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 19, 2016
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 2016 results through March 31, 2016. 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 19, 2016, announcing the first quarter 2016 results through March 31, 2016.
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 19, 2016
Exhibit 99.1
AMERISERV FINANCIAL REPORTS EARNINGS FOR THE FIRST QUARTER OF 2016
JOHNSTOWN, PA – AmeriServ Financial, Inc. (NASDAQ: ASRV) reported a first quarter 2016 net loss available to common shareholders of $1,282,000, or ($0.07) per diluted common share, due primarily to an increased provision for loan losses. This net loss is consistent with the information previously disclosed in an 8K filed on March 31, 2016. In the first quarter of 2015, net income available to common shareholders totaled $1,316,000, or $0.07 per diluted common share. The following table highlights the Company’s financial performance for the quarters ended March 31, 2016 and 2015:
| First Quarter 2016 | First Quarter 2015 | $ Change | % Change |
|
|
|
|
|
Net income (loss) | ($1,267,000) | $1,369,000 | ($2,636,000) | (192.5%) |
Net income (loss) available to common shareholders | ($1,282,000) | $1,316,000 | ($2,598,000) | (197.4%) |
Diluted earnings per share | ($ 0.07) | $ 0.07 | ($ 0.14) | (200.0%) |
Jeffrey A. Stopko, President and Chief Executive Officer, commented on the first quarter 2016 financial results: “The net loss that we reported in the first quarter of 2016 was caused by an increased provision for loan losses that was needed to resolve our only meaningful direct loan exposure to the energy industry. While I am disappointed with this loss, the Company’s overall loan portfolio quality continues to be strong. Additionally, we achieved several meaningful positive accomplishments in the first quarter of 2016 which included the pay-off of $21 million of SBLF preferred stock, continued year over year growth in both loans and deposits, and the identification of further non-interest expense savings which will benefit earnings in future quarters. I expect that AmeriServ Financial will return to more typical profitability levels in the second quarter of 2016.”
The Company’s net interest income in the first quarter of 2016 decreased by $376,000, or 4.2%, when compared to the first quarter of 2015. The Company’s net interest margin of 3.30% for the first quarter of 2016 was 27 basis points lower than the net interest margin of 3.57% for the first quarter 2015 and was consistent with the 3.30% margin reported for the more recent fourth quarter 2015 performance. The reduction in net interest income is a direct result of net interest margin compression that is prevalent in the banking industry along with the interest expense associated with the Company’s late fourth quarter 2015 issuance of subordinated debt. The prolonged low interest rate environment that exists in the economy, along with intense market competition for loans, more than offset the Company continuing to grow earning assets and control its cost of funds through disciplined deposit pricing. Specifically, the earning asset growth occurred in the loan portfolio as total loans averaged $881 million in the first quarter of 2016 which is $39.5 million, or 4.7%, higher than the $842 million average for the first quarter 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. Despite this meaningful loan growth experienced between years, loan interest income increased modestly by $9,000, or 0.1%. Interest income on investments in 2016 also returned to a more normal level after the Company benefited from a special dividend from the FHLB of Pittsburgh in 2015. Overall, total interest income decreased by $101,000, or 1.0%, between years.
Total interest expense for the first quarter of 2016 increased by $275,000, or 17.3%, due to a higher level of both borrowings and deposit interest expense. The Company experienced a $195,000 increase in the interest cost for borrowings in the first quarter of 2016 with $129,000 of this increase attributable to the Company’s recent subordinated debt issuance. Specifically, the Company issued $7.65 million of subordinated debt which has a 6.50% fixed interest rate in late December 2015. 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 interest expense was due to the December increase in the fed funds rate which had an immediate impact on the cost of overnight borrowed funds, which increased by $16 million in the first quarter of 2016. The Company also experienced growth in deposits which we believe reflects the loyalty of our core deposit base and ongoing efforts to cross sell new loan customers into deposit products. Specifically, total deposits averaged a record level of $910 million for the first quarter of 2016 which is $13.4 million, or 1.5%, higher than the $897 million average for the first quarter of 2015. The Company is pleased that a meaningful portion of this deposit growth occurred in non-interest bearing demand deposit accounts. Deposit interest expense in 2016 increased by $80,000, or 6.8%, due to the higher balance of deposits along with certain money market accounts repricing upward after the Federal Reserve fed funds interest rate increase.
