Item 2.02 Results of operation and financial condition.
AMERISERV FINANCIAL, Inc. (the "Registrant") announced first quarter 2020
results through March 31, 2020. For a more detailed description of the
announcement see the press release attached as Exhibit 99.1.
Item 8.01 Other events.
On April 21, 2020, the Registrant issued a press release announcing that its
Board of Directors declared a $0.025 per share quarterly common stock cash
dividend. The cash dividend is payable May 18, 2020 to shareholders of record
on May 4, 2020. The press release, attached hereto as Exhibit 99.1, is
incorporated herein.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits:
99.1 Press release dated April 21, 2020, announcing first quarter 2020 earnings
through March 31, 2020 and 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 21, 2020
Exhibit 99.1
AMERISERV FINANCIAL REPORTS 2020 FIRST QUARTER EARNINGS AND ANNOUNCES QUARTERLY
COMMON STOCK CASH DIVIDEND
JOHNSTOWN, PA - AmeriServ Financial, Inc. (NASDAQ: ASRV) reported first quarter
2020 net income of $1,409,000, or $0.08 per diluted common share. This earnings
performance represented a $469,000, or 25.0%, decrease from the first quarter of
2019 when net income totaled $1,878,000, or $0.11 per diluted common share. The
following table highlights the Company's financial performance for the quarters
ended March 31, 2020 and 2019:
First Quarter $ Change % Change
2020 First Quarter 2019
Net income $1,409,000 $1,878,000 ($469,000) (25.0%)
Diluted earnings per share $ 0.08 $ 0.11 ($0.03) (27.3%)
Jeffrey A. Stopko, President and Chief Executive Officer, commented on the 2020
first quarter financial results: "AmeriServ Financial Inc. reported sound
earnings in the first quarter of 2020 while taking the necessary actions to
begin to position our Company for the economic uncertainty created by the
coronavirus pandemic. We are entering the second quarter of 2020 with strong
liquidity, good capital and an increased allowance for loan losses. However, I
am most proud of how the AmeriServ team has stepped up and worked tirelessly
with customers to provide them with resources to address the financial
challenges that they are experiencing as a result of the pandemic.
Specifically, in regards to the Paycheck Protection Program (PPP), we have
received approval from the Small Business Administration (SBA) for more than 250
loans totaling over $43 million which will fund in the second quarter and
provide meaningful financial support to the small businesses in the communities
in which we operate. We have also prudently executed numerous loan modifications
and payment deferrals for our existing loan customers which will give them some
financial flexibility during a period in which their business has been
negatively impacted by the shutdown of the economy."
The Company's net interest income in the first quarter of 2020 increased by
$94,000, or 1.1%, from the prior year's first quarter. The Company's net
interest margin of 3.21% for the first quarter of 2020 was three basis points
lower than the net interest margin of 3.24% for the first quarter of 2019. The
change in the U.S. Treasury yield curve between years impacted the Company's net
interest margin. The overall U.S. Treasury yield curve shifted downward since
last year while the shape of the curve remained relatively flat, demonstrating
inversion in certain segments at various times during the first quarter of 2020.
Late in the quarter, the outbreak of the COVID-19 pandemic caused the yield
curve to move down further. Correspondingly, the Federal Reserve's actions to
lower the fed funds rate by 150 basis points in March, caused the short end of
the yield curve to decrease and result in the curve exhibiting a more normal
steeper shape. Total earning assets increased in the first quarter of 2020 and
partially offset the unfavorable impact that the lower level of national
interest rates had on total interest income. The increase in total average
earning assets was due to growth in total loans and short-term investments while
total investment securities decreased. Interest bearing deposits increased and
resulted in less reliance on higher cost borrowed funds. Effective management
of our funding costs along with the downward repricing of certain interest
bearing liabilities tied to market indexes resulted in total interest expense
decreasing between years. The decrease to total interest expense more than
offset the decrease in total interest income resulting in net interest income
increasing between years.
Total loans averaged $877 million in the first quarter of 2020 which was $16.9
million, or 2.0%, higher than the $860 million average for the first quarter of
2019. The impact from the strong level of loan production in 2019 was still
evident in the increased total loan portfolio average balance during the first
quarter of 2020. Also, residential mortgage loan production in the first
quarter of 2020 nearly tripled the level of production experienced during the
first quarter of 2019 due to the significantly lower level of national interest
rates. However, loan payoff activity exceeded total new loan originations in
the first quarter of 2020 resulting in a $10 million decline in the total loan
portfolio balance since December 31, 2019. Even though total average loans
increased compared to the same period last year, loan interest and fee income
decreased by $86,000, or 0.8%, between the first quarter of 2020 and last year's
first quarter. The lower loan interest income reflects the impact of the lower
interest rate environment as new loans originated at lower yields and certain
loans tied to LIBOR or the prime rate repriced downward as both of these indices
have moved down with the Federal Reserve's decision to decrease the target
federal funds interest rate three times in the second half of 2019, and more
significantly, twice in March of this year.
