SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report
Pursuant to Section 13 or 15(d) of the Securities Act of 1934
Date of Report (Date of earliest event reported) April 18, 2017
AMERISERV FINANCIAL, Inc.
(exact name of registrant as specified in its charter)
Pennsylvania 0-11204 25-1424278
(State or other (commission (I.R.S. Employer
jurisdiction File Number) Identification No.)
of Incorporation)
Main and Franklin Streets, Johnstown, Pa. 15901
(address or principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 814-533-5300
N/A
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under
any of the following provisions:
( ) Written communications pursuant to Rule 425 under the Securities
Act (17 CFR 230.425)
( ) Soliciting material pursuant to Rule 14a-12 under the Exchange
Act (17 CFR 240.14a-12)
( ) Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
( ) Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4c))
Form 8-K
Item 2.02 Results of operation and financial condition.
AMERISERV FINANCIAL Inc. (the "Registrant") announced first quarter 2017 results through March 31, 2017. For a more detailed description of the announcement see the press release attached as Exhibit 99.1.
Exhibits
--------
Exhibit 99.1
Press release dated April 18, 2017, announcing first quarter 2017 earnings through March 31, 2017.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
AMERISERV FINANCIAL, Inc.
By /s/Michael D. Lynch
Michael D. Lynch
SVP & CFO
Date: April 18, 2017
Exhibit 99.1
AMERISERV FINANCIAL REPORTS EARNINGS FOR THE FIRST QUARTER OF 2017
JOHNSTOWN, PA – AmeriServ Financial, Inc. (NASDAQ: ASRV) reported first quarter 2017 net income available to common shareholders of $1,348,000, or $0.07 per diluted common share. This represents a significant improvement of $2.6 million from the first quarter of 2016 net loss available to common shareholders of $1,282,000, or ($0.07) per diluted common share. The following table highlights the Company’s financial performance for the quarters ended March 31, 2017 and 2016:
| First Quarter 2017 | First Quarter 2016 | $ Change | % Change |
|
|
|
|
|
Net income (loss) | $1,348,000 | ($1,267,000) | $2,615,000 | 206.4% |
Net income (loss) available to common shareholders | $1,348,000 | ($1,282,000) | $2,630,000 | 205.1% |
Diluted earnings per share | $ 0.07 | ($ 0.07) | $ 0.14 | 200.0% |
Jeffrey A. Stopko, President and Chief Executive Officer, commented on the first quarter 2017 financial results: “Our improved earnings in the first quarter of 2017 resulted from growth in total revenue, a reduction in non-interest expense and a controlled loan loss provision due to outstanding asset quality. Our balance sheet is well positioned for higher interest rates and we began to see some of that benefit in the form of increased net interest income in the first quarter of 2017. Additionally, I was pleased to see the tangible benefit from several profitability improvement initiatives that we executed last year as each of our reported non-interest expense categories favorably declined in the first quarter of 2017.”
The Company’s net interest income in the first quarter of 2017 increased by $163,000, or 1.9%, when compared to the first quarter of 2016. The Company’s net interest margin of 3.27% for the first quarter of 2017 was three basis points lower than the net interest margin of 3.30% for the first quarter 2016 but improved by nine basis points from the 3.18% margin reported for the more recent fourth quarter 2016 performance. The improvement in net interest income is a result of a higher volume of total earning assets which more than offset the lower net interest margin. The Company continues to grow earning assets while also controlling its cost of funds through disciplined deposit pricing. Specifically, the earning asset growth occurred in, both, the investment securities portfolio and the loan portfolio. Total investment securities averaged $168 million in the first quarter of 2017 which is $26.1 million or 18.4% higher than the $142 million average for the first quarter of 2016 while total loans averaged $890 million in the first quarter of 2017 which is $8.8 million, or 1.0%, higher than the $881 million average for the first quarter of 2016. The growth in the investment securities portfolio is the result of management electing to diversify the mix of the investment securities portfolio through purchases of high quality corporate and taxable municipal securities. This revised strategy for securities purchases was facilitated by the increase in national interest rates and the steepening yield curve that resulted in improved opportunities to purchase additional securities and grow the portfolio. As a result, interest on investments increased between years by $235,000 or 24.6%. The growth in the loan portfolio reflects the successful results of the Company’s business development efforts, with an emphasis on generating commercial loans and owner occupied commercial real estate loans particularly through its loan production offices. The year over year loan growth was lower in comparison to what the Company has recently experienced due to a slowdown in production during the second half of 2016 that was caused by uncertainty in the economy because of the Presidential election. Loan production has since returned to more normal and higher levels. Loan interest income increased by $91,000, or 1.0% even though prepayment fee income on early loan payoffs were approximately $110,000 lower in the first quarter of 2017 when compared to the first quarter of 2016. Overall, total interest income increased by $326,000, or 3.1%, between years.