The Company recorded a $3.1 million provision for loan losses in the first quarter of 2016 compared to a $250,000 provision for loan losses in the first quarter of 2015, or an increase of $2.85 million between periods. The substantially higher than typical provision in the first quarter of 2016 was necessary to resolve the Company’s only meaningful direct loan exposure to the energy industry. These loans are related to a single borrower in the fracking industry who had filed for bankruptcy protection in the fourth quarter of 2015. With the bankruptcy recently changing from Chapter 11 (reorganization) to Chapter 7 (liquidation), the Company concluded that its previously established reserves on these non-accrual loans were not sufficient to cover the discounted collateral values that will result from the liquidation process. As a result of this action, the Company also experienced heightened net loan charge-offs of $3.4 million, or 1.60% of total loans, in the first quarter of 2016 compared to net loan charge-offs of $184,000, or 0.09% of total loans, in the first quarter of 2015. Overall, the Company continued to maintain good asset quality as its non-performing assets totaled $3.0 million, or only 0.34% of total loans, at March 31, 2016. In summary, the allowance for loan losses provided a strong 408% coverage of non-performing loans, and 1.08% of total loans, at March 31, 2016, compared to 159% coverage of non-performing loans, and 1.13% of total loans, at December 31, 2015.
Total non-interest income in the first quarter of 2016 decreased by $275,000, or 7.4%, from the first quarter of 2015. Decreased revenue from bank owned life insurance, mortgage loan sales, and mortgage related fees were the main factors causing the decrease. Specifically, revenue from bank owned life insurance decreased by $196,000 after the Company received a death claim in 2015 and no such claim occurred in 2016. Gains realized on residential mortgage loan sales into the secondary market decreased by $84,000 and mortgage related fee income declined by $52,000 due to decreased refinance activity and a reduced level of new mortgage loan originations in the first quarter of 2016. These negative items were partially offset by the recognition of $57,000 of gains from investment security transactions in the first quarter of 2016. The Company did not execute any sale transactions in the first quarter of 2015. Also, trust and investment advisory fees increased modestly by $19,000 due to successful new business development efforts which more than offset fee pressure from reduced asset market values.
The Company’s total non-interest expense in the first quarter of 2016 increased by $301,000, or 2.9%, when compared to the first quarter of 2015. The increase in professional fees was almost entirely attributable to $288,000 of non-recurring costs for legal and accounting services that were necessary to resolve a trust operations trading error. Costs related to this trust issue were also the primary reason that other expenses increased by $76,000 between years. Salaries and employee benefits were also up by $93,000, or 1.5%, in the first quarter of 2016 primarily due to increased health care costs and severance costs related to the previously disclosed consolidation of branches in the State College market. Partially offsetting these higher expenses were lower levels of occupancy and equipment related costs which is reflective of the Company’s ongoing focus on reducing and controlling non-interest expenses. Finally, due to the pre-tax loss, the Company recorded an income tax benefit of $549,000, or an effective tax rate of 30.2%, in the first quarter of 2016. This compares to the income tax expense of $617,000, or an effective tax rate of 31.1%, for the first quarter of 2015.
The Company had total assets of $1.1 billion, shareholders’ equity of $98 million, a book value of $5.16 per common share and a tangible book value of $4.53 per common share at March 31, 2016. The Company continued to maintain strong capital ratios that exceed the regulatory defined well capitalized status and had a tangible common equity to tangible assets ratio of 7.72% at March 31, 2016.
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, 2016
(In thousands, except per share and ratio data)
(Unaudited)
2016
| 1QTR |
|
|
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|
|
|
|
|
|
|
PERFORMANCE DATA FOR THE PERIOD: |
|
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|
|
|
Net income (loss) | $(1,267) |
|
|
|
|
Net income (loss) available to common shareholders | (1,282) |
|
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|
|
|
|
|
|
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PERFORMANCE PERCENTAGES (annualized): |
|
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|
|
|
Return on average assets | (0.45)% |
|
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|
Return on average equity | (4.86) |
|
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|
Net interest margin | 3.30 |
|
|
|
|
Net charge-offs as a percentage of average loans | 1.60 |
|
|
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|
Loan loss provision as a percentage of average loans | 1.42 |
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|
Efficiency ratio | 89.24 |
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PER COMMON SHARE: |
|
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|
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|
Net income (loss): |
|
|
|
|
|
Basic | $(0.07) |
|
|
|
|
Average number of common shares outstanding | 18,884 |
|
|
|
|
Diluted | (0.07) |
|
|
|
|
Average number of common shares outstanding | 18,937 |
|
|
|
|
Cash dividends declared | $0.01 |
|
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|
2015
| 1QTR | 2QTR | 3QTR | 4QTR | FULL |
|
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|
| YEAR |
PERFORMANCE DATA FOR THE PERIOD: |
|
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|
|
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 |
|
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|
|
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PERFORMANCE PERCENTAGES (annualized): |
|
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|
|
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 |
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PER COMMON SHARE: |
|
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|
|
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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 |
|
|
|
FINANCIAL CONDITION DATA AT PERIOD END |
|
|
|
|
Assets | $1,121,701 |
|
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|
Short-term investments/overnight funds | 5,556 |
|
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|
Investment securities | 139,000 |
|
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Loans and loans held for sale | 882,410 |
|
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Allowance for loan losses | 9,520 |
|
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Goodwill | 11,944 |
|
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Deposits | 906,773 |
|
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FHLB borrowings | 88,952 |
|
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|
