Filed Pursuant to Rule 424B3
Registration No. 333-129009
PROSPECTUS
AMERISERV FINANCIAL, INC.
2,367,760 SHARES
COMMON STOCK (PAR VALUE $2.50 PER SHARE)
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This prospectus relates to the proposed sale from time to time by selling
shareholders of shares of common stock of AmeriServ Financial, Inc. The shares
were originally issued and sold by AmeriServ Financial, Inc. in a private
placement on September 29, 2005. This prospectus will be used by selling
shareholders to resell their shares of the common stock.
We will not receive any proceeds from the sale of the shares of common
stock. Holders of the shares of our common stock may offer the common stock for
sale at any time at market prices prevailing at the time of sale or at privately
negotiated prices. Selling shareholders may sell the common stock directly to
purchasers or through underwriters, broker-dealers or agents, who may receive
compensation in the form of discounts, concessions or commissions.
Our common stock is listed on The Nasdaq Stock Market under the symbol
"ASRV." The closing sales price of the common stock on October 24, 2005 was
$4.56 per share.
INVESTING IN OUR SECURITIES INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 4 OF THIS PROSPECTUS TO READ ABOUT FACTORS YOU SHOULD
CONSIDER BEFORE BUYING OUR SECURITIES.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
The date of this prospectus is October 27, 2005.
PROSPECTUS TABLE OF CONTENTS
IMPORTANT NOTICE TO READERS................................. 1
FORWARD-LOOKING STATEMENTS.................................. 1
OUR COMPANY................................................. 1
RECENT DEVELOPMENTS......................................... 3
RISK FACTORS................................................ 4
USE OF PROCEEDS............................................. 10
SELLING SHAREHOLDERS........................................ 11
PLAN OF DISTRIBUTION........................................ 12
LEGAL MATTERS............................................... 14
EXPERTS..................................................... 15
INDEMNIFICATION OF DIRECTORS AND OFFICERS................... 15
WHERE YOU CAN FIND MORE INFORMATION......................... 15
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............. 16
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IMPORTANT NOTICE TO READERS
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission, or SEC. The selling shareholders may, from
time to time, offer shares of our common stock owned by them pursuant to this
registration statement. Each time the selling shareholders offer common stock
under this prospectus, they will provide a copy of this prospectus and, if
applicable, a copy of a prospectus supplement. You should read both this
prospectus and, if applicable, any prospectus supplement together with the
information incorporated by reference in this prospectus. See "Where You Can
Find More Information" and "Incorporation of Certain Documents by Reference" for
more information.
You should rely only on the information contained or incorporated by
reference in this prospectus. We have not authorized anyone else to provide you
with different information. If anyone provides you with different information,
you should not rely on it. We are not making an offer to sell these securities
in any jurisdiction where the offer or sale is not permitted. You should assume
that the information appearing in this prospectus or any document incorporated
by reference in this prospectus is accurate only as of the date on the front
cover of the applicable document or as specifically indicated in the document.
Our business, financial condition, results of operations and prospects may have
changed since that date.
FORWARD-LOOKING STATEMENTS
This prospectus, including the documents incorporated by reference, contain
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended (the "Securities Act"), and Section 21E of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). These
statements relate to future events or our future financial performance. In some
cases, forward-looking statements can be identified by terminology such as
"may," "will," "should," "could," "expect," "plan," "anticipate," "believe,"
"estimate," "predict," "intend," "potential" or "continue" or the negative of
such terms or other comparable terminology. Without limiting the broader
description of forward-looking statements above, we specifically note that
statements regarding our business strategy, market trends, and projected sources
and uses of funds from operations are forward-looking statements. We cannot
assure you that our expectations and assumptions will prove to be correct. These
statements reflect our current views and are based upon certain assumptions.
Actual results could differ materially from those anticipated as a result of a
number of factors, including the factors discussed under the heading "Risk
Factors" in this prospectus and in other documents we may file with the
Securities and Exchange Commission. We do not intend to update or revise any
forward-looking statements, whether as a result of future events, new
information or otherwise, except to the extent that the reports we are required
to file under the Exchange Act contain such updates or revisions.
OUR COMPANY
GENERAL
We are a bank holding company, incorporated under the Pennsylvania Business
Corporation Law. Our principal activities consist of owning and operating four
wholly owned subsidiaries, AmeriServ Financial Bank (the Bank), AmeriServ Trust
and Financial Services Company (the Trust Company), AmeriServ Associates, Inc.
(AmeriServ Associates), and AmeriServ Life Insurance Company (AmeriServ Life).
We and our subsidiaries derive substantially all of our income from banking and
bank-related services. We function primarily as a coordinating and servicing
unit for our subsidiaries in general management, accounting and taxes, loan
review, auditing, investment accounting, marketing and insurance risk
management.
Our target market for banking services is Allegheny, Cambria, Centre,
Somerset, and Westmoreland counties in southwest and central Pennsylvania. Our
market for trust services includes this market area but also has a national
focus with respect to its business of attracting union pension fund accounts.
Our clients are primarily individuals, privately-owned businesses and, with
respect to the Trust Company, union pension funds.
At June 30, 2005, we had consolidated total assets, deposits, and
shareholders' equity of $996.8 million, $691.7 million and $86.3 million,
respectively. Our principal office is located at Main and Franklin Streets,
Johnstown, Pennsylvania and our telephone number is (814) 533-5300. Our website
address is http://www.ameriservfinancial.com. The information on our website is
not part of this prospectus.
THE BANK
The Bank is a state bank chartered under the Pennsylvania Banking Code of
1965, as amended. Through 22 locations in Allegheny, Cambria, Centre, Somerset
and Westmoreland Counties, Pennsylvania, the Bank conducts a general banking
business. It is a full-service bank offering both retail banking services and
financial services to institutions. The Bank operates 23 automated bank teller
machines (ATMs) through its 24-Hour Banking Network that is linked with STAR, a
regional ATM network and CIRRUS, a national ATM network. The Bank also offers
internet banking services and engages in the sale of annuities, mutual funds and
insurance.
