Carolyn Fisher, FCF DDM Model UPDATED
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Transcript of Carolyn Fisher, FCF DDM Model UPDATED
2010 2011Revenue
LoansandLeases 225 197Growth% -12%Securities 43 34Growth% -21%
Totalinterestincome 268 232InterestexpenseDeposits 50 33Short-termborrowing 2 1Long-termdebt 10 7
Totalinterestexpense 62 42InterestExpenseChange -32%
Netinterestincome 207 190Margin
NoninterestrevenueCommissionsandfees 51 40Lendinganddeposit-relatedfees 17 15Securitiesgains(losses) 2 2Creditcardincome 10 12Otherincome -31 -11
Totalnoninterestrevenue 49 58NoninterestRevenueGrowth 18%
Totalnetrevenue 256 248Provisionsforcreditlosses 62 56
NoninterestexpensesCompensationandbenefits 85 85Occupancyexpense 14 14Tech,communicationandequipment 13 13Professionalandoutsideservices 4 5AdvertisingandmarketingAmortizationofintangibles 2 2Otherspecialcharges 9 9Otherexpenses 44 49
Totalnoninterestexpenses 171 1774%
Income(loss)fromcontopsbeforetaxes 23 15
FIRSTCOMMONWEALTHFINANCIALCORP(FCF)INCOMESTATEMENT
Provision(benefit)fortaxes 0 0EffectiveTaxRate 0% 0%
Netincome 23 159% 6%
Netincomeavailabletocommonshareholders 23 15
EarningspershareDiluted 0.25 0.15EPSGrowth -40%
WeightedaveragesharesoutstandingDiluted 93 105
DividenedDiscountModelNetIncomepershare 0.25 0.15Dividends 0.05 0.12%Growth 130%
ROE 3.07% 1.98%
**FiscalyearendsinDecember.USDinmillionsexceptpersharedata.
2012 2013 2014 2015 2016 2017 2018
187 176 171 175 182 189 198-5% -6% -3% 2% 4% 4% 5%32 30 29 30 30 31 32-6% -6% -3% 2% 2% 3% 3%219 206 202 204 212 220 230
21 16 12 7 15 26 351 1 2 5 4 4 38 5 4 3 3 2 130 22 19 16 22 32 39
-29% -27% -14% -18% 42% 44% 23%
189 185 184 188 190 189 191
40 42 4215 16 160 -1 113 14 14-4 -10 -1265 60 61 61 65 70 73
12% -8% 2% 1% 6% 7% 4%
254 245 245 250 255 258 26421 19 11 15 15 13 13
86 86 87 8913 14 13 1412 15 18 114 4 4 4
3 51 1 1 17 6 1052 43 35 32177 169 171 164 167 170 1740% -5% 1% -4% 2% 2% 2%
56 57 62 71 73 75 77
15 15 18 21 22 22 2327% 26% 29% 29% 30% 30% 30%42 41 44 50 51 52 54
17% 17% 18% 20%
42 41 44 50 51 52 54
0.4 0.43 0.48 0.56 0.59 0.61 0.63167% 7% 12% 17% 6% 3% 3%
104 97 93 89 86 86 86
0.40 0.43 0.48 0.56 0.59 0.61 0.630.18 0.23 0.28 0.28 0.28 0.33 0.3548% 24% 23% 0% 0% 17% 7%
5.63% 5.76% 6.15% 6.97% 6.13% 6.25% 6.37%
