Company Quick10K Filing
Ameriserv Financial
Price4.20 EPS0
Shares18 P/E10
MCap74 P/FCF55
Net Debt-33 EBIT23
TEV40 TEV/EBIT2
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-09-30 Filed 2020-11-06
10-Q 2020-06-30 Filed 2020-08-10
10-Q 2020-03-31 Filed 2020-05-08
10-K 2019-12-31 Filed 2020-03-02
10-Q 2019-09-30 Filed 2019-11-08
10-Q 2019-06-30 Filed 2019-08-12
10-Q 2019-03-31 Filed 2019-05-10
10-K 2018-12-31 Filed 2019-03-05
10-Q 2018-09-30 Filed 2018-11-09
10-Q 2018-06-30 Filed 2018-08-10
10-Q 2018-03-31 Filed 2018-05-11
10-K 2017-12-31 Filed 2018-03-02
10-Q 2017-09-30 Filed 2017-11-03
10-Q 2017-06-30 Filed 2017-08-04
10-Q 2017-03-31 Filed 2017-05-05
10-K 2016-12-31 Filed 2017-03-03
10-Q 2016-09-30 Filed 2016-11-04
10-Q 2016-06-30 Filed 2016-08-05
10-Q 2016-03-31 Filed 2016-05-06
10-K 2015-12-31 Filed 2016-03-08
10-Q 2015-09-30 Filed 2015-11-06
10-Q 2015-06-30 Filed 2015-08-07
10-Q 2015-03-31 Filed 2015-05-08
10-K 2014-12-31 Filed 2015-03-06
10-Q 2014-09-30 Filed 2014-11-07
10-Q 2014-06-30 Filed 2014-08-08
10-Q 2014-03-31 Filed 2014-05-09
10-K 2013-12-31 Filed 2014-02-28
10-Q 2013-09-30 Filed 2013-11-13
10-Q 2013-06-30 Filed 2013-08-09
10-Q 2013-03-31 Filed 2013-05-10
10-K 2012-12-31 Filed 2013-03-08
10-Q 2012-09-30 Filed 2012-11-09
10-Q 2012-06-30 Filed 2012-08-09
10-Q 2012-03-31 Filed 2012-05-09
10-K 2011-12-31 Filed 2012-03-09
10-Q 2011-09-30 Filed 2011-11-10
10-Q 2011-06-30 Filed 2011-08-12
10-Q 2011-03-31 Filed 2011-05-06
10-K 2010-12-31 Filed 2011-03-07
10-Q 2010-09-30 Filed 2010-11-05
10-Q 2010-06-30 Filed 2010-08-06
10-Q 2010-03-31 Filed 2010-05-07
10-K 2009-12-31 Filed 2010-02-26
8-K 2021-01-15 Regulation FD, Exhibits
8-K 2020-12-31 Earnings, Other Events, Exhibits
8-K 2020-09-30
8-K 2020-06-30
8-K 2020-05-08
8-K 2020-04-28
8-K 2020-04-06
8-K 2020-03-31
8-K 2019-12-31
8-K 2019-10-18
8-K 2019-10-17
8-K 2019-09-30
8-K 2019-07-19
8-K 2019-06-30
8-K 2019-04-23
8-K 2019-04-22
8-K 2019-04-18
8-K 2019-03-31
8-K 2019-01-24
8-K 2019-01-23
8-K 2018-12-31
8-K 2018-10-22
8-K 2018-09-30
8-K 2018-07-27
8-K 2018-07-20
8-K 2018-06-30
8-K 2018-06-21
8-K 2018-05-23
8-K 2018-04-24
8-K 2018-04-19
8-K 2018-03-31
8-K 2018-01-24
8-K 2018-01-23
8-K 2018-01-11

ASRV 10Q Quarterly Report

Item 1. Financial Statements
Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A")
Item 3…..Quantitative and Qualitative Disclosure About Market Risk…..
Item 4…..Controls and Procedures…..
Part II Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-15.1 asrv-20200930ex151b0b23d.htm
EX-15.2 asrv-20200930ex152bf02e7.htm
EX-31.1 asrv-20200930ex3115301a7.htm
EX-31.2 asrv-20200930ex312b55ff0.htm
EX-32.1 asrv-20200930ex32148ba93.htm
EX-32.2 asrv-20200930ex3225e8fc7.htm

Ameriserv Financial Earnings 2020-09-30

Balance SheetIncome StatementCash Flow

10-Q 1 asrv-20200930x10q.htm 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q


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

For the quarterly period ended September 30, 2020

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

For the transition period from ____________ to_____________

Commission File Number 0-11204


AmeriServ Financial, Inc.