Total investment securities averaged $189 million in the first quarter of 2020
which is $9.5 million, or 4.8%, lower than the $198 million average for the
first quarter of 2019. Investment security purchases in 2020 have been more
selective as the market is less favorable for purchasing activity given the
difference in the position and shape of the U.S. Treasury yield curve from the
prior year. The limited level of purchases that did occur during the first
quarter of 2020 primarily focused on federal agency mortgage backed securities
due to the ongoing cash flow that these securities provide. Purchases also
included high quality corporate and taxable municipal securities. The Company
also responded to the uncertain economic environment by maintaining a strong
liquidity position as average short-term investments in money market funds
increased by $9.7 million in the first quarter of 2020. Interest income on
investments decreased between the first quarter of 2020 and the first quarter of
2019 by $134,000, or 7.7%. Overall, total interest income decreased by
$220,000, or 1.8%, between years.
Total interest expense for the first quarter of 2020 decreased by $314,000, or
9.0%, when compared to 2019, due to lower levels of both deposit and borrowing
interest expense. Deposit interest expense in 2020 was lower by $272,000, or
10.0%. Overall, the Company's loyal core deposit base continues to be a source
of strength for the Company during periods of market volatility. Total average
deposits grew since the first quarter of 2019 and totaled $983 million in the
first quarter of 2020 which was $13.8 million, or 1.4%, higher than the 2019
first quarter average. This represents the fourth consecutive quarter that total
deposits have averaged in a relatively narrow range of $980 to $985 million.
Management prudently and effectively executed several deposit product pricing
decreases given the declining interest rate environment and the corresponding
downward pressure that these falling interest rates have on the net interest
margin. As a result, the Company experienced deposit cost relief. Specifically,
the Company's average cost of interest bearing deposits declined by 17 basis
points between the first quarter of 2020 and the first quarter of 2019. The
Company's loan to deposit ratio averaged 89.2% in the first quarter of 2020
which we believe indicates that the Company has ample capacity to grow its loan
portfolio and is positioned well to assist our customers and the community given
the impact that the COVID-19 pandemic is having on the economy.
The Company experienced a $42,000, or 5.4%, decrease in the interest cost of
borrowings in the first quarter of 2020 when compared to the first quarter of
2019. The decline is a result of lower total average borrowings between years
combined with the impact from the Federal Reserve's actions to decrease interest
rates since the middle of 2019 and the impact that these rate decreases had on
the cost of overnight borrowed funds and the replacement of matured FHLB term
advances. The total 2020 first quarter average term advance borrowings balance
increased by approximately $8.3 million, or 17.7%, when compared to the first
quarter of 2019 as the Company took advantage of yield curve inversions to
prudently extend borrowings. As a result, the combined growth of average FHLB
term advances and total average deposits resulted in total average overnight
borrowed funds decreasing between years by $12.5 million, or 81.1%. Overall, the
2020 first quarter average of FHLB borrowed funds was $58.2 million, which
represents a decrease of $4.2 million, or 6.7%.
The Company recorded a $175,000 provision expense for loan losses in the first
quarter of 2020 as compared to a $400,000 provision recovery recorded in the
first quarter of 2019, which represents a net unfavorable shift of $575,000.
The 2020 provision reflects the loan growth experienced since last year along
with our decision to strengthen certain qualitative factors within our allowance
for loan losses calculation due to the economic uncertainty caused by the
COVID-19 pandemic. The Company's current asset quality remains strong as
evidenced by low levels of loan delinquency, net loan charge-offs and
non-performing assets. The Company experienced net loan charge-offs of
$120,000, or 0.06% of total loans, in the 2020 first quarter compared to net
loan charge-offs of $164,000, or 0.08% of total loans, in the first quarter of
2019. Non-performing assets totaled $2.2 million, or only 0.26% of total loans,
at March 31, 2020. In summary, the allowance for loan losses provided 416%
coverage of non-performing assets, and 1.06% of total loans, at March 31, 2020,
compared to 397% coverage of non-performing assets, and 1.05% of total loans, at
December 31, 2019.
