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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C 20549
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-11242
First Commonwealth Financial Corporation
(Exact name of registrant as specified in its charter)
Pennsylvania 25-1428528
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
22 North Sixth Street Indiana, PA 15701
(Address of principal executive offices) (Zip Code)
724-349-7220
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate a check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No .
Number of shares outstanding of issuer's common stock, $1.00 Par Value as
of May 11, 1999 was 30,967,352.
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FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Included in Part I of this report: PAGE
First Commonwealth Financial Corporation and
Subsidiaries Consolidated Balance Sheets . . . . . 3
Consolidated Statements of Income. . . . . . . . . 4
Consolidated Statements of Changes in
Shareholders' Equity . . . . . . . . . . . . . . 5
Consolidated Statements of Cash Flows. . . . . . . 6
Notes to Consolidated Financial Statements . . . . 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS . . . . . . . . 9
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK . . . . . . . . . . . . . . . . . . . . . . . . 23
PART II - OTHER INFORMATION
Other Information . . . . . . . . . . . . . . . . . . . . . . 24
Signatures . . . . . . . . . . . . . . . . . . . . Signature Page
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FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Dollars in thousands)
March 31, December 31,
1999 1998
ASSETS
Cash and due from banks on demand.... $ 79,886 $ 96,615
Interest-bearing deposits with banks. 1,859 1,914
Federal funds sold .................. 1,100 1,000
Securities available for sale, at
market.............................. 1,123,255 1,042,636
Securities held to maturity, at cost,
(market value $483,784 in 1999 and
$486,185 in 1998).................. 481,348 482,696
Loans................................ 2,366,833 2,382,229
Unearned income.................... (6,139) (7,379)
Allowance for possible credit losses (33,106) (32,304)
Net loans....................... 2,327,588 2,342,546
Property and equipment............... 41,757 41,929
Other real estate owned.............. 2,053 2,370
Other assets......................... 114,547 85,083
TOTAL ASSETS.................... $4,173,393 $4,096,789
LIABILITIES
Deposits (all domestic):
Noninterest-bearing................ $ 240,090 $ 264,082
Interest-bearing................... 2,665,000 2,667,049
Total deposits.................. 2,905,090 2,931,131
Short-term borrowings................ 238,455 140,547
Other liabilities.................... 43,094 38,856
Long-term debt....................... 630,082 630,850
Total liabilities............... 3,816,721 3,741,384
SHAREHOLDERS' EQUITY
Preferred stock, $1 par value per
share, 3,000,000 shares authorized,
none issued........................ -0- -0-
Common stock $1 par value per share,
100,000,000 shares authorized;
31,262,706 shares issued; 30,941,973
and 30,937,973 shares outstanding in
1999 and 1998, respectively........ 31,263 31,263
Additional paid-in capital........... 100,062 100,240
Retained earnings.................... 240,511 235,623
Accumulated other comprehensive income (2,027) 2,199
Treasury stock (320,733 shares at
March 31, 1999 and 324,733 at
December 31, 1998, at cost)........ (5,840) (5,913)
Unearned ESOP shares................. (7,297) (8,007)
Total shareholders' equity......... 356,672 355,405
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY.......... $4,173,393 $4,096,789
The accompanying notes are an integral part of these consolidated financial
statements.
3<PAGE>
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FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollars in thousands except per share data)
For the 3 Months
Ended March 31,
1999 1998
Interest Income
Interest and fees on loans......... $48,273 $50,957
Interest and dividends on
investments:
Taxable interest................. 20,465 15,290
Interest exempt from Federal
income taxes.................... 2,249 1,374
Dividends........................ 704 371
Interest on Federal funds sold..... 49 428
Interest on bank deposits.......... 61 30
Total interest income........... 71,801 68,450
Interest Expense
Interest on deposits............... 25,867 28,385
Interest on short-term borrowings 2,429 2,892
Interest on long-term debt......... 8,444 3,924
Total interest expense.......... 36,740 35,201
Net Interest Income.................. 35,061 33,249
Provision for possible credit
losses............................ 2,213 2,475
Net interest income after provision
for possible credit losses......... 32,848 30,774
Other Income
Securities gains................... 563 982
Trust income....................... 1,814 1,274
Service charges on deposit accounts 2,058 1,961
Other income....................... 3,447 1,821
Total other income.............. 7,882 6,038
Other Expenses
Salaries and employee benefits..... 13,078 12,463
Net occupancy expense.............. 1,756 1,761
Furniture and equipment expense.... 1,491 1,458
Data processing expense............ 848 751
Pennsylvania shares tax expense.... 847 783
Other operating expenses........... 6,171 5,714
Total other expenses............ 24,191 22,930
Income before income taxes........... 16,539 13,882
Applicable income taxes............ 4,534 3,900
Net income........................... $12,005 $ 9,982
Average Shares Outstanding...........30,576,354 30,803,977
Average Shares Outstanding
Assuming Dilution..................30,716,285 31,011,647
Per Share Data:
Basic earnings per share........... $ 0.39 $ 0.32
Diluted earnings per share......... $ 0.39 $ 0.32
Cash dividends per share........... $ 0.23 $ 0.22
The accompanying notes are an integral part of these consolidated financial
statements.
