- Published: 13 October 2008
- Written by Editor
AmeriServ Financial, Inc. (Nasdaq: ASRV) reported third quarter 2008 net income of $1,149,000 or $0.05 per diluted share. This represents an increase of $275,000 or 31.5% over the third quarter 2007 net income of $874,000 or $0.04 per diluted share. For the nine month period ended September 30, 2008, the Company earned $3,894,000 or $0.18 per diluted share. This also represents an increase of $1,784,000 or over 84.5% when compared to net income of $2,110,000 or $0.10 per diluted share for the first nine months of 2007. The following table highlights the Company's financial performance for the both the three and nine month periods ended September 30, 2008 and 2007:
Third Third Nine Months Nine Months
Quarter Quarter Ended September Ended September
2008 2007 30, 2008 30, 2007
Net income $1,149,000 $874,000 $3,894,000 $2,110,000
Diluted earnings
per share $ 0.05 $ 0.04 $ 0.18 $0.10
Allan R. Dennison, President and Chief Executive Officer, commented on the 2008 financial results, "Our conservatively positioned balance sheet has allowed AmeriServ Financial to post improved financial performance during a historic period of turmoil and crisis within the financial markets. Our Company has no direct exposure to subprime mortgages, Fannie Mae or Freddie Mac preferred stock, or credit exposure to any of the large financial firms that have recently failed or been taken over. The Bank's loyal deposit base has provided us with ample liquidity to grow our loan portfolio during the third quarter of 2008 when many banks have restricted lending due to the credit crunch. We enter the fourth quarter of 2008 with an improved net interest margin, stable asset quality, and strong capital levels which provide us with greater financial flexibility during this period of economic uncertainty."
The Company's net interest income in the third quarter of 2008 increased by $1.2 million from the prior year's third quarter and for the first nine months of 2008 increased by $2.9 million or 16.4% when compared to the first nine months of 2007. The Company's net interest margin is also up sharply by 59 and 49 basis points, respectively for the quarter and nine month periods ended September 30, 2008. The Company's balance sheet positioning allowed it to benefit from the significant Federal Reserve reductions in short-term interest rates and the return to a more traditional positively sloped yield curve. As a result of these changes, the Company's interest expense on deposits and borrowings declined at a faster rate than the interest income on loans and investment securities. Additionally, an improved earning asset mix with fewer investment securities and more loans outstanding also contributed to the increased net interest income and margin in 2008. For the first nine months of 2008, total loans have increased by $28 million or 4.4%. Overall, net interest income has now increased for seven consecutive quarters and the Company believes its balance sheet is well positioned for further reductions in short-term interest rates recently announced by the Federal Reserve.
The Company recorded a $775,000 provision for loan losses in the third quarter of 2008 and a $2.3 million provision for the nine month period ended September 30, 2008 compared to a $150,000 loan loss provision for the same periods in 2007. When determining the provision for loan losses, the Company considers a number of factors some of which include periodic credit reviews, delinquency and charge-off trends, concentrations of credit, loan volume trends and broader local and national economic trends. The higher loan provision in 2008 was caused by the Company's decision to strengthen its allowance for loan losses due to the downgrade of the rating classification of several specific performing commercial loans and uncertainties in the local and national economies. Overall net charge-offs are down modestly in 2008 when compared to 2007. Specifically, for the nine month period ended September 30, 2008, net charge-offs have amounted to $875,000 or 0.18% of total loans compared to net charge-offs of $1.1 million or 0.25% of total loans for the same nine month period in 2007. Non-performing assets increased by $673,000 since the second quarter of 2008 but are still lower than the year-end 2007 level. Non-performing assets totaled $4.4 million or 0.66% of total loans at September 30, 2008 compared to $5.3 million or 0.83% of total loans at December 31, 2007. Overall, the allowance for loan losses provided 198% coverage of non-performing assets and was 1.31% of total loans at September 30, 2008 compared to 137% of non-performing assets and 1.14% of total loans at December 31, 2007. Note also that the Company has no direct exposure to sub-prime mortgage loans in either the loan or investment portfolios.
The Company's non-interest income in the third quarter of 2008 decreased by $255,000 from the prior year's third quarter but for the first nine months of 2008 increased by $2.1 million when compared to the first nine months of 2007. Increased revenue from bank owned life insurance due to the payment of death claims favorably impacted the 2007 third quarter performance and the second quarter 2008 results. Overall for the nine month period, income from bank owned life insurance is $1.4 million greater in 2008 than 2007. The remainder of the increase in non-interest income was driven by increases in several other non-interest revenue categories. Deposit service charges increased by $100,000 for the 2008 quarterly period and $420,000 or 22.2% for the nine month period due to increased overdraft fees and greater service charge revenue that resulted from a realignment of the bank's checking accounts to include more fee based products. The Company also recorded an increase on gains realized on residential mortgage loan sales into the secondary market that amounted to $22,000 for the third quarter of 2008 and $128,000 for the nine month period ended September 30, 2008. This increase reflects improved residential mortgage production from the Company's primary market as this has been an area of emphasis in the Company's strategic plan. Trust fees were up modestly by $14,000 for the 2008 quarterly period and by $148,000 or 2.9% for the nine month period due to continued successful new business development efforts which has helped mitigate the declines in the market value of assets due to reduced equity values. The decline in equity values was also responsible for the approximate $90,000 drop in investment advisory fees in 2008. Finally, the Company took advantage of the positively sloped yield curve to position the investment portfolio for better future earnings by selling some of the lower yielding securities in the portfolio and replacing them with higher yielding securities with a modestly longer duration. The Company realized a net security loss of $117,000 in 2008 from this strategy.
