Item 2.02 Results of operation and financial condition.
AMERISERV FINANCIAL, Inc. (the "Registrant") announced first quarter 2021
results through March 31, 2021. For a more detailed description of the
announcement see the press release attached as Exhibit 99.1.
Item 8.01 Other events.
On April 20, 2021, 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 17, 2021 to shareholders of record
on May 3, 2021. 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 20, 2021, announcing first quarter 2021 earnings
through March 31, 2021 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 20, 2021
Exhibit 99.1
AMERISERV FINANCIAL REPORTS INCREASED 2021 FIRST QUARTER EARNINGS AND ANNOUNCES
QUARTERLY COMMON STOCK CASH DIVIDEND
JOHNSTOWN, PA - AmeriServ Financial, Inc. (NASDAQ: ASRV) reported first quarter
2021 net income of $2,081,000, or $0.12 per diluted common share. This earnings
performance represented a $672,000, or 47.7%, increase from the first quarter of
2020 when net income totaled $1,409,000, or $0.08 per diluted common share. The
following table highlights the Company's financial performance for the quarters
ended March 31, 2021 and 2020:
First First $ Change % Change
Quarter Quarter
2021 2020
Net income $2,081,000 $1,409,000 $672,000 47.7%
Diluted earnings per share $ 0.12 $ 0.08 $ 0.04 50.0%
Jeffrey A. Stopko, President and Chief Executive Officer, commented on the first
quarter 2021 financial results: "The benefits of our community bank
customer-focused business model and the diversification of our revenue streams
contributed to AmeriServ Financial's best earnings quarter since the third
quarter of 2018. Our ability to generate positive operating leverage by growing
our revenues at a faster pace than expenses caused this strong growth in
earnings in the first quarter of 2021. We continued to achieve record levels of
both loans and deposits as we served as an important financial resource to small
businesses and consumers in our marketplace. Additionally, 32% of our total
first quarter 2021 revenue came from non-interest income sources which included
record contributions from our strong wealth management business and active
residential mortgage operation. As a result of this good earnings momentum and
our diligent and conservative focus on our asset quality, I believe that
AmeriServ Financial is well positioned to take advantage of opportunities that
may result from the expected improvement in the economy during the remainder of
2021."
The Company's net interest income in the first quarter of 2021 increased by
$941,000, or 10.8%, from the prior year's first quarter while the net interest
margin of 3.23% was two basis points higher than the net interest margin of
3.21% for the first quarter of 2020. First quarter 2021 results were indicative
of the Company's continuing response to the challenges presented by the
pandemic, including the current low interest rate environment as well as
economic uncertainty and volatility. The economy has been demonstrating some
improvement due to the positive impact of the COVID-19 vaccine distribution and
the gradual easing of social restrictions that businesses and consumers have
been operating under. The Company continues to experience robust balance sheet
growth as, both, total loans and total deposits reached new record levels due to
business development efforts and the government implementing new stimulus
programs during the quarter. Net interest income improved as net interest
margin pressure from the low interest rate environment was offset by fee income
from existing Paycheck Protection Program (PPP) loan forgiveness and new fee
income from the most recent second round of PPP loans implemented earlier in the
quarter. The low interest rate environment is also positively impacting deposit
and borrowings interest expense cost. Overall, total interest expense decreased
significantly more than the decrease in total interest income, resulting in net
interest income increasing for the first quarter of 2021 compared to last year's
first quarter. Overall, the increase to net interest income, along with a
higher level of non-interest income, more than offset an increased loan loss
provision and a higher level of non-interest expense resulting in an improved
earnings performance for the first quarter of 2021.