FIRSTCOMMONWEALTHFINANCIALCORP 2010 2011 2012DIVIDENDDISCOUNTMODELNetIncomepershare 0.25 0.15 0.4%Growth -40% 167%Dividends 0.05 0.12 0.18%Growth 130.3% 47.6%PayoutRatio 21.5% 82.5% 45.7%PVofDividendsTerminalValue
DDMVALUATIONPVofdividends 0.95PVofTerminalValue 6.96Targetprice 7.92Current 8.92Upside -11%*indollars
BearBaseBull
WeightedaveragesharesoutstandingDiluted 93 105 104
2013 2014 2015 2016 2017 2018
0.43 0.48 0.56 0.59 0.61 0.637% 12% 17% 6% 3% 3%0.23 0.28 0.28 0.28 0.33 0.35
24.1% 23.3% 0.1% -0.3% 16.7% 7.1%52.7% 58.2% 49.9% 47.1% 53.4% 55.8%
0.28 0.33 0.355.20
P/EMULTIPLEVALUTATION P/BMULTIPLEVALUTATIONTVofP/E 10.63 TVofP/B 1033.16PVofTV 14.23 PVofTV 943.14SumofPVofDiv. 0.95 PerShare 10.97TargetPrice 15.18 TargetPrice 11.92Current 8.92 Current 8.92Upside 70% Upside 34%
ImpliedP/B ImpliedP/E Price Upside1 15 10 15%
1.2 16 11 25%1.3 17 12 31%
97 93 89 86 86 86
ASSUMPTIONSCostofEquity 10.20%TerminalDividendGrowthRate 3.49%JustifiedP/B 1.3JustifiedP/E 17
FINALDDMVAL 33%P/BVAL 33%P/EVAL 33%Intrinsic 12Current 8.92Upside 31%
P/E P/B NMIFCF 16.0 1.08 3.2%HTLF 10.4 1.21 3.7%WIBC 12.8 1.5 3.7%LKFN 16.6 1.9 3.1%HAFC 12.6 1.4 3.8%CHCO 15.0 1.67 3.6%STBA 12.4 1.11 3.7%Industry 13.7 1.2 3%
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
FCF HTLF WIBC LKFN HAFC
P/E P/B
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
HAFC CHCO STBA Industry
NMI
2010 2011Assets
Cashandduefrombanks 70 75Depositswithbanks 0 4Debtsecurities 1017 1183Loans 4218 4057Allowanceforloanlosses -71 -61Netloans 4147 3996Premisesandequipment 67 67Goodwill 160 160Otherintangibleassets 5 4Otherassets 347 354
Totalassets 5813 5841%Growth 0.5%
Liabilitiesandstockholders'equityLiabilities
Deposits 4618 4505Short-termborrowing 188 313Long-termdebt 204 207Otherliabilities 53 58
Totalliabilities 5063 5083%Growth 0.4%
Stockholders'equityCommonstock 106 106Additionalpaid-incapital 366 366Retainedearnings 291 294Treasurystock -8 -7Accumulatedothercomprehensiveincome -2 2
Totalstockholders'equity 750 759SharesOutstanding 93 105StockholdersEquityPerShare 8.06 7.23
Totalliabilitiesandstockholders'equity 5813 5841
TangibleStockholdersEquity(**nopreferedstock) 585 595%Growth 2%TangibleSEpershare 6.29 5.67**FiscalyearendsinDecember.USDinmillionsexceptpersharedata.
