AmeriServ Financial, Inc. Announces Expected Third Quarter Goodwill Impairment Charge And Profitability Improvement Initiatives

AmeriServ Financial, Inc.

announced that it expects to record a third quarter non-cash goodwill impairment charge of approximately $675,000 related to West Chester Capital Advisors (WCCA), its registered investment advisor subsidiary. As previously disclosed in our filings with the Securities and Exchange Commission, the voluntary departure of WCCA's former CEO and the related litigation against him for violations of his employment agreement, caused disruption within the WCCA customer base during 2014. This disruption ultimately led to the loss of certain clients and a reduction in the projected earnings capacity of WCCA which caused the goodwill impairment charge. The Company remains strategically committed to its asset management subsidiary. WCCA is well integrated into our wealth management businesses and is expected to improve its earnings power with new business development in future periods. The Company's financial results for the third quarter of 2014 will also include approximately $150,000 of non-recurring expenses related to a profitability improvement project. The Company engaged a consulting firm that specializes in the areas of expense rationalization and profit improvement for community banks. This firm completed a thorough analysis of our business operations and practices during the third quarter. As a result of this project, the firm provided the Company with recommendations to reduce expenses and improve future profitability that we will evaluate and prioritize for implementation beginning in the fourth quarter of 2014 and continuing into 2015. The Company expects that its payback on this project will be significant. The Company also recently offered an early retirement incentive program to employees that were at least age 60 with 15 years of pension benefit service. A total of 46 employees, or approximately 13% of our workforce, are eligible for the program. The Company expects to incur a one-time charge in the fourth quarter of 2014 to record a special termination benefit for those employees that elect to participate in this early retirement incentive program. We currently anticipate that the maximum amount of such charge would be approximately $550,000 if all 46 eligible employees elect to participate in this early retirement incentive program. The final amount of the charge, however, will not be determined until the fourth quarter when participant election decisions are due. The Company offered this program in an attempt to reduce future employee costs particularly the expenses associated with its defined benefit pension plan. The ongoing future savings resulting from this program also cannot be finalized until the fourth quarter of 2014 when participant elections are made. However, the Company initially expects that between the profitability improvement project and the early retirement incentive program, we should be able to reduce future non-interest expenses by $1.5 million annually once these programs are fully implemented. AmeriServ Financial, Inc. is the parent of AmeriServ Financial Bank and AmeriServ Trust and Financial Services Company in Johnstown. The Company's subsidiaries provide full-service banking and trust and wealth management services through seventeen community offices in southwestern Pennsylvania. At June 30, 2014, AmeriServ had total assets of $1.06 billion, a book value of $5.05 per common share and a tangible book value of $4.38 per common share.