The slowly improving economy was evident in our lending activity as we continued
to experience commercial loan growth during the first quarter of 2021 along with
commercial loan pipelines returning to pre-COVID levels. The strong level of
residential mortgage loan production experienced in 2020 continued into the
first quarter of 2021. Residential mortgage loan production totaled $29.7
million in the first quarter of 2021 and was 64.0% higher than the production
level of $18.1 million achieved in last year's first quarter. Additionally,
loan volumes were positively impacted by the previously mentioned second round
of the 100% guaranteed PPP loans, which was announced in late December 2020 as
part of the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues
Act and implemented during the middle of January 2021. (Note that there were no
PPP loans on the balance sheet in the first quarter of 2020 as the initial round
of the program was not implemented until the second quarter of 2020.) The
Company, again, elected to participate in this renewed program to assist small
businesses in our community in this difficult economy. The combination of
growth in traditional loan products and our participation in the latest round of
the PPP resulted in total loans reaching a record level. Later in the first
quarter, the President signed into law another round of economic stimulus as
part of the American Rescue Plan Act of 2021. The stimulus checks delivered to
most Americans and the financial assistance provided to municipalities and
school districts as part of this program contributed to total deposits
increasing significantly and, similar to the loan portfolio, reaching a record
level.
The average balance of total interest earning assets for the first quarter of
2021 continued to grow and are now $119 million, or 10.9%, higher than the first
quarter of 2020. Likewise, on the liability side of the balance sheet, total
average deposits increased by $121 million, or 12.3%, since last year primarily
because of government stimulus and consumers/businesses changing their spending
habits because of the pandemic. Looking into the near future, we expect that
our deposit balances will be positively impacted in the second quarter of 2021
by the acquisition of two branch offices from Riverview Bank, which we
anticipate should provide approximately $45 million of additional deposits. This
branch acquisition is described in our press release and Current Report on Form
8-K dated January 15, 2021, which can be found on our website. Overall, the
Company's loan to deposit ratio averaged 89.0% in the first quarter of 2021,
which we believe indicates that the Company has ample capacity to continue to
grow its loan portfolio and is well positioned to continue assisting our
customers and the community to recover from the impact that the COVID-19
pandemic is having on our local economy.
As stated previously, total loans reached a new record level and averaged $982
million in the first quarter of 2021 which is $105 million, or 11.9%, higher
than the $877 million average for the first quarter of 2020. Along with
continued robust residential mortgage loan production and additional normal
commercial loan growth, the Company processed 219 PPP loans totaling $30.8
million. Also, the Company recorded a total of $897,000 of processing fee
income and interest income from PPP lending activity. Finally, on an end of
period basis, excluding total PPP loans, the total loan portfolio grew by
approximately $41.9 million, or 4.8%, since the end of the first quarter of
2020.
The Company remains committed to prudently working with and supporting our
borrowers that have been hardest hit by the pandemic by granting them loan
payment modifications. Most of these borrowers are those that have requested a
second loan payment deferral plan. Borrower requested modifications primarily
consist of the deferral of principal and/or interest payments for a period of
three to six months. On March 31, 2021, loans totaling approximately $50
million, or 5.0% of total loans, were on a payment modification plan. These
loans include 18 commercial borrowers primarily in the hospitality industry.
This current level of borrowers requesting payment deferrals is down sharply
from its peak level of approximately $200 million that occurred on June 30,
2020. Management continues to carefully monitor asset quality with a particular
focus on these customers that have requested payment deferrals. Deferral
extension requests are considered based upon the customer's needs and their
impacted industry, borrower and guarantor capacity to service debt and issued
regulatory guidance.
Total investment securities averaged $190 million for the first quarter of 2021
which is $1.6 million, or 0.8%, higher than the $189 million average for last
year's first quarter. The Company continues to be selective in 2021 when
purchasing securities due to the low interest rate environment. However, the
yield curve began to steepen during the latter part of the first quarter as the
long end of the U.S. Treasury yield curve increased while the short end of the
curve remained relatively stable. This resulted in improved yields for federal
agency mortgage-backed securities and federal agency bonds, and management
decided to add more of these investments to our portfolio. The Company also
continues to purchase corporate securities, particularly subordinated debt
issued by other financial institutions, along with taxable municipal securities.
