SECURITIES AND EXCHANGE COMMISSION





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 17, 2018


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 2018 results through March 31, 2018 and announced an increased quarterly common stock cash dividend.  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 17, 2018, announcing first quarter 2018 earnings through March 31, 2018 and announcing an increased quarterly common stock cash dividend.



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 17, 2018







Exhibit 99.1


AMERISERV FINANCIAL REPORTS HIGHER 2018 FIRST QUARTER EARNINGS AND ANNOUNCES AN INCREASED QUARTERLY COMMON STOCK CASH DIVIDEND

JOHNSTOWN, PA - AmeriServ Financial, Inc. (NASDAQ: ASRV) reported first quarter 2018 net income of $1,767,000, or $0.10 per diluted common share.  This represented a $0.03, or 42.9%, increase in earnings per share from the first quarter of 2017 where net income totaled $1,348,000 or $0.07 per diluted common share.  The following table highlights the Company’s financial performance for the quarters ended March 31, 2018 and 2017:  


 

First Quarter

2018

First Quarter 2017

 


$ Change


% Change

 

 

 

 

 

 

Net income

$1,767,000

$1,348,000

 

$419,000

31.1%

Diluted earnings per share


$ 0.10


$ 0.07

 


$ 0.03


42.9%


COMMON STOCK DIVIDEND INCREASE

The Company also announced that its Board of Directors declared a $0.02 per share quarterly common stock cash dividend.  This new quarterly dividend amount represents a 33% increase from the previous $0.015 per share quarterly dividend.  The cash dividend is payable May 21, 2018 to shareholders of record on May 7, 2018.  This increased cash dividend represents an approximate 2.0% annualized yield using a recent common stock price of $4.10 and represents a payout ratio of 20% based upon the Company's reported first quarter 2018 earnings per share of $0.10.

Jeffrey A. Stopko, President and Chief Executive Officer, commented on the 2018 first quarter financial results: "I was pleased with the strong growth in earnings per share (EPS) that our Company achieved in the first quarter of 2018. This EPS growth resulted from a combination of lower income tax expense, positive operating leverage, and effective capital management.  As a result of the confidence that our Board of Directors has in AmeriServ Financial Inc.’s improved earnings power that was demonstrated in our first quarter results, we are pleased to return more capital to our shareholders through an increased common stock cash dividend.”  

The Company's net interest income in the first quarter of 2018 increased by $27,000, or 0.3%, from the prior year's first quarter.  The Company’s net interest margin of 3.29% for the first quarter of 2018 was two basis points higher than the net interest margin of 3.27% for the first quarter 2017.  The 2018 increase in net interest income and the improved net interest margin performance are the result of continued growth of the investment securities portfolio, a change in the mix of total investment securities and the positive impact from the higher interest rate environment.  The growth of investment securities offset a decrease in the balance of total loans as total average earning assets were relatively stable compared to the first quarter of 2017.  Specifically, total investment securities averaged $177 million in the first quarter of 2018 which was $8.9 million, or 5.3%, higher than the $168 million average for the first quarter of 2017.  Total loans averaged $881 million for the first quarter of 2018 which was $8.4 million, or 0.9%, lower than the 2017 first quarter average.  Also favorably impacting net interest income was the Company continuing to limit increases in its cost of funds through controlled but competitive deposit pricing.  


The growth in the investment securities portfolio is the result of a continuation of the strategy that management implemented last year, which included the diversification of the mix of the investment securities 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 resulted in improved opportunities to purchase additional securities and grow the portfolio.  As a result, interest on investments increased between the first quarter of 2018 and the first quarter of 2017 by $207,000, or 17.4%.  The combination of a higher level of early loan payoffs and a slowdown in loan production resulted in the decrease in the loan portfolio.  Total loan production was negatively impacted in the fourth quarter of 2017 because of the uncertainty that existed in the market during this time from potential borrowers regarding the timing that corporate tax reform would be enacted.  Although loan pipelines grew and are currently strong, the fourth quarter 2017 slowdown in loan production carried forward into the first quarter of 2018 and, along with the increased loan pre-payment activity, resulted in the total portfolio demonstrating a decrease since last year’s first quarter.  The Company expects that its loan portfolio will resume growth in the second quarter of 2018.  However, even with the decrease in total loan volume, loan interest income increased by $262,000, or 2.7%, between the first quarter of 2018 and the first quarter of 2017.  The higher loan interest income resulted from new loans originating at higher yields due to the higher interest rates and also reflected the upward repricing of certain loans tied to LIBOR or the prime rate as both of these indices have moved up with the Federal Reserve's decision to increase the target federal funds interest rate. Overall, total interest income increased by $469,000, or 4.4%, between years.

