Bancorp Will Write Off CMC Bankruptcy Portfolio
CASTLE, Ind.----Ameriana Bancorp (NASDAQ/NM: ASBI) reports that it has
completed the previously announced sale of its two Cincinnati-area branches,
located in Deer Park and Landen, Ohio, to Peoples Community Bancorp,
Inc. (NASDAQ/NM: PCBI) of West Chester, Ohio. In connection with the
sale, Ameriana will record an after-tax gain of approximately $2,940,000
or $0.93 per diluted share in the third quarter ending September 30,
transaction included Ameriana's real property related to the Deer Park
branch and its leasehold on the premises for the Landen branch. Additionally,
Ameriana conveyed most consumer and commercial loans at those branches
as part of the transaction, as well as the branches' savings deposits,
but retained and will continue to service certain single-family residential
mortgages originated in those locations.
on the announcement, Harry J. Bailey, President and Chief Executive
Officer, said, "The sale of these branches will allow us to intensify
our focus on our core market, one that stretches from New Castle to
western Indianapolis, where we currently have nine branches and a stronger
presence. We are excited about the prospects for growth in this region
and are already working to capitalize on the opportunities we see here
with the construction of a new branch in McCordsville. We believe this
will be a strategic addition to our franchise that will help fill in
the Hancock County corridor."
Ameriana said it will write off two lease pools in the third quarter,
an action that will reduce the quarter's net income by approximately
$2,784,000 or $0.88 per diluted share. Heretofore, Ameriana had established
reserves against these lease pools equal to approximately 58% of the
approximately $10,900,000 that currently remains outstanding.
previously reported, during 2001 Ameriana purchased two pools of equipment
lease receivables originated by the Commercial Money Center ("CMC"),
a now-bankrupt equipment leasing company. Each lease in the pools was
backed by a surety bond issued by one of two insurance companies guaranteeing
payment of all amounts due under the leases in the event of default
by the lessee. Both insurers now claim they were defrauded by CMC and
are denying responsibility for payment. Ameriana and other financial
institutions participating in the lease pools have initiated litigation
against the sureties.
the uncertainty surrounding the prospects for eventual recovery from
the sureties increased due to a ratings change on one of the two sureties
involved in the transaction, the Kemper Insurance Companies, which was
downgraded to "D" by A.M. Best.
we continue to believe that the surety bonds are enforceable against
the insurers, and we intend to pursue that issue aggressively, it is
clear that current litigation in this matter will be more protracted
and challenging than we originally thought," Bailey said. "Aside
from the inherent uncertainty surrounding the potential for recovery
and its timing, we believe regulators will be increasingly conservative
in their stance toward the level of reserves they consider prudent in
this matter. Already, we have witnessed this, and the recent questions
about Kemper's financial strength will likely intensify regulatory concerns.
Accordingly, in keeping with Ameriana's conservative method for reserving
against its assets, we believe that it is in the interest of our shareholders
to take this final step to write off these lease pools completely."
Bailey noted that despite the write off, Ameriana's regulatory capital
is expected to remain well above required levels at September 30, 2003.
Bancorp, New Castle
J. Bailey, 765-529-2230
NetBank and others have taken over certain aspects of the defaulted
as reported earlier, and suits with the insurance agency surety
while the class action suit continues taking depositions, while
former officers have started new leasing and finance ventures. editor)
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