AmeriServ Financial Reports Earnings for the Third Quarter and First Nine Months of 2016

Dienstag, 18.10.2016 14:05 von

PR Newswire

JOHNSTOWN, Pa., Oct. 18, 2016 /PRNewswire/ -- AmeriServ Financial, Inc. (NASDAQ: ASRV) reported net income available to common shareholders of $1,065,000, or $0.06 per diluted common share, in the third quarter of 2016.  This earnings performance was lower than the third quarter of 2015 where net income available to common shareholders totaled $1,781,000, or $0.09 per diluted common share.  For the nine month period ended September 30, 2016, the Company reported net income available to common shareholders of $1,145,000, or $0.06 per diluted share.  This represented a decrease in earnings per share from the first nine months of 2015 where net income available to common shareholders totaled $4,466,000, or $0.24 per diluted common share, due largely to an increased provision for loan losses that was recorded in the first quarter of 2016. The following table highlights the Company's financial performance for both the three and nine month periods ended September 30, 2016 and 2015:


Third Quarter 2016

Third Quarter 2015


Nine Months Ended

September 30, 2016

Nine Months Ended

September 30, 2015







Net income

$1,065,000

$1,833,000


$1,160,000

$4,623,000

Net income available to
common shareholders

 

$1,065,000

 

$1,781,000


 

$1,145,000

 

$4,466,000

Diluted earnings per share

$ 0.06

$ 0.09


$ 0.06

$0.24

Jeffrey A. Stopko, President and Chief Executive Officer, commented on the 2016 financial results: "AmeriServ Financial Inc. has achieved several positive accomplishments in 2016 which have included the pay-off of $21 million of SBLF preferred stock, an increase in our common stock cash dividend, and continued solid growth in both loans and deposits.  Our balance sheet remains strong with good capital levels, ample liquidity and excellent asset quality.  We are well positioned to continue to strategically focus on growing both our community banking and wealth management businesses in a disciplined manner."

The Company's net interest income in the third quarter of 2016 decreased by $529,000, or 5.9%, from the prior year's third quarter and for the first nine months of 2016 decreased by $1,219,000, or 4.6%, when compared to the first nine months of 2015.  The Company's net interest margin of 3.23% for the first nine months of 2016 was 29 basis points lower than the net interest margin of 3.52% for the first nine months of 2015.  There was also a net interest margin decline of 37 basis points between the third quarter of 2016 and the prior year's third quarter.  The reduction in net interest income has been significantly impacted by the following three factors:  1.) a significantly lower level of loan prepayment fee income, which decreased by approximately $400,000 for the third quarter and $500,000 for the nine month period, 2.) additional interest expense that was associated with the Company's late fourth quarter 2015 issuance of subordinated debt, and 3.) net interest margin compression that results from the prolonged low interest rate environment that exists in the economy and is pressuring community bank net interest margins. These factors  more  than  offset  the  Company  continuing  to  grow  earning  assets  and  control  its cost of funds through disciplined deposit pricing.  Specifically, the earning asset growth occurred in the loan portfolio as total loans averaged $888 million in the first nine months of  2016  which is $35  million, or  4.1%,  higher  than the  $853  million average  for the first nine months of 2015.  This loan growth reflects the successful results of the Company's business development efforts, with an emphasis on generating commercial loans and owner occupied commercial real estate loans particularly through its loan production offices.  Despite this loan growth experienced between years, loan interest income decreased by $318,000, or 1.1%, due primarily to the previously mentioned decline in loan prepayment fees.  Interest income on investments grew in the third quarter of 2016 and is also slightly higher for the nine month period as the Company benefited from a higher balance of investment securities in 2016.  Overall, total interest income decreased by $312,000, or 1.0%, in the first nine months of 2016.

Total interest expense for the first nine months of 2016 increased by $907,000, or 18.8%, due to higher levels of both borrowings and deposit interest expense.  The Company experienced a $451,000 increase in the interest cost for borrowings in the first nine months of 2016 with $389,000 of this increase attributable to the Company's recent subordinated debt issuance.  Specifically, the Company issued $7.65 million of subordinated debt which has a 6.50% fixed interest rate in late December 2015.  The proceeds from the subordinated debt issuance, along with other cash on hand, was used to redeem all $21 million of our outstanding SBLF preferred stock on January 27, 2016.  The remainder of the increase in borrowings interest expense was due to a greater utilization of FHLB term advances to extend borrowings for interest rate risk management purposes.