Our liquidity position continues to be strong due to the significant influx of
deposits. The challenges this excess liquidity presents are twofold. First,
there is the uncertainty regarding the duration that these excess funds will
remain on the balance sheet which will be determined by customer behavior as the
economic conditions change. The second challenge is to profitably deploy this
excess liquidity given the current low yields on short term investment products.
As a result, short-term investment balances averaged $31 million in the first
quarter of 2021 which remains high by historical standards. Therefore, future
loan growth and continued prudent investment in securities is critical to
achieve the best return on the excess funds. The low interest rate environment
resulted in interest income on total investments decreasing between the first
quarter of 2021 and first quarter of 2020. Overall, total interest income on
both loans and investments decreased by $175,000, or 1.5%, between years despite
increased volume.
Total interest expense for the first quarter of 2021 decreased by $1.1 million,
or 35.0%, when compared to the first quarter of 2020, due to lower levels of
both deposit and borrowing interest expense. Deposit interest expense was lower
by $1.1 million, or 43.0%, despite the previously mentioned record increase in
deposits that occurred during the first quarter of 2021 reflecting new deposit
inflows as well as the loyalty of the bank's core deposit base. Management
continues to effectively execute several deposit product pricing reductions in
order to address the net interest margin challenges presented by the low
interest rate environment. As a result, the Company experienced some deposit
cost relief. Specifically, our total deposit cost averaged 0.52% in the first
quarter of 2021 compared to 1.01% in the first quarter of 2020, representing a
meaningful decrease of 49 basis points.
The Company recorded a $400,000 provision expense for loan losses in the first
quarter of 2021 as compared to a $175,000 provision expense recorded in the
first quarter of 2020. Although higher than the first quarter of 2020 by
$225,000, an improved credit quality outlook for the overall portfolio resulted
in a lower loan loss provision in the first quarter of 2021 after three
consecutive quarters of a provision increase. The Company, however, continues
to believe that a strong allowance for loan losses is needed given the overall
economic climate and the uncertainty that remains because of the impact that the
COVID-19 pandemic is having on certain borrowers. The first quarter 2021
provision primarily reflects an increased allocation on two commercial loan
relationships transferred into non-accrual status during the quarter and the
rating downgrade of a loan in the health care industry. As a result,
non-performing assets, while still well controlled, totaled $4.2 million, or
0.43% of total loans, on March 31, 2021 compared to $3.3 million, or 0.34% of
total loans, at December 31, 2020. The Company experienced low net loan
charge-offs of $114,000, or 0.05% of total loans, in first quarter of 2021 which
was comparable to net loan charge-offs of $120,000, or 0.06% of total loans, for
the first quarter of 2020. As a result of the provision expense sharply
exceeding net loan charge-offs over the last 12 months, the balance in the
allowance for loan losses increased by $2.3 million, or 24.6%, to $11.6 million
at March 31, 2021. Management continues to carefully monitor asset quality with
a particular focus on loan customers that have requested a second payment
deferral. The Asset Quality Task Force is meeting at least monthly to review
these particular relationships, receiving input from the business lenders
regarding their ongoing discussions with the borrowers. In summary, the
allowance for loan losses provided 274% coverage of non-performing assets, and
1.18% of total loans, on March 31, 2021, compared to 341% coverage of
non-performing assets, and 1.16% of total loans, on December 31, 2020. Note
that the reserve coverage of total loans, excluding PPP loans, is 1.27%(1) on
March 31, 2021. The Small Business Administration guarantees 100% of the PPP
loans made to eligible borrowers which minimizes the level of credit risk
associated with these loans.