(Exact name of registrant as specified in its charter)


Pennsylvania

    

25-1424278

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

Main & Franklin Streets, P.O. Box 430, Johnstown, PA

15907-0430

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code (814) 533-5300

Securities registered pursuant to Section 12(b) of the Act:

Title Of Each Class

Trading Symbol

Name of Each Exchange On Which Registered

Common Stock

ASRV

The NASDAQ Stock Market LLC

8.45% Beneficial Unsecured Securities, Series A

(AmeriServ Financial Capital Trust I)

ASRVP

The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes    No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes   No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

Accelerated Filer

Non-accelerated Filer

Smaller Reporting Company

Emerging growth Company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes    No  

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class

    

Outstanding at November 1, 2020

Common Stock, par value $0.01

17,058,644


AmeriServ Financial, Inc.

INDEX

Page No.

PART I.

FINANCIAL INFORMATION

Item 1. Financial Statements

2

Consolidated Balance Sheets (Unaudited) – September 30, 2020 and December 31, 2019

2

Consolidated Statements of Operations (Unaudited) – Three and nine months ended September 30, 2020 and 2019

3

Consolidated Statements of Comprehensive Income (Unaudited) – Three and nine months ended September 30, 2020 and 2019

4

Consolidated Statements of Changes in Stockholders’ Equity (Unaudited) – Three and nine months ended September 30, 2020 and 2019

5

Consolidated Statements of Cash Flows (Unaudited) – Nine months ended September 30, 2020 and 2019

6

Notes to Unaudited Consolidated Financial Statements .

7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

38

Item 3. Quantitative and Qualitative Disclosure About Market Risk

60

Item 4. Controls and Procedures .

60

PART II. OTHER INFORMATION

60

Item 1. Legal Proceedings

60

Item 1A. Risk Factors

60

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds .

60

Item 3. Defaults Upon Senior Securities

60

Item 4. Mine Safety Disclosures .

60

Item 5. Other Information

60

Item 6. Exhibits

61

1


Item 1. Financial Statements

AmeriServ Financial, Inc.

CONSOLIDATED BALANCE SHEETS

(In thousands except shares)

(Unaudited)

September 30, 2020

December 31, 2019

ASSETS

 

  

 

  

Cash and due from depository institutions

$

17,986

$

15,642

Interest bearing deposits

 

3,214

 

2,755

Short-term investments

 

20,008

 

3,771

Cash and cash equivalents

 

41,208

 

22,168

Investment securities:

 

  

 

  

Available for sale, at fair value

 

141,716

 

141,749

Held to maturity (fair value $45,308 on September 30, 2020 and $41,082 on December 31, 2019)

 

42,636

 

39,936

Loans held for sale

 

7,587

 

4,868

Loans

 

943,246

 

883,090

Less: Unearned income

 

1,466

 

384

Less: Allowance for loan losses

 

10,284

 

9,279

Net loans

 

931,496

 

873,427

Premises and equipment:

 

 

Operating lease right-of-use asset

781

846

Financing lease right-of-use asset

3,024

3,078

Other premises and equipment, net

14,533

14,643

Accrued interest income receivable

 

5,722

 

3,449

Goodwill

 

11,944

 

11,944

Bank owned life insurance

 

39,354

 

38,916

Net deferred tax asset

 

3,216

 

3,976

Federal Home Loan Bank stock

 

4,153

 

3,985

Federal Reserve Bank stock

 

2,125

 

2,125

Other assets

 

8,636

 

6,074

TOTAL ASSETS

$

1,258,131

$

1,171,184

LIABILITIES

Non-interest bearing deposits

$

179,922

$

136,462

Interest bearing deposits

 

862,313

 

824,051

Total deposits

 

1,042,235

 

960,513

Short-term borrowings

 

5,894

 

22,412

Advances from Federal Home Loan Bank

 

74,336

 

53,668

Operating lease liabilities

798

865

Financing lease liabilities

3,161

3,163

Guaranteed junior subordinated deferrable interest debentures

 

12,966

 

12,955

Subordinated debt

 

7,528

 

7,511

Total borrowed funds

 

104,683

 

100,574

Other liabilities

 

7,844

 

11,483

TOTAL LIABILITIES

 

1,154,762

 

1,072,570

SHAREHOLDERS' EQUITY

 

  

 

  