THE TRUST COMPANY
The Trust Company is a trust company organized under Pennsylvania law in
October 1992. As one of the larger providers of trust and investment management
products and services between Pittsburgh and Harrisburg, the Trust Company is
committed to delivering personalized, professional service to its clients. Its
staff of approximately 40 professionals administers assets valued at
approximately $1.49 billion at June 30, 2005, and provides a wide spectrum of
services, which include trust and estate administration, union collective
investment funds (ERECT and BUILD Funds), pension, profit sharing, 401(k) and
403(b) plans, as well as custom designed accounts and non-qualified plans for
special purposes. At June 30, 2005, the Trust Company had $1.49 billion in
assets under management, and it had total assets of $2.0 million and total
shareholder's equity of $1.5 million. The Trust Company is subject to regulation
and supervision by the Federal Reserve Bank of Philadelphia (the Federal
Reserve) and the Pennsylvania Department of Banking (the Department).
AMERISERV ASSOCIATES
AmeriServ Associates is a registered investment advisory firm that
administers investment portfolios, offers operational support systems and
provides asset and liability management services to small and mid-sized
financial institutions. At June 30, 2005, AmeriServ Associates had total assets
of $279,000 and total shareholder's equity of $236,000.
AMERISERV LIFE
AmeriServ Life is a captive insurance company organized under the laws of
the State of Arizona. AmeriServ Life engages in underwriting as a reinsurer of
credit life and disability insurance within our market area. Operations of
AmeriServ Life are conducted in each office of the Bank. AmeriServ Life is
subject to supervision and regulation by the Arizona Department of Insurance,
the Pennsylvania Insurance Department, and the Federal Reserve. At June 30,
2005, AmeriServ Life had total assets of $1.6 million and total shareholder's
equity of $1.2 million.
MEMORANDUM OF UNDERSTANDING
On February 28, 2003, AmeriServ and the Bank entered into a Memorandum of
Understanding (MOU) with the Federal Reserve and the Department. The principal
requirements of the MOU require AmeriServ and the Bank to:
- improve credit quality and credit administration practices,
- improve data security and disaster recovery procedures,
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- make periodic reports to the Federal Reserve and the Department regarding
compliance with the MOU, and
- appoint an independent committee of the Board of Directors to monitor
compliance with the MOU.
The principal restrictions imposed by the MOU on AmeriServ and the Bank are
that without the approval of the Federal Reserve and the Department:
- we and the Bank may not declare dividends,
- we may not repurchase any of our own stock, and
- we cannot incur any debt other than in the ordinary course of business.
The MOU will remain in effect until terminated or modified by the Federal
Reserve and the Department. We have been informed by the Federal Reserve and the
Department that we are in full compliance with the terms of the MOU.
RECENT DEVELOPMENTS
OUR RECENT FINANCINGS AND USE OF PROCEEDS
We completed a private placement of our common stock on September 29, 2005.
Gross proceeds to us were $10.3 million prior to deducting expenses payable of
approximately $1.1 million, which included selling commissions of $640,000. We
used or expect to use the net proceeds of this offering as follows:
- We contributed approximately $1.0 million to the Bank. This replenished
the capital of the Bank, which was reduced by approximately $10.5 million
because the Bank deleveraged its balance sheet by selling investment
securities and using the proceeds to repay all $100.0 million of
remaining long-term Federal Home Loan Bank convertible advances and
terminated prior to maturity two related interest rate swaps that hedged
these advances. The Bank incurred a loss on the sale of securities to
fund this prepayment and incurred prepayment penalties as a result of
both the prepayment and the termination prior to maturity of the interest
rate swaps, all of which, in the aggregate, totaled approximately $10.5
million, after tax.
- We contributed approximately $1.0 million to the Trust Company, which has
experienced strong growth and which benefited from additional capital to
support further growth.
- We will redeem approximately $7.2 million of our guaranteed junior
subordinated deferrable interest debentures that collateralized a like
amount of trust preferred securities issued by AmeriServ Capital Trust I,
a special purpose entity formed for the purpose of issuing trust
preferred securities. This will result in the write-off of approximately
$140,000, after tax, in deferred issuance costs.
Pending these uses, we intend to invest proceeds in money market funds and
short-term, investment-grade, interest-bearing securities.
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RISK FACTORS
Investors should carefully consider the risks described below before
investing in our common stock. The risks described below are not the only ones
facing AmeriServ. Additional risks not currently known to us or that we
currently believe are immaterial also may impair our business. Our business
could be harmed by any of these risks. The trading price of our common stock
could decline due to any of these risks, and you may lose all or part of your
investment. In assessing these risks, you should also refer to the other
information contained or incorporated by reference in this prospectus, including
our consolidated financial statements and related notes.
WE ARE SUBJECT TO THE MOU, WHICH IMPOSES RESTRICTIONS ON OUR OPERATIONS THAT MAY
ADVERSELY AFFECT OUR FINANCIAL RESULTS.
We signed the MOU with the Federal Reserve and the Department, which
imposes restrictions on the payment of dividends and a number of other
restrictions. In addition to the restrictions on payment of dividends, the MOU
does not permit us to redeem any of our stock or incur any additional debt other
than in the ordinary course of business, in each case, without the prior written
approval of the Federal Reserve and the Department.
Other provisions of the MOU require us to:
- improve credit quality and credit administration practices,
- improve data security and disaster recovery procedures,
- make periodic reports to the Federal Reserve and the Department regarding
compliance with the MOU, and
- appoint a committee of independent directors to monitor compliance with
the MOU.
The MOU will remain in effect until modified or terminated by the Federal
Reserve and the Department. We have been informed by the Federal Reserve and the
Department that we are in full compliance with the terms of the MOU, but we
cannot predict when or if the MOU will be terminated.
RESTRUCTURING STEPS WE TOOK IN 2004 IN CONNECTION WITH THE 2004 PRIVATE
PLACEMENT OF OUR COMMON STOCK CAUSED US TO INCUR A SIGNIFICANT LOSS IN 2004.
As a result of our 2004 private placement of common stock, we were able to
take the following steps to begin to address the structural impediments we face:
- We used $15.3 million of the net proceeds to redeem a portion of our
guaranteed junior subordinated deferrable interest debentures. This
resulted in the write-off of approximately $300,000, after tax, in
deferred issuance costs.
