10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

(MARK ONE)

☒

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

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2019

OR

☐

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)

PENNSYLVANIA	25-1424278
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

MAIN & FRANKLIN STREETS,
P.O. BOX 430, JOHNSTOWN,
PENNSYLVANIA (Address of principal executive offices) 15907-0430 (Zip Code)

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

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

Title Of Each Class	Trading Symbol	Name of 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)	ASRVP	The NASDAQ Stock Market LLC

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

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes ☒ 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. ☐ Yes ☒ 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. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). ☒ Yes ☐ No

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

Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Smaller reporting company ☒
Emerging growth company ☐​

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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes ☒ 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 price 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 $65,717,632 as of June 30, 2019.

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. There were 17,057,871 shares outstanding as of January 31, 2020.

DOCUMENTS INCORPORATED BY REFERENCE.

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

FORM 10-K INDEX

​	Page No.
PART I	​	​
Item 1. Business	​	1
Item 1A. Risk Factors	​	12
Item 1B. Unresolved Staff Comments	​	12
Item 2. Properties	​	12
Item 3. Legal Proceedings	​	12
Item 4. Mine Safety Disclosures	​	12
PART II	​	​
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer     Purchases of Equity Securities	​	13
Item 6. Selected Consolidated Financial Data	​	14
Item 7. Management’s Discussion and Analysis of Consolidated Financial Condition and     Results of Operations	​	15
Item 7A. Quantitative and Qualitative Disclosures about Market Risk	​	37
Item 8. Consolidated Financial Statements and Supplementary Data	​	39
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial    Disclosure	​	95
Item 9A. Controls and Procedures	​	95
Item 9B. Other Information	​	95
PART III	​	​
Item 10. Directors, Executive Officers, and Corporate Governance	​	96
Item 11. Executive Compensation	​	96
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related     Stockholder Matters	​	96
Item 13. Certain Relationships and Related Transactions, and Director Independence	​	96
Item 14. Principal Accountant Fees and Services	​	96
PART IV	​	​
Item 15. Exhibits, Financial Statement Schedules	​	97
Signatures	​	99

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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 include AmeriServ Trust and Financial Services Company (the Trust Company), formed in October 1992, and AmeriServ Life Insurance Company (AmeriServ Life), formed in October 1987. When used in this report, the “Company” may refer 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 three wholly owned subsidiary entities. At December 31, 2019, the Company had, on a consolidated basis, total assets, deposits, and shareholders’ equity of  $1.2 billion, $960.5 million, and $98.6 million, respectively. The Company and its subsidiaries derive substantially all of their income from banking and bank-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). The Company is also under the jurisdiction of the Securities and Exchange Commission (the 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 Code). Through 16 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, money orders, and traveler’s checks; 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-construction loans, business savings accounts, certificates of deposit, wire transfers, night depository, and lock box services. The Bank also operates 17 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 registered investment advisor, is a subsidiary of the Bank. The Company also operates loan production offices (LPOs) in Altoona and Wilkins Township in 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 its 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-mile radius of Johnstown, Pennsylvania, the Bank’s headquarters.

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, 2019:

1

Headquarters	Johnstown, PA
Total Assets	​	$	1,156,426
Total Investment Securities	​		175,278
Total Loans and Loans Held for Sale (net of unearned income)	​		887,574
Total Deposits	​		960,712
Total Net Income	​		7,082
Asset Leverage Ratio	​		9.50%
Return on Average Assets	​		0.61
Return on Average Equity	​		6.61
Total Full-time Equivalent Employees	​		240

RISK MANAGEMENT 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. The Company controls and monitors these risks with policies, procedures, and various levels of oversight from the Company’s Board of Directors (the Board) and management. The Company has a Management Enterprise Risk Committee with Board of Director representation to help manage and monitor the Company’s risk position which is reported formally to the Board 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 control 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 control 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. The Company uses its credit policy and disciplined approach to evaluating the adequacy of the allowance for loan losses (the ALL) to control and manage credit risk. The Company’s investment policy and hedging policy 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 also 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.

2

Commercial Loans Secured by Non-Owner Occupied Real Estate

This category includes various types of loans, including acquisition and construction of investment 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 in accordance with federal and state laws and regulations and in accordance with generally accepted accounting principles (GAAP).

The investment portfolio is primarily made up of AAA rated agency mortgage-backed securities, high quality corporate securities, 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, unless otherwise approved by the Company’s CEO or the Asset/Liability Management Committee.

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. The following table sets forth the cost basis and fair value of the Company’s investment portfolio as of the periods indicated:

3

Investment securities available for sale at:

​	AT DECEMBER 31,
​	2019			2018			2017
​	(IN THOUSANDS)
U.S. Agency	​	$	5,084	​	$	7,685	​	$	6,612
Municipal	​		14,678	​	​	13,301	​	​	7,198
Corporate bonds	​		39,769	​	​	37,359	​	​	35,886
U.S. Agency mortgage-backed securities	​		80,046	​	​	90,169	​	​	79,854
Total cost basis of investment securities available for sale	​	$	139,577	​	$	148,514	​	$	129,550
Total fair value of investment securities available for sale	​	$	141,749	​	$	146,731	​	$	129,138

Investment securities held to maturity at:

​	AT DECEMBER 31,
​	2019			2018			2017
​	(IN THOUSANDS)
Municipal	​	$	24,438	​	$	24,740	​	$	22,970
U.S. Agency mortgage-backed securities	​		9,466	​	​	9,983	​	​	9,740
Corporate bonds and other securities	​		6,032	​	​	6,037	​	​	6,042
Total cost basis of investment securities held to maturity	​	$	39,936	​	$	40,760	​	$	38,752
Total fair value of investment securities held to maturity	​	$	41,082	​	$	40,324	​	$	38,811

DEPOSITS

The Bank has a stable core deposit base made up of traditional commercial bank products that exhibits modest fluctuation, 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 Fund 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 three calendar years:

​	AT DECEMBER 31,
​	2019				2018				2017
​	(IN THOUSANDS, EXCEPT PERCENTAGES)
Demand:	​	​	​	​	​	​	​	​	​	​	​	​
Non-interest bearing	​	$	151,292	—%	​	$	174,108	—%	​	$	182,301	—%
Interest bearing	​		170,326	0.94	​	​	138,572	0.82	​	​	129,589	0.49
Savings	​		96,783	0.17	​	​	98,035	0.17	​	​	97,405	0.17
Money market	​		234,387	1.08	​	​	249,618	0.87	​	​	275,636	0.52
Certificates of deposit in denominations of $100,000 or more	​		36,324	2.33	​	​	31,893	1.66	​	​	29,002	1.10
Other time	​		290,543	2.09	​	​	267,498	1.70	​	​	262,473	1.41
Total deposits	​	$	979,655	1.35%	​	$	959,724	1.07%	​	$	976,406	0.79%

4

The maturities on certificates of deposit of  $100,000 or more as of December 31, 2019, are as follows:

​	(IN THOUSANDS)
MATURING IN:	​	​	​
Three months or less	​	$	4,893
Over three through six months	​		10,325
Over six through twelve months	​		18,227
Over twelve months	​		5,325
Total	​	$	38,770

LOANS

The loan portfolio of the Company consisted of the following:

​

AT DECEMBER 31,

​

2019

2018

2017

2016

2015

​

(IN THOUSANDS)

Commercial:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Commercial and industrial

​

$

174,021

​

$

158,306

​

$

159,219

​

$

171,570

​

$

181,117

Commercial loans secured by owner occupied real estate(1)

​

91,693

​

​

91,938

​

​

89,979

​

​

91,861

​

​

97,172

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

​

363,882

​

​

356,805

​

​

374,173

​

​

355,172

​

​

324,971

Real estate – residential mortgage(1)

​

235,239

​

​

237,964

​

​

247,278

​

​

245,765

​

​

257,937

Consumer

​

18,255

​

​

17,591

​

​

19,383

​

​

19,872

​

​

20,344

Total loans

​

883,090

​

​

862,604

​

​

890,032

​

​

884,240

​

​

881,541

Less: Unearned income

​

384

​

​

322

​

​

399

​

​

476

​

​

557

Total loans, net of unearned income

​

$

882,706

​

$

862,282

​

$

889,633

​

$

883,764

​

$

880,984

(1)

For each of the periods presented beginning with December 31, 2019, real estate-construction loans constituted 4.9%, 3.5%, 4.1%, 4.7%, and 3.0% of the Company’s total loans, net of unearned income, respectively.

Secondary Market Activities

The residential lending department of the Bank continues to originate one-to-four family mortgage loans for customers, the majority of which are sold to outside investors in the secondary market and some of which are retained for the Bank’s portfolio. Mortgages sold in 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. 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. These loans are usually kept in the Bank’s portfolio.

5

Non-performing Assets

The following table presents information concerning non-performing assets:

​

AT DECEMBER 31,

​

2019

2018

2017

2016

2015

​

(IN THOUSANDS, EXCEPT PERCENTAGES)

Non-accrual loans:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Commercial and industrial

​

$

—

​

$

—

​

$

353

​

$

496

​

$

4,260

Commercial loans secured by owner occupied real estate

​

—

​

​

—

​

​

859

​

​

—

​

​

—

Commercial loans secured by non-owner occupied real estate

​

8

​

​

11

​

​

547

​

​

178

​

​

18

Real estate – residential mortgage

​

1,479

​

​

1,210

​

​

1,257

​

​

929

​

​

1,788

Total

​

1,487

​

​

1,221

​

​

3,016

​

​

1,603

​

​

6,066

Other real estate owned:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Commercial loans secured by owner occupied real estate

​

—

​

​

157

​

​

—

​

​

—

​

​

—

Real estate – residential mortgage

​

37

​

​

—

​

​

18

​

​

21

​

​

75

Total

​

37

​

​

157

​

​

18

​

​

21

​

​

75

Total restructured loans not in non-accrual (TDR)

​

815

​

​

—

​

​

—

​

​

—

​

​

156

Total non-performing assets including TDR

​

$

2,339

​

$

1,378

​

$

3,034

​

$

1,624

​

$

6,297

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

​

0.26%

​

​

0.16%

​

​

0.34%

​

​

0.18%

​

​

0.71%

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,
​	2019			2018			2017			2016			2015
​	(IN THOUSANDS)
Interest income due in accordance with original terms	​	$	57	​	$	75	​	$	103	​	$	118	​	$	94
Interest income recorded	​		—	​	​	—	​	​	(75)	​	​	—	​	​	—
Net reduction in interest income	​	$	57	​	$	75	​	$	28	​	$	118	​	$	94

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 billion that are not recognized on the Company’s balance sheet at December 31, 2019. 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

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defined contribution employee benefit plans, and individual retirement accounts are included in this segment. This segment also includes financial services, which include the sale of mutual funds, annuities, and insurance products. The wealth management business also includes the union collective investment funds, namely the ERECT 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, 2019, the Trust Company had total assets of  $6.5 million and total stockholder’s equity of  $6.5 million. In 2019, the Trust Company contributed earnings to the Company as its gross revenue amounted to $9.3 million and the net income contribution was $1.5 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 laws 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, and the Board of Governors of the Federal Reserve System (the Federal Reserve). At December 31, 2019, AmeriServ Life had total assets of  $272,000.