Common stock, par value $0.01 per share; 30,000,000 shares authorized; 26,687,463 shares issued and 17,058,644 shares outstanding on September 30, 2020; 26,650,728 shares issued and 17,057,871 shares outstanding on December 31, 2019

 

267

 

267

Treasury stock at cost, 9,628,819 shares on September 30, 2020 and 9,592,857 shares on December 31, 2019

 

(83,280)

 

(83,129)

Capital surplus

 

145,965

 

145,888

Retained earnings

 

54,375

 

51,759

Accumulated other comprehensive loss, net

 

(13,958)

 

(16,171)

TOTAL SHAREHOLDERS' EQUITY

 

103,369

 

98,614

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

1,258,131

$

1,171,184

See accompanying notes to unaudited consolidated financial statements.

2


AmeriServ Financial, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

Three months ended

Nine months ended

    

September 30, 

September 30, 

    

2020

    

2019

    

2020

    

2019

INTEREST INCOME

 

  

 

  

 

  

 

  

 

Interest and fees on loans

 

$

9,724

 

$

10,737

 

$

30,504

 

$

32,149

 

Interest bearing deposits

 

4

 

6

 

11

 

19

Short-term investments

 

51

 

84

 

219

 

212

Investment securities:

 

  

 

  

 

  

 

  

Available for sale

 

1,122

 

1,265

 

3,464

 

3,898

Held to maturity

 

336

 

341

 

1,044

 

1,084

Total Interest Income

 

11,237

 

12,433

 

35,242

 

37,362

INTEREST EXPENSE

 

  

 

  

 

  

 

  

Deposits

 

1,727

 

2,895

 

6,054

 

8,492

Short-term borrowings

 

1

 

38

 

17

 

276

Advances from Federal Home Loan Bank

 

280

 

297

 

840

 

793

Financing lease liabilities

28

29

85

88

Guaranteed junior subordinated deferrable interest debentures

 

280

 

280

 

841

 

841

Subordinated debt

 

130

 

130

 

390

 

390

Total Interest Expense

 

2,446

 

3,669

 

8,227

 

10,880

Net Interest Income

 

8,791

 

8,764

 

27,015

 

26,482

Provision (credit) for loan losses

 

675

 

225

 

1,300

 

(175)

Net Interest Income after Provision (Credit) for Loan Losses

 

8,116

 

8,539

 

25,715

 

26,657

NON-INTEREST INCOME

 

  

 

  

 

  

 

  

Wealth management fees

 

2,604

 

2,431

 

7,629

 

7,246

Service charges on deposit accounts

 

206

 

321

 

668

 

948

Net gains on loans held for sale

 

507

 

405

 

1,079

 

574

Mortgage related fees

 

161

 

97

 

432

 

218

Net realized gains on investment securities

 

 

88

 

 

118

Bank owned life insurance

 

161

 

131

 

438

 

388

Other income

 

665

 

622

 

1,657

 

1,865

Total Non-Interest Income

 

4,304

 

4,095

 

11,903

 

11,357

NON-INTEREST EXPENSE

 

  

 

  

 

  

 

  

Salaries and employee benefits

 

6,838

 

6,324

 

20,161

 

18,973

Net occupancy expense

 

608

 

599

 

1,885

 

1,879

Equipment expense

 

374

 

333

 

1,158

 

1,081

Professional fees

 

1,373

 

1,276

 

3,858

 

3,645

Supplies, postage and freight

 

150

 

142

 

551

 

455

Miscellaneous taxes and insurance

 

291

 

280

 

855

 

851

Federal deposit insurance expense

 

140

 

 

296

 

160

Other expense

 

1,333

 

1,549

 

3,982

 

4,208

Total Non-Interest Expense

 

11,107

 

10,503

 

32,746

 

31,252

PRETAX INCOME

1,313

2,131

4,872

6,762

Provision for income taxes

235

442

966

1,403

NET INCOME

$

1,078

$

1,689

$

3,906

$

5,359

PER COMMON SHARE DATA:

Basic:

Net income

$

0.06

$

0.10

$

0.23

$

0.31

Average number of shares outstanding

17,059

17,278

17,051

17,443

Diluted:

Net income

$

0.06

$

0.10

$

0.23

$

0.31

Average number of shares outstanding

17,062

17,360

17,063

17,524

See accompanying notes to unaudited consolidated financial statements.

