UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

 

FORM 10-K

 

(MARK ONE)
þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 20132014

OR

o		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, PENNSYLVANIA		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		Name Of Each Exchange On Which Registered
Common Stock, Par Value $0.01 Per Share		The NASDAQ Stock Market LLC
8.45% Beneficial Unsecured Securities, Series A (AmeriServ Financial Capital Trust I)		The NASDAQ Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act: None

Title Of Class		Share Purchase Rights (Title of class)

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.o Yesþ No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.o Yesþ No

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.þ Yeso No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted 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 and post such files).þ Yeso No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.þ

Indicate by check mark whether the registrant is a large accelerated filer, accelerated filer, non-accelerated filer or a smaller reporting company. See definition of “accelerated filer, large accelerated filer and smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filero		Accelerated filero		Non-accelerated filero		Smaller reporting companyþ

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

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked prices of such common equity, as of the business day of the registrant’s most recently completed second fiscal quarter. The aggregate market value was $51,468,675$58,827,999 as of June 30, 2013.2014.

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. There were 18,784,18818,853,521 shares outstanding as of January 31, 2014.30, 2015.

DOCUMENTS INCORPORATED BY REFERENCE.

Portions of the proxy statement for the annual shareholders’ meeting are incorporated by reference in Parts II and III.

 

		Page No.
PART I
Item 1. Business			1
Item 1A. Risk Factors			12
Item 1B. Unresolved Staff Comments			12
Item 2. Properties			12
Item 3. Legal Proceedings			12
Item 4. Mine Safety Disclosures			12
PART II
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and     Issuer Purchases of Equity Securities			13
Item 6. Selected Consolidated Financial Data			14
Item 7. Management’s Discussion and Analysis of Consolidated Financial Condition and     Results of Operations			15
Item 7A. Quantitative and Qualitative Disclosures about Market Risk			35
Item 8. Financial Statements and Supplementary Data			3736
Item 9. Changes in and Disagreements With Accountants On Accounting and Financial     Disclosure			9591
Item 9A. Controls and Procedures			9591
Item 9B. Other Information			9591
PART III
Item 10. Directors, Executive Officers, and Corporate Governance			9691
Item 11. Executive Compensation			9691
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related     Stockholder Matters			9692
Item 13. Certain Relationships and Related Transactions, and Director Independence			9692
Item 14. Principal Accountant Fees and Services			9692
PART IV
Item 15. Exhibits, Financial Statement Schedules			9793
Signatures			9995

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The Bank is subject to supervision and regular examination by the Federal Reserve Bank of Philadelphia and the Pennsylvania Department of Banking.PDB. Various federal and state laws and regulations govern many aspects of its banking operations. The following is a summary of key data (dollars in thousands) and ratios of the Bank at December 31, 2013:2014:

Headquarters		Johnstown, PA				Johnstown, PA
Total Assets		$	1,027,510			$	1,061,080
Total Investment Securities			145,968				132,780
Total Loans and Loans Held for Sale (net of unearned income)			786,748				832,131
Total Deposits			854,722				870,081
Total Net Income			5,911				3,799
Asset Leverage Ratio			9.46%				9.19	%
Return on Average Assets			0.60				0.37
Return on Average Equity			6.01				3.70
Total Full-time Equivalent Employees			281				245

RISK MANAGEMENT OVERVIEW:

Risk identification and management are essential elements for the successful management of the Company. In the normal course of business, the Company is subject to various types of risk, which includes credit, interest rate and market, liquidity, operational, legal/compliance, strategic/reputational and security risk. The Company controls and monitors these risks with policies, procedures, and various levels of managerialoversight from the Company’s Board of Directors (the Board) and Board oversight.management. The Company has both a Management Enterprise Risk Committee and a Board Enterprise Risk Committee to help manage and monitor the Company’s risk position.

Interest rate risk is the sensitivity of net interest income and the market value of financial instruments to the magnitude, direction, and frequency of changes in interest rates. Interest rate risk results from various repricing frequencies and the maturity structure of assets and liabilities. The Company uses its asset liability management policy to control and manage interest rate risk.

Liquidity risk represents the inability to generate cash or otherwise obtain funds at reasonable rates to satisfy commitments to borrowers, as well as the obligations to depositors, debtholders and the funding of operating costs. The Company uses its asset liability management policy and contingency funding plan to control and manage liquidity risk.

Credit risk represents the possibility that a customer may not perform in accordance with contractual terms resulting in an economic loss to the organization. Credit risk results from extending credit to customers, purchasing securities, and entering into certain off-balance sheet loan funding commitments. The Company’s primary credit risk occurs in the loan portfolio. The Company uses its credit policy and disciplined approach to evaluating the adequacy of the allowance for loan losses (the ALL) to control and manage credit risk. The Company’s investment policy and hedging policy limit the amount of credit risk that may be assumed in the investment portfolio and through hedging activities. The following summarizes and describes the Company’s various loan categories and the underwriting standards applied to each:

Commercial Loans

This category includes credit extensions to commercial and industrial borrowers. Business assets, including accounts receivable, inventory and/or equipment, typically secure these credits. In appropriate instances, extensions of credit in this category are subject to collateral advance formulas. Balance sheet strength and profitability are considered when analyzing these credits, with special attention given to historical, current and prospective sources of cash flow, and the ability of the customer to sustain cash flow at acceptable levels. The Bank’s policy permits flexibility in determining acceptable debt service coverage ratios, with a minimum level of 1.1 to 1x desired. Personal guarantees are frequently required; however, as the financial strength of the borrower increases, the Bank’s ability to obtain personal guarantees decreases. In addition to economic risk, this category is impacted by the strength of the borrower’s management, industry risk and portfolio concentration risk each of which are also monitored and considered during the underwriting process.

