AMERISERV FINANCIAL REPORTS EARNINGS FOR THE FULL YEAR OF 2023 AND ANNOUNCES QUARTERLY COMMON STOCK CASH DIVIDEND

Rhea-AI Summary

AmeriServ Financial, Inc. (ASRV) reported a net loss for the fourth quarter of 2023, with a significant decrease in net interest income and non-interest income. The company attributes the loss to increased provision for credit losses related to commercial real estate loans and an investment portfolio repositioning strategy. Despite this, the company saw growth in total loans and wealth management revenues, positioning them for earnings growth in 2024.

Insights

Financial Analyst

The reported net loss by AmeriServ Financial, Inc. for both the fourth quarter and the entire year of 2023 is a significant deviation from the prior year's net income, signaling potential challenges in the company's profitability. The loss is primarily attributed to a higher provision for credit losses, specifically related to commercial real estate loans involving Rite Aid and an investment portfolio repositioning strategy. This situation underscores the importance of credit risk management and asset allocation strategies within financial institutions. The company's loan growth and wealth management revenue expansion are positive indicators, but they are overshadowed by the losses incurred.

From a financial health perspective, the net interest margin compression is a concern as it reflects the increasing cost of funds relative to income from interest-earning assets. This trend is consistent across the banking industry due to the Federal Reserve's monetary policy actions. The management's decision to implement interest rate hedge transactions is a strategic move to mitigate the impact of rising interest rates on net interest income. However, the effectiveness of these hedges in the current economic environment will require close monitoring.

The company's loan to deposit ratio suggests a strong liquidity position, which is crucial for sustaining loan portfolio growth and weathering economic volatility. The stability of the core deposit base, despite industry-wide challenges, is a testament to customer confidence in AmeriServ Financial Bank. Yet, the increase in deposit and borrowing costs due to rising national interest rates is a concern that could affect future profitability if not managed effectively.

Market Research Analyst

The banking sector is currently experiencing margin pressures due to the rising interest rate environment. AmeriServ's situation, including the credit losses tied to Rite Aid's bankruptcy and the net interest margin decline, reflects broader industry trends. Investors and stakeholders should be aware of the potential for further margin compression if interest rates continue to rise, as well as the impact of economic downturns on the credit quality of loan portfolios.

Additionally, the company's strategic sale of lower-yielding securities in favor of higher-yielding ones could be seen as a proactive approach to improve interest earnings. However, the immediate loss recognized on these sales may raise concerns about the timing and valuation of such transactions. The ability to recover this loss and generate additional interest income will be a key factor to watch in 2024.

It's also worth noting AmeriServ's response to the challenges posed by an activist investor, which resulted in increased legal and professional services costs. This indicates a potentially contentious relationship with certain shareholders, which can impact investor sentiment and the company's strategic focus.

Economist

The report reflects the impact of macroeconomic factors on AmeriServ Financial, Inc., particularly the influence of the Federal Reserve's monetary policy on the banking sector. The Fed's actions to combat inflation have led to higher interest rates, which, while potentially increasing loan yields, also raise the cost of deposits and borrowings. This dynamic has resulted in the compression of net interest margins, a critical profitability measure for banks.

The loan growth, particularly in commercial and industrial, commercial real estate and home equity loans, suggests responsiveness to market demand, which is a positive indicator for the local economy where AmeriServ operates. However, the bankruptcy of a major tenant like Rite Aid poses systemic risks that could affect not just AmeriServ but other financial institutions with similar exposures.

The company's asset repositioning strategy, aimed at improving interest earnings in 2024, is an adaptation to the inverted yield curve, a phenomenon that often precedes economic slowdowns. The management's strategic decisions in this context will be crucial for the company's performance in the upcoming period, particularly as the economy navigates through uncertain times.

JOHNSTOWN, Pa., Jan. 23, 2024 /PRNewswire/ -- AmeriServ Financial, Inc. (NASDAQ: ASRV) reported a fourth quarter 2023 net loss of $5,321,000, or $0.31 per diluted common share. This compares to net income for the fourth quarter of 2022 of $947,000, or $0.06 per diluted common share. For the year ended December 31, 2023, the Company reported a net loss of $3,346,000, or $0.20 per diluted common share. This compares to net income of $7,448,000, or $0.43 per diluted common share, for the full year of 2022. The following table details the Company's financial performance for both the three- and twelve-month periods ended December 31, 2023 and 2022:

		Fourth Quarter  2023			Fourth Quarter  2022			Year Ended December 31, 2023			Year Ended December 31, 2022
Net income (loss)		$	(5,321,000)		$	947,000		$	(3,346,000)		$	7,448,000
Diluted earnings per share		$	(0.31)		$	0.06		$	(0.20)		$	0.43

Jeffrey A. Stopko, President and Chief Executive Officer, commented on the 2023 fourth quarter financial results: "During the fourth quarter of 2023, we continued to see several encouraging new business development results which included a $36 million, or 3.6%, increase in total loans and our fourth consecutive quarter of growth in wealth management revenues. This positive momentum in our key business lines combined with the previously announced $1.5 million benefit expected from our Earnings Improvement Program position the Company well for earnings growth in 2024.  The net loss that AmeriServ Financial, Inc. reported for the fourth quarter of 2023 was consistent with the pre-earnings guidance that we issued on January 12, 2024. This net loss was caused by an increased provision for credit losses related to commercial real estate loans that had Rite Aid as a tenant and our decision to execute an investment portfolio repositioning strategy.  We remain committed to operating our customer focused community bank for the benefit of all our stakeholders."

All fourth quarter and full year 2023 financial performance metrics within this document are compared to the fourth quarter and full year 2022 unless otherwise noted.