4<PAGE>
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FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
Accumulated
Additional Other Unearned Total
Common Paid-in Retained Comprehensive Treasury ESOP Shareholders'
Stock Capital Earnings Income Stock Shares Equity
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1997......$31,661 $106,659 $228,230 $ 2,156 $(11,947) $(2,436) $354,323
Comprehensive income
Net income...................... -0- -0- 9,982 -0- -0- -0- 9,982
Other comprehensive income, net
of tax: Unrealized holding gains
(losses) on securities arising
during the period............ -0- -0- -0- (135) -0- -0- (135)
Less: reclassification adjust-
ment for gains on securities
included in net income....... -0- -0- -0- (622) -0- -0- (622)
Total other comprehensive
income....................... -0- -0- -0- (757) -0- -0- (757)
Total comprehensive income...... -0- -0- 9,982 (757) -0- -0- 9,225
Cash dividends declared......... -0- -0- (5,934) -0- -0- -0- (5,934)
Decrease in unearned ESOP shares -0- -0- -0- -0- -0- 143 143
Discount on dividend reinvestment
plan purchases................ -0- (262) -0- -0- -0- -0- (262)
Treasury stock acquired......... -0- -0- -0- -0- (105) -0- (105)
Treasury stock reissued......... -0- (55) -0- -0- 887 -0- 832
Balance at March 31, 1998.........$31,661 $106,342 $232,278 $ 1,399 $(11,165) $(2,293) $358,222
Balance at December 31, 1998......$31,263 $100,240 $235,623 $ 2,199 $ (5,913) $(8,007) $355,405
Comprehensive income
Net income...................... -0- -0- 12,005 -0- -0- -0- 12,005
Other comprehensive income, net
of tax: Unrealized holding gains
(losses) on securities arising
during the period............ -0- -0- -0- (3,860) -0- -0- (3,860)
Less: reclassification adjust-
ment for gains on securities
included in net income....... -0- -0- -0- (366) -0- -0- (366)
Total other comprehensive
income....................... -0- -0- -0- (4,226) -0- -0- (4,226)
Total comprehensive income...... -0- -0- 12,005 (4,226) -0- -0- 7,779
Cash dividends declared......... -0- -0- (7,117) -0- -0- -0- (7,117)
Decrease in unearned ESOP shares -0- -0- -0- -0- -0- 710 710
Discount on dividend reinvestment
plan purchases................ -0- (179) -0- -0- -0- -0- (179)
Treasury stock acquired......... -0- -0- -0- -0- -0- -0- -0-
Treasury stock reissued......... -0- 1 -0- -0- 73 -0- 74
Balance at March 31, 1999.........$31,263 $100,062 $240,511 $(2,027) $(5,840) $(7,297) $356,672
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5<PAGE>
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FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollars in thousands)
For the 3 Months
Ended March 31,
1999 1998
Operating Activities
Net income....................................... $12,005 $ 9,982
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for possible loan losses............ 2,213 2,475
Depreciation and amortization................. 2,217 1,727
Net gains on sales of assets.................. (1,389) (1,004)
Income from increase in cash surrender value
of bank owned life insurance................. (519) (323)
Decrease (Increase) in interest receivable.... 92 (810)
Increase (Decrease) in interest payable....... (1,071) 342
Increase in income taxes payable.............. 5,363 3,712
Change in deferred taxes...................... (1,819) 203
Other-net..................................... (7,856) (2,948)
Net cash provided by operating activities... 9,236 13,356
Investing Activities
Transactions with securities held to maturity:
Proceeds from sales........................... -0- -0-
Proceeds from maturities and redemptions...... 33,134 40,409
Purchases..................................... (31,768) (23,090)
Transactions with securities available for sale:
Proceeds from sales........................... 38,085 59,058
Proceeds from maturities and redemptions...... 68,668 26,754
Purchases..................................... (193,328) (300,836)
Proceeds from sales of loans and other assets.... 56,257 5,685
Investment in bank owned life insurance......... (20,000) -0-
Net decrease (increase) in time deposits with
banks........................................... 55 (1,350)
Net increase in loans............................ (42,454) (39,988)
Purchases of premises and equipment.............. (1,134) (2,149)
Net cash used by investing activities....... (92,485) (235,507)
Financing Activities
Repayments of long-term debt..................... (57) (18,507)
Proceeds from issuance of long-term debt......... -0- 200,000
Discount on dividend reinvestment plan purchases. (178) (262)
Dividends paid................................... (5,086) (5,923)
Net increase in Federal funds purchased.......... 64,900 64,600
Net increase (decrease) in other short-term
borrowings...................................... 33,008 (15,176)
Net increase (decrease) in deposits.............. (26,041) 10,026
Purchase of treasury stock....................... -0- (105)
Proceeds from sale of treasury stock............. 74 832
Net cash provided by financing activities... 66,620 235,485
Net increase (decrease) in cash and cash
equivalents................................ (16,629) 13,334
Cash and cash equivalents at January 1............. 97,615 112,380
Cash and cash equivalents at March 31.............. $80,986 $125,714
The accompanying notes are an integral part of these consolidated financial
statements.
6<PAGE>
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FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1999
(Unaudited)
NOTE 1 Management Representation
In the opinion of management, the unaudited interim consolidated
financial statements include all adjustments (consisting of only
normal recurring adjustments) necessary for a fair statement of
financial position as of March 31, 1999 and the results of
operations for the three month periods ended March 31, 1999 and
1998, and statements of cash flows and changes in shareholders'
equity for the three month periods ended March 31, 1999 and 1998.
The results of the three months ended March 31, 1999 and 1998 are
not necessarily indicative of the results to be expected for the
entire year. The interim consolidated financial statements
should be read in conjunction with the annual consolidated
financial statements of First Commonwealth Financial Corporation
and Subsidiaries, including the notes thereto.