Total interest expense for the first quarter of 2017 increased by $163,000, or 8.7%, due to a higher level of deposit interest expense. The Company experienced growth in deposits which we believe reflects the loyalty of our core deposit base that provides a strong foundation upon which this growth builds. Management’s ability to acquire new core deposit funding from outside of our traditional market areas as well as our ongoing efforts to offer new loan customers deposit products were the primary reasons for this growth. Specifically, total deposits averaged $976 million for the first quarter of 2017 which is $66.0 million, or 7.3%, higher than the $910 million average for the first quarter of 2016. The Company is also pleased that a meaningful portion of this deposit growth occurred in non-interest bearing demand deposit accounts. Deposit interest expense in 2017 increased by $182,000, or 14.5%, due to the higher balance of deposits along with certain money market accounts repricing upward after the Federal Reserve elected to increase the overnight fed funds interest rate in December of 2016 and again in March of 2017. As a result of the strong deposit growth, the Company’s loan to deposit ratio averaged 91.2% in the first quarter of 2017 which indicates that the Company has ample room to further grow its loan portfolio in 2017. The Company experienced a $19,000 decrease in the interest cost for borrowings in the first quarter of 2017 because there was a lower level of total borrowed funds due to the deposit growth. Total borrowings decreased by $24.2 million or 24.4% and more than offset the immediate impact that the increases in the Federal Funds Rate had on the cost of borrowed funds.
The Company recorded a $225,000 provision for loan losses in the first quarter of 2017 compared to a $3.1 million provision for loan losses in the first quarter of 2016, or a decrease of $2.875 million between periods. Both, the loan loss provision and net charge-offs were at more typical levels this year than the substantially higher levels that were necessary last year to resolve a troubled loan exposure to the energy industry. The provision recorded in the first quarter of 2017 supported the continuing loan growth and more than covered the low level of net loan charge-offs incurred in the first quarter of 2017. The Company experienced net loan charge-offs of $77,000, or 0.04% of total loans, in the first quarter of 2017 compared to net loan charge-offs of $3.4 million, or 1.60% of total loans, in the first quarter of 2016. Overall, the Company continued to maintain excellent asset quality as its non-performing assets totaled $1.5 million, or only 0.17% of total loans, at March 31, 2017. In summary, the allowance for loan losses provided a strong 677% coverage of non-performing loans, and 1.12% of total loans, at March 31, 2017, compared to 612% coverage of non-performing loans, and 1.12% of total loans, at December 31, 2016.
Total non-interest income in the first quarter of 2017 increased by $125,000, or 3.6%, from the first quarter of 2016. Trust and investment advisory fees increased by $91,000 due to a higher level of fee income that resulted from the effective management of client accounts as asset market values improved. Other income was also higher due to an increase in income from our Financial Services business unit by $57,000 as wealth management continues to be an important strategic focus of the Company. These positive items were partially offset by service charges on deposits declining by $41,000 due to a reduced level of overdraft fee income. The Company did recognize a $27,000 gain from an investment security sale transaction in the first quarter of 2017. However, the amount of the gain was $30,000 less than what was recognized last year.
The Company’s total non-interest expense in the first quarter of 2017 decreased significantly by $626,000, or 5.8%, when compared to the first quarter of 2016. This decrease was primarily attributable to two factors. First, as noted in previously disclosed financial results, the Company incurred $366,000 of non-recurring costs for legal and accounting services that were necessary in 2016 to resolve a trust operations trading error. There were no such costs in 2017. Second, improved efficiencies contributed to the remainder of this positive comparison between quarters. Specifically, salaries and employee benefits were down by $156,000, or 2.5%, as there were 10 fewer full time equivalent employees in the first quarter of 2017 due primarily to a branch consolidation and closure of an unprofitable loan production office. This ongoing focus to reduce and control non-interest expense was also evident in net occupancy expense and equipment expense, which decreased by a combined $80,000, or 6.8% in the first quarter of 2017. The Company also recorded an income tax expense of $625,000, or an effective tax rate of 31.7%, in the first quarter of 2017. This compares to an income tax benefit of $549,000, or an effective tax rate of -30.2%, for the first quarter of 2016.