- The Bank prepaid approximately $125.0 million of primarily long-term
Federal Home Loan Bank advances. These prepayments were funded through
the sale of investment securities and cash flow from prepayments and
normal amortization of mortgage backed securities. As a result of this
prepayment, the Bank incurred prepayment penalties of approximately $8.4
million, after tax, and losses on sales of securities of approximately
$400,000, after tax.
- The Bank sold its remaining mortgage servicing rights held by Standard
Mortgage Company of Georgia (SMC) and began the process of closing SMC,
which was completed in the second quarter of 2005. The sale of the
servicing rights and the closure of SMC resulted in a charge of
approximately $800,000, after tax, consisting principally of losses on
the sale of the servicing portfolio and severance expenses. An additional
net loss of $139,000 was incurred in the first six months of 2005 with
respect to the closure of SMC, which principally included lease
termination expenses.
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The purpose of these restructuring steps was to improve our performance in
future periods, but the short-term result of these and certain other
restructuring measures was an after tax charge of approximately $10.0 million.
This resulted in a consolidated loss in 2004 of $9.7 million.
FAILURE TO SUCCESSFULLY EXECUTE OUR TURNAROUND STRATEGY WOULD ADVERSELY AFFECT
FUTURE EARNINGS.
At the end of 2003, we adopted a turnaround strategy that consisted of
three distinct elements. These were:
- In 2003, stabilizing AmeriServ and taking immediate steps to eliminate or
minimize those risk elements that posed a threat to our survival;
- In 2004, initiating steps to eliminate the three structural impediments
to sustainable, improved earnings; and
- Articulating and executing, over the long-term, a strategy centered on
community banking and continued expansion of our successful trust
business that is intended to produce consistent future earnings.
We believe we accomplished the first element of this turnaround strategy.
Our 2004 private placement was a significant initial step toward achieving the
second goal and our recent offering substantially furthers this process. The
final element of our turnaround strategy requires sustained execution of our
business plan. If we are unable to achieve the last element of our turnaround
strategy, our financial condition and results of operations will not
dramatically improve and may deteriorate.
WEAK LOAN GROWTH MAY HINDER OUR ABILITY TO IMPROVE EARNINGS PERFORMANCE.
In 2003, our Board of Directors articulated a strategy predicated upon a
return to traditional community banking. In order to improve our performance in
accordance with this strategy, we must increase our average balance of quality
loans. However, our market area is characterized by an aging and declining
population base and comparatively weak economic growth. Despite these
unattractive fundamentals, our market also is highly competitive. Accordingly,
throughout 2005, loan originations have been less than we projected. Unless loan
originations increase, our earnings performance may not improve to the degree we
have planned.
AFTER OUR RECENT PRIVATE PLACEMENT WE STILL HAVE APPROXIMATELY $12 MILLION OF
HIGH COST DEBT OUTSTANDING.
The private placement provided sufficient capital to permit us to incur the
costs associated with repaying all $100 million of remaining long-term FHLB
convertible advances and terminating prior to maturity related interest rate
swaps that hedged these borrowings. However, the net proceeds of the offering
will permit us to redeem only up to $7.2 million of our $19.2 million in
outstanding debentures. Therefore, we will continue to bear the high debt
service costs associated with approximately $12.0 million of debentures bearing
interest at the rate of 8.45% per annum.
RESTRUCTURING STEPS WE ARE TAKING WILL CAUSE US TO INCUR A SIGNIFICANT LOSS IN
2005.
The following things occurred in the third quarter of 2005 or are expected
to occur in the fourth quarter of 2005:
- The Bank prepaid all $100.0 million of remaining long-term Federal Home
Loan Bank convertible advances, which bear interest at a rate of 6% and
mature in 2010. As a result of this prepayment, the Bank incurred losses
on the sale of securities to fund the prepayment and related prepayment
penalties of approximately $10.5 million, after tax.
- We will use $7.2 million of the net proceeds from our recent private
placement to redeem a portion of our guaranteed junior subordinated
deferrable interest debentures. This will result in the write-off of
approximately $140,000 after tax, in deferred issuance costs.
The result of these steps will be that we will incur a consolidated loss in
2005.
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WE HAVE FILED AN AMENDMENT TO OUR ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED DECEMBER 31, 2004 AND THIS MAY HAVE AN ADVERSE EFFECT ON THE PRICE OF OUR
COMMON STOCK.
Subsequent to the issuance of AmeriServ's 2004 consolidated financial
statements, we determined that certain misclassifications existed in the
consolidated statements of cash flows relating to the presentation of cash flows
from discontinued operations as a single line presentation rather than within
the categories of operating, investing and financing activities. Accordingly,
amounts on our consolidated statements of cash flows for the years ended
December 31, 2004, 2003 and 2002, have been restated to appropriately classify
cash flows from discontinued operations as either operating, investing or
financing activities. We filed an Annual Report on Form 10-K/A that amends the
Annual Report on Form 10-K for the fiscal year ended December 31, 2004. The
purpose of this amendment was to include the restated financial statements
(including a new footnote 28 regarding the restatement) and to make other
conforming minor changes. Other changes in the Form 10-K/A consist of:
- explanatory statements in the introduction to Management's Discussion of
Financial Condition and Results of Operations section (MD&A) that alert
the reader to the fact that the statement of cash flows has been
restated;
- updating certifications of officers and mention of the restatement in
Item 9A of the Form 10-K/A relating to Controls and Procedures;
- a conforming change to the Liquidity section of MD&A that changes a
reference to cash provided by investing activities in 2004 from $124
million to $125 million; and
- changing prior references to Form 10-K to references to Form 10-K/A.
The filing of restated financial statements may be perceived negatively by
investors and could have an adverse effect on the price of our common stock.
IF WE FAIL TO COMPLY WITH THE MOU OR OUR FINANCIAL CONDITION DETERIORATES, WE
MAY BE SUBJECT TO ADDITIONAL ENFORCEMENT ACTION.
An MOU is an enforcement action that the Federal Reserve and the Department
impose on companies under their regulatory authority. An MOU is more severe than
a request that a company adopt a board resolution to effect some corrective
action, but it is less severe than a formal written enforcement agreement or a
cease and desist order. We have been informed by the Federal Reserve and the
Department that we are in full compliance with the terms of the MOU, but if we
fail to comply with the MOU in the future or our financial condition
deteriorates in the opinion of the Federal Reserve or the Department, these
regulators could impose more severe enforcement sanctions.