3


AmeriServ Financial, Inc.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

Three months ended

Nine months ended

    

September 30, 

September 30, 

    

2020

    

2019

    

2020

    

2019

COMPREHENSIVE INCOME

 

  

 

  

 

  

 

  

 

Net income

$

1,078

$

1,689

$

3,906

$

5,359

Other comprehensive income, before tax:

 

  

 

  

 

  

 

  

Pension obligation change for defined benefit plan

 

 

403

 

528

 

(1,030)

Income tax effect

 

 

(85)

 

(111)

 

216

Unrealized holding gains on available for sale securities arising during period

 

143

 

608

 

2,272

 

4,191

Income tax effect

 

(30)

 

(128)

 

(476)

 

(880)

Reclassification adjustment for gains on available for sale securities included in net income

 

 

(88)

 

 

(118)

Income tax effect

 

 

19

 

 

25

Other comprehensive income

 

113

 

729

 

2,213

 

2,404

Comprehensive income

$

1,191

$

2,418

$

6,119

$

7,763

See accompanying notes to unaudited consolidated financial statements.

4


AmeriServ Financial, Inc.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(In thousands, except share data)

(Unaudited)

Three months ended

Nine months ended

    

September 30, 

September 30, 

    

2020

    

2019

    

2020

    

2019

COMMON STOCK

 

  

 

  

 

  

 

  

Balance at beginning of period

$

267

$

266

$

267

$

266

New common shares issued for exercise of stock options (36,735 and 38,917 shares for the nine months ended September 30, 2020 and 2019, respectively)

 

 

 

 

Balance at end of period

 

267

 

266

 

267

 

266

TREASURY STOCK

 

  

 

  

 

  

 

  

Balance at beginning of period

 

(83,280)

 

(81,741)

 

(83,129)

 

(80,579)

Treasury stock, purchased at cost (237,641 shares for the three months ended September 30, 2019 and 35,962 and 511,506 shares for the nine months ended September 30, 2020 and 2019, respectively)

 

 

(1,004)

 

(151)

 

(2,166)

Balance at end of period

 

(83,280)

 

(82,745)

 

(83,280)

 

(82,745)

CAPITAL SURPLUS

 

  

 

  

 

  

 

  

Balance at beginning of period

 

145,965

 

145,883

 

145,888

 

145,782

New common shares issued for exercise of stock options (36,735 and 38,917 shares for the nine months ended September 30, 2020 and 2019, respectively)

 

 

 

75

 

96

Stock option expense

 

 

1

 

2

 

6

Balance at end of period

 

145,965

 

145,884

 

145,965

 

145,884

RETAINED EARNINGS

 

  

 

  

 

  

 

  

Balance at beginning of period

 

53,723

 

49,618

 

51,759

 

46,733

Net income

 

1,078

 

1,689

 

3,906

 

5,359

Cash dividend declared on common stock ($0.025 per share for the three months ended September 30, 2020 and 2019 and $0.075 and $0.070 per share for the nine months ended September 30, 2020 and 2019, respectively)

 

(426)

 

(431)

 

(1,290)

 

(1,216)

Balance at end of period

 

54,375

 

50,876

 

54,375

 

50,876

ACCUMULATED OTHER COMPREHENSIVE LOSS, NET

 

  

 

  

 

  

 

  

Balance at beginning of period

 

(14,071)

 

(12,550)

 

(16,171)

 

(14,225)

Other comprehensive income

 

113

 

729

 

2,213

 

2,404

Balance at end of period

 

(13,958)

 

(11,821)

 

(13,958)

 

(11,821)

TOTAL STOCKHOLDERS’ EQUITY

$

103,369

$

102,460

$

103,369

$

102,460

See accompanying notes to unaudited consolidated financial statements.

5


AmeriServ Financial, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Nine months ended

    

September 30, 

    

 

2020

    

2019

 

OPERATING ACTIVITIES

Net income

$

3,906

$

5,359

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

 

  

 

  

Provision (credit) for loan losses

 

1,300

 

(175)

Depreciation and amortization expense

 

1,472

 

1,360

Net amortization of investment securities

 

206

 

203

Net realized gains on investment securities available for sale

 

 

(118)

Net gains on loans held for sale

 

(1,079)

 

(574)

Amortization of deferred loan fees

 

(339)

 

(91)

Origination of mortgage loans held for sale

 

(71,330)

 

(28,232)

Sales of mortgage loans held for sale

 

69,690

 

23,704

Increase in accrued interest receivable

 

(2,273)

 

(276)

Increase (decrease) in accrued interest payable

 

(499)

 

307

Earnings on bank-owned life insurance

 

(438)

 

(388)