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Commercial Loans Secured by Real Estate

This category includes various types of loans, including acquisition and construction of investment property, owner-occupied property and operating property. Maximum term, minimum cash flow coverage, leasing requirements, maximum amortization and maximum loan to value ratios are controlled by the Bank’s credit policy and follow industry guidelines and norms, and regulatory limitations. Personal guarantees are normally required during the construction phase on construction credits and are frequently obtained on mid to smaller commercial real estateCRE loans. In addition to economic risk, this category is subject to geographic and portfolio concentration risk, each of which are monitored and considered in underwriting.

Residential Real Estate — Mortgages

This category includes mortgages that are secured by residential property. Underwriting of loans within this category is pursuant to Freddie Mac/Fannie Mae underwriting guidelines, with the exception of Community Reinvestment Act (CRA) loans, which have more liberal standards. The major risk in this category is that a significant downward economic trend would increase unemployment and cause payment default. The Bank does not engage and has never engaged, in subprime residential mortgage lending.

Consumer Loans

This category includes consumer installment loans and revolving credit plans. Underwriting is pursuant to industry norms and guidelines. The major risk in this category is a significant economic downturn.

INVESTMENTS

The investment securities portfolio of the Company and its subsidiaries is managed primarily to provide ample liquidity to fund, for example, loan growth and secondarily for earnings in a manner that is consistent with proper bank asset/liability management and current banking practices. The objectives of portfolio management include consideration of proper liquidity levels, interest rate and market valuation sensitivity, and profitability. The investment portfolio of the Company and its subsidiaries are proactively managed in accordance with federal and state laws and regulations and in accordance with generally accepted accounting principles.principles (GAAP).

The investment portfolio is primarily made up of AAA rated agency mortgage-backed securities and short maturity agency securities. Beginning in 2012, the Company began to add high quality corporate securities and select taxable municipal securities to the portfolio. Management strives to maintain a relatively short duration in the portfolio. All holdings must meet standards documented in the AmeriServ Financial Investment Policy.

Investment securities classified as held to maturity are carried at amortized cost while investment securities classified as available for sale are reported at fair market value. The following table sets forth the cost basis and fair value of the Company’s investment portfolio as of the periods indicated:

Investment securities available for sale at:

		AT DECEMBER 31,												AT DECEMBER 31,
		2013				2012				2011				2014				2013				2012
		(IN THOUSANDS)												(IN THOUSANDS)
U.S. Agency		$	6,926			$	5,848			$	10,689			$	5,931			$	6,926			$	5,848
Corporate bonds			11,992				7,992				—				15,497				11,992				7,992
U.S. Agency mortgage-backed securities			121,480				131,425				165,484				102,888				121,480				131,425
Total cost basis of investment securities available for sale		$	140,398			$	145,265			$	176,173			$	124,316			$	140,398			$	145,265
Total fair value of investment securities available for sale		$	141,978			$	151,538			$	182,923			$	127,110			$	141,978			$	151,538

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Investment securities held to maturity at:

		AT DECEMBER 31,												AT DECEMBER 31,
		2013				2012				2011				2014				2013				2012
		(IN THOUSANDS)												(IN THOUSANDS)
Taxable municipal		$	1,521			$	410			$	—			$	3,364			$	1,521			$	410
U.S. Agency mortgage-backed securities			12,671				9,318				9,280				12,481				12,671				9,318
Corporate bonds and other securities			3,995				3,995				3,000				3,995				3,995				3,995
Total cost basis of investment securities held to maturity		$	18,187			$	13,723			$	12,280			$	19,840			$	18,187			$	13,723
Total fair value of investment securities held to maturity		$	17,788			$	14,266			$	12,914			$	20,213			$	17,788			$	14,266

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Secondary Market Activities

The Residential Lending department of the Company continues to originate one-to-four family mortgage loans for customers, the majority of which are sold to outside investors in the secondary market and some of which are retained for the Bank’s portfolio. Mortgages sold on the secondary market are sold to investors on a “flow” basis; mortgages are priced and delivered on a “best efforts” pricing basis, with servicing released to the investor. Fannie Mae/Freddie Mac guidelines are used in underwriting all mortgages with the exception of a limited amount of CRA loans. Mortgages with longer terms, such as 20-year, 30-year, FHA, and VA loans, are usually sold. The remaining production of the department includes construction, adjustable rate mortgages, 10-year, 15-year,quality non-salable loans, and bi-weekly mortgages. These loans are usually kept in the Bank’s portfolios, although during periods of low interest rates 15-year loans are typically sold into the secondary market as they have been over the last several years.portfolios. New portfolio production is predominately adjustable rate mortgages.