AMERISERV OPERATES UNDER SIGNIFICANT LIQUIDITY CONSTRAINTS AND MAY DO SO IN THE
FUTURE BECAUSE OF PLANNED LOSSES AT THE BANK.
We believe we need to improve our liquidity. The payment of dividends by
the Bank to us is a primary source of funding for us and is also the principal
source of funds for us to pay dividends to our shareholders. Under federal
banking law, the Bank may only pay dividends out of accumulated earnings for the
current year and the prior two calendar years. Because the Bank incurred $2.6
million in losses in 2002, the Bank's ability to pay dividends to us was
eliminated. Because of the restructuring undertaken in 2004, the Bank incurred
an additional loss of $8.0 million, which extended the date on which the Bank's
dividend authority could be restored. Furthermore, we expect that the Bank will
incur a loss in 2005 as a result of restructuring steps the Bank is taking. This
will further extend the date on which the Bank's dividend authority will be
restored. Finally, under the MOU, any dividend payment requires the prior
approval of the Federal Reserve and the Department. As a consequence, we have
relied on dividends from non-bank subsidiaries, a tax refund, inter-company tax
payments, $3.2 million of retained proceeds from the 2004 private placement, and
other short-term solutions to provide the cash needed to make interest payments
on the debentures. We believe we have sufficient cash on hand at the holding
company and from these alternative sources to make dividend payments on the
debentures until the Bank's dividend authority is restored, which we believe
will
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occur no later than the first quarter of 2008 if the MOU is terminated and the
Bank does not suffer future losses. However, we cannot assure you that the MOU
will be terminated, or that the Bank's dividend authority will be restored.
Moreover, we have no significant secondary sources of liquidity such as lines of
credit. If the Bank's dividend authority is not restored or we are unable to
develop meaningful secondary sources of liquidity, we may not be able to improve
our liquidity.
WE HAVE UNIONIZED EMPLOYEES, WHICH INCREASES OUR COSTS AND MAY DETER ANY
ACQUISITION PROPOSAL.
The Bank is party to a collective bargaining agreement with the United
Steelworkers of America, which represents approximately 60% of our employees. A
new three year agreement was executed in October 2004. As a result of provisions
in the contract, generally known as work rules, we sometimes cannot take steps
that would reduce our operating costs. Furthermore, to our knowledge, we are one
of only 13 unionized banking institutions in the United States. The banking
industry is a consolidating industry in which acquisitions are frequent.
However, some banking institutions may be reluctant to buy a unionized bank
because of a perception that operating costs may be higher or that it could
result in unionization of its work force. Therefore, our stock price may be
adversely affected because investors may conclude that there is a reduced
likelihood that we will be acquired.
WE WILL INCUR SIGNIFICANT EXPENSE TO COMPLY WITH A PROVISION OF THE
SARBANES-OXLEY ACT OF 2002.
Section 404 of the Sarbanes-Oxley Act of 2002 requires all public companies
to prepare a report stating their responsibility for establishing and
maintaining an adequate internal control structure and procedures for financial
reporting and to make an assessment of the internal control structure and
procedures for financial reporting. The independent registered public accounting
firm of each public company must also attest to, and report on, management's
assessment of its internal controls. We become subject to Section 404 for the
fiscal year ended December 31, 2005. We estimate that the initial external,
pre-tax cost of complying with this new requirement will be approximately
$600,000 to $800,000, substantially all of which will be incurred in 2005. This
expense is significant relative to our 2005 earnings.
A SIGNIFICANT PORTION OF OUR TRUST BUSINESS IS DEPENDENT ON A UNION CLIENT BASE.
In an effort to capitalize on the Bank's union affiliation, our Trust
Company operates two funds, the ERECT Fund and the BUILD Fund, that seek to
attract investment from union pension funds. These funds then use the
investments to make loans on construction projects that use union labor. At June
30, 2005, approximately $340.3 million was invested by unions in the ERECT and
BUILD Funds. This represents approximately 22.9% of the total assets under
management held by the Trust Company. Therefore, the Trust Company is dependent
on a discrete union client base for a significant portion of its assets under
management and its resulting revenue and net income.
CHANGES IN INTEREST RATES COULD REDUCE OUR INCOME, CASH FLOWS AND ASSET VALUES.
Our income and cash flows and the value of our assets depend to a great
extent on the difference between the interest rates we earn on interest-earning
assets, such as loans and investment securities, and the interest rates we pay
on interest-bearing liabilities such as deposits and borrowings. These rates are
highly sensitive to many factors which are beyond our control, including general
economic conditions and policies of various governmental and regulatory agencies
and, in particular, the Board of Governors of the Federal Reserve System.
Changes in monetary policy, including changes in interest rates, will influence
not only the interest we receive on our loans and investment securities and the
amount of interest we pay on deposits and borrowings, but also will affect our
ability to originate loans and obtain deposits and the value of our investment
portfolio. If the rate of interest we pay on our deposits and other borrowings
increases more than the rate of interest we earn on our loans and other
investments, our net interest income, and therefore our earnings, could be
adversely affected. Our earnings also could be adversely affected if the rates
on our loans and other investments fall more quickly than those on our deposits
and other borrowings.
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BECAUSE OUR OPERATIONS ARE CONCENTRATED IN CAMBRIA AND SOMERSET COUNTIES,
PENNSYLVANIA, WE ARE SUBJECT TO ECONOMIC CONDITIONS IN THIS AREA, WHICH
TYPICALLY LAG BEHIND ECONOMIC ACTIVITY IN OTHER AREAS.
Our loan and deposit activities are largely based in Cambria and Somerset
Counties, Pennsylvania. As a result, our financial performance will depend
largely upon economic conditions in this area. Economic activity in this
geographic market generally lags behind the economic activity in Pennsylvania
and the nation. Similarly, unemployment in this market area is typically higher
than the unemployment rate in Pennsylvania and the nation. Adverse local
economic conditions could cause us to experience an increase in loan
delinquencies, a reduction in deposits, an increase in the number of borrowers
who default on their loans and a reduction in the value of the collateral
securing their loans, all of which could adversely affect our profitability.
