2008-11-09 19:30:59 -
- First Commonwealth Financial Corp (FCF) announced on Nov. 5, 2008 a common stock raise of approximately $115 million. During an unprecedented market dislocation, which has led to a scarcity of capital sources, Fitch views positively FCF's ability to tap investors for equity capital. Participants in the common stock issuance were largely institutional in nature and distributed among existing and
new investors.
Headquartered in Indiana, Pennsylvania, FCF has experienced significant loan growth in the last nine months, particularly in commercial-related categories, which is exceptional given the hesitation exhibited by peers to lend in this loan segment. The majority of this growth is organically originated, with the remainder through loan participations with borrowers in its footprint. FCF has benefited from the inability of certain larger bank competitors to serve these borrowers due to capital constraints. Consequently, FCF has been highly selective in the origination of new loans to high-credit-quality borrowers with favorable terms having attractive spreads.
Management has indicated that for the first nine months of 2008, internal models show lower credit risk of new loans than in its existing portfolio - a demonstration of the new origination loan quality. Further, loan quality of its existing loan book continues to outperform most peers. Nonperforming loans declined during third-quarter 2008 and, as mentioned previously, the company has one large credit relationship that is driving the nonperforming assets (NPA) ratio. Growth in the last three quarters was primarily in commercial real estate, commercial & industrial and construction loans on commercial properties (residential construction represents only 3.2% of total construction portfolio). The successful opening of its State College loan production office in 2007 has been a significant contributor of balance sheet growth.
With Fitch monitoring loan growth and capital management, continued stability in asset quality metrics and operating performance may have positive rating implications. FCF has not yet decided whether it will participate in the Treasury Department's Capital Purchase Program; in the event it does sell preferred stock, it will have only a modest impact on debt service coverage. An updated credit analysis will be available shortly to subscribers on the Fitch web site at www.fitchratings.com.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
Fitch Ratings, New York
Eric Newell, 212-908-0769
Joseph Scott, 212-908-0624
Tyrene Frederick-Mack, 212-908-0540 (Media Relations)
tyrene.frederick-mack@fitchratings.com 