Non-performing Assets

The following table presents information concerning non-performing assets:

		AT DECEMBER 31,																				AT DECEMBER 31,
		2013				2012				2011				2010				2009				2014				2013				2012				2011				2010
		(IN THOUSANDS, EXCEPT PERCENTAGES)																				(IN THOUSANDS, EXCEPT PERCENTAGES)
Non-accrual loans:
Commercial		$	—			$	—			$	—			$	3,679			$	3,375			$	—			$	—			$	—			$	—			$	3,679
Commercial loans secured by real estate			1,632				4,623				3,870				6,731				11,716				778				1,632				4,623				3,870				6,731
Real estate-mortgage			1,239				1,191				1,205				1,879				2,025				1,417				1,239				1,191				1,205				1,879
Total			2,871				5,814				5,075				12,289				17,116				2,195				2,871				5,814				5,075				12,289
Other real estate owned:
Commercial loans secured by real estate			344				1,101				20				436				871				384				344				1,101				20				436
Real estate-mortgage			673				127				104				302				350				128				673				127				104				302
Total			1,017				1,228				124				738				1,221				512				1,017				1,228				124				738
Total restructured loans not in non-accrual (TDR)			221				182				—				1,337				—				210				221				182				—				1,337
Total non-performing assets including TDR		$	4,109			$	7,224			$	5,199			$	14,364			$	18,337			$	2,917			$	4,109			$	7,224			$	5,199			$	14,364
Total non-performing assets as a percent of loans, net of unearned income, and other real estate owned			0.52%				1.00	%			0.78	%			2.14	%			2.55	%			0.35	%			0.52	%			1.00	%			0.78	%			2.14	%

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AMERISERV FINANCIAL NON-BANKING SUBSIDIARIES

AMERISERV TRUST AND FINANCIAL SERVICES COMPANY

AmeriServ Trust and Financial Services Company is a trust company organized under Pennsylvania law in October 1992. Its staff of approximately 4544 professionals administers assets valued at approximately $1.7$1.8 billion that are not recognized on the Company’s balance sheet at December 31, 2013.2014. The Trust Company focuses on wealth management. Wealth management includes personal trust products and services such as personal portfolio investment management, estate planning and administration, custodial services and pre-need trusts. Also, institutional trust products and services such as 401(k) plans, defined benefit and defined contribution employee benefit plans, and individual retirement accounts are included in this segment. This segment also includes financial services which include the sale of mutual funds, annuities, and insurance products. The wealth management business also includes the union collective investment funds, namely the ERECT and BUILD funds which are designed to use union pension dollars in construction projects that utilize union labor. The BUILD fund is in the process of liquidation. At December 31, 2013,2014, the Trust Company had total assets of $4.3$4.6 million and total stockholder’s equity of $3.8$4.2 million. In 2013,2014, the Trust Company contributed earnings to the corporation as its gross revenue amounted to $7.5$7.9 million and the net income contribution was $1.0$1.2 million. The Trust Company is subject to regulation and supervision by the Federal Reserve Bank of Philadelphia and the Pennsylvania Department of Banking.PDB.

AMERISERV LIFE

AmeriServ Life is a captive insurance company organized under the laws of the State of Arizona. AmeriServ Life engages in underwriting as reinsurer of credit life and disability insurance within the Company’s market area. Operations of AmeriServ Life are conducted in each office of the Company’s banking subsidiary. AmeriServ Life is subject to supervision and regulation by the Arizona Department of Insurance, the Pennsylvania Insurance Department, and the Board of Governors of the Federal Reserve System (the Federal Reserve). At December 31, 2013,2014, AmeriServ Life had total assets of $427,000.$400,000.

MONETARY POLICIES

Commercial banks are affected by policies of various regulatory authorities including the Federal Reserve. An important function of the Federal Reserve is to regulate the national supply of bank credit. Among the instruments of monetary policy used by the Federal Reserve are: open market operations in U.S. Government securities, changes in the federal funds rate and discount rate on member bank borrowings, and changes in reserve requirements on bank deposits. These means are used in varying combinations to influence overall growth of bank loans, investments, and deposits, and may also affect interest rate charges on loans or interest paid for deposits. The monetary policies of the Federal Reserve have had, and will continue to have, a significant effect on the operating results of commercial banks in the past and are expected to continue to do so in the future.

COMPETITION

Our subsidiaries face strong competition from other commercial banks, savings banks, credit unions, savings and loan associations, and other financial or investment service institutions for business in the communities they serve. Several of these institutions are affiliated with major banking and financial institutions which are substantially larger and have greater financial resources than the Bank and the Trust Company. As the financial services industry continues to consolidate, the scope of potential competition affecting our subsidiaries will also increase. Brokerage houses, consumer finance companies, insurance companies, and pension trusts are important competitors for various types of financial services. In addition, personal and corporate trust investment counseling services are offered by insurance companies, other firms, and individuals.

MARKET AREA & ECONOMY

TheIn January 2015, the Federal Open Market Committee (the Committee) characterized economic activity as “expanding at a solid pace.” There has been continued improvement in labor market conditions as the Federal Reserve characterizes economic growthnoted strong job gains and a lower unemployment rate. Underutilization of labor resources continues to diminish. Household spending is rising moderately as being on a moderate pace. Labor market indicators are mixed, but on balance showing further improvement.recent declines in energy prices have boosted household purchasing power. Business fixed investment has been growing more quicklyis advancing, while the recovery in recent months. In December 2013, the Federal Reserve began to modestly reduce monthly asset purchases by $10 billion per month taking purchases of Treasuries from $45 billion to $35 billion and purchases of Mortgage Backed Securities from $40 billion to $30 billion. The Federal Open

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Markethousing sector remains slow. Inflation has declined further below the Committee’s longer-run objective, largely reflecting declines in energy prices. Market-based measures of inflation compensation have declined substantially in recent months; survey-based measures of longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the Committee (FOMC) anticipates further reductions as “asset purchases are not onseeks to foster maximum employment and price stability. The Committee expects that, with appropriate policy accommodation, economic activity will expand at a preset course, andmoderate pace, with labor market indicators continuing to move toward levels the Committee's decisions about their pace will remain contingent onCommittee judges consistent with its dual mandate. The Committee continues to see the Committee'srisks to the outlook for economic activity and the labor market as nearly balanced. Inflation is anticipated to decline further in the near term, but the Committee expects inflation to rise gradually toward 2 percent over the medium term as the labor market improves further and the transitory effects of lower energy prices and other factors dissipate. The Committee continues to monitor inflation developments closely.