The Company experienced significant growth in deposits between years which is a reflection of the loyalty and stability of our core deposit base that provides a strong foundation from which this growth builds.  Management's ability to acquire new core deposit funding from outside of our traditional market areas as well as our ongoing efforts to offer new loan customers deposit products were the primary reasons for this growth.  Specifically, total deposits averaged $947 million for the first nine months of 2016 which is $60 million, or 6.8%, higher than the $887 million average for the first nine months of 2015.  The Company is also pleased that a meaningful portion of this deposit growth occurred in non-interest bearing demand deposit accounts.  Deposit interest expense through nine months of 2016 increased by $456,000, or 13.0%, due to the higher balance of deposits along with certain money market accounts repricing upward after the December 2015 Federal Reserve fed funds interest rate increase.

The Company recorded a $300,000 provision for loan losses in the third quarter of 2016 which matched the provision for loan losses in the third quarter of 2015.  For the nine month period in 2016, the Company recorded a $3,650,000 provision for loan losses compared to a $750,000 provision for loan losses in the first nine months of 2015.  A substantially higher than typical provision and net loan charge-offs were recorded in the first quarter of 2016 and were necessary to resolve the Company's only meaningful direct loan exposure to the energy industry, the specifics of which were discussed in detail in the Company's first quarter results.  The provision recorded in the third quarter of 2016 was more typical of what is required to support the continuing growth of the loan portfolio and approximated net loan charge-offs.  The Company experienced net loan charge-offs of $320,000, or 0.14% of total loans, in the third quarter of 2016, compared to net loan charge-offs of $245,000, or 0.11% of total loans, in the third quarter of 2015.  For the nine month periods, there were net loan charge-offs of $3.8 million, or 0.58%, of total loans in 2016, compared to net loan charge-offs of $601,000, or 0.09% of total loans, in 2015.  Overall, the Company continued to maintain outstanding asset quality in the third quarter of 2016.  At September 30, 2016, non-performing assets totaled $1.9 million, or only 0.21% of total loans.  In summary, the allowance for loan losses  provided  a  strong  510%  coverage  of  non-performing  loans,  and  1.10%  of  total  loans, at September 30, 2016, compared to 158% coverage of non-performing loans, and 1.13% of total loans, at December 31, 2015.

Total non-interest income in the third quarter of 2016 decreased by $354,000, or 8.8%, from the prior year's third quarter, and for the first nine months of 2016 decreased by $579,000, or 5.1%, when compared to the first nine months of 2015.  Revenue from bank owned life insurance decreased by $515,000 for the quarter and $713,000 for the nine month period and was the primary factor contributing to the non-interest income decline as there were no death claims received in 2016 compared to three claims in the first nine months of 2015. Trust and investment advisory fees decreased by $50,000, or 2.4%, for the quarter and $42,000, or 0.7%, for the nine months as the loss of certain client accounts through normal attrition more than offset continued successful new business development activities as well as effective management of existing customer accounts in this volatile market environment.  Trust assets under administration totaled $2.0 billion as of September 30, 2016.  Partially offsetting these reductions was a greater recognition of gains from investment security sale transactions by $96,000 for the quarter and $185,000 for the nine months of 2016 as the Company has sold certain rapidly pre-paying mortgage backed securities in this low interest rate environment.   Finally, although revenue from mortgage loan sales and mortgage related fee income is lower through nine months of 2016 by a combined $60,000, this unfavorable comparison to last year narrowed in the third quarter.  Increased refinance activity and a higher level of new mortgage loan originations resulted in higher revenue from mortgage loan sales by $82,000 and increased fees from residential mortgage lending activity by $45,000 in the third quarter of 2016.

