Good day, ladies and gentlemen, and welcome to the First Commonwealth Financial Second Quarter 2014 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct the question-and-answer session and instructions will follow at that time. (Operator Instructions) I would now like to introduce your host for today’s conference, Mr. Rich Stimel. You may begin.

Thank you. 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 will 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, Executive Vice President and Chief Financial Officer. After brief comments from management, we will open the call to your questions. For that portion of the call we’ll be joined by Bob Emmerich, our Chief Credit Officer and Mark Lopushansky, our Chief Treasury Officer. Before we begin, I’d like to caution listeners that this conference call will contain forward-looking statements about First Commonwealth, its business, strategies, and prospects. Please refer to our forward-looking statements disclaimer on Page 2 of the slide presentation for a description of the risks and uncertainties that could cause actual results to differ materially from those reflected in the forward-looking statements. And now, I’d like to turn the call over to Mike Price.

Hey, thanks Rich and welcome everyone. First, I would like to welcome Jim Reske, our new CFO, who is with us this afternoon for his inaugural earnings call with First Commonwealth. He joined us in early May after the retirement of Bob Rout. He will provide some commentary on our second quarter financial performance in a few minutes. Second quarter earnings of $0.13 per share are the same as the first quarter. This includes a $2.6 million second quarter charge associated with our core conversion, which we have named operation excellence. I would like to give some additional time to operation excellence this afternoon given the strategic importance to the company. In the fourth quarter of 2013, we shared that this project would require $10 million to $12 million investment and result in some $6 million to $8 million of annual savings, which would begin to accrue in the fourth quarter of this year. The project has unfolded as we have hoped and we are slated for our conversion in August. Besides the financial benefits, this will enable better solutions for our clients, better integration of our systems, and improved speed to market with products and services. As you think about the financial impact the last several quarters, the charges associated with this project have totaled $4.6 million in the fourth quarter of 2013, $2.4 million in the first quarter of 2014, $2.6 million here in the second quarter of 2014, and another final charge in the third quarter of approximately $2 million for $11.6 million total. Starting in the fourth quarter of 2014, we will expect to realize the financial savings we have outlined of at least $1.5 million per quarter. Having these one-time charges in our rear-view mirror coupled with realizing the savings outlined in the fourth quarter,…

Thanks Mike. First of all since this is my first earnings call with the company, let me say how happy I am to be joining First Commonwealth at such a strategic time especially with the IT conversion, the new mortgage initiative and expansion into new markets such as Cleveland. It’s certainly very exciting time for the company and I am delighted to be part of it. Let’s start with a few broad statements about the company’s second quarter performance and then provide some detail that I hope will be helpful to you. Overall, the company’s financial performance in the second quarter could be characterized as one of stability when compared to the previous quarter and strong improvement when compared to the same quarter a year ago. Earnings per share came in at $0.13 in the second quarter unchanged from the prior quarter and up strongly from $0.06 a share a year ago. In comparing the second quarter to the linked quarter a few things standout. Loan balance has experienced solid growth, credit quality continued to improve, fee income expanded and expenses on an adjusted basis remained under control. First half performance as a whole is particularly impressive in light of the $5 million headwind of one-time expenditures related to our IT conversion. Now let me take each element of the income statement in turn. First of all, net interest income came in at $46.2 million in the second quarter, which is down by about $300,000 from the first quarter, a decrease of less than 1%. Net interest margin did contract somewhat over this period from 3.3% to 3.26%. However, approximately 10 basis points at the first quarter’s margin were due to prepayment penalties compared with four basis points in the second quarter. Like most banks, our loans continue to re-price…

Operator, questions?

(Operator Instructions) And I am showing our first question comes from the line of Bob Ramsay from FBR Capital Markets. Your line is now open.

Hey, good afternoon, guys.

Hey, Bob.

Hey, really a nice quarter for loan growth, it’s nice to see on an end period basis, those balances are moving higher. I know it’s something you guys have been focused on for a long time. You highlighted the contribution from the Cleveland commercial business center, is something $20 million, $25 million a quarter, is that a good run rate out of that office or was there anything sort of unusually strong this quarter or sort of what’s the expectation from that branch?

