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) October 17, 2017


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 third quarter and first nine months of 2017 results through September 30, 2017.  For a more detailed description of the announcement see the press release attached as Exhibit 99.1.  



Exhibits

--------


Exhibit 99.1

Press release dated October 17, 2017, announcing third quarter and first nine months of 2017 earnings through September 30, 2017.



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: October 17, 2017







Exhibit 99.1


AMERISERV FINANCIAL REPORTS EARNINGS FOR THE THIRD QUARTER AND FIRST NINE MONTHS OF 2017

JOHNSTOWN, PA - AmeriServ Financial, Inc. (NASDAQ: ASRV) reported third quarter 2017 net income available to common shareholders of $1,551,000, or $0.08 per diluted common share.  This earnings performance represented an increase of $486,000, or 45.6%, from the third quarter of 2016 where net income available to common shareholders totaled $1,065,000, or $0.06 per diluted common share.  For the nine-month period ended September 30, 2017, the Company reported net income available to common shareholders of $4,288,000, or $0.23 per diluted common share.  This represents a significant improvement of $3.1 million from the nine-month period of 2016 where net income available to common shareholders totaled $1,145,000, or $0.06 per diluted common share.  The following table highlights the Company's financial performance for both the three and nine month periods ended September 30, 2017 and 2016:


 

Third Quarter

2017

Third Quarter 2016

 

Nine Months Ended  September 30, 2017

Nine Months Ended September 30, 2016

 

 

 

 

 

 

Net income

$1,551,000

$1,065,000

 

$4,288,000

$1,160,000

Net income available to common shareholders

$1,551,000

$1,065,000

 

$4,288,000

$1,145,000

Diluted earnings per share


$ 0.08


$ 0.06

 


$ 0.23


$ 0.06


Jeffrey A. Stopko, President and Chief Executive Officer, commented on the 2017 financial results: "In the third quarter of 2017, the continued execution of our strategic plan generated increased earnings per share and more active capital returns to our shareholders.  The strong growth in earnings resulted from a favorable combination of increased revenue, reduced non-interest expense and a controlled loan loss provision.  This improved net income allowed us to exceed our strategic plan goal of returning 75% of our earnings for the first nine months of 2017 to our shareholders through accretive stock buybacks and cash dividends."

The Company's net interest income in the third quarter of 2017 increased by $431,000, or 5.1%, from the prior year's third quarter and for the first nine months of 2017 increased by $1.0 million, or 3.9%, when compared to the first nine months of 2016.  The Company's net interest margin was 3.28% for the quarter and 3.27% for the first nine months of 2017 representing an improvement of 13 basis points from the prior year's third quarter and a four basis point improvement from the first nine months of 2016.  The 2017 increase in net interest income is a result of a higher level of total earning assets and favorable balance sheet positioning which has contributed to the improved net interest margin performance.  The Company continues to grow earning assets while also limiting increases in its cost of funds through disciplined deposit pricing.  Specifically, for the quarter, the earning asset growth occurred in the investment securities portfolio while the loan portfolio remained relatively stable.  Total investment securities averaged $175 million in the third quarter of 2017 which is $26.2 million, or 17.6%, higher than the $149 million average for the third quarter of 2016.  Investment securities have also averaged $172 million for the nine-month time period which is $26.8 million, or 18.5%, higher than the nine month 2016 average.  Total loans averaged $892 million in the third quarter of 2017 and  for the nine month period, total loans averaged $894 million which is $6.4 million, or 0.7%, higher than the 2016 nine month average.