The Company's net interest income in the fourth quarter of 2023 decreased by $1.6 million, or 15.3%, from the prior year's fourth quarter and, for the full year of 2023, decreased by $4.5 million, or 11.2%, when compared to the full year of 2022. The Company's net interest margin of 2.63% for the fourth quarter of 2023 and 2.86% for the full year represents a 58-basis point decrease for the quarter and a 41-basis point decline for the full year.  The decrease in net interest income reflects total interest expense increasing to a higher level than the increase in total interest income. The Company continues to benefit from increased yields on total loans and investment securities due to a higher U.S. Treasury yield curve and the Federal Reserve's action to tighten monetary policy in their effort to tame decades high inflation. But, similar to what is occurring across the banking industry, increased national interest rates have caused total deposit and borrowing costs to increase to a higher degree, resulting in net interest margin compression and lower net interest income.  The provision for credit losses was significantly higher for both the fourth quarter and full year of 2023 versus last year's fourth quarter and full year. Rite Aid, a national tenant in several commercial real estate properties financed by the bank, declared bankruptcy in the fourth quarter of 2023 resulting in increased credit costs and charge-offs related to these loans. Total non-interest income is lower for both the fourth quarter and full year of 2023 when compared to last year primarily due to the recognition of a loss on the sale of investment securities in December of 2023.  The Company believes that recognizing this loss on the investment securities positions the Company for improved interest earnings from the investment securities portfolio in 2024 for the reasons discussed later in this press release.  Total non-interest expense in the fourth quarter of 2023 compares favorably to non-interest expense for the fourth quarter of 2022 but is higher for the full year of 2023 compared to 2022, due to additional legal and professional services costs caused by litigation and responses to the actions of an activist investor. Overall, the Company's full year 2023 net loss reflects the significantly higher provision for credit losses, decreased levels of both net interest income and non-interest income and increased total non-interest expense.

Total average loans in the fourth quarter of 2023 are higher than the 2022 fourth quarter average by $43.9 million, or 4.5%, while total average loans for the full year of 2023 were $19.7 million, or 2.0%, higher than the 2022 full year average.  More significantly, on an end of period basis, total loans at December 31, 2023, increased by $47.6 million, or 4.8%, since December 31, 2022. Loan pipelines were strong, and the loan portfolio demonstrated good growth in 2023, particularly in the second half of the year, as total loans surpassed and continued to grow above the $1.0 billion threshold for the first time in Company history.  Year over year growth in commercial & industrial (C&I), commercial real estate (CRE), and home equity loans more than offset decreased residential mortgage and consumer loans. Overall, the higher interest rate environment along with the higher average volumes of C&I, CRE and home equity loans, resulted in total loan interest income improving by $2.0 million, or 17.4%, for the fourth quarter of 2023, and by $10.1 million, or 24.5%, for the full year of 2023 when compared to both time periods of last year.  This increase occurred despite a $434,000 total reduction in PPP loan related income in 2023.

Total investment securities averaged $262.2 million for the full year of 2023, which is $16.9 million, or 6.9%, higher than the $245.2 million average for the full year of 2022. The increase reflects additional securities purchased over this period as the U.S. Treasury yield curve increased resulting in a more favorable market for securities purchasing activity causing the Company to redeploy some of its short-term excess liquidity. Overall, the higher rates resulted in yields for new federal agency mortgage-backed securities and federal agency bonds improving and exceeding the overall average yield of the existing securities portfolio causing interest income from investments to increase by $1.7 million, or 21.9%, for the 2023 year. In 2023, purchases of securities were slower than the second half of 2022 as more funds were allocated to the loan portfolio while the Company controlled the amount of overnight borrowed funds. While yields on new security purchases exceeded the overall average yield of the existing securities portfolio, the spread between overnight borrowings and the yield on new securities ranged from negative to only marginally positive causing the slowdown in purchasing activity. Thus, new investment security purchases during 2023 were primarily used to replace cash flow from maturing securities to maintain appropriate balances for pledging purposes related to deposits of public funds. This is an example of how the inverted treasury yield curve impacts the Company's balance sheet management strategies. Finally, the full year 2023 total average balance of short-term investments and bank deposits decreased since last year by $19.3 million, or 83.0%, as the Company re-deployed its excess liquidity into higher yield loans and securities.  Overall, the 2023 full year average balance of total interest earning assets increased over last year's full year average by $17.3 million, or 1.4%, while total interest income increased by $11.8 million, or 24.1%, since the full year of 2022.

On the liability side of the balance sheet, for the full year of 2023, total average deposits were relatively consistent with the 2022 full year average, decreasing by only $2.5 million, or 0.2%. The modest decrease since last year is reflective of a portion of the funds from the government stimulus programs leaving the balance sheet and greater pricing competition in the market to retain deposits because of the increasing national interest rates. The Company's core deposit base continued to demonstrate the strength and stability that it has for many years, even during times of turmoil when three large bank failures occurred early in 2023 and customer fear of contagion within the industry caused deposit flight. Total deposits grew during 2023 by $49.8 million, or 4.5%, on an end of period basis since December 31, 2022, demonstrating customer confidence in AmeriServ Financial Bank. The Company does not utilize brokered deposits as a funding source. In addition to its loyal core deposit base, the Company has several other sources of liquidity, including a significant unused borrowing capacity at the Federal Home Loan Bank (FHLB), overnight lines of credit at correspondent banks and access to the Federal Reserve Discount Window. The loan to deposit ratio averaged 88.1% in the fourth quarter of 2023, which indicates that the Company has ample capacity to continue to grow its loan portfolio and is well positioned to support our customers and our community during times of economic volatility.

