AmeriServ Financial Reports Earnings for the Second Quarter and First Six Months of 2009

JOHNSTOWN, Pa., July 14 /PRNewswire-FirstCall/ -- AmeriServ Financial, Inc. (Nasdaq: ASRV) reported a second quarter 2009 net loss of $939,000 or $0.06 per diluted share. This represents a decrease of $2,455,000 from the second quarter 2008 net income of $1,516,000 or $0.07 per diluted share. For the six month period ended June 30, 2009, the Company reported a net loss of $406,000 or $0.04 per diluted share. This also represents a decrease of $3,151,000 when compared to net income of $2,745,000 or $0.13 per diluted share for the first six months of 2008. The following table highlights the Company's financial performance for both the three and six month periods ended June 30, 2009 and 2008:

                         Second        Second       Six Months    Six Months
                         Quarter       Quarter        Ended         Ended
                           2009          2008     June 30, 2009 June 30, 2008
                        ---------    ----------     ---------     ----------

    Net income (loss)   ($939,000)   $1,516,000     ($406,000)    $2,745,000
    -----------------   ---------    ----------     ---------     ----------
    Diluted earnings
     per share             ($0.06)        $0.07        ($0.04)         $0.13
    ----------------       ------         -----        ------          -----

Allan R. Dennison, President and Chief Executive Officer, commented on the second quarter 2009 financial results, "AmeriServ Financial reported a loss for the second quarter of 2009 due to an increased provision for loan losses and higher FDIC insurance expense. We prudently increased our allowance for loan losses to respond to higher non-performing loans as the continued recessionary economic environment is negatively impacting our commercial borrowers. This higher provision unfortunately more than offset increased net interest income that resulted from strong loan and deposit growth within our retail bank. Overall at June 30, 2009, our allowance for loan losses provided 100% coverage of non-performing loans and represented 1.84% of total loans outstanding. With a tangible common equity ratio of 8.17% and an asset leverage ratio of 11.61%, AmeriServ Financial has good capital strength to work through this challenging economic period."

The Company's net interest income in the second quarter of 2009 increased by $1.2 million from the prior year's second quarter and for the first six months of 2009 increased by $2.6 million or 19.1% when compared to the first six months of 2008. The Company's net interest margin is also up by 8 and 24 basis points, respectively for the quarter and six-month periods ended June 30, 2009. The increased net interest income and margin resulted from a combination of good balance sheet growth and the pricing benefits achieved from a steeper positively sloped yield curve. Specifically, total loans averaged $723 million in the first six months of 2009, an increase of $94 million or 15.0% over the first half of 2008. This loan growth caused overall interest income to increase for both 2009 periods. The loan growth was driven by increased commercial and commercial real-estate loan production as the majority of increased residential mortgage loan production has been sold into the secondary market. Total deposits averaged $742 million in the first six months of 2009, an increase of $43 million or 6.2% over the same 2008 period. The Company believes that uncertainties in the financial markets and the economy have contributed to growth in both money market and demand deposits as consumers have looked for safety in well capitalized community banks like AmeriServ Financial. Additionally, the Company also benefited from a favorable decline in interest expense caused by the more rapid downward repricing of both deposits and Federal Home Loan Bank borrowings due to the market decline in short-term interest rates.

The Company appropriately strengthened its allowance for loan losses in the second quarter of 2009 in response to an increase in non-performing loans. Specifically, non-performing assets increased by $9.6 million from $5.1 million or 0.70% of total loans at March 31, 2009 to $14.7 million or 1.98% of total loans at June 30, 2009. The following two credits, both negatively impacted by weakening economic conditions, were primarily responsible for the increased level of non-performing assets: 1) a $5.9 million commercial loan to an information technology consulting company that is experiencing cash flow difficulties. A $3.4 million specific reserve has been established against this credit. 2) a $3.9 million commercial relationship with a paper manufacturer that has ceased operations. This relationship consists of both an asset based line of credit and a commercial mortgage with an 80% government guarantee. A $370,000 specific reserve has been established against this relationship.