Total non-interest expense in the third quarter of 2008 was essentially flat with the prior year's third quarter and for the first nine months of 2008 increased by $620,000 or 2.4% when compared to the first nine months of 2007. The higher 2008 expenses were due to a $802,000 increase in other expenses, a $274,000 increase in professional fees, and a $91,000 charge on the prepayment of $6 million of Federal Home Loan Bank Advances. Note that the increase in other expenses was due to higher advertising and business development expenses in 2008 and the non-recurrence of a favorable $400,000 recovery on a previous mortgage loan securitization that was realized in the second quarter of 2007. The increased professional fees resulted primarily from higher legal and other professional fees in the trust company. The $91,000 FHLB debt prepayment charge resulted from the Company's decision to retire some higher cost advances and replace them with lower cost current market rate advances in order to reduce ongoing interest expense. These negative items were partially offset by expense decreases recorded in salaries and employee benefits and equipment expense as a result of the Company's continuing focus on containing and reducing non-interest expenses. For the first nine months of 2008, salaries and employee benefits costs are down by $228,000 or 1.6% due to on average a reduction of 19 full-time equivalent employees and reduced medical insurance premiums. The $329,000 reduction in equipment expense resulted from the benefits achieved on the migration to a new core data processing operating system and mainframe processor.
ASRV had total assets of $911 million and shareholders' equity of $93.7 million or a book value of $4.29 per share at September 30, 2008. The Company built its capital and maintained a strong asset leverage ratio of 10.37% at quarter-end. During the first quarter of 2008, the Company repurchased 354,500 shares of its common stock at an average price of $3.11 in conjunction with the terms of the Company's stock buyback program that was announced on January 22, 2008. The Company did not repurchase any additional shares during the second or third quarter.
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
October 13, 2008
(In thousands, except per share and ratio data)
(All quarterly and 2008 data unaudited)
2008
1QTR 2QTR 3QTR YEAR
TO DATE
PERFORMANCE DATA FOR THE PERIOD:
Net income $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
2007
1QTR 2QTR 3QTR YEAR
TO DATE
PERFORMANCE DATA FOR THE PERIOD:
Net income $428 $808 $874 $2,110
PERFORMANCE PERCENTAGES (annualized):
Return on average assets 0.20% 0.37% 0.39% 0.32%
Return on average equity 2.05 3.79 4.00 3.30
Net interest margin 2.97 3.01 3.00 3.00
Net charge-offs as a percentage of
average loans 0.06 0.07 0.61 0.25
Loan loss provision as a percentage
of average loans - - 0.10 0.03
Efficiency ratio 94.16 88.52 87.15 89.84
PER COMMON SHARE:
Net income:
Basic $0.02 $0.04 $0.04 $0.10
Average number of common shares
outstanding 22,159 22,164 22,175 22,166
Diluted 0.02 0.04 0.04 0.10
Average number of common shares
outstanding 22,166 22,171 22,177 22,170
AMERISERV FINANCIAL, INC.
(In thousands, except per share, statistical, and ratio data)
(All quarterly and 2008 data unaudited)
2008
1QTR 2QTR 3QTR
PERFORMANCE DATA AT PERIOD
END:
Assets $902,349 $877,230 $911,306
Investment securities 151,967 148,819 148,777
Loans 632,934 623,798 663,996
Allowance for loan losses 7,309 7,963 8,677
Goodwill and core deposit
intangibles 14,254 14,038 13,821
Deposits 682,459 722,913 688,998
FHLB borrowings 106,579 40,214 106,897
Stockholders' equity 91,558 92,248 93,671
Non-performing assets 3,050 3,717 4,390
Asset leverage ratio 9.78% 10.47% 10.37%
PER COMMON SHARE:
Book value (A) $4.19 $4.22 $4.29
Market value 2.79 2.98 2.51
Market price to book value 66.62% 70.59% 58.57%
Trust assets - fair
market value (B) 1,838,029 1,813,231 1,678,698
STATISTICAL DATA AT PERIOD
END:
Full-time equivalent
employees 350 353 352
Branch locations 19 18 18
Common shares outstanding 21,842,691 21,850,773 21,859,409
2007
1QTR 2QTR 3QTR 4QTR
PERFORMANCE DATA AT PERIOD
END:
Assets $891,559 $876,160 $897,940 $904,878
Investment securities 185,338 174,508 170,765 163,474
Loans 603,834 604,639 629,564 636,155
Allowance for loan losses 8,010 7,911 7,119 7,252
Goodwill and core deposit
intangibles 15,119 14,903 14,687 14,470
Deposits 768,947 762,902 763,771 710,439
FHLB borrowings 15,170 4,258 23,482 82,115
Stockholders' equity 85,693 86,226 88,517 90,294
Non-performing assets 2,706 2,825 2,463 5,280
Asset leverage ratio 10.23% 10.36% 10.44% 9.74%
PER COMMON SHARE:
Book value $3.87 $3.89 $3.99 $4.07
Market value 4.79 4.40 3.33 2.77
Market price to book value 123.88% 113.12% 83.44% 68.07%
Trust assets - fair
market value (B) 1,828,475 1,872,366 1,846,240 1,883,307
STATISTICAL DATA AT PERIOD
END:
Full-time equivalent
employees 375 376 358 351
Branch locations 21 21 20 19
Common shares outstanding 22,161,445 22,167,235 22,180,650 22,188,997
Note:
(A) Other comprehensive income had a negative impact of $0.16 on book
value per share at September 30, 2008.
