Ameriserv Financial Reports Increased Earnings For The Third Quarter And First Nine Months | Online Earning

JOHNSTOWN, Pa., Oct. 19, 2021 /PRNewswire/ — AmeriServ Financial, Inc. (NASDAQ: ASRV) reported third quarter 2021 net income of $1,431,000, or $0.08 per diluted common share.  This earnings performance was a $353,000, or 32.7%, increase from the third quarter of 2020 when net income totaled $1,078,000, or $0.06 per diluted common share.  For the nine-month period ended September 30, 2021, the Company reported net income of $5,220,000, or $0.31 per diluted common share.  This represents a 34.8% increase in earnings per share from the nine-month period of 2020 when net income totaled $3,906,000, or $0.23 per diluted common share.  The following table highlights the Company’s financial performance for both the three- and nine-month periods ended September 30, 2021 and 2020:

		Third  Quarter  2021			Third  Quarter  2020			Nine Months Ended September 30, 2021			Nine Months Ended September 30, 2020
Net income		$	1,431,000		$	1,078,000		$	5,220,000	$	3,906,000
Diluted earnings per share		$	0.08		$	0.06		$	0.31	$	0.23

Jeffrey A. Stopko, President and Chief Executive Officer, commented on the third quarter 2021 financial results: “Highlights of our third quarter included the previously disclosed successful completion of a $27 million private placement of subordinated debt, continued loan portfolio growth, and strong performance from our wealth management businesses. The financial benefits of utilizing the funds from our sub debt offering to retire higher cost debt will begin to be fully realized in the fourth quarter of 2021 which we expect will favorably reduce our cost of funds. Additionally, our earning asset yield will benefit from another quarter of loan growth.  Excluding Paycheck Protection Program (PPP) loan activity, good growth in both commercial real estate loans and residential mortgage loans caused our total loan portfolio to increase by $22 million, or 2.3%, during the third quarter of 2021.  As a result of these items, we believe that our net interest margin is well positioned to expand in the fourth quarter of 2021. Additionally, even with growing net interest income, the diversification of our revenue streams continues to be a strength for our Company as 32% of our total year-to-date 2021 revenue came from non-interest income sources, which was driven by record contributions from our wealth management businesses.”

The Company’s net interest income in the third quarter of 2021 increased by $435,000, or 4.9%, from the prior year’s third quarter and, for the nine months of 2021, increased by $1.8 million, or 6.6%, when compared to the nine months of 2020.  The Company’s net interest margin of 2.85% for the third quarter of 2021 and 3.07% for the nine-month timeframe was 12 basis points lower for the quarter and was 9 basis points lower for the nine-month period.  Financial results when comparing 2021 to 2020 were indicative of the Company’s effective execution of strategies as continued improvement in the economic environment was conducive to growth, as demonstrated by an increase in our revenues while we work to meet the challenges of the current low interest rate environment.  While businesses and consumers are resuming their normal activities and more people are getting vaccinated, recent developments and the Delta variant remind us that many risks remain.  AmeriServ has proven to be resilient and will continue to adapt in this fluid environment, adjust in real-time, and prioritize the well-being of our employees and the communities we serve.

The Company continued to experience significantly higher than historical levels of both total average loans and total average deposits for both the quarter and year-to-date time periods in 2021 versus 2020.  This growth is due to successful business development efforts, the impact from the government stimulus programs and the recently completed Somerset County branch acquisition.  Net interest income improved due to the positive impact of commercial real estate and residential mortgage loan growth as well as the low interest rate environment favorably impacting deposit and FHLB borrowings interest expense.  The combination of these two factors more than offset the unfavorable impact of net interest margin pressure from lower earning asset yields.  Overall, total interest expense decreased significantly more than the decrease in total interest income, resulting in net interest income increasing for both the third quarter and year-to-date time periods of 2021, compared to last year.  Overall, the increase to net interest income, a growing level of non-interest income, and a reduced loan loss provision more than offset a higher level of non-interest expense resulting in an improved earnings performance for the third quarter and nine months of 2021.

The economic recovery has been evident in our lending activity as we continued to experience loan growth throughout the nine months of 2021.  Commercial loan pipelines returned to pre-COVID levels early this year and reached record levels during the third quarter.  The overall total loan portfolio volume stabilized during the third quarter in comparison to the previous quarter in 2021 as additional loan growth was offset by declining PPP loans as they complete the forgiveness process.  Although reduced from its peak in 2020, strong residential mortgage loan production continued throughout 2021.  Residential mortgage loan production totaled $76.2 million for the nine months of 2021 which declined by 22.5% from the production level of $98.3 million achieved in the nine months of 2020.  Despite the decline between years, thus far, this is the second highest level of residential mortgage loan production in the Company’s history.  The Company did revise strategy in 2021 and is retaining a higher percentage of our residential mortgage loan production in the loan portfolio as opposed to selling into the secondary market.  This strategic change allowed us to more profitably deploy a portion of the increased liquidity that we have on our balance sheet.