NOTE 2 Cash Flow Disclosures (dollar amounts in thousands)
1999 1998
Cash paid during the first three
months of the year for:
Interest $37,811 $32,799
Income Taxes $ 950 $ -0-
Noncash investing and financing
activities:
ESOP loan reductions $ 711 $ 143
Loans transferred to other real
estate owned and repossessed
assets $ 1,446 $ 1,605
NOTE 3 Comprehensive Income Disclosures
The following table identifies the related tax effects allocated
to each component of other comprehensive income in the Statements
of Changes in Shareholders' Equity: (dollar amounts in thousands)
<TABLE>
<CAPTION>
March 31, 1999 March 31, 1998
Tax Net of Tax Net of
Pre-tax (Expense) Tax Pre-tax (Expense) Tax
Amount Benefit Amount Amount Benefit Amount
<S> <C> <C> <C> <C> <C> <C>
Unrealized gains (losses) on securities:
Unrealized holding gains (losses)
arising during the period $(5,939) $2,079 $(3,860) $ (206) $ 71 $(135)
Less: reclassification adjustment for
gains realized in net income (563) 197 (366) (957) 335 (622)
Net unrealized gains (6,502) 2,276 (4,226) (1,163) 406 (757)
Other comprehensive income $(6,502) $2,276 $(4,226) $(1,163) $406 $(757)
</TABLE>
7
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FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1999
(Unaudited)
NOTE 4 New Accounting Pronouncements
Effective January 1, 1999, the Corporation adopted the Financial
Accounting Standards Board Statement No. 134, "Accounting for
Mortgage-Backed Securities Retained after the Securitization of
Mortgage Loans Held for Sale by a Mortgage Banking Enterprise"
("FAS No. 134"). FAS No. 134 amends FAS No. 65 "Accounting for
Certain Mortgage Banking Activities". FAS No. 65 requires that
after the securitization of mortgage loans held for sale, an
entity engaged in mortgage banking activities classify the
resulting mortgage-backed securities as trading securities while
FAS No. 134 requires the resulting mortgage-backed securities or
other retained interests be classified based on the entity's
ability and intent to sell or hold those investments. On the
date FAS No. 134 is initially applied, an enterprise may
reclassify mortgage backed securities and other beneficial
interests retained after the securitization of mortgage loans
held for sale from the trading category, except for those with
sales commitments in place. The Corporation currently holds no
mortgage backed securities or other beneficial interests retained
after the securitization of mortgage loans held for sale. The
adoption of FAS No. 134 did not have a material impact on the
Corporation's financial condition or results of operations.
In June 1998, the Financial Accounting Standards Board ("FASB")
issued statement No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("FAS No. 133") which is effective for
the first quarter of years beginning after June 15, 1999. FAS
No. 133 establishes accounting and reporting standards for
derivative instruments and for hedging activities which require
that an entity recognize all derivatives as either assets or
liabilities in a balance sheet and measure those instruments at
fair value. Management believes that adoption of FAS No. 133
will not have a material impact on the Corporation's financial
condition or results of operations.
NOTE 5 Subsequent Event
Effective April 1, 1999 the Corporation sold all of the
outstanding common stock of BSI Financial Services Inc. ("BSI"),
a wholly-owned subsidiary of the Corporation, to First Bank
Richmond headquartered in Richmond, Indiana. Cash proceeds in
the amount of $1.7 million were received, resulting in a loss on
sale of $167 thousand which will be reflected in the financial
statements for the second quarter of 1999. BSI provided mortgage
banking, loan servicing and collection services to the
Corporation's subsidiary banks and unaffiliated organizations.
Services performed by BSI for the subsidiary banks will be
transferred to the subsidiary banks or other nonbank subsidiaries
of the Corporation.
8<PAGE>
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ITEM 2. FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
First Three Months of 1999 as Compared to the First Three Months
of 1998
This discussion and the related financial data are presented to
assist in the understanding and evaluation of the consolidated
financial condition and results of operations of First
Commonwealth Financial Corporation (the "Corporation") including
its subsidiaries. In addition to historical information, this
discussion and analysis contains forward-looking statements.
The forward-looking statements contained herein are subject to
certain risks and uncertainties that could cause actual results
to differ materially from those projected in the forward-looking
statements. Important factors that might cause such a difference
include, but are not limited to, those discussed in this
"Management's Discussion and Analysis of Financial Condition and
Results of Operations." Readers are cautioned not to place undue
reliance on these forward-looking statements, which reflect
management's analysis only as of the date hereof. The
Corporation undertakes no obligation to publicly revise or update
these forward-looking statements to reflect events or
circumstances that arise after the date hereof.
Net income in the three months of 1999 was $12.0 million
reflecting an increase of $2.0 million over 1998 results of $10.0
million. Net income excluding the impact of securities
transactions and mortgage sales reflected an increase of $1.7
million or 18% when comparing the three months of 1999 to the
same period of 1998. Basic earnings per share of $0.39 for the
three months of 1999 increase $0.07 per share over basic earnings
per share of $0.32 for the three months of 1998. Changes in net
interest income increased earnings by $0.07 per share during 1999
while the impact of mortgage sales increased earnings per share
$0.03 during 1999. Mortgage loans with a book value of $42.2
million were sold during the first quarter of 1999 resulting in a
gain on sale of $890 thousand. Return on average assets was
1.18% and return on average equity was 13.45% during the 1999
period, compared to 1.07% and 11.25%, respectively during the
same period of 1998.
Net interest income, the most significant component of earnings,
is the amount by which interest generated from earning assets
exceeds interest expense on liabilities. Net interest income was
$35.1 million for the three months of 1999 compared to $33.2
million for the same period of 1998. Net interest margin (net
interest income, on a tax-equivalent basis, as a percentage of
average earning assets) for the 1999 period was 3.81%, reflecting
a decrease of 10 basis points (0.10%) from 3.91% reported in
1998.
9<PAGE>
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ITEM 2. FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
RESULTS OF OPERATIONS (Continued)
First Three Months of 1999 as Compared to the First Three Months
of 1998 (Continued)
Interest and fees on loans decreased $2.7 million for 1999 over
1998 levels including a decrease due to volume of $1.3 million
and a decrease due to rate of $1.4 million. Average loans for
the first quarter of 1999 decreased $67.8 million compared to
averages for the first quarter of 1998, primarily in residential
mortgage loans and indirect auto loans. The total yield on loans
decreased 20 basis points (0.20%) for the three months of 1999
compared to the three months of 1998. Loan yields on innovative
loan products introduced in previous years which bear lower
introductory interest rates continue to increase during 1999 as
these products aged and introductory interest rates were no
longer offered on aged loans, but since many of these loans are
still at introductory rates these products continue to generate
lower yields than the mortgage loan portfolio as a whole.