Total non-interest income in the first quarter of 2021 increased by $782,000, or
20.4%, from the prior year's first quarter. Wealth management fees increased by
$318,000, or 12.5%, in the first quarter of 2021 compared to the same time
period in 2020. The entire wealth management division has been resilient since
the pandemic began and is performing well managing client accounts and adding
new business despite the major market value decline that occurred in late March
2020. The market value of wealth management assets is now in excess of $2.5
billion and has fully recovered and improved from the pre-pandemic valuation,
exceeding the March 31, 2020 market value by 27%. Income from residential
mortgage loan sales into the secondary market increased by $258,000, or 108.9%,
due to a sharply higher level of residential mortgage loan production in the
first quarter of 2021. Revenue from bank owned life insurance increased by
$207,000 due to the receipt of a $159,000 death claim and a financial floor
taking hold which caused increased earnings and a higher rate of return on
certain policies. Partially offsetting these favorable items was service
charges on deposit accounts decreasing by $85,000, or 29.7%, as a result of
fewer overdraft fees due to customers maintaining higher deposit balances.
The Company's total non-interest expense in the first quarter of 2021 increased
by $672,000, or 6.3%, when compared to the first quarter of 2020. The increase
was due to higher salaries & benefits expense of $237,000, or 3.5%, increased
professional fees by $160,000, or 13.9%, higher other expenses by $142,000, or
8.4%, and increased FDIC insurance expense by $129,000. Within salaries &
employee benefits, factors causing the increase included greater incentive
compensation by $217,000 primarily due to commissions earned as a result of the
strong residential mortgage loan production and incentives earned from the good
performance in the wealth management division. Also contributing to the higher
salaries & employee benefits expense was increased health care costs by $97,000,
or 11.1%. Partially offsetting these increases within total salaries & employee
benefits were lower salaries expense by $139,000, or 3.1%, due to the level of
full time equivalent employees (FTEs) being lower by five. The higher level of
professional fees results from an increased level of outside professional
services related costs, increased fees due to the significantly higher level of
residential mortgage loan production and PPP activity and higher legal fees.
The increase to FDIC deposit insurance expense is due to an increase in the
asset assessment base along with the benefit of the Small Bank Assessment Credit
being fully utilized in the first quarter of 2020. Finally, the higher level of
other expenses is due to an increased expense related to the unfunded commitment
reserve along with $110,000 of costs incurred related to the upcoming branch
acquisition from Riverview Bank. Slightly offsetting these increased items and
favorably impacting other expenses was a lower level of meals & travel costs
that is related to travel restrictions from the pandemic. Finally, the Company
recorded an income tax expense of $520,000, or an effective tax rate of 20.0%,
in the first quarter of 2021. This compares to an income tax expense of
$366,000, or an effective tax rate of 20.6%, for the first quarter of 2020.
The Company had total assets of $1.3 billion, shareholders' equity of $105.3
million, a book value of $6.17 per common share and a tangible book value(1) of
$5.47 per common share on March 31, 2021. 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 17, 2021 to shareholders
of record on May 3, 2021. This cash dividend represents a 2.5% annualized yield
using the April 13, 2021 closing stock price of $4.01. For the first quarter of
2021, the Company's dividend payout ratio amounted to 20.8%.
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, proposed branch
acquisition, including the timing, anticipated benefits, and financial impact
thereof, 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 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;
expected timing and benefits of the proposed branch acquisition; estimates of
deposits and other assets to be acquired; 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, 2020. 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, 2021
(Dollars in thousands, except per share and ratio data)
(Unaudited)
2021
1QTR
PERFORMANCE DATA FOR THE PERIOD:
Net income $2,081
PERFORMANCE PERCENTAGES (annualized):
Return on average assets 0.65%
Return on average equity 8.04
Return on average tangible common equity (B) 9.08
Net interest margin
3.23
Net charge-offs as a percentage of average loans 0.05
Loan loss provision as a percentage of
0.17
average loans
Efficiency ratio (D) 79.00
EARNINGS PER COMMON SHARE:
Basic $0.12
Average number of common shares outstanding 17,064
Diluted
0.12
Average number of common shares outstanding 17,101
Cash dividends paid per share $0.025
2020
1QTR 2QTR 3QTR 4QTR FULL YEAR
PERFORMANCE DATA FOR THE
PERIOD:
Net income $1,409 $1,419 $1,078 $692 $4,598
PERFORMANCE PERCENTAGES
(annualized):
Return on average assets 0.48% 0.46% 0.34% 0.21% 0.37%
Return on average equity 5.69 5.63 4.17 2.66 4.52
Return on average tangible 6.46 6.38 4.72 3.01 5.12
common equity (B)
Net interest margin 3.21 3.30 2.97 3.12 3.19
Net charge-offs as a 0.06 0.04 0.04 0.01 0.03
percentage of average loans
Loan loss provision as a 0.08 0.20 0.29 0.44 0.26
percentage of
average loans
Efficiency ratio (D) 84.46 83.09 84.79 85.28 84.41
EARNINGS PER COMMON SHARE:
Basic $0.08 $0.08 $0.06 $0.04 $0.27
Average number of common 17,043 17,052 17,059 17,059 17,053
shares outstanding
Diluted 0.08 0.08 0.06 0.04 0.27
Average number of common 17,099 17,056 17,062 17,065 17,063
shares outstanding
Cash dividends paid per $0.025 $0.025 $0.025 $0.025 $0.100
share
AMERISERV FINANCIAL, INC.