Total interest expense increased by $3.7 million, or 101.6%, for the fourth quarter of 2023, and by $16.3 million, or 192.4%, for the full year of 2023 when compared to both time periods of last year, due to higher deposit and borrowings interest expense. Deposit interest expense was higher by $14.6 million, or 227.1%, while the full year 2023 average volume of total interest-bearing deposits grew from the 2022 full year average by $21.1 million, or 2.2%. The rising national interest rates resulted in certain deposit products, particularly public funds, which are tied to a market index, repricing upward with the move in short-term national interest rates causing interest expense to increase. Additionally, increased market competition resulted in the Company increasing rates on certain shorter-term certificates of deposit to retain funds. Another factor contributing to net interest margin compression was an unfavorable deposit mix shift as the full year average of non-interest bearing demand deposits declined by $23.6 million, or 11.0%, while, as mentioned above, total interest-bearing deposits increased by $21.1 million, or 2.2%. For interest rate risk management purposes and to offset a portion of the unfavorable impact that rising funding costs are having on net interest income, management proactively executed $70 million of interest rate hedge transactions during 2023 to fix the cost of certain deposits that are indexed and move with short-term interest rates.  These hedging transactions reduced the Company's negative variability of net interest income in a rising interest rate environment and helped slow net interest margin compression. Overall, total deposit cost averaged 1.82% for the full year of 2023, which is 126 basis points higher than total deposit cost of 0.56% for the full year of 2022.

Total borrowings interest expense increased by $518,000, or 73.2%, in the fourth quarter of 2023 and by $1.8 million, or 84.7%, for the full year of 2023 when compared to 2022. The increases primarily result from the impact that the higher national interest rates had on overnight borrowings cost as well as the Company utilizing more overnight borrowed funds in 2023. Total fed funds purchased and other short-term borrowings averaged $35.8 million for the full year of 2023 after averaging $9.3 million for the full year of 2022. The increase to borrowings interest expense in 2023 also reflects a higher level of interest expense from FHLB term borrowings, which increased by $178,000, or 32.2%, for the full year of 2023 compared to 2022.  The full year average balance of advances from FHLB was lower in 2023 by $11.1 million, or 33.3%.  However, management began to replace maturing term advances and then began to increase our level of term advances in the fourth quarter of 2023 due to the inversion in the yield curve and as part of our overall balance sheet management strategy.  Although new FHLB term advances have higher interest rates than the term advances they replaced, their cost is lower than overnight night borrowed funds due to the inverted yield curve.  

The Company adopted ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (CECL), as of January 1, 2023. Details of the day one accounting adjustments were described in the prior quarterly press releases this year.

The Company recognized an increased provision for credit losses and higher net loan charge-offs in the fourth quarter of 2023. The Company recorded a $6.0 million provision for credit losses in the fourth quarter of 2023 after recognizing a $275,000 provision expense in the fourth quarter of 2022. For the full year of 2023, the Company recorded a $7.4 million provision for credit losses after recognizing a $50,000 provision expense for the full year of 2022. The Company recognized net loan charge-offs of approximately $3.3 million during the fourth quarter and $3.5 million, or 0.35% of total average loans, for the full year of 2023 compared to net loan charge-offs of $1.7 million, or 0.17% of total average loans, for the 2022 year. 

Rite Aid, a national tenant in several commercial real estate properties financed by the Bank, declared bankruptcy in the fourth quarter of 2023. As a result of this action, the Bank updated its comprehensive evaluation of its exposure to Rite Aid throughout its loan portfolio as it received information on leases that Rite Aid either rejected or modified. This evaluation required the recognition of $2 million in charge-offs related to two CRE loans in which Rite Aid was the sole tenant.  Note that these loans had been on the Company's books since 2009 and the Company was able to completely exit these two credits with no ongoing exposure to Rite Aid. There was also a partial charge-off of $804,000 on another CRE loan for a mixed-use retail/office property that has Rite Aid as the major tenant.  The remaining balance of this loan moved into non-accrual status which was the main reason for non-performing assets increasing by $6.2 million since the end of the third quarter of 2023.  Non-performing assets amounted to $12.4 million, or 1.19% of total loans, at December 31, 2023. Also contributing to the significant increase in the provision for credit losses in the fourth quarter of 2023 was an unfavorable adjustment to the historical loss factor used to calculate the allowance for credit losses in accordance with CECL requirements and growth in the loan portfolio.

As a result of this action, the Company built its allowance for credit losses and maintained solid coverage of both total loans and non-performing assets at December 31, 2023 as indicated by the allowance for credit losses coverage ratio of non-performing assets at 121% while the allowance for credit losses as a percentage of total loans increased to 1.45%.  This compares to allowance coverage of non-performing assets of 207%, and total loans of 1.08% as of December 31, 2022. Finally, also included in full year 2023 provision expense was the recognition of a $926,000 loss in the first quarter of 2023 from a subordinated debt investment with Signature Bank which was closed by banking regulators on March 12, 2023.

