we've it's year just more mean, tough so job and just FTEs we're XX have better I to a too. probably a salespeople, in in half, we the of have finding. frankly, XX lot banking year, last a and

Daniel Cardenas

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

Michael Price

gotten business branch of When you continued getting of non-interest I the is go call customers. know XX% grow we And under they've on really model, want our about and and we're you and people Jim, XX% that leadership I has our small our calling anything don't business. importance we're in look and non-interest culture there? and at to out, deposit just going that say would bearing and two-thirds add Jane book, business. bearing to stronger or the in managers our have has our branch think and gathering sales And others talent just branches deposits. abated. I out the

James Reske

to next remains specials, but some competition intense. people still I pulling deposit don’t crazier you going may the have dollar about think, deposit the are back question incremental to little some your pressures, on of edges right seen bit a for the the

that so very closely. that we something And watch is

Daniel Cardenas

for of Good. about be question remainder the I'll should And XXXX? your just one tax here, model rate then quick how thinking

James Reske

XX.X%

Daniel Cardenas

All you, right. guys. Thank

Operator

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

Michael Price

Hey you. just thank

really appreciate look always course over you Thank number the with be of next will quarter of company. our forward and you we As I in I the our know interest a that. again. to too

Operator

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

now may You disconnect.

Ryan Thomas	Vice President of Finance and Investor Relations
Michael Price	President and Chief Executive Officer
James Reske	Executive Vice President and Chief Financial Officer
Jane Grebenc	Chief Revenue Officer and President
Brian Karrip	Chief Credit Officer
Mark Lopushansky	Chief Treasury Officer
Frank Schiraldi	Sandler O'Neill + Partners, L.P.
Stephen Moss	B. Riley FBR, Inc.
Russell Gunther	D.A. Davidson & Co.
Collyn Gilbert	Keefe Bruyette & Woods Inc.
Daniel Cardenas	Raymond James & Associates, Inc.

First Commonwealth Financial (FCF) 24 Apr 192019 Q1 Earnings call transcript