JOHNSTOWN, Pa., July 23 /PRNewswire-FirstCall/ -- Reporting
AmeriServ Financial, Inc.'s (Nasdaq: ASRV) second quarter 2002 earnings today,
Jeffrey A. Stopko, Senior Vice President & Chief Financial Officer, states
"Our performance results are mixed. Net income per share for both the quarter
and six-month period ended June 30, 2002 is down $0.02 per share due primarily
to a higher loan loss provision and additional non-cash mortgage servicing
impairment charges, reflecting the weak national economic environment and
skepticism in the equity markets which have caused further declines in
interest rates to 40 year lows. The impact of the weak economic environment
overshadowed improvement in the Company's fundamental performance. These
fundamental improvements included an increased net interest margin due to a
lower cost of funds. This reduced cost of funds resulted from the April 15th
maturity of an interest rate swap and continued solid deposit growth. The
Company's deposits grew at a gross rate of 6.4% over the past twelve months."
The following table highlights the Company's financial performance for both
the quarter and six-month periods ended June 30, 2002 and 2001:
Second Second Six Months Six Months
Quarter Quarter Ended Ended
2002 2001 June 30, 2002 June 30, 2001
Net income $408,000 $638,000 $1,034,000 $1,334,000
Diluted earnings
per share 0.03 0.05 0.08 0.10
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Robust growth in deposits occurred despite the strategic third quarter
2001 sale of approximately $15 million of deposits associated with the
Company's Coalport Branch. Factors contributing to the overall gross
$43 million average deposit growth included: $15 million of deposits from the
Company's two new union niche offices, $9 million from the full service
community office opened in State College, the acquisition of $10 million of
escrow deposits from our mortgage banking operation, and increased market
share within the Company's core Cambria County market. A series of
strategically focused advertising campaigns to capture business from the
Company's largest Cambria County competitor, which was recently acquired by a
bank holding company headquartered out-of-state, has been instrumental in
moving deposit market share. These campaigns resulted in the addition of
nearly 1,500 new customers and approximately $3.5 million in new deposits in
the first half of 2002. The cost of new customer acquisition has been
prudently cost-effective reaching breakeven in just 10 months. Overall,
retail account relationships are growing at a brisk annualized rate of 5.5% in
2002.
The Company's net interest income in the second quarter of 2002 increased
by $131,000 from the prior year second quarter as the net interest margin
averaged 2.63% in 2002 compared to 2.47% in 2001. On a linked quarter basis,
the net interest margin and net interest income improvement was more
significant amounting to 28 basis points and $724,000, respectively. The
April 15, 2002 maturity of an $80 million interest rate swap that had fixed
the cost of certain borrowings at 6.92% was a key factor responsible for a
lower cost of funds and the net interest margin increase. This margin
improvement more than offset the negative impact on net interest income
resulting from a reduced level of earning assets. The decline in the level of
earning assets was due to a $126 million reduction in the investment
securities portfolio. This decline resulted from the Company's decision to
reduce its interest rate risk in the fourth quarter of 2001 and maintain a
lower borrowed funds position in 2002. As a result of this action, the
Company's level of Federal Home Loan Bank advances and short term borrowings
to total assets averaged 31.8% in the second quarter of 2002 compared to 38.3%
in the second quarter of 2001.
The Company's provision for loan losses totaled $815,000 or 0.56% of total
loans in the second quarter of 2002. This represented an increase of $485,000
from the second quarter 2001 provision of $330,000 or 0.24% of total loans.
The Company completed in the second quarter of 2002 the workout of its largest
non-performing asset (a $2.9 million commercial lease in the steel industry).
This workout included a $1.6 million charge-off and a $1.3 million secured
loan to the new buyer of the equipment. As a result of this workout and the
ongoing successful monitoring of other problem credits, the Company's level of
non-performing assets declined for the second consecutive quarter. Total non-
performing assets amounted to $5.7 million or 0.94% of total loans at June 30,
2002 compared to $10.0 million or 1.67% of total loans at December 31, 2001.
The Company's loan loss reserve coverage of non-performing assets also
improved to 97% at June 30, 2002 compared to 58% at December 31, 2001. The
Company will provide a detailed update on its asset quality in the webcast
conference call. (See login instructions later in this release.)
