AMERISERV FINANCIAL, INC. JOHNSTOWN, Pa., Jan. 24, 2017 /PRNewswire/ -- AmeriServ Financial, Inc. (NASDAQ: ASRV) reported net income available to common shareholders of $1,150,000, or $0.06 per diluted common share, in the fourth quarter of 2016. This earnings performance was lower than the fourth quarter of 2015 where net income available to common shareholders totaled $1,321,000, or $0.07 per diluted common share. For the year ended December 31, 2016, the Company reported net income available to common shareholders of $2,295,000, or $0.12 per diluted share. This represented a decrease in earnings per share from the full year 2015 where net income available to common shareholders totaled $5,787,000, or $0.31 per diluted common share, due largely to an increased provision for loan losses that was recorded in the first quarter of 2016. The following table highlights the Company's financial performance for both the quarters and years ended December 31, 2016 and 2015:
Fourth Quarter Fourth Quarter Year Ended Year Ended
2016 2015
December 31, 2016 December 31, 2015
----------------- -----------------
Net income $1,150,000 $1,374,000 $2,310,000 $5,997,000
---------- ---------- ---------- ---------- ----------
Net income available to $1,150,000 $1,321,000 $2,295,000 $5,787,000
common shareholders
-------------------
Diluted earnings per share $0.06 $0.07 $0.12 $0.31
-------------------------- ----- ----- ----- -----
Additionally, the Company's Board of Directors approved a new common stock repurchase program which calls for AmeriServ Financial, Inc. to buy back up to 5%, or approximately 945,000 shares, of its outstanding common stock during the next 18 months. The authorized repurchases will be made from time to time in either the open market or through privately negotiated transactions. The timing, volume and nature of share repurchases will be at the sole discretion of management, dependent on market conditions, applicable securities laws, and other factors, and may be suspended or discontinued at any time. No assurance can be given that any particular amount of common stock will be repurchased. This repurchase program may be modified, extended or terminated by the Board of Directors at any time. As of December 31, 2016, the Company had approximately 18.9 million shares of its common stock outstanding.
Jeffrey A. Stopko, President and Chief Executive Officer, commented on the 2016 financial results and common stock repurchase program: "AmeriServ Financial, Inc. enters 2017 with improving earnings momentum and a strong balance sheet evidenced by good capital levels, deep liquidity, and excellent asset quality. The announcement of this new common stock repurchase program reflects our belief that the current ASRV stock price does not fully reflect the value of some of the key strategic initiatives that we accomplished in 2016 which included: the pay-off of $21 million of Small Business Lending Fund (SBLF) preferred stock, an increase in our common stock cash dividend, and continued solid growth in our community banking business. Accordingly, we believe that the return of capital to our shareholders through a common stock buyback program is an appropriate capital management strategy at this time."
The Company's net interest income in the fourth quarter of 2016 decreased by only $8,000 from the prior year's fourth quarter and for the full year of 2016 decreased by $1,227,000, or 3.5%, when compared to the full year of 2015. The Company's net interest margin of 3.26% for the full year of 2016 was 23 basis points lower than the net interest margin of 3.49% for the full year of 2015. There was also a net interest margin decline of 12 basis points between the fourth quarter of 2016 and the prior year's fourth quarter although the net interest margin did demonstrate some modest improvement of three basis points between the third and fourth quarters of 2016. The 2016 reduction in net interest income has been significantly impacted by the following three factors: 1.) net interest margin compression that results from the prolonged low interest rate environment that exists in the economy and is pressuring community bank net interest margins, 2.) additional interest expense that was associated with the Company's late fourth quarter 2015 issuance of subordinated debt, and 3.) a significantly lower level of loan prepayment fee income, which decreased by approximately $300,000 for full year of 2016. These factors more than offset the Company's continued growth in earning assets and control of its cost of funds through disciplined deposit pricing. Specifically, the earning asset growth occurring in the loan portfolio as total loans averaged $888 million for both the fourth quarter and the full year of 2016, which is $17 million, or 2.0%, higher than $870 million average for the fourth quarter of 2015 and $31 million, or 3.6%, higher than the $857 million average for the full year of 2015. This loan growth 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. Loan interest income increased by $184,000, or 2.0%, in the fourth quarter of 2016 when compared to the fourth quarter of 2015 as loan growth more than offset the negative impact from net interest margin compression. However, loan interest income is $134,000, or 0.4%, lower for the full year of 2016 when compared to the full year of 2015 due primarily to the previously mentioned decline in loan prepayment fees between years. Interest income on investments grew in the fourth quarter of 2016 and is also higher by $122,000 or 3.1% for the full year as the Company benefited from a higher balance of investment securities in 2016. Overall, total interest income decreased by $12,000, or 0.03%, in 2016.
