First Commonwealth Announces Second Quarter 2021 Earnings; Declares Quarterly Dividend

INDIANA, Pa., July 27, 2021 (GLOBE NEWSWIRE) -- First Commonwealth Financial Corporation (NYSE: FCF) today announced financial results for the second quarter of 2021.

Financial Summary

(1) Core operating results are a non-GAAP measure used by management to measure performance in operating the business that management believes enhances investors' ability to better understand the underlying business performance and trends related to core business activities. A full reconciliation of non-GAAP financial measures can be found at the end of the financial statements which accompany this release.
(2) Reserve build/(release) represents the net change in the Company's allowance for credit losses (ACL) from the prior period.

Second Quarter 2021 Highlights

• Net income of $29.6 million and diluted earnings per share totaled $0.31, an increase of $5.8 million, or $0.07 per share from the second quarter of 2020
• Core pre-tax pre-provision net revenue (PPNR)(1) totaled $42.9 million, a decrease of $2.1 million from the previous quarter and an increase of $6.8 million from the second quarter of 2020
• The Company achieved positive operating leverage during the first six months of 2021
  • Core revenue(1) grew $12.3 million, or 6.9%, from the prior year
  • Core noninterest expense(1) decreased $1.0 million, or 1.0%, from the prior year
• Portfolio loans (excluding Paycheck Protection Program (PPP) loans) increased $189.7 million, or 12.1% annualized from the previous quarter, driven by strong commercial production and continued consumer loan growth
  • Year-to-date annualized portfolio loan growth (excluding PPP loans) was 5.3%
  • Average loans (excluding PPP loans) increased $49.7 million, or 3.2% annualized, from the previous quarter
• Net interest income (FTE) of $68.5 million decreased $1.3 million from the previous quarter due to lower interest and fees recognized on PPP loans, but increased $1.4 million from the second quarter of 2020
• Noninterest income of $26.1 million (excluding net security gains) decreased $1.2 million from the previous quarter but increased $4.3 million from the second quarter of 2020
• Noninterest expense of $51.5 million decreased $0.3 million from the previous quarter and decreased $1.2 million from the second quarter of 2020
• Total PPP loans decreased $186.1 million from the previous quarter resulting in the total PPP loan balance at June 30, 2021 of $292.4 million
• Average deposits increased $375.9 million, or 19.9% annualized compared to the prior quarter, despite $69.6 million in intentional time deposit runoff
  • End of period deposits grew $15.8 million from the previous quarter
  • Average noninterest-bearing deposits grew $190.8 million, or 31.6% annualized, compared to the prior quarter
• Tangible book value per share grew 10.4% annualized compared to the prior quarter and 6.5% year-over-year
• First Commonwealth Bank (the Bank) has been recognized for the third consecutive year by Forbes as one of the World’s Best Banks for 2021
• On June 14, 2021, the Bank announced it will enter the equipment leasing and finance business with the addition of Rob Boyer to its executive team as President of First Commonwealth Equipment Finance Group

Profitability

• The core efficiency ratio(1) of 53.21% improved 352 basis points from the second quarter of 2020 and was relatively unchanged from the previous quarter
• The return on average assets (ROA) improved 20 basis points to 1.26% compared to the second quarter of 2020
• Core pre-tax pre-provision ROA(1) for the quarter ended June 30, 2021 was 1.82% as compared to 2.00% in the prior quarter and 1.61% in the second quarter of 2020
• The net interest margin of 3.17% decreased 23 basis points compared to the prior quarter and decreased 12 basis points as compared to the prior year quarter

Strong capital and liquidity positions

• On April 26, 2021, the Board of Directors authorized a 4.5% increase in the quarterly cash dividend to shareholders
• Bank-level Tier 1 Capital ratio of 11.9%, which represents $273.0 million in excess capital above the regulatory “well capitalized” requirement of 8.0%
• Total available liquidity of $4.7 billion
• A total of 72,724 shares at a weighted average price of $13.95 were purchased during the second quarter of 2021 under the company’s previously authorized share repurchase program. The remaining repurchase capacity under the current program was $23.6 million as of June 30, 2021

Asset quality

• The provision for credit losses was $5.4 million, an increase of $9.8 million compared to the previous quarter when the provision for credit losses was ($4.4) million
• The allowance for credit losses as a percentage of end-of-period loans (excluding PPP loans) was 1.50% compared to 1.55% in the previous quarter
• Total criticized loans decreased $21.7 million from the previous quarter
  • Total nonperforming assets increased $1.4 million from the previous quarter
• Net charge-offs on loans totaled $3.9 million, an increase of $0.7 million from the previous quarter
  • Net charge-offs as a percentage of average loans outstanding (excluding PPP loans, annualized) was 0.25% in the second quarter of 2021 as compared to 0.21% in the previous quarter

“I am pleased with our results in the second quarter. As expected, our loan growth accelerated in multiple categories during the second quarter, bringing our year-to-date annualized loan growth to 5.3% excluding PPP, well within our mid-single-digit long-term target,” stated T. Michael Price, President and Chief Executive Officer. “We remain committed to achieving positive operating leverage despite revenue headwinds from net interest margin compression. Our track record of controlling expenses continued in the second quarter even while we continued to make investments to drive future growth. In June, we announced our entry into the equipment finance business through the hiring of Rob Boyer. Through Rob’s leadership, this new vertical will further diversify our earnings stream, and will benefit both our commercial customers and our shareholders in the long-run.”

