SECURITIES AND EXCHANGE COMMISSION





SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549


Form 8-K


Current Report

Pursuant to Section 13 or 15(d) of the Securities Act of 1934


Date of Report (Date of earliest event reported) April 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

 

 

 

 

 

 

 

 

 

 

PERFORMANCE DATA FOR THE PERIOD:

 

 

 

 

 

Net income (loss)

$(1,267)

 

 

 

 

Net income (loss) available to common shareholders

(1,282)

 

 

 

 

 

 

 

 

 

 

PERFORMANCE PERCENTAGES (annualized):

 

 

 

 

 

Return on average assets

(0.45)%

 

 

 

 

Return on average equity

(4.86)

 

 

 

 

Net interest margin

3.30

 

 

 

 

Net charge-offs as a percentage of average loans

1.60

 

 

 

 

Loan loss provision as a percentage of

    average loans


1.42

 

 

 

 

Efficiency ratio

89.24

 

 

 

 

 

 

 

 

 

 

PER COMMON SHARE:

 

 

 

 

 

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

 

 

 

 


2015

 

1QTR

2QTR

3QTR

4QTR

FULL

 

 

 

 

 

YEAR

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

 

 

 

FINANCIAL CONDITION  DATA AT PERIOD END

 

 

 

 

Assets

$1,121,701

 

 

 

Short-term investments/overnight funds

5,556

 

 

 

Investment securities

139,000

 

 

 

Loans and loans held for sale

882,410

 

 

 

Allowance for loan losses

9,520

 

 

 

Goodwill

11,944

 

 

 

Deposits

906,773

 

 

 

FHLB borrowings

88,952

 

 

 

Subordinated debt, net

7,424

 

 

 

Shareholders’ equity

97,589

 

 

 

Non-performing assets

3,007

 

 

 

Tangible common equity ratio

7.72

 

 

 

PER COMMON SHARE:

 

 

 

 

Book value (A)

$5.16

 

 

 

Tangible book value (A)

4.53

 

 

 

Market value

2.99

 

 

 

Trust assets – fair market value (B)

$1,974,180

 

 

 

 

 

 

 

 

STATISTICAL DATA AT PERIOD END:

 

 

 

 

Full-time equivalent employees

317

 

 

 

Branch locations

16

 

 

 

Common shares outstanding

18,894,561

 

 

 


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

 

 

 

 

INTEREST INCOME

 

 

 

 

 

Interest and fees on loans

$9,465

 

 

 

 

Interest on investments

957

 

 

 

 

Total Interest Income

10,422

 

 

 

 

 

 

 

 

 

 

INTEREST EXPENSE

 

 

 

 

 

Deposits

1,254

 

 

 

 

All borrowings

610

 

 

 

 

Total Interest Expense

1,864

 

 

 

 

 

 

 

 

 

 

NET INTEREST INCOME

8,558

 

 

 

 

Provision for loan losses

3,100

 

 

 

 

NET INTEREST INCOME AFTER

   PROVISION FOR LOAN LOSSES


5,458

 

 

 

 

 

 

 

 

 

 

NON-INTEREST INCOME

 

 

 

 

 

Trust and investment advisory fees

2,075

 

 

 

 

Service charges on deposit accounts

415

 

 

 

 

Net realized gains on loans held for sale

107

 

 

 

 

Mortgage related fees

63

 

 

 

 

Net realized gains on investment securities

57

 

 

 

 

Bank owned life insurance

167

 

 

 

 

Other income

553

 

 

 

 

Total Non-Interest Income

3,437

 

 

 

 

 

 

 

 

 

 

NON-INTEREST EXPENSE

 

 

 

 

 

Salaries and employee benefits

6,166

 

 

 

 

Net occupancy expense

737

 

 

 

 

Equipment expense

436

 

 

 

 

Professional fees

1,465

 

 

 

 

FDIC deposit insurance expense

179

 

 

 

 

Other expenses

1,728

 

 

 

 

Total Non-Interest Expense

10,711

 

 

 

 

 

 

 

 

 

 

PRETAX INCOME (LOSS)

(1,816)

 

 

 

 

Income tax expense (benefit)

(549)

 

 

 

 

NET INCOME (LOSS)

(1,267)

 

 

 

 

Preferred stock dividends

15

 

 

 

 

NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS


$(1,282)

 

 

 

 


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

 

 

 

 

 

 

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 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

 

 

 

 

 

 

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