AmeriServ Accesses Inexpensive Capital to Redeem SBLF Preferred Stock

Situation
AmeriServ Financial, Inc. is a $1.1 billion commercial bank holding company headquartered in Johnstown, PA, and parent of AmeriServ Financial Bank and AmeriServ Trust & Financial Services Co. The Company’s subsidiaries provide full-service banking and trust and wealth management services through 17 community offices and 2 LPO’s in southwestern Pennsylvania as well as 2 LPO’s located in Maryland and Northern Virginia.

After taking advantage of a low (1%) SBLF dividend by way of solid loan growth, AmeriServ put a plan in place to redeem potentially expensive preferred stock prior to the reset of its dividend (to 9%) in early 2016.

Strong capital, a solid risk profile, improving earnings, and healthy management of its holding company liquidity allows for the full redemption of its preferred stock, with minimal additional capital issued.

Solution
On December 29, 2015, the Company issued $7.65 million of subordinated notes to accredited investors, with Griffin Financial Group serving as placement agent. The subordinated notes bear interest at a fixed rate of 6.50% (pre-tax), are non-callable for five years, mature on December 31, 2025, and qualify as Tier-2 regulatory capital at the holding company.

The Company anticipates using the proceeds for general corporate purposes, including the redemption of the full $21 million of SBLF preferred stock, supporting its disciplined holding company liquidity management philosophy and providing a regulatory capital cushion for continued loan growth.

Measures of Success
Subordinated debt provides AmeriServ with low cost Tier 2 regulatory capital at the parent company and on a consolidated basis, and provides additional holding company liquidity in support of the redemption of  its SBLF preferred stock, prior to its reset in early 2016.

AmeriServ was able to access the subordinated debt market while the interest rate environment and demand for the product were both still favorable to investors, giving the Company competitive execution in a market that was becoming challenging.

For more information on this transaction, contact Joseph M. Harenza, CEO and Senior Managing Director.

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