Total non-interest expense in the third quarter of 2016 increased by $137,000, or 1.3%, from the prior year's third quarter and for the first nine months of 2016 increased by $238,000, or 0.8%, when compared to the first nine months of 2015.  As noted in our previously disclosed first quarter financial results, non-recurring costs for legal and accounting services were necessary to address a trust operations trading error and are the reasons for the negative comparisons for both the quarter and nine month time periods. Additionally, in the third quarter of 2016, another $250,000 of expenses were required to resolve this issue.  The impact of the additional expenses were clearly evident in higher levels of total professional fees and other expenses.  Professional fees continue to compare unfavorably, increasing by $124,000, or 10.3%, for the quarter and by $295,000, or 8.0%, for the nine month time period, while other expenses compare unfavorably, increasing by $203,000, or 17.1%, for the quarter and by $322,000, or 9.0%, for the nine months.  Partially offsetting these additional expenses were our continued cost control efforts that are demonstrated, both, for the quarter and nine month time period comparisons.  Occupancy and equipment related expenses are lower by $26,000, or 2.4%, for the third quarter and lower by $259,000, or 7.2%, for the nine months.  Salaries and employee benefits were down by $178,000, or 2.9%, in the third quarter and $161,000, or 0.9%, in the first nine months of 2016.  The favorable comparisons are due to the previously disclosed branch consolidation in the State College market and reduction of staff in the executive office.  Finally, the Company recorded an income tax expense of $474,000, or an effective tax rate of 29.0%, in the first nine months of 2016 which is lower when compared to the income tax expense of $1,947,000, or an effective tax rate of 29.6%, for the first nine months of 2015.  The lower income tax expense and effective tax rate are due to the first quarter 2016 loss recognized by the Company.  However, as we have demonstrated in the second and third quarters of 2016 our actions taken for an immediate improvement to more typical and expected profitability levels have proven successful.  We anticipate that our earnings momentum will increase in the fourth quarter of the year.

The Company had total assets of $1.146 billion, shareholders' equity of $100 million, a book value of $5.29 per common share and a tangible book value of $4.66 per common share at September 30, 2016.  The Company continued to maintain strong capital ratios that exceed the regulatory defined well capitalized status and had a tangible common equity to tangible assets ratio of 7.77% at September 30, 2016. 

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 



September 30, 2016



(Dollars in thousands, except per share and ratio data)



(Unaudited)









2016






1QTR

2QTR

3QTR

YEAR






TO DATE

PERFORMANCE DATA FOR THE PERIOD:






Net income 


(1,267)

1,362

1,065

1,160

Net income available to common shareholders


(1,282)

1,362

1,065

1,145







PERFORMANCE PERCENTAGES (annualized):






Return on average assets


(0.45%)

0.48%

0.37%

0.14%

Return on average equity


(4.86)

5.60

4.27

1.54

Net interest margin


3.30

3.23

3.15

3.23

Net charge-offs as a percentage of average loans


1.60

0.01

0.14

0.58

Loan loss provision as a percentage of average loans


1.42

0.11

0.13

0.55

Efficiency ratio


89.24

82.05

85.07

85.43







PER COMMON SHARE:






Net income:






Basic


(0.07)

0.07

0.06

0.06

Average number of common shares outstanding


18,884

18,897

18,899

18,893

Diluted


(0.07)

0.07

0.06

0.06

Average number of common shares outstanding


18,884

18,948

18,957

18,947

Cash dividends declared


0.010

0.010

0.015

0.035









2015






1QTR

2QTR

3QTR

YEAR






TO DATE

PERFORMANCE DATA FOR THE PERIOD:






Net income 


1,369

1,421

1,833

4,623

Net income available to common shareholders


1,316

1,369

1,781

4,466







PERFORMANCE PERCENTAGES (annualized):






Return on average assets


0.51%

0.52%

0.66%

0.56%

Return on average equity


4.80

4.88

6.15

5.29

Net interest margin


3.57

3.45

3.52

3.52

Net charge-offs as a percentage of average loans


0.09

0.08

0.11

0.09

Loan loss provision as a percentage of average loans


0.12

0.09

0.14

0.12

Efficiency ratio


82.29

81.93

78.25

80.79







PER COMMON SHARE:






Net income:






Basic


0.07

0.07

0.09

0.24

Average number of common shares outstanding


18,851

18,859

18,869

18,860

Diluted


0.07

0.07

0.09

0.24

Average number of common shares outstanding


18,909

18,941

18,951

18,928

Cash dividends declared


0.01

0.01

0.01

0.03

 

 




AMERISERV FINANCIAL, INC.






