AmeriServ Financial(ASRV) - 2025 Q2 - Quarterly Results

Earnings Summary AmeriServ Financial reported a Q2 2025 net loss of $0.282 million, improving from Q2 2024, with H1 2025 net income rising to $1.626 million due to positive operating leverage Overall Financial Performance AmeriServ Financial reported a Q2 2025 net loss of $0.282 million, improving from Q2 2024, with H1 2025 net income rising to $1.626 million due to positive operating leverage Consolidated Earnings Summary | Period | Net Income (Loss) (in thousands) | Diluted EPS | | :--- | :--- | :--- | | Q2 2025 | $(282) | $(0.02) | | Q2 2024 | $(375) | $(0.02) | | H1 2025 | $1,626 | $0.10 | | H1 2024 | $1,529 | $0.09 | - The modest Q2 2025 loss was caused by an increased provision for credit losses related to the resolution of the company's largest problem loan[1] - The company achieved positive operating leverage in the first half of 2025, as total revenue increased while non-interest expenses declined, with the revenue increase driven by a $2.7 million rise in net interest income[1] Financial Performance Analysis This section analyzes AmeriServ Financial's key performance areas, including net interest income, asset and liability management, credit quality, non-interest income and expense, and capital position Net Interest Income and Margin Net interest income and margin significantly grew year-over-year in Q2 and H1 2025, driven by controlled balance sheet growth, effective pricing, and lower funding costs, with continued improvement expected Net Interest Income and Margin Performance | Metric | Q2 2025 vs Q2 2024 | H1 2025 vs H1 2024 | | :--- | :--- | :--- | | Net Interest Income | +$1.5M (+17.1%) | +$2.7M (+15.3%) | | Net Interest Margin | 3.10% (+36 bps) | 3.06% (+34 bps) | - Key drivers for margin improvement include controlled growth in loans and deposits, effective pricing, and the favorable impact of the Federal Reserve's rate cuts in late 2024 on funding costs[2] - Management believes the net interest margin will continue to improve through the second half of 2025[2] Asset and Liability Management The company achieved growth in average loans and deposits in H1 2025, reducing reliance on higher-cost borrowings and expanding its investment securities portfolio - Total average loans grew by $37.2 million, or 3.6%, in the first six months of 2025 compared to the same period in 2024[3] - The investment securities portfolio grew by $17.9 million, or 8.1%, since December 31, 2024, as improved yields made purchases more attractive[5] - Total average deposits for H1 2025 were $67.8 million, or 5.8%, higher than H1 2024, reflecting successful business development, with the loan-to-deposit ratio at a healthy 86.2% in Q2 2025[6] - Use of overnight borrowed funds in H1 2025 was significantly lower than H1 2024 by $26.0 million, or 83.8%, due to the higher level of deposits[8] Credit Quality Credit quality was significantly impacted by a $3.1 million Q2 2025 provision for credit losses and a $3.0 million H1 net charge-off due to resolving a large problem loan Provision for Credit Losses | Period | Provision Expense (Recovery) (in thousands) | | :--- | :--- | | Q2 2025 | $3,100 | | Q2 2024 | $434 | | H1 2025 | $3,000 | | H1 2024 | $(123) | - The Q2 2025 provision primarily reflects a $2.8 million charge-off on the company's largest problem asset, a mixed-use CRE property, to write it down to a court-approved sales price[9] Credit Quality Metrics (as of June 30, 2025) | Metric | Value | | :--- | :--- | | Non-performing assets | $16.4 million (+9.7% from Q1 2025) | | Non-performing loans to total loans | 1.42% | | Net loan charge-offs (H1 2025) | $3.0 million (0.56% of avg. loans) | | Allowance coverage of non-performing loans | 93% | Non-Interest Income Non-interest income declined in Q2 and H1 2025, primarily due to lower wealth management fees from market volatility and reduced other income Non-Interest Income Comparison | Period | Total Non-Interest Income (in millions) | Change YoY | | :--- | :--- | :--- | | Q2 2025 | $4.10 | -$0.276 (-6.3%) | | H1 2025 | $8.22 | -$1.1 (-11.8%) | - The decrease was primarily due to lower wealth management fees, which fell by $679,000 (10.7%) in H1 2025 due to market volatility[11] - Other income for H1 2025 was lower partly because a $250,000 signing bonus from Visa was recognized in Q1 2024, with no similar bonus in 2025[12] - Despite lower fees, the fair market value of wealth management assets increased by $24.7 million (1.0%) to $2.6 billion since December 31, 2024[12] Non-Interest