Deferred income taxes

 

609

 

623

Stock compensation expense

 

2

 

6

Net change in operating leases

(67)

(46)

Other, net

 

(5,564)

 

(323)

Net cash provided by (used in) operating activities

 

(4,404)

 

1,339

INVESTING ACTIVITIES

 

  

 

  

Purchase of investment securities — available for sale

 

(23,706)

 

(11,701)

Purchase of investment securities — held to maturity

 

(6,648)

 

(1,000)

Proceeds from maturities of investment securities — available for sale

 

25,871

 

15,704

Proceeds from maturities of investment securities — held to maturity

 

3,883

 

2,403

Proceeds from sales of investment securities — available for sale

 

 

3,374

Purchase of regulatory stock

 

(6,252)

 

(11,254)

Proceeds from redemption of regulatory stock

 

6,084

 

12,144

Long-term loans originated

 

(207,028)

 

(163,343)

Principal collected on long-term loans

 

147,958

 

156,357

Proceeds from sale of other real estate owned

 

21

 

198

Purchases of premises and equipment

 

(1,094)

 

(2,550)

Net cash provided by (used in) investing activities

 

(60,911)

 

332

FINANCING ACTIVITIES

 

  

 

  

Net increase in deposit balances

 

81,722

 

20,818

Net decrease in other short-term borrowings

 

(16,518)

 

(29,754)

Principal borrowings on advances from Federal Home Loan Bank

 

34,210

 

16,909

Principal repayments on advances from Federal Home Loan Bank

 

(13,542)

 

(8,000)

Principal payments on financing lease liabilities

(151)

(126)

Stock options exercised

 

75

 

96

Purchases of treasury stock

 

(151)

 

(2,166)

Common stock dividend paid

 

(1,290)

 

(1,216)

Net cash provided by (used in) financing activities

 

84,355

 

(3,439)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

 

19,040

 

(1,768)

CASH AND CASH EQUIVALENTS AT JANUARY 1

 

22,168

 

34,894

CASH AND CASH EQUIVALENTS AT SEPTEMBER 30

$

41,208

$

33,126

See accompanying notes to unaudited consolidated financial statements.

6


Table of Contents

AmeriServ Financial, Inc.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1.    Principles of Consolidation

The accompanying consolidated financial statements include the accounts of AmeriServ Financial, Inc. (the Company) and its wholly-owned subsidiaries, AmeriServ Financial Bank (the Bank), AmeriServ Trust and Financial Services Company (the Trust Company), and AmeriServ Life Insurance Company (AmeriServ Life). The Bank is a Pennsylvania state-chartered full service bank with 15 locations in Pennsylvania and 1 location in Maryland. The Trust Company offers a complete range of trust and financial services and administers assets valued at $2.3 billion that are not reported on the Company’s Consolidated Balance Sheets at September 30, 2020. AmeriServ Life was a captive insurance company that engaged in underwriting as a reinsurer of credit life and disability insurance. New business ceased being generated by AmeriServ Life in 2005. Since that time, the outstanding insurance policies have been running off, and the final policy has expired. On September 30, 2020, the Arizona Corporation Commission approved the Articles of Dissolution for AmeriServ Life.

In addition, the Parent Company is an administrative group that provides support in such areas as audit, finance, investments, loan review, general services, and marketing. Intercompany accounts and transactions have been eliminated in preparing the Consolidated Financial Statements. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (generally accepted accounting principles, or GAAP) requires management to make estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and accompanying notes. Actual results may differ from these estimates and the differences may be material to the Consolidated Financial Statements. The Company’s most significant estimates relate to the allowance for loan losses, goodwill, income taxes, investment securities, pension, and the fair value of financial instruments.

2.    Basis of Preparation

The unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information. In the opinion of management, all adjustments consisting of normal recurring entries considered necessary for a fair presentation have been included. They are not, however, necessarily indicative of the results of consolidated operations for a full-year.

For further information, refer to the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

3.    Recent Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments (ASU 2016-13), which changes the impairment model for most financial assets. This Update is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. The underlying premise of the Update is that financial assets measured at amortized cost should be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The allowance for credit losses should reflect management’s current estimate of credit losses that are expected to occur over the remaining life of a financial asset. The income statement will be affected for the measurement of credit losses for newly recognized financial assets, as well as the expected increases or decreases of expected credit losses that have taken place during the period. With certain exceptions, transition to the new requirements will be through a cumulative effect adjustment to opening retained earnings as of the beginning of the first reporting period in which the guidance is adopted.

