JOHNSTOWN, Pa., Oct. 22 /PRNewswire-FirstCall/ --
AmeriServ Financial, Inc. (Nasdaq: ASRV) today reported an expected net loss
for the third quarter of 2002 amounting to $4.2 million or $0.31 per share.
For the first nine months of 2002, the Company's net loss amounted to
$3.2 million or $0.23 per share. As discussed in a September 19, 2002 press
release, the Company noted that it expected to report a net loss in the third
quarter of 2002 due in part to restructuring costs associated with
implementing its earnings improvement program. The Company also stated that
it expected to incur additional mortgage servicing impairment charges and a
higher loan loss provision in the third quarter of 2002. These three factors
were the key items responsible for the third quarter loss. The following
table highlights the Company's financial performance for both the quarter and
nine-month periods ended September 30, 2002 and 2001:
Third Quarter Third Quarter Nine Months Nine Months
2002 2001 Ended Ended
September 30, September 30,
2002 2001
Net income
(loss) ($4,224,000) $240,000 ($3,190,000) $1,574,000
Diluted
earnings
(loss) per share (0.31) 0.02 (0.23) 0.12
The Company also announced on September 19, 2002 that its new common stock
dividend rate is $0.12 per year effective with the fourth quarter dividend
declaration scheduled for November 2002. Based upon a recent share price of
$2.40, this represents a 5.0% yield. At September 30, 2002, ASRV had total
assets of $1.2 billion and shareholders' equity of $80 million or $5.77 per
share. The company continues to be considered well-capitalized for regulatory
purposes with an asset leverage ratio at September 30, 2002 of 7.0% compared
to a regulatory minimum of 5.0%.
The Company's total non-interest expense in the third quarter of 2002
increased by $3.4 million or 29.0% from the third quarter of 2001. The
Company recognized a $3.0 million non-cash impairment charge on its mortgage
servicing rights in the third quarter of 2002. This non-cash impairment
charge is $1.4 million greater than the prior year third quarter and reflects
an increase in mortgage prepayment speeds due to further declines in mortgage
interest rates. These low rates have contributed to unprecedented levels of
mortgage refinancing activity which has had a significant negative impact on
the value of the Company's mortgage servicing rights. Specifically, the
Mortgage Bankers Association Refi Index reached in excess of 5000 in September
2002, the highest level ever recorded. Since January 1, 2001, the Company has
recognized mortgage servicing impairment charges that have amounted to
$6.2 million.
The Company also recorded in the third quarter of 2002 a $920,000
restructuring charge associated with implementing its previously announced
earnings improvement program. The first phase of the earnings improvement
program will produce at least $4 million of pre-tax earnings improvement with
$3.5 million or 88% coming from identified cost savings and $500,000 or 12%
coming from identified revenue enhancements. Within the cost savings,
approximately $2 million will be achieved through a reduction in force that
will result in the elimination of at least 43 full-time equivalent employees
or 9.1% of the Company's workforce. As of September 30, 2002, 19 of these
employees had already been eliminated with the remainder of the position
eliminations scheduled for completion by mid-November when the contractual
union bumping process is finished. Other expense savings will be achieved
through a significant curtailment of advertising expense, reduced technology-
related expenditures through reallocation of existing personal computers,
reduced charitable contributions, and the deferment of certain planned capital
expenditures. Full earnings benefit from all first phase actions will be
achieved in 2003. Orlando Hanselman, Chairman, President and CEO and Jeffrey
Stopko, Senior Vice President and CFO hosted a conference call that was web
cast over the Internet on September 24, 2002 that discussed in greater detail
both phases of the earnings improvement program and the Company's new capital
management program. To listen to a replay of the webcast simply log on to
http://www.videonewswire.com/AMERISERV/092402 anytime through December 23, 2002.
The other expense category increased by $291,000 due to actions taken by
the Company to strengthen its general contingency reserves. Salaries and
employee benefits increased by $465,000 due to higher medical insurance
premiums, increased sales incentive based compensation, and higher pension
expense. 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 third quarter of 2001 while no
amortization of, or impairment charges to goodwill were recorded in the third
quarter of 2002.