The Company experienced significant growth in deposits between years which is a reflection of the loyalty and stability 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 $956 million for the full year of 2016 which is $63 million, or 7.0%, higher than the $893 million average for the full year of 2015. The Company is also pleased that a meaningful portion of this deposit growth occurred in non-interest bearing demand deposit accounts. Deposit interest expense for the full year of 2016 increased by $648,000, or 13.6%, due to the higher balance of deposits along with certain money market accounts repricing upward after Federal Reserve fed funds interest rate increases. As a result of this strong deposit growth, the Company's loan to deposit ratio ended the year at 91.6% which indicates that the Company has ample room to further grow its loan portfolio in 2017.
Total interest expense increased by $308,000 in the fourth quarter of 2016 and for the full year of 2016 increased by $1,215,000, or 18.6%, each as compared to 2015 periods due to higher levels of both borrowings and deposit interest expense. The Company experienced a $567,000 increase in the interest cost for borrowings in 2016 with $515,000 of this increase attributable to the Company's subordinated debt issuance which occurred late in December of 2015. Specifically, the Company issued $7.65 million of subordinated debt which has a 6.50% fixed interest rate. The proceeds from the subordinated debt issuance, along with other cash on hand, was used to redeem all $21 million of our outstanding SBLF preferred stock on January 27, 2016. The remainder of the increase in borrowings interest expense was due to a greater utilization of FHLB term advances to extend borrowings for interest rate risk management purposes.
The Company recorded a $300,000 provision for loan losses in the fourth quarter of 2016 compared to a $500,000 provision in the fourth quarter of 2015. For the full year of 2016, the Company recorded a $3,950,000 provision for loan losses compared to a $1,250,000 provision for loan losses for the full year of 2015 or an increase of $2.7 million between years. A substantially higher than typical provision and net loan charge-offs were recorded in the first quarter of 2016 and were necessary to resolve a meaningful direct loan exposure to the energy industry, the specifics of which were discussed in detail in the Company's first quarter results. The provision recorded in the fourth quarter of 2016 was more typical of what is required to support the continuing growth of the loan portfolio and cover net loan charge-offs. The Company experienced net loan charge-offs of $94,000, or 0.04% of total loans, in the fourth quarter of 2016, compared to net loan charge-offs of $351,000, or 0.16% of total loans, in the fourth quarter of 2015. For the full year periods, there were net loan charge-offs of $3.9 million, or 0.44%, of total loans in 2016, compared to net loan charge-offs of $952,000, or 0.11% of total loans, in 2015. Overall, the Company continued to maintain outstanding asset quality in the fourth quarter of 2016. At December 31, 2016, non-performing assets totaled $1.6 million, or only 0.18% of total loans, which is down by $4.7 million from the prior year-end and is one of the lowest levels ever reported by the Company. In summary, the allowance for loan losses provided a strong 612% coverage of non-performing loans, and 1.12% of total loans, at December 31, 2016, compared to 158% coverage of non-performing loans, and 1.13% of total loans, at December 31, 2015.