NASDAQ: ASRV
--CONTINUED--
(Dollars in thousands, except per share, statistical, and ratio data)
(Unaudited)
2021
1QTR
FINANCIAL CONDITION DATA AT PERIOD END:
Assets $1,311,412
Short-term investments/overnight funds 18,025
Investment securities 204,193
Total loans and loans held for sale, net of unearned income 986,557
Paycheck Protection Program (PPP) loans
67,253
Allowance for loan losses 11,631
Goodwill 11,944
Deposits 1,117,091
Short-term and FHLB borrowings 55,149
Subordinated debt, net 7,540
Shareholders' equity 105,331
Non-performing assets 4,245
Tangible common equity ratio (B) 7.19%
Total capital (to risk weighted assets) ratio 13.03
PER COMMON SHARE:
Book value $6.17
Tangible book value (B) 5.47
Market value (C) 4.06
Wealth management assets - fair market value (A) $2,517,810
STATISTICAL DATA AT PERIOD END:
Full-time equivalent employees 301
Branch locations 16
Common shares outstanding 17,069,000
2020
1QTR 2QTR 3QTR 4QTR
FINANCIAL CONDITION DATA AT
PERIOD END:
Assets $1,168,355 $1,242,074 $1,258,131 $1,279,713
Short-term 6,431 30,219 23,222 11,077
investments/overnight funds
Investment securities 184,784 184,908 184,352 188,387
Total loans and loans held 877,399 928,350 949,367 978,345
for sale, net of unearned
income
Paycheck Protection Program 0 66,956 68,460 58,344
(PPP) loans
Allowance for loan losses 9,334 9,699 10,284 11,345
Goodwill 11,944 11,944 11,944 11,944
Deposits 957,593 1,033,033 1,042,235 1,054,920
Short-term and FHLB 74,572 69,894 80,230 89,691
borrowings
Subordinated debt, net 7,517 7,522 7,528 7,534
Shareholders' equity 100,840 102,604 103,369 104,399
Non-performing assets 2,244 3,122 2,603 3,331
Tangible common equity 7.69% 7.37% 7.34% 7.29%
ratio (B)
Total capital (to risk 13.41 13.18 13.02 12.93
weighted assets) ratio
PER COMMON SHARE:
Book value $5.92 $6.01 $6.06 $6.12
Tangible book value (B) 5.22 5.31 5.36 5.42
Market value (C) 2.62 3.08 2.81 3.13
Wealth management assets - $1,983,952 $2,193,504 $2,289,948 $2,481,144
fair market value (A)
STATISTICAL DATA AT PERIOD
END:
Full-time equivalent 306 305 306 299
employees
Branch locations 16 16 16 16
Common shares outstanding 17,043,644 17,058,644 17,058,644 17,060,144
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.
(D)
Ratio calculated by dividing total non-interest expense by tax equivalent net
. . .
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AMERISERV FINANCIAL, INC. 