FIRSTCOMMONWEALTHFINANCIALCORP(FCF)BALANCESHEET
2012 2013 2014 2015 2016 2017 2018
99 74 72 674 3 2 3
1200 1354 1354 9504205 4284 4460 4684-67 -54 -52 -51
4138 4230 4408 462469 68 65160 160 161 1662 1 2
324 325 296 3595995 6215 6360 6567 6729 6896 70672.6% 3.7% 2.3% 3.3% 2.5% 2.5% 2.5%
4558 4604 4316 4196356 627 1106 1511280 217 162 8155 56 61 59
5249 5503 5644 5847 6018 6195 63763.3% 4.8% 2.6% 3.6% 2.9% 2.9% 2.9%
106 106 106365 365 366316 335 353-42 -73 -1041 -21 -4
746 712 716 720 746 771 795104 97 93 89 86 86 867.17 7.34 7.70 8.05 8.68 8.96 9.245995 6215 6360 6567
584 551 553 554 746 771 795-2% -6% 0% 0% 35% 3% 3%5.62 5.68 5.95 6.20 8.68 8.96 9.24
2010 2011CashFlowsFromOperatingActivitiesNetincome 23 15
Provisionforcreditlosses 62 56Depreciation&amortization 11 9Depreciation/AmortizationofOverallRevenue 3% 3%Deferredtax(benefit)expense -5 -1Investments(gains)losses 9 10Receivable 4 1Prepaidexpenses 7 5Payables 2 -5Accruedliabilities -1 -1Interestpayable -1 -1Incometaxespayable 2 -5Otherassetsandliabilities 4 8Otheroperatingactivities -5 -6
Netcashprovidedbyoperatingactivities 111 84CashFlowsFromInvestingActivitiesSales/maturityofinvestments 591 557Purchasesofinvestments -387 -724Changesinloans,net 335 62AcquisitionsanddispositionsProperty,andequipments,net -5 -8Otherinvestingactivities 9 33
Netcashusedforinvestingactivities 543 -80
CashFlowsFromFinancingActivitiesChangeindeposits 82 -113Changeinfederalfundspurchased -92 62Changeinshort-termborrowing -679 62Long-termdebtissued 50 30Long-termdebtrepayment -117 -25Commonstockissued 88 0Repurchasesoftreasurystock 0 0Cashdividendspaid -5 -13Otherfinancingactivities 0 0
Netcashprovidedby(usedfor)financingactivities -673 4Netchangeincash -20 9
Cashatbeginningofperiod 90 70Cashatendofperiod 70 78
FIRSTCOMMONWEALTHFINANCIALCORP(FCF)StatementofCASHFLOW
**FiscalyearendsinDecember.USDinmillionsexceptpersharedata.
2012 2013 2014 2015 2016 2017 2018
42 41 44 5021 19 11 158 11 14 8 14 16 18
3% 4% 5% 3% 5% 6% 6%3 13 52 0 33 1 1
96 -1 2-1 -1 0-1 -1 06 -1 2
-11 2 -11 -8 179 86 82
577 359 376-605 -540 -340-162 -123 -192
-3-10 -10 -1129 5 6
-171 -307 -164
53 46 -288-41 -18 -785 288 486100 5-25 -65 -60 -80 -389 -407 -4261 0 0
-36 -33 -31-19 -22 -26 -25 -24 -28 -300 0 0
117 196 7925 -26 -378 103 77103 77 75
2011 %TotalCommercial,financial,agriculturalandother 996,739 25%Realestateconstruction 76,564 2%Residentialrealestate 1,137,059 28%Commericalrealestate 1,267,432 31%Loanstoindividuals 565,849 14%Totalloans&leasesnetofunearnedincome 4,043,643
LoansandLeasesInterestIncome 197,000AverageInterestRate 4.87%
2011TotalSecurities 1,182,572TotalSecuritiesInterestIncome 34,000
AverageInterestRate 2.88%