Overall, the Company recorded a $3.3 million provision for loan losses in the second quarter of 2009 compared to a $1.4 million provision in the second quarter of 2008, or an increase of $1.9 million. For the six month period ended June 30, 2009, the Company recorded a $5.1 million provision for loan losses compared to a $1.5 million provision for the first half of 2008, or an increase of $3.6 million. When determining the provision for loan losses, the Company considers a number of factors some of which include periodic credit reviews, non-performing, delinquency and charge-off trends, concentrations of credit, loan volume trends and broader local and national economic trends. In addition to the higher level of non-performing loans, the increased loan loss provision in 2009 was also caused by the Company's decision to strengthen its allowance for loan losses due to the downgrade of the rating classification of several performing commercial loans and uncertainties in the local and national economies. For the six month period ended June 30, 2009, net charge-offs have amounted to $404,000 or 0.11% of total loans compared to net charge-offs of $814,000 or 0.26% of total loans for the same six month period in 2008. In summary, the allowance for loan losses provided 100% coverage of non-performing loans and was 1.84% of total loans at June 30, 2009 compared to 264% of non-performing loans and 1.26% of total loans at December 31, 2008.

The Company's non-interest income in the second quarter of 2009 decreased by $1.9 million from the prior year's second quarter and for the first six months of 2009 decreased by $2.1 million when compared to the first six months of 2008. The largest item causing the decline was related to bank owned life insurance. Bank owned life insurance revenue returned to a more typical level in 2009 as the 2008 revenue was impacted by the payment of $1.6 million in death claims. Trust and investment advisory fees also declined by $365,000 for the second quarter and $685,000 for the six month period due to reductions in the market value of assets managed due to lower equity and real estate values in 2009. These negative items were partially offset by increased gains on asset sales. Specifically, gains realized on residential mortgage sales into the secondary market in 2009 increased by $42,000 for the second quarter and $71,000 for the six month period due to increased mortgage purchase and refinance activity in the Company's primary market. The Company also took advantage of market opportunities and generated $164,000 of gains on the sale of investment securities in 2009 compared to a $137,000 loss on a portfolio repositioning strategy executed in 2008.

Total non-interest expense in the second quarter of 2009 increased by $611,000 from the prior year's second quarter and for the first six months of 2009 increased by $994,000 or 5.6% when compared to the first six months of 2008. Higher FDIC deposit insurance expense is the largest factor responsible for the non-interest expense increase in 2009. Specifically, FDIC deposit insurance expense has increased by $681,000 due to the recognition of a $435,000 expense for a special five basis point assessment, mandated for all banks, that was accrued in the second quarter of 2009 and an increase in the recurring insurance premiums due to the need to strengthen the deposit insurance fund. Total salaries and benefits expense in 2009 increased by $171,000 in the second quarter and $433,000 for the six month period due to greater salary costs as a result of merit increases and higher pension expense. Other expenses have increased by $120,000 in the first six months of 2009 due primarily to increased other real estate owned expense. These negative items were partially offset by a reduction in core deposit amortization expense of $216,000 for the second quarter and $324,000 for the six month period as a branch core deposit intangible was fully amortized in the first quarter of 2009.

ASRV had total assets of $979 million and shareholders' equity of $113 million or a book value of $4.37 per common share at June 30, 2009. The Company's asset leverage ratio remained strong at 11.61% and the Company had a tangible common equity to tangible assets ratio of 8.17% at June 30, 2009.

This news release may contain forward-looking statements that involve risks and uncertainties, as defined in the Private Securities Litigation Reform Act of 1995, including the risks detailed in the Company's Annual Report and Form 10-K to the Securities and Exchange Commission. Actual results may differ materially.