The Company had total assets of $1.17 billion, shareholders’ equity of $95.6 million, a book value of $5.12 per common share and a tangible book value of $4.48 per common share at March 31, 2017. In accordance with the common stock buyback program announced on January 24, 2017, the Company returned $992,000 of capital to its shareholders through the repurchase of 251,800 shares of its common stock in the first quarter of 2017. The Company continued to maintain strong capital ratios that exceed the regulatory defined well capitalized status.
This news release may contain forward-looking statements that involve risks and uncertainties, as defined in the Private Securities Litigation Reform Act of 1995, including the risks detailed in the Company's Annual Report and Form 10-K to the Securities and Exchange Commission. Actual results may differ materially.
NASDAQ: ASRV
SUPPLEMENTAL FINANCIAL PERFORMANCE DATA
March 31, 2017
(In thousands, except per share and ratio data)
(Unaudited)
2017
| 1QTR |
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PERFORMANCE DATA FOR THE PERIOD: |
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Net income | $1,348 |
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Net income available to common shareholders | 1,348 |
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PERFORMANCE PERCENTAGES (annualized): |
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Return on average assets | 0.47% |
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Return on average equity | 5.74 |
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Net interest margin | 3.27 |
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Net charge-offs as a percentage of average loans | 0.04 |
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Loan loss provision as a percentage of average loans | 0.10 |
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Efficiency ratio | 82.04 |
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PER COMMON SHARE: |
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Net income: |
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Basic | $0.07 |
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Average number of common shares outstanding | 18,814 |
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Diluted | 0.07 |
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Average number of common shares outstanding | 18,922 |
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Cash dividends declared | $0.015 |
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2016
| 1QTR | 2QTR | 3QTR | 4QTR | YEAR |
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| TO DATE |
PERFORMANCE DATA FOR THE PERIOD: |
|
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Net income (loss) | $(1,267) | $1,362 | $1,065 | $1,150 | $2,310 |
Net income (loss) available to common shareholders | (1,282) | 1,362 | 1,065 | 1,150 | 2,295 |
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PERFORMANCE PERCENTAGES (annualized): |
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Return on average assets | (0.45)% | 0.48% | 0.37% | 0.40% | 0.20% |
Return on average equity | (4.86) | 5.60 | 4.27 | 4.58 | 2.30 |
Net interest margin | 3.30 | 3.23 | 3.15 | 3.18 | 3.26 |
Net charge-offs as a percentage of average loans | 1.60 | 0.01 | 0.14 | 0.04 | 0.44 |
Loan loss provision as a percentage of average loans | 1.42 | 0.11 | 0.13 | 0.13 | 0.44 |
Efficiency ratio | 89.24 | 82.05 | 85.07 | 84.82 | 85.27 |
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PER COMMON SHARE: |
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Net income (loss): |
|
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|
Basic | $(0.07) | $0.07 | $0.06 | $0.06 | $0.12 |
Average number of common shares outstanding | 18,884 | 18,897 | 18,899 | 18,903 | 18,896 |
Diluted | (0.07) | 0.07 | 0.06 | 0.06 | 0.12 |
Average number of common shares outstanding | 18,884 | 18,948 | 18,957 | 18,990 | 18,955 |
Cash dividends declared | $0.010 | $0.010 | $0.015 | $0.015 | $0.050 |
AMERISERV FINANCIAL, INC.
