Table of Contents

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​

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



FORM 10-K



​

(MARK ONE)

(MARK ONE)

☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31 2017, 2022

OR

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM              TO              

COMMISSION FILE NUMBER 0-11204



AMERISERV FINANCIAL, INC.

(Exact name of registrant as specified in its charter)



(Exact name of registrant as specified in its charter)

​

PENNSYLVANIA

25-1424278

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

(I.R.S. Employer

Identification No.)

​

​

MAIN & FRANKLIN STREETS
,

​

P.O. BOX 430, JOHNSTOWN
PENNSYLVANIA,

15907-0430

​

PENNSYLVANIA

15907-0430

(Address of principal executive offices)

(Zip Code)

​

Registrant’s telephone number, including area code (814) (814) 533-5300



Securities registered pursuant to Section 12(b) of the Act:

​

​

​

​

​

Title Of Each Class

Trading Symbol

Name Ofof Each Exchange On Which Registered

Common Stock, Par Value $0.01 Per Share

​

ASRV

​

The NASDAQ Stock Market LLC

8.45% Beneficial Unsecured Securities, Series A
(AmeriServ Financial Capital Trust I)

​

​


The NASDAQ Stock Market LLC

​

​

​

​

Securities registered pursuant to Section 12(g) of the Act: None None



​

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.o◻ Yesþ⌧ No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.o◻ Yesþ⌧ No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.þ⌧ Yeso◻ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).þ⌧ Yeso◻ No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See definitiondefinitions of “large accelerated filer,” “accelerated“ accelerated filer,” “smaller reporting company”company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

​

Large accelerated filero◻

Accelerated filero◻

Non-accelerated filero⌧

Smaller reporting companyþ☒

​

​

​

Emerging growth companyo☐

​

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.o◻

Indicate by check mark whether the registrant has filed a report on and attestation to its mangagement’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).o☐ Yesþ⌧ No

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked pricesprice of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter. The aggregate market value was $69,492,588$60,981,043 as of June 30, 2017.2022.

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. There were 18,128,24717,147,270 shares outstanding as of January 31, 2018.March 21, 2023.

DOCUMENTS INCORPORATED BY REFERENCE.

Portions of the proxy statement for the annual shareholders’ meeting are incorporated by reference in Parts II andPart III.

​

​

​

​

TABLE OF CONTENTSTable of Contents

FORM 10-K INDEX

​

​

​

Page No.

PART I

Page No.

​

PART I

Item 1.

Business

3

Item 1.

Business1A.

Risk Factors

1

12

Item 1A.

Risk Factors1B.

11

Item 1B.

Unresolved Staff Comments

11

12

Item 2.

Properties

Properties

11

12

Item 3.

Legal Proceedings

11

12

Item 4.

Mine Safety Disclosures

11

12

PART II

​

Item 5.

Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

12

13

Item 6.

Selected Consolidated Financial Data

13

14

Item 7.

Management’s Discussion and Analysis of Consolidated Financial Condition and Results of Operations

14

15

Item 7A.

Quantitative and Qualitative Disclosures about Market Risk

34

39

Item 8.

Consolidated Financial Statements and Supplementary Data

36

40

Item 9.

Changes in and Disagreements Withwith Accountants Onon Accounting and Financial Disclosure

93

102

Item 9A.

Controls and Procedures

93

102

Item 9B.

Other Information

93

102

PART III

​

​

Item 10.

Directors, Executive Officers, and Corporate Governance

94

103

Item 11.

Executive Compensation

94

103

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

95

103

Item 13.

Certain Relationships and Related Transactions, and Director Independence

95

103

Item 14.

Principal Accountant Fees and Services

95

103

PART IV

​

​

Item 15.

Exhibits, Financial Statement Schedules

96

104

Signatures

​

Signatures

98

106

i

​

​

​

2

TABLE OF CONTENTSTable of Contents

PART I

ITEM 1.   BUSINESS

GENERAL

AmeriServ Financial, Inc. (the Company) is a bank holding company organized under the Pennsylvania Business Corporation Law. The Company became a holding company upon acquiring all of the outstanding shares of AmeriServ Financial Bank (the Bank) in January 1983. The Company’s other wholly owned subsidiaries includesubsidiary is AmeriServ Trust and Financial Services Company (the Trust Company), which was formed in October 1992, and1992. AmeriServ Life Insurance Company (AmeriServ Life), formed in October 1987.1987, was a captive insurance company that engaged in underwriting as a reinsurer of credit life and disability insurance. New business ceased being generated by AmeriServ Life in 2005. Since that time, the outstanding insurance policies have been running off and the final policy has expired. On September 30, 2020, the Arizona Corporation Commission approved the Articles of Dissolution for AmeriServ Life. The remaining assets of AmeriServ Life were transferred to AmeriServ Financial, Inc. and the subsidiary was formally closed on December 31, 2020. When used in this report, the “Company” may refer, depending on the context, to AmeriServ Financial, Inc. individually or AmeriServ Financial, Inc. and its direct and indirect subsidiaries.

The Company’s principal activities consist of owning and operating its threetwo wholly owned subsidiary entities. At December 31, 2017,2022, the Company had, on a consolidated basis, total assets, deposits, and shareholders’ equity of  $1.168$1.4 billion, $948 million,$1.1 billion, and $95$106.2 million, respectively. The Company and its subsidiaries derive substantially all of their income from banking, bank related services, and bank-relatedtrust and wealth management related services. The Company functions primarily as a coordinating and servicing unit for its subsidiary entities in general management, accounting and taxes, loan review, auditing, investment accounting, marketing and risk management.

As a bank holding company, the Company is subject to supervision and regular examination by the Federal Reserve Bank of Philadelphia and the Pennsylvania Department of Banking and Securities (the PDB)(PDB). The Company is also under the jurisdiction of the Securities and Exchange Commission (the SEC)(SEC) for matters relating to registered offerings and sales of its securities under the Securities Act of 1933, as amended, and the disclosure and regulatory requirements of the Securities Exchange Act of 1934, as amended. The Company’s common stock is listed on The NASDAQ Stock Market under the trading symbol “ASRV,” and the Company is subject to the NASDAQ rules applicable to listed companies.

AMERISERV FINANCIAL BANKING SUBSIDIARY

AMERISERV FINANCIAL BANK

The Bank is a state bank chartered under the Pennsylvania Banking Code of 1965, as amended (the Banking(Banking Code). Through 1517 branch locations in Allegheny, Cambria, Centre, Somerset, and Westmoreland counties, Pennsylvania and Washington county, Maryland, the Bank conducts a general banking business. It is a full-service bank offering (i) retail banking services, such as demand, savings and time deposits, checking accounts, money market accounts, secured and unsecured consumer loans, mortgage loans, safe deposit boxes, holiday club accounts, and money orders, and traveler’s checks;orders; and (ii) lending, depository and related financial services to commercial, industrial, financial, and governmental customers, such as commercial real estate mortgage loans (CRE), short and medium-term loans, revolving credit arrangements, lines of credit, inventory and accounts receivable financing, real estate-constructionestate construction loans, business savings accounts, certificates of deposit, wire transfers, night depository, and lock box services. The Bank also operates 1618 automated bank teller machines (ATMs) through its 24-hour banking network that is linked with NYCE, a regional ATM network, and CIRRUS, a national ATM network. West Chester Capital Advisors (WCCA), a SEC registeredSEC-registered investment advisor, is also a subsidiary of the Bank. The Company also operates loan production offices (LPOs) in MonroevilleAltoona and AltoonaWilkins Township in Pennsylvania, and in Hagerstown, Maryland.Pennsylvania.

We believe that the Bank’s deposit base is such that loss of one depositor or a related group of depositors would not have a materially adverse effect on itsthe Bank’s business. The Bank’s business is not seasonal, nor does it have any risks attendant to foreign sources. A significant majority of the Bank’s customer base is located within a 150 mile250-mile radius of Johnstown, Pennsylvania, the Bank’s headquarters.

3


TABLE OF CONTENTSTable of Contents

The Bank is subject to supervision and regular examination by the Federal Reserve Bank of Philadelphia and the PDB. Various federal and state laws and regulations govern many aspects of its banking operations. The following is a summary of key data (dollars in thousands) and ratios of the Bank at December 31, 2017:2022:

​

 
Headquarters Johnstown, PA
Total Assets $1,151,205 
Total Investment Securities  159,956 
Total Loans and Loans Held for Sale (net of unearned income)  892,758 
Total Deposits  948,145 
Total Net Income  4,337 
Asset Leverage Ratio  8.75% 
Return on Average Assets  0.38 
Return on Average Equity  4.37 
Total Full-time Equivalent Employees  232 

​

​

​

​

​

Headquarters

    

Johnstown, PA

 

Total Assets

​

$

1,350,198

​

Total Investment Securities

​

 

231,750

​

Total Loans and Loans Held for Sale (net of unearned income)

​

 

990,825

​

Total Deposits

​

 

1,111,276

​

Total Net Income

​

 

8,593

​

Asset Leverage Ratio

​

 

9.39

%

Return on Average Assets

​

 

0.65

​

Return on Average Equity

​

 

7.10

​

Total Full-time Equivalent Employees

​

 

247

​

​

RISK MANAGEMENT OVERVIEW:

OVERVIEW

Risk identification and management are essential elements for the successful management of the Company. In the normal course of business, the Company is subject to various types of risk, which includes credit, interest rate and market, liquidity, operational, legal/compliance, strategic/reputational and security risk. Additionally, in 2022, the Company continued to monitor the risks stemming from the COVID-19 pandemic. The Company controlsseeks to identify, manage and monitorsmonitor these risks with policies, procedures, and various levels of oversight from the Company’s Board of Directors (the Board) and management. The Company has both a Management Enterprise Risk Committee with Board of Director representation and a Board Enterprise Risk Committee to help manage and monitor the Company’s risk position.position, which is reported formally to the Board, at a minimum, on a semi-annual basis.

Interest rate risk is the sensitivity of net interest income and the market value of financial instruments to the magnitude, direction, and frequency of changes in interest rates. Interest rate risk results from various repricing frequencies and the maturity structure of assets and liabilities. The Company uses its asset liability management policy to controlmonitor and manage interest rate risk.

Liquidity risk represents the inability to generate cash or otherwise obtain funds at reasonable rates to satisfy commitments to borrowers, as well as the obligations to depositors, debtholders and the funding of operating costs. The Company uses its asset liability management policy and contingency funding plan to controlmonitor and manage liquidity risk.

Credit risk represents the possibility that a customer may not perform in accordance with contractual terms resulting in an economic loss to the organization. Credit risk results from extending credit to customers, purchasing securities, and entering into certain off-balance sheet loan funding commitments. The Company’s primary credit risk occurs in the loan portfolio.portfolio with limited credit risk within the investment portfolio due to holdings of corporate and municipal securities. The Company uses its credit policy and disciplined approach to evaluating the adequacy of the allowance for loan losses (the ALL) to controlmonitor and manage credit risk. The Company’s investment policy and hedging policy seeks to limit the amount of credit risk that may be assumed in the investment portfolio and through hedging activities.

The following summarizes and describes the Company’s various loan categories and the underwriting standards applied to each:

Commercial Loans

This category includes credit extensions to commercial and industrial borrowers. Business assets, including accounts receivable, inventory and/or equipment, typically secure these credits. The commercial loan segment includes commercial loans secured by owner occupied real estate. In appropriate instances, extensions of credit in this category are subject to collateral advance formulas. Balance sheet strength and profitability are considered when analyzing these credits, with special attention given to historical, current and prospective sources of cash flow, and the ability of the customer to sustain cash flow at acceptable levels. The Bank’s policy permits flexibility in determining acceptable debt service coverage ratios. Personal guarantees are frequently required; however, as the financial strength of the borrower increases, the Bank’s ability to obtain personal guarantees decreases. In addition to economic risk, this category is impacted by the strength of the borrower’s management, industry risk and portfolio concentration risk each of which are also monitored and considered during the underwriting process.


4

Table of Contents

TABLE OF CONTENTSThe commercial loan segment also includes Paycheck Protection Program (PPP) loans. The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) authorized the Small Business Administration (SBA) to guarantee 100% of the PPP loans made to eligible borrowers pursuant to standards as defined by the SBA. The SBA guarantee on PPP loans minimizes the level of credit risk associated with the loans. As a result, such loans are assigned a 0% risk weight for purposes of calculating the Company’s risk-based capital ratios. Therefore, it was deemed appropriate to not allocate any portion of the loan loss reserve for the PPP loans. As of December 31, 2022, the Company had 1 PPP loan outstanding totaling $22,000.

Commercial Loans Secured by Non-Owner Occupied Real Estate

This category includes various types of loans, including acquisition and construction of investment property, owner-occupied property and operating property. Maximum term, minimum cash flow coverage, leasing requirements, maximum amortization and maximum loan to value ratios are controlled by the Bank’s credit policy and follow industry guidelines and norms, and regulatory limitations. Personal guarantees are normally required during the construction phase on construction credits and are frequently obtained on mid to smaller CRE loans. In addition to economic risk, this category is subject to geographic and portfolio concentration risk, each of which are monitored and considered in underwriting.

The Company utilizes a robust and diligent risk management framework to monitor the non-owner occupied commercial real estate segment of the portfolio. This analysis considers more forward looking credit metrics such as stress test results and underwriting trend data, coupled with risk tolerance and concentration guidelines. The process is intended to allow identification of emerging risk, in part, to determine any future change to lending policy, underwriting practices or broader lending strategy prior to any indication of performance deterioration.

Residential Real Estate — Mortgages

This category includes mortgages that are secured by residential property. Underwriting of loans within this category is pursuant to Freddie Mac/Fannie Mae underwriting guidelines, with the exception of Community Reinvestment Act (CRA) loans, which have more liberal standards. A meaningful portion of this portfolio consists of home equity loans. The major risk in this category is that a significant downward economic trend would increase unemployment and cause payment default. The Bank does not engage, and has never engaged, in subprime residential mortgage lending.

Consumer Loans

This category includes consumer installment loans and revolving credit plans. Underwriting is pursuant to industry norms and guidelines. The major risk in this category is a significant economic downturn.

INVESTMENTS

The strategic focus of the investment securities portfolio is managed for liquidity and earnings in a prudent manner that is consistent with proper bank asset/liability management and current banking practices. The objectives of portfolio management include consideration of proper liquidity levels, interest rate and market valuation sensitivity, and profitability. The investment portfolio of the Company and its subsidiaries are proactively managed, including in accordance with federal and state laws and regulations and in accordance with generally accepted accounting principles (GAAP). All holdings must meet standards documented in its investment policy, unless otherwise approved by the Company’s CEO or the Asset/Liability Management Committee.

The investment portfolio is primarily made up of AAA rated agency mortgage-backed securities, short maturity agency securities, high quality corporate securities, and select taxable municipal securities, and agency securities. Management strives to maintain a portfolio duration that is less than 60 months. All holdings must meet standards documented in its investment policy.

Investment securities classified as held to maturity are carried at amortized cost while investment securities classified as available for sale are reported at fair market value.

5

Table of Contents

The following table sets forth the weighted average yield for each type of investment security and range of maturity as of December 31, 2022. Yields are not presented on a tax-equivalent basis, but are based upon the cost basis and fair value ofare weighted for the Company’s investment portfolio as of the periods indicated:scheduled maturity.

Investment securities available for sale at:

sale:

​

   
 AT DECEMBER 31,
   2017 2016 2015
   (IN THOUSANDS)
U.S. Agency $6,612  $400  $2,900 
Taxable municipal  7,198   3,793   — 
Corporate bonds  35,886   34,403   18,541 
U.S. Agency mortgage-backed securities  79,854   88,738   96,801 
Total cost basis of investment securities available for sale $129,550  $127,334  $118,242 
Total fair value of investment securities available for sale $129,138  $127,077  $119,467 

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

AT DECEMBER 31, 2022

​

​

​

​

​

​

​

​

​

​

​

​

​

​

TOTAL

​

    

​

​

    

​

​

    

​

​

    

U.S. AGENCY

​

INVESTMENT

​

​

​

​

​

​

​

​

​

​

​

MORTGAGE-

​

SECURITIES

​

​

​

​

​

​

​

​

CORPORATE

​

BACKED

​

AVAILABLE

​

​

U. S. AGENCY

​

MUNICIPAL

​

BONDS

​

SECURITIES

​

FOR SALE

Within 1 year

​

—

%  

 

1.58

%  

 

5.50

%  

 

—

%  

​

4.92

%

After 1 year but within 5 years

​

3.27

​

 

3.03

​

 

5.54

​

 

2.94

​

​

4.53

​

After 5 years but within 10 years

​

1.78

​

 

2.52

​

 

6.20

​

 

2.63

​

​

4.78

​

Over 10 years

​

2.69

​

 

—

​

 

4.20

​

 

2.69

​

​

2.70

​

Total

​

2.44

​

 

2.78

​

 

5.84

​

 

2.69

​

​

3.70

​

TABLE OF CONTENTS​

​

Investment securities held to maturity at:maturity:

​

   
 AT DECEMBER 31,
   2017 2016 2015
   (IN THOUSANDS)
Taxable municipal $22,970  $13,441  $5,592 
U.S. Agency mortgage-backed securities  9,740   11,177   10,827 
Corporate bonds and other securities  6,042   6,047   5,000 
Total cost basis of investment securities held to maturity $38,752  $30,665  $21,419 
Total fair value of investment securities held to maturity $38,811  $30,420  $21,533 

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

AT DECEMBER 31, 2022

​

​

​

​

​

​

​

​

​

​

​

​

​

​

TOTAL

​

    

​

​

    

​

​

    

​

​

    

U.S. AGENCY

​

INVESTMENT

​

​

​

​

​

​

​

​

CORPORATE

​

MORTGAGE-

​

SECURITIES

​

​

​

​

​

​

​

​

BONDS AND

​

BACKED

​

HELD TO

​

​

U. S. AGENCY

​

MUNICIPAL

​

OTHER

​

SECURITIES

​

MATURITY

Within 1 year

​

—

%  

 

2.65

%  

 

0.80

%  

 

—

%  

​

1.12

%

After 1 year but within 5 years

​

—

​

 

3.34

​

 

4.07

​

 

2.82

​

​

3.47

​

After 5 years but within 10 years

​

2.01

​

 

3.03

​

 

6.39

​

 

3.40

​

​

3.01

​

Over 10 years

​

—

​

 

3.04

​

 

6.61

​

 

3.14

​

​

3.29

​

Total

​

2.01

​

 

3.11

​

 

3.63

​

 

3.13

​

​

3.13

​

​

DEPOSITS

The Bank believes it has a stable core deposit base made up of traditional commercial bank products that exhibits littleexhibit modest fluctuation during the year, other than jumbo certificates of deposits (CDs), and certain municipal deposits, which demonstrate some seasonality. The Company also utilizes certain Trust Company specialty deposits related to the ERECT Fundfunds as a funding source, which serve as an alternative to wholesale borrowings and can exhibit some limited degree of volatility.

The following table sets forth the average balance of the Company’s deposits and average rates paid thereon for the past threetwo calendar years:

​

      
 AT DECEMBER 31,
   2017 2016 2015
   (IN THOUSANDS, EXCEPT PERCENTAGES)
Demand:
                              
Non-interest bearing $182,301   —%  $182,732   —%  $171,175   —% 
Interest bearing  129,589   0.49   108,350   0.29   97,201   0.21 
Savings  97,405   0.17   95,986   0.17   94,425   0.17 
Money market  275,636   0.52   277,967   0.43   242,298   0.34 
Other time  291,475   1.38   290,612   1.28   287,783   1.24 
Total deposits $976,406   0.79%  $955,647   0.70%  $892,882   0.66% 
LOANS

​

​

​

​

​

​

​

​

​

​

​

​

​

​

AT DECEMBER 31, 

​

​

    

2022

    

2021

    

​

​

(IN THOUSANDS, EXCEPT PERCENTAGES)

​

Demand:

​

​

​

    

​

​

​

​

    

​

​

Non-interest bearing

​

$

215,196

 

—

%  

$

211,557

 

—

%  

Interest bearing

​

 

227,838

 

0.53

​

 

213,736

 

0.12

​

Savings

​

 

137,845

 

0.10

​

 

126,050

 

0.14

​

Money market

​

 

289,674

 

0.69

​

 

297,844

 

0.23

​

Certificates of deposit

​

 

285,760

 

1.08

​

 

305,251

 

1.22

​

Total deposits

​

$

1,156,313

 

0.68

%  

$

1,154,438

 

0.51

%  

​

The loan portfolioFederal Deposit Insurance Corporation (FDIC) is an independent agency of the Company consistedUnited States government that protects bank depositors against loss. The Bank is an FDIC-insured institution, therefore, deposits are insured up to the standard insurance amount of $250,000 per depositor. As of December 31, 2022 and 2021, the following:estimated amount of uninsured deposits was $316.5 million and $326.1 million, respectively. The estimate of uninsured deposits was done at a single account level and does not take into account total customer balances in the Bank. It should be noted that approximately 50% of these uninsured deposits relate to public funds from municipalities, government entities, and

     
 AT DECEMBER 31,
   2017 2016 2015 2014 2013
   (IN THOUSANDS)
Commercial $159,218  $171,563  $181,115  $139,158  $120,120 
Commercial loans secured by real estate(1)  464,153   447,040   422,145   410,851   412,254 
Real estate-mortgage(1)  247,278   245,765   257,937   258,616   235,689 
Consumer  19,383   19,872   20,344   19,009   15,864 
Total loans  890,032   884,240   881,541   827,634   783,927 
Less: Unearned income  399   476   557   554   581 
Total loans, net of unearned income $889,633  $883,764  $880,984  $827,080  $783,346 

(1)For each of the periods presented beginning with December 31, 2017, real estate-construction loans constituted 4.1%, 4.7%, 3.0%, 3.5% and 3.0% of the Company’s total loans, net of unearned income, respectively.

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Table of Contents

TABLE OF CONTENTSschool districts which by law are required to be collateralized with investment securities or FHLB letters of credit to protect these depositor funds.

​

The maturities on CDs with balances that exceed the FDIC insurance limit of  $250,000 as of December 31, 2022, are as follows:

​

​

​

​

​

​

    

(IN THOUSANDS)

MATURING IN:

 

​

  

Three months or less

​

$

18,608

Over three through six months

​

 

10,049

Over six through twelve months

​

 

20,994

Over twelve months

​

 

24,323

Total

​

$

73,974

​

LOANS

Secondary Market Activities

The residential lending department of the Bank continues to originate one-to-four family mortgage loans for customers, the majoritysome of which are sold to outside investors in the secondary market and some of which are retained for the Bank’s portfolio. Mortgages sold onin the secondary market are sold to investors on a “flow” basis; mortgages are priced and delivered on a “best efforts” pricing basis, with servicing released to the investor. Fannie Mae/Freddie Mac guidelines are used in underwriting all mortgages with the exception of a limited amount of CRA loans.loans and internal special programs. Mortgages with longer terms, such as 20-year, 30-year, FHA, and VA loans, are usually sold. The remaining production of the department includes construction, adjustable rate mortgages, and quality non-salable loans, and bi-weekly mortgages.loans. These loans are usually kept in the Bank’s portfolio. New portfolio production is predominately adjustable rate mortgages.

Non-performing Assets

The following table presents information concerning non-performing assets:

     
 AT DECEMBER 31,
   2017 2016 2015 2014 2013
   (IN THOUSANDS, EXCEPT PERCENTAGES)
Non-accrual loans:
                         
Commercial $353  $496  $4,260  $—  $— 
Commercial loans secured by real estate  1,406   178   18   778   1,632 
Real estate-mortgage  1,257   929   1,788   1,417   1,239 
Total  3,016   1,603   6,066   2,195   2,871 
Other real estate owned:
                         
Commercial loans secured by real estate  —   —   —   384   344 
Real estate-mortgage  18   21   75   128   673 
Total  18   21   75   512   1,017 
Total restructured loans not in
non-accrual (TDR)		  —   —   156   210   221 
Total non-performing assets including TDR $3,034  $1,624  $6,297  $2,917  $4,109 
Total non-performing assets as a percent of loans, net of unearned income, and other real estate owned  0.34%   0.18%   0.71%   0.35%   0.52% 

The Company is unaware of any additional loans which are required to either be charged-off or added to the non-performing asset totals disclosed above. Other real estate owned (OREO) is measured at fair value based on appraisals, less cost to sell at the date of foreclosure. The Company had no loans past due 90 days or more, still accruing, for the periods presented.

The following table sets forth, for the periods indicated, (1) the gross interest income that would have been recorded if non-accrual loans had been current in accordance with their original terms and had been outstanding throughout the period or since origination if held for part of the period, (2) the amount of interest income actually recorded on such loans, and (3) the net reduction in interest income attributable to such loans.

     
 YEAR ENDED DECEMBER 31,
   2017 2016 2015 2014 2013
   (IN THOUSANDS)
Interest income due in accordance with original terms $103  $118  $94  $136  $178 
Interest income recorded  (75)   —   —   —   — 
Net reduction in interest income $28  $118  $94  $136  $178 

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AMERISERV FINANCIAL NON-BANKING SUBSIDIARIES
AMERISERV TRUST AND FINANCIAL SERVICES COMPANY

AmeriServ Trust and Financial Services Company is a trust company organized under Pennsylvania law in October 1992. Its staff of approximately 45 professionals administers assets valued at approximately $2.2$2.3 billion that are not recognized on the Company’s balance sheet at December 31, 2017.2022. The Trust Company focuses on wealth management. Wealth management includes personal trust products and services such as personal portfolio investment management, estate planning and administration, custodial services and pre-need trusts. Also, institutional trust products and services such as 401(k) plans, defined benefit and defined contribution employee benefit plans, and individual retirement accounts are included in this segment. This segment also includes financial services, which includeprovide the sale of mutual funds, annuities, and insurance products. The wealth management business also includes the union collective investment funds, namely the ERECT and BUILD funds, which are designed to use union pension dollars in construction projects that utilize union labor. The BUILD fund continues in the process of liquidation. At December 31, 2017,2022, the Trust Company had total assets of  $5.1$6.7 million and total stockholder’s equity of  $5.1$6.5 million. In 2017,2022, the Trust Company contributed earnings to the Company as its gross revenue amounted to $8.8$10.6 million and the net income contribution was $1.1$1.3 million. The Trust Company is subject to regulation and supervision by the Federal Reserve Bank of Philadelphia and the PDB.

AMERISERV LIFE

AmeriServ Life is a captive insurance company organized under the lawsMONETARY POLICIES

Commercial banks are affected by policies of the State of Arizona. AmeriServ Life engages in underwriting as reinsurer of credit life and disability insurance within the Company’s market area. Operations of AmeriServ Life are conducted in each office of the Company’s banking subsidiary. AmeriServ Life is subject to supervision and regulation by the Arizona Department of Insurance, the Pennsylvania Insurance Department, andvarious regulatory authorities including the Board of Governors of the Federal Reserve System (the Federal Reserve). At December 31, 2017, AmeriServ Life had total assets of $284,000.

MONETARY POLICIES

Commercial banks are affected by policies of various regulatory authorities including the Federal Reserve. An important function of the Federal Reserve is to regulate the national supply of bank credit. Among the instruments of monetary policy used by the Federal Reserve are: open market operations in U.S. Government securities, changes in the federal funds rate and discount rate on member bank borrowings, and changes in reserve requirements on bank deposits. These means are used in varying combinations to influence overall growth of bank loans, investments, and deposits, and may also affect interest rate charges on loans or interest paid for deposits. The monetary policies of the Federal Reserve have had and will continue to have, a significant effect on the operating results of commercial banks in the past and are expected to continue to do so in the future.

COMPETITION

Our subsidiaries face strong competition from other commercial banks, savings banks, credit unions, savings and loan associations, and other financial or investment service institutions for business in the communities they serve.

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Several of these institutions are affiliated with major banking and financial institutions which are substantially larger and have greater financial resources than the Bank and the Trust Company. As the financial services industry continues to consolidate, the scope of potential competition affecting our subsidiaries will also increase. Brokerage houses, consumer finance companies, insurance companies, financial technology firms, and pension trusts are important competitors for various types of financial services. In addition, personalPersonal and corporate trust investment counseling services are offered by insurance companies, other firms, and individuals. In addition, some of these competitors, such as credit unions, are subject to a lesser degree of regulation or taxation than that imposed on us.

MARKET AREA & ECONOMY

U.S. inflation surged with in 2022, reaching heights unseen since the early 1980s. Increasing prices shrank Americans’ inflation-adjusted pay despite high wage growth for many. Pandemic price pressures, dismissed as transitory, turned out to be enduring and the Russia / Ukraine war caused a fresh spike in food and energy costs. A surge in demand coming out of the COVID-19 recession, coupled with lingering supply-chain disruptions and labor shortages, created a perfect storm for price increases. The Fed increased interest rates aggressively at the risk of plunging the world’s largest economy into recession. Positive second half 2022 GDP growth tempered recessionary fears, though 2023 concerns continue to exist. Interest rate-sensitive sectors like autos and housing were impacted the most by the Fed tightening, but pent-up demand and pandemic savings kept spending elevated. The labor market remains historically tight, showing strong wage pressures and solid job growth despite 425 basis points of Fed tightening. Job growth slowed somewhat over the course of 2022, but with the 12-month average around 400k it is nearly double the pre-pandemic average. The Fed is looking for much slower job growth as it aims to rebalance labor supply and demand in its mission to cool wage pressures. Supply chain improvements have cooled some producer price inflation. Rising mortgage rates and elevated house prices have pulled sales down from their pandemic peaks.

Johnstown, Pennsylvania, where the Company is headquartered, continues to have a cost of living that is lower than the national average. Johnstown is home to The University of Pittsburgh at Johnstown, Pennsylvania Highlands Community College and Conemaugh Health System. The high-tech defense industry is now the main non-health care staple of the Johnstown economy, with the region fulfilling many Federalfederal government contracts, punctuated by one of the premier defense trade shows in the U.S., the annual Showcase


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For for Commerce. The city also hosts annual events such as the Flood City Music Festival and the Thunder in the Valley Motorcycle Rally, each of which draw several thousand visitors. The Johnstown, PA MSA unemployment rate decreased from a 6.8%7.0% average in 20162021 to a 6.0%5.1% average in 2017.2022. The Johnstown, PA MSA continues to have one of the highest jobless rates among the 18 metropolitan statistical areas across the state. As of December 31, 2022, employment within the Johnstown MSA has not yet recovered to pre-pandemic levels as there were 83,600 persons employed compared to 88,400 employed at December 31, 2019 representing a decline of 4,800 jobs, or 5.4%. This economic data, coupled with a declining population trend, creates a growth challenge moving forward.

Economic conditions are stronger in the State College market and have demonstrated the same improvement experienced in the national economy. The community is a college town, dominated economically and demographically by the presence of the University Park campus of the Pennsylvania State University. “Happy Valley” is another often-used term to refer to the State College area, including the borough and the townships of College, Harris, Patton, and Ferguson. The unemployment rate for the State College MSA decreased from a 4.1%4.6% average in 20162021 to a 3.7%3.2% average in 20172022 and remains the one of the lowest of all regions in the Commonwealth. A large percentage of the population in State College falls into the 18 to 34 year old34-year-old age group, while potential customers in the Cambria/Somerset markets tend to be over 50 years of age.

Hagerstown in Washington County, Maryland offers a rare combination of business advantages providing a major crossroads location that is convenient to the entire East Coast at the intersection of I-81 and I-70. It has a workforce of over 400,000 with strengths in manufacturing and technology. It also offers an affordable cost of doing business and living, all within an hour of the Washington, D.C./Baltimore regions. There are also plenty of facilities and land slated for industrial/commercial development. Hagerstown has become a choice location for manufacturers, financial services, and distribution companies. The Hagerstown, MD-Martinsburg, WV MSA unemployment rate decreased from a 4.5% average in 2021 to a 3.4% average in 2022.

The Company also has loan production offices in MonroevilleWilkins Township in Allegheny County and Altoona in Blair County, Pennsylvania, and Hagerstown in Washington County, Maryland. MonroevillePennsylvania. Wilkins Township in Allegheny County, Pennsylvania is located 15 miles east of the city of Pittsburgh. While the city is historically known for its steel industry, today its economy is largely based on healthcare, education, technology and financial services. The city of Pittsburgh is home to many colleges, universities and research

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facilities, the most well-known of which are Carnegie Mellon University, Duquesne University and the University of Pittsburgh. Pittsburgh is rich in art and culture. Pittsburgh museums and cultural sites include the Andy Warhol Museum, the Carnegie Museum of Art, the Frick Art & Historical Center, and Pittsburgh Center for the Arts among numerous others. Pittsburgh is also the home of the Pirates, Steelers and Penguins. The unemployment rate for the Pittsburgh MSA decreased from a 5.7%6.4% average in 20162021 to a 5.0%4.3% average in 2017.2022.

Altoona is the business center of Blair County, Pennsylvania with a strong retail, government and manufacturing base. The top field of employment in Altoona and the metro area is healthcare. Its location along I-99 draws from a large trade area over a wide geographic area that extends to State College and Johnstown. It serves as the headquarters for Sheetz Corporation, which ranks on Forbes list of the top privately owned companies. In addition to being located adjacent to I-99 and a major highway system, Altoona also has easy access to rail and air transportation. The average unemployment rate in the Altoona MSA decreased from a 5.3% average6.0% in 20162021 to a 4.8% average4.1% in 2017.2022.

Hagerstown in Washington County, Maryland offers a rare combination of business advantages providing a major crossroads location that is convenient to the entire East Coast at the intersection of I-81 and I-70. It has a workforce of over 400,000 with strengths in manufacturing and technology. It also offers an affordable cost of doing business and living within an hour of the Washington, D.C./Baltimore regions. There are also plenty of facilities and land slated for industrial/commercial development. Hagerstown has become a choice location for manufacturers, financial services, and distribution companies. The Hagerstown, MD-Martinsburg, WV MSA unemployment rate improved from a 4.6% average in 2016 to a 3.7% average in 2017.EMPLOYEES

EMPLOYEES

The Company employed 321329 people as of December 31, 20172022 in full- and part-time positions. Approximately 155150 non-supervisory employees of the Company are represented by the United Steelworkers AFL-CIO-CLC, Local Union 2635-06. The Company is under a four yearfour-year labor contract with the United Steelworkers Local, thatwhich will expire on October 15, 2021.2025. The contract calls for annual wage increases of 3.0%. Additionally, effective January 1, 2014,2% during the Company implemented a soft freeze of its defined benefit pension plan for union employees. A soft freeze means that all existing union employees as of December 31, 2013 currently participating will remain in the defined benefit pension plan but any new union employees hired after January 1, 2014 will no longer be partlife of the defined benefit plan but instead will be offered retirement benefits under an enhanced 401(k) program.contract. The Company has not experienced a work stoppage since 1979. Unionization in financial institutions remains exceptionally low with less than 0.25% of banks nationwide being covered by a Collective Bargaining Agreement. This unique unionization situation creates both challenges and opportunities for the Company. The key goals of organized labor are to provide their members with strong wages and benefits, stable jobs, and safe and respectable workplaces. As a result of these key union goals, the Company’s salaries and benefit costs are higher than its non-union peers as we offer good wages and strong benefits which include affordable health care and strong retirement benefits with the majority of current union employees participating in a defined benefit pension plan. The Company has consistently viewed its positive union relationships as a potential source of additional revenue. Examples of success in these efforts include the previously mentioned ERECT Fund where the wealth management group is onetrustee for this $250 million fund whose purpose is to invest in commercial construction projects with the requirement that they utilize union labor. The Bank has also been a preferred mortgage and consumer loan provider for the Pennsylvania State Education Association for almost 10 years which provides us with the opportunity to expand our lending in these products throughout Pennsylvania. Since inception of an estimated ten union-represented banks nationwide.the partnership, the Bank has funded approximately $280 million in mortgage and consumer loans to unionized teachers and their family members.


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INDUSTRY REGULATION

The banking and trust industry, and the operation of bank holding companies, is highly regulated by federal and state law, and by numerous regulations adopted by the federal banking agencies and state banking agencies. Bank regulation affects all aspects of conducting business as a bank, including such major items as minimum capital requirements, limits on types and amounts of investments, loans and other assets, as well as borrowings and other liabilities, and numerous restrictions or requirements on the loan terms and other products made available to customers, particularly consumers. Federal deposit insurance from the Federal Deposit Insurance Corporation (the FDIC)(FDIC) is required for all banks in the United States, and maintaining FDIC insurance requires observation of the various rules of the FDIC, as well as payment of deposit insurance premiums. New branches, or acquisitions or mergers, are required to be pre-approved by the responsible agency, which in the case of the Company and the Bank is the Federal Reserve and the PDB. The Bank provides detailed financial information to its regulators, including a quarterly call report that is filed pursuant to detailed prescribed instructions to ensure that all U.S. banks report the same way. The U.S. banking laws and regulations are frequently updated and amended, especially in response to crises in the financial industry, such as the global financial crisis of 2008, which resulted in the Dodd-Frank Wall Street Reform and Consumer Protection Act enacted in 2010 (the Dodd-Frank Act), a statute affecting many facets of the financial industry. The Economic Growth, Regulatory Relief, and Consumer Protection Act was enacted into law in 2018 and was designed to ease certain restrictions imposed by the Dodd-Frank Act. The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted into law on March 27, 2020 in response to the COVID-19 pandemic.

On March 12, 2023, the Board of Governors of the Federal Reserve System established a new Bank Term Funding Program (BTFP), offering loans of up to one year in length to banks, savings associations, credit unions, and other eligible depository institutions pledging U.S. Treasuries, agency debt and mortgage-backed securities, and other qualifying assets as collateral. These assets will be valued at par. The BTFP is intended to be an additional source of

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liquidity against high-quality securities, eliminating an institution's need to quickly sell those securities in times of stress it will make available additional funding to eligible depository institutions to help assure banks have the ability to meet the needs of all their depositors.

While it is impractical to discuss all laws and regulations that regularly affect the business of the Company and its subsidiaries, set forth below is an overview of some of the major provisions and statutes that apply.

CAPITAL REQUIREMENTS

One of the most significant regulatory requirements for banking institutions is minimalminimum capital, imposed as a ratio of capital to assets. The Federal Deposit Insurance Act, as amended (the FDIA)(FDIA), identifies five capital categories for insured depository institutions: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized. It requires U.S. federal bank regulatory agencies to implement systems for “promptprompt corrective action”action for insured depository institutions that do not meet minimum capital requirements based on these categories. The FDICIA imposesBoth federal and state banking regulation impose progressively more restrictive constraints on operations, management and capital distributions, depending on the category in which an institution is classified. Unless a bank is well capitalized, it is subject to restrictions on its ability to utilize brokered deposits and on other aspects of its operations. Generally, a bank is prohibited from paying any dividend or making any capital distribution or paying any management fee to its holding company if the bank would thereafter be undercapitalized.

As of December 31, 2017,2022, the Company believes that its bank subsidiary was well capitalized, based on the prompt corrective action guidelines described above. On January 1, 2015, U.S. federal banking agencies implemented the new Basel III capital standards, which establish the minimum capital levels to be considered well-capitalized and reviserevised the prompt corrective action requirements under banking regulations. The revisions from the previous standards include a revised definition of capital, the introduction of a minimum common equity tier 1 capital ratio and changed risk weightings for certain assets. The implementation of the new rules will be phased in over a four year period ending January 1, 2019 with minimum capital requirements becoming increasingly more strict each year of the transition. The new minimum capital to risk-adjusted assets requirements (which includes the impact of the capital conservation buffer applicable to each year) are as follows:

   
 Minimum Capital Well Capitalized
   Effective January 1,
   2016 2017
Common equity tier 1 capital ratio  5.125%   5.75%   6.5% 
Tier 1 capital ratio  6.625%   7.25%   8.0% 
Total capital ratio  8.625%   9.25%   10.0% 

Under the newcurrent rules, in order to avoid limitations on capital distributions (including dividend payments and certain discretionary bonus payments to executive officers), a banking organization must hold a capital conservation buffer above its minimum risk-based capital requirements which increases over the transition


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period, from 0.625%of 2.50% of total risk weighted assets in 2016 to 2.50% in 2019. Implementation of the deductions and other adjustments to common equity tier 1 capital began on January 1, 2015 and will be phased-in over a three-year period (beginning at 40% on January 1, 2015, 60% on January 1, 2016 and an additional 20% per year thereafter).assets.

​

The capital to risk-adjusted assets requirements for minimum capital plus the applicable buffer, and the requirement to be well capitalized, are as follows:

​

​

​

​

​

​

​

​

​

​

 

​

​

​

​

​

 

​

​

Minimum Capital 

​

Well

 

​

    

Plus Buffer

    

Capitalized

  

Common equity tier 1 capital ratio

    

7.00

%  

6.50

%

Tier 1 capital ratio

 

8.50

%  

8.00

%

Total capital ratio

 

10.50

%  

10.00

%

​

DIVIDEND RESTRICTIONS

The primary source of cash to pay dividends, if any, to the Company’s shareholders and to meet the Company’s obligations is dividends paid to the Company by the Bank and the Trust Company. Dividend payments by the Bank to the Company are subject to the laws of the Commonwealth of Pennsylvania, the Banking Code, the FDIA and the regulation of the PDB and of the Federal Reserve. Under the Banking Act and the FDIA, a bank may not pay any dividends if, after paying such dividends, it would be undercapitalized under applicable capital requirements. In addition to these explicit limitations, the federal regulatory agencies are authorized to prohibit a banking subsidiary or bank holding company from engaging in unsafe or unsound banking practices. Depending upon the circumstances, the agencies could take the position that paying a dividend would constitute an unsafe or unsound banking practice.

It is the policy of the Federal Reserve that bank holding companies should pay cash dividends on common stock only out of income available from the immediately preceding year and only if prospective earnings retention is consistent with the organization’s expected future needs and financial condition. The policy provides that bank holding companies should not maintain a level of cash dividend that undermines the bank holding company’s ability to serve as a source of strength to its banking subsidiary. A bank holding company may not pay dividends when it is insolvent.

For more information regarding quarterly cash dividends, see Part II, Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities below.

SARBANES-OXLEY ACT OF 2002

The Sarbanes-Oxley Act10

Table of 2002 is not a banking law, but contains important requirements for public companies in the area of financial disclosure and corporate governance. In accordance with Section 302(a) of the Sarbanes-Oxley Act, written certifications by the Company’s principal executive officer and principal financial officer are required. These certifications attest, among other things, that the Company’s quarterly and annual reports filed with the SEC do not contain any untrue statement of a material fact. In response to the Sarbanes-Oxley Act of 2002, the Company adopted a series of procedures to further strengthen its corporate governance practices. The Company also requires signed certifications from managers who are responsible for internal controls throughout the Company as to the integrity of the information they prepare. These procedures supplement the Company’s Code of Conduct Policy and other procedures that were previously in place. The Company maintains a program designed to comply with Section 404 of the Sarbanes-Oxley Act. This program included the identification of key processes and accounts, documentation of the design of control effectiveness over process and entity level controls, and testing of the effectiveness of key controls.Contents

PRIVACY PROVISIONS

Federal banking regulators adopted rules that limit the ability of banks and other financial institutions to disclose non-public information about customers to non-affiliated third parties. These limitations require disclosure of privacy policies to consumers and, in some circumstances, allow consumers to prevent disclosure of certain personal information to non-affiliated third parties. The privacy provisions affect how consumer information is transmitted through diversified financial companies and conveyed to outside vendors. The Company believes it is in compliance with the various provisions.

USA PATRIOT ACT

A major focus of governmental policy on financial institutions in recent years has been aimed at combating money laundering and terrorist financing. The USA Patriot Act substantially broadened the scope of United States anti-money laundering laws and regulations by imposing significant new compliance and due diligence obligations, creating new crimes and penalties and expanding the extra-territorial jurisdiction of the United States. The United States Treasury Department has issued and, in some cases, proposed a number of regulations that apply various requirements of the USA Patriot Act to financial institutions. These regulations impose obligations on financial institutions to maintain appropriate policies, procedures and controls to detect,


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prevent and report money laundering and terrorist financing and to verify the identity of their customers. Failure of a financial institution to maintain and implement adequate programs to combat money laundering and terrorist financing, or to comply with all of the relevant laws or regulations, could have serious legal and reputational consequences for the Company.

DODD-FRANK WALL STREET REFORM

CORONAVIRUS AID, RELIEF, AND CONSUMER PROTECTIONECONOMIC SECURITY ACT

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted into law on March 27, 2020. Federal, state, and local governments adopted various statutes, rules, regulations, orders, and guidelines in order to address the COVID-19 pandemic and the adverse economic effects of the pandemic on individuals, families, businesses, and governments. Financial institutions, including the Company, were affected by many of these measures, including measures that were broadly applicable to businesses operating in the communities where the Company does business. Financial services firms, like the Company, were required to operate in a manner that seeked to protect the health and safety of their customers and employees.

In addition, the federal banking agencies along with state bank regulators issued an interagency statement on March 22, 2020, addressing loan modifications that were made by financial institutions for borrowers affected by the COVID-19 crisis. The agencies stated that short-term loan modifications made on a good faith basis in response to COVID-19 for borrowers who were current prior to any relief did not need to be categorized as TDRs and that financial institutions were not expected to designate loans with deferrals granted due to COVID-19 as past due because of the deferral.

The CARES Act contained a number of provisions that affected banking organizations. The CARES Act provided funding for various programs under which the federal government lended to, guaranteed loans to, or made investments in businesses. Banking organizations were expected to play a role in some of those programs, and when they did so, they were subject to certain requirements. One of those programs was the Paycheck Protection Program (PPP), a program administered by the Small Business Administration (SBA) that provided loans to small businesses for payroll and other basic expenses during the COVID-19 crisis. The loans could be made by SBA-certified lenders and were 100% guaranteed by the SBA. The loans were eligible to be forgiven if certain conditions were satisfied, in which event the SBA would make payment to the lender for the forgiven amounts. The Bank participated in the PPP as a lender. In accordance with the CARES Act, a PPP loan is assigned a risk weight of zero percent under the federal banking agencies’ risk-based capital rules.

The Dodd-FrankCARES Act also authorized temporary changes to certain provisions applicable to banking organizations. Among other changes, Section 4013 of the CARES Act gave financial institutions the right to elect to suspend GAAP principles and regulatory determinations for loan modifications relating to COVID-19 that would otherwise be categorized as TDRs from March 1, 2020, through the earlier of December 31, 2020, or 60 days after the COVID-19 national emergency ended. On April 7, 2020, the federal banking agencies, in consultation with state bank regulators, issued an interagency statement clarifying the interaction between (i) their earlier statement discussing whether loan modifications relating to COVD-19 need to be treated as TDRs and (ii) the CARES Act provision on this subject. In this interagency statement, the agencies also said that when exercising supervisory and enforcement responsibility with respect to consumer protection requirements, they would take into account the unique circumstances impacting

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borrowers and institutions resulting from the COVID-19 emergency and that they did not expect to take a consumer compliance public enforcement action against an institution, provided that the circumstances were related to this emergency and the institution made good faith efforts to support borrowers and comply with the consumer protection requirements and addressed any needed corrective action. The suspension of TDR identification and accounting triggered by the effects of the COVID-19 pandemic was extended by the Consolidated Appropriations Act, 2021, signed into law on July 21, 2010. This law significantly changed the previous bank regulatory structure and affects the lending, deposit, investment, trading and operating activities of financial institutions and their holding companies.

A provisionDecember 27, 2020. The period established by Section 4013 of the Dodd-FrankCARES Act eliminateswas extended to the federal prohibitionsearlier of January 1, 2022 or 60 days after the date on paying interestwhich the national COVID-19 emergency terminated. It is currently anticipated that the national COVID-19 emergency will terminate on demand deposits, thus allowing businesses to have interest bearing checking accounts. The Dodd-Frank Act also broadened the base for FDIC insurance assessments. Assessments will now be based on the average consolidated total assets less tangible equity capital of a financial institution. The Dodd-Frank Act also permanently increased the maximum amount of deposit insurance for banks, savings institutions and credit unions to $250,000 per depositor.May 11, 2023.

Bank and thrift holding companies with assets of less than $15 billion as of December 31, 2009, such as the Company, are permitted to include trust preferred securities that were issued before May 19, 2010, such as the Company’s 8.45% Trust Preferred Securities, as Tier 1 capital; however, trust preferred securities issued by a bank or thrift holding company (other than those with assets of less than $500 million) after May 19, 2010, will no longer count as Tier 1 capital. Such trust preferred securities still will be entitled to be treated as Tier 2 capital.

The Dodd-Frank Act created the Consumer Financial Protection Bureau (the CFPB), a new independent regulatory agency with broad powers to supervise and enforce consumer protection laws. The CFPB has broad rule-making authority for a wide range of consumer protection laws that apply to all banks and savings institutions, including the authority to prohibit “unfair, deceptive or abusive” acts and practices. The CFPB has examination and enforcement authority over all banks and savings institutions with more than $10 billion in assets. Banks and savings institutions with $10 billion or less in assets such as the Company will continue to be examined for compliance with the consumer laws by their primary bank regulators. The Dodd-Frank Act also weakens the federal preemption rules that have been applicable for national banks and federal savings associations and gives state attorney generals the ability to enforce federal consumer protection laws.

AVAILABLE INFORMATION

We file annual, quarterly and current reports, proxy statements and other information with the SEC. These filings are available to the public on the Internetinternet at the SEC��sSEC’s website athttp://www.sec.gov. You may also read and copy any document we file with the SEC at the SEC’s public reference room, located at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room.

Our Internetinternet address ishttp://www.ameriserv.com. We make available, free of charge onhttp://www.ameriserv.com, our annual, quarterly and current reports, and amendments to those reports, as soon as reasonably practical after we electronically file such material with, or furnish it to, the SEC.


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ITEM 1A.   RISK FACTORS

Not applicable.

​

ITEM 1B.   UNRESOLVED STAFF COMMENTS

The Company has no unresolved staff comments from the SEC for the reporting periods presented.

​

ITEM 2.   PROPERTIES

The principal offices of the Company and the Bank occupy the five-story AmeriServ Financial building at the corner of Main and Franklin Streets in Johnstown plus twelveeleven floors of the building adjacent thereto. The Company occupies the main office and its subsidiary entities have 13 other14 locations which are owned. SixSeven additional locations are leased with terms expiring from January 1, 2018September 30, 2023 to July 31, 2030.June 30, 2033.

​

ITEM 3.   LEGAL PROCEEDINGS

The Company is subject to a number of asserted and unasserted potential legal claims encountered in the normal course of business. In the opinion of both management and legal counsel, there is no present basis to conclude that the resolution of these claims will have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.

​

ITEM 4.   MINE SAFETY DISCLOSURE

DISCLOSURES

Not applicable.

​

​


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PART II

ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

COMMON STOCK

As of January 31, 2018,March 21, 2023, the Company had 2,9832,560 shareholders of record for its common stock. The Company’s common stock is traded on The NASDAQ Stock Market under the symbol “ASRV.” The following table sets forth the actual high and low closing prices and the cash dividends declared per share for the periods indicated:

​

   
 PRICES CASH
DIVIDENDS
DECLARED
 HIGH LOW
Year ended December 31, 2017:
               

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

CASH

​

​

PRICES

​

DIVIDENDS

​

    

HIGH

    

LOW

    

DECLARED

Year ended December 31, 2022:

​

​

  

​

​

  

​

​

  

First Quarter $4.00  $3.60  $0.015 

​

$

4.50

​

$

3.85

​

$

0.025

Second Quarter  4.20   3.70   0.015 

​

 

4.08

​

 

3.92

​

 

0.030

Third Quarter  4.05   3.80   0.015 

​

 

4.03

​

 

3.80

​

 

0.030

Fourth Quarter  4.35   3.85   0.015 

​

 

4.10

​

 

3.70

​

 

0.030

Year ended December 31, 2016
               

Year ended December 31, 2021:

​

 

  

​

 

  

​

 

  

First Quarter $3.36  $2.96  $0.01 

​

$

4.39

​

$

3.09

​

$

0.025

Second Quarter  3.27   2.95   0.01 

​

 

4.31

​

 

3.77

​

 

0.025

Third Quarter  3.34   3.02   0.015 

​

 

4.00

​

 

3.70

​

 

0.025

Fourth Quarter  3.80   3.15   0.015 

​

 

4.01

​

 

3.74

​

 

0.025

​

The declaration of cash dividends on the Company’s common stock is at the discretion of the Board, and any decision to declare a dividend is based on a number of factors, including, but not limited to, earnings, prospects, financial condition, regulatory capital levels, applicable covenants under any credit agreements and other contractual restrictions, Pennsylvania law, federal and Pennsylvania bank regulatory law, and other factors deemed relevant. Additionally, on January 24, 2017, the Company’s Board of Directors approved apreviously announced common stock repurchase program that called for AmeriServ Financial, Inc. to buy back up to 5% or approximately 945,000 sharesprograms have been completed.

​

​

13

Table of its outstanding common stock over an 18 month time period beginning on the day of announcement.

Following are the Company’s monthly common stock purchases during the fourth quarter of 2017. All shares are repurchased under Board of Directors authorization.

    
Period Total number of
shares purchased		 Average price
paid per share		 Total number of
shares purchased
as part of
publicly
announced plan		 Maximum number
of shares that may
yet be purchased
under the plan
October 1 – 31, 2017  19,900  $4.12   19,900   238,740 
November 1 – 30, 2017  61,194   4.17   61,194   177,546 
December 1 – 31, 2017  71,883   4.31   71,883   105,663 
Total  152,977  $4.23   152,977      

In first nine months of 2017, the Company was able to repurchase 686,360 shares at an average price of $4.02. Through December 31, 2017, the Board of Director approved repurchase plan had a total of 839,337 shares repurchased at an average price of $4.06. This represents approximately 89% of the authorized repurchase plan.Contents


TABLE OF CONTENTS

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

SELECTED FIVE-YEAR CONSOLIDATED FINANCIAL DATA

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

AT OR FOR THE YEAR ENDED DECEMBER 31, 

​

​

    

2022

    

2021

    

2020

    

2019

    

2018

​

     
 AT OR FOR THE YEAR ENDED DECEMBER 31,
 2017 2016 2015 2014 2013
 (DOLLARS IN THOUSANDS,
EXCEPT PER SHARE DATA AND RATIOS)

​

​

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)

​

SUMMARY OF INCOME STATEMENT DATA:
                         

 

​

  

 

​

  

 

​

  

 

​

  

 

​

  

​

Total interest income $44,356  $41,869  $41,881  $40,441  $39,343 

​

$

49,058

​

$

46,669

​

$

46,882

​

$

49,767

​

$

47,094

​

Total interest expense  8,795   7,735   6,520   6,397   6,482 

​

 

8,495

​

 

7,586

​

 

10,515

​

 

14,325

​

 

11,600

​

Net interest income  35,561   34,134   35,361   34,044   32,861 

​

 

40,563

​

 

39,083

​

 

36,367

​

 

35,442

​

 

35,494

​

Provision (credit) for loan losses  800   3,950   1,250   375   (1,100) 

​

 

50

​

 

1,100

​

 

2,375

​

 

800

​

 

(600)

​

Net interest income after provision (credit) for loan losses  34,761   30,184   34,111   33,669   33,961 

​

 

40,513

​

 

37,983

​

 

33,992

​

 

34,642

​

 

36,094

​

Total non-interest income  14,645   14,638   15,267   14,323   15,744 

​

 

16,692

​

 

17,761

​

 

16,275

​

 

14,773

​

 

14,224

​

Total non-interest expense  40,766   41,615   41,038   43,371   42,223 

​

 

48,004

​

 

46,970

​

 

44,455

​

 

41,815

​

 

40,873

​

Income before income taxes  8,640   3,207   8,340   4,621   7,482 

​

 

9,201

​

 

8,774

​

 

5,812

​

 

7,600

​

 

9,445

​

Provision for income taxes  5,347   897   2,343   1,598   2,289 

​

 

1,753

​

 

1,702

​

 

1,214

​

 

1,572

​

 

1,677

​

Net income $3,293  $2,310  $5,997  $3,023  $5,193 

​

$

7,448

​

$

7,072

​

$

4,598

​

$

6,028

​

$

7,768

​

Net income available to common shareholders $3,293  $2,295  $5,787  $2,813  $4,984 
PER COMMON SHARE DATA:
                         

​

 

  

​

 

  

​

 

  

​

 

  

​

 

  

​

Basic earnings per share $0.18  $0.12  $0.31  $0.15  $0.26 

​

$

0.44

​

$

0.41

​

$

0.27

​

$

0.35

​

$

0.43

​

Diluted earnings per share  0.18   0.12   0.31   0.15   0.26 

​

 

0.43

​

 

0.41

​

 

0.27

​

 

0.35

​

 

0.43

​

Cash dividends declared  0.06   0.05   0.04   0.04   0.03 

​

 

0.115

​

 

0.100

​

 

0.100

​

 

0.095

​

 

0.075

​

Book value at period end  5.25   5.05   5.19   4.97   4.91 

​

 

6.20

​

 

6.82

​

 

6.12

​

 

5.78

​

 

5.56

​

BALANCE SHEET AND OTHER DATA:
                         

​

 

  

​

 

  

​

 

  

​

 

  

​

 

  

​

Total assets $1,167,655  $1,153,780  $1,148,497  $1,089,263  $1,056,036 

​

$

1,363,874

​

$

1,335,560

​

$

1,282,733

​

$

1,171,184

​

$

1,160,680

​

Loans and loans held for sale, net of unearned income  892,758   886,858   883,987   832,131   786,748 

​

 

990,825

​

 

986,037

​

 

978,345

​

 

887,574

​

 

863,129

​

Allowance for loan losses  10,214   9,932   9,921   9,623   10,104 

​

 

10,743

​

 

12,398

​

 

11,345

​

 

9,279

​

 

8,671

​

Investment securities available for sale  129,138   127,077   119,467   127,110   141,978 

​

 

179,508

​

 

163,171

​

 

144,165

​

 

141,749

​

 

146,731

​

Investment securities held to maturity  38,752   30,665   21,419   19,840   18,187 

​

 

61,878

​

 

53,751

​

 

44,222

​

 

39,936

​

 

40,760

​

Deposits  947,945   967,786   903,294   869,881   854,522 

​

 

1,108,537

​

 

1,139,378

​

 

1,054,920

​

 

960,513

​

 

949,171

​

Total borrowed funds  115,701   78,645   117,058   93,965   79,640 

​

 

138,373

​

 

72,837

​

 

114,080

​

 

100,574

​

 

108,177

​

Stockholders’ equity  95,102   95,395   118,973   114,407   113,307 

​

 

106,178

​

 

116,549

​

 

104,399

​

 

98,614

​

 

97,977

​

Full-time equivalent employees  302   305   318   314   352 

​

 

315

​

 

304

​

 

299

​

 

309

​

 

303

​

SELECTED FINANCIAL RATIOS:
                         

​

 

  

​

 

  

​

 

  

​

 

  

​

 

  

​

Return on average assets  0.28%   0.20%   0.54%   0.29%   0.51% 

​

 

0.55

%  

 

0.52

%  

 

0.37

%  

 

0.51

%  

 

0.67

%  

Return on average total equity  3.42   2.30   5.10   2.61   4.69 

​

 

6.83

​

 

6.48

​

 

4.52

​

 

6.02

​

 

8.08

​

Loans and loans held for sale, net of unearned income, as a percent of deposits, at period end  94.18   91.64   97.86   95.66   92.07 

​

 

89.38

​

 

86.54

​

 

92.74

​

 

92.41

​

 

90.94

​

Ratio of average total equity to average assets  8.24   8.79   10.65   10.92   10.86 

​

 

8.09

​

 

8.10

​

 

8.21

​

 

8.52

​

 

8.28

​

Common stock cash dividends as a percent of net income available to common shareholders  33.80   41.18   13.03   26.73   11.36 

Common stock cash dividends as a percent of net income

​

 

26.41

​

 

24.14

​

 

37.09

​

 

27.36

​

 

17.31

​

Interest rate spread  3.14   3.08   3.33   3.36   3.39 

​

 

3.11

​

 

3.01

​

 

3.01

​

 

3.05

​

 

3.08

​

Net interest margin  3.32   3.26   3.49   3.52   3.56 

​

 

3.27

​

 

3.15

​

 

3.19

​

 

3.29

​

 

3.31

​

Allowance for loan losses as a percentage of loans, net of unearned income, at period end  1.15   1.12   1.13   1.16   1.29 

​

 

1.08

​

 

1.26

​

 

1.16

​

 

1.05

​

 

1.00

​

Non-performing assets as a percentage of loans and other real estate owned, at period end  0.34   0.18   0.71   0.35   0.52 

​

 

0.52

​

 

0.34

​

 

0.34

​

 

0.26

​

 

0.16

​

Net charge-offs as a percentage of average loans  0.06   0.44   0.11   0.11   0.18 

​

 

0.17

​

 

—

​

 

0.03

​

 

0.02

​

 

0.11

​

Ratio of earnings to fixed charges and preferred dividends:(1)
                         
Excluding interest on deposits  4.22X   2.26X   4.68X   3.30X   5.13X 
Including interest on deposits  1.97   1.40   2.19   1.67   2.07 
Cumulative one year interest rate sensitivity gap ratio, at period end  1.22   1.44   1.23   1.13   1.09 

​

(1)The ratio of earnings to fixed charges and preferred dividends is computed by dividing the sum of income before taxes, fixed charges, and preferred dividends by the sum of fixed charges and preferred dividends. Fixed charges represent interest expense and are shown as both excluding and including interest on deposits.

​


14

TABLE OF CONTENTSTable of Contents

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS (MD&A)

The following discussion and analysis of financial condition and results of operations of the Company should be read in conjunction with the consolidated financial statements of the Company including the related notes thereto, included elsewhere herein.

RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2017, 2016,2022, 2021, AND 2015

20172020

2022 SUMMARY OVERVIEW:

The new Tax Cut and Jobs Act became law on December 21, 2017. Subsequently, AmeriServ and most other banksDuring a period of extreme economic volatility in the nation were caught up in the technical accounting issues the legislation created. We recalculated our Federal tax position for 2017 as of December 31, 2017. The result was a one-time $2.6 million charge against 2017 earnings. This action was taken as of December 21, 2017 and reported in an 8-K filing on January 11, 2018. With those issues completed, we begin this year with a new statutory tax rate of 21%, replacing the previous rate of 34%. We believe that this will be an opportunity for the Company.

This new tax code arrived at a favorable time for AmeriServ. Our goal for 2017 was to re-establish the financial performance level that we reported in mid-2015. The result of this strong emphasis was that AmeriServ ended 2017 with2022, characterized by the highest level of average loans for a full year on record. AmeriServ also ended 2017 with the highest level of average deposits on record, the highest level of total revenue on recordinflation in almost 40 years and a reduced level of operating expenses. It is possible that had it not been necessarymore than 4% increase in short-term interest rates by the Federal Reserve, the Company was able to recalculate the tax accounting process and accept a one-time charge against earnings, that 2017 may have been the best year since the restructure of the franchise in 2000.

That one-time charge resulted in AmeriServ announcing on January 23, 2018 net income for 2017 of $3,293,000 or $0.18 per common share. This was a 43% improvement in net income and a 50% improvement inachieve its highest earnings per share (EPS) performance in over 201620 years and a 15% increase in dividend payments to shareholders.

The Company is proud of the hard work of the AmeriServ bankers that made this success happen and allowed us to get mostly back to normal when it comes to customer service. These efforts included overcoming the challenges created by the pandemic and we are deeply grateful to our very patient customers and staff members who have been more than willing to go the extra mile.

