AmeriServ Financial Reports Earnings for the Third Quarter and First Nine Months of 2020 and Announces Quarterly Common Stock Cash Dividend

JOHNSTOWN, Pa., Oct. 20, 2020 /PRNewswire/ — AmeriServ Monetary, Inc. (NASDAQ: ASRV) reported third quarter 2020 web earnings of $1,078,000, or $zero.06 per diluted widespread share.  This earnings efficiency was a $611,000, or 36.2%, lower from the third quarter of 2019 when web earnings totaled $1,689,000, or $zero.10 per diluted widespread share.  For the nine-month interval ended September 30, 2020, the Firm reported web earnings of $three,906,000, or $zero.23 per diluted widespread share.  This represents a 25.eight% lower in earnings per share from the nine-month interval of 2019 when web earnings totaled $5,359,000, or $zero.31 per diluted widespread share.  The next desk highlights the Firm’s monetary efficiency for each the three and 9 month durations ended September 30, 2020 and 2019:  

Jeffrey A. Stopko, President and Chief Govt Officer, commented on the 2020 third quarter monetary outcomes: “Our group financial institution customer-focused enterprise mannequin and conservative threat administration posture has served us properly up to now in 2020 as our Firm has skilled document ranges of each loans and deposits whereas coping with the challenges introduced by the COVID-19 pandemic.  The decline in earnings between years is because of our determination to additional strengthen our allowance for mortgage losses given the financial uncertainty ensuing from the pandemic.  Moreover, over 32% of our complete income within the third quarter of 2020 got here from non-interest earnings sources which included document contributions from our sturdy wealth administration enterprise and energetic residential mortgage operation.  General, I’m happy with how the AmeriServ group has served our communities with constant, protected and uninterrupted entry to banking providers and personalised monetary steerage and recommendation throughout this pandemic.”

The Firm’s web curiosity earnings within the third quarter of 2020 elevated barely by $27,000, or zero.three%, from the prior yr’s third quarter and, for the primary 9 months of 2020, elevated by $533,000, or 2.zero%, when in comparison with the primary 9 months of 2019.  The Firm’s web curiosity margin of two.97% for the third quarter of 2020 and three.16% for the nine-month timeframe was 21 foundation factors decrease than final yr’s third quarter outcomes and was eight foundation factors decrease when in comparison with the primary 9 months of 2019.  Third quarter 2020 outcomes have been indicative of the gradual financial restoration presently being skilled as a result of uncertainty that exists from the pandemic and the upcoming Presidential election.  Though demonstrating growing power late within the third quarter, the financial uncertainty resulted in gradual industrial mortgage demand, which has an unfavorable influence on our enterprise mannequin since industrial loans comprise roughly 73% of our complete mortgage portfolio.  The gradual mortgage demand mixed with the low Federal Reserve managed rates of interest continues to strain incomes asset margins and, together with an elevated mortgage loss provision, greater than offset a better degree of non-interest earnings and resulted in a decrease earnings efficiency for each time durations in 2020.  The Firm’s steadiness sheet skilled strong development in the course of the second quarter of 2020 because of AmeriServ’s participation within the Small Enterprise Administration’s 100% assured Paycheck Safety Program (PPP) and the influence of different authorities sponsored initiatives established to stimulate the financial system.  The upper degree of loans and deposits that resulted from these authorities sponsored packages remained on the steadiness sheet all through the third quarter.  Because of this, the common steadiness of complete curiosity incomes property for each the third quarter of 2020 and the nine-month yr to this point time durations is increased in comparison with the identical time durations in 2019.  Progress in complete loans and short-term investments greater than offset complete funding securities lowering.  The upper degree of common incomes property was primarily attributable to roughly $68 million of PPP loans which have an rate of interest of 1.zero% and roughly $40 million of short-term investments which earned zero.5% in the course of the third quarter.  These low incomes property additional contributed to the strain being skilled on incomes asset margins, that are already unfavorably impacted by the low rate of interest surroundings.  Excluding the low yielding PPP loans from the online curiosity margin calculation for the 2020 third quarter would end result within the web curiosity margin proportion being 9 foundation factors increased and averaging three.06%⁽¹⁾.  Each non-interest and curiosity bearing deposits additionally elevated since final yr leading to much less reliance on quick time period borrowed funds.  Efficient administration of our funding prices together with the downward repricing of sure curiosity bearing liabilities tied to market indexes resulted in complete curiosity expense lowering properly between years.  This lower to complete curiosity expense greater than offset the lower in complete curiosity earnings ensuing within the enhance to web curiosity earnings for each the third quarter and first 9 months of 2020.