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 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. 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, and pension trusts are important competitors for various types of financial services. Personal 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

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 Federal government contracts, punctuated by one of the premier defense trade shows in the U.S., the annual Showcase for Commerce. The city also hosts annual events such as the Flood City Music Festival and the Thunder in the Valley Motorcycle Rally, which draw several thousand visitors. The Johnstown, PA MSA unemployment rate decreased from a 5.2% average in 2018 to a 5.0% average in 2019. The Johnstown, PA MSA continues to have one of the highest jobless rates among the 18 metropolitan statistical areas across the state. This coupled with a declining population trend creates a challenge moving forward.

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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 3.2% average in 2018 to a 3.1% average in 2019 and remains 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-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 4.2% average in 2018 to a 3.7% average in 2019.

The Company also has loan production offices in Wilkins Township in Allegheny County and Altoona in Blair County, Pennsylvania. 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 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 4.3% average in 2018 to a 4.1% average in 2019.

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 remained stable in 2019 at the 2018 level of 4.2%.

EMPLOYEES

The Company employed 328 people as of December 31, 2019 in full- and part-time positions. Approximately 155 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-year labor contract with the United Steelworkers Local that will expire on October 15, 2021. The contract calls for annual wage increases of 3.0%. The Company has not experienced a work stoppage since 1979. The Company is one of an estimated ten union represented banks nationwide.

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 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) 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

8

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.

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 minimum capital, imposed as a ratio of capital to assets. The Federal Deposit Insurance Act, as amended (the 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 “prompt corrective action” for insured depository institutions that do not meet minimum capital requirements based on these categories. Both 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, 2019, 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 revise 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 was phased in over a four-year period ending January 1, 2019 with minimum capital requirements becoming increasingly stricter each year of the transition. 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 Plus Buffer As of December 31,				Well Capitalized
​	2018		2019
Common equity tier 1 capital ratio	​	6.38%	​	7.00%	​	6.50%
Tier 1 capital ratio	​	7.88%	​	8.50%	​	8.00%
Total capital ratio	​	9.88%	​	10.50%	​	10.00%

Under the current 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 of 2.50% of total risk weighted assets.

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

9

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 Act 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 the key processes and entity level controls, and testing of the effectiveness of key controls.

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, 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 AND CONSUMER PROTECTION ACT

The Dodd-Frank Act was 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.

10

A provision of the Dodd-Frank Act eliminated the federal prohibitions on paying interest 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.

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.

ECONOMIC GROWTH, REGULATORY RELIEF, AND CONSUMER PROTECTION ACT

The Economic Growth, Regulatory Relief, and Consumer Protection Act (the “Act”), which was designed to ease certain restrictions imposed by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, was enacted into law on May 24, 2018. Most of the changes made by the Act can be grouped into five general areas: mortgage lending; certain regulatory relief for “community” banks; enhanced consumer protections in specific areas, including subjecting credit reporting agencies to additional requirements; certain regulatory relief for large financial institutions, including increasing the threshold at which institutions are classified a systemically important financial institutions (from $50 billion to $250 billion) and therefore subject to stricter oversight, and revising the rules for larger institution stress testing; and certain changes to federal securities regulations designed to promote capital formation.

Some of the key provisions of the Act as it relates to community banks and bank holding companies include, but are not limited to: (i) designating mortgages held in portfolio as “qualified mortgages” for banks with less than $10 billion in assets, subject to certain documentation and product limitations; (ii) exempting banks with less than $10 billion in assets from Volcker Rule requirements relating to proprietary trading; (iii) simplifying capital calculations for banks with less than $10 billion in assets by requiring federal banking agencies to establish a community bank leverage ratio of tangible equity to average consolidate assets not less than 8% or more than 10% and provide that banks that maintain tangible equity in excess of such ratio will be deemed to be in compliance with risk-based capital and leverage requirements; (iv) assisting smaller banks with obtaining stable funding by providing an exception for reciprocal deposits from FDIC restrictions on acceptance of brokered deposits; (v) raising the eligibility for use of short-form call reports from $1 billion to $5 billion in assets; and (vi) clarifying definitions pertaining to high volatility commercial real estate loans (HVCRE), which require higher capital allocations, so that only loans with increased risk are subject to higher risk weightings.

In September 2019, as directed pursuant to the Act, the federal bank regulatory agencies issued final rules for a community bank leverage ratio (“CBLR”) for certain community banking organizations, which will be available to use in call reports filed for the period beginning January 1, 2020 or April 1, 2020 pursuant to subsequent final rules adopted in October 2019. Under the final rules, a bank or holding company would be eligible to elect the CBLR framework if the institution had less than $10.0 billion in total consolidated assets, met certain risk-based qualifying criteria and had a CBLR greater than 9%. A qualifying community banking organization that elected to opt in to the CBLR framework would not be subject to

11

risk-based and leverage capital requirements under the Basel III rules. In July 2019, the federal bank regulatory agencies issued final rules pursuant to the Act simplifying several requirements in the agencies’ regulatory capital rules for banks generally less than $250 billion in assets. As directed pursuant to the Act, the federal bank regulatory agencies issued final rules increasing the asset thresholds for management interlocks between depository institutions, which became effective in October 2019. Also, in October 2019, the federal bank regulatory agencies issued final rules to, among other things, increase the threshold for appraisals in a residential real estate transaction from $250,000 to $400,000 and make conforming changes to add to the list of exempt transactions those transactions secured by residential property in rural areas that have been exempted from the agencies’ appraisal requirements pursuant to the Act. Additionally, the Act requires the enactment of a number of other implementing regulations, the details of which may have a material effect on the ultimate impact of the law. The Company continues to analyze the changes implemented by the Act and further rulemaking from federal banking regulators, but, at this time, does not believe that such changes will materially impact the Company’s business, operations, or financial results.

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 internet at the SEC’s website at http://www.sec.gov.

Our internet address is http://www.ameriserv.com. We make available, free of charge on http://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.

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 eleven floors of the building adjacent thereto. The Company occupies the main office and its subsidiary entities have 13 other locations which are owned. Seven additional locations are leased with terms expiring from September 30, 2020 to 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 DISCLOSURES

Not applicable.

12

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, 2020, the Company had 2,798 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, 2019:	​	​	​	​	​	​	​	​	​
First Quarter	​	$	4.24	​	$	3.97	​	$	0.020
Second Quarter	​	​	4.30	​	​	4.03	​	​	0.025
Third Quarter	​	​	4.24	​	​	4.08	​	​	0.025
Fourth Quarter	​	​	4.30	​	​	4.11	​	​	0.025
Year ended December 31, 2018:	​	​	​	​	​	​	​	​	​
First Quarter	​	$	4.20	​	$	4.00	​	$	0.015
Second Quarter	​	​	4.30	​	​	4.00	​	​	0.020
Third Quarter	​	​	4.55	​	​	4.10	​	​	0.020
Fourth Quarter	​	​	4.43	​	​	3.98	​	​	0.020

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.

On July 17, 2018, the Company announced a common stock repurchase program that called for AmeriServ Financial, Inc. to buy back up to 3%, or approximately 540,000 shares, of its outstanding common stock over a 12-month time period. As of the end of the first quarter of 2019, all shares authorized under this plan had been repurchased.

On April 16, 2019, the Company announced a new program to repurchase up to 3%, or approximately 526,000 shares, of the Company’s outstanding common stock during the next 12 months. Following are the Company’s monthly common stock purchases during the fourth quarter of 2019. 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, 2019	​	15,107	​	$	4.21	​	15,107	​	111,698
November 1 – 30, 2019	​	51,486	​	​	4.24	​	51,486	​	60,212
December 1 – 31, 2019	​	24,250	​	​	4.24	​	24,250	​	35,962
Total	​	90,843	​	​	​	​	90,843	​	​

During 2019, the Company was able to repurchase a total of 602,349 shares at an average price of $4.23 under these repurchase programs.

13

ITEM 6.

SELECTED CONSOLIDATED FINANCIAL DATA

SELECTED FIVE-YEAR CONSOLIDATED FINANCIAL DATA

​

AT OR FOR THE YEAR ENDED DECEMBER 31,

​

2019

2018

2017

2016

2015

​

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

SUMMARY OF INCOME STATEMENT DATA:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Total interest income

​

$

49,767

​

$

47,094

​

$

44,356

​

$

41,869

​

$

41,881

Total interest expense

​

14,325

​

​

11,600

​

​

8,795

​

​

7,735

​

​

6,520

Net interest income

​

35,442

​

​

35,494

​

​

35,561

​

​

34,134

​

​

35,361

Provision (credit) for loan losses

​

800

​

​

(600)

​

​

800

​

​

3,950

​

​

1,250

Net interest income after provision (credit) for loan losses

​

34,642

​

​

36,094

​

​

34,761

​

​

30,184

​

​

34,111

Total non-interest income

​

14,773

​

​

14,224

​

​

14,645

​

​

14,638

​

​

15,267

Total non-interest expense

​

41,815

​

​

40,873

​

​

40,726

​

​

41,615

​

​

41,038

Income before income taxes

​

7,600

​

​

9,445

​

​

8,680

​

​

3,207

​

​

8,340

Provision for income taxes

​

1,572

​

​

1,677

​

​

5,387

​

​

897

​

​

2,343

Net income

​

$

6,028

​

$

7,768

​

$

3,293

​

$

2,310

​

$

5,997

Net income available to common shareholders

​

$

6,028

​

$

7,768

​

$

3,293

​

$

2,295

​

$

5,787

PER COMMON SHARE DATA:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Basic earnings per share

​

$

0.35

​

$

0.43

​

$

0.18

​

$

0.12

​

$

0.31

Diluted earnings per share

​

0.35

​

​

0.43

​

​

0.18

​

​

0.12

​

​

0.31

Cash dividends declared

​

0.095

​

​

0.075

​

​

0.060

​

​

0.050

​

​

0.040

Book value at period end

​

5.78

​

​

5.56

​

​

5.25

​

​

5.05

​

​

5.19

BALANCE SHEET AND OTHER DATA:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Total assets

​

$

1,171,184

​

$

1,160,680

​

$

1,167,655

​

$

1,153,780

​

$

1,148,497

Loans and loans held for sale, net of unearned income

​

887,574

​

​

863,129

​

​

892,758

​

​

886,858

​

​

883,987

Allowance for loan losses

​

9,279

​

​

8,671

​

​

10,214

​

​

9,932

​

​

9,921

Investment securities available for sale

​

141,749

​

​

146,731

​

​

129,138

​

​

127,077

​

​

119,467

Investment securities held to maturity

​

39,936

​

​

40,760

​

​

38,752

​

​

30,665

​

​

21,419

Deposits

​

960,513

​

​

949,171

​

​

947,945

​

​

967,786

​

​

903,294

Total borrowed funds

​

100,574

​

​

108,177

​

​

115,701

​

​

78,645

​

​

117,058

Stockholders’ equity

​

98,614

​

​

97,977

​

​

95,102

​

​

95,395

​

​

118,973

Full-time equivalent employees

​

309

​

​

303

​

​

302

​

​

305

​

​

318

SELECTED FINANCIAL RATIOS:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Return on average assets