To support continued progress toward maximum employment and price stability, the Committee reaffirmed its view that the current 0 to ¼ percent target range for the federal funds rate remains appropriate. In determining how long to maintain this target range, the Committee will assess progress — both realized and expected — toward its objectives of maximum employment and two percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation as well asexpectations, and readings on financial and international developments. Based on its current assessment, the Committee judges that it can be patient in beginning to normalize the stance of monetary policy. However, if incoming information indicates faster progress toward the likely efficacyCommittee’s employment and costs of such purchases.”

Even asinflation objectives than the Federal Reserve tapers its asset purchases,Committee now expects, then increases in the Fed is expected to maintain a highly accommodative policy stance with a very lowtarget range for the federal funds rate. Guidance from the December 2013 FOMC meeting is that it would be appropriaterate are likely to keepoccur sooner than currently anticipated. Conversely, if progress proves slower than expected, then increases in the target raterange are likely to occur later than currently anticipated.

The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at its current level well pastauction. This policy, by keeping the time that the unemployment rate declines below 6.5%. The FOMC recently changed their language from they “anticipate” inflation moving back toward its 2.0% target to they are “monitoring inflation developments carefully for evidence” that it will do so. This is a carefully worded shift to bring lower-than-target inflation into focus as a potential reason to add back more accommodation and to keep interest rates from moving sharply higher. Some economists have pushed their first predicted rate hike out into 2016.Committee’s holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions.

The outlook for 2014 as projected by a committee of 13 chief economists at some of2015 is that the nation’s largest banks indicates that weeconomy should grow with GDP predicted to be slightly above 3.0%. Consumers will experience the strongestdrive economic growth sincewith the availability of more jobs and low energy prices, which puts more money into their pockets for spending on other goods and services. According to Kiplinger’s, spending in the fourth quarter of 2014 grew at the fastest pace in more than eight years and, with the unemployment rate dropping, consumer confidence is at a seven year high. Increased consumer spending should result in businesses investing in new production capacity. Housing is in a recovery mode with builders expected to increase the pace of new home construction in 2015. Conversely, the strong dollar and sluggish global economic expansion beganwill hinder sales abroad while some U.S. manufacturers will also lose sales as U.S. consumers will opt for cheaper imported products, especially autos and other durable goods.

The job market should continue to be strong in 20092015 and the committee’s strongest forecast since 2005. This committee attributed the outlookkeep incomes and consumption fueling healthy economic growth. The unemployment rate is projected to faster growthdecline further in business investment,2015 to about 5.3%. A strong job creation, rebounding consumer confidence and a growing housing market. Short rates on the yield curve are anticipated to remain constant over 2014 while long term rates are expected to slowly rise.

Inflationmarket is likely to remain below 2% in 2014. Economic growth is forecasted to pick up moderately this year. The Consumer Price Index in 2014 is forecasted to increase about 1.8%, measuring from December 2013 to December 2014. Energy prices are likely to continue to decline in 2014, but the size of the drop is likely to be less than 2013

Increased business spending, growing consumer confidence, the continued housing renaissance and healthy export gains all add up to an increasingly growing economy, which should be able to support net monthly hiring that frequently, if not regularly, tops 200,000 during 2014. Although the unemployment rate dropped in December 2013 to 6.7%, the lowest level since 2008, the decline is the result of individuals leavingentice more people back into the labor force rather than people finding jobs. which will slow the pace of the falling unemployment rate.

The labor force participation rate droppedexpectation for business spending is to 62.8%, its lowest level since 1978. Itmatch the 5% gain obtained in 2014. The dollar’s soaring value and the steep decline in oil prices makes it hard to sell capital goods overseas because they cost more for foreigners to buy. At the same time, demand for energy related equipment at home is anticipated that the unemployment ratedeclining. Business sentiment, however, is likely to stabilize and approximate 6.5%.

strong, particularly among smaller companies. The housing market is expected to experience more expansion in 2014,2015, with startsincome and new-home sales continuing to rise at double-digit rates. But the pace of existing-home sales will moderate. Existing home sales are expected to increase by 4%. Further increases in interest rates are likely to dampen recent strong price gains. In almost all markets across the country, prices rose in 2013. Nevertheless, prices in most regions remain below previous peaks.employment rising, demand for housing should increase.

The economy in Cambria and Somerset counties, Pennsylvania at the end of 20132014 produced seasonally adjusted unemployment rates of 7.8%5.9% and 8.4%5.8%, respectively, as compared to national and state rates of 6.7%5.6% and 6.9%4.8%. Local markets continue to be negatively impacted by the slow economic conditions that have existed since the recession began in 2007. Johnstown, Pennsylvania, where AmeriServ Financial, Inc.the Company is headquartered, continues to have a cost of living that is lower than the national average. On an annual average basis, the 20132014 job level for the Johnstown Metropolitan Statistical Area of 62,300 declined58,100 increased by 300a very modest 100 over the previous year. This patternAnnual growth

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in the overall job market is well short of modest year to year change, dating back to the beginning of 2006 – 2007,anticipated improvement. This documents the fact that the local economy continues to face a long hard climb back from the recession. The jobless rate in Johnstown MSA averaged 8.8%5.2% in 2013 and matched2014. Unemployment in the 2012 average. A relatively staticJohnstown labor market area has recently experienced substantial declines in comparison to previous periods. However this is a function of the declining number of labor force signals the absence of a growing economy. A rankingparticipants who have dropped out of the 14 MSAs across Pennsylvania placed Johnstown 13^th lowest.labor force.