(In thousands, except per share, statistical, and ratio data)
(Unaudited)
2017
| 1QTR |
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|
FINANCIAL CONDITION DATA AT PERIOD END |
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Assets | $1,172,127 |
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Short-term investments/overnight funds | 8,320 |
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Investment securities | 165,781 |
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Loans and loans held for sale | 899,456 |
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Allowance for loan losses | 10,080 |
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Goodwill | 11,944 |
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Deposits | 964,776 |
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FHLB borrowings | 79,718 |
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Subordinated debt, net | 7,447 |
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Shareholders’ equity | 95,604 |
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Non-performing assets | 1,488 |
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Tangible common equity ratio | 7.21 |
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Total capital (to risk weighted assets) ratio | 13.03 |
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PER COMMON SHARE: |
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Book value | $5.12 |
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Tangible book value | 4.48 |
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Market value | 3.75 |
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Trust assets – fair market value (A) | $2,025,304 |
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STATISTICAL DATA AT PERIOD END: |
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Full-time equivalent employees | 307 |
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Branch locations | 16 |
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Common shares outstanding | 18,666,520 |
|
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2016
| 1QTR | 2QTR | 3QTR | 4QTR |
FINANCIAL CONDITION DATA AT PERIOD END |
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|
Assets | $1,121,701 | $1,142,492 | $1,145,655 | $1,153,780 |
Short-term investments/overnight funds | 5,556 | 6,836 | 8,279 | 8,966 |
Investment securities | 139,000 | 145,753 | 145,609 | 157,742 |
Loans and loans held for sale | 882,410 | 895,513 | 896,301 | 886,858 |
Allowance for loan losses | 9,520 | 9,746 | 9,726 | 9,932 |
Goodwill | 11,944 | 11,944 | 11,944 | 11,944 |
Deposits | 906,773 | 940,931 | 962,736 | 967,786 |
FHLB borrowings | 88,952 | 72,617 | 56,943 | 58,296 |
Subordinated debt, net | 7,424 | 7,430 | 7,435 | 7,441 |
Shareholders’ equity | 97,589 | 99,232 | 100,044 | 95,395 |
Non-performing assets | 3,007 | 2,230 | 1,907 | 1,624 |
Tangible common equity ratio | 7.72 | 7.72 | 7.77 | 7.31 |
Total capital (to risk weighted assets) ratio | 13.11 | 13.04 | 13.17 | 13.15 |
PER COMMON SHARE: |
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Book value | $5.16 | $5.25 | $5.29 | $5.05 |
Tangible book value | 4.53 | 4.62 | 4.66 | 4.41 |
Market value | 2.99 | 3.02 | 3.32 | 3.70 |
Trust assets – fair market value (A) | $1,974,180 | $1,982,868 | $2,011,344 | $1,992,978 |
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STATISTICAL DATA AT PERIOD END: |
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Full-time equivalent employees | 317 | 311 | 310 | 305 |
Branch locations | 16 | 16 | 16 | 16 |
Common shares outstanding | 18,894,561 | 18,896,876 | 18,903,472 | 18,903,472 |
NOTES:
(A) Not recognized on the consolidated balance sheets.
AMERISERV FINANCIAL, INC.
CONSOLIDATED STATEMENT OF INCOME
(In thousands)
(Unaudited)
2017
| 1QTR |
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INTEREST INCOME |
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Interest and fees on loans | $9,556 |
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Interest on investments | 1,192 |
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Total Interest Income | 10,748 |
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INTEREST EXPENSE |
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Deposits | 1,436 |
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All borrowings | 591 |
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Total Interest Expense | 2,027 |
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NET INTEREST INCOME | 8,721 |
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Provision for loan losses | 225 |
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NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES | 8,496 |
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NON-INTEREST INCOME |
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Trust and investment advisory fees | 2,166 |
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Service charges on deposit accounts | 374 |
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Net realized gains on loans held for sale | 114 |
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Mortgage related fees | 75 |
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Net realized gains on investment securities | 27 |
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Bank owned life insurance | 141 |
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Other income | 665 |
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Total Non-Interest Income | 3,562 |