Well, I think we got off to a really strong start. The $23.8 million is really with probably in excess of $70 million of approvals. So, those are just beginning to fund. We will continue to monitor that kind of pipeline, but it continues to look pretty strong and it’s pretty split between commercial real estate and C&I.

Okay, great. And then in the growth that you saw in the rest of the portfolio, was it more sort of some of the – I guess less of a drag from loan sales and loan run-off this quarter or was it stronger originations or what was sort of in the rest of the book the factors in the growth?

Yes. I wish I could say that run-offs had – and our episodic de-risking had come to close, but it hasn’t and we probably there was another creditor too that were a little larger, that we had a pretty good production quarter probably in excess of quarter $0.25 billion of loan production and that was pretty equally split between commercial real estate and C&I.

Okay. And then so I guess you are doing a little more production and do you have the sense that borrowers are little more confident and is this something that you expect to continue?

I wouldn’t go there yet. I was just looking at the spreads and I think I have shared some of these spreads before. I don’t know that I need to do that, but I am looking at ‘12, ‘13 and ‘14 and there continues to be downward pressure on these spreads for the quality credits. I mean, it’s really that simple. And that obviously you see that in the margin.

Yes, okay. Shifting to fee income, I know you guys highlighted that strong interchange income was one of the factors this quarter, what is driving that? Has there been any sort of push to I guess get people spending on debit cards, to your debit cards or is it – yes, I am just curious for any color there?

Yes. It’s really just the continued growth in consumer households and the interchange associated with that. It kind of seems paradoxical given the leakage in our deposits, particularly on the savings and the time deposit side. But on the time side, the bulk of that, I think it was $133 million downdraft, with seeders and we have gotten pretty stiff when it comes to promo rates. We haven’t done a promo rate I think now for almost a year. And everybody hangs a rate. Now, part of that was our margin and honestly part of it was just we have this conversion, and it just makes the product mapping less complicated when we get to the conversion here in August. So, that was a little bit of the thought process as well. So, we have kind of driven out a lot of the households that just come in and shop rates. There is really – there is not really a lot of vehicles for them other than some exception pricing that could happen on a discrete basis, branch-by-branch, but that’s pretty rare. So, the benefit is you see it in the rate, in the downdraft in the funding cost, but we are somewhat pleased that households continue to grow and you can see that obviously in the deposit service charges and not just the interchange. So, it just we are growing households, but we are losing that kind of single service rate shopper. Now, in fairness that single-service rate shopper will become important to us at some point and we will want to bring them back into the house and we will begin to experiment with some promo rates, I am sure on the other side of the conversion, Bob.

Okay. Last question and I’ll hop back out, but it looks like most of the margin compression this quarter really related to the drop in prepayment fees that were really strong last quarter. Do you guys think you’re getting closer to a trough in the margin?

I’ve kind of had that perspective before, so I’ll stop short of reiterating that. So, I just focus on the strategy, but it’s still downward pressure on C&I side of the business.

Okay, great, thank you guys.

Our next question comes from the line of Collyn Gilbert from KBW. Your line is now open. Collyn Gilbert – KBW: Thanks, good afternoon guys.

Hi, Collyn. Collyn Gilbert – KBW: Just want to ask about the net charge-off that came in this quarter. It – I presume that that was somewhat unexpected, just wanted to kind of better understand the circumstances around that and then also to – if you guys could provide any color on the direction of the reserve.

Yeah, I have Bob Emmerich with us and I’ll turn to Bob for that question.

Yes, Collyn, that was an oil services company that was heard by – obviously by the decline in gas prices and the reduction in drilling activity. On top of that, both the CEO and the CFO became ill very close to each other within about six months of each other and let the company so there was a vacuum in leadership with the company while the market was going down. And so they – that really hampered them being able to work their way through it in terms of that one specific credit that we – where we took the charge off is. Collyn Gilbert – KBW: Okay, okay.

And we took a specific reserve in the first quarter and then charged through here in the second quarter.

Yes.