Turning back to financial performance: Net income for 2022 totaled $7,448,000, or $0.43 diluted earnings per share, which reportedrepresented a 4.9% increase over the full year of 2021. On an adjusted non-GAAP basis, excluding the impact of pension settlement charges which are not reflective of the operations of the Company, adjusted net income totaled $9,470,000, or $0.55 adjusted diluted earnings per share(1)(2). This represented an even stronger 12% increase in EPS from the adjusted 2021 full year results. The improved earnings performance for 2022, on both an actual and adjusted basis, reflects the full benefit of $2,295,000 or $0.12 per share. Parenthetically, it is a factseveral important strategic actions that if the Tax Cut and Jobs Act had never occurred and the Company would not have been requiredexecuted in 2021 to recognize an additional income tax chargereduce our cost of $2,624,000, AmeriServ would have reported net incomefunding, the successful management of $5,917,000 or $0.32 per share for 2017. Thisour asset quality throughout the pandemic, and effective balance sheet management.

While 2021 was our year-long goal for 2017.

AmeriServ is growing strongera year over year, but challenges remain. AmeriServ has become awith near record loan demand, 2022 was still very active lenderbut less strong. A late year surge in lending permitted AmeriServ to smallreport good loan totals in December and mid-size businesses. AmeriServ finished 2017end the year on a positive note. We hope this continues into 2023, and we believe we have the capacity for our loan portfolio to reach $1 billion for the fourth consecutive year with a record offirst time as our lending over 90% of deposits into our regional markets.continues to be an important economic driver in the communities where we operate.

The media has perpetuated the narrative that, as the Federal Reserve continues to raise interest rates, loans may become scarce. However, here in western Pennsylvania, more folks are savers than spenders. This means we are always seeking freshthat our friends and neighbors have provided us with more stable deposits because it is our responsibility to provide affordable loans to the local and regional businesses and consumers who are the backbone of our local economies.

AmeriServ also has been a company with a higher level of overhead than most community banks our size. We are working to improve this through technical advances which allow for higher productivity. A relationship has been established with a company who is the largest provider of banking software in the U.S. The goal is to continue to improve productivityfocus on growing the loan portfolio. AmeriServ will continue to be active in lending, but we also will continue to be rigorous in our loan underwriting standards. This will permit us to grow loans while maintaining a high-quality portfolio.

Wealth management is involved in a day-to-day struggle with the turmoil in securities markets. The bear market in equities and bonds has been punishing individual estate plans. There have been market value losses even in the AmeriServ Pathroad portfolio. However, our team of professionals have taken their customary stop loss actions. Our clients understand the Pathroad investment logic and are patiently watching the markets for any signs of an impending turnaround. Fortunately, the Pathroad logic has been tested by similar recessions over the years and it has always proven to consequently further reduce expenses.

It is important tokeep losses below other investment strategies. We note that AmeriServ is now fully focused on executingnot only has the 2017 – 2019 Strategic Plan. Perhaps the biggest challenge in that plan is to improve shareholder return. It was especially gratifying to meet and exceed the shareholder return target establishednumber of clients involved in the strategic plan. That target is to return up to 75%Pathroad logic remained virtually stable during this market but also, the number of earnings to shareholders annually, subject to maintaining sufficient capital to support balance sheet growth. Using the adjusted net income figure prior to the one-time charge required under the Tax Cut and Jobs Act, the total capital return in 2017 was 76.4%. This was composed of quarterly cash dividend payments totaling $1,113,000. Also, a stock repurchase program returned $3,405,000 to shareholders. Upon completion of these entries, AmeriServ still met and exceeded the capital requirements established by the regulators enabling AmeriServ to operate successfully and to respond to expansion opportunities.

Asnew clients has been our aim, we are setting forth in 2018 with allincreased as investors have taken notice of the issues contained inPathroad records. We believe our clients’ biggest concern is about the Tax Cut and Jobs Act as we know them today behind us.duration of this bear market. History tells us that the most significant market value gains often occur during the beginning of a turnaround. It is our job to usemonitor for that turnaround and be ready to take the new lower tax rateappropriate actions for our clients.

Our Board, management group, and team of banking and investment professionals are studying and working hard every day. We support their efforts and have the utmost confidence in their strategies. Understanding western Pennsylvania as we do, it is not difficult for us to build an even strongerthe kind of banking and more profitable company. We will not chase the latest “fad.” Instead, we will continueinvestment strategies needed by our

(1) Non-GAAP financial information, see “Reconciliation of Non-GAAP Financial Measures” later in this MD&A.

(2) Adjusted for pension settlement charge.

15

Table of Contents

customers. It is also our goal to offer a solid stock that continues to build strength in our balance sheet and then leverage that strengthvalue for the benefit of our customers andall our shareholders. We think these are exciting times to be community bankers.


TABLE OF CONTENTSOur stock currently has a 3% dividend yield and an active trading market.

PERFORMANCE OVERVIEW...OVERVIEW.   The following table summarizes some of the Company’s key profitability performance indicators for each of the past three years.

​

​

​

​

​

​

​

​

​

​

​

​

​

    

YEAR ENDED DECEMBER 31, 

 

​

    

2022

    

2021

    

2020

 

   
 YEAR ENDED DECEMBER 31,
 2017 2016 2015
 (IN THOUSANDS, EXCEPT
PER SHARE DATA AND RATIOS)

​

​

(IN THOUSANDS, EXCEPT

 

​

​

PER SHARE DATA AND RATIOS)

​

Net income $3,293  $2,310  $5,997 

​

$

7,448

​

$

7,072

​

$

4,598

​

Net income available to common shareholders  3,293   2,295   5,787 

Net income, adjusted (1)(2)

​

​

9,470

​

​

8,471

​

​

4,598

​

Diluted earnings per share  0.18   0.12   0.31 

​

 

0.43

​

 

0.41

​

 

0.27

​

Diluted earnings per share, adjusted (1)(2)

​

​

0.55

​

​

0.49

​

​

0.27

​

Return on average assets  0.28%   0.20%   0.54% 

​

 

0.55

%  

 

0.52

%  

 

0.37

%  

Return on average assets, adjusted (1)(2)

​

​

0.70

​

​

0.63

​

​

0.37

​

Return on average equity  3.42   2.30   5.10 

​

 

6.83

​

 

6.48

​

 

4.52

​

Return on average equity, adjusted (1)(2)

​

 

8.69

​

 

7.76

​

 

4.52

​

The Company reported net income available to common shareholders of $3,293,000, or $0.18 per diluted common share. This represents an improvement of $998,000 from the full year of 2016 where net income available to common shareholders totaled $2,295,000, or $0.12 per diluted common share. In the fourth quarter of 2017, the enactment into law of “H.R.1.”, known as the “Tax Cuts and Jobs Act”, necessitated the revaluation of the Company’s deferred tax asset because of the new lower corporate tax rate. This revaluation required that the Company recognize additional income tax expense of $2.6 million, which is consistent with the information previously disclosed in an 8-K filed on January 11, 2018. The additional income tax expense negatively impacted diluted earnings per share by $0.14 for both the fourth quarter and full year of 2017.​

The Company reported net income of  $7,448,000, or $0.43 per diluted common share, in 2022. This represents a 4.9% increase in earnings per share from the full year of 2021 when net income totaled $7,072,000, or $0.41 per diluted common share. On an adjusted basis, eliminating the impact of the pension settlement charge, diluted earnings per share for the 2022 year increased by 12% to $0.55(1)(2), while adjusted net income improved to $9,470,000(1)(2). Due to the effects of eliminating the pension settlement charge, the Company’s return on average assets (ROA) in 2022 would improve from 0.55% to an adjusted ROA of 0.70%(1)(2). Further, the Company’s return on average equity (ROE) in 2022 would improve from 6.83% to an adjusted ROE of 8.69%(1)(2). The improved earnings performance for the 2022 year, on both an actual and adjusted basis, reflects the full benefit of several important strategic actions that the Company executed in 2021, the successful management of our asset quality throughout the pandemic, and effective balance sheet management. Overall, the increase in net interest income, along with a reduced loan loss provision, more than offset a lower level of non-interest income and higher non-interest expense resulting in an improved earnings performance in 2022. Finally, the Company’s tangible book value per share ended 2022 at $5.40(1) a decrease of 10.3% from 2021. The decline in tangible book value per share in 2022 reflects a decrease in the fair value of the Company’s available for sale investment securities due to common shareholdershigher interest rates. The Company continued to maintain strong capital ratios that exceed the regulatory defined well capitalized status.

The Company reported net income of  $2.3$7.1 million, or $0.12$0.41 per diluted common share, for 2016.2021. This represented a 61%51.9% increase in earnings per share from 2020 when net income totaled $4.6 million, or $0.27 per diluted common share. During 2021, earnings demonstrated meaningful improvement as the Company realized the benefit of several important strategic actions that were executed during the year. Overall, increased net interest income, a growing level of non-interest income, and a reduced loan loss provision more than offset a higher level of non-interest expense resulting in an improved earnings performance.

The Company reported net income of  $4.6 million, or $0.27 per diluted common share, for 2020. This represented a 22.9% decrease in earnings per share from 2015 where2019 when net income available to common shareholders totaled $5.8$6.0 million, or $0.31$0.35 per diluted common share. This reduction reflects, 1.) a substantially higher than typical provisionDuring 2020, the Company dealt with the many unexpected challenges resulting from the COVID-19 pandemic. We continued our conservative risk management posture and prudently built our allowance for loan losses and net loan charge offs that were recorded in the first quarter of 2016 to resolve the Company’s only meaningful direct loan exposure to the energy industry, 2.) a reduced level of net interest income that results from net interest margin compression, which is prevalent in the banking industry, as well as a lower level of loan prepayment fee income and additional interest expense related to the issuance of subordinated debt, and 3.) operating expenses increasing by $577,000, or 1.4% due to non-recurring costs for legal and accounting services that were necessary to address increased credit risk in certain sectors of our loan portfolio which was a trust operations trading error.

The Company reported net income available to common shareholders of $5.8 million, or $0.31 per diluted common share, for 2015. This represented a 107% increaseprimary factor causing the decline in earnings per share from 2014 where net income available to common shareholders totalled $2.8 million, or $0.15 per diluted share. Factors causing this increase in earnings were solid loan and deposit growth in our community banking business which contributed to an increase of $1.3 million, or 3.9%, in net interest income while increasing revenue from our trust and wealth management business contributed to 6.6% growth in non-interest income in 2015. Additionally, operating expenses declined by $2.3 million, or 5.4%, as we improved the ongoing efficiency of the Company by successfully executing several profitability improvement initiatives.between years.

NET INTEREST INCOME AND MARGIN...MARGIN.   The Company’s net interest income represents the amount by which interest income on earning assets exceeds interest paid on interest bearing liabilities. Net interest income is a primary source of the Company’s earnings; it is affected by interest rate fluctuations as well as changes in the amount

(1) Non-GAAP financial information, see “Reconciliation of Non-GAAP Financial Measures” later in this MD&A.

(2) Adjusted for pension settlement charge.

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and mix of earning assets and interest bearing liabilities. The following table summarizes the Company’s net interest income performance for each of the past three years:

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 YEAR ENDED DECEMBER 31,
   2017 2016 2015
   (IN THOUSANDS, EXCEPT RATIOS)
Interest income $44,356  $41,869  $41,881 
Interest expense  8,795   7,735   6,520 
Net interest income  35,561   34,134   35,361 
Net interest margin  3.32%   3.26%   3.49% 

​

​

​

​

​

​

​

​

​

​

​

​

    

YEAR ENDED DECEMBER 31, 

 

​

    

2022

    

2021

    

2020

 

​

​

(IN THOUSANDS, EXCEPT RATIOS)

 

Interest income

​

$

49,058

​

$

46,669

​

$

46,882

​

Interest expense

​

 

8,495

​

 

7,586

​

 

10,515

​

Net interest income

​

 

40,563

​

 

39,083

​

 

36,367

​

Net interest margin

​

 

3.27

%  

 

3.15

%  

 

3.19

%  

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20172022 NET INTEREST PERFORMANCE OVERVIEW...OVERVIEW.   The Company’s net interest income for the full year of 20172022 increased by $1.4$1.5 million, or 4.2%3.8%, when compared to the full year of 2016.2021. The Company’s net interest margin was 3.32%3.27% for the full year of 20172022 representing a six12 basis point improvement from the full year of 2016. The 2017 increase in net2021. Net interest income is a resultdemonstrated an increasing trend through the first three quarters of 2022 as interest income increased to a higher level of total earning assets and favorable balance sheet positioning which contributedthan the increase in interest expense. However, this positive trend reversed in the fourth quarter as interest expense increased to a higher level than the increase in interest income.

The Company benefitted from the higher U.S. Treasury yield curve as interest rates increased due to the improved netFederal Reserve’s action to tighten monetary policy in their effort to tame decades high inflation. The higher interest margin performance. The Company continuesrate environment along with increased investment in the securities portfolio more than offset a reduced level of Paycheck Protection Program (PPP) loan fee income and caused total interest income to grow earning assets while also limiting increases in its cost of funds through disciplined deposit pricing. Specifically, the earning asset growth occurred in both the loan and investment securities portfolios. Investment securities averaged $173 millionincrease for the full year of 20172022 when compared to last year. The increased national interest rates also resulted in total deposit and borrowing costs increasing in 2022. However, the increase in deposit interest expense was partially offset by a 26% reduction in total borrowings interest expense, as the strategic actions taken by management in 2021 to lower funding costs favorably impacted financial performance.

Overall, in 2022, the average balance of total interest earning assets was consistent with the full year 2021 average, totaling $1.2 billion. Specifically, total loans averaged $978 million in 2022 which is $25.3 $11.2 million, or 17.2%1.1%, lower than the 2021 full year average. Short-term investments including commercial paper averaged $23.2 million in 2022 which is $24.1 million, or 50.9%, lower than the 2021 full year average. Total investment securities averaged $245.2 million in 2022 which is $35.3 million, or 16.8%, higher than the 2021 full year 2016 average. Despite the balance of total average interest earning assets remaining relatively unchanged from the prior year, total interest income increased by $2.4 million, or 5.1%, between years due to an increase in the yield on earning assets, which increased from 3.76% to 3.95%.

Total loansdeposits, including non-interest bearing demand deposits, averaged $894 million$1.156 billion for the full year 2017of 2022, which is $6.2was $1.9 million, or 0.7%0.2%, higher than the 2016 full year average.

The Company experienced growth in average deposits which we believe reflects the loyalty of our core deposit base that provides a strong foundation upon which this growth builds. Specifically, total deposits averaged $976 million in 2017 which is $20.8 million, or 2.2%, higher than the $956 million$1.154 billion average for the full year of 20162021. The deposit growth occurred in interest bearing deposits while the total non-interest bearing demand deposit account balances remained relatively stable between years. As a result of this strong deposit growth, the Company’s loan to deposit ratio ended the year at 91.5% which indicates that the Company has ample capacity to further grow its loan portfolio in 2018.

Total interest expense increased by $1,060,000, or 13.7%, for the2022 full year average of 2017 when compared to 2016, due to higher levelsshort-term and FHLB borrowed funds was $43 million, which represented a decrease of  both deposit and borrowing interest expense. Deposit interest expense in 2017 increased by $855,000,$7.2 million, or 15.8%, due to the higher balance of deposits along with certain indexed money market accounts repricing upward after the Federal Reserve interest rate increases. The Company experienced a $205,000 increase in the interest cost for borrowings in 2017 primarily due to the immediate impact that the increases in the Federal Funds Rate had on14.5%. Overall, the cost of overnight borrowed funds as well as matured FHLB term advances that were replaced with advances at higher rates. For the full year of 2017, total average FHLB borrowed funds of $62.6 million,interest bearing liabilities increased by $4.9 million, or 8.4%from 0.75% to 0.84%.

COMPONENT CHANGES IN NET INTEREST INCOME: 20172022 VERSUS 2016...2021.   Regarding the separate components of net interest income, the Company’s total interest income in 20172022 increased by $2.5$2.4 million, or 5.1%, when compared to 2016.2021. Total average earningsearning assets remained consistent in 2017 grew by $23.7 million due to increases in both2022 as there was a decreased level of average total loans and short-term investments which were offset by an increased level of average securities, whichtotal investment securities. Despite this, interest income was complementedfavorably impacted by a 15 basis pointan increase in the earning asset yield which improved by 19 basis points from 3.99%3.76% to 4.14%3.95%. WithinAll categories within the earning asset base investment securitiesdemonstrated an interest revenueincome increase between years. The average total loan portfolio yield increased by $1.1 million or 27.8%14 basis points from 4.11% to 4.25% in 2017 due to a $25.3 million increase in2022 while the average investment securities portfolio. The yield on total investment securities increased by 2413 basis points from 2.66%2.87% to 2.90%3.00%. The growth in the investment securities portfolio is the result of management electing to diversify the mix of the investment securities portfolio through purchases of high quality corporate and taxable municipal securities. This revised strategy for securities purchases was facilitated by the increase in national interest rates that resulted in improved opportunities to purchase additional securities and grow the portfolio.

Total loan interest income increased by $1.4 million as the yield on the total loan portfolio increased by 12 basis points from 4.27% to 4.39%. Even though loan production slowed somewhat during the fourth quarter because of the uncertainty that existed in the market from potential borrowers due to the timing that corporate tax reform would be enacted, the loan portfolio still demonstrated an increase. This increase was the result of the successful results of the Company’s business development efforts, with an emphasis on generating all types of commercial businessaverage loans particularly through its loan production offices. Loan interest income increased by $1,356,000, or 3.6%, for the full year of 20172022 were $11.2 million, or 1.1%, lower than the 2021 full year average. Strong loan pipelines resulted in 2022 production more than offsetting a higher than typical level of payoff activity during the year. Excluding PPP loans, total average loans for the full year of 2022 exceeded the 2021 full year average by $30.1 million, or 3.2%, as growth of commercial real estate (CRE) and home equity loans along with a higher volume of residential mortgage loans more than offset a decrease in the level of commercial & industrial loans. Of the approximately $100 million of PPP loans originated from the government stimulus programs, only one very small PPP loan remains on the balance sheet, reflecting the Company’s successful efforts working with our customers through the Small Business Administration (SBA) to complete the forgiveness process. Overall, the higher interest rate environment along with the higher average volumes of CRE, residential mortgages and home equity loans, resulted in total loan

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interest income improving by $899,000, or 2.2%, for 2022 when compared to last year. The higher loan interest income alsoThis results from newthe favorable impact of the higher volume of traditional loans originating at higher yields due toand the higher interest rates and also reflects the upward repricing of certain loans tied to LIBOR or the prime rate as both of these indices have moved up with the Federal Reserve’s decision to increase the target federal funds interest rateenvironment being partially offset by 25 basis points three times in 2017.

The Company’s total interest expense increased by $1,060,000, or 13.7%, in 2017 when compared to 2016, due to higher levels of both deposit and borrowing interest expense. The Company experienced growth in average deposits which we believe reflects the loyalty of our core deposit base that provides a strong foundation upon which this growth builds. Management’s ability to acquire new core deposit funding from outside of our traditional market areas as well as our ongoing efforts to offer new loan customers deposit


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products were the primary reasons for this growth. Specifically, total interest bearing deposits averaged $794 million in 2017 which is $21.2$1.8 million, or 2.7%80.9%, reduction in PPP loan fee related income. Finally, on an end of period basis at December 31, 2022 and excluding total PPP loans, the total loan portfolio is approximately $22.1 million, or 2.3%, higher than the $773December 31, 2021 level.

​

Total investment securities averaged $245.2 million average for the full year of 2016. Deposit interest expense2022 which is $35.3 million, or 16.8%, higher than the $209.9 million average for the twelve months of last year. The increase in 2017the U.S. Treasury yield curve resulted in a more favorable market for securities purchasing activity in 2022. The two-year to ten-year portion of the yield curve increased by $855,000, or 15.8%, dueapproximately 225 to 363 basis points since the beginning of the year, with shorter yields in that range increasing to a higher degree than the longer yields, resulting in yield curve inversion. Overall, the higher rates resulted in yields for new federal agency mortgage-backed securities and federal agency bonds improving and exceeding the overall average yield of the existing securities portfolio. Management purchased more of these investments by redeploying the cash flow from the excess payoff activity from the loan portfolio and profitably utilizing the increased short-term liquidity on our balance sheet. This redeployment of interest bearingfunds contributed to total securities growing between years. Management also continued to purchase taxable municipals and corporate securities to maintain a well-diversified portfolio.

​

Due to a combination of increased investment in securities, loan growth and total deposits alongmodestly declining, short-term investments decreased throughout the year and are now at pre-pandemic levels before government stimulus impacted the economy. Total short-term investments including commercial paper averaged $23.2 million in 2022, which is $24.1 million, or 50.9%, lower than the 2021 average. Despite this decline, the Company’s liquidity position remains strong. We will continue to carefully monitor our liquidity position and short-term investments as we expect deposits related to government stimulus programs to continue to decline in 2023.

​

On the liability side of the balance sheet, total average deposits for 2022 are relatively consistent with certain indexed money market accounts repricing upward after the Federal Reserve interest rate increases. The cost of interest bearing2021 full year average, exceeding by $1.9 million, or 0.2%. Total deposits increased by nine basis pointscontinued to demonstrate stability over the past year despite a $16.3 million, or 1.4%, decrease in 2017total average deposits when comparing the 2022 fourth quarter to 0.79% duelast year’s fourth quarter. Deposit volumes continue to reflect the favorable impact of government stimulus which provided support to many Americans and financial assistance to municipalities and school districts during the pandemic. However, the quarterly decrease reflects a portion of the funds from the government stimulus programs leaving the balance sheet and also reflects greater pricing competition in the market to retain deposits because of the increasing national interest rates. Management continuesOverall, the loan to carefully price interest rates paid on all deposit categories. The Company experienced a $205,000 increaseratio averaged 85.4% in the fourth quarter of 2022, which indicates that the Company has ample capacity to continue to grow its loan portfolio and is strongly positioned to support our customers and our community during times of economic volatility.

​

Total interest costexpense for borrowings in 2017the full year of 2022 increased by $909,000, or 12.0%, when compared to the full year of 2021, due to higher deposit and short-term borrowings interest expense. Deposit interest expense was higher by $1.6 million, or 33.7%, despite the immediatefull year average volume of total deposits remaining relatively consistent with the 2021 full year average. The impact that the increases in the Federal Funds Ratehigher national interest rates had on deposit costs combined with increased market competition to retain and attract deposits became more evident during the fourth quarter of 2022. In 2022, the Company benefitted from management’s decision to allow a high-cost, institutional deposit to mature during the third quarter of 2021 which proved to be beneficial since the interest rate on this particular deposit was indexed to the market and would have become more expensive with the rising national interest rates experienced this year. This large institutional deposit was replaced by the additional low cost, fixed rate deposits from the Somerset County branch acquisition and resulted in significant interest expense savings. The rising national interest rates this year did result in certain deposit products, particularly public funds, that are tied to a market index, repricing upward with the move in national interest rates and causing interest expense to increase. Specifically, total deposit cost averaged 0.56% in 2022, which is 14 basis points higher than total deposit cost of overnight borrowed funds, FHLB term advances and a higher level0.42% in 2021.

​

Total borrowings interest expense decreased by $709,000, or 25.5%, when comparing the full year of total borrowed funds. Total overnight borrowings increased by $7.9 million while their cost increased by 64 basis points2022 to 1.21%.the full year of 2021. The Company also continued to utilize term advancesdecrease results from the FHLB, with maturities ranging between three and five years,favorable impact of the August 2021 subordinated debt offering which was used to help fund earning asset growth and managereplace higher cost debt. This transaction effectively lowered debt cost on these long-term funds by nearly 4.0%. This savings is recognized even though the size of the new subordinated debt is $7.0 million higher than the debt instruments it replaced. Note that included in 2021 borrowings interest rate risk.expense is $202,000 of additional interest expense that the Company had to recognize from the write-off of the unamortized issuance costs from the original debt instruments that the new sub-debt replaced. Borrowings interest expense was favorably impacted by reduced interest

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expense from Federal Home Loan Bank (FHLB) term borrowings, which declined by $322,000, or 36.8%, for the year. The average balance of FHLB term advances decreasedborrowings was lower in 2022 by $3.1$16.1 million, whileor 32.6%, as strength of the average cost of these advances increased by 20 basis pointsCompany’s liquidity position allowed management to 1.52% as maturedlet FHLB term advances were replaced by advances with higher interest rates. Total FHLB borrowed funds, including overnight borrowed funds, averaged $62.6 million or 5.4% of total average assetsmature and increased by $4.9 million, or 8.4%. Overall, total interest bearing funding costs increased by nine basis points to 1.00%.

Overall, the Company expects that continued growth of earning assets as well as an increasing net interest margin will result in net interest income growth in 2018. The net interest margin stabilized in 2017 after a period of compression and also demonstrated improvement in the second half of the year. It is expected that this moderate pace of improvement in the net interest margin should continue in 2018. Solid commercial pipelines suggest that the Company shouldnot be able to grow the loan portfolio in 2018 although we expect the pricing pressures on new commercial loans to continue to be intense.replaced.

20162021 NET INTEREST PERFORMANCE OVERVIEW...OVERVIEW.   The Company’s net interest income for the full year of 2016 decreased2021 increased by $1,227,000,$2.7 million, or 3.5%7.5%, when compared to the full year of 2015.2020. The Company’s net interest margin of 3.26%was 3.15% for the full year of 20162021 which represented a four basis point decline from the full year of 2020. Financial results when comparing 2021 to 2020 were indicative of an improving economic environment as well as the Company’s execution of strategies to effectively meet the challenge presented by the low interest rate environment. This included the execution of several strategies to reduce our cost of funds. However, the emergence of the omicron variant, high inflation and supply chain issues reminded us that many risks remained. AmeriServ has proven to be resilient given the complex challenges we have confronted. The Company continued to adapt in the fluid environment and prioritized the well-being of our employees and the communities we serve.

The Company demonstrated significantly higher than historical levels of both total average loans and total average deposits during 2021. This growth was 23 basis points lowerdue to successful business development efforts, the impact from the government stimulus programs and the 2021 Somerset County branch acquisition. Net interest income improved due to (i) the positive impact of commercial real estate and residential mortgage loan growth, (ii) significant interest expense savings from the issuance of the subordinated debt during the third quarter of 2021, which was used to retire higher cost existing subordinated debt and trust preferred securities, and (iii) the utilization of acquired low-cost core deposits to replace higher cost institutional deposits that were on our balance sheet. The combination of these three factors more than offset the unfavorable impact of net interest margin of 3.49%pressure from lower earning asset yields. The significant decrease to total interest expense in 2021 was the primary driver for net interest income increasing compared to the prior year.

Total average earning assets increased by $102.9 million, or 9.0%, in 2021. Specifically, total loans averaged $989 million in 2021 which is $65.5 million, or 7.1%, higher than the 2020 full year average. Short-term investments and commercial paper averaged $47 million in 2021 which was $15.3 million, or 48.0%, higher than the 2020 full year average. Total investment securities averaged $210 million in 2021 which was $22.1 million, or 11.8%, higher than the 2020 full year average. These increases were largely offset by decreases in the yield on earning assets.

Total deposits, including non-interest bearing demand deposits, averaged $1.154 billion for the full year of 2015. The 2016 reduction in net interest income has been significantly impacted by the following three factors: 1.) net interest margin compression that results from the prolonged low interest rate environment that exists in the economy and is pressuring community bank net interest margins, 2.) additional interest expense that2021, which was associated with the Company’s late fourth quarter 2015 issuance of subordinated debt, and 3.) a significantly lower level of loan prepayment fee income, which decreased by approximately $300,000 for full year of 2016. These factors more than offset the Company’s continued growth in earning assets and control of its cost of funds through disciplined deposit pricing. Specifically, the earning asset growth occurred in the loan portfolio as total loans averaged $888 million for the full year of 2016, which is $31$119.6 million, or 3.6%11.6%, higher than the $857 million$1.035 billion average for the full year of 2015. This loan growth reflects the successful results of the Company’s business development efforts, with an emphasis on generating commercial loans and owner occupied commercial real estate loans particularly through its loan production offices. However, loan interest income is $134,000, or 0.4%, lower for the full year of 2016 when compared to the full year of 2015 due primarily to the previously mentioned decline in loan prepayment fees between years. Interest income on short-term investments and investment securities grew by $122,000 or 3.1% for the full year as the Company benefited from a higher balance of investment securities in 2016. Overall, total interest income decreased by $12,000, or 0.03%, in 2016.

2020. The Company experienced significant growth in deposits between years which is a reflection of the loyalty and stability of our core deposit base that provides a strong foundation upon which this growth builds. Management’s ability to acquire new core deposit funding from outside of our traditional market areas as well as our ongoing efforts to offer new loan customers deposit products were the primary reasons for this growth. Specifically, total deposits averaged $956 million for the full year of 2016 which is $63 million, or 7.0%, higher than the $893 million average for the full year of 2015. The Company is also pleased that a meaningful portion of this deposit growth occurred in non-interest bearing demand deposit accounts. Deposit interest expense for the full year of 2016 increased by $648,000, or 13.6%, due to the higher balance of deposits along with certain money market accounts repricing upward after Federal Reserve fed funds interest rate increases. As a result of this strong deposit growth, the Company’s loan to deposit ratio endedaveraged 85.5% in the year at 91.6%.


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Total interest expense increased for thefourth quarter of 2021. The 2021 full year average of 2016 by $1,215,000,short-term and FHLB borrowed funds was $50 million, which represented a decrease of  $19.3 million, or 18.6%, as compared27.9%. Overall, the cost of total interest bearing liabilities decreased from 1.10% to 2015 due to higher levels of both borrowings and deposit interest expense. The Company experienced a $567,000 increase in the interest cost for borrowings in 2016, with $515,000 of this increase attributable to the Company’s subordinated debt issuance which occurred late in December of 2015. Specifically, the Company issued $7.65 million of subordinated debt which has a 6.50% fixed interest rate. The proceeds from the subordinated debt issuance, along with other cash on hand, was used to redeem all $21 million of our outstanding SBLF preferred stock on January 27, 2016. The remainder of the increase in borrowings interest expense was due to a greater utilization of FHLB term advances to extend borrowings for interest rate risk management purposes.0.75%.

COMPONENT CHANGES IN NET INTEREST INCOME: 20162021 VERSUS 2015...2020.   Regarding the separate components of net interest income, the Company’s total interest income in 20162021 decreased by $12,000$213,000, or 0.5%, when compared to 2015. This is evidenced2020. Total average earning assets increased by a $36.9$102.9 million, increaseor 9.0%, in 2021 as there was an increased level of average total loans, short-term investments, and total investment securities. Despite the growth in average earning assets, due to increases in both average loans and average securities, whichinterest income was more than offsetunfavorably impacted by a 15 basis point declinedecrease in the earning asset yield which declined by 35 basis points from 4.14%4.11% to 3.99%3.76%. WithinAll categories within the earning asset base total loandemonstrated an interest income decreased by $134,000 as the yield on thedecrease between years. The average total loan portfolio yield decreased by 1729 basis points from 4.44%4.40% to 4.27%. The greater level of total average loans4.11% in 2016 was more than offset by the impact of new loans having yields that are below the rate on the maturing instruments that they are replacing. Also negatively impacting loan interest income in 2016 was the reduced level of loan prepayment fee income. Investment securities interest revenue increased by $47,000 in 2016 due to a $2.3 million increase in2021 while the average investment securities portfolio. However, the yield on total investment securities decreased by one33 basis points from 2.67%3.20% to 2.66%2.87%.

Total investment securities averaged $210 million for the full year of 2021, which was $22.1 million, or 11.8%, higher than the $188 million average in 2020. The Company continued to be selective in 2021 when purchasing securities due to netthe low interest margin compressionrate environment. Specifically, the steeper U.S. Treasury yield curve resulted in improved yields for federal agency mortgage-backed securities and federal agency bonds. Once this occurred, management purchased more of those investments for our portfolio. This provided us with the opportunity to more profitably deploy a portion of the increased liquidity on our balance sheet into the securities portfolio as well as an increaseopposed to leaving the funds in premium amortization on mortgage backedlow yielding federal funds sold. This redeployment of funds contributed to total securities which resulted from an increase in mortgage prepayment speeds in 2016.growing between years. Management also continued to purchase taxable municipal and corporate securities to maintain a well-diversified portfolio.

The Company’seconomic recovery had been evident in our lending activity as we continued to experience good loan production throughout 2021. Commercial loan pipelines returned to pre-COVID levels early in the year. The overall total loan portfolio volume stabilized during the second half of the year as additional loan growth was offset by a high level of

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early payoff activity, particularly during the fourth quarter. Also, PPP loans continued to decline as they completed the forgiveness process. Overall, when compared to the pre-pandemic year of 2019, total loan production was over $79 million, or 31.2%, higher in 2021. Although reduced from its peak in 2020, strong residential mortgage loan production continued throughout 2021. Residential mortgage loan production totaled $90.5 million in 2021 which declined by 36.5% from the production level of $142.5 million achieved in 2020. Despite the decline between years, this was the second highest level of residential mortgage loan production during the most recently completed eight-year period. The Company revised strategy in 2021 and retained a higher percentage of our residential mortgage loan production in the loan portfolio as opposed to selling into the secondary market. This strategic change allowed us to more profitably deploy a portion of the increased liquidity that we had on our balance sheet.

As stated previously, total loans continued to be significantly higher than historical levels and averaged $989 million for the full year of 2021, which was $65.5 million, or 7.1%, higher than the 2020 full year average. The growth experienced in our commercial real estate portfolio resulted in traditional loan fee income increasing by $465,000, or 41.9%, for the full year of 2021 when compared to the prior year. Total PPP loans averaged $23.4 million for the fourth quarter of 2021, decreasing by $41.4 million, or 63.9%, from the prior year’s fourth quarter average as we continued to work with our customers through the forgiveness process. The Company recorded a total of $2.3 million of processing fee income and interest income from PPP lending activity in 2021, which was $398,000, or 21.2%, higher than the 2020 level. Finally, on an end of period basis, excluding total PPP loans, the total loan portfolio grew by approximately $48.7 million, or 5.3%, since the end of the fourth quarter of 2020.

Similar to what was occurring across the banking industry, our liquidity position continued to be strong due to the significant influx of deposits. During the first quarter of 2021, the President signed into law another round of economic stimulus as part of the American Rescue Plan Act of 2021. The stimulus checks delivered to most Americans and the financial assistance provided to municipalities and school districts as part of the program contributed to total deposits increasing significantly. Our deposit balances were also positively impacted in the second quarter of 2021 by the Somerset County branch acquisition, which provided approximately $42 million of additional deposits. The challenges the increased liquidity presented were twofold. First, there was the uncertainty regarding the duration that these increased funds would remain on the balance sheet which would be determined by customer behavior as economic conditions changed. The second challenge was to profitably deploy the increased liquidity given the low yields on short-term investment products. As a result, short-term investment and commercial paper balances averaged $47.3 million for the full year of 2021, which remained high by historical standards. Late in the third quarter of 2021, the Company benefitted from utilizing a significant portion of our increased liquidity to allow a $33 million, high-cost, institutional deposit to mature. This resulted in total short-term investments declining to a more manageable level.

Total interest expense for 2016 increasedthe twelve months of 2021 decreased by $1.2$2.9 million, or 18.6%27.9%, when compared to 2015. Total2020, due to lower levels of both deposit and Federal Home Loan Bank (FHLB) borrowings interest bearing deposits increasedexpense. Specifically, deposit interest expense in 2021 was lower by $51.2$2.8 million, or 7.1% due to management’s ability to acquire37.0%, despite the previously mentioned increase in deposits that occurred between years. The deposit growth reflected new core deposit funding from outside our traditional market areasinflows as well as our ongoing efforts to offer new loan customersthe loyalty of the bank’s core deposit products. Total interest bearingbase. The previously mentioned late third quarter 2021 maturity of a $33 million institutional deposit that had an annual cost of 2.95% resulted in approximately $240,000 of interest expense increasedsavings during the fourth quarter. Additionally, management continued to effectively execute several deposit product pricing reductions to address the net interest margin challenges presented by $648,000the low interest rate environment. As a result, the Company experienced deposit cost relief. Specifically, our total deposit cost averaged 0.42% for the full year of 2021 compared to 0.74% in 2016 due to the higher volume2020, which represented a meaningful decrease of interest bearing deposits and an increase of four32 basis pointspoints. Note that total deposit cost in the costfourth quarter of interest bearing deposits to 0.70%. Management continues to carefully price interest rates paid on all deposit categories. The Company experienced a $567,000 increase in the interest cost for borrowings in 2016, with $515,000 of this increase attributable to the Company’s subordinated debt issuance which occurred late in December of 2015. The increase in borrowings interest expense is also reflective of a greater usage total average FHLB term advances. The Company has utilized term advances from the FHLB, with maturities ranging between three and five years, to help fund its earning asset growth and manage interest rate risk. The average balance of FHLB term advances has increased by $2.6 million while the average cost of these advances has increased by 11 basis point to 1.32%2021 averaged 0.31%. Total FHLB borrowings including overnight borrowed funds, averaged $57.8interest expense for the full year of 2021 was lower by $252,000, or 22.3%, compared to 2020. The strong liquidity position allowed the Company to paydown short-term and FHLB advances, which typically cost more than similar term deposit products. At December 31, 2021, total short-term and FHLB advances were $42.7 million, which was $47 million, or 5.1%52.4%, lower than the December 31, 2020 level.

The Company completed a private placement of total assets during 2016. Overall, total$27 million in fixed-to-floating rate subordinated notes on August 26, 2021. The notes have a fixed annual interest bearing fundingrate of 3.75%, payable until September 1, 2026. From and including September 1, 2026, the interest rate will reset quarterly to the then-current three-month Secured Overnight Financing Rate (SOFR) plus 3.11%. The Company used approximately $20 million of the net proceeds to retire its existing subordinated debt and trust preferred securities that had a weighted average cost of 7.73%. This strategy favorably reduced fourth quarter 2021 interest expense by $147,000. The remainder of the proceeds were utilized for general corporate purposes, including the downstream of $3.5 million of capital to the bank which supported additional loan growth. Long-term debt interest expense was higher for the full year of 2021 when compared to 2020 because the Company was required to immediately write off the remaining portion of the unamortized issuance costs increased by 10 basis points to 0.91%.from both


20

Table of Contents

TABLE OF CONTENTSoriginal debt instruments which generated $202,000 of additional borrowings interest expense in the third quarter of 2021. Therefore, in aggregate, when considering the reduced short-term and FHLB borrowings interest cost, total borrowings interest expense decreased by $101,000, or 3.5%, for the full year.

The table that follows provides an analysis of net interest income on a tax-equivalent basis (non-GAAP) setting forth (i) average assets, liabilities, and stockholders’ equity, (ii) interest income earned on interest earning assets and interest expense paid on interest bearing liabilities, (iii) average yields earned on interest earning assets and average rates paid on interest bearing liabilities, (iv) interest rate spread (the difference between the average yield earned on interest earning assets and the average rate paid on interest bearing liabilities), and (v) net interest margin (net interest income as a percentage of average total interest earning assets). For purposes of these tablesthis table, loan balances include non-accrual loans, and interest income on loans includes loan fees or amortization of such fees which have been deferred, as well as interest recorded on certain non-accrual loans as cash is received.deferred. Regulatory stock is included within available for sale investment securities for this analysis. Additionally, a tax rate of approximately 34% is21% was used to compute tax-equivalent yields.interest income and yields (non-GAAP). The tax equivalent adjustments to interest income on loans and municipal securities for the years ended December 31, 2022, 2021, and 2020 was 13,000, 18,000, and 24,000, respectively, which is reconciled to the corresponding GAAP measure at the bottom of the table. Differences between the net interest spread and margin from a GAAP basis to a tax-equivalent basis were not material.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

YEAR ENDED DECEMBER 31, 

 

​

​

2022

​

2021

​

2020

 

​

​

​

​

​

INTEREST 

​

​

​

​

​

​

INTEREST

​

​

​

​

​

​

INTEREST

​

​

 

​

​

AVERAGE

​

INCOME/

​

YIELD/

​

AVERAGE

​

INCOME/

​

YIELD/

​

AVERAGE

​

INCOME/

​

YIELD/

 

​

    

BALANCE

    

EXPENSE

    

RATE

    

BALANCE

    

EXPENSE

    

RATE

    

BALANCE

    

EXPENSE

    

RATE

 

​

​

(IN THOUSANDS, EXCEPT PERCENTAGES)

 

Interest earning assets:

 

​

  

 

​

  

 

  

 

​

  

 

​

  

 

  

 

​

  

 

​

  

 

  

​

Loans, net of unearned income

​

$

977,541

​

$

41,497

 

4.25

%  

$

988,761

​

$

40,603

 

4.11

%  

$

923,269

​

$

40,652

 

4.40

%  

Short-term investments and bank deposits

​

 

23,213

​

 

209

 

0.90

​

 

46,977

​

 

58

 

0.12

​

 

19,955

​

 

100

 

0.50

​

Commercial paper

​

 

—

​

 

—

 

—

​

 

329

​

 

2

 

0.52

​

 

12,013

​

 

146

 

1.21

​

Investment securities:

​

 

  

​

 

  

 

  

​

 

  

​

 

  

 

  

​

 

  

​

 

  

 

  

​

Available for sale

​

 

185,710

​

 

5,610

 

3.02

​

 

159,458

​

 

4,543

 

2.85

​

 

145,788

​

 

4,591

 

3.15

​

Held to maturity

​

 

59,516

​

 

1,755

 

2.95

​

 

50,434

​

 

1,481

 

2.94

​

 

41,994

​

 

1,417

 

3.37

​

Total investment securities

​

 

245,226

​

 

7,365

 

3.00

​

 

209,892

​

 

6,024

 

2.87

​

 

187,782

​

 

6,008

 

3.20

​

TOTAL INTEREST EARNING ASSETS/ INTEREST INCOME

​

 

1,245,980

​

 

49,071

 

3.95

​

 

1,245,959

​

 

46,687

 

3.76

​

 

1,143,019

​

 

46,906

 

4.11

​

Non-interest earning assets:

​

 

  

​

 

  

 

  

​

 

  

​

 

  

 

  

​

 

  

​

 

  

 

  

​

Cash and due from banks

​

 

17,602

​

 

​

 

​

​

 

18,736

​

 

​

 

​

​

 

18,091

​

 

​

 

​

​

Premises and equipment

​

 

17,498

​

 

​

 

​

​

 

17,749

​

 

​

 

​

​

 

18,439

​

 

​

 

​

​

Other assets

​

 

77,194

​

 

​

 

​

​

 

77,806

​

 

​

 

​

​

 

70,867

​

 

​

 

​

​

Allowance for loan losses

​

 

(11,895)

​

 

​

 

​

​

 

(11,919)

​

 

​

 

​

​

 

(9,732)

​

 

​

 

​

​

TOTAL ASSETS

​

$

1,346,379

​

​

​

​

​

​

$

1,348,331

​

​

​

​

​

​

$

1,240,684

​

​

​

​

​

​

Interest bearing liabilities:

​

 

  

​

 

  

​

  

​

 

  

​

 

  

​

  

​

 

  

​

 

  

​

  

​

Interest bearing deposits:

​

 

  

​

 

  

​

  

​

 

  

​

 

  

​

  

​

 

  

​

 

  

​

  

​

Interest bearing demand

​

$

227,838

​

$

1,198

​

0.53

%  

$

213,736

​

$

248

​

0.12

%  

$

175,088

​

$

483

​

0.28

%  

Savings

​

 

137,845

​

 

135

​

0.10

​

 

126,050

​

 

173

​

0.14

​

 

104,442

​

 

148

​

0.14

​

Money market

​

 

289,674

​

 

2,008

​

0.69

​

 

297,844

​

 

673

​

0.23

​

 

234,771

​

 

1,031

​

0.44

​

Other time

​

 

285,760

​

 

3,083

​

1.08

​

 

305,251

​

 

3,712

​

1.22

​

 

345,228

​

 

5,972

​

1.73

​

Total interest bearing deposits

​

 

941,117

​

 

6,424

​

0.68

​

 

942,881

​

 

4,806

​

0.51

​

 

859,529

​

 

7,634

​

0.89

​

Federal funds purchased and other short-term borrowings

​

 

9,268

​

 

364

​

3.97

​

 

389

​

 

1

​

0.37

​

 

4,947

​

 

29

​

0.58

​

Advances from Federal Home Loan Bank

​

 

33,253

​

 

553

​

1.66

​

 

49,328

​

 

875

​

1.77

​

 

64,046

​

 

1,099

​

1.72

​

Guaranteed junior subordinated deferrable interest debentures

​

 

—

​

 

—

​

—

​

 

9,741

​

 

944

​

9.69

​

 

13,085

​

 

1,121

​

8.57

​

Subordinated debt

​

 

27,000

​

 

1,054

​

3.90

​

 

15,079

​

 

854

​

5.66

​

 

7,650

​

 

520

​

6.80

​

Lease liabilities

​

 

3,446

​

 

100

​

2.89

​

 

3,729

​

 

106

​

2.86

​

 

3,949

​

 

112

​

2.84

​

TOTAL INTEREST BEARING LIABILITIES/INTEREST EXPENSE

​

 

1,014,084

​

 

8,495

​

0.84

​

 

1,021,147

​

 

7,586

​

0.75

​

 

953,206

​

 

10,515

​

1.10

​

Non-interest bearing liabilities:

​

 

  

​

 

  

​

  

​

 

  

​

 

  

​

  

​

 

  

​

 

  

​

  

​

Demand deposits

​

 

215,196

​

 

​

​

​

​

 

211,557

​

 

​

​

​

​

 

175,336

​

 

​

​

​

​

Other liabilities

​

 

8,113

​

 

​

​

​

​

 

6,446

​

 

​

​

​

​

 

10,340

​

 

​

​

​

​

Stockholders’ equity

​

 

108,986

​

 

​

​

​

​

 

109,181

​

 

​

​

​

​

 

101,802

​

 

​

​

​

​

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

​

$

1,346,379

​

​

​

​

​

​

$

1,348,331

​

​

​

​

​

​

$

1,240,684

​

​

​

​

​

​

Interest rate spread

​

 

​

​

 

​

​

3.11

​

 

​

​

 

​

​

3.01

​

 

​

​

 

​

​

3.01

​

Net interest income/net interest margin (non-GAAP)

​

 

​

​

 

40,576

​

3.27

%  

 

​

​

 

39,101

​

3.15

%  

 

​

​

 

36,391

​

3.19

%  

Tax-equivalent adjustment

​

 

​

​

 

(13)

​

​

​

 

​

​

 

(18)

​

​

​

 

​

​

 

(24)

​

​

​

Net interest income (GAAP)

​

​

​

​

$

40,563

​

​

​

 

​

​

$

39,083

​

​

​

 

​

​

$

36,367

​

​

​

         
         
 YEAR ENDED DECEMBER 31,
   2017 2016 2015
   AVERAGE
BALANCE		 INTEREST
INCOME/
EXPENSE		 YIELD/
RATE		 AVERAGE
BALANCE		 INTEREST
INCOME/
EXPENSE		 YIELD/
RATE		 AVERAGE
BALANCE		 INTEREST
INCOME/
EXPENSE		 YIELD/
RATE
   (IN THOUSANDS, EXCEPT PERCENTAGES)
Interest earning assets:
                                             
Loans, net of unearned income $893,849  $39,257   4.39%  $887,679  $37,891   4.27%  $857,015  $38,024   4.44% 
Deposits with banks  1,028   11   1.11   1,668   13   0.70   2,198   8   0.34 
Short-term investment in money market funds  7,996   130   1.63   15,156   84   0.56   10,700   14   0.14 
Investment securities:
                                             
Available for sale  135,131   3,800   2.81   121,630   3,132   2.58   124,383   3,250   2.61 
Held to maturity  37,484   1,198   3.20   25,649   779   3.04   20,576   614   2.98 
Total investment securities  172,615   4,998   2.90   147,279   3,911   2.66   144,959   3,864   2.67 
TOTAL INTEREST EARNING ASSETS/INTEREST INCOME  1,075,488   44,396   4.14   1,051,782   41,899   3.99   1,014,872   41,910   4.14 
Non-interest earning assets:
                                             
Cash and due from banks  22,393             20,626             17,312           
Premises and equipment  12,273             11,930             12,617           
Other assets  67,169             68,046             69,201           
Allowance for loan losses  (10,241)         (9,790)         (9,766)       
TOTAL ASSETS $1,167,082        $1,142,594        $1,104,236       
Interest bearing liabilities:
                                             
Interest bearing deposits:
                                             
Interest bearing demand $129,589  $638   0.49%  $108,350  $317   0.29%  $97,201  $199   0.21% 
Savings  97,405   162   0.17   95,986   159   0.17   94,425   156   0.17 
Money market  275,636   1,446   0.52   277,967   1,198   0.43   242,298   817   0.34 
Other time  291,475   4,009   1.38   290,612   3,726   1.28   287,783   3,580   1.24 
Total interest bearing
deposits		  794,105   6,255   0.79   772,915   5,400   0.70   721,707   4,752   0.66 
Federal funds purchased and other short-term borrowings  16,972   206   1.21   9,030   52   0.57   24,582   86   0.35 
Advances from Federal Home Loan Bank  45,657   694   1.52   48,720   644   1.32   46,166   558   1.21 
Guaranteed junior subordinated deferrable interest debentures  13,085   1,120   8.57   13,085   1,120   8.57   13,085   1,120   8.57 
Subordinated debt  7,650   520   6.80   7,650   519   6.79   62   4   6.72 
TOTAL INTEREST BEARING LIABILITIES/INTEREST EXPENSE  877,469   8,795   1.00   851,400   7,735   0.91   805,602   6,520   0.81 
Non-interest bearing liabilities:
                                             
Demand deposits  182,301             182,732             171,175           
Other liabilities  11,119             8,074             9,871           
Stockholders’ equity  96,193         100,388         117,588       
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $1,167,082        $1,142,594        $1,104,236       
Interest rate spread            3.14             3.08             3.33 
Net interest income/net interest margin       35,601   3.32%        34,164   3.26%        35,390   3.49% 
Tax-equivalent adjustment     (40)         (30)         (29)    
Net interest income    $35,561        $34,134        $35,361    

TABLE OF CONTENTS​

Net interest income may also be analyzed by segregating the volume and rate components of interest income and interest expense. The table below sets forth an analysis of volume and rate changes in net interest income on a tax-equivalent basis. For purposes of this table, changes in interest income and interest expense are allocated to volume and rate categories based upon the respective percentage changes in average balances and average rates. Changes in net

21

Table of Contents

interest income that could not be specifically identified as either a rate or volume change were allocated proportionately to changes in volume and changes in rate.

​

      
 2017 vs. 2016 2016 vs. 2015
   INCREASE (DECREASE)
DUE TO CHANGE IN:		 INCREASE (DECREASE)
DUE TO CHANGE IN:
   AVERAGE
VOLUME		 RATE TOTAL AVERAGE
VOLUME		 RATE TOTAL
   (IN THOUSANDS)
INTEREST EARNED ON:
                              
Loans, net of unearned income $271  $1,095  $1,366  $247  $(380)  $(133) 
Deposits with banks  (6)   4   (2)   (1)   6   5 
Short-term investments in money market funds  (15)   61   46   7   63   70 
Investment securities:
                              
Available for sale  370   298   668   (78)   (40)   (118) 
Held to maturity  376   43   419   153   12   165 
Total investment securities  746   341   1,087   75   (28)   47 
Total interest income  996   1,501   2,497   328   (339)   (11) 
INTEREST PAID ON:
                              
Interest bearing demand deposits  71   250   321   27   91   118 
Savings deposits  3   —   3   3   —   3 
Money market  (10)   258   248   136   245   381 
Other time deposits  10   273   283   34   112   146 
Federal funds purchased and other short-term borrowings  68   86   154   (64)   30   (34) 
Advances from Federal Home Loan Bank  (35)   85   50   33   53   86 
Subordinated debt  —   1   1   515   —   515 
Total interest expense  107   953   1,060   684   531   1,215 
Change in net interest income $889  $548  $1,437  $(356)  $(870)  $(1,226) 

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

2022 vs. 2021

​

2021 vs. 2020

​

​

INCREASE (DECREASE)

​

INCREASE (DECREASE)

​

​

DUE TO CHANGE IN:

​

DUE TO CHANGE IN:

​

​

AVERAGE

​

​

​

​

​

​

​

AVERAGE

​

​

​

​

​

​

​

    

VOLUME

    

RATE

    

TOTAL

    

VOLUME

    

RATE

    

TOTAL

​

​

(IN THOUSANDS)

INTEREST EARNED ON:

 

​

  

 

​

  

 

​

  

 

​

  

 

​

  

 

​

  

Loans, net of unearned income

​

$

(468)

​

$

1,362

​

$

894

​

$

2,750

​

$

(2,799)

​

$

(49)

Short-term investments and bank deposits

​

 

(42)

​

 

193

​

 

151

​

 

70

​

 

(112)

​

 

(42)

Commercial paper

​

 

(1)

​

 

(1)

​

 

(2)

​

 

(91)

​

 

(53)

​

 

(144)

Investment securities:

​

 

  

​

 

  

​

 

​

​

 

  

​

 

  

​

 

​

Available for sale

​

 

783

​

 

284

​

 

1,067

​

 

410

​

 

(458)

​

 

(48)

Held to maturity

​

 

269

​

 

5

​

 

274

​

 

260

​

 

(196)

​

 

64

Total investment securities

​

 

1,052

​

 

289

​

 

1,341

​

 

670

​

 

(654)

​

 

16

Total interest income

​

 

541

​

 

1,843

​

 

2,384

​

 

3,399

​

 

(3,618)

​

 

(219)

INTEREST PAID ON:

​

 

  

​

 

  

​

 

  

​

 

  

​

 

  

​

 

  

Interest bearing demand deposits

​

 

18

​

 

932

​

 

950

​

 

91

​

 

(326)

​

 

(235)

Savings deposits

​

 

16

​

 

(54)

​

 

(38)

​

 

25

​

 

—

​

 

25

Money market

​

 

(19)

​

 

1,354

​

 

1,335

​

 

226

​

 

(584)

​

 

(358)

Other time deposits

​

 

(225)

​

 

(404)

​

 

(629)

​

 

(637)

​

 

(1,623)

​

 

(2,260)

Federal funds purchased and other short-term borrowings

​

 

255

​

 

108

​

 

363

​

 

(20)

​

 

(8)

​

 

(28)

Advances from Federal Home Loan Bank

​

 

(270)

​

 

(52)

​

 

(322)

​

 

(256)

​

 

32

​

 

(224)

Guaranteed junior subordinated deferrable interest debentures

​

 

(472)

​

 

(472)

​

 

(944)

​

 

(311)

​

 

134

​

 

(177)

Subordinated debt

​

 

524

​

 

(324)

​

 

200

​

 

434

​

 

(100)

​

 

334

Lease liabilities

​

 

(7)

​

 

1

​

 

(6)

​

 

(7)

​

 

1

​

 

(6)

Total interest expense

​

 

(180)

​

 

1,089

​

 

909

​

 

(455)

​

 

(2,474)

​

 

(2,929)

Change in net interest income

​

$

721

​

$

754

​

$

1,475

​

$

3,854

​

$

(1,144)

​

$

2,710

TABLE OF CONTENTS​

LOAN QUALITY...QUALITY.The Company’s written lending policies require underwriting, loan documentation, and credit analysis standards to be met prior to funding any loan. After the loan has been approved and funded, continued periodic credit review is required. The Company’s policy is to individually review, as circumstances warrant, each of its commercial and commercial mortgage loans to determine if a loan is impaired. At a minimum, credit reviews are mandatory for all commercial and commercial mortgage loan relationships with aggregate balances in excess of  $250,000$1,000,000 within a 12-month period. The Company has also identified three pools of small dollar value homogeneous loans which are evaluated collectively for impairment. These separate pools are for small business relationships with aggregate balances of  $250,000 or less, residential mortgage loans and consumer loans. Individual loans within these pools are reviewed and removed from the pool if factors such as significant delinquency in payments of 90 days or more, bankruptcy, or other negative economic concerns indicate impairment. The following table sets forth information concerning

​

Overall, the Company’s loan delinquency and other non-performing assets.

   
 AT DECEMBER 31,
   2017 2016 2015
   (IN THOUSANDS, EXCEPT
PERCENTAGES)
Total accruing loans past due 30 to 89 days $8,178  $3,278  $4,396 
Total non-accrual loans  3,016   1,603   6,066 
Total non-performing assets including TDRs(1)  3,034   1,624   6,297 
Loan delinquency as a percentage of total loans, net of unearned income  0.92%   0.37%   0.50% 
Non-accrual loans as a percentage of total loans, net of unearned income  0.34   0.18   0.69 
Non-performing assets as a percentage of total loans, net of unearned income, and other real estate owned  0.34   0.18   0.71 
Non-performing assets as a percentage of total assets  0.26   0.14   0.55 
Total classified loans (loans rated substandard or doubtful) $5,433  $6,039  $8,566 

(1)Non-performing assets are comprised of (i) loans that are on a non-accrual basis, (ii) loans that are contractually past due 90 days or more as to interest and principal payments, (iii) performing loans classified as troubled debt restructuring and (iv) other real estate owned.

The Company continues to maintain excellentgood asset quality. Non-performing assets increased by $1.4 million since the prior year-end and now total $3.0 million. The continued successful ongoing problem credit resolution efforts of the Company is demonstrated in the table above as levels of non-accrual loans, non-performing assets, classified loans and low loan delinquency levels are well below 1% of total loans. Overall, we believe that non-performing assets remain well controlled totaling $5.2 million, or 0.53% of total loans, at December 31, 2022 which is an increase from the December 31, 2021 total of $3.3 million, or 0.34% of total loans. The increase in non-performing assets, as well as non-accrual loans, reflects the partial charge-down and transfer of one commercial real estate loan relationship into non-accrual status while the borrower pursues the sale of the property. Total classified loans increased $6.8 million since the prior year-end and now total $23.8 million. The increase in classified loans is the result of the risk rating downgrade of a large commercial real estate loan as well as a commercial and industrial loan relationship which were partially offset by the payoff of a substandard credit and the previously mentioned partial charge-down of a substandard credit during 2022.

We also continue to closely monitor the loan portfolio given the uneven recovery in the economy and the number of relatively large-sized commercial and CREcommercial real estate loans within the portfolio. As of December 31, 2017,2022, the 25 largest credits represented 26.4%21.7% of total loans outstanding.outstanding, which represents a decrease from December 31, 2021 when it was 22.3%.


22

TABLE OF CONTENTSTable of Contents

ALLOWANCE AND PROVISION FOR LOAN LOSSES...LOSSES.As described in more detail in the Critical Accounting Policies and Estimates section of this MD&A, the Company uses a comprehensive methodology and procedural discipline to maintain an ALL to absorb inherent losses in the loan portfolio. The Company believes this is a critical accounting policy since it involves significant estimates and judgments. The following table sets forth changes in the ALL and certain ratios for the periods ended.

​

     
 YEAR ENDED DECEMBER 31,
   2017 2016 2015 2014 2013
   (IN THOUSANDS, EXCEPT RATIOS AND PERCENTAGES)
Balance at beginning of year $9,932  $9,921  $9,623  $10,104  $12,571 
Charge-offs:
                         
Commercial  (278)   (3,648)   (170)   (172)   (50) 
Commercial loans secured by real estate  (165)   (13)   (250)   (708)   (1,777) 
Real estate-mortgage  (313)   (291)   (753)   (322)   (139) 
Consumer  (172)   (344)   (188)   (121)   (154) 
Total charge-offs  (928)   (4,296)   (1,361)   (1,323)   (2,120) 
Recoveries:
                         
Commercial  27   140   101   141   80 
Commercial loans secured by real
estate		  14   40   111   231   481 
Real estate-mortgage  250   147   171   71   122 
Consumer  119   30   26   24   70 
Total recoveries  410   357   409   467   753 
Net charge-offs  (518)   (3,939)   (952)   (856)   (1,367) 
Provision (credit) for loan losses  800   3,950   1,250   375   (1,100) 
Balance at end of year $10,214  $9,932  $9,921  $9,623  $10,104 
Loans and loans held for sale, net of unearned income:
                         
Average for the year $893,849  $887,679  $857,015  $804,721  $746,490 
At December 31  892,758   886,858   880,984   827,080   786,748 
As a percent of average loans:
                         
Net charge-offs  0.06%   0.44%   0.11%   0.11%   0.18% 
Provision (credit) for loan losses  0.09   0.44   0.15   0.05   (0.15) 
Allowance as a percent of each of the following:
                         
Total loans, net of unearned income  1.15   1.12   1.13   1.16   1.29 
Total accruing delinquent loans (past due 30 to 89 days)  124.90   302.99   225.68   364.09   309.56 
Total non-accrual loans  338.66   619.59   163.55   438.21   351.93 
Total non-performing assets  336.65   611.58   157.55   329.89   245.90 
Allowance as a multiple of net
charge-offs		  19.72x   2.52x   10.42x   11.24x   7.39x 

​

​

​

​

​

​

​

​

​

​

​

​

​

YEAR ENDED DECEMBER 31, 

​

​

​

2022

​

2021

​

2020

​

​

​

(IN THOUSANDS, EXCEPT RATIOS AND PERCENTAGES)

​

Loans and loans held for sale, net of unearned income:

​

 

  

​

 

  

​

 

  

​

Average for the year:

​

​

​

​

​

​

​

​

​

​

Commercial

​

$

225,487

​

$

275,795

​

$

294,630

​

Commercial loans secured by non-owner occupied real estate

​

​

443,406

​

​

424,765

​

​

378,781

​

Real estate – residential mortgage

​

​

295,528

​

​

274,016

​

​

242,823

​

Consumer

​

​

14,218

​

​

15,796

​

​

17,131

​

Total loans and loans held for sale, net of unearned income

​

​

977,541

​

​

988,761

​

​

923,269

​

At December 31, 

​

 

990,825

​

 

986,037

​

 

978,345

​

As a percent of average loans:

​

 

  

​

 

  

​

 

  

​

Net charge-offs (recoveries):

​

 

​

​

​

​

​

​

​

​

Commercial

​

​

0.04

%  

 

0.02

%  

 

0.04

%  

Commercial loans secured by non-owner occupied real estate

​

​

0.30

​

​

(0.01)

​

​

(0.01)

​

Real estate – residential mortgage

​

​

—

​

​

(0.01)

​

​

0.07

​

Consumer

​

​

1.88

​

​

0.46

​

​

0.44

​

Total loans and loans held for sale, net of unearned income

​

​

0.17

​

​

—

​

​

0.03

​

Provision (credit) for loan losses

​

 

0.01

​

 

0.11

​

 

0.26

​

Allowance, as a percent of each of the following:

​

 

  

​

 

  

​

 

  

​

Total loans, net of unearned income

​

 

1.08

​

 

1.26

​

 

1.16

​

Total accruing delinquent loans (past due 30 to 89 days)

​

 

170.63

​

 

195.68

​

 

206.12

​

Total non-accrual loans

​

 

208.16

​

 

373.10

​

 

453.80

​

Total non-performing assets

​

 

206.60

​

 

373.10

​

 

340.59

​

Allowance, as a multiple of net charge-offs

​

 

6.30x

​

 

263.79x

​

 

36.72x

​

Non-accrual loans, as a percentage of total loans, net of unearned income

​

 

0.52

%

 

0.34

%

 

0.26

%

​

For 2017,2022, the Company recorded an $800,000a $50,000 provision expense for loan losses compared to a $3,950,000$1.1 million provision expense in 2021. The $1,050,000 favorable comparison for total provision expense for the full year of 2022 reflects improved credit quality for the overall portfolio due to several loan losses in 2016 orupgrades and increased payoff and paydown activity of criticized loans. As demonstrated historically, the Company continues its strategic conviction that a decrease of $3.2 million between years. Both, the loan loss provision and net charge-offs were at more typical levels this year than the substantially higher levels that were necessary early last year to resolve a troubled loan exposure to the energy industry. The provision recorded in 2017 supported commercial loan growth and more than covered the low level of net loan charge-offs in 2017 resulting in thestrong allowance for loan losses growing between years.is needed, which has proven to be essential given the support provided to certain borrowers as they fully recover from the COVID-19 pandemic. Note that the Small Business Administration guarantees 100% of the PPP loans made to eligible borrowers which minimizes the level of credit risk associated with these loans. As a result, such loans are assigned a 0% risk weight for purposes of calculating the Bank’s risk-based capital ratios. Therefore, it was deemed appropriate to not allocate any portion of the loan loss reserve for the PPP loans.

