Good day, ladies and gentlemen. And welcome to the First Commonwealth Financial Corporation's Second Quarter 2015 Earnings Conference Call. At this time, all participants on the phone line have been placed on mute. Later, we will conduct a question-and-answer session and the instructions will be given at that time [Operator Instructions]. I'd now like to now introduce your host for today's program Mr. Ryan Thomas, Vice President of Finance and Investor Relations. Sir, please begin.

Thank you, Rollin. 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’ve 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 risks and uncertainties that could cause actual results to differ materially from those reflected in forward-looking statements. Now, I’d like to turn the call over to Mike Price.

Hey thanks Ryan and welcome to our second quarter analyst call. And thank you for joining us this afternoon. Our second quarter net income was 13.4 million or $0.15 earnings per share. Our first and second quarter earnings per share of $0.31 are the best consecutive quarterly earnings per share figures since the second and third quarters of 2008. Jim will elaborate the tailwinds for the second quarter included improved non-interest income on a linked quarter basis of over $2 million and a significant reduction in operating losses stemming from debit card activity as compared to the first quarter. Headwinds on a linked quarter basis were a $1.9 million increase in provision expense, a $1.1 million OREO write down and a $400,000 write down of a former headquarters building and branch as we sold the property and consolidated into a location western 1 mile away in DuBois, Pennsylvania. I will briefly touch on two themes, our earnings capacity and secondly our cost structure. First, our earnings capacity is improving as prior initiatives are taking hold. Now I will speak to just a few of these areas. Loans grew roughly 5.1% on an annualized basis in the second quarter largely due to momentum in corporate banking. We saw nice traction in direct C&I lending, commercial real estate lending and construction lending. We have two corporate banking initiatives our Cleveland corporate banking LPO and a dealer fore plan initiative and they are both growing in line with our business plan. Corporate lending also offset some sluggishness in our branch consumer lending and in our indirect auto business. Jim will tease up a nuance in our net interest income and margin in a minute. Next, our wealth management and insurance income is performing well as the partnership with our branches has strengthened. You…

Thanks Mike. As usual I will take up on some of my themes which are our performance in the second quarter along with providing some additional detail that we hope you will find helpful. I encourage you to take advantage of the earnings release supplement that is available on our website which we feel provides investors with useful information that expands on the earnings release. First of all, net interest income at $47.2 million was up by $1 million over the same quarter a year ago but decreased by $800,000 compared to last quarter, reflected the impact of the $1 million special dividend from the Federal Home Loan Bank that we received in the first quarter of this year. Loan growth of $57 million from last quarter and $167 million from a year ago helped offset declining yields and maintain net interest income. Our net interest margin in the second quarter was 3.26% exactly the same as the year ago period but down 9 basis points from last quarter. 7 basis points of the quarter-on-quarter decline was driven by the one-time FHLB special dividend in the first quarter. Total loan yields contracted by 5 basis points. The bank once again experienced positive commercial loan replacement yields continuing the trend from the first quarter, however this was not enough to offset unfavorable replacement yield to other categories. Lower funding cost contributed 2 basis points to the margin as we continue to run off higher cost brokered time deposits and grow demand deposits and savings deposits. Our total cost of deposits is now down to 16 basis points and our total cost of funds is 26 basis points. Non-interest bearing demand deposits increased by $28 million over the prior quarter for a 10.9% annualized rate and currently comprise over 25% of total…

Thank you. [Operator Instructions]. Our first question comes from the line of Bob Ramsey with FBR. Your line is now open, your question please.

Hey good afternoon.

] Hey Bob.

First question I have for you guys was I know you gave some good color around operating expenses in the quarter and I am just curious how you are thinking about the outlook from here, do you feel it will stay in a pretty close range from where we sit today as compared to the back half of the year?

Yes it should and the only upward pressure would come in fourth quarter with the integration of First Community in Columbus and I shared that number before it's about $600,000 uptick.

Okay, great.

There also the one-time closing cost if that merger closes which we expect in the fourth quarter this year.

Yes 1.3 million there.

Okay, okay. And then could you talk a little about sort of loan demand where the pipeline sits today as compared to a quarter ago and whether you think the loan growth in the back of the year will be at similar pace to what you guys had this quarter or whether there's any opportunity for to bill move it?

Pretty satisfied with where it sat putting along into that 5% and also encouraged as we look at the pipeline the percentage is, and even the closings in the first half of the year are predominantly direct loans about 86%, and then the type of loan really C&I predominantly 43%, IRA and construction about 45% and municipal about 10%. So we like that mix. And when we look at the types of loans we are getting some really nice looks. We are seeing some strain on a little bit with covenants and recourse around the edges of investment real estate. We tend to may be walk away from a few of those but just some nice companies looking at a long-term care facility for the elderly we just did here in the last month for about 6 million, a highway and bridge construction company for about 10 million, a nice few clients. Just the type of thing you expect a community bank to do, a foods company expanding and acquiring a medical office building. Just kind of garden variety kind of stuff Bob, a school district and really highly rated for capital projects, about $6 million or $8 million there, another few company, 6 million, good stuff.