And then in terms of the direction of the reserve, the reserve as you know has been going down for the last few quarters and down from last quarter, where it was at 128, and a lot of this has been in reduction in specific reserves or impaired loans and that was really the reduction of this quarter was really from that one large charge-off because where we took this specific reserve in the first quarter. And as Mike mentioned in this comments earlier the reserve – the general reserve for the non-impaired loans has been pretty consistent at 105 down to 104. Collyn Gilbert – KBW: Okay, okay, that’s helpful. And then just on the loan growth, Mike, I know you said it was fairly evenly split between CRE and C&I, and Cleveland had been driving a lot of that. Was there any – anything in there that was out of market or were other loan participations or with all of this in-market originated, and you guys carried the bulk of the projects?

I’m looking at the most right now, Collyn and I’d say, I mean if you’re just including Ohio as an adjacent state, I would say that the vast majority of this is either Western PA or Ohio and particularly Northern Ohio or Central Ohio and we’ve got a pretty good total than Ohio right now. I think we have a $238 million of the loans and about $80 million of that is C&I and the remainder of it is commercial real-estate, and some nice projects in Columbus. So, I think that’s the bulk of it. As you know, we have done some SNCs and some participations in the past, and there are few of those in here, as well. Collyn Gilbert – KBW: Okay, okay, that’s helpful. And I think you may have just covered it, and I apologize. With the – your outlook for the NIM, or more specifically on kind of the loan yield trajectory, how are you guys thinking about that from here? Assuming we don’t see any kind of change in rates and certainly not for the rest of this year.

Yes, Collyn, this is Jim Reske. I think we’re seeing is something that we see a lot of other bank experiencing which is that the new loans coming on are at slightly lower rates in the loans that are loan off and so, we expect that to continue for a little while here until rates eventually rise. Collyn Gilbert – KBW: Okay, okay and anything more to do on the funding side in terms of cost reduction, or are you kind of bottoming there.

Your total cost of funds is down in the 0.30 level, getting closer the cost of borrowing overnights, it’s hard to see that getting a lot lower than it is now.

Okay, okay, good, that was all I had, thanks guys.

Thank you.

And our next question comes from the line of Matthew Breese from Sterne Agee. Your line is now open.

Good afternoon guys.

Hi, Matt. Matthew Breese – Sterne Agee: I just wanted to drill a little bit down into non-interest income, specifically the gain on sale of assets line. Given how much credit quality has improved. Should we expect that line item to dwindle quite a bit over the next few quarters?

Yeah, this is Jim Reske, yes, actually, we did actually provide in the supplemental presentation, some non-GAAP disclosures that will help you with that. But, yes, some of that was just a recovery of an REO property of $2 million gain on sale in the second quarter. The other part of that and if you’re looking at back of the supplement, it’s really start seeing the quarter-by-quarter and it’s stated in a first half basis. So, you see gain on sales assets of $3.7 million, $2.3 million of that covering ROE I just mentioned that $1.2 million of the gain on the sale of our first investment advisory business that we saw in the first quarter so, if you’re adjusting and looking at adjustments to make those would probably be proper adjustments. Matthew Breese – Sterne Agee: Right. So I mean, all things aside, we shouldn’t expect much of a contribution from that line item going forward?

No, I wish we could sell – a gain of piece of OREO property recorded for $2 million, but probably not that happen again. Matthew Breese – Sterne Agee: Okay. And then turning to the swap side of things, what would be a more realistic run rate on swap income, versus that of what you put on the books this quarter?

Yeah, the swap income is up nicely and I really – and saying those numbers in my prepared remarks, they want to overstate the case. I think these items like the swap income and some of the other items as well are moving in the right direction, fee incomes going up, it’s all positive, but they’re really, relatively minor of variances. So, I wouldn’t put too much attention on that as a growth trend, swap income of 400,000 are increased in the first quarter which is healthy, it’s good, some of them might actually come down a little bit. I think there is expectations may be to do little less swap activity going forward so that might come down there. Matthew Breese – Sterne Agee: And then on the overall expense side, Mike, you noted a $1.5 million per quarter reduction in overall expenses. So, as we think about that and this quarter’s operating expenses, should we just basically subtract $1.5 million from this quarter’s run rate and that will be the new expenses, post-conversion?

