Ameriserv Finl has a market cap of $56.3 million; its shares were traded at around $2.724 with a P/E ratio of 10.8 and P/S ratio of 1.
Highlight of Business Operations:net interest income performance has been relatively stable throughout 2011. It decreased for the full year of 2011 by only $59,000, or 0.2%, when compared to the entire year of 2010. Non-interest income decreased by $398,000 or 2.8% largely due to an investment security loss of $358,000 realized in the first quarter of 2011 that resulted from a portfolio repositioning strategy. Continued focus on expense control helped contain the increase in non-interest expense to $340,000 or 0.9%. Income tax expense increased sharply by $2.8 million in 2011 due to the Companys improved profitability. Finally, diluted earnings per share were again impacted by the $1.1 million dividend requirement on preferred stock and the $267,000 accelerated preferred stock discount accretion related to the repayment of the TARP Capital Purchase Program (TARP CPP) preferred stock which reduced the amount of net income available to common shareholders.
COMPONENT CHANGES IN NET INTEREST INCOME: 2011 VERSUS 2010 Regarding the separate components of net interest income, the Companys total interest income in 2011 decreased by $2.9 million when compared to 2010. This decrease was due to a 42 basis point decline in the earning asset yield from 5.26% to 4.84%, partially offset by additional interest income from a $2.8 million increase in average earning assets due to an increase in investment securities. Within the earning asset base, the yield on the total loan portfolio decreased by 19 basis points from 5.58% to 5.39% while the yield on total investment securities dropped by 39 basis points from 3.54% to 3.15%. Both of these yield declines reflect the impact of the lower interest rate environment that has now been in place for over 3 years. New investment securities and loans that are being booked typically have yields that are below the rate on the maturing instruments that they are replacing. Also the asset mix shift with fewer dollars invested in loans and more dollars invested in lower yielding short duration investment securities also negatively impacts the earning asset yield. Overall, the decline in loans combined with deposit growth caused the Companys loan to deposit ratio to average 81.1% in 2011 compared to 87.3% in 2010. However, improved commercial loan pipelines and the opening of several new loan production offices suggest that the Company may be able to grow the loan portfolio in 2012 and increase the loan to deposit ratio. This loan growth will be needed to help maintain or grow net interest income as the Company is concerned that Federal Reserve interest rate policies will continue to flatten the yield curve and pressure net interest income and the interest margin in 2012.
2010 NET INTEREST PERFORMANCE OVERVIEW The Companys net interest income declined modestly in 2010 by only $92,000 or 0.28% when compared to 2009. Careful management of funding costs during a period when interest revenues declined and the balance sheet contracted allowed the Company to increase its net interest margin by seven basis points to average 3.79% for the full year of 2010. This solid net interest margin performance was reflective of the Companys strong liquidity position and its ability to reduce its funding costs during a period of deposit growth. Specifically, total deposits averaged $803 million for the full year of 2010, an increase of $41 million or 5.3% over 2009. Growth in non-interest bearing demand deposits was even greater at 7.4%. The Company believes that uncertainties in the economy contributed to growth in money market accounts, certificates of deposit and demand deposits as consumers and businesses looked for safety in well capitalized community banks like AmeriServ Financial. Overall, total loans and loans held for sale declined by $45 million or 6.2% since December 31, 2009 as the Company successfully focused on reducing its commercial real estate exposure and non-performing assets during this period of economic weakness.
The previously discussed improvements in asset quality evidenced by lower levels of non-performing assets and classified loans allowed the Company to reverse a portion of the allowance for loan losses into earnings in 2011 while still increasing the non-performing assets coverage ratio. As a result of this asset quality improvement, the Company recorded a negative provision for loan losses of $3.6 million in 2011 compared to a $5.3 million provision in 2010. We actively identify and seek prompt resolution to problem credits in order to limit actual losses. For the full year 2011, net charge-offs totaled $1.6 million or 0.24% of total loans which represents a decrease from the entire year of 2010 when net charge-offs totaled $5.2 million or 0.74% of total loans. In summary, the allowance for loan losses provided 281% coverage of non-performing assets and was 2.18% of total loans at December 31, 2011, compared to 138% of non-performing assets and 2.91% of total loans at December 31, 2010.
The trust segments net income contribution was $795,000 in 2011 compared to $222,000 in 2010 and $148,000 in 2009. The increase in net income reflected higher non-interest revenue as our wealth management businesses benefitted from the implementation of new fee schedules in 2011. Also, the rate of non-interest expense growth was limited to 1.7% in 2011. The increase in net income in 2010 resulted from a decline in expenses particularly within our investment advisory subsidiary as non-interest revenue was relatively constant between years. Overall, the fair market value of trust assets totaled $1.383 billion at December 31, 2011, a modest increase of $15.8 million, or 1.2%, from the December 31, 2010 total of $1.367 billion.
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