JOHNSTOWN, Pa., Oct. 8 /PRNewswire-FirstCall/ -- The future of AmeriServ
Financial, Inc. (Nasdaq: ASRV) became much more positive today according to
President and CEO Allan R. Dennison. Dennison announced that AmeriServ has
entered into definitive agreements with institutional investors on a
$12.6 million private placement of common stock, and a planned second closing
of $13.2 million. The placements are designed to strengthen the Company's
balance sheet. Investors in the private placement include Financial Stocks
Capital Partners III L.P., institutional investors managed by a large
investment management firm headquartered in Boston and other institutional
investors. Lehman Brothers Inc. acted as exclusive placement agent for the
financing.
The commitment of significant funds by professional investors is a vote of
confidence in the turnaround progress for the region's largest locally owned
and managed bank, according to Dennison.
"We are increasingly pleased with the day-by-day progress in our
turnaround. However, it is no secret that it is also necessary that we
strengthen our balance sheet by reducing the impact of outmoded strategies and
complex financing programs. This transaction will help us begin this important
process," said Dennison.
AmeriServ secured commitments from investors to purchase 5.7 million
shares at a price of $4.50 per share. The private placement will fund in two
tranches. The first tranche for 2.8 million shares, or $12.6 million, is
scheduled to close on or about October 8. 2004. The second tranche of
2.9 million shares, or $13.2 million, will close subject to shareholder
approval and other contingencies. Under NASDAQ rules, the issuance of more
than 20 percent of outstanding stock in a private placement requires
shareholder approval. Therefore, AmeriServ plans a special shareholder meeting
to approve the issuance and sale of these additional shares. The special
shareholder meeting will be held in early December in Johnstown, PA, and if
shareholders approve and other contingencies are satisfied, the closing of the
second tranche of the offering will occur promptly thereafter.
AmeriServ will use the net proceeds of the private placement to
significantly strengthen its balance sheet. The specific actions include a
reduction in the level of high-cost long-term borrowings from the Federal Home
Loan Bank (FHLB) of Pittsburgh, reducing the amount of costly AmeriServ Trust
Preferred Stock outstanding, and an exit from lines of business which are
typically not associated with a community bank.
AmeriServ's Board of Directors, at its regularly scheduled meeting in
August 2004, authorized the Company to use proceeds from the initial sale of
2.8 million shares to help facilitate the retirement of certain Federal Home
Loan Bank of Pittsburgh advances during the fourth quarter of 2004. AmeriServ
intends to pre-pay approximately $100 million of the advances. Penalties in
connection with the prepayment of the advances, expenses associated with
reducing the amount of Trust Preferred Stock, and the exiting of lines of
business not normally associated with a community bank will result in a one-
time after tax charge of approximately $8.8 million in the fourth quarter of
2004. If shareholders approve the second offering, an additional $25 million
of FHLB advances will be prepaid and additional shares of Trust Preferred
Securities will be redeemed. This will result in a further after-tax charge of
approximately $1.2 million. While the restructuring will create a loss for the
fourth quarter and for the full year 2004, the Company expects to return to a
significantly improved level of profitability in the first quarter of 2005.
The Company anticipates that the new capital from the first closing will
generate annual additions to net income of approximately $2.3 million
beginning in the first quarter of 2005. If the second closing is completed,
the Company anticipates that this will generate annual additions to net income
of approximately $1.0 million beginning in the first quarter of 2005.
This action should lead to improvements for shareholders, employees, and
the community, according to AmeriServ Chairman of the Board Craig G. Ford.
"It is our view that the Company is now stabilized. We remain totally
committed to returning to our roots as a community bank. This means that as a
part of our turnaround this Company is working to become even stronger. Our
turnaround continues, and we are pleased that the investment community has
offered this vote of confidence in our efforts thus far," said Ford.
AmeriServ has reported five consecutive quarters of profitability
following losses in the second half of 2002 and in the first quarter of 2003.
The Company also anticipates that it will report a sixth consecutive quarter
of profitability with the scheduled announcement of its third quarter
financial results on October 19, 2004. Highlights of the third quarter will
include a sizable reduction in the level of non-performing assets from
$10.2 million at June 30, 2004, to approximately $4.0 million at September 30,
2004. This $6 million reduction reflects the successful workout of the
Company's two largest non-performing credits as net charge-offs for the third
quarter will only approximate $1.1 million. The Company anticipates that its
loan loss reserve coverage of non-performing assets will improve to
approximately 250% at September 30, 2004. These asset quality improvements
will also have a favorable impact on the Company's third quarter earnings
which are currently projected to approximate $700,000. In addition to the
asset quality improvements, the Company will also benefit from lower income
tax expense due to a reduction in reserves for prior year tax contingencies.
As part of this transaction, AmeriServ Financial has agreed to file a
registration statement covering the resale of the shares of Common Stock
acquired in this offering.
AmeriServ Financial, Inc., is the parent of AmeriServ Financial Bank and
AmeriServ Trust & Financial Services Company in Johnstown, AmeriServ
Associates of State College, and AmeriServ Life Insurance Company.
This release may contain forward-looking statements, which are included in
accordance with the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995, and accordingly, the cautionary statements
contained in AmeriServ Financial's Annual Report on Form 10-K for the year
ended Dec. 31, 2003, and other filings with the Securities and Exchange
Commission are incorporated herein by reference. These factors include, but
are not limited to: the effect of interest rate and currency exchange
fluctuations; competition in the financial services market for both deposits
and loans; AmeriServ's ability to efficiently incorporate acquisitions into
its operations; the ability of AmeriServ and its subsidiaries to increase its
customer base; the effect of regulatory and legislative action; possible
rejection by our shareholders of the proposal to approve the second part of
this offering; and regional and general economic conditions. Actual results
and performance in future periods may be materially different from any future
results or performance suggested by the forward-looking statements in this
release. AmeriServ expressly disclaims any obligation to update or revise any
forward-looking statements found herein to reflect any changes in the Bank's
expectations of results or any change in events.
SOURCE AmeriServ Financial, Inc.
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Related links:
http://www.ameriservfinancial.com
CONTACT:
Jeffrey Stopko, Senior Vice President, Chief
Financial Officer of AmeriServ Financial, Inc., +1-814-533-5310
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