2011TotalInterestBearingDeposits 3,724,307TotalInterestExpenseonDeposits 33,000
AverageInterestRate 0.89%
AverageInterestEarningAssets 8,640Interest-bearingdepositswithbanks 0% 40,459Tax-freeInvestmentsecurities 1% 1,248,689TaxableInvestmentSecurities 21% 4,553,634Loans,netofunearnedincome 78% 5,851,422
Commercial,financial,agriculturalandotherRealestateconstructionResidentialrealestateCommericalrealestateLoanstoindividuals
FIRSTCOMMONWEALTHFINANCIALCORPLOANMIX
0%1%21%
78%
Interest-bearing deposits with banksTax-free Investment securities
securities
%Growth 2012 %Total %Growth 2013 %Total1,019,822 24% 2% 1,021,056 24%
87,438 2% 14% 93,289 2%1,241,565 30% 9% 1,262,718 29%1,273,661 30% 0% 1,296,472 30%582,218 14% 3% 610,298 14%
4,204,704 4% 4,283,833
187,000 -5% 176,0004.45% 4.11%
2012 20131,199,531 1.43% 1,353,809
32,000 30,0002.67% 2.22%
2012 20133,674,612 -1.33% 3,691,502
21,000 16,0000.57% 0.43%
Commercial,financial,agriculturalandotherRealestateconstructionResidentialrealestateCommericalrealestateLoanstoindividuals
%Growth 2014 %Total %Growth 2015 %Total0% 1,052,109 24% 3% 1,150,906 25%7% 120,785 3% 29% 220,736 5%2% 1,226,344 28% -3% 1,224,465 26%2% 1,405,256 32% 8% 1,479,000 32%5% 652,814 15% 7% 608,643 13%2% 4,457,308 4% 4,683,750
-6% 171,000 -3% 175,0003.84% 3.74%
2014 201512.86% 1,354,364 0.04% 1,333,836
29,000 30,0002.14% 2.25%
2014 20150.46% 3,326,484 -10% 3,079,205
12,000 7,0000.36% 0.23%
Commercial,financial,agriculturalandotherRealestateconstructionResidentialrealestateCommericalrealestateLoanstoindividuals
%Growth 2016 %Total %Growth 20179% 1,199,062 25% 4% 1,265,47483% 308,233 6% 40% 464,2650% 1,219,036 25% 0% 1,204,9075% 1,555,067 32% 5% 1,652,423-7% 618,834 13% 2% 622,7015% 4,855,670 4% 5,062,851
2% 193,563 10.61% 217,0103.99% 4.29%
2016 2017-1.5% 1,384,463 4% 1,437,012
34,600 40,2242.50% 2.80%
2016 2017-7% 3,171,581 3% 3,330,160
15,139 25,8860.48% 0.78%
2015Commercial,financial,agriculturalandother25%Realestateconstruction 5%Residentialrealestate 26%Commericalrealestate 32%Loanstoindividuals 13%
32%
%Total %Growth 2018 %Total %Growth25% 6% 1,346,098 25% 6%9% 51% 732,009 14% 58%24% -1% 1,197,855 23% -1%33% 6% 1,744,141 33% 6%12% 1% 613,429 12% -1%
4% 5,282,537 4%
12.11% 239,633 10.42%4.54%
20184% 1,491,555 4%
45,4803.05%
20185% 3,596,573 8%
35,1500.98%
24%
5%
13%Commercial, financial, agricultural and other
Real estate construction
Residential real estate
26%
Commerical real estate
Loans to individuals
2011 2012 2013 2014Charge-offsasa%oftotalloans 1.51% 0.35% 0.76% 0.31%
Income Statement Highlights2014 Q4 2015 Q4 % ChangeNet Interest Margin 3.27% 3.28% 0.3%ROA 0.71% 0.78% 10%ROE 6.18% 6.98% 13%Net Income 44,453 50,143 13%Diluted Earnings per Share 0.48 0.56 17%