The Company's total non-interest income in the second quarter of 2002
increased by $1.4 million or 37.4% from the second quarter of 2001 due
primarily to increased revenue from investment security gains and deposit
service charges. Gains on the sale of investment securities increased by
$1.1 million as the Company took advantage of volatility in the market to
shorten the investment portfolio duration and also capture profits on
securities that had risks of accelerated prepayments or extension. The
Company also benefited from a $212,000 or 44% increase in deposit service
charges due to the fourth quarter 2001 implementation of a first in the market
overdraft privilege program. The revenue contribution from the financial
services unit increased by $113,000 in the second quarter of 2002 as a result
of increased fixed annuity sales. Annuity sales volume in the first half of
2002 amounted to $8.4 million compared to $6.1 million in all of 2001. The
financial services unit, formed in October 1997, has now been profitable for
three consecutive quarters.
The Company's total non-interest expense in the second quarter of 2002
increased by $1.3 million or 13.9% from the second quarter of 2001. The
Company recognized a $787,000 non-cash impairment charge on its mortgage
servicing rights in the second quarter of 2002. This non-cash impairment
charge is $646,000 greater than the prior year second quarter and reflects an
increase in mortgage prepayment speeds due to further unprecedented declines
in mortgage interest rates. Salaries and employee benefits increased by
$412,000 due to higher medical insurance premiums, increased sales incentive
based compensation, and salary increases. The Company benefited from the
January 1, 2002 adoption of Statement of Financial Accounting Standards # 142
which requires that goodwill no longer be amortized but reviewed annually for
impairment. The Company recorded $325,000 of amortization expense in the
second quarter of 2001 while no amortization or impairment charges were
recorded in the second quarter of 2002.
Assessing the Company's financial performance for the first half of 2002
and the outlook for the remainder of the year, Orlando B. Hanselman, Chairman,
President & CEO states, "In my Chairman's Letter to the Shareholder included
in our 2001 Annual Report, I stated that our financial performance targets for
2002 assumed that an improving economy and increasing interest rate
environment would begin approximately mid-year 2002. I cautioned that if this
did not occur our loan growth would be slower than anticipated, our net
charge-offs could rise above expected levels, and the value of our mortgage
servicing rights would be further impaired. This more pessimistic scenario,
unfortunately, has materialized. Consequently, our previously disclosed
earnings range of $0.36 to $0.38 net income per share for 2002 is no longer
realistic."
Hanselman continues, "I also mentioned in my Chairman's letter that our
Company had contingency plans in place that would mitigate some, but certainly
not all, of the impact of a negative economic environment. We will begin to
swiftly execute these contingency plans during the second half of 2002 given
the current outlook for continued economic and market volatility and the
strong likelihood that the Federal Reserve will not change the federal funds
rate in the near future. The execution of these contingency plans should
allow AmeriServ Financial for the second consecutive year to achieve net
income per share growth of 10% for the full year 2002." Since the spin-off of
Three Rivers Bank, AmeriServ Financial has reported net income per share of
$0.13 for the year 2000 and $0.15 for the year 2001.
These contingency plans focus on strategies that balance improving the
near term financial performance of the Company without sacrificing the longer-
term strategic course that AmeriServ Financial has embarked on since the April
2000 spin-off of Three Rivers Bank. The Company has recently implemented a
hiring freeze and will be carefully evaluating marginally profitable business
lines for possible exit. Other contingency plans focus on further increasing
revenue throughout the retail banking system, diligently focusing on reducing
discretionary expenses, and deferring certain planned capital expenditures.
This approach will ensure that the four key areas of strategic focus for the
Company are not compromised: geographic diversification and expansion, growth
in share of market and share of wallet, income growth and diversification, and
strategy differentiation.
The Company's annual common stock cash dividend is $0.36 per share. Based
upon a recent share price of $4.50, this represents an 8.0% yield. The
Company has adequate cash reserves to sustain the dividend at this level
through the end of 2002. Additionally, the Company is considered well
capitalized with an asset leverage ratio of 7.46% at June 30, 2002, well in
excess of the regulatory minimum of 5.0%. Given the current economic climate,
the Company's Board of Directors will be carefully evaluating the Company's
future dividend policies during the second half of this year. At June 30,
2002, ASRV had total assets of $1.2 billion and shareholders' equity of
$82 million or $6.00 per share. The Company's book value per share improved
by 5.4% during the second quarter of 2002.