Government economic stimulus to support most Americans and financial assistance provided to municipalities and school districts during the pandemic contributed to total deposits increasing significantly between years and reaching record levels.  Also, as noted in our second quarter of 2021 press release, the Somerset County branch acquisition resulted in approximately $42 million of additional deposits coming on to our balance sheet in the middle of the second quarter.  Therefore, total average deposit volumes in the third quarter of 2021 reflect the first full impact to quarterly average deposits due to the acquisition.  Overall, the Company’s loan to deposit ratio averaged 83.2% in the third quarter of 2021, which we believe indicates that the Company has ample capacity to continue to grow its loan portfolio and is strongly positioned to provide the necessary assistance to our customers and our community as they recover from the COVID-19 pandemic and respond to an improving economy.  The average balance of total interest earning assets for the third quarter of 2021 is $112.0 million, or 9.6%, higher than the third quarter of 2020.  Likewise, on the liability side of the balance sheet, total average deposits for the third quarter increased by $134.7 million, or 12.8%, since last year.

As stated previously, total loans continue to be significantly higher than historical levels and averaged $989.2 million in the third quarter of 2021 which is $56.0 million, or 6.0%, higher than the $933.1 million average for the third quarter of 2020, while total average loans for the nine months of 2021 were $79.9 million, or 8.8%, higher than the 2020 nine-month average.  The growth experienced in our commercial real estate portfolio resulted in traditional loan fee income increasing by $126,000, or 61.9%, for the quarter and by $306,000, or 46.3%, for the nine months when compared to the same time periods from last year.  Total PPP loans averaged $35.8 million for the quarter, decreasing by $32.2 million from last year’s third quarter average as nearly all loans from the first round of this government stimulus program have been forgiven.  The Company recorded a total of $1.9 million of processing fee income and interest income from PPP lending activity through nine months of 2021, which is $529,000, or 37.7%, higher than the 2020 level.  Finally, on an end of period basis, excluding total PPP loans, the total loan portfolio grew by approximately $85.9 million, or 9.7%, since the end of the third quarter of 2020.

Note that the level of Paycheck Protection Program fee income in the third quarter of 2021 decreased significantly when compared to the second quarter of 2021 by $431,000 as nearly all loans from the first round of this program completed the forgiveness process during the second quarter.  The remaining PPP loans on the balance sheet from the second round of this program, which was executed earlier this year, are just beginning the forgiveness process.  We anticipate that the majority of the unamortized fees associated with these loans will be recognized as income during the fourth quarter of 2021.

The Company remains committed to prudently working with our borrowers that have been hardest hit by the pandemic by granting them loan payment modifications. Borrower requested modifications primarily consist of the deferral of principal and/or interest payments for a period of three to six months.  On September 30, 2021, loans totaling approximately $15.7 million, or 1.6% of total loans, were on a payment modification plan.  These loans include five commercial borrowers primarily in the hospitality industry.  This current level of borrowers requesting payment deferrals is down sharply from its peak level of approximately $200 million as of June 30, 2020. Management continues to carefully monitor asset quality with a particular focus on these customers that have requested payment deferrals.  Deferral extension requests are considered based upon the customer’s needs and their impacted industry, borrower and guarantor capacity to service debt and issued regulatory guidance.

Total investment securities averaged $206.9 million for the nine months of 2021, which is $20.0 million, or 10.7%, higher than the $186.9 million average for the nine months of last year.  The Company continues to be selective in 2021 when purchasing securities due to the low interest rate environment.  However, a slightly more favorable yield curve existed earlier this year as the long end of the U.S. Treasury yield curve increased while the short end of the curve remained relatively stable. This resulted in improved yields for federal agency mortgage-backed securities and federal agency bonds, and management decided to add more of these investments to our portfolio.  Similar to our change in strategy to retain more residential mortgage loan production in our loan portfolio, the steeper yield curve provided the opportunity to more profitably deploy a portion of the increased liquidity on our balance sheet into the securities portfolio as opposed to leaving these funds in low yielding federal funds sold.  This redeployment of funds also resulted in securities growing between years.  Management also continued to purchase taxable municipals and corporate securities.

Similar to what is occurring across the banking industry, our liquidity position continues to be strong due to the significant influx of deposits. The challenges this increased liquidity presents are twofold.  First, there is the uncertainty regarding the duration that these increased funds will remain on the balance sheet which will be determined by customer behavior as economic conditions change.  The second challenge is to profitably deploy this increased liquidity given the current low yields on short-term investment products.  As a result, short-term investment balances averaged $71.4 million in the third quarter of 2021…

Ameriserv Financial Reports Increased Earnings For The Third Quarter And First Nine Months