(Dollars in thousands, except per share, statistical, and ratio data)






(Unaudited)















2016









1QTR

2QTR

3QTR





FINANCIAL CONDITION DATA AT PERIOD END:








Assets


1,121,701

1,142,492

1,145,655





Short-term investments/overnight funds


5,556

6,836

8,279





Investment securities


139,000

145,753

145,609





Loans and loans held for sale


882,410

895,513

896,301





Allowance for loan losses


9,520

9,746

9,726





Goodwill 


11,944

11,944

11,944





Deposits


906,773

940,931

962,736





FHLB borrowings


88,952

72,617

56,943





Subordinated debt, net


7,424

7,430

7,435





Shareholders' equity


97,589

99,232

100,044





Non-performing assets


3,007

2,230

1,907





Tangible common equity ratio


7.72

7.72

7.77





PER COMMON SHARE:









Book value (A)


5.16

5.25

5.29





Tangible book value (A)


4.53

4.62

4.66





Market value


2.99

3.02

3.32





Trust assets - fair market value (B)


1,974,180

1,982,868

2,011,344














STATISTICAL DATA AT PERIOD END:









Full-time equivalent employees


317

311

310





Branch locations


16

16

16





Common shares outstanding


18,894,561

18,896,876

18,903,472

























2015









1QTR

2QTR

3QTR

4QTR




FINANCIAL CONDITION DATA AT PERIOD END:








Assets


1,103,416

1,112,934

1,110,843

1,148,922




Short-term investments/overnight funds


10,127

9,843

14,966

25,067




Investment securities


142,010

142,448

135,013

140,886




Loans and loans held for sale


853,972

866,243

868,213

883,987




Allowance for loan losses


9,689

9,717

9,772

9,921




Goodwill 


11,944

11,944

11,944

11,944




Deposits


892,676

862,902

869,899

903,294




FHLB borrowings


71,219

109,430

100,988

96,748




Subordinated debt, net


-

-

-

7,418




Shareholders' equity


116,328

117,305

119,408

118,973




Non-performing assets


3,046

2,565

2,294

6,297




Tangible common equity ratio


7.64

7.66

7.87

7.57




PER COMMON SHARE:









Book value (A)


5.06

5.11

5.21

5.19




Tangible book value (A)


4.42

4.47

4.58

4.56




Market value


2.98

3.33

3.24

3.20




Trust assets - fair market value (B)


2,033,573

2,012,358

1,935,495

1,974,882













STATISTICAL DATA AT PERIOD END:









Full-time equivalent employees


318

318

318

318




Branch locations


17

17

17

17




Common shares outstanding


18,855,021

18,861,811

18,870,811

18,870,811













Note:









(A)  For 2015, Preferred stock of $21 million received through the Small Business Lending Fund is excluded from the book value per common share and

  tangible book value per common share calculations.  The Company repaid the US Treasury for the SBLF funds on January 27, 2016.



(B)  Not recognized on the consolidated balance sheets.







 

 





AMERISERV FINANCIAL, INC.






CONSOLIDATED STATEMENT OF INCOME






(Dollars in thousands)






 (Unaudited)