Interest income on investments increased $6.4 million for the
three months of 1999 compared to the corresponding period of 1998
primarily as result of increases due to volume of $5.9 million
and decreases due to rate of $398 thousand in U.S. government
agency securities. Average balances of U.S. government agency
securities for the three months of 1999 increased $367.0 million
over 1998 averages as part of a capital management leveraging
strategy whereby borrowings from the Federal Home Loan Bank
classified as long-term debt were invested in U.S. government
agency securities. Investment income on state and municipal
bonds and asset backed securities also reflected increases during
1999 compared to the 1998 period of $885 thousand and $727
thousand respectively. Yields on investments for the 1999 period
reflected a decrease of 5 basis points (0.05%) over 1998 yields.
Interest on deposits decreased $2.5 million for the 1999 period
compared to 1998, and included decreases in interest on time
deposits of $2.0 million and decreases in interest on total
savings deposits of $546 thousand. The decrease in interest on
total savings deposits included decreases due to rate of $1.1
million which were partially offset by increases due to volume of
$554 thousand. Interest expense on time deposits for the first
quarter of 1999 compared to the first quarter of 1998 reflected
decreases due to volume of $898 thousand and decreases due to
rate of $1.1 million. Cost of total savings deposits decreased
38 basis points (0.38%) and cost of time deposits decreased 30
basis points (0.30%) for the three months of 1999 compared to the
three months of 1998.
10<PAGE>
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ITEM 2. FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
RESULTS OF OPERATIONS (Continued)
First Three Months of 1999 as Compared to the First Three Months
of 1998 (Continued)
Interest expense on short-term borrowings decreased $463 thousand
for the first three months of 1999 compared to the first three
months of 1998 as average Federal Funds purchased decreased $46.5
million over 1998 averages. Interest expense on Federal Funds
purchased decreased $799 thousand including decreases due to
volume of $653 thousand and decreases due to rate of $146
thousand. Interest expense on long-term debt increased $4.5
million compared to the 1998 period as average long-term debt for
the three months of 1999 increased $348.0 million over 1998
averages. The long-term debt increase for 1999 was a result of
borrowings from the Federal Home Loan Bank with maturities of up
to 10 years to be utilized as part of the above mentioned capital
management leveraging strategy. The average spread of this
leverage strategy was 1.19% during the 1999 period.
The provision for possible credit losses was $2.2 million for the
three month period of 1999 compared to $2.5 million during the
1998 period. Net charge-offs against the allowance for possible
credit losses were $1.4 million in the 1999 period and $2.2
million in the 1998 period. The 1999 decrease in net charge-offs
included decreases in net charge-offs for credit card loans,
loans to individuals and leases of $161 thousand, $507 thousand
and $228 thousand respectively compared to 1998 charge-offs. The
decreases in net charge-offs for the three months of 1999 were
partially offset by increases in net charge-offs of commercial
loans secured by real estate and loans secured by residential
real estate. See the "Credit Review" section for an analysis of
the quality of the loan portfolio.
11<PAGE>
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ITEM 2. FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
RESULTS OF OPERATIONS (Continued)
First Three Months of 1999 as Compared to the First Three Months
of 1998 (Continued)
Below is an analysis of the consolidated allowance for possible
credit losses for the three month periods ended March 31, 1999
and 1998.
1999 1998
(Amounts in thousands)
Balance January 1, $32,304 $25,932
Loans charged off:
Commercial, financial and
agricultural 100 200
Real estate-construction -0- -0-
Real estate-commercial 11 301
Real estate-residential 288 63
Loans to individuals 1,329 1,993
Lease financing receivables -0- 229
Total loans charged off 1,728 2,786
Recoveries of previously
charged off loans:
Commercial, financial and
agricultural 25 308
Real estate-construction -0- -0-
Real estate-commercial -0- 26
Real estate-residential 14 4
Loans to individuals 278 274
Lease financing receivables -0- 1
Total recoveries 317 613
Net charge offs 1,411 2,173
Provision charged to operations 2,213 2,475
Balance March 31, $33,106 $26,234
Net securities gains decreased $419 thousand during the 1999
period from $982 thousand reported in 1998. The security gains
during 1999 resulted in part from the sales of fixed rate U.S.
government agency securities and U.S. Treasury securities
classified as securities "available for sale" having book values
of $15.0 million and $21.9 million, respectively, which resulted
in security gains of $167 thousand and $317 thousand,
respectively. The securities gains during 1998 resulted
primarily from the sale of U.S. Treasury securities classified as
"available for sale" having a book value of $45.8 million with
the proceeds being reinvested in mortgage backed and other U.S.
government agency securities with similar average expected
maturities.
12<PAGE>
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ITEM 2. FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
RESULTS OF OPERATIONS (Continued)
First Three Months of 1999 as Compared to the First Three Months
of 1998 (Continued)
Total other operating income, excluding securities gains
increased $2.3 million during the first quarter of 1999 compared
to the first quarter of 1998. Trust income reflected an increase
for the 1999 period of $540 thousand. Other income for the first
three months of 1999 increased $1.6 million compared to the first
three months of 1998. Included in other income for the 1999
period was the sale of mortgage loans with a book value of $42.2
million which resulted in a gain of $890 thousand.
Other income for the first quarter of 1999 compared to the first
quarter of 1998 also reflected increases in the cash surrender
value of bank owned life insurance of $196 thousand and insurance
commissions of $164 thousand. Additional increases included in
other income for the three months of 1999 over the 1998 period
occurred in merchant discount and loan servicing income.