KeyRatios 2011 2012 2013 2014Returnonaverageassets 0.27 0.71 0.68 0.71Returnonaverageequity 2 5.46 5.7 6.18Netloanstodepositsratio 88.7 90.78 91.87 102.08Dividendspershareasa%ofnewincomepershare82.26 44.57 53.49 58.33Averageequitytoavergaeassetsratio 13.133 12.95 11.87 11.45
20150.36%
20150.786.98
110.4250
11.23
0.00%
0.50%
1.00%
1.50%
2.00%
2011 2012 2013 2014 2015
2015
Company First Commonwealth Financial Corp. (FCF) Analyst Name Carrie FisherFYE = 12/31 ($in millions) 3 Yr 5 Yr Common Sized
Income Statement Summary 2009 2010 2011 2012 2013 2014 Growth Growth 2009 2010 2011 2012 2013 2014Total Interest Income 293 268 232 219 206 202 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Interest Income Growth -8.5% -13.7% -5.4% -5.8% -2.0% -4.4% -7.2%Total Interest Expense 87 62 42 30 22 19 29.6% 23.0% 18.0% 13.8% 10.5% 9.2%Net Interest Income 207 207 190 189 185 184 70.4% 77.0% 82.0% 86.2% 89.5% 90.8%Provision for Loan Losses 101 62 56 21 19 11 34.3% 22.9% 24.1% 9.4% 9.3% 5.5%Net Interest Income After Provision 106 145 134 168 165 172 36.1% 54.1% 57.9% 76.9% 80.2% 85.3% Net Interest Income Growth 37.1% -7.7% 25.6% -1.8% 4.3% 8.8% 10.2%Non Interest Income 19 49 58 65 60 61 6.6% 18.3% 24.9% 29.9% 29.2% 30.1%Non Interest Expense 171 171 177 177 169 171 58.4% 63.8% 76.3% 80.9% 81.8% 84.7%Earnings Before Tax -46 23 15 57 57 62 -15.6% 8.7% 6.5% 25.8% 27.5% 30.7% Pre-Tax Profit Growth -150.6% -35.0% 275.1% 0.3% 9.5% 60.3% -206.3%Taxes -26 0 0 15 15 18 -8.8% 0.1% -0.2% 6.7% 7.4% 8.7% Tax Rate 1% 26% 27% 28%Net Income from Continuing Operations -20 23 15 42 41 44 -6.8% 8.6% 6.7% 19.2% 20.1% 22.0% Profit Growth -214.5% -32.7% 171.1% -1.1% 7.2% 42.2% -217.2%Extraordinary Income/(Expense) 0 0 0 0 0 0 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%Net Income -20 23 15 42 41 44 -6.8% 8.6% 6.7% 19.2% 20.1% 22.0%Preferred Dividend 0 0 0 0 0 0 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%Net Income Attributable to Common -20 23 15 42 41 44 -6.8% 8.6% 6.7% 19.2% 20.1% 22.0%Earnings Per Share (diluted) -0.24 0.25 0.15 0.40 0.43 0.48 EPS Growth -204.2% -40.0% 166.7% 7.5% 11.6% 47.4% -214.9% `
Dividend Per Share (diluted) 0.18 0.06 0.12 0.18 0.23 0.28 DPS Growth -66.7% 100.0% 50.0% 27.8% 21.7% 32.6% 9.2% Dividend Payout -75.0% 24.0% 80.0% 45.0% 53.5% 58.3%# diluted shares (in millions) 84.6 93.2 104.7 103.9 97.0 93.1Balance Sheet Summary (Based on total assets)Cash 89 70 75 99 74 72 1.4% 1.2% 1.3% 1.6% 1.2% 1.1%Investment Securities 1,222 1,017 1,183 1,200 1,354 1,354 19.0% 17.5% 20.2% 20.0% 21.8% 21.3%Loans Held For Sale 0 0 13 0 0 3 0.0% 0.0% 0.2% 0.0% 0.0% 0.0%Loans-Commercial 1,208 914 997 1,020 1,021 1,052 18.7% 15.7% 17.1% 17.0% 16.4% 16.5%Loans-Commercial Real Estate 387 1,354 1,267 