First Commonwealth Financial Corporation, headquartered in Indiana, on Wednesday reported net income of $5.8 million, or six cents diluted earnings per share, for the second quarter that ended June 30, as compared to net income of $12.3 million, or 12 cents diluted earnings per share, in the second quarter of 2012.
A common stock quarterly dividend of six cents per share is payable on Aug. 16 to shareholders of record as of Aug. 5.
This dividend represents a 3 percent projected annual yield utilizing the July 23 closing market price of $8.09.
The decrease in net income was due to higher provision for credit losses, primarily related to one legacy credit, and decreases in net interest income and non-interest income, according to a release from the bank.
For the six months that ended June 30, net income was $16.4 million, or 17 cents diluted earnings per share, compared to net income of $23.4 million, or 22 cents diluted earnings per share, for the comparable period in 2012.
The decrease in net income was primarily the result of a higher provision for credit losses and a lower amount of gains on sale of commercial loans held for sale, partially offset by significantly lower non-interest expense.
“Overall growth continues to be tempered as a result of our credit quality improvement activities, including charge-offs, exiting excessive exposures and the sale of problem credits,” stated T. Michael Price, president and chief executive officer.
“Collectively, these activities have significantly improved our credit quality metrics and our overall risk profile. Our path to becoming a best-in-class performer begins with lower long- term credit costs, and our second-quarter results demonstrate our progress in this regard.”
Other second-quarter highlights:
• Net interest income, on a fully taxable equivalent basis, was $46.7 million, a $1.3 million, or 3 percent, decrease as compared to the second quarter of 2012.
The decrease was the result of a 26 basis point decline in the net interest margin, partially offset by a $238.2 million increase in average earning assets.
• Average loan growth for the quarter that ended June 30 was $40.2 million compared to $112.8 million over the past 12 months.
Average deposits increased $129.6 million over the past 12 months, including an $80.9 million, or 10 percent, increase in non-interest-bearing demand checking accounts.
• The provision for credit losses was $10.8 million and $15.3 million for the three and six months that ended June 30, respectively, as compared to $4.3 million and $8.1 million in the prior-year periods.
The increase in provision expense is primarily related to the $13.1 million charge-off of an $18.6 million credit relationship to a local real estate developer due to deterioration in expected cash flow.
• Non-interest income, excluding net security gains, decreased $1.2 million, or 7 percent, in the second quarter of 2013 compared to the same period last year. The decrease is primarily the result of lower gains on the sale of troubled commercial loans of $1 million as compared to the second quarter of 2012.
First Commonwealth is a $6.2 billion financial holding company that operates 110 retail branch offices in 15 counties in western and central Pennsylvania through First Commonwealth Bank, a Pennsylvania-chartered bank and trust company.
It is traded on the New York Stock Exchange under the symbol FCF.