Economic conditions are stronger in the State College market and have demonstrated the same modest improvement experienced in the national economy. The community is a college town, dominated economically and demographically by the presence of the University Park campus of the Pennsylvania State University. The unemployment rate for State College MSA averaged 5.8%4.2% in 2013,2014, which represents a 0.1%1.4% improvement over the 2012 average2013 and remains the lowest of all regions in the Commonwealth. Seasonally adjusted average total nonfarm jobs for the MSA increased by 1,900800 since December 2012.2013. A large percentage of the population in State College falls into the 18 to 34 year old age group, while potential customers in the Cambria/Somerset markets tend to be over 50 years of age.

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provides detailed financial information to its regulators, including a quarterly call report that is filed pursuant to detailed prescribed instructions to ensure that all U.S. banks report the same way. The U.S. banking laws and regulations are frequently updated and amended, especially in response to crises in the financial industry, such as the global financial crisis of 2008, which resulted in the Dodd-Frank Wall Street Reform and Consumer Protection Act enacted in 2010 (the Dodd-Frank Act), a massive statute over 1,000 pages in length affecting many facets of the financial industry.

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It is the policy of the Federal Reserve Board that bank holding companies should pay cash dividends on common stock only out of income available from the immediately preceding year and only if prospective earnings retention is consistent with the organization’s expected future needs and financial condition. The policy provides that bank holding companies should not maintain a level of cash dividend that undermines the bank holding company’s ability to serve as a source of strength to its banking subsidiary. A bank holding company may not pay dividends when it is insolvent.

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USA PATRIOT ACT

A major focus of governmental policy on financial institutions in recent years has been aimed at combating money laundering and terrorist financing. The USA Patriot Act substantially broadened the scope of United States anti-money laundering laws and regulations by imposing significant new compliance and due diligence obligations, creating new crimes and penalties and expanding the extra-territorial jurisdiction of the United States. The United States Treasury Department has issued and, in some cases, proposed a number of regulations that apply various requirements of the USA Patriot Act to financial institutions. These regulations impose obligations on financial institutions to maintain appropriate policies, procedures and controls to detect, prevent and report money laundering and terrorist financing and to verify the identity of their customers. Failure of a financial institution to maintain and implement adequate programs to combat money laundering and terrorist financing, or to comply with all of the relevant laws or regulations, could have serious legal and reputational consequences for the Company.

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It is difficult to predict at this time what the total impact the Dodd-Frank Act will have on community banks.banks as it continues to be subject to intensive rulemaking and public comment, which has not yet been completed with respect to the application of certain key aspects of the Dodd-Frank Act. However, it is expected that, at a minimum, it will continue to increase our capital requirements, our operating and compliance costs, and could increase our interest expense.

AVAILABLE INFORMATION

We file annual, quarterly and current reports, proxy statements and other information with the SEC. These filings are available to the public on the Internet at the SEC’s website at http://www.sec.gov. You may also read and copy any document we file with the SEC at the SEC’s public reference room, located at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room.

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PART II

ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

COMMON STOCK

As of January 31, 2014,30, 2015, the Company had 3,7573,545 shareholders of record for its common stock. The Company’s common stock is traded on the NASDAQ Global Market System under the symbol “ASRV.” The following table sets forth the actual high and low closing prices and the cash dividends declared per share for the periods indicated:

		PRICES								CASH DIVIDENDS DECLARED				PRICES								CASH DIVIDENDS DECLARED
		HIGH				LOW								HIGH				LOW
Year ended December 31, 2013:
Year ended December 31, 2014:
First Quarter		$	3.23			$	2.90			$	0.00			$	3.91			$	3.00			$	0.01
Second Quarter			3.17				2.74				0.01				3.88				3.40				0.01
Third Quarter			3.29				2.97				0.01				3.52				3.14				0.01
Fourth Quarter			3.26				2.99				0.01				3.31				3.02				0.01
Year ended December 31, 2012
Year ended December 31, 2013
First Quarter		$	2.80			$	1.85			$	0.00			$	3.23			$	2.90			$	0.00
Second Quarter			3.07				2.55				0.00				3.17				2.74				0.01
Third Quarter			2.99				2.70				0.00				3.29				2.97				0.01
Fourth Quarter			3.05				2.76				0.00				3.26				2.99				0.01

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ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