Total interest expense for the first quarter of 2018 increased by $442,000, or 21.8%, due to higher levels of both deposit and borrowing interest expense.  The Company experienced a decrease in total deposits which was reflective of the rising national interest rates as the decline occurred in money market deposit accounts.  It was anticipated that as interest rates rise a portion of these funds would move into other higher rate alternative bank deposit products having a stated maturity or leave for other non-banking products.  We have indeed experienced growth in our term deposit products due to some of these deposit funds shifting into CDs or IRAs.  Growth in these accounts also reflects our ongoing business development efforts as well as the loyalty of our core deposit base that provides a strong foundation to support our balance sheet.  Overall, however, the runoff of money market deposits has more than offset the growth of term deposit products and resulted in the decrease in the balance of total deposits.  Specifically, total deposits averaged $960 million in the first quarter of 2018 which was $15.5 million, or 1.6%, lower than the $976 million average for the first quarter of 2017.  Deposit interest expense in 2018 increased by $345,000, or 24.0%, due to the higher interest rate environment as deposit pricing increased in a controlled manner and certain indexed money market accounts repriced upward after the Federal Reserve interest rate increases.  Overall, the Company's loan to deposit ratio averaged 91.78% in the first quarter of 2018 which we believe indicates that the Company has ample capacity to grow its loan portfolio.  The Company experienced a $97,000, or 16.4%, increase in the interest cost for borrowings in first quarter of 2018 due to the immediate impact that the increases in the Federal Funds Rate had on the cost of overnight borrowed funds.  Also, a higher level of total borrowed funds, which were necessary to offset the decrease in total deposits caused borrowings interest expense to increase.  For the first quarter of 2018, total average FHLB borrowed funds of $68.1 million, increased by $13.7 million, or 25.2%, when compared to the first quarter of 2017.


The Company recorded a $50,000 provision for loan losses in the first quarter of 2018 compared to a $225,000 provision for loan losses in the first quarter of 2017.  The lower 2018 provision reflects our overall strong asset quality, the successful workout of several criticized loans, and reduced loan portfolio balances.  The Company experienced net loan charge-offs of $333,000, or 0.15% of total loans, in 2018 compared to net loan charge-offs of $77,000, or 0.04% of total loans, in 2017.  Overall, the Company continued to maintain strong asset quality as its nonperforming assets totaled $2.2 million, or only 0.25% of total loans, at March 31, 2018.  In summary, the allowance for loan losses provided 460% coverage of non-performing loans, and 1.13% of total loans, at March 31, 2018, compared to 337% coverage of non-performing loans, and 1.14% of total loans, at December 31, 2017.


Total non-interest income in the first quarter of 2018 increased by $73,000, or 2.0%, from the prior year's first quarter.  Trust and investment advisory fees increased by $112,000, or 5.2%, as the Company benefited from increased market values for assets under management in the first quarter of 2018.  Wealth management continues to be an important strategic focus as it contributes to non-interest revenue comprising over 29% of the Company’s total revenue in the first quarter of 2018.  Also increasing since last year’s first quarter was other income by $32,000, or 4.8%, due to higher interchange fees and additional income from greater debit card usage.  These favorable comparisons more than offset reductions in revenue from mortgage related fee income of $36,000 and lower income from residential mortgage loan sales into the secondary market of $16,000 due to lower residential mortgage loan production in the first quarter of 2018.  Also, there were fewer gains realized from security sales which decreased by $19,000 in the first quarter of 2018.


The Company's total non-interest expense in the first quarter of 2018 increased by $35,000, or only 0.4%, when compared to the first quarter of 2017 as a result of the Company’s ongoing efforts to carefully manage and contain non-interest expense.  The increase was primarily due to a higher level of salaries & benefits expense of $145,000, or 2.4%, which more than offset reductions in other expenses of $64,000, or 3.8%, equipment costs of $28,000, or 6.7%, and professional fees of $16,000, or 1.3%.  Within salaries & benefits, higher salaries expense and incentive compensation more than offset reduced levels of pension expense and lower health care costs due to our union employees changing healthcare providers as per terms of the new collective bargaining agreement.  The reduction to other expense is due to reduced check card processing costs, supplies usage, armored transport costs and telephone expense.  The lower level of equipment expense since last year resulted from the Company’s ongoing focus to reduce and control expenses.  Finally, professional fees declined in the first quarter of 2018 due to reduced costs from outsourced professional services.  


