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AmeriServ Financial Inc. Reports Operating Results (10-Q)

May 07, 2010 | About:

10qk

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AmeriServ Financial Inc. (ASRV) filed Quarterly Report for the period ended 2010-03-31.

Ameriserv Financial Inc. has a market cap of $47.7 million; its shares were traded at around $2.25 with and P/S ratio of 0.8. ASRV is in the portfolios of Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

AmeriServ reported a net loss of $918,000 or $0.06 per diluted common share for the first quarter of 2010. This compares unfavorably to net income of $533,000 or $0.01 per diluted common share reported in the first quarter 2009, but represents an improvement from the net loss of $1.7 million or $0.09 per diluted common share earned in the fourth quarter of 2009. While AmeriServ has now reported a loss in each of the last four quarters, the loss in this quarter is the lowest yet, and represents the second consecutive reduction in the level of loss. We believe this is the result of our extreme vigilance during this period of economic distress.

The Company reported a first quarter 2010 net loss of $918,000 or ($0.06) per diluted common share. This represents a decrease of $1.5 million from the first quarter 2009 net income of $533,000 or $0.01 per diluted common share. An increased provision for loan losses and higher non-interest expense were the primary factors causing the decline in earnings between periods. We appropriately increased our allowance for loan losses to respond to deterioration in asset quality evidenced by higher levels of nonperforming loans and classified loans as the recessionary economic environment continues to impact our commercial borrowers. Diluted earnings per share also declined by the preferred dividend requirement on the CPP preferred stock which amounted to $263,000 and increased the amount of the net loss available to common shareholders.

Overall, the Company recorded a $3.1 million provision for loan losses in the first quarter of 2010 compared to a $1.8 million provision in the first quarter of 2009, or an increase of $1.3 million. Actual credit losses realized through charge-offs, however, are running well below the provision level, but are higher than the prior year. For the first quarter 2010, net charge-offs amounted to $1.2 million or 0.69% of total loans compared to net charge-offs of $49,000 or 0.03% of total loans for the first quarter 2009. During the first quarter, non-performing assets increased by $2 million to $20.3 million or 2.85% of total loans at March 31, 2010. This increase was caused by the transfer of one commercial real estate loan that is secured by newly constructed student housing into non-accrual status as the project has not yet stabilized to support the required principal payments on the loan. In summary, the allowance for loan losses provided 110% coverage of non-performing loans and was 3.02% of total loans at March 31, 2010, compared to 115% of non-performing loans and 2.72% of total loans at December 31, 2009.

.....BALANCE SHEET.....The Company's total consolidated assets were $961 million at March 31, 2010, which was down modestly by $9.2 million or 0.9% from the $970 million level at December 31, 2009. The Companys loans totaled $713 million at March 31, 2010, a decrease of $10.0 million or 1.4% as a result of net portfolio run-off since year-end. The Company plans to reduce its commercial real-estate loan concentration through the funding of fewer new commercial real-estate loans in 2010. Therefore, we expect that it will be difficult to grow the overall loan portfolio this year. Investment securities and short-term money market investments increased by $5.5 million so far in 2010 due to some net principal repayments in the loan portfolio being reinvested in the investment securities portfolio.

The Companys deposits totaled $802 million at March 31, 2010, which was $16.2 million or 2.1% higher than December 31, 2009, due to an increase in money market deposits and certificates of deposit. We believe that uncertainties in the economy have contributed to growth in our deposits as consumers have looked for safety in well capitalized community banks like AmeriServ Financial. As a result of this deposit growth, we were able to reduce total FHLB borrowings by $26.3 million during the first quarter of 2010. Total FHLB borrowings now represent only 2.6% of total assets compared to 5.3% at December 31, 2009. The Companys total shareholders equity has decreased by $861,000 since year-end 2009 mainly due to the net loss reported for the first quarter of 2010. The Company continues to be considered well capitalized for regulatory purposes with an asset leverage ratio at March 31, 2010 of 11.01%. The Companys tangible book value per common share at March 31, 2010 was $3.43, and its tangible common equity to tangible assets ratio was 7.70%.

As a result of the recessionary economy, non-performing assets have trended upward over the past year and now total $20.3 million or 2.85% of total loans. Three credits were primarily responsible for the increased level of non-performing assets: 1) In response to the Shared National Credit Examination, the Company transferred in the third quarter of 2009 a $9.1 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. Recently, the borrower has resumed making normal principal and interest payments in accordance with the terms of the forbearance agreement. A $3.5 million specific reserve has been established against this credit. 2) A $3.0 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 $1.1 million specific reserve has been established against this credit. 3) In the first quarter of 2010, the Company transferred a $5 million commercial real estate loan that is secured by newly constructed student housing into non-accrual status as the project has not yet stabilized to support the required principal payments on the loan. The Company has established a $1.4 million specific reserve against this loan. We are a participant in this loan with two larger banks, and our share represents 12.5% of the total loan balance. We are currently working with the participant banks to develop a workout strategy for this credit.

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