Orlando Hanselman, Chairman, President and CEO, Jeryl Graham, Executive
Vice President and COO, and Jeffrey Stopko, Senior Vice President and CFO will
host a conference call that will be webcast live over the Internet on July 23,
2002 at 2:00 pm EDT. The purpose of the call will be to review second quarter
financial performance, discuss the strategic outlook for the Company through
the remainder of 2002 and provide a more detailed asset quality update. To
listen live over the Internet to the webcast simply log on to
http://www.firstcallevents.com/service/ajwz362691499gf12.html or to
participate in the conference call dial 800-711-5301 and use conference ID#
AMERISERV.
AmeriServ Financial, Inc., a financial holding company is the parent of
AmeriServ Financial (the bank) and AmeriServ Trust and Financial Services in
Johnstown, AmeriServ Associates of State College, and AmeriServ Life Insurance
Company in Arizona. The AmeriServ Financial, Inc. customer reach is extensive
beyond its primary dominant market of Cambria and Somerset Counties. The
Bank's mortgage subsidiary also has retail mortgage operations based in
Greensburg, State College, and Altoona. Standard Mortgage Corporation (also a
subsidiary of the Bank) has a mortgage servicing operation based in Atlanta,
Georgia. AmeriServ Associates, the consulting subsidiary, has financial
services industry clients that are located in Pennsylvania, Ohio and Michigan.
AmeriServ Trust and Financial Services, with $1.2 billion of client assets
under management, has union investor clients in Pennsylvania, Ohio, Michigan,
West Virginia and Indiana.
This news release may contain forward-looking statements that involve
risks and uncertainties, including the risks detailed in the Company's Annual
Report and Form 10-K to the Securities and Exchange Commission as defined in
the Private Securities Litigation Reform Act of 1995. Actual results may
differ materially.
Nasdaq NMS: ASRV
SUPPLEMENTAL FINANCIAL PERFORMANCE DATA (A)
July 23, 2002
(In thousands, except per share and ratio data)
2002
1QTR 2QTR YEAR
TO DATE
PERFORMANCE DATA FOR THE PERIOD:
Net interest income $6,583 $7,307 $13,890
Net interest income tax equivalency
adjustment 15 19 34
Net income 626 408 1,034
PERFORMANCE PERCENTAGES (annualized):
Return on average equity 3.16% 2.04% 2.59%
Net interest margin 2.35 2.63 2.49
Net charge-offs as a percentage of
average loans 0.06 1.09 0.58
Loan loss provision as a percentage
of average loans 0.37 0.56 0.47
Net overhead expense as a percentage
of tax equivalent net interest
income 80.13 82.34 81.29
Efficiency ratio 88.34 89.52 88.96
PER COMMON SHARE:
Net income:
Basic $0.05 $0.03 $0.08
Average number of common shares
outstanding 13,689,478 13,748,179 13,718,990
Diluted 0.05 0.03 0.08
Average number of common shares
outstanding 13,712,382 13,778,716 13,745,459
Cash dividends declared 0.09 0.09 0.18
CASH PERFORMANCE RESULTS: (B)
Earnings $922 $726 $1,648
Diluted earnings per common share 0.07 0.05 0.12
Return on average equity 4.67% 3.63% 4.13%
Efficiency ratio 85.16 86.62 85.93
2001
1QTR 2QTR YEAR
TO DATE
PERFORMANCE DATA FOR THE PERIOD:
Net interest income $7,115 $7,176 $14,291
Net interest income tax equivalency
adjustment 269 322 591
Net income 696 638 1,334
PERFORMANCE PERCENTAGES (annualized):
Return on average equity 3.60% 3.26% 3.43%
Net interest margin 2.48 2.47 2.47
Net charge-offs as a percentage of
average loans 0.16 0.65 0.40
Loan loss provision as a percentage
of average loans 0.22 0.24 0.23
Net overhead expense as a percentage
of tax equivalent net interest
income 80.31 80.71 80.51
Efficiency ratio 87.59 87.04 87.32
PER COMMON SHARE:
Net income:
Basic $0.05 $0.05 $0.10
Average number of common shares
outstanding 13,495,422 13,543,592 13,519,640
Diluted 0.05 0.05 0.10
Average number of common shares
outstanding 13,497,986 13,559,755 13,522,528
Cash dividends declared 0.09 0.09 0.18
CASH PERFORMANCE RESULTS: (B)
Earnings $1,307 $1,251 $2,558
Diluted earnings per share 0.10 0.09 0.19
Return on average equity 6.78% 6.40% 6.59%
Efficiency ratio 81.76 80.91 81.35
NOTES:
(A) All quarterly data unaudited.