                                  NASDAQ:   ASRV
                    SUPPLEMENTAL FINANCIAL PERFORMANCE DATA
                                 July 14, 2009
                (In thousands, except per share and ratio data)
                    (All quarterly and 2009 data unaudited)

                                                       2009
                                                   1QTR    2QTR      YEAR
                                                                   TO DATE
    PERFORMANCE DATA FOR THE PERIOD:
    Net income (loss)                              $533   $(939)    $(406)
    Net income (loss) available to common
     shareholders                                   274  (1,202)     (928)

    PERFORMANCE PERCENTAGES (annualized):
    Return on average assets                       0.22%  (0.39)%   (0.08)%
    Return on average equity                       1.90   (3.29)    (0.72)
    Net interest margin                            3.72    3.66      3.69
    Net charge-offs as a percentage of
     average loans                                 0.03    0.19      0.11
    Loan loss provision as a percentage of
     average loans                                 1.02    2.79      1.42
    Efficiency ratio                              78.22   82.56     79.93

    PER COMMON SHARE:
    Net income (loss):
    Basic                                         $0.01  $(0.06)   $(0.04)
    Average number of common shares
     outstanding                                 21,137  21,151    21,144
    Diluted                                        0.01   (0.06)    (0.04)
    Average number of common shares
     outstanding                                 21,137  21,152    21,144


                                                      2008
                                                  1QTR    2QTR      YEAR
                                                                   TO DATE
    PERFORMANCE DATA FOR THE PERIOD:
    Net income                                   $1,229  $1,516    $2,745
    Net income available to common
     shareholders                                 1,229   1,516     2,745

    PERFORMANCE PERCENTAGES (annualized):
    Return on average assets                       0.55%   0.71%     0.63%
    Return on average equity                       5.43    6.64      6.04
    Net interest margin                            3.32    3.58      3.45
    Net charge-offs as a percentage of
     average loans                                 0.06    0.46      0.26
    Loan loss provision as a percentage of
     average loans                                 0.10    0.89      0.49
    Efficiency ratio                              82.87   73.20     77.67

    PER COMMON SHARE:
    Net income:
    Basic                                         $0.06   $0.07     $0.13
    Average number of common shares
     outstanding                                 22,060  21,847    21,954
    Diluted                                        0.06    0.07      0.13
    Average number of common shares
     outstanding                                 22,062  21,848    21,955



                          AMERISERV FINANCIAL, INC.
        (In thousands, except per share, statistical, and ratio data)
                   (All quarterly and 2009 data unaudited)

                                    2009
                              1QTR        2QTR
    PERFORMANCE DATA
     AT PERIOD END:
    Assets                  $975,062    $978,899
    Short-term investment
     in money market
     funds                    10,817       7,516
    Investment securities    138,853     136,119
    Loans                    726,961     739,649
    Allowance for
     loan losses              10,661      13,606
    Goodwill and core
     deposit intangibles      13,498      13,498
    Deposits                 746,813     783,807
    FHLB borrowings           90,346      57,702
    Shareholders' equity     114,254     112,880
    Non-performing assets      5,099      14,670
    Asset leverage ratio       11.82%      11.61%
    Tangible common
     equity ratio               8.35        8.17
    PER COMMON SHARE:
    Book value (A)             $4.44       $4.37
    Market value                1.67        1.85
    Trust assets - fair
     market value (B)     $1,432,375  $1,376,272

    STATISTICAL DATA
     AT PERIOD END:
    Full-time equivalent
     employees                   355         352
    Branch locations              18          18
    Common shares
     outstanding          21,144,700  21,156,801


                                    2008
                              1QTR        2QTR        3QTR        4QTR
    PERFORMANCE DATA
     AT PERIOD END:
    Assets                  $902,349    $877,230    $911,306    $966,929
    Short-term
     investment
     in money market
     funds                     5,682       6,952       7,147      15,578
    Investment securities    146,285     141,867     141,630     142,675
    Loans                    632,934     623,798     663,996     707,108
    Allowance for
     loan losses               7,309       7,963       8,677       8,910
    Goodwill and core
     deposit intangibles      14,254      14,038      13,821      13,605
    Deposits                 682,459     722,913     688,998     694,956
    FHLB borrowings          106,579      40,214     106,897     133,778
    Shareholders' equity      91,558      92,248      93,671     113,252
    Non-performing assets      3,050       3,717       4,390       4,572
    Asset leverage ratio        9.78%      10.47%      10.37%      12.15%
    Tangible common
     equity ratio               8.70        9.06        8.90        8.31
    PER COMMON SHARE:
    Book value (A)             $4.19       $4.22       $4.29       $4.39
    Market value                2.79        2.98        2.51        1.99
    Trust assets - fair
     market value (B)     $1,838,029  $1,813,231  $1,678,398  $1,554,351