WE ARE SUBJECT TO LENDING RISKS.
There are risks inherent in making all loans. These risks include interest
rate changes over the time period in which loans may be repaid and changes in
the national economy or the economy of our regional market that affect the
ability of our borrowers to repay their loans or the value of the collateral
securing these loans.
At June 30, 2005, 57.5% of our net loan portfolio consisted of commercial
and commercial mortgage loans, including construction loans. Commercial loans
are generally viewed as having more risk of default than residential real estate
loans or consumer loans. These types of loans also are typically larger than
residential real estate loans and consumer loans. Because our loan portfolio
contains a significant number of commercial, construction and commercial
mortgage loans with relatively large balances, the deterioration of one or a few
of these loans would cause a significant increase in nonperforming loans. An
increase in nonperforming loans could result in a net loss of earnings from
these loans, an increase in our provision for loan losses and an increase in
loan charge-offs.
OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS WOULD BE ADVERSELY AFFECTED IF
OUR ALLOWANCE FOR LOAN LOSSES IS NOT SUFFICIENT TO ABSORB ACTUAL LOSSES OR IF WE
ARE REQUIRED TO INCREASE OUR ALLOWANCE.
Despite our underwriting criteria, we may experience loan delinquencies and
losses for reasons beyond our control, such as general economic conditions. At
June 30, 2005, we had nonperforming assets equal to 0.64% of total loans, and
loans held for sale, net of unearned income and other real estate owned; we
expect that the ratio at September 30, 2005 will be similar. In order to absorb
losses associated with nonperforming assets, we maintain an allowance for loan
losses based on, among other things, historical experience, an evaluation of
economic conditions, and regular reviews of delinquencies and loan portfolio
quality. Determination of the allowance inherently involves a high degree of
subjectivity and requires us to make significant estimates of current credit
risks and future trends, all of which may undergo material changes. We may be
required to increase our allowance for loan losses for any of several reasons.
State and federal regulators, in reviewing our loan portfolio as part of a
regulatory examination, may request that we increase our allowance for loan
losses. Changes in economic conditions affecting borrowers, new information
regarding existing loans, identification of additional problem loans and other
factors, both within and outside of our control, may require an increase in our
allowance. In addition, if charge-offs in future periods exceed our allowance
for loan losses, we will need additional increases in our allowance for loan
losses. Any increases in our allowance for loan losses will result in a decrease
in our net income and, possibly, our capital, and may materially affect our
results of operations in the period in which the allowance is increased.
OUR FUTURE SUCCESS WILL DEPEND ON OUR ABILITY TO COMPETE EFFECTIVELY IN A HIGHLY
COMPETITIVE MARKET AND GEOGRAPHIC AREA.
We face substantial competition in all phases of our operations from a
variety of different competitors, including commercial banks, savings and loan
associations, mutual savings banks, credit unions, consumer finance companies,
factoring companies, insurance companies and money market mutual funds. There is
very strong competition among financial services providers in our principal
service area. Due to their size, many
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competitors can achieve economies of scale and, as a result, may offer a broader
range of products and services as well as better pricing for those products and
services than we can.
We believe that our ability to compete successfully depends on a number of
factors, including:
- our ability to build upon existing customer relationships and market
position;
- competitors' interest rates and service fees;
- the scope of our products and services;
- the relevance of our products and services to customer needs and demands
and the rate at which we and our competitors introduce them;
- satisfaction of our customers with our customer service; and
- industry and general economic trends.
If we experience difficulty in any of these areas, our competitive position
could be materially adversely affected, which will affect our growth and
profitability.
Some of the financial services organizations with which we compete are not
subject to the same degree of regulation as is imposed on federally insured
financial institutions. As a result, those nonbank competitors may be able to
access funding and provide various services more easily or at less cost than we
can, adversely affecting our ability to compete effectively.
ENVIRONMENTAL LIABILITY ASSOCIATED WITH LENDING ACTIVITIES COULD RESULT IN
LOSSES.
In the course of our business, we may foreclose on and take title to
properties securing our loans. If hazardous substances were discovered on any of
these properties, we may be liable to governmental entities or third parties for
the costs of remediation of the hazard, as well as for personal injury and
property damage. Many environmental laws can impose liability regardless of
whether we knew of, or were responsible for, the contamination. In addition, if
we arrange for the disposal of hazardous or toxic substances at another site, we
may be liable for the costs of cleaning up and removing those substances from
the site, even if we neither own nor operate the disposal site. Environmental
laws may require us to incur substantial expenses and may materially limit use
of properties we acquire through foreclosure, reduce their value or limit our
ability to sell them in the event of a default on the loans they secure. In
addition, future laws or more stringent interpretations or enforcement policies
with respect to existing laws may increase our exposure to environmental
liability.
WE MAY BE ADVERSELY AFFECTED BY GOVERNMENT REGULATION.
We are subject to extensive federal and state banking regulation and
supervision. Banking regulations are intended primarily to protect our
depositors' funds and the federal deposit insurance funds, not shareholders.
Regulatory requirements affect our lending practices, capital structure,
investment practices, dividend policy and growth. Our failure to meet minimum
capital requirements will result in the imposition of limitations on our
operations that would adversely impact our operations and could, if capital
levels drop significantly, result in our being required to cease operations.
Changes in governing law, regulations or regulatory practices could impose
additional costs on us or adversely affect our ability to obtain deposits or
make loans and, as a consequence, our revenues and profitability.
AN INVESTMENT IN OUR COMMON STOCK IS NOT AN INSURED DEPOSIT.
Our common stock is not a bank deposit and, therefore, is not insured
against loss by the Federal Deposit Insurance Corporation, commonly referred to
as the FDIC, any other deposit insurance fund or by any other public or private
entity. Investment in our common stock is inherently risky for the reasons
described in this "Risk Factors" section and elsewhere in this prospectus and
the documents incorporated by reference herein and is subject to the same market
forces that affect the price of common stock in any company. As a result, if you
acquire our common stock, you may lose some or all of your investment.