Noninterest expense was $24.2 million for the three months of
1999 reflecting an increase of $1.3 million over the 1998 level
of $22.9 million. Although total noninterest expense for 1999
increased over 1998 levels, total noninterest expense as a
percent of average assets declined from 2.43% for the three
months of 1998 to 2.34% for the same period of 1999. Employee
costs were $13.1 million in 1999, representing 1.28% of average
assets on an annualized basis compared to $12.5 million and 1.34%
of average assets on an annualized basis for 1998. Salary and
benefit costs increased 4.9% for 1999 over the corresponding
period of 1998 but will be favorably impacted during the second
half of 1999 by the early retirement plan offered to employees
during the fourth quarter of 1998. The success of the early
retirement plan accelerated the process of right-sizing the
Corporation beyond normal attrition management by adjusting
employment levels quickly while continuing the Corporation's
tradition of not laying off employees due to merger activity.
Pennsylvania shares tax expense increased $64 thousand for the
first quarter of 1999 compared to the first quarter of 1998 and
is expected to continue to increase as shareholders' equity of
the subsidiary banks increases. Outside data processing expenses
for the first three months of 1999 increased $97 thousand over
the first three months of 1998 and will continue to be controlled
in future periods through centralized management by the
Corporation's data processing subsidiary. Other operating
expenses increased $457 thousand in 1999 to $6.2 million. Other
operating expenses for the first quarter of 1999 included an
increase in the amortization of mortgage servicing rights in the
amount of $354 thousand related to the disposition of BSI.
13<PAGE>
<PAGE>
ITEM 2. FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
RESULTS OF OPERATIONS (Continued)
First Three Months of 1999 as Compared to the First Three Months
of 1998 (Continued)
Advertising, filing and recording fees and printing costs
reflected increases for the first three months of 1999 compared
to the 1998 period. Legal fees and other professional fees for
the first quarter of 1999 decreased compared to 1998 levels.
Outside professionals contracted during 1998 under limited
engagements to review the Corporation's asset/liability
management model, analyze fee structures, and provide research
and consulting services for marketing, customer profitability
analysis and branch automation initiatives were not extended into
the 1999 period.
Income tax expense was $4.5 million for the three months of 1999
compared to $3.9 million for the same period of 1998. The
Corporation's effective tax rate was 27.4% for the 1999 period
compared to 28.1% for 1998, reflecting an increase in tax-free
income.
LIQUIDITY
Liquidity is a measure of the Corporation's ability to
efficiently meet normal cash flow requirements of both borrowers
and depositors. In the ordinary course of business, funds are
generated from deposits (primary source) and the maturity or
repayment of earning assets, such as securities and loans. As an
additional secondary source, short-term liquidity needs may be
provided through the use of overnight Federal funds purchased,
borrowings through the use of lines available for repurchase
agreements, and borrowings from the Federal Reserve Bank.
Additionally, the banking subsidiaries are members of the Federal
Home Loan Bank and may borrow under overnight and term borrowing
arrangements. The sale of earning assets may also provide an
additional source of liquidity.
Net loans decreased by $15.0 million in the first three months of
1999 as decreases in loans secured by residential real estate of
$129.8 million were partially offset by increases in loans to
individuals of $79.4 million. The reduction in residential
mortgage loans was primarily the result of the sale of $42.2
million of residential mortgages in March of 1999. The mortgage
loans were sold to reduce the Corporation's prepayment risk and
to shorten the average life of the fixed rate loan portfolio.
14<PAGE>
<PAGE>
ITEM 2. FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
LIQUIDITY (Continued)
Total deposits decreased $26.0 million during the first quarter
of 1999 and included decreases in noninterest bearing demand
deposits of $24.0 million and decreases in total savings deposits
of $10.1 million. All savings categories reflected decreases for
the first quarter of 1999 except for the Corporation's American
Dream Savings product. Customers continue to reinvest
traditional savings dollars in this product which offers higher
interest rates than traditional savings accounts. This product
was designed to build long-term customer relationships and is
intended to produce a favorable impact on the Corporation's net
interest margin over the long-term. Time deposits increased $8.1
million since December 31 and included increases in time deposits
in denominations greater than $100 thousand of $27.1 million
since year-end.
Marketable securities that the Corporation holds in its
investment portfolio are an additional source of liquidity.
These securities are classified as "securities available for
sale" and while the Corporation does not have specific intentions
to sell these securities they have been designated as "available
for sale" because they may be sold for the purpose of obtaining
future liquidity, for management of interest rate risk or as part
of the implementation of tax management strategies. As of
March 31, 1999 securities available for sale had an amortized
cost of $1,126.3 million and an approximate fair value of
$1,123.3 million. Growth of the available for sale portfolio
during the first three months of 1999 in the amount of $80.6
million was funded primarily by short-term borrowings. The
investment of $20.0 million in the bank owned life insurance
during the first quarter of 1999 was funded primarily from the
liquidation of U.S. government agencies and U.S. treasury
securities.
Interest Sensitivity
The objective of interest rate sensitivity management is to
maintain an appropriate balance between the stable growth of
income and the risks associated with maximizing income through
interest sensitivity imbalances. While no single number can
accurately describe the impact of changes in interest rates on
net interest income, interest rate sensitivity positions, or
"gaps", when measured over a variety of time periods, may be
helpful.
An asset or liability is considered to be interest-sensitive if
the rate it yields or bears is subject to change within a
predetermined time period. If interest-sensitive assets ("ISA")
exceed interest-sensitive liabilities ("ISL") during the
prescribed time period, a positive gap results. Conversely, when
ISL exceeds ISA during a time period, a negative gap results.
15<PAGE>
<PAGE>
ITEM 2. FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Interest Sensitivity (Continued)
A positive gap tends to indicate that earnings will be impacted
favorably if interest rates rise during the period and negatively
when interest rates fall during the time period. A negative gap
tends to indicate that earnings will be affected inversely to
interest rate changes. In other words, as interest rates fall, a
negative gap should tend to produce a positive effect on
earnings, and when interest rates rise, a negative gap should
tend to affect earnings negatively.