The Company recorded an income tax expense of $446,000, or an effective tax rate of 20.1%, in the first quarter of 2018.  This compares to an income tax expense of $625,000, or an effective tax rate of 31.7%, for the first quarter of 2017.  The lower effective tax rate and income tax expense in the first quarter of 2018 reflects the benefits of corporate tax reform as a result of the enactment of the “Tax Cuts and Jobs Act” late in the fourth quarter of 2017.



The Company had total assets of $1.15 billion, shareholders' equity of $95.8 million, a book value of $5.31 per common share and a tangible book value of $4.65 per common share at March 31, 2018.  In accordance with the common stock buyback program announced on January 24, 2017, the Company returned an additional $445,000 of capital to its shareholders through the repurchase of 105,663 shares of its common stock in the first quarter of 2018.  This represented the completion of the most recently authorized buyback program as all 945,000 common stock shares have been repurchased and a total of $3.8 million was returned to our shareholders over the past 14 months.  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, 2018

(In thousands, except per share and ratio data)

(Unaudited)


                                          2018

 

1QTR

 

 

 

 

 

 

 

 

 

 

PERFORMANCE DATA FOR THE PERIOD:

 

 

 

 

 

Net income

  $1,767

 

 

 

 

 

 

 

 

 

 

PERFORMANCE PERCENTAGES (annualized):

 

 

 

 

 

Return on average assets

 0.62%

 

 

 

 

Return on average equity

     7.55

 

 

 

 

Net interest margin

     3.29

 

 

 

 

Net charge-offs as a percentage of average loans

     0.15

 

 

 

 

Loan loss provision as a percentage of

    average loans


    0.02

 

 

 

 

Efficiency ratio

  81.69

 

 

 

 

 

 

 

 

 

 

PER COMMON SHARE:

 

 

 

 

 

Net income:

 

 

 

 

 

Basic

   $0.10

 

 

 

 

Average number of common shares outstanding

18,079

 

 

 

 

Diluted

    0.10

 

 

 

 

Average number of common shares outstanding

18,181

 

 

 

 

Cash dividends declared

$0.015

 

 

 

 


2017

 

1QTR

2QTR

3QTR

4QTR**

YEAR

 

 

 

 

 

TO DATE

PERFORMANCE DATA FOR THE PERIOD:

 

 

 

 

 

Net income

  $1,348

$1,389

$1,551

$(995)

$3,293

 

 

 

 

 

 

PERFORMANCE PERCENTAGES (annualized):

 

 

 

 

 

Return on average assets

 0.47%

0.48%

0.53%

(0.34)%

0.28%

Return on average equity

     5.74

    5.81

    6.37

  (4.07)

    3.42

Net interest margin

     3.27

    3.27

    3.28

   3.31

    3.32

Net charge-offs as a percentage of average loans

     0.04

    0.01

    0.11

   0.08

    0.06

Loan loss provision as a percentage of

    average loans


    0.10


    0.14


    0.09


   0.02


    0.09

Efficiency ratio

  82.04

  81.47

  80.42

  80.63

  81.13

 

 

 

 

 

 

PER COMMON SHARE:

 

 

 

 

 

Net income:

 

 

 

 

 

Basic

   $0.07

  $0.07

  $0.08

  $(0.05)

  $0.18

Average number of common shares outstanding

18,814

18,580

18,380

18,226

18,498

Diluted

    0.07

   0.07

   0.08

    (0.05)

    0.18

Average number of common shares outstanding

18,922

18,699

18,481

 18,226

18,600

Cash dividends declared

$0.015

   $0.015

$0.015

 $0.015

$0.060


** - The fourth quarter 2017 results were impacted by a $2.6 million increase of tax expense because of the new tax law that caused the revaluation of the Company’s deferred tax assets from 34% to 21%.














AMERISERV FINANCIAL, INC.