    STATISTICAL DATA
     AT PERIOD END:
    Full-time equivalent
     employees                   350         353         352         353
    Branch locations              19          18          18          18
    Common shares
     outstanding          21,842,691  21,850,773  21,859,409  21,128,831


    Note:
    (A)  Preferred stock received through the Capital Purchase Program is
    excluded from the book value per common share calculation.

    (B)  Not recognized on the balance sheet



                          AMERISERV FINANCIAL, INC.
                     CONSOLIDATED STATEMENT OF INCOME
                               (In thousands)
                  (All quarterly and 2009 data unaudited)

                                                      2009
                                                  1QTR    2QTR      YEAR
                                                                  TO DATE
    INTEREST INCOME

    Interest and fees on loans                  $10,349 $10,544  $20,893
    Total investment portfolio                    1,586   1,511    3,097
                                                  -----   -----    -----
    Total Interest Income                        11,935  12,055   23,990

    INTEREST EXPENSE
    Deposits                                      3,255   3,405    6,660
    All borrowings                                  539     479    1,018
                                                    ---     ---    -----
    Total Interest Expense                        3,794   3,884    7,678
                                                  -----   -----    -----

    NET INTEREST INCOME                           8,141   8,171   16,312
    Provision for loan losses                     1,800   3,300    5,100
                                                  -----   -----    -----

    NET INTEREST INCOME AFTER PROVISION
     FOR LOAN LOSSES                              6,341   4,871   11,212

    NON-INTEREST INCOME
    Trust fees                                    1,559   1,438    2,997
    Net realized gains on investment
     securities available for sale                  101      63      164
    Net realized gains on
     loans held for sale                            118     163      281
    Service charges on deposit accounts             673     710    1,383
    Investment advisory fees                        137     152      289
    Bank owned life insurance                       250     254      504
    Other income                                    723     711    1,434
                                                    ---     ---    -----
    Total Non-Interest Income                     3,561   3,491    7,052

    NON-INTEREST EXPENSE
    Salaries and employee benefits                5,092   4,983   10,075
    Net occupancy expense                           722     641    1,363
    Equipment expense                               415     442      857
    Professional fees                               920     873    1,793
    FDIC deposit insurance expense                   32     691      723
    Amortization of core deposit intangibles        108       -      108
    Other expenses                                1,873   2,006    3,879
                                                  -----   -----    -----
    Total Non-Interest Expense                    9,162   9,636   18,798
                                                  -----   -----   ------

    PRETAX INCOME (LOSS)                            740  (1,274)    (534)
    Income tax expense (benefit)                    207    (335)    (128)
                                                    ---    ----     ----
    NET INCOME (LOSS)                               533    (939)    (406)
    Preferred stock dividends                       259     263      522
                                                    ---     ---      ---
    NET INCOME (LOSS) AVAILABLE
     TO COMMON SHAREHOLDERS                        $274 $(1,202)   $(928)
                                                   ---- -------    -----


                                                      2008
                                                  1QTR    2QTR      YEAR
                                                                  TO DATE
    INTEREST INCOME

    Interest and fees on loans                  $10,462  $9,862  $20,324
    Total investment portfolio                    1,820   1,588    3,408
                                                  -----   -----    -----
    Total Interest Income                        12,282  11,450   23,732

    INTEREST EXPENSE
    Deposits                                      4,499   3,861    8,360
    All borrowings                                1,048     623    1,671
                                                  -----     ---    -----
    Total Interest Expense                        5,547   4,484   10,031
                                                  -----   -----   ------

    NET INTEREST INCOME                           6,735   6,966   13,701
    Provision for loan losses                       150   1,375    1,525
                                                    ---   -----    -----