Total non-interest income in the fourth quarter of 2023 decreased by $1.1 million, or 29.0%, from the prior year's fourth quarter and decreased by $303,000, or 1.8%, for the full year of 2023 when compared to the full year of 2022. The Company recognized a $922,000 loss on investment securities during the fourth quarter of 2023 after selling $16.8 million of available for sale (AFS) investment securities which included both government agency obligations and municipal bonds. The sold securities had an average yield of 3.1% and an effective duration of 3.3 years. The proceeds from this sale were used to purchase new government agency mortgage-backed securities that have a yield of 5.2% and an effective duration of 3.6 years. The Company expects to recover this loss in 3.7 years and to generate additional interest income from this transaction of approximately $325,000 in 2024.  Wealth management fees improved by $228,000, or 8.6%, for the fourth quarter of 2023, but are $354,000, or 3.0%, lower for the full year compared to 2022. The fourth quarter improvement resulted from the addition of several new large accounts within the Financial Services division as well as the market value of wealth management assets increasing. However, full year results for wealth management fees reflected the unfavorable market conditions for both equity securities and particularly bonds which existed for the majority of the 2023 year that more than offset the positive impact of new customer business growth. Overall, the fair market value of wealth management assets totaled $2.5 billion at December 31, 2023.  Other income is $403,000, or 70.1%, lower for the fourth quarter of 2023 and $765,000, or 30.0%, lower for the full year due primarily to the recognition of an unfavorable adjustment to the fair market value of an interest rate swap related risk participation agreement as well as the recognition of a credit valuation adjustment to the market value of the interest rate swap contracts that the Company executed to accommodate the needs of certain borrowers while managing our interest rate risk position.  The Company did benefit in 2023 from AmeriServ Financial Bank selling all 7,859 shares of the Class B common stock of Visa Inc. during the first quarter of the year, resulting in a $1.7 million gain. The Company elected to capture this gain in 2023 due to volatility and uncertainty in the financial markets. 

Total non-interest expense in the fourth quarter of 2023 decreased by $555,000, or 4.4%, when compared to the fourth quarter of 2022 but increased by $1.4 million, or 2.8%, for the full year of 2023 when compared to the full year of 2022. The rise in total non-interest expense for the full year is primarily due to increased legal and professional fees related to the defense against an activist investor and a proxy contest relating to our 2023 annual meeting. These costs amounted to $2.2 million for the full year of 2023. As expected, costs related to the activist shareholder issue continued to decline for a second consecutive quarter, decreasing by $125,000 between the third and fourth quarters of 2023. However, given continued activity by the activist investor, the Company cannot estimate, at this time, costs related to this issue in 2024. Salaries & employee benefits increased by $314,000, or 4.5%, in the fourth quarter of 2023 and $1.1 million, or 4.0%, for the full year of 2023. The increase is attributable to management restructuring costs within the wealth management division, annual employee merit increases, a greater level of full-time equivalent employees (FTE) as the Company filled certain open positions that were vacant last year, and the impact that inflationary pressures are having on the cost of new hires. Partially offsetting the higher level of salaries were lower incentive compensation for the full year and reduced pension expense in both time periods as there are fewer employees in the defined benefit pension plan due to numerous retirements over the past few years. Data processing and IT expenses increased by $114,000, or 11.2%, in the fourth quarter of 2023 and $485,000, or 12.3%, for the full year of 2023 due to increased software costs from our core data provider and additional expenses related to monitoring our computing and network environment. FDIC insurance increased by $105,000, or 91.3%, for the quarter and by $200,000, or 38.8%, for the full year due to an increase in both the asset assessment base as well as the assessment rate. Favorably impacting non-interest expense was a $1.2 million, or 47.3%, reduction in other expense in the fourth quarter and a $2.6 million, or 35.3%, reduction for the full year of 2023 as the Company did not have to recognize a pension settlement charge in 2023. The Company recorded an income tax benefit of $1.5 million, in the fourth quarter of 2023, which compares to income tax expense of $126,000, or an effective tax rate of 11.7%, for the fourth quarter of 2022. For the full year 2023, the Company's income tax benefit totaled $1.0 million compared to $1.8 million of income tax expense in 2022.

The Company had total assets of $1.390 billion, shareholders' equity of $102.3 million, a book value of $5.96 per common share and a tangible book value⁽¹⁾ of $5.16 per common share on December 31, 2023. The decline in the Company's book value and tangible book value per share at December 31, 2023 compared to December 31, 2022 primarily reflects the net loss recognized in 2023.  The Company continued to maintain strong capital ratios that exceed the regulatory defined well capitalized status as of December 31, 2023.

QUARTERLY COMMON STOCK DIVIDEND

The Company's Board of Directors declared a $0.03 per share quarterly common stock cash dividend. The cash dividend is payable February 20, 2024 to shareholders of record on February 5, 2024. This cash dividend represents a 3.87% annualized yield using the January 17, 2024, closing stock price of $3.10. The Company's Board of Directors elected to continue the common dividend at its current level given the Company's strong capital position and expected earnings improvement in 2024.

