AmeriServ Financial Inc. (ASRV, Financial) filed Quarterly Report for the period ended 2009-06-30.
Ameriserv Financial Inc. a financial holding company is the parent of Ameriserv Financial and AmeriServ Trust & Financial Services in Johnstown Standard Mortgage Corporation in Atlanta AmeriServ Associates of State College and AmeriServ Life Insurance Company in Arizona. AmeriServ Financial Inc. has a market cap of $36 million; its shares were traded at around $1.7 with a P/E ratio of 24.2 and P/S ratio of 0.6.
The Company reported a net loss of $939,000 or $0.06 loss per diluted common share for the second quarter of 2009. This represents a decrease of $2.5 million from the second quarter 2008 net income of $1.5 million or $0.07 per diluted common share. Diluted earnings per share declined by a greater extent than net income due to the preferred dividend requirement on the CPP preferred stock in 2009, which amounted to $263,000 and reduced the amount of net income available to common shareholders. An increased provision for loan losses and higher FDIC insurance expense were the primary factors causing the decline in earnings between periods. We prudently increased our allowance for loan losses to respond to higher non-performing loans as the continued recessionary economic environment is negatively impacting our commercial borrowers. This higher provision for loan losses more than offset increased net interest income that resulted from strong loan and deposit growth within our retail bank.
The Companys net interest income in the second quarter of 2009 increased by $1.2 million or 17.3% from the prior years second quarter and the net interest margin rose by eight basis points to 3.66% over the same comparative period. The increased net interest income and margin resulted from a combination of good balance sheet growth and the pricing benefits achieved from a steeper positively sloped yield curve. Specifically, total loans averaged $733 million in the second quarter of 2009, an increase of $108 million or 17.4% over the second quarter of 2008. The loan growth was driven by increased commercial and commercial real-estate production. Total deposits averaged $768 million in the second quarter of 2009, an increase of $67 million or 9.5% over the same 2008 quarter. We believe 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 benefitted from a favorable decline in interest expense caused by the more rapid downward repricing of both deposits and FHLB borrowings due to the market decline in short-term interest rates.
..PROVISION FOR LOAN LOSSES..... The Company strengthened its allowance for loan losses in the second quarter of 2009 in response to an increase in non-performing loans. Specifically, non-performing assets increased by $9.6 million from $5.1 million or 0.70% of total loans at March 31, 2009 to $14.7 million or 1.98% of total loans at June 30, 2009. (See the loan quality section of this MD &A for more specific discussion on the credits causing the increase.) As a result of this increase, the Company recorded a $3.3 million provision for loan losses in the second quarter of 2009 compared to a $1.4 million provision in the second quarter of 2008, an increase of $1.9 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 Companys 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. The Companys net charge-offs in the second quarter of 2009 amounted to $355,000 or 0.19% of total loans. This amount was lower than the net charge-offs of $721,000 or 0.46% of total loans experienced in the second quarter of 2008. Overall, the allowance for loan losses provided 100% coverage of non-performing loans and was 1.84% of total loans at June 30, 2009 compared to 264% of non-performing loans and 1.26% of total loans at December 31, 2008.
The Company reported a net loss of $406,000 or $0.04 per diluted common share for the first half of 2009. This represents a decrease of $3.2 million from the first six months of 2008 net income of $2.7 million or $0.13 per diluted common share. Diluted earnings per share declined more significantly than net income due to the preferred dividend requirement on the CPP preferred stock in 2009, which amounted to $522,000 and reduced the amount of net income available to common shareholders. An increased provision for loan losses and reduced non-interest income were the main factors causing the decrease in net income in 2009. These negative items more than offset strong growth in net interest income due to increased loans outstanding and effective balance sheet management in a declining interest rate environment.
The Companys net interest income in the first six months of 2009 increased by $2.6 million or 19.1% from the prior years first six months and the net interest margin rose by 24 basis points to 3.69% over the same comparative period. The increased net interest income and margin resulted from a combination of good balance sheet growth and the pricing benefits achieved from a steeper positively sloped yield curve. Specifically, total loans averaged $723 million in the first six months of 2009, an increase of $94 million or 15.0% over the first six months of 2008. Total deposits averaged $741 million in the first six months of 2009, an increase of $43 million or 6.2% over the same 2008 period. The Company also benefitted from the cost of funds declining at a faster pace than the earning asset yield in 2009. Specifically, effective balance sheet management strategies caused the cost of funds to decrease by 88 basis points, while the earning asset yield dropped by a lesser amount of 55 basis points.
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Ameriserv Financial Inc. a financial holding company is the parent of Ameriserv Financial and AmeriServ Trust & Financial Services in Johnstown Standard Mortgage Corporation in Atlanta AmeriServ Associates of State College and AmeriServ Life Insurance Company in Arizona. AmeriServ Financial Inc. has a market cap of $36 million; its shares were traded at around $1.7 with a P/E ratio of 24.2 and P/S ratio of 0.6.