In November 2019, the FASB issued ASU 2019-10, Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842). This update defers the effective date of ASU 2016-13 for SEC filers that are eligible to be smaller reporting companies, non-SEC filers, and all other companies to fiscal years beginning

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after December 15, 2022, including interim periods within those fiscal years. The Company, as a smaller reporting company, continues to evaluate the impact that the Update will have on our consolidated financial statements. We are currently working with an industry leading third-party consultant and software provider to assist us in the implementation of this standard. We expect to recognize a one-time cumulative effect adjustment to the allowance for loan losses as of the beginning of the first reporting period in which the new standard is effective, but cannot yet determine the magnitude of any such one-time adjustment or the overall impact of the new guidance on the consolidated financial statements. The overall impact of the amendment will be affected by the portfolio composition and quality at the adoption date as well as economic conditions and forecasts at that time.

In January 2020, the FASB issued ASU 2020-4, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, March 2020, to provide temporary optional expedients and exceptions to the U.S. GAAP guidance on contract modifications to ease the financial reporting burdens of the expected market transition from LIBOR to alternative reference rates, such as Secured Overnight Financing Rate. Entities can elect not to apply certain modification accounting requirements to contracts affected by what the guidance calls reference rate reform, if certain criteria are met. An entity that makes this election would not have to remeasure the contracts at the modification date or reassess a previous accounting determination. The amendments in this ASU are effective for all entities upon issuance through December 31, 2022. The Company has identified its LIBOR exposure across product categories and is analyzing the risks associated with the LIBOR transition. However, it is too early to predict whether a new rate index replacement and the adoption of this ASU will have a material impact on the Company’s financial statements.

4.    Revenue Recognition

ASU 2014-09, Revenue from Contracts with Customers – Topic 606, requires the Company to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers at the time the transfer of goods or services takes place. Management determined that the primary sources of revenue associated with financial instruments, including interest and fee income on loans and interest on investments, along with certain noninterest revenue sources including net realized gains (losses) on investment securities, mortgage related fees, net gains on loans held for sale, and bank owned life insurance are not within the scope of Topic 606. These sources of revenue cumulatively comprise 79.7% of the total revenue of the Company.

Non-interest income within the scope of Topic 606 are as follows:

Wealth management fees - Wealth management fee income is primarily comprised of fees earned from the management and administration of trusts and customer investment portfolios. The Company’s performance obligation is generally satisfied over a period of time and the resulting fees are billed monthly or quarterly, based upon the month end market value of the assets under management. Payment is generally received after month end through a direct charge to customers’ accounts. Due to this delay in payment, a receivable of $825,000 has been established as of September 30, 2020 and is included in other assets on the Consolidated Balance Sheets in order to properly recognize the revenue earned but not yet received. Other performance obligations (such as delivery of account statements to customers) are generally considered immaterial to the overall transactions’ price. Commissions on transactions are recognized on a trade-date basis as the performance obligation is satisfied at the point in time in which the trade is processed. Also included within wealth management fees are commissions from the sale of mutual funds, annuities, and life insurance products. Commissions on the sale of mutual funds, annuities, and life insurance products are recognized when sold, which is when the Company has satisfied its performance obligation.
Service charges on deposit accounts - The Company has contracts with its deposit account customers where fees are charged for certain items or services. Service charges include account analysis fees, monthly service fees, overdraft fees, and other deposit account related fees. Revenue related to account analysis fees and service fees is recognized on a monthly basis as the Company has an unconditional right to the fee consideration. Fees

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AmeriServ Financial, Inc.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

attributable to specific performance obligations of the Company (i.e. overdraft fees, etc.) are recognized at a defined point in time based on completion of the requested service or transaction.
Other non-interest income - Other non-interest income consists of other recurring revenue streams such as safe deposit box rental fees, gain (loss) on sale of other real estate owned, ATM and VISA debit card fees, and other miscellaneous revenue streams. Safe deposit box rental fees are charged to the customer on an annual basis and recognized when billed. However, if the safe deposit box rental fee is prepaid (i.e. paid prior to issuance of annual bill), the revenue is recognized upon receipt of payment. The Company has determined that since rentals and renewals occur consistently over time, revenue is recognized on a basis consistent with the duration of the performance obligation. Gains and losses on the sale of other real estate owned are recognized at the completion of the property sale when the buyer obtains control of the real estate and all the performance obligations of the Company have been satisfied. The Company offers ATM and VISA debit cards to deposit account holders which allows our customers to access their account electronically at ATMs and POS terminals. Fees related to ATM and VISA debit card transactions are recognized when the transactions are completed and the Company has satisfied its performance obligation.