SELECTED FIVE-YEAR CONSOLIDATED FINANCIAL DATA

		AT OR FOR THE YEAR ENDED DECEMBER 31,																				AT OR FOR THE YEAR ENDED DECEMBER 31,
		2013				2012				2011				2010				2009				2014				2013				2012				2011				2010
		(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)																				(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
SUMMARY OF INCOME STATEMENT DATA:
Total interest income		$	39,343			$	39,917			$	41,964			$	44,831			$	47,455			$	40,441			$	39,343			$	39,917			$	41,964			$	44,831
Total interest expense			6,482				7,714				9,681				12,489				15,021				6,397				6,482				7,714				9,681				12,489
Net interest income			32,861				32,203				32,283				32,342				32,434				34,044				32,861				32,203				32,283				32,342
Provision (credit) for loan losses			(1,100)				(775	)			(3,575	)			5,250				15,150				375				(1,100	)			(775	)			(3,575	)			5,250
Net interest income after provision (credit) for loan losses			33,961				32,978				35,858				27,092				17,284				33,669				33,961				32,978				35,858				27,092
Total non-interest income			15,744				14,943				13,569				13,967				13,928				14,323				15,744				14,943				13,569				13,967
Total non-interest expense			42,223				40,641				40,037				39,697				39,157				43,371				42,223				40,641				40,037				39,697
Income (loss) before income taxes			7,482				7,280				9,390				1,362				(7,945	)
Provision (benefit) for income taxes			2,289				2,241				2,853				80				(3,050	)
Net income (loss)		$	5,193			$	5,039			$	6,537			$	1,282			$	(4,895	)
Net income (loss) available to common shareholders		$	4,984			$	4,211			$	5,152			$	121			$	(6,053	)
Income before income taxes																							4,621				7,482				7,280				9,390				1,362
Provision for income taxes																							1,598				2,289				2,241				2,853				80
Net income																						$	3,023			$	5,193			$	5,039			$	6,537			$	1,282
Net income available to common shareholders																						$	2,813			$	4,984			$	4,211			$	5,152			$	121
PER COMMON SHARE DATA:
Basic earnings (loss) per share		$	0.26			$	0.21			$	0.24			$	0.01			$	(0.29	)
Diluted earnings (loss) per share			0.26				0.21				0.24				0.01				(0.29	)
Basic earnings per share																						$	0.15			$	0.26			$	0.21			$	0.24			$	0.01
Diluted earnings per share																							0.15				0.26				0.21				0.24				0.01
Cash dividends declared			0.03				0.00				0.00				0.00				0.00				0.04				0.03				0.00				0.00				0.00
Book value at period end			4.91				4.67				4.37				4.07				4.09				4.97				4.91				4.67				4.37				4.07
BALANCE SHEET AND OTHER DATA:
Total assets		$	1,056,036			$	1,000,991			$	979,076			$	948,974			$	970,026			$	1,089,263			$	1,056,036			$	1,000,991			$	979,076			$	948,974
Loans and loans held for sale, net of unearned income			786,748				731,741				670,847				678,181				722,904				832,131				786,748				731,741				670,847				678,181
Allowance for loan losses			10,104				12,571				14,623				19,765				19,685				9,623				10,104				12,571				14,623				19,765
Investment securities available for sale			141,978				151,538				182,923				164,811				131,272				127,110				141,978				151,538				182,923				164,811
Investment securities held to maturity			18,187				13,723				12,280				7,824				11,611				19,840				18,187				13,723				12,280				7,824
Deposits			854,522				835,734				816,420				801,216				786,011				869,881				854,522				835,734				816,420				801,216
Total borrowed funds			79,640				41,745				34,850				27,385				64,664				93,965				79,640				41,745				34,850				27,385
Stockholders’ equity			113,307				110,468				112,352				107,058				107,254				114,407				113,307				110,468				112,352				107,058
Full-time equivalent employees			352				350				347				348				345				314				352				350				347				348
SELECTED FINANCIAL RATIOS:
Return on average assets			0.51%				0.51	%			0.68	%			0.13	%			(0.51	)%			0.29	%			0.51	%			0.51	%			0.68	%			0.13	%
Return on average total equity			4.69				4.51				5.90				1.19				(4.33	)			2.61				4.69				4.51				5.90				1.19
Loans and loans held for sale, net of unearned income, as a percent of deposits, at period end			92.07				87.56				82.17				84.64				91.97				95.66				92.07				87.56				82.17				84.64
Ratio of average total equity to average assets			10.86				11.36				11.49				11.25				11.72				10.92				10.86				11.36				11.49				11.25
Common stock cash dividends as a percent of net income available to common shareholders			11.36				—				—				—				—				26.73				11.36				—				—				—
Interest rate spread			3.39				3.43				3.47				3.51				3.37				3.36				3.39				3.43				3.47				3.51
Net interest margin			3.56				3.65				3.72				3.79				3.72				3.52				3.56				3.65				3.72				3.79
Allowance for loan losses as a percentage of loans, net of unearned income, at period end			1.29				1.74				2.20				2.95				2.74				1.16				1.29				1.74				2.20				2.95
Non-performing assets as a percentage of loans and other real estate owned, at period end			0.52				1.00				0.78				2.14				2.55				0.35				0.52				1.00				0.78				2.14
Net charge-offs as a percentage of average loans			0.18				0.19				0.24				0.74				0.60				0.14				0.18				0.19				0.24				0.74
Ratio of earnings to fixed charges and preferred dividends:(1)
Excluding interest on deposits			5.13X				3.80X				4.11X				1.49X				(1.12)X				3.30X				5.13X				3.80X				4.11X				1.49X
Including interest on deposits			2.07				1.80				1.83				1.10				0.53				1.67				2.07				1.80				1.83				1.10
Cumulative one year interest rate sensitivity gap ratio, at period end			1.09				1.30				1.29				1.13				1.08				1.13				1.09				1.30				1.29				1.13

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS (MD&A)

The following discussion and analysis of financial condition and results of operations of AmeriServ Financial, Inc. (AmeriServ)the Company should be read in conjunction with the consolidated financial statements of AmeriServ Financial, Inc.the Company including the related notes thereto, included elsewhere herein.

RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2014, 2013, 2012, AND 2011

2012

20132014 SUMMARY OVERVIEW:

On January 20, 2015, the Company reported its financial performance for the fourth quarter of 2014 and consequently for the full year of 2014. Net income available to common shareholders inwas $749,000 or $0.04 per share for the fourth quarter of 2014. This was $0.05 per share less than the fourth quarter of 2013, was $1,789,000 or $0.09but $0.02 per diluted share. This was 52% aboveshare more than the third quarter of 2013 and more than double the same quarter of 2012. This strong quarter pushed the net2014. Net income available to common shareholders for the full year 2013 to $4,984,000was $3,023,000, or $0.15 per share, which represents a decline from $0.26 per share or 23.8% better thanin 2013.

