AmeriServ Financial(ASRV) - 2025 Q2 - Quarterly Report

Capital Adequacy - As of June 30, 2025, the Company maintained total capital of $150,427, representing a ratio of 12.50% to risk-weighted assets, exceeding the minimum required ratio of 8.00%[128] - Common equity tier 1 capital was $109,289, with a ratio of 9.08% to risk-weighted assets, above the minimum requirement of 4.50%[129] - The Company was categorized as "well capitalized" under the regulatory framework as of June 30, 2025, indicating compliance with capital adequacy requirements[128] Interest Rate Risk Management - The Company entered into interest rate swaps with a total notional value of $70 million as of June 30, 2025, to hedge interest rate risk associated with floating-rate time deposit accounts[138] - Interest rate swap agreements allow the Company to manage interest rate risk and match rates on certain assets, converting fixed-rate debt to variable rates[132] - The Company had no caps or floors outstanding at June 30, 2025, and 2024, under its hedging policy[145] - The Company did not recognize any hedge ineffectiveness in earnings during the periods ended June 30, 2025, and 2024[139] Financial Performance - The Company reported consolidated net income for the three months ended June 30, 2025, of $11,000, compared to $3,000 for the same period in 2024, indicating a significant recovery in credit losses[153] - The allowance for credit losses related to unfunded commitments and standby letters of credit was $246,000 as of June 30, 2025, down from $966,000 at December 31, 2024, reflecting improved credit quality[153] - The Company recorded a provision for credit losses recovery of $720,000 for the six months ended June 30, 2025, compared to $1,000 for the same period in 2024, highlighting a significant improvement in credit loss management[153] Lending Activity - The Company had outstanding commitments to extend credit of approximately $253.3 million as of June 30, 2025, compared to $233.2 million as of December 31, 2024, showing an increase in lending activity[152] Pension Management - The net periodic pension benefit for the three months ended June 30, 2025, was $(487,000), compared to $(118,000) for the same period in 2024, indicating a shift towards a net benefit due to changes in pension plan management[156] - The Company implemented a soft freeze of its defined benefit pension plan, affecting non-union employees hired on or after January 1, 2013, to reduce future pension costs[160] - The Company recognized no settlement charge in connection with its defined benefit pension plan for the first six months of 2025, compared to a charge of $376,000 in the same period of 2024, reflecting a positive trend in pension management[158] Asset Valuation - The fair value of equity securities was $600,000 as of June 30, 2025, unchanged from December 31, 2024, indicating stability in this asset class[165] - The Company’s total assets measured at fair value included $179,000 in equity securities and $103,530,000 in U.S. Agency mortgage-backed securities as of June 30, 2025[170] - The carrying value of investment securities held to maturity (HTM) as of June 30, 2025, is $67,555,000, with a fair value of $63,280,000, indicating a fair value discount of approximately 6.7%[180] - Loans, net of allowance for credit losses and unearned income, have a carrying value of $1,055,000,000 and a fair value of $1,042,003,000 as of June 30, 2025, reflecting a slight decrease in fair value[180] - The company reported that deposits with stated maturities have a carrying value of $376,149,000 and a fair value of $375,741,000, showing minimal variance[180] - As of December 31, 2024, the fair value of loans held for sale was $470,000, compared to a carrying value of $460,000, indicating a fair value premium of approximately 2.2%[181] - The company utilizes independent third-party valuations for fair value measurements, with significant estimates and present value calculations applied to financial instruments lacking an active market[178] - The fair value of all financial instruments is categorized into Level 1, Level 2, and Level 3 measurements, with the majority being Level 1[179] Market Risk Management - The company manages market risk primarily through interest rate risk management strategies, as discussed in the Interest Rate Sensitivity section of the MD&A[277] - Changes in assumptions or estimation methodologies may materially affect the estimated fair values of the company's financial instruments[182] Real Estate Valuation - As of June 30, 2025, the fair value of other real estate owned and repossessed assets is $258,000, down from $1,724,000 on December 31, 2024, representing a decrease of approximately 85%[176] - The fair value measurement for other real estate owned and repossessed assets includes appraisal adjustments ranging from 15% to 63% with a weighted average of 45% as of June 30, 2025[177]