AmeriServ Financial Reports Earnings For The First Quarter Of 2013

JOHNSTOWN, Pa., April 16, 2013 /PRNewswire/ -- AmeriServ Financial, Inc. (NASDAQ: ASRV) reported first quarter 2013 net income available to common shareholders of $1,004,000 or $0.05 per diluted common share.  This represented a 25.0% increase in earnings per share from the most recent fourth quarter of 2012 where net income available to common shareholders totaled $683,000 or $0.04 per diluted common share.  Earnings per share in the first quarter of 2013 declined by 16.7% when compared to the first quarter of 2012 where net income available to common shareholders totaled $1,302,000 or $0.06 per diluted common share.  The following table highlights the Company's quarterly financial performance:    

Glenn L. Wilson, President and Chief Executive Officer, commented on the first quarter 2013 financial results: "This was a good quarter overall for AmeriServ Financial.  We have grown our loan portfolio by $47 million or 6.9% over the past 12 months which has been an important factor in keeping our level of net interest income relatively stable during this period of record low interest rates.  Non-interest income grew nicely, mainly attributable to continued strong residential mortgage originations and subsequent sale into the secondary market.  We also reported strong asset quality metrics in the first quarter of 2013 consistent with our continued conservative credit discipline and effective loan workout strategies.  At March 31, 2013, non-performing assets were only 0.61% of total loans and our allowance for loan losses provided 344% coverage of non-performing loans.  Our high quality balance sheet is well positioned for further growth which will be needed to increase earnings as we work through 2013." 

The Company's net interest income in the first quarter of 2013 has been relatively stable as it decreased by only $16,000 or 0.2% when compared to the first quarter of 2012.  The Company's first quarter 2013 net interest margin of 3.59% was 11 basis points lower than the net interest margin of 3.70% for the first quarter of 2012.  The lower net interest margin reflects the challenges of a flatter yield curve which has pressured interest revenue and demonstrates the impact of Federal Reserve low interest rate policies.  The Company has been able to counteract some of this net interest margin pressure and keep net interest income relatively constant by reducing its cost of funds and growing its earning assets, particularly loans.  Specifically, total loans have averaged $728 million in the first quarter of 2013, which is $61 million or 9.1% higher than the $667 million average in the first quarter of 2012.  This loan growth reflects the successful results of the Company's more intensive sales calling efforts with an emphasis on generating commercial loans and owner occupied commercial real estate loans which qualify as Small Business Lending Fund (SBLF) loans, particularly through its loan production offices.  As a result of this growth in SBLF qualified loans, the Company will continue to pay the lowest preferred share dividend rate of 1% available under the SBLF program.  Despite this solid growth in loans, total interest revenue dropped by $422,000 between years and reflects the lower interest rate environment.  Interest revenue has also been negatively impacted by premium amortization on mortgage backed securities due to accelerated mortgage prepayment speeds and lower overall total investment security balances.  However, careful management of funding costs has allowed the Company to mitigate a significant portion of this drop in interest revenue during the past year.  Specifically, total interest expense for the first quarter of 2013 declined by $406,000 from the first quarter of 2012 due to the Company's proactive efforts to reduce deposit costs.  Even with this reduction in deposit costs, the Company still experienced solid growth in deposits which increased by $27 million or 3.3% over the past year.  The Company continues to maintain strong liquidity as evidenced by a loan to deposit ratio of 84.7% at March 31, 2013.   

Improvements in asset quality evidenced by lower levels of non-performing assets and classified loans allowed the Company to again reverse a portion of the allowance for loan losses into earnings in the first quarter of 2013 while still maintaining especially strong coverage ratios.  During the first quarter of 2013, total non-performing assets declined to $4.4 million or 0.61% of total loans as a result of successful ongoing resolution efforts.  Classified loans (loans rated substandard or doubtful) also dropped by $8 million or 35.7% during this same period due to the improving financial condition of certain borrowers and, to a lesser extent, charge-offs of loans that were previously classified.  As a result of these improvements, the Company recorded a negative provision for loan losses of $250,000 in the first quarter of 2013 compared to a negative provision of $625,000 in the first quarter of 2012.  Consequently, there has been $375,000 less earnings benefit from a negative loan loss provision in 2013.  Net charge-offs in the first quarter of 2013 totaled $1.4 million or 0.76% of total loans, compared to net charge-offs of $220,000 or 0.13% of total loans in the first quarter of 2012.  The higher net charge-offs in the first quarter of 2013 reflect the resolution of a $2 million problem commercial real estate loan for which the Company had previously established reserves for in 2012.  When determining the provision for loan losses, the Company considers a number of factors some of which include periodic credit reviews, non-performing assets, loan delinquency and charge-off trends, concentrations of credit, loan volume trends and broader local and national economic trends.  In summary, the allowance for loan losses provided 344% coverage of non-performing loans, and was 1.54% of total loans, at March 31, 2013, compared to 210% of non-performing loans, and 1.74% of total loans, at December 31, 2012.

The Company's non-interest income in the first quarter of 2013 increased by $142,000 or 3.9% from the prior year's first quarter.  The first quarter 2013 non-interest income increase was driven by increased revenue from residential mortgage banking activities and a gain realized on the sale of investment securities.  Specifically, gains realized on residential mortgage loan sales into the secondary market increased by $110,000 due to increased mortgage loan production in the first quarter of 2013.  The higher residential mortgage loan production reflected both increased refinance and purchase activity.  The Company also realized a $71,000 investment security gain in the first quarter of 2013 due to the sale of several smaller balance mortgage backed securities that were experiencing rapid prepayment speeds.  There were no investments security sales in the first quarter of 2012.              

Total non-interest expense in the first quarter of 2013 increased by $508,000 or 5.0% from the prior year's first quarter.  Salaries and employee benefits increased by $345,000 due to higher salaries expense, incentive compensation, and pension expense in the first quarter of 2013.  The higher incentive compensation relates to incentives earned on the increased levels of both residential mortgage and commercial loan production.  The higher pension expense relates to the Company's defined benefit pension plan and reflects the negative impact that the low interest rate environment is having on the discount rate used to calculate the plan liabilities.  This increasing pension cost was a key factor causing the Company to implement a soft freeze of its defined benefit pension plan to provide that non-union employees hired on or after January 1, 2013 are not eligible to participate.  Instead, such employees are eligible to participate in a qualified 401(k) plan.  Professional fees also increased by $112,000 in the first quarter of 2013 due largely to higher legal costs and moderate increases in several other professional fee categories.  Finally, the Company recorded an income tax expense of $430,000 or an effective tax rate of 28.9% for the first quarter of 2013 compared to an income tax expense of $678,000 or an effective tax rate of 30.2% for the first quarter of 2012.  The lower income tax expense and effective rate in 2013 reflects the Company's reduced pre-tax earnings combined with a relatively consistent level of tax free earnings from bank owned life insurance.

ASRV had total assets of $1.0 billion, shareholders' equity of $111 million, a book value of $4.72 per common share and a tangible book value of $4.06 per common share at March 31, 2013.  The Company has increased its tangible book value per share by 5.7% over the past twelve months.  The Company continued to maintain strong capital ratios that considerably exceed the regulatory defined well capitalized status with a risk based capital ratio of 16.11%, an asset leverage ratio of 11.58% and a tangible common equity to tangible assets ratio of 7.88% at March 31, 2013. 

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. 

SOURCE AmeriServ Financial, Inc.