Overall non-performing assets remain well controlled totaling $5.2 million, or 0.53% of total loans, on December 31, 2022. The Company experienced net loan


TABLE OF CONTENTS

charge-offs of $518,000,$1.7 million, or 0.06%0.17% of total average loans, in 2017 compared tofor the 2022 year and is higher than net loan charge-offs of $3.9 million, or 0.44%,$47,000, which equates to 0.00% of total average loans, for the full year of 2021. The higher level of net charge-offs in 2016. Overall,2022 is primarily related to the Company continued to maintain strong asset quality as its nonperforming assets totaled $3.0 million, or 0.34%,partial charge-down and transfer of total loans, at December 31, 2017.one non-owner occupied commercial real estate loan relationship into non-accrual status while the borrower pursues the sale of the property. In summary, the allowance for loan losses provided 337%207% coverage of non-performing assets, and 1.08% of total loans, on December 31, 2022, compared to 373% coverage of non-performing assets, and 1.15%1.26% of total loans, on December 31, 2021.

For 2021, the Company recorded a $1.1 million provision expense for loan losses compared to a $2.4 million provision expense in 2020. The lower 2021 provision reflected an improved credit quality outlook for the overall portfolio due to several loan upgrades as well as reduced criticized asset levels and delinquent loan balances

23

Table of Contents

demonstrating improvement during the year. This was reflective of the Company’s loan officers working effectively with our customers as the economy improved and as businesses returned to normal operations with limited restrictions. The Company continued to grow the allowance for loan losses given the portfolio growth achieved during 2021, specifically in the non-owner occupied commercial real estate and residential mortgage portfolios, which was dampened by a decline in the commercial portfolio. The need to fund the allowance for portfolio growth was somewhat eased by numerous upgrades, which occurred during 2021. The Company experienced low net loan charge-offs of $47,000, which equates to 0.00% of total loans, in 2021 and compared favorably to net loan charge-offs of  $309,000, or 0.03% of total loans, in 2020. Overall, non-performing assets totaled $3.3 million, or 0.34% of total loans, at December 31, 2017, compared to 612% coverage of non-performing loans, and 1.12% of total loans, at December 31, 2016. The Company presently expects that it will have a typical loan loss provision in 2018. The expected provision will be necessary to cover loan charge-offs and support the anticipated growth in the loan portfolio.

For 2016, the Company recorded a $3,950,000 provision for loan losses compared to a $1,250,000 provision for loan losses for the full year of 2015 or an increase of $2.7 million between years. A substantially higher than typical provision and net loan charge-offs were recorded in the first quarter of 2016 and were necessary to resolve the Company’s only meaningful direct loan exposure to the energy industry. These loans were related to a single borrower in the fracking industry who had filed for bankruptcy protection in the fourth quarter of 2015. The bankruptcy changed from Chapter 11 (reorganization) to Chapter 7 (liquidation), and the Company concluded that its previously established reserves on these non-accrual loans were not sufficient to cover the discounted collateral values that resulted from the liquidation process. As a result of this action, the Company also experienced heightened net loan charge-offs of $3.9 million, or 0.44%, of total loans in 2016, compared to net loan charge-offs of $952,000, or 0.11% of total loans, in 2015. Overall, the Company continued to maintain excellent asset quality. At December 31, 2016, non-performing assets totaled $1.6 million, or only 0.18% of total loans, which is down by $4.7 million from the prior year-end and is one of the lowest levels ever reported by the Company.2021. In summary, the allowance for loan losses provided a strong 612%373% coverage of non-performing loans,assets, and 1.12%1.26% of total loans, at December 31, 2016,2021, compared to 158%341% coverage of non-performing loans,assets, and 1.13%1.16% of total loans, at December 31, 2015.2020.

The following schedule sets forth the allocation of the ALL among various loan categories. This allocation is determined by using the consistent quarterly procedural discipline that was previously discussed. The entire ALL is available to absorb future loan losses in any loan category.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

AT DECEMBER 31,

 

​

​

2022

​

2021

​

2020

​

2019

​

2018

 

​

​

​

​

​

PERCENT

​

​

​

​

PERCENT

​

​

​

​

PERCENT

​

​

​

​

PERCENT

​

​

​

​

PERCENT

 

​

​

​

​

​

OF LOANS

​

​

​

​

OF LOANS

​

​

​

​

OF LOANS

​

​

​

​

OF LOANS

​

​

​

​

OF LOANS

 

​

​

​

​

 

IN EACH

​

​

​

 

IN EACH

​

​

​

​

IN EACH

​

​

​

 

IN EACH

​

​

​

 

IN EACH

​

​

​

​

​

 

CATEGORY

​

​

​

​

CATEGORY

​

​

​

 

CATEGORY

​

​

​

​

CATEGORY

​

​

​

​

CATEGORY

​

​

​

​

​

​

TO TOTAL

​

​

​

 

TO TOTAL

​

​

​

​

TO TOTAL

​

​

​

 

TO TOTAL

​

​

​

 

TO TOTAL

​

​

    

AMOUNT

    

LOANS

    

AMOUNT

    

LOANS

    

AMOUNT

    

LOANS

    

AMOUNT

    

LOANS

    

AMOUNT

    

LOANS

​

          
          
    AT DECEMBER 31,   
 2017 2016 2015 2014 2013
 AMOUNT PERCENT
OF LOANS
IN EACH
CATEGORY
TO TOTAL
LOANS		 AMOUNT PERCENT
OF LOANS
IN EACH
CATEGORY
TO TOTAL
LOANS		 AMOUNT PERCENT
OF LOANS
IN EACH
CATEGORY
TO TOTAL
LOANS		 AMOUNT PERCENT
OF LOANS
IN EACH
CATEGORY
TO TOTAL
LOANS		 AMOUNT PERCENT OF LOANS IN EACH
CATEGORY TO TOTAL
LOANS
    (IN THOUSANDS, EXCEPT PERCENTAGES)

​

 

(IN THOUSANDS, EXCEPT PERCENTAGES)

​

Commercial $4,299   17.8%  $4,041   19.3%  $4,244   20.6%  $3,262   16.8%  $2,844   15.3% 

    

$

2,653

​

23.1

%

$

3,071

​

25.5

%

$

3,472

​

31.4

%

$

3,951

​

30.1

%

$

3,057

​

29.0

%

Commercial loans secured by real estate  3,666   52.0   3,584   50.4   3,449   47.9   3,902   49.6   4,885   52.6 
Real estate-mortgage  1,102   28.0   1,169   28.1   1,173   29.3   1,310   31.3   1,260   30.1 

Commercial loans secured by non-owner occupied real estate

​

 

5,972

 

45.5

​

 

6,392

 

43.8

​

 

5,373

 

41.2

​

 

3,119

 

41.2

​

 

3,389

 

41.4

​

Real estate – residential mortgage

​

 

1,380

 

30.1

​

 

1,590

 

29.2

​

 

1,292

 

25.7

​

 

1,159

 

26.6

​

 

1,235

 

27.6

​

Consumer  128   2.2   151   2.2   151   2.2   190   2.3   136   2.0 

​

 

85

 

1.3

​

 

113

 

1.5

​

 

115

 

1.7

​

 

126

 

2.1

​

 

127

 

2.0

​

Allocation to general risk  1,019   —   987   —   904   —   959   —   979   — 

​

 

653

 

—

​

 

1,232

 

—

​

 

1,093

 

—

​

 

924

 

—

​

 

863

 

—

​

Total $10,214   100.0%  $9,932   100.0%  $9,921   100.0%  $9,623   100.0%  $10,104   100.0% 

​

$

10,743

 

100.0

%  

$

12,398

 

100.0

%  

$

11,345

 

100.0

%  

$

9,279

 

100.0

%  

$

8,671

 

100.0

%

​

Even though residential real estate-mortgageestate mortgage loans comprise 28.0%30.1% of the Company’s total loan portfolio, only $1.1$1.4 million, or 10.8%12.8%, of the total ALL is allocated against this loan category. The residential real estate-mortgageestate mortgage loan allocation is based upon the Company’s three-year historical average of actual loan charge-offs experienced in that category and other qualitative factors. The disproportionately higher allocations for commercial loans and commercial loans secured by non-owner occupied real estate reflect the increased credit risk associated with this typethose types of lending, the Company’s historical loss experience in these categories, and other qualitative factors. The stability in the part of the allowance allocated to each loan category reflects the continued strong asset quality of each sector.


TABLE OF CONTENTS

Based on the Company’s current ALL methodology and the related assessment of the inherent risk factors contained within the Company’s loan portfolio, we believe that the ALL is adequate at December 31, 20172022 to cover losses within the Company’s loan portfolio.

NON-INTEREST INCOME...INCOME.Non-interest income for 2017 totalled $14.62022 totaled $16.7 million, a decrease of $1.1 million, or 6.0%, from 2021. Factors contributing to this lower level of non-interest income in 2022 included:

●a $456,000, or 68.7%, decrease in net gains on loans held for sale due to the lower level of residential mortgage loan production which reflects a reduced level of mortgage loan refinance activity because of the rapid escalation of interest rates since the beginning of 2022. Residential mortgage loan production through twelve months in 2022 totaled $24.8 million representing a $65.8 million, or 72.6%, reduction from the 2021 production level. The reduced level of mortgage loan production also caused mortgage related fees to decline by $243,000, or 67.9%;
●a $366,000, or 3.1%, decline in wealth management fees due to the unfavorable impact of the declining equity markets as well as the unfavorable impact that the move in the bond market is having on wealth management asset values, both of which were partially offset by new customer business growth. The fair market value of wealth management assets declined since the fourth quarter of 2021 by $398.3 million, or 14.7%, and totaled $2.3 billion at December 31, 2022;

24

Table of Contents

●a $143,000, or 14.8%, increase in service charges on deposit accounts as consumers are more active this year, increasing their spending habits; and
●the Company recognized an $84,000 gain on investment securities in 2021 as compared to this year when no such gain was recognized.

Non-interest income for 2021 totaled $17.8 million, an increase of $7,000,$1.5 million, or 0.1%9.1%, from 2016.2020. Factors contributing to this higher level of non-interest income in 20172021 included:

—●a $258,000,$1.8 million, or 10.2%17.4%, increase in wealth management fees as the entire wealth management group had performed exceptionally well through the pandemic, actively working for clients to increase the value of their holdings in the financial markets and adding new business. The fair market value of wealth management assets totaled $2.7 billion and increased from the early pandemic fair market value low point on March 31, 2020 by $728.7 million, or 36.7%;
●an $859,000, or 56.4%, decrease in net gains on loans held for sale due to a lower level of mortgage loan refinance activity in 2021 and the Company’s revised strategy to retain a higher percentage of our residential mortgage loan production in the portfolio as opposed to selling into the secondary market. The Company had retained 79% of all residential mortgage loan originations into the loan portfolio in 2021 compared to 40% in 2020;
●a $335,000, or 42.8%, increase in revenue from bank owned life insurance due to the receipt of $310,000 in death claims as well as 2021 income being positively impacted by a financial floor taking hold which caused increased earnings and a higher rate of return on certain policies;
●a $291,000, or 12.7%, increase in other income primarily due to higher interchange fee income that resulted from increased usage of debit cards as the Company benefited from additional revenue resulting from a more aggressive business development strategy within its Financial Services Division.pandemic caused consumers to increase online purchases and many businesses to implement contactless services by not accepting cash due to health safety concerns. Also, fee revenue from Trust and investment advisory feesservice charges on deposit accounts increased by a $129,000,$62,000, or 1.6%6.9%, in 2021 as the Company benefited from increasing market values for assets under management in 2017. Wealth management continues to be an important strategic focus as it contributed over 29% of the Company’s total revenue in 2017.consumers became more active and increased their spending habits;

—●a $62,000 increase in Bank Owned Life Insurance (BOLI) revenue after the Company received one death claim in 2017.

—a $287,000,$201,000, or 22.9%36.0%, decrease in mortgage loan sale gains and mortgage related fees due to reduced refinance activity and a lower level of newresidential mortgage loan originations when compared to 2016.production; and

—●a $93,000, or 5.6%, decrease in service charges on deposit accounts due to fewer overdraft charges.

—a $62,000 decrease in revenue from investment security sale transactions due to the increase in national interest rates which resulted in the market value of existing securities in the Company’s portfolio decreasing since last year.

Non-interest income for 2016 totalled $14.6 million, a decrease of $629,000, or 4.1%, from 2015. Factors contributing to this lower level of non-interest income in 2016 included:

—a $942,000 decrease in BOLI revenue after the Company received four death claims in 2015 and there were no such claims in 2016.

—a $201,000, or 8.6%, increase in other income as the Company benefited from additional revenue resulting from a more aggressive business development strategy within its Financial Services Division.

—a $106,000 increase in revenue from investment security sale transactions as the Company recognized a higher level of gainsan $84,000 gain on the sale of rapidly prepaying, low balance mortgage backed securities.

—a $93,000, or 8.0%, increaseinvestment security sales in mortgage loan sale gains and mortgage related fees due to increased refinance activity and a comparable level of new mortgage loan originations when2021 as compared to 2015.2020 when no securities were sold.

—a $76,000, or 4.3%, decrease in service charges on deposit accounts due to fewer overdraft charges and account analysis fees as customers have generally maintained higher balances in their checking accounts in 2016.

NON-INTEREST EXPENSE...EXPENSE.Non-interest   The Company has demonstrated good expense control in this inflationary environment as non-interest expense for 2017 totalled $40.82022 totaled $48.0 million which represents an $849,000,and increased by $1.0 million, or 2.0%2.2%, decrease from 2016. Factors contributing to the lower non-interest expense in 2017 included:

—other expenses were down $413,000, or 7.8%, while professional fees declined by $222,000, or 4.2%, due to lower legal fees and litigation costs and the non-recurrence of costs related to resolving a trust operations trading error in 2016.

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—occupancy expenses were lower by $182,000, or 6.5%, and equipment costs declined by $103, 000, or 6.1%, as a result of the management’s continued efforts to control costs. Specifically, a branch consolidation and closure of an unprofitable loan production office were the primary reasons for these expenses decreasing between years.

—Total salaries and benefits increased by $93,000, or 0.4%. The increase between years was limited by our ongoing cost control focus despite additional investment in talent, particularly in our wealth management division.

Non-interest expense for 2016 totalled $41.6 million, which represents a $577,000, or 1.4%, increase from 2015.2021. Factors contributing to the higher non-interest expense in 20162022 included:

—●the Company was required to recognize a settlement charge in connection with its defined benefit pension plan in 2022, which is explained in Note 17, Employee Benefit Plans. The amount of the 2022 charge was $2.5 million which is $762,000, or 43.9%, higher than the $1.7 million settlement charge recognized in 2021;
●a $645,000, or 2.3%, increase in salaries and employee benefits expense. Within total salaries and benefits expense, salaries cost increased by $1.4 million, or 7.8%, due to merit increases and a higher level of full-time equivalent employees as the Company has been able to fill certain open positions this year. Also, contributing to the higher salaries and employee benefits costs were additional increases to health care, payroll taxes and other expenses were up $544,000,employee benefits. Partially offsetting these higher costs within salaries and benefits expense was lower incentive compensation by $808,000, or 11.5%38.2%, due to the reduced level of loan production and no performance related executive incentive payments in 2022;
●a $338,000, or 11.8%, increase in professional fees due primarily to higher legal costs within our wealth management group;
●no additional costs related to the branch acquisition were recognized in 2022 after $389,000 was recognized in 2021;

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●a $279,000, or 7.6%, increase in data processing and IT expense resulted from additional costs from our core data provider and increased costs related to monitoring our computing and network environment;
●a $263,000, or 10.0%, increase in net occupancy expense due to increased utilities cost along with maintenance and repair expense which was primarily related to the new branch office;
●other expense was favorably impacted by $277,000, or 5.5%a $243,000 credit for the unfunded commitment reserve after $117,000 of expense was recognized last year, resulting in a $360,000 favorable shift; and
●a $140,000, or 21.4%, reduction in FDIC deposit insurance expense.

The Company anticipates that costs related to its ongoing proxy contest will impact the level of non-interest expense during 2023.

Non-interest expense for 2021 totaled $47.0 million, which represents a $2.5 million, or 5.7%, increase from 2020. Factors contributing to the higher non-interest expense in 2021 included:

●a $1.1 million, or 19.8%, increase in other expense primarily due to the recognition of a $1.7 million settlement charge in connection with the Company’s defined benefit pension plan. Also, contributing to the higher level of other expense was the Company recognizing $117,000 of expense associated with the unfunded commitment reserve in 2021 which represented a $271,000 unfavorable shift from 2020;
●a $457,000, or 1.7%, increase in salaries and employee benefits expense. Factors causing the increase included greater incentive compensation primarily due to commissions earned as a result of non-recurringstrong performance in the wealth management businesses and continued good residential mortgage and commercial loan production. Also, contributing to the higher salaries and employee benefits expense was increased health care costs which were partially offset by the Company’s basic salary expense declining due to fewer employees;
●the Company recognized costs for legal and accounting services that were necessary to address a trust operations trading error.the branch acquisition totaling $389,000 for 2021;

—●occupancya $238,000, or 6.9%, increase in data processing and equipmentIT expense due to increased costs from our core data provider and increased software related expenses are lower by $244,000, or 5.2%, as a result of management’s continued efforts to improve efficiencies and control costs.expenses;
●a $174,000, or 36.2%, increase in FDIC deposit insurance expense due to an increase in the asset assessment base and the benefit of the Small Bank Assessment Credit being fully utilized in the first quarter of 2020;
●a $110,000, or 4.4%, increase in net occupancy expense primarily due to the additional costs related to the branch acquisition; and
●a $46,000, or 6.4%, decrease in supplies, postage and freight expense as the majority of the personal protective equipment to protect our employees and customers during the pandemic were purchased in 2020.

INCOME TAX EXPENSE...EXPENSE.   The Company recorded an income tax expense of  $5.3$1.8 million, or an effective tax rate of 61.9%19.1%, in 2017. The higher income tax expense is due2022, compared to the enactment into law of “H.R.1.”, known as the “Tax Cuts and Jobs Act”, which necessitated the revaluation of the Company’s deferred tax asset because of the new lower corporate tax rate. The revaluation required that the Company recognize additional income tax expense of  $2.6$1.7 million, which was recorded in December of 2017. Without this charge, the Company’sor a 19.4% effective tax rate, would have approximated 31.5% in 2017. In 2016,2021, and compared to income tax expense totalled $897,000,of  $1.2 million, or ana 20.9% effective tax rate, of 28.0%. Beginning in 2018, we expect a reduction in the Company’s2020. The higher effective tax rate in 2020 resulted from the write-off of a deferred tax asset related to approximately 20% which we believe will provide a meaningful boost to future earnings.the dissolution of the Company’s former small life insurance subsidiary. The Company’s deferred tax asset was $6.0$2.8 million at December 31, 2017 and relates2022 compared to a deferred tax liability of $934,000 at December 31, 2021, resulting primarily to AMT carryforwards andfrom the ALL.decrease in the fair value of the available for sale investment securities portfolio.

SEGMENT RESULTS...RESULTS.Retail banking’s   The community banking segment reported a net income contribution was $2.7of $12.4 million in 2017 and decreased2022 which improved from the $3.0$12.1 million contribution in 20162021 and $3.0 also increased from the $10.1 million contribution in 2015.2020. The decrease in 2017 reflectsimprovement between years is due to a higher level of net interest income and a reduced loan loss provision which more than offset decreased non-interest income and an increased level of non-interest expense. Net interest income improved between years as the increase in total interest income more than offset the increase to total interest expense. Total loan interest income improved by $901,000, or 2.2%, and resulted from the favorable impact of higher total loan volumes and the higher interest rate environment which more than offset a $1.8 million, or 80.9%, reduction in PPP loan fee related income and a $550,000, or 34.9%, reduction in total loan charge income. This segment

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benefitted from the continued strong production of commercial real estate loans in 2022 and the residential real estate loan production that occurred throughout 2021, which resulted in the 2022 full year average balance for both of these loan categories exceeding the 2021 full year average by $32.1 million. This segment also benefitted from a greater level of production of home equity loans, as the 2022 full year average for this loan category exceeds the 2021 full year average by $6.2 million. Total interest income from CRE, residential mortgage, and home equity loans was $2.9 million higher in 2022 when compared to 2021. Deposit interest expense was higher by $1.6 million, or 33.7%, despite the full year average volume of fixed ratetotal deposits remaining relatively consistent with the 2021 full year average. The increased deposit interest expense occurred due to the impact that the higher national interest rates had on deposit costs combined with increased market competition to retain and attract deposits. The rising national interest rates resulted in certain deposit products, particularly public funds, that are tied to a market index, repricing upward with the move in national interest rates and causing interest expense to increase. This segment did benefit from management’s decision to allow a high-cost institutional deposit to mature during 2021, which was indexed to the market, and replaced by the low cost deposits from the Somerset County branch acquisition (discussed previously in the MD&A). Overall, total deposit cost of 56 basis points in 2022 was 14 basis points higher than total deposit cost in 2021. The Company recorded a $50,000 provision expense for loan losses in 2022 compared to a $1,100,000 provision in 2021. This also was discussed previously in the Allowance and Provision for Loan Losses section within this document. Non-interest income was unfavorably impacted by by a reduced level of loan sale gain income by $456,000 due to the lower level of residential mortgage loans being soldloan production in 2022, which also caused mortgage related fees to decline by $243,000. Overall, these unfavorable items more than offset the secondary market resultingfavorable impact of higher service charges on deposit accounts by $143,000. Non-interest expense in a lower volume held on our balance sheet. Interest expense is also higher between years2022 compares unfavorably to 2021 results due to higher deposit totalstotal employee costs and certain indexed money market accounts repriced upward with the increases in the fed funds rate. Favorably impacting the retail segment’s income was aoccupance expense which more than offset lower level of non-interest expense due to the Company’s focus on reducing and controlling costs which resulted in lower employee and occupancy expenses due to a branch consolidation. Finally, FDIC insurance expense and miscellaneous expenses are lower in 2017.

The commercial banking segment reported net income of $5.8 million in 2017 compared to net income of $3.3 million in 2016expense. Total employee costs were unfavorably impacted by higher salaries and $5.4 million in 2015. The net income contribution for 2017 increased due to the lower provision for loan losses. The higher loan loss provision in 2016 was necessary to resolve the troubled energy sector loanpension costs that had a significant negative impact to reported net income in 2016. Also, a decrease in classified assets and the level of delinquency during the year contributed to the lower provision expense. Growth in commercial real estate loans over the past year also contributedwere related to the higher levelsettlement charge recognized on the defined benefit pension obligation in 2022. This is explained in Note 17. Both of net income. In additionthese items more than offset reduced incentive compensation. Within miscellaneous expense, the Company had $389,000 of additional costs for the the branch acquisition in 2021 while there was very minimal costs in 2022. Also, the Company recognized a credit to the growth experiencedunfunded commitment reserve of $243,000 after $117,000 of expense was recognized last year, resulting in the CRE portfolio the commercial banking segment also benefitted from a lower level of non-interest expense due to the closure of a loan production office and additional operation efficiencies.$360,000 favorable shift.

The trustwealth management segment’s net income contribution was $1.4$2.2 million in 20172022 compared to $1.1$2.9 million in 20162021 and $1.3$2.0 million in 2015.2020. The increase to total income occurred as expenses returned to a more normal level after additional costs were necessary in 2016 to address a trust operations trading error. Also,decrease reflects the higher levelunfavorable impact of net income results from continued effective management of existing customer accounts as asset market values have improved. Finally, income from the Financial Services business unit increased asdeclining equity markets on wealth management continuesfee income as well as the unfavorable impact that the move in the bond market is having on wealth management asset values. Both unfavorable items were partially offset by new customer business growth. Also contributing to be an important strategic focusthe decline in 2022, were higher levels of the Company. Additionally,legal fees, total employee costs and slightly offsetting the favorable items mentioned above was additional investment in talent, which contributed to higher salaries


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and benefits expense.meals & travel related expenses for business development. Overall, the fair market value of trustwealth management assets under administrationdeclined since the end of 2021 by $398.3 million, or 14.7%, and totaled $2.186$2.3 billion at December 31, 2017, an increase of $193 million, or 9.7%, from the December 31, 2016 total of $1.993 billion.2022.

The investment/parent segment reported a net loss of  $6.7$7.1 million in 2017,2022, which was higherlower than the net loss of  $5.2$7.8 million in 20162021 and $3.8$7.5 million in 2015.2020. The increasedreduced loss results from lower borrowings interest expense primarily due to the favorable impact of the 2021 subordinated debt offering which was used to replace higher cost debt. This transaction effectively lowered debt cost on long-term funds by nearly 4.0%, resulting in $744,000 of reduced interest expense on long term borrowings. The remaining portion of the favorable variance in borrowings interest expense between years is solely reflectivedue to reduced interest expense from Federal Home Loan Bank (FHLB) borrowings. Finally, and also contributing to the reduced loss in this segment, was an increase in interest income from the securities portfolio due to the higher average volume of total securities. The increase to the U.S. Treasury yield curve resulted in improved yields for federal agency mortgage-backed securities and federal agency bonds making purchases of these investments more attractive. Therefore, management was able to more profitably deploy a portion of the higher income tax expense that resulted from the additional income tax charge of $2.6 million recorded in December of 2017 and is related to corporate income tax reform. This additional tax expense more than offset the favourable impact of the higher level of investment securitiesincreased liquidity on the Company’sour balance sheet in 2017 that resulted frominto the Company’s strategic decision to purchase more high quality corporate and taxable municipal securities. This segment continues to feel the most earnings pressure from the continued low interest rate environment. The Company did generate investment security gains of $115,000 in 2017 and $177,000 in 2016 from the sale of certain low balance, rapidly prepaying mortgage backed securities which had a favorable impact on earnings in this segment.

For greater discussion on the future strategic direction of the Company’s key business segments, see “Management’s Discussion and Analysis — Forward Looking Statements.” For a more detailed analysis of the segment results, see Footnote 22.portfolio.

BALANCE SHEET...SHEET.   The Company’s total consolidated assets of  $1.168$1.364 billion at December 31, 2017 grew2022 increased by $13.9$28.3 million, or 1.2%2.1%, from the $1.154$1.336 billion level at December 31, 2016.2021. This asset growthchange was duerelated, primarily, to increased levels of investment securities, loans, and other assets which were partially offset by a $10.1 million or 6.4% increasedecrease in cash and cash equivalents. Specifically, total investment securities in 2017. The growthincreased $24.5 million, or 11.3%, as the increase in the investmentU.S. Treasury yield curve resulted in a more favorable market for securities portfolio ispurchasing activity in 2022. The higher rates resulted in yields for new federal agency mortgage-backed securities and federal agency bonds improving and exceeding the result of management electing to diversify the mixoverall average yield of the investmentexisting securities portfolio through purchasesportfolio. As a result, management purchased more of high qualitythese types of securities. The Company also continued to purchase corporate and taxable municipal securities. This revised strategysecurities to maintain a well-diversified portfolio. Loans, net of unearned fees, and loans held for securities purchases was facilitatedsale modestly increased by $4.8 million, or 0.5%. Strong loan pipelines resulted in 2022 production more than offsetting a higher than typical level of payoff activity

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during the year as growth of commercial real estate and home equity loans along with a higher volume of residential mortgage loans more than offset a decrease in the level of commercial and industrial loans. Other assets increased $8.8 million, or 35.1%, as a result of an increase in the positive balance of the accrued pension liability, which totaled $21.3 million and $19.5 million as of December 31, 2022 and 2021, respectively. Due to the positive (debit) balance of the accrued pension liability, it was reclassified to other assets on the Consolidated Balance Sheets as of December 31, 2022 and 2021. The positive value of the accrued pension liability increased as a result of the $4.0 million contribution made in 2022 and the revaluation of the obligation due to the recognition of the settlement charge. In addition, the balance of other assets was impacted by a $5.8 million increase in the fair value of the interest rate swap agreements. These increases were partially offset by a decrease of $18.1 million, or 44.1%, in cash and cash equivalents. Due to a combination of increased investment in securities, loan growth, and total deposits modestly declining, cash and cash equivalents decreased throughout the year and are now at pre-pandemic levels. Despite this decline, the Company’s liquidity position remains strong.

Total deposits decreased by $30.8 million, or 2.7%, during 2022. Deposit volumes continue to reflect the favorable impact of government stimulus which provided support to many Americans and financial assistance to municipalities and school districts during the pandemic. However, the decrease reflects a portion of the funds from the government stimulus programs leaving the balance sheet and also reflects greater pricing competition in the market to retain deposits because of the increasing national interest rates that resultedrates. As of December 31, 2022, the 25 largest depositors represented 18.8% of total deposits and remained relatively unchanged from December 31, 2021 when it was 18.9%. Total borrowings have increased $65.5 million, or 90.0%, since year-end 2021. This change was driven by an increase in improved opportunities to purchase additional securities and grow the portfolio. This investment securities increaseshort-term borrowings which was partially offset by a $1.0 million decrease in shortFHLB term investments. Total loan growth of $5.9advances. Specifically, short-term borrowings totaled $88.6 million at December 31, 2022 compared to no short-term borrowings being outstanding at December 31, 2021. In addition, FHLB term advances decreased by $22.9 million, or 0.7% between years was lower than what is typically experienced as loan production slowed in53.7%, and totaled $19.8 million at December 31, 2022. The current strong liquidity position has allowed the second half ofCompany to let higher cost FHLB term advances mature and not be replaced. However, the year because ofCompany does continue to utilize the uncertainty in the market from potential regarding the timing that corporate tax reform would be enacted. The loan growth that did occur was dueFHLB term advances to continued successful results of the Company’s intensive sales calling efforts with an emphasis on generating commercial loans and owner occupied CRE loans particularly through its loan production offices.help manage interest rate risk.

The Company’s deposits at period end declined by $19.8 million and was offset by an increase in FHLB borrowings ($37 million). The increase in FHLB borrowings occurred in overnight borrowed funds. The FHLB term advances, with maturities between 3 and 5 years, remained relatively stable at $46 million as the Company has utilized these advances to help mitigate interest rate risk. Other liabilities decreased by $3.0 million due to a decrease in the Company’s pension liability. Total stockholders’total shareholders’ equity decreased by $293,000$10.4 million, or 8.9%, since year-end 20162021. Capital was increased during 2022 by the Company’s $7.4 million of net income and the $316,000 positive impact on accumulated other comprehensive loss from the recording of the settlement charge in connection with the defined benefit pension plan and the revaluation of the pension obligation. More than offsetting these increases was the $2.0 million common stock cash dividend and the $16.3 million negative impact experienced due to the impactreduced market value of the available for sale investment securities portfolio. The Company returning more capitalreturned approximately 26% of our 2022 earnings to itsour shareholders through the quarterly common stock repurchase program. This along with the negative impact that the additional income tax charge had on total equity more than offset retained earnings growth.cash dividend. The Company continues to be considered well capitalized for regulatory purposes with a risk based capital ratio of 13.21%13.87% and an asset leverage ratio of 9.32%8.52% at December 31, 2017.2022. The Company’s book value per common share was $5.25,$6.20, its tangible book value per common share was $4.59$5.40(1) and its tangible common equity to tangible assets ratio was 7.20%6.85%(1) at December 31, 2017.2022. The decline in the Company’s book value and tangible book value per share in 2022 reflects a decrease in the fair value of the Company’s available for sale investment securities due to higher interest rates.

(1) Non-GAAP financial information, see “Reconciliation of Non-GAAP Financial Measures” later in this MD&A.

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LIQUIDITY...LIQUIDITY.   The Company’s liquidity position has been strongcontinues to be strong. Deposit volumes remain at a high level by historical standards and continue to reflect the favorable impact of government stimulus which provided support to many Americans and financial assistance to municipalities and school districts during the last several years. Ourpandemic. Deposit volumes have been positively impacted due to effective business development efforts as well as management’s ability to retain the significant influx of deposits that resulted from the government stimulus programs. Also, deposit levels were positively impacted in the second quarter of 2021 by the Somerset County branch acquisition which more than offset the third quarter 2021 maturity of the high cost, institutional deposit. In addition, the Company’s loyal core retail deposit base has grown overcontinues to prove to be a source of strength for the past four years and has beenCompany during periods of market volatility. Overall, total deposits continued to demonstrate stability during 2022 despite a modest decrease during the fourth quarter of 2022 reflecting the greater pricing competition in the market to retain deposits because of the increasing national interest rates. Total average deposits for the full year of 2022 were $1.9 million, or 0.2%, higher compared to the full year of 2021. The core deposit base is adequate to fund the Company’s operations. Cash flow from maturities, prepayments and amortization of securities was alsois used to help fund loan growth.growth when needed.

Due to a combination of increased investment in securities, loan growth and total deposits modestly declining in the fourth quarter of 2022, short-term investments decreased throughout 2022 and are now at pre-pandemic levels before

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government stimulus impacted the economy. The challenge remains as to the uncertainty regarding the duration that the existing government stimulus funds will remain on the balance sheet which will be determined by customer behavior as the economic conditions change. Diligent monitoring and management of our short-term investment position remains a priority. Continued loan growth and prudent investment in securities are critical to achieve the best return on the remaining liquid funds. On an end of period basis, at December 31, 2022, total interest bearing deposits and short-term investments decreased by $12.2 million since December 31, 2021. Given the increase to national interest rates experienced in 2022, a portion of the increased balance sheet liquidity was invested in additional securities to more profitably deploy these funds. Loan production during 2022 more than offset a higher than typical level of payoff activity causing total loans and loans held for sale to increase since the end of 2021 by $4.8 million. We strive to operate our loan to deposit ratio in a range of 85%80% to 100%. At December 31, 2017, theThe Company’s loan to deposit ratio was 91.5%. Given current commercialaveraged 85.4% in the fourth quarter of 2022, which indicates that the Company has ample capacity to continue to grow its loan pipelinesportfolio and the continued developmentis well positioned to support our customers and our community during times of economic volatility. We are also well positioned to service our three existing loan production offices, we are optimistic that we canpipeline and grow our loan to deposit ratio and remainwhile remaining within our guideline parameters.

Liquidity can also be analyzed by utilizing the Consolidated Statements of Cash Flows. Cash and cash equivalents increaseddecreased by $115,000$18.1 million from December 31, 2016,2021, to $22.9 million at December 31, 2017,2022, due to $12.7$56.3 million of net cash used in investing activities which more than offset $32.9 million of net cash provided by financing activities and $7.7$5.2 million of net cash provided by operating activities. This was offset


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by $20.2 million of cash used in investing activities. Within investing activities, cash advanced for new loan fundings and purchases totalled $166.4loans originated totaled $223.7 million and was $6.3$6.9 million higher than the $160.1$216.8 million of cash received from loan principal payments and sales.payments. Within financing activities, total short-term borrowings increased by $88.6 million, total FHLB borrowings decreased by $22.9 million and total deposits decreased by $19.8$30.7 million. Total FHLB borrowings increased as advances, both short-term and long term,Within operating activities, $9.4 million of mortgage loans held for sale were increased by $37.0 million. Early inoriginated while $10.6 million of mortgage loans were sold into the first quarter of 2016, the Company redeemed the $21 million preferred stock issued to the US Treasury under the SBLF program.secondary market.

The holding company had a total of $9.9$9.6 million of cash, short-term investments, and investment securities at December 31, 2017. Additionally, dividend2022, which represents a $300,000 increase from the holding company’s cash position since December 31, 2021. Dividend payments from our subsidiaries can also provide ongoing cash to the holding company. At December 31, 2017,2022, our subsidiary Bank had $2.7$14.4 million of cash available for immediate dividends to the holding company under applicable regulatory formulas. As such,Management follows a policy that limits dividend payments from the Trust Company to 75% of annual net income. Overall, we believe that the holding company has strongsufficient liquidity to meet its trust preferred debt service requirements, its subordinated debt interest payments, and its dividend payout level with respect to its common stock dividends, and support its common stock repurchase program, which in total should approximate $3.3 million over the next twelve months.stock.

Financial institutions must maintain liquidity to meet day-to-day requirements of depositors and borrowers, take advantage of market opportunities, and provide a cushion against unforeseen needs. Liquidity needs can be met by either reducing assets or increasing liabilities. Sources of asset liquidity are provided by short-term investment securities, timeinvestments, interest bearing deposits with banks, and federal funds sold, and short-term investments in money market funds.sold. These assets totaled $42$23.0 million and $38$41.1 million at December 31, 20172022 and 2016,December 31, 2021, respectively. Maturing and repaying loans, as well as the monthly cash flow associated with mortgage-backed securities and security maturities are other significant sources of asset liquidity for the Company.

Liability liquidity can be met by attracting deposits with competitive rates, using repurchase agreements, buying federal funds, or utilizing the facilities of the Federal Reserve or the FHLB systems. The Company utilizes a variety of these methods of liability liquidity. Additionally, the Company’s subsidiary bank is a member of the FHLB, which provides the opportunity to obtain short-short-term to longer-term advances based upon the Company’s investment in assets secured by one- to four-familycertain residential mortgage, commercial real estate.estate, and commercial and industrial loans. At December 31, 2017,2022, the Company had $371$302 million of overnight borrowing availability at the FHLB, $34$41 million of short-term borrowing availability at the Federal Reserve Bank and $35 million of unsecured federal funds lines with correspondent banks. The Company believes it has ample liquidity available to fund outstanding loan commitments if they were fully drawn upon.

CAPITAL RESOURCES...RESOURCES.The CompanyBank meaningfully exceeds all regulatory capital ratios for each of the periods presented and is considered well capitalized. The assetCompany’s common equity tier 1 capital ratio was 10.41%, the tier 1 capital ratio was 10.41%, and the total capital ratio was 13.87% at December 31, 2022. The Company’s tier 1 leverage ratio was 9.32% and the risk based capital ratio was 13.21%8.52% at December 31, 2017.2022. We anticipate that we will maintain our strong capital ratios throughout 2018. On January 24, 2017, the Company’s Board of Directors approved a common stock repurchase program that called for AmeriServ Financial, Inc. to buy back up to 5% or approximately 945,000 shares of its outstanding common stock over an 18 month time period beginning on the day of announcement. The shares may be purchased from time to time in open market, privately negotiated, or block transactions. This common stock repurchase program does not obligate the Company to acquire any specific number of shares and may be modified, suspended or discontinued at any time. During 2017, the Company returned $3.4 million of capital to its shareholders through the repurchase of 839,337 shares of its common stock in 2017. This represents approximately 89% of the authorized common stock repurchase program. 2023.

Capital generated from earnings will be utilized to pay the common stock cash dividend support the stock repurchase program and will also support controlled balance sheet growth. Our common dividend payout ratio for the full year 20172022 was 33.7%26.7%. Total Parent Company cash was $9.9$9.6 million at December 31, 2017.2022. There is a particular emphasis on ensuring that the subsidiary bank has appropriate levels of capital to support its non-owner occupied commercial real estate loan concentration, which stood at

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350% of regulatory capital at December 31, 2022. It should be noted that this ratio weakened slightly from 347% at December 31, 2021 due to growth in total non-owner occupied commercial real estate loans between years.

On January 1, 2015, U.S. federal banking agencies implementedOur focus is on preserving capital to support customer lending and allow the newCompany to take advantage of business opportunities as they arise. We currently believe that we have sufficient capital and earnings power to continue to pay our common stock cash dividend at its current rate of $0.03 per quarter. While the Company has frequently executed common stock buyback programs in the past, we presently do not have one in place due to the drop in our tangible common equity ratio to 6.85%(1) as a result of the decline in value of our AFS securities portfolio in 2022. At December 31, 2022, the Company had approximately 17.1 million common shares outstanding.

The Basel III capital standards which establish the minimum capital levels in addition to be considered well-capitalized and revise the well capitalized requirements under the federal banking regulations prompt corrective action requirements under banking regulations.action. The revisions from the previous standards includecapital rules also impose a revised definition of2.5% capital the introduction of a minimum Common Equity Tier 1 capital ratio and changed risk weightings for certain assets. The implementationconservation buffer (CCB) on top of the new rulesthree minimum risk-weighted asset ratios. Banking institutions that fail to meet the effective minimum ratios once the CCB is taken into account will be phased in over a four year period ending January 1, 2019 with minimum capital requirements becoming increasingly more strict each year of the transition. The new minimum capital requirements for each ratio, both, initially on January 1, 2015 and at the end of the transition on January 1, 2019, are as follows: A common equity tier 1 capital ratio of 4.5%


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initially and 7.0% at January 1, 2019; a tier 1 capital ratio of 6.0% and 8.50%; a total capital ratio of 8.0% and 10.50%; and a tier 1 leverage ratio of 5.00% and 5.00%. Under the new rules, in ordersubject to avoid limitationsconstraints on capital distributions, (including dividend paymentsincluding dividends and share repurchases, and certain discretionary bonus payments to executive officers), a banking organization must hold a capital conservation buffer above its minimum risk-basedcompensation. The severity of the constraints depends on the amount of the shortfall and the institution’s “eligible retained income” (four quarter trailing net income, net of distributions and tax effects not reflected in net income). The Company and the Bank meet all capital requirements, which increases overincluding the transition period, from 0.625% of total risk weighted assets in 2016 to 2.5% in 2019. The Company continuesCCB, and continue to be committed to maintaining strong capital levels that exceed regulatory requirements while also supporting balance sheet growth and providing a return to our shareholders.

The Company’sUnder the Basel III capital position will be more than adequate to meetstandards, the revised regulatoryminimum capital requirements.ratios are:

​

​

​

​

​

​

​

​

​

​

​

MINIMUM CAPITAL RATIO

 

​

​

MINIMUM

​

PLUS CAPITAL

 

​

    

CAPITAL RATIO

    

CONSERVATION BUFFER

 

Common equity tier 1 capital to risk-weighted assets

​

4.5

%  

7.0

%

Tier 1 capital to risk-weighted assets

 

6.0

 

8.5

​

Total capital to risk-weighted assets

 

8.0

 

10.5

​

Tier 1 capital to total average consolidated assets

 

4.0

 

  

​

(1) Non-GAAP financial information, see “Reconciliation of Non-GAAP Financial Measures” later in this MD&A.

INTEREST RATE SENSITIVITY...SENSITIVITY.   Asset/liability management involves managing the risks associated with changing interest rates and the resulting impact on the Company’s net interest income, net income and capital. The management and measurement of interest rate risk at the Company is performed by using the following tools: 1)(i) simulation modeling, which analyzes the impact of interest rate changes on net interest income, net income and capital levels over specific future time periods. The simulation modeling forecasts earnings under a variety of scenarios that incorporate changes in the absolute level of interest rates, the shape of the yield curve, prepayments and changes in the volumes and rates of various loan and deposit categories. The simulation modeling incorporates assumptions about reinvestment and the repricing characteristics of certain assets and liabilities without stated contractual maturities; 2)(ii) market value of portfolio equity sensitivity analysis,analysis; and 3)(iii) static GAP analysis, which analyzes the extent to which interest rate sensitive assets and interest rate sensitive liabilities are matched at specific points in time. The overall interest rate risk position and strategies are reviewed by senior management and the Company’s Board of Directors on an ongoing basis.

30

Table of Contents

The following table presents a summary of the Company’s static GAP positions at December 31, 2017:2022:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

OVER

​

OVER

​

​

​

​

​

​

​

​

​

​

 

3 MONTHS

 

6 MONTHS

​

​

​

​

​

​

​

​

3 MONTHS OR

 

THROUGH

 

THROUGH

​

OVER

​

​

​

INTEREST SENSITIVITY PERIOD

    

LESS

    

6 MONTHS

    

1 YEAR

    

1 YEAR

    

TOTAL

​

 

(IN THOUSANDS, EXCEPT RATIOS AND PERCENTAGES)

RATE SENSITIVE ASSETS:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Loans and loans held for sale

​

$

275,555

​

$

46,331

​

$

98,507

​

$

570,432

​

$

990,825

Investment securities

​

 

28,427

​

 

5,721

​

 

13,454

​

 

193,784

​

 

241,386

Short-term assets

​

 

4,132

​

 

—

​

 

—

​

 

—

​

 

4,132

Regulatory stock

​

 

5,754

​

 

—

​

 

—

​

 

2,125

​

 

7,879

Bank owned life insurance

​

 

—

​

 

—

​

 

38,895

​

 

—

​

 

38,895

Total rate sensitive assets

​

$

313,868

​

$

52,052

​

$

150,856

​

$

766,341

​

$

1,283,117

RATE SENSITIVE LIABILITIES:

​

 

  

​

 

  

​

 

  

​

 

  

​

 

  

Deposits:

​

 

  

​

 

  

​

 

  

​

 

  

​

 

  

Non-interest bearing demand deposits

​

$

—

​

$

—

​

$

—

​

$

195,123

​

$

195,123

Interest bearing demand deposits

​

 

79,611

​

 

730

​

 

1,461

​

 

154,944

​

 

236,746

Savings

​

 

730

​

 

730

​

 

1,460

​

 

132,876

​

 

135,796

Money market

​

 

82,930

​

 

7,099

​

 

14,199

​

 

150,640

​

 

254,868

Certificates of deposit

​

 

116,578

​

 

26,792

​

 

39,688

​

 

102,946

​

 

286,004

Total deposits

​

 

279,849

​

 

35,351

​

 

56,808

​

 

736,529

​

 

1,108,537

Borrowings

​

 

98,563

​

 

4,790

​

 

1,142

​

 

33,878

​

 

138,373

Total rate sensitive liabilities

​

$

378,412

​

$

40,141

​

$

57,950

​

$

770,407

​

$

1,246,910

INTEREST SENSITIVITY GAP:

​

 

  

​

 

  

​

 

  

​

 

  

​

 

  

Interval

​

 

(64,544)

​

 

11,911

​

 

92,906

​

 

(4,066)

​

 

—

Cumulative

​

$

(64,544)

​

$

(52,633)

​

$

40,273

​

$

36,207

​

$

36,207

Period GAP ratio

​

 

0.83X

​

 

1.30X

​

 

2.60X

​

 

0.99X

​

 

  

Cumulative GAP ratio

​

 

0.83

​

 

0.87

​

 

1.08

​

 

1.03

​

 

  

Ratio of cumulative GAP to total assets

​

 

(4.73)

%  

 

(3.86)

%  

 

2.95

%  

 

2.65

%  

 

  

     
INTEREST SENSITIVITY PERIOD 3 MONTHS
OR LESS		 OVER
3 MONTHS
THROUGH
6 MONTHS		 OVER
6 MONTHS
THROUGH
1 YEAR		 OVER
1 YEAR		 TOTAL
   (IN THOUSANDS, EXCEPT RATIOS AND PERCENTAGES)
RATE SENSITIVE ASSETS:
                         
Loans and loans held for sale $272,879  $55,391  $113,203  $451,285  $892,758 
Investment securities  33,294   6,179   11,496   116,921   167,890 
Short-term assets  7,954   —   —   —   7,954 
Regulatory stock  4,675   —   —   2,125   6,800 
Bank owned life insurance  —   —   37,860   —   37,860 
Total rate sensitive assets $318,802  $61,570  $162,559  $570,331  $1,113,262 
RATE SENSITIVE LIABILITIES:
                         
Deposits:
                         
Non-interest bearing deposits $—  $—  $—  $183,603  $183,603 
NOW  4,620   —   33,042   132,681   170,343 
Money market  193,829   —   —   44,290   238,119 
Other savings  24,146   —   —   72,437   96,583 
Certificates of deposit of $100,000 or more  6,649   9,511   8,034   6,103   30,297 
Other time deposits  52,633   21,761   28,135   126,471   229,000 
Total deposits  281,877   31,272   69,211   565,585   947,945 
Borrowings  51,084   4,000   6,000   54,617   115,701 
Total rate sensitive liabilities $332,961  $35,272  $75,211  $620,202  $1,063,646 
INTEREST SENSITIVITY GAP:
                         
Interval  (14,159)   26,298   87,348   (49,871)   — 
Cumulative $(14,159)  $12,139  $99,487  $49,616  $49,616 
Period GAP ratio  0.96X   1.75X   2.16X   0.82X      
Cumulative GAP ratio  0.96   1.03   1.22   1.05      
Ratio of cumulative GAP to total assets  (1.21)%   1.04%   8.52%   4.25%      

TABLE OF CONTENTS​

When December 31, 20172022 is compared to December 31, 2016,2021, the Company’s cumulative GAP ratio through one yearsix months indicates that the Company’s balance sheet is stillliability sensitive, representing a shift from an asset sensitive with some improvement noted between years.sensitivity position at the end of 2021. The shift results from an increased level of short-term borrowings, which are immediately impacted by changes to national interest rates. The Comppany also experienced an increase balance of deposits that have an interest rate that is indexed to the market. Customers have shifted funds into money market type accounts in order to benefit from the rising interest rates in the economy. We continue to see loan customer preference for fixed rate loans given the overall low levelexpectation for additional futures national interest rate increases. The Company’s interest rate sensitivity position shifts from being liability to an asset sensitive position over six months and beyond as more of interest rates. Also, we have extended someour loans begin to reprice. Finally, even though the balance of FHLB term advances withat December 31, 2022 decreased $22.9 million, or 53.7%, from the FHLBprior year, the Company continues to utilize such advances to help manage our interest rate risk position. Overall, the low level of short interest rates makes this table more difficult to analyze since there is little room for certain deposit liabilities to reprice downward further.

Management places primary emphasis on simulation modeling to manage and measure interest rate risk. The Company’s asset/liability management policy seeks to limit net interest income variability over the first twelve months of the forecast period to +/-5.0% and -7.5%, which include interest rate movements of 100 and 200 basis points.points, respectively. Additionally, the Company also uses market value sensitivity measures to further evaluate the balance sheet exposure to changes in interest rates. The Company monitors the trends in market value of portfolio equity sensitivity analysis on a quarterly basis.

The following table presents an analysis of the sensitivity inherent in the Company’s net interest income and market value of portfolio equity. The interest rate scenarios in the table compare the Company’s base forecast, which was prepared using a flat interest rate scenario, to scenarios that reflect immediate interest rate changes of 100 and 200 basis points. Note that we suspended the 200 basis point downward rate shock since it has little value due to the absolute low level

31

Table of interest rates.Contents

points. Each rate scenario contains unique prepayment and repricing assumptions that are applied to the Company’s existing balance sheet that was developed under the flat interest rate scenario.

​

  

​

​

​

​

​

​

​

​

VARIABILITY OF

    

CHANGE IN

 

​

​

NET INTEREST

​

MARKET VALUE OF

​

INTEREST RATE SCENARIO VARIABILITY
OF NET
INTEREST
INCOME		 CHANGE IN
MARKET
VALUE OF
PORTFOLIO
EQUITY

    

INCOME

    

PORTFOLIO EQUITY

​

200 bp increase  1.4%   18.7% 

​

(2.3)

%  

(3.8)

%  

100 bp increase  1.0   11.0 

 

(1.2)

 

(1.1)

​

100 bp decrease  (1.1)   (16.5) 

 

0.7

 

(2.7)

​

200 bp decrease

 

0.8

 

(10.1)

​

​

The Company believes that its overall interest rate risk position is well controlled. The variability of net interest income is positivenegative in the upward rate shocks due to the increased short-term borrowings position and increased level of deposit balances that have rates indexed to market interest rates. This is partially offset by the Company’s shortshorter duration investment securities portfolio and the scheduled repricing of loans tied to LIBORan index, such as SOFR or prime. Also, the Company expects that it will not havehas effectively utilized interest rate swaps for interest rate risk management purposes. The interest rate swaps allow our customers to repricelock in fixed interest rates while the Company retains the benefit of interest rates moving with the market. Regarding interest bearing liabilities, management continues its disciplined approach to price its core term deposit accounts up as quickly when interest rates rise.in a controlled but competitive manner. The variability of net interest income is negativepositive in the 100 basis point downward rate scenarioscenarios as the Company has more exposure to assetsshort-term liabilities repricing downward to a greater extent than liabilities due to the absolute low levelassets. As of interest rates withDecember 31, 2022, the fed funds rate currentlyis at a targeted range of 1.25%4.25% to 1.50%.4.50% as the Federal Reserve took action several times in 2022 to increase the rate a total of 425 basis points. Further, there is an expectation of additional short-term interest rate increases by the Federal Reserve during 2023. Subsequent to year-end, the Company executed a $50 million swap to fix the cost of certain deposits that are indexed and move with short-term interest rates. This transaction brought the Company’s variability of net interest income to a more neutral position. The market value of portfolio equity increasesdecreases in the upward rate shocks due to the fact that the improved value of the Company’s core deposit base.base was more than offset by the downward movement in the market value of the AFS investment securities portfolio and loans. Negative variability of market value of portfolio equity occurs in the downward rate shockshocks due to a reduced value for core deposits.

Within the investment securities portfolio at December 31, 2017, 78%2022, 76.2% of the portfolio is classified as available for sale and 22%23.8% as held to maturity. The available for sale classification provides management with greater flexibility to manage the securities portfolio to better achieve overall balance sheet rate sensitivity goals and provide liquidity if needed. The mark to market of the available for sale securities does inject more volatility in the book value of equity, but has no impact on regulatory capital. There are 133426 securities that are temporarily impaired at December 31, 2017.2022. The Company reviews its securities quarterly and has asserted that at December 31, 2017,2022, the impaired value of securities represents temporary declines due to movements in interest rates and the Company does have the ability and intent to hold those securities to maturity or to allow a market recovery. Furthermore, it is the Company’s intent to manage its long-term interest rate risk by continuing to sell a portion of newly originated fixed-rate 30-year mortgage loans into the secondary market (excluding construction and any jumbo loans). The Company also sells 15-year fixed-rate mortgage loans into the secondary market as well, depending on market conditions. For the year 2017, 82%2022, 41.8% of all residential mortgage loan production was sold into the secondary market.


32

TABLE OF CONTENTSTable of Contents

The amount of loans outstanding by category as of December 31, 2017,2022, which are due in (i) one year or less, (ii) more than one year through five years, (iii) more than five years through 15 years, and (iii)(iv) over five15 years, are shown in the following table. Loan balances are also categorized according to their sensitivity to changes in interest rates.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

MORE

​

MORE

​

​

​

​

​

​

 

​

​

​

​

​

THAN ONE

​

THAN FIVE

​

​

​

​

​

​

 

​

​

ONE

​

YEAR

​

YEARS

​

​

​

​

​

​

 

​

​

YEAR OR

​

THROUGH

​

THROUGH

​

OVER 15

​

TOTAL

​

​

    

LESS

    

FIVE YEARS

    

15 YEARS

​

YEARS

    

LOANS

​

​

 

(IN THOUSANDS, EXCEPT RATIOS)

​

Commercial and industrial

​

$

30,392

​

$

73,036

​

$

19,872

​

$

30,098

​

$

153,398

​

Paycheck Protection Program (PPP)

​

​

—

​

​

22

​

​

—

​

​

—

​

​

22

​

Commercial loans secured by owner occupied real estate

​

 

5,313

​

 

8,196

​

 

60,867

​

​

782

​

 

75,158

​

Commercial loans secured by non-owner occupied real estate

​

 

33,512

​

 

129,958

​

 

277,381

​

​

9,893

​

 

450,744

​

Real estate – residential mortgage

​

 

10,934

​

 

44,060

​

 

136,496

​

​

106,540

​

 

298,030

​

Consumer

​

 

4,784

​

 

3,315

​

 

1,061

​

​

4,313

​

 

13,473

​

Total

​

$

84,935

​

$

258,587

​

$

495,677

​

​

151,626

​

$

990,825

​

Loans with fixed-rate

​

$

27,218

​

$

158,018

​

$

217,288

​

​

70,172

​

$

472,696

​

Loans with floating-rate

​

 

57,717

​

 

100,569

​

 

278,389

​

​

81,454

​

 

518,129

​

Total

​

$

84,935

​

$

258,587

​

$

495,677

​

​

151,626

​

$

990,825

​

Percent composition of maturity

​

 

8.6

%  

 

26.1

%  

 

50.0

%  

​

15.3

%  

 

100.0

%

Fixed-rate loans as a percentage of total loans

​

​

​

​

​

​

​

​

​

​

​

​

​

 

47.7

%

Floating-rate loans as a percentage of total loans

​

​

​

​

​

​

​

​

​

​

​

​

​

 

52.3

%

​

    
 ONE YEAR
OR LESS		 MORE THAN
ONE YEAR
THROUGH
FIVE YEARS		 OVER FIVE
YEARS		 TOTAL
LOANS
   (IN THOUSANDS, EXCEPT RATIOS)
Commercial $51,136  $70,481  $37,575  $159,192 
Commercial loans secured by real estate  62,886   135,410   265,484   463,780 
Real estate-mortgage  22,921   58,389   169,093   250,403 
Consumer  7,103   5,095   7,185   19,383 
Total $144,046  $269,375  $479,337  $892,758 
Loans with fixed-rate $49,404  $132,852  $244,437  $426,693 
Loans with floating-rate  94,642   136,523   234,900   466,065 
Total $144,046  $269,375  $479,337  $892,758 
Percent composition of maturity  16.1%   30.2%   53.7%   100.0% 
Fixed-rate loans as a percentage of total
loans		                 47.8% 
Floating-rate loans as a percentage of total loans                 52.2% 

The loan maturity information is based upon original loan terms and is not adjusted for principal paydowns and rollovers. In the ordinary course of business, loans maturing within one year may be renewed, in whole or in part, as to principal amount at interest rates prevailing at the date of renewal.

CONTRACTUAL OBLIGATIONS...The following table presents the total loans due after one year that have predetermined (fixed) interest rates and floating interest rates as of December 31, 2017, significant fixed and determinable contractual obligations to third parties by payment date. Further discussion of the nature of each obligation is included in the referenced note to the consolidated financial statements.2022.

​

​

​

​

​

​

​

​

​

​

​

​

FIXED-RATE

​

FLOATING-RATE

​

​

​

​

    

LOANS

    

LOANS

    

TOTAL

​

 

(IN THOUSANDS)

Commercial and industrial

​

$

90,306

​

$

32,700

​

$

123,006

Paycheck Protection Program (PPP)

​

​

22

​

​

—

​

​

22

Commercial loans secured by owner occupied real estate

​

 

3,416

​

 

66,429

​

 

69,845

Commercial loans secured by non-owner occupied real estate

​

 

119,957

​

 

297,275

​

 

417,232

Real estate – residential mortgage

​

 

227,567

​

 

59,529

​

 

287,096

Consumer

​

 

4,210

​

 

4,479

​

 

8,689

Total

​

$

445,478

​

$

460,412

​

$

905,890

​

      
 PAYMENTS DUE IN
   NOTE
REFERENCE		 ONE YEAR
OR LESS		 ONE TO
THREE
YEARS		 THREE TO
FIVE
YEARS		 OVER
FIVE
YEARS		 TOTAL
   (IN THOUSANDS)
Deposits without a stated maturity  8  $688,648  $—  $—  $—  $688,648 
Certificates of deposit*  8   128,307   95,520   30,205   13,109   267,141 
Borrowed funds*  10   62,019   30,667   5,438   —   98,124 
Guaranteed junior subordinated deferrable interest debentures*  10   1,015   2,030   2,030   17,784   22,859 
Subordinated debt*  10   497   994   994   9,142   11,627 
Pension obligation  14   3,500   —   —   —   3,500 
Lease commitments  15   445   531   500   1,558   3,034 

*Includes interest based upon interest rates in effect at December 31, 2017. Future changes in market interest rates could materially affect contractual amounts to be paid.

OFF BALANCE SHEET ARRANGEMENTS...The Company incurs off-balance sheet risks in the normal course of business in order to meet the financing needs of its customers. These risks derive from commitments to extend credit and standby letters of credit. Such commitments and standby letters of credit involve, to varying degrees, elements of credit risk in excess of the amount recognized in the consolidated financial statements. The Company’s exposure to credit loss in the event of nonperformance by the other party to these commitments to extend credit and standby letters of credit is represented by their contractual


TABLE OF CONTENTS

amounts. The Company uses the same credit and collateral policies in making commitments and conditional obligations as for all other lending. The Company had various outstanding commitments to extend credit approximating $165.1$227.6 million and standby letters of credit of  $10.0$9.0 million as of December 31, 2017.2022. The Company can also use various interest rate contracts, such as interest rate swaps, caps, floors and swaptions to help manage interest rate and market valuation risk exposure, which is incurred in normal recurrent banking activities. As of December 31, 2017,2022, the Company had $34$130.9 million in the notional amount of interest rate swaps outstanding, with a fair value of $7.0 million. In addition, the Company entered into a risk participation agreement (RPA) with the lead bank of a commercial real estate loan arrangement. As a participating bank, the Company

33

Table of Contents

guarantees the performance on a borrower-related interest rate swap contract. The notional amount of the RPA outstanding at December 31, 2022 was $2.1 million, with a fair value of zero.

As of December 31, 2022 and 2021, municipal deposit letters of credit issued by the Federal Home Loan Bank of Pittsburgh on behalf of AmeriServ Financial Bank naming applicable municipalities as beneficiaries totaled $72.9 million and $62.2 million, respectively. The letters of credit serve as collateral, in place of pledged securities, for municipal deposits maintained at AmeriServ Financial Bank.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES. This document contains certain financial information determined by methods other than in accordance with generally accepted accounting policies in the United States (GAAP). These non-GAAP diclosures, which includes adjusted net income, adjusted diluted earnings per share, adjusted return on average assets, and adjusted return on average equity, have limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of the Company’s results as reported under GAAP, nor is it necessarily comparable to non-GAAP performance measures that may be presented by other companies. These non-GAAP measures are used by management in their analysis of the Company’s performance or, management believes, facilitate an understanding of the Company’s performance. Management also believes that presenting non-GAAP financial measures provides additional information to facilitate comparison of the Company’s historical operating results and trends in the underlying operating results. Management considers quantitative and qualitative factors in assessing whether to adjust for the impact of items that may be significant or that could affect an understanding of our ongoing financial and business performance or trends. Currently, the only adjustment included is for non-cash settlement charges in connection with the Company’s pension plan distributions.