(B) For 2002, cash performance results exclude amortization related to
core deposit intangibles which, except in the calculation of the
efficiency ratio, are net of applicable income tax effects. For
2001, cash performance results exclude amortization related to both
goodwill and core deposit intangibles. While mortgage servicing
impairment charges are non-cash at the time of recognition, they are
by industry definition not excluded from cash performance.
AMERISERV FINANCIAL, INC.
(In thousands, except per share, statistical, and ratio data)
2002
1QTR 2QTR
PERFORMANCE DATA AT
PERIOD END
Assets $1,213,764 $1,202,086
Investment securities 532,349 493,322
Loans 585,085 597,801
Loans held for sale 2,539 2,977
Allowance for loan losses 6,286 5,518
Goodwill and core deposit
intangibles 16,968 16,610
Deposits 680,435 705,662
Stockholders' equity 78,051 82,491
Trust assets 1,198,480 1,190,834
Non-performing assets 9,105 5,668
Asset leverage ratio 7.54% 7.46%
PER COMMON SHARE:
Book value (A) $5.69 $6.00
Market value 4.96 4.58
Market price to book
value 87.17% 76.37%
STATISTICAL DATA AT
PERIOD END:
Full-time equivalent
employees 468 464
Branch locations 24 24
Common shares
outstanding 13,709,329 13,754,342
2001
1QTR 2QTR 3QTR 4QTR
PERFORMANCE DATA AT
PERIOD END
Assets $1,297,811 $1,341,375 $1,300,891 $1,198,859
Investment securities 624,226 654,716 620,212 498,626
Loans 572,613 564,364 584,120 593,301
Loans held for sale 2,934 6,559 2,510 6,180
Allowance for loan losses 6,023 5,462 5,692 5,830
Goodwill and core
deposit intangibles 19,375 18,692 18,009 17,326
Deposits 657,944 666,373 650,169 676,346
Stockholders' equity 80,211 78,349 85,369 79,490
Trust assets 1,274,667 1,268,313 1,320,154 1,226,722
Non-performing assets 5,158 3,820 5,538 10,044
Asset leverage ratio 6.63% 6.58% 7.05% 7.12%
PER COMMON SHARE:
Book value (A) $5.94 $5.78 $6.28 $5.83
Market value 4.56 5.15 4.60 4.80
Market price to book
value 76.80% 89.07% 73.27% 82.38%
STATISTICAL DATA AT PERIOD END:
Full-time equivalent
employees 464 461 468 475
Branch locations 23 23 23 24
Common shares
outstanding 13,502,693 13,550,193 13,596,946 13,642,411
NOTES:
(A) Other comprehensive income had a positive impact of $0.22 on book
value per share at June 30, 2002.
AMERISERV FINANCIAL, INC.
Nasdaq NMS: ASRV
Average Balance Sheet Data (In thousands)
(Quarterly Data Unaudited)
Note: 2001 data appears before 2002.
2001 2002
SIX SIX
2QTR MONTHS 2QTR MONTHS
Interest earning assets:
Loans and loans held for
sale, net of unearned
income $549,930 $559,147 $584,090 $584,258
Deposits with banks 21,076 16,515 16,544 17,511
Federal funds sold 502 509 277 990
Total investment
securities 627,956 608,412 502,245 500,043
Total interest earning
assets 1,199,464 1,184,583 1,103,156 1,102,802
Non-interest earning
assets:
Cash and due from banks 19,681 20,724 22,683 22,348
Premises and equipment 13,248 13,330 13,219 13,343
Other assets 65,392 66,037 67,554 68,045
Allowance for loan
losses (5,874) (5,951) (6,246) (6,174)
Total assets $1,291,911 $1,278,723 $1,200,366 $1,200,364
Interest bearing
liabilities:
Interest bearing
deposits:
Interest bearing demand $48,277 $47,420 $49,680 $49,118
Savings 93,089 92,261 102,287 98,602
Money market 135,927 136,674 131,349 133,117
Other time 301,698 300,310 303,327 303,266
Total interest bearing
deposits 578,991 576,665 586,643 584,103
Borrowings:
Federal funds purchased,
securities sold under
agreements to repurchase,
and other short-term
borrowings 61,717 56,451 48,603 34,924
Advanced from Federal
Home Loan Bank 432,992 429,363 333,488 351,226
Guaranteed junior
subordinated deferrable
interest debentures 34,500 34,500 34,500 34,500
Long-term debt 3,183 2,258 - -
Total interest bearing
liabilities 1,111,383 1,099,237 1,003,234 1,004,753
Non-interest bearing
liabilities:
Demand deposits 87,569 86,486 107,429 105,031
Other liabilities 14,427 14,537 9,238 10,150
Stockholders' equity 78,532 78,463 80,465 80,430
Total liabilities and
stockholders' equity $1,291,911 $1,278,723 $1,200,366 $1,200,364
AMERISERV FINANCIAL, INC.