Whole loans continued to achieve a brand new document degree and averaged $933 million within the third quarter of 2020 which is $52.eight million, or 6.zero%, increased than the $880 million common for the third quarter of 2019, whereas complete common loans for the primary 9 months of 2020 have been $33.zero million, or three.eight%, increased than the 2019 nine-month common.  The expansion in complete common loans was due primarily to the Firm’s participation within the PPP program.  As of September 30, 2020, the Firm processed 474 PPP loans totaling roughly $68 million to help small companies and our group on this troublesome financial system.  Additionally, the Firm recorded a complete of $1.four million of processing payment earnings and curiosity earnings from PPP lending exercise.  Observe that PPP processing payment earnings decreased considerably by roughly $700,000 between the second and third quarters of 2020 as a lot of the allowable up-front charges from the PPP loans have been already acknowledged as earnings within the second quarter.  The remaining portion of PPP processing charges totals roughly $1.1 million and are being amortized into earnings over the time interval that the loans stay on our steadiness sheet or till the PPP mortgage is forgiven at which era the remaining payment shall be acknowledged instantly as earnings.  Regular industrial lending exercise has been gradual due to the financial uncertainty however did enhance because the third quarter progressed.  Business mortgage pipelines are presently at ranges which might be just like the place they have been previous to the pandemic.  General on an finish of interval foundation, excluding complete PPP loans, the entire mortgage portfolio grew by roughly $20 million since June 30, 2020.  Residential mortgage mortgage exercise continued to be exceptionally sturdy given the decrease rate of interest surroundings.  By the primary 9 months of 2020, residential mortgage mortgage manufacturing is 65.zero% increased than the manufacturing degree achieved for the complete yr of 2019.  Despite the fact that complete common loans elevated in comparison with the identical time durations final yr and mortgage curiosity earnings was enhanced by the PPP income, mortgage curiosity and payment earnings decreased by $1.zero million, or 9.four%, for the quarter and likewise declined by $1.6 million, or 5.1%, for the 9 months.  The decrease mortgage curiosity earnings displays the challenges that this document low rate of interest surroundings has created.  New loans are being originated at decrease yields and sure loans tied to LIBOR or the prime price reprice downward as each of those indices have moved down with the Federal Reserve’s determination to lower the goal federal funds rate of interest by a complete of 225 foundation factors since June of 2019.  Lastly, the Firm is working prudently with our debtors which were negatively impacted from the consequences of this troublesome financial system by granting them mortgage cost modifications.  Requested modifications primarily encompass the deferral of principal and/or curiosity funds for a interval of three to 6 months and maturity date extensions.  Initially, the steadiness of mortgage modifications associated to COVID-19 that have been granted to our prospects totaled $200 million.  At September 30, 2020, complete mortgage modifications demonstrated an bettering pattern, lowering by $55.6 million, or 27.eight%, and totaled $144 million, or 15.2% of complete loans.  Administration is rigorously monitoring asset high quality with a specific concentrate on prospects which have requested these cost deferrals and does anticipate a big variety of the remaining loans with cost modifications to return to regular cost standing in the course of the fourth quarter of 2020.  As we attain the tip of the deferral time durations, deferral extension requests shall be thought of based mostly upon the client’s wants and their impacted trade, borrower and guarantor capability to service debt and present in addition to any further regulatory steerage. 