Total non-interest income in the first quarter of 2020 increased by $227,000, or
6.3%, from the prior year's first quarter. Income from residential mortgage
loan sales into the secondary market increased by $175,000, or 282.3%, due to
the strong level of residential mortgage loan production in the first quarter of
2020. The higher level of residential mortgage loan production also resulted in
mortgage related fees increasing by $82,000, or 186.4%. Wealth management fees
increased by $158,000, or 6.6%, due to an improved equity market which
positively impacted market values for assets under management in the first two
months of the first quarter of 2020. The late first quarter 2020 negative
impact to the equity market from the COVID-19 pandemic and the pandemic's impact
on the Company's wealth management fees will be more evident in this year's
second quarter financial results. Other income declined by $161,000, or 24.2%,
after the Company recognized a gain in 2019 on the sale of equity shares from a
previous acquisition.
The Company's total non-interest expense in the first quarter of 2020 increased
by $340,000, or 3.3%, when compared to the first quarter of 2019. The increase
was due to higher salaries & benefits expense of $403,000, or 6.4%, and
increased occupancy & equipment costs of $47,000, or 4.6%. These increases more
than offset reductions to other expense of $90,000, or 5.1%, and FDIC deposit
insurance expense of $54,000, or 67.5%. Within salaries & benefits, pension
expense increased by $188,000, or 53.0% between years. This significant
increase results from the unfavorable impact that the lower interest rate
environment has on the discount rates that are used to revalue the defined
benefit pension obligation each year. In addition, the higher salaries &
benefits expense is also due to increased health care costs, greater incentive
compensation as a result of increased residential mortgage loan production, and
increased salaries expense. The higher salaries expense reflects annual merit
increases and the addition of several employees to address management succession
planning. The greater level of occupancy & equipment expenses since last year
resulted largely from higher depreciation costs. The decrease to other expense
resulted from the Company recognizing a reduction in the unfunded commitment
reserve while the lower FDIC deposit insurance expense was due to the Company
applying the remaining portion of the credit from the application of the Small
Bank Assessment Credit regulation. Finally, the Company recorded an income tax
expense of $366,000, or an effective tax rate of 20.6%, in the first quarter of
2020. This compares to an income tax expense of $491,000, or an effective tax
rate of 20.7%, for the first quarter of 2019.
The Company had total assets of $1.17 billion, shareholders' equity of $100.8
million, a book value of $5.92 per common share and a tangible book value(1) of
$5.22 per common share at March 31, 2020. In accordance with the common stock
buyback program announced on April 16, 2019, the Company returned an additional
$151,000 of capital to its shareholders through the repurchase of 35,962 shares
of its common stock in the first quarter of 2020 to complete this program. The
Company continued to maintain strong capital ratios that exceed the regulatory
defined well capitalized status.
QUARTERLY COMMON STOCK CASH DIVIDEND
The Company's Board of Directors declared a $0.025 per share quarterly common
stock cash dividend. The cash dividend is payable May 18, 2020 to shareholders
of record on May 4, 2020. This cash dividend represents a 3.6% annualized yield
using the April 17, 2020 closing stock price of $2.76. For the first quarter of
2020, the Company's dividend payout ratio amounted to 31.3%.
Forward-Looking Statements
This press release contains forward-looking statements as defined in the
Securities Exchange Act of 1934 and is subject to the safe harbors created
therein. Such statements are not historical facts and include expressions about
management's confidence and strategies and management's current views and
expectations about new and existing programs and products, relationships,
opportunities, technology, market conditions, dividend program and future
payment obligations. These statements may be identified by such forward-looking
terminology as "continuing," "expect," "look," "believe," "anticipate," "may,"
"will," "should," "projects," "strategy," or similar statements. Actual results
may differ materially from such forward-looking statements, and no reliance
should be placed on any forward-looking statement. Factors that may cause
results to differ materially from such forward-looking statements include, but
are not limited to, unanticipated changes in the financial markets and the
direction of interest rates; volatility in earnings due to certain financial
assets and liabilities held at fair value; competition levels; loan and
investment prepayments differing from our assumptions; insufficient allowance
for credit losses; a higher level of loan charge-offs and delinquencies than
anticipated; material adverse changes in our operations or earnings; a decline
in the economy in our market areas; changes in relationships with major
customers; changes in effective income tax rates; higher or lower cash flow
levels than anticipated; inability to hire or retain qualified employees; a
decline in the levels of deposits or loss of alternate funding sources; a
decrease in loan origination volume or an inability to close loans currently in
the pipeline; changes in laws and regulations; adoption, interpretation and
implementation of accounting pronouncements; operational risks, including the
risk of fraud by employees, customers or outsiders; unanticipated effects of our
new banking platform; risks and uncertainties relating to the duration of the
COVID-19 pandemic, and actions that may be taken by governmental authorities to
contain the pandemic or to treat its impact; and the inability to successfully
implement or expand new lines of business or new products and services. These
forward-looking statements involve risks and uncertainties that could cause
AmeriServ's results to differ materially from management's current expectations.