Total non-interest income in the fourth quarter of 2016 decreased by $50,000, or 1.3%, from the prior year's fourth quarter, and for the year of 2016 decreased by $629,000, or 4.1%, when compared to the full year of 2015. Revenue from bank owned life insurance decreased by $229,000 for the quarter and $942,000 for the full year and was the primary factor contributing to the non-interest income decline as there were no death claims received in 2016 compared to four claims in 2015. Slightly offsetting these unfavorable variances for the quarter and full year was increased revenue from mortgage loan sales and mortgage related fee income in the fourth quarter of 2016 by $153,000, or 60%, when compared to the fourth quarter of 2015 and for the full year of 2016 by $93,000, or 8.0%, when compared to the full year of 2015. This higher level of revenue from residential mortgage lending was due to increased refinance activity and a comparable level of new mortgage loan originations when compared to last year. Other income was higher by $113,000, or 19.2%, for the quarter and by $201,000, or 8.6%, for the full year as the Company benefited from additional revenue resulting from a more aggressive business development strategy within its Financial Services Division. There were no net gains recognized on the sale of investment securities during the fourth quarter of 2016 after a $79,000 gain was recognized in the fourth quarter of 2015. For the full year, however, net gains recognized on investment security sales were $177,000 in 2016, which was $106,000, or 149%, higher than the 2015 level as the Company sold certain rapidly pre-paying mortgage backed securities in this low interest rate environment. Trust and investment advisory fees decreased slightly by $11,000, or 0.1%, for the full year as the loss of certain client accounts through normal attrition more than offset continued successful new business development activities as well as effective management of existing customer accounts in this volatile market environment. However, Trust and investment advisory fees increased by $31,000, or 1.5%, for the fourth quarter. Trust assets under administration totaled $2.0 billion as of December 31, 2016.
Total non-interest expense in the fourth quarter of 2016 increased by $339,000, or 3.3%, from the prior year's fourth quarter and for the full year of 2016 increased by $577,000, or 1.4%, when compared to the full year of 2015. As noted in our previously disclosed first quarter financial results, non-recurring costs for legal and accounting services were necessary to address a trust operations trading error and are the primary reasons for the negative comparison for full year time period while an unrelated litigation settlement and higher pension costs contributed to the negative comparison for the fourth quarter. The impact of these trust operations expenses were clearly evident for the full year of 2016 in higher levels of total professional fees and other expenses. Professional fees were $277,000, or 5.5%, higher and other expenses also compare unfavorably by $512,000 for the full year time period. Salaries and employee benefits were higher by $153,000, or 2.6%, in the fourth quarter but were slightly lower by $8,000 for the full year of 2016. The unfavorable comparison for the quarter was due to additional expense related to the Company's defined pension benefit plan which results from the prolonged low interest rate environment. Partially offsetting these additional expenses were our continued cost control efforts as occupancy and equipment related expenses are lower by $244,000, or 5.2%, for the full year. Finally, the Company recorded an income tax expense of $897,000, or an effective tax rate of 28.0%, in 2016 which is lower when compared to the income tax expense of $2,343,000, or an effective tax rate of 28.1%, for 2015. The lower income tax expense and effective tax rate are due to the first quarter 2016 loss recognized by the Company. However, as we have demonstrated in the remaining three quarters of 2016 our actions taken for an immediate improvement to more typical and expected profitability levels have proven successful. We anticipate that our earnings momentum will increase in 2017.