​

0.51%

​

​

0.67%

​

​

0.28%

​

​

0.20%

​

​

0.54%

Return on average total equity

​

6.02

​

​

8.08

​

​

3.42

​

​

2.30

​

​

5.10

Loans and loans held for sale, net of unearned income, as a percent of deposits, at period end

​

92.41

​

​

90.94

​

​

94.18

​

​

91.64

​

​

97.86

Ratio of average total equity to average assets

​

8.52

​

​

8.28

​

​

8.24

​

​

8.79

​

​

10.65

Common stock cash dividends as a percent of net income available to common shareholders

​

27.36

​

​

17.31

​

​

33.80

​

​

41.18

​

​

13.03

Interest rate spread

​

3.05

​

​

3.08

​

​

3.14

​

​

3.08

​

​

3.33

Net interest margin

​

3.29

​

​

3.31

​

​

3.32

​

​

3.26

​

​

3.49

Allowance for loan losses as a percentage of loans, net of unearned income, at period end

​

1.05

​

​

1.00

​

​

1.14

​

​

1.12

​

​

1.13

Non-performing assets as a percentage of loans and other real estate owned, at period end

​

0.26

​

​

0.16

​

​

0.34

​

​

0.18

​

​

0.71

Net charge-offs as a percentage of average loans

​

0.02

​

​

0.11

​

​

0.06

​

​

0.44

​

​

0.11

Cumulative one year interest rate sensitivity gap ratio, at period end

​

1.41

​

​

1.15

​

​

1.22

​

​

1.44

​

​

1.23

14

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, 2019, 2018, AND 2017

2019 SUMMARY OVERVIEW:

On January 21, 2020, AmeriServ issued a press release detailing our financial results for the fourth quarter and the full year of 2019. Results included net income of  $669,000, or $0.04 per share, as compared with the fourth quarter of 2018, when net income was $1,928,000, or $0.11 per share. The full year of 2019 resulted in net income of  $6,028,000, or $0.35 per share, as compared with net income of  $7,768,000, or $0.43 per share, for 2018. This decline is explained primarily by two specific events during the fourth quarter of 2019.

First, financial institutions such as AmeriServ are required to invest in positive economic progress within the markets where the institution conducts business. This Community Reinvestment Act (CRA) was passed into law by Congress in the latter half of the last century. Fortunately, there are occasions when such programs result in economic growth in areas where growth is needed. However, there are also occasions when the programs fail. AmeriServ previously provided $500,000 for such a program, but, in late 2019, AmeriServ was notified by a specific Federal agency that the managing company of this particular fund was placed into receivership. Consequently, a $500,000 impairment charge was recognized on this CRA investment in the fourth quarter of 2019, and there will be no further developments or losses. It should be noted that the Company only has one other similar CRA related investment that totals $100,000 that has been performing as expected.

Secondly, shortly after Christmas in 2019, we were informed of the unexpected death of one of our large commercial borrowers. The $6.5 million loan had been on the books since the spring of 2018 and was performing as agreed. AmeriServ’s legal counsel has already begun to work with the attorneys for the estate. In such situations, while AmeriServ regrets the passing of this individual, necessary actions are being taken to protect the interests of AmeriServ. As a result, an additional reserve of  $675,000 was allocated against this loan while the legal discussions take place. Since the date of the borrower’s passing was December 26, 2019, it was necessary for this reserve to be established in the fourth quarter of 2019.

On a brighter note, the quarter and the year contained several positive results:

1)

In spite of the disarray in the national economy from time to time, 2019 was a very strong year for loan closings. Both November and December were quite active, and this trend may continue in 2020.

2)

The 2019 deposit performance has been strong. Consumer and commercial customers were very active which resulted in solid growth that permitted AmeriServ to report the highest average level of deposits in the history of the company.

3)

In 2018, fees in our wealth management activities set a record. We are excited to report that, in 2019, wealth management reported an even higher total of fees. This is a new record for the second consecutive year. Additionally, our sizable wealth management company is well positioned for further revenue growth in 2020 with the equity markets reaching record highs to close out 2019.

4)

Additionally, during 2019, the tangible book value(1) of AmeriServ shares passed $5.00. This was an increase of  $0.20 per share, or 4.1%, over December 2018 and reflects the benefits of active capital management. As of December 31, 2019, our book value per share was $5.78.

This progress indicates that our business model is healthy. AmeriServ continues to lend approximately 90% of our deposits to small and medium size businesses and consumers in our region. We want this economic

(1)

See reconciliation of non-GAAP tangible book value later in this MD&A.

15

expansion to continue. Our energies are focused on helping to keep our region economically strong while providing a competitive return to our shareholders. Specifically, in 2019, as a result of the increased cash dividend and the repurchase of 602,349 shares of AmeriServ common stock, we were able to return approximately 70% of our 2019 earnings to our shareholders while still maintaining a strong balance sheet which is conservatively constructed and maintained.

PERFORMANCE 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,
​	2019			2018			2017
​	(IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
Net income	​	$	6,028	​	$	7,768	​	$	3,293
Diluted earnings per share	​		0.35	​	​	0.43	​	​	0.18
Return on average assets	​		0.51%	​	​	0.67%	​	​	0.28%
Return on average equity	​		6.02	​	​	8.08	​	​	3.42

The Company reported net income of  $6,028,000, or $0.35 per diluted common share in 2019. This represents an 18.6% decrease in earnings per share from the full year of 2018 when net income totaled $7,768,000, or $0.43 per diluted common share. The Company’s return on average equity declined to 6.02% for the 2019 year from 8.08% in 2018. Finally, the Company increased tangible book value per share by 4.1% during 2019 and returned almost 70% of net income to its shareholders through accretive common stock buybacks and an increased cash dividend.

The Company reported net income of  $7.8 million, or $0.43 per diluted common share, for 2018. This represented an 139% increase in earnings per share from 2017 where net income totaled $3.3 million, or $0.18 per diluted common share. The strong growth in earnings resulted from a favorable combination of lower income tax expense, outstanding asset quality, and well controlled non-interest expense.

The Company reported net income of  $3.3 million, or $0.18 per diluted common share, for 2017. This represented a 50% increase in earnings per share from 2016 where net income totaled $2.3 million, or $0.12 per diluted 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. The additional income tax expense negatively impacted diluted earnings per share by $0.14 for both the fourth quarter and full year of 2017.

NET INTEREST INCOME AND 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 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:

​	YEAR ENDED DECEMBER 31,
​	2019			2018			2017
​	(IN THOUSANDS, EXCEPT RATIOS)
Interest income	​	$	49,767	​	$	47,094	​	$	44,356
Interest expense	​		14,325	​	​	11,600	​	​	8,795
Net interest income	​		35,442	​	​	35,494	​	​	35,561
Net interest margin	​		3.29%	​	​	3.31%	​	​	3.32%

2019 NET INTEREST PERFORMANCE OVERVIEW.   The Company’s net interest income for the full year of 2019 decreased by $52,000, or 0.1%, when compared to the full year of 2018. The Company’s net interest margin was 3.29% for the full year of 2019 representing a two basis point decline from the full year

16

of 2018. Our net interest margin performance was challenged throughout 2019 as the U.S. Treasury Yield Curve shifted downward, flattened and became inverted in certain segments, at various times during the year. The lower interest rate environment along with a lower full year average total loan portfolio balance resulted in the modest year over year unfavorable comparison for net interest income. Positively impacting net interest income during 2019 was a favorable shift experienced in the mix of total average interest bearing liabilities as the amount of total interest bearing deposits increased and resulted in less reliance on higher cost borrowings to fund interest earning assets. Total average earning assets increased by $6.7 million, or 0.6% in 2019. Specifically, total investment securities averaged $194 million in 2019 which is $9.5 million, or 5.1%, higher than the 2018 full year average. Total loans averaged $875 million in 2019 which is $6.6 million, or 0.7%, lower than the 2018 full year average.

Total average interest bearing liabilities increased by $31.5 million, or 3.6%, as a lower level of total average FHLB borrowings was more than offset by a higher level of interest bearing deposits. Total interest bearing deposits averaged $828 million in 2019 and increased when compared to the 2018 average by $42.7 million, or 5.4%. The 2019 full year average of FHLB borrowed funds was $63.4 million, which represented a decrease of  $14.7 million, or 18.8%. Total deposits, including non-interest bearing demand deposits, averaged $980 million for the full year of 2019, which was $19.9 million, or 2.1%, higher than the $960 million average for the full year of 2018. Overall, the Company’s loan to deposit ratio averaged 89.1% in the fourth quarter of 2019 which we believe indicates that the Company has ample capacity to grow its loan portfolio.

COMPONENT CHANGES IN NET INTEREST INCOME: 2019 VERSUS 2018.   Regarding the separate components of net interest income, the Company’s total interest income in 2019 increased by $2.7 million, or 5.7%, when compared to 2018. Total average earning assets increased by $6.7 million, or 0.6%, in 2019 as a lower level of total average loans were more than offset by an increased level of total investment securities. Also contributing to the higher level of interest income was the earning asset yield increasing by 22 basis points from 4.39% to 4.61%. All categories within the earning asset base demonstrated an interest income increase between years. The average total loan portfolio yield increased by 25 basis points from 4.66% to 4.91% in 2019 while the yield on total investment securities increased by 19 basis points from 3.17% to 3.36%. Total investment securities averaged $194 million for the full year of 2019 which is $9.5 million, or 5.1%, higher than the $185 million average in 2018. The growth in the investment securities portfolio occurred primarily as the year progressed during 2018 and is the result of management taking advantage of the rising interest rate environment experienced during 2018 which provided an attractive market for additional security purchases. Purchases primarily focused on federal agency mortgage backed securities due to the ongoing cash flow that these securities provide. Also, management continued its portfolio diversification strategy through purchases of high quality corporate and taxable municipal securities. Investment security purchase activity slowed significantly during 2019 as the interest rate market was less favorable. Total loans averaged $875 million for the full year of 2019 which is $6.6 million, or 0.7%, lower than the 2018 full year average. Overall, total loan originations in 2019 exceeded the prior year’s level by $50.4 million and also exceeded another strong level of loan payoffs during the year. However, because of the high level of loan payoffs received late in 2018, the full year average comparison between years is unfavorable. Loan pipelines remained strong throughout 2019. Loan interest income increased by $1.9 million, or 4.6%, between the full year of 2019 and the full year of 2018. The higher loan interest income primarily reflects the Federal Reserve increasing the federal funds interest rate in 2018. This resulted in new loans originating at higher yields throughout 2018 and during the first half of 2019 and also caused the upward repricing of certain loans tied to LIBOR or the prime rate as both of these indices moved up with the federal funds rate increases in 2018. Certain floating rate loans, however, did reprice down in the second half of 2019 as the Federal Reserve reduced the federal funds rate by a total of 75 basis points in the second half of 2019. Also, included in the favorable year over year loan interest income increase was a higher level of loan fee income by $325,000, due primarily to prepayment fees collected on certain early loan payoffs.