9
FEDERAL AND STATE BANKING LAWS, OUR ARTICLES OF INCORPORATION AND OUR BY-LAWS
MAY HAVE AN ANTI-TAKEOVER EFFECT.
Federal law imposes restrictions, including regulatory approval
requirements, on persons seeking to acquire control over us. Pennsylvania law
also has provisions that may have an anti-takeover effect. In addition, our
articles of incorporation and bylaws permit our board of directors to issue,
without shareholder approval, preferred stock and additional shares of common
stock that could adversely affect the voting power and other rights of existing
common shareholders.
USE OF PROCEEDS
We will receive no proceeds from the sale of the shares of common stock by
the selling shareholders.
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SELLING SHAREHOLDERS
We originally issued the shares of common stock to the selling shareholders
in a private placement that closed on September 29, 2005. Selling shareholders
may offer and sell the shares of common stock they purchased in that private
placement pursuant to this prospectus.
The following table sets forth information as of September 29, 2005 about
the amount of common stock beneficially owned by each selling shareholder and
the amount of such common stock that may be offered using this prospectus.
Except as set forth below, each of the selling shareholders has represented
to us that it is not, nor is it affiliated with, a registered broker-dealer.
PERCENTAGE OF
NUMBER OF SHARES MAXIMUM NUMBER COMMON STOCK
BENEFICIALLY OWNED OF SHARES BENEFICIALLY OWNED
NAME AND ADDRESS OF SELLING SHAREHOLDER PRIOR TO OFFERING(1) BEING OFFERED AFTER THE OFFERING(2)
--------------------------------------- -------------------- -------------- ---------------------
First Financial Fund, Inc. (nominee: Hare
& Co.)(3)............................... 541,900 73,900 2.1%
c/o Wellington Management Company, LLP
75 State Street
Boston, MA 02109
Attention: Gina DiMento
Bay Pond Partners, L.P.(3)................ 573,642 118,500 2.1%
c/o Wellington Management Company, LLP
75 State Street
Boston, MA 02109
Attention: Gina DiMento
Bay Pond Investors (Bermuda) L.P.(3)...... 176,300 37,600 *
c/o Wellington Management Company, LLP
75 State Street
Boston, MA 02109
Attention: Gina DiMento
Crestview Capital Master, LLC(4).......... 1,177,760 1,177,760 *
95 Revere Drive, Suite A
Northbrook, IL 60062
Heartland Value Fund c/o Brown Brothers
Harriman(5)............................. 1,000,000 500,000 2.2%
Brown Brothers Harriman & Co.
140 Broadway Street
New York, NY 10005-1101
Radcliffe SPC, Ltd for and on behalf of
the Class A Convertible Crossover
Segregated Portfolio(6)................. 115,000 115,000 *
c/o RG Capital Management, L.P.
3 Bala Plaza East, Suite 501
Bala Cynwyd, PA 19004
Financial Stocks Capital Partners III
L.P.(7)................................. 2,180,000 230,000 8.8%
441 Vine Street, Suite 507
Cincinnati, Ohio 45202
LB I Group Inc.(8)........................ 1,045,000 115,000 4.2%
c/o William M. Yelsits
Lehman Brothers
399 Park Ave., 9th Floor
New York, NY 10022
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---------------
* Represents less than 1% of outstanding common stock.
(1) Beneficial ownership is determined in accordance with Rule 13d-3 under the
Exchange Act.
(2) Assumes all shares offered hereby are sold.
(3) Wellington Management Company, LLP ("Wellington") is an investment adviser
registered under the Investment Advisers Act of 1940, as amended.
Wellington, in such capacity, is deemed to share beneficial ownership over
the shares held by its client accounts.
(4) Stewart Flink, Robert Hoyt and Daniel Warsh have the power to vote and/or
dispose of these shares. Crestview Capital Master, LLC is an affiliate of
Dillon Capital, Inc., a registered broker-dealer. Crestview Capital Master,
LLC has represented to us that it purchased the shares in the ordinary
course of business and that at the time of purchase, it had no agreements or
understandings, direct or indirect, with any person to distribute the
shares.
(5) Heartland Advisers, Inc., a registered investment advisor, has the power to
vote and/or dispose of these shares. Heartland Value Fund is an affiliate of
Heartland Investor Services, LLC, a registered broker-dealer. Heartland
Value Fund has represented to us that it purchased the shares in the
ordinary course of business and that at the time of purchase, it had no
agreements or understandings, direct or indirect, with any person to
distribute the shares.
(6) Pursuant to an investment management agreement, RG Capital Management, L.P.
("RG Capital") serves as the investment manager of Radcliffe SPC, Ltd.'s
Class A Convertible Crossover Segregated Portfolio. RGC Management Company,
LLC ("Management") is the general partner of RG Capital. Steve Katznelson
and Gerald Stahlecker serve as the managing members of Management. Each of
RG Capital, Management and Messrs. Katznelson and Stahlecker disclaims
beneficial ownership of the securities owned by Radcliffe SPC, Ltd. for and
on behalf of the Class A Convertible Crossover Segregated Portfolio
(7) Steven N. Stein and John M. Stein have the power to vote and/or dispose of
these shares through their control of the general partner of Financial
Stocks Capital Partners III L.P.
(8) Henry Klein has the power to vote and/or dispose of these shares. LB I Group
Inc. is an affiliate of Lehman Brothers Inc., a registered broker-dealer. LB
I Group Inc. has represented to us that it purchased the shares in the
ordinary course of business and that at the time of purchase, it had no
agreements or understandings, direct or indirect, with any person to
distribute the shares. Lehman Brothers Inc. served as AmeriServ's exclusive
placement agent in connection with the initial sale of the shares offered
hereby and received a commission, paid in cash, therefor.
We prepared this table based on the information supplied to us by the
selling shareholders named in the table, and we have not sought to verify such
information. No selling shareholder has indicated that it has held any position
or office or had any other material relationship with us or our affiliates
(other than the purchase of the shares of common stock from us) during the past
three years except that Lehman Brothers Inc., an affiliate of one of the selling
shareholders, served as our exclusive placement agent in connection with the
initial sale of the shares offered hereby and received a commission, paid in
cash, therefor. Ownership information about the selling shareholders may change
over time. Any changed information supplied to us will be set forth in
prospectus supplements or amendments to this prospectus.
