AmeriServ Financial Inc. in Johnstown, Pa., will take a charge of $10 million to $11 million this quarter, because of penalties associated with prepaying Federal Home Loan Bank advances.
The $1 billion-asset company said Tuesday that prepaying its $100 million of long-term advances would improve its interest rate position and increase future earnings.
Still, as a result of the charge, AmeriServ will probably post a significant loss for the third quarter. It reported earnings of $3 million for the second quarter and $4.6 million for the third quarter of last year.
The prepayment is part of a balance-sheet restructuring AmeriServ announced Tuesday.
It is also redeeming outstanding trust-preferred securities, which it said would save the company $600,000 a year. It is paying for the redemption through a private stock placement with institutional investors.
That transaction is expected to close Thursday and bring in $10.3 million.
This restructuring is the company's second in less than a year. In the fourth quarter it prepaid $125 million of Home Loan bank advances and incurred $12.6 million of penalties. It also redeemed $15.3 million of trust-preferred securities with funding from a private placement of stock.
Consequently, AmeriServ reported a loss of $10.9 million for that quarter.