Such risks and uncertainties are detailed in AmeriServ's filings with the
Securities and Exchange Commission, including our Annual Report on Form 10-K for
the year ended December 31, 2019. Forward-looking statements are based on the
beliefs and assumptions of AmeriServ's management and on currently available
information. The statements in this press release are made as of the date of
this press release, even if subsequently made available by AmeriServ on its
website or otherwise. AmeriServ undertakes no responsibility to publicly update
or revise any forward-looking statement.
(1) Non-GAAP Financial Information. See "Reconciliation of Non-GAAP Financial
Measures" at end of release.
AMERISERV FINANCIAL, INC.
NASDAQ: ASRV
SUPPLEMENTAL FINANCIAL PERFORMANCE DATA
March 31, 2020
(Dollars in thousands, except per share and ratio data)
(Unaudited)
2020
1QTR
PERFORMANCE DATA FOR THE PERIOD:
Net income $1,409
PERFORMANCE PERCENTAGES (annualized):
Return on average assets 0.48%
Return on average equity 5.69
Return on average tangible common equity (B) 6.46
Net interest margin 3.21
Net charge-offs (recoveries) as a percentage of average loans
0.06
Loan loss provision (credit) as a percentage of 0.08
average loans
Efficiency ratio 84.46
EARNINGS PER COMMON SHARE:
Basic $0.08
Average number of common shares outstanding 17,043
Diluted 0.08
Average number of common shares outstanding 17,099
Cash dividends paid per share $0.025
2019
1QTR 2QTR 3QTR 4QTR FULL YEAR 2019
PERFORMANCE DATA FOR THE PERIOD:
Net income $1,878 $1,792 $1,689 $669 $6,028
PERFORMANCE PERCENTAGES
(annualized):
Return on average assets 0.66% 0.61% 0.57% 0.23% 0.51%
Return on average equity 7.84 7.24 6.60 2.59 6.02
Return on average tangible common 8.94 8.22 7.48 2.93 6.84
equity (B)
Net interest margin
3.24 3.30 3.18 3.26 3.29
Net charge-offs (recoveries) as a
percentage of average loans 0.08 0.00 (0.01) 0.02 0.02
Loan loss provision (credit) as a (0.19) 0.00 0.10 0.44 0.09
percentage of
average loans
Efficiency ratio 83.90 82.18 81.65 85.30 83.23
EARNINGS PER COMMON SHARE:
Basic $0.11 $0.10 $0.10 $0.04 $0.35
Average number of common shares 17,578 17,476 17,278 17,111 17,359
outstanding
Diluted
0.11 0.10 0.10 0.04 0.35
Average number of common shares 17,664 17,560 17,360 17,193 17,440
outstanding
Cash dividends paid per share $0.020 $0.025 $0.025 $0.025 $0.095
AMERISERV FINANCIAL, INC.
NASDAQ: ASRV
--CONTINUED--
(Dollars in thousands, except per share, statistical, and ratio data)
(Unaudited)
2020
1QTR
FINANCIAL CONDITION DATA AT PERIOD END:
Assets $1,168,355
Short-term investments/overnight funds 6,431
Investment securities 184,784
Loans and loans held for sale 877,399
Allowance for loan losses 9,334
Goodwill 11,944
Deposits 957,593
FHLB borrowings 74,572
Subordinated debt, net 7,517
Shareholders' equity 100,840
Non-performing assets 2,244
Tangible common equity ratio (B) 7.69%
Total capital (to risk weighted assets) ratio 13.41
PER COMMON SHARE:
Book value
$5.92
Tangible book value (B) 5.22
Market value (C) 2.62
Wealth management assets - fair market value (A) $1,983,952
STATISTICAL DATA AT PERIOD END:
Full-time equivalent employees 306
Branch locations 16
Common shares outstanding 17,043,644
2019
1QTR 2QTR 3QTR 4QTR
FINANCIAL CONDITION DATA
AT PERIOD END:
Assets $1,167,682 $1,190,583 $1,171,426 $1,171,184
Short-term 7,996 6,532 6,039 6,526
investments/overnight funds
Investment securities 194,553 191,168 182,699 181,685
Loans and loans held for 863,134 890,081 875,082 887,574
sale
Allowance for loan losses 8,107 8,102 8,345 9,279
Goodwill 11,944 11,944 11,944 11,944
Deposits 957,779 968,480 969,989 960,513
FHLB borrowings 79,483 88,314 66,905 76,080
Subordinated debt, net 7,493 7,499 7,505 7,511
Shareholders' equity 99,061 101,476 102,460 98,614
Non-performing assets 1,168 1,681 1,957 2,339
Tangible common equity 7.54% 7.60% 7.81% 7.48%
ratio (B)
Total capital (to risk 13.37 13.14 13.33 13.49
weighted assets) ratio
PER COMMON SHARE:
Book value $5.65 $5.84 $5.98 $5.78
Tangible book value (B) 4.97 5.15 5.28 5.08
Market value (C) 4.02 4.15 4.14 4.20
Wealth management assets - $2,229,860 $2,288,576 $2,142,513 $2,237,898
fair market value (A)
STATISTICAL DATA AT PERIOD
END:
Full-time equivalent 309 309 308 309
employees
Branch locations 16 16 16 16
Common shares outstanding 17,540,676 17,384,355 17,146,714 17,057,871
NOTES:
(A)
Not recognized on the consolidated balance sheets.