The Company's provision for loan losses totaled $3.4 million or 2.24% of
total loans in the third quarter of 2002. This represented an increase of
$3.1 million from the third quarter 2001 provision of $315,000 or 0.22% of
total loans. The $3.4 million third quarter 2002 provision exceeded net
charge-offs for the quarter that totaled $3.1 million or 2.08% of total loans.
Of the $3.1 million of third quarter net charge-offs, $2.5 million related to
two previously discussed problem loans -- one in the food services industry
with locations at the Pittsburgh Airport and the other in the lumber industry.
At September 30, 2002, these two non-performing assets totaled $1.7 million on
which the Company's anticipates there will be no further charge-offs as it
completes the workout process. Overall, total non-performing assets amounted
to $5.4 million or 0.91% of total loans at September 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 106% at
September 30, 2002 compared to 58% at December 31, 2001.
The Company's total non-interest income in the third quarter of 2002
decreased by $382,000 or 7.2% due primarily to the non-recurrence of a
$1.4 million gain on the sale of the Company's Coalport branch that was
realized in the third quarter of 2001. The Company did benefit from increased
revenue from investment security gains and deposit service charges. Gains on
the sale of investment securities increased by $1.2 million as the Company
took advantage of volatility in the market and the lower interest rates to
shorten the investment portfolio duration and also capture profits on certain
securities that had risks of accelerated prepayments or extension. The
Company also benefited from a $209,000 or 40% increase in deposit service
charges due to the fourth quarter 2001 implementation of a first in the market
overdraft privilege program.
The Company's net interest income in the third quarter of 2002 decreased
by $73,000 or 1.1% from the prior year third quarter due to a reduced level of
earning assets. The decline in the level of earning assets was due to a
$142 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 31.6% in the third
quarter of 2002 compared to 38.0% in the third quarter of 2001. The reduced
net interest income from a smaller earning asset base was partially offset by
improvement in the net interest margin. The Company's net interest margin
averaged 2.48% in the third quarter of 2002, 13 basis points better than the
2.35% net interest margin reported in the third quarter of 2001. 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.
BUSINESS SEGMENT PERFORMANCE
The last page of this press release presents the Company's key business
segments and identifies their net income contribution and risk-adjusted return
on equity (ROE) performance for the nine-month periods ended September 30,
2002 and 2001. Retail banking was again the largest net income contributor
earning $3.3 million or a 15.5% ROE in the first nine months of 2002. The
retail banking net income contribution is down approximately $1 million from
the prior year due entirely to the non-recurrence of the $1.4 million gain on
the Coalport branch sale that was realized in 2001. Excluding this gain, the
core retail banking performance in 2002 was comparable with the prior year and
represents a third consecutive year of improving net income performance. The
retail banking segment has benefited from increased non-interest income
resulting from the overdraft privilege program which has offset higher
marketing costs due to greater advertising expense in 2002.
The trust segment's net income contribution in 2002 amounted to $471,000
or 20.4% ROE. This represents a decline from the $659,000 net income or 28.5%
ROE earned in 2001 due in part to lower market-based fee revenue resulting
from the declines in equity values over the past year. The trust segment is
focused on continuing to increase the fee revenue generated from union
business activities, particularly the ERECT and Build Funds, which are
collective investment funds for trade union pension funds. These funds are
currently in five states -- Pennsylvania, Ohio, West Virginia, Michigan and
Indiana -- and expect to expand into Illinois and Missouri in the fourth
quarter of 2002. The value of assets in these funds has increased by 19%
during the first nine months of 2002 and now totals $190 million.
The Company has experienced the greatest earnings pressure in the mortgage
banking segment which has lost $3.0 million in the first nine months of 2002
compared to a loss of $1.8 million in the same 2001 period. This negative
performance reflects the previously discussed heightened mortgage servicing
impairment charges experienced in 2002. The commercial lending segment has
also lost $1.6 million in the first nine months of 2002 compared to a positive
net income contribution of $1.5 million in 2001. The loss in 2002 resulted
primarily from increased credit costs in the commercial leasing portfolio
which has caused the Company to increase its provision for loan losses by
$3.8 million this year. As part of phase two of its earnings improvement
program, the Company is seeking to exit both the mortgage banking and
commercial leasing lines of business. The net loss in the investment/parent
segment was reduced by $847,000 in 2002 due to increased revenue earned on
leverage assets in 2002 as a result of higher investment security gains. Note
that the $920,000 restructuring charge recorded in the third quarter of 2002
is included in this segment.