CONSOLIDATED STATEMENT OF INCOME
(In thousands)
(Quarterly data unaudited)
2002
YEAR
INTEREST INCOME 1QTR 2QTR TO DATE
Interest and fees on loans $10,562 $10,434 $20,996
Total investment portfolio 6,698 6,637 13,335
Total Interest Income 17,260 17,071 34,331
INTEREST EXPENSE
Deposits 4,288 4,215 8,503
All other funding sources 6,389 5,549 11,938
Total Interest Expense 10,677 9,764 20,441
NET INTEREST INCOME 6,583 7,307 13,890
Provision for loan losses 540 815 1,355
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 6,043 6,492 12,535
NON-INTEREST INCOME
Trust fees 1,279 1,235 2,514
Net realized gains on investment
securities available for sale 637 1,314 1,951
Net realized gains on loans and
loans held for sale 124 141 265
Service charges on deposit accounts 674 694 1,368
Net mortgage servicing fees 92 123 215
Bank owned life insurance 554 317 871
Other income 1,288 1,200 2,488
Total Non-interest Income 4,648 5,024 9,672
NON-INTEREST EXPENSE
Salaries and employee benefits 5,145 5,128 10,273
Net occupancy expense 739 750 1,489
Equipment expense 783 768 1,551
Professional fees 750 847 1,597
FDIC deposit insurance expense 29 29 58
Amortization of core deposit
intangibles 358 358 716
Impairment charge (credit) for
mortgage servicing rights (123) 787 664
Wholesale mortgage production
exit costs (26) (14) (40)
Other expenses 2,280 2,403 4,683
Total Non-interest Expense 9,935 11,056 20,991
INCOME BEFORE INCOME TAXES 756 460 1,216
Provision for income taxes 130 52 182
NET INCOME $626 $408 $1,034
2001
YEAR
INTEREST INCOME 1QTR 2QTR TO DATE
Interest and fees on loans $11,699 $11,119 $22,818
Total investment portfolio 9,475 9,878 19,353
Total Interest Income 21,174 20,997 42,171
INTEREST EXPENSE
Deposits 5,970 5,547 11,517
All other funding sources 8,089 8,274 16,363
Total Interest Expense 14,059 13,821 27,880
NET INTEREST INCOME 7,115 7,176 14,291
Provision for loan losses 315 330 645
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 6,800 6,846 13,646
NON-INTEREST INCOME
Trust fees 1,247 1,204 2,451
Net realized gains on investment
securities available for sale 381 253 634
Net realized gains on loans and
loans held for sale 176 170 346
Service charges on deposit accounts 465 482 947
Net mortgage servicing fees 121 88 209
Bank owned life insurance 313 308 621
Other income 1,627 1,151 2,778
Total Non-interest Income 4,330 3,656 7,986
NON-INTEREST EXPENSE
Salaries and employee benefits 4,847 4,716 9,563
Net occupancy expense 751 651 1,402
Equipment expense 812 685 1,497
Professional fees 683 682 1,365
FDIC deposit insurance expense 31 31 62
Amortization of goodwill and core
deposit intangibles 683 683 1,366
Impairment charge for mortgage
servicing rights 367 141 508
Wholesale mortgage production
exit costs - (103) (103)
Other expenses 2,086 2,222 4,308
Total Non-interest Expense 10,260 9,708 19,968
INCOME BEFORE INCOME TAXES 870 794 1,664
Provision for income taxes 174 156 330
NET INCOME $696 $638 $1,334
SOURCE AmeriServ Financial, Inc.
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http://www.ameriservfinancial.com
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CONTACT:
Jeffrey Stopko, Senior Vice President and
Chief Financial Officer of AmeriServ Financial, +1-814-533-5310
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