1,274 1,296 1,405 6.0% 23.3% 21.7% 21.2% 20.9% 22.1%Loans-Retail 557 561 566 582 610 653 8.6% 9.7% 9.7% 9.7% 9.8% 10.3%Loans-Real Estate 1,209 1,127 1,137 1,242 1,263 1,226 18.8% 19.4% 19.5% 20.7% 20.3% 19.3%Loans-Other 1,275 261 77 87 93 121 19.8% 4.5% 1.3% 1.5% 1.5% 1.9% Total Loans 4,637 4,218 4,044 4,205 4,284 4,457 71.9% 72.6% 69.2% 70.1% 68.9% 70.1%Allowance for Loan Losses 82 71 61 67 54 52 1.3% 1.2% 1.0% 1.1% 0.9% 0.8% Net Loans 4,555 4,147 3,982 4,138 4,230 4,405 70.7% 71.3% 68.2% 69.0% 68.1% 69.3% Loan Growth -9.0% -4.0% 3.9% 2.2% 4.2% Allowance/Gross Loans 1.8% 1.7% 1.5% 1.6% 1.3% 1.2%Fixed Assets 71 67 67 69 68 65 1.1% 1.2% 1.1% 1.2% 1.1% 1.0%Intangibles 167 165 164 162 161 163 2.6% 2.8% 2.8% 2.7% 2.6% 2.6%Total Assets 6,446 5,813 5,841 5,995 6,215 6,360 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%Deposits 4,536 4,618 4,505 4,558 4,604 4,316 70.4% 79.4% 77.1% 76.0% 74.1% 67.9%Fed Funds Purchased 1,678 105 41 128 43 42 26.0% 1.8% 0.7% 2.1% 0.7% 0.7%Debt 1,233 392 520 636 843 1,268 19.1% 6.7% 8.9% 10.6% 13.6% 19.9%Total Liabilities 5,807 5,063 5,083 5,249 5,503 5,644 90.1% 87.1% 87.0% 87.6% 88.5% 88.7%Shareholders Equity 639 750 759 746 712 716 9.9% 12.9% 13.0% 12.4% 11.5% 11.3%Total Liabilities and Equity 6,446 5,813 5,841 5,995 6,215 6,360 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%Book Value per Share 7.55 8.04 7.24 7.18 7.34 7.69 Book Value Growth 6.5% -9.9% -0.9% 2.2% 4.8% 2.0% 0.4%Cash Flow Summary (Based on revenue)Operating Cash Flow 57 111 84 79 86 82 -0.8% 7.5% 19.5% 41.3% 36.3% 35.9% 41.5% 40.6% OCF Growth 93.7% -24.1% -6.4% 8.9% -4.2%OCF/Net Income -2.9 4.8 5.4 1.9 2.1 1.8Amortization 0 0 0 0 0 0 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%Depreciation+Amortization 10 11 9 8 11 14 3.3% 4.0% 3.9% 3.6% 5.4% 6.8%Acquisitions Purchased with Cash 0 0 0 0 0 3Dividends 30 5 13 19 22 26 DebtStock Repurchase 0 0 0 36 33 31 Maturities $ %Stock Issuance 0 88 0 1 0 0 2015 1,258.15 99%Net Charge-Offs (see notes) 72 72 66 15 32 13 2015 0.56 0%Non-Performing Loans (see notes) 149 117 112 108 59 55 2016 0.59 0%Ratios 2017 0.61 0%ROA -0.3% 0.4% 0.3% 0.7% 0.7% 0.7% 2018 0.63 0%ROE -3.1% 3.1% 2.0% 5.6% 5.8% 6.2% After 6.931 1% Profit Margin (NI/S) -6.8% 8.6% 6.7% 19.2% 20.1% 22.0% Total Debt 1,267.46 100.0% Asset Turnover (S/A) 0.0 0.0 0.0 0.0 0.0 0.0 Leverage (A/E) 10.1 7.8 7.7 8.0 8.7 8.9 Debt to Equity 9.1 6.8 6.7 7.0 7.7 7.9 Times Interest Earned -1.4 1.5 1.3 1.9 1.9 2.0Loan/Deposit 1.00 0.90 0.88 0.91 0.92 1.02Charge-Off/Allowance 87.8% 101.0% 107.5% 21.7% 59.4% 25.7%NPL/Allowance 182.0% 164.9% 183.2% 160.1% 109.5% 106.1%Tangible Common Equity 471 584 595 584 550 553 Tier 1 Capital 365 397 400 421 440 459 Version 3 (1/15/2016)