AmeriServ Financial Reports Earnings for the Third Quarter and First Nine Months of 2009

JOHNSTOWN, Pa., Oct. 20 /PRNewswire-FirstCall/ -- AmeriServ Financial, Inc. (Nasdaq: ASRV) reported a third quarter 2009 net loss of $2.8 million or $0.15 per diluted share. This represents a decrease of $4 million from the third quarter 2008 net income of $1.1 million or $0.05 per diluted share. For the nine month period ended September 30, 2009, the Company reported a net loss of $3.2 million or $0.19 per diluted share. This also represents a decrease of $7.1 million when compared to net income of $3.9 million or $0.18 per diluted share for the first nine months of 2008. The following table highlights the Company's financial performance for both the three and nine month periods ended September 30, 2009 and 2008:


                    Third Quarter Third Quarter  Nine Months     Nine Months
                         2009          2008         Ended           Ended
                    ------------- ------------- September 30,   September 30,
                                                     2009            2008
                                                -------------   -------------

    Net income
     (loss)           ($2,810,000)   $1,149,000    ($3,216,000)    $3,894,000
    ----------        -----------    ----------    -----------     ----------
    Diluted earnings
     per share             ($0.15)        $0.05         ($0.19)         $0.18
    ----------------       ------         -----         ------          -----

Allan R. Dennison, retiring President and Chief Executive Officer, commented on the third quarter 2009 financial results, "AmeriServ Financial reported a loss for the third quarter of 2009 due to an increased provision for loan losses. The continued recessionary economy is now clearly impacting our commercial borrowers based in Western Pennsylvania. We appropriately increased our allowance for loan losses to respond to this deterioration in asset quality evidenced by higher levels of non-performing assets and classified loans. This higher provision unfortunately more than offset some strong fundamentals, such as, increased net interest income that resulted from solid loan and deposit growth experienced within our bank during 2009. Overall at September 30, 2009, our allowance for loan losses represented 2.66% of total loans outstanding and provided 94% coverage of non-performing loans. AmeriServ Financial is well capitalized to work through this challenging economic period with a tangible common equity ratio of 8.16% and an asset leverage ratio of 11.41% at the end of the third quarter 2009."

The Company's net interest income in the third quarter of 2009 increased by $694,000 from the prior year's third quarter, and for the first nine months of 2009 increased by $3.3 million or 15.8% when compared to the first nine months of 2008. The Company's net interest margin of 3.65% for the first nine months of 2009 is also 16 basis points better than the 3.49% net interest margin achieved during the first nine months of 2008. The increased net interest income and margin resulted from a combination of good loan growth and the pricing benefits achieved from a steeper positively sloped yield curve. Specifically, total loans averaged $726 million in the first nine months of 2009, an increase of $94 million or 14.8% over the same period in 2008. This growth caused overall loan interest revenue to increase for both 2009 periods despite the lower interest rate environment in 2009. The loan growth was driven by increased commercial real-estate loan production as the majority of increased residential mortgage loan production has been sold into the secondary market. The Company's strong liquidity position has been supported by total deposits that averaged $756 million in the first nine months of 2009, an increase of $58 million or 8.3% 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 third quarter and first nine months of 2009 in response to deterioration in asset quality. Specifically, non-performing assets increased by $9.0 million from $14.7 million or 1.98% of total loans at June 30, 2009 to $23.7 million or 3.28% of total loans at September 30, 2009. The following two credits were responsible for the increased level of non-performing assets: 1) In response to the Shared National Credit Examination, the Company transferred a $10 million commercial loan relationship to a borrower in the restaurant industry to non-accrual status. The Company restructured this loan at its maturity by entering into a forbearance agreement with the borrower to make reduced payments over a six-month period in an effort to give the borrower greater flexibility to restructure its operations to improve its cash flows during this difficult economic period. The Company has never had any payment delinquency with this borrower who is performing in accordance with the terms of the forbearance agreement. A $3.5 million specific reserve has been established against this credit. 2) A $3.1 million loan to a borrower in the heavy construction equipment rental business was transferred to non-accrual status. This borrower was experiencing cash flow difficulties that caused payment delinquency. A $622,000 reserve has been established against this credit.