(In thousands, except per share, statistical, and ratio data)

(Unaudited)


                                     2018

 

1QTR

FINANCIAL CONDITION  DATA AT PERIOD END

 

Assets

$1,151,160

Short-term investments/overnight funds

7,796

Investment securities

171,053

Loans and loans held for sale

875,716

Allowance for loan losses

9,932

Goodwill

11,944

Deposits

944,206

FHLB borrowings

82,864

Subordinated debt, net

7,470

Shareholders’ equity

95,810

Non-performing assets

2,157

Tangible common equity ratio

7.36%

Total capital (to risk weighted assets) ratio

13.45

PER COMMON SHARE:

 

Book value

$5.31

Tangible book value

4.65

Market value

4.00

Trust assets – fair market value (A)

$2,175,538

 

 

STATISTICAL DATA AT PERIOD END:

 

Full-time equivalent employees

304

Branch locations

15

Common shares outstanding

18,033,401


2017

 

1QTR

2QTR

3QTR

4QTR

FINANCIAL CONDITION  DATA AT PERIOD END

 

 

 

 

Assets

$1,172,127

$1,171,962

$1,170,916

$1,167,655

Short-term investments/overnight funds

8,320

8,389

8,408

7,954

Investment securities

165,781

168,367

168,443

167,890

Loans and loans held for sale

899,456

897,876

897,900

892,758

Allowance for loan losses

10,080

10,391

10,346

10,214

Goodwill

11,944

11,944

11,944

11,944

Deposits

964,776

956,375

966,921

947,945

FHLB borrowings

79,718

87,143

77,635

95,313

Subordinated debt, net

7,447

7,453

7,459

7,465

Shareholders’ equity

95,604

96,277

97,110

95,102

Non-performing assets

1,488

2,362

5,372

3,034

Tangible common equity ratio

7.21%

7.27%

7.35%

7.20%

Total capital (to risk weighted assets) ratio

13.03

13.13

13.08

13.21

PER COMMON SHARE:

 

 

 

 

Book value

$5.12

$5.21

$5.31

$5.25

Tangible book value

4.48

4.57

4.66

4.59

Market value

3.75

4.15

4.00

4.15

Trust assets – fair market value (A)

$2,025,304

$2,070,212

$2,119,371

$2,186,393

 

 

 

 

 

STATISTICAL DATA AT PERIOD END:

 

 

 

 

Full-time equivalent employees

307

308

307

302

Branch locations

16

16

16

15

Common shares outstanding

18,666,520

18,461,628

18,281,224

18,128,247

NOTES:

        (A) Not recognized on the consolidated balance sheets.




AMERISERV FINANCIAL, INC.

CONSOLIDATED STATEMENT OF INCOME

(In thousands)

(Unaudited)


                                      2018

 

1QTR

 

 

 

 

INTEREST INCOME

 

 

 

 

 

Interest and fees on loans

$9,818

 

 

 

 

Interest on investments

1,399

 

 

 

 

Total Interest Income

11,217

 

 

 

 

 

 

 

 

 

 

INTEREST EXPENSE

 

 

 

 

 

Deposits

1,781

 

 

 

 

All borrowings

688

 

 

 

 

Total Interest Expense

2,469

 

 

 

 

 

 

 

 

 

 

NET INTEREST INCOME

8,748

 

 

 

 

Provision for loan losses

50

 

 

 

 

NET INTEREST INCOME AFTER

   PROVISION FOR LOAN LOSSES


8,698

 

 

 

 

 

 

 

 

 

 

NON-INTEREST INCOME

 

 

 

 

 

Trust and investment advisory fees

2,278

 

 

 

 

Service charges on deposit accounts

383

 

 

 

 

Net realized gains on loans held for sale

98

 

 

 

 

Mortgage related fees

39

 

 

 

 

Net realized gains on investment securities

8

 

 

 

 

Bank owned life insurance

132

 

 

 

 

Other income

697

 

 

 

 

Total Non-Interest Income

3,635

 

 

 

 

 

 

 

 

 

 

NON-INTEREST EXPENSE

 

 

 

 

 

Salaries and employee benefits

6,093

 

 

 

 

Net occupancy expense

670

 

 

 

 

Equipment expense

391

 

 

 

 

Professional fees

1,184

 

 

 

 

FDIC deposit insurance expense

162

 

 

 

 

Other expenses

1,620

 

 

 

 

Total Non-Interest Expense

10,120

 

 

 

 

 

 

 

 

 

 

PRETAX INCOME

2,213

 

 

 

 

Income tax expense

446

 

 

 

 

NET INCOME AVAILABLE TO COMMON SHAREHOLDERS


$1,767

 