The growth in the investment securities portfolio is the result of management electing to diversify the mix of the investment securities portfolio through purchases of high quality corporate and taxable municipal securities.  This revised strategy for securities purchases was facilitated by the increase in national interest rates that resulted in improved opportunities to purchase additional securities and grow the portfolio.  As a result, interest on investments increased between the third quarter of 2017 and the third quarter of 2016 by $318,000 or 31.4% and increased in the first nine months of 2017 from the same time period in 2016 by $846,000 or 28.7%.  The slight decrease in the loan portfolio when comparing the third quarter average in 2017 to last year’s third quarter average was the result of accelerated prepayment activity along with new commercial loan production funding occurring late in the 2017 quarter.  However, the growth demonstrated when comparing the nine- month average from 2017 to 2016 reflects the successful results of the Company's business development efforts, with an emphasis on generating all types of commercial business loans particularly through its loan production offices.  Loan interest income increased by $393,000, or 4.2%, between the third quarter of 2017 and the third quarter of 2016 and also increased by $853,000, or 3.0%, in the first nine months of 2017 when compared to last year.  The higher loan interest income results from new loans originating at higher yields due to the higher interest rates and also reflects the upward repricing of certain loans tied to LIBOR or the prime rate as both of these indices have moved up with the Federal Reserve's decision to increase the target federal funds interest rate by 25 basis points in December of 2016, March of 2017, and again in June of 2017.  Overall, total interest income increased by $1.7 million, or 5.4%, in the first nine months of 2017.

Total interest expense for the third quarter of 2017 increased by $280,000, or 14.2%, and increased by $692,000, or 12.1%, in the first nine months of 2017 when compared to 2016, due to higher levels of both deposit and borrowing interest expense.  The Company experienced growth in deposits which we believe reflects the loyalty of our core deposit base that provides a strong foundation upon which this growth builds.  Management's ability to acquire new core deposit funding from outside of our traditional market areas as well as our ongoing efforts to offer new loan customers deposit products were the primary reasons for this growth.  Specifically, total deposits averaged $977 million for the first nine months of 2017 which is $29.9 million, or 3.2%, higher than the $947 million average for the first nine months of 2016.  Deposit interest expense through nine months in 2017 increased by $583,000, or 14.7%, due to the higher balance of deposits along with certain indexed money market accounts repricing upward after the Federal Reserve interest rate increases.  As a result of the solid deposit growth, the Company's loan to deposit ratio averaged 91.5% in the first nine months of 2017 which indicates  that  the  Company  has  ample  room  to  further  grow  its  loan  portfolio.   The Company experienced a $109,000 increase in the interest cost for borrowings in the first nine months of 2017 primarily due to the immediate impact that the increases in the Federal Funds Rate had on the cost of overnight borrowed funds.  In the first nine months of 2017, total average FHLB borrowed funds of $61.2 million remained relatively stable, increasing slightly by $339,000, or 0.6%.

The Company recorded a $200,000 provision for loan losses in the third quarter of 2017 compared to a $300,000 provision for loan losses in the third quarter of 2016.   For the nine-month period in 2017, the Company recorded a $750,000 provision for loan losses compared to a $3,650,000 provision for loan losses in 2016 or a decrease of $2.9 million between years.  Both, the loan loss provision and net charge-offs were at more typical levels this year than the substantially higher levels that were necessary early last year to resolve a troubled loan exposure to the energy industry.  The provision recorded in 2017 supported commercial loan growth, a higher level of criticized loans and more than covered the low level of net loan charge-offs incurred in the first nine months of 2017.  For the nine-month timeframe, the Company experienced net loan charge-offs of $336,000, or 0.05% of total loans in 2017 compared to net loan charge-offs of $3.8 million, or 0.58%, of total loans in 2016.  Overall, the Company continued to maintain strong asset quality as its nonperforming assets totaled $5.4 million, or 0.60%, of total loans, at September 30, 2017.  Total non-performing assets did increase by $3.0 million since the end of the second quarter due primarily to the transfer of one commercial credit exposure into non-accrual status.  It is believed that the Company’s loss exposure on this loan is limited because it is well secured with a low loan to value ratio.  In summary, the allowance for loan losses provided 193% coverage of non-performing loans, and 1.15% of total loans, at September 30, 2017, compared to 612% coverage of non-performing loans, and 1.12% of total loans, at December 31, 2016.