Total interest expense for the twelve months of 2019 increased by $2.7 million, or 23.5%, when compared to 2018, due to higher levels of deposit interest expense which more than offset a slight decrease in borrowings interest expense. Deposit interest expense in 2019 was higher by $2.7 million, or 32.5%, for the full the year which reflects the higher level of total average interest bearing deposits and certain indexed money market accounts repricing upward due to the impact of the Federal Reserve increasing interest rates during 2018. The full year average cost of total interest bearing deposits increased between years by 28 basis points from

17

1.07% in 2018 to 1.35% in 2019. Even though total average interest bearing deposit cost increased for the full year of 2019, the Company did experience deposit pricing relief during the third and fourth quarters of 2019 because of the Federal Reserve easing interest rates late in July, September and October of 2019. Specifically, the Company’s cost of interest bearing deposits declined by 10 basis points between the third and fourth quarters of 2019. However, the Company continues to experience competitive market pressure to retain existing deposit customers and attract new customer deposits. Customer product preference changed as well in 2019 resulting in movement of funds from non-interest bearing demand deposit accounts and lower yielding money market accounts into higher yielding certificates of deposits. Overall, total deposits grew during the year and averaged $980 million for the full year of 2019, which was $19.9 million, or 2.1%, higher than the 2018 full year average.

The Company experienced a $21,000, or 0.7%, decrease in the interest cost of borrowings for the full year of 2019. The decline is a result of the lower total average borrowings balance between years combined with the impact from the Federal Reserve’s action to decrease interest rates three times in 2019 and the immediate impact that these rate decreases had on the cost of overnight borrowed funds and the replacement of matured FHLB term advances. The total full year average term advance borrowings balance increased by approximately $7.3 million, or 16.3%, when compared to the full year 2018. This increase is due to the inversion demonstrated by the U.S. Treasury Yield Curve in 2019 and resulted in certain term advances costing less than overnight borrowed funds. Overall, the 2019 full year average of FHLB borrowed funds was $63.4 million, which represented a decrease of  $14.7 million, or 18.8%, due to the increase in total average deposits.

2018 NET INTEREST PERFORMANCE OVERVIEW.   The Company’s net interest income for the full year of 2018 decreased by $67,000, or 0.2%, when compared to the full year of 2017. The net interest margin remained relatively stable in 2018 for a second consecutive year, even though rising interest rates and competitive pricing pressure to retain and attract new deposits resulted in the net interest margin decreasing during the fourth quarter of 2018. The Company’s net interest margin was 3.31% for the full year of 2018 representing a one basis point decline from the full year of 2017. The 2018 decrease in net interest income is a result of a reduced level of total average earning assets as lower total loans more than offset an increased level of total investment securities. Total average earning assets decreased modestly by $1.4 million, or 0.1% in 2018. Specifically, total investment securities averaged $185 million in 2018 which is $11.9 million, or 6.9%, higher than the 2017 full year average. Total loans averaged $882 million in 2018 which is $12.1 million, or 1.4%, lower than the 2017 full year average. This combined with the upward repricing of interest bearing liabilities, as well as a higher level of average interest bearing liabilities, resulted in net interest income decreasing between years.

Total average interest bearing liabilities increased by $7.0 million, or 0.8%, as a lower level of interest bearing deposits was more than offset by a higher level of total average borrowings. Total interest bearing deposits averaged $786 million in 2018 and decreased when compared to 2017 average by $8.5 million, or 1.1%. This decrease to average interest bearing deposits was more than offset by total average FHLB borrowings of  $78.1 million increasing by $15.5 million, or 24.7%, between years. Total deposits, including non-interest bearing demand deposits, averaged $960 million for the full year of 2018 which was $16.7 million, or 1.7%, lower than the $976 million average for the full year of 2017. Overall, the Company’s loan to deposit ratio averaged 90.4% in the fourth quarter of 2018.

COMPONENT CHANGES IN NET INTEREST INCOME: 2018 VERSUS 2017.   Regarding the separate components of net interest income, the Company’s total interest income in 2018 increased by $2.7 million, or 6.2%, when compared to 2017. Total average earning assets decreased modestly by $1.4 million, or 0.1% in 2018 as a lower level of total loans more than offset an increased level of total investment securities. The modest decrease in total average earning assets was more than offset by a 25 basis point increase in the earning asset yield from 4.14% to 4.39%. Within the earning asset base, deposits with banks, short term investments in money market funds, and investment securities interest revenue increased by $927,000 or 18.0% in 2018 due to the increase in the average investment securities portfolio and the yield on total investment securities increasing by 27 basis points from 2.90% to 3.17%. The growth in the investment securities portfolio is the result of management taking advantage of the higher interest rate environment in 2018 to purchase additional securities. Purchases in 2018 primarily focused on federal agency mortgage backed securities due to the ongoing liquid cash flow that these securities provide. Also, management

18

continued its portfolio diversification strategy through purchases of high quality corporate and taxable municipal securities. Even though total average loans decreased since 2017, loan interest income increased by $1.8 million, or 4.6%, for the full year of 2018 when compared to 2017 as the yield on the total loan portfolio increased by 27 basis points from 4.39% to 4.66%. The higher loan interest income reflects new loans originating at higher yields as well as 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 program to increase the target federal funds interest rate. Overall, total loan originations were consistent with the prior year’s level. However, loan payoffs exceeded what we experienced in 2017 and also exceeded loan originations in 2018, resulting in a net reduction to the loan portfolio. Included in the total level of payoffs experienced in 2018 was the successful workout of several criticized but performing loans which favorably impacted the quality of the loan portfolio.

Total interest expense for the full year of 2018 increased $2.8 million, or 31.9%, when compared to 2017, due to higher levels of both deposit and borrowing interest expense. Deposit interest expense in 2018 was higher by $2.2 million which reflects certain indexed money market accounts and term CDs repricing upward after the Federal Reserve interest rate increases. The cost of interest bearing deposits increased by 28 basis points in 2018 to 1.07% due to the impact of increasing national interest rates. The higher national interest rate environment in 2018 resulted in increasing market competitive pressure to retain existing deposit customers and attract new customer deposits. Additionally, there has been customer movement of some funds out of lower yielding money market accounts into higher yielding certificates of deposits. The runoff of money market deposits has more than offset the growth of term deposit products and resulted in a decrease in the balance of total deposits in 2018. The Company experienced a $617,000, or 24.3%, increase in the interest cost for borrowings in the full year of 2018 due to a higher average balance of total borrowed funds and the immediate impact that the increases in the federal funds rate had on the cost of overnight borrowed funds. Overall, total interest bearing funding costs increased by 31 basis points to 1.31%.

The table that follows provides an analysis of net interest income on a tax-equivalent basis 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 tables, 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. Regulatory stock is included within available for sale investment securities for this analysis. Additionally, a tax rate of 21% was used to compute tax-equivalent interest income and yields (non-GAAP) during 2019 and 2018, while a tax rate of 34% was used for 2017. The tax equivalent adjustments to interest income on loans and municipal securities for the years ended December 31, 2019, 2018, and 2017 was 24,000, 21,000, and 40,000, 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.

19

​

YEAR ENDED DECEMBER 31,

​

2019

2018

2017

​

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

​

$

875,198

​

$

42,957

​

4.91%

​

$

881,767

​

$

41,049

​

4.66%

​

$

893,849

​

$

39,257

​

4.39%

Deposits with banks

​

1,018

​

24

​

2.32

​

​

1,023

​

​

20

​

1.90

​

​

1,028

​

​

11

​

1.11

Short-term investment in money market funds

​

10,552

​

293

​

2.77

​

​

6,725

​

​

201

​

3.00

​

​

7,996

​

​

130

​

1.63

Investment securities:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Available for sale

​

153,458

​

5,090

​

3.32

​

​

145,162

​

​

4,527

​

3.12

​

​

135,131

​

​

3,800

​

2.81

Held to maturity

​

40,553

​

1,427

​

3.52

​

​

39,388

​

​

1,318

​

3.35

​

​

37,484

​

​

1,198

​

3.20

Total investment securities

​

194,011

​

6,517

​

3.36

​

​

184,550

​

​

5,845

​

3.17

​

​

172,615

​

​

4,998

​

2.90

TOTAL INTEREST EARNING ASSETS/ INTEREST INCOME

​

1,080,779

​

49,791

​

4.61

​

​

1,074,065

​

​

47,115

​

4.39

​

​

1,075,488

​

​

44,396

​

4.14

Non-interest earning assets:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Cash and due from banks

​

20,239

​

​

​

​

​

​

​

23,067

​

​

​

​

​

​

​

22,393

​

​

​

​

​

Premises and equipment

​

17,928

​

​

​

​

​

​

​

12,480

​

​

​

​

​

​

​

12,273

​

​

​

​

​

Other assets

​

64,083

​

​

​

​

​

​

​

62,040

​

​

​

​

​

​

​

67,169

​

​

​

​

​

Allowance for loan losses

​

(8,404)

​

​

​

​

​

​

​

(9,866)

​

​

​

​

​

​

​

(10,241)

​

​

​

​

​

TOTAL ASSETS

​

$

1,174,625

​

​

​

​

​

​

$

1,161,786

​

​

​

​

​

​

$

1,167,082

​

​

​

​

​

Interest bearing liabilities:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Interest bearing deposits:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Interest bearing demand

​

$

170,326

​

$

1,595

​

0.94%

​

$

138,572

​

$

1,134

​

0.82%

​

$

129,589

​

$

638

​

0.49%

Savings

​

96,783

​

162

​

0.17

​

​

98,035

​

​

163

​

0.17

​

​

97,405

​

​

162

​

0.17

Money market

​

234,387

​

2,525

​

1.08

​

​

249,618

​

​

2,183

​

0.87

​

​

275,636

​

​

1,446

​

0.52

Other time

​

326,867

​

6,907

​

2.11

​

​

299,391

​

​

4,963

​

1.66

​

​

291,475

​

​

4,009

​

1.38

Total interest bearing deposits

​

828,363

​

11,189

​

1.35

​

​

785,616

​

​

8,443

​

1.07

​

​

794,105

​

​

6,255

​

0.79

Federal funds purchased and other short-term borrowings

​

11,088

​

288

​

2.59

​

​

33,126

​

​

720

​

2.17

​

​

16,972

​

​

206

​

1.21

Advances from Federal Home Loan Bank

​

52,309

​

1,090

​

2.09

​

​

44,974

​

​

797

​

1.77

​

​

45,657

​

​

694

​

1.52

Guaranteed junior subordinated deferrable interest debentures

​

13,085

​

1,121

​

8.57

​

​

13,085

​

​

1,120

​

8.57

​

​

13,085

​

​

1,120

​

8.57

Subordinated debt

​

7,650

​

520

​

6.80

​

​

7,650

​

​

520

​

6.80

​

​

7,650

​

​

520

​

6.80

Lease liabilities

​

3,444

​

117

​

3.40

​

​

—

​

​

—

​

—

​

​

—

​

​

—

​

—

TOTAL INTEREST BEARING LIABILITIES/INTEREST EXPENSE

​

915,939

​

14,325

​

1.56

​

​

884,451

​

​

11,600

​

1.31

​

​

877,469

​

​

8,795

​

1.00

Non-interest bearing liabilities:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Demand deposits

​

151,292

​

​

​

​

​

​

​

174,108

​

​

​

​

​

​

​

182,301

​

​

​

​

​

Other liabilities

​

7,271

​

​

​

​

​

​

​

7,077

​

​

​

​

​

​

​

11,119

​

​

​

​

​

Stockholders’ equity

​

100,123

​

​

​

​

​

​

​

96,150

​

​

​

​

​

​

​

96,193

​

​

​

​

​

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

​

$

1,174,625

​

​

​

​

​

​

$

1,161,786

​

​

​

​

​

​

$

1,167,082

​

​

​

​

​

Interest rate spread

​

​

​

​

​

​

​

3.05

​

​

​

​

​

​

​

3.08

​

​

​

​

​

​

​

3.14

Net interest income/net interest margin

​

​

​

​

35,466

​

3.29%

​

​

​

​

​

35,515

​

3.31%

​

​

​

​

​

35,601

​

3.32%

Tax-equivalent adjustment

​

​

​

​

(24)

​

​

​

​

​

​

​

(21)

​

​

​

​

​

​

​

(40)

​

​

Net interest income

​

​

​

​

$

35,442

​

​

​

​

​

​

$

35,494

​

​

​

​

​

​

$

35,561

​

​

20

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 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.