 

 

 



















                                     2017

 

1QTR

2QTR

3QTR

4QTR

YEAR

INTEREST INCOME

 

 

 

 

TO DATE

Interest and fees on loans

$9,556

$9,778

$9,855

$10,028

$39,217

Interest on investments

1,192

1,273

1,332

1,342

5,139

Total Interest Income

10,748

11,051

11,187

11,370

44,356

 

 

 

 

 

 

INTEREST EXPENSE

 

 

 

 

 

Deposits

1,436

1,504

1,618

1,697

6,255

All borrowings

591

648

632

669

2,540

Total Interest Expense

2,027

2,152

2,250

2,366

8,795

 

 

 

 

 

 

NET INTEREST INCOME

8,721

8,899

8,937

9,004

35,561

Provision for loan losses

225

325

200

50

800

NET INTEREST INCOME AFTER

   PROVISION  FOR LOAN LOSSES


8,496


8,574


8,737


8,954


34,761

 

 

 

 

 

 

NON-INTEREST INCOME

 

 

 

 

 

Trust and investment advisory fees

2,166

2,081

2,045

2,170

8,462

Service charges on deposit accounts

374

385

409

413

1,581

Net realized gains on loans held for sale

114

186

217

162

679

Mortgage related fees

75

83

69

58

285

Net realized gains on investment securities

27

32

56

-

115

Bank owned life insurance

141

310

143

143

737

Other income

665

678

690

753

2,786

Total Non-Interest Income

3,562

3,755

3,629

3,699

14,645

 

 

 

 

 

 

NON-INTEREST EXPENSE

 

 

 

 

 

Salaries and employee benefits

5,948

5,917

5,943

6,112

23,920

Net occupancy expense

674

639

634

653

2,600

Equipment expense

419

434

343

389

1,585

Professional fees

1,200

1,415

1,213

1,230

5,058

FDIC deposit insurance expense

160

152

156

160

628

Other expenses

1,684

1,760

1,825

1,706

6,975

Total Non-Interest Expense

10,085

10,317

10,114

10,250

40,766

 

 

 

 

 

 

PRETAX INCOME

1,973

2,012

2,252

2,403

8,640

Income tax expense

625

623

701

3,398

5,347

NET INCOME AVAILABLE TO COMMON SHAREHOLDERS


$1,348


$1,389


$1,551


$(995)


$3,293
























AMERISERV FINANCIAL, INC.

NASDAQ: ASRV

Average Balance Sheet Data (In thousands)

(Unaudited)


2018

2017

 

 

 

 

 

 

1QTR

 

1QTR

 

Interest earning assets:

 

 

 

 

Loans and loans held for sale, net of unearned income

$881,485

 

$889,908

 

Short-term investment in money market funds

7,133

 

7,940

 

Deposits with banks

1,025

 

1,030

 

Total investment securities

177,133

 

168,261

 

Total interest earning assets

1,066,776

 

1,067,139

 

 

 

 

 

 

Non-interest earning assets:

 

 

 

 

Cash and due from banks

21,859

 

22,330

 

Premises and equipment

12,623

 

11,804

 

Other assets

62,374

 

67,794

 

Allowance for loan losses

(10,251)

 

(10,053)

 

 

 

 

 

 

Total assets

$1,153,381

 

$1,159,014

 

 

 

 

 

 

Interest bearing liabilities:

 

 

 

 

Interest bearing deposits:

 

 

 

 

Interest bearing demand

$133,379

 

$ 127,531

 

Savings

97,304

 

97,254

 

Money market

253,665

 

278,811

 

Other time

293,858

 

288,830

 

Total interest bearing deposits

778,206

 

792,426

 

Borrowings:

 

 

 

 

Federal funds purchased and other short-term borrowings

22,261

 

8,863

 

Advances from Federal Home Loan Bank

45,838

 

45,535

 

Guaranteed junior subordinated deferrable interest debentures

13,085

 

13,085

 

Subordinated debt

7,650

 

7,650

 

Total interest bearing liabilities

867,040

 

867,559

 

 

 

 

 

 

Non-interest bearing liabilities:

 

 

 

 

  Demand deposits

182,215

 

183,532

 

  Other liabilities

9,170

 

12,613

 

Shareholders’ equity

94,956

 

95,310

 

Total liabilities and shareholders’ equity

$1,153,381

 

$1,159,014