Total non-interest income in the third quarter of 2017 decreased by $32,000, or 0.9%, from the prior year's third quarter, and for the first nine months of 2017 increased by $106,000, or 1.0%, when compared to the first nine months of 2016.  For the third quarter of 2017, the decrease was due to lower revenue from mortgage related fees ($63,000) and residential mortgage loan sales into the secondary market ($43,000) as a result of reduced residential mortgage refinance activity in the third quarter of 2017.  The reduced revenue more than offset a greater level of other income primarily from our financial services business unit by $87,000 as wealth management continues to be an important strategic focus of the Company.  For the nine-month period, a $240,000 increase in financial services revenue, higher revenue from bank owned life insurance (BOLI) by $89,000 due to the second quarter receipt of a death claim, and a greater level of trust and investment advisory fees by $58,000 more than offset lower levels of service charges on deposits by $84,000, reduced mortgage related fees and residential mortgage loan sale gains by $101,000, and fewer gains realized from security sales by $62,000 in 2017.

The Company's total non-interest expense in the third quarter of 2017 decreased by $242,000, or 2.3%, when compared to the third quarter of 2016, and for the first nine months of 2017 decreased by $590,000, or 1.9%.  The decrease in the third quarter of 2017 is attributed to lower levels of professional fees ($117,000) and other expenses ($98,000) as both of these expense categories were higher in 2016 due to costs associated with the resolution of a trust operations trading error.  Also decreasing between quarters were equipment & occupancy expenses by a combined $98,000 due to the Company’s ongoing profitability improvement initiatives. These favorable items more than offset higher salaries & employee benefits ($104,000) that resulted from increased health care costs and additional investment in talent, particularly in our wealth management division.  For the nine-month period, the $590,000 decrease in non-interest expense in 2017 was attributable to the Company's ongoing efforts to control and reduce costs.  Specifically, a branch consolidation and closure of an unprofitable loan production office were the primary reasons for occupancy expense decreasing by $136,000, or 6.5% and equipment costs declining by $68,000.  Other expense is lower by $198,000 while professional fees declined by $159,000 for similar reasons mentioned above for the quarterly comparison.  Reduced FDIC insurance by $88,000 also contributed to the favorable nine-month comparison.  Overall, this continued focus on expense control and rationalization results in the efficiency ratio improving through nine months from 85.43% in 2016 to 81.30% in 2017.  Finally, the Company recorded an income tax expense of $1.9 million, or an effective tax rate of 31.2%, in the first nine months of 2017.  This compares to an income tax expense of $474,000, or an effective tax rate of 29.0%, for the first nine months of 2016.


The Company had total assets of $1.17 billion, shareholders' equity of $97.1 million, a book value of $5.31 per common share and a tangible book value of $4.66 per common share at September 30, 2017.  In accordance with the common stock buyback program announced on January 24, 2017, the Company returned $2.8 million of capital to its shareholders through the repurchase of 686,360 shares of its common stock in the first nine months of 2017.  This represents approximately 73% of the authorized common stock repurchase program. The Company continued to maintain strong capital ratios that exceed the regulatory defined well capitalized status.

This news release may contain forward-looking statements that involve risks and uncertainties, as defined in the Private Securities Litigation Reform Act of 1995, including the risks detailed in the Company's Annual Report and Form 10-K to the Securities and Exchange Commission. Actual results may differ materially.

















NASDAQ: ASRV

SUPPLEMENTAL FINANCIAL PERFORMANCE DATA

September 30, 2017

(In thousands, except per share and ratio data)

(Unaudited)


        2017

 

1QTR

2QTR

3QTR

YEAR

 

 

 

 

TO DATE

PERFORMANCE DATA FOR THE PERIOD:

 

 

 

 

Net income

$1,348

$1,389

$1,551

$4,288

Net income available to common shareholders

1,348

1,389

1,551

4,288

 

 

 

 

 

PERFORMANCE PERCENTAGES (annualized):

 

 

 

 

