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10 Bank Stocks With Up to 154% Upside for 2012

9. First Commonwealth Financial

Shares First Commonwealth Financial Corp. (FCF - Get Report) of Indiana, Pa., closed at $4.88 Friday, declining 30% year-to-date. Based on a consensus price target of $6.38, the shares have 31% upside potential.

Based on a quarterly payout of three cents, the shares have a dividend yield of 2.46%.

First Commonwealth had $5.7 billion in total assets as of Sept. 30, operating 112 First Commonwealth Bank offices in 15 counties in western and central Pennsylvania.

On Dec. 5, the company announced that CEO John Dolan would retire, effective Dec. 31, with the board of directors naming First Commonwealth Bank president T. Michael Price as interim CEO.

The company reported third-quarter earnings of $8.3 million, or 8 cents a share, declining from $10.6 million, or 11 cents a share, in the third quarter of 2010.

The year-over-year earnings decline reflected an 8% decline in net interest income to a tax-adjusted $48.8 million in the third quarter, as the company saw its loan portfolio shrink 8% "as the result of more disciplined underwriting guidelines concerning geography and size for commercial loans, the managing down of large credit relationships over $15 million," and weak loan demand.

Earnings were also affected by a $7.0 million third-quarter provision for loan losses, increasing from $4.5 million a year earlier.

First Commonwealth's nonperforming assets ratio was 3.45%, increasing from 3.22% the previous quarter and 2.70% a year earlier, with one commercial credit relationship in Pennsylvania representing $32.8 million, or 17% of the company's $195.2 million in nonperforming assets.

The third-quarter net charge-off ratio was 1.00% and loan loss reserves covered 1.81% of total loans as of September 30.

The third-quarter return on average assets (ROA) was 0.59%, according to SNL Financial.

Following First Commonwealth's earnings announcement in October, Sterne Agee analyst Mike Shafir reiterated his Buy rating on the shares, with a price target of $6.50, and said that "While NPAs rose during the quarter, the company exhibited positive trends with a higher net interest margin, lower expenses, and a reduction in the pace of loan decline."

The shares trade for 11.2 times the consensus 2012 EPS estimate of 42 cents, and 0.8 times their Sept. 30 tangible book value of $5.77, according to SNL.

Five out of eight analysts covering First Commonwealth rate the shares a buy, while the remaining analysts all have neutral ratings.

Interested in more on First Commonwealth? See TheStreet Ratings' report card for this stock.

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