Subordinated debt, net | 7,424 |
|
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|
Shareholders’ equity | 97,589 |
|
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Non-performing assets | 3,007 |
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Tangible common equity ratio | 7.72 |
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PER COMMON SHARE: |
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Book value (A) | $5.16 |
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Tangible book value (A) | 4.53 |
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Market value | 2.99 |
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Trust assets – fair market value (B) | $1,974,180 |
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STATISTICAL DATA AT PERIOD END: |
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Full-time equivalent employees | 317 |
|
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Branch locations | 16 |
|
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Common shares outstanding | 18,894,561 |
|
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|
2015
| 1QTR | 2QTR | 3QTR | 4QTR |
FINANCIAL CONDITION DATA AT PERIOD END |
|
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|
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: |
|
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|
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 |
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STATISTICAL DATA AT PERIOD END: |
|
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|
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 |
|
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|
|
INTEREST INCOME |
|
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|
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|
Interest and fees on loans | $9,465 |
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Interest on investments | 957 |
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Total Interest Income | 10,422 |
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INTEREST EXPENSE |
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Deposits | 1,254 |
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All borrowings | 610 |
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Total Interest Expense | 1,864 |
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NET INTEREST INCOME | 8,558 |
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Provision for loan losses | 3,100 |
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NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES | 5,458 |
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NON-INTEREST INCOME |
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Trust and investment advisory fees | 2,075 |
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Service charges on deposit accounts | 415 |
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Net realized gains on loans held for sale | 107 |
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Mortgage related fees | 63 |
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Net realized gains on investment securities | 57 |
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Bank owned life insurance | 167 |
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Other income | 553 |
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Total Non-Interest Income | 3,437 |
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NON-INTEREST EXPENSE |
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Salaries and employee benefits | 6,166 |
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Net occupancy expense | 737 |
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Equipment expense | 436 |
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Professional fees | 1,465 |
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FDIC deposit insurance expense | 179 |
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Other expenses | 1,728 |
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Total Non-Interest Expense | 10,711 |
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|
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PRETAX INCOME (LOSS) | (1,816) |
|
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|
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Income tax expense (benefit) | (549) |
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|
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NET INCOME (LOSS) | (1,267) |
|
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Preferred stock dividends | 15 |
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NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS | $(1,282) |
|
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2015
| 1QTR | 2QTR | 3QTR | 4QTR | FULL |
INTEREST INCOME |
|
|
|
| YEAR |
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 |
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INTEREST EXPENSE |
|
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|
|
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 |
|
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|
|
|
|
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 |
|
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NON-INTEREST INCOME |
|
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|
|
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 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 |
|
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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 |
|
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|
|
|
|
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
|
|
|
|
|
| 1QTR |
| 1QTR |
|
Interest earning assets: |
|
|
|
|
Loans and loans held for sale, net of unearned income | $881,063 |
| $841,612 |
|
Short-term investment in money market funds | 7,955 |
| 2,017 |
|
Deposits with banks | 3,484 |
| 11,296 |
|
Total investment securities | 142,161 |
| 147,652 |
|
Total interest earning assets | 1,034,663 |
| 1,002,577 |
|
|
|
|
|
|
Non-interest earning assets: |
|
|
|
|
Cash and due from banks | 18,739 |
| 17,293 |
|
Premises and equipment | 12,090 |
| 12,953 |
|
Other assets | 67,751 |
| 70,301 |
|
Allowance for loan losses | (9,886) |
| (9,673) |
|
|
|
|
|
|
Total assets | $1,123,357 |
| $1,093,451 |
|
|
|
|
|
|
Interest bearing liabilities: |
|
|
|
|
Interest bearing deposits: |
|
|
|
|
Interest bearing demand | $101,293 |
| $ 92,926 |
|
Savings | 95,303 |
| 92,490 |
|
Money market | 264,433 |
| 232,542 |
|
Other time | 267,805 |
| 306,050 |
|
Total interest bearing deposits | 728,834 |
| 724,008 |
|
Borrowings: |
|
|
|
|
Federal funds purchased and other short-term borrowings | 29,449 |
| 13,484 |
|
Advances from Federal Home Loan Bank | 49,135 |
| 43,581 |
|
Guaranteed junior subordinated deferrable interest debentures | 13,085 |
| 13,085 |
|
Subordinated debt | 7,650 |
| - |
|
Total interest bearing liabilities | 828,153 |
| 794,158 |
|
|
|
|
|
|
Non-interest bearing liabilities: |
|
|
|
|
Demand deposits | 181,096 |
| 172,559 |
|
Other liabilities | 9,370 |
| 11,052 |
|
Shareholders’ equity | 104,738 |
| 115,682 |
|
Total liabilities and shareholders’ equity | $1,123,357 |
| $1,093,451 |
|