Return on average assets

0.47%

0.48%

0.53%

0.49%

Return on average equity

5.74

5.81

6.37

5.98

Net interest margin

3.27

3.27

3.28

3.27

Net charge-offs as a percentage of average loans

0.04

0.01

0.11

0.05

Loan loss provision as a percentage of

    average loans


0.10


0.14


0.09


0.11

Efficiency ratio

82.04

81.47

80.42

81.30

 

 

 

 

 

PER COMMON SHARE:

 

 

 

 

Net income:

 

 

 

 

Basic

$0.07

$0.07

$0.08

$0.23

Average number of common shares outstanding

18,814

18,580

18,380

18,590

Diluted

0.07

0.07

0.08

0.23

Average number of common shares outstanding

18,922

18,699

18,481

18,689

Cash dividends declared

$0.015

$0.015

$0.015

$0.045


          2016

 

1QTR

2QTR

2QTR

YEAR

 

 

 

 

TO DATE

PERFORMANCE DATA FOR THE PERIOD:

 

 

 

 

Net income (loss)

$(1,267)

$1,362

$1,065

$1,160

Net income (loss) available to common shareholders

(1,282)

1,362

1,065

1,145

 

 

 

 

 

PERFORMANCE PERCENTAGES (annualized):

 

 

 

 

Return on average assets

(0.45)%

0.48%

0.37%

0.14%

Return on average equity

(4.86)

5.60

4.27

1.54

Net interest margin

3.30

3.23

3.15

3.23

Net charge-offs as a percentage of average loans

1.60

0.01

0.14

0.58

Loan loss provision as a percentage of

    average loans


1.42


0.11


0.13


0.55

Efficiency ratio

89.24

82.05

85.07

85.43

 

 

 

 

 

PER COMMON SHARE:

 

 

 

 

Net income (loss):

 

 

 

 

Basic

$(0.07)

$0.07

$0.06

$0.06

Average number of common shares outstanding

18,884

18,897

18,899

18,893

Diluted

(0.07)

0.07

0.06

0.06

Average number of common shares outstanding

18,884

18,948

18,957

18,947

Cash dividends declared

$0.01

$0.01

$0.015

$0.035















AMERISERV FINANCIAL, INC.

(In thousands, except per share, statistical, and ratio data)

(Unaudited)


              2017

 

1QTR

2QTR

3QTR

 

FINANCIAL CONDITION  DATA AT PERIOD END

 

 

 

 

Assets

$1,172,127

$1,171,962

$1,170,916

 

Short-term investments/overnight funds

8,320

8,389

8,408

 

Investment securities

165,781

168,367

168,443

 

Loans and loans held for sale

899,456

897,876

897,900

 

Allowance for loan losses

10,080

10,391

10,346

 

Goodwill

11,944

11,944

11,944

 

Deposits

964,776

956,375

966,921

 

FHLB borrowings

79,718

87,143

77,635

 

Subordinated debt, net

7,447

7,453

7,459

 

Shareholders’ equity

95,604

96,277

97,110

 

Non-performing assets

1,488

2,362

5,372

 

Tangible common equity ratio

7.21

7.27

7.35

 

Total capital (to risk weighted assets) ratio

13.03

13.13

13.08

 

PER COMMON SHARE:

 

 

 

 

Book value

$5.12

$5.21

$5.31

 

Tangible book value

4.48

4.57

4.66

 

Market value

3.75

4.15

4.00

 

Trust assets – fair market value (A)

$2,025,304

$2,070,212

$2,070,212

 

 

 

 

 

 

STATISTICAL DATA AT PERIOD END:

 

 

 

 

Full-time equivalent employees

307

308

307

 

Branch locations

16

16

16

 

Common shares outstanding

18,666,520

18,461,628

18,281,224

 


                2016

 

1QTR

2QTR

3QTR

4QTR

FINANCIAL CONDITION  DATA AT PERIOD END

 

 

 

 

