AmeriServ Financial in Johnstown, Pa., will record a first-quarter loss because an unnamed energy-sector client plans to liquidate under bankruptcy protection.
The $1.2 billion-asset banking company said in a press release Thursday that it will post a loan-loss provision of $3 million to $3.5 million in the first quarter to cover the borrower's nonperforming loans. The provision will result in a quarterly loss, although AmeriServ did not estimate the amount.
AmeriServ said it decided to record the provision after the borrower's bankruptcy case was converted to a liquidation from a reorganization. AmeriServ will also record higher net chargeoffs in the quarter due to the bankruptcy.
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Word that Hancock Holding in Mississippi would more than double its loan-loss allowance has triggered broader questions about how the oil slump could spread beyond the energy portfolios of a whole class of banks.
March 30 -
Hancock Holding is warning of more pain in its energy portfolio as low prices continue to hamper oil and gas firms ability to repay their loans.
March 29 -
AmeriServ Financial in Johnstown, Pa., and Provident Bancorp in Amesbury, Mass., are the latest community banks to announce plans to exit the Small Business Lending Fund.
January 4
Once it became clear the borrower's business would be liquidated, AmeriServ said it calculated that its previously established reserves on nonaccrual loans would not cover the client's discounted collateral values.
AmeriServ said the borrower, which operates in the fracking industry, is its "only meaningful direct loan exposure to the energy industry."
To compensate for the higher provision, AmeriServ said it took steps to cut costs in other parts of its business. AmeriServ will close a branch in State College, Pa., and it has terminated a senior position on its executive team. The company did not identify the executive who was fired. The two moves will save about $750,000.
