Fitch Dwngr AmeriServ Financial Inc.; Outlook To Negative.

Business Editors

NEW YORK--(BUSINESS WIRE)--Oct. 21, 2002

Fitch Ratings has downgraded the ratings for AmeriServ Financial, Inc. (ASRV) as follows: long-term debt rating to 'BB' from 'BB+' and individual rating to 'C/D' from 'C'. Fitch has also lowered the long-term deposit rating for ASRV's banking subsidiary, AmeriServ Financial Bank (ASRVB), to 'BB+' from 'BBB-' and ASRVB's individual rating to 'C/D' from 'C'. Additionally, Fitch has downgraded the trust preferred rating for AmeriServ Capital Trust I to 'B+' from 'BB'. All other ratings for ASRV and its subsidiaries are removed from Rating Watch Negative where they were placed on September 23, 2002. The Rating Outlook for all ratings for ASRV and its subsidiaries has been changed to Negative. A list of all ratings is provided at the end of this release.

The rating action reflects Fitch's view that ASRV's liquidity position, especially at the parent company, has weakened due to continued lack of earnings momentum. On April 1, 2000, ASRV (then USBANCORP, Inc.) completed the tax-free spin-off of its Three Rivers Bank subsidiary. The spin-off was intended to improve growth prospects and maximize shareholder value of each entity, with ASRV focusing on leveraging its union affiliation. However, the spin-off also left ASRV with one less subsidiary from which to upstream dividends to service its relatively large $34.5 mln of trust preferred securities. Furthermore, earnings performance at ASRVB has suffered in recent periods from narrow margins, increased credit costs due primarily to the commercial leasing portfolio, and significant prepayments in the mortgage servicing portfolio at Standard Mortgage Corporation (SMC). This, combined with an above average common dividend, has contributed to a fairly lean cash position at the parent company level.

Important steps are being taken to improve the company's financial profile. ASRV recently announced a capital and earnings improvement program, including a 66% reduction of its dividend to $0.12/year, and $4 mln in anticipated incremental (pre-tax) earnings ($3.5 mln from cost savings and $500K from revenue enhancement) for FY03. The implementation of this earnings improvement program will result in a 3Q02 loss and perhaps a loss for FY02 as the company experiences higher credit costs and additional mortgage servicing rights impairments associated with increases in prepayment speeds due to lower mortgage interest rates. The company will also perform a strategic and efficiency evaluation of its trust, commercial lending, loan processing, and management information systems operations. Despite the potential cost, Fitch has taken a positive view of the earnings improvement plan as well as management's decision to exit or sell SMC and the commercial leasing business line (commercial lease portfolio totaled approximately $37 mln at 08/31/02). However, the Rating Outlook Negative reflects execution risk in improving the company's financial profile heightened by uncertainty related to the economic environment and minimal financial flexibility. The Rating Outlook would likely be resolved in favor of the current ratings should management successfully improve earnings performance over coming quarters and exit non-strategic and under-performing businesses, while maintaining the company's sound capital position, solid deposit base, and still adequate asset quality. Conversely, continued lackluster performance could result in lower ratings for ASRV and its subsidiaries.

Ratings downgraded, Removed from Rating Watch Negative

AmeriServ Financial, Inc.

-- Long-term to 'BB' from 'BB+' ;

-- Individual to 'C/D' from 'C' ;

-- Rating Outlook Negative.

AmeriServ Financial Bank.

-- Long-term Deposits to 'BB+' from 'BBB-';

-- Individual to 'C/D' from 'C';

-- Rating Outlook Negative.

AmeriServ Capital Trust I

-- Trust Preferred to 'B+' from 'BB';

-- Rating Outlook Negative.

Ratings affirmed, Removed from Rating Watch Negative:

AmeriServ Financial Bank

-- Long-term 'BB+'.

Ratings Affirmed:

AmeriServ Financial, Inc.

-- Short-term 'B';

-- Support '5';

AmeriServ Financial Bank

-- Short-term 'B';

-- Short-term deposits 'B';

-- Support '5'.