The following presents non-interest income, segregated by revenue streams in-scope and out-of-scope of Topic 606, for the three and nine month periods ending September 30, 2020 and 2019 (in thousands).

    

Three months ended

    

Nine months ended

    

 

September 30, 

September 30, 

 

2020

    

2019

 

2020

    

2019

Non-interest income:

In-scope of Topic 606

 

  

 

  

 

  

 

  

 

Wealth management fees

$

2,604

$

2,431

$

7,629

$

7,246

Service charges on deposit accounts

 

206

 

321

 

668

 

948

Other

 

485

 

471

 

1,271

 

1,325

Non-interest income (in-scope of topic 606)

 

3,295

 

3,223

 

9,568

 

9,519

Non-interest income (out-of-scope of topic 606)

 

1,009

 

872

 

2,335

 

1,838

Total non-interest income

$

4,304

$

4,095

$

11,903

$

11,357

5.    Earnings Per Common Share

Basic earnings per share include only the weighted average common shares outstanding. Diluted earnings per share include the weighted average common shares outstanding and any potentially dilutive common stock equivalent shares in the calculation. Treasury shares are excluded for earnings per share purposes. For the three month periods ending September 30, 2020 and 2019, options to purchase 189,259 common shares, with an exercise price of $2.96 to $4.22, and options to purchase 12,000 common shares, with an exercise price of $4.19 to $4.22, respectively, were outstanding but were not included in the computation of diluted earnings per common share because to do so would be antidilutive. For the nine month periods ending September 30, 2020 and 2019, options to purchase 69,759 common shares, with an exercise price of $3.20 to $4.22, and options to purchase 12,000 common shares, with an exercise price of $4.19 to 4.22,

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respectively, were outstanding but were not included in the computation of diluted earnings per common share because to do so would be antidilutive.

Three months ended

Nine months ended

September 30, 

September 30, 

    

2020

    

2019

    

2020

    

2019

(In thousands, except per share data)

Numerator:

 

  

 

  

 

  

Net income

$

1,078

$

1,689

$

3,906

$

5,359

Denominator:

 

  

 

  

 

  

 

  

Weighted average common shares outstanding (basic)

 

17,059

 

17,278

 

17,051

 

17,443

Effect of stock options

 

3

 

82

 

12

 

81

Weighted average common shares outstanding (diluted)

 

17,062

 

17,360

 

17,063

 

17,524

Earnings per common share:

 

  

 

  

 

  

 

  

Basic

$

0.06

$

0.10

$

0.23

$

0.31

Diluted

 

0.06

 

0.10

 

0.23

 

0.31

6.    Consolidated Statement of Cash Flows

On a consolidated basis, cash and cash equivalents include cash and due from depository institutions, interest bearing deposits and short-term investments in both money market funds and commercial paper. The Company made $315,000 in income tax payments in the first nine months of 2020 and $785,000 in the same 2019 period. The Company made total interest payments of $8,726,000 in the first nine months of 2020 compared to $10,573,000 in the same 2019 period. The Company had $40,000 non-cash transfers to other real estate owned (OREO) in the first nine months of 2020 compared to $75,000 non-cash transfers in the same 2019 period. During the first nine months of 2020, the Company entered into two new financing leases, one related to office equipment and the other to a branch location, and recorded a right-of-use asset and lease liability of $149,000. As a result of the adoption of ASU 2016-02, Leases (Topic 842) as of January 1, 2019, the Company had non-cash transactions associated with the recognition of the right-of-use assets and lease liabilities. Specifically, the Company recognized a right-of-use asset and lease liability of $932,000 related to operating leases and a right-of-use asset and lease liability of $3.3 million related to financing leases during the first nine months of 2019.