Overall, the Company recorded a $6.3 million provision for loan losses in the third quarter of 2009 compared to a $775,000 provision in the third quarter of 2008, or an increase of $5.5 million. For the nine month period ended September 30, 2009, the Company recorded an $11.4 million provision for loan losses compared to a $2.3 million provision for the first nine months of 2008, or an increase of $9.1 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. Actual credit losses realized through charge-off, however, are running fairly comparable with the prior year. For the nine month period ended September 30, 2009, net charge-offs have amounted to $1.1 million or 0.19% of total loans compared to net charge-offs of $875,000 or 0.18% of total loans for the same nine month period in 2008. In summary, the balance in the allowance for loan losses has increased from $8.9 million at December 31, 2008 to $19.3 million at September 30, 2009. The allowance provided 94% coverage of non-performing loans and was 2.66% of total loans at September 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 third quarter of 2009 decreased by $313,000 from the prior year's third quarter and for the first nine months of 2009 decreased by $2.4 million when compared to the first nine months of 2008. The largest item responsible for the quarterly decline was a $323,000 decrease in trust and investment advisory fees as a result of reductions in the market value of assets managed due to lower equity and real estate values in 2009. The largest item causing the nine month 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 $1.0 million for the nine month period while deposit service charges dropped by $217,000 due to fewer overdraft fees. 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 $146,000 for the nine 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 $117,000 loss on a portfolio repositioning strategy executed in 2008.

Total non-interest expense in the third quarter of 2009 increased by $782,000 from the prior year's third quarter and for the first nine months of 2009 increased by $1.8 million or 6.7% when compared to the first nine months of 2008. Higher FDIC deposit insurance expense is a key factor responsible for both the quarterly and year-to-date increase in non-interest expense in 2009. Specifically, the third quarter FDIC expense is up by $281,000 due to a higher basic assessment rate while the nine month expense is up by $962,000 due to the higher basic rate and the industry mandated special five basis point or $435,000 assessment realized in the second quarter of 2009. Total salaries and benefits expense in 2009 increased by $356,000 in the third quarter and $789,000 for the nine month period due to greater salary costs as a result of normal merit increases and higher sales related incentive compensation along with greater pension expense. Professional fees increased by $128,000 for the third quarter and $242,000 for the nine-month period due to increased legal fees and recruitment costs in 2009. Other expenses in both periods have also been negatively impacted by increased other real estate owned expense. These negative items were partially offset by a reduction in core deposit amortization expense of $217,000 for the third quarter and $541,000 for the nine month period as a branch core deposit intangible was fully amortized in the first quarter of 2009.

ASRV had total assets of $959 million and shareholders' equity of $111 million or a book value of $4.25 per common share at September 30, 2009. The Company remained well capitalized with an asset leverage ratio of 11.41% and a tangible common equity to tangible assets ratio of 8.16% at September 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.


                                        2009
                                        1QTR    2QTR     3QTR      YEAR
                                                                 TO DATE
    PERFORMANCE DATA FOR THE PERIOD:
    Net income (loss)                   $533   $(939)  $(2,810)  $(3,216)
    Net income (loss) available to
     common shareholders                 274  (1,202)   (3,073)   (4,001)

    PERFORMANCE PERCENTAGES
     (annualized):
    Return on average assets           0.22%  (0.39)%   (1.15)%   (0.44)%
    Return on average equity            1.90   (3.29)    (9.83)    (3.77)
    Net interest margin                 3.72    3.66      3.57      3.65
    Net charge-offs as a percentage
     of average loans                   0.03    0.19      0.35      0.19
    Loan loss provision as a
     percentage of average loans        1.02    2.79      3.42      2.10
    Efficiency ratio                   78.22   82.56     84.00     81.57

    PER COMMON SHARE:
    Net income (loss):
    Basic                              $0.01  $(0.06)   $(0.15)   $(0.19)
    Average number of common
     shares outstanding               21,137  21,151    21,178    21,156
    Diluted                             0.01   (0.06)    (0.15)    (0.19)
    Average number of common
     shares outstanding               21,137  21,152    21,182    21,159


                                        2008
                                        1QTR    2QTR     3QTR      YEAR
                                                                 TO DATE
    PERFORMANCE DATA FOR THE PERIOD:
    Net income                        $1,229  $1,516    $1,149    $3,894
    Net income available
     to common shareholders            1,229   1,516     1,149     3,894

    PERFORMANCE PERCENTAGES
     (annualized):
    Return on average assets           0.55%   0.71%     0.52%     0.59%
    Return on average equity            5.43    6.64      4.93      5.66
    Net interest margin                 3.32    3.58      3.59      3.49
    Net charge-offs as a percentage
     of average loans                   0.06    0.46      0.04      0.18
    Loan loss provision as a
     percentage of average loans        0.10    0.89      0.48      0.49
    Efficiency ratio                   82.87   73.20     79.72     78.33