​

​

​

​

​

​

​

​

​

​

​

AT DECEMBER 31, 

​

​

2022

    

2021

    

2020

    

​

(IN THOUSANDS, EXCEPT PER SHARE AND RATIO DATA)

​

Adjusted net income and ratios for pension settlement charge

​

​

​

​

​

​

​

​

​

Net income (A)

$

7,448

​

$

7,072

​

$

4,598

​

Plus: Pension settlement charge (B)

 

2,498

​

 

1,736

​

 

—

​

Less: Related tax effect (C)

 

476

​

 

337

​

 

—

​

Net income, adjusted (D = A + B - C)

 

9,470

​

 

8,471

​

 

4,598

​

​

​

​

​

​

​

​

​

​

​

Return on average assets

​

​

​

​

​

​

​

​

​

Average assets (E)

$

1,346,379

​

$

1,348,331

​

$

1,240,684

​

Return on average assets (= A / E)

 

0.55

%  

 

0.52

%  

 

0.37

%  

Return on average assets, adjusted (= D / E)

 

0.70

​

 

0.63

​

 

0.37

​

​

​

​

​

​

​

​

​

​

​

Return on average equity

​

​

​

​

​

​

​

​

​

Average equity (F)

$

108,986

​

$

109,181

​

$

101,802

​

Return on average equity (= A / F)

 

6.83

%  

 

6.48

%  

 

4.52

%  

Return on average equity, adjusted (= D / F)

 

8.69

​

 

7.76

​

 

4.52

​

​

​

​

​

​

​

​

​

​

​

Earnings per common share (EPS)

​

​

​

​

​

​

​

​

​

Diluted average number of common shares outstanding (G)

 

17,146

​

 

17,114

​

 

17,063

​

Diluted EPS (= A / G)

$

0.43

​

$

0.41

​

$

0.27

​

Diluted EPS, adjusted (= D / G)

​

0.55

​

​

0.49

​

​

0.27

​

​

34

Table of Contents

The tangible common equity ratio and tangible book value per share are considered to be non-GAAP measures and are calculated by dividing tangible equity by tangible assets or shares outstanding. The following table sets forth the calculation of the Company’s tangible common equity ratio and tangible book value per share at December 31, 2022 and 2021 (in thousands, except share and ratio data):

​

​

​

​

​

​

​

​

AT DECEMBER 31, 

​

​

2022

    

2021

    

Total shareholders’ equity

$

106,178

​

$

116,549

​

Less: Intangible assets

 

13,739

​

 

13,769

​

Tangible common equity

 

92,439

​

 

102,780

​

Total assets

 

1,363,874

​

 

1,335,560

​

Less: Intangible assets

 

13,739

​

 

13,769

​

Tangible assets

 

1,350,135

​

 

1,321,791

​

Tangible common equity ratio (non-GAAP)

 

6.85

%  

 

7.78

%  

Total shares outstanding

 

17,117,617

​

 

17,081,500

​

Tangible book value per share (non-GAAP)

$

5.40

​

$

6.02

​

​

CRITICAL ACCOUNTING POLICIES AND ESTIMATES...ESTIMATES.   The accounting and reporting policies of the Company are in accordance with GAAPGenerally Accepted Accounting Principles (GAAP) and conform to general practices within the banking industry. Accounting and reporting policies for the ALL, goodwill,pension liability, allowance for loan losses, intangible assets, income taxes, and investment securities are deemed critical because they involve the use of estimates and require significant management judgments. Application of assumptions different than those used by the Company could result in material changes in the Company’s financial position or results of operation.

ACCOUNT — Pension liability

BALANCE SHEET REFERENCE — Other assets

INCOME STATEMENT REFERENCE — Salaries and employee benefits and Other expense

DESCRIPTION

Pension costs and liabilities are dependent on assumptions used in calculating such amounts. These assumptions include discount rates, benefits earned, interest costs, expected return on plan assets, mortality rates, and other factors. In accordance with GAAP, actual results that differ from the assumptions are accumulated and amortized over future periods and, therefore, generally affect recognized expense and the recorded obligation of future periods. While management believes that the assumptions used are appropriate, differences in actual experience or changes in assumptions may affect the Company’s pension obligations and future expense. Additionally, pension expense can also be impacted by settlement accounting charges if the amount of employee selected lump sum distributions exceed the total amount of service and interest component costs of the net periodic pension cost in a particular year. Our pension benefits are described further in Note 17 of the Notes to Consolidated Financial Statements.

ACCOUNT — Allowance for loan losses

BALANCE SHEET REFERENCE — Allowance for loan losses

INCOME STATEMENT REFERENCE — Provision for loan losses

DESCRIPTION

The allowance for loan losses is calculated with the objective of maintaining reserve levels believed by management to be sufficient to absorb estimated probable credit losses. Management’s determination of the adequacy of the allowance is based on periodic evaluations of the credit portfolio and other relevant factors. However, this quarterly evaluation is inherently subjective as it requires material estimates, including, among others, likelihood of customer default, loss given default, exposure at default, the amounts and timing of expected future cash flows on impaired loans, value of collateral, estimated losses on consumer loans and residential mortgages, and general amounts for historical loss experience. This process also considers economic conditions, uncertainties in estimating losses and inherent risks in the various credit portfolios. All of these factors may be susceptible to significant change. Also, the allocation of the allowance for credit losses to specific loan pools is based on historical loss trends and management’s judgment concerning those trends.

Commercial and CREcommercial real estate loans are the largest category of credits and the most sensitive to changes in assumptions and judgments underlying the determination of the ALL.allowance for loan losses. Approximately $8.0$8.6 million, or 78%80%, of the total ALLallowance for loan losses at December 31, 20172022 has been allocated to these two loan categories. This allocation also considers other relevant factors such as actual versus estimated losses, economic trends, delinquencies,

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levels of non-performing and Troubled Debt Restructuredtroubled debt restructured (TDR) loans, concentrations of credit, trends in loan volume, experience and depth of management, examination and audit results, effects of any changes in lending policies and trends in policy, financial information and documentation exceptions. To the extent actual outcomes differ from management estimates, additional provision for loan losses may be required that would adversely impact earnings in future periods.

ACCOUNT — GoodwillIntangible assets

BALANCE SHEET REFERENCE — GoodwillIntangible assets

INCOME STATEMENT REFERENCE — Goodwill impairmentOther expense

DESCRIPTION

The Company considers our accounting policies related to goodwill and core deposit intangible to be critical because the assumptions or judgment used in determining the fair value of assets and liabilities acquired in past acquisitions are subjective and complex. As a result, changes in these assumptions or judgment could have a significant impact on our financial condition or results of operations.

The fair value of acquired assets and liabilities, including the resulting goodwill and core deposit intangible, was based either on quoted market prices or provided by other third party sources, when available. When third party information was not available, estimates were made in good faith by management primarily through the use of internal cash flow modeling techniques. The assumptions that were used in the cash flow modeling were subjective


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and are susceptible to significant changes. The Company routinely utilizes the services of an independent third party that is regarded within the banking industry as an expert in valuing core deposits to monitor the ongoing value and changes in the Company’s core deposit base. These core deposit valuation updates are based upon specific data provided from statistical analysis of the Company’s own deposit behavior to estimate the duration of these non-maturity deposits combined with market interest rates and other economic factors.

Goodwill arising from business combinations represents the value attributable to unidentifiable intangible elements in the business acquired. The Company’s goodwill relates to value inherent in the banking and wealth management businesses, and the value is dependent upon the Company’s ability to provide quality, cost-effective services in the face of free competition from other market participants on a regional basis. This ability relies upon continuing investments in processing systems, the development of value-added service features and the ease of use of the Company’s services. As such, goodwill value is supported ultimately by revenue that is driven by the volume of business transacted and the loyalty of the Company’s deposit and customer base over a longer time frame. The quality and value of a Company’s assets is also an important factor to consider when performing goodwill impairment testing. A decline in earnings as a result of a lack of growth or the inability to deliver cost-effective value added services over sustained periods can lead to the impairment of goodwill.

Goodwill, which has an indefinite useful life, is tested for impairment at least annually and written down and charged to results of operations only in periods in which the recorded value is more than the estimated fair value. The core deposit intangible, which is a wasting asset, is amortized and reported in other expense for a period of ten years using the sum of the years digits amortization method.

ACCOUNT — Income Taxestaxes

BALANCE SHEET REFERENCE — Net deferred tax asset and Net deferred tax liability

INCOME STATEMENT REFERENCE — Provision for income taxes

DESCRIPTION

The provision for income taxes is the sum of income taxes both currently payable and deferred. The changes in deferred tax assets and liabilities are determined based upon the changes in differences between the basis of assets and liabilities for financial reporting purposes and the basis of assets and liabilities as measured by the enacted tax rates that management estimates will be in effect when the differences reverse. This income tax review is completed on a quarterly basis.

In relation to recording the provision for income taxes, management must estimate the future tax rates applicable to the reversal of tax differences, make certain assumptions regarding whether tax differences are permanent or temporary and the related timing of the expected reversal. Also, estimates are made as to whether taxable operating income in future periods will be sufficient to fully recognize any gross deferred tax assets. If recovery is not likely, we must increase our provision for taxes by recording a valuation allowance against the deferred tax assets that we estimate will

36

Table of Contents

not ultimately be recoverable. Alternatively, we may make estimates about the potential usage of deferred tax assets that decrease our valuation allowances. As of December 31, 2017,2022, we believe that all of the deferred tax assets recorded on our balance sheet will ultimately be recovered and that no valuation allowances were needed.

In addition, the calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax regulations. We recognize liabilities for anticipated tax audit issues based on our estimate of whether, and the extent to which, additional taxes will be due. If we ultimately determine that payment of these amounts is unnecessary, we reverse the liability and recognize a tax benefit during the period in which we determine that the liability is no longer necessary. We record an additional charge in our provision for income taxes in the period in which we determine that the recorded tax liability is less than we expect the ultimate assessment to be.


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ACCOUNT — Investment Securitiessecurities

BALANCE SHEET REFERENCE — Investment securities

INCOME STATEMENT REFERENCE — Net realized gains on investment securities

DESCRIPTION

Available-for-sale and held-to-maturity securities are reviewed quarterly for possible other-than-temporary impairment. The review includes an analysis of the facts and circumstances of each individual investment such as the severity of loss, the length of time the fair value has been below cost, the expectation for that security’s performance, the creditworthiness of the issuer and the Company’s intent and ability to hold the security to recovery. A decline in value that is considered to be other-than-temporary is recorded as a loss within non-interest income in the Consolidated Statements of Operations. At December 31, 2017,2022, the unrealized losses in the available-for-sale security portfolio were comprised of securities issued by government agencies or government sponsored agencies and certain high quality corporate and taxable municipal securities. The Company believes the unrealized losses are primarily a result of increases in market yields from the time of purchase. In general, as market yields rise, the value of securities will decrease; as market yields fall, the fair value of securities will increase. Management generally views changes in fair value caused by changes in interest rates as temporary; therefore, these securities have not been classified as other-than-temporarily impaired. Management has also concluded that based on current information we expect to continue to receive scheduled interest payments as well as the entire principal balance. Furthermore, management does not intend to sell these securities and does not believe it will be required to sell these securities before they recover in value.

FORWARD LOOKING STATEMENTS...

STATEMENTS

THE STRATEGIC FOCUS:

The challengeAmeriServ Financial is committed to increasing shareholder value by striving for consistently improving financial performance; providing our customers with products and exceptional service for every step in their lifetime financial journey; cultivating an employee atmosphere rooted in trust, empowerment and growth; and serving our communities through employee involvement and a philanthropic spirit. We will strive to provide our shareholders with consistently improved financial performance; the future isproducts, services and know-how needed to improve earnings performanceforge lasting banking for life customer relationships; a work environment that challenges and rewards staff; and the manpower and financial resources needed to peer levels throughmake a disciplineddifference in the communities we serve. Our strategic initiatives will focus on community banking and improvingthese four key constituencies:

●Shareholders — We strive to increase earnings per share; identifying and managing revenue growth and expense control; and managing risk. Our goal is to increase value for AmeriServ shareholders by growing earnings per share and narrowing the financial performance gap between AmeriServ and its peer banks. We try to return earnings to shareholders through a combination of dividends and share repurchases (none currently authorized) subject to maintaining sufficient capital to support balance sheet growth and economic uncertainty. We strive to educate our employee base as to the meaning/importance of earnings per share as a performance measure. We will develop a value added combination for increasing revenue and controlling expenses that is rooted in developing and offering high-quality financial products and services; an existing branch network; electronic banking capabilities with 24/7 convenience; and providing truly exceptional customer service. We will explore branch consolidation opportunities and further leverage union affiliated revenue streams, prudently manage the Company’s risk profile to improve asset yields and increase profitability and continue to identify and implement technological opportunities and advancements to drive efficiency for the holding company and its affiliates.

37

Table of our Trust Company. In accordance with our strategic plan, the Company will maintain its focus as a community bank delivering banking and trust services to the best of our ability and focus on further growing revenues by leveraging our strong capital base and infrastructure. This Company will not succumb to the lure of quick fixes and fancy financial gimmicks. It is our plan to continue to build the Company into a potent banking force in this region and in this industry. Our focus encompasses the following:Contents

Customer Service — It is the existing and prospective customer that the Company must satisfy. This means good products and fair prices. But it also means quick response time and professional competence. It means speedy problem resolution and a minimizing of bureaucratic frustrations. The Company is training and motivating its staff to meet these standards while providing customers with more banking options that involve leading technologies such as computers, smartphones, and tablets to conduct business.
Revenue Growth — It is necessary for the Company to focus on growing revenues. This means loan growth, deposit growth and fee growth. It also means close coordination among all customer service areas so our revenue producing products can be tailored to meet the needs of existing and prospective customers. The Company’s Strategic Plan contains action plans in each of these areas particularly on increasing loans through several loan production offices. The Strategic Plan also states that purchases of investment securities will become more diverse and include high quality corporate and taxable municipal securities while continuing to purchase federal agency mortgage backed securities that provide a return consistent with the market as well as asset cash flow liquidity. An examination of the peer bank database provides ample proof that a well-executed community banking business model can generate a reliable and rewarding revenue stream.
●Customers — The Company expects to provide exceptional customer service, identifying opportunities to enhance the Banking for Life philosophy by providing products and services to meet the financial needs in every step through a customer’s life cycle, and further defining the role technology plays in anticipating and satisfying customer needs. We anticipate providing leading banking systems and solutions to improve and enhance customers’ Banking for Life experience. We will provide customers with a comprehensive offering of financial solutions including retail and business banking, home mortgages and wealth management at one location. We have upgraded and modernized select branches to be more inviting and technologically savvy to meet the needs of the next generation of AmeriServ customers without abandoning the needs of our existing demographic.
●Staff — We are committed to developing high-performing employees, establishing and maintaining a culture of trust and effectively and efficiently managing staff attrition. We will employ a work force succession plan to manage anticipated staff attrition while identifying and grooming high performing staff members to assume positions with greater responsibility within the organization. We will employ technological systems and solutions to provide staff with the tools they need to perform more efficiently and effectively.
●Communities — We will continue to promote and encourage employee community involvement and leadership while fostering a positive corporate image. This will be accomplished by demonstrating our commitment to the communities we serve through assistance in providing affordable housing programs for low-to-moderate-income families; donations to qualified charities; and the time and talent contributions of AmeriServ staff to a wide-range of charitable and civic organizations.

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Expense Rationalization — The Company remains focused on trying to reduce and rationalize expenses. This has not been a program of broad based cuts, but has been targeted so the Company stays strong but spends less. It is critical to be certain that future expenditures are directed to areas that are playing a positive role in the drive to improve revenues. The Company also recently completed three additional initiatives that further reduced non-interest expenses and improved the Company’s profitability. Specifically, at the end of the first quarter of 2016, the Company had closed its Southern Atherton branch office in the State College market and consolidated the retail customer accounts from this branch into its nearby and newer branch office located on North Atherton Street. The Company remains committed to the State College market, and this change will allow for a more efficient operation that will allow us to better compete in this demographically attractive but highly competitive banking market. The Company also realigned its executive leadership team by eliminating one senior position in its executive office. Finally, the Company closed its Harrisonburg, Virginia loan production office. The combined annual cost savings from these profitability improvement initiatives approximates $1.2 million, which the Company realized in 2017.

This Form 10-K contains various forward-looking statements and includes assumptions concerning the Company’s beliefs, plans, objectives, goals, expectations, anticipations, estimates, intentions, operations, future results, and prospects, including statements that include the words “may,” “could,” “should,” “would,” “believe,” “expect,” “anticipate,” “estimate,” “intend,” “project,” “plan” or similar expressions. These forward-looking statements are based upon current expectations, are subject to risk and uncertainties and are applicable only as of the dates of such statements. Forward-looking statements involve risks, uncertainties and assumptions. Although we do not make forward-looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy. You should not put undue reliance on any forward-looking statements. These statements speak only as of the date of this Form 10-K, even if subsequently made available on our website or otherwise, and we undertake no obligation to update or revise these statements to reflect events or circumstances occurring after the date of this Form 10-K. In connection with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, the Company provides the following cautionary statement identifying important factors (some of which are beyond the Company’s control) which could cause the actual results or events to differ materially from those set forth in or implied by the forward-looking statements and related assumptions.

Such factors include the following: (i) the effect of changing regional and national economic conditions; (ii) the effects of trade, monetary and fiscal policies and laws, including interest rate policies of the Federal Reserve; (iii) significant changes in interest rates and prepayment speeds; (iv) inflation, stock and bond market, and monetary fluctuations; (v) credit risks of commercial, real estate, consumer, and other lending activities; (vi) changes in federal and state banking and financial services laws and regulations; (vii) the presence in the Company’s market area of competitors with greater financial resources than the Company; (viii) the timely development of competitive new products and services by the Company and the acceptance of those products and services by customers and regulators (when required); (ix) the willingness of customers to substitute competitors’ products and services for those of the Company and vice versa; (x) changes in consumer spending and savings habits; (xi) unanticipated regulatory or judicial proceedings; (xii) potential risks and (xii)uncertainties also include those relating to the duration of the COVID-19 outbreak and its variants, and actions that may be taken by governmental authorities to contain the outbreak or to treat its impact, including the distribution and effectiveness of COVID-19 vaccines; (xiii) expense and reputational impact on the Company as a result of its ongoing proxy contest, and (xiv) other external developments which could materially impact the Company’s operational and financial performance.

The foregoing list of important factors is not exclusive, and neither such list nor any forward-looking statement takes into account the impact that any future acquisition may have on the Company and on any such forward-looking statement.

​

38

Table of Contents

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Risk identification and management are essential elements for the successful management of the Company. In the normal course of business, the Company is subject to various types of risk, including interest rate, credit, and liquidity risk. The Company controlsseeks to identify, manage and monitorsmonitor these risks with policies, procedures, and various levels of managerial and Board oversight. The Company’s objective is to optimize profitability while managing and controllingmonitoring risk within Board approved policy limits.

Interest rate risk is the sensitivity of net interest income and the market value of financial instruments to the magnitude, direction, and frequency of changes in interest rates. Interest rate risk results from various


TABLE OF CONTENTS

repricing frequencies and the maturity structure of assets, liabilities, and hedges. The Company uses its asset liability management policy and hedging policy to control and manage interest rate risk. For information regarding the effect of changing interest rates on the Company’s net interest income and market value of its investment portfolio, see “Management’s Discussion and Analysis of Consolidated Financial Condition and Results of Operations — Interest Rate Sensitivity.”

Liquidity risk represents the inability to generate cash or otherwise obtain funds at reasonable rates to satisfy commitments to borrowers, as well as, the obligations to depositors, debtholders and to fund operating expenses. The Company uses its asset liability management policy and contingency funding plan to control and manage liquidity risk. See “Management’s Discussion and Analysis of Consolidated Financial Condition and Results of Operations — Liquidity.”

Credit risk represents the possibility that a customer may not perform in accordance with contractual terms. Credit risk results from extending credit to customers, purchasing securities, and entering into certain off-balance sheet loan funding commitments. The Company’s primary credit risk occurs in the loan portfolio and to a lesser extent in the corporate and municipal portions of the investment portfolio. The Company uses its credit policy and disciplined approach to evaluating the adequacy of the ALLallowance for loan losses to control and manage credit risk. The Company’s investment policy and hedging policy strictly limit the amount of credit risk that may be assumed in the investment portfolio and through hedging activities.

For information regarding the market risk of the Company’s financial instruments, see “Management’s Discussion and Analysis of Consolidated Financial Condition and Results of Operations — Interest Rate Sensitivity.” The Company’s principal market risk exposure is to interest rates.

​

​


39

TABLE OF CONTENTSTable of Contents

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

AMERISERV FINANCIAL, INC.

CONSOLIDATED BALANCE SHEETS

​

​

​

​

​

​

​

​

​

​

AT DECEMBER 31, 

​

    

2022

    

2021

​

​

(IN THOUSANDS,

​

​

EXCEPT SHARE DATA)

ASSETS

 

​

  

 

​

  

Cash and due from depository institutions

​

$

18,830

​

$

24,748

Interest bearing deposits

​

 

4,132

​

 

10,942

Short-term investments

​

 

—

​

 

5,411

Cash and cash equivalents

​

 

22,962

​

 

41,101

Investment securities:

​

 

  

​

 

  

Available for sale, at fair value

​

 

179,508

​

 

163,171

Held to maturity (fair value $55,192 on December 31, 2022 and $55,516 on December 31, 2021)

​

 

61,878

​

 

53,751

Loans held for sale

​

 

59

​

 

983

Loans

​

 

991,109

​

 

985,880

Less: Unearned income

​

 

343

​

 

826

Less: Allowance for loan losses

​

 

10,743

​

 

12,398

Net loans

​

 

980,023

​

 

972,656

Premises and equipment:

​

 

​

​

 

​

Operating lease right-of-use asset

​

​

630

​

​

667

Financing lease right-of-use asset

​

​

2,413

​

​

2,684

Other premises and equipment, net

​

​

14,460

​

​

14,082

Accrued interest income receivable

​

 

4,804

​

 

3,984

Intangible assets:

​

 

​

​

 

​

Goodwill

​

 

13,611

​

 

13,611

Core deposit intangible

​

 

128

​

 

158

Bank owned life insurance

​

 

38,895

​

 

38,842

Net deferred tax asset

​

 

2,789

​

 

—

Federal Home Loan Bank stock

​

 

5,754

​

 

2,692

Federal Reserve Bank stock

​

 

2,125

​

 

2,125

Other assets

​

 

33,835

​

 

25,053

TOTAL ASSETS

​

$

1,363,874

​

$

1,335,560

LIABILITIES

​

​

​

​

​

​

Non-interest bearing deposits

​

$

195,123

​

$

211,106

Interest bearing deposits

​

 

913,414

​

 

928,272

Total deposits

​

 

1,108,537

​

 

1,139,378

Short-term borrowings

​

 

88,641

​

 

—

Advances from Federal Home Loan Bank

​

 

19,765

​

 

42,653

Operating lease liabilities

​

​

643

​

​

682

Financing lease liabilities

​

​

2,680

​

​

2,899

Subordinated debt

​

 

26,644

​

 

26,603

Total borrowed funds

​

 

138,373

​

 

72,837

Net deferred tax liability

​

 

—

​

 

934

Other liabilities

​

 

10,786

​

 

5,862

TOTAL LIABILITIES

​

 

1,257,696

​

 

1,219,011

SHAREHOLDERS' EQUITY

​

 

  

​

 

  

Common stock, par value $0.01 per share; 30,000,000 shares authorized; 26,746,436 shares issued and 17,117,617 shares outstanding on December 31, 2022; 26,710,319 shares issued and 17,081,500 shares outstanding on December 31, 2021

​

 

267

​

 

267

Treasury stock at cost, 9,628,819 shares on December 31, 2022 and December 31, 2021

​

 

(83,280)

​

 

(83,280)

Capital surplus

​

 

146,225

​

 

146,069

Retained earnings

​

 

65,486

​

 

60,005

Accumulated other comprehensive loss, net

​

 

(22,520)

​

 

(6,512)

TOTAL SHAREHOLDERS' EQUITY

​

 

106,178

​

 

116,549

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

​

$

1,363,874

​

$

1,335,560

​

Seeaccompanyingnotestoconsolidatedfinancialstatements.

​

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Table of Contents

AMERISERV FINANCIAL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

​

​

​

​

​

​

​

​

​

​

​

​

​

YEAR ENDED DECEMBER 31, 

​

    

2022

    

2021

    

2020

​

​

EXCEPT PER SHARE DATA)

INTEREST INCOME

 

​

  

 

​

  

 

​

  

Interest and fees on loans

 

​

  

 

​

  

 

​

  

Taxable

​

$

41,413

​

$

40,496

​

$

40,518

Tax exempt

​

 

71

​

 

89

​

 

110

Interest bearing deposits

​

 

26

​

 

6

​

 

15

Short-term investments

​

 

183

​

 

54

​

 

231

Investment securities:

​

 

  

​

 

  

​

 

  

Available for sale

​

 

5,610

​

 

4,543

​

 

4,591

Held to maturity

​

 

1,755

​

 

1,481

​

 

1,417

Total Interest Income

​

 

49,058

​

 

46,669

​

 

46,882

INTEREST EXPENSE

​

 

  

​

 

  

​

 

  

Deposits

​

 

6,424

​

 

4,806

​

 

7,634

Short-term borrowings

​

 

364

​

 

1

​

 

29

Advances from Federal Home Loan Bank

​

 

553

​

 

875

​

 

1,099

Financing lease liabilities

​

​

100

​

​

106

​

​

112

Guaranteed junior subordinated deferrable interest debentures

​

 

—

​

 

944

​

 

1,121

Subordinated debt

​

 

1,054

​

 

854

​

 

520

Total Interest Expense

​

 

8,495

​

 

7,586

​

 

10,515

Net Interest Income

​

 

40,563

​

 

39,083

​

 

36,367

Provision for loan losses

​

 

50

​

 

1,100

​

 

2,375

Net Interest Income after Provision for Loan Losses

​

 

40,513

​

 

37,983

​

 

33,992

NON-INTEREST INCOME

​

 

  

​

 

  

​

 

  

Wealth management fees

​

 

11,620

​

 

11,986

​

 

10,212

Service charges on deposit accounts

​

 

1,108

​

 

965

​

 

903

Net gains on loans held for sale

​

 

208

​

 

664

​

 

1,523

Mortgage related fees

​

 

115

​

 

358

​

 

559

Net realized gains on investment securities

​

 

—

​

 

84

​

 

—

Bank owned life insurance

​

 

1,089

​

 

1,117

​

 

782

Other income

​

 

2,552

​

 

2,587

​

 

2,296

Total Non-Interest Income

​

 

16,692

​

 

17,761

​

 

16,275

NON-INTEREST EXPENSE

​

 

  

​

 

  

​

 

  

Salaries and employee benefits

​

 

28,492

​

 

27,847

​

 

27,390

Net occupancy expense

​

 

2,883

​

 

2,620

​

 

2,510

Equipment expense

​

 

1,636

​

 

1,582

​

 

1,559

Professional fees (1)

​

 

3,210

​

 

2,872

​

 

2,909

Data processing and IT expense (1)

​

​

3,945

​

​

3,666

​

​

3,428

Supplies, postage and freight

​

 

651

​

 

668

​

 

714

Miscellaneous taxes and insurance

​

 

1,373

​

 

1,236

​

 

1,143

Federal deposit insurance expense

​

 

515

​

 

655

​

 

481

Branch acquisition costs

​

 

—

​

 

389

​

 

—

Other expense (1)

​

 

5,299

​

 

5,435

​

 

4,321

Total Non-Interest Expense

​

 

48,004

​

 

46,970

​

 

44,455

​

​

​

​

​

​

​

​

​

​

PRETAX INCOME

​

​

9,201

​

​

8,774

​

​

5,812

Provision for income taxes

​

​

1,753

​

​

1,702

​

​

1,214

NET INCOME

​

$

7,448

​

$

7,072

​

$

4,598

​

​

​

41

Table of Contents

AMERISERV FINANCIAL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)

​

​

​

​

​

​

​

​

​

​

​

​

​

YEAR ENDED DECEMBER 31, 

​

    

2022

    

2021

    

2020

​

​

(IN THOUSANDS,

​

​

EXCEPT PER SHARE DATA)

PER COMMON SHARE DATA:

​

 

  

​

 

  

​

 

  

Basic:

​

 

  

​

 

  

​

 

  

Net income

​

$

0.44

​

$

0.41

​

$

0.27

Average number of shares outstanding

​

​

17,107

​

​

17,073

​

​

17,053

Diluted:

​

​

​

​

​

​

​

​

​

Net income

​

$

0.43

​

$

0.41

​

$

0.27

Average number of shares outstanding

​

​

17,146

​

​

17,114

​

​

17,063

Cash dividends declared

​

$

0.115

​

$

0.100

​

$

0.100

​

  
 AT DECEMBER 31,
   2017 2016
   (IN THOUSANDS,
EXCEPT SHARE DATA)
ASSETS
          
Cash and due from depository institutions $26,234  $25,107 
Interest bearing deposits  2,698   3,066 
Short-term investments in money market funds  5,256   5,900 
Cash and cash equivalents  34,188   34,073 
Investment securities:
          
Available for sale  129,138   127,077 
Held to maturity (fair value $38,811 at December 31, 2017 and $30,420 at December 31, 2016)  38,752   30,665 
Loans held for sale  3,125   3,094 
Loans  890,032   884,240 
Less: Unearned income  399   476 
Allowance for loan losses  10,214   9,932 
Net loans  879,419   873,832 
Premises and equipment, net  12,734   11,694 
Accrued interest income receivable  3,603   3,116 
Goodwill  11,944   11,944 
Bank owned life insurance  37,860   37,903 
Net deferred tax asset  5,963   10,655 
Federal Home Loan Bank stock  4,675   3,359 
Federal Reserve Bank stock  2,125   2,125 
Other assets  4,129   4,243 
TOTAL ASSETS $1,167,655  $1,153,780 
LIABILITIES
          
Non-interest bearing deposits $183,603  $188,808 
Interest bearing deposits  764,342   778,978 
Total deposits  947,945   967,786 
Short-term borrowings  49,084   12,754 
Advances from Federal Home Loan Bank  46,229   45,542 
Guaranteed junior subordinated deferrable interest debentures  12,923   12,908 
Subordinated debt  7,465   7,441 
Total borrowed funds  115,701   78,645 
Other liabilities  8,907   11,954 
TOTAL LIABILITIES  1,072,553   1,058,385 
STOCKHOLDERS’ EQUITY
          
Common stock, par value $0.01 per share; 30,000,000 shares authorized: 26,585,403 shares issued and 18,128,247 shares outstanding on December 31, 2017; 26,521,291 shares issued and 18,903,472 shares outstanding on December 31, 2016  266   265 
Treasury stock at cost, 8,457,156 shares on December 31, 2017 and 7,617,819 shares on December 31, 2016  (78,233)   (74,829) 
Capital surplus  145,707   145,535 
Retained earnings  40,312   36,001 
Accumulated other comprehensive loss, net  (12,950)   (11,577) 
TOTAL STOCKHOLDERS’ EQUITY  95,102   95,395 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $1,167,655  $1,153,780 
(1)Certain comparative amounts for prior years have been reclassified to conform with current-year presentations. Such reclassifications did not affect net income or retained earnings.



​

​

Seeaccompanyingnotestoconsolidatedfinancialstatements.

​

42

Table of Contents

AMERISERV FINANCIAL, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

​

​

​

​

​

​

​

​

​

​

​

YEAR ENDED DECEMBER 31, 

​

2022

    

2021

    

2020

​

(IN THOUSANDS)

COMPREHENSIVE (LOSS) INCOME

​

  

 

​

  

 

​

  

Net income

$

7,448

​

$

7,072

​

$

4,598

Other comprehensive (loss) income

 

  

​

 

  

​

 

  

Pension obligation change for defined benefit plan

 

400

​

 

11,189

​

 

1,454

Income tax effect

 

(84)

​

 

(2,350)

​

 

(305)

Unrealized holding (losses) gains on available for sale securities arising during period

 

(20,664)

​

 

(2,642)

​

 

2,309

Income tax effect

 

4,340

​

 

555

​

 

(485)

Reclassification adjustment for net realized gains on available for sale securities included in net income

 

—

​

 

(84)

​

 

—

Income tax effect

 

—

​

 

18

​

 

—

Other comprehensive (loss) income

 

(16,008)

​

 

6,686

​

 

2,973

Comprehensive (loss) income

$

(8,560)

​

$

13,758

​

$

7,571

​

See accompanying notes to consolidated financial statements.

​


43

TABLE OF CONTENTSTable of Contents

AMERISERV FINANCIAL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONSCHANGES IN SHAREHOLDERS’ EQUITY

​

   
 YEAR ENDED DECEMBER 31,
   2017 2016 2015
   (IN THOUSANDS,
EXCEPT PER SHARE DATA)
INTEREST INCOME
               
Interest and fees on loans:
               
Taxable $39,122  $37,786  $37,923 
Tax exempt  95   75   72 
Interest bearing deposits  11   13   8 
Short-term investments in money market funds  130   84   14 
Investment securities:
               
Available for sale  3,800   3,132   3,250 
Held to maturity  1,198   779   614 
Total Interest Income  44,356   41,869   41,881 
INTEREST EXPENSE
               
Deposits  6,255   5,400   4,752 
Short-term borrowings  206   52   86 
Advances from Federal Home Loan Bank  694   644   558 
Guaranteed junior subordinated deferrable interest debentures  1,120   1,120   1,120 
Subordinated debt  520   519   4 
Total Interest Expense  8,795   7,735   6,520 
Net Interest Income  35,561   34,134   35,361 
Provision for loan losses  800   3,950   1,250 
Net Interest Income after Provision for Loan Losses  34,761   30,184   34,111 
NON-INTEREST INCOME
               
Trust and investment advisory fees  8,462   8,333   8,344 
Service charges on deposit accounts  1,581   1,674   1,750 
Net gains on loans held for sale  679   884   767 
Mortgage related fees  285   367   391 
Net realized gains on investment securities  115   177   71 
Bank owned life insurance  737   675   1,617 
Other income  2,786   2,528   2,327 
Total Non-Interest Income  14,645   14,638   15,267 
NON-INTEREST EXPENSE
               
Salaries and employee benefits  24,127   24,034   24,042 
Net occupancy expense  2,600   2,782   2,941 
Equipment expense  1,585   1,688   1,773 
Professional fees  5,058   5,280   5,003 
Supplies, postage, and freight  676   705   726 
Miscellaneous taxes and insurance  1,234   1,146   1,157 
Federal deposit insurance expense  628   709   669 
Other expense  4,858   5,271   4,727 
Total Non-Interest Expense  40,766   41,615   41,038 

​

​

​

​

​

​

​

​

​

​

​

​

YEAR ENDED DECEMBER 31, 

​

    

2022

    

2021

    

2020

​

​

(IN THOUSANDS)

COMMON STOCK

​

 

  

​

 

  

​

 

  

Balance at beginning of period

​

$

267

​

$

267

​

$

267

New common shares issued for exercise of stock options (36,117, 21,356, and 38,235 shares in 2022, 2021, and 2020, respectively)

​

 

—

​

 

—

​

 

—

Balance at end of period

​

 

267

​

 

267

​

 

267

TREASURY STOCK

​

 

  

​

 

  

​

 

  

Balance at beginning of period

​

 

(83,280)

​

 

(83,280)

​

 

(83,129)

Treasury stock purchased (35,962 shares in 2020)

​

 

—

​

 

—

​

 

(151)

Balance at end of period

​

 

(83,280)

​

 

(83,280)

​

 

(83,280)

CAPITAL SURPLUS

​

 

  

​

 

  

​

 

  

Balance at beginning of period

​

 

146,069

​

 

145,969

​

 

145,888

New common shares issued for exercise of stock options (36,117, 21,356, and 38,235 shares in 2022, 2021, and 2020, respectively)

​

 

106

​

 

57

​

 

78

Stock option expense

​

 

50

​

 

43

​

 

3

Balance at end of period

​

 

146,225

​

 

146,069

​

 

145,969

RETAINED EARNINGS

​

 

  

​

 

  

​

 

  

Balance at beginning of period

​

 

60,005

​

 

54,641

​

 

51,759

Net income

​

 

7,448

​

 

7,072

​

 

4,598

Cash dividend declared on common stock ($0.115, $0.100, and $0.100 per share in 2022, 2021, and 2020, respectively)

​

 

(1,967)

​

 

(1,708)

​

 

(1,716)

Balance at end of period

​

 

65,486

​

 

60,005

​

 

54,641

ACCUMULATED OTHER COMPREHENSIVE LOSS, NET

​

 

  

​

 

  

​

 

  

Balance at beginning of period

​

 

(6,512)

​

 

(13,198)

​

 

(16,171)

Other comprehensive (loss) income

​

 

(16,008)

​

 

6,686

​

 

2,973

Balance at end of period

​

 

(22,520)

​

 

(6,512)

​

 

(13,198)

TOTAL SHAREHOLDERS’ EQUITY

​

$

106,178

​

$

116,549

​

$

104,399



​

See accompanying notes to consolidated financial statements.

​


44

TABLE OF CONTENTSTable of Contents

AMERISERV FINANCIAL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS – (continued)CASH FLOWS

​

   
 YEAR ENDED DECEMBER 31,
   2017 2016 2015
   (IN THOUSANDS,
EXCEPT PER SHARE DATA)
PRETAX INCOME  8,640   3,207   8,340 
Provision for income taxes  5,347   897   2,343 
NET INCOME  3,293   2,310   5,997 
Preferred stock dividends  —   15   210 
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $3,293  $2,295  $5,787 
PER COMMON SHARE DATA:
               
Basic:
               
Net income $0.18  $0.12  $0.31 
Average number of shares outstanding  18,498   18,896   18,863 
Diluted:
               
Net income $0.18  $0.12  $0.31 
Average number of shares outstanding  18,600   18,955   18,933 
Cash dividends declared $0.06  $0.05  $0.04 

​

​

​

​

​

​

​

​

​

​

​

​

YEAR ENDED DECEMBER 31

​

    

2022

    

2021

    

2020

​

 

(IN THOUSANDS)

OPERATING ACTIVITIES

​

​

​

​

​

​

​

​

​

Net income

​

$

7,448

​

$

7,072

​

$

4,598

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

​

 

  

​

 

  

​

 

  

Provision for loan losses

​

 

50

​

 

1,100

​

 

2,375

Depreciation and amortization expense

​

 

2,066

​

 

2,016

​

 

1,996

Amortization expense of core deposit intangible

​

 

30

​

 

19

​

 

—

Amortization of fair value adjustment on acquired time deposits

​

 

(101)

​

 

(98)

​

 

—

Net amortization of investment securities

​

 

108

​

 

222

​

 

285

Net realized gains on investment securities — available for sale

​

 

—

​

 

(84)

​

 

—

Net amortization of deferred loan fees

​

 

(553)

​

 

(1,351)

​

 

(707)

Net gains on loans held for sale

​

 

(208)

​

 

(664)

​

 

(1,523)

Origination of mortgage loans held for sale

​

 

(9,421)

​

 

(13,806)

​

 

(87,140)

Sales of mortgage loans held for sale

​

 

10,553

​

 

19,737

​

 

87,281

(Increase) decrease in accrued interest receivable

​

 

(820)

​

 

1,084

​

 

(1,619)

Increase (decrease) in accrued interest payable

​

 

45

​

 

(490)

​

 

(525)

Earnings on bank-owned life insurance

​

 

(1,089)

​

 

(1,117)

​

 

(782)

Deferred income taxes

​

 

533

​

 

729

​

 

1,614

Stock compensation expense

​

 

50

​

 

43

​

 

3

Net change in operating leases

​

​

(84)

​

​

(94)

​

​

(89)

Other, net

​

 

(3,398)

​

 

(4,379)

​

 

(7,140)

Net cash provided by (used in) operating activities

​

 

5,209

​

 

9,939

​

 

(1,373)

INVESTING ACTIVITIES

​

 

  

​

 

  

​

 

  

Purchase of investment securities — available for sale

​

 

(58,207)

​

 

(61,578)

​

 

(36,519)

Purchase of investment securities — held to maturity

​

 

(11,104)

​

 

(16,272)

​

 

(9,359)

Proceeds from maturities of investment securities — available for sale

​

 

19,638

​

 

38,826

​

 

36,215

Proceeds from maturities of investment securities — held to maturity

​

 

2,918

​

 

6,665

​

 

4,985

Proceeds from sales of investment securities — available for sale

​

 

1,519

​

 

960

​

 

—

Purchase of regulatory stock

​

 

(11,143)

​

 

(1,799)

​

 

(9,979)

Proceeds from redemption of regulatory stock

​

 

8,081

​

 

3,928

​

 

9,143

Long-term loans originated

​

 

(223,704)

​

 

(313,125)

​

 

(301,210)

Principal collected on long-term loans

​

 

216,787

​

 

301,498

​

 

212,179

Purchases of premises and equipment

​

 

(2,080)

​

 

(1,241)

​

 

(1,325)

Proceeds from sale of other real estate owned and repossessed assets

​

 

14

​

 

8

​

 

63

Cash acquired in branch acquisition, net

​

 

—

​

 

40,431

​

 

—

Proceeds from life insurance policies

​

 

1,000

​

 

1,211

​

 

490

Net cash used in investing activities

​

 

(56,281)

​

 

(488)

​

 

(95,317)

FINANCING ACTIVITIES

​

 

  

​

 

  

​

 

  

Net (decrease) increase in deposit balances

​

 

(30,740)

​

 

42,124

​

 

94,407

Net increase (decrease) in other short-term borrowings

​

 

88,641

​

 

(24,702)

​

 

2,290

Principal borrowings on advances from Federal Home Loan Bank

​

 

—

​

 

2,000

​

 

36,050

Principal repayments on advances from Federal Home Loan Bank

​

 

(22,888)

​

 

(24,336)

​

 

(24,729)

Principal payments on financing lease liabilities

​

​

(219)

​

​

(210)

​

​

(203)

Redemption of guaranteed junior subordinated deferrable interest debentures

​

​

—

​

​

(12,018)

​

​

—

Subordinated debt issuance, net

​

​

—

​

​

26,589

​

​

—

Redemption of subordinated debt

​

​

—

​

​

(7,650)

​

​

—

Stock options exercised

​

 

106

​

 

57

​

 

78

Purchases of treasury stock

​

 

—

​

 

—

​

 

(151)

Common stock dividend paid

​

 

(1,967)

​

 

(1,708)

​

 

(1,716)

Net cash provided by financing activities

​

 

32,933

​

 

146

​

 

106,026

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

​

 

(18,139)

​

 

9,597

​

 

9,336

CASH AND CASH EQUIVALENTS AT JANUARY 1

​

 

41,101

​

 

31,504

​

 

22,168

CASH AND CASH EQUIVALENTS AT DECEMBER 31

​

$

22,962

​

$

41,101

​

$

31,504



​

See accompanying notes to consolidated financial statements.

​

​


45

TABLE OF CONTENTSTable of Contents

AMERISERV FINANCIAL, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

   
 YEAR ENDED DECEMBER 31,
   2017 2016 2015
   (IN THOUSANDS)
COMPREHENSIVE INCOME (LOSS)
               
Net income $3,293  $2,310  $5,997 
Other comprehensive loss, before tax:
               
Pension obligation change for defined benefit plan  1,303   (4,612)   579 
Income tax effect  (442)   1,569   (197) 
Unrealized holding losses on available for sale securities arising during period  (40)   (1,305)   (1,498) 
Income tax effect  13   443   509 
Reclassification adjustment for net realized gains on available for sale securities included in net income  (115)   (177)   (71) 
Income tax effect  39   60   25 
Other comprehensive income (loss)  758   (4,022)   (653) 
Comprehensive income (loss) $4,051  $(1,712)  $5,344 



See accompanying notes to consolidated financial statements.


TABLE OF CONTENTS

AMERISERV FINANCIAL, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

   
 YEAR ENDED DECEMBER 31,
   2017 2016 2015
   (IN THOUSANDS)
PREFERRED STOCK
               
Balance at beginning of period $—  $21,000  $21,000 
Redemption of all preferred shares outstanding  —   (21,000)   — 
Balance at end of period  —   —   21,000 
COMMON STOCK
               
Balance at beginning of period  265   265   264 
New common shares issued for dividend reinvestment and stock purchase plan  1   —   1 
Balance at end of period  266   265   265 
TREASURY STOCK
               
Balance at beginning of period  (74,829)   (74,829)   (74,829) 
Treasury stock, 839,337 shares purchased at cost  (3,404)   —   — 
Balance at end of period  (78,233)   (74,829)   (74,829) 
CAPITAL SURPLUS
               
Balance at beginning of period�� 145,535   145,441   145,256 
New common shares issued for exercise of stock options  159   74   156 
Stock option expense  13   20   29 
Balance at end of period  145,707   145,535   145,441 
RETAINED EARNINGS
               
Balance at beginning of period  36,001   34,651   29,618 
Net income  3,293   2,310   5,997 
Cash dividend declared on common stock  (1,113)   (945)   (754) 
Reclassification of certain income tax effects from accumulated other comprehensive income  2,131   —   — 
Cash dividend declared on preferred stock  —   (15)   (210) 
Balance at end of period  40,312   36,001   34,651 
ACCUMULATED OTHER COMPREHENSIVE LOSS, NET
               
Balance at beginning of period  (11,577)   (7,555)   (6,902) 
Reclassification of certain income tax effects from accumulated other comprehensive income  (2,131)   —   — 
Other comprehensive income (loss)  758   (4,022)   (653) 
Balance at end of period  (12,950)   (11,577)   (7,555) 
TOTAL STOCKHOLDERS’ EQUITY $95,102  $95,395  $118,973 



See accompanying notes to consolidated financial statements.


TABLE OF CONTENTS

AMERISERV FINANCIAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

   
 YEAR ENDED DECEMBER 31
   2017 2016 2015
   (IN THOUSANDS)
OPERATING ACTIVITIES
               
Net income $3,293  $2,310  $5,997 
Adjustments to reconcile net income to net cash provided by operating activities:
               
Provision for loan losses  800   3,950   1,250 
Depreciation and amortization expense  1,665   1,803   1,790 
Net amortization of investment securities  436   488   342 
Net realized gains on investment securities – available for sale  (115)   (177)   (71) 
Net gains on loans held for sale  (679)   (884)   (767) 
Amortization of deferred loan fees  (162)   (231)   (249) 
Origination of mortgage loans held for sale  (45,637)   (59,252)   (51,759) 
Sales of mortgage loans held for sale  46,285   60,045   54,574 
Decrease (increase) in accrued interest receivable  (487)   (59)   70 
Increase (decrease) in accrued interest payable  114   (11)   (55) 
Earnings on bank-owned life insurance  (571)   (675)   (690) 
Deferred income taxes  4,303   414   888 
Stock compensation expense  173   94   186 
Amortization of long term debt issuance costs  39   39   — 
Other, net  (1,776)   (1,186)   (1,674) 
Net cash provided by operating activities  7,681   6,668   9,832 
INVESTING ACTIVITIES
               
Purchase of investment securities – available for sale  (32,889)   (42,844)   (22,241) 
Purchase of investment securities – held to maturity  (10,572)   (12,038)   (6,237) 
Proceeds from maturities of investment securities – available for sale  22,311   24,574   24,532 
Proceeds from maturities of investment securities – held to maturity  2,383   2,693   4,601 
Proceeds from sales of investment securities – available for sale  8,143   8,966   3,570 
Purchase of regulatory stock  (17,661)   (10,911)   (19,320) 
Proceeds from redemption of regulatory stock  16,345   12,180   18,740 
Long-term loans originated  (154,054)   (196,998)   (246,304) 
Principal collected on long-term loans  157,258   189,505   183,380 
Participations purchased  (11,804)   (17,192)   (15,019) 
Participations sold  2,800   18,900   23,774 
Net increase in other short-term loans  (502)   (875)   (627) 
Purchases of premises and equipment  (2,705)   (1,380)   (881) 
Proceeds from sale of other real estate owned  108   235   579 
Proceeds from life insurance policies  614   —   1,598 
Net cash used in investing activities  (20,225)   (25,185)   (49,855) 
FINANCING ACTIVITIES
               
Net (decrease) increase in deposit balances  (19,841)   64,492   33,339 
Net increase (decrease) in other short-term borrowings  36,330   (35,994)   9,868 
Principal borrowings on advances from Federal Home Loan Bank  12,687   9,542   10,000 
Principal repayments on advances from Federal Home Loan Bank  (12,000)   (12,000)   (4,000) 
Subordinated debt issuance, net  —   —   7,418 
Purchases of treasury stock  (3,404)   —   — 
Preferred stock redemption  —   (21,000)   — 
Preferred stock dividend paid  —   (15)   (210) 
Common stock dividend paid  (1,113)   (945)   (754) 
Net cash provided by financing activities  12,659   4,080   55,661 
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS  115   (14,437)   15,638 
CASH AND CASH EQUIVALENTS AT JANUARY 1  34,073   48,510   32,872 
CASH AND CASH EQUIVALENTS AT DECEMBER 31 $34,188  $34,073  $48,510 



See accompanying notes to consolidated financial statements.


TABLE OF CONTENTS

AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BUSINESS AND NATURE OF OPERATIONS:

AmeriServ Financial, Inc. (the Company) is a bank holding company, headquartered in Johnstown, Pennsylvania. Through its banking subsidiary, the Company operates 1517 banking locations in five southwestern Pennsylvania counties.counties and Hagerstown, Maryland. These branches provide a full range of consumer, mortgage, and commercial financial products.

The AmeriServ Trust and Financial Services Company (Trust(the Trust Company) offers a complete range of trust and financial services and administers assets valued at approximately $2.2$2.3 billion that are not recognized on the Company’s Consolidated Balance SheetSheets at December 31, 2017.2022.

PRINCIPLES OF CONSOLIDATION:

The consolidated financial statements include the accounts of AmeriServ Financial, Inc. and its wholly-owned subsidiaries, AmeriServ Financial Bank (the Bank), the Trust Company, and AmeriServ Life Insurance Company (AmeriServ Life). The Bank is a Pennsylvania state-chartered full service bank with 1516 locations in Pennsylvania.Pennsylvania and 1 location in Maryland. AmeriServ Life iswas a captive insurance company that engageswas formally closed on December 31, 2020.

In addition, the Parent Company is an administrative group that provides support in underwritingsuch areas as a reinsurer of credit lifeaudit, finance, investments, loan review, general services, and disability insurance.

marketing. Intercompany accounts and transactions have been eliminated in preparing the Consolidated Financial Statements. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (generally accepted accounting principles, or GAAP) requires management to make estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and accompanying notes. Actual results may differ from these estimates and the differences may be material to the Consolidated Financial Statements. The Company’s most significant estimates relate to the allowance for loan losses, goodwill,intangible assets, income taxes, investment securities, pension, and the fair value of financial instruments.

INVESTMENT SECURITIES:

Securities are classified at the time of purchase as investment securities held to maturity if it is management’s intent and the Company has the ability to hold the securities until maturity. These held to maturity securities are carried on the Company’s books at cost, adjusted for amortization of premium and accretion of discount which is computed using the level yield method which approximates the effective interest method. Alternatively, securities are classified as available for sale if it is management’s intent at the time of purchase to hold the securities for an indefinite period of time and/or to use the securities as part of the Company’s asset/liability management strategy. Securities classified as available for sale include securities which may be sold to effectively manage interest rate risk exposure, prepayment risk, and other factors (such as liquidity requirements). These available for sale securities are reported at fair value with unrealized aggregate appreciation/depreciation excluded from income and credited/charged to accumulated other comprehensive income/loss within stockholders’shareholders’ equity on a net of tax basis. Any securities classified as trading assets are reported at fair value with unrealized aggregate appreciation/depreciation included in income on a net of tax basis. The Company does not engage in trading activity.

Realized gains or losses on securities sold are computed upon the adjusted cost of the specific securities sold. Available-for-sale and held-to-maturity securities are reviewed quarterly for possible other-than-temporary impairment. The review includes an analysis of the facts and circumstances of each individual investment such as the severity of loss, the length of time the fair value has been below cost, the expectation for that security’s performance, the creditworthiness of the issuer and the Company’s intent and ability to hold the security to recovery. The Company believes the unrealized losses on certain securities within the investments portfolio are primarily a result of increases in market yields from the time of purchase. In general, as market yields rise, the value of securities will decrease; as market yields fall, the fair value of securities will increase. Management generally views changes in fair value caused by changes in interest rates as temporary; therefore, these securities have not been classified as other-than-temporarily impaired. Management has also concluded that based on current information we expect to continue to receive scheduled

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AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

interest payments as well as the entire principal


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AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  – (continued)

balance. Furthermore, management does not intend to sell these securities and does not believe it will be required to sell these securities before they recover in value.

Additionally, the Company holds equity securities which are comprised of mutual funds held within a rabbi trust for the executive deferred compensation plan. Such securities are reported at fair value within other assets on the Consolidated Balance Sheets. Unrealized holding gains and losses on equity securities are included in earnings.

FEDERAL HOME LOAN BANK STOCK:

The Bank is a member of the Federal Home Loan Bank of Pittsburgh (FHLB) and as such, is required to maintain a minimum investment in stock of the FHLB that varies with the level of advances outstanding with the FHLB. The stock is bought from and sold to the FHLB based upon its $100 par value. The stock does not have a readily determinable fair value and as such is classified as restricted stock, carried at cost and evaluated for impairment by management. The stock’s value is determined by the ultimate recoverability of the par value rather than by recognizing temporary declines. The determination of whether the par value will ultimately be recovered is influenced by criteria such as the following: (a) The(1) the significance of the decline in net assets of the FHLB as compared to the capital stock amount and the length of time any such situation has persisted (b) Commitmentspersisted; (2) commitments by the FHLB to make payments required by law or regulation and the level of such payments in relation to the operating performance (c) Theperformance; (3) the impact of legislative and regulatory changes on the customer base of FHLBFHLB; and (d) The(4) the liquidity position of the FHLB. Management evaluated the stock and concluded that the stock was not impaired for the periods presented herein.

LOANS:

Interest income is recognized using the level yield method related to principal amounts outstanding. The Company typically discontinues the accrual of interest income when loans become 90 days past due in either principal or interest. In addition, if circumstances warrant, the accrual of interest may be discontinued prior to 90 days. Payments received on non-accrual loans are credited to principal until full recovery of principal has been recognized; or the loan has been returned to accrual status. The only exception to this policy is for residential mortgage loans wherein interest income is recognized on a cash basis as payments are received. A non-accrual commercial loan is placed on accrual status after becoming current and remaining current for twelve consecutive payments. Residential mortgage loans are placed on accrual status upon becoming current.

LOAN FEES:

Loan origination and commitment fees, net of associated direct costs, are deferred and amortized into interest and fees on loans over the loan or commitment period. Fee amortization is determined by the effective interest method.

LOANS HELD FOR SALE:

Certain newly originated fixed-rate residential mortgage loans are classified as held for sale, because it is management’s intent to sell these residential mortgage loans. The residential mortgage loans held for sale are carried at the lower of aggregate cost or marketfair value.

TRANSFERS OF FINANCIAL ASSETS:

Transfers of financial assets are accounted for as sales when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company; (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets; and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

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AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

PREMISES AND EQUIPMENT:

Premises and equipment are stated at cost less accumulated depreciation and amortization. Land is carried at cost. Depreciation is charged to operations over the estimated useful lives of the premises and equipment using the straight-line method with a half-year convention. Useful lives of up to 30 years for buildings and up to 10 years for equipment are utilized. Leasehold improvements are amortized using the straight-line method over the terms of the respective leases or useful lives of the improvements, whichever is shorter. Maintenance, repairs, and minor alterations are charged to current operations as expenditures are incurred.


TABLE OF CONTENTSLEASES:

AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  – (continued)

​

The Company has operating and financing leases for several office locations and equipment. Generally, the underlying lease agreements do not contain any material residual value guarantees or material restrictive covenants. Many of our leases include both lease (e.g., minimum rent payments) and non-lease components, such as common area maintenance charges, utilities, real estate taxes, and insurance. The Company has elected to account for the variable non-lease components separately from the lease component. Such variable non-lease components are reported in net occupancy expense on the Consolidated Statements of Operations when incurred. These variable non-lease components were excluded from the calculation of the present value of the remaining lease payments, therefore, they are not included in the right-of-use assets and lease liabilities reported on the Consolidated Balance Sheets.

Certain of the Company’s leases contain options to renew the lease after the initial term. Management considers the Company’s historical pattern of exercising renewal options on leases and the performance of the leased locations, when determining whether it is reasonably certain that the leases will be renewed. If management concludes that there is reasonable certainty about the renewal option, it is included in the calculation of the remaining term of each applicable lease. The discount rate utilized in calculating the present value of the remaining lease payments for each lease is the Federal Home Loan Bank of Pittsburgh advance rate corresponding to the remaining maturity of the lease.

Under Topic 842, the lessee can elect to not record on the Consolidated Balance Sheets a lease whose term is twelve months or less and does not include a purchase option that the lessee is reasonably certain to exercise. As of December 31, 2022, the Company had one short-term lease for an office location compared to no short-term leases as of December 31, 2021.

ALLOWANCE FOR LOAN LOSSES AND CHARGE-OFF PROCEDURES:

As a financial institution, which assumes lending and credit risks as a principal element of its business, the Company anticipates that credit losses will be experienced in the normal course of business. Accordingly, the Company consistently applies a comprehensive methodology and procedural discipline to perform an analysis which is updated on a quarterly basis at the Bank level to determine both the adequacy of the allowance for loan losses and the necessary provision for loan losses to be charged against earnings. This methodology includes:

 — ●Review of all criticized, classifiedimpaired commercial and impairedcommercial real estate loans with aggregate balances over $250,000 to determine if any specific reserve allocations are required on an individual loan basis. In addition, consumer and residential mortgage loans with a balance of $150,000 or more are evaluated for impairment and specific reserve allocations are established, if applicable. All required specific reserve allocations are based on careful analysis of the loan’s performance, the related collateral value, cash flow considerations and the financial capability of any guarantor. For impaired loans the measurement of impairment may be based upon: 1)upon (1) the present value of expected future cash flows discounted at the loan’s effective interest rate; 2)(2) the observable market price of the impaired loan; or 3)(3) the fair value of the collateral of a collateral dependent loan.
 — ●The application of formula driven reserve allocations for all commercial and commercial real-estatereal estate loans by using a three-year migration analysis of net losses incurred within each risk grade for the entire commercial loan portfolio. The difference between estimated and actual losses is reconciled through the nature of the migration analysis.

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AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 — ●The application of formula driven reserve allocations to consumer and residential mortgage loans which are based upon historical net charge-off experience for those loan types. The residential mortgage loan and consumer loan allocations are based upon the Company’s three-year historical average of actual loan net charge-offs experienced in each of those categories.
 — ●The application of formula driven reserve allocations to all outstanding loans is based upon review of historical losses and qualitative factors, which include but are not limited to, economic trends, delinquencies, levels of non-accrual and TDR loans, concentrations of credit, trends in loan volume, experience and depth of management, examination and audit results, effects of any changes in lending policies and trends in policy, financial information and documentation exceptions.
 — ●Management recognizes that there may be events or economic factors that have occurred affecting specific borrowers or segments of borrowers that may not yet be fully reflected in the information that the Company uses for arriving at reserves for a specific loan or portfolio segment. Therefore, the Company believes that there is estimation risk associated with the use of specific and formula driven allowances.

After completion of this process, a formal meeting of the Loan Loss Reserve Committee is held to evaluate the adequacy of the reserve.

When it is determined that the prospects for recovery of the principal of a loan have significantly diminished, the loan is chargedcharged-off against the allowance account; subsequent recoveries, if any, are credited to the allowance account. In addition, non-accrual and large delinquent loans are reviewed monthly to determine potential losses.

The Company’s policy is to individually review, as circumstances warrant, its commercial and commercial mortgage loans to determine if a loan is impaired. At a minimum, credit reviews are mandatory for all commercial and commercial mortgage loan relationships with aggregate balances in excess of $250,000$1,000,000 within a 12-month period. The Company defines classified loans as those loans rated substandard or doubtful. The Company has also identified three pools of small dollar value homogeneous loans which are evaluated collectively for impairment. These separate pools are for small business relationships with aggregate balances of $250,000 or less, residential mortgage loans and consumer loans. Individual loans within these pools are


TABLE OF CONTENTS

AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  – (continued)

reviewed and evaluated for specific impairment if factors such as significant delinquency in payments of 90 days or more, bankruptcy, or other negative economic concerns indicate impairment.

ALLOWANCE FOR UNFUNDED LOAN COMMITMENTS AND LETTERS OF CREDIT:

The allowance for unfunded loan commitments and letters of credit is maintained at a level believed by management to be sufficient to absorb estimated losses related to these unfunded credit facilities. The determination of the adequacy of the allowance is based on periodic evaluations of the unfunded credit facilities including an assessment of the probability of commitment usage, credit risk factors for loans outstanding to these same customers and the terms and expiration dates of the unfunded credit facilities. Net adjustments to the allowance for unfunded loan commitments and letters of credit are provided for in the unfunded commitment reserve expense line item within other expense in the Consolidated Statements of Operations and a separate reserve is recorded within the other liabilities sectionline item of the Consolidated Balance Sheets.

TRUST FEES:

Trust fees are recorded on the cash basis which approximates the accrual basis for such income.

BANK-OWNED LIFE INSURANCE:

The Company has purchased life insurance policies on certain current and previous employees. These policies are recorded on the Consolidated Balance Sheets at their cash surrender value, or the amount that can be realized. Income from these policies and changes in the cash surrender value are recorded in bank owned life insurance within non-interest income. Additionally, income is accrued on certain policies that have reached the minimum floor rate of return. This guaranteed portion of income is not added to the cash surrender value of the policy until the policy anniversary date and is reported in other assets on the Consolidated Balance Sheets.

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AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

INTANGIBLE ASSETS:

Goodwill arising from business combinations represents the value attributable to unidentifiable intangible elements in the business acquired. Goodwill is not amortized, but is periodically evaluated for impairment. The Company accountstests goodwill for goodwill using a two-step process for testing the impairment of goodwill on at least an annual basis. This approach could cause more volatility in the Company’s reported net income because impairment losses, if any, could occur irregularly and in varying amounts.

Identifiable intangible assets are amortized to their estimated residual values over their expected useful lives. Such lives are also periodically reassessed to determine if any amortization period adjustments are required. The identifiable intangible assets consist of a core deposit intangible which is being amortized on an accelerated basis over a ten-year useful life.

EARNINGS PER COMMON SHARE:

Basic earnings per share include only the weighted average common shares outstanding. Diluted earnings per share include the weighted average common shares outstanding and any potentially dilutive common stock equivalent shares in the calculation. Treasury shares are treated as retiredexcluded for earnings per share purposes. Options to purchase 10,000, 51,273,22,000, 22,000, and 58,788139,759 shares of common stock were outstanding during 2017, 20162022, 2021 and 2015,2020, respectively, but were not included in the computation of diluted earnings per common share because to do so would be anti-dilutive. Exercise prices of anti-dilutive options to purchase common stock outstanding were $4.00, $3.23-$4.00-$4.60,4.22, $4.00-$4.22, and $3.23-$3.18-$4.704.22 during 2017, 20162022, 2021 and 2015,2020, respectively. Dividends on preferred shares are deducted from net income in the calculation of earnings per common share.