Highlight of Business Operations:
AmeriServ Financial reported a net loss of $939,000 or $0.06 per share for the second quarter, and a cumulative net loss of $406,000 or $0.04 per share for the first half of 2009. This loss was brought about by the weakening of some specific borrowing relationships. In one case, AmeriServ has already begun to take possession of the borrowers assets and is instituting the necessary actions to liquidate those remaining assets. In two other cases, AmeriServ continues to work with the principals to plot the best course of action. The source of these troubled loan difficulties is the recession. True to our resolve, AmeriServ has taken action to increase the allowance for loan losses, while taking immediate action with the borrowers. The increase in the allowance brought about the net loss for the quarter. The allowance for loan losses was increased by $2,945,000 over March 31, 2009, and is sufficient to provide 100% coverage of all non- performing loans.The Company reported a net loss of $939,000 or $0.06 loss per diluted common share for the second quarter of 2009. This represents a decrease of $2.5 million from the second quarter 2008 net income of $1.5 million or $0.07 per diluted common share. Diluted earnings per share declined by a greater extent than net income due to the preferred dividend requirement on the CPP preferred stock in 2009, which amounted to $263,000 and reduced the amount of net income available to common shareholders. An increased provision for loan losses and higher FDIC insurance expense were the primary factors causing the decline in earnings between periods. We prudently increased our allowance for loan losses to respond to higher non-performing loans as the continued recessionary economic environment is negatively impacting our commercial borrowers. This higher provision for loan losses more than offset increased net interest income that resulted from strong loan and deposit growth within our retail bank.
The Companys net interest income in the second quarter of 2009 increased by $1.2 million or 17.3% from the prior years second quarter and the net interest margin rose by eight basis points to 3.66% over the same comparative period. The increased net interest income and margin resulted from a combination of good balance sheet growth and the pricing benefits achieved from a steeper positively sloped yield curve. Specifically, total loans averaged $733 million in the second quarter of 2009, an increase of $108 million or 17.4% over the second quarter of 2008. The loan growth was driven by increased commercial and commercial real-estate production. Total deposits averaged $768 million in the second quarter of 2009, an increase of $67 million or 9.5% over the same 2008 quarter. We believe 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 benefitted from a favorable decline in interest expense caused by the more rapid downward repricing of both deposits and FHLB borrowings due to the market decline in short-term interest rates.
..PROVISION FOR LOAN LOSSES..... The Company strengthened its allowance for loan losses in the second quarter of 2009 in response to an increase in non-performing loans. Specifically, non-performing assets increased by $9.6 million from $5.1 million or 0.70% of total loans at March 31, 2009 to $14.7 million or 1.98% of total loans at June 30, 2009. (See the loan quality section of this MD &A for more specific discussion on the credits causing the increase.) As a result of this increase, the Company recorded a $3.3 million provision for loan losses in the second quarter of 2009 compared to a $1.4 million provision in the second quarter of 2008, an increase of $1.9 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 Companys 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. The Companys net charge-offs in the second quarter of 2009 amounted to $355,000 or 0.19% of total loans. This amount was lower than the net charge-offs of $721,000 or 0.46% of total loans experienced in the second quarter of 2008. Overall, the allowance for loan losses provided 100% coverage of non-performing loans and was 1.84% of total loans at June 30, 2009 compared to 264% of non-performing loans and 1.26% of total loans at December 31, 2008.
The Company reported a net loss of $406,000 or $0.04 per diluted common share for the first half of 2009. This represents a decrease of $3.2 million from the first six months of 2008 net income of $2.7 million or $0.13 per diluted common share. Diluted earnings per share declined more significantly than net income due to the preferred dividend requirement on the CPP preferred stock in 2009, which amounted to $522,000 and reduced the amount of net income available to common shareholders. An increased provision for loan losses and reduced non-interest income were the main factors causing the decrease in net income in 2009. These negative items more than offset strong growth in net interest income due to increased loans outstanding and effective balance sheet management in a declining interest rate environment.
The Companys net interest income in the first six months of 2009 increased by $2.6 million or 19.1% from the prior years first six months and the net interest margin rose by 24 basis points to 3.69% over the same comparative period. The increased net interest income and margin resulted from a combination of good balance sheet growth and the pricing benefits achieved from a steeper positively sloped yield curve. Specifically, total loans averaged $723 million in the first six months of 2009, an increase of $94 million or 15.0% over the first six months of 2008. Total deposits averaged $741 million in the first six months of 2009, an increase of $43 million or 6.2% over the same 2008 period. The Company also benefitted from the cost of funds declining at a faster pace than the earning asset yield in 2009. Specifically, effective balance sheet management strategies caused the cost of funds to decrease by 88 basis points, while the earning asset yield dropped by a lesser amount of 55 basis points.
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