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, 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, the level of inflation, 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; ability to successfully execute the Earnings Improvement Program and achieve the anticipated benefits in the amounts and at times estimated; operational risks, including the risk of fraud by employees, customers or outsiders; unanticipated effects to our banking platform; expense and reputational impact on the Company as a result of litigation and other expenses related to the continuing activities of an activist shareholder; 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, 2022. 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 December 31, 2023 (Dollars in thousands, except per share and ratio data) (Unaudited)   2023
	1QTR				2QTR					3QTR			4QTR				YEAR TO DATE
PERFORMANCE DATA FOR THE PERIOD:
Net income (loss)	$	1,515			$	(187)			$	647			$	(5,321)			$	(3,346)
PERFORMANCE PERCENTAGES (annualized):
Return on average assets		0.45	%			(0.06)	%			0.19	%			(1.53)	%			(0.25)	%
Return on average equity		5.85				(0.72)				2.49				(20.85)				(3.23)
Return on average tangible common equity (1)		6.73				(0.82)				2.88				(24.11)				(3.72)
Net interest margin		3.03				2.89				2.76				2.63				2.86
Net charge-offs (recoveries) as a percentage of average loans		0.05				(0.02)				0.05				1.27				0.35
Efficiency ratio (3)		79.58				101.55				92.60				106.81				94.17
EARNINGS PER COMMON SHARE:
Basic	$	0.09			$	(0.01)			$	0.04			$	(0.31)			$	(0.20)
Average number of common shares outstanding		17,131				17,147				17,147				17,147				17,143
Diluted	$	0.09			$	(0.01)			$	0.04			$	(0.31)			$	(0.20)
Average number of common shares outstanding		17,155				17,147				17,147				17,147				17,144
Cash dividends paid per share	$	0.030			$	0.030			$	0.030			$	0.030			$	0.120
2022
	1QTR				2QTR					3QTR			4QTR				YEAR TO DATE
PERFORMANCE DATA FOR THE PERIOD:
Net income (loss)	$	2,418			$	1,981			$	2,102			$	947			$	7,448
PERFORMANCE PERCENTAGES (annualized):
Return on average assets		0.73	%			0.59	%			0.62	%			0.28	%			0.55	%
Return on average equity		8.48				7.10				7.81				3.70				6.83
Return on average tangible common equity (1)		9.62				8.10				8.97				4.27				7.82
Net interest margin		3.14				3.23				3.35				3.21				3.27
Net charge-offs (recoveries) as a percentage of average loans		0.03				0.01				0.57				0.08				0.17
Efficiency ratio (3)		81.38				84.89				78.93				90.37				83.82
EARNINGS PER COMMON SHARE:
Basic	$	0.14			$	0.12			$	0.12			$	0.06			$	0.44
Average number of common shares outstanding		17,094				17,109				17,111				17,115				17,107
Diluted	$	0.14			$	0.12			$	0.12			$	0.06			$	0.43
Average number of common shares outstanding		17,146				17,149				17,145				17,150				17,146
Cash dividends paid per share	$	0.025			$	0.030			$	0.030			$	0.030			$	0.115

 

AMERISERV FINANCIAL, INC. NASDAQ: ASRV --CONTINUED-- (Dollars in thousands, except per share, statistical, and ratio data) (Unaudited)   2023
												1QTR					2QTR			3QTR			4QTR
FINANCIAL CONDITION DATA AT PERIOD END:
Assets												$		1,345,957			$	1,345,721		$	1,361,789		$	1,389,638
Short-term investments/overnight funds														4,116				3,366			3,598			4,349
Investment securities, net of allowance for credit losses - securities														238,613				232,259			229,335			229,690
Total loans and loans held for sale, net of unearned income														980,877				988,221			1,002,306			1,038,401
Paycheck Protection Program (PPP) loans (4)														19				18			15			13
Allowance for credit losses - loans														12,132				12,221			12,313			15,053
Intangible assets														13,731				13,724			13,718			13,712
Deposits														1,131,789				1,127,569			1,129,290			1,158,360
Short-term and FHLB borrowings														69,124				72,793			85,568			85,513
Subordinated debt, net														26,654				26,665			26,675			26,685
Shareholders' equity														105,899				103,565			101,326			102,277
Non-performing assets														4,599				5,650			5,939			12,393
Tangible common equity ratio (1)														6.92		%		6.74	%		6.50	%		6.44	%
Total capital (to risk weighted assets) ratio														14.17				14.00			13.72			13.03
PER COMMON SHARE:
Book value												$		6.18			$	6.04		$	5.91		$	5.96
Tangible book value (1)														5.38				5.24			5.11			5.16
Market value (2)														3.05				2.54			2.65			3.24
Wealth management assets – fair market value (5)												$		2,354,498			$	2,446,639		$	2,385,590		$	2,521,501
STATISTICAL DATA AT PERIOD END:
Full-time equivalent employees														308				315			308			307
Branch locations														17				17			17			17
Common shares outstanding														17,147,270				17,147,270			17,147,270			17,147,270
2022
												1QTR						2QTR			3QTR			4QTR
FINANCIAL CONDITION DATA AT PERIOD END:
Assets												$	1,331,265				$	1,321,402		$	1,350,048		$	1,363,874
Short-term investments/overnight funds													13,588					10,714			4,133			4,132
Investment securities, net of allowance for credit losses - securities													223,286					231,255			236,867			241,386
Total loans and loans held for sale, net of unearned income													978,692					965,587			979,450			990,825
Paycheck Protection Program (PPP) loans (4)													7,835					2,242			24			22
Allowance for credit losses - loans													11,922					11,568			10,672			10,743
Intangible assets													13,761					13,753			13,746			13,739
Deposits													1,140,889					1,142,756			1,152,813			1,108,537
Short-term and FHLB borrowings													37,863					34,028			54,796			108,406
Subordinated debt, net													26,613					26,624			26,634			26,644
Shareholders' equity													113,692					106,392			101,587			106,178
Non-performing assets													3,401					3,240			4,596			5,200
Tangible common equity ratio (1)													7.58			%		7.08	%		6.57	%		6.85	%
Total capital (to risk weighted assets) ratio													14.01					14.33			13.92			13.87
PER COMMON SHARE:
Book value												$	6.65				$	6.22		$	5.94		$	6.20
Tangible book value (1)													5.84					5.41			5.13			5.40
Market value (2)													4.04					3.94			3.80			3.94
Wealth management assets – fair market value (5)												$	2,633,096				$	2,372,772		$	2,290,678		$	2,314,414
STATISTICAL DATA AT PERIOD END:
Full-time equivalent employees													301					310			306			315
Branch locations													17					17			17			17
Common shares outstanding													17,109,084					17,109,097			17,112,617			17,117,617

NOTES:
(1)	Non-GAAP Financial Information.  See "Reconciliation of Non-GAAP Financial Measures" at end of release.
(2)	Based on closing price reported by the principal market on which the share is traded on the last business day of the corresponding reporting period.
(3)	Ratio calculated by dividing total non-interest expense by tax equivalent net interest income plus total non-interest income.
(4)	Paycheck Protection Program (PPP) loans are included in total loans and loans held for sale, net of unearned income.
(5)	Not recognized on the consolidated balance sheets.