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AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  – (continued)

​

​

​

​

​

​

​

​

​

​

​

​

YEAR ENDED DECEMBER 31, 

​

    

2022

    

2021

    

2020

​

​

(IN THOUSANDS, EXCEPT PER SHARE DATA)

Numerator:

​

​

​

​

​

​

​

​

​

Net income

​

$

7,448

​

$

7,072

​

$

4,598

Denominator:

​

 

  

​

 

  

​

 

  

Weighted average common shares outstanding (basic)

​

 

17,107

​

 

17,073

​

 

17,053

Effect of stock options

​

 

39

​

 

41

​

 

10

Weighted average common shares outstanding (diluted)

​

 

17,146

​

 

17,114

​

 

17,063

Earnings per common share:

​

 

  

​

 

  

​

 

  

Basic

​

$

0.44

​

$

0.41

​

$

0.27

Diluted

​

 

0.43

​

 

0.41

​

 

0.27

​

   
 YEAR ENDED DECEMBER 31,
   2017 2016 2015
   (IN THOUSANDS, EXCEPT PER SHARE DATA)
Numerator:
               
Net income $3,293  $2,310  $5,997 
Preferred stock dividends  —   15   210 
Net income available to common shareholders $3,293  $2,295  $5,787 
Denominator:
               
Weighted average common shares outstanding (basic)  18,498   18,896   18,863 
Effect of stock options  102   59   70 
Weighted average common shares outstanding (diluted)  18,600   18,955   18,933 
Earnings per common share:
               
Basic $0.18  $0.12  $0.31 
Diluted  0.18   0.12   0.31 

STOCK-BASED COMPENSATION:

The Company uses the modified prospective method for accounting of stock-based compensation. The Company recognized $13,000, $20,000 and $29,000 of pretax compensation expense for the years 2017, 2016 and 2015, respectively. The fair value of each option grant is estimated on the grant date using the Binomial or Black-Scholes option pricing model.model and the expense is recognized ratably over the service period. Forfeitures are recognized as they occur. See Note 1819 for details on the assumptions used.

ACCUMULATED OTHER COMPREHENSIVE LOSS:

The Company presents the components of other comprehensive (loss) income (loss) in the Consolidated Statements of Comprehensive (Loss) Income. These components are comprised of the change in the defined benefit pension obligation and the unrealized holding gains (losses) on available for sale securities, net of any reclassification adjustments for realized gains and losses.

CONSOLIDATED STATEMENT OF CASH FLOWS:

On a consolidated basis, cash and cash equivalents include cash and due from depository institutions, interest bearing deposits, and short-term investments in both money market funds.funds and commercial paper. The Company made $1,075,000$1.1 million in income tax payments in 2017; $375,0002022; $200,000 in 2016;2021; and $1,554,000$315,000 in 2015.2020. The Company had non-cash

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AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

transfers to other real estate owned (OREO) and repossessed assets in the amounts of $77,000$53,000 in 2017; $172,0002022; $8,000 in 2016;2021; and $189,000$40,000 in 2015.2020. During 2022, the Company entered into a new operating lease related to an office location and recorded a right-of-use asset and lease liability of $45,000. During 2021, the Company did not enter into any new lease agreements. During 2020, the Company entered into two new financing leases, one related to office equipment and the other to a branch location, and recorded a right-of-use asset and lease liability of $149,000. The Company made total interest payments of $8,681,000$8,450,000 in 2017; $7,746,0002022; $8,049,000 in 2016;2021; and $6,575,000$11,040,000 in 2015.2020.

On May 21, 2021, AmeriServ Financial Bank completed its acquisition from Citizen’s Neighborhood Bank (CNB), an operating division of Riverview Bank, the branch and related deposit customers in Meyersdale, Pennsylvania and the deposit customers in Somerset, Pennsylvania. In addition to the branch acquisition related information disclosed on the Consolidated Statements of Cash Flows, the following were recorded as non-cash transfers on the corresponding lines of the Consolidated Balance Sheets as of December 31, 2021 (in thousands).

​

​

​

​

Acquisition of Riverview Bank Branches

​

​

​

Non-cash assets acquired

​

 

​

Loans

​

$

36

Other premises and equipment, net

​

 

158

Intangible assets

​

​

1,844

​

​

​

2,038

Non-cash liabilities assumed

​

 

​

Non-interest bearing deposits

​

​

(7,372)

Interest bearing deposits

​

 

(35,060)

Other liabilities

​

 

(37)

​

​

​

(42,469)

Net non-cash liabilities assumed

​

$

(40,431)

​

INCOME TAXES:

Deferred tax assets or liabilities are computed based on the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate. Deferred income tax expenses or credits are based on the changes in the corresponding asset or liability from period to period. Deferred tax assets are reduced, if necessary, by the amounts of such benefits that are not expected to be realized based upon available evidence.

INTEREST RATE CONTRACTS:

The Company recognizes all derivatives as either assets or liabilities on the Consolidated Balance Sheets and measures those instruments at fair value. For derivatives designated as fair value hedges, changes in the fair value of the derivative and hedged item related to the hedged risk are recognized in earnings. Changes in fair value of derivatives designated and accounted as cash flow hedges, to the extent they are effective as hedges, are recorded in “Other Comprehensive Income,” net of deferred taxes and are subsequently


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AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  – (continued)

reclassified to earnings when the hedged transaction affects earnings. Any hedge ineffectiveness would be recognized in the income statement line item pertaining to the hedged item.

The Company periodically enters into derivative instruments to meet the financing, interest rate and equity risk management needs of its customers.customers or the Bank. Upon entering into these instruments to meet customer needs, the Company enters into offsetting positions to minimize interest rate and equity risk to the Company. These derivative financial instruments are reported at fair value with any resulting gain or loss recorded in current period earnings.earnings in amounts that offset. These instruments and their offsetting positions are recorded in other assets and other liabilities on the Consolidated Balance Sheets.

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AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

PENSION:

Pension costs and liabilities are dependent on assumptions used in calculating such amounts. These assumptions include discount rates, benefits earned, interest costs, expected return on plan assets, mortality rates, and other factors. In accordance with GAAP, actual results that differ from the assumptions are accumulated and amortized over future periods and, therefore, generally affect recognized expense and the recorded obligation of future periods. While management believes that the assumptions used are appropriate, differences in actual experience or changes in assumptions may affect the Company’s pension obligations and future expense. In conjunction withAdditionally, pension expense can also be impacted by settlement accounting charges if the annual measurementamount of employees selected lump sum distributions exceed the total amount of service and interest component costs of the funded status of Company’snet periodic pension plan at December 31, 2016, management elected to change the mannercost in which thea particular year.

The service cost and interest cost componentscomponent of net periodic benefit cost will be determined in 2017 and beyond. Previously, the service cost and interest cost components were determined by multiplying the single equivalent rate described above and the aggregate discounted cash flows of the plan’s service cost and projected benefit obligations.

Under the new methodology, the service cost component will beis determined by aggregating the product of the discounted cash flows of the plan’s service cost for each year and an individual spot rate (referred to as the “spot rate” approach). The interest cost component will beis determined by aggregating the product of the discounted cash flows of the plan’s projected benefit obligations for each year and an individual spot rate. This change will result in a lower service cost and interest cost components of net periodic benefit cost under the new methodology compared to the previous methodology.

Management believes this new methodology which represents a change inis an accounting estimate, is a betterappropriate measure of the service cost and interest cost as each year’s cash flows are specifically linked to the interest rates of bond payments in the same respective year. Our pension benefits are described further in Note 1417 of the Notes to Consolidated Financial Statements.

FAIR VALUE OF FINANCIAL INSTRUMENTS:

We group our assets at fair value in three levels, based on the markets in which the assets are traded and the reliability of the assumptions used to determine fair value. These levels are:

Level I — Valuation is based upon quoted prices for identical instruments traded in active markets.

Level II — Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

Level III — Valuation is generated from model-based techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect the Company’s own estimates of assumptions that market participants would use in pricing the asset.

We base our fair values on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. It is our policy to maximize the use of observable inputs and minimize the use of unobservable inputs when developing fair value measurements, in accordance with the fair value hierarchy in generally accepted accounting principles.


TABLE OF CONTENTS​

AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  – (continued)

Fair value measurements for most of our assets are obtained from independent pricing services that we have engaged for this purpose. When available, we, or our independent pricing service, use quoted market prices to measure fair value. If market prices are not available, fair value measurement is based upon models that incorporate available trade, bid, and other market information. Subsequently, all of our financial instruments use either of the foregoing methodologies to determine fair value adjustments recorded to our financial statements. In certain cases, however, when market observable inputs for model-based valuation techniques may not be readily available, we are required to make judgments about assumptions market participants would use in estimating the fair value of financial instruments. The degree of management judgment involved in determining the fair value of a financial instrument is dependent upon the availability of quoted market prices or observable market parameters. For financial instruments that trade actively and have quoted market prices or observable market parameters, there is minimal subjectivity involved in measuring fair value. When observable market prices and parameters are not fully available, management judgment is necessary to estimate fair value. In addition, changes in the market conditions may reduce the availability of quoted prices or observable data. When market data is not available, we use valuation techniques requiring more management judgment to estimate the appropriate fair value measurement. Therefore, the results cannot be determined with precision and may not be realized in an actual sale or immediate settlement of the asset. Additionally, there may be inherent weaknesses in any calculation technique, and changes in the underlying assumptions used, including discount rates and estimates of future cash flows, that could significantly affect the results of current or future valuations.

2. RECENT ACCOUNTING STANDARDS:

In January 2016, the FASB issued ASU 2016-01,Financial Instruments — Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. This Update applies to all entities that hold financial assets or owe financial liabilities and is intended to provide more useful information on the recognition, measurement, presentation, and disclosure of financial instruments. For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. All entities that are not public business entities may adopt the amendments in this Update earlier as of the fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial position or results of operations.PRONOUNCEMENTS

In February 2016, the FASB issued ASU 2016-02,Leases (Topic 842). The standard requires lessees to recognize the assets and liabilities that arise from leases on the balance sheet. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. A short-term lease is defined as one in which (a) the lease term is 12 months or less and (b) there is not an option to purchase the underlying asset that the lessee is reasonably certain to exercise. For short-term leases, lessees may elect to recognize lease payments over the lease term on a straight-line basis. For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2018, and interim periods within those years. For all other entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2019, and for interim periods within fiscal years beginning after December 15, 2020. The amendments should be applied at the beginning of the earliest period presented using a modified retrospective approach with earlier application permitted as of the beginning of an interim or annual reporting period. The Company is currently assessing the practical measures it may elect at adoption, but does not anticipate the amendment will have a significant impact to the financial statements. Based on the Company’s preliminary analysis of its current portfolio, the Company expects to recognize a right of use asset and a lease liability for its operating leases commitments. The Company also anticipates additional disclosures to be provided at adoption.


TABLE OF CONTENTS

AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  – (continued)

In June 2016, the FASB issued ASU 2016-13,Financial Instruments —- Credit Losses: Measurement of Credit Losses on Financial Instruments(“ASU 2016-13”)2016-13), which changes the impairment model for most financial assets. This Updateupdate is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. The underlying premise of the Updateupdate is that financial assets measured at amortized cost should be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The allowance for credit losses should reflect management’s current estimate of credit losses that are expected to occur over the remaining life of a financial asset. The income statement will be effectedaffected for the measurement of credit losses for newly recognized financial assets, as well as the expected increases or decreases of expected credit losses that have taken place during the period. ASU 2016-13 is effective for annual and interim periods beginning after December 15, 2019, and early adoption is permitted for annual and interim periods beginning after December 15, 2018. With certain exceptions, transition to the new requirements will be through a cumulative effect adjustment to opening retained earnings as of the beginning of the first reporting period in which the guidance is adopted. This update is effective for SEC filers that are eligible to be smaller reporting companies, non-SEC filers, and all other companies to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

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AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company, is currently evaluatingas a smaller reporting company, evaluated the impact that the UpdateASU 2016-13 will have on our consolidated financial statements. The overall impact of the amendment will be affected by the portfolio compositionWe worked with an industry leading third-party consultant and quality at the adoption date as well as economic conditions and forecasts at that time. We are currently evaluating third-party vendor solutionssoftware provider to assist us in the applicationimplementation of this standard.ASU 2016-13. Our implementation plan included assessment and documentation of processes, internal controls and data sources; model development, documentation and validation, including loan segmentation procedures and analyzing the methodology options; and system configuration, among other things. The Company intends to adopt ASU 2016-13 effective January 1, 2023.

In March 2017,​

The allowance for credit losses (ACL) will be based on our historical loss experience, borrower characteristics, reasonable and supportable forecasts of future economic conditions, and other relevant factors. We will also apply qualitative factors to account for information that may not be reflected in quantitatively derived results to ensure that the FASB issuedACL reflects the best estimate of current expected credit losses.

​

Our team, under the direction of senior management, has completed the initial data gap assessment, enhancement of existing data, finalized the loan segmentation selections, and analyzed the methodology options regarding the calculation of expected credit losses. After analyzing our data and the nature of our portfolio in relation to the CECL transition, the team agreed to utilize the static pool analysis (cohort) method. This methodology most closely aligns with the Company’s current methodology leveraged in our incurred loss model calculation. The Company’s current methodology will be adjusted to appropriately incorporate and comply with ASU 2017-07,Compensation — Retirement Benefits (Topic 715). 2016-13 and, thus, offers an effective and efficient path to CECL compliance.

​

The amendmentsstatic pool analysis methodology captures loans that qualify for a segment (i.e. balance of a pool of loans with similar risk characteristics) as of a point in this Update requiretime to form a cohort, then tracks that an employer report the service cost component incohort over their remaining lives to determine their loss behavior. The remaining lifetime loss rate is then applied to current loans that qualify for the same line item or itemssegmentation criteria to form a remaining life expectation on current loans. Based on a preliminary parallel calculation as other compensation costs arising from services rendered byof December 31, 2022, the pertinent employees duringCompany believes that the period. The other componentsadoption of net benefit cost as defined in paragraphs 715-30-35-4 and 715-60-35-9 are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. If a separate line item or items are used to present the other components of net benefit cost, that line item or items must be appropriately described. If a separate line item or items areASU 2016-13 will not used, the line item or items used in the income statement to present the other components of net benefit cost must be disclosed. This Update is not expected to have a significant impact on our financial statements. The allowance of credit losses under the CECL methodology is estimated to be between $11.8 million and $12.2 million for our loan portfolio.

​

Furthermore, ASU 2016-13 will necessitate that we establish an allowance for expected credit losses for held to maturity (HTM) debt securities. Based on the credit quality of the Company’s financial statements.HTM debt securities portfolio, we do not expect the ACL to be significant and estimate it will be between $50,000 and $150,000.

​

In March 2017,2022, the FASB issued ASU 2017-08,2022-02, Receivables — Nonrefundable FeesFinancial Instruments – Credit Losses (ASC 326): Troubled Debt Restructurings (TDRs) and Other Costs (Subtopic 310-20)Vintage Disclosures. The amendments in this Update shortenguidance amends ASC 326 to eliminate the amortization periodaccounting guidance for TDRs by creditors, while enhancing disclosure requirements for certain callable debt securities held atloan refinancing and restructuring activities by creditors when a premium.borrower is experiencing financial difficulty. Specifically, rather than applying TDR recognition and measurement guidance, creditors will determine whether a modification results in a new loan or continuation of an existing loan. These amendments are intended to enhance existing disclosure requirements and introduce new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty. Additionally, the amendments of ASC 326 require that an entity disclose current-period gross writeoffs by year of origination within the premium to bevintage disclosures, which requires that an entity disclose the amortized to the earliest call date.cost basis of financing receivables by credit quality indicator and class of financing receivable by year of origination. The amendments do not require an accounting changeguidance is only for securities held at a discount; the discount continues to be amortized to maturity. For public business entities that have adopted the amendments in this Update are effectiveof ASU 2016-13 for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. For all other entities,2022. The Company is currently evaluating the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Earlyimpact the adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity should apply the amendments in this Update on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. Additionally, in the period of adoption, an entity should provide disclosures about a change in accounting principle. This Update is not expected tostandard will have a significant impact on the Company’s financial statements.position or results of operations which will be adopted with ASU 2016-13 effective January 1, 2023.

In February 2018,​

3. REVENUE RECOGNITION

ASU 2014-09, Revenue from Contracts with Customers – Topic 606, requires the FASB issued ASU 2018-02,Income Statement — Reporting Comprehensive Income (Topic 220). On December 22, 2017,Company to recognize the U.S. federal government enacted a tax bill, H.R.1,An Actamount of revenue to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018 (Tax Cuts and Jobs Act), which requires deferred tax liabilities and assetsit expects to be adjustedentitled for the effecttransfer of a change in tax laws. The amendments in this Update allow a reclassification from accumulated other comprehensivepromised goods or services to customers at the time the transfer of goods or services takes place. Management determined that the primary sources of revenue associated with financial instruments, including interest and fee income to retained earnings for stranded tax effects resulting from the Tax Cutson loans and Jobs Act.interest on investments, along with certain non-


53

TABLE OF CONTENTSTable of Contents

AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  – (continued)

The amendments in this Updateinterest revenue sources including net realized gains (losses) on investment securities, mortgage related fees, net gains on loans held for sale, and bank owned life insurance are effective for all entities for fiscal years beginning after December 15, 2018, and interim periodsnot within those fiscal years. Early adoptionthe scope of Topic 606. These sources of revenue cumulatively comprise 77.6% of the amendments in this Update is permitted. The amendments in this Update should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effecttotal revenue of the change inCompany.

Non-interest income within the U.S. federal corporatescope of Topic 606 are as follows:

●Wealth management fees – Wealth management fee income is primarily comprised of fees earned from the management and administration of trusts and customer investment portfolios. The Company’s performance obligation is generally satisfied over a period of time and the resulting fees are billed monthly or quarterly, based upon the month end market value of the assets under management. Payment is generally received after month end through a direct charge to customers’ accounts. Due to this delay in payment, a receivable of $850,000 has been established as of December 31, 2022 and is included in other assets on the Consolidated Balance Sheets in order to properly recognize the revenue earned but not yet received. Other performance obligations (such as delivery of account statements to customers) are generally considered immaterial to the overall transactions’ price. Commissions on transactions are recognized on a trade-date basis as the performance obligation is satisfied at the point in time in which the trade is processed. Also included within wealth management fees are commissions from the sale of mutual funds, annuities, and life insurance products. Commissions on the sale of mutual funds, annuities, and life insurance products are recognized when sold, which is when the Company has satisfied its performance obligation.
●Service charges on deposit accounts — The Company has contracts with its deposit account customers where fees are charged for certain items or services. Service charges include account analysis fees, monthly service fees, overdraft fees, and other deposit account related fees. Revenue related to account analysis fees and service fees is recognized on a monthly basis as the Company has an unconditional right to the fee consideration. Fees attributable to specific performance obligations of the Company (i.e. overdraft fees, etc.) are recognized at a defined point in time based on completion of the requested service or transaction.
●Other non-interest income — Other non-interest income consists of other recurring revenue streams such as safe deposit box rental fees, gain (loss) on sale of other real estate owned, ATM and VISA debit card fees, and other miscellaneous revenue streams. Safe deposit box rental fees are charged to the customer on an annual basis and recognized when billed. However, if the safe deposit box rental fee is prepaid (i.e. paid prior to issuance of annual bill), the revenue is recognized upon receipt of payment. The Company has determined that since rentals and renewals occur consistently over time, revenue is recognized on a basis consistent with the duration of the performance obligation. Gains and losses on the sale of other real estate owned are recognized at the completion of the property sale when the buyer obtains control of the real estate and all the performance obligations of the Company have been satisfied. The Company offers ATM and VISA debit cards to deposit account holders which allows our customers to access their account electronically at ATMs and POS terminals. Fees related to ATM and VISA debit card transactions are recognized when the transactions are completed and the Company has satisfied it performance obligation.

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AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following presents non-interest income, tax rate insegregated by revenue streams in-scope and out-of-scope of Topic 606, for the Tax Cuts and Jobs Act is recognized. The Company has elected to early adopt this standard as ofyears ended December 31, 2017, which resulted in a one-time cumulative effect adjustment of $2.1 million between retained earnings2022, 2021, and accumulated other comprehensive loss on the Consolidated Balance Sheets. The adjustment had no impact on net income or any prior periods presented.2020 (in thousands).

2.

​

​

​

​

​

​

​

​

​

​

​

​

    

AT DECEMBER 31, 

​

 

2022

    

2021

    

2020

​

​

​

​

​

​

​

​

​

​

Non-interest income:

​

​

​

​

​

​

​

​

​

In-scope of Topic 606

 

​

  

 

​

  

 

​

  

Wealth management fees

​

$

11,620

​

$

11,986

​

$

10,212

Service charges on deposit accounts

​

 

1,108

​

 

965

​

 

903

Other

​

 

2,009

​

 

2,017

​

 

1,708

Non-interest income (in-scope of topic 606)

​

 

14,737

​

 

14,968

​

 

12,823

Non-interest income (out-of-scope of topic 606)

​

 

1,955

​

 

2,793

​

 

3,452

Total non-interest income

​

$

16,692

​

$

17,761

​

$

16,275

​

​

​

4. CASH AND DUE FROM DEPOSITORY INSTITUTIONS

Included in “CashCash and due from depository institutions” are required federal reservesinstitutions totaled $18.8 million and $24.7 million as of $5,000 for December 31, 20172022 and $6,000 for December 31, 2016, respectively, for facilitating the implementation of monetary policy by the2021, respectively. The Federal Reserve System. The required reserves are computed by applying prescribed ratiosreduced reserve requirements to the classeszero as of average deposit balances. These are held in the form of vault cash and a depository amount held with the Federal Reserve Bank.March 26, 2020.

3.

​

​

5. INVESTMENT SECURITIES

The cost basis and fair values of investment securities are summarized as follows:

Investment securities available for sale:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

DECEMBER 31, 2022

​

​

​

​

​

GROSS

​

GROSS

​

​

​

​

​

​

​

​

UNREALIZED

​

UNREALIZED

​

FAIR

​

    

COST BASIS

    

GAINS

    

LOSSES

    

VALUE

    
 AT DECEMBER 31, 2017
 COST
BASIS		 GROSS
UNREALIZED
GAINS		 GROSS
UNREALIZED
LOSSES		 FAIR
VALUE
 (IN THOUSANDS)

​

​

(IN THOUSANDS)

U.S. Agency $6,612  $—  $(40)  $6,572 

​

$

11,797

​

$

1

​

$

(1,265)

​

$

10,533

Taxable municipal  7,198   27   (189)   7,036 

U.S. Agency mortgage-backed securities

​

 

102,631

​

 

64

​

 

(12,710)

​

 

89,985

Municipal

​

 

20,837

​

 

—

​

 

(1,799)

​

 

19,038

Corporate bonds  35,886   322   (424)   35,784 

​

 

63,152

​

 

30

​

 

(3,230)

​

 

59,952

U.S. Agency mortgage-backed securities  79,854   611   (719)   79,746 
Total $129,550  $960  $(1,372)  $129,138 

​

$

198,417

​

$

95

​

$

(19,004)

​

$

179,508

​

Investment securities held to maturity:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

DECEMBER 31, 2022

​

​

​

​

​

GROSS

​

GROSS

​

​

​

​

​

​

​

​

UNREALIZED

​

UNREALIZED

​

FAIR

​

    

COST BASIS

    

GAINS

    

LOSSES

    

VALUE

​

​

(IN THOUSANDS)

U.S. Agency

​

$

2,500

​

$

—

​

$

(432)

​

$

2,068

U.S. Agency mortgage-backed securities

​

​

18,877

​

​

8

​

​

(2,212)

​

​

16,673

Municipal

​

 

33,993

​

 

2

​

 

(3,880)

​

 

30,115

Corporate bonds and other securities

​

 

6,508

​

 

—

​

 

(172)

​

 

6,336

Total

​

$

61,878

​

$

10

​

$

(6,696)

​

$

55,192

​

    
 AT DECEMBER 31, 2017
   COST
BASIS		 GROSS
UNREALIZED
GAINS		 GROSS
UNREALIZED
LOSSES		 FAIR
VALUE
   (IN THOUSANDS)
U.S. Agency mortgage-backed securities $9,740  $149  $(45)  $9,844 
Taxable municipal  22,970   203   (238)   22,935 
Corporate bonds and other securities  6,042   38   (48)   6,032 
Total $38,752  $390  $(331)  $38,811 

55


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AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3.  INVESTMENT SECURITIES  – (continued)

Investment securities available for sale:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

DECEMBER 31, 2021

​

​

​

​

​

GROSS

​

GROSS

​

​

​

​

​

​

​

​

UNREALIZED

​

UNREALIZED

​

FAIR

​

    

COST BASIS

    

GAINS

    

LOSSES

    

VALUE

    
 AT DECEMBER 31, 2016
 COST
BASIS		 GROSS
UNREALIZED
GAINS		 GROSS
UNREALIZED
LOSSES		 FAIR
VALUE
 (IN THOUSANDS)

​

​

(IN THOUSANDS)

U.S. Agency $400  $—  $(2)  $398 

​

$

7,371

​

$

86

​

$

(70)

​

$

7,387

Taxable municipal  3,793   3   (174)   3,622 

U.S. Agency mortgage-backed securities

​

 

80,136

​

 

1,202

​

 

(1,171)

​

 

80,167

Municipal

​

 

20,066

​

 

851

​

 

(25)

​

 

20,892

Corporate bonds  34,403   194   (724)   33,873 

​

 

53,843

​

 

1,028

​

 

(146)

​

 

54,725

U.S. Agency mortgage-backed securities  88,738   1,132   (686)   89,184 
Total $127,334  $1,329  $(1,586)  $127,077 

​

$

161,416

​

$

3,167

​

$

(1,412)

​

$

163,171

​

Investment securities held to maturity:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

DECEMBER 31, 2021

​

​

​

​

​

GROSS

​

GROSS

​

​

​

​

​

​

​

​

UNREALIZED

​

UNREALIZED

​

FAIR

​

​

COST BASIS

    

GAINS

    

LOSSES

    

VALUE

    
 AT DECEMBER 31, 2016
 COST
BASIS		 GROSS
UNREALIZED
GAINS		 GROSS
UNREALIZED
LOSSES		 FAIR
VALUE
 (IN THOUSANDS)

​

​

(IN THOUSANDS)

U.S. Agency

    

$

2,500

​

$

—

​

$

(11)

​

$

2,489

U.S. Agency mortgage-backed securities $11,177  $180  $(79)  $11,278 

    

​

10,556

​

​

203

​

​

(115)

​

​

10,644

Taxable municipal  13,441   70   (348)   13,163 

Municipal

​

 

33,188

​

 

1,734

​

 

(103)

​

 

34,819

Corporate bonds and other securities  6,047   15   (83)   5,979 

​

 

7,507

​

 

64

​

 

(7)

​

 

7,564

Total $30,665  $265  $(510)  $30,420 

​

$

53,751

​

$

2,001

​

$

(236)

​

$

55,516

​

Maintaining investment quality is a primary objective of the Company’s investment policy which, subject to certain limited exceptions, prohibits the purchase of any investment security below a Moody’s Investors Service or Standard & Poor’s rating of A. At December 31, 2017, 57.8%2022, 52.5% of the portfolio was rated AAA as compared to 63.5%47.1% at December 31, 2016. 9.7%2021. Approximately 14.7% of the portfolio was rated below A or unrated on December 31, 2017.2022 and 2021. The Company and its subsidiaries, collectively, did not hold securities of any single issuer, excluding U.S. Treasury and U.S. Agencies,agencies, that exceeded 10% of shareholders’ equity at December 31, 2017.2022.

The book value of securities, both available for sale and held to maturity, pledged to secure public and trust deposits and certain Federal Home Loan Bank borrowings was $117,181,000$134,002,000 at December 31, 20172022 and $104,953,000$122,574,000 at December 31, 2016.2021.

The Company realized $115,000$5,000 of gross investment security gains and $5,000 of gross investment security losses in 2022, realized $84,000 of gross investment security gains in 20172021, and 183,000 of grosssold no investment security gains and $6,000 of gross investment security losses in 2016, and $107,000 of gross investment gains and $36,000 of gross investment security losses in 2015.securities during 2020. On a net basis, the realized gain for 20172022 was $76,000zero and the realized gain for 2021 was $66,000 after factoring in tax expense of $39,000 and the realized gain for 2016 was $117,000 after factoring in tax expense of $60,000, and the realized gain for 2015 was $46,000 after factoring in tax expense of $25,000.$18,000. Proceeds from sales of investment securities available for sale were $8.1$1.5 million for 2017, $9.0 million2022 and $960,000 for 2016,2021.

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AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company’s consolidated investment securities portfolio had an effective duration of approximately 4.67 years. The weighted average expected maturity for available for sale securities at December 31, 2022 for U.S. agency, U.S. agency mortgage-backed, corporate bond, and $3.6 million during 2015.

municipal securities was 5.62, 6.99, 4.18, and 4.06 years, respectively. The weighted average expected maturity for held to maturity securities at December 31, 2022 for U.S. agency, U.S. agency mortgage-backed, corporate bond/other securities, and municipal securities was 7.57, 7.39, 2.97, and 5.37 years, respectively. The following table sets forth the contractual maturity distribution of the investment securities, cost basis and fair market values and the weighted average yield for each type and range of maturity as of December 31, 2017. Yields are not presented on a tax-equivalent basis, but are based upon the cost basis and are weighted for the scheduled maturity. The Company’s consolidated investment securities portfolio had an effective duration of approximately 3.69 years. The weighted average expected maturity for available for sale securities at December 31, 2017 for U.S. Agency, U.S. Agency Mortgage-Backed and Corporate Bond securities was 10.38, 4.60 and 5.44 years, respectively. The weighted average expected maturity for held to


TABLE OF CONTENTS

AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3.  INVESTMENT SECURITIES  – (continued)

maturity securities at December 31, 2017 for U.S. Agency Mortgage-Backed and Corporate Bonds/Taxable Municipals and other securities were 4.57 and 6.51 years.2022.

Investment securities available for sale:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

AT DECEMBER 31, 2022

​

​

​

​

​

​

​

​

​

​

​

​

​

​

TOTAL

​

    

​

​

    

​

​

    

​

​

    

U.S. AGENCY

​

INVESTMENT

​

​

​

​

​

​

​

​

​

MORTGAGE-

​

SECURITIES

​

​

​

​

​

​

CORPORATE

​

BACKED

​

AVAILABLE

​

​

U. S. AGENCY

​

MUNICIPAL

​

BONDS

​

SECURITIES

​

FOR SALE

        
 AT DECEMBER 31, 2017
 U. S. AGENCY U.S. AGENCY
MORTGAGE-BACKED
SECURITIES		 CORPORATE
BONDS AND OTHER		 TOTAL INVESTMENT
SECURITIES
AVAILABLE
FOR SALE
 (IN THOUSANDS, EXCEPT YIELDS)

​

​

(IN THOUSANDS)

COST BASIS
                                        

 

​

  

 

​

  

 

​

  

 

​

  

 

​

  

Within 1 year $400   1.03%  $1   6.00%  $—   —%  $401   1.04% 

​

$

—

 

$

1,065

 

$

6,000

 

$

—

​

$

7,065

After 1 year but within 5 years  —   —   848   2.09   10,938   2.99   11,786   2.93 

​

 

4,279

 

 

12,538

 

 

26,039

 

 

1,488

​

 

44,344

After 5 years but within 10 years  3,230   2.75   14,623   2.91   30,646   3.64   48,499   3.36 

​

 

6,000

 

 

7,234

 

 

30,463

 

 

5,577

​

 

49,274

After 10 years but within 15 years  —   —   24,516   2.30   1,500   3.98   26,016   2.39 
Over 15 years  2,982   2.69   39,866   2.52   —   —   42,848   2.53 

Over 10 years

​

 

1,518

 

 

—

 

 

650

 

 

95,566

​

 

97,734

Total $6,612   2.62  $79,854   2.52  $43,084   3.49  $129,550   2.84 

​

$

11,797

 

$

20,837

 

$

63,152

 

$

102,631

​

$

198,417

FAIR VALUE
                                        

​

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Within 1 year $399       $1       $—       $400      

​

$

—

 

$

1,045

 

$

5,970

​

$

—

​

$

7,015

After 1 year but within 5 years  —        843        10,924        11,767      

​

 

4,102

 

 

11,873

 

 

25,084

​

 

1,431

​

 

42,490

After 5 years but within 10 years  3,220        14,859        30,477        48,556      

​

 

5,048

 

 

6,120

 

 

28,364

​

 

5,264

​

 

44,796

After 10 years but within 15 years  —        24,301        1,419        25,720      
Over 15 years  2,953      39,742      —      42,695    

Over 10 years

​

 

1,383

 

 

—

 

 

534

​

 

83,290

​

 

85,207

Total $6,572     $79,746     $42,820     $129,138    

​

$

10,533

 

$

19,038

 

$

59,952

​

$

89,985

​

$

179,508

​

Investment securities held to maturity:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

AT DECEMBER 31, 2022

​

    

​

​

​

    

​

​

    

​

​

​

TOTAL 

​

​

​

​

​

​

​

​

​

​

​

U.S. AGENCY

​

INVESTMENT

​

​

​

​

​

​

​

​

CORPORATE

​

MORTGAGE-

​

SECURITIES 

​

​

​

​

​

​

​

​

BONDS AND

​

BACKED

​

HELD TO

​

​

U.S. AGENCY

​

MUNICIPAL

​

OTHER

​

SECURITIES

​

MATURITY

​

​

(IN THOUSANDS)

COST BASIS

 

​

  

 

​

  

 

​

  

 

​

  

 

​

​

Within 1 year

​

$

—

 

$

425

 

$

2,000

 

$

—

 

$

2,425

After 1 year but within 5 years

​

 

—

​

 

8,874

​

 

3,015

​

 

1,005

​

 

12,894

After 5 years but within 10 years

​

 

2,500

​

 

21,315

​

 

500

​

 

812

​

 

25,127

Over 10 years

​

 

—

​

 

3,379

​

 

993

​

 

17,060

​

 

21,432

Total

​

$

2,500

​

$

33,993

​

$

6,508

​

$

18,877

​

$

61,878

FAIR VALUE

​

 

  

 

 

  

 

 

  

 

 

  

 

 

  

Within 1 year

​

$

—

 

$

419

 

$

1,942

 

$

—

 

$

2,361

After 1 year but within 5 years

​

 

—

​

 

8,411

​

 

2,901

​

 

979

​

 

12,291

After 5 years but within 10 years

​

 

2,068

​

 

18,550

​

 

500

​

 

779

​

 

21,897

Over 10 years

​

 

—

​

 

2,735

​

 

993

​

 

14,915

​

 

18,643

Total

​

$

2,068

​

$

30,115

​

$

6,336

​

$

16,673

​

$

55,192

​

      
 AT DECEMBER 31, 2017
   U.S. AGENCY MORTGAGE-BACKED SECURITIES CORPORATE
BONDS AND OTHER		 TOTAL INVESTMENT SECURITIES HELD TO MATURITY
   (IN THOUSANDS, EXCEPT YIELDS)
COST BASIS
                              
Within 1 year $—   —%  $2,000   1.78%  $2,000   1.78% 
After 1 year but within 5 years  688   2.11   1,751   2.29   2,439   2.24 
After 5 years but within 10 years  2,081   2.49   12,797   3.57   14,878   3.42 
After 10 years but within 15 years  2,604   3.30   11,643   3.64   14,247   3.58 
Over 15 years  4,367   3.07   821   4.75   5,188   3.34 
Total $9,740   2.94  $29,012   3.43  $38,752   3.31 
FAIR VALUE
                              
Within 1 year $—       $1,976       $1,976      
After 1 year but within 5 years  677        1,734        2,411      
After 5 years but within 10 years  2,075        12,815        14,890      
After 10 years but within 15 years  2,685        11,597        14,282      
Over 15 years  4,407      845      5,252    
Total $9,844     $28,967     $38,811    

57


TABLE OF CONTENTSTable of Contents

AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3.  INVESTMENT SECURITIES  – (continued)

The following tables presenttable presents information concerning investments with unrealized losses as of December 31, 20172022 (in thousands):

​

      
Total investment securities: LESS THAN 12 MONTHS 12 MONTHS OR LONGER TOTAL
 FAIR
VALUE		 UNREALIZED
LOSSES		 FAIR
VALUE		 UNREALIZED
LOSSES		 FAIR
VALUE		 UNREALIZED
LOSSES
U.S. Agency $5,923  $(39)  $399  $(1)  $6,322  $(40) 
U.S. Agency mortgage-backed securities  36,783   (253)   22,625   (511)   59,408   (764) 
Taxable municipal  8,657   (109)   7,727   (318)   16,384   (427) 
Corporate bonds and other securities  7,123   (71)   13,655   (401)   20,778   (472) 
Total $58,486  $(472)  $44,406  $(1,231)  $102,892  $(1,703) 

Total investment securities:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

DECEMBER 31, 2022

​

​

LESS THAN 12 MONTHS

​

12 MONTHS OR LONGER

​

TOTAL

​

​

FAIR

​

UNREALIZED

​

FAIR

​

UNREALIZED

​

FAIR

​

UNREALIZED

​

    

VALUE

    

LOSSES

    

VALUE

    

LOSSES

    

VALUE

    

LOSSES

U.S. Agency

​

$

5,446

​

$

(350)

​

$

6,653

​

$

(1,347)

​

$

12,099

​

$

(1,697)

U.S. Agency mortgage-backed securities

​

​

57,193

​

​

(4,018)

​

​

44,083

​

​

(10,904)

​

​

101,276

​

​

(14,922)

Municipal

​

 

37,175

​

​

(3,113)

​

​

11,475

​

​

(2,566)

​

​

48,650

​

​

(5,679)

Corporate bonds and other securities

​

 

39,549

​

​

(1,923)

​

​

16,721

​

​

(1,479)

​

​

56,270

​

​

(3,402)

Total

​

$

139,363

​

$

(9,404)

​

$

78,932

​

$

(16,296)

​

$

218,295

​

$

(25,700)

​

The following tables presenttable presents information concerning investments with unrealized losses as of December 31, 20162021 (in thousands):

​

      
Total investment securities: LESS THAN 12 MONTHS 12 MONTHS OR LONGER TOTAL
 FAIR
VALUE		 UNREALIZED
LOSSES		 FAIR
VALUE		 UNREALIZED
LOSSES		 FAIR
VALUE		 UNREALIZED
LOSSES
U.S. Agency $398  $(2)  $—  $—  $398  $(2) 
U.S. Agency mortgage-backed securities  49,918   (703)   1,576   (62)   51,494   (765) 
Taxable municipal  13,301   (522)   —   —   13,301   (522) 
Corporate bonds and other securities  20,380   (570)   6,762   (237)   27,142   (807) 
Total $83,997  $(1,797)  $8,338  $(299)  $92,335  $(2,096) 

Total investment securities:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

DECEMBER 31, 2021

​

​

LESS THAN 12 MONTHS

​

12 MONTHS OR LONGER

​

TOTAL

​

​

FAIR

​

UNREALIZED

​

FAIR

​

UNREALIZED

​

FAIR

​

UNREALIZED

​

    

VALUE

    

LOSSES

    

VALUE

    

LOSSES

    

VALUE

    

LOSSES

U.S. Agency

​

$

7,419

​

$

(81)

​

$

—

​

$

—

​

$

7,419

​

$

(81)

U.S. Agency mortgage-backed securities

​

​

45,422

​

​

(972)

​

​

6,691

​

​

(314)

​

​

52,113

​

​

(1,286)

Municipal

​

 

7,832

​

​

(128)

​

​

—

​

​

—

​

​

7,832

​

​

(128)

Corporate bonds and other securities

​

 

14,558

​

​

(92)

​

​

2,439

​

​

(61)

​

​

16,997

​

​

(153)

Total

​

$

75,231

​

$

(1,273)

​

$

9,130

​

$

(375)

​

$

84,361

​

$

(1,648)

​

The unrealized losses are primarily a result of increases in market yields from the time of purchase. In general, as market yields rise, the value of securities will decrease; as market yields fall, the fair value of securities will increase. There are 133426 positions that are considered temporarily impaired at December 31, 2017.2022. Management generally views changes in fair value caused by changes in interest rates as temporary; therefore, these securities have not been classified as other-than-temporarily impaired. Management has also concluded that based on current information we expect to continue to receive scheduled interest payments as well as the entire principal balance. Furthermore, management does not intend to sell these securities and does not believe it will be required to sell these securities before they recover in value or mature.

4.

The interest rate environment and market yields can also have a significant impact on the yield earned on mortgage-backed securities (MBS). Prepayment speed assumptions are an important factor to consider when evaluating the returns on an MBS. Generally, as interest rates decline, borrowers have more incentive to refinance into a lower rate, so prepayments will rise. Conversely, as interest rates increase, prepayments will decline. When an MBS is purchased at a premium, the yield will decrease as prepayments increase and the yield will increase as prepayments decrease. As of December 31, 2022, the Company had low premium risk as the book value of our mortgage-backed securities purchased at a premium was only 100.9% of the par value.

As of December 31, 2022, 2021, and 2020, the Company reported $502,000, $526,000, and $443,000, respectively, of equity securities within other assets on the Consolidated Balance Sheets. These equity securities are held within a nonqualified deferred compensation plan in which a select group of executives of the Company can participate. An eligible executive can defer a certain percentage of their current salary to be placed into the plan and

58

Table of Contents

AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

held within a rabbi trust. The assets of the rabbi trust are invested in various publicly listed mutual funds. The gain or loss on the equity securities (both realized and unrealized) is reported within other income on the Consolidated Statements of Operations. The realized loss on equity securities was $9,000 during 2022 while the realized gain on equity securities was $36,000 and $2,000 during 2021 and 2020, respectively. The unrealized loss was $13,000 in 2022 compared to an unrealized gain of $7,000 and $3,000 in 2021 and 2020, respectively. Additionally, the Company has recognized a deferred compensation liability, which is equal to the balance of the equity securities and is reported within other liabilities on the Consolidated Balance Sheets.

6. LOANS

The loan portfolio of the Company consisted of the following:

​

​

​

​

​

​

​

​

​

​

AT DECEMBER 31, 

​

    

2022

    

2021

​

​

(IN THOUSANDS)

Commercial:

​

​

​

​

​

​

Commercial and industrial

​

$

153,398

​

$

134,182

Paycheck Protection Program (PPP)

​

​

22

​

​

17,311

Commercial loans secured by owner occupied real estate (1)

 

​

75,158

​

​

99,644

Commercial loans secured by non-owner occupied real estate (1)

 

​

450,744

​

​

430,825

Real estate − residential mortgage (1)

 

​

297,971

​

​

287,996

Consumer

 

​

13,473

​

​

15,096

Loans, net of unearned income

​

$

990,766

​

$

985,054

  
 AT DECEMBER 31,
   2017 2016
   (IN THOUSANDS)
Commercial $159,192  $171,529 
Commercial loans secured by real estate  463,780   446,598 
Real estate-mortgage  247,278   245,765 
Consumer  19,383   19,872 
Loans, net of unearned income $889,633  $883,764 
(1)Real estate construction loans constituted 4.7% and 5.6% of the Company’s total loans, net of unearned income as of December 31, 2022 and 2021, respectively.

TABLE OF CONTENTS

AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4.  LOANS  – (continued)

Loan balances at December 31, 20172022 and 20162021 are net of unearned income of $399,000$343,000 and $476,000,$826,000, respectively. Real estate construction loans comprised 4.1% and 4.7% of total loans net ofThe unearned income balance at December 31, 2017 and 2016, respectively.2022 includes no unrecognized fee income from PPP loan originations compared to $386,000 at December 31, 2021. The Company has no exposure to subprime mortgage loans in either the loan or investment portfolios. The Company has no direct loan exposure to foreign countries. Additionally, the Company has no significant industry lending concentrations. As of December 31, 20172022 and 2016,2021, loans to customers engaged in similar activities and having similar economic characteristics, as defined by standard industrial classifications, did not exceed 10% of total loans. Additionally, the majority of the Company’s lending occurs within a 250 mile250-mile radius of the Johnstown market.

In the ordinary course of business, the subsidiaries have transactions, including loans, with their officers, directors, and their affiliated companies. In management’s opinion, these transactions were on substantially the same terms as those prevailing at the time for comparable transactions with unaffiliated parties and do not involve more than the normal credit risk. These loans totaled $554,000$587,000 and $578,000$601,000 at December 31, 20172022 and 2016,2021, respectively.

5.  ALLOWANCE FOR LOAN LOSSES

The following table summarizes the rollforward59

Table of the allowance for loan losses by portfolio segment (in thousands).Contents

     
 BALANCE AT
DECEMBER 31,
2016		 CHARGE-
OFFS		 RECOVERIES PROVISION
(CREDIT)		 BALANCE AT
DECEMBER 31,
2017
Commercial $4,041  $(278)  $27  $509  $4,299 
Commercial loans secured by real estate  3,584   (165)   14   233   3,666 
Real estate-mortgage  1,169   (313)   250   (4)   1,102 
Consumer  151   (172)   119   30   128 
Allocation for general risk  987   —   —   32   1,019 
Total $9,932  $(928)  $410  $800  $10,214 

     
 BALANCE AT
DECEMBER 31, 2015		 CHARGE-
OFFS		 RECOVERIES PROVISION
(CREDIT)		 BALANCE AT
DECEMBER 31,
2016
Commercial $4,244  $(3,648)  $140  $3,305  $4,041 
Commercial loans secured by real estate  3,449   (13)   40   108   3,584 
Real estate-mortgage  1,173   (291)   147   140   1,169 
Consumer  151   (344)   30   314   151 
Allocation for general risk  904   —   —   83   987 
Total $9,921  $(4,296)  $357  $3,950  $9,932 

     
 BALANCE AT
DECEMBER 31,
2014		 CHARGE-
OFFS		 RECOVERIES PROVISION
(CREDIT)		 BALANCE AT
DECEMBER 31,
2015
Commercial $3,262  $(170)  $101  $1,051  $4,244 
Commercial loans secured by real estate  3,902   (250)   111   (314)   3,449 
Real estate-mortgage  1,310   (753)   171   445   1,173 
Consumer  190   (188)   26   123   151 
Allocation for general risk  959   —   —   (55)   904 
Total $9,623  $(1,361)  $409  $1,250  $9,921 

TABLE OF CONTENTS

AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5.  ALLOWANCE FOR LOAN LOSSES  – (continued)

For 2017, the Company recorded an $800,000 provisionThe following table provides information regarding our potential risk concentrations for loan losses compared to a $3,950,000 provision for loan losses in 2016 or a decrease of $3.2 million between years. Both, the loan loss provisioncommercial and net charge-offs were at more typical levels this year than the substantially higher levels that were necessary early last year to resolve a troubled loan exposure to the energy industry. The provision recorded in 2017 supported commercial loan growth and more than covered the low level of net loan charge-offs in 2017 resulting in the allowance for loan losses growing between years. The Company experienced net loan charge-offs of $518,000, or 0.06% of totalreal estate loans in 2017 compared to net loan charge-offs of $3.9 million, or 0.44%, of total loans in 2016. Overall, the Company continued to maintain strong asset quality as its nonperforming assets totaled $3.0 million, or 0.34%, of total loans,by industry type at December 31, 2017.2022 and 2021 (in thousands).

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

DECEMBER 31, 2022

​

​

​

​

​

Paycheck

​

Commercial loans

​

Commercial loans

​

​

​

​

​

Commercial

​

Protection

​

secured by owner

​

secured by non-owner

​

​

​

​

    

and industrial

    

Program

    

occupied real estate

    

occupied real estate

    

Total

1-4 unit residential

​

$

—

​

$

—

​

$

—

​

$

7,690

​

$

7,690

Multifamily/apartments/student housing

​

 

—

​

 

—

​

 

65

​

 

83,033

​

 

83,098

Office

​

 

44,959

​

 

—

​

 

7,428

​

 

23,775

​

 

76,162

Retail

​

 

6,478

​

 

—

​

 

17,072

​

 

147,601

​

 

171,151

Industrial/manufacturing/warehouse

​

 

82,540

​

 

—

​

 

11,016

​

 

77,640

​

 

171,196

Hotels

​

 

—

​

 

—

​

 

—

​

 

36,214

​

 

36,214

Eating and drinking places

​

 

276

​

 

22

​

 

4,575

​

 

1,354

​

 

6,227

Personal care

​

 

881

​

 

—

​

 

—

​

 

2,647

​

 

3,528

Amusement and recreation

​

 

66

​

 

—

​

 

3,223

​

 

3

​

 

3,292

Mixed use

​

 

—

​

 

—

​

 

4,268

​

 

51,222

​

 

55,490

Other

​

 

18,198

​

 

—

​

 

27,511

​

 

19,565

​

 

65,274

Total

​

$

153,398

​

$

22

​

$

75,158

​

$

450,744

​

$

679,322

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

DECEMBER 31, 2021

​

​

​

​

​

Paycheck

​

Commercial loans

​

Commercial loans

​

​

​

​

​

Commercial

​

Protection

​

secured by owner

​

secured by non-owner

​

​

​

​

    

and industrial

    

Program

    

occupied real estate

    

occupied real estate

    

Total

1-4 unit residential

​

$

1,246

​

$

—

​

$

96

​

$

8,565

​

$

9,907

Multifamily/apartments/student housing

​

 

—

​

 

—

​

 

245

​

 

73,912

​

 

74,157

Office

​

 

37,386

​

 

203

​

 

8,644

​

 

28,500

​

 

74,733

Retail

​

 

7,253

​

 

444

​

 

20,439

​

 

148,668

​

 

176,804

Industrial/manufacturing/warehouse

​

 

74,508

​

 

5,940

​

 

21,468

​

 

44,316

​

 

146,232

Hotels

​

 

154

​

 

1,764

​

 

—

​

 

42,425

​

 

44,343

Eating and drinking places

​

 

484

​

 

6,591

​

 

4,537

​

 

1,752

​

 

13,364

Personal care

​

 

1,197

​

 

173

​

 

—

​

 

4,315

​

 

5,685

Amusement and recreation

​

 

92

​

 

53

​

 

5,402

​

 

12

​

 

5,559

Mixed use

​

 

—

​

 

—

​

 

4,031

​

 

62,088

​

 

66,119

Other

​

 

11,862

​

 

2,143

​

 

34,782

​

 

16,272

​

 

65,059

Total

​

$

134,182

​

$

17,311

​

$

99,644

​

$

430,825

​

$

681,962

​

Paycheck Protection Program

The following tables summarizeCoronavirus Aid, Relief, and Economic Security Act, or CARES Act, was signed into law on March 27, 2020, and provides emergency economic relief to individuals and businesses impacted by the COVID-19 pandemic. The CARES Act and subsequent legislation authorized the Small Business Administration (SBA) to temporarily guarantee loans under a new 7(a) program called the Paycheck Protection Program (PPP). As a qualified SBA lender, the Company was automatically authorized to originate PPP loans.

An eligible business could apply for a PPP loan up to the lesser of: (1) 2.5 times its average monthly payroll costs; or (2) $10.0 million. PPP loans have: (a) an interest rate of 1.0%; (b) a two-year (if originated prior to June 5, 2020) or five-year (if originated after June 5, 2020) loan term to maturity; and (c) principal and interest payments deferred for six months from the date of disbursement. The SBA will guarantee 100% of the PPP loans made to eligible borrowers pursuant to standards as defined by the SBA. The entire principal amount of the borrower’s PPP loan, including any accrued interest, is eligible to be reduced by the loan portfolioforgiveness amount under the PPP so long as employee and allowance for loan loss bycompensation levels of the primary segmentsbusiness are maintained and at least 60% of the loan portfolio.proceeds are used for payroll expenses,

60

AT DECEMBER 31, 2017
(IN THOUSANDS)
Loans:COMMERCIALCOMMERCIAL
LOANS
SECURED BY
REAL ESTATE		REAL
ESTATE- MORTGAGE		CONSUMERTOTAL
Individually evaluated for impairment$1,212$547$—$—$1,759
Collectively evaluated for impairment157,980463,233247,27819,383887,874
Total loans$159,192$463,780$247,278$19,383$889,633

      
 AT DECEMBER 31, 2017
   (IN THOUSANDS)
Allowance for loan losses: COMMERCIAL COMMERCIAL
LOANS
SECURED BY
REAL ESTATE		 REAL
ESTATE-
MORTGAGE		 CONSUMER ALLOCATION
FOR GENERAL
RISK		 TOTAL
Specific reserve allocation $909  $—  $—  $—  $—  $909 
General reserve allocation  3,390   3,666   1,102   128   1,019   9,305 
Total allowance for loan losses $4,299  $3,666  $1,102  $128  $1,019  $10,214 

     
 AT DECEMBER 31, 2016
   (IN THOUSANDS)
Loans: COMMERCIAL COMMERCIAL
LOANS
SECURED BY
REAL ESTATE		 REAL
ESTATE-
MORTGAGE		 CONSUMER TOTAL
Individually evaluated for impairment $496  $178  $—  $—  $674 
Collectively evaluated for impairment  171,033   446,420   245,765   19,872   883,090 
Total loans $171,529  $446,598  $245,765  $19,872  $883,764 

      
 AT DECEMBER 31, 2016
   (IN THOUSANDS)
Allowance for loan losses: COMMERCIAL COMMERCIAL
LOANS
SECURED BY
REAL ESTATE		 REAL
ESTATE-
MORTGAGE		 CONSUMER ALLOCATION
FOR GENERAL
RISK		 TOTAL
Specific reserve allocation $496  $31  $—  $—  $—  $527 
General reserve allocation  3,545   3,553   1,169   151   987   9,405 
Total allowance for loan losses $4,041  $3,584  $1,169  $151  $987  $9,932 

TABLE OF CONTENTSTable of Contents

AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5.

with the remaining loan proceeds being used for other qualifying expenses such as interest on mortgages, rent, and utilities.

In addition, PPP allows certain eligible borrowers that previously received a PPP loan to apply for a second draw loan with the same general terms described above. The maximum loan amount of a second draw PPP loan is 2.5 times, or 3.5 times for borrowers within the hospitality industry, the average monthly 2019 or 2020 payroll costs up to $2.0 million. Eligibility for a second draw PPP loan is based on the following criteria: (a) borrower previously received a first draw PPP loan and used the full amount for only authorized expenditures; (b) borrower has 300 or less employees; and (c) borrower can demonstrate at least a 25% reduction in gross receipts between comparable quarters in 2019 and 2020. The PPP loan program expired on May 31, 2021 for originating new loans.

As of December 31, 2022, the Company had 1 PPP loan outstanding totaling $22,000 and has recorded a total of $434,000 of processing fee income and interest income from PPP lending activity for the year ended. As of December 31, 2021, the Company had 114 PPP loans outstanding totaling $17.3 million and had recorded a total of $2.3 million of processing fee income and interest income from PPP lending activity for the year ended.

7. ALLOWANCE FOR LOAN LOSSES  – (continued)

The segments of the Company’s loan portfolio are disaggregated to a levelinto classes that allows management to monitor risk and performance. The loan segmentsclasses used are consistent with the internal reports evaluated by the Company’s management and Board of Directors to monitor risk and performance within various segments of its loan portfolio and therefore, no further disaggregation into classes is necessary.portfolio. The overall risk profile forcommercial loan segment includes both the commercial and industrial and the owner occupied commercial real estate loan classes while the remaining segments are impacted by non-owner occupied CRE loans, which include loans secured by non-owner occupied nonfarm nonresidential properties,not separated into classes as a meaningful but closely monitored portion of the commercial portfolio is centeredmanagement monitors risk in these types of accounts.loans at the segment level. The residential mortgage loan segment is comprised of first lien amortizing residential mortgage loans and home equity loans secured by residential real estate. The consumer loan segment consists primarily of installment loans and overdraft lines of credit connected with customer deposit accounts.

​

The following table summarizes the rollforward of the allowance for loan losses by portfolio segment (in thousands).

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

BALANCE AT

​

CHARGE-

​

​

​

​

PROVISION 

​

BALANCE AT

​

    

DECEMBER 31, 2021

    

OFFS

    

RECOVERIES

    

(CREDIT)

    

DECEMBER 31, 2022

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Commercial

​

$

3,071

​

$

(97)

​

$

4

​

$

(325)

​

$

2,653

Commercial loans secured by non-owner occupied real estate

​

 

6,392

​

 

(1,390)

​

 

54

​

 

916

​

 

5,972

Real estate − residential mortgage

​

 

1,590

​

 

(28)

​

 

19

​

 

(201)

​

 

1,380

Consumer

​

 

113

​

 

(334)

​

 

67

​

 

239

​

 

85

Allocation for general risk

​

 

1,232

​

 

—

​

 

—

​

 

(579)

​

 

653

Total

​

$

12,398

​

$

(1,849)

​

$

144

​

$

50

​

$

10,743

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

BALANCE AT

​

CHARGE-

​

​

​

​

PROVISION

​

BALANCE AT

​

    

DECEMBER 31, 2020

    

OFFS

    

RECOVERIES

    

(CREDIT)

    

DECEMBER 31, 2021

Commercial

​

$

3,472

​

$

(146)

​

$

89

​

$

(344)

​

$

3,071

Commercial loans secured by non-owner occupied real estate

​

 

5,373

​

 

—

​

 

51

​

 

968

​

 

6,392

Real estate − residential mortgage

​

 

1,292

​

 

(17)

​

 

49

​

 

266

​

 

1,590

Consumer

​

 

115

​

 

(131)

​

 

58

​

 

71

​

 

113

Allocation for general risk

​

 

1,093

​

 

—

​

 

—

​

 

139

​

 

1,232

Total

​

$

11,345

​

$

(294)

​

$

247

​

$

1,100

​

$

12,398

​

61

Table of Contents

AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

BALANCE AT

​

CHARGE-

​

​

​

​

PROVISION

​

BALANCE AT

​

    

DECEMBER 31, 2019

    

OFFS

    

RECOVERIES

    

(CREDIT)

    

DECEMBER 31, 2020

Commercial

​

$

3,951

​

$

(111)

​

$

4

​

$

(372)

​

$

3,472

Commercial loans secured by non-owner occupied real estate

​

 

3,119

​

 

—

​

 

44

​

 

2,210

​

 

5,373

Real estate − residential mortgage

​

 

1,159

​

 

(233)

​

 

62

​

 

304

​

 

1,292

Consumer

​

 

126

​

 

(143)

​

 

68

​

 

64

​

 

115

Allocation for general risk

​

 

924

​

 

—

​

 

—

​

 

169

​

 

1,093

Total

​

$

9,279

​

$

(487)

​

$

178

​

$

2,375

​

$

11,345

​

The $325,000 allowance for loan losses credit recorded during the year ended December 31, 2022 within the commercial portfolio was due to a lower level of criticized assets and, to a lesser extent, portfolio contraction. A $916,000 allowance for loan losses provision was recorded for the non-owner occupied commercial real estate portfolio as a result of the partial charge-down and transfer of one loan relationship into non-accrual status during the third quarter of the year while the borrower pursues the sale of the property. Additionally, the non-owner occupied commercial real estate portfolio was impacted by the risk rating downgrade of another loan relationship as well as portfolio growth. It is further noted that the allocation for general risk eased due to improvement in the qualitative adjustment as the economy demonstrated improvement coming out of the pandemic during 2022.

The $344,000 allowance for loan losses credit recorded during the year ended December 31, 2021 within the commercial portfolio was attributable to lower criticized commercial and industrial loans outstanding resulting from upgrades of certain credits originally impacted by the pandemic, as well as lower historical loss rates. While a $968,000 allowance for loan losses provision was recorded for the non-owner occupied commercial real estate portfolio which stemmed from overall portfolio growth as well as elevated classified commercial real estate balances.

For the year ended December 31, 2020, a $372,000 allowance for loan losses credit was recognized for the commercial portfolio due to portfolio contraction, reduced classified asset levels, and lower historical loss factors. In addition, a $2.2 million allowance for loan losses provision was recorded for the non-owner occupied commercial real estate portfolio which resulted from overall portfolio growth coupled with escalated criticized asset levels driven primarily by pandemic related downgrades.

The following tables summarize the loan portfolio and allowance for loan losses by the primary segments of the loan portfolio.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

AT DECEMBER 31, 2022

​

​

​

​

​

COMMERCIAL LOANS

​

​

​

​

​

​

​

​

​

​

​

​

​

SECURED BY NON-

​

REAL ESTATE −

​

​

​

​

​

​

​

​

​

​

​

OWNER OCCUPIED

​

RESIDENTIAL

​

​

​

​

​

​

Loans:

    

COMMERCIAL

    

REAL ESTATE

    

MORTGAGE

    

CONSUMER

    

TOTAL

​

​

(IN THOUSANDS)

Individually evaluated for impairment

​

$

1,989

​

$

1,586

​

$

—

​

$

—

​

$

3,575

Collectively evaluated for impairment

​

 

226,589

​

 

449,158

​

 

297,971

​

 

13,473

​

 

987,191

Total loans

​

$

228,578

​

$

450,744

​

$

297,971

​

$

13,473

​

$

990,766

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

AT DECEMBER 31, 2022

​

​

​

​

​

COMMERCIAL LOANS

​

​

​

​

​

​

ALLOCATION

​

​

​

​

​

​

​

​

SECURED BY NON-

​

REAL ESTATE −

​

​

​

​

FOR

​

​

​

Allowance

​

​

​

​

OWNER OCCUPIED

​

RESIDENTIAL

​

​

​

​

GENERAL

​

​

​

for loan losses:

    

COMMERCIAL

    

REAL ESTATE

    

MORTGAGE

    

CONSUMER

    

RISK

    

TOTAL

​

​

(IN THOUSANDS)

Specific reserve allocation

​

$

520

​

$

3

​

$

—

​

$

—

​

$

—

​

$

523

General reserve allocation

​

 

2,133

​

 

5,969

​

 

1,380

​

 

85

​

 

653

​

 

10,220

Total allowance for loan losses

​

$

2,653

​

$

5,972

​

$

1,380

​

$

85

​

$

653

​

$

10,743

​

62

Table of Contents

AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

AT DECEMBER 31, 2021

​

​

​

​

​

COMMERCIAL LOANS

​

​

​

​

​

​

​

​

​

​

​

​

​

SECURED BY NON-

​

REAL ESTATE −

​

​

​

​

​

​

​

​

​

​

​

OWNER OCCUPIED

​

RESIDENTIAL

​

​

​

​

​

​

Loans:

    

COMMERCIAL

    

REAL ESTATE

    

MORTGAGE

    

CONSUMER

    

TOTAL

​

​

(IN THOUSANDS)

Individually evaluated for impairment

​

$

2,165

​

$

5

​

$

—

​

$

—

​

$

2,170

Collectively evaluated for impairment

​

 

248,972

​

 

430,820

​

 

287,996

​

 

15,096

​

 

982,884

Total loans

​

$

251,137

​

$

430,825

​

$

287,996

​

$

15,096

​

$

985,054

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

AT DECEMBER 31, 2021

​

​

​

​

​

COMMERCIAL LOANS

​

​

​

​

​

​

ALLOCATION

​

​

​

​

​

​

​

​

SECURED BY NON-

​

REAL ESTATE −

​

​

​

​

FOR

​

​

​

Allowance

​

​

​

​

OWNER OCCUPIED

​

RESIDENTIAL

​

​

​

​

GENERAL

​

​

​

for loan losses:

​

COMMERCIAL

    

REAL ESTATE

    

MORTGAGE

    

CONSUMER

    

RISK

    

TOTAL

​

​

(IN THOUSANDS)

Specific reserve allocation

    

$

628

​

$

5

​

$

—

​

$

—

​

$

—

​

$

633

General reserve allocation

​

 

2,443

​

 

6,387

​

 

1,590

​

 

113

​

 

1,232

​

 

11,765

Total allowance for loan losses

​

$

3,071

​

$

6,392

​

$

1,590

​

$

113

​

$

1,232

​

$

12,398

​

Management evaluates for possible impairment any individual loan in the commercial or commercial real estate segment with a loan balance in excess of $100,000 that is in nonaccrualnon-accrual status or classified as a Troubled Debt Restructure (TDR). In addition, consumer and residential mortgage loans with a balance of $150,000 or more are evaluated for impairment. Loans are considered to be impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in evaluating impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. The Company does not separately evaluate individual consumer and residential mortgage loans for impairment, unless such loans are part of a larger relationship that is impaired, or are classified as a TDR.