    PER COMMON SHARE:
    Net income:
    Basic                              $0.06   $0.07     $0.05     $0.18
    Average number of
     common shares outstanding        22,060  21,847    21,855    21,921
    Diluted                             0.06    0.07      0.05      0.18
    Average number of
     common shares outstanding        22,062  21,848    21,856    21,922



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

                                2009
                              1QTR        2QTR        3QTR
    PERFORMANCE DATA
     AT PERIOD END:
    Assets                   $975,062    $978,899    $959,344
    Short-term investment
     in money market funds     10,817       7,516       6,565
    Investment securities     138,853     136,119     138,715
    Loans                     726,961     739,649     722,540
    Allowance for
     loan losses               10,661      13,606      19,255
    Goodwill and core
     deposit intangibles       13,498      13,498      12,950
    Deposits                  746,813     783,807     779,185
    FHLB borrowings            90,346      57,702      44,451
    Shareholders' equity      114,254     112,880     110,706
    Non-performing assets       5,099      14,670      23,689
    Asset leverage ratio       11.82%      11.61%      11.41%
    Tangible common
     equity ratio                8.35        8.17        8.16
    PER COMMON SHARE:
    Book value (A)              $4.44       $4.37       $4.25
    Market value                 1.67        1.85        1.80
    Trust assets - fair
     market value (B)      $1,432,375  $1,376,272  $1,340,119

    STATISTICAL DATA
     AT PERIOD END:
    Full-time equivalent
     employees                    355         352         350
    Branch locations               18          18          18
    Common shares
     outstanding           21,144,700  21,156,801  21,215,115


                               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



                                        2009
                                      1QTR    2QTR     3QTR      YEAR
                                                                TO DATE
    INTEREST INCOME

    Interest and fees on loans        $10,349 $10,544  $10,247  $31,140
    Total investment portfolio          1,586   1,511    1,451    4,548
                                        -----   -----    -----    -----
    Total Interest Income              11,935  12,055   11,698   35,688

    INTEREST EXPENSE
    Deposits                            3,255   3,405    3,316    9,976
    All borrowings                        539     479      457    1,475
                                          ---     ---      ---    -----
    Total Interest Expense              3,794   3,884    3,773   11,451
                                        -----   -----    -----   ------

    NET INTEREST INCOME                 8,141   8,171    7,925   24,237
    Provision for loan losses           1,800   3,300    6,300   11,400
                                        -----   -----    -----   ------

    NET INTEREST INCOME AFTER
     PROVISION FOR LOAN LOSSES          6,341   4,871    1,625   12,837

    NON-INTEREST INCOME
    Trust fees                          1,559   1,438    1,377    4,374
    Net realized gains on investment
     securities available for sale        101      63        -      164
    Net realized gains on
     loans held for sale                  118     163      213      494
    Service charges on deposit
     accounts                             673     710      712    2,095
    Investment advisory fees              137     152      176      465
    Bank owned life insurance             250     254      258      762
    Other income                          723     711      718    2,152
                                          ---     ---      ---    -----
    Total Non-Interest Income           3,561   3,491    3,454   10,506

    NON-INTEREST EXPENSE
    Salaries and employee benefits      5,092   4,983    5,114   15,189
    Net occupancy expense                 722     641      602    1,965
    Equipment expense                     415     442      398    1,255
    Professional fees                     920     873    1,050    2,843
    FDIC deposit insurance expense         32     691      311    1,034
    Amortization of core
     deposit intangibles                  108       -        -      108
    Other expenses                      1,873   2,006    2,091    5,970
                                        -----   -----    -----    -----
    Total Non-Interest Expense          9,162   9,636    9,566   28,364
                                        -----   -----    -----   ------

    PRETAX INCOME (LOSS)                  740  (1,274)  (4,487)  (5,021)
    Income tax expense (benefit)          207    (335)  (1,677)  (1,805)
                                          ---    ----   ------   ------
    NET INCOME (LOSS)                     533    (939)  (2,810)  (3,216)
    Preferred stock dividends             259     263      263      785
                                          ---     ---      ---      ---
    NET INCOME (LOSS) AVAILABLE
     TO COMMON SHAREHOLDERS              $274 $(1,202) $(3,073) $(4,001)
                                         ---- -------  -------  -------


                                         2008
                                      1QTR    2QTR     3QTR     YEAR
                                                                TO DATE
    INTEREST INCOME

    Interest and fees on loans        $10,462  $9,862  $10,015  $30,339
    Total investment portfolio          1,820   1,588    1,717    5,125
                                        -----   -----    -----    -----
    Total Interest Income              12,282  11,450   11,732   35,464

