First Commonwealth Financial Corp. (NYSE:FCF) Q3 2018 Earnings Conference Call Transcript

Oct 24, 2018 • 02:00 pm ET

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First Commonwealth Financial Corp. (NYSE:FCF) Q3 2018 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Good day, and welcome to the First Commonwealth Financial Corporation Third Quarter 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, today's event is being recorded. I would now like to turn the conference over to Ryan Thomas, VP of Finance and IR. Please go ahead, sir.

Executive
Ryan Thomas

Thank you, Rocco. 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 have 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; and Jim Reske, EVP and CFO. After brief comments from management, we will open the phone call to your questions. For that portion of the call, we will be joined by Jane Grebenc, Chief Revenue Officer and President of First Commonwealth Bank; Brian Karrip, our Chief Credit Officer; and Mark Lopushansky, Chief Treasury officer.

(Forward-Looking Cautionary Statements)

Today's call will also include non-GAAP financial measures. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, our reported results prepared in accordance with Generally Accepted Accounting Principles. A reconciliation of GAAP to non-GAAP operating measures can be found of top of Page 13 of today's slide presentation.

And now I'd like to turn the call over to Mike Price.

Executive
Mike Price

Thank you, Ryan. Net income for the third quarter of $25.1 million produced earnings per share of $0.25, a return on assets of 1.3% and efficiency ratio of 57.8%. 2018 year-to-date financial performance through September, as compared with the same period in 2017, is up impressively in virtually every key line item and performance indicator. So include a 31% increase in pre-tax net income to $100.2 million. Jim Reske will elaborate further on the financial picture, with a few brief thoughts on the third quarter follow.

Although, the stated net interest margin quarter-over-quarter dropped to 3.67%, the one-time items that Jim Reske illuminated last quarter point to a margin that we expect will remain buoyant in a rising interest rate environment. Deposit betas, up 20% in the third quarter, improved from the prior quarter. At the same time, we had another good quarter of deposit growth.

Loan production is at record levels in both the corporate bank and the consumer categories and will easily top $2 billion in 2018. However, commercial loan payoffs are up appreciably, resulting in modest organic loan growth for the year. These payoffs are largely attributed to activities in our corporate C&I and commercial real estate portfolios. Private equity firms are eager to put capital to work and M&A activity has ticked up, they both resulting in several commercial clients finding new ownership structures.

While this has certainly curtailed our net loan growth this quarter, we're particularly