Once the determination has been made that a loan is impaired, the determination of whether a specific allocation of the allowance is necessary is measured by comparing the recorded investment in the loan to the fair value of the loan using one of three methods: (a) the present value of expected future cash flows discounted at the loan’s effective interest rate; (b) the loan’s observable market price; or (c) the fair value of the collateral less selling costs for collateral dependent loans. The method is selected on a loan-by-loan basis, with management primarily utilizing either the discounted cash flows or the fair value of collateral method. The evaluation of the need and amount of a specific allocation of the allowance and whether a loan can be removed from impairment status is made on a quarterly basis. The Company’s policy for recognizing interest income on impaired loans does not differ from its overall policy for interest recognition.

The need for an updated appraisal on collateral dependent loans is determined on a case-by-case basis. The useful life of an appraisal or evaluation will vary depending upon the circumstances of the property and the economic conditions in the marketplace. A new appraisal is not required if there is an existing appraisal which, along with other information, is sufficient to determine a reasonable value for the property and to support an appropriate and adequate allowance for loan losses. At a minimum, annual documented reevaluation of the property is completed by the Bank’s internal Collections and Assigned Risk Department to support the value of the property.

When reviewing an appraisal associated with an existing collateral real estate collateral dependent transaction, the Bank’s internal Collections and Assigned Risk Department must determine if there have been material changes to the underlying assumptions in the appraisal which affect the original estimate of value. Some of the factors that could cause material changes to reported values include:

●the passage of time;
●the volatility of the local market;

63

Table of time;

the volatility of the local market;
the availability of financing;

TABLE OF CONTENTSContents

AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5.  ALLOWANCE FOR LOAN LOSSES  – (continued)

natural disasters;

the inventory of competing properties;
new improvements to, or lack of maintenance of, the subject property or competing properties upon physical inspection by the Bank;
changes in underlying economic and market assumptions, such as material changes in current and projected vacancy, absorption rates, capitalization rates, lease terms, rental rates, sales prices, concessions, construction overruns and delays, zoning changes, etc.; and/or
environmental contamination.
●the availability of financing;
●natural disasters;
●the inventory of competing properties;
●new improvements to, or lack of maintenance of, the subject property or competing properties upon physical inspection by the Bank;
●changes in underlying economic and market assumptions, such as material changes in current and projected vacancy, absorption rates, capitalization rates, lease terms, rental rates, sales prices, concessions, construction overruns and delays, zoning changes, etc.; and/or
●environmental contamination.

​

The value of the property is adjusted to appropriately reflect the above listed factors and the value is discounted to reflect the value impact of a forced or distressed sale, any outstanding senior liens, any outstanding unpaid real estate taxes, transfer taxes and closing costs that would occur with sale of the real estate. If the Collections and Assigned Risk Department personnel determine that a reasonable value cannot be derived based on available information, a new appraisal is ordered. The determination of the need for a new appraisal, versus completion of a property valuation by the Bank’s Collections and Assigned Risk Department personnel, rests with the Collections and Assigned Risk Department and not the originating account officer.

The following tables present impaired loans by class,portfolio segment, segregated by those for which a specific allowance was required and those for which a specific allowance was not necessary.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

AT DECEMBER 31, 2022

​

​

​

​

​

​

​

​

IMPAIRED

​

​

​

​

​

​

​

​

​

​

​

​

​

​

LOANS WITH

​

​

​

​

​

​

​

​

IMPAIRED LOANS WITH

​

NO SPECIFIC

​

​

​

​

​

​

​

​

SPECIFIC ALLOWANCE

​

ALLOWANCE

​

TOTAL IMPAIRED LOANS

​

​

​

​

​

​

​

​

​

​

​

​

​

 

UNPAID

​

 

RECORDED

 

RELATED

 

RECORDED

 

RECORDED

 

PRINCIPAL

​

    

INVESTMENT

    

ALLOWANCE

    

INVESTMENT

    

INVESTMENT

    

BALANCE

​

 

(IN THOUSANDS)

Commercial

​

$

1,989

​

$

520

​

$

—

​

$

1,989

​

$

2,240

Commercial loans secured by non-owner occupied real estate

​

​

3

​

​

3

​

​

1,583

​

​

1,586

​

​

1,643

Total impaired loans

​

$

1,992

​

$

523

​

$

1,583

​

$

3,575

​

$

3,883

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

AT DECEMBER 31, 2021

​

​

​

​

​

​

​

​

IMPAIRED

​

​

​

​

​

​

​

​

​

​

LOANS WITH

​

​

​

​

​

​

​

​

IMPAIRED LOANS WITH

​

NO SPECIFIC

​

​

​

​

​

​

​

​

SPECIFIC ALLOWANCE

​

ALLOWANCE

​

TOTAL IMPAIRED LOANS

​

​

​

​

​

​

​

​

​

​

​

​

​

​

UNPAID

​

​

RECORDED

​

RELATED

​

RECORDED

​

RECORDED

​

PRINCIPAL

​

    

INVESTMENT

    

ALLOWANCE

    

INVESTMENT

    

INVESTMENT

    

BALANCE

​

 

(IN THOUSANDS)

Commercial

​

$

2,165

​

$

628

​

$

—

​

$

2,165

​

$

2,260

Commercial loans secured by non-owner occupied real estate

​

​

5

​

​

5

​

​

—

​

​

5

​

​

27

Total impaired loans

​

$

2,170

​

$

633

​

$

—

​

$

2,170

​

$

2,287

​

     
 AT DECEMBER 31, 2017
   IMPAIRED LOANS WITH
SPECIFIC ALLOWANCE
 IMPAIRED
LOANS WITH
NO SPECIFIC
ALLOWANCE		 TOTAL IMPAIRED LOANS
   RECORDED
INVESTMENT		 RELATED
ALLOWANCE		 RECORDED
INVESTMENT		 RECORDED
INVESTMENT		 UNPAID
PRINCIPAL
BALANCE
   (IN THOUSANDS)
Commercial $342  $342  $11  $353  $354 
Commercial loans secured by real estate  859   567   547   1,406   1,461 
Total impaired loans $1,201  $909  $558  $1,759  $1,815 

64

     
 AT DECEMBER 31, 2016
   IMPAIRED LOANS WITH
SPECIFIC ALLOWANCE		 IMPAIRED
LOANS WITH
NO SPECIFIC
ALLOWANCE		 TOTAL IMPAIRED LOANS
   RECORDED
INVESTMENT		 RELATED
ALLOWANCE		 RECORDED
INVESTMENT		 RECORDED
INVESTMENT		 UNPAID
PRINCIPAL
BALANCE
   (IN THOUSANDS)
Commercial $496  $496  $—  $496  $517 
Commercial loans secured by real estate  162   31   16   178   209 
Total impaired loans $658  $527  $16  $674  $726 

TABLE OF CONTENTSTable of Contents

AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5.  ALLOWANCE FOR LOAN LOSSES  – (continued)

The following table presents the average recorded investment in impaired loans and related interest income recognized for the periods indicated.

​

​

​

​

​

​

​

​

​

​

​

​

​

YEAR ENDED DECEMBER 31, 

​

    

2022

    

2021

    

2020

   
 YEAR ENDED DECEMBER 31,
 2017 2016 2015
 (IN THOUSANDS)

​

​

(IN THOUSANDS)

Average impaired balance:
               

 

​

  

 

​

  

 

​

  

Commercial $1,075  $718  $1,271 

​

$

2,062

​

$

2,301

​

$

839

Commercial loans secured by real estate  838   356   866 
Consumer  —   —   9 

Commercial loans secured by non-owner occupied real estate

​

 

805

​

 

7

​

 

8

Average investment in impaired loans $1,913  $1,074  $2,146 

​

$

2,867

​

$

2,308

​

$

847

Interest income recognized:
               

​

 

  

​

 

  

​

 

  

Commercial $28  $14  $10 

​

$

—

​

$

15

​

$

38

Commercial loans secured by real estate  34   8   17 
Consumer  —   —   — 

Commercial loans secured by non-owner occupied real estate

​

 

—

​

 

—

​

 

—

Interest income recognized on a cash basis on impaired loans $62  $22  $27 

​

$

—

​

$

15

​

$

38

​

Management uses a nine pointnine-point internal risk rating system to monitor the credit quality of the overall loan portfolio. The first six categories are considered not criticized. The first five “Pass” categories are aggregated, while the Pass-6, Special Mention, Substandard and Doubtful categories are disaggregated to separate pools. The criticized rating categories utilized by management generally follow bank regulatory definitions. The Special Mention category includes assets that are currently protected but are potentially weak, resulting in an undue and unwarranted credit risk, but not to the point of justifying a Substandard classification. Loans in the Substandard category have well-defined weaknesses that jeopardize the liquidation of the debt, and have a distinct possibility that some loss will be sustained if the weaknesses are not corrected. All loans greater than 90 days past due, or for which any portion of the loan represents a specific allocation of the allowance for loan losses are placed in Substandard or Doubtful.

To help ensure that risk ratings are accurate and reflect the present and future capacity of borrowers to repay a loan as agreed, the Company has a structured loan rating process, which dictates that, at a minimum, credit reviews are mandatory for all commercial and commercial mortgage loan relationships with aggregate balances in excess of $250,000$1,000,000 within a 12-month period. Generally, consumer and residential mortgage loans are included in the Pass categories unless a specific action, such as bankruptcy, delinquency, or death occurs to raise awareness of a possible credit event. The Company’s commercial relationship managers are responsible for the timely and accurate risk rating of the loans in their portfolios at origination and on an ongoing basis. Risk ratings are assigned by the account officer, but require independent review and rating concurrence from the Company’s internal Loan Review Department. The Loan Review Department is an experienced, independent function which reports directly to the Board’s Audit Committee. The scope of commercial portfolio coverage by the Loan Review Department is defined and presented to the Audit Committee for approval on an annual basis. The approved scope of coverage for 20172022 required review of a minimum range of 50% to 55%approximately 40% of the commercial loan portfolio.

In addition to loan monitoring by the account officer and Loan Review Department, the Company also requires presentation of all credits rated Pass-6 with aggregate balances greater than $1,000,000,$2,000,000, all credits rated Special Mention or Substandard with aggregate balances greater than $250,000, and all credits rated Doubtful with aggregate balances greater than $100,000 on an individual basis to the Company’s Loan Loss Reserve Committee on a quarterly basis. Additionally, the Asset Quality Task Force, which is a group comprised of senior level personnel, meets monthly to monitor the status of problem loans.


65

TABLE OF CONTENTSTable of Contents

AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5.  ALLOWANCE FOR LOAN LOSSES  – (continued)

The following table presents the classes of the commercial and commercial real estate loan portfolioportfolios summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard and Doubtful within the internal risk rating system.

​

     
 AT DECEMBER 31, 2017
   PASS SPECIAL
MENTION		 SUBSTANDARD DOUBTFUL TOTAL
   (IN THOUSANDS)
Commercial $156,449  $500  $1,999  $244  $159,192 
Commercial loans secured by real estate  450,019   11,828   1,634   299   463,780 
Total $606,468  $12,328  $3,633  $543  $622,972 

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

AT DECEMBER 31, 2022

​

​

​

​

​

SPECIAL

​

​

​

​

​

​

​

​

​

​

    

PASS

    

MENTION

    

SUBSTANDARD

    

DOUBTFUL

    

TOTAL

​

​

(IN THOUSANDS)

Commercial and industrial

​

$

148,361

​

$

—

​

$

5,037

​

$

—

​

$

153,398

Paycheck Protection Program (PPP)

​

​

22

​

​

—

​

​

—

​

​

—

​

​

22

Commercial loans secured by owner occupied real estate

 

​

74,187

 

​

—

 

​

971

 

​

—

 

​

75,158

Commercial loans secured by non-owner occupied real estate

 

​

423,486

 

​

11,015

 

​

16,240

 

​

3

 

​

450,744

Total

​

$

646,056

​

$

11,015

​

$

22,248

​

$

3

​

$

679,322

​

     
 AT DECEMBER 31, 2016
   PASS SPECIAL
MENTION		 SUBSTANDARD DOUBTFUL TOTAL
   (IN THOUSANDS)
Commercial $168,116  $1,087  $1,830  $496  $171,529 
Commercial loans secured by real estate  436,318   7,497   2,767   16   446,598 
Total $604,434  $8,584  $4,597  $512  $618,127 

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

AT DECEMBER 31, 2021

​

​

​

​

​

SPECIAL

​

​

​

​

​

​

​

​

​

​

    

PASS

    

MENTION

    

SUBSTANDARD

    

DOUBTFUL

    

TOTAL

​

​

(IN THOUSANDS)

Commercial and industrial

​

$

125,079

​

$

6,722

​

$

738

​

$

1,643

​

$

134,182

Paycheck Protection Program (PPP)

​

​

17,311

​

​

—

​

​

—

​

​

—

​

​

17,311

Commercial loans secured by owner occupied real estate

 

​

98,271

 

​

297

 

​

1,076

 

​

—

 

​

99,644

Commercial loans secured by non-owner occupied real estate

 

​

399,104

 

​

19,322

 

​

12,394

 

​

5

 

​

430,825

Total

​

$

639,765

​

$

26,341

​

$

14,208

​

$

1,648

​

$

681,962

​

It is generally the policy of the bankBank that the outstanding balance of any residential mortgage loan that exceeds 90-days past due as to principal and/or interest is transferred to non-accrual status and an evaluation is completed to determine the fair value of the collateral less selling costs, unless the balance is minor. A charge downcharge-down is recorded for any deficiency balance determined from the collateral evaluation. The remaining non-accrual balance is reported as impaired with no specific allowance. It is generally the policy of the bankBank that the outstanding balance of any consumer loan that exceeds 90-days past due as to principal and/or interest is charged off.charged-off. The following tables present the performing and non-performing outstanding balances of the residential and consumer portfolios.portfolio classes.

​

​

​

​

​

​

​

​

​

​

​

​

​

AT DECEMBER 31, 2022

​

​

​

​

    

NON-

​

 

​

​

    

PERFORMING

    

PERFORMING

    

TOTAL

​

​

 (IN THOUSANDS)

Real estate – residential mortgage

​

$

296,401

​

$

1,570

​

$

297,971

Consumer

​

 

13,457

​

 

16

​

​

13,473

Total

​

$

309,858

​

$

1,586

​

$

311,444

​

​

​

​

​

​

​

​

​

​

​

​

​

AT DECEMBER 31, 2021

​

    

​

​

    

NON-

​

 

​

​

    

PERFORMING

    

PERFORMING

    

TOTAL

​

​

 (IN THOUSANDS)

Real estate – residential mortgage

​

$

286,843

​

$

1,153

​

$

287,996

Consumer

​

 

15,096

​

 

—

​

​

15,096

Total

​

$

301,939

​

$

1,153

​

$

303,092

​

  
 AT DECEMBER 31, 2017
   PERFORMING NON-
PERFORMING
   (IN THOUSANDS)
Real estate-mortgage $246,021  $1,257 
Consumer  19,383   — 
Total $265,404  $1,257 

66

  
 AT DECEMBER 31, 2016
   PERFORMING NON-
PERFORMING
   (IN THOUSANDS)
Real estate-mortgage $244,836  $929 
Consumer  19,872   — 
Total $264,708  $929 

TABLE OF CONTENTSTable of Contents

AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5.  ALLOWANCE FOR LOAN LOSSES  – (continued)

Management further monitors the performance and credit quality of the loan portfolio by analyzing the age of the portfolio as determined by the length of time a recorded payment is past due. The following tables present the classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrualnon-accrual loans.

​

       
 AT DECEMBER 31, 2017
   CURRENT 30 – 59
DAYS
PAST DUE		 60 – 89
DAYS
PAST DUE		 90 DAYS
PAST DUE		 TOTAL
PAST DUE		 TOTAL
LOANS		 90 DAYS
PAST DUE
AND STILL
ACCRUING
   (IN THOUSANDS)
Commercial $159,181  $—  $—  $11  $11  $159,192  $— 
Commercial loans secured by real estate  457,722   5,238   534   286   6,058   463,780   — 
Real estate-mortgage  243,393   2,373   671   841   3,885   247,278   — 
Consumer  19,262   76   45   —   121   19,383   — 
Total $879,558  $7,687  $1,250  $1,138  $10,075  $889,633  $— 

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

AT DECEMBER 31, 2022

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

90 DAYS

​

​

​

​

​

30 – 59

​

60 – 89

​

​

​

​

​

​

​

​

​

​

PAST DUE

​

​

​

​

​

DAYS

​

DAYS

​

90 DAYS

​

TOTAL

​

TOTAL

​

AND STILL

​

    

CURRENT

    

PAST DUE

    

PAST DUE

    

PAST DUE

    

PAST DUE

    

LOANS

    

ACCRUING

​

​

(IN THOUSANDS)

Commercial and industrial

​

$

152,314

​

$

797

​

$

287

​

$

—

​

$

1,084

​

$

153,398

​

$

—

Paycheck Protection Program (PPP)

​

​

22

​

​

—

​

​

—

​

​

—

​

​

—

​

​

22

​

​

—

Commercial loans secured by owner occupied real estate

​

 

74,960

​

 

198

​

​

—

​

 

—

​

 

198

​

​

75,158

​

 

—

Commercial loans secured by non-owner occupied real estate

​

 

446,809

​

 

3,935

​

​

—

​

 

—

​

 

3,935

​

​

450,744

​

 

—

Real estate – residential mortgage

​

 

295,790

​

 

489

​

​

422

​

 

1,270

​

 

2,181

​

​

297,971

​

 

—

Consumer

​

 

13,290

​

 

60

​

​

114

​

 

9

​

 

183

​

​

13,473

​

 

—

Total

​

$

983,185

​

$

5,479

​

$

823

​

$

1,279

​

$

7,581

​

$

990,766

​

$

—

​

       
 AT DECEMBER 31, 2016
   CURRENT 30 – 59
DAYS
PAST DUE		 60 – 89
DAYS
PAST DUE		 90 DAYS
PAST DUE		 TOTAL
PAST DUE		 TOTAL
LOANS		 90 DAYS
PAST DUE
AND STILL
ACCRUING
   (IN THOUSANDS)
Commercial $171,292  $237  $—  $—  $237  $171,529  $— 
Commercial loans secured by real estate  446,477   121   —   —   121   446,598   — 
Real estate-mortgage  241,802   2,856   610   497   3,963   245,765   — 
Consumer  19,795   50   27   —   77   19,872   — 
Total $879,366  $3,264  $637  $497  $4,398  $883,764  $— 

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

AT DECEMBER 31, 2021

​

​

​

​

​

​

​

​

​

​

    

​

​

​

​

​

​

​

​

​

90 DAYS

​

​

​

​

​

30 – 59

​

60 – 89

​

​

​

​

​

​

​

​

​

​

PAST DUE

​

​

​

​

​

DAYS

​

DAYS

​

90 DAYS

​

TOTAL

​

TOTAL

​

AND STILL

​

    

CURRENT

    

PAST DUE

    

PAST DUE

    

PAST DUE

    

PAST DUE

    

LOANS

    

ACCRUING

​

​

(IN THOUSANDS)

Commercial and industrial

​

$

133,918

​

$

14

​

$

250

​

$

—

​

$

264

​

$

134,182

​

$

—

Paycheck Protection Program (PPP)

​

​

17,311

​

​

—

​

​

—

​

​

—

​

​

—

​

​

17,311

​

​

—

Commercial loans secured by owner occupied real estate

​

 

99,454

​

 

—

​

​

190

​

 

—

​

 

190

​

​

99,644

​

 

—

Commercial loans secured by non-owner occupied real estate

​

 

428,790

​

 

2,035

​

​

—

​

 

—

​

 

2,035

​

​

430,825

​

 

—

Real estate – residential mortgage

​

 

283,178

​

 

2,449

​

​

1,240

​

 

1,129

​

 

4,818

​

​

287,996

​

 

—

Consumer

​

 

14,938

​

 

151

​

​

7

​

 

—

​

 

158

​

​

15,096

​

 

—

Total

​

$

977,589

​

$

4,649

​

$

1,687

​

$

1,129

​

$

7,465

​

$

985,054

​

$

—

​

An allowance for loan losses (“ALL”) is maintained to absorb lossessupport loan growth and cover charge-offs from the loan portfolio. The ALL is based on management’s continuing evaluation of the risk characteristics and credit quality of the loan portfolio, assessment of current economic conditions, diversification and size of the portfolio, adequacy of collateral, past and anticipated loss experience, and the amount of non-performing loans.

Loans that are collectively evaluated for impairment are analyzed with general allowances being made as appropriate. For general allowances, historical loss trends are used in the estimation of losses in the current portfolio. These historical loss amounts are complemented by consideration of other qualitative factors.

Management tracks the historical net charge-off activity at each risk rating grade level for the entire commercial portfolio and at the aggregate level for the consumer, and residential mortgage and small business portfolios. A historical charge-off factor is calculated utilizing a rolling 12 consecutive historical quarters for the commercial portfolios. TheThis historical charge-off factorsfactor for the consumer, and residential mortgage and small business portfolios are based on a three yearthree-year historical average of actual loss experience.

The Company uses a comprehensive methodology and procedural discipline to maintain an ALL to absorb inherent losses in the loan portfolio. The Company believes this is a critical accounting policy since it involves significant

67

Table of Contents

AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

estimates and judgments. The allowance consists of three elements: 1)(1) an allowance established on specifically identified problem loans, 2)(2) formula driven general reserves established for loan categories based upon historical loss experience and other qualitative factors which include delinquency, non-performing and TDR loans, loan trends, economic trends, concentrations of credit, trends in loan volume, experience and depth of management, examination and audit results, effects of any changes in lending


TABLE OF CONTENTS

AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5.  ALLOWANCE FOR LOAN LOSSES  – (continued)

policies, and trends in policy, financial information, and documentation exceptions, and 3)(3) a general risk reserve which provides support for variance from our assessment of the previously listed qualitative factors, provides protection against credit risks resulting from other inherent risk factors contained in the Company’s loan portfolio, and recognizes the model and estimation risk associated with the specific and formula driven allowances. The qualitative factors used in the formula driven general reserves are evaluated quarterly (and revised if necessary) by the Company’s management to establish allocations which accommodate each of the listed risk factors.

“Pass” rated credits are segregated from “Criticized” and “Classified” credits for the application of qualitative factors.

Management reviews the loan portfolio on a quarterly basis using a defined, consistently applied process in order to make appropriate and timely adjustments to the ALL. When information confirms all or part of specific loans to be uncollectible, these amounts are promptly charged off against the ALL.

6.

​

8. NON-PERFORMING ASSETS INCLUDING TROUBLED DEBT RESTRUCTURINGS

(TDR)

Non-performing assets are comprised of (i) loans which are on a non-accrual basis, (ii) loans which are contractually past due 90 days or more as to interest or principal payments, (iii) performing loans classified as TDR and (iv) OREO (real estate acquired through foreclosure and in-substance foreclosuresforeclosures) and repossessed assets).assets.

The following tables presenttable presents information concerning non-performing assets including TDR:

​

  
 AT DECEMBER 31,
   2017 2016
   (IN THOUSANDS, EXCEPT PERCENTAGES)
Non-accrual loans:
          
Commercial $353  $496 
Commercial loans secured by real estate  1,406   178 
Real estate-mortgage  1,257   929 
Total  3,016   1,603 
Other real estate owned:
          
Real estate-mortgage  18   21 
Total  18   21 
Total restructured loans not in non-accrual (TDR)  —   — 
Total non-performing assets including TDR $3,034  $1,624 
Total non-performing assets as a percent of loans, net of unearned income, and other real estate owned  0.34%   0.18% 

​

​

​

​

​

​

​

​

​

​

AT DECEMBER 31, 

 

​

    

2022

    

2021

 

​

​

(IN THOUSANDS, EXCEPT

 

​

​

PERCENTAGES)

 

Non-accrual loans:

​

​

​

​

​

​

​

Commercial and industrial

​

$

1,989

​

$

2,165

​

Commercial loans secured by non-owner occupied real estate

​

​

1,586

​

​

5

​

Real estate – residential mortgage

​

 

1,577

​

 

1,153

​

Consumer

​

​

9

​

​

—

​

Total

​

 

5,161

​

 

3,323

​

​

​

​

​

​

​

​

​

Other real estate owned and repossessed assets:

​

 

  

​

 

  

​

Real estate – residential mortgage

​

 

38

​

 

—

​

Consumer

​

 

1

​

 

—

​

Total

​

 

39

​

 

—

​

Total non-performing assets including TDR

​

$

5,200

​

$

3,323

​

Total non-performing assets as a percent of loans, net of unearned income, other real estate owned and repossessed assets

​

 

0.53

%  

 

0.34

%

​

The Company had no loans past due 90 days or more for the periods presented which were accruing interest.

Consistent with accounting and regulatory guidance, the Bank recognizes a TDR when the Bank, for economic or legal reasons related to a borrower’s financial difficulties, grants a concession to the borrower that would not normally be considered. Regardless of the form of concession granted, the Bank’s objective in offering a TDR is to increase the probability of repayment of the borrower’s loan.


68

TABLE OF CONTENTSTable of Contents

AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6.  NON-PERFORMING ASSETS INCLUDING TROUBLED DEBT RESTRUCTURINGS  – (continued)

To be considered a TDR,both of the following criteria must be met:

the borrower must be experiencing financial difficulties; and
●the borrower must be experiencing financial difficulties; and
●the Bank, for economic or legal reasons related to the borrower’s financial difficulties, grants a concession to the borrower that would not otherwise be considered.

Factors that indicate a borrower is experiencing financial difficulties include, but are not limited to:

the borrower is currently in default on their loan(s);
the borrower has filed for bankruptcy;
•●the borrower is currently in default on their loan(s);
●the borrower has filed for bankruptcy;
●the borrower has insufficient cash flows to service their loan(s);and or
●the borrower is unable to obtain refinancing from other sources at a market rate similar to rates available to a non-troubled debtor.

Factors that indicate that a concession has been granted include, but are not limited to:

•●the borrower is granted an interest rate reduction to a level below market rates for debt with similar risk;or
●the borrower is granted a material maturity date extension, or extension of the amortization plan to provide payment relief. For purposes of this policy, a material maturity date extension will generally include any maturity date extension, or the aggregate of multiple consecutive maturity date extensions, that exceed 120 days. A restructuring that results in an insignificant delay in payment, i.e. 120 days or less, is not necessarily a TDR. Insignificant payment delays occur when the amount of the restructured payments subject to the delay is insignificant relative to the unpaid principal or collateral value, and will result in an insignificant shortfall in the originally scheduled contractual amount due, and/or the delay in timing of the restructured payment period is insignificant relative to the frequency of payments, the original maturity or the original amortization.

The determination of whether a restructured loan is a TDR requires consideration of all of the facts and circumstances surrounding the modification. No single factor is determinative of whether a restructuring is a TDR. An overall general decline in the economy or some deterioration in a borrower’s financial condition does not automatically mean that the borrower is experiencing financial difficulty. Accordingly, determination of whether a modification is a TDR involves a large degree of judgment.

Any loan modification where the borrower’s aggregate exposure is at least $250,000 and where the loan currently maintains a criticized or classified risk rating, i.e. Special Mention, Substandard or Doubtful, or where the loan will be assigned a criticized or classified rating after the modification is evaluated to determine the need for TDR classification. The specific ALL reserve for loans modified as TDR’s was $748,000$123,000 and $527,000$132,000 as of December 31, 20172022 and 2016,2021, respectively.

69

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AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table details the loans modified as TDRs during the year ended December 31, 2022 (dollars in thousands).

​

​

​

​

​

​

​

​

​

Loans in non-accrual status

​

# of Loans

    

Current Balance

    

Concession Granted

Commercial and industrial

​

1

​

$

452

​

Subsequent modification of a TDR - Extension of maturity date with a below market interest rate

Commercial loans secured by non-owner occupied real estate

​

1

​

$

1,583

​

Extension of maturity date with an interest only period at below market interest rate

​

The following table details the TDRs atloan modified as a TDR during the year ended December 31, 20172021 (dollars in thousands).

​

   
Loans in non-accrual status # of Loans Current
Balance		 Concession Granted
Commercial  2  $343   Extension of maturity date 
Commercial loan secured by real estate  2   587   Extension of maturity date 

​

​

​

​

​

​

​

​

Loans in non-accrual status

​

# of Loans

    

Current Balance

    

Concession Granted

Commercial and industrial

 

1

​

$

477

 

Subsequent modification of a TDR - Extension of maturity date with a below market interest rate

TABLE OF CONTENTS​

AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6.  NON-PERFORMING ASSETS INCLUDING TROUBLED DEBT RESTRUCTURINGS  – (continued)

The following table details the TDRs at December 31, 2016 (dollars in thousands).

   
Loans in non-accrual status # of Loans Current
Balance		 Concession Granted
Commercial  2  $496   Extension of maturity date 
Commercial loan secured by real estate  1   16   Extension of maturity date 

The following table details the TDRs at December 31, 2015 (dollars in thousands).

   
Loans in non-accrual status # of Loans Current
Balance		 Concession Granted
Commercial loan secured by real estate  6  $4,320   Extension of maturity date 

   
Loans in accrual status # of Loans Current
Balance		 Concession Granted
Commercial loan secured by real estate  1  $156   Extension of maturity date 

In all instances where loans have been modified in troubled debt restructurings the pre- and post-modified balances are the same.

Once a loan is classified as a TDR, this classification will remain until documented improvement in the financial position of the borrower supports confidence that all principal and interest will be paid according to terms. Additionally, the customer must have re-established a track record of timely payments according to the restructured contract terms for a minimum of six consecutive months prior to consideration for removing the loan from non-accrual TDR status. However, a loan will continue to be on non-accrual status until, consistent with our policy, the borrower has made a minimum of six consecutive payments in accordance with the terms of the loan.

There were no loans that were modified as TDR’sTDRs in the previous 12 months and defaulted during the reporting periods ending December 31, 2017, 20162022, 2021 or 2015,2020, respectively

All TDRs are individually evaluated for impairment and a related allowance is recorded, as needed.

The Company is unaware of any additional loans which are required to either be charged-off or added to the non-performing asset totals disclosed above. OREO isand repossessed assets are recorded at the lower of 1)(1) fair value minus estimated costs to sell or 2)(2) carrying cost.

The following table sets forth, for the periods indicated, (1) the gross interest income that would have been recorded if non-accrual loans had been current in accordance with their original terms and had been outstanding throughout the period or since origination if held for part of the period, (2) the amount of interest income actually recorded on such loans, and (3) the net reduction in interest income attributable to such loans.

   
 YEAR ENDED DECEMBER 31,
   2017 2016 2015
   (IN THOUSANDS)
Interest income due in accordance with original terms $103  $118  $94 
Interest income recorded  (75)   —   — 
Net reduction in interest income $28  $118  $94 

Foreclosed assets acquired in settlement of loans carried at fair value less estimated costs to sell are included in the other assets on the Consolidated Balance Sheets. As of December 31, 2017 and 2016,2022, a total of $18,000 and $21,000, respectively$38,000 of residential real estate foreclosed assets were included in other assets. As of December 31, 2017,2021, there were no residential real estate foreclosed assets included in other assets. As of December 31, 2022, the Company had initiated formal foreclosure procedures on $74,000$258,000 of consumer residential mortgages.

​

Loan Modifications Related to COVID-19

​

Under section 4013 of the CARES Act, loans less than 30 days past due as of December 31, 2019 will be considered current for COVID-19 modifications. A financial institution can then suspend the requirements under GAAP for loan


70

TABLE OF CONTENTSTable of Contents

AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7.

modifications related to COVID-19 that would otherwise be categorized as a TDR, and suspend any determination of a loan modified as a result of COVID-19 as being a TDR, including the requirement to determine impairment for accounting purposes and reporting the loan as past due. Financial institutions wishing to utilize this authority must make a policy election, which applies to any COVID-19 modification made between March 1, 2020 and the earlier of either December 31, 2020 or the 60th day after the end of the COVID-19 national emergency so long as the loan was current on payments as of December 31, 2019. The suspension of TDR identification and accounting triggered by the effects of the COVID-19 pandemic was extended by the Consolidated Appropriations Act, 2021, signed into law on December 27, 2020. The period established by Section 4013 of the CARES Act was extended to the earlier of January 1, 2022 or 60 days after the date on which the national COVID-19 emergency terminates. Additionally, the Financial Accounting Standards Board has confirmed that short-term modifications made on a good-faith basis in response to COVID-19 to loan customers who were current prior to any relief are not TDRs.

​

In response to the COVID-19 pandemic, the Company remains committed to prudently working with and supporting our borrowers that have been hardest hit by the pandemic by granting them loan payment modifications. The following table presents information comparing loans which were subject to a loan modification related to COVID-19, as of December 31, 2022 and 2021. Note that the percentage of outstanding loans presented below was calculated based on loan totals excluding PPP loans. Management believes that this method more accurately reflects the concentration of COVID-19 related modifications within the loan portfolio.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

AT DECEMBER 31, 2022

​

​

AT DECEMBER 31, 2021

​

​

​

​

    

% of Outstanding

 

    

​

​

    

% of Outstanding

 

​

Balance

​

Non-PPP Loans

 

​

Balance

​

Non-PPP Loans

 

​

(in thousands)

​

​

 

​

(in thousands)

​

​

 

CRE/Commercial

$

199

 

0.03

%

​

$

7,488

 

1.08

%

Home Equity/Consumer

 

—

 

—

​

​

 

57

 

0.06

​

Residential Mortgage

 

32

 

0.02

​

​

 

203

 

0.11

​

Total

$

231

 

0.02

​

​

$

7,748

 

0.80

​

​

​

The balance of loan modifications related to COVID-19 at December 31, 2022 represents a decrease of $7.5 million, or 97.0%, from the balance of loans modified for COVID-19 at December 31, 2021. In addition, this current level of borrowers requesting payment deferrals is down sharply from its peak level of approximately $200 million that occurred at June 30, 2020. As a result of these loan modifications, the Company has recorded $503,000 of accrued interest income that has not been received as of December 31, 2022.

​

Borrower requested modifications primarily consist of the deferral of principal and/or interest payments. The following table presents the composition of the types of payment relief that have been granted.

​

​

​

​

​

​

​

​

​

​

​

​

AT DECEMBER 31, 2022

​

AT DECEMBER 31, 2021

​

Number of Loans

    

Balance

    

Number of Loans

    

Balance

​

​

​

(in thousands)

​

​

​

(in thousands)

Type of Payment Relief

  

 

​

  

 

  

 

​

  

Interest only payments

1

​

$

199

 

6

​

$

3,768

Complete payment deferrals

2

​

 

32

 

5

​

 

3,980

Total

3

​

$

231

 

11

​

$

7,748

​

Management continues to carefully monitor asset quality with a particular focus on customers that have requested payment deferrals during this difficult economic time. Deferral extension requests were considered based upon the customer’s needs and their impacted industry, borrower and guarantor capacity to service debt as well as issued regulatory guidance. At December 31, 2022, the COVID-19 related modification within the commercial real estate and commercial loan portfolios is to one borrower in the personal care industry. In order to properly monitor the increased credit risk associated with modified loans, the Asset Quality Task Force meets periodically to review these particular relationships, receiving input from the business lenders regarding their ongoing discussions with the borrowers.

71

Table of Contents

AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

​

9. PREMISES AND EQUIPMENT

An analysis of premises and equipment follows:

​

​

​

​

​

​

​

​

​

​

AT  DECEMBER 31, 

​

    

2022

    

2021

   
 AT DECEMBER 31,
 2017 2016
 (IN THOUSANDS)

​

​

(IN THOUSANDS)

Land $1,198  $1,198 

​

$

1,225

​

$

1,225

Premises  25,745   24,670 

​

 

30,079

​

 

28,944

Furniture and equipment  8,664   7,949 

​

 

8,428

​

 

8,908

Leasehold improvements  483   708 

​

 

1,202

​

 

1,174

Total at cost  36,090   34,525 

​

 

40,934

​

 

40,251

Less: Accumulated depreciation and amortization  23,356   22,831 

​

 

26,474

​

 

26,169

Premises and equipment, net $12,734  $11,694 

​

$

14,460

​

$

14,082

​

The Company recorded depreciation and amortization expense wasof $1.7 million for 2017 and $1.82022, $1.7 million for 2021, and $1.6 million for 2020.

The Company utilizes a contract cleaner to provide janitorial services for several office locations. The contract cleaner is owned by a Director of the Company. The amount paid to this related party totaled $200,000, $241,000, and $232,000 for the years ended December 31, 2022, 2021, and 2020, respectively.

​

10. LEASE COMMITMENTS

The Company has operating and financing leases for several office locations and equipment. Several assumptions and judgments were made when applying the requirements of ASU 2016-02, Leases (Topic 842), to the Company’s lease commitments, including the allocation of consideration in the contracts between lease and non-lease components, determination of the lease term, and determination of the discount rate used in calculating the present value of the lease payments. See Note 1 for information on policy elections.

The following table presents the lease cost associated with both 2016operating and 2015.financing leases for the years ended December 31, 2022, 2021, and 2020.

8.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

YEAR ENDED DECEMBER 31, 

​

​

​

2022

​

​

2021

​

​

2020

​

​

(IN THOUSANDS)

Lease cost

​

​

​

​

​

  

​

​

  

Financing lease cost:

​

​

​

​

​

  

​

​

  

  Amortization of right-of-use asset

​

$

271

​

$

272

​

$

271

  Interest expense

​

 

100

​

 

106

​

 

112

Operating lease cost

​

​

106

​

​

116

​

​

116

Total lease cost

​

$

477

​

$

494

​

$

499

​

The following table presents the weighted-average remaining lease term and discount rate for the leases outstanding at December 31, 2022 and 2021.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

AT DECEMBER 31, 

​

​

2022

​

​

2021

​

​

    

OPERATING

​

    

FINANCING

​

​

OPERATING

​

    

FINANCING

​

Weighted-average remaining term (years)

 

10.0

​

 

15.1

​

​

11.0

​

 

15.5

​

Weighted-average discount rate

 

3.54

%

​

3.62

%

​

3.53

%

​

3.56

%

​

72

Table of Contents

AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table presents the undiscounted cash flows due related to operating and financing leases as of December 31, 2022 and 2021, along with a reconciliation to the discounted amount recorded on the Consolidated Balance Sheets.

​

​

​

​

​

​

​

​

DECEMBER 31, 2022

​

    

OPERATING

    

FINANCING

​

​

(IN THOUSANDS)

Undiscounted cash flows due in:

​

​

​

​

​

​

2023

​

$

85

​

$

309

2024

​

 

85

​

 

249

2025

​

 

75

​

 

248

2026

​

 

69

​

 

181

2027

​

 

69

​

 

181

Thereafter

​

 

382

​

 

2,397

Total undiscounted cash flows

​

 

765

​

 

3,565

Discount on cash flows

​

 

(122)

​

 

(885)

Total lease liabilities

​

$

643

​

$

2,680

​

​

​

​

​

​

​

​

DECEMBER 31, 2021

​

    

OPERATING

    

FINANCING

​

​

(IN THOUSANDS)

Undiscounted cash flows due in:

​

​

​

​

​

​

2022

​

$

98

​

$

320

2023

​

 

69

​

 

309

2024

​

 

69

​

 

249

2025

​

 

69

​

 

248

2026

​

 

69

​

 

181

Thereafter

​

 

452

​

 

2,578

Total undiscounted cash flows

​

 

826

​

 

3,885

Discount on cash flows

​

 

(144)

​

 

(986)

Total lease liabilities

​

$

682

​

$

2,899

​

The Company leases approximately 1,049 square feet of office space within its headquarters building to a Director of the Company. The amount paid by this related party totaled $13,000 for the years ended December 31, 2022, 2021, and 2020 and is reported in net occupancy expense on the Consolidated Statements of Operations.

​

​

11. DEPOSITS

The following table sets forth the balance of the Company’s deposits:

​

​

​

​

​

​

​

​

​

​

AT  DECEMBER 31, 

​

    

2022

    

2021

​

​

(IN THOUSANDS)

Demand:

 

​

  

 

​

  

Non-interest bearing

​

$

195,123

​

$

211,106

Interest bearing

​

 

236,746

​

 

235,582

Savings

​

 

135,796

​

 

133,163

Money market

​

 

254,868

​

 

267,202

Certificates of deposit

​

 

286,004

​

 

292,325

Total deposits

​

$

1,108,537

​

$

1,139,378

​

  
 AT DECEMBER 31,
   2017 2016
   (IN THOUSANDS)
Demand:
          
Non-interest bearing $183,603  $188,808 
Interest bearing  170,343   163,801 
Savings  96,583   96,475 
Money market  238,119   258,978 
Certificates of deposit in denominations of $100,000 or more  30,297   27,427 
Other time  229,000   232,297 
Total deposits $947,945  $967,786 

73

Interest expense on deposits consistedTable of the following:Contents

AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

   
 YEAR ENDED DECEMBER 31,
   2017 2016 2015
   (IN THOUSANDS)
Interest bearing demand $638  $317  $199 
Savings  162   159   156 
Money market  1,446   1,198   817 
Certificates of deposit in denominations of $100,000 or more  319   283   266 
Other time  3,690   3,443   3,314 
Total interest expense $6,255  $5,400  $4,752 

The following table sets forth the balance of other time deposits and certificates of deposit of $100,000 or more as of December 31, 20172022 maturing in the periods presented:

​

  
YEAR: OTHER
TIME
DEPOSITS		 CERTIFICATES
OF DEPOSIT
OF $100,000
OR MORE
   (IN THOUSANDS)
2018 $102,529  $24,194 
2019  47,133   2,295 
2020  38,932   3,707 
2021  18,796   — 
2022  9,532   — 
2023 and after  12,078   101 
Total $229,000  $30,297 

​

​

​

​

​

​

​

​

 

​

​

CERTIFICATES OF

 

YEAR:

    

DEPOSIT 

    

​

 

(IN THOUSANDS)

​

2023

​

$

166,109

​

2024

​

 

79,097

​

2025

​

 

14,550

​

2026

​

 

7,566

​

2027

​

 

7,044

​

2028 and after

​

 

11,638

​

Total

​

$

286,004

​

TABLE OF CONTENTS​

AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8.  DEPOSITS  – (continued)

The maturities on certificates of deposit greater than $100,000 or more as of December 31, 2017, are as follows:

 
MATURING IN: (IN THOUSANDS)
Three months or less $6,649 
Over three through six months  9,511 
Over six through twelve months  8,034 
Over twelve months  6,103 
Total $30,297 

The aggregate amount of time deposit accounts (including certificates of deposit)deposit that meet or exceed the FDIC insurance limit of $250,000 at December 31, 20172022 and 20162021 are $49.7$74.0 million and $45.8$66.7 million, respectively.

9.

The amount of related party deposits totaled $3,135,000 and $3,499,000 at December 31, 2022 and 2021, respectively

12. SHORT-TERM BORROWINGS

Short-term borrowings, which consist of federal funds purchased and other short-term borrowings are summarized as follows:

​

​

​

​

​

​

​

​

​

​

​

AT DECEMBER 31, 2022

 

​

    

FEDERAL

    

​

​

 

​

​

FUNDS

​

SHORT-TERM

 

​

    

PURCHASED

    

BORROWINGS

 

​

​

(IN THOUSANDS, EXCEPT RATES)

 

Balance

​

$

—

​

$

88,641

​

Maximum balance at any month end

​

 

—

​

 

88,641

​

Average balance during year

​

 

113

​

 

9,155

​

Average rate paid for the year

​

 

3.11

%  

 

3.93

%

Interest rate on year-end balance

​

 

—

​

 

4.45

​

​

​

​

​

​

​

​

​

​

​

​

AT DECEMBER 31, 2021

​

FEDERAL

​

​

​

​

FUNDS

​

SHORT-TERM

​

PURCHASED

BORROWINGS

​

​

(IN THOUSANDS, EXCEPT RATES)

Balance

​

$

—

​

$

—

​

Maximum balance at any month end

​

—

​

4,077

​

Average balance during year

​

—

​

389

​

Average rate paid for the year

​

—

%  

0.37

%

Interest rate on year-end balance

​

—

​

0.28

​

​

  
 AT DECEMBER 31, 2017
   FEDERAL
FUNDS
PURCHASED		 SHORT-TERM
BORROWINGS
   (IN THOUSANDS, EXCEPT RATES)
Balance $—  $49,084 
Maximum indebtedness at any month end  645   51,760 
Average balance during year  54   16,972 
Average rate paid for the year  0.95%   1.21% 
Interest rate on year-end balance  —   1.54 

74

  
 AT DECEMBER 31, 2016
   FEDERAL
FUNDS
PURCHASED		 SHORT-TERM
BORROWINGS
   (IN THOUSANDS, EXCEPT RATES)
Balance $—  $12,754 
Maximum indebtedness at any month end  —   56,686 
Average balance during year  —   9,030 
Average rate paid for the year  —   0.58% 
Interest rate on year-end balance  —   0.74 

  
 AT DECEMBER 31, 2015
   FEDERAL
FUNDS
PURCHASED		 OTHER
SHORT-TERM
BORROWINGS
   (IN THOUSANDS, EXCEPT RATES)
Balance $—  $48,748 
Maximum indebtedness at any month end  —   65,071 
Average balance during year  —   24,582 
Average rate paid for the year  —   0.35% 
Interest rate on year-end balance  —   0.43 

TABLE OF CONTENTSTable of Contents

AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9.  SHORT-TERM BORROWINGS  – (continued)

​

​

​

​

​

​

​

​

​

​

AT DECEMBER 31, 2020

 

​

    

FEDERAL

    

​

 

​

​

FUNDS

​

SHORT-TERM

 

​

    

PURCHASED

    

BORROWINGS

 

​

​

(IN THOUSANDS, EXCEPT RATES)

 

Balance

​

$

—

​

$

24,702

​

Maximum balance at any month end

​

 

2,000

​

 

41,632

​

Average balance during year

​

 

18

​

 

4,929

​

Average rate paid for the year

​

 

0.87

%  

 

0.58

%

Interest rate on year-end balance

​

 

—

​

 

0.41

​

​

Average amounts outstanding during the year represent daily averages. Average interest rates represent interest expense divided by the related average balances.

These borrowing transactions can range from overnight to one year in maturity. Thehave an average maturity was three days at the end of 2017, 2016, and 2015.overnight.

10.

​

13. ADVANCES FROM FEDERAL HOME LOAN BANK GUARANTEED JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES AND SUBORDINATED DEBT

Advances from the FHLBFederal Home Loan Bank (FHLB) consist of the following:

​

  
 AT DECEMBER 31, 2017
MATURING WEIGHTED
AVERAGE YIELD		 BALANCE
   (IN THOUSANDS, EXCEPT RATES)
2018  1.48  $12,000 
2019  1.51   12,500 
2020  1.74   16,729 
2021  1.75   5,000 
Total advances from FHLB  1.61  $46,229 

​

​

​

​

​

​

​

    

AT DECEMBER 31, 2022

​

​

WEIGHTED

​

​

​

​

    

AVERAGE YIELD

    

BALANCE

MATURING

​

(IN THOUSANDS, EXCEPT RATES)

2023

 

1.59

%

$

15,568

2024

 

1.19

​

 

4,197

Total advances from FHLB

 

1.50

​

$

19,765

​

  
 AT DECEMBER 31, 2016
MATURING WEIGHTED
AVERAGE YIELD		 BALANCE
   (IN THOUSANDS, EXCEPT RATES)
2017  1.06  $12,000 
2018  1.48   12,000 
2019  1.51   12,500 
2020  1.59   8,042 
2021  1.60   1,000 
Total advances from FHLB  1.37  $45,542 

​

​

​

​

​

​

​

    

AT DECEMBER 31, 2021

​

​

WEIGHTED

​

​

​

​

    

AVERAGE YIELD

    

BALANCE

MATURING

​

(IN THOUSANDS, EXCEPT RATES)

2022

 

1.88

%

$

22,888

2023

 

1.59

​

 

15,568

2024

 

1.19

​

 

4,197

Total advances from FHLB

 

1.71

​

$

42,653

​

The Company’s subsidiary Bank is a member of the FHLB which provides this subsidiary with the opportunity to obtain short to longer-term advances based upon the Company’s investment in assets secured by one- to four-family residential real estate and certain types of CRE.commercial and commercial real estate loans. The rate on open repo plus advances, which are typically overnight borrowings, can change daily, while the raterates on the advances isare fixed until the maturity of the advance. All FHLB stock along with an interest in certain residential mortgage, commercial real estate, and CREcommercial and industrial loans with an aggregate statutory value equal to the amount of the advances, are pledged as collateral to the FHLB of Pittsburgh to support these borrowings. At December 31, 2017,2022, the Company had immediately available $371$302 million of overnight borrowing capability at the FHLB, $34$41 million of short-term borrowing availability at the Federal Reserve Bank and $35 million of unsecured federal funds lines with correspondent banks.

Guaranteed Junior Subordinated Deferrable Interest Debentures:

On April 28, 1998, the Company completed a $34.5 million public offering of 8.45% Trust Preferred Securities, which represent undivided beneficial interests in the assets of a Delaware business trust, AmeriServ Financial Capital Trust I. The Trust Preferred Securities will mature on June 30, 2028, and are callable at par at the option of the Company after June 30, 2003. Proceeds of the issue were invested by AmeriServ Financial Capital Trust I in Junior Subordinated Debentures issued by the Company. The Trust Preferred securities are listed on NASDAQ under the symbol ASRVP. The Company used $22.5 million of proceeds from a private placement of common stock to redeem Trust Preferred Securities in 2005 and 2004. The net balance as of December 31, 2017 and 2016 was $12.9 million.


TABLE OF CONTENTS

AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

10.  ADVANCES FROM FEDERAL HOME LOAN BANK, GUARANTEED JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES AND SUBORDINATED DEBT  – (continued)

Subordinated Debt:

On December 29, 2015,August 26, 2021, the Company completed a private placement of $7.65$27 million in aggregate principal amount of fixedfixed-to-floating rate subordinated notes to certain accredited investors. The subordinated notes mature December 31, 2025September 1, 2031 and are non-callable for five years. The notes have a 6.50% fixed annual interest rate forof 3.75%, payable until September 1, 2026. From and including September 1, 2026, the entire term. Thisinterest rate will reset quarterly to the then-current three-month Secured Overnight Financing Rate (SOFR) plus 3.11%. The subordinated debt has beenwas structured to qualify as Tiertier 2 capital under the Federal Reserve’s capital guidelines and will be non-callable for five years. guidelines.

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AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

​

The Company used approximately $20 million of the net proceeds to retire its existing subordinated debt and guaranteed junior subordinated deferrable interest debentures (trust preferred securities) on September 30, 2021. Specifically, the Company retired $12 million of 8.45% trust preferred securities which had been issued on April 28, 1998 and $7.7 million of 6.50% subordinated debt which had been issued on December 29, 2015. The remainder of the proceeds from this private placement and other cash on handwere utilized for general corporate purposes, including the downstream of $3.5 million as capital to redeem all $21 millionthe Bank in the third quarter of its issued and outstanding SBLF preferred stock on January 27, 2016.2021. The net balance of subordinated debt as of December 31, 20172022 and 20162021 was $7.5 million and $7.4 million, respectively.$26.6 million.

11.

​

14. DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS

The following disclosures establish a hierarchal disclosure framework associated with the level of pricing observability utilized in measuring assets and liabilities at fair value. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The three broad levels defined within this hierarchy are as follows:

Level I: Quoted prices are available in active markets for identical assets or liabilities as of the reported date.

Level II: Pricing inputs are other than the quoted prices in active markets, which are either directly or indirectly observable as of the reported date. The nature of these assets and liabilities includes items for which quoted prices are available but traded less frequently and items that are fair-valued using other financial instruments, the parameters of which can be directly observed.

Level III: Assets and liabilities that have little to no pricing observability as of the reported date. These items do not have two-way markets and are measured using management’s best estimate of fair value, where the inputs into the determination of fair value require significant management judgment or estimation.

Assets and Liability Measured and Recorded on a Recurring Basis

Equity securities are reported at fair value utilizing Level 1 inputs. These securities are mutual funds held within a rabbi trust for the Company’s executive deferred compensation plan. The mutual funds held are open-end funds that are registered with the Securities and Exchange Commission. These funds are required to publish their daily net asset value and to transact at that price.

Securities classified as available for sale are reported at fair value utilizing Level 2 inputs. For these securities, the Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quoted market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things.

The fair valuevalues of the swap asset isinterest rate swaps used for interest rate risk management and the risk participation agreement associated with a commercial real estate loan are based on an external derivative valuation model using data inputs from similar transactions as of the valuation date and classified Level 2.

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Table of Contents

AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table presents the assets and liabilities measured and reported on the Consolidated Balance Sheets on a recurring basis at their fair value as of December 31, 20172022 and 2016,2021 by level within the fair value hierarchy. Financialhierarchy (in thousands).

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

FAIR VALUE MEASUREMENTS AT DECEMBER 31, 2022 USING

​

    

TOTAL

    

(LEVEL 1)

    

(LEVEL 2)

    

(LEVEL 3)

Equity securities (1)

​

$

502

​

$

502

​

$

—

​

$

—

Available for sale securities:

​

​

​

​

​

​

​

​

​

​

​

​

U.S. Agency

​

 

10,533

​

 

—

​

 

10,533

​

 

—

U.S. Agency mortgage-backed securities

​

​

89,985

​

​

—

​

​

89,985

​

​

—

Municipal

​

 

19,038

​

 

—

​

 

19,038

​

 

—

Corporate bonds

​

 

59,952

​

 

—

​

 

59,952

​

 

—

Interest rate swap asset (1)

​

 

6,992

​

 

—

​

 

6,992

​

 

—

Interest rate swap liability (2)

​

 

(6,872)

​

 

—

​

 

(6,872)

​

 

—

Risk participation agreement (2)

​

 

—

​

 

—

​

 

—

​

 

—

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

FAIR VALUE MEASUREMENTS AT DECEMBER 31, 2021 USING

​

    

TOTAL

    

(LEVEL 1)

    

(LEVEL 2)

    

(LEVEL 3)

Equity securities (1)

​

$

526

​

$

526

​

$

—

​

$

—

Available for sale securities:

​

​

​

​

​

​

​

​

​

​

​

​

U.S. Agency

​

 

7,387

​

 

—

​

 

7,387

​

 

—

U.S. Agency mortgage-backed securities

​

​

80,167

​

​

—

​

​

80,167

​

​

—

Municipal

​

 

20,892

​

 

—

​

 

20,892

​

 

—

Corporate bonds

​

 

54,725

​

 

—

​

 

54,725

​

 

—

Interest rate swap asset (1)

​

 

1,226

​

 

—

​

 

1,226

​

 

—

Interest rate swap liability (2)

​

 

(1,226)

​

 

—

​

 

(1,226)

​

 

—

Risk participation agreement (2)

​

 

—

​

 

—

​

 

—

​

 

—

(1)Included within other assets on the Consolidated Balance Sheets.
(2)Included within other liabilities on the Consolidated Balance Sheets.

Assets Measured and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

Assets and Liability MeasuredRecorded on a Recurring Basis:Non-Recurring Basis

Assets and liability measured at fair value on a recurring basis are summarized below (in thousands):

    
 FAIR VALUE MEASUREMENTS AT DECEMBER 31, 2017 USING
   TOTAL (LEVEL 1) (LEVEL 2) (LEVEL 3)
U.S. Agency securities $6,572  $—  $6,572  $— 
Taxable municipal  7,036   —   7,036   — 
Corporate bonds  35,784   —   35,784   — 
U.S. Agency mortgage-backed securities  79,746   —   79,746   — 
Fair value swap asset  92   —   —   92 
Fair value swap liability  (92)   —   —   (92) 

TABLE OF CONTENTS

AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11.  DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS  – (continued)

    
 FAIR VALUE MEASUREMENTS AT DECEMBER 31, 2016 USING
   TOTAL (LEVEL 1) (LEVEL 2) (LEVEL 3)
U.S. Agency securities $398  $—  $398  $— 
Taxable municipal  3,622   —   3,622   — 
Corporate bonds  33,873   —   33,873   — 
U.S. Agency mortgage-backed securities  89,184   —   89,184   — 

Assets Measured on a Non-recurring Basis:

Assets measured at fair value on a non-recurring basis are summarized below (in thousands):

    
 FAIR VALUE MEASUREMENTS AT DECEMBER 31, 2017 USING
   TOTAL (LEVEL 1) (LEVEL 2) (LEVEL 3)
Assets:
                    
Impaired loans $850  $—  $—  $850 
Other real estate owned  18   —   —   18 

    
 FAIR VALUE MEASUREMENTS AT DECEMBER 31, 2016 USING
   TOTAL (LEVEL 1) (LEVEL 2) (LEVEL 3)
Assets:
                    
Impaired loans $147  $—  $—  $147 
Other real estate owned  21   —   —   21 

Loans considered impaired are loans for which, based on current information and events, it is probable that the creditor will be unable to collect all amounts due according to the contractual terms of the loan agreement. Impaired loans are reported at the fair value of the underlying collateral if the repayment is expected solely from the collateral. Collateral values are estimated using Level 3 inputs based on observable market data which at times are discounted.discounted using unobservable inputs. At December 31, 2017,2022, impaired loans evaluated using the collateral method with a carrying value of $1.8$1.6 million were reduced by a specific valuation allowance totaling $909,000$3,000 resulting in a net fair value of $850,000.$1.6 million. At December 31, 2016,2021, impaired loans evaluated using the collateral method with a carrying value of $674,000$5,000 were reduced by a specific valuation allowance totaling $527,000$5,000 resulting in a net fair value of $147,000.zero.

OREOOther real estate owned is measured at fair value based on appraisals, less costestimated costs to sell at the date of foreclosure. The Bank’s internal Collections and Assigned Risk Department estimates the fair value of repossessed assets, such as vehicles and equipment, using a formula driven analysis based on automobile or other industry data, less estimated costs to sell at the time of repossession. Valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value, less cost to sell. Income and expenses from operations and changes in valuation allowance are included in the net expenses from OREO.OREO and repossessed assets.

77

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AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

    
December 31, 2017 Quantitative Information About Level 3 Fair Value Measurements
 Fair Value Valuation Techniques Unobservable Input Range (Wgtd Ave)
Impaired loans $850   Appraisal of collateral(1)
   Appraisal adjustments(2)
   21% to 75% (54)% 
Other real estate owned  18   Appraisal of collateral(1),(3)
   Appraisal adjustments(2)
   16% to 64% (29)%
 
              Liquidation expenses(2)
   2% to 206% (79)% 

Assets measured and recorded at fair value on a non-recurring basis are summarized below (in thousands, except range data):

    
December 31, 2016 Quantitative Information About Level 3 Fair Value Measurements
 Fair Value Valuation Techniques Unobservable Input Range (Wgtd Ave)
Impaired loans $147   Appraisal of collateral(1)
   Appraisal adjustments(2)
   40% to 99% (45)% 
Other real estate owned  21   Appraisal of collateral(1),(3)
   Appraisal adjustments(2)
   20% to 77% (42)% 
              Liquidation expenses(2)
   3% to 199% (37)% 

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

FAIR VALUE MEASUREMENTS AT DECEMBER 31, 2022 USING

​

    

TOTAL

    

(LEVEL 1)

    

(LEVEL 2)

    

(LEVEL 3)

Impaired loans

​

$

1,583

​

$

—

​

$

—

​

$

1,583

Other real estate owned and repossessed assets

​

 

39

​

 

—

​

 

—

​

 

39

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

FAIR VALUE MEASUREMENTS AT DECEMBER 31, 2021 USING

​

TOTAL

(LEVEL 1)

(LEVEL 2)

(LEVEL 3)

Impaired loans

​

$

—

​

$

—

​

$

—

​

$

—

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Quantitative Information About Level 3 Fair Value Measurements

 

​

​

​

​

Valuation

​

Unobservable

​

​

​

December 31, 2022

    

Fair Value

    

Techniques

    

Input

    

Range (Wgtd Avg)

 

Impaired loans

​

$

1,583

 

Appraisal of

 

Appraisal

 

0% to 100% (0.2%)

​

​

​

​

​

​

collateral (1)

​

adjustments (2)

​

​

​

Other real estate owned and repossessed assets

​

 

39

 

Appraisal of

 

Appraisal

 

52% (52%)

​

​

​

 

  

 

collateral (1)

 

adjustments (2)

 

​

​

​

​

​

​

​

​

​

Liquidation

​

10% to 39% (11%)

​

​

​

​

​

​

​

​

expenses

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Quantitative Information About Level 3 Fair Value Measurements

​

​

​

​

Valuation

​

Unobservable

​

​

​

December 31, 2021

Fair Value

Techniques

Input

Range (Wgtd Avg)

Impaired loans

$

—

Appraisal of

Appraisal

100% (100%)

​

​

​

collateral (1)

adjustments (2)

​

​

(1)Fair Value is generally determined through independent appraisals of the underlying collateral, which generally include various level 3 inputs which are not identifiable.Also includes qualitative adjustments by management and estimated liquidation expenses.
(2)Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses.conditions.
(3)Includes qualitative adjustments by management and estimated liquidation expenses.

TABLE OF CONTENTS​

AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12.

15. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

For the Company, as for most financial institutions, approximately 90% of its assets and liabilities are considered financial instruments. Many of the Company’s financial instruments, however, lack an available trading market characterized by a willing buyer and willing seller engaging in an exchange transaction. Therefore, significant estimates and present value calculations were used by the Company for the purpose of this disclosure.

Fair values have been determined by the Company using independent third party valuations that usesuse the best available data (Level 2) and an estimation methodology (Level 3) the Company believes is suitable for each category of financial instruments. Management believes that cash and cash equivalents, bank owned life insurance, regulatory stock, accrued interest receivable and loans andpayable, deposits with floating interest ratesno stated maturities, and short-term borrowings have estimated fair values which approximate the recorded carrying values. The estimation methodologies used, thefair value measurements for all of these financial instruments are Level 1 measurements.