​

2019 vs. 2018

2018 vs. 2017

​

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

​

$

(308)

​

$

2,216

​

$

1,908

​

$

(505)

​

$

2,297

​

$

1,792

Deposits with banks

​

​

—

​

4

​

4

​

​

(1)

​

​

10

​

​

9

Short-term investments in money market funds

​

106

​

(14)

​

92

​

​

(17)

​

​

88

​

​

71

Investment securities:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Available for sale

​

265

​

298

​

563

​

​

292

​

​

435

​

​

727

Held to maturity

​

40

​

69

​

109

​

​

62

​

​

58

​

​

120

Total investment securities

​

305

​

367

​

672

​

​

354

​

​

493

​

​

847

Total interest income

​

103

​

2,573

​

2,676

​

​

(169)

​

​

2,888

​

​

2,719

INTEREST PAID ON:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Interest bearing demand deposits

​

281

​

180

​

461

​

​

46

​

​

450

​

​

496

Savings deposits

​

(1)

​

—

​

(1)

​

​

1

​

​

—

​

​

1

Money market

​

(116)

​

458

​

342

​

​

(120)

​

​

857

​

​

737

Other time deposits

​

492

​

1,452

​

1,944

​

​

113

​

​

841

​

​

954

Federal funds purchased and other short-term borrowings

​

(609)

​

177

​

(432)

​

​

280

​

​

234

​

​

514

Advances from Federal Home Loan Bank

​

139

​

154

​

293

​

​

(10)

​

​

113

​

​

103

Guaranteed junior subordinated deferrable interest debentures

​

​

—

​

1

​

1

​

​

—

​

​

—

​

​

—

Lease liabilities

​

117

​

​

—

​

117

​

​

—

​

​

—

​

​

—

Total interest expense

​

303

​

2,422

​

2,725

​

​

310

​

​

2,495

​

​

2,805

Change in net interest income

​

$

(200)

​

$

151

​

$

(49)

​

$

(479)

​

$

393

​

$

(86)

LOAN 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  $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 the Company’s loan delinquency and other non-performing assets.

21

​	AT DECEMBER 31,
​	2019			2018			2017
​	(IN THOUSANDS, EXCEPT PERCENTAGES)
Total accruing loans past due 30 to 89 days	​	$	2,956	​	$	4,752	​	$	8,178
Total non-accrual loans	​		1,487	​	​	1,221	​	​	3,016
Total non-performing assets including TDRs(1)	​		2,339	​	​	1,378	​	​	3,034
Loan delinquency as a percentage of total loans, net of unearned income	​		0.33%	​	​	0.55%	​	​	0.92%
Non-accrual loans as a percentage of total loans, net of unearned income	​		0.17	​	​	0.14	​	​	0.34
Non-performing assets as a percentage of total loans, net of unearned income, and other real estate owned	​		0.26	​	​	0.16	​	​	0.34
Non-performing assets as a percentage of total assets	​		0.20	​	​	0.12	​	​	0.26
Total classified loans (loans rated substandard or doubtful)(2)	​	$	16,338	​	$	4,302	​	$	5,433

(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.

(2)

Total includes residential real estate and consumer loans that are considered non-performing.

The Company continues to maintain good asset quality. Non-performing assets increased by $961,000 since the prior year-end and now total $2.3 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, and loan delinquency are below 1% of total loans. The Company did experience an increase in classified loans in the second half of 2019 due to the downgrade of several commercial loans, the largest of which was a $6.5 million C&I loan due to the unexpected death of the borrower in late 2019 (see further discussion on this loan later in the MD&A). We continue to closely monitor the loan portfolio given the number of relatively large-sized commercial and CRE loans within the portfolio. As of December 31, 2019, the 25 largest credits represented 24.3% of total loans outstanding.

ALLOWANCE AND PROVISION FOR LOAN 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.

22

​

YEAR ENDED DECEMBER 31,

​

2019

2018

2017

2016

2015

​

(IN THOUSANDS, EXCEPT RATIOS AND PERCENTAGES)

Balance at beginning of year

​

$

8,671

​

$

10,214

​

$

9,932

​

$

9,921

​

$

9,623

Charge-offs:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Commercial

​

(9)

​

​

(574)

​

​

(311)

​

​

(3,662)

​

​

(404)

Commercial loans secured by non-owner occupied real estate

​

(63)

​

​

—

​

​

(132)

​

​

(82)

​

​

(365)

Real estate – residential mortgage

​

(98)

​

​

(380)

​

​

(313)

​

​

(208)

​

​

(403)

Consumer

​

(262)

​

​

(251)

​

​

(172)

​

​

(344)

​

​

(188)

Total charge-offs

​

(432)

​

​

(1,205)

​

​

(928)

​

​

(4,296)

​

​

(1,360)

Recoveries:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Commercial

​

22

​

​

31

​

​

27

​

​

169

​

​

174

Commercial loans secured by non-owner occupied real estate

​

48

​

​

51

​

​

56

​

​

58

​

​

76

Real estate – residential mortgage

​

118

​

​

119

​

​

207

​

​

100

​

​

132

Consumer

​

52

​

​

61

​

​

120

​

​

30

​

​

26

Total recoveries

​

240

​

​

262

​

​

410

​

​

357

​

​

408

Net charge-offs

​

(192)

​

​

(943)

​

​

(518)

​

​

(3,939)

​

​

(952)

Provision (credit) for loan losses

​

800

​

​

(600)

​

​

800

​

​

3,950

​

​

1,250

Balance at end of year

​

$

9,279

​

$

8,671

​

$

10,214

​

$

9,932

​

$

9,921

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

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Average for the year

​

$

875,198

​

$

881,767

​

$

893,849

​

$

887,679

​

$

857,015

At December 31

​

887,574

​

​

863,129

​

​

892,758

​

​

886,858

​

​

883,987

As a percent of average loans:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Net charge-offs

​

0.02%

​

​

0.11%

​

​

0.06%

​

​

0.44%

​

​

0.11%

Provision (credit) for loan losses

​

0.09

​

​

(0.07)

​

​

0.09

​

​

0.44

​

​

0.15

Allowance as a percent of each of the following:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Total loans, net of unearned income

​

1.05

​

​

1.00

​

​

1.14

​

​

1.12

​

​

1.13

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

​

313.90

​

​

182.47

​

​

124.90

​

​

302.99

​

​

225.68

Total non-accrual loans

​

624.01

​

​

710.16

​

​

338.66

​

​

619.59

​

​

163.55

Total non-performing assets

​

396.71

​

​

629.25

​

​

336.65

​

​

611.58

​

​

157.55

Allowance as a multiple of net charge-offs

​

48.33x

​

​

9.20x

​

​

19.72x

​

​

2.52x

​

​

10.42x

For 2019, the Company recorded an $800,000 provision expense for loan losses compared to a $600,000 provision recovery in 2018 which resulted in a net unfavorable shift of  $1.4 million between years. The rating downgrade of a $6.5 million performing commercial loan to substandard as a result of the unexpected death of a borrower caused a $675,000 increase in fourth quarter 2019 provision expense. This rating action was prudent due to the inherent uncertainties associated with a large estate liquidation. Recent updates related to this loan indicate that the estate is presently illiquid due to holds placed on deposit accounts and significant real estate holdings and other unique assets that will need to be unwound. As such there is heightened risk that this loan may move into non-performing status in 2020 as a result of payment delays. The Company experienced net loan charge-offs of only $192,000, or 0.02% of total loans, in 2019 compared to net loan charge-offs of  $943,000, or 0.11% of total loans, in 2018. Overall, nonperforming assets totaled $2.3 million, or only 0.26% of total loans, at December 31, 2019. In summary, the allowance

23

for loan losses provided 397% coverage of non-performing assets, and 1.05% of total loans, at December 31, 2019, compared to 629% coverage of non-performing assets, and 1.00% of total loans, at December 31, 2018.

For 2018, the Company recorded a $600,000 provision recovery compared to an $800,000 provision for loan losses in 2017, or a decrease of  $1.4 million between years. The 2018 provision recovery reflects our overall strong asset quality, reduced loan portfolio balance and the successful workout of several criticized loans which resulted in the release of reserves after two criticized loans that had balances totaling in excess of $11 million fully paid off during the third and fourth quarters of 2018. The Company experienced net loan charge-offs of  $943,000, or 0.11% of total loans in 2018 compared to net loan charge-offs of  $518,000, or 0.06%, of total loans in 2017. Overall, the Company continued to maintain outstanding asset quality as its nonperforming assets totaled $1.4 million, or only 0.16% of total loans, at December 31, 2018.

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,
​	2019					2018					2017					2016					2015
​	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)
Commercial	​	$	3,951	​	30.1%	​	$	3,057	​	29.0%	​	$	4,298	​	28.0%	​	$	4,041	​	29.8%	​	$	4,243	​	31.6%
Commercial loans secured by non-owner occupied real estate	​		3,119	​	41.2	​	​	3,389	​	41.4	​	​	3,666	​	42.0	​	​	3,584	​	40.2	​	​	3,449	​	36.9
Real estate – residential mortgage	​		1,159	​	26.6	​	​	1,235	​	27.6	​	​	1,102	​	27.8	​	​	1,169	​	27.8	​	​	1,174	​	29.2
Consumer	​		126	​	2.1	​	​	127	​	2.0	​	​	128	​	2.2	​	​	151	​	2.2	​	​	151	​	2.3
Allocation to general risk	​		924	​	—	​	​	863	​	—	​	​	1,020	​	—	​	​	987	​	—	​	​	904	​	—
Total	​	$	9,279	​	100.0%	​	$	8,671	​	100.0%	​	$	10,214	​	100.0%	​	$	9,932	​	100.0%	​	$	9,921	​	100.0%

Even though residential real estate-mortgage loans comprise 26.6% of the Company’s total loan portfolio, only $1.2 million or 12.5% of the total ALL is allocated against this loan category. The residential real estate-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 those 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 good asset quality of each sector.

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, 2019 to cover losses within the Company’s loan portfolio.