Earnings

Net income for the second quarter of 2021 was $29.6 million, or $0.31 per share, compared to $39.8 million, or $0.41 per share in the first quarter of 2021 and $23.9 million, or $0.24 per share for the second quarter of 2020.

Net Interest Income and Net Interest Margin

Net interest income (FTE) of $68.5 million decreased $1.3 million from the previous quarter and increased $1.4 million from the prior year quarter. The decrease from the previous quarter was primarily due to a $2.4 million decrease in fees and interest on PPP loans, partially offset by the effects of a $356.1 million increase in average investment securities and a $69.6 million decrease in higher-cost time deposits. Interest and fee income recognized on PPP loans totaled $5.5 million in the second quarter of 2021 as compared to $7.9 million in the prior quarter.

The net interest margin for the second quarter of 2021 was 3.17%, a decrease of 23 basis points from the previous quarter and a decrease of 12 basis points from the second quarter of 2020. The decrease from the previous quarter was due primarily to an 11 basis point decrease in the yield on loans (excluding PPP loans) and a 147 basis point decrease in the yield on PPP loans (inclusive of loan forgiveness), partially offset by a seven basis point decrease in the cost of interest-bearing liabilities.

Total average deposits grew $375.9 million in the second quarter of 2021 as compared to the previous quarter. Average noninterest bearing deposits grew $190.8 million and offset a $69.6 million decrease in average time deposits.

Total end-of-period deposits grew $15.8 million from the previous quarter.

Asset Quality

The Company adopted CECL on December 31, 2020, effective January 1, 2020.

Provision expense in the second quarter of 2021 totaled $5.4 million as compared to ($4.4) million in the previous quarter. The provision expense during the quarter was a reflection of an improved economic forecast offset by strong end-of-period loan growth and a $1.2 million increase in unfunded commitment reserves.

At June 30, 2021, nonperforming loans totaled $52.8 million, an increase of $2.4 million from the previous quarter and a decrease of $3.2 million from the second quarter of 2020. Nonperforming loans represented 0.82% of total loans (excluding PPP loans) as compared to 0.80% and 0.88% for the periods ended March 31, 2021 and June 30, 2020, respectively.

At June 30, 2021, criticized loans totaled $250.4 million, a decrease of $21.7 million from the previous quarter.

During the second quarter of 2021, net charge-offs were $3.9 million as compared to $3.3 million in the previous quarter and $4.5 million in the second quarter of 2020. Net charge-offs in the second quarter of 2021 were negatively impacted by a $3.6 million charge-off related to an individual commercial borrower.

Net charge-offs as a percentage of average loans (excluding PPP, annualized) were 0.25%, 0.21% and 0.28% for the periods ended June 30, 2021, March 31, 2021 and June 30, 2020, respectively.

Noninterest Income and Noninterest Expense

Noninterest income (excluding net security gains) totaled $26.1 million for the second quarter of 2021, as compared to $27.3 million for the first quarter of 2021 and $21.8 million for the second quarter of 2020.

The $1.2 million decrease from the previous quarter was primarily due to a $2.0 million decrease in gain on sale of mortgage loans due to an increase in new mortgage originations being retained in the Bank’s loan portfolio and a $1.7 million decrease in the derivative mark-to-market adjustment on interest rate swaps as a result of changes in fair value due to movement in bond spreads, swap rates and counterparty credit risk, which negatively impacted noninterest income. These decreases were partially offset by a $1.1 million increase in fee income related to new interest rate swaps due to increased commercial demand and a $1.0 million increase in card-related interchange income.

Noninterest expense (excluding branch consolidation, early retirement and COVID-19 related expenses) totaled $51.3 million for the second quarter of 2021, as compared to $51.7 million for the first quarter of 2021 and $52.3 million for the second quarter of 2020. The $0.4 million decrease from the previous quarter was primarily the result of a $0.9 million decrease in occupancy expense due to seasonally higher snow removal in the previous quarter and a $0.5 million decrease in contributions, partially offset by a $0.7 million increase in hospitalization expense and a $0.4 million increase in Pennsylvania shares tax.

The core efficiency ratio was 53.21% during the second quarter of 2021 as compared to 53.18% in the previous quarter and 56.73% in the second quarter of 2020.

Full time equivalent staff was 1,392 at June 30, 2021, 1,387 at March 31, 2021, and 1,465 at June 30, 2020. The decrease from the prior year quarter is the result of a company-wide hiring freeze implemented at the end of the first quarter of 2020 and the consolidation of 20% of the Bank’s branch facilities in the fourth quarter of 2020.

