AmeriServ Financial(ASRV) - 2025 Q3 - Quarterly Results

Executive Summary & Highlights Third Quarter 2025 Performance AmeriServ Financial reported record quarterly earnings in Q3 2025, driven by significant improvements in net interest income and effective balance sheet management, leading to a substantial increase in net income and diluted EPS compared to the prior year Third Quarter Financial Performance (YoY) (in thousands) | Metric | Q3 2025 | Q3 2024 | Change ($) | Change (%) | | :--------------------- | :------------ | :------------ | :------------ | :------------ | | Net income | $2,544 | $1,183 | $1,361 | 115.0% | | Diluted earnings per share | $0.15 | $0.07 | $0.08 | 114.3% | - The increase in total revenue was primarily due to a meaningful improvement in net interest income, which represents approximately 70% of total revenue[1] Nine Months Ended September 30, 2025 Performance For the first nine months of 2025, the Company achieved a significant increase in net income and diluted EPS, primarily due to a $4.8 million increase in net interest income and a favorable decline in non-interest expense, despite higher provision for credit losses Nine Months Ended September 30 Financial Performance (YoY) (in thousands) | Metric | 9M 2025 | 9M 2024 | Change ($) | Change (%) | | :--------------------- | :------------ | :------------ | :------------ | :------------ | | Net income | $4,170 | $2,712 | $1,458 | 53.8% | | Diluted earnings per share | $0.25 | $0.16 | $0.09 | 56.3% | - Net interest margin increased by 41-basis points for the first nine months of 2025, contributing to a $4.8 million increase in net interest income[1] - Non-interest expense favorably declined for the first nine months of 2025, contributing to improved operating efficiency[1] CEO Commentary Jeffrey A. Stopko, President and CEO, highlighted the Company's focus on generating positive operating leverage through effective balance sheet management, leading to record quarterly earnings. He emphasized continued diligence on revenue growth and expense control to enhance operating efficiency - AmeriServ Financial achieved record quarterly earnings in Q3 2025 due to a continued focus on generating positive operating leverage[1] - The increase in total revenue was caused by meaningful improvement in net interest income for both the third quarter and first nine months of 2025 because of effective balance sheet management[1] - Management will continue to diligently focus on both revenue growth and expense control to further improve the Company's operating efficiency[1] Financial Performance Analysis Net Interest Income and Margin Net interest income saw substantial growth in both the third quarter and the first nine months of 2025, driven by a significant improvement in net interest margin, effective balance sheet management, and favorable interest rate movements Net Interest Income and Margin Performance | Metric | Q3 2025 | Q3 2024 | 9M 2025 | 9M 2024 | | :----------------- | :---------- | :---------- | :---------- | :---------- | | Net Interest Income | +$2.1M (23.9%) | | +$4.8M (18.2%) | | | Net Interest Margin | 3.27% | 2.71% | 3.13% | 2.72% | | NIM Improvement | +56 bps | | +41 bps | | - The Federal Reserve's action to lower short-term interest rates during the latter portion of 2024 favorably impacted total interest-bearing deposits and borrowings costs[2] - Management anticipates continued net interest margin improvement through the remainder of 2025 due to effective strategy execution and the Federal Reserve's September 2025 monetary policy easing[2] Loan and Investment Portfolio Performance The Company experienced growth in average loans and investment securities, contributing to increased interest income. Loan fee income significantly improved, and the investment portfolio benefited from higher yields and strategic purchases Loan and Investment Portfolio Growth (YoY) | Metric | 9M 2025 Average | 9M 2024 Average | Change ($) | Change (%) | | :----------------------------------- | :-------------- | :-------------- | :------------ | :------------ | | Total average loans | $1,066.8M | $1,030.9M | $35.9M | 3.5% | | Total investment securities (Q3 avg) | $242.9M | $238.5M | $4.4M | 1.8% | | Securities portfolio (since Dec 31, 2024) | +$17.3M | | | 7.9% | Interest Income from Loans and Investments (YoY) | Metric | 9M 2025 | 9M 2024 | Change ($) | Change (%) | | :------------------------- | :------------ | :------------ | :------------ | :------------ | | Total loan interest income | +$3.0M | | | 7.2% | | Loan fee income | +$544K | | | 