The primary components of ISA include adjustable rate loans and
investments, loan repayments, investment maturities and money
market investments. The primary components of ISL include
maturing certificates of deposit, money market deposits, savings
deposits, NOW accounts and short-term borrowings.
The following table lists the amounts and ratios of assets and
liabilities with rates or yields subject to change within the
periods indicated as of March 31, 1999 and December 31, 1998
(Dollar amounts in thousands):
March 31, 1999
0-90 91-180 181-365 Cumulative
Days Days Days 0-365 Days
Loans....................$ 769,019 $139,379 $250,879 $1,159,277
Investments.............. 88,846 78,865 142,605 310,316
Other interest-earning
assets.................. 13,985 5,232 3,932 23,149
Total interest-sensitive
assets................ 871,850 223,476 397,416 1,492,742
Certificates of deposits. 510,286 242,324 316,424 1,069,034
Other deposits........... 1,080,051 -0- -0- 1,080,051
Borrowings............... 205,307 5,139 26,380 236,826
Total interest-sensitive
liabilities........... 1,795,644 247,463 342,804 2,385,911
GAP....................$ (923,794) $(23,987) $ 54,612 $ (893,169)
ISA/ISL.................. 0.49 0.90 1.16 0.63
Gap/Total assets......... 22.14% 0.57% 1.31% 21.40%
December 31, 1998
0-90 91-180 181-365 Cumulative
Days Days Days 0-365 Days
Loans....................$ 765,948 $168,297 $293,082 $1,227,327
Investments.............. 59,942 87,042 149,497 296,481
Other interest-earning
assets.................. 38,048 4,120 6,207 48,375
Total interest-sensitive
assets................ 863,938 259,459 448,786 1,572,183
Certificates of deposits. 359,487 323,760 318,282 1,001,529
Other deposits........... 1,094,125 -0- -0- 1,094,125
Borrowings............... 142,509 1,085 2,413 146,007
Total interest-sensitive
liabilities........... 1,596,121 324,845 320,695 2,241,661
GAP....................$ (732,183) $(65,386) $128,091 $ (669,478)
ISA/ISL.................. 0.54 0.80 1.40 0.70
Gap/Total assets......... 17.87% 1.60% 3.13% 16.34%
16<PAGE>
<PAGE>
ITEM 2. FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Interest Sensitivity (continued)
Although the periodic gap analysis provides management with a
method of measuring current interest rate risk, it only measures
rate sensitivity at a specific point in time. Therefore, to more
precisely measure the impact of interest rate changes on the
Corporation's net interest income, management simulates the
potential effects of changing interest rates through computer
modeling. The income simulation model used by the Corporation
captures all assets, liabilities, and off-balance sheet financial
instruments, accounting for significant variables that are
believed to be affected by interest rates. These variables
include prepayment speeds on mortgage loans and mortgage backed
securities, cash flows from loans, deposits and investments and
balance sheet growth assumptions. The model also captures
embedded options, such as interest rate caps/floors or call
options, and accounts for changes in rate relationships as
various rate indices lead or lag changes in market rates. The
Corporation is then better able to implement strategies which
would include an acceleration of a deposit rate reduction or lag
in a deposit rate increase. The repricing strategies for loans
would be inversely related.
The Corporation's asset/liability management policy guidelines
limit interest rate risk exposure for the succeeding twenty-four
month period. Simulations are prepared under the base case where
interest rates remain flat and most likely case where interest
rates are defined using projections of economic factors.
Additional simulations are produced estimating the impact on net
interest income of a 300 basis point (3.00%) movement upward or
downward from the base case scenario. The Corporation's current
asset/liability management policy indicates that a 300 basis
point (3.00%) change in interest rates up or down cannot result
in more than a 7.5% change in net interest income when compared
to a base case, without Board approval and a strategy in place to
reduce interest rate risk below the established maximum level.
The analysis at March 31, 1999, indicated that a 300 basis point
(3.00%) movement in interest rates in either direction over the
next twelve months would not have a significant impact on the
Corporation's anticipated net interest income over that time
frame nor over the next twenty-four months and the Corporation's
position would remain well within current policy guidelines.
The Corporation's "Asset/Liability Management Committee" ("ALCO")
is responsible for the identification, assessment and management
of interest rate risk exposure, liquidity, capital adequacy and
investment portfolio position. The primary objective of the ALCO
process is to ensure that the Corporation's balance sheet
structure maintains prudent levels of risk within the context of
currently known and forecasted economic conditions and to
establish strategies which provide the Corporation with
appropriate compensation for the assumption of those risks. The
ALCO attempts to mitigate interest rate risk through the use of
strategies such as asset disposition, asset and liability pricing
and matched maturity funding. The ALCO strategies are
established by the Corporation's senior management and are
approved by the Corporation's board of directors.
17<PAGE>
<PAGE>
ITEM 2. FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
CREDIT REVIEW
The following table identifies amounts of loan losses and
nonperforming loans. Past due loans are those which were
contractually past due 90 days or more as to interest or
principal payments but are well secured and in the process of
collection. Renegotiated loans are those loans which terms have
been renegotiated to provide a reduction or deferral of principal
or interest as a result of the deteriorating financial position
of the borrower and are in compliance with the restructured
terms.