Whole funding securities averaged $187 million within the first 9 months of 2020 which is $9.9 million, or 5.zero%, decrease than the $197 million common for the primary 9 months of 2019.  The Firm continues to be selective this yr when buying the extra typical kinds of securities which were bought traditionally because the market is much less favorable given the variations within the place and form of the U.S. Treasury yield curve from the prior yr.  The Firm has been energetic since March buying company securities, notably subordinated debt issued by different monetary establishments.  Subordinated debt affords increased yields than the everyday kinds of securities wherein we make investments and is especially enticing given the present low rate of interest surroundings and flat form of the yield curve.  Administration believes it to be acceptable to extend our investments in financial institution subordinated debt in a gradual and diversified method, given the closely regulated nature of the trade mixed with our intensive due diligence course of. 

Our liquidity place continues to be exceptionally sturdy as a result of vital inflow of deposits that resulted from the federal government stimulus packages and as prospects proceed to be cautious and are demonstrating lowered spending exercise as a result of financial uncertainty.  Because of this, common short-term investments elevated by $28.7 million within the third quarter of 2020 and by $23.three million for the primary 9 months when in comparison with 2019.  The problem of profitably deploying this extra liquidity resulted in administration investing in prime quality industrial paper given their quick maturities and better charges of return.  Nonetheless, because the third quarter progressed, the yields on industrial paper demonstrated a gentle decline, making it much more difficult to discover a appropriate return for our extra liquidity.  General, curiosity earnings on complete investments decreased between the primary 9 months of 2020 and first 9 months of 2019 by $475,000, or 9.1%.  General, by way of 9 months in 2020, complete curiosity earnings decreased by $2.1 million, or 5.7%, between years.

Whole curiosity expense for the primary 9 months of 2020 decreased by $2.7 million, or 24.four%, when in comparison with 2019, as a consequence of decrease ranges of each deposit and borrowing curiosity expense.  By 9 months, deposit curiosity expense in 2020 is decrease by $2.four million, or 28.7%.  Whole deposits grew considerably in the course of the second quarter of 2020 due to the federal government stimulus packages and shoppers being extra cautious with their spending.  The upper degree of complete deposits remained on the Firm’s steadiness sheet all through the third quarter.  Much like complete loans, complete common deposits, once more, reached a document degree, averaging $1.zero54 billion for the quarter, which is $69.1 million, or 7.zero%, increased than the 2019 third quarter common.  As well as, the Firm’s loyal core deposit base continues to be a supply of power for the Firm during times of market volatility.  Administration continued to successfully execute a number of deposit product pricing decreases given the low rate of interest surroundings and the downward strain that the low rates of interest are having on the web curiosity margin.  Because of this, the Firm skilled deposit price aid.  Particularly, the Firm’s common price of curiosity bearing deposits declined by 59 foundation factors for the reason that third quarter of 2019 and averaged zero.79% within the third quarter of 2020.  Additionally offsetting a portion of the online curiosity margin strain from the decrease nationwide rates of interest is a good portion of the deposit development occurring in non-interest bearing demand deposits.  General, complete deposit price, together with demand deposits, averaged zero.65% within the third quarter of 2020 in comparison with 1.17% within the third quarter of 2019.  The Firm’s mortgage to deposit ratio averaged 88.6% within the third quarter of 2020 which we imagine signifies that the Firm has ample capability to develop its mortgage portfolio and is properly positioned to proceed aiding our prospects and the group given the influence that the COVID-19 pandemic is having on the financial system.