Okay. Great. 15 years it's great to see your non-performers continue to come down. Just curious I think this was a quarter with the annual shared national credit exam from the Fed sort of how that factored in, whether you guys saw much in a way of downgrades or upgrades as a result of that exam?

We saw three or four downgrades in our portfolio. It created a little strain, it showed up in the [AOOO] methodology and the provisioning.

Okay. Great. I will hope back giving someone else a chance. Thank you.

Thank you. [Operator Instructions]. Our next question comes from the line of John Moran with Macquarie Capital. Your line is now open. Your question please.

Hey guys. How is it going?

Good.

How are you John?

Good. Hey, I wanted to just dig into fees a little bit, a really nice outcome for you guys this quarter. Wondering if you view this run rate as sort of sustainable for the back half of the year? And then I know mortgage was kind of off to a slow start initially, it sounds like things have picked up a little bit but just wondering if you had any update on when that was going to breakeven?

Yes, it's not there yet on mortgage that is and we're running probably at 50% to 60% of where we had hoped to be and that we saw some nice positive traction in the second quarter. So we think that will continue to contribute and we may be another six months away or so from breakeven there. I would say with ATM fees that was a nice sustainable outcome in the second quarter. I would say with deposit service charges probably the same and interchange income. And the other real positive is just good traction with [wealth] income and a lot more there over the course of the last six to seven months, so a pretty positive.

Okay. And then you guys did mention a fee schedule change. When did that take effect?

It was actually the beginning of the second quarter. And when I mentioned that I was referring to our ATM surcharge fees and foreign fees.

Got it. And so that was in there for the full quarter then?

Correct.

Correct.

Okay. That’s helpful. And the other one I had was just if you could help us out in terms of margin outlook. I know that there is some noise created this quarter on a linked quarter basis just given the special one-time dividend there but it sounds like replacement yields in the commercial book are coming on at or better than existing book yield. So kind of how we might think about a walkthrough on that as you guys are looking forward here?

Yes, sure. So the margin actually has exhibited remarkable stability, the margin in the second quarter of 3.26% is exactly the same as it was in the same quarter year ago. The margin for the first half of this year is 3.30% which is also exactly the same it was in the first half of the prior year. So nice stability in the margin there. The replacement yields on commercial loans, we have been watching that very closely, that seems to go back and forth quarter-on-quarter depending on the loan originations, the run offs and the payments that we experience. As noted this was our second quarter with positive commercial loan replacement yields. So that's really good. But we think that the margin is generally speaking going to be bouncing around this range until we see a rise in interest rates.

Got it. Alright. Thanks very much for the question.

Thanks.

Thank you. [Operator Instructions]. Our next question comes from the line of Matt Schultheis with Boenning. Your line is now open. Your question please.

Good afternoon.

Hi Matt.

Hey Matt.

Hi. A couple of sort of clean up questions I guess. Your classified loans linked quarter increased a little bit and was wondering if that's applied the [indiscernible] or if there is something else there?

That was primarily the [indiscernible].

Okay. And with regard to the former headquarters that you are selling, that's not related to the fourth quarter former headquarters building transaction, is it?

It's not.

Okay. So do you have any sense of how many of these are maybe these types of real estate transactions rather the former headquarter buildings or branches, how long we may be seeing these types of items in your income statement?

Will just be an opportunistic with the cleanup in an adjacent facility. And we’ve been kind of nipping and tucking with real estate probably for two to three branches a year for the last several years. So this is just more the same. And we have a bull eye on this old some headquarters buildings that are little unreality and used lot of employees and now we just have a branch. And we really don’t have too many of those left.

To give you an idea on the financial impact, so we mentioned that it’s a $400,000 charge we’re taking in the second quarter but it should save about $200,000 a year, so it’s about two year payback.

And then lastly on the capital side, you mentioned Jim that you would be looking to return capital via dividends and share repurchases in the future. I was wondering will you wait till your acquisition closes before you look at another authorization, or is that just nothing that you’re comfortable talking about right now?

Nothing to announce right now but generally speaking the timing of that acquisitions close will coincide rather nicely with the timing of our annual capital plan. We prepare strategic planning exercise, so as we do all that together towards the end of this year, we’ll be looking our capital levels and if we think it’s appropriate to seek another authorization we will.

Thank you. And we have a question from the line of Will Curtiss, SunTrust. Your line is now open your question please.

So I think most of my questions have been addressed. But just wanted to go back to expenses real quick, and I think if I heard you correctly there is a couple of initiatives or some products could be rolling out over the -- in the second half of the year. But just curious if from an infrastructure standpoint is there anything that you see right now that might need -- you might look to invest in or might need additional spend?

You mean in terms of product capability….

Well, I guess more from a regulatory infrastructural or technology standpoint? I know you guys have done a lot of that in the past. But just curious how you see it going from here?

No, I think we’re in good shape.

Thank you. And I am showing no further questions in the phones at this time. I’d like to hand the program back over to Mike Price, President and CEO for any concluding remarks.

Just as always, we appreciate your interest in our Company and the services that you provide us and also thank you.

Thank you. Ladies and gentlemen, this does conclude the program. Thank you very much for your participation and you may now disconnect. Everyone, have a wonderful day.