After accumulating an 8% ownership stake in AmeriServ Financial, a prominent activist investor is seeking a big say in how the Johnstown, Pennsylvania, community bank is run.
Abbott Cooper, founder and managing member of Driver Management Co. in New York, has a track record of pursuing change at community banks he deems "underperforming." Cooper says he believes the $1.4 billion-asset AmeriServ — which reported a return on assets of 0.65% and an efficiency ratio north of 81% through the first nine months of 2022 — is ripe for a shake-up.
To that end, Cooper is seeking three seats on AmeriServ's board. Cooper said he is likely to occupy one of the seats himself. He wants the other two for a pair of colleagues, though he has yet to identify them.
AmeriServ has 10 directors, including President and CEO Jeffrey Stopko. According to the company's most recent proxy statement, three directors are up for reelection in 2023.
AmeriServ hasn't ruled out agreeing to Cooper's terms. It said Thursday in a written statement it was "always open to considering director candidates put forth by shareholders."
"In addition to asking Driver to share its ideas for enhancing our ongoing value-creation efforts, we have invited the firm to provide director-candidate biographies and make individuals available for interviews," the company added.
However, Cooper said he is disinclined to give the board a say in the matter.
"We've asked them to make changes at the board level," Cooper said in an interview. "If they're not ready to do that, we'll take the matter to the shareholders. … We don't have any interest in letting a board that has done nothing for shareholders over the past 20 years limit who shareholders can vote for as directors."
AmeriServ has been a presence in Johnstown for well over a century, with community-banking roots stretching back to 1901. Founded as United States National Bank of Johnstown, it rebranded as AmeriServ in May 2001. It put Stopko in charge in 2015.
For the first nine months of 2022, AmeriServ reported net income of $6.5 million, up 23% from the same period in 2021. Cooper is focused more on AmeriServ's performance metrics, most notably its efficiency ratio and return on assets, both of which lag industry averages. The efficiency ratio in particular "is way too high," Cooper said. According to the Federal Deposit Insurance Corp., the average ROA for community banks was 1.13% on Sept. 30. The average efficiency ratio was 60%.
Cooper labeled the company a "prolonged underperformer."
"The management team is just not doing it, and the board doesn't want to hold them accountable for poor performance," Cooper said.
For its part, AmeriServ said it "has been producing strong year-over-year net income and earnings-per-share growth thanks to our balance sheet strength, risk management efforts and diversification of our revenue streams in areas such as wealth management. As we've emerged from the pandemic, our strategy has helped drive solid total shareholder returns on an absolute and relative basis."
One area where AmeriServ appears to have had few if any problems is asset quality. Net charge-offs are near rock bottom while nonperforming assets were 0.44% of total loans on Sept. 30.
Cooper is no stranger to proxy contests.
Indeed, since 2020, Cooper and Driver have launched campaigns against three community banks, First United Corp. in Oakland, Maryland, Republic First Bancorp in Philadelphia and Codorus Valley Bancorp in York, Pennsylvania. In April 2021, the $1.8 billion-asset First United
Codorus and Republic both entered into cooperation agreements, agreeing to add Driver-nominated candidates to their boards of directors. The $2.3 billion-asset Codorus appointed John Kiernan April 12. Republic First, with $6 billion of assets, appointed Peter Bartholow Oct. 4.
Many of his investments proceed more smoothly. On Monday, The First of Long Island Corp. in Melville, New York, agreed to nominate Cooper for a director seat at its 2023 annual meeting and renominate him in 2025 as part of a cooperation agreement between the company and Driver.
"We look forward to having Mr. Cooper join the board of The First of Long Island Corporation and believe that his experience in, and knowledge of, the financial services business will add value to the board's governance and oversight deliberations and responsibilities," Chairman Walter Teagle said Monday in a press release.
Cooper owns about 136,000 shares of The First of Long Island, amounting to an ownership stake of just under 1%.
