First Commonwealth Financial Corp. (NYSE:FCF) Q1 2018 Earnings Conference Call - Preliminary Transcript

Apr 25, 2018 • 10:00 am ET

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First Commonwealth Financial Corp. (NYSE:FCF) Q1 2018 Earnings Conference Call - Preliminary Transcript

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Presentation
Operator
Operator

Good morning and welcome to the First Commonwealth First Quarter 2018 Earnings Conference 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. Please go ahead Mr. Thomas.

Executive
Ryan Thomas

Thank you, Vanilla. As a reminder, a copy of today's earnings release can be accessed by logging on to fcbanking.com and selecting the Investor Relations link at the top of the page. We've also included a slide presentation on our Investor Relations page with supplemental financial information that may be referenced throughout today's call.

With me in the room today are Mike Price, President and CEO of First Commonwealth Financial Corporation; Jim Reske, our Chief Financial Officer; and Mark Lopushansky, our Chief Treasury Officer. After brief comments from Mike and Jim, we will open the phone call to your questions.

Before we begin, I would like to caution listeners that this conference call will contain forward-looking statements about First Commonwealth, its businesses, strategies and prospects. Before we -- please refer to our forward-looking statements disclaimer on Page 2 of the slide presentation for a description of risks and uncertainties that could cause actual results to differ materially from those reflected in the forward-looking statements.

And now, I would like to turn the call over to Mike Price.

Executive
Mike Price

Hey, thank you, Ryan. And welcome, everyone. First quarter 2018 core net income was $23.3 million, our highest quarterly net income figure in the history of our company. First quarter net income produced earnings per share of $0.24, core return on assets of 1.31%, a core return on tangible common equity of 15.73%, a core efficiency ratio of 58.3%. We also raised our dividend 12.5% to $0.09 per quarter or $0.36 per year.

Three tail work winds for the quarter included; first, the interest margin improved 8 basis points on a linked quarter basis to 3.69% and a couple of things were at work here. The December increase in the Fed fund rates was absorbed positively into the loan book, additionally deposit pricing remained disciplined and balances grew nicely, also allowing the payoff of increasingly expensive borrowings. I think also our newly booked yields on commercial loans were greater than those that were running off.

The margin helped enable net interest income of $60.2 million despite a decrease in ending loan balances of $31.2 million on a linked quarter basis. For the quarter, unanticipated payoffs in commercial loans increased significantly. Conversely average deposits increased $77.1 million in large part due to traction in consumer checking balances.

The second tailwind beside margin was core non-interest expense and this is excluding merger related expenses of $300,000, was $46.5 million which showed good progression on a linked quarter basis. And then the third tailwind was a security gain of $2.8 million coming from the liquidation of the previously written-down