Indicate by check mark whether the registrant is an
emerging growth company as defined in Rule 405 of the Securities
Act of 1933 (230.405 of this chapter) or Rule 12b-2 of the
Securities Exchange Act of 1934 (240.12b-2 of this chapter).
Emerging growth company ( )
If an emerging growth company, indicate by check
mark if the registrant has elected not to use the extended
transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 13(a) of the
Exchange Act. ( )
Form 8-K
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
2020
|
First Quarter 2019
|
|
$ Change
|
% Change
|
|
|
|
|
|
|
|
|
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