    NET INTEREST INCOME AFTER PROVISION
     FOR LOAN LOSSES                              6,585   5,591   12,176

    NON-INTEREST INCOME
    Trust fees                                    1,790   1,737    3,527
    Net realized losses on
     investment securities
     available for sale                               -    (137)    (137)
    Net realized gains on loans
     held for sale                                   89     121      210
    Service charges on deposit accounts             734     807    1,541
    Investment advisory fees                        226     218      444
    Bank owned life insurance                       249   1,923    2,172
    Other income                                    750     674    1,424
                                                    ---     ---    -----
    Total Non-Interest Income                     3,838   5,343    9,181

    NON-INTEREST EXPENSE
    Salaries and employee benefits                4,830   4,812    9,642
    Net occupancy expense                           661     653    1,314
    Equipment expense                               431     414      845
    Professional fees                               769     910    1,679
    FHLB prepayment penalty                           -      91       91
    FDIC deposit insurance expense                   22      20       42
    Amortization of core deposit intangibles        216     216      432
    Other expenses                                1,850   1,909    3,759
                                                  -----   -----    -----
    Total Non-Interest Expense                    8,779   9,025   17,804
                                                  -----   -----   ------

    PRETAX INCOME                                 1,644   1,909    3,553
    Income tax expense                              415     393      808
                                                    ---     ---      ---
    NET INCOME                                    1,229   1,516    2,745
    Preferred stock dividends                         -       -        -
                                                     --      --       --
    NET INCOME AVAILABLE TO
     COMMON SHAREHOLDERS                         $1,229  $1,516   $2,745



                                AMERISERV FINANCIAL, INC.
                               AVERAGE BALANCE SHEET DATA
                                     (In thousands)
                        (All quarterly and 2009 data unaudited)

                                        2009                2008
                                                   SIX                 SIX
                                        2QTR     MONTHS     2QTR     MONTHS

    Interest earning assets:
    Loans and loans held for sale,
     net of unearned income           $732,568  $723,410  $624,193  $629,003
    Deposits with banks                  1,715     1,731       446       395
    Short-term investment in
     money market funds                 10,579    11,051     6,399     6,402
    Federal funds                            -        28         -       212
    Total investment
     securities                        144,863   146,664   143,490   155,274
                                       -------   -------   -------   -------
    Total interest
     earning assets                    889,725   882,884   774,528   791,286

    Non-interest earning assets:
    Cash and due from banks             14,005    14,747    17,056    17,495
    Premises and equipment               9,122     9,284     9,101     8,993
    Other assets                        72,074    71,539    69,798    69,766
    Allowance for loan losses          (11,101)  (10,123)   (7,350)   (7,329)
                                       -------   -------    ------    ------

    Total assets                       973,825   968,331   863,133   880,211
                                       =======   =======   =======   =======

    Interest bearing liabilities:
    Interest bearing deposits:
    Interest bearing demand             61,316    61,836    65,495    64,902
    Savings                             72,988    72,373    70,976    69,822
    Money market                       171,019   156,231   105,308   104,744
    Other time                         347,422   336,821   350,229   348,681
                                       -------   -------   -------   -------
    Total interest bearing
     deposits                          652,745   627,261   592,008   588,149
    Borrowings:
    Federal funds purchased,
     securities sold under
     agreements to repurchase,
     and other short-term
     borrowings                         52,358    73,629    35,822    56,409
    Advanced from Federal Home
     Loan Bank                          13,840    13,847    11,822    11,770
    Guaranteed junior
     subordinated deferrable
     interest debentures                13,085    13,085    13,085    13,085
                                        ------    ------    ------    ------
    Total interest
     bearing liabilities               732,028   727,822   652,737   669,413

    Non-interest bearing liabilities:
    Demand deposits                    115,248   114,273   109,316   109,980
    Other liabilities                   11,914    12,090     9,220     9,374
    Shareholders' equity               114,635   114,146    91,860    91,444
                                       -------   -------    ------    ------
    Total liabilities and
     shareholders' equity             $973,825  $968,331  $863,133  $880,211
                                      ========  ========  ========  ========



SOURCE AmeriServ Financial, Inc.



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