Because the selling shareholders may offer all or some of their shares of
common stock from time to time, we cannot estimate the amount of shares of
common stock that will be held by the selling shareholders upon the termination
of any particular offering. See "Plan of Distribution."
PLAN OF DISTRIBUTION
We will not receive any of the proceeds of the sale of the shares of common
stock offered by this prospectus. The shares of common stock may be sold from
time to time to purchasers:
- directly by the selling shareholders or their pledgees, donees,
transferees or successors in interest (all of whom may be selling
shareholders); or
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- through underwriters, broker-dealers or agents who may receive
compensation in the form of discounts, concessions or commissions from
the selling shareholders or the purchasers of the shares of common stock.
The selling shareholders and any such broker-dealers or agents who
participate in the distribution of the shares of common stock may be deemed to
be "underwriters." As a result, any profits on the sale of shares of the common
stock by selling shareholders and any discounts, commissions or concessions
received by any such broker-dealers or agents may be deemed to be underwriting
discounts and commissions under the Securities Act. If the selling shareholders
were deemed to be underwriters, the selling shareholders may be subject to
statutory liabilities including, but not limited to, those of Sections 11, 12
and 17 of the Securities Act and Rule 10b-5 under the Exchange Act.
If the shares of common stock are sold through underwriters or
broker-dealers, the selling shareholders will be responsible for underwriting
discounts or commissions or agent's commissions.
The shares of common stock may be sold in one or more transactions at:
- fixed prices;
- prevailing market prices at the time of sale;
- varying prices determined at the time of sale; or
- negotiated prices.
The selling shareholders may sell the securities from time to time on any
stock exchange or automated interdealer quotation system on which the securities
are listed, including in the over-the-counter market, in privately negotiated
transactions or otherwise. The selling shareholders may sell the securities by
one or more of the following methods, without limitation:
- block trades in which the broker or dealer so engaged will attempt to
sell the securities as agent but may position and resell a portion of the
block as principal to facilitate the transaction pursuant to a supplement
or amendment to this prospectus naming such broker or dealer;
- purchases by a broker or dealer as principal and resale by the broker or
dealer for its own account pursuant to a supplement or amendment to this
prospectus naming such broker or dealer;
- exchange distributions in accordance with the rules of any stock exchange
on which the securities are listed;
- ordinary brokerage transactions and transactions in which the broker
solicits purchases;
- privately negotiated transactions;
- in connection with short sales;
- through the writing of options on the securities, whether or not the
options are listed on an options exchange;
- through the distribution of the securities by the selling shareholders to
their partners, members or stockholders/shareholders;
- one or more underwritten offerings on a firm commitment or best efforts
basis;
- derivative or other hedging transactions;
- loan or pledge transactions;
- pursuant to Rule 144 or Section 4(1) of the Securities Act of 1933, to
the extent available; and
- any combination of any of these methods of sale.
The selling shareholders may engage brokers and dealers, and any brokers or
dealers may arrange for other brokers or dealers to participate in effecting
sales of the securities. These brokers, dealers or underwriters
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may act as principals, or as agents of selling shareholders. Broker-dealers may
agree with selling shareholders to sell a specified number of the securities at
a stipulated price per security. If the broker-dealer is unable to sell
securities acting as agent for selling shareholders, it may purchase as
principal any unsold securities at the stipulated price. Broker-dealers who
acquire securities as principals may thereafter resell the securities from time
to time in transactions in any stock exchange or automated interdealer quotation
system on which the securities are then listed, at prices and on terms then
prevailing at the time of sale, at prices related to the then-current market
price or in negotiated transactions. Broker-dealers may use block transactions
and sales to and through broker-dealers, including transactions of the nature
described above.
In connection with the sale of the shares of common stock, the selling
shareholders may enter into hedging transactions with broker-dealers. These
broker-dealers may in turn engage in short sales of the shares of common stock
in the course of hedging their positions. The selling shareholders may also sell
the shares of common stock short and deliver the shares of common stock to close
out short positions, or loan or pledge the shares of common stock to
broker-dealers that, in turn, may sell the shares of common stock.
To our knowledge, there are currently no plans, arrangements or
understandings between any selling shareholders and any underwriter,
broker-dealer or agent regarding the sale of the common stock by the selling
shareholders. Selling shareholders may decide not to sell all or a portion of
the shares of common stock offered by them pursuant to this prospectus or may
decide not to sell the common stock under this prospectus. In addition, any
selling shareholder may transfer, devise or give the shares of common stock by
other means not described in this prospectus. Any shares of common stock covered
by this prospectus that qualifies for sale pursuant to Rule 144 or Rule 144A of
the Securities Act, or Regulation S under the Securities Act, may be sold under
Rule 144 or Rule 144A or Regulation S rather than pursuant to this prospectus.
Our common stock is listed on The Nasdaq Stock Market under the trading symbol
"ASRV."
The selling shareholders and any other persons participating in the
distribution of the shares of common stock will be subject to the Exchange Act.
The Exchange Act rules include, without limitation, Regulation M, which may
limit the timing of purchases and sales of shares of the underlying common stock
by the selling shareholders and any such other person. In addition, Regulation M
of the Exchange Act may restrict the ability of any person engaged in the
distribution of the shares of the common stock to engage in market-making
activities with respect to the common stock being distributed for a period of up
to five business days prior to the commencement of such distribution. This may
affect the marketability of the shares of common stock and the ability to engage
in market-making activities with respect to the shares of common stock.
Under the Purchase Agreement that is an exhibit to the registration
statement of which this prospectus is a part, we agreed to use our best efforts
to keep the registration statement effective until the earliest of:
- two years after the date of the original issuance of the shares of common
stock pursuant to the Purchase Agreement;
- the date when the purchasers pursuant to the Purchase Agreement are able
to sell the shares of common stock immediately without restriction
pursuant to Rule 144(k) under the Securities Act; and
- the date when all of the common stock purchased by the purchasers
pursuant to the Purchase Agreement has been sold pursuant to the
registration statement or Rule 144.