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 $1.1 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)
October 22, 2002
(In thousands, except per share and ratio data)
2002
1QTR 2QTR 3QTR YEAR
TO DATE
PERFORMANCE DATA FOR THE PERIOD:
Net interest income $6,583 $7,307 $6,794 $20,684
Net interest income tax
equivalency adjustment 15 19 20 54
Net income (loss) 626 408 (4,224) (3,190)
PERFORMANCE PERCENTAGES
(annualized):
Return on average equity 3.16% 2.04% (20.19)% (5.25)%
Net interest margin 2.35 2.63 2.48 2.49
Net charge-offs as a
percentage of average
loans 0.06 1.09 2.08 1.08
Loan loss provision as a
percentage of average
loans 0.37 0.56 2.24 1.07
Net overhead expense as a
percentage of tax
equivalent net interest
income 80.13 82.34 147.87 103.17
Efficiency ratio 88.34 89.52 127.78 101.86
PER COMMON SHARE:
Net income (loss):
Basic $0.05 $0.03 $(0.31) $(0.23)
Average number of common
shares outstanding 13,689,478 13,748,179 13,799,547 13,746,138
Diluted 0.05 0.03 (0.31) (0.23)
Average number of
common shares
outstanding 13,712,382 13,778,716 13,800,897 13,765,998
Cash dividends declared 0.09 0.09 0.09 0.27
CASH PERFORMANCE
RESULTS: (B)
Earnings (loss) $922 $726 $(3,997) $(2,349)
Diluted earnings
(loss) per common share 0.07 0.05 (0.29) (0.17)
Return on average equity 4.67% 3.63% (19.37)% (3.86)%
Efficiency ratio 85.16 86.62 124.73 98.82
2001
1QTR 2QTR 3QTR YEAR
TO DATE
PERFORMANCE DATA FOR THE
PERIOD:
Net interest income $7,115 $7,176 $6,867 $21,158
Net interest income tax
equivalency adjustment 269 322 251 842
Net income 696 638 240 1,574
PERFORMANCE PERCENTAGES
(annualized):
Return on average equity 3.60% 3.26% 1.18% 2.66%
Net interest margin 2.48 2.47 2.35 2.43
Net charge-offs as a
percentage of average
loans 0.16 0.65 0.06 0.29
Loan loss provision as
a percentage of average
loans 0.22 0.24 0.22 0.23
Net overhead expense as
a percentage of tax
equivalent net interest
income 80.31 80.71 88.75 83.18
Efficiency ratio 87.59 87.04 93.56 89.51
PER COMMON SHARE:
Net income:
Basic $0.05 $0.05 $0.02 $0.12
Average number of
common shares
outstanding 13,495,422 13,543,592 13,588,753 13,542,931
Diluted 0.05 0.05 0.02 0.12
Average number of
common shares
outstanding 13,497,986 13,559,755 13,629,424 13,547,143
Cash dividends declared 0.09 0.09 0.09 0.27
CASH PERFORMANCE
RESULTS: (B)
Earnings $1,307 $1,251 $862 $3,419
Diluted earnings per share 0.10 0.09 0.06 0.25
Return on average equity 6.78% 6.40% 4.29% 5.79%
Efficiency ratio 81.76 80.91 88.06 83.71
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 3QTR
PERFORMANCE DATA AT PERIOD END
Assets $1,213,764 $1,202,086 $1,182,678
Investment securities 532,349 493,322 491,861
Loans 585,085 597,801 590,270
Loans held for sale 2,539 2,977 4,015
Allowance for loan losses 6,286 5,518 5,757
Goodwill and core deposit
intangibles 16,968 16,610 16,252
Mortgage servicing rights 8,315 7,566 5,146
Deposits 680,435 705,662 674,573
Stockholders' equity 78,051 82,491 79,711
Trust assets 1,198,480 1,190,834 1,082,311
Non-performing assets 9,105 5,668 5,407
Asset leverage ratio 7.54% 7.46% 7.00%
PER COMMON SHARE:
Book value (A) $5.69 $6.00 $5.77
Market value 4.96 4.58 2.45
Market price to book value 87.17% 76.37% 42.45%
STATISTICAL DATA AT PERIOD END:
Full-time equivalent employees 468 464 445
Branch locations 24 24 24
Common shares outstanding 13,709,329 13,754,342 13,811,595
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
Mortgage servicing rights 9,117 9,086 7,723 7,828
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 $0.40 on book
value per share at September 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
NINE NINE
3QTR MONTHS 3QTR MONTHS
Interest earning assets:
Loans and loans held
for sale, net of
unearned income $560,640 $559,645 $591,743 $586,753
Deposits with banks 19,295 17,442 15,379 16,800
Federal funds sold 731 583 124 702
Total investment
securities 625,347 614,056 483,688 494,591
Total interest earning
assets 1,206,013 1,191,726 1,090,934 1,098,846
Non-interest earning assets:
Cash and due from banks 21,661 21,036 21,957 22,218
Premises and equipment 13,346 13,335 13,060 13,249
Other assets 66,713 66,264 67,308 67,798
Allowance for loan
losses (5,527) (5,811) (5,529) (5,959)
Total assets $1,302,206 $1,286,550 $1,187,730 $1,196,152
Interest bearing
liabilities:
Interest bearing deposits:
Interest bearing demand $47,695 $47,512 $49,633 $49,290
Savings 92,527 92,349 103,435 100,213
Money market 133,869 135,739 125,893 130,710
Other time 309,250 303,291 301,037 302,521
Total interest bearing
deposits 583,341 578,891 579,998 582,734
Borrowings:
Federal funds purchased,
securities sold under
agreements to repurchase,
and other short-term
borrowings 55,825 55,752 70,244 46,697
Advanced from Federal
Home Loan Bank 439,067 432,598 304,645 335,700
Guaranteed junior
subordinated deferrable
interest debentures 34,500 34,500 34,500 34,500
Long-term debt 4,190 3,391 - -
Total interest bearing
liabilities 1,116,923 1,105,132 989,387 999,631
Non-interest bearing
liabilities:
Demand deposits 91,406 88,126 106,752 105,604
Other liabilities 13,165 14,079 8,602 9,634
Stockholders' equity 80,712 79,213 82,989 81,283
Total liabilities and
stockholders' equity $1,302,206 $1,286,550 $1,187,730 $1,196,152
AMERISERV FINANCIAL, INC.
CONSOLIDATED STATEMENT OF INCOME
(In thousands)
(Quarterly data unaudited)
2002
YEAR
INTEREST INCOME 1QTR 2QTR 3QTR TO DATE
Interest and fees on
loans $10,562 $10,434 $10,191 $31,187
Total investment portfolio 6,698 6,637 6,011 19,346
Total Interest Income 17,260 17,071 16,202 50,533
INTEREST EXPENSE
Deposits 4,288 4,215 4,015 12,518
All other funding sources 6,389 5,549 5,393 17,331
Total Interest Expense 10,677 9,764 9,408 29,849
NET INTEREST INCOME 6,583 7,307 6,794 20,684
Provision for loan losses 540 815 3,380 4,735
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 6,043 6,492 3,414 15,949
NON-INTEREST INCOME
Trust fees 1,279 1,235 1,077 3,591
Net realized gains on
investment securities
available for sale 637 1,314 1,356 3,307
Net realized gains on
loans and loans held
for sale 124 141 160 425
Service charges on
deposit accounts 674 694 732 2,100
Net mortgage servicing fees 92 123 97 312
Bank owned life insurance 554 317 309 1,180
Other income 1,288 1,200 1,198 3,686
Total Non-interest Income 4,648 5,024 4,929 14,601
NON-INTEREST EXPENSE
Salaries and employee
benefits 5,145 5,128 5,342 15,615
Net occupancy expense 739 750 682 2,171
Equipment expense 783 768 741 2,292
Professional fees 750 847 1,057 2,654
FDIC deposit insurance
