Fitch affirms ameriserv financial's idr at 'bb' ; outlook revised to
stable from negative
New york--(business wire)--fitch ratings has affirmed the long-term issuer default rating (idr) and short-term idr for ameriserv financial inc. (asrv) and its subsidiaries at 'bb' and 'b', respectively. the rating outlook has been revised to stable from negative. a complete list of ratings follows this release. fitch's affirmation reflects asrv's sound capital levels, controlled credit costs, ample reserve coverage, and strong liquidity levels. providing additional ratings support is the company's earnings generation which has been driven by solid growth in non-interest income coupled with substantially lower provision costs, helping asrv return to profitability over the past three consecutive quarters. while credit costs are expected to persist in the near term as the company addresses challenges in its commercial real estate (cre) portfolio, fitch anticipates asrv's profitability metrics will continue improving modestly over the near term with stabilization thereafter. ratings remain constrained, however, due to the lack of granularity in the company's loan portfolio, heavy cre concentration (55% of total loans), and asrv's limited franchise. primarily a cre lender, the company's higher risk loan portfolio has not translated into significantly higher credit costs. asrv's markets did not participate in the rapid growth in real estate values or their subsequent decline, consequently non-performing assets (npas) have remained at manageable levels, totaling 2.12% at year end (ye) 2010, as net charge-offs (ncos) have also remained controlled and materially lower than similarly rated peers, equaling 0.74% for 2010. in addition, based on fitch's existing cre stress tests (as articulated in its special report 'u.s. bank cre exposure review' dated nov. 16, 2009), fitch believes asrv's capital and reserve levels provide ample coverage for any potential cre asset quality deterioration and are consistent with the respective ratings. asrv's capital levels also provide a sufficient cushion for additional asset quality deterioration, with tangible common equity (tce) totaling 7.94% at ye 2010. regulatory capital levels are further strengthened by the $21 million in u.s. treasury's capital purchase program (cpp) still outstanding. given asrv's significant cre exposure and lack of granularity in its loan portfolio, fitch views the company's capital levels as a key factor to its risk profile. furthermore, asrv's deposit growth over the past year, including the attraction of additional non-interest-bearing deposits, has resulted in an improved liquidity profile as evidenced by a loan-to-deposit ratio of roughly 80% (down from nearly 90% at ye 2009). the outlook revision to stable reflects fitch's view of asrv's improved overall financial performance. moreover, fitch recognizes the improvements new management has contributed to the company's general risk profile. in fitch's opinion, while measured credit stress is expected to persist in the cre book, should credit costs become more pronounced than anticipated, creating pressure on asrv's solid capital levels and impeding the company's financial performance, negative rating implications could ensue. however, as the institution's overall risk profile has improved, fitch expects operating performance to remain sound. headquartered in johnstown, pa, with $950 million in assets, asrv provides financial services, along with retail, small business and commercial banking through its wholly owned subsidiary, ameriserv financial bank (asrvb). one of 13 banks in the united states that operates with unionized employees, roughly 60% of asrvb's total workforce is unionized. fitch has affirmed the following ratings, with a stable outlook: ameriserv financial inc. --long-term idr rating at 'bb'; --short-term idr at 'b'; --individual at 'c/d'; --preferred stock at 'b+'; --support rating at '5'; --support floor at 'nf' ameriserv financial bank --lt idr at 'bb'; --lt deposits at 'bb+''; --st idr at 'b'; --st deposits at 'b' --individual at 'c/d'; --support at '5; --support floor at 'nf'. ameriserv capital trust i --preferred stock at 'b+'. additional information is available at 'www.fitchratings.com' applicable criteria and related research: --'global financial institutions rating criteria' (aug. 16, 2010); --'bank holding companies' (dec. 30, 2009); --'equity credit for hybrids & other capital securities-amended' (dec. 29, 2009); --'rating hybrid securities' (dec. 29, 2009); --'short-term ratings for corporate finance' (nov. 2, 2010); --'u.s. bank cre exposure review', nov. 16, 2009. applicable criteria and related research: equity credit for hybrids & other capital securities - amended http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=493112 bank holding companies http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=493324 u.s. bank cre exposure review (midsized regional banks most at risk) http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=485006 short-term ratings for corporate finance http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=568726 rating hybrid securities http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=493086 global financial institutions rating criteria http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=547685 all fitch credit ratings are subject to certain limitations and disclaimers. please read these limitations and disclaimers by following this link: http://fitchratings.com/understandingcreditratings. in addition, rating definitions and the terms of use of such ratings are available on the agency's public website 'www.fitchratings.com'. published ratings, criteria and methodologies are available from this site at all times. fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'code of conduct' section of this site.