 

AMERISERV FINANCIAL, INC. NASDAQ: ASRV CONSOLIDATED STATEMENT OF INCOME (Dollars in thousands) (Unaudited)   2023
	1QTR			2QTR			3QTR					4QTR					YEAR TO DATE
INTEREST INCOME
Interest and fees on loans	$	12,276		$	12,609		$		13,154				$	13,589				$	51,628
Interest on investments		2,298			2,270				2,285					2,379					9,232
Total Interest Income		14,574			14,879				15,439					15,968					60,860
INTEREST EXPENSE
Deposits		4,189			5,019				5,653					6,153					21,014
All borrowings		863			750				987					1,226					3,826
Total Interest Expense		5,052			5,769				6,640					7,379					24,840
NET INTEREST INCOME		9,522			9,110				8,799					8,589					36,020
Provision (credit) for credit losses		1,179			43				189					6,018					7,429
NET INTEREST INCOME AFTER PROVISION (CREDIT) FOR CREDIT LOSSES		8,343			9,067				8,610					2,571					28,591
NON-INTEREST INCOME
Wealth management fees		2,738			2,789				2,845					2,894					11,266
Service charges on deposit accounts		266			280				311					306					1,163
Net realized gains on loans held for sale		26			38				59					46					169
Mortgage related fees		33			34				41					23					131
Net realized losses on investment securities		0			0				0					(922)					(922)
Gain on sale of Visa Class B shares		1,748			0				0					0					1,748
Bank owned life insurance		239			242				321					245					1,047
Other income		457			479				679					172					1,787
Total Non-Interest Income		5,507			3,862				4,256					2,764					16,389
NON-INTEREST EXPENSE
Salaries and employee benefits		7,175			7,728				7,358					7,367					29,628
Net occupancy expense		772			713				719					713					2,917
Equipment expense		415			422				376					410					1,623
Professional fees		1,308			1,907				1,146					956					5,317
Data processing and IT expense		1,078			1,080				1,139					1,133					4,430
FDIC deposit insurance expense		125			175				195					220					715
Other expenses		1,090			1,152				1,162					1,334					4,738
Total Non-Interest Expense		11,963			13,177				12,095					12,133					49,368
PRETAX INCOME (LOSS)		1,887			(248)				771					(6,798)					(4,388)
Income tax expense (benefit)		372			(61)				124					(1,477)					(1,042)
NET INCOME (LOSS)	$	1,515		$	(187)		$		647				$	(5,321)				$	(3,346)
2022
	1QTR			2QTR			3QTR					4QTR					YEAR TO DATE
INTEREST INCOME
Interest and fees on loans	$	9,496		$	9,725		$		10,691				$	11,572				$	41,484
Interest on investments		1,532			1,802				2,009					2,231					7,574
Total Interest Income		11,028			11,527				12,700					13,803					49,058
INTEREST EXPENSE
Deposits		796			956				1,720					2,952					6,424
All borrowings		465			447				451					708					2,071
Total Interest Expense		1,261			1,403				2,171					3,660					8,495
NET INTEREST INCOME		9,767			10,124				10,529					10,143					40,563
Provision (credit) for credit losses		(400)			(325)				500					275					50
NET INTEREST INCOME AFTER PROVISION (CREDIT) FOR CREDIT LOSSES		10,167			10,449				10,029					9,868					40,513
NON-INTEREST INCOME
Wealth management fees		3,165			2,976				2,813					2,666					11,620
Service charges on deposit accounts		272			263				289					284					1,108
Net realized gains on loans held for sale		95			35				53					25					208
Mortgage related fees		33			32				27					23					115
Net realized losses on investment securities		0			0				0					0					0
Gain on sale of Visa Class B shares		0			0				0					0					0
Bank owned life insurance		209			231				329					320					1,089
Other income		561			601				815					575					2,552
Total Non-Interest Income		4,335			4,138				4,326					3,893					16,692
NON-INTEREST EXPENSE
Salaries and employee benefits		7,405			6,963				7,071					7,053					28,492
Net occupancy expense		741			697				698					747					2,883
Equipment expense		397			415				393					431					1,636
Professional fees		630			838				948					794					3,210
Data processing and IT expense		953			937				1,036					1,019					3,945
FDIC deposit insurance expense		145			130				125					115					515
Other expenses		1,208			2,130				1,456					2,529					7,323
Total Non-Interest Expense		11,479			12,110				11,727					12,688					48,004
PRETAX INCOME (LOSS)		3,023			2,477				2,628					1,073					9,201
Income tax expense (benefit)		605			496				526					126					1,753
NET INCOME (LOSS)	$	2,418		$	1,981		$		2,102				$	947				$	7,448

 