(B) Not recognized on the balance sheet
AMERISERV FINANCIAL, INC.
CONSOLIDATED STATEMENT OF INCOME
(In thousands)
(All quarterly and 2008 data unaudited)
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 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
2007
1QTR 2QTR 3QTR YEAR
TO DATE
INTEREST INCOME
Interest and fees on loans $10,061 $10,303 $10,591 $30,955
Total investment portfolio 2,114 2,005 1,863 5,982
Total Interest Income 12,175 12,308 12,454 36,937
INTEREST EXPENSE
Deposits 5,699 5,931 5,994 17,624
All borrowings 521 364 438 1,323
Total Interest Expense 6,220 6,295 6,432 18,947
NET INTEREST INCOME 5,955 6,013 6,022 17,990
Provision for loan losses - - 150 150
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 5,955 6,013 5,872 17,840
NON-INTEREST INCOME
Trust fees 1,704 1,689 1,677 5,070
Net realized gains on loans held
for sale 25 79 116 220
Service charges on deposit accounts 585 636 671 1,892
Investment advisory fees 102 329 275 706
Bank owned life insurance 258 265 479 1,002
Other income 559 594 804 1,957
Total Non-Interest Income 3,233 3,592 4,022 10,847
NON-INTEREST EXPENSE
Salaries and employee benefits 4,885 4,930 4,813 14,628
Net occupancy expense 664 615 618 1,897
Equipment expense 546 564 466 1,576
Professional fees 695 818 814 2,327
FDIC deposit insurance expense 22 22 22 66
Amortization of core deposit
intangibles 216 216 216 648
Other expenses 1,645 1,357 1,824 4,826
Total Non-Interest Expense 8,673 8,522 8,773 25,968
PRETAX INCOME 515 1,083 1,121 2,719
Income tax expense 87 275 247 609
NET INCOME $428 $808 $874 $2,110
AMERISERV FINANCIAL, INC.
AVERAGE BALANCE SHEET DATA
(In thousands)
(All quarterly and 2008 data unaudited)
Note: 2007 data appears before 2008.
2007 2008
NINE NINE
3QTR MONTHS 3QTR MONTHS
Interest earning assets:
Loans and loans held for sale,
net of unearned income $612,424 $601,592 $634,807 $628,928
Deposits with banks 616 525 399 403
Federal funds 2,249 3,009 32 152
Total investment securities 176,474 187,398 160,459 161,264
Total interest earning assets 791,763 792,524 795,697 790,747
Non-interest earning assets:
Cash and due from banks 18,673 17,734 16,574 17,188
Premises and equipment 8,607 8,722 9,593 9,193
Other assets 71,506 69,550 71,647 72,402
Allowance for loan losses (7,808) (7,947) (8,088) (7,582)
Total assets 882,741 880,583 885,423 881,948
Interest bearing liabilities:
Interest bearing deposits:
Interest bearing demand 55,151 56,559 65,704 65,169
Savings 71,503 73,112 71,520 70,388
Money market 173,844 182,215 108,181 92,907
Other time 353,331 344,153 341,455 359,255
Total interest bearing deposits 653,829 656,039 586,860 587,719
Borrowings:
Federal funds purchased,
securities sold under
agreements to repurchase,
and other short-term
borrowings 6,760 8,441 60,635 57,818
Advanced from Federal Home Loan
Bank 5,499 3,607 10,258 11,266
Guaranteed junior subordinated
deferrable interest debentures 13,085 13,085 13,085 13,085
Total interest bearing
liabilities 679,173 681,172 670,838 669,888
Non-interest bearing liabilities:
Demand deposits 106,055 104,336 111,136 110,366
Other liabilities 10,768 9,477 10,763 9,836
Stockholders' equity 86,745 85,598 92,686 91,858
Total liabilities and
stockholders' equity $882,741 $880,583 $885,423 $881,948
SOURCE AmeriServ Financial, Inc.