The Company had total assets of $1.154 billion, shareholders' equity of $95.4 million, a book value of $5.05 per common share and a tangible book value of $4.41 per common share at December 31, 2016. The decline in the book value and tangible book value per share in the fourth quarter of 2016 was due to a decrease in the value of the Company's available for sale investment securities and an increase in the defined benefit pension obligation as changes in both of these items flow through the equity section of the balance sheet but do not impact regulatory capital. 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
December 31, 2016
(In thousands, except per share and ratio data)
(Unaudited)
2016
1QTR 2QTR 3QTR 4QTR YEAR
TO DATE
PERFORMANCE DATA FOR THE PERIOD:
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
PERFORMANCE PERCENTAGES (annualized):
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
PER COMMON SHARE:
Net income (loss):
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
2015
1QTR 2QTR 3QTR 4QTR YEAR
TO DATE
PERFORMANCE DATA FOR THE PERIOD:
Net income $1,369 $1,421 $1,833 $1,374 $5,997
Net income available
to common
shareholders 1,316 1,369 1,781 1,321 5,787
PERFORMANCE PERCENTAGES (annualized):
Return on average
assets 0.51% 0.52% 0.66% 0.49% 0.54%
Return on average
equity 4.80 4.88 6.15 4.56 5.10
Net interest margin 3.57 3.45 3.52 3.30 3.49
Net charge-offs as a
percentage of average
loans 0.09 0.08 0.11 0.16 0.11
Loan loss provision as a percentage of
average loans 0.12 0.09 0.14 0.23 0.15
Efficiency ratio 82.29 81.93 78.25 81.69 81.01
PER COMMON SHARE:
Net income:
Basic $0.07 $0.07 $0.09 $0.07 $0.31
Average number of
common shares
outstanding 18,851 18,859 18,869 18,871 18,863
Diluted 0.07 0.07 0.09 0.07 0.31
Average number of
common shares
outstanding 18,909 18,941 18,951 18,950 18,933
Cash dividends
declared $0.01 $0.01 $0.01 $0.01 $0.04
AMERISERV FINANCIAL, INC.
(In thousands, except per share, statistical, and ratio data)
(Unaudited)
2016
1QTR 2QTR 3QTR 4QTR
FINANCIAL CONDITION DATA AT
PERIOD END
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
PER COMMON SHARE:
Book value (A) $5.16 $5.25 $5.29 $5.05
Tangible book value (A) 4.53 4.62 4.66 4.41
Market value 2.99 3.02 3.32 3.70
Trust assets - fair market value (B) $1,974,180 $1,982,868 $2,011,344 $1,992,978
STATISTICAL DATA AT PERIOD END:
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
2015
1QTR 2QTR 3QTR 4QTR
FINANCIAL CONDITION DATA AT
PERIOD END
Assets $1,103,416 $1,112,934 $1,110,843 $1,148,922
Short-term investments/overnight funds 10,127 9,843 14,966 25,067
Investment securities 142,010 142,448 135,013 140,886
Loans and loans held for sale 853,972 866,243 868,213 883,987
Allowance for loan losses 9,689 9,717 9,772 9,921
Goodwill 11,944 11,944 11,944 11,944
Deposits 892,676 862,902 869,899 903,294
FHLB borrowings 71,219 109,430 100,988 96,748
Subordinated debt, net - - - 7,418
Shareholders' equity 116,328 117,305 119,408 118,973
Non-performing assets 3,046 2,565 2,294 6,297
Tangible common equity ratio 7.64 7.66 7.87 7.57
PER COMMON SHARE:
Book value (A) $5.06 $5.11 $5.21 $5.19
Tangible book value (A) 4.42 4.47 4.58 4.56
Market value 2.98 3.33 3.24 3.20
Trust assets - fair market value (B) $2,033,573 $2,012,358 $1,935,495 $1,974,882
STATISTICAL DATA AT PERIOD END:
Full-time equivalent employees 318 318 318 318
Branch locations 17 17 17 17
Common shares outstanding 18,855,021 18,861,811 18,870,811 18,870,811
NOTES:
(A) For 2015, Preferred stock of $21
million received through the
Small Business Lending Fund is
excluded from the book value
per common share and tangible
book value per common share
calculations. The Company
repaid the US Treasury for the
SBLF funds on January 27,2016.
(B) Not recognized on the
consolidated balance sheets.
AMERISERV FINANCIAL, INC.