Dividends and Capital

First Commonwealth Financial Corporation declared a common stock quarterly dividend of $0.115 per share, which represents a 4.5% increase from the second quarter of 2020. The cash dividend is payable on August 20, 2021 to shareholders of record as of August 6, 2021. This dividend represents a 3.4% projected annual yield utilizing the July 26, 2021 closing market price of $13.41.

First Commonwealth’s capital ratios for Total, Tier I, Leverage and Common Equity Tier I at June 30, 2021 were 15.2%, 12.6%, 9.6% and 11.6% respectively. First Commonwealth’s current capital levels exceed the fully phased-in Basel III capital requirements issued by U.S. bank regulators.

Conference Call

First Commonwealth will host a quarterly conference call to discuss its financial results for the second quarter of 2021 on Wednesday, July 28, 2021 at 2:00 PM (ET). The call can be accessed by dialing (toll free) 1-833-302-1887 conference ID # 2497028 or through the company’s web page, http://www.fcbanking.com/InvestorRelations. A replay of the call will be available approximately one hour following the conclusion of the conference by dialing 1-800-585-8367 and entering the conference ID # 2497028. A link to the webcast replay will also be accessible on the company’s webpage for 30 days.

About First Commonwealth Financial Corporation

First Commonwealth Financial Corporation (NYSE: FCF), headquartered in Indiana, Pennsylvania, is a financial services Company with 119 community banking offices in 26 counties throughout western and central Pennsylvania and throughout Ohio, as well as business banking operations in Pittsburgh, Pennsylvania, and Canton, Cleveland, Columbus and Cincinnati, Ohio. The Company also operates mortgage offices in Wexford, Pennsylvania, as well as Hudson, and Lewis Center, Ohio. First Commonwealth provides a full range of commercial banking, consumer banking, mortgage, wealth management and insurance products and services through its subsidiaries First Commonwealth Bank and First Commonwealth Insurance Agency. For more information about First Commonwealth or to open an account today, please visit www.fcbanking.com.

Forward-Looking Statements

Certain statements contained in this release that are not historical facts may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, notwithstanding that such statements are not specifically identified as such. In addition, certain statements may be contained in our future filings with the Securities and Exchange Commission, in press releases, and in oral and written statements made by us or with our approval that are not statements of historical fact and constitute “forward-looking statements” as well. These statements, which are based on certain assumptions and describe our future plans, strategies and expectations, can generally be identified by the use of words such as “may,” “will,” “should,” “could,” “would,” “plan,” “believe,” “expect,” “anticipate,” “intend,” “estimate” or words of similar meaning. These forward-looking statements are subject to significant risks, assumptions and uncertainties, including uncertainties regarding the impact of the COVID-19 pandemic, and could be affected by many factors, including, but not limited to: (1) the effects of the COVID-19 pandemic on First Commonwealth and its customers; (2) volatility and disruption in national and international financial markets; (3) the effects of and changes in trade and monetary and fiscal policies and laws, including the interest rate policies of the Federal Reserve Board; (4) inflation, interest rate, commodity price, securities market and monetary fluctuations; (5) the effect of changes in laws and regulations (including laws and regulations concerning taxes, banking, securities and insurance) with which First Commonwealth or its customers must comply; (6) the soundness of other financial institutions; (7) political instability; (8) impairment of First Commonwealth’s goodwill or other intangible assets; (9) acts of God or of war or terrorism; (10) the timely development and acceptance of new products and services and perceived overall value of these products and services by users; (11) changes in consumer spending, borrowings and savings habits; (12) changes in the financial performance and/or condition of First Commonwealth’s borrowers; (13) technological changes; (14) acquisitions and integration of acquired businesses; (15) First Commonwealth’s ability to attract and retain qualified employees; (16) changes in the competitive environment in First Commonwealth’s markets and among banking organizations and other financial service providers; (17) the ability to increase market share and control expenses; (18) the effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board and other accounting standard setters; (19) the reliability of First Commonwealth’s vendors, internal control systems or information systems; (20) the costs and effects of legal and regulatory developments, the resolution of legal proceedings or regulatory or other governmental inquiries, the results of regulatory examinations or reviews and the ability to obtain required regulatory approvals; and (21) other risks and uncertainties described in this report and in the other reports that we file with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K. Further, statements about the potential effects of the COVID-19 pandemic on our business, financial condition, liquidity and results of operations may constitute forward-looking statements and are subject to the risk that the actual effects may differ, possibly materially, from what is reflected in those forward-looking statements due to factors and future developments that are uncertain, unpredictable and in many cases beyond our control, including the scope and duration of the pandemic, actions taken by governmental authorities in response to the pandemic, and the direct and indirect impact of the pandemic on our customers, clients, third parties and us.

In light of these risks, uncertainties and assumptions, you should not place undue reliance on any forward-looking statements in this release. We undertake no obligation to publicly update or otherwise revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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

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