7.    Investment Securities

The cost basis and fair values of investment securities are summarized as follows:

Investment securities available for sale (AFS):

SEPTEMBER 30, 2020

GROSS

GROSS

UNREALIZED

UNREALIZED

FAIR

    

COST BASIS

    

GAINS

    

LOSSES

    

VALUE

(IN THOUSANDS)

U.S. Agency

$

3,079

$

197

$

$

3,276

U.S. Agency mortgage-backed securities

 

66,198

 

2,850

 

(6)

 

69,042

Municipal

 

17,409

 

1,242

 

 

18,651

Corporate bonds

 

50,586

 

557

 

(396)

 

50,747

Total

$

137,272

$

4,846

$

(402)

$

141,716

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Investment securities held to maturity (HTM):

SEPTEMBER 30, 2020

GROSS

GROSS

UNREALIZED

UNREALIZED

FAIR

    

COST BASIS

    

GAINS

    

LOSSES

    

VALUE

(IN THOUSANDS)

U.S. Agency mortgage-backed securities

$

7,719

$

394

$

$

8,113

Municipal

 

28,889

 

2,225

 

(51)

 

31,063

Corporate bonds and other securities

 

6,028

 

108

 

(4)

 

6,132

Total

$

42,636

$

2,727

$

(55)

$

45,308

Investment securities available for sale (AFS):

DECEMBER 31, 2019

GROSS

GROSS

UNREALIZED

UNREALIZED

FAIR

    

COST BASIS

    

GAINS

    

LOSSES

    

VALUE

(IN THOUSANDS)

U.S. Agency

$

5,084

$

32

$

$

5,116

U.S. Agency mortgage-backed securities

 

80,046

 

1,681

 

(94)

 

81,633

Municipal

 

14,678

 

509

 

(17)

 

15,170

Corporate bonds

 

39,769

 

342

 

(281)

 

39,830

Total

$

139,577

$

2,564

$

(392)

$

141,749

Investment securities held to maturity (HTM):

DECEMBER 31, 2019

GROSS

GROSS

UNREALIZED

UNREALIZED

FAIR

COST BASIS

    

GAINS

    

LOSSES

    

VALUE

(IN THOUSANDS)

U.S. Agency mortgage-backed securities

    

$

9,466

$

251

$

(4)

$

9,713

Municipal

 

24,438

 

941

 

(53)

 

25,326

Corporate bonds and other securities

 

6,032

 

58

 

(47)

 

6,043

Total

$

39,936

$

1,250

$

(104)

$

41,082

Maintaining investment quality is a primary objective of the Company’s investment policy which, subject to certain limited exceptions, prohibits the purchase of any investment security below a Moody’s Investor’s Service or Standard & Poor’s rating of “A.” At September 30, 2020, 43.5% of the portfolio was rated “AAA” as compared to 53.4% at December 31, 2019. Approximately 14.8% of the portfolio was either rated below “A” or unrated at September 30, 2020 as compared to 9.1% at December 31, 2019.

The Company sold no AFS securities during the third quarter or first nine months of 2020. Total proceeds from the sale of AFS securities for the third quarter and first nine months of 2019 were $2.8 million and $3.4 million, respectively, resulting in $88,000 and $118,000, respectively, of gross investment security gains.

The carrying value of securities, both available for sale and held to maturity, pledged to secure public and trust deposits was $113,126,000 at September 30, 2020 and $117,076,000 at December 31, 2019.

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AmeriServ Financial, Inc.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The following tables present information concerning investments with unrealized losses as of September 30, 2020 and December 31, 2019 (in thousands):

Total investment securities:

SEPTEMBER 30, 2020

LESS THAN 12 MONTHS

12 MONTHS OR LONGER

TOTAL

FAIR

UNREALIZED

FAIR

UNREALIZED

FAIR

UNREALIZED

    

VALUE

    

LOSSES

    

VALUE

    

LOSSES

    

VALUE

    

LOSSES

U.S. Agency

$

$

$

$

$

$

U.S. Agency mortgage-backed securities

 

1,438

(5)

138

(1)

1,576

(6)

Municipal

 

1,044

(1)

752

(50)

1,796

(51)

Corporate bonds and other securities

 

15,741

(259)

6,859

(141)

22,600

(400)

Total

$

18,223

$

(265)

$

7,749

$

(192)

$

25,972

$

(457)

Total investment securities:

DECEMBER 31, 2019

LESS THAN 12 MONTHS

12 MONTHS OR LONGER

TOTAL

FAIR

UNREALIZED

FAIR

UNREALIZED

FAIR

UNREALIZED

    

VALUE

    

LOSSES

    

VALUE

    

LOSSES

    

VALUE

    

LOSSES

U.S. Agency

$

$

$

$

$

$

U.S. Agency mortgage-backed securities

 

7,084

 

(23)

 

8,562

 

(75)

 

15,646

(98)

Municipal

 

2,269

 

(18)

 

1,123

 

(52)

 

3,392

(70)

Corporate bonds and other securities

 

7,797

 

(85)

 

11,783

 

(243)

 

19,580

(328)

Total

$

17,150

$

(126)

$

21,468

$

(370)