At March 31,
1999 1998
(amounts in thousands)
Nonperforming Loans:
Loans on nonaccrual basis $ 10,649 $ 12,009
Past due loans 13,013 14,496
Renegotiated loans 64 55
Total Nonperforming Loans $ 23,726 $ 26,560
Other real estate owned $ 2,053 $ 2,076
Loans outstanding at end of period $2,360,694 $2,468,320
Average loans outstanding (year-to-date) $2,384,385 $2,452,218
Nonperforming loans as percent of
total loans 1.01% 1.08%
Provision for possible credit losses $ 2,213 $ 2,475
Net charge-offs $ 1,411 $ 2,173
Net charge-offs as percent of
average loans 0.06% 0.09%
Provision for possible credit losses as
percent of net charge-offs 156.84% 113.90%
Allowance for possible credit losses as
percent of average loans outstanding 1.39% 1.07%
Allowance for possible credit losses as
percent of end-of-period loans
outstanding 1.40% 1.06%
Allowance for possible credit losses as
percent of nonperforming loans 139.53% 98.77%
18<PAGE>
<PAGE>
ITEM 2. FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
CREDIT REVIEW (Continued)
The Corporation considers a loan to be impaired when, based on
current information and events, it is probable that the
Corporation will be unable to collect principal or interest due
according to the contractual terms of the loan. Loan impairment
is measured based on the present value of expected cash flows
discounted at the loan's effective interest rate or, as a
practical expedient, at the loan's observable market price or the
fair value of the collateral if the loan is collateral dependent.
Payments received on impaired loans are applied against the
recorded investment in the loan. For loans other than those that
the Corporation expects repayment through liquidation of the
collateral, when the remaining recorded investment in the
impaired loan is less than or equal to the present value of the
expected cash flows, income is recorded on a cash basis.
Impaired loans include loans on a nonaccrual basis and
renegotiated loans.
The following table identifies impaired loans, and information
regarding the relationship of impaired loans to the reserve for
possible credit losses at March 31, 1999 and March 31, 1998.
1999 1998
(amounts in thousands)
Recorded investment in impaired loans at end
of period $10,713 $12,064
Year to date average balance of impaired loans $10,373 $11,763
Allowance for possible credit losses related to
impaired loans $ 2,431 $ 2,064
Impaired loans with an allocation of the allowance
for possible credit losses $ 5,180 $ 6,306
Impaired loans with no allocation of the allowance
for possible credit losses $ 5,533 $ 5,758
Year to date income recorded on impaired loans on
a cash basis $ 159 $ 129
Other than those described above, there are no material credits
that management has serious doubts as to the borrower's ability
to comply with the present loan repayment terms. Additionally,
the portfolio is well diversified and as of March 31, 1999, there
were no significant concentrations of credit.
Nonperforming loans at March 31, 1999 decreased $2.8 million
compared to 1998 levels and included decreases in past due loans
of $1.5 million and decreases in nonaccrual loans of $1.3
million. Past due loans reflected decreases in commercial loans
secured by real estate of $1.4 million, and commercial loans not
secured by real estate of $310 thousand which were partially
offset by increases in past due auto leases of $351 thousand.
Nonaccrual loans reflected decreases in commercial loans not
secured by real estate of $1.4 million, loans secured by
residential real estate of $737 thousand and auto leases of
19<PAGE>
<PAGE>
ITEM 2. FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
CREDIT REVIEW (Continued)
$313 thousand. Nonaccrual construction loans increased $1.1
million at March 31, 1999 compared to March 31, 1998.
Nonperforming loans as a percent of total loans were 1.01% at
March 31, 1999 compared to 1.08% at March 31, 1998. The
allowance for possible credit losses as a percent of
nonperforming loans at March 31, 1999 has increased over both
March 31, 1998 and year-end 1998 levels. Net charge-offs in both
dollars and as a percentage of average loans at March 31, 1999
have decreased over 1998 levels.
The Corporation's loan portfolio continues to be monitored by
senior management to identify potential portfolio risks and
detect potential credit deterioration in the early stages.
Credit risk is mitigated through the use of sound underwriting
policies and collateral requirements. Management attempts to
minimize loan losses by analyzing and modifying collection
techniques on a periodic basis. Management believes that the
allowance for possible credit losses and nonperforming loans
remain safely within acceptable levels.
CAPITAL RESOURCES
Equity capital increased $1.3 million in the first three months
of 1999. Dividends declared reduced equity by $7.1 million
during the 1999 period, while earnings retention was $4.9
million, representing an earnings retention rate of 40.7%. The
retained net income remains in permanent capital to fund future
growth and expansion. Payments by the Corporation's Employee
Stock Ownership Plan ("ESOP") to reduce debt it incurred to
acquire the Corporation's common stock for future distribution as
employee compensation, net of fair value adjustments to Unearned
ESOP shares, increased equity by $710 thousand. Amounts paid to
fund the discount on reinvested dividends and optional cash
payments reduced equity by $179 thousand. The market value
adjustment to securities available for sale decreased equity by
$4.2 million. Proceeds from the reissuance of treasury shares to
provide for stock options exercised increased equity by $74
thousand.
A capital base can be considered adequate when it enables the
Corporation to intermediate funds responsibly and provide related
services, while protecting against future uncertainties. The
evaluation of capital adequacy depends on a variety of factors,
including asset quality, liquidity, earnings history and
prospects, internal controls and management caliber. In
consideration of these factors, management's primary emphasis
with respect to the Corporation's capital position is to maintain
an adequate and stable ratio of equity to assets.
20<PAGE>
<PAGE>
ITEM 2. FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
CAPITAL RESOURCES (Continued)
The Federal Reserve Board has issued risk-based capital adequacy
guidelines which are designed principally as a measure of credit
risk. These guidelines require: (1) at least 50% of a banking
organization's total capital be common and other "core" equity
capital ("Tier I Capital"); (2) assets and off-balance-sheet
items be weighted according to risk; (3) the total capital to
risk-weighted assets ratio be at least 8%; and (4) a minimum
leverage ratio of Tier I capital to average total assets. The
minimum leverage ratio is not specifically defined, but is
generally expected to be 3-5 percent for all but the most highly
rated banks, as determined by a regulatory rating system.