The Firm skilled a $215,000, or 9.zero%, lower within the curiosity price of borrowings within the first 9 months of 2020 when in comparison with the primary 9 months of 2019.  The decline is a results of the Federal Reserve’s actions to lower rates of interest and the influence that these price decreases have on the price of in a single day borrowed funds and the substitute of matured FHLB time period advances.  The whole 2020 third quarter common time period advance borrowings steadiness elevated by roughly $18.1 million, or 32.four%, when in comparison with the third quarter of 2019 because the Firm took benefit of the decrease yield curve to prudently prolong borrowings.  The speed on sure FHLB time period advances is decrease than the speed on in a single day borrowings.  Because of this, the mixed development of common FHLB time period advances and complete common deposits resulted in much less reliance on in a single day borrowed funds, which decreased between years by $four.6 million, or 76.four%, for the quarter.  General, the 2020 third quarter common of complete short-term and FHLB borrowed funds was $75.three million, which represents a rise of $13.5 million, or 21.eight%, from the 2019 third quarter. 

The Firm recorded a $675,000 provision expense for mortgage losses within the third quarter of 2020 as in comparison with a $225,000 provision expense recorded within the third quarter of 2019.  For the primary 9 months of 2020, the Firm recorded a $1.three million provision expense for mortgage losses in comparison with a $175,000 provision restoration recorded within the first 9 months of 2019, which represents a web unfavorable shift of $1,475,000.  The Firm continues to construct the allowance for mortgage losses given the general financial local weather and the uncertainty that exists due to the COVID-19 pandemic.  The 2020 provision displays administration strengthening sure qualitative elements inside the allowance for mortgage losses calculation in addition to the third quarter ranking downgrade of a number of loans totaling roughly $29 million from the lodge trade.  The lodge trade has been particularly negatively impacted from the pandemic and is demonstrating a gradual tempo of restoration from the financial lockdown.  Whereas we anticipate that our lodge debtors will want further time to get better, we stay inspired by their indicators of accelerating occupancy charges.  Moreover, in the course of the third quarter, two substantial industrial loans beforehand categorized as substandard have been upgraded, whereas one other troubled industrial mortgage paid off.  The ranking enhancements on these loans helped restrict the rise within the mortgage loss provision in the course of the third quarter of 2020.  The Firm skilled low web mortgage charge-offs of $296,000, or zero.04% of complete loans, within the first 9 months of 2020 in comparison with web mortgage charge-offs of $152,000, or zero.02% of complete loans, for a similar time interval of 2019.  Non-performing property totaled $2.6 million, or zero.27% of complete loans, at September 30, 2020 and are under trade ranges.  As talked about beforehand, administration is rigorously monitoring asset high quality with a specific concentrate on prospects which have requested cost deferrals throughout this troublesome financial time.  The Asset High quality Activity Drive is assembly month-to-month to overview these specific relationships, receiving enter from the enterprise lenders concerning their ongoing discussions with the debtors.  In abstract, the allowance for mortgage losses supplied 395% protection of non-performing property, and 1.08% of complete loans, at September 30, 2020, in comparison with 397% protection of non-performing property, and 1.05% of complete loans, at December 31, 2019.  Observe that the reserve protection of complete loans, excluding PPP loans, is 1.17%⁽¹⁾ at September 30, 2020.  The Small Enterprise Administration ensures 100% of the PPP loans made to eligible debtors which minimizes the extent of credit score threat related to these loans. 