We have previously emphasized the full yearCompany’s determination to become a significant competitor in every market where the company has a presence. Loans outstanding increased in 2014 by $45 million to a new company year-end record high of 2012.

About two thirds$832 million. Meanwhile deposits also closed 2014 at the highest year-end total on record of our revenue is generated by lending money. While most of our borrowers are good people, both the national and the regional economies have been weak and have caused stress for some borrowers. If we believe$870 million. However, it is a serious situation, we will monitorfact that such progress has been achieved at the loanprice of increased expense levels. The Board and management determined that 2014 would be the borrower closely. We may createyear to take action on this increase in expenses. These actions have included:

The goal of these actions is to permit the Company to continue growing the business but to avoid expense increases so as to increase earnings per share and shareholder return.

Finally in 2014, the Company put behind us a costly litigation process that was previously disclosed in our regulatory filings earlier this year. This litigation concerned our registered investment advisory subsidiary, WCCA, and resulted in a $669,000 impairment charge related to Goodwill on the balance sheet.

We like to say that this is howbelieve the process is supposed to work.sum of these can result in 2014 being a foundation year for the next decade. The Company has strong capital, a substantial and growing tangible book value, along with the previously mentioned success in the market place. It is importantalso gratifying to establish a loss reserve for a weak borrower, but also to work vigorously to bringtell you that the borrower through the crisis. The result then is a healthier borrower, a stronger balance sheet for AmeriServ and increased net income for the AmeriServ shareholder as the allowance for loan losses can be reduced.

While this strengthening of the loan portfolio was important in 2013, there were other items of note:

As of December 31, 2013, AmeriServ’s net loans were at a record year end level,

As of December 31, 2013, AmeriServ’s deposits were at a record year end level,

As of December 31, 2013, AmeriServ’s non-interest income was at the highest level since the Great Recession of 2009,

As of December 31, 2013, AmeriServ still maintained an allowance for loan losses which provides a 327% coverage ratio of all non-performing loans.

We have also commented previously on the importance of AmeriServ Trust and Financial Services Company during this kind of economy. 2013 was a banner year for equity markets and less so for bond markets, but AmeriServ’s Trust Company was able to exceed a very strong 2012 level of after tax net income by 21% in 2013. This marks threehas now completed four consecutive years of double digit increasesnet income increases.

We should mention that early 2015 did bring a new challenge; Glenn L. Wilson voluntarily resigned on January 9, 2015 to join a small bank close to his long-term home in Maryland. Glenn served as President and Chief Executive Officer since November 1, 2009. Jeffrey A. Stopko, our former Chief Financial Officer, is now leading an Interim Management Team.

It is enough to say that we expect another bumpy year in the TrustU.S. and regional economies. Just when the Marcellus Shale began to promise job gains for Pennsylvania, the global price of oil has experienced a sudden and dramatic decline. Our answer to these larger issues of the national and global economy remains the same. The Company bottom line. It is these trends that causewill maintain strong capital, deep liquidity and a conservative balance sheet. As we enter the seventh year of Washington’s Easy Money program, the Federal Reserve speaks of new directions. Therefore this Boardwould not seem to be the time for anything but the most basic banking and wealth management team to continue to supportprograms and careful watching of the Strategic Planmarkets. As a result of this Company. During 2014 the Trust Companysituation, we will install state of the art software which promises better service for customers, better efficiencies for staff and more product capabilitiesfocus our energies on successfully executing our business plans in order to help the Company continue to grow.

We believe that AmeriServ is growing stronger day by day. But we know that $0.26improve earnings per share are just not good enough. Duringand the latter half of 2013, management initiated a company-wide cost management effort. We were pleased withresulting return to the identified improvementscommon shareholder in efficiency that will result from this management effort going forward. However, we intend to do more in 2014. AmeriServ recognizes that we must search out ways to further increase earnings per share. It is encouraging to report record loan and deposit levels and continuing growth in fee income. But the real focus must be on improving net income available to common shareholders. We are reaching across the industry for best practices that may help us. Please remember that the AmeriServ Board of Directors is composed of substantial shareholders who want AmeriServ to be both a strong community bank and a rewarding investment.2015.

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Usually, at about this time, it is our wont to comment on the national and regional economies. In truth, we are less optimistic than the opinions coming from inside the Washington Beltway. We expect 2014 will be a hardscrabble struggle, just as every year has been since 2009. However, the Board and management have positioned AmeriServ for this kind of economy. The balance sheet is strong, asset quality is good, capital is above regulatory requirements, liquidity is deep and we are focusing our energies on efficiency. We do not expect any help from the Federal Reserve, the Congress or the Administration; we are going to have to do it ourselves no matter whether the economy rises or falls. There will be no fancy financial gimmicks, or reduction on monitoring the many risks that abound in these markets.

PERFORMANCE OVERVIEW... The following table summarizes some of the Company’s key profitability performance indicators for each of the past three years.