78

Table of Contents

AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The estimated fair values based on US GAAP measurements and recorded carrying values at December 31, 20172022 and 2016,2021, for the remaining financial instruments not required to be reported at fair value were as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

AT DECEMBER 31, 2022

​

    

Carrying 

    

​

​

    

​

​

    

​

​

    

​

​

​

​

Value

​

​

Fair Value

​

​

(Level 1)

​

​

(Level 2)

​

​

(Level 3)

​

​

​

(IN THOUSANDS)

FINANCIAL ASSETS:

​

 

  

​

 

  

​

 

  

​

 

  

​

 

  

Investment securities – HTM

​

$

61,878

​

$

55,192

​

$

—

​

$

52,323

​

$

2,869

Loans held for sale

​

 

59

​

​

57

​

​

57

​

 

—

​

 

—

Loans, net of allowance for loan loss and unearned income

​

 

980,023

​

​

938,188

​

​

—

​

 

—

​

 

938,188

FINANCIAL LIABILITIES:

​

 

  

​

 

  

​

 

  

​

 

  

​

 

  

Deposits with stated maturities

​

​

286,004

​

​

281,297

​

​

—

​

​

—

​

​

281,297

All other borrowings (1)

​

 

46,409

​

 

44,759

​

 

—

​

 

—

​

 

44,759

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

AT DECEMBER 31, 2021

​

    

Carrying 

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Value

​

    

Fair Value

​

    

(Level 1)

​

    

(Level 2)

​

    

(Level 3)

​

​

​

(IN THOUSANDS)

FINANCIAL ASSETS:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Investment securities – HTM

​

$

53,751

​

$

55,516

​

$

—

​

$

52,523

​

$

2,993

Loans held for sale

​

 

983

​

​

1,022

​

​

1,022

​

 

—

​

 

—

Loans, net of allowance for loan loss and unearned income

​

 

972,656

​

​

969,681

​

​

—

​

 

—

​

 

969,681

FINANCIAL LIABILITIES:

​

 

  

​

 

  

​

 

  

​

 

  

​

 

  

Deposits with stated maturities

​

​

292,325

​

​

294,280

​

​

—

​

​

—

​

​

294,280

All other borrowings (1)

​

 

69,256

​

 

69,506

​

 

—

​

 

—

​

 

69,506

     
 AT DECEMBER 31, 2017
   Carrying
Value		 Fair
Value		 (Level 1) (Level 2) (Level 3)
   (IN THOUSANDS)
FINANCIAL ASSETS:
                         
Cash and cash equivalents $34,188  $34,188  $34,188  $—  $— 
Investment securities – AFS  129,138   129,138   —   129,138   — 
Investment securities – HTM  38,752   38,811   —   35,859   2,952 
Regulatory stock  6,800   6,800   6,800   —   — 
Loans held for sale  3,125   3,173   3,173   —   — 
Loans, net of allowance for loan loss and unearned income  879,419   873,784   —   —   873,784 
Accrued interest income receivable  3,603   3,603   3,603   —   — 
Bank owned life insurance  37,860   37,860   37,860   —   — 
Fair value swap asset  92   92   —   —   92 
FINANCIAL LIABILITIES:
                         
Deposits with no stated maturities $688,648  $688,648  $688,648  $—  $— 
Deposits with stated maturities  259,297   260,153   —   —   260,153 
Short-term borrowings  49,084   49,084   49,084   —   — 
All other borrowings  66,617   69,684   —   —   69,684 
Accrued interest payable  1,754   1,754   1,754   —   — 
Fair value swap liability  92   92   —   —   92 

     
 AT DECEMBER 31, 2016
   Carrying
Value		 Fair
Value		 (Level 1) (Level 2) (Level 3)
   (IN THOUSANDS)
FINANCIAL ASSETS:
                         
Cash and cash equivalents $34,073  $34,073  $34,073  $—  $— 
Investment securities – AFS  127,077   127,077   —   127,077   — 
Investment securities – HTM  30,665   30,420   —   27,473   2,947 
Regulatory stock  5,484   5,484   5,484   —   — 
Loans held for sale  3,094   3,158   3,158   —   — 
Loans, net of allowance for loan loss and unearned income  873,832   869,960   —   —   869,960 
Accrued interest income receivable  3,116   3,116   3,116   —   — 
Bank owned life insurance  37,903   37,903   37,903   —   — 
FINANCIAL LIABILITIES:
                         
Deposits with no stated maturities $708,062  $708,062  $708,062  $—  $— 
Deposits with stated maturities  259,724   261,446   —   —   261,446 
Short-term borrowings  12,754   12,754   12,754   —   — 
All other borrowings  65,891   69,348   —   —   69,348 
Accrued interest payable  1,640   1,640   1,640   —   — 
(1)All other borrowings include advances from Federal Home Loan Bank and subordinated debt.

TABLE OF CONTENTS

AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12.  DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS  – (continued)

The fair value of cash and cash equivalents, regulatory stock, accrued interest income receivable, short-term borrowings, and accrued interest payable are equal to the current carrying value.

The fair value of investment securities is equal to the available quoted market price for similar securities. The fair value measurements consider observable data that may include dealer quoted market spreads, cash flows, the US Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things. The Level 3 securities are valued by discounted cash flows using the US Treasury rate for the remaining term of the securities.

Loans held for sale are priced individually at market rates on the day that the loan is locked for commitment with an investor. All loans in the held for sale account conform to Fannie Mae underwriting guidelines, with the specific intent of the loan being purchased by an investor at the predetermined rate structure. Loans in the held for sale account have specific delivery dates that must be executed to protect the pricing commitment (typically a 30, 45, or 60 day lock period).

The net loan portfolio has been valued using a present value discounted cash flow. The discount rate used in these calculations is based upon the treasury yield curve adjusted for non-interest operating costs, credit loss, current market prices and assumed prepayment risk.

The fair value of bank owned life insurance is based upon the cash surrender value of the underlying policies and matches the book value.

Deposits with stated maturities have been valued using a present value discounted cash flow with a discount rate approximating current market for similar assets and liabilities. Deposits with no stated maturities have an estimated fair value equal to both the amount payable on demand and the recorded book balance.

The fair value of all other borrowings is based on the discounted value of contractual cash flows. The discount rates are estimated using rates currently offered for similar instruments with similar remaining maturities.

The fair values of the fair value swaps used for interest rate risk management represents the amount the Company would have expected to receive or pay to terminate such agreements.

Commitments to extend credit and standby letters of credit are financial instruments generally not subject to sale, and fair values are not readily available. The carrying value, represented by the net deferred fee arising from the unrecognized commitment, and the fair value, determined by discounting the remaining contractual fee over the term of the commitment using fees currently charged to enter into similar agreements with similar credit risk, are not considered material for disclosure. The contractual amounts of unfunded commitments are presented in Note 16.

Changes in assumptions or estimation methodologies may have a material effect on these estimated fair values. The Company’s remaining assets and liabilities which are not considered financial instruments have not been valued differently than has been customary under historical cost accounting.


TABLE OF CONTENTS

AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13.16. INCOME TAXES

The Tax Cuts and Jobs Act, enacted on December 22, 2017 lowered the federal corporate income tax rate from 35% to 21% effective January 1, 2018. As a result, the carrying value of the net deferred tax assets was reduced which increased income tax expense by $2,624,000. The expense for income taxes is summarized below:below and includes both federal and applicable state corporate income taxes:

​

​

​

​

​

​

​

​

​

​

​

​

​

YEAR ENDED DECEMBER 31, 

​

    

2022

    

2021

    

2020

​

​

(IN THOUSANDS)

Current

​

$

1,220

​

$

973

​

$

(400)

Deferred

​

 

533

​

 

729

​

 

1,614

Income tax expense

​

$

1,753

​

$

1,702

​

$

1,214

​

   
 YEAR ENDED DECEMBER 31,
   2017 2016 2015
   (IN THOUSANDS)
Current $1,044  $483  $1,455 
Deferred  1,679   414   888 
Change in corporate tax rate  2,624   —   — 
Income tax expense $5,347  $897  $2,343 

79

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AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The reconciliation between the federal statutory tax rate and the Company’s effective consolidated income tax rate is as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

YEAR ENDED DECEMBER 31, 

 

​

​

2022

​

2021

​

2020

 

​

    

AMOUNT

    

RATE

    

AMOUNT

    

RATE

    

AMOUNT

    

RATE

 

      
 YEAR ENDED DECEMBER 31,
 2017 2016 2015
 AMOUNT RATE AMOUNT RATE AMOUNT RATE
 (IN THOUSANDS, EXCEPT PERCENTAGES)

​

​

(IN THOUSANDS, EXCEPT PERCENTAGES)

 

Income tax expense based on federal statutory rate $2,938   34.0%  $1,090   34.0%  $2,836   34.0% 

​

$

1,932

 

21.0

%  

$

1,843

 

21.0

%  

$

1,221

 

21.0

%

Tax exempt income  (283)   (3.3)   (255)   (7.9)   (574)   (6.9) 

​

 

(244)

 

(2.6)

​

 

(253)

 

(2.9)

​

 

(188)

 

(3.2)

​

Other  68   0.8   62   1.9   81   1.0 

​

 

65

 

0.7

​

 

112

 

1.3

​

 

181

 

3.1

​

Change in corporate tax rate  2,624   30.4   —   —   —   — 
Total expense for income taxes $5,347   61.9%  $897   28.0%  $2,343   28.1% 

​

$

1,753

 

19.1

%  

$

1,702

 

19.4

%  

$

1,214

 

20.9

%

​

The following table highlights the major components comprising the deferred tax assets and liabilities for each of the periods presented:

​

  
 AT DECEMBER 31,
   2017 2016
   (IN THOUSANDS)
DEFERRED TAX ASSETS:
          
Allowance for loan losses $2,145  $3,377 
Unfunded commitment reserve  192   303 
Unrealized investment security losses  87   87 
Premises and equipment  804   1,542 
Accrued pension obligation  948   2,582 
Alternative minimum tax credits  1,724   2,110 
Other  219   895 
Total tax assets  6,119   10,896 
DEFERRED TAX LIABILITIES:
          
Investment accretion  (33)   (24) 
Other  (123)   (217) 
Total tax liabilities  (156)   (241) 
Net deferred tax asset $5,963  $10,655 

​

​

​

​

​

​

​

​

​

AT DECEMBER 31, 

​

    

2022

    

2021

​

​

(IN THOUSANDS)

DEFERRED TAX ASSETS:

​

  

​

​

  

​

Allowance for loan losses

​

$

2,256

​

$

2,604

Unfunded commitment reserve

​

 

157

​

 

208

Unrealized investment security losses

​

 

3,971

​

 

—

Premises and equipment

​

 

955

​

 

743

Lease liabilities

​

​

698

​

​

752

Other

​

 

185

​

 

175

Total tax assets

​

 

8,222

​

 

4,482

DEFERRED TAX LIABILITIES:

​

 

​

​

 

​

Investment accretion

​

 

(107)

​

 

(51)

Unrealized investment security gains

​

​

—

​

​

(369)

Lease right-of-use assets

​

​

(639)

​

​

(704)

Accrued pension obligation

​

​

(4,494)

​

​

(4,098)

Other

​

 

(193)

​

 

(194)

Total tax liabilities

​

 

(5,433)

​

 

(5,416)

Net deferred tax asset (liability)

​

$

2,789

​

$

(934)

TABLE OF CONTENTS​

AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13.  INCOME TAXES  – (continued)

At December 31, 20172022 and 2016,2021, the Company had no valuation allowance established against its deferred tax assets as we believe the Company will generate sufficient future taxable income to fully utilize alternative minimum tax (AMT) credits.

The change in net deferred tax assets and liabilities consist of the following:

  
 YEAR ENDED
DECEMBER 31,
   2017 2016
   (IN THOUSANDS)
Unrealized gains recognized in comprehensive income $53  $507 
Pension obligation of the defined benefit plan not yet recognized in income  (442)   1,569 
Deferred provision for income taxes  (1,679)   (414) 
Change in corporate tax rate  (2,624)   — 
Net increase (decrease) $(4,692)  $1,662 

The Company has AMT credit carryforwards of approximately $1.7 million at December 31, 2017. These credits have an indefinite carryforward period.these assets.

The Company utilizes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Benefits from tax positions should be recognized in the financial statements only when it is more likely than not that the tax position will be sustained upon examination by the appropriate taxing authority that would have full knowledge of all relevant information. A tax position that meets the more-likely-than-not recognition threshold is measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not recognition threshold should be derecognized in the first subsequent financial reporting period in which that threshold is no longer met. The Company has no tax liability for uncertain tax positions. The Company’s federal and state income tax returns for taxable years through 20142018 have been closed for purposes of examination by the Internal Revenue Service and the Pennsylvania Department of Revenue.

14.

80

Table of Contents

AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

17. EMPLOYEE BENEFIT PLANS

PENSION PLANS:PLAN:

The Company has a noncontributory defined benefit pension plan covering allcertain employees who work at least 1,000 hours per year. The participants shall have a vested interest in their accrued benefit after five full years of service. The benefits of the plan are based upon the employee’s years of service and average annual earnings for the highest five consecutive calendar years during the final ten yearten-year period of employment. Effective January 1, 2013, the Company implemented a soft freeze of its defined benefit pension plan for non-union employees. A soft freeze means that all existing employees as of December 31, 2012 will remain in the defined benefit pension plan but any new non-union employees hired after January 1, 2013 will no longer be part of the defined benefit plan but instead will be offered retirement benefits under an enhanced 401K401(k) program. The Company implemented a similar soft freeze of its defined benefit pension plan for union employees effective January 1, 2014. The Company executed these changes to help reduce its pension costs in future years. Plan assets are primarily debt securities (including U.S. Treasury and Agency securities, corporate notes and bonds), listed common stocks (including shares of the Company’s common stock valued


TABLE OF CONTENTS

AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

14.  EMPLOYEE BENEFIT PLANS  – (continued)

at $1.2$1.9 million and is limited to 10% of the plan’s assets), mutual funds, and short-term cash equivalent instruments. The following actuarial tables are based upon data provided by an independent third party as of December 31, 2017.31.

PENSION BENEFITS:

​

​

​

​

​

​

​

​

​

​

YEAR ENDED DECEMBER 31, 

​

    

2022

    

2021

​

​

(IN THOUSANDS)

CHANGE IN BENEFIT OBLIGATION:

 

​

  

 

​

  

Benefit obligation at beginning of year

​

$

50,287

​

$

54,861

Service cost

​

 

1,419

​

​

1,708

Interest cost

​

 

1,462

​

​

894

Actuarial (gain) loss

​

 

(9,787)

​

​

273

Settlements

​

 

(7,541)

​

​

(6,516)

Benefits paid

​

 

(934)

​

​

(933)

Benefit obligation at end of year

​

 

34,906

​

​

50,287

CHANGE IN PLAN ASSETS:

​

 

  

​

 

  

Fair value of plan assets at beginning of year

​

 

70,432

​

​

58,447

Actual return on plan assets

​

 

(9,700)

​

​

11,434

Employer contributions

​

 

4,000

​

​

8,000

Settlements

​

 

(7,541)

​

​

(6,516)

Benefits paid

​

 

(934)

​

​

(933)

Fair value of plan assets at end of year

​

 

56,257

​

​

70,432

Funded status of the plan

​

$

21,351

​

$

20,145

​

​

​

​

​

​

​

​

​

​

YEAR ENDED DECEMBER 31, 

​

    

2022

    

2021

​

​

(IN THOUSANDS)

AMOUNTS NOT YET RECOGNIZED AS A COMPONENT OF NET PERIODIC PENSION COST:

 

​

  

 

​

​

Amounts recognized in accumulated other comprehensive loss consists of:

 

​

  

 

​

​

Net actuarial loss

​

$

9,597

​

$

9,319

Total

​

$

9,597

​

$

9,319

​

  
 YEAR ENDED DECEMBER 31,
   2017 2016
   (IN THOUSANDS)
CHANGE IN BENEFIT OBLIGATION:
          
Benefit obligation at beginning of year $38,637  $33,117 
Service cost  1,516   1,468 
Interest cost  1,292   1,430 
Actuarial (gain) loss  1,588   4,578 
Benefits paid  (2,020)   (1,956) 
Benefit obligation at end of year  41,013   38,637 
CHANGE IN PLAN ASSETS:
          
Fair value of plan assets at beginning of year  30,671   28,429 
Actual return on plan assets  4,949   348 
Employer contributions  3,500   3,850 
Benefits paid  (2,020)   (1,956) 
Fair value of plan assets at end of year  37,100   30,671 
Funded status of the plan $(3,913)  $(7,966) 

81

Table of Contents

AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

  
 YEAR ENDED DECEMBER 31,
   2017 2016
   (IN THOUSANDS)
AMOUNTS NOT YET RECOGNIZED AS A COMPONENT OF NET PERIODIC PENSION COST:
          
Amounts recognized in accumulated other comprehensive loss consists of:
          
Net actuarial loss $15,326  $17,602 
Total $15,326  $17,602 

​

​

​

​

​

​

​

​

​

YEAR ENDED DECEMBER 31, 

​

    

2022

    

2021

​

​

(IN THOUSANDS)

ACCUMULATED BENEFIT OBLIGATION:

 

​

  

 

​

  

Accumulated benefit obligation

​

$

32,190

​

$

46,319

​

  
 YEAR ENDED DECEMBER 31,
   2017 2016
   (IN THOUSANDS)
ACCUMULATED BENEFIT OBLIGATION:
          
Accumulated benefit obligation $37,594  $35,153 

The weighted-average assumptions used to determine benefit obligations at December 31, 20172022 and 20162021 were as follows:

​

​

​

​

​

​

​

​

​

YEAR ENDED DECEMBER 31, 

 

​

    

2022

    

2021

 

WEIGHTED AVERAGE ASSUMPTIONS:

 

  

 

  

​

Discount rate

 

5.45

%  

2.80

%

Salary scale

​

​

​

​

​

Ages 30-34

​

5.00

​

2.50

​

Ages 35-44

​

4.00

​

2.50

​

Ages 45-54

​

3.00

​

2.50

​

Ages 55+

 

2.50

 

2.50

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

YEAR ENDED DECEMBER 31, 

​

    

2022

    

​

2021

    

2020

​

​

​

(IN THOUSANDS)

COMPONENTS OF NET PERIODIC BENEFIT COST:

​

​

  

 

​

​

  

 

​

  

Service cost

​

$

1,419

​

​

$

1,708

​

$

1,676

Interest cost

​

 

1,462

​

​

 

894

​

 

1,281

Expected return on plan assets

​

 

(4,193)

​

​

 

(4,008)

​

 

(3,241)

Amortization of net loss

​

 

1,330

​

​

 

2,421

​

 

2,453

Settlement charge

​

 

2,498

​

​

 

1,736

​

 

—

Net periodic pension cost

​

$

2,516

​

​

$

2,751

​

$

2,169

​

The service cost component of net periodic benefit cost is included in salaries and employee benefits and all other components of net periodic benefit cost are included in other expense on the Consolidated Statements of Operations.

​

The Company recognized a settlement charge in connection with its defined benefit pension plan of $2.5 million and $1.7 million in 2022 and 2021, respectively. A settlement charge must be recognized when the total dollar amount of lump sum distributions paid from the pension plan to retired employees exceeds a threshold of expected annual service and interest costs in the current year. The value of the lump sums continued to be elevated this year due to the lower interest rate levels late in 2021 when the lump sums were calculated. It is important to note that since the retired employees have chosen to take the lump sum payments, these individuals are no longer included in the pension plan. Therefore, we anticipate that the Company’s normal annual pension expense should be lower in the future. This was evident in 2022 as the basic amount of pension expense required to be recognized, excluding the impact of settlement charges, was $997,000, or 98.2%, lower for the full year of 2022 compared to basic pension expense for the full year of 2021.

​

Note that pension settlement charges are dependent upon the level of national interest rates from the previous year and the impact that interest rates have on lump sum distributions to those employees eligible to retire. Pension settlement charges are also dependent upon the choice of retiring employees to either take a lump sum distribution or receive future monthly annuity payments.

​

The accrued pension liability, which had a positive (debit) balance of $21.3 million and $19.5 million, was reclassified to other assets on the Consolidated Balance Sheets as of December 31, 2022 and 2021, respectively. The

  
 YEAR ENDED DECEMBER 31,
   2017 2016
WEIGHTED AVERAGE ASSUMPTIONS:
          
Discount rate  3.63%   4.12% 
Salary scale  2.50   2.50 

82


TABLE OF CONTENTSTable of Contents

AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

14.  EMPLOYEE BENEFIT PLANS  – (continued)

balance of the accrued pension liability remained a positive value as a result of the Company’s contributions to the plan during the year and the revaluation of the obligation due to the recognition of the settlement charge.

   
 YEAR ENDED DECEMBER 31,
   2017 2016 2015
   (IN THOUSANDS)
COMPONENTS OF NET PERIODIC BENEFIT COST:
               
Service cost $1,516  $1,468  $1,557 
Interest cost  1,292   1,430   1,341 
Expected return on plan assets  (2,539)   (2,275)   (2,130) 
Recognized net actuarial loss  1,454   1,333   1,386 
Net periodic pension cost $1,723  $1,956  $2,154 

​

​

​

​

​

​

​

​

​

​

​

​

​

YEAR ENDED DECEMBER 31, 

​

    

2022

    

2021

    

2020

   
 YEAR ENDED DECEMBER 31,
 2017 2016 2015
 (IN THOUSANDS)

​

​

(IN THOUSANDS)

OTHER CHANGES IN PLAN ASSETS AND BENEFIT OBLIGATIONS RECOGNIZED IN OTHER COMPREHENSIVE LOSS
               

 

​

​

 

​

  

 

​

  

Net (gain) loss $(822)  $6,505  $1,221 

Net loss (gain)

​

$

4,106

​

$

(7,153)

​

$

968

Recognized loss  (1,454)   (1,333)   (1,386) 

​

 

(3,828)

​

 

(4,157)

​

 

(2,453)

Total recognized in other comprehensive loss before tax effect $(2,276)  $5,172  $(165) 

​

$

278

​

$

(11,310)

​

$

(1,485)

Total recognized in net benefit cost and other comprehensive loss before tax effect $(553)  $7,128  $1,989 

​

$

2,794

​

$

(8,559)

​

$

684

The estimated net ​

For the year ended December 31, 2022, actuarial gains in the projected benefit obligation were primarily the result of the increase in discount rate. Other sources of gain/loss forsuch as plan experience, updated census data, and minor adjustments to actuarial assumptions, including updates to the defined benefit pension plan that will be amortized from accumulated other comprehensive loss into net periodic benefit cost over the nextretirement rates, form of payment election, salary scale, lump sum interest rates, and lump sum mortality tables, generated a combined gain of about 19% of expected year is $1,561,000.end obligations.

The weighted-average assumptions used to determine net periodic benefit cost for the years ended December 31, 2017, 20162022, 2021 and 20152020 were as follows:

��

   
 YEAR ENDED DECEMBER 31,
 2017 2016 2015

​

​

​

​

​

​

​

​

​

​

YEAR ENDED DECEMBER 31, 

 

​

    

2022

    

2021

    

2020

 

WEIGHTED AVERAGE ASSUMPTIONS:
               

 

  

 

  

 

  

​

Discount rate  4.12%   4.20%   4.00% 

 

2.81

%  

2.48

%  

3.20

%

Expected return on plan assets  7.75   7.75   8.00 

 

7.00

 

7.00

 

7.00

​

Rate of compensation increase  2.50   2.50   2.50 

 

2.50

 

2.50

 

2.50

​

​

The Company has assumed a 7.75%7.00% long-term expected return on plan assets. This assumption was based upon the plan’s historical investment performance over a longer-term period of 1520 years combined with the plan’s investment objective of balanced growth and income. Additionally, this assumption also incorporates a targeted range for equity securities of approximately 0% to 60% of plan assets.


TABLE OF CONTENTS

AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

14.  EMPLOYEE BENEFIT PLANS  – (continued)

PLAN ASSETS:

The plan’s measurement date is December 31, 2017.2022. This plan’s asset allocationsallocation at December 31, 20172022 and 2016,2021, by asset category are as follows:

​

​

​

​

​

​

​

​

​

YEAR ENDED DECEMBER 31, 

 

​

    

2022

    

2021

 

ASSET CATEGORY:

 

  

 

  

​

Cash and cash equivalents

 

89.9

%  

0.1

%

Domestic equities

 

7.1

 

12.1

​

Mutual funds/ETFs

 

—

 

84.1

​

International equities

 

—

 

0.3

​

Corporate bonds

 

3.0

 

3.4

​

Total

 

100.0

%  

100.0

%

​

  
 YEAR ENDED
DECEMBER 31,
   2017 2016
ASSET CATEGORY:
          
Cash and cash equivalents  —%   8% 
Domestic equities  12   10 
Mutual funds/ETFs  82   76 
International equities  4   1 
Corporate bonds  2   5 
Total  100%   100% 

83

Table of Contents

AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The major categories of assets in the Company’s Pension Planpension plan as of yearendyear-end are presented in the following table. Assets are segregated by the level of the valuation inputs within the fair value hierarchy established by ASC Topic 820 utilized to measure fair value.

​

​

​

​

​

​

​

​

​

​

YEAR ENDED DECEMBER 31, 

​

    

2022

    

2021

  
 YEAR ENDED
DECEMBER 31,
 2017 2016
 (IN THOUSANDS)

​

​

(IN THOUSANDS)

Level 1:
          

 

​

  

 

​

  

Cash and cash equivalents $44  $2,454 

​

$

50,553

​

$

56

Domestic equities  4,340   3,067 

​

 

4,026

​

​

8,488

Mutual funds/ETFs  30,470   23,310 

​

 

—

​

​

59,306

International equities  1,322   307 

​

 

—

​

​

199

Level 2:
          

​

 

​

​

​

​

Corporate bonds  924   1,533 

​

 

1,678

​

​

2,383

Total fair value of plan assets $37,100  $30,671 

​

$

56,257

​

$

70,432

​

Cash and cash equivalents may include uninvested cash balances along with money market mutual funds, treasury bills, or other assets normally categorized as cash equivalents. Domestic equities may include common or preferred stocks, covered options, rights or warrants, or American Depository Receipts which are traded on any U.S. equity market. Mutual funds/ETFs may include any equity, fixed income, balanced, international, or global mutual fund or exchange traded fund including any propriety fund managed by the Trust Company. Agencies may include any U.S. government agency security or asset-backed security. Collective investment funds may include equity, fixed income, or balanced collective investment funds managed by the Trust Company.West Chester Capital Advisors. Corporate bonds may include any corporate bond or note.

The investment strategy objective for the pension plan is a balance of growth and income. This objective seeks to develop a portfolio for acceptable levels of current income together with the opportunity for capital appreciation. The balanced growth and income objective reflects a relativelyan equal balance between equity and fixed income investments such as debt securities. The allocation between equity and fixed income assets may vary by a moderate degree butduring normal market cycles. The pension plan’s allocation to equities is 0% to 60% while the plan typically targets aallocation to fixed income can fall within the range of equity investments between 50% and 60%0% to 100% of the plan assets. This means that fixed income andIn addition, cash investments typically approximate 40%equivalents can range from 0% to 50%100% of the plan assets. The plan is also able to invest in ASRV common stock up to a maximum level of 10% of the


TABLE OF CONTENTS

AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

14.  EMPLOYEE BENEFIT PLANS  – (continued)

market value of the plan assets (at December 31, 2017, 3.4%2022, 3.3% of the plan assets were invested in ASRV common stock). This asset mix is intended to ensure that there is a steady stream of cash from maturing investments to fund benefit payments. The plan’s investment manager temporarily shifted the majority of plan assets to cash in 2022 to protect the plan’s assets due to declines in both equities and bonds as a result of the higher interest rate environment.

CASH FLOWS:

The Company presently expects that the contribution to be made to the Planplan in 20182023 will be approximately $3.5approximate $2.0 million. Funding requirements for subsequent years are uncertain and will significantly depend on whether the plan’s actuary changes any assumptions used to calculate plan funding levels, the actual return on plan assets, changes in the employee groups covered by the plan, and any legislative or regulatory changes affecting plan funding requirements. For tax planning, financial planning, cash flow management or cost reduction purposes the Company may increase, accelerate, decrease or delay contributions to the plan to the extent permitted by law.

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AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ESTIMATED FUTURE BENEFIT PAYMENTS:

The following benefit payments, which reflect future service, as appropriate, are expected to be paid.

​

 
YEAR: ESTIMATED FUTURE
BENEFIT PAYMENTS
   (IN THOUSANDS)
2018 $2,698 
2019  2,692 
2020  2,817 
2021  2,832 
2022  3,116 
Years 2023 – 2027  14,988 

​

​

​

​

​

    

ESTIMATED FUTURE

YEAR:

​

BENEFIT PAYMENTS

​

​

(IN THOUSANDS)

2023

​

$

3,422

2024

​

 

4,177

2025

​

 

3,934

2026

​

 

4,059

2027

​

 

3,534

Years 2028-2032

​

 

12,780

​

401(k) PLAN:

The Company maintains a qualified 401(k) plan that allows for participation by Company employees. Under the plan, employees may elect to make voluntary pretax contributions to their accounts which the Company will match one half on the first 2% of contribution up to a maximum of 1%. The Company also contributes 4% of salaries for union members who are in the plan. These contribution percentages apply to employees who are eligible to participate in our defined benefit pension plan.

Effective January 1, 2013, any new non-union employees receive a 4% non-elective contribution and these employees may elect to make voluntary pretax contributions to their accounts which the Company will match one half on the first 6% of contribution up to a maximum of 3%. Effective January 1, 2014, any new union employees receive a 4% non-elective contribution and these employees may elect to make voluntary pretax contributions to their accounts which the Company will match dollar for dollar up to a maximum of 4%. Contributions by the Company charged to operations were $469,000, $447,000$808,000, $704,000 and $433,000$653,000 for the years ended December 31, 2017, 20162022, 2021 and 2015,2020, respectively. The fair value of plan assets includes $1.1 million$425,000 pertaining to the value of the Company’s common stock and Trust Preferred securities that arewas held by the plan at December 31, 2017.2022.

DEFERRED COMPENSATION PLAN:

The Company maintains a nonqualified deferred compensation plan in which a select group of executives are permitted to participate. An eligible executive can defer a certain percentage of their current salary to be placed into the plan. The Company has established a rabbi trust to provide funding for the benefits payable under our deferred compensation plan. As of December 31, 2022 and 2021, the Company reported a deferred compensation liability of $502,000 and $526,000, respectively, within other liabilities on the Consolidated Balance Sheets. For the year ended December 31, 2022, the Company recognized deferred compensation plan income of $15,000 compared to $44,000 and $7,000 of deferred compensation plan expense for the years ended December 31, 2021 and 2020, respectively. The deferred compensation plan income/expense is reported within other expense on the Consolidated Statements of Operations. See Note 5 (Investment Securities) for additional disclosures related to the nonqualified deferred compensation plan and assets held within the rabbi trust.

Except for the above described benefit plans, the Company has no significant additional exposure for any other post-retirement or post-employment benefits.

15.  LEASE COMMITMENTS

The Company’s obligation for future minimum lease payments on operating leases at December 31, 2017, is as follows:​

85

 
YEAR: FUTURE MINIMUM LEASE PAYMENTS
   (IN THOUSANDS)
2018 $445 
2019  277 
2020  254 
2021  254 
2022  256 
2023 and thereafter  1,558 

TABLE OF CONTENTSTable of Contents

AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

15.  LEASE COMMITMENTS  – (continued)

In addition to the amounts set forth above, certain of the leases require payments by the Company for taxes, insurance, and maintenance. Rent expense included in total non-interest expense amounted to $571,000, $767,000 and $821,000, in 2017, 2016, and 2015, respectively.

16.18. COMMITMENTS AND CONTINGENT LIABILITIES

The Company incurs off-balance sheet risks in the normal course of business in order to meet the financing needs of its customers. These risks derive from commitments to extend credit and standby letters of credit. Such commitments and standby letters of credit involve, to varying degrees, elements of credit risk in excess of the amount recognized in the consolidated financial statements. Commitments to extend credit are obligations to lend to a customer as long as there is no violation of any condition established in the loan agreement. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Because many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer’s creditworthiness on a case-by-case basis. Collateral which secures these types of commitments is the same as for other types of secured lending such as accounts receivable, inventory, fixed assets, and fixed assets.real estate.

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements, including normal business activities, bond financings, and similar transactions. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers. Letters of credit are issued both on an unsecured and secured basis. Collateral securing these types of transactions is similar to collateral securing the Company’s commercial loans.

The Company’s exposure to credit loss in the event of nonperformance by the other party to these commitments to extend credit and standby letters of credit is represented by their contractual amounts. The Company uses the same credit and collateral policies in making commitments and conditional obligations as for all other lending. At December 31, 2017,2022, the Company had various outstanding commitments to extend credit approximating $165.1$227.6 million and standby letters of credit of $10.0$9.0 million, compared to commitments to extend credit of $160.5$216.6 million and standby letters of credit of $8.5$13.1 million at December 31, 2016. 2021.

Standby letters of credit had terms ranging from 1one to 2five years with annual extension options available. Standby letters of credit of approximately $5.1$5.6 million and $8.5 million were secured as of December 31, 20172022 and approximately $3.9 million at December 31, 2016.2021, respectively. The carrying amount of the liability for AmeriServ obligations related to unfunded commitments and standby letters of credit was $915,000$746,000 at December 31, 20172022 and $890,000$989,000 at December 31, 2016.2021.

Pursuant to its bylaws, the Company provides indemnification to its directors and officers against certain liabilities incurred as a result of their service on behalf of the Company. In connection with this indemnification obligation, the Company can advance on behalf of covered individuals costs incurred in defending against certain claims. Additionally, the Company is also subject to a number of asserted and unasserted potential claims encountered in the normal course of business. In the opinion of the Company, neither the resolution of these claims nor the funding of these credit commitments will have a material adverse effect on the Company’s consolidated financial position, results of operationoperations or cash flows.

17.  PREFERRED STOCK

SBLF:​

On August 11, 2011, pursuant to the Small Business Lending Fund (SBLF), the Company issued and sold to the US Treasury 21,000 shares of its Senior Non-Cumulative Perpetual Preferred Stock, Series E (Series E Preferred Stock) for the aggregate proceeds of $21 million. The SBLF was a voluntary program sponsored by the US Treasury that encouraged small business lending by providing capital to qualified community banks at


TABLE OF CONTENTS

AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

17.  PREFERRED STOCK  – (continued)

favorable rates. The Company used the proceeds from the Series E Preferred Stock issued to the US Treasury to repurchase all 21,000 shares of its outstanding preferred shares previously issued to the US Treasury under the Capital Purchase Program.

On January 27, 2016, we redeemed the Series E Preferred Stock, at a redemption price of 100% of the liquidation amount plus accrued but unpaid dividends, after receiving approval of our federal banking regulator and the US Treasury.

18.19. STOCK COMPENSATION PLANS

The Company uses the modified prospective method for accounting for stock-based compensation and recognized $13,000$50,000 of pretax compensation expense for the year 2017, $20,0002022, $43,000 in 20162021 and $29,000$3,000 in 2015.2020.

During 2011,2021, the Company’s Board adopted, and its shareholders approved, the AmeriServ Financial, Inc. 2011 Stock2021 Equity Incentive Plan (the Plan) authorizing the grant of options or restricted stock covering 800,000600,000 shares of common stock. This Plan replaced the expired 20012011 Stock OptionIncentive Plan. Under the Plan, options or restricted stock can be granted (the Grant Date) to directors, officers, and employees that provide services to the Company and its affiliates, as selected by the compensation committee of the Board. The option price at which a granted stock option may be exercised waswill not be less than 100% of the fair market value per share of common stock on the Grant Date. The maximum term of any option granted under the Plan cannot exceed 10 years. Generally, options vest over a three yearthree-year period and become exercisable in equal installments over the vesting period. At times, options with a one year vesting period may also be issued.

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AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A summary of the status of the Company’s StockEquity Incentive Plan at December 31, 2017, 2016,2022, 2021, and 2015,2020, and changes during the years then ended is presented in the table and narrative following:

​

      
 YEAR ENDED DECEMBER 31
   2017 2016 2015
   SHARES WEIGHTED AVERAGE EXERCISE PRICE SHARES WEIGHTED AVERAGE EXERCISE PRICE SHARES WEIGHTED AVERAGE EXERCISE PRICE
Outstanding at beginning of year  417,566  $2.76   470,449  $2.74   559,909  $2.66 
Granted  17,500   3.96   54,000   3.03   32,500   2.96 
Exercised  (64,112)   2.49   (32,661)   2.27   (75,923)   2.07 
Forfeited  (10,233)   3.10   (74,222)   3.04   (46,037)   3.04 
Outstanding at end of year  360,721   2.85   417,566   2.76   470,449   2.74 
Exercisable at end of year  308,301   2.79   328,062   2.69   336,555   2.58 
Weighted average fair value of options granted in current year      $1.12       $0.93       $0.67 

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

YEAR ENDED DECEMBER 31, 

​

​

2022

​

2021

​

2020

​

    

​

    

WEIGHTED

    

​

    

WEIGHTED

    

​

    

WEIGHTED

​

​

​

​

AVERAGE

​

​

​

AVERAGE

​

​

​

AVERAGE

​

​

SHARES

​

EXERCISE PRICE

​

SHARES

​

EXERCISE PRICE

​

SHARES

​

EXERCISE PRICE

Outstanding at beginning of year

​

369,047

​

$

3.47

​

230,913

​

$

3.14

​

296,648

​

$

3.02

Granted

 

—

​

​

—

​

160,000

​

​

3.84

 

—

​

​

—

Exercised

 

(36,117)

​

​

2.96

​

(21,356)

​

​

2.68

 

(38,235)

​

​

2.06

Forfeited

 

(9,144)

​

​

3.62

​

(510)

​

​

3.23

 

(27,500)

​

​

3.30

Outstanding at end of year

 

323,786

​

​

3.52

​

369,047

​

​

3.47

 

230,913

​

​

3.14

Exercisable at end of year

 

223,784

​

​

3.38

​

206,713

​

​

3.18

 

224,580

​

​

3.11

Weighted average fair value of options granted in current year

 

  

​

$

—

​

  

​

$

1.78

 

  

​

$

—

TABLE OF CONTENTS​

AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

18.  STOCK COMPENSATION PLANS  – (continued)

A total of 308,301223,784 of the 360,721323,786 options outstanding at December 31, 2017,2022, are exercisable and have exercise prices between $1.53$2.96 and $4.00,$4.22, with a weighted average exercise price of $2.85$3.38 and a weighted average remaining contractual life of 5.033.51 years. The remaining 52,420100,002 options that are not yet exercisable have exercise prices between $2.96$3.83 and $4.00,$3.84, with a weighted average exercise price of $3.22$3.84 and a weighted average remaining contractual life of 7.908.13 years. The fair value of each option grant is estimated on the date of grant using the Binomial or Black-Scholes option pricing model with the following assumptions used for grants in 2017, 2016,2021. No stock options were granted during 2022 and 2015.2020.

​

​

​

​

​

​

​

YEAR ENDED DECEMBER 31, 

​

PRICING MODEL ASSUMPTION RANGES

2021

Risk-free interest rate

1.27 - 1.42

%  

Expected lives in years

10

Expected volatility

40.38 - 45.03

%  

Expected dividend rate

2.60 - 2.61

%  

​

The intrinsic value of stock options exercised was $47,000, $27,000, and $56,000 in 2022, 2021, and 2020, respectively.

​

   
 YEAR ENDED DECEMBER 31
BLACK-SCHOLES ASSUMPTION RANGES
 2017 2016 2015
Risk-free interest rate  2.23 – 2.38%   1.56 – 1.73%   1.97% 
Expected lives in years  10   10   10 
Expected volatility  28.09 – 28.84%   29%   22% 
Expected dividend rate  1.50%   1.35-1.81%   1.35% 

87

19.

Table of Contents

AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

20. ACCUMULATED OTHER COMPREHENSIVE LOSS

The following table presents the changes in each component of accumulated other comprehensive loss, net of tax, for the periods ending December 31, 20172022, 2021, and 20162020 (in thousands):

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

YEAR ENDING DECEMBER 31, 2022

​

YEAR ENDED DECEMBER 31, 2021

​

YEAR ENDING DECEMBER 31, 2020

​

    

Net

    

​

​

    

​

​

    

Net

    

​

​

    

​

​

    

Net

    

​

​

    

​

​

​

​

Unrealized

​

​

​

​

​

​

​

Unrealized

​

​

​

​

​

​

​

Unrealized

​

​

​

​

​

​

​

​

Gains and

​

​

​

​

​

​

​

Gains and

​

​

​

​

​

​

​

Gains and

​

​

​

​

​

​

​

​

Losses on

​

Defined

​

​

​

​

Losses on

​

Defined

​

​

​

​

Losses on

​

Defined

​

​

​

​

​

Investment

​

Benefit

​

​

​

​

Investment

​

Benefit

​

​

​

​

Investment

​

Benefit

​

​

​

​

​

Securities 

​

Pension

​

​

​

​

Securities

​

Pension

​

​

​

​

Securities

​

Pension

​

​

​

​

​

AFS(1)

​

Items(1)

​

Total(1)

​

AFS(1)

​

Items(1)

​

Total(1)

​

AFS(1)

​

Items(1)

​

Total(1)

Beginning balance

​

$

1,386

​

$

(7,898)

​

$

(6,512)

​

$

3,539

​

$

(16,737)

​

$

(13,198)

​

$

1,715

​

$

(17,886)

​

$

(16,171)

Other comprehensive income (loss) before reclassifications

​

 

(16,324)

​

 

(2,708)

​

 

(19,032)

​

 

(2,087)

​

 

5,555

​

 

3,468

​

 

1,824

​

 

(789)

​

 

1,035

Amounts reclassified from accumulated other comprehensive loss

​

 

—

​

 

3,024

​

 

3,024

​

 

(66)

​

 

3,284

​

 

3,218

​

 

—

​

 

1,938

​

 

1,938

Net current period other comprehensive income (loss)

​

 

(16,324)

​

 

316

​

 

(16,008)

​

 

(2,153)

​

 

8,839

​

 

6,686

​

 

1,824

​

 

1,149

​

 

2,973

Ending balance

​

$

(14,938)

​

$

(7,582)

​

$

(22,520)

​

$

1,386

​

$

(7,898)

​

$

(6,512)

​

$

3,539

​

$

(16,737)

​

$

(13,198)

      
 YEAR ENDING DECEMBER 31, 2017 YEAR ENDING DECEMBER 31, 2016
   Net
Unrealized
Gains and
Losses on
Investment
Securities
AFS(1)		 Defined
Benefit
Pension
Items(1)		 Total(1) Net
Unrealized
Gains and
Losses on
Investment
Securities
AFS(1)		 Defined
Benefit
Pension
Items(1)		 Total(1)
Beginning balance $(171)  $(11,406)  $(11,577)  $808  $(8,363)  $(7,555) 
Reclassification of certain income tax effects from accumulated other comprehensive loss  (53)   (2,078)   (2,131)   —   —   — 
Other comprehensive income (loss) before reclassifications  (27)   1,071   1,044   (862)   (3,563)   (4,425) 
Amounts reclassified from accumulated other comprehensive loss  (76)   (210)   (286)   (117)   520   403 
Net current period other comprehensive loss  (156)   (1,217)   (1,373)   (979)   (3,043)   (4,022) 
Ending balance $(327)  $(12,623)  $(12,950)  $(171)  $(11,406)  $(11,577) 

(1)Amounts in parentheses indicate debits on the Consolidated Balance Sheets.

TABLE OF CONTENTS

AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

19.  ACCUMULATED OTHER COMPREHENSIVE LOSS  – (continued)

The following table presents the amounts reclassified out of each component of accumulated other comprehensive loss for the periods ending December 31, 20172022, 2021, and 20162020 (in thousands):

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Amount reclassified from accumulated

​

​

​

​

other comprehensive loss(1)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Details about accumulated other

​

YEAR ENDING

​

YEAR ENDING

​

YEAR ENDING

​

Affected line item in the

comprehensive loss components

    

DECEMBER��31, 2022

    

DECEMBER 31, 2021

    

DECEMBER 31, 2020

    

statement of operations

Realized gains on sale of securities

​

​

​

​

​

​

​

​

​

​

​

​

​

$

—

​

$

(84)

​

$

—

​

Net realized gains on investment securities

​

​

​

—

​

​

18

​

​

—

​

Provision for income taxes

​

​

$

—

​

$

(66)

​

$

—

 

​

Amortization of estimated defined benefit pension plan loss(2)

​

​

​

​

​

​

​

​

​

​

​

​

​

$

3,828

​

$

4,157

​

$

2,453

 

Other expense

​

​

 

(804)

​

 

(873)

​

 

(515)

 

Provision for income taxes

​

​

$

3,024

​

$

3,284

​

$

1,938

 

​

Total reclassifications for the period

​

$

3,024

​

$

3,218

​

$

1,938

 

​

   
 Amount reclassified from accumulated other comprehensive loss(1)
Details about accumulated other comprehensive loss components YEAR ENDING
DECEMBER 31,
2017		 YEAR ENDING
DECEMBER 31,
2016		 Affected line item in the
statement of operations
Unrealized gains and losses on sale of securities $(115)  $(177)   Net realized gains on investment securities 
    39   60   Provision for income taxes 
   $(76)  $(117)   Net of tax 
Amortization of defined benefit items(2) Recognized net actuarial loss $(318)  $788   Salaries and employee benefits 
    108   (268)   Provision for income taxes 
   $(210)  $520   Net of tax 
Total reclassifications for the period $(286)  $403   Net income 

(1)Amounts in parentheses indicate credits.
(2)These accumulated other comprehensive loss components are included in the computation of net periodic benefit cost (see Note 1417 for additional details).

20.

​

88

Table of Contents

AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

21. INTANGIBLE ASSETS

The Company’s Consolidated Balance Sheets show both tangible assets (such as loans, buildings, and investments) and intangible assets (such as goodwill)goodwill and core deposit intangible). Goodwill has an indefinite life and is not amortized. Instead such intangible is evaluated for impairment at the reporting unit level at least annually.annually, or more frequently if indicators of impairment are present. Any resulting impairment would be reflected as a non-interest expense. Based on this analysis, no impairment was recorded in 2022 or 2021. Of the Company’s goodwill of $11.9$13.6 million, $9.5$11.2 million is allocated to the retailcommunity banking segment and $2.4 million relates to the WCCA acquisition which is included in the trustwealth management segment. The balance of the Company’s goodwill at December 31, 20172022 and 20162021 was $11.9$13.6 million. During 2021, the Company recorded $1.7 million of goodwill as a result of the Riverview Bank branch acquisition.

​

​

​

​

​

​

​

​

​

YEAR ENDED DECEMBER 31, 

​

​

2022

​

2021

    

​

(IN THOUSANDS)

​

GOODWILL

​

​

​

​

​

​

Balance at beginning of year

$

13,611

​

$

11,944

​

Goodwill acquired

 

—

​

​

1,667

​

Balance at end of year

$

13,611

​

$

13,611

​

​

Other identifiable intangible assets, such as core deposit intangible, are assigned useful lives, which are amortized on an accelerated basis over their useful lives. Such lives are also periodically reassessed to determine if any amortization period adjustments are required. During the years ended December 31, 2022 and 2021, no such adjustments were recorded. During 2021, the Company recorded a core deposit intangible of $177,000 as a result of the Riverview Bank branch acquisition. As of December 31, 2022 and 2021, accumulated amortization on the core deposit intangible totaled $49,000 and $19,000, respectively.

21.

​

​

​

​

​

​

​

​

​

YEAR ENDED DECEMBER 31, 

​

​

2022

​

2021

    

​

(IN THOUSANDS)

​

CORE DEPOSIT INTANGIBLE

​

​

​

​

​

​

Balance at beginning of year

$

158

​

$

—

​

Core deposit intangible acquired

​

—

​

​

177

​

Amortization

 

(30)

​

​

(19)

​

Balance at end of year

$

128

​

$

158

​

​

As of December 31, 2022, the estimated future amortization expense for the core deposit intangible associated with the Riverview branch acquisition is as follows (in thousands):

​

​

​

​

2023

$

27

2024

​

24

2025

 

21

2026

 

17

2027

 

14

After five years

​

25

​

$

128

​

​

22. DERIVATIVE HEDGING INSTRUMENTS

The Company can use various interest rate contracts, such as interest rate swaps, caps, floors and swaptions to help manage interest rate and market valuation risk exposure, which is incurred in normal recurrent banking activities. The

89

Table of Contents

AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Company can use derivative instruments, primarily interest rate swaps, to manage interest rate risk and match the rates on certain assets by hedging the fair value of certain fixed rate debt, which converts the debt to variable rates and by hedging the cash flow variability associated with certain variable rate debt by converting the debt to fixed rates.

Interest Rate Swap Agreements

To accommodate the needs of our customers and support the Company’s asset/liability positioning, we enteredmay enter into interest rate swap agreements with customers and a large financial institution that specializes in these types of transactions in 2017.transactions. These arrangements involve the exchange of interest payments based on the notional amounts. The Company entered into floating rate loans and fixed rate swaps with our customers. Simultaneously, the Company entered into an offsetting fixed rate swaps with PNC.this large financial institution. In connection with each swap transaction, the Company agrees to pay interest to the customer on a notional amount at a variable interest rate and receive interest from the customer on the same notional amount at a fixed interest rate. At the same time, the Company agrees to pay PNCthe large financial institution the same fixed interest rate on the same notional amount and receive the same variable interest rate on the same notional amount. These transactions allow the Company’s customers to effectively convert a variable rate loan to a fixed rate. Because the Company acts as an


TABLE OF CONTENTS

AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

21.  DERIVATIVE HEDGING INSTRUMENTS  – (continued)

intermediary for its customers, changes in the fair value of the underlying derivative contracts offset each other and do not significantly impact the Company’s results of operations. TheFor the years ended December 31, 2022 and 2021, the Company received $139,000$8,000 and $191,000, respectively, in fees on the transactions.interest rate swap transactions, which are recognized as revenue when received.

These swaps are considered free-standing derivatives and are reported at fair value within other assets and other liabilities on the Consolidated Balance Sheets. Disclosures related to the fair value of the swap transactions can be found in Note 14.

The following table summarizes the interest rate swap transactions that impacted the Company’s 2017 performance.2022 and 2021 performance (in thousands, except percentages).

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

DECEMBER 31, 2022

​

​

​

​

​

​

​

​

​

​

​

INCREASE

​

​

​

​

AGGREGATE

​

WEIGHTED

​

​

​

(DECREASE)

​

​

​

​

NOTIONAL

​

AVERAGE RATE

​

REPRICING

​

IN INTEREST

​

​

HEDGE TYPE

​

AMOUNT

​

RECEIVED/(PAID)

​

FREQUENCY

​

EXPENSE

Swap assets

    

N/A

    

$

65,431

    

4.23

%  

Monthly

    

$

21

Swap liabilities

 

N/A

​

 

(65,431)

 

(4.23)

 

Monthly

​

 

(21)

Net exposure

 

​

​

 

—

 

—

 

  

​

 

—

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

DECEMBER 31, 2021

​

​

​

​

​

​

​

​

​

​

​

INCREASE

​

​

​

​

AGGREGATE

​

WEIGHTED

​

​

​

(DECREASE)

​

​

​

​

NOTIONAL

​

AVERAGE RATE

​

REPRICING

​

IN INTEREST

​

​

HEDGE TYPE

​

AMOUNT

​

RECEIVED/(PAID)

​

FREQUENCY

​

EXPENSE

Swap assets

    

N/A

    

$

67,280

    

2.59

%  

Monthly

    

$

(857)

Swap liabilities

 

N/A

​

 

(67,280)

 

(2.59)

 

Monthly

​

 

857

Net exposure

 

​

​

 

—

 

—

 

  

​

 

—

​

Risk Participation Agreement

​

The Company entered into a risk participation agreement (RPA) with the lead bank of a commercial real estate loan arrangement. As a participating bank, the Company guarantees the performance on a borrower-related interest rate swap contract. The Company has no obligations under the RPA unless the borrower defaults on their swap transaction with the lead bank and the swap is a liability to the borrower. In that instance, the Company has agreed to pay the lead bank a pre-determined percentage of the swap’s value at the time of default. In exchange for providing the guarantee, the Company received an upfront fee from the lead bank.

​

     
 HEDGE
TYPE		 AGGREGATE
NOTIONAL
AMOUNT		 WEIGHTED
AVERAGE
RATE
RECEIVED/
(PAID)		 REPRICING
FREQUENCY		 INCREASE
(DECREASE)
IN INTEREST
EXPENSE
SWAP ASSETS  FAIR VALUE  $16,948,686   3.47%   MONTHLY  $(110,778) 
SWAPLIABILITIES  FAIR VALUE   (16,948,686)   (3.47)   MONTHLY   110,778 
NET EXPOSURE     —   —      — 

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AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

RPAs are derivative financial instruments and are recorded at fair value. These derivatives are not designated as hedges and therefore, changes in fair value are recognized in earnings with a corresponding offset within other liabilities. Disclosures related to the fair value of the RPA can be found in Note 14. The notional amount of the risk participation agreement outstanding at December 31, 2022 and 2021 was $2.1 million and $2.5 million, respectively.

​

The Company monitors and controls all derivative products with a comprehensive Board of DirectorDirectors approved hedging policy.Hedging Policy. This policy permits a total maximum notional amount outstanding of $500 million for interest rate swaps, interest rate caps/floors, and swaptions. All hedge transactions must be approved in advance by the Investment Asset/Liability Committee (ALCO) of the Board of Directors.Directors, unless otherwise approved, as per the terms, within the Board of Directors approved Hedging Policy. The Company had no caps or floors outstanding at December 31, 2017.2022 and 2021. None of the Company’s derivatives are designated as hedging instruments.

22.

​

23. SEGMENT RESULTS

The financial performance of the Company is also monitored by an internal funds transfer pricing profitability measurement system which produces line of business results and key performance measures. The Company’s major business units include retailcommunity banking, commercial banking, trust,wealth management, and investment/parent. The reported results reflect the underlying economics of the business segments. Expenses for centrally provided services are allocated based upon the cost and estimated usage of those services. The businesses are match-funded and interest rate risk is centrally managed and accounted for within the investment/parent business segment. The key performance measure the Company focuses on for each business segment is net income contribution.

The community banking segment includes both retail and commercial banking activities. Retail banking includes the deposit-gathering branch franchise and lending to both individuals and small businesses. Lending activities include residential mortgage loans, direct consumer loans, and small business commercial loans. Commercial banking to businesses includes commercial loans, business services, and CRE loans. The trust segment contains our wealth management businesses which includesegment includes the Trust Company, WCCA,West Chester Capital Advisors (WCCA), our registered investment advisory firm, and financial services.Financial Services. Wealth management includesactivities include personal trust products and services such as personal portfolio investment management, estate planning and administration, custodial services and pre-need trusts. Also, institutional trust products and services such as 401(k) plans, defined benefit and defined contribution employee benefit plans, and individual retirement accounts are included in this segment. Financial servicesServices include the sale of mutual funds, annuities, and insurance products. The wealth management businesses also includesinclude the BUILD funds which are union collective investment funds (ERECT funds) which are designed to use union pension dollars in construction projects that utilize union labor. The investment/parent includes the net results of investment securities and borrowing activities, general corporate expenses not allocated to the business segments, interest expense on guaranteed junior subordinated deferrable interest debentures,corporate debt, and centralized interest rate risk management. Inter-segment revenues were not material.


TABLE OF CONTENTS

AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

22.  SEGMENT RESULTS  – (continued)

The contribution of the major business segments to the Consolidated ResultsStatements of Operations were as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

YEAR ENDED DECEMBER 31, 2022

​

​

COMMUNITY

​

WEALTH

​

INVESTMENT/

​

​

​

​

​

BANKING

​

MANAGEMENT

​

PARENT

​

TOTAL

​

​

(IN THOUSANDS)

Net interest income (expense)

    

$

46,135

    

$

65

    

$

(5,637)

    

$

40,563

Provision for loan loss

​

 

50

​

 

—

​

 

—

​

 

50

Non-interest income (loss)

​

 

5,174

​

 

11,620

​

 

(102)

​

 

16,692

Non-interest expense

​

 

36,216

​

 

8,834

​

 

2,954

​

 

48,004

Income (loss) before income taxes

​

 

15,043

​

 

2,851

​

 

(8,693)

​

 

9,201

Income tax expense (benefit)

​

 

2,638

​

 

688

​

 

(1,573)

​

 

1,753

Net income (loss)

​

$

12,405

​

$

2,163

​

$

(7,120)

​

$

7,448

Total assets

​

$

1,114,923

​

$

10,867

​

$

238,084

​

$

1,363,874

​

     
 YEAR ENDED DECEMBER 31, 2017
   RETAIL BANKING COMMERCIAL BANKING TRUST INVESTMENT/
PARENT		 TOTAL
   (IN THOUSANDS)
Net interest income $20,541  $18,642  $61  $(3,683)  $35,561 
Provision for loan loss  122   678   —   —   800 
Non-interest income  4,956   414   9,170   105   14,645 
Non-interest expense  21,247   9,892   7,094   2,533   40,766 
Income (loss) before income taxes  4,128   8,486   2,137   (6,111)   8,640 
Income tax expense  1,381   2,642   772   552   5,347 
Net income (loss) $2,747  $5,844  $1,365  $(6,663)  $3,293 
Total assets $353,924  $643,055  $5,413  $165,263  $1,167,655 

91

     
 YEAR ENDED DECEMBER 31, 2016
   RETAIL BANKING COMMERCIAL BANKING TRUST INVESTMENT/
PARENT		 TOTAL
   (IN THOUSANDS)
Net interest income $20,860  $18,518  $56  $(5,300)  $34,134 
Provision for loan loss  175   3,775   —   —   3,950 
Non-interest income  5,281   439   8,749   169   14,638 
Non-interest expense  21,704   10,453   7,097   2,361   41,615 
Income (loss) before income taxes  4,262   4,729   1,708   (7,492)   3,207 
Income tax expense (benefit)  1,252   1,387   581   (2,323)   897 
Net income (loss) $3,010  $3,342  $1,127  $(5,169)  $2,310 
Total assets $357,500  $635,843  $5,217  $155,220  $1,153,780 

     
 YEAR ENDED DECEMBER 31, 2015
   RETAIL BANKING COMMERCIAL BANKING TRUST INVESTMENT/
PARENT		 TOTAL
   (IN THOUSANDS)
Net interest income $20,680  $18,390  $58  $(3,767)  $35,361 
Credit provision for loan loss  192   1,058   —   —   1,250 
Non-interest income  5,537   552   8,683   495   15,267 
Non-interest expense  21,849   10,303   6,606   2,280   41,038 
Income (loss) before income taxes  4,176   7,581   2,135   (5,552)   8,340 
Income tax expense (benefit)  1,160   2,167   726   (1,710)   2,343 
Net income (loss) $3,016  $5,414  $1,409  $(3,842)  $5,997 
Total assets $415,008  $589,840  $5,263  $138,386  $1,148,497 

TABLE OF CONTENTSTable of Contents

AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

23.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

YEAR ENDED DECEMBER 31, 2021

​

​

COMMUNITY

​

WEALTH

​

INVESTMENT/

​

​

​

​

​

BANKING

​

MANAGEMENT

​

PARENT

​

TOTAL

​

​

(IN THOUSANDS)

Net interest income (expense)

    

$

45,934

    

$

72

    

$

(6,923)

    

$

39,083

Provision for loan loss

​

 

1,100

​

 

—

​

 

—

​

 

1,100

Non-interest income

​

 

5,649

​

 

11,986

​

 

126

​

 

17,761

Non-interest expense

​

 

35,636

​

 

8,349

​

 

2,985

​

 

46,970

Income (loss) before income taxes

​

 

14,847

​

 

3,709

​

 

(9,782)

​

 

8,774

Income tax expense (benefit)

​

 

2,797

​

 

841

​

 

(1,936)

​

 

1,702

Net income (loss)

​

$

12,050

​

$

2,868

​

$

(7,846)

​

$

7,072

Total assets

​

$

1,111,856

​

$

10,822

​

$

212,882

​

$

1,335,560

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

YEAR ENDED DECEMBER 31, 2020

​

​

COMMUNITY

​

WEALTH

​

INVESTMENT/

​

​

​

​

​

BANKING

​

MANAGEMENT

​

PARENT

​

TOTAL

​

​

(IN THOUSANDS)

Net interest income (expense)

    

$

42,862

    

$

55

    

$

(6,550)

    

$

36,367

Provision for loan loss

​

 

2,375

​

 

—

​

 

—

​

 

2,375

Non-interest income

​

 

6,022

​

 

10,212

​

 

41

​

 

16,275

Non-interest expense

​

 

34,136

​

 

7,683

​

 

2,636

​

 

44,455

Income (loss) before income taxes

​

 

12,373

​

 

2,584

​

 

(9,145)

​

 

5,812

Income tax expense (benefit)

​

 

2,303

​

 

598

​

 

(1,687)

​

 

1,214

Net income (loss)

​

$

10,070

​

$

1,986

​

$

(7,458)

​

$

4,598

Total assets

​

$

1,086,653

​

$

10,471

​

$

185,609

​

$

1,282,733

​

​

24.  REGULATORY CAPITAL

The Company is subject to various capital requirements administered by the federal banking agencies. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company must meet specific capital guidelines that involve quantitative measures of the Company’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Company’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements. For a more detailed discussion see the Capital Resources section of Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A).

Quantitative measures established by regulation to ensure capital adequacy require the Company to maintain minimum amounts and ratios (set forth in the table below) of total, common equity tier 1, and Tier Itier 1 capital to risk-weighted assets (as defined) and of Tier Itier 1 capital to average assets. Additionally, under Basel III rules, the decision was made to opt-out of including accumulated other comprehensive income in regulatory capital. As of December 31, 20172022 and 2016, the Federal Reserve categorized2021 , the Company was categorized as Well Capitalized“well capitalized” under the regulatory framework for prompt corrective action.action promulgated by the Federal Reserve. The Company believes that no conditions or events have occurred that would change this conclusion.conclusion as of such date. To be categorized as well capitalized, the Company must maintain minimum total risk-based,capital, common equity Tier I risk-based, Tier I risk-based,tier 1 capital, tier 1 capital, and Tier Itier 1 leverage ratios as set forth in the table. Additionally, while not a regulatory capital ratio, the Company’s tangible common equity ratio was 7.20% and 7.31% for 2017 and 2016, respectively.

​

      
 AT DECEMBER 31, 2017
   COMPANY BANK MINIMUM REQUIRED FOR CAPITAL ADEQUACY PURPOSES TO BE WELL CAPITALIZED UNDER PROMPT CORRECTIVE ACTION REGULATIONS*
   AMOUNT RATIO AMOUNT RATIO RATIO RATIO
   (IN THOUSANDS, EXCEPT RATIOS)
Total Capital (To Risk Weighted Assets) $126,276   13.21%  $110,681   11.64%   8.00%   10.00% 
Tier 1 Common Equity (To Risk Weighted Assets)  95,882   10.03   99,552   10.47   4.50   6.50 
Tier 1 Capital (To Risk Weighted Assets)  107,682   11.26   99,552   10.47   6.00   8.00 
Tier 1 Capital (To Average Assets)  107,682   9.32   99,552   8.75   4.00   5.00 

      
 AT DECEMBER 31, 2016
   COMPANY BANK MINIMUM REQUIRED FOR CAPITAL ADEQUACY PURPOSES TO BE WELL CAPITALIZED UNDER PROMPT CORRECTIVE ACTION REGULATIONS*
   AMOUNT RATIO AMOUNT RATIO RATIO RATIO
   (IN THOUSANDS, EXCEPT RATIOS)
Total Capital (To Risk Weighted Assets) $125,131   13.15%  $107,618   11.35%   8.00%   10.00% 
Tier 1 Common Equity (To Risk Weighted Assets)  95,028   9.99   96,796   10.21   4.50   6.50 
Tier 1 Capital (To Risk Weighted Assets)  106,868   11.23   96,796   10.21   6.00   8.00 
Tier 1 Capital (To Average Assets)  106,868   9.35   96,796   8.61   4.00   5.00 

*Applies to the Bank only.