I think we’ve been taking there to the $40 million number less than $1.5 million over the last few quarters I think that’s fair. Matthew Breese – Sterne Agee: Okay, okay, that’s all I had. Thank you.

Thank you.

(Operator Instructions) And we have a question from John Moran from Macquarie. Your line is now open. John Moran – Macquarie: Hey, guys.

Hey, John. John Moran – Macquarie: Hey, I just want to circle back on this mix, real quick. Is the result of the annual review incorporated in this print, or are you guys still – is that kind of ongoing?

It’s in the print. John Moran – Macquarie: It is in this print, okay, great. The next question – just if I’m looking at this wrong, flag me here, but as I look at the kind of year-on-year growth, create a lot of that has been driven out of commercial. And then if we tease it out in dollar terms, right you are up year-on-year about $110 million in the total commercial portfolio. The SNCs are up $107 million, so it’s kind of 97% of that growth, if I’m thinking about it right. And I guess what I’m driving at here is, SNCs – and I appreciate that more of these are being done in footprint, but SNCs was part of what drove a whole lot of credit sins of the past. So maybe it’s a question for Bob sort of what’s changed and can you give an update on the company’s approach to how we should think about this business, or how you guys think about this business?

Yeah, in comparison to how things were in the past, I think there are a lot different than they were in the past. I think we’re a lot more selective about who we have as an agent bank and also a lot of the transactions I’d really classify as club deals where we know a bank reasonably well and we share in exposure there and rather than a broad syndication. And we are doing that both on the C&I side and also on the real estate side. And we have had a situation here maybe it was in the first quarter where there was a large real estate transaction here in the City of Pittsburgh. And we were trying to win the agency and we didn’t win it, another bank here locally won it. And we ended up splitting the deal. And so we do have a fair number of either participation in loans or syndication of loans that kind of fall into that category as well. And in addition to just being more careful about the agent banks and the kind of transactions we are getting into, as you know we have also been more careful about the size of the credits we got into and trying to make the – keep the portfolio very granular.

And John this is Mike let me just add to Bob’s comments I think if you looked at – if you track ($1.25 billion) of credit costs over four years that came out of that ’04 to ’07 timeframe, the vast majority, underscore the word vast probably 85% would be come out of the construction portfolio and participations in speculative development lending. And we are not doing participations in speculative development lending. So now you are talking about a C&I credit that quite frankly preformed pretty well through the cycle and it wasn’t the credit that kind of it is the back side. The other thing I would say is that we underwrite all of these loans and we are not buying these loans in the aftermarket. And a good portion of these loans we have other relations with them in terms of either deposits or a cash management, a branch in their corporate headquarters you name it and so just a little different. Again speculative development and participations that’s what hurt this company and these aren’t those types of deals. John Moran – Macquarie: Got it. That’s actually really helpful. If I could just do quick follow-ups on that, one I guess back to Bob, how large was that CRE credit that you referenced in Pittsburgh that came-in in the first quarter, were you guys were trying to be agent and it ended up, it sounds like you kind of got second place?

I think the total credit was probably around $40 million something like that. John Moran – Macquarie: Okay. And then maybe just a second quick follow-up to Mike, you mentioned that you guys have another relationship of some sort with a whole lot of these guys, do you know offhand what the percentage would be where either it’s a deposit relationship or some other kind of product relationship versus just a physical branch in the building?

I think the fact that they are in our backyard, I am going to speculate it’s probably a third to a half, but I will get back to you on that. John Moran – Macquarie: Okay. So a third to a half that you guys would have some sort of other relationship with, I mean do you know or have handy and I think you guys used to disclose this but how many you were actually lead on?

The number where we would be a lead on would just be a handful and there is probably about 70 credits or so would be in this bucket. John Moran – Macquarie: Got it. I really appreciate all the detail. Thanks very much guys.

At this time I am showing no further question. I would like to now turn it back over to management for any further remarks.

We appreciate your interest in our company, your questions and we invite your questions at anytime and either Jim or I will be helpful and suspect we will get to see a lot of you before our next earnings call. So thank you.

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program and you may all disconnect.