(B)
Non-GAAP Financial Information. See "Reconciliation of Non-GAAP Financial
Measures" at end of release.
(C)
Based on closing price reported by the principal market on which the security is
traded last business day of the corresponding reporting period.
AMERISERV FINANCIAL, INC.
NASDAQ: ASRV
CONSOLIDATED STATEMENT OF INCOME
(Dollars in thousands)
(Unaudited)
2020
1QTR
INTEREST INCOME
Interest and fees on loans $10,332
Interest on investments 1,612
Total Interest Income 11,944
INTEREST EXPENSE
Deposits 2,458
All borrowings 735
Total Interest Expense 3,193
NET INTEREST INCOME 8,751
Provision (credit) for loan losses 175
NET INTEREST INCOME AFTER 8,576
PROVISION (CREDIT) FOR LOAN LOSSES
NON-INTEREST INCOME
Wealth management fees 2,554
Service charges on deposit accounts 286
Net realized gains on loans held for sale 237
Mortgage related fees
126
Net realized gains on investment securities 0
Impairment charge on other investments
0
Bank owned life insurance 125
Other income 504
Total Non-Interest Income 3,832
NON-INTEREST EXPENSE
Salaries and employee benefits 6,704
Net occupancy expense 671
Equipment expense 395
Professional fees 1,154
FDIC deposit insurance expense 26
Other expenses 1,683
Total Non-Interest Expense 10,633
PRETAX INCOME 1,775
Income tax expense 366
NET INCOME $1,409
2019
1QTR 2QTR 3QTR 4QTR FULL YEAR 2019
INTEREST INCOME
Interest and fees on loans $10,418 $10,994 $10,737 $10,784 $42,933
Interest on investments 1,746 1,771 1,696 1,621 6,834
Total Interest Income 12,164 12,765 12,433 12,405 49,767
INTEREST EXPENSE
Deposits 2,730 2,867 2,895 2,697 11,189
All borrowings 777 837 774 748 3,136
Total Interest Expense 3,507 3,704 3,669 3,445 14,325
NET INTEREST INCOME 8,657 9,061 8,764 8,960 35,442
Provision (credit) for loan (400) 0 225 975 800
losses
NET INTEREST INCOME AFTER 9,057 9,061 8,539 7,985 34,642
PROVISION (CREDIT) FOR LOAN
LOSSES
NON-INTEREST INCOME
Wealth management fees 2,396 2,419 2,431 2,484 9,730
Service charges on deposit 310 317 321 323 1,271
accounts
Net realized gains on loans held 62 107 405 291 865
for sale
Mortgage related fees 44 77 97 84 302
Net realized gains on investment 0 30 88 0 118
securities
Impairment charge on other 0 0 0 (500) (500)
investments
Bank owned life insurance 128 129 131 133 521
Other income 665 578 622 601 2,466
Total Non-Interest Income 3,605 3,657 4,095 3,416 14,773
NON-INTEREST EXPENSE
Salaries and employee benefits 6,301 6,348 6,324 6,456 25,429
Net occupancy expense
658 622 599 618 2,497
Equipment expense 361 387 333 429 1,510
Professional fees 1,120 1,249 1,276 1,240 4,885
FDIC deposit insurance expense 80 80 0 (60) 100
Other expenses 1,773 1,770 1,971 1,880 7,394
Total Non-Interest Expense 10,293 10,456 10,503 10,563 41,815
PRETAX INCOME 2,369 2,262 2,131 838 7,600
. . .
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