NON-INTEREST INCOME.   Non-interest income for 2019 totaled $14.8 million, an increase of $549,000, or 3.9%, from 2018. Factors contributing to this higher level of non-interest income in 2019 included:

•

the Company recognized a $500,000 impairment charge on other investments related to a Community Reinvestment Act (CRA) investment. The Small Business Administration (SBA) recently gave formal notice that the managing company of this particular fund was placed into receivership which caused us to write off the full investment and no further action or loss will occur. It should be noted that the Company only has one other similar CRA related investment that totals $100,000 that has been performing as expected;

24

•

Net realized gains on loans held for sale increased by $376,000, or 76.9% between years due to increased residential mortgage loan sales in the secondary market as the lower interest rate environment in the second half of 2019 resulted in a greater level of residential mortgage loan production. In addition to increased residential mortgage originations, the full year favorable comparison in 2019 was also due to the sale of the guaranteed portion of a SBA loan that resulted in a $197,000 gain;

•

The Company recognized a net investment security sale gain of  $118,000 in 2019 compared to a $439,000 net loss in 2018 as the opportunity existed to capture gains on certain securities that demonstrated higher than typical market appreciation in this low interest rate environment. The 2018 net loss resulted from the Company repositioning a portion of the investment portfolio for stronger future returns;

•

a $149,000, or 10.5%, decrease in revenue from deposit service charges was due primarily to a reduced level of overdraft fee income;

•

a $106,000, or 54.1%, increase in mortgage related fees was due to the higher level of residential mortgage loan production;

•

a $103,000, or 4.4%, increase in other income was due to higher letter of credit fees and increased revenue from check supply sales as a result of a favorable vendor contract renegotiation; and

•

a $71,000, or 0.7%, increase in wealth management fees was primarily due to the Company benefitting from a continuing increase in market values for assets under management as well as management’s effective execution of managing client accounts. Wealth management continues to be an important strategic focus.

Non-interest income for 2018 totaled $14.2 million, a decrease of  $421,000, or 2.9%, from 2017. Factors contributing to this lower level of non-interest income in 2018 included:

•

a $554,000 negative change in the net realized gain/loss on investment securities primarily results from two security sell transactions. Early in 2018, management viewed the gain recognized on the sale of equity securities, described in the third bulleted item, as an opportunity to rid the investment securities portfolio of certain investments having a low yield and a small balance. Similarly, because of the negative loan loss provision recognized during the fourth quarter of 2018, management viewed this as another opportunity to, again, sell certain low yielding securities. The funds from both sells were reinvested in securities with higher current market coupon rates. Both security sell transactions were negatively impacted by the market value of sold securities decreasing since 2017 due to the higher interest rate environment in 2018. However, because of the reinvestment of the sold funds into higher yielding instruments, the result of both transactions positions the Company for an increased future return from the investment securities portfolio;

•

a $489,000 increase in wealth management fees was primarily due to the Company benefitting from increased market values for assets under management in 2018 as well as management’s effective execution of managing client accounts;

•

a $285,000 increase in other income primarily was due to a $156,000 gain realized on the sale of certain equity method investments that the Company owned from a previous acquisition. The Company also benefitted from higher interchange fees, increased revenue from business services, and higher letter of credit fees;

•

a combined $279,000 decrease in net gains on loans sold into the secondary market and mortgage related fees was due to lower production and reduced refinance activity of residential mortgage loans;

•

a $201,000 decrease in revenue from bank owned life insurance (BOLI) occurred after the Company received a death claim in 2017 and there was no such claim in 2018; and

•

a $161,000 decrease in revenue from deposit service charges was due to a reduced level of overdraft fee income.

25

NON-INTEREST EXPENSE.   Non-interest expense for 2019 totaled $41.8 million, which represents a $942,000, or 2.3%, increase from 2018. Factors contributing to the higher non-interest expense in 2019 included:

•

a $1.1 million, or 4.4%, increase in salaries & benefits expense was due to annual merit increases, the addition of several employees to address management succession planning as well as our expansion into the Hagerstown, Maryland market. Increased pension and health care costs also contributed to the higher employee costs between years;

•

a $457,000, or 82.0%, reduction in FDIC insurance expense. As part of the application of the Small Bank Assessment Credit regulation, the FDIC awarded community banks under $10 billion in assets an assessment credit because the banking industry reserve ratio exceeded its 1.38% target. The Company currently expects to receive one additional assessment credit of less than $100,000 in the first quarter of 2020.;

•

a $397,000, or 7.6%, increase in other expense was due to additional expense for the unfunded commitment reserve as a result of increased loan approvals in 2019, as well as, an increased investment in technology as evidenced by higher website costs and additional telecommunications expense; and

•

a $154,000, or 3.1%, decrease in professional fees was due to lower legal fees and other professional fees.

Non-interest expense for 2018 totaled $40.9 million, which represents a $170,000, or 0.4%, increase from 2017. Factors contributing to the higher non-interest expense in 2018 included:

•

a $438,000, or 1.8%, increase in salaries & benefits expense due to higher salaries and incentive compensation as a result of the typical annual salary merit increases and additional incentives paid primarily within our Wealth Management division due to the increased level of fee income mentioned previously. Also in the fourth quarter of 2018, four additional employees were hired for our new Hagerstown, Maryland financial banking center; and

•

a combined $259,000 reduction in occupancy & equipment costs is primarily attributable to the Company’s ongoing efforts to carefully manage and contain non-interest expense. Specifically, a branch office closure in Cambria County along with a branch consolidation in the State College market resulted in reduced rent expense and other occupancy related costs.

INCOME TAX EXPENSE.   The Company recorded an income tax expense of  $1.6 million, or an effective tax rate of 20.7%, in 2019, compared to income tax expense of  $1.7 million, or a 17.8% effective tax rate, in 2018, and compared to income tax expense of  $5.4 million, or a 62.1% effective tax rate, in 2017. The lower effective tax rate in 2019 and 2018 reflected the benefits of corporate tax reform as a result of the enactment of the “Tax Cuts and Jobs Act” late in the fourth quarter of 2017, which lowered the corporate income tax rate from 34% to 21%. Also, because of the enactment of this new tax law, the Company was able to achieve a greater income tax benefit in the third quarter of 2018 by making a one-time additional contribution to the defined benefit pension plan. The tax benefit of this additional pension contribution favorably reduced income tax expense by $264,000 in the third quarter of 2018. Finally, the higher income tax expense in 2017 resulted from an additional income tax charge of  $2.6 million recorded in the fourth quarter of 2017 as corporate income tax reform necessitated the revaluation of the Company’s deferred tax asset because of the new lower corporate tax rate. The Company’s deferred tax asset was $4.0 million at December 31, 2019.

SEGMENT RESULTS.   The community banking segment reported a net income contribution of $10.9 million in 2019 which decreased from the $11.1 million contribution in 2018 and increased from the $8.6 million contribution in 2017. The primary driver for the lower level of net income in 2019 was the Company recording an $800,000 provision expense for loan losses compared to a $600,000 provision recovery in 2018 which resulted in a net unfavorable shift of  $1.4 million between years. This is discussed previously in the “Allowance and Provision for Loan Losses” section within this document. Also, unfavorably impacting net income was total employee costs increasing, a higher level of funding for the unfunded commitment reserve due to increased loan approvals within the commercial lending division and the lower level of deposit service charge income within the retail banking division. Nearly offsetting these unfavorable items was

26

total loan interest income increasing between years which primarily reflects the Federal Reserve increasing the federal funds interest rate in 2018. This resulted in new commercial loans originating at higher yields throughout 2018 and during the first half of 2019 and also caused the upward repricing of certain loans tied to LIBOR or the prime rate as both of these indices moved up with the federal funds rate increases in 2018. Also, included in the favorable year over year loan interest income comparison was a higher level of commercial loan fee income by $325,000, due primarily to prepayment fees collected on certain early loan payoffs. Within the retail banking division, net interest income increased between years as the funding benefit for deposits improved due to the growth of total deposits. This funding benefit more than offset the impact of the immediate upward repricing of money market deposit accounts because of the increases to the federal funds rate during 2018 and the corresponding incremental increase to other term deposit products. Note that the retail banking division did experience deposit cost relief during the second half of 2019 because of the Federal Reserve’s action to decrease the fed funds rate in July, September and October. Retail banking was also positively impacted by the lower level of FDIC insurance expense due to the application of the assessment credit during 2019. Finally, there was a higher level of net gains on loan sales into the secondary market as well as a higher level of mortgage related fee income due to increased residential mortgage loan production.

The wealth management segment’s net income contribution was $1.9 million in 2019 compared to $1.8 million in 2018 and $1.4 million in 2017. The increase is due to wealth management fees increasing as this segment has benefitted from increased market values for assets under management which occurred as the year progressed as well as management’s effective execution of managing client accounts. Also, positively impacting the wealth management segment’s net income was a lower level of incentive compensation and decreased professional fees due to lower legal fees and costs for other professional services. Slightly offsetting these items was higher employee costs due to higher salaries because of annual merit increases and a greater level of pension cost. Also, there was a decrease in the volume of life insurance sales within the financial services division. Overall, the fair market value of trust assets under administration totaled $2.238 billion at December 31, 2019, an increase of  $132 million, or 6.3%, from the December 31, 2018 total of  $2.106 billion.

The investment/parent segment reported a net loss of  $6.8 million in 2019, which was greater than the net loss of  $5.1 million in 2018 and $6.7 million in 2017. The increased loss between years is reflective of the previously discussed $500,000 impairment charge on other investments related to a CRA investment. Also, the increased loss was the result of overnight borrowed funds having a higher cost due to the increase in national interest rates during 2018 and the immediate impact that the rising interest rates had on overnight borrowed funds. Additionally, the replacement of maturing FHLB term advances repriced upward during the first nine months of 2019. Slightly offsetting these unfavorable items was the Company recognizing a net investment security sale gain of  $118,000 in 2019 compared to a $439,000 net loss in 2018 as the opportunity existed to capture gains on certain securities that demonstrated higher than typical market appreciation in this low interest rate environment. The 2018 net loss resulted from the Company repositioning a portion of the investment portfolio for stronger future returns.

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 Note 24.

BALANCE SHEET.   The Company’s total consolidated assets of  $1.171 billion at December 31, 2019 increased by $10.5 million, or 0.9% from the $1.161 billion level at December 31, 2018. The increase to total consolidated assets was due primarily to a $24.4 million, or 2.8%, increase in total loans which more than offset total investment securities decreasing by $5.8 million, or 3.1% and cash balances declining by $12 million. Overall, total loan originations in 2019 exceeded the prior year’s level by $50 million and also exceeded another strong level of loan payoffs in 2019. Loan pipelines remained strong throughout 2019. The Company experienced growth in the investment securities portfolio during 2018 as a result of management taking advantage of the rising interest rate environment during 2018 which provided an attractive market for additional security purchases. Investment security purchase activity slowed significantly during 2019 as the interest rate market was less favorable resulting in a decrease of total investment securities between years. Also, as a result of the adoption of ASU 2016-02, Leases (Topic 842), the Company reported $3.9 million of right of use assets within the fixed assets line of the Consolidated Balance Sheets at December 31, 2019.