AMERISERV FINANCIAL, INC. NASDAQ: ASRV AVERAGE BALANCE SHEET DATA (Dollars in thousands) (Unaudited)
	2023						2022
	4QTR			TWELVE MONTHS			4QTR			TWELVE MONTHS
Interest earning assets:
Loans and loans held for sale, net of unearned income	$	1,021,950		$	997,204		$	978,005		$	977,541
Short-term investments and bank deposits		4,470			3,942			4,628			23,213
Total investment securities		260,705			262,167			265,433			245,226
Total interest earning assets		1,287,125			1,263,313			1,248,066			1,245,980
Non-interest earning assets:
Cash and due from banks		14,087			15,446			16,947			17,602
Premises and equipment		17,264			17,270			17,646			17,498
Other assets		75,366			75,111			71,726			77,194
Allowance for credit losses		(13,398)			(13,066)			(11,242)			(11,895)
Total assets	$	1,380,444		$	1,358,074		$	1,343,143		$	1,346,379
Interest bearing liabilities:
Interest bearing deposits:
Interest bearing demand	$	225,470		$	225,713		$	226,078		$	227,838
Savings		121,373			127,539			135,809			137,845
Money market		310,609			302,964			285,860			289,674
Other time		320,033			306,044			284,853			285,760
Total interest bearing deposits		977,485			962,260			932,600			941,117
Borrowings:
Federal funds purchased and other short-term borrowings		41,361			35,755			30,431			9,268
Advances from Federal Home Loan Bank		32,316			22,167			24,518			33,253
Subordinated debt		27,000			27,000			27,000			27,000
Lease liabilities		3,332			3,238			3,351			3,446
Total interest bearing liabilities		1,081,494			1,050,420			1,017,900			1,014,084
Non-interest bearing liabilities:
Demand deposits		181,978			191,580			211,987			215,196
Other liabilities		15,685			12,507			11,616			8,113
Shareholders' equity		101,287			103,567			101,640			108,986
Total liabilities and shareholders' equity	$	1,380,444		$	1,358,074		$	1,343,143		$	1,346,379

 

AMERISERV FINANCIAL, INC. NASDAQ: ASRV CHANGES IN SHAREHOLDERS' EQUITY (Dollars in thousands) (Unaudited)   2023
		COMMON STOCK			TREASURY STOCK			SURPLUS			RETAINED EARNINGS			ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME			TOTAL
Balance at December 31, 2022		$	267		$	(83,280)		$	146,225		$	65,486		$	(22,520)		$	106,178
Net income			0			0			0			1,515			0			1,515
Exercise of stock options and stock option expense			1			0			106			0			0			107
Adjustment for defined benefit pension plan			0			0			0			0			0			0
Adjustment for unrealized gain on available for sale securities			0			0			0			0			449			449
Market value adjustment for interest rate hedge			0			0			0			0			(655)			(655)
Cumulative effect adjustment for change in accounting principal			0			0			0			(1,181)			0			(1,181)
Common stock cash dividend			0			0			0			(514)			0			(514)
Balance at March 31, 2023		$	268		$	(83,280)		$	146,331		$	65,306		$	(22,726)		$	105,899
Net loss			0			0			0			(187)			0			(187)
Exercise of stock options and stock option expense			0			0			12			0			0			12
Adjustment for defined benefit pension plan			0			0			0			0			0			0
Adjustment for unrealized loss on available for sale securities			0			0			0			0			(2,560)			(2,560)
Market value adjustment for interest rate hedge			0			0			0			0			916			916
Common stock cash dividend			0			0			0			(515)			0			(515)
Balance at June 30, 2023		$	268		$	(83,280)		$	146,343		$	64,604		$	(24,370)		$	103,565
Net income			0			0			0			647			0			647
Exercise of stock options and stock option expense			0			0			11			0			0			11
Adjustment for defined benefit pension plan			0			0			0			0			0			0
Adjustment for unrealized loss on available for sale securities			0			0			0			0			(2,700)			(2,700)
Market value adjustment for interest rate hedge			0			0			0			0			316			316
Common stock cash dividend			0			0			0			(513)			0			(513)
Balance at September 30, 2023		$	268		$	(83,280)		$	146,354		$	64,738		$	(26,754)		$	101,326
Net loss			0			0			0			(5,321)			0			(5,321)
Exercise of stock options and stock option expense			0			0			10			0			0			10
Adjustment for defined benefit pension plan			0			0			0			0			1,688			1,688
Adjustment for unrealized gain on available for sale securities			0			0			0			0			6,019			6,019
Market value adjustment for interest rate hedge			0			0			0			0			(929)			(929)
Common stock cash dividend			0			0			0			(516)			0			(516)
Balance at December 31, 2023		$	268		$	(83,280)		$	146,364		$	58,901		$	(19,976)		$	102,277
2022
		COMMON STOCK			TREASURY STOCK			SURPLUS			RETAINED EARNINGS			ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME			TOTAL
Balance at December 31, 2021		$	267		$	(83,280)		$	146,069		$	60,005		$	(6,512)		$	116,549
Net income			0			0			0			2,418			0			2,418
Exercise of stock options and stock option expense			0			0			93			0			0			93
Adjustment for defined benefit pension plan			0			0			0			0			919			919
Adjustment for unrealized loss on available for sale securities			0			0			0			0			(5,860)			(5,860)
Common stock cash dividend			0			0			0			(427)			0			(427)
Balance at March 31, 2022		$	267		$	(83,280)		$	146,162		$	61,996		$	(11,453)		$	113,692
Net income			0			0			0			1,981			0			1,981
Exercise of stock options and stock option expense			0			0			13			0			0			13
Adjustment for defined benefit pension plan			0			0			0			0			(4,488)			(4,488)
Adjustment for unrealized loss on available for sale securities			0			0			0			0			(4,292)			(4,292)
Common stock cash dividend			0			0			0			(514)			0			(514)
Balance at June 30, 2022		$	267		$	(83,280)		$	146,175		$	63,463		$	(20,233)		$	106,392
Net income			0			0			0			2,102			0			2,102
Exercise of stock options and stock option expense			0			0			23			0			0			23
Adjustment for defined benefit pension plan			0			0			0			0			(47)			(47)
Adjustment for unrealized loss on available for sale securities			0			0			0			0			(6,370)			(6,370)
Common stock cash dividend			0			0			0			(513)			0			(513)
Balance at September 30, 2022		$	267		$	(83,280)		$	146,198		$	65,052		$	(26,650)		$	101,587
Net income			0			0			0			947			0			947
Exercise of stock options and stock option expense			0			0			27			0			0			27
Adjustment for defined benefit pension plan			0			0			0			0			3,932			3,932
Adjustment for unrealized gain on available for sale securities			0			0			0			0			198			198
Common stock cash dividend			0			0			0			(513)			0			(513)
Balance at December 31, 2022		$	267		$	(83,280)		$	146,225		$	65,486		$	(22,520)		$	106,178

 

AMERISERV FINANCIAL, INC.