92

TABLE OF CONTENTSTable of Contents

AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

23.  REGULATORY CAPITAL  – (continued)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

AT DECEMBER 31, 2022

 

​

​

​

​

​

​

​

​

​

​

​

​

​

​

TO BE WELL

 

​

​

​

​

​

​

​

​

​

​

​

​

MINIMUM

​

CAPITALIZED

 

​

​

​

​

​

​

​

​

​

​

​

​

REQUIRED

​

UNDER

 

​

​

​

​

​

​

​

​

​

​

​

​

FOR

​

PROMPT

 

​

​

​

​

​

​

​

​

​

​

​

​

CAPITAL

​

CORRECTIVE

 

​

​

​

​

​

​

​

​

​

​

​

​

ADEQUACY

​

ACTION

 

​

​

COMPANY

​

BANK

​

PURPOSES

​

REGULATIONS*

 

​

    

AMOUNT

    

RATIO

    

AMOUNT

    

RATIO

    

RATIO

    

RATIO

​

​

 

(IN THOUSANDS, EXCEPT RATIOS)

​

Total Capital (To Risk Weighted Assets)

​

$

153,092

 

13.87

%  

$

136,767

 

12.44

%  

8.00

%  

10.00

%

Common Equity Tier 1 Capital (To Risk Weighted Assets)

​

 

114,959

 

10.41

​

 

125,278

 

11.39

 

4.50

 

6.50

​

Tier 1 Capital (To Risk Weighted Assets)

​

 

114,959

 

10.41

​

 

125,278

 

11.39

 

6.00

 

8.00

​

Tier 1 Capital (To Average Assets)

​

 

114,959

 

8.52

​

 

125,278

 

9.39

 

4.00

 

5.00

​

On July 2, 2013, the Federal Reserve approved final rules that substantially amend the regulatory risk-based capital rules applicable​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

AT DECEMBER 31, 2021

 

​

​

​

​

​

​

​

​

​

​

​

​

​

​

TO BE WELL

 

​

​

​

​

​

​

​

​

​

​

​

​

MINIMUM

​

CAPITALIZED

 

​

​

​

​

​

​

​

​

​

​

​

​

REQUIRED

​

UNDER

 

​

​

​

​

​

​

​

​

​

​

​

​

FOR

​

PROMPT

 

​

​

​

​

​

​

​

​

​

​

​

​

CAPITAL

​

CORRECTIVE

 

​

​

​

​

​

​

​

​

​

​

​

​

ADEQUACY

​

ACTION

 

​

​

COMPANY

​

BANK

​

PURPOSES

​

REGULATIONS*

 

​

    

AMOUNT

    

RATIO

    

AMOUNT

    

RATIO

    

RATIO

    

RATIO

​

​

 

(IN THOUSANDS, EXCEPT RATIOS)

​

Total Capital (To Risk Weighted Assets)

​

$

149,177

 

14.04

%  

$

133,881

 

12.66

%  

8.00

%  

10.00

%

Common Equity Tier 1 Capital (To Risk Weighted Assets)

​

 

109,292

 

10.29

​

 

120,656

 

11.41

 

4.50

 

6.50

​

Tier 1 Capital (To Risk Weighted Assets)

​

 

109,292

 

10.29

​

 

120,656

 

11.41

 

6.00

 

8.00

​

Tier 1 Capital (To Average Assets)

​

 

109,292

 

8.17

​

 

120,656

 

9.12

 

4.00

 

5.00

​

* Applies to the Company and the Bank. The final rules implement the “Basel III” regulatory capital reforms, as well as certain changes required by the Dodd-Frank Act, which will require institutions to, among other things, have more capital and a higher qualityBank only.

​

93

Table of capital by increasing the minimum regulatory capital ratios, and requiring capital buffers. The new rules became effective for the Company on January 1, 2015, with an implementation period that stretches to 2019. For a more detailed discussion see the Capital Resources section of the MD&A.Contents

24.

AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

25. PARENT COMPANY FINANCIAL INFORMATION

The parent company functions primarily as a coordinating and servicing unit for all subsidiary entities. Provided services include general management, accounting and taxes, loan review, internal auditing, investment advisory, marketing, insurance, risk management, general corporate services, and financial and strategic planning. The following financial information relates only to the parent company operations:

BALANCE SHEETS

​

​

​

​

​

​

​

​

​

​

AT DECEMBER 31, 

​

    

2022

    

2021

​

​

(IN THOUSANDS)

ASSETS

 

​

  

 

​

  

Cash

​

$

100

​

$

100

Short-term investments

​

 

3,178

​

 

5,533

Cash and cash equivalents

​

​

3,278

​

​

5,633

Investment securities available for sale

​

 

6,334

​

 

3,692

Equity investment in banking subsidiary

​

 

117,432

​

 

127,874

Equity investment in non-banking subsidiaries

​

 

6,533

​

 

6,707

Other assets

​

 

1,008

​

 

866

TOTAL ASSETS

​

$

134,585

​

$

144,772

LIABILITIES

​

 

  

​

 

  

Subordinated debt

​

$

26,644

​

$

26,603

Other liabilities

​

 

1,763

​

 

1,620

TOTAL LIABILITIES

​

 

28,407

​

 

28,223

STOCKHOLDERS’ EQUITY

​

 

  

​

 

  

Total stockholders’ equity

​

 

106,178

​

 

116,549

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

​

$

134,585

​

$

144,772

​

STATEMENTS OF OPERATIONS

​

​

​

​

​

​

​

​

​

​

​

​

​

​

YEAR ENDED DECEMBER 31, 

​

    

2022

    

2021

    

2020

​

​

(IN THOUSANDS)

INCOME

 

​

  

 

​

  

 

​

  

Inter-entity management and other fees

​

$

2,566

​

$

2,520

​

$

2,708

Dividends from banking subsidiary

​

 

4,000

​

 

2,000

​

 

2,000

Dividends from non-banking subsidiaries

​

 

1,055

​

 

1,550

​

 

1,944

Interest, dividend and other income

​

 

146

​

 

115

​

 

106

TOTAL INCOME

​

 

7,767

​

 

6,185

​

 

6,758

EXPENSE

​

 

​

​

 

​

​

 

​

Interest expense

​

 

1,054

​

 

1,798

​

 

1,642

Salaries and employee benefits

​

 

2,811

​

 

2,871

​

 

2,667

Other expense

​

 

1,948

​

 

1,783

​

 

1,749

TOTAL EXPENSE

​

 

5,813

​

 

6,452

​

 

6,058

INCOME (LOSS) BEFORE INCOME TAXES AND EQUITY IN UNDISTRIBUTED EARNINGS OF SUBSIDIARIES

​

 

1,954

​

 

(267)

​

 

700

Benefit for income taxes

​

 

(652)

​

 

(802)

​

 

(681)

Equity in undistributed earnings of subsidiaries

​

 

4,842

​

 

6,537

​

 

3,217

NET INCOME

​

$

7,448

​

$

7,072

​

$

4,598

COMPREHENSIVE (LOSS) INCOME

​

$

(8,560)

​

$

13,758

​

$

7,571

​

  
 AT DECEMBER 31,
   2017 2016
   (IN THOUSANDS)
ASSETS
          
Cash $100  $100 
Short-term investments in money market funds  4,521   5,397 
Investment securities available for sale  5,307   6,041 
Equity investment in banking subsidiary  99,408   97,158 
Equity investment in non-banking subsidiaries  6,444   5,168 
Other assets  499   2,665 
TOTAL ASSETS $116,279  $116,529 
LIABILITIES
          
Guaranteed junior subordinated deferrable interest debentures $12,923  $12,908 
Subordinated debt  7,465   7,441 
Other liabilities  789   785 
TOTAL LIABILITIES  21,177   21,134 
STOCKHOLDERS’ EQUITY
          
Total stockholders’ equity  95,102   95,395 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $116,279  $116,529 

94


TABLE OF CONTENTSTable of Contents

AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

24.  PARENT COMPANY FINANCIAL INFORMATION  – (continued)

STATEMENTS OF OPERATIONS

   
 YEAR ENDED DECEMBER 31,
   2017 2016 2015
   (IN THOUSANDS)
INCOME
               
Inter-entity management and other fees $2,315  $2,305  $2,432 
Dividends from banking subsidiary  2,850   3,000   5,100 
Dividends from non-banking subsidiaries  840   650   975 
Interest, dividend and other income  163   214   669 
TOTAL INCOME  6,168   6,169   9,176 
EXPENSE
               
Interest expense  1,642   1,640   1,125 
Salaries and employee benefits  2,416   2,314   2,302 
Other expense  1,618   1,549   1,562 
TOTAL EXPENSE  5,676   5,503   4,989 
INCOME BEFORE INCOME TAXES AND EQUITY IN UNDISTRIBUTED EARNINGS OF SUBSIDIARIES  492   666   4,187 
Benefit for income taxes  (1,114)   (1,015)   (642) 
Equity in undistributed earnings of subsidiaries  1,687   629   1,168 
NET INCOME $3,293  $2,310  $5,997 
COMPREHENSIVE INCOME (LOSS) $4,051  $(1,712)  $5,344 

TABLE OF CONTENTS

AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

24.  PARENT COMPANY FINANCIAL INFORMATION  – (continued)

STATEMENTS OF CASH FLOWS

​

​

​

​

​

​

​

​

​

​

​

​

​

YEAR ENDED DECEMBER 31,

​

    

2022

    

2021

    

2020

   
 YEAR ENDED DECEMBER 31,
 2017 2016 2015
 (IN THOUSANDS)

​

​

(IN THOUSANDS)

OPERATING ACTIVITIES
               

 

​

  

 

​

  

 

​

  

Net income $3,293  $2,310  $5,997 

​

$

7,448

​

$

7,072

​

$

4,598

Adjustment to reconcile net income to net cash (used in) provided by operating activities:
               

Adjustment to reconcile net income to net cash provided by operating activities:

​

 

​

​

 

​

​

 

​

Equity in undistributed earnings of subsidiaries  (1,687)   (629)   (1,168) 

​

 

(4,842)

​

 

(6,537)

​

 

(3,217)

Stock compensation expense  13   20   29 

​

 

50

​

 

43

​

 

3

Other – net  1,325   1,463   842 

​

 

189

​

 

1,204

​

 

(133)

NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES  2,944   3,164   5,700 

NET CASH PROVIDED BY OPERATING ACTIVITIES

​

 

2,845

​

 

1,782

​

 

1,251

INVESTING ACTIVITIES
               

​

 

  

​

 

  

​

 

  

Purchase of investment securities – available for sale  (1,002)   (996)   (1,533) 

​

 

(3,994)

​

 

(1,008)

​

 

(1,254)

Proceeds from maturity and sales of investment securities – available for sale  1,699   3,396   4,669 

​

 

655

​

 

991

​

 

1,246

Proceeds from life insurance policies  —   —   719 
NET CASH PROVIDED BY INVESTING ACTIVITIES  697   2,400   3,855 

Capital contribution to banking subsidiary

​

 

—

​

 

(3,500)

​

 

—

NET CASH USED IN INVESTING ACTIVITIES

​

 

(3,339)

​

 

(3,517)

​

 

(8)

FINANCING ACTIVITIES
               

​

 

  

​

 

  

​

 

  

Redemption of guaranteed junior subordinated deferrable interest debentures

​

 

—

​

 

(12,018)

​

 

—

Subordinated debt issuance, net  —   —   7,418 

​

 

—

​

 

26,589

​

 

—

Preferred stock redemption  —   (21,000)   — 
Preferred stock dividends paid  —   (15)   (210) 

Redemption of subordinated debt

​

 

—

​

 

(7,650)

​

 

—

Stock options exercised

​

 

106

​

 

57

​

 

78

Purchases of treasury stock  (3,404)   —   — 

​

 

—

​

 

—

​

 

(151)

Common stock dividends paid  (1,113)   (945)   (754) 

​

 

(1,967)

​

 

(1,708)

​

 

(1,716)

NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES  (4,517)   (21,960)   6,454 

​

 

(1,861)

​

 

5,270

​

 

(1,789)

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS  (876)   (16,396)   16,009 

​

 

(2,355)

​

 

3,535

​

 

(546)

CASH AND CASH EQUIVALENTS AT JANUARY 1  5,497   21,893   5,884 

​

 

5,633

​

 

2,098

​

 

2,644

CASH AND CASH EQUIVALENTS AT DECEMBER 31 $4,621  $5,497  $21,893 

​

$

3,278

​

$

5,633

​

$

2,098

​

The ability of the subsidiary Bank to upstream cash to the parent company is restricted by regulations. Federal law prevents the parent company from borrowing from its subsidiary Bank unless the loans are secured by specified assets. Further, such secured loans are limited in amount to ten percent of the subsidiary Bank’s capital and surplus. In addition, the Bank is subject to legal limitations on the amount of dividends that can be paid to its shareholder. The dividend limitation generally restricts dividend payments to a bank’s retained net income for the current and preceding two calendar years. The subsidiary Bank had a combined $121,974,000 of restricted surplus and retained earnings at December 31, 2022. Cash may also be upstreamed to the parent company by the subsidiaries as an inter-entity management fee. The subsidiary Bank had a combined $110,300,000

​

95

Table of restricted surplus and retained earnings at December 31, 2017.


TABLE OF CONTENTSContents

AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

25.

26. SELECTED QUARTERLY CONSOLIDATED FINANCIAL DATA (unaudited)

The following table sets forth certain unaudited quarterly consolidated financial data regarding the Company:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

2022 QUARTER ENDED

​

    

DEC. 31

    

SEPT. 30

    

JUNE 30

    

MARCH 31

​

​

(IN THOUSANDS, EXCEPT PER SHARE DATA)

Interest income

​

$

13,803

​

$

12,700

​

$

11,527

​

$

11,028

Interest expense

​

 

3,660

​

 

2,171

​

 

1,403

​

 

1,261

Net interest income

​

 

10,143

​

 

10,529

​

 

10,124

​

 

9,767

Provision (credit) for loan losses

​

 

275

​

 

500

​

 

(325)

​

 

(400)

Net interest income after provision (credit) for loan losses

​

 

9,868

​

 

10,029

​

 

10,449

​

 

10,167

Non-interest income

​

 

3,893

​

 

4,326

​

 

4,138

​

 

4,335

Non-interest expense

​

 

12,688

​

 

11,727

​

 

12,110

​

 

11,479

Income before income taxes

​

 

1,073

​

 

2,628

​

 

2,477

​

 

3,023

Provision for income taxes

​

 

126

​

 

526

​

 

496

​

 

605

Net income

​

$

947

​

$

2,102

​

$

1,981

​

$

2,418

Basic earnings per common share

​

$

0.06

​

$

0.12

​

$

0.12

​

$

0.14

Diluted earnings per common share

​

 

0.06

​

 

0.12

​

 

0.12

​

 

0.14

Cash dividends declared per common share

​

 

0.030

​

 

0.030

​

 

0.030

​

 

0.025

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

2021 QUARTER ENDED

​

    

DEC. 31

    

SEPT. 30

    

JUNE 30

    

MARCH 31

​

​

(IN THOUSANDS, EXCEPT PER SHARE DATA)

Interest income

​

$

11,690

​

$

11,372

​

$

11,838

​

$

11,769

Interest expense

​

 

1,392

​

 

2,146

​

 

1,971

​

 

2,077

Net interest income

​

 

10,298

​

 

9,226

​

 

9,867

​

 

9,692

Provision for loan losses

​

 

250

​

 

350

​

 

100

​

 

400

Net interest income after provision for loan losses

​

 

10,048

​

 

8,876

​

 

9,767

​

 

9,292

Non-interest income

​

 

4,332

​

 

4,416

​

 

4,399

​

 

4,614

Non-interest expense

​

 

12,107

​

 

11,520

​

 

12,038

​

 

11,305

Income before income taxes

​

 

2,273

​

 

1,772

​

 

2,128

​

 

2,601

Provision for income taxes

​

 

421

​

 

341

​

 

420

​

 

520

Net income

​

$

1,852

​

$

1,431

​

$

1,708

​

$

2,081

Basic earnings per common share

​

$

0.11

​

$

0.08

​

$

0.10

​

$

0.12

Diluted earnings per common share

​

 

0.11

​

 

0.08

​

 

0.10

​

 

0.12

Cash dividends declared per common share

​

 

0.025

​

 

0.025

​

 

0.025

​

 

0.025

​

​

A

​

​

​

​

​

    
 2017 QUARTER ENDED
   DEC. 31 SEPT. 30 JUNE 30 MARCH 31
   (IN THOUSANDS, EXCEPT PER SHARE DATA)
Interest income $11,370  $11,187  $11,051  $10,748 
Interest expense  2,366   2,250   2,152   2,027 
Net interest income  9,004   8,937   8,899   8,721 
Provision for loan losses  50   200   325   225 
Net interest income after provision for loan losses  8,954   8,737   8,574   8,496 
Non-interest income  3,699   3,629   3,755   3,562 
Non-interest expense  10,250   10,114   10,317   10,085 
Income before income taxes  2,403   2,252   2,012   1,973 
Provision for income taxes  3,398   701   623   625 
Net income (loss) $(995)  $1,551  $1,389  $1,348 
Basic earnings (loss) per common share $(0.05)  $0.08  $0.07  $0.07 
Diluted earnings (loss) per common share  (0.05)   0.08   0.07   0.07 
Cash dividends declared per common share  0.015   0.015   0.015   0.015 

96

    
 2016 QUARTER ENDED
   DEC. 31 SEPT. 30 JUNE 30 MARCH 31
   (IN THOUSANDS, EXCEPT PER SHARE DATA)
Interest income $10,582  $10,476  $10,389  $10,422 
Interest expense  1,998   1,970   1,903   1,864 
Net interest income  8,584   8,506   8,486   8,558 
Provision for loan losses  300   300   250   3,100 
Net interest income after provision for loan losses  8,284   8,206   8,236   5,458 
Non-interest income  3,798   3,661   3,742   3,437 
Non-interest expense  10,509   10,356   10,039   10,711 
Income (loss) before income taxes  1,573   1,511   1,939   (1,816) 
Provision (benefit) for income taxes  423   446   577   (549) 
Net income (loss) $1,150  $1,065  $1,362  $(1,267) 
Basic earnings (loss) per common share $0.06  $0.06  $0.07  $(0.07) 
Diluted earnings (loss) per common share  0.06   0.06   0.07   (0.07) 
Cash dividends declared per common share  0.015   0.015   0.010   0.010 

Table of Contents

AMERISERV FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

​

27. SUBSEQUENT EVENTS

Management has evaluated subsequent events through the filing of this Form 10-K, and determined that there have been no events that have occurred that would require adjustments to our disclosures in the consolidated financial statements except for the following:

The Company has a $918,000 investment in a debt security with Signature Bank which was closed by the banking regulators on March 12, 2023. In a press release issued by the Federal Deposit Insurance Corporation (FDIC), it was disclosed that unsecured debt holders of the institution will not be protected, therefore, the Company expects to recognize a substantial loss on this investment in the first quarter of 2023. Management has reviewed the December 31, 2022 Form 10-K filed by Signature and determined that no circumstances existed to indicate that the debt security held by the Company was impaired as of year-end. Specifically, as of December 31, 2022, Signature had total assets of $110.4 billion, net income of $1.3 billion for the year ended, and demonstrated strong regulatory capital ratios.

On March 17, 2023, AmeriServ Financial Bank agreed to sell all 7,859 shares of the Class B common stock of Visa Inc. that the bank owned for a purchase price of $1.7 million. The shares had no carrying value on the Bank’s balance sheet and, as the Bank had no historical cost basis in the shares, the entire purchase will be realized as a pre-tax gain. The Company believes that this was an appropriate time to capture the gain on these shares due to the current volatility and future uncertainty in the financial markets. The transaction will have a positive impact on the Company's first quarter 2023 earnings.

​

97

TABLE OF CONTENTSTable of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

​

To the Shareholdersandthe Board of Directors and Stockholders of AmeriServ Financial, Inc.

​

Opinion on the Financial Statements

​

We have audited the accompanying consolidated balance sheetsheets of AmeriServ Financial Inc. and subsidiaries (the “Company”) as of December 31, 20172022 and 2016;2021; the related consolidated statements of operations, comprehensive (loss) income, changes in stockholders’shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2017;2022; and the related notes to the consolidated financial statements (collectively, the “financial statements”)financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20172022 and 2016,2021, and the results of its operations and its cash flows for each of the three years thenin the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2017, based on criteria established inInternal Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013, and our report dated March 2, 2018, expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.​

Basis for Opinion

​

ThesefinancialstatementsaretheresponsibilityoftheCompany’smanagement.Ourresponsibility istoexpressanopinionontheCompany’sfinancialstatementsbasedonouraudits.Weareapublic accountingfirmregisteredwiththe Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent, withrespecttothe Company, in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and thePCAOB.

​

WeconductedourauditsinaccordancewiththestandardsofthePCAOB.Thosestandardsrequire that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

​

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosuresin the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for ouropinion.

​

Critical Audit Matters

​

Thecriticalauditmatterscommunicatedbelowaremattersarisingfromthecurrentperiodauditof the financial statements that were communicated or required to be communicated to the Audit Committeeandthat:(1)relatetoaccountsordisclosuresthatarematerialtothefinancialstatements; and(2)involveourespeciallychallenging,subjective,orcomplexjudgments.Thecommunication of critical audit matters does not alter, in any way, our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which theyrelate.

​

Allowance for Loan Losses (ALL) – Qualitative Factors

​

Description of the Matter

The Company’s loan portfolio totaled $990.8 million as of December 31, 2022, and the associated ALL was $10.7 million. As discussed in Notes 1, 6 and 7 to the consolidated financial statements, determining the amount of the ALL requires significant judgment about the collectability of loans, which includes an assessment of quantitative factors such as historical loss experience within each risk category of loans and testing of certain commercial loans for impairment. Management applies additional qualitative adjustments to reflect the inherent losses that exist in the loan portfolio at the balance sheet date that are not reflected in the historical loss experience.Qualitativeadjustmentsaremadebaseduponchangesinlendingpoliciesandpractices, economicconditions,changesintheloanportfoliomix and volumes,trendsinloandelinquenciesandclassified loans, collateral values, and concentrations of credit risk for the commercial loanportfolios.

98

Table of Contents

​

We identified these qualitative adjustments within the ALL as critical audit matters because they involve a high degree of subjectivity. In turn, auditing management’s judgments regarding the qualitative factors applied in the ALL calculation involved a high degree of subjectivity.

​

How We Addressed the Matter in Our Audit

We gained an understanding of the Company’s process for establishing the ALL, including the qualitative adjustments made to the ALL. We evaluated the design and tested the operating effectiveness of controls over the Company’s ALL process, which included, among others, management’s review and approval controls designed to assess the need and level of qualitative adjustments to the ALL, as well as the reliability of the data utilized to support management’s assessment.

​

To test the qualitative adjustments, we evaluated the appropriateness of management’s methodology and assessed whether all relevant risks were reflected in the ALL.

​

Regarding the measurement of the qualitative adjustments, we evaluated the completeness, accuracy,andrelevanceofthedataandinputsutilizedinmanagement’sestimate.Forexample,we compared the inputs and data to the Company’s historical loan performance data, third-party macroeconomic data, and considered the existence of new and contrary information.  We also compared the ALL to the base range of historical losses to evaluate the level of reserves, including the reasonableness of qualitative adjustments.  Furthermore, we analyzed the changes in the components of the qualitative reserves relative to changes in external market factors, the Company’sloanportfolio, various internal risk metrics, and asset quality trends.

​

We also utilized internal credit review specialists with knowledge to evaluate the appropriateness ofmanagement’srisk-ratingprocesses,toensurethattheriskratingsappliedtothecommercialloan portfolio werereasonable.

​

We have served as the Company’s auditor since 2007.

​

​

/s/S.R. Snodgrass, P.C.

​

​

Cranberry Township, Pennsylvania

March 2, 201827, 2023

​


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REPORT ON MANAGEMENT’S ASSESSMENT OF CONTENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON
INTERNAL CONTROL OVER FINANCIAL REPORTING

To the Board of Directors and Stockholders of AmeriServ Financial, Inc.

Opinion on Internal Control over Financial Reporting

We have audited AmeriServ Financial Inc. and subsidiaries’ (the “Company”) internal control over financial reporting as of December 31, 2017, based on criteria established inInternal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017, based on criteria established inInternal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of December 31, 2017 and 2016, and the related consolidated statements of operations, comprehensive income, changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2017, of the Company and in our report dated March 2, 2018, expressed an unqualified opinion.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting in the accompanying Report on Management’s Assessment of Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.


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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ S.R. Snodgrass, P.C.

Cranberry Township, Pennsylvania
March 2, 2018


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REPORT ON MANAGEMENT’S ASSESSMENT OF
INTERNAL CONTROL OVER FINANCIAL REPORTING

We, as management of AmeriServ Financial, Inc., are responsible for establishing and maintaining effective internal control over financial reporting that is designed to produce reliable financial statements in conformity with United States generally accepted accounting principles. The system of internal control over financial reporting as it relates to the financial statements is evaluated for effectiveness by management and tested for reliability through a program of internal audits. Actions are taken to correct potential deficiencies as they are identified. Any system of internal control, no matter how well designed, has inherent limitations, including the possibility that a control can be circumvented or overridden and misstatements due to error or fraud may occur and not be detected. Also, because of changes in conditions, internal control effectiveness may vary over time. Accordingly, even an effective system of internal control will provide only reasonable assurance with respect to financial statement preparation.

Management assessed the Company’s system of internal control over financial reporting as of December 31, 2017,2022, in relation to criteria for effective internal control over financial reporting as described in “2013 Internal Control — Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management concludes that, as of December 31, 2017,2022, its system of internal control over financial reporting is effective and meets the criteria of the “2013 Internal Control — Integrated Framework”. S.R. Snodgrass, P.C., independent registered public accounting firm, has issued an audit report on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2017.

Management is responsible for compliance with the federal and state laws and regulations concerning dividend restrictions and federal laws and regulations concerning loans to insiders designated by the Federal Reserve as safety and soundness laws and regulations.

Management has assessed compliance by the Company with the designated laws and regulations relating to safety and soundness. Based on the assessment, management believes that the Company complied, in all significant respects, with the designated laws and regulations related to safety and soundness for the year ended December 31, 2017.2022.

​

​

/s/ JEFFREY A. STOPKO

Jeffrey A. Stopko
President &
Chief Executive Officer

/s/ MICHAEL D. LYNCH

Jeffrey A. Stopko

Michael D. Lynch
Senior

President & Chief Executive Officer

​

Executive Vice President &
Chief Financial Officer

​

​

Johnstown, PA

March 2, 201827, 2023

​


100

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STATEMENT OF MANAGEMENT RESPONSIBILITY

February 15, 2018

March 27, 2023

To the Stockholders and
Board of Directors of
AmeriServ Financial, Inc.

Management of AmeriServ Financial, Inc. and its subsidiaries have prepared the consolidated financial statements and other information in the Annual Report and Form 10-K in accordance with United States generally accepted accounting principles and are responsible for its accuracy.

In meeting its responsibility, management relies on internal accounting and related control systems, which include selection and training of qualified personnel, establishment and communication of accounting and administrative policies and procedures, appropriate segregation of responsibilities, and programs of internal audit. These systems are designed to provide reasonable assurance that financial records are reliable for preparing financial statements and maintaining accountability for assets and that assets are safeguarded against unauthorized use or disposition. Such assurance cannot be absolute because of inherent limitations in any internal control system.

Management also recognizes its responsibility to foster a climate in which Company affairs are conducted with the highest ethical standards. The Company’s Code of Conduct, furnished to each employee and director, addresses the importance of open internal communications, potential conflicts of interest, compliance with applicable laws, including those related to financial disclosure, the confidentiality of proprietary information, and other items. There is an ongoing program to assess compliance with these policies.

The Audit Committee of the Company’s Board of Directors consists solely of independent directors. The Audit Committee meets periodically with management and the independent auditors to discuss audit, financial reporting, and related matters. S.R. Snodgrass P.C. and the Company’s internal auditors have direct access to the Audit Committee.

​

​

/s/ JEFFREY A. STOPKO

Jeffrey A. Stopko
President &
Chief Executive Officer

/s/ MICHAEL D. LYNCH

Jeffrey A. Stopko

Michael D. Lynch
Senior

​

President & Chief Executive Officer

​

Executive Vice President &
Chief Financial Officer

​

​

​

​

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ITEM 9.       CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

​

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures.   As of December 31, 2017,2022, an evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, on the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the Exchange Act)). Based on that evaluation, the Company’s management, including the Chief Executive Officer and Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective as of December 31, 2017.2022.

Disclosure controls and procedures are the controls and other procedures that are designed to ensure that the information required to be disclosed by the Company in its reports filed and submitted under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in its reports filed under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Management Report on Internal Control over Financial Reporting.   The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act. Management’s assessment of internal control over financial reporting for the fiscal year ended December 31, 20172022 is included in Item 8.

​

ITEM 9B.   OTHER INFORMATION

None.

​

​


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PART III

ITEM 10.   DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Information required by this section relating to Directors of the Registrant is presented in the “Election of ASRV Directors” section of the Proxy Statement for the Annual Meeting of Shareholders.

​

ITEM 11.   EXECUTIVE COMPENSATION

Information required by this section is presented in the “Compensation“Compensation/Human Resources Committee Interlocks and Insider Participation,” “Compensation Discussion and Analysis,” the “Compensation Committee Report,” and “Compensation Paid to Executive Officers” sections of the Proxy Statement for the Annual Meeting of Shareholders.


TABLE OF CONTENTS​

ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Equity Compensation Plan Information

The following table summarizes the number of shares remaining for issuance under the Company’s outstanding stockequity incentive plans as of December 31, 2017.2022.

​

   

​

​

​

​

​

​

​

​

Equity Compensation Plan Information Equity Compensation Plan Information

Equity Compensation Plan Information

​

    

​

    

​

​

    

Number of securities

​

 

​

 

​

​

​

 remaining available for

​

 

​

 

​

​

​

 future issuance under

​

 

Number of securities

 

Weighted-average

​

 equity compensation 

​

 

 to be issued upon exercise

 

 exercise price of

​

plans (excluding 

​

​

 of outstanding options,

​

 outstanding options,

​

securities reflected in

​

​

 warrants and rights 

​

 warrants and rights 

​

 column (a))

Plan category Number of securities
to be issued upon exercise of outstanding options,
warrants and rights (a)		 Weighted-average
exercise price of
outstanding options,
warrants and rights (b)		 Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected in
column (a))
(c)

​

(a)

​

(b)

 

 (c)

Equity compensation plans approved by security holders  360,721  $2.79   448,170 

 

323,786

​

$

3.52

 

600,000

Equity compensation plans not approved by security holders  0   0   0 

 

—

​

 

—

 

—

Total  360,721  $2.79   448,170 

 

323,786

​

$

3.52

 

600,000

​

Information required by this section is presented in the “Principal Owners”Shareholders” and “Security Ownership of Directors and Management” sections of the Proxy Statement for the Annual Meeting of Shareholders.

​

ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

​

Information required by this section is presented in the “Director Independence and Transactions with Related Parties” section of the Proxy Statement for the Annual Meeting of Shareholders.

​

ITEM 14.   PRINCIPAL ACCOUNTANT FEES AND SERVICES

Information required by this section is presented in the “Independent Registered Accounting Firm” section of the Proxy Statement for the Annual Meeting of Shareholders.

​

​


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PART IV

ITEM 15.   EXHIBITS AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULES

CONSOLIDATED FINANCIAL STATEMENTS FILED:

The consolidated financial statements listed below are from this 20172022 Form 10-K and Part II — Item 8. Page references are to this Form 10-K.

CONSOLIDATED FINANCIAL STATEMENTS:

​

AmeriServ Financial, Inc. and Subsidiaries

Consolidated Balance Sheets

36

40

Consolidated Statements of Operations

37

41

Consolidated Statements of Comprehensive (Loss) Income (Loss)

39

43

Consolidated Statements of Changes in Stockholders’Shareholders’ Equity

40

44

Consolidated Statements of Cash Flows

41

45

Notes to Consolidated Financial Statements

42

46

Report of Independent Registered Public Accounting Firm (PCAOB ID 00074)

88

98

Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting

89
Report of Management’s Assessment of Internal Control Over Financial Reporting

91

100

Statement of Management Responsibility

92

101

​

CONSOLIDATED FINANCIAL STATEMENT SCHEDULES:

These schedules are not required or are not applicable under SEC accounting regulations and therefore have been omitted.


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EXHIBITS:

The exhibits listed below are filed herewith or to other filings.

​

EXHIBIT

NUMBER

DESCRIPTION

PRIOR FILING OR EXHIBIT

PAGE NUMBER HEREIN

​

​

​

​

​

​

3.1

Amended and Restated Articles of Incorporation as amended through August 11, 2011.

Exhibit 3.1 to the Registration Statement on Form S-8 (File No. 333-176869) filed on September 16, 2011

 3.2

​

​

​

​

​

​

3.2

Bylaws, as amended and restated effective December 30, 2014.April 2, 2020.

Exhibit 3.23.1 to the Current Report on Form 8-K filed on January 2, 2015April 6, 2020

10.1

​

​

​

​

​

​

4.1

​

Description of Capital Stock

​

Attached

​

​

​

​

​

​

​

10.1

Employment Agreement, dated April 27, 2015, between AmeriServ Financial, Inc. and Jeffrey A. Stopko.

Exhibit 10.1 to the Current Report on Form 8-K filed on April 28, 2015

10.2

​

​

​

​

​

​

10.2

AmeriServ Financial, Inc. 20112021 Stock Incentive Plan

Appendix A to the Definitive Proxy Statement, filed under Schedule 14A, filed on March 21, 201123, 2021

10.3

​

​

​

​

​

​

10.3

AmeriServ Financial, Inc. Deferred Compensation Plan

Exhibit 10.1 to the Current Report on Form 8-K filed on October 21, 2014

10.4

​

​

​

​

​

​

104

Table of Contents

EXHIBIT
NUMBER

DESCRIPTION

PRIOR FILING OR EXHIBIT
PAGE NUMBER HEREIN

​

​

​

​

​

​

10.4

Employment Agreement, dated February 19, 2016, between AmeriServ Financial, Inc. and Michael D. Lynch.Lynch

Exhibit 10.1 to the Current Report on Form 8-K filed on February 24, 2016

21.1

​

​

​

​

​

​

21.1

Subsidiaries of the Registrant.

Attached

23.1

​

​

​

​

​

​

23.1

Consent of Independent Registered Public Accounting Firm

Attached

31.1

​

​

​

​

​

​

31.1

​

Certification pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002.

​

Attached

​

31.2

​

​

​

​

​

​

31.2

​

Certification pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002.

​

Attached

​

32.1

​

​

​

​

​

​

32.1

​

Certification pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.

​

Attached

​

32.2

​

​

​

​

​

​

32.2

​

Certification pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.

​

Attached

​

101

​

​

​

​

​

​

101

​

The following information from AMERISERV FINANCIAL, INC.’s Annual Report on Form 10-K for the year ended December 31, 2017,2022, formatted in Inline XBRL (eTensible(eXtensible Business Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive (Loss) Income, (iv) Consolidated Statements of Changes in Shareholders’ Equity, (v) Consolidated Statements of Cash Flows, and (iv)(vi) Notes to the Consolidated Financial Statements.

​

Attached

​

​

​

​

​

​

​

104

​

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

​

Attached

​

​

​

​


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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

AmeriServ Financial, Inc.
(Registrant)​

​

By:

AmeriServ Financial, Inc.

​

(Registrant)

​

​

​

By :

/s/ Jeffrey A. Stopko

​

​

Jeffrey A. Stopko

​

​

President & CEO

Date: March 27, 2023

​

Date: February 15, 2018​

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on February 15, 2018:March 27, 2023:

​

/s/ Allan R. Dennison

Chairman

/s/ Michael D. Lynch

EVP & CFO

/s/ Craig G. Ford

Craig G. Ford

Allan R. Dennison

​

Chairman

Director

​

Michael D. Lynch

​

​

​

​

​

​

​

​

​

​

​

/s/ Jeffrey A. Stopko

President & CEO

/s/ Margaret A. O’Malley

Director

Jeffrey A. Stopko

​

President & CEO

Director

​

/s/ Michael D. Lynch

Michael D. Lynch

Margaret A. O’Malley

​

CFO & SVP

​

​

​

​

​

​

​

​

​

​

/s/ J. Michael Adams, Jr.

Director

/s/ Daniel A. Onorato

Director

J. Michael Adams, Jr.

​

Director

​

​

/s/ Margaret

Daniel A. O’Malley

Margaret A. O’MalleyOnorato

​

Director

​

​

​

​

​

​

​

​

​

​

/s/ Allan R. Dennison

Allan R. DennisonAmy M. Bradley

Director

/s/ Mark E. Pasquerilla

Director

Amy M. Bradley

​

​

​

Mark E. Pasquerilla

​

Director

​

​

​

​

​

​

​

​

​

​

/s/ Daniel R. DeVos

Daniel R. DeVosKim W. Kunkle

Director

/s/ Sara A. Sargent

​

Director

Kim W. Kunkle

​

​

​

Sara A. Sargent

​

Director
/s/ Bruce E. Duke, III

Bruce E. Duke, III

​

Director/s/ Thomas C. Slater

Thomas C. Slater		Director
/s/ Kim W. Kunkle

Kim W. Kunkle		Director/s/ Robert L. Wise

Robert L. Wise		Director

​

​

​

​

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AMERISERV FINANCIAL, INC.

AMERISERV FINANCIAL
BANK OFFICE LOCATIONS

​

AMERISERV FINANCIAL BANK OFFICE LOCATIONS

*

​

​

AMERISERV LOAN PRODUCTION LOCATIONS

​

​

​

HEADQUARTERS

Main Office Downtown
Johnstown
216 Franklin Street
PO Box 520

Johnstown, PA 15907-0520
15901
1-800-837-BANK (2265)

*Westmont Office
110 Plaza

​

Carrolltown
101 S. Main Street
Carrolltown, PA 15722

​

Central City
104 Sunshine Avenue
Central City, PA 15926

​

Derry
112 S. Chestnut Street
Derry, PA 15627

​

East Hills Drive
Up
1213 Scalp Avenue
Johnstown, PA 15905-1211

*University Heights Office
1404 Eisenhower Boulevard
Johnstown, PA 15904-3218
*15904

​

Eighth Ward Office

1059 Franklin Street

Johnstown, PA 15905-4303

15905

​

Hagerstown
12806 Shank Farm Way
Hagerstown, MD 21742

​

Lovell Park
179 Lovell Avenue
Ebensburg, PA 15931

​

Meyersdale

135 Center Street

Meyersdale, PA 15552

​

Nanty Glo
1383 Shoemaker Street
Nanty Glo, PA 15943

​

*Carrolltown Office
101 South Main

​

North Atherton
1857 N. Atherton Street
Carrolltown,
State College, PA 15722-0507

*16803

​

Northern Cambria Office

4206 Crawford Avenue

Suite 1
Northern Cambria, PA 15714-1342

*Lovell Park Office
179 Lovell Avenue
Ebensburg, PA 15931-1864
*Nanty Glo Office
1383 Shoemaker Street
Nanty Glo, PA 15943-1254



15714

*Seward Office
1 Roadway Plaza
6858 Route 711 Suite One
Seward, PA 15954-3130
*Windber Office
1501 Somerset Avenue
Windber, PA 15963-1745
*Central City Office
104 Sunshine Avenue
Central City, PA 15926-1129
*Somerset Office
108 W. Main Street
Somerset, PA 15501-2035
*Derry Office
112 South Chestnut Street
Derry, PA 15627-1938
*East Hills Drive-up,
1213 Scalp Avenue
Johnstown, PA 15904-

​

Pittsburgh Office

United Steelworkers Bldg
Building
60 Boulevard of the Allies

Suite 100

Pittsburgh, PA 15222-1232

15222

​

Seward
6858 Route 711

Suite 1
Seward, PA 15954

​

Somerset
108 W. Main Street
Somerset, PA 15501

​

University Heights
1404 Eisenhower Boulevard
Johnstown, PA 15904

​

Westmont
110 Plaza Drive
Johnstown, PA 15905

​

Windber
1501 Somerset Avenue
Windber, PA 15963

*North Atherton Office
1857 N. Atherton Street
State College,

​

Altoona
3415 Pleasant Valley Boulevard
Pleasant Valley Shopping Center
Altoona, PA 16803-1521

*= 24-Hour ATM Banking
Available

REMOTE ATM
BANKING LOCATIONS

**Main Office,
216 Franklin Street,
Johnstown16602

​

Wilkins Township
201 Penn Center Boulevard

Suite 200
Pittsburgh, PA 15235

AMERISERV LOAN
PRODUCTION LOCATIONS24-hr ATM available at all branches except Pittsburgh where there is no ATM available

Main Office Downtown
216 Franklin Street
PO Box 520
Johnstown, PA 15907-0520​

Altoona Office
3415 Pleasant Valley Boulevard
Pleasant Valley Shopping Center
Altoona, PA 16602-4321

Hagerstown Office
1829 Howell Road
Suite 3
Hagerstown, MD 21740-6606

Monroeville LPO
201 Penn Center Boulevard
Suite 200
Pittsburgh, PA 15235-5507

State College Loan Store
1857 N. Atherton Street
State College, PA 16803-1521107


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SHAREHOLDER INFORMATION

​

SECURITIES MARKETS

​

AmeriServ Financial, Inc. Common Stock is publicly traded and quoted on the NASDAQ National Market System. The common stock is traded under the symbol of  “ASRV.” The listed market makers for the stock are:

​

Piper Sandler O’Neill & Partners, L.P.
Companies 1251 Avenue of the Americas
6th Floor
New York, NY 10020
Telephone: (800) 635-6860

Keefe Bruyette & Woods, Inc.
787 Seventh Avenue
Equitable Bldg — 4th Floor
New York, NY 10019
Telephone: (800) 966-1559

Stifel Nicolaus
7111 Fairway Drive, STE 301
Palm Beach Gardens, FL 33418
Telephone: (561) 615-5300

​

​

KCG
300 Vesey Street

​

​

Raymond James & Associates 222 S. Riverside Plaza,

7th Floor Chicago, IL 60606 Telephone: (312) 655-2961

Virtu Financial, Inc. 1 Liberty Plaza New York, NY 10282
10006 Telephone: (888) 931-4357

Citadel Securities LLC
131 South Dearborn Street
Chicago, IL 60603
Telephone: (312) 395-2100		UBS Securities LLC
5600 Walnut Street
Pittsburgh, PA 15232
Telephone: (412) 665-9900

​

​

CORPORATE OFFICES

​

The corporate offices of AmeriServ Financial, Inc. are located at 216 Franklin Street, Johnstown, PA 15901.

​

Mailing address:

P.O. Box 430

Johnstown, PA 15907-0430

(814) 533-5300

​

AGENTS

​

The transfer agent and registrar for AmeriServ Financial, Inc.’s common stock is:

​

Computershare Investor Services
P O

P.O. Box 43078
Providence, RI 02940-3078
505000

Louisville, KY 40233-5000

Shareholder Inquiries: 1-800-730-4001

Internet Address:http://www.Computershare.com

​

INFORMATION

​

Analysts, investors, shareholders, and others seeking financial data about AmeriServ Financial, Inc. or any of its subsidiaries’ annual and quarterly reports, proxy statements, 10-K, 10-Q, 8-K, and call reports — are asked to contact Jeffrey A. Stopko, President & Chief Executive Officer at (814) 533-5310 or by e-mail atJStopko@AmeriServ.com. JStopko@AmeriServ.com. The Company also maintains a website (www.AmeriServ.com)(www.AmeriServ.com) that makes available, free of charge, such reports and proxy statements and other current financial information, such as press releases and SEC documents, as well as the corporate governance documents under the Investor Relations tab on the Company’s website. Information contained on the Company’s website is not incorporated by reference into this Annual Report on Form 10-K.

​


108

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TABLE OF CONTENTS​

AMERISERV FINANCIAL, INC.

AMERISERV FINANCIAL, INC.

​

Board of Directors

General Officers

​

​

​

​

​

J. Michael Adams, Jr.

Managing Member of Mike Adams & Associates, LLC

Non-Executive Vice Chairman of the Board of all Subsidiaries

​

Amy M. Bradley

President & CEO, Cambria Regional Chamber of Commerce

​

Allan R. Dennison

Non-Executive Chairman of the Board of all Subsidiaries

​

Kim W. Kunkle

President & CEO,

Laurel Holdings, Inc

​

Margaret A. O’Malley

Attorney-at-Law

Yost & O’Malley

​

Daniel A. Onorato

Executive Vice President, Chief Corporate Affairs and Communications Officer of Highmark Health

​

Mark E. Pasquerilla

President, Pasquerilla Enterprises L.P.

​

Sara A. Sargent

Owner/President,

The Sargent’s Group

​

Jeffrey A. Stopko, CPA

President & Chief Executive Officer

AmeriServ Financial, Inc. & AmeriServ

Financial Bank

​

Jeffrey A. Stopko, CPA

President & Chief Executive Officer

​

Michael D. Lynch

Executive Vice President, Chief Financial Officer, Chief Investment Officer & Chief Risk Officer

​

Susan Tomera Angeletti

Senior Vice President, Director of Marketing & Alternative Delivery

​

Laura L. Fiore, CPA

Senior Vice President, Chief Auditor

​

Wendy M. Gressick

Senior Vice President, Chief Loan Review Officer

​

Anthony M. Gojmerac

Vice President, Purchasing & Facilities Officer

​

Jessica L. Johnson

Vice President, Manager of Regulatory Accounting

​

Tammie L. Slavick

Vice President, Financial & Profitability Analysis

​

Sharon M. Callihan

Corporate Secretary

​

​

​

​

​

Board

109

Table of Directors

J. Michael Adams, Jr.
Attorney-at-Law
   Mike Adams & Associates, LLC

Allan R. Dennison
Non-executive Vice Chairman,
  Retired President & Chief
  Executive Officer AmeriServ
  Financial Bank, and
  Non-executive Vice Chairman
  of the Board of all Subsidiaries

Daniel R. DeVos
Retired President & CEO,
  Concurrent Technologies
  Corporation

Bruce E. Duke, III M.D.
Retired Surgeon, Conemaugh
  Health Initiatives

Craig G. Ford
Non-executive Chairman,
  Former President & CEO,
  AmeriServ Financial, Inc.,
  AmeriServ Financial Bank, and
  Non-executive Chairman of the
  Board of all SubsidiariesContents

Kim W. Kunkle
President & CEO,
  Laurel Holdings, Inc.

Margaret A. O’Malley
Attorney-at-Law
  Yost & O’Malley

Mark E. Pasquerilla
President, Pasquerilla
  Enterprises L.P.

Sara A. Sargent
Owner/President,
  The Sargent’s Group

Thomas C. Slater
Retired Owner,
  President & Director,
  Slater Laboratories, Inc.

Jeffrey A. Stopko, CPA
President & Chief Executive
  Officer AmeriServ
  Financial, Inc. &
   AmeriServ Financial Bank

Robert L. Wise
Retired President,
  Pennsylvania Electric Company,
  GPU Genco, Inc. and GPU
  International, Inc. and GPU
  Energy, Inc.

General Officers

Jeffrey A. Stopko, CPA
President & Chief Executive
  Officer

Susan Tomera Angeletti
Senior Vice President,
  Director of Marketing &
  Alternative Delivery

Michael D. Lynch
  Senior Vice President,
  Chief Financial Officer,
  Chief Investment Officer &
  Chief Risk Officer

James P. Ziance
Senior Vice President &
  Chief Internal Auditor

Frank E. Adams
Vice President &
  Chief Loan Review Officer

Anthony M. Gojmerac
  Vice President, Purchasing &
   Facilities Officer

William D. Layton
Vice President & Manager of
  Regulatory Accounting

Sharon M. Callihan
Corporate Secretary

TABLE OF CONTENTS

AMERISERV FINANCIAL, INC.

AMERISERV FINANCIAL BANK

​

Board of Directors

General Officers

​

​

​

​

​

J. Michael Adams, Jr.

Managing Member of Mike Adams & Associates, LLC

Non-Executive Vice Chairman of the Board of all Subsidiaries

​

Amy M. Bradley

President & CEO, Cambria Regional Chamber of Commerce

​

Allan R. Dennison

Non-Executive Chairman of the Board of all Subsidiaries

​

Kim W. Kunkle

President & CEO,

Laurel Holdings, Inc.

​

Margaret A. O’Malley

Attorney-at-Law

Yost & O’Malley

​

Daniel A. Onorato

Executive Vice President, Chief Corporate Affairs and Communications Officer of Highmark Health

​

Mark E. Pasquerilla

President, Pasquerilla Enterprises L.P.

​

Sara A. Sargent

Owner/President,

The Sargent’s Group

​

Jeffrey A. Stopko, CPA

President & Chief Executive Officer AmeriServ Financial, Inc. & AmeriServ Financial Bank

​

Jeffrey A. Stopko, CPA

President & Chief Executive Officer

​

Michael R. Baylor

Executive Vice President & Chief Commercial Banking Officer

​

Michael D. Lynch

Executive Vice President, Chief Financial Officer, Chief Investment Officer & Chief Risk Officer

​

Robert J. Cabala

Senior Vice President, Area Executive, Johnstown

​

Mitchell D. Edwards

Senior Vice President, Area Executive, Wilkins Township

​

Russell B. Flynn

Senior Vice President, Retail Lending

​

Bettina D. Fochler

Senior Vice President, Chief Credit Officer

​

Kerri L. Mueller

Senior Vice President, Retail Banking

​

Michele M. Scanlan

Senior Vice President, Chief Human Resources Officer

​

Tara M. Shaffer

Senior Vice President, Area Executive, State College

​

Shana M. Stiles

Senior Vice President, BSA & Chief Compliance Officer

​

Charlene J. Tessari

Senior Vice President, Operations & Applications

​

Catherine M. Torok

Senior Vice President, Chief Information Officer

​

Scott Berardinelli

Vice President, Portfolio Manager

​

Thomas R. Boyd, Jr.

Vice President, Commercial Relationship Manager

​

Carie L. Braniff

Vice President, Corporate Security Officer

​

Angela M. Briggs

Vice President, Deposit Operations Manager

​

George T. Chaney II

Vice President, Commercial Relationship Manager

​

Lori L. Czekaj-Thompson

Vice President, Commercial Relationship Manager

​

Benjamin M. Danley

Vice President, Commercial Relationship Manager

​

Jason D. Eminhizer

Vice President, Commercial Relationship Manager

​

Kurt Fetzer

Vice President, Commercial Relationship Manager

​

Christine E. Fisher

Vice President, Business Services Officer

​

Stephen M. Gagan

Vice President, Manager of Technology

​

Anthony M. Gojmerac

Vice President, Purchasing & Facilities Officer

​

Chelsea M. Hartnett

Vice President, Manager Credit Analysis

​

Janet Isman

Vice President, Chief Information Security Officer

​

Nathan Kirk

Vice President, Consumer Underwriting Manager

​

Melissa A. Lohr

Vice President, Collections & Loan Administration

​

Randy S. McLaughlin

Vice President, Regional Sales Officer

​

Patrick Miles

Vice President, Commercial Relationship Manager

​

David J. O’Leary

Vice President, Residential Mortgage Lending

​

Heidi L. Rosenberger

Vice President, Retail Operations

​

Cynthia L. Stewart

Vice President, Mortgage Administrator

​

Anthony T. Weisenburger

Vice President, Commercial Relationship Manager

​

Michelle D. Wyandt

Vice President, Credit Specialist Project Manager

​

​

Board

110

Table of Directors

J. Michael Adams, Jr.
Attorney-at-Law
  Mike Adams & Associates, LLC

Allan R. Dennison
Non-executive Vice Chairman,
  Retired President &
  Chief Executive Officer
  AmeriServ Financial Bank, and
  Non-executive Vice Chairman of
  the Board of all Subsidiaries

Daniel R. DeVos
Retired President & CEO,
  Concurrent Technologies
  Corporation

Bruce E. Duke, III, M.D.
Retired Surgeon, Conemaugh
  Health Initiatives

Craig G. Ford
Non-executive Chairman,
  Former President & CEO,
  AmeriServ Financial, Inc.,
  AmeriServ Financial Bank, and
  Non-executive Chairman of the
  Board of all Subsidiaries

Kim W. Kunkle
President & CEO,
  Laurel Holdings, Inc.

Margaret A. O’Malley
Attorney-at-Law
  Yost & O’Malley

Mark E. Pasquerilla
President, Pasquerilla
  Enterprises L.P.

Sara A. Sargent
Owner/President,
  The Sargent’s Group

Thomas C. Slater
Retired Owner, President &
  Director, Slater
  Laboratories, Inc.

Jeffrey A. Stopko, CPA
President & Chief Executive
  Officer AmeriServ
  Financial, Inc. &
   AmeriServ Financial Bank

Robert L. Wise
Retired President,
  Pennsylvania Electric Company,
  GPU Genco, Inc. and
  GPU International, Inc. and
  GPU Energy, Inc.Contents

General Officers

Jeffrey A. Stopko, CPA
President & Chief
  Executive Officer

Michael R. Baylor
Executive Vice President &
  Chief Commercial Banking Officer

Jack W. Babich
Senior Vice President, Chief
  Human Resources Officer &
  Corporate Services Officer

Michael A. Bodnar
Senior Vice President, Area
  Executive & Commercial Real
  Estate Manager

Russell B. Flynn
Senior Vice President, Retail
  Lending

Bettina D. Fochler
Senior Vice President, Chief Credit
  Officer

Wayne A. Kessler
Senior Vice President, Area
  Executive Johnstown

Michael D. Lynch
Senior Vice President, Chief
  Financial Officer, Chief Investment
  Officer & Chief Risk Officer

Kerri L. Mueller
Senior Vice President Retail
  Banking

Matthew C. Rigo
Senior Vice President, Area
  Executive, Wilkins Township

J. Seth Smith
Senior Vice President, Area
  Executive State College

Robert E. Werner, III
Senior Vice President & Chief
  Information Officer

Todd C. Allison
Vice President & Director of
  Information Technology

Michael S. Andrascik
Vice President, Bank Security
  Officer

Thomas R. Boyd, Jr.
Vice President, Commercial
  Relationship Manager II

Jennifer L. Devan
Vice President, Chief Compliance
  Officer

Bernard A. Eckenrode
Vice President, Commercial
  Relationship Manager II

Mitchell D. Edwards
Vice President, Commercial
  Relationship Manager III

Jason D. Eminhizer
Vice President, Commercial
  Relationship Manager II

Christine E. Fisher
Vice President, Business Services

Anthony M. Gojmerac
Vice President, Purchasing &
  Facilities Officer

Daniel L. Herr
Vice President, Portfolio Manager

Kevin H. Justice
Vice President, Commercial
  Relationship Manager II,
  Hagerstown

Bruce A. Mabon
Vice President, Collection &
  Assigned Risk Manager
  Patrick R.   Miles Vice President,
  Commercial Relationship
  Manager II Altoona

Elizabeth R. Shank
Vice President, Deposit Operations
  Manager

Cynthia L. Stewart   
  Vice President, Manager Loan
  Administration

Charlene J. Tessari
Vice President, Application and
  IT Risk Management

Michelle D. Wyandt
Vice President, Supervisor Credit
  Analysis

TABLE OF CONTENTS

AMERISERV FINANCIAL, INC.

AMERISERV TRUST &
FINANCIAL SERVICES
COMPANY

Board of Directors

J. Michael Adams, Jr.
Attorney-at-Law
  Mike Adams & Associates, LLC

Allan R. Dennison
Non-executive Vice Chairman,
  Retired President & Chief
  Executive Officer AmeriServ
  Financial Bank, and
  Non-executive Vice Chairman of
  the Board of all Subsidiaries​

AMERISERV TRUST & FINANCIAL
SERVICES COMPANY

​

WEST CHESTER
CAPITAL ADVISORS

​

Board of Directors

​

Board of Directors

​

J. Michael Adams, Jr.

Managing Member of Mike Adams & Associates, LLC

Non-Executive Vice Chairman of the Board of all Subsidiaries

​

Richard W. Bloomingdale
Retired President, PA AFL-CIO

​

Allan R. Dennison
Non-Executive Chairman of the Board of all Subsidiaries

​

James T. Huerth
President & Chief Executive Officer, AmeriServ Trust & Financial Services Company

​

George B. Kaufman
Attorney-at-Law

​

Kim W. Kunkle
President & CEO,
Laurel Holdings, Inc.

​

Mark E. Miller
Retired VP of Facilities and Support Services, UPMC Somerset & President, Pine Grill, Inc.

​

Margaret A. O’Malley
Attorney-at-Law
Yost & O’Malley

​

Sara A. Sargent
Owner/President
The Sargent’s Group

​

Jeffrey A. Stopko, CPA
President & Chief Executive Officer, AmeriServ Financial, Inc. & AmeriServ Financial Bank

​

General Officers

​

James T. Huerth
President & Chief Executive Officer

​

David A. Finui
Executive Vice President, Director of Wealth and Capital Management

​

Michael D. Lynch
Executive Vice President, Treasurer

​

Robert J. Cabala
Senior Vice President, Area Executive, Johnstown

​

​

​

Nicholas E. Debias, Jr., CTA

Senior Vice President, Senior Wealth Management Advisor

​

Bettina D. Fochler
Senior Vice President, Chief Credit Officer

​

Michael P. Geiser
Senior Vice President, Trust Operations Manager

​

Christopher C. Sheedy
Senior Vice President, Director of Specialty Real Estate

​

Kathleen M. Wallace, CPA, CRPP
Senior Vice President, Chief Admin Officer

​

Timothy E. Walters
Senior Vice President, Diversified Services Wealth Advisor

​

Cortnie Beaver
Vice President, Retirement Services Manager

​

Mary Ann Brustle
Vice President, Risk Management & Trust Compliance Officer

​

Keashia R. Holtzman-Kishlock
Vice President, Trust Accounting Officer

​

James A. Hotchkiss
Vice President, Wealth Management Advisor

​

Mark F. Lumley

Vice President, Assistant Trust Operations Manager

​

Justin F. Maser
Vice President, Portfolio Manager

​

Scott D. Porterfield
Vice President, Wealth Management Advisor

​

Trust Company Office Locations

​

216 Franklin Street
AmeriServ Financial Bank Building
Johnstown, PA 15901-1911

​

140 South Main Street
Greensburg, PA 15601

​

J. Michael Adams, Jr.

Managing Member of Mike Adams & Associates, LLC

Non-Executive Vice Chairman of the Board of all Subsidiaries

​

Allan R. Dennison
Non-Executive Chairman of the Board of all Subsidiaries

​

James T. Huerth
President & Chief Executive Officer,
AmeriServ Trust & Financial Services Company

​

Steven M. Krawick, AAMS, CMFC
President & Chief Executive Officer,
West Chester Capital Advisors

​

Jeffrey A. Stopko, CPA
President & Chief Executive Officer,
AmeriServ Financial, Inc. & AmeriServ Financial Bank

​

General Officers

​

Steven M. Krawick, AAMS, CMFC
President & Chief Executive Officer

​

Michael D. Lynch
Executive Vice President, Chief Financial Officer & Treasurer

​

Frank J. Lapinsky
Senior Vice President, Chief Administrative Officer & COO

​

Eric Ludy
Vice President, Portfolio Manager

​

Ron Shostek
Vice President, Portfolio Manager

​

Office Location

​

216 Franklin Street
AmeriServ Financial Bank Building
Johnstown, PA 15901-1911

​

Craig G. Ford
Non-executive Chairman,
  Former President & CEO,
  AmeriServ Financial, Inc.,
  AmeriServ Financial Bank, and
  Non-executive Chairman of the
  Board of all Subsidiaries​

Richard W. Bloomingdale
President, PA AFL-CIO

James T. Huerth
President & Chief Executive
  Officer AmeriServ Trust &
  Financial Services Company

George B. Kaufman
Attorney-at-Law

Kim W. Kunkle
President & CEO,
  Laurel Holdings, Inc.

Mark E. Miller
Director of Support Services,
  Somerset Hospital & President,
  Pine Grill, Inc.

Margaret A. O’Malley
Attorney-at-Law Yost &
  O’Malley

Sara A. Sargent
Owner/President
  The Sargent’s Group

Jeffrey A. Stopko, CPA
President & Chief Executive
  Officer AmeriServ Financial, Inc.
  & AmeriServ Financial Bank

Robert L. Wise
Retired President,
  Pennsylvania Electric Company,
  GPU Genco, Inc. and GPU
  International, Inc. and GPU
  Energy, Inc.​

General Officers

James T. Huerth
President & Chief Executive
  Officer

Nicholas E. Debias, Jr., CTA
Senior Vice President, Senior
  Wealth Management Advisor

David A. Finui
Senior Vice President, Personal
  Trust & Financial Services
  Manager

Bettina D. Fochler
Senior Vice President,
  Chief Credit Officer

Michael D. Lynch
Senior Vice President, Treasurer

Ernest L. Petersen, III
Senior Vice President,
  Chief Administrative Officer &
  Diversified Services Manager

Christopher C. Sheedy
Senior Vice President & Trust
  Specialty Real Estate Director

Kathleen M. Wallace
Senior Vice President,
  Retirement Services Manager

Mary Ann Brustle
Vice President Risk Management
  &Trust Compliance Officer

Sharon E. Delic
Vice President, Retirement
  Services Officer

Michael P. Geiser
Vice President, Trust Operations
  Manager

John T. Krupa
Vice President, Wealth
  Management Advisor

David M. Margetan
Vice President, Retirement
  Services Officer

Justin F. Maser
Vice President, Portfolio Manager

Monica M. Papuga
Vice President, Senior Trust
  Accounting Officer

Trust Company Office

  216 Franklin Street
  AmeriServ Financial Bank
  Building PO Box 520
  Johnstown, PA 15907-0520

WEST CHESTER
CAPITAL ADVISORS

Board of Directors

J. Michael Adams, Jr.
Attorney-at-Law
  Mike Adams & Associates, LLC

Allan R. Dennison
Non-executive Vice Chairman,
  Retired President &
  Chief Executive Officer
  AmeriServ Financial Bank,
  and Non-executive Vice Chairman
  of the Board of all Subsidiaries

Craig G. Ford
Non-executive Chairman, Former
  President & CEO, AmeriServ
  Financial, Inc., AmeriServ
  Financial Bank, and
  Non-executive Chairman
  of the Board of all Subsidiaries

James T. Huerth
President & Chief Executive
  Officer AmeriServ Trust &
  Financial Services Company

Steven M. Krawick, AAMS, CMFC
President & Chief Executive
  Officer West Chester Capital
  Advisors

Jeffrey A. Stopko, CPA
President & Chief Executive Officer
  AmeriServ Financial, Inc. &
  AmeriServ Financial Bank

Robert L. Wise
Retired President,
  Pennsylvania Electric Company,
  GPU Genco, Inc. and GPU
  International, Inc. and GPU
  Energy, Inc.

General Officers

Steven M. Krawick, AAMS, CMFC
President & Chief Executive
  Officer

Michael D. Lynch
Senior Vice President, Chief
  Financial Officer & Treasurer

Frank J. Lapinsky
Vice President, Chief
  Administrative
  Officer & Portfolio Manager

Mary F. Stanek
Vice President, Portfolio Manager

Office Location

  216 Franklin Street
  AmeriServ Financial Bank
  Building PO Box 520 Johnstown,
  PA 15907-0520111