		YEAR ENDED DECEMBER 31,												YEAR ENDED DECEMBER 31,
		2013				2012				2011				2014				2013				2012
		(IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)												(IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
Net income		$	5,193			$	5,039			$	6,537			$	3,023			$	5,193			$	5,039
Net income available to common shareholders			4,984				4,211				5,152				2,813				4,984				4,211
Diluted earnings per share			0.26				0.21				0.24				0.15				0.26				0.21
Return on average assets			0.51%				0.51	%			0.68	%			0.29	%			0.51	%			0.51	%
Return on average equity			4.69				4.51				5.90				2.61				4.69				4.51

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for the SBLF. As such, the dividend rate that AmeriServ pays on the SBLF preferred stock dropped in the fourth quarter of 2012 from 5% to 1%.

The Company reported net income available to common shareholders of $5.2 million or $0.24 per diluted common share for 2011. This represents an increase of $5.3 million from the 2010 net income of $1.3 million or $0.01 per diluted common share. A significant and sustained improvement in asset quality was an important factor contributing to our financial success in 2011. Specifically, non-performing assets and classified loans declined as a result of our successful problem credit resolution efforts allowing the Company to reverse a portion of the allowance for loan loss into earnings in 2011 while still increasing the non-performing assets coverage ratio. The Company’s net interest income performance was relatively stable throughout 2011. It decreased for the full year of 2011 by only $59,000, or 0.2%, when compared to the entire year of 2010. Non-interest income decreased by $398,000 or 2.8% largely due to an investment security loss of $358,000 realized in the first quarter of 2011 that resulted from a portfolio repositioning strategy. Continued focus on expense control helped contain the increase in non-interest expense to $340,000 or 0.9%. Income tax expense increased sharply by $2.8 million in 2011 due to the Company’s improved profitability.

NET INTEREST INCOME AND MARGIN... The Company’s net interest income represents the amount by which interest income on earning assets exceeds interest paid on interest bearing liabilities. Net interest income is a primary source of the Company’s earnings; it is affected by interest rate fluctuations as well as changes in the amount and mix of earning assets and interest bearing liabilities. The following table summarizes the Company’s net interest income performance for each of the past three years:

		YEAR ENDED DECEMBER 31,												YEAR ENDED DECEMBER 31,
		2013				2012				2011				2014				2013				2012
		(IN THOUSANDS, EXCEPT RATIOS)												(IN THOUSANDS, EXCEPT RATIOS)
Interest income		$	39,343			$	39,917			$	41,964			$	40,441			$	39,343			$	39,917
Interest expense			6,482				7,714				9,681				6,397				6,482				7,714
Net interest income			32,861				32,203				32,283				34,044				32,861				32,203
Net interest margin			3.56%				3.65	%			3.72	%			3.52	%			3.56	%			3.65	%

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The Company's total interest expense for 2014 decreased by $85,000, or 1.3%, when compared to 2013. This decrease in interest expense was due to a lower cost of funds as the cost of interest bearing liabilities declined by six basis points to 0.82%. Management’s decision to further reduce interest rates paid on all deposit categories has not had a negative impact on deposit growth and reflects the loyalty of the bank’s core deposit base. This decrease in funding costs occurred in spite of a $43.4 million increase in the volume of average interest bearing liabilities. The Company has utilized term advances from the FHLB, with maturities ranging between three and five years, to help fund its earning asset growth and manage interest rate risk. The average balance of FHLB term advances has increased by $15 million while the average cost of these advances has increased by only 17 basis points to 1.01%. Overall, total FHLB borrowings averaged $52 million or 4.9% of total assets during 2014.

2013 NET INTEREST PERFORMANCE OVERVIEW... The Company’s net interest income in 2013 increased by 658,000, or 2.0%, when compared to 2012. The Company’s 2013 net interest margin of 3.56% was nine basis points lower than the net interest margin of 3.65% for 2012. The lower net interest margin demonstrates the impact of the Federal Reserve low interest rate policies which have pressured interest revenue. The Company has been able to overcome this net interest margin pressure and increase net interest income by reducing its cost of funds and growing its earning assets, particularly loans. Specifically, these efforts have resulted in total loans averaging $746 million in 2013, which iswas $58 million or 8.4% higher than the $689 million average for 2012. This loan growth reflects the successful results of the Company’s more intensive sales calling efforts with an emphasis on generating commercial loans and owner occupied commercial real estateCRE loans which qualify as SBLF loans, particularly through its loan production offices. Overall, the increase in loans caused the Company’s loan to deposit ratio to average 88.2% in 2013 compared to 82.7% in 2012.

Total interest expense for 2013 declined by $1.2 million from 2012 due to the Company’s proactive efforts to reduce deposit costs. Even with this reduction in deposit costs, the Company still experienced growth in deposits which reflects the loyalty of its core deposit base and its ongoing efforts to cross sell new loan customers into deposit products. Specifically, total deposits have averaged $847 million in 2013, which is $14 million or 1.6% higher than the $833 million average in 2012. The Company is pleased that the majority of the deposit growth has occurred in non-interest bearing demand deposit accounts. Overall, the Company expects that it will need to continue to grow earning assets to achieve net interest income growth in 2014 as little net interest margin improvement is expected given the Federal Reserve’s announced plans to keep short term interest rates exceptionally low into 2015. Solid commercial loan pipelines suggest that the Company should be able to again grow the loan portfolio in 2014.

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yield earned on interest earning assets and the average rate paid on interest bearing liabilities), and (v) net interest margin (net interest income as a percentage of average total interest earning assets). For purposes of these tables loan balances include non-accrual loans, and interest income on loans includes loan fees or amortization of such fees which have been deferred, as well as interest recorded on certain non-accrual loans as cash is received. Regulatory stock is included within available for sale investment securities for this analysis. Additionally, a tax rate of approximately 34% is used to compute tax-equivalent yields.