NASDAQ: ASRV

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

RETURN ON AVERAGE TANGIBLE COMMON EQUITY, TANGIBLE COMMON EQUITY RATIO, AND TANGIBLE BOOK VALUE PER SHARE

(Dollars in thousands, except per share and ratio data)

(Unaudited)

The press release contains certain financial information determined by methods other than in accordance with generally accepted accounting policies in the United States (GAAP).  These non-GAAP financial measures are "return on average tangible common equity", "tangible common equity ratio", and "tangible book value per share".  This non-GAAP disclosure has limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of the Company's results as reported under GAAP, nor is it necessarily comparable to non-GAAP performance measures that may be presented by other companies.  These non-GAAP measures are used by management in their analysis of the Company's performance or, management believes, facilitate an understanding of the Company's performance.  We also believe that presenting non-GAAP financial measures provides additional information to facilitate comparison of our historical operating results and trends in our underlying operating results.  We consider quantitative and qualitative factors in assessing whether to adjust for the impact of items that may be significant or that could affect an understanding of our ongoing financial and business performance or trends.

 

2023
		1QTR			2QTR			3QTR						4QTR				FULL YEAR 2023
RETURN ON AVERAGE TANGIBLE COMMON EQUITY
Net income (loss)		$	1,515		$	(187)		$	647					$		(5,321)		$	(3,346)
Average shareholders' equity			105,092			104,913			102,976							101,287			103,567
Less: Average intangible assets			13,734			13,727			13,720							13,714			13,724
Average tangible common equity			91,358			91,186			89,256							87,573			89,843
Return on average tangible common equity (annualized)			6.73	%		(0.82)	%		2.88	%						(24.11)	%		(3.72)	%

 

		1QTR			2QTR			3QTR						4QTR
TANGIBLE COMMON EQUITY
Total shareholders' equity		$	105,899		$	103,565		$	101,326							$	102,277
Less: Intangible assets			13,731			13,724			13,718								13,712
Tangible common equity			92,168			89,841			87,608								88,565
TANGIBLE ASSETS
Total assets			1,345,957			1,345,721			1,361,789								1,389,638
Less: Intangible assets			13,731			13,724			13,718								13,712
Tangible assets			1,332,226			1,331,997			1,348,071								1,375,926
Tangible common equity ratio			6.92	%		6.74	%		6.50			%					6.44	%
Total shares outstanding			17,147,270			17,147,270			17,147,270								17,147,270
Tangible book value per share		$	5.38		$	5.24		$	5.11							$	5.16

 

2022
		1QTR			2QTR			3QTR						4QTR				FULL YEAR 2022
RETURN ON AVERAGE TANGIBLE COMMON EQUITY
Net income (loss)		$	2,418		$	1,981		$	2,102					$		947		$	7,448
Average shareholders' equity			115,658			111,898			106,749							101,640			108,986
Less: Average intangible assets			13,766			13,757			13,749							13,742			13,753
Average tangible common equity			101,892			98,141			93,000							87,898			95,233
Return on average tangible common equity (annualized)			9.62	%		8.10	%		8.97	%						4.27	%		7.82	%

 

		1QTR			2QTR				3QTR								4QTR
TANGIBLE COMMON EQUITY
Total shareholders' equity		$	113,692		$	106,392		$	101,587							$		106,178
Less: Intangible assets			13,761			13,753			13,746									13,739
Tangible common equity			99,931			92,639			87,841									92,439
TANGIBLE ASSETS
Total assets			1,331,265			1,321,402			1,350,048									1,363,874
Less: Intangible assets			13,761			13,753			13,746									13,739
Tangible assets			1,317,504			1,307,649			1,336,302									1,350,135
Tangible common equity ratio			7.58	%		7.08	%		6.57			%						6.85	%
Total shares outstanding			17,109,084			17,109,097			17,112,617									17,117,617
Tangible book value per share		$	5.84		$	5.41		$	5.13							$		5.40

 

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SOURCE AmeriServ Financial, Inc.

FAQ

What was AmeriServ Financial, Inc.'s (ASRV) net loss for the fourth quarter of 2023?

AmeriServ Financial, Inc. (ASRV) reported a net loss of $5,321,000, or $0.31 per diluted common share for the fourth quarter of 2023.

What caused the net loss in the fourth quarter of 2023 for AmeriServ Financial, Inc. (ASRV)?

The net loss was caused by an increased provision for credit losses related to commercial real estate loans that had Rite Aid as a tenant and the company's decision to execute an investment portfolio repositioning strategy.

What were the key financial performance metrics for AmeriServ Financial, Inc. (ASRV) in the fourth quarter of 2023?

Key financial performance metrics for AmeriServ Financial, Inc. (ASRV) in the fourth quarter of 2023 included a decrease in net interest income, lower non-interest income, and a significantly higher provision for credit losses.

What are the plans for earnings growth in 2024 for AmeriServ Financial, Inc. (ASRV)?

The company expects earnings growth in 2024 due to positive momentum in key business lines, growth in total loans, and a fourth consecutive quarter of growth in wealth management revenues.

What were the business development results for AmeriServ Financial, Inc. (ASRV) in the fourth quarter of 2023?

AmeriServ Financial, Inc. (ASRV) saw encouraging new business development results, including a $36 million increase in total loans and growth in wealth management revenues.