27

The Company’s deposits at period end increased by $11.3 million and was offset by a decrease in FHLB borrowings of  $11.7 million. The decrease in FHLB borrowings was the result of an $18.6 million, or 45.4%, decline in overnight borrowed funds. The substantial decrease in short term borrowings was partially offset by an increase in FHLB term advances. Specifically, total FHLB term advances increased by $6.9 million, or 14.9%, and totaled $53.7 million. The Company has utilized these term advances to help manage interest rate risk and the inversion demonstrated by the U.S. Treasury Yield Curve at certain times in 2019 resulted in certain term advances costing less than overnight borrowed funds. In addition, the Company reported $4.0 million of lease liabilities as a result of the adoption of ASU 2016-02, Leases (Topic 842). Other liabilities increased by $6.1 million primarily due to an increase in the Company’s pension liability.

Total stockholders’ equity increased by $637,000, or 0.7%, since year-end 2018. Capital decreased during 2019 by the Company’s common stock repurchase program and the annual revaluation of the Company’s pension obligation which negatively impacted other comprehensive income by $5.1 million due to an approximate 1% decline in the discount rate between years. Offsetting these decreases, was the Company’s $6.0 million of net income and the positive $3.1 million impact capital experienced due to the improved market value of the available for sale investment securities portfolio. The Company returned approximately 70% of our 2019 earnings to our shareholders through the accretive common stock repurchases and an increased quarterly common stock cash dividend. The Company continues to be considered well capitalized for regulatory purposes with a risk based capital ratio of 13.49% and an asset leverage ratio of 9.87% at December 31, 2019. The Company’s book value per common share was $5.78, its tangible book value per common share (non-GAAP) was $5.08 and its tangible common equity to tangible assets ratio (non-GAAP) was 7.48% at December 31, 2019.

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, 2019, 2018, and 2017 (in thousands, except share and ratio data):

​	AT DECEMBER 31,
​	2019			2018			2017
Total shareholders’ equity	​	$	98,614	​	$	97,977	​	$	95,102
Less: Goodwill	​		11,944	​	​	11,944	​	​	11,944
Tangible equity	​		86,670	​	​	86,033	​	​	83,158
Total assets	​		1,171,184	​	​	1,160,680	​	​	1,167,655
Less: Goodwill	​		11,944	​	​	11,944	​	​	11,944
Tangible assets	​		1,159,240	​	​	1,148,736	​	​	1,155,711
Tangible common equity ratio (non-GAAP)	​		7.48%	​	​	7.49%	​	​	7.20%
Total shares outstanding	​		17,057,871	​	​	17,619,303	​	​	18,128,247
Tangible book value per share (non-GAAP)	​	$	5.08	​	$	4.88	​	$	4.59

LIQUIDITY.   The Company’s liquidity position continues to be strong. Our core retail deposit base has remained relatively stable over the past several years and demonstrated growth during 2019. The core deposit base is adequate to fund the Company’s operations. Cash flow from maturities, prepayments and amortization of securities is used to help fund loan growth. We strive to operate our loan to deposit ratio in a range of 85% to 100%. At December 31, 2019, the Company’s loan to deposit ratio was 92.4%. Given current commercial loan pipelines and the continued development of our existing loan production offices, we are optimistic that we can grow our loan to deposit ratio and remain within our guideline parameters.

Liquidity can also be analyzed by utilizing the Consolidated Statements of Cash Flows. Cash and cash equivalents decreased by $12.7 million from December 31, 2018, to $22.2 million at December 31, 2019, due to $4.9 million of cash provided by operating activities being more than offset by $13.0 million of cash used in investing activities and $4.6 million of cash used in financing activities. Within investing activities,

28

cash advanced for new loan fundings and participations purchased totaled $205.6 million and was $20.5 million higher than the $185.1 million of cash received from loan principal payments and participations sold. Within financing activities, deposits increased by $11.3 million while total FHLB borrowings declined as short term borrowings decreased by $18.6 million and advances, both short-term and long term, increased by $6.9 million.

The holding company had a total of  $6.4 million of cash, short-term investments, and investment securities at December 31, 2019. Additionally, dividend payments from our subsidiaries can also provide ongoing cash to the holding company. At December 31, 2019, our subsidiary Bank had $10.2 million of cash available for immediate dividends to the holding company under applicable regulatory formulas. As such, the holding company has good liquidity to meet its trust preferred debt service requirements, its subordinated debt interest payments, and its common stock dividends, which in total should approximate $3.2 million over the next twelve months.

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, time deposits with banks, federal funds sold, and short-term investments in money market funds. These assets totaled $22.2 million and $34.9 million at December 31, 2019 and 2018, 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- to longer-term advances based upon the Company’s investment in certain residential mortgage, commercial real estate, and commercial and industrial loans. At December 31, 2019, the Company had $358 million of overnight borrowing availability at the FHLB, $30 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.   The Company meaningfully exceeds all regulatory capital ratios for each of the periods presented and is considered well capitalized. The Company’s common equity tier 1 capital ratio was 10.47%, the tier 1 capital ratio was 11.68%, and the total capital ratio was 13.49% at December 31, 2019. The Company’s tier 1 leverage ratio was 9.87% at December 31, 2019. We anticipate that we will maintain our strong capital ratios throughout 2020.

Capital generated from earnings will be utilized to pay the common stock cash dividend, fund the stock repurchase program and will also support controlled balance sheet growth. Our common dividend payout ratio for the full year 2019 was 27.1%. Total Parent Company cash was $6.4 million at December 31, 2019. 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 334% of regulatory capital at December 31, 2019.

The Basel III capital standards establish the minimum capital levels in addition to the well capitalized requirements under the federal banking regulations prompt corrective action. The capital rules also impose a capital conservation buffer (“CCB”) on top of the three minimum risk-weighted asset ratios. As of January 1, 2019, the CCB was 2.5%. Banking institutions that fail to meet the effective minimum ratios once the CCB is taken into account will be subject to constraints on capital distributions, including dividends and share repurchases, and certain discretionary executive compensation. 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, including the CCB, 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.

29

Under the Basel III capital standards, the minimum capital ratios are:

​	MINIMUM CAPITAL RATIO		MINIMUM CAPITAL RATIO PLUS CAPITAL 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	​	​

In the first quarter of 2019, the Company completed the previous common stock repurchase program where it bought back 540,000 shares, or 3% of its common stock, over a 9-month period at a total cost of $2.38 million. Specifically, during the first three months of 2019, the Company was able to repurchase 112,311 shares of its common stock and return $476,000 of capital to its shareholders through this program.

On April 16, 2019, the Company announced that its Board of Directors approved a new common stock repurchase program which calls for AmeriServ Financial, Inc. to buy back up to 3%, or approximately 526,000 shares, of its outstanding common stock during the next 12 months. The authorized repurchases will be made from time to time in either the open market or through privately negotiated transactions. The timing, volume and nature of share repurchases will be at the sole discretion of management, dependent on market conditions, applicable securities laws, and other factors, and may be suspended or discontinued at any time. No assurance can be given that any particular amount of common stock will be repurchased. This buyback program may be modified, extended or terminated by the Board of Directors at any time. The Company was able to repurchase 490,038 shares of its common stock and return $2.1 million of capital to its shareholders through this program. Overall in 2019, this latest common stock buyback program, combined with the first quarter completion of the previously authorized common stock buyback program, resulted in the Company returning $2.6 million to its shareholders through the repurchase of 602,349 shares of its common stock. When including the increased cash dividend payments on our common stock, total capital returned to our shareholders was approximately 70% of net income for 2019. At December 31, 2019, the Company had approximately 17.1 million common shares outstanding.

INTEREST RATE 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) 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) market value of portfolio equity sensitivity analysis; and 3) 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

The following table presents a summary of the Company’s static GAP positions at December 31, 2019:

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

​

$

290,368

​

$

51,288

​

$

95,376

​

$

450,542

​

$

887,574

Investment securities

​

​

38,832

​

​

7,223

​

​

12,092

​

​

123,538

​

​

181,685

Short-term assets

​

​

6,526

​

​

—

​

​

—

​

​

—

​

​

6,526

Regulatory stock

​

​

3,985

​

​

—

​

​

—

​

​

2,125

​

​

6,110

Bank owned life insurance

​

​

—

​

​

—

​

​

38,916

​

​

—

​

​

38,916

Total rate sensitive assets

​

$

339,711

​

$

58,511

​

$

146,384

​

$

576,205

​

$

1,120,811

RATE SENSITIVE LIABILITIES:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Deposits:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Non-interest bearing demand deposits

​

$

—

​

$

—

​

$

—

​

$

136,462

​

$

136,462

Interest bearing demand deposits

​

​

56,910

​

​

834

​

​

1,667

​

​

118,356

​

​

177,767

Savings

​

​

512

​

​

512

​

​

1,024

​

​

93,885

​

​

95,933

Money market

​

​

56,252

​

​

5,177

​

​

10,354

​

​

136,560

​

​

208,343

Certificates of deposit of  $100,000 or more

​

​

4,893

​

​

10,325

​

​

18,227

​

​

5,325

​

​

38,770

Other time deposits

​

​

115,850

​

​

19,427

​

​

42,005

​

​

125,956

​

​

303,238

Total deposits

​

​

234,417

​

​

36,275

​

​

73,277

​

​

616,544

​

​

960,513

Borrowings

​

​

28,981

​

​

4,110

​

​

8,324

​

​

59,159

​

​

100,574

Total rate sensitive liabilities

​

$

263,398

​

$

40,385

​

$

81,601

​

$

675,703

​

$

1,061,087

INTEREST SENSITIVITY GAP:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Interval

​

​

76,313

​

​

18,126

​

​

64,783

​

​

(99,498)

​

​

—

Cumulative

​

$

76,313

​

$

94,439

​

$

159,222

​

$

59,724

​

$

59,724

Period GAP ratio

​

​

1.29X

​

​

1.45X

​

​

1.79X

​

​

0.85X

​

​

​

Cumulative GAP ratio

​

​

1.29

​

​

1.31

​

​

1.41

​

​

1.06

​

​

​

Ratio of cumulative GAP to total assets

​

​

6.52%

​

​

8.06%

​

​

13.59%

​

​

5.10%

​

​

​

When December 31, 2019 is compared to December 31, 2018, the Company’s cumulative GAP ratio through one year indicates that the Company’s balance sheet is still asset sensitive and the level of asset sensitivity increased between years. We continue to see loan customer preference for fixed rate loans given the low overall level of interest rates. The increase in total deposits resulted in overnight borrowings decreasing which are immediately impacted by changes to national interest rates. We continue to have a relatively consistent level of term advances with the FHLB to help manage our interest rate risk position. It should be noted that the level of term advances increased by $6.9 million in 2019 for interest rate risk management purposes. Due to the U.S. Treasury Yield curve becoming inverted in certain segments at various times during the year, term advances had a lower interest rate cost than overnight borrowed funds.

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, 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.

31

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 of interest rates. 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.