95.8% | | Interest income from investments (Q3) | +$388K | | | 16.1% | | Interest income from investments (9M) | +$704K | | | 9.6% | - Loan payoff activity exceeded originations in 2025, resulting in a $12.7 million (1.2%) decrease in total loans since December 31, 2024[3] Deposit Growth and Funding Costs The Company achieved significant deposit growth, strengthening its liquidity and reducing reliance on borrowed funds. Interest expense decreased due to effective monetary policy easing by the Federal Reserve, leading to an improved total deposit cost Deposit and Interest Expense Performance (YoY) | Metric | 9M 2025 Average | 9M 2024 Average | Change ($) | Change (%) | | :----------------------------------- | :-------------- | :-------------- | :------------ | :------------ | | Total average deposits | +$69.5M | | | 6.0% | | Total interest expense (Q3) | -$345K | | | -4.4% | | Total interest expense (9M) | -$1.1M | | | -4.7% | | Deposit interest expense (9M) | -$22K | | | -0.1% | | Total average interest-bearing deposits (9M) | +$71.9M | | | 7.3% | | Total deposit cost (9M) | 2.07% | 2.19% | -12 bps | | - The Company's core deposit base continues to demonstrate strength and stability, and it does not utilize brokered deposits[7] - The loan to deposit ratio averaged 86.2% in Q3 2025, indicating ample capacity for continued loan portfolio growth[7] - Borrowings interest expense decreased significantly due to lower utilization of overnight borrowed funds, a direct result of higher total average deposits and the Federal Reserve's 2024 monetary policy easing[9] Provision for Credit Losses and Asset Quality The Company recognized a higher provision for credit losses in both the third quarter and first nine months of 2025, primarily due to specific reserve increases and a significant charge-off. Despite this, non-performing assets decreased, and the allowance for loan credit losses provided strong coverage Provision for Credit Losses (YoY) (in thousands) | Metric | Q3 2025 | Q3 2024 | 9M 2025 | 9M 2024 | | :----------------------------------- | :------------ | :------------ | :------------ | :------------ | | Provision (recovery) for credit losses | $360 | ($51) | $3,396 | ($174) | | Net unfavorable change | +$411 | | +$3,570 | | Asset Quality Metrics | Metric | Sep 30, 2025 | Change since Jun 30, 2025 | | :----------------------------------- | :------------ | :------------------------ | | Non-performing assets | $15.0M | -$1.5M (-8.9%) | | Non-performing loans as % of total loans | 1.39% | | | Net loan charge-offs (9M 2025) | $2.9M (0.37%) | | | Net loan charge-offs (9M 2024) | $488K (0.06%) | | | Allowance for loan credit losses coverage of non-performing loans | 98% | | | Allowance for loan credit losses as % of total loans | 1.36% | | - The significant increase in the nine-month provision for credit losses was related to an additional $2.8 million charge-off to resolve the Company's largest problem asset[10] Non-Interest Income Non-interest income showed mixed results, increasing in the third quarter but declining year-to-date. Wealth management fees were lower due to market volatility, while BOLI revenue increased significantly, and new trading securities generated gains Non-Interest Income Performance (YoY) | Metric | Q3 2025 | Q3 2024 | 9M 2025 | 9M 2024 | | :------------------------- | :------------ | :------------ | :------------ | :------------ | | Total non-interest income | +$198K (4.7%) | | -$904K (-6.7%) | | | Wealth management fees (Q3) | -$201K (-6.6%) | | | | | Wealth management fees (9M) | | | -$880K (-9.4%) | | | BOLI revenue (Q3) | +$289K | | | | | BOLI revenue (9M) | | | +$220K (26.8%) | | | Mortgage banking revenue (Q3) | -$46K (-54.1%) | | | | | Mortgage banking revenue (9M) | | | -$106K (-45.9%) | | | Gains on trading securities (Q3) | $55K | $0 | | | | Gains on trading securities (9M) | | | $90K | $0 | - The decline in wealth management fees was attributed to financial market volatility and uncertainty, particularly in early 2025[12] - Other income was lower year-to-date due to a $250,000 Visa signing bonus recognized in Q1 2024 that did not recur in 2025[14] Non-Interest Expense Total non-interest expense increased in the third quarter but decreased year-to-date, primarily due to lower professional fees following the resolution of litigation and the absence of a pension settlement charge. However, salaries and employee benefits saw an increase driven by healthcare costs and merit raises Non-Interest Expense Performance (YoY) | Metric | Q3 2025 | Q3 2024 | 9M 2025 | 9M 2024 | | :------------------------- | :------------ | :------------ | :------------ | :------------ | | Total non-interest expense | +$243K (2.1%) | | -$1.4M (-3.9%) | | | Professional fees (Q3) | -$191K (-24.1%) | | | | | Professional fees (9M) | | | -$1.7M (-43.7%) | | | Other expenses (9M) | -$147K (-3.7%) | | | | | Salaries & employee benefits (9M) | +$269K (1.3%) | | | | | Health care costs (9M) | +$364K (15.1%) | | | | | Total salaries (9M) | +$411K (2.7%) | | | | | Incentive compensation (9M) | -$444K (-37.8%) | | | | - The significant decrease in professional fees for the nine months was due to the resolution of litigation and activist investor actions in 2024[15] - Lower other expenses year-to-date were primarily driven by the absence of a $410,000 pension settlement charge recognized in 2024[15] Income Tax Expense Income tax expense increased for the first nine months of 2025, with a stable effective tax rate compared to the prior year Income Tax Expense (YoY) (in thousands) | Metric | 9M 2025 | 9M 2024 | | :-------------------- | :------------ | :------------ | | Income tax expense | $948 | $611 | | Effective tax rate | 18.5% | 18.4% | Financial Condition and Capital Balance Sheet Overview As of September 30, 2025, the Company maintained a strong financial position with total assets of $1.46 billion and healthy shareholders' equity Key Financial Condition Data (September 30, 2025) | Metric | Amount | | :------------------- | :------------ | | Total assets | $1.46 billion | | Shareholders' equity | $114.6 million | Capital Ratios and Book Value The Company continued to maintain strong capital ratios, exceeding regulatory 'well capitalized' status. Book value and tangible book value per common share increased significantly year-over-year due to favorable adjustments and improved earnings Book Value and Capital Ratios (September 30, 2025) | Metric | Amount | Change since Sep 30, 2024 | | :--------------------------- | :------------ | :------------------------ | | Book value per common share | $6.94 | +$0.39 (6.0%) | | Tangible book value per common share | $6.11 | +$0.39 (6.8%) | | Total capital (to risk weighted assets) ratio | 12.97% | | | Tangible common equity ratio | 6.97% | | - The Company continued to maintain strong capital ratios that exceed the regulatory defined well capitalized status as of September 30, 2025[18] Dividend Announcement The Board of Directors declared a quarterly common stock cash dividend of $0.03 per share, reflecting a 4.0% annualized yield and a 36% payout ratio based on year-to-date earnings Quarterly Common Stock Cash Dividend | Metric | Value | | :---------------------- | :------------ | | Dividend per share | $0.03 | | Payment Date | November 17, 2025 | | Record Date | November 3, 2025 | | Annualized Yield (Oct 17, 2025 closing price of $3.01) | 4.0% | | Payout Ratio (2025 YTD earnings) | 36% | Forward-Looking Statements This section contains standard forward-looking statements, which are subject to risks and uncertainties that could cause actual results to differ materially from expectations. These statements are based on management's current views and assumptions and are not guarantees of future performance - Forward-looking statements are not historical facts and include expressions about management's confidence, strategies, views, and expectations regarding programs, products, relationships, opportunities, technology, market conditions, and future payment obligations[20] - Actual results may differ materially due to factors such as changes in financial markets, inflation, interest rates, competition, loan and investment prepayments, credit losses, economic decline, regulatory changes, and operational risks[20][21] - AmeriServ undertakes no responsibility to publicly update or revise any forward-looking statement[22] Supplemental Financial Data Performance Data This section provides detailed quarterly and year-to-date performance metrics for 2025 and 2024, including net income, return on assets and equity, net interest margin, charge-offs, efficiency ratio, and earnings per common share Key Performance Data (2025 vs 2024) (in thousands) | Metric | 3QTR 2025 | 3QTR 2024 | YTD 2025 | YTD 2024 | | :----------------------------------------- | :-------- | :-------- | :------- | :------- | | Net income (loss) | $2,544 | $1,183 | $4,170 | $2,712 | | Return on average assets (annualized) | 0.70 % | 0.34 % | 0.39 % | 0.26 % | | Return on average equity (annualized) | 9.06 | 4.51 | 5.05 | 3.52 | | Net interest margin | 3.27 | 2.71 | 3.13 | 2.72 | | Net charge-offs (recoveries) as % of avg loans | (0.01) | 0.06 | 0.37 | 0.06 | | Efficiency ratio | 77.55 | 89.49 | 80.55 | 92.09 | | Diluted earnings per share | $0.15 | $0.07 | $0.25 | $0.16 | Financial Condition Data This section presents quarterly financial condition data for 2025 and 2024, including assets, liabilities, equity, non-performing assets, and key ratios, providing a snapshot of the Company's balance sheet at period end Key Financial Condition Data (Quarterly) (in thousands) | Metric | 1QTR 2025 | 2QTR 2025 | 3QTR 2025 | 4QTR 2024 | | :----------------------------------------- | :------------ | :------------ | :------------ | :------------ | | Assets | $1,431,524 | $1,448,733 | $1,461,494 | $1,422,362 | | Total loans and loans held for sale, net of unearned income | $1,062,326 | $1,069,220 | $1,055,683 | $1,068,409 | | Deposits | $1,216,838 | $1,244,533 | $1,258,588 | $1,200,995 | | Shareholders' equity | $110,759 | $110,921 | $114,575 | $107,248 | | Non-performing assets | $14,971 | $16,419 | $14,953 | $13,657 | | Tangible common equity ratio | 6.85% | 6.78% | 6.97% | 6.64% | | Book value per share | $6.70 | $6.71 | $6.94 | $6.49 | | Wealth management assets – fair market value | $2,486,920 | $2,583,839 | $2,661,214 | $2,559,155 | Consolidated Statement of Income This section provides detailed quarterly and year-to-date consolidated statements of income for 2025 and 2024, breaking down interest income, interest expense, net interest income, provision for credit losses, non-interest income, non-interest expense, and net income Consolidated Statement of Income (YTD) (in thousands) | Metric | YTD 2025 | YTD 2024 | | :----------------------------------------- | :------------ | :------------ | | Total Interest Income | $53,194 | $49,442 | | Total Interest Expense | $21,862 | $22,933 | | NET INTEREST INCOME | $31,332 | $26,509 | | Provision (recovery) for credit losses | $3,396 | ($174) | | Total Non-Interest Income | $12,618 | $13,522 | | Total Non-Interest Expense | $35,436 | $36,882 | | PRETAX INCOME (LOSS) | $5,118 | $3,323 | | Income tax expense (benefit) | $948 | $611 | | NET INCOME (LOSS) | $4,170 | $2,712 | Average Balance Sheet Data This section presents average balance sheet data for the third quarter and nine months ended September 30, 2025 and 2024, detailing interest-earning assets, non-interest-earning assets, interest-bearing liabilities, and non-interest-bearing liabilities Average Balance Sheet Data (9 Months Ended) (in thousands) | Metric | 9M 2025 | 9M 2024 | | :----------------------------------------- | :------------ | :------------ | | Total interest earning assets | $1,320,743 | $1,273,086 | | Total assets | $1,442,347 | $1,391,089 | | Total interest bearing deposits | $1,055,586 | $983,729 | | Total interest bearing liabilities | $1,144,268 | $1,095,965 | | Shareholders' equity | $110,382 | $103,030 | Changes in Shareholders' Equity This section details the changes in shareholders' equity on a quarterly basis for 2025 and 2024, showing the impact of net income/loss, adjustments for unrealized gains/losses on available-for-sale securities, pension plan adjustments, and common stock cash dividends Changes in Shareholders' Equity (YTD September 30, 2025) (in thousands) | Metric | Amount | | :----------------------------------------- | :------------ | | Balance at December 31, 2024 | $107,248 | | Net income | $4,170 | | Adjustment for unrealized gain on available for sale securities | $4,635 | | Market value adjustment for interest rate hedge | $8 | | Common stock cash dividend | ($1,486) | | Balance at September 30, 2025 | $114,575 | Reconciliation of Non-GAAP Financial Measures This section provides a reconciliation of non-GAAP financial measures, including return on average tangible common equity, tangible common equity ratio, and tangible book value per share, to their most directly comparable GAAP measures for 2025 and 2024 - Non-GAAP financial measures are used by management to analyze performance and facilitate understanding of the Company's ongoing financial and business performance or trends[38] Non-GAAP Financial Measures (YTD 2025) (in thousands) | Metric | YTD 2025 | | :----------------------------------------- | :------------ | | Net income (loss) | $4,170 | | Average shareholders' equity | $110,382 | | Less: Average intangible assets | $13,679 | | Average tangible common equity | $96,703 | | Return on average tangible common equity (annualized) | 5.77% | | Tangible common equity | $100,903 | | Tangible assets | $1,447,822 | | Tangible common equity ratio | 6.97% | | Tangible book value per share | $6.11 |