AmeriServ Financial, Inc. — 2022 Form 10-K
Business context and reporting period. This annual report covers the fiscal year ended December 31, 2022; it is not a standalone fourth-quarter filing. AmeriServ is a Pennsylvania-based bank holding company operating a community bank and trust and wealth-management business, primarily in Pennsylvania and Maryland. Its shares trade on Nasdaq as ASRV.
Financial performance and condition
| Metric | 2022 | 2021 |
|---|---|---|
| Total interest income | $49.1 million | $46.7 million |
| Net interest income | $40.6 million | $39.1 million |
| Net interest margin | 3.27% | 3.15% |
| Provision for loan losses | $0.05 million | $1.1 million |
| Non-interest income | $16.7 million | $17.8 million |
| Non-interest expense | $48.0 million | $47.0 million |
| Net income | $7.45 million | $7.07 million |
| Diluted earnings per share | $0.43 | $0.41 |
- Management-reported adjusted net income, excluding pension settlement charges, was $9.47 million, or $0.55 per diluted share, versus $8.47 million and $0.49 in 2021. These are non-GAAP measures; reported GAAP results are lower.
- Full-year operating cash flow was $5.2 million. Investing activities used $56.3 million and financing activities provided $32.9 million. Cash and cash equivalents declined $18.1 million to $23.0 million.
- At year-end, consolidated assets were $1.364 billion, loans net of unearned income were $990.8 million, deposits were $1.109 billion, borrowed funds were $138.4 million, and shareholders’ equity was $106.2 million.
- Capital ratios were above regulatory well-capitalized thresholds: common equity Tier 1 and Tier 1 capital ratios were 10.41%, total capital was 13.87%, and Tier 1 leverage was 8.52%. The bank reported $302 million of overnight FHLB borrowing capacity, $41 million of Federal Reserve capacity, and $35 million of correspondent-bank lines.
- Book value per share was $6.20; tangible book value per share, a non-GAAP measure, was $5.40. The company declared $0.115 per share in 2022 dividends, up 15% from 2021.
Material changes versus the prior comparable period
- Net income rose 5.3% and diluted EPS rose from $0.41 to $0.43. Higher asset yields lifted net interest income 3.8%; the net interest margin expanded 12 basis points.
- Rising rates increased deposit costs, while year-end deposits declined 2.7% to $1.109 billion. Short-term borrowings rose to $88.6 million from zero at year-end 2021; total borrowed funds increased 90% to $138.4 million.
- Non-interest income fell 6.0%, mainly due to reduced mortgage-sale gains and lower wealth-management fees as market values declined. Non-interest expense rose 2.2%, including a $2.5 million pension settlement charge.
- Non-performing assets increased to $5.2 million, or 0.53% of loans, from $3.3 million, or 0.34%. Net charge-offs rose to $1.7 million (0.17% of average loans) from $47,000. The allowance declined to $10.7 million, or 1.08% of loans, from $12.4 million, or 1.26%.
- Accumulated other comprehensive loss widened to $22.5 million from $6.5 million, principally reflecting a $16.3 million after-tax decline in the fair value of available-for-sale securities. Management described the securities losses as interest-rate-related and temporary, and said it did not intend or expect to need to sell the securities before recovery or maturity.
Outlook, risks, contingencies and unusual items
- No formal earnings or revenue guidance is provided. Management said it expects to maintain strong capital ratios in 2023, believes it can sustain the current $0.03 quarterly dividend, and sees capacity for loan growth; it also expects government-stimulus-related deposits to continue declining and deposit competition to remain a concern.
- Interest-rate sensitivity shifted to liability-sensitive through six months at year-end. Management reported that a subsequent $50 million swap to fix the cost of certain rate-indexed deposits moved net-interest-income variability toward neutral. Higher rates also pressured securities values and tangible book value.
- Credit exposure is concentrated in commercial real estate: non-owner-occupied CRE was approximately 350% of regulatory capital. A large CRE relationship was downgraded and partially charged down; another CRE relationship was downgraded. Management identified large commercial credits and local economic conditions as areas to monitor.
- Estimated uninsured deposits were $316.5 million. The filing says approximately half related to public funds required by law to be collateralized; the estimate is based on individual accounts and does not aggregate each customer’s total balances.
- Off-balance-sheet commitments to extend credit were $227.6 million and standby letters of credit were $9.0 million. Legal claims in the ordinary course were not considered likely to have a material adverse effect. Management anticipated proxy-contest costs would affect 2023 expenses.
- For 2023 adoption of CECL, management preliminarily estimated a loan allowance of $11.8–$12.2 million and an HTM securities allowance of $50,000–$150,000; it did not expect a significant overall impact. These are preliminary estimates.
- Subsequent events: The company held a $918,000 Signature Bank debt security and expected a substantial first-quarter 2023 loss after the bank’s closure; the filing does not provide a clear loss estimate. AmeriServ also agreed to sell its Visa Class B shares for $1.7 million, expecting a pre-tax gain because the shares had no carrying value or historical cost basis.
- The auditor gave an unqualified opinion on the financial statements. The company, as a smaller reporting company, was not required to obtain an auditor attestation on internal control; management reported its controls assessment as effective.
Important facts for investors to verify
- How the $88.6 million of year-end short-term borrowings was funded, its cost and duration, and how deposit outflows and uninsured balances have changed since year-end.
- Current status, collateral, expected recovery and charge-off implications of the criticized CRE relationships, especially the loan transferred to non-accrual.
- The realized impact of the Signature Bank security and Visa share sale on first-quarter 2023 results, and any other subsequent balance-sheet or liquidity developments.
- Actual CECL adoption effects versus the preliminary allowance ranges, including any opening-equity adjustment and HTM securities reserve.
- Whether the dividend remains supported by earnings, capital and subsidiary dividend capacity, and the scale of proxy-contest expenses.
- Reconcile filing figures where presentations differ: the business section cites bank assets and deposits of $1.350 billion and $1.111 billion, while consolidated statements report $1.364 billion and $1.109 billion, respectively.