    INTEREST EXPENSE
    Deposits                            4,499   3,861    3,774   12,134
    All borrowings                      1,048     623      727    2,398
                                        -----     ---      ---    -----
    Total Interest Expense              5,547   4,484    4,501   14,532
                                        -----   -----    -----   ------

    NET INTEREST INCOME                 6,735   6,966    7,231   20,932
    Provision for loan losses             150   1,375      775    2,300
                                          ---   -----      ---    -----

    NET INTEREST INCOME AFTER
     PROVISION FOR LOAN LOSSES          6,585   5,591    6,456   18,632

    NON-INTEREST INCOME
    Trust fees                          1,790   1,737    1,691    5,218
    Net realized gains (losses)
     on investment securities
     available for sale                     -    (137)      20     (117)
    Net realized gains on
     loans held for sale                   89     121      138      348
    Service charges on deposit
     accounts                             734     807      771    2,312
    Investment advisory fees              226     218      185      629
    Bank owned life insurance             249   1,923      260    2,432
    Other income                          750     674      702    2,126
                                          ---     ---      ---    -----
    Total Non-Interest Income           3,838   5,343    3,767   12,948

    NON-INTEREST EXPENSE
    Salaries and employee benefits      4,830   4,812    4,758   14,400
    Net occupancy expense                 661     653      586    1,900
    Equipment expense                     431     414      402    1,247
    Professional fees                     769     910      922    2,601
    FHLB prepayment penalty                 -      91        -       91
    FDIC deposit insurance expense         22      20       30       72
    Amortization of core
     deposit intangibles                  216     216      217      649
    Other expenses                      1,850   1,909    1,869    5,628
                                        -----   -----    -----    -----
    Total Non-Interest Expense          8,779   9,025    8,784   26,588
                                        -----   -----    -----   ------

    PRETAX INCOME                       1,644   1,909    1,439    4,992
    Income tax expense                    415     393      290    1,098
                                          ---     ---      ---    -----
    NET INCOME                          1,229   1,516    1,149    3,894
    Preferred stock dividends               -       -        -        -
                                            -       -        -        -
    NET INCOME AVAILABLE TO COMMON
     SHAREHOLDERS                      $1,229  $1,516   $1,149   $3,894
                                       ======  ======   ======   ======



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

                                   2009                2008
                                          NINE                NINE
                                 3QTR    MONTHS      3QTR    MONTHS

    Interest earning assets:
    Loans and loans held for sale,
     net of unearned income      $730,152  $725,657  $637,841  $631,948
    Deposits with banks             1,746     1,762       399       403
    Short-term investment in
     money market funds             7,388     9,804     7,983     6,922
    Federal funds                     413       156        32       152
    Total investment
     securities                   145,109   146,146   152,476   154,342
                                  -------   -------   -------   -------
    Total interest earning
     assets                       884,808   883,525   798,731   793,767

    Non-interest earning assets:
    Cash and due from banks        14,135    14,543    16,574    17,188
    Premises and equipment          9,052     9,207     9,593     9,193
    Other assets                   73,296    72,124    68,613    69,382
    Allowance for loan losses     (13,658)  (11,301)   (8,088)   (7,582)
                                  -------   -------    ------    ------

    Total assets                  967,633   968,098   885,423   881,948
                                  =======   =======   =======   =======

    Interest bearing liabilities:
    Interest bearing deposits:
    Interest bearing demand        62,479    62,050    65,704    65,169
    Savings                        72,864    72,537    71,520    70,388
    Money market                  182,735   165,065   108,181    92,907
    Other time                    352,584   342,076   341,455   359,255
                                  -------   -------   -------   -------
    Total interest bearing
     deposits                     670,662   641,728   586,860   587,719
    Borrowings:
    Federal funds purchased,
     securities sold under
     agreements to repurchase,
     and other short-term
     borrowings                    29,851    59,037    60,635    57,818
    Advanced from Federal
     Home Loan Bank                13,828    13,840    10,258    11,266
    Guaranteed junior
     subordinated deferrable
     interest debentures           13,085    13,085    13,085    13,085
                                   ------    ------    ------    ------
    Total interest bearing
     liabilities                  727,426   727,690   670,838   669,888

    Non-interest bearing liabilities:
    Demand deposits               114,548   114,365   111,136   110,366
    Other liabilities              12,234    12,137    10,763     9,836
    Shareholders' equity          113,425   113,906    92,686    91,858
                                  -------   -------    ------    ------
    Total liabilities and
     shareholders' equity        $967,633  $968,098  $885,423  $881,948
                                 ========  ========  ========  ========

SOURCE AmeriServ Financial, Inc.



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