Whole non-interest earnings within the third quarter of 2020 elevated by $209,000, or 5.1%, from the prior yr’s third quarter, and elevated by $546,000, or four.eight%, within the first 9 months of 2020 when in comparison with the primary 9 months of 2019.  Revenue from residential mortgage mortgage gross sales into the secondary market elevated by $102,000, or 25.2%, for the quarter and elevated by $505,000, or 88.zero%, for the primary 9 months as a result of sturdy degree of residential mortgage mortgage manufacturing.  The upper degree of residential mortgage mortgage manufacturing additionally resulted in mortgage associated charges growing by $64,000, or 66.zero%, for the quarter and by $214,000, or 98.2%, for the 9 months.  Wealth administration charges elevated by $173,000, or 7.1%, within the third quarter of 2020 and by $383,000, or 5.three%, for the 9 months of 2020 in comparison with the identical time durations in 2019.  Along with an improved degree of payment earnings from the Monetary Companies enterprise unit, all the Wealth Administration Division has been resilient and carried out properly despite the volatility of the markets and a significant market worth decline that occurred in late March has been totally recovered by the tip of the third quarter of 2020.  Different earnings compares favorably for the quarter by $43,000, or 6.9%, whereas different earnings compares unfavorably for the nine-month time interval by 208,000, or 11.2%, after the Firm acknowledged a acquire in 2019 on the sale of fairness shares from a earlier acquisition.  Barely offsetting these favorable objects was service fees on deposit accounts lowering by $115,000, or 35.eight%, for the quarter and by $280,000, or, 29.5%, for the primary 9 months.  Client spending exercise based mostly charges comparable to deposit service fees, which embody overdraft charges, decreased considerably with the shutdown of the financial system and has been gradual to enhance given the tempo of the financial restoration.  Lastly, the Firm has not acknowledged a acquire or loss on safety gross sales this yr.  In 2019, an $88,000 acquire was acknowledged in the course of the third quarter of 2019 which contributed to a $118,000 acquire acknowledged in the course of the first 9 months of final yr.     

The Firm’s complete non-interest expense within the third quarter of 2020 elevated by $604,000, or 5.eight%, when in comparison with the third quarter of 2019 and elevated within the first 9 months of 2020 by $1,494,000, or four.eight%, when in comparison with 2019.  The rise in each time durations was as a consequence of increased salaries & advantages expense of $514,000, or eight.1%, for the quarter and $1,188,000, or 6.three%, for the 9 months of 2020.  Inside salaries & advantages, pension expense elevated by $71,000, or 15.5%, for the quarter between years and elevated by $447,000, or 37.eight%, for the 9 months.  This vital enhance outcomes from the unfavorable influence that the decrease rate of interest surroundings has on the low cost charges which might be used to revalue the outlined profit pension obligation annually.  As well as, the upper salaries & advantages expense for each time durations can also be as a consequence of elevated well being care prices ($90,000, or 11.9%, for the quarter and $330,000, or 14.5%, for the 9 months) and larger incentive compensation ($160,000, or 52.5%, for the quarter and $327,000, or 39.zero%, for the 9 months) primarily as a consequence of commissions earned because of elevated residential mortgage mortgage manufacturing. Whole salaries are increased by $92,000, or 2.1%, for the third quarter and by $285,000, or 2.2%, for the 9 months.  Whole skilled charges elevated by $97,000, or 7.6%, within the third quarter of 2020 and by $213,000, or 5.eight%, for the primary 9 months of the yr.  The rise outcomes from increased appraisal charges as a result of considerably increased degree of residential mortgage mortgage manufacturing, increased authorized charges associated to PPP mortgage processing and a better degree of outdoor skilled providers associated prices.  FDIC deposit insurance coverage expense is $140,000 increased for the quarter and $136,000, or 85.zero% increased for the 9 months as this line returned to a extra regular degree after the profit from the appliance of the Small Financial institution Evaluation Credit score regulation expired earlier this yr.  Lastly, and barely offsetting these increased bills was different expense evaluating favorably to final yr’s third quarter by $197,000, or 10.zero%, and by $126,000, or 2.three% for the 9 months.  The favorable comparability for each time durations between years is because of a decrease degree of meals & journey associated prices that’s associated to journey restrictions from the pandemic in addition to lowered exterior processing charges and phone prices.  The nine-month favorable comparability for different expense additionally resulted from a credit score acknowledged earlier within the yr for the unfunded dedication reserve.

