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.