Assets

$1,121,701

$1,142,492

$1,145,655

$1,153,780

Short-term investments/overnight funds

5,556

6,836

8,279

8,966

Investment securities

139,000

145,753

145,609

157,742

Loans and loans held for sale

882,410

895,513

896,301

886,858

Allowance for loan losses

9,520

9,746

9,726

9,932

Goodwill

11,944

11,944

11,944

11,944

Deposits

906,773

940,931

962,736

967,786

FHLB borrowings

88,952

72,617

56,943

58,296

Subordinated debt, net

7,424

7,430

7,435

7,441

Shareholders’ equity

97,589

99,232

100,044

95,395

Non-performing assets

3,007

2,230

1,907

1,624

Tangible common equity ratio

7.72

7.72

7.77

7.31

Total capital (to risk weighted assets) ratio

13.11

13.04

13.17

13.15

PER COMMON SHARE:

 

 

 

 

Book value

$5.16

$5.25

$5.29

$5.05

Tangible book value

4.53

4.62

4.66

4.41

Market value

2.99

3.02

3.32

3.70

Trust assets – fair market value (A)

$1,974,180

$1,982,868

$2,011,344

$1,992,978

 

 

 

 

 

STATISTICAL DATA AT PERIOD END:

 

 

 

 

Full-time equivalent employees

317

311

310

305

Branch locations

16

16

16

16

Common shares outstanding

18,894,561

18,896,876

18,903,472

18,903,472

NOTES:

        (A) Not recognized on the consolidated balance sheets.




AMERISERV FINANCIAL, INC.

CONSOLIDATED STATEMENT OF INCOME

(In thousands)

(Unaudited)


              2017

 

1QTR

2QTR

3QTR

YEAR

INTEREST INCOME

 

 

 

TO DATE

Interest and fees on loans

$9,556

$9,778

$9,855

$29,189

Interest on investments

1,192

1,273

1,332

3,797

Total Interest Income

10,748

11,051

11,187

32,986

 

 

 

 

 

INTEREST EXPENSE

 

 

 

 

Deposits

1,436

1,504

1,618

4,558

All borrowings

591

648

632

1,871

Total Interest Expense

2,027

2,152

2,250

6,429

 

 

 

 

 

NET INTEREST INCOME

8,721

8,899

8,937

26,557

Provision for loan losses

225

325

200

750

NET INTEREST INCOME AFTER

   PROVISION FOR LOAN LOSSES


8,496


8,574


8,737


25,807

 

 

 

 

 

NON-INTEREST INCOME

 

 

 

 

Trust and investment advisory fees

2,166

2,081

2,045

6,292

Service charges on deposit accounts

374

385

409

1,168

Net realized gains on loans held for sale

114

186

217

517

Mortgage related fees

75

83

69

227

Net realized gains on investment securities

27

32

56

115

Bank owned life insurance

141

310

143

594

Other income

665

678

690

2,033

Total Non-Interest Income

3,562

3,755

3,629

10,946

 

 

 

 

 

NON-INTEREST EXPENSE

 

 

 

 

Salaries and employee benefits

6,010

5,979

6,005

17,994

Net occupancy expense

674

639

634

1,947

Equipment expense

419

434

343

1,196

Professional fees

1,200

1,415

1,213

3,828

FDIC deposit insurance expense

160

152

156

468

Other expenses

1,622

1,698

1,763

5,083

Total Non-Interest Expense

10,085

10,317

10,114

30,516

 

 

 

 

 

PRETAX INCOME

1,973

2,012

2,252

6,237

Income tax expense

625

623

701

1,949

NET INCOME AVAILABLE TO COMMON SHAREHOLDERS


1,348


1,389


1,551


4,288



















      2016

 

1QTR

2QTR

3QTR

YEAR

INTEREST INCOME

 

 

 

TO DATE

Interest and fees on loans

$9,465

$9,409

$9,462

$28,336

Interest on investments

957

980

1,014

2,951

Total Interest Income

10,422

10,389

10,476

31,287

 

 

 

 

 

INTEREST EXPENSE

 

 

 

 

Deposits

1,254

1,330

1,391

3,975

All borrowings

610

573

579

1,762

Total Interest Expense

1,864

1,903

1,970

5,737

 