The Firm recorded an earnings tax expense of $235,000, or an efficient tax price of 17.9%, within the third quarter of 2020.  This compares to an earnings tax expense of $442,000, or an efficient tax price of 20.7%, for the third quarter of 2019.  The decrease efficient tax price and earnings tax expense within the third quarter of 2020 mirrored a modest earnings tax credit score acknowledged to right an over accrual of earnings tax expense that occurred earlier this yr.  Equally, for the primary 9 months of 2020, the Firm recorded earnings tax expense of $966,000, or an efficient tax price of 19.eight%, in comparison with earnings tax expense of $1,403,000 in 2019, or an efficient tax price of 20.7%.    

The Firm had complete property of $1.26 billion, shareholders’ fairness of $103.four million, a ebook worth of $6.06 per widespread share and a tangible ebook worth⁽¹⁾ of $5.36 per widespread share at September 30, 2020.  The Firm continued to keep up sturdy capital ratios that exceed the regulatory outlined properly capitalized standing.

QUARTERLY COMMON STOCK CASH DIVIDEND

The Firm’s Board of Administrators declared a $zero.025 per share quarterly widespread inventory money dividend.  The money dividend is payable November 16, 2020 to shareholders of document on November 2, 2020.  This money dividend represents a three.three% annualized yield utilizing the October 16, 2020 closing inventory worth of $three.02.  For the primary 9 months of 2020, the Firm’s dividend payout ratio amounted to 32.6%.

Ahead-Wanting Statements

This press launch incorporates forward-looking statements as outlined within the Securities Trade Act of 1934 and is topic to the protected harbors created therein. Such statements are usually not historic information and embody expressions about administration’s confidence and methods and administration’s present views and expectations about new and present packages and merchandise, relationships, alternatives, know-how, market situations, dividend program and future cost obligations. These statements could also be recognized by such forward-looking terminology as “persevering with,” “anticipate,” “look,” “imagine,” “anticipate,” “might,” “will,” “ought to,” “initiatives,” “technique,” or comparable statements. Precise outcomes might differ materially from such forward-looking statements, and no reliance ought to be positioned on any forward-looking assertion. Elements that will trigger outcomes to vary materially from such forward-looking statements embody, however are usually not restricted to, unanticipated adjustments within the monetary markets and the path of rates of interest; volatility in earnings as a consequence of sure monetary property and liabilities held at honest worth; competitors ranges; mortgage and funding prepayments differing from our assumptions; inadequate allowance for credit score losses; a better degree of mortgage charge-offs and delinquencies than anticipated; materials antagonistic adjustments in our operations or earnings; a decline within the financial system in our market areas; adjustments in relationships with main prospects; adjustments in efficient earnings tax charges; increased or decrease money circulation ranges than anticipated; lack of ability to rent or retain certified staff; a decline within the ranges of deposits or lack of alternate funding sources; a lower in mortgage origination quantity or an lack of ability to shut loans presently within the pipeline; adjustments in legal guidelines and rules; adoption, interpretation and implementation of accounting pronouncements; operational dangers, together with the danger of fraud by staff, prospects or outsiders; unanticipated results of our banking platform; dangers and uncertainties regarding the period of the COVID-19 pandemic, and actions that could be taken by governmental authorities to comprise the pandemic or to deal with its influence; and the shortcoming to efficiently implement or develop new traces of enterprise or new services and products.  These forward-looking statements contain dangers and uncertainties that might trigger AmeriServ’s outcomes to vary materially from administration’s present expectations. Such dangers and uncertainties are detailed in AmeriServ’s filings with the Securities and Trade Fee, together with our Annual Report on Kind 10-Ok for the yr ended December 31, 2019. Ahead-looking statements are based mostly on the beliefs and assumptions of AmeriServ’s administration and on presently accessible info. The statements on this press launch are made as of the date of this press launch, even when subsequently made accessible by AmeriServ on its web site or in any other case. AmeriServ undertakes no duty to publicly replace or revise any forward-looking assertion.

⁽¹⁾ Non-GAAP Monetary Data.  See “Reconciliation of Non-GAAP Monetary Measures” at finish of launch.

SOURCE AmeriServ Monetary, Inc.

Associated Hyperlinks

http://www.ameriservfinancial.com