Under the Purchase Agreement, we and the selling shareholders will each
indemnify the other against certain liabilities, including certain liabilities
under the Securities Act, or will be entitled to contribution in connection with
these liabilities.
We have agreed to pay all of the expenses incidental to our performance of
or compliance with the Purchase Agreement, including all registration and filing
fees and printing expenses.
LEGAL MATTERS
Stevens & Lee, P.C., Valley Forge, Pennsylvania, has passed upon the
validity of the shares of common stock being offered under this prospectus.
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EXPERTS
The financial statements for the years ended December 31, 2004 and 2003
incorporated in this prospectus by reference from the Company's Annual Report on
Form 10-K/A (Amendment No. 1) for the year ended December 31, 2004 have been
audited by Deloitte & Touche LLP, an independent registered public accounting
firm, as stated in their report (which report expresses an unqualified opinion
and includes an explanatory paragraph relating to the restatements discussed in
Note 28), which is incorporated herein by reference, and have been so
incorporated in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
With respect to the unaudited interim financial information for the periods
ended March 31, 2005 and 2004 and June 30, 2005 and 2004 which is incorporated
herein by reference, Deloitte & Touche LLP, an independent registered public
accounting firm, have applied limited procedures in accordance with standards of
the Public Company Accounting Oversight Board (United States) for a review of
such information. However, as stated in their reports included in the Company's
Quarterly Reports on Form 10-Q for the quarters ended March 31, 2005 and June
30, 2005 incorporated by reference herein, they did not audit and they do not
express an opinion on that interim financial information. Accordingly, the
degree of reliance on their reports on such information should be restricted in
light of the limited nature of the review procedures applied. Deloitte & Touche
LLP are not subject to the liability provisions of Section 11 of the Securities
Act of 1933 for their reports on the unaudited interim financial information
because those reports are not "reports" or a "part" of the registration
statement prepared or certified by an accountant within the meaning of Sections
7 and 11 of the Act.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Pennsylvania law provides that a Pennsylvania corporation may indemnify
directors, officers, employees and agents of the corporation against liabilities
they may incur in such capacities for any action taken or any failure to act,
whether or not the corporation would have the power to indemnify the person
under any provision of law, unless such action or failure to act is determined
by a court to have constituted recklessness or willful misconduct. Pennsylvania
law also permits the adoption of a bylaw amendment, approved by shareholders,
providing for the elimination of a director's liability for monetary damages for
any action taken or any failure to take any action unless (i) the director has
breached or failed to perform the duties of his office and (ii) the breach or
failure to perform constitutes self-dealing, willful misconduct or recklessness.
Our bylaws provide for (i) indemnification of our directors, officers,
employees and agents and (ii) the elimination of a director's liability for
monetary damages, to the fullest extent permitted by Pennsylvania law unless the
director has breached or failed to perform the duties of his or her office under
Subchapter B of Chapter 17 of the Pennsylvania Business Corporation Law, and
such breach or failure to perform constitutes self-dealing, willful misconduct
or recklessness.
Directors and officers also are insured against certain liabilities for
their actions, as such, by an insurance policy obtained by us.
WHERE YOU CAN FIND MORE INFORMATION
This prospectus is a part of a registration statement on Form S-3, which we
filed with the Securities and Exchange Commission ("SEC") under the Securities
Act. It omits some of the information set forth in the registration statement.
You can find additional information about us in the registration statement.
Copies of the registration statement are on file at the offices of the SEC. You
may obtain them by paying the prescribed fee or you may examine them without
charge at the SEC's public reference facilities described below.
We are subject to the informational requirements of the Exchange Act and as
required by the Exchange Act, we file reports, proxy statements and other
information with the SEC. You may inspect these reports, proxy statements and
other information without charge and copy them at the Public Reference Room
15
maintained by the SEC at 100 F Street, N.E., Room 1580, Washington, D.C. 20549.
You may obtain information on the operation of the Public Reference Room by
calling the SEC at 1-800-SEC-0330. The information we file with the SEC is also
available through the SEC's web site (http://www.sec.gov) and our web site
(http://www.ameriservfinancial.com).
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which we have filed with the SEC, are incorporated
herein by reference:
(a) Our Annual Report on Form 10-K/A (Amendment No. 1) for the fiscal
year ended December 31, 2004, filed on September 7, 2005.
(b) Our Proxy Statement for our Annual Meeting of Shareholders held
April 26, 2005, filed on March 16, 2005.
(c) Our Quarterly Report on Form 10-Q for the quarter ended March 31,
2005, filed on May 10, 2005.
(d) Our Quarterly Report on Form 10-Q for the quarter ended June 30,
2005, filed on August 11, 2005.
(e) Our Current Reports on Form 8-K, dated January 26, 2005 and
September 27, 2005.
(f) The description of our common stock contained in post-effective
amendment no. 3 to our registration statement on Form S-3 (Reg. No.
33-56604) filed on December 4, 1997.
All documents which we file under Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act after the date of this prospectus and prior to termination of the
offering shall be deemed to be incorporated by reference herein and to be a part
of this prospectus from the date of the filing of such documents. Any statement
contained in this prospectus or in a document incorporated by reference or
deemed to be incorporated by reference in this prospectus shall be deemed to be
modified or superseded for purposes of this prospectus to the extent that the
statement is modified or superseded by any other subsequently filed document
which is incorporated or is deemed to be incorporated by reference herein. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this prospectus. Nothing in this
prospectus shall be deemed to incorporate information furnished by us but not
filed with the SEC pursuant to a Current Report on Form 8-K.
This prospectus incorporates documents by reference that are not presented
herein or delivered with this prospectus. We will provide without charge to each
person, including any beneficial owner, to whom this prospectus is delivered,
upon such person's written or oral request, a copy of any or all of the
documents referred to above which have been or may be incorporated into this
prospectus and deemed to be a part of this prospectus, other than exhibits to
the documents unless exhibits are specifically incorporated by reference in the
documents. These documents are available upon request from Jeffrey S. Stopko,
Chief Financial Officer at AmeriServ Financial, Inc., Main and Franklin Streets,
Johnstown, Pennsylvania 15907. Our telephone number is (814) 533-5300 and our
website is located at www.ameriservfinancial.com. Information on our website is
not incorporated by reference into this prospectus.
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