The table below presents the Corporation's capital position at
March 31, 1999:
Percent
Amount of Adjusted
(in thousands) Assets
Tier I Capital $348,812 14.2%
Risk-Based Requirement 98,094 4.0
Total Capital 379,467 15.5
Risk-Based Requirement 196,188 8.0
Minimum Leverage Capital 348,812 8.5
Minimum Leverage Requirement 123,803 3.0
At March 31, 1999 the Corporation and its banking subsidiaries
are considered well capitalized as defined by the Federal Deposit
Insurance Corporation Improvement Act of 1991.
YEAR 2000 UPDATE
The Corporation's data processing subsidiary, Commonwealth
Systems Corporation continued to address year 2000 issues during
the first quarter of 1999. Renovation whereby code enhancements,
hardware and software upgrades and system replacements are
implemented is near completion for mission critical systems. An
application is considered mission critical if it is vital to the
successful continuation of a core business activity. Validation
or testing of all changes to hardware and software components,
including connections with other systems is 95% complete, while
implementation of mission critical systems is currently 90%
complete. All mission critical systems are scheduled for
implementation by June 30, 1999 which places the Corporation
within guidelines established by federal regulatory agencies. As
per the regulatory agencies schedule they will continue to
perform quarterly year 2000 status reviews at financial
institutions throughout 1999. Outside professionals engaged by
the Corporation during 1998 to provide additional independent
verification and validation processes and to assure the
reliability of internal risk and cost estimates continue their
engagement during 1999.
21<PAGE>
<PAGE>
ITEM 2. FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Corporation will continue to strengthen its remediation
contingency plan for year 2000 events during the remainder of
1999. Additional alternative processes in event that a system
fails will be identified and tested and third party vendors and
outside sources will continue to be tested as these outside
sources make testing available to the Corporation. Contingency
planning will continue throughout 1999 and although all possible
problems can not possibly be anticipated, management believes
that potential difficulties associated with implementation are
likely to result in only minor delays in transaction or
information availability.
The Corporation utilized internal resources to evaluate,
reprogram and test software and hardware for year 2000 issues to
the extent possible. Salary and benefit costs related to year
2000 activities were expensed as incurred. External year 2000
expenditures included amounts for capitalized hardware and
software which will be amortized over three years for software
and five years for hardware. Year 2000 expenditures which were
expensed as incurred included the cost of leased off-site testing
of mainframe systems, outside professionals utilized for
independent verification, travel and lodging during off-site
testing and vendor testing. The Corporation's estimates of
additional year 2000 expenditures to be incurred during 1999 are
based on presently available information and estimates. Cash
outlays were funded through operating cash flows. Due to the
Corporation's commitment to mitigate year 2000 risks where
possible, management does not believe the year 2000 problem will
have a material impact on the Corporation's financial condition
or results of operations.
22<PAGE>
<PAGE>
ITEM 2. FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
YEAR 2000 UPDATE
The following table summarizes year 2000 expenditures incurred
through the first quarter of 1999 and estimated amounts to be
incurred throughout the remainder of 1999. (Dollar amounts in
thousands)
<TABLE>
<CAPTION>
3 Months 12 Months 12 Months Estimate
Ended Ended Ended for Remainder
3/31/99 12/31/98 12/31/97 of 1999
<S> <C> <C> <C> <C>
Capitalized hardware and software $ 3 $ 250 $106 $ 92
Nonemployee expenses including testing 17 152 20 131
Employee related costs 262 1,003 163 158
Subtotal 282 1,405 289 381
Capitalized hardware and software replaced
without acceleration due to year 2000 459 2,043 70 200
Total expenditures $741 $3,448 $359 $581
</TABLE>
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Information appearing in Item 2 of this report under the caption
"Interest Sensitivity" is incorporated herein by reference in
response to this item.
23<PAGE>
<PAGE>
FIRST COMMONWEALTH FINANCIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There were no material legal proceedings to which
the Corporation or its subsidiaries are a party, or
of which any of their property is the subject,
except proceedings which arise in the normal course
of business and, in the opinion of management, will
not have a material adverse effect on the
consolidated operations or financial position of the
Corporation and its subsidiaries.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
None
24<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
FIRST COMMONWEALTH FINANCIAL CORPORATION
(Registrant)
DATED: MAY 14, 1999 /S/ Joseph E. O'Dell
Joseph E. O'Dell, President and
Chief Executive Officer
DATED: MAY 14, 1999 /S/ John J. Dolan
John J. Dolan, Sr. Vice President
and Chief Financial Officer
25
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 79,886
<INT-BEARING-DEPOSITS> 1,859
<FED-FUNDS-SOLD> 1,100
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,123,255
<INVESTMENTS-CARRYING> 481,348
<INVESTMENTS-MARKET> 483,784
<LOANS> 2,366,833
<ALLOWANCE> 33,106
<TOTAL-ASSETS> 4,173,393
<DEPOSITS> 2,905,090
<SHORT-TERM> 238,455
<LIABILITIES-OTHER> 43,094
<LONG-TERM> 630,082
0
0
<COMMON> 31,263
<OTHER-SE> 325,409
<TOTAL-LIABILITIES-AND-EQUITY> 4,173,393
<INTEREST-LOAN> 48,273
<INTEREST-INVEST> 23,418
<INTEREST-OTHER> 110
<INTEREST-TOTAL> 71,801
<INTEREST-DEPOSIT> 25,768
<INTEREST-EXPENSE> 36,740
<INTEREST-INCOME-NET> 35,061
<LOAN-LOSSES> 2,213
<SECURITIES-GAINS> 563
<EXPENSE-OTHER> 24,191
<INCOME-PRETAX> 16,539
<INCOME-PRE-EXTRAORDINARY> 12,005
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,005
<EPS-PRIMARY> 0.39
<EPS-DILUTED> 0.39
<YIELD-ACTUAL> 7.60
<LOANS-NON> 10,649
<LOANS-PAST> 13,013
<LOANS-TROUBLED> 64
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 32,304
<CHARGE-OFFS> 1,728
<RECOVERIES> 317
<ALLOWANCE-CLOSE> 33,106
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