2016










1QTR


2QTR


3QTR


YEAR










TO DATE


INTEREST INCOME




















Interest and fees on loans


9,465


9,409


9,462


28,336


Interest on investments


957


980


1,014


2,951


Total Interest Income


10,422


10,389


10,476


31,287












INTEREST EXPENSE










Deposits


1,254


1,330


1,391


3,975


All borrowings


610


573


579


1,762


Total Interest Expense


1,864


1,903


1,970


5,737












NET INTEREST INCOME


8,558


8,486


8,506


25,550


Provision for loan losses


3,100


250


300


3,650












NET INTEREST INCOME AFTER PROVISION










FOR LOAN LOSSES


5,458


8,236


8,206


21,900












NON-INTEREST INCOME










Trust and investment advisory fees


2,075


2,124


2,035


6,234


Service charges on deposit accounts


415


404


433


1,252


Net realized gains on loans held for sale


107


185


260


552


Mortgage related fees


63


98


132


293


Net realized gains on investment securities 

57


60


60


177


Bank owned life insurance


167


169


169


505


Other income


553


702


572


1,827


Total Non-Interest Income


3,437


3,742


3,661


10,840












NON-INTEREST EXPENSE










Salaries and employee benefits


6,166


5,868


5,901


17,935


Net occupancy expense


737


690


656


2,083


Equipment expense


436


409


419


1,264


Professional fees


1,465


1,192


1,330


3,987


FDIC deposit insurance expense


179


188


189


556


Other expenses


1,728


1,692


1,861


5,281


Total Non-Interest Expense


10,711


10,039


10,356


31,106












PRETAX INCOME 


-1,816


1,939


1,511


1,634


Income tax expense 


-549


577


446


474


NET INCOME 


-1,267


1,362


1,065


1,160


Preferred stock dividends 


15


-


-


15


NET INCOME AVAILABLE TO COMMON SHAREHOLDERS

-1,282


1,362


1,065


1,145








2015










1QTR


2QTR


3QTR


YEAR










TO DATE


INTEREST INCOME




















Interest and fees on loans


9,456


9,480


9,718


28,654


Interest on investments


1,067


929


949


2,945


Total Interest Income


10,523


10,409


10,667


31,599












INTEREST EXPENSE










Deposits


1,174


1,171


1,174


3,519


All borrowings


415


438


458


1,311


Total Interest Expense


1,589


1,609


1,632


4,830












NET INTEREST INCOME


8,934


8,800


9,035


26,769


Provision for loan losses


250


200


300


750












NET INTEREST INCOME AFTER PROVISION 










FOR LOAN LOSSES


8,684


8,600


8,735


26,019












NON-INTEREST INCOME










Trust and investment advisory fees


2,056


2,135


2,085


6,276


Service charges on deposit accounts


419


429


441


1,289


Net realized gains on loans held for sale


191


225


178


594


Mortgage related fees


115


109


87


311


Net realized gains on investment securities 


-


28


-36


-8


Bank owned life insurance


363


171


684


1,218


Other income


568


595


576


1,739


Total Non-Interest Income


3,712


3,692


4,015


11,419












NON-INTEREST EXPENSE










Salaries and employee benefits


6,073


5,944


6,079


18,096


Net occupancy expense


841


718


692


2,251


Equipment expense


466


480


409


1,355


Professional fees


1,211


1,275


1,206


3,692


FDIC deposit insurance expense


167


164


174


505


Other expenses


1,652


1,658


1,659


4,969


Total Non-Interest Expense


10,410


10,239


10,219


30,868












PRETAX INCOME 


1,986


2,053


2,531


6,570


Income tax expense 


617


632


698


1,947


NET INCOME 


1,369


1,421


1,833


4,623


Preferred stock dividends 


53


52


52


157


NET INCOME AVAILABLE TO COMMON SHAREHOLDERS

1,316


1,369


1,781


4,466












 








AMERISERV FINANCIAL, INC.





AVERAGE BALANCE SHEET DATA





(Dollars in thousands)





(Unaudited)


























2016



2015











3QTR

NINE


3QTR

NINE




MONTHS



MONTHS

Interest earning assets:







Loans and loans held for sale, net of unearned income

893,143

887,681


858,752

852,553

Short-term investment in money market funds


20,797

12,987


9,496

10,228

Deposits with banks


1,065

1,871


1,235

1,235

Total investment securities


148,608

145,192


144,958

146,348

Total interest earning assets


1,063,613

1,047,731


1,014,441

1,010,364








Non-interest earning assets:







Cash and due from banks


21,675

19,883


16,362

17,241

Premises and equipment


11,887

11,982


12,508

12,729

Other assets 


68,660

68,351


69,021

69,732

Allowance for loan losses


(9,794)

(9,777)


(9,837)

(9,751)








Total assets


1,156,041

1,138,170


1,102,495

1,100,315








Interest bearing liabilities:







Interest bearing deposits:







Interest bearing demand


111,040

106,983


101,494

98,668

Savings


96,593

96,149


95,968

95,050

Money market


285,358

275,226


235,578

233,311

Other time


302,610

286,966


277,680

291,668

Total interest bearing deposits


795,601

765,324


710,720

718,697

Borrowings:







Federal funds purchased and other short-term borrowings

1,309

11,480


40,427

27,228

Advances from Federal Home Loan Bank


49,852

49,356


46,386

45,300

Guaranteed junior subordinated deferrable interest debentures

13,085

13,085


13,085

13,085

Subordinated debt


7,650

7,650


-

-

Total interest bearing liabilities


867,497

846,895


810,618

804,310








Non-interest bearing liabilities:







  Demand deposits


181,365

182,003


164,092

168,634

  Other liabilities 


7,931

8,683


9,531

10,442

Shareholders' equity


99,248

100,589


118,254

116,929

Total liabilities and shareholders' equity


1,156,041

1,138,170


1,102,495

1,100,315

 

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SOURCE AmeriServ Financial, Inc.