 

 

 

 

NET INTEREST INCOME

8,558

8,486

8,506

25,550

Provision for loan losses

3,100

250

300

3,650

NET INTEREST INCOME AFTER

   PROVISION  FOR LOAN LOSSES


5,458


8,236


8,206


21,900

 

 

 

 

 

NON-INTEREST INCOME

 

 

 

 

Trust and investment advisory fees

2,075

2,124

2,035

6,234

Service charges on deposit accounts

415

404

433

1,252

Net realized gains on loans held for sale

107

185

260

552

Mortgage related fees

63

98

132

293

Net realized gains on investment securities

57

60

60

177

Bank owned life insurance

167

169

169

505

Other income

553

702

572

1,827

Total Non-Interest Income

3,437

3,742

3,661

10,840

 

 

 

 

 

NON-INTEREST EXPENSE

 

 

 

 

Salaries and employee benefits

6,166

5,868

5,901

17,935

Net occupancy expense

737

690

656

2,083

Equipment expense

436

409

419

1,264

Professional fees

1,465

1,192

1,330

3,987

FDIC deposit insurance expense

179

188

189

556

Other expenses

1,728

1,692

1,861

5,281

Total Non-Interest Expense

10,711

10,039

10,356

31,106

 

 

 

 

 

PRETAX INCOME (LOSS)

(1,816)

1,939

1,511

1,634

Income tax expense (benefit)

(549)

577

446

474

NET INCOME (LOSS)

(1,267)

1,362

1,065

1,160

Preferred stock dividends

15

-

-

15

NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS


$(1,282)


$1,362


$1,065


$1,145






















AMERISERV FINANCIAL, INC.

NASDAQ: ASRV

Average Balance Sheet Data (In thousands)

(Unaudited)


2017

2016

 

 

NINE

 

NINE

 

3QTR

MONTHS

3QTR

MONTHS

Interest earning assets:

 

 

 

 

Loans and loans held for sale, net of unearned income

$892,198

$894,088

$893,143

$887,681

Short-term investment in money market funds

8,921

8,049

20,797

12,987

Deposits with banks

1,026

1,029

1,065

1,871

Total investment securities

174,784

171,985

148,608

145,192

Total interest earning assets

1,076,929

1,075,151

1,063,613

1,047,731

 

 

 

 

 

Non-interest earning assets:

 

 

 

 

Cash and due from banks

22,082

22,214

21,675

19,883

Premises and equipment

12,467

12,095

11,887

11,982

Other assets

67,240

67,552

68,660

68,351

Allowance for loan losses

(10,537)

(10,290)

(9,794)

(9,777)

 

 

 

 

 

Total assets

$1,168,181

$1,166,722

$1,156,041

$1,138,170

 

 

 

 

 

Interest bearing liabilities:

 

 

 

 

Interest bearing deposits:

 

 

 

 

Interest bearing demand

$131,493

$129,923

$ 111,040

$ 106,983

Savings

98,184

97,852

96,593

96,149

Money market

277,948

276,958

285,358

275,226

Other time

292,054

290,598

302,610

286,966

Total interest bearing deposits

799,679

795,331

795,601

765,324

Borrowings:

 

 

 

 

Federal funds purchased and other short-term borrowings

13,179

15,390

1,309

11,480

Advances from Federal Home Loan Bank

45,997

45,785

49,852

49,356

Guaranteed junior subordinated deferrable interest debentures

13,085

13,085

13,085

13,085

Subordinated debt

7,650

7,650

7,650

7,650

Total interest bearing liabilities

879,590

877,241

867,497

846,895

 

 

 

 

 

Non-interest bearing liabilities:

 

 

 

 

  Demand deposits

181,356

181,924

181,365

182,003

  Other liabilities

10,628

11,630

7,931

8,683

Shareholders’ equity

96,607

95,927

99,248

100,589

Total liabilities and shareholders’ equity

$1,168,181

$1,166,722

$1,156,041

$1,138,170