Expense Total non-interest expense significantly decreased in Q2 and H1 2025, mainly driven by a sharp reduction in professional fees following resolved litigation Non-Interest Expense Comparison | Period | Total Non-Interest Expense (in millions) | Change YoY | | :--- | :--- | :--- | | Q2 2025 | $11.71 | -$1.6 (-11.9%) | | H1 2025 | $23.47 | -$1.7 (-6.7%) | - Professional fees decreased by $1.5 million (48.7%) for H1 2025, as 2024 expenses were higher due to litigation and actions of an activist investor, which was resolved in June 2024[14] - Salaries & employee benefits increased by only 0.5% for H1 2025, as higher healthcare costs and merit increases were largely offset by a $393,000 (45.1%) reduction in incentive compensation[14] Capital Position and Shareholder Returns The company maintained strong capital ratios exceeding "well capitalized" status, with book value per share and tangible book value per share increasing year-over-year Capital and Book Value (as of June 30, 2025) | Metric | Value | Change from June 30, 2024 | | :--- | :--- | :--- | | Total Assets | $1.45 billion | N/A | | Shareholders' Equity | $110.9 million | N/A | | Book Value per Share | $6.71 | +$0.43 (+6.8%) | | Tangible Book Value per Share | $5.89 | +$0.44 (+8.1%) | - The company's capital ratios exceed the regulatory defined well-capitalized status[16] - The Board declared a $0.03 per share quarterly cash dividend, representing a 3.9% annualized yield and a 60% payout ratio based on year-to-date earnings[17] Financial Statements and Supplemental Data This section provides detailed financial statements and supplemental data, including performance metrics, income statements, balance sheets, and reconciliations of non-GAAP measures Supplemental Financial Performance Data This section presents key performance metrics and financial condition data for 2025 and 2024, including annualized returns and period-end balances Performance Data for H1 2025 | Metric (Annualized) | Value | | :--- | :--- | | Return on average assets | 0.23% | | Return on average equity | 2.99% | | Net interest margin | 3.06% | | Efficiency ratio | 82.18% | Financial Condition at June 30, 2025 | Account | Value (in thousands) | | :--- | :--- | | Total Assets | $1,448,733 | | Total Loans | $1,069,220 | | Total Deposits | $1,244,533 | | Shareholders' Equity | $110,921 | Consolidated Statement of Income The consolidated statement details revenue and expenses for Q1 and Q2 2025 and 2024, reporting a H1 2025 net income of $1.6 million Consolidated Income Statement Summary (Six Months Ended June 30) | (In thousands) | 2025 | 2024 | | :--- | :--- | :--- | | Net Interest Income | $20,325 | $17,622 | | Provision for credit losses | $3,036 | $(123) | | Non-Interest Income | $8,217 | $9,319 | | Non-Interest Expense | $23,472 | $25,161 | | Pretax Income | $2,034 | $1,903 | | Net Income | $1,626 | $1,529 | Average Balance Sheet Data This section presents average balances for assets, liabilities, and equity for Q2 and H1 2025 and 2024, showing average total assets of $1.44 billion in H1 2025 Average Balance Sheet Summary (Six Months Ended June 30) | (In thousands) | 2025 | 2024 | | :--- | :--- | :--- | | Total interest earning assets | $1,317,354 | $1,271,838 | | Total assets | $1,439,673 | $1,389,316 | | Total interest bearing deposits | $1,050,062 | $981,338 | | Total interest bearing liabilities | $1,139,130 | $1,092,956 | | Shareholders' equity | $109,829 | $102,337 | Changes in Shareholders' Equity This statement details changes in shareholders' equity for 2024 and H1 2025, showing an increase to $110.9 million at June 30, 2025 Reconciliation of Shareholders' Equity (H1 2025) | (In thousands) | Amount | | :--- | :--- | | Balance at December 31, 2024 | $107,248 | | Net income (H1 2025) | $1,626 | | Adjustment for unrealized gain on securities | $3,025 | | Common stock cash dividend | $(991) | | Other adjustments | $13 | | Balance at June 30, 2025 | $110,921 | Reconciliation of Non-GAAP Financial Measures This section reconciles GAAP to non-GAAP measures, including tangible book value per share, which increased to $5.89 at June 30, 2025 Tangible Book Value Per Share (Non-GAAP) | Period End | Total Equity (in thousands) | Intangible Assets (in thousands) | Tangible Common Equity (in thousands) | Shares Outstanding | Tangible Book Value per Share | | :--- | :--- | :--- | :--- | :--- | :--- | | June 30, 2025 | $110,921 | $13,677 | $97,244 | 16,519,267 | $5.89 | | June 30, 2024 | $103,661 | $13,699 | $89,962 | 16,519,267 | $5.45 |