expense 29 29 28 86
Amortization of core
deposit intangibles 358 358 358 1,074
Impairment charge (credit)
for mortgage servicing
rights (123) 787 3,034 3,698
Wholesale mortgage
production exit costs (26) (14) - (40)
Restructuring costs - - 920 920
Other expenses 2,280 2,403 2,843 7,526
Total Non-interest Expense 9,935 11,056 15,005 35,996
INCOME (LOSS) BEFORE
INCOME TAXES 756 460 (6,662) (5,446)
Provision (benefit) for
income taxes 130 52 (2,438) (2,256)
NET INCOME (LOSS) $626 $408 $(4,224) $(3,190)
2001
YEAR
INTEREST INCOME 1QTR 2QTR 3QTR TO DATE
Interest and fees on
loans $11,699 $11,119 $11,058 $33,876
Total investment portfolio 9,475 9,878 9,507 28,860
Total Interest Income 21,174 20,997 20,565 62,736
INTEREST EXPENSE
Deposits 5,970 5,547 5,375 16,892
All other funding sources 8,089 8,274 8,323 24,686
Total Interest Expense 14,059 13,821 13,698 41,578
NET INTEREST INCOME 7,115 7,176 6,867 21,158
Provision for loan losses 315 330 315 960
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 6,800 6,846 6,552 20,198
NON-INTEREST INCOME
Trust fees 1,247 1,204 1,114 3,565
Net realized gains on
investment securities
available for sale 381 253 179 813
Net realized gains on
loans and loans held
for sale 176 170 186 532
Service charges on
deposit accounts 465 482 523 1,470
Net mortgage servicing fees 121 88 92 301
Bank owned life insurance 313 308 313 934
Other income 1,627 1,151 1,508 4,286
Total Non-interest Income 4,330 3,656 5,311 13,297
NON-INTEREST EXPENSE
Salaries and employee
benefits 4,847 4,716 4,877 14,440
Net occupancy expense 751 651 641 2,043
Equipment expense 812 685 684 2,181
Professional fees 683 682 678 2,043
FDIC deposit insurance
expense 31 31 29 91
Amortization of goodwill
and core deposit
intangibles 683 683 683 2,049
Impairment charge for
mortgage servicing rights 367 141 1,636 2,144
Wholesale mortgage
production exit costs - (103) (152) (255)
Other expenses 2,086 2,222 2,552 6,860
Total Non-interest
Expense 10,260 9,708 11,628 31,596
INCOME BEFORE INCOME TAXES 870 794 235 1,899
Provision (benefit) for
income taxes 174 156 (5) 325
NET INCOME $696 $638 $240 $1,574
AMERISERV FINANCIAL, INC.
SEGMENT RESULTS
(In thousands)
(Unaudited)
Nine Months Ended
September 30, 2002
Net Income Risk Adjusted Total
(Loss) Return On Equity Assets
Retail Banking $3,269 15.5% $404,382
Commercial Lending (1,568) (12.3) 267,159
Mortgage Banking (3,019) (95.0) 14,477
Trust 471 20.4 1,874
Other Fee Based 44 3.0 2,925
Investment/Parent (2,387) (11.9) 491,861
Total (3,190) (5.2)% $1,182,678
Nine Months Ended
September 30, 2001
Net Income Risk Adjusted Total
(Loss) Return On Equity Assets
Retail Banking $4,335 22.5% $384,190
Commercial Lending 1,509 13.4 268,429
Mortgage Banking (1,838) (43.9) 23,222
Trust 659 28.5 1,776
Other Fee Based 143 10.3 3,062
Investment/Parent (3,234) (15.5) 620,212
Total 1,574 2.6% $1,300,891
SOURCE AmeriServ Financial, Inc.
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Related links:
http://www.ameriservfinancial.com
Audio:http://www.videonewswire.com/AMERISERV/092402
CONTACT:
Jeffrey A. Stopko, Senior Vice President and
CFO of AmeriServ Financial, +1-814-533-5310, or
jstopko@ameriservfinancial.com, or fax: +1-814-533-5383
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