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NON-INTEREST EXPENSE |
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Salaries and employee benefits | 6,010 |
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Net occupancy expense | 674 |
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Equipment expense | 419 |
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Professional fees | 1,200 |
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FDIC deposit insurance expense | 160 |
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Other expenses | 1,622 |
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Total Non-Interest Expense | 10,085 |
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PRETAX INCOME | 1,973 |
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Income tax expense | 625 |
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NET INCOME AVAILABLE TO COMMON SHAREHOLDERS | 1,348 |
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2016
| 1QTR | 2QTR | 3QTR | 4QTR | YEAR |
INTEREST INCOME |
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| TO DATE |
Interest and fees on loans | $9,465 | $9,409 | $9,462 | $9,525 | $37,861 |
Interest on investments | 957 | 980 | 1,014 | 1,057 | 4,008 |
Total Interest Income | 10,422 | 10,389 | 10,476 | 10,582 | 41,869 |
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INTEREST EXPENSE |
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Deposits | 1,254 | 1,330 | 1,391 | 1,425 | 5,400 |
All borrowings | 610 | 573 | 579 | 573 | 2,335 |
Total Interest Expense | 1,864 | 1,903 | 1,970 | 1,998 | 7,735 |
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NET INTEREST INCOME | 8,558 | 8,486 | 8,506 | 8,584 | 34,134 |
Provision for loan losses | 3,100 | 250 | 300 | 300 | 3,950 |
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES | 5,458 | 8,236 | 8,206 | 8,284 | 30,184 |
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NON-INTEREST INCOME |
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Trust and investment advisory fees | 2,075 | 2,124 | 2,035 | 2,099 | 8,333 |
Service charges on deposit accounts | 415 | 404 | 433 | 422 | 1,674 |
Net realized gains on loans held for sale | 107 | 185 | 260 | 332 | 884 |
Mortgage related fees | 63 | 98 | 132 | 74 | 367 |
Net realized gains (losses) on investment securities | 57 | 60 | 60 | - | 177 |
Bank owned life insurance | 167 | 169 | 169 | 170 | 675 |
Other income | 553 | 702 | 572 | 701 | 2,528 |
Total Non-Interest Income | 3,437 | 3,742 | 3,661 | 3,798 | 14,638 |
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NON-INTEREST EXPENSE |
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Salaries and employee benefits | 6,166 | 5,868 | 5,901 | 6,099 | 24,034 |
Net occupancy expense | 737 | 690 | 656 | 699 | 2,782 |
Equipment expense | 436 | 409 | 419 | 424 | 1,688 |
Professional fees | 1,465 | 1,192 | 1,330 | 1,293 | 5,280 |
FDIC deposit insurance expense | 179 | 188 | 189 | 153 | 709 |
Other expenses | 1,728 | 1,692 | 1,861 | 1,841 | 7,122 |
Total Non-Interest Expense | 10,711 | 10,039 | 10,356 | 10,509 | 41,615 |
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PRETAX INCOME (LOSS) | (1,816) | 1,939 | 1,511 | 1,573 | 3,207 |
Income tax expense (benefit) | (549) | 577 | 446 | 423 | 897 |
NET INCOME (LOSS) | (1,267) | 1,362 | 1,065 | 1,150 | 2,310 |
Preferred stock dividends | 15 | - | - | - | 15 |
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS | $(1,282) | $1,362 | $1,065 | $1,150 | $2,295 |
AMERISERV FINANCIAL, INC.
NASDAQ: ASRV
Average Balance Sheet Data (In thousands)
(Unaudited)
2017 2016
|
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|
| 1QTR |
| 1QTR |
|
Interest earning assets: |
|
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|
|
Loans and loans held for sale, net of unearned income | $889,908 |
| $881,063 |
|
Short-term investment in money market funds | 7,940 |
| 3,484 |
|
Deposits with banks | 1,030 |
| 7,955 |
|
Total investment securities | 168,261 |
| 142,161 |
|
Total interest earning assets | 1,067,139 |
| 1,034,663 |
|
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Non-interest earning assets: |
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|
|
Cash and due from banks | 22,330 |
| 18,739 |
|
Premises and equipment | 11,804 |
| 12,090 |
|
Other assets | 67,794 |
| 67,751 |
|
Allowance for loan losses | (10,053) |
| (9,886) |
|
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|
|
|
|
Total assets | $1,159,014 |
| $1,123,357 |
|
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Interest bearing liabilities: |
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Interest bearing deposits: |
|
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|
|
Interest bearing demand | $127,531 |
| $ 101,293 |
|
Savings | 97,254 |
| 95,303 |
|
Money market | 278,811 |
| 264,433 |
|
Other time | 288,830 |
| 267,805 |
|
Total interest bearing deposits | 792,426 |
| 728,834 |
|
Borrowings: |
|
|
|
|
Federal funds purchased and other short-term borrowings | 8,863 |
| 29,449 |
|
Advances from Federal Home Loan Bank | 45,535 |
| 49,135 |
|
Guaranteed junior subordinated deferrable interest debentures | 13,085 |
| 13,085 |
|
Subordinated debt | 7,650 |
| 7,650 |
|
Total interest bearing liabilities | 867,559 |
| 828,153 |
|
|
|
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|
|
Non-interest bearing liabilities: |
|
|
|
|
Demand deposits | 183,532 |
| 181,096 |
|
Other liabilities | 12,613 |
| 9,370 |
|
Shareholders’ equity | 95,310 |
| 104,738 |
|
Total liabilities and shareholders’ equity | $1,159,014 |
| $1,123,357 |
|