CONSOLIDATED STATEMENT OF INCOME
(In thousands)
(Unaudited)
2016
1QTR 2QTR 3QTR 4QTR YEAR
INTEREST INCOME 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
INTEREST EXPENSE
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
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
NON-INTEREST INCOME
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 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
NON-INTEREST EXPENSE
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
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
2015
1QTR 2QTR 3QTR 4QTR YEAR
INTEREST INCOME TO DATE
Interest and fees on loans $9,456 $9,480 $9,718 $9,341 $37,995
Interest on investments 1,067 929 949 941 3,886
Total Interest Income 10,523 10,409 10,667 10,282 41,881
INTEREST EXPENSE
Deposits 1,174 1,171 1,174 1,233 4,752
All borrowings 415 438 458 457 1,768
Total Interest Expense 1,589 1,609 1,632 1,690 6,520
NET INTEREST INCOME 8,934 8,800 9,035 8,592 35,361
Provision for loan losses 250 200 300 500 1,250
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 8,684 8,600 8,735 8,092 34,111
NON-INTEREST INCOME
Trust and investment advisory fees 2,056 2,135 2,085 2,068 8,344
Service charges on deposit accounts 419 429 441 461 1,750
Net realized gains on loans held for sale 191 225 178 173 767
Mortgage related fees 115 109 87 80 391
Net realized gains (losses) on investment
securities - 28 (36) 79 71
Bank owned life insurance 363 171 684 399 1,617
Other income 568 595 576 588 2,327
Total Non-Interest Income 3,712 3,692 4,015 3,848 15,267
NON-INTEREST EXPENSE
Salaries and employee benefits 6,073 5,944 6,079 5,946 24,042
Net occupancy expense 841 718 692 690 2,941
Equipment expense 466 480 409 418 1,773
Professional fees 1,211 1,275 1,206 1,311 5,003
FDIC deposit insurance expense 167 164 174 164 669
Other expenses 1,652 1,658 1,659 1,641 6,610
Total Non-Interest Expense 10,410 10,239 10,219 10,170 41,038
PRETAX INCOME 1,986 2,053 2,531 1,770 8,340
Income tax expense 617 632 698 396 2,343
NET INCOME 1,369 1,421 1,833 1,374 5,997
Preferred stock dividends 53 52 52 53 210
NET INCOME AVAILABLE TO
COMMON SHAREHOLDERS
$1,316 $1,369 $1,781 $1,321 $5,787
AMERISERV FINANCIAL, INC.
NASDAQ: ASRV
Average Balance Sheet Data (In thousands)
(Unaudited)
2016 2015
TWELVE TWELVE
4QTR MONTHS 4QTR MONTHS
Interest earning assets:
Loans and loans held for sale, net of unearned income $887,671 $887,679 $870,400 $857,015
Short-term Investment in money market funds 21,663 15,156 12,116 10,700
Deposits with banks 1,059 1,668 5,086 2,198
Total investment securities 153,539 147,279 140,794 144,959
Total interest earning assets 1,063,932 1,051,782 1,028,396 1,014,872
Non-interest earning assets:
Cash and due from banks 22,854 20,626 17,525 17,312
Premises and equipment 11,772 11,930 12,282 12,617
Other assets 67,137 68,046 67,605 69,201
Allowance for loan losses (9,829) (9,790) (9,808) (9,766)
TOTAL ASSETS $1,155,866 $1,142,594 $1,116,000 $1,104,236
Interest bearing liabilities:
Interest bearing deposits:
Interest bearing demand $112,451 $108,350 $92,800 $97,201
Savings 95,494 95,986 92,550 94,425
Money market 286,187 277,967 269,251 242,298
Other time 301,555 290,612 276,134 287,783
Total interest bearing deposits 795,687 772,915 730,735 721,707
Borrowings:
Federal funds purchased and other short-term borrowings 1,685 9,030 16,650 24,582
Advances from Federal Home Loan Bank 46,810 48,720 48,763 46,166
Guaranteed junior subordinated deferrable interest debentures 13,085 13,085 13,085 13,085
Subordinated debt 7,650 7,650 247 62
Total interest bearing liabilities: 864,917 851,400 809,480 805,602
Non-interest bearing liabilities:
Demand deposits 184,920 182,732 178,801 171,175
Other liabilities 6,241 8,074 8,157 9,871
Shareholders' equity 99,788 100,388 119,562 117,588
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,155,866 $1,142,594 $1,116,000 $1,104,236
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SOURCE AmeriServ Financial, Inc.