INTEREST RATE SCENARIO	VARIABILITY OF NET INTEREST INCOME		CHANGE IN MARKET VALUE OF PORTFOLIO EQUITY
200 bp increase	​	5.5%	​	26.6%
100 bp increase	​	3.3	​	16.1
100 bp decrease	​	(4.1)	​	(24.6)

The Company believes that its overall interest rate risk position is well controlled. The variability of net interest income is positive in the upward rate shocks due to the Company’s short duration investment securities portfolio, the scheduled repricing of loans tied to LIBOR or prime, and the reduction to overnight borrowed funds. Also, the Company will continue its disciplined approach to price its core deposit accounts in a controlled but competitive manner. The variability of net interest income is negative in the 100 basis point downward rate scenario as the Company has more exposure to assets repricing downward to a greater extent than liabilities due to the absolute low level of interest rates with the fed funds rate currently at a targeted range of 1.50% to 1.75%. The market value of portfolio equity increases in the upward rate shocks due to the improved value of the Company’s core deposit base. Negative variability of market value of portfolio equity occurs in the downward rate shock due to a reduced value for core deposits.

Within the investment portfolio at December 31, 2019, 78.5% of the portfolio is classified as available for sale and 21.5% 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 54 securities that are temporarily impaired at December 31, 2019. The Company reviews its securities quarterly and has asserted that at December 31, 2019, 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 2019, 76% of all residential mortgage loan production was sold into the secondary market.

The amount of loans outstanding by category as of December 31, 2019, which are due in (i) one year or less, (ii) more than one year through five years, and (iii) over five years, are shown in the following table. Loan balances are also categorized according to their sensitivity to changes in interest rates.

32

​

ONE YEAR OR LESS

MORE THAN ONE YEAR THROUGH FIVE YEARS

OVER FIVE YEARS

TOTAL LOANS

​

(IN THOUSANDS, EXCEPT RATIOS)

Commercial and industrial

​

$

40,194

​

$

93,467

​

$

40,261

​

$

173,922

Commercial loans secured by owner occupied real estate

​

​

603

​

​

29,233

​

​

61,819

​

​

91,655

Commercial loans secured by non-owner occupied real estate

​

​

29,955

​

​

118,755

​

​

214,925

​

​

363,635

Real estate – residential mortgage

​

​

10,581

​

​

39,109

​

​

190,417

​

​

240,107

Consumer

​

​

6,712

​

​

4,488

​

​

7,055

​

​

18,255

Total

​

$

88,045

​

$

285,052

​

$

514,477

​

$

887,574

Loans with fixed-rate

​

$

36,237

​

$

189,670

​

$

197,217

​

$

423,124

Loans with floating-rate

​

​

51,808

​

​

95,382

​

​

317,260

​

​

464,450

Total

​

$

88,045

​

$

285,052

​

$

514,477

​

$

887,574

Percent composition of maturity

​

​

9.9%

​

​

32.1%

​

​

58.0%

​

​

100.0%

Fixed-rate loans as a percentage of total loans

​

​

​

​

​

​

​

​

​

​

47.7%

Floating-rate loans as a percentage of total loans

​

​

​

​

​

​

​

​

​

​

52.3%

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.

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 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 $195.5 million and standby letters of credit of  $14.7 million as of December 31, 2019. 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, 2019, the Company had $63.3 million in the notional amount of interest rate swaps outstanding.

As of December 31, 2019 and 2018, 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 $41.5 million and $52.3 million, respectively. The letters of credit serve as collateral, in place of pledged securities, for municipal deposits maintained at AmeriServ Financial Bank.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES.   The accounting and reporting policies of the Company are in accordance with Generally Accepted Accounting Principles (GAAP) and conform to general practices within the banking industry. Accounting and reporting policies for the pension liability, allowance for loan losses, goodwill, 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.

33

ACCOUNT — Pension liability
BALANCE SHEET REFERENCE — Other liabilities
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. Our pension benefits are described further in Note 18 of the Notes to Consolidated Financial Statements.

ACCOUNT — Allowance for loan losses
BALANCE SHEET REFERENCE — Allowance for loan losses
INCOME STATEMENT REFERENCE — Provision (credit) 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 commercial real estate loans are the largest category of credits and the most sensitive to changes in assumptions and judgments underlying the determination of the allowance for loan losses. Approximately $7.1 million, or 76%, of the total allowance for loan losses at December 31, 2019 has been allocated to these two loan categories. This allocation also considers other relevant factors such as actual versus estimated losses, economic trends, delinquencies, levels of non-performing and troubled 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 — Goodwill
BALANCE SHEET REFERENCE — Goodwill
INCOME STATEMENT REFERENCE — Goodwill impairment
DESCRIPTION

The Company considers our accounting policies related to goodwill 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, 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 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

34

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.

ACCOUNT — Income Taxes
BALANCE SHEET REFERENCE — Net deferred tax asset
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 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, 2019, 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 taxes in the period in which we determine that the recorded tax liability is less than we expect the ultimate assessment to be.

ACCOUNT — Investment Securities
BALANCE SHEET REFERENCE — Investment securities
INCOME STATEMENT REFERENCE — Net realized gains (losses) 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

35

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, 2019, 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

THE STRATEGIC FOCUS:

AmeriServ 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 products, services and know-how needed to forge lasting banking for life customer relationships; a work environment that challenges and rewards staff; and the manpower and financial resources needed to make a difference in the communities we serve. Our strategic initiatives will focus on these four key constituencies:

•

Shareholders — We strive to increase earnings per share; identifying and managing revenue growth and expense control and reduction; 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 up to 75 percent of earnings to shareholders through a combination of dividends and share repurchases subject to maintaining sufficient capital to support balance sheet growth. 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.

•

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.

36

•

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.

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; and (xii) 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.

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 controls and monitors these risks with policies, procedures, and various levels of managerial and Board oversight. The Company’s objective is to optimize profitability while managing and controlling 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 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

37

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. The Company uses its credit policy and disciplined approach to evaluating the adequacy of the allowance 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.

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ITEM 8.   CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

AMERISERV FINANCIAL, INC.

CONSOLIDATED BALANCE SHEETS

​	AT DECEMBER 31,
​	2019			2018
​	(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS	​	​	​	​	​	​
Cash and due from depository institutions	​	$	15,642	​	$	27,970
Interest bearing deposits	​		2,755	​	​	2,740
Short-term investments in money market funds	​		3,771	​	​	4,184
Cash and cash equivalents	​		22,168	​	​	34,894
Investment securities:	​	​	​	​	​	​
Available for sale	​		141,749	​	​	146,731
Held to maturity (fair value $41,082 at December 31, 2019 and $40,324 at December 31, 2018)	​		39,936	​	​	40,760
Loans held for sale	​		4,868	​	​	847
Loans	​		883,090	​	​	862,604
Less: Unearned income	​		384	​	​	322
Allowance for loan losses	​		9,279	​	​	8,671
Net loans	​		873,427	​	​	853,611
Premises and equipment:	​	​	​	​	​	​
Operating lease right-of-use asset	​		846	​	​	—
Financing lease right-of-use asset	​		3,078	​	​	—
Other premises and equipment, net	​		14,643	​	​	13,348
Accrued interest income receivable	​		3,449	​	​	3,489
Goodwill	​		11,944	​	​	11,944
Bank owned life insurance	​		38,916	​	​	38,395
Net deferred tax asset	​		3,976	​	​	3,637
Federal Home Loan Bank stock	​		3,985	​	​	4,520
Federal Reserve Bank stock	​		2,125	​	​	2,125
Other assets	​		6,074	​	​	6,379
TOTAL ASSETS	​	$	1,171,184	​	$	1,160,680
LIABILITIES	​	​	​	​	​	​
Non-interest bearing deposits	​	$	136,462	​	$	150,627
Interest bearing deposits	​		824,051	​	​	798,544
Total deposits	​		960,513	​	​	949,171
Short-term borrowings	​		22,412	​	​	41,029
Advances from Federal Home Loan Bank	​		53,668	​	​	46,721
Operating lease liabilities	​		865	​	​	—
Financing lease liabilities	​		3,163	​	​	—
Guaranteed junior subordinated deferrable interest debentures	​		12,955	​	​	12,939
Subordinated debt	​		7,511	​	​	7,488
Total borrowed funds	​		100,574	​	​	108,177
Other liabilities	​		11,483	​	​	5,355
TOTAL LIABILITIES	​		1,072,570	​	​	1,062,703
STOCKHOLDERS’ EQUITY	​	​	​	​	​	​
Common stock, par value $0.01 per share; 30,000,000 shares authorized: 26,650,728 shares issued and 17,057,871 shares outstanding on December 31, 2019; 30,000,000 shares authorized: 26,609,811 shares issued and 17,619,303 shares outstanding on December 31, 2018	​		267	​	​	266
Treasury stock at cost, 9,592,857 shares on December 31, 2019 and 8,990,508 shares on December 31, 2018	​		(83,129)	​	​	(80,579)
Capital surplus	​		145,888	​	​	145,782
Retained earnings	​		51,759	​	​	46,733
Accumulated other comprehensive loss, net	​		(16,171)	​	​	(14,225)
TOTAL STOCKHOLDERS’ EQUITY	​		98,614	​	​	97,977
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	​	$	1,171,184	​	$	1,160,680

See accompanying notes to consolidated financial statements.

39

AMERISERV FINANCIAL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

​	YEAR ENDED DECEMBER 31,
​	2019			2018			2017
​	(IN THOUSANDS, EXCEPT PER SHARE DATA)
INTEREST INCOME	​	​	​	​	​	​	​	​	​
Interest and fees on loans:	​	​	​	​	​	​	​	​	​
Taxable	​	$	42,832	​	$	40,938	​	$	39,122
Tax exempt	​		101	​	​	90	​	​	95
Interest bearing deposits	​		24	​	​	20	​	​	11
Short-term investments in money market funds	​		293	​	​	201	​	​	130
Investment securities:	​	​	​	​	​	​	​	​	​
Available for sale	​		5,090	​	​	4,527	​	​	3,800
Held to maturity	​		1,427	​	​	1,318	​	​	1,198
Total Interest Income	​		49,767	​	​	47,094	​	​	44,356
INTEREST EXPENSE	​	​	​	​	​	​	​	​	​
Deposits	​		11,189	​	​	8,443	​	​	6,255
Short-term borrowings	​		288	​	​	720	​	​	206
Advances from Federal Home Loan Bank	​		1,090	​	​	797	​	​	694
Financing lease liabilities	​		117	​	​	—	​	​	—
Guaranteed junior subordinated deferrable interest debentures	​		1,121	​	​	1,120	​	​	1,120
Subordinated debt	​		520	​	​	520	​	​	520
Total Interest Expense	​		14,325	​	​	11,600	​	​	8,795
Net Interest Income	​		35,442	​	​	35,494	​	​	35,561
Provision (credit) for loan losses	​		800	​	​	(600)	​	​	800
Net Interest Income after Provision (Credit) for Loan Losses	​		34,642	​	​	36,094	​	​	34,761
NON-INTEREST INCOME	​	​	​	​	​	​	​	​	​
Wealth management fees	​		9,730	​	​	9,659	​	​	9,170
Service charges on deposit accounts	​		1,271	​	​	1,420	​	​	1,581
Net gains on loans held for sale	​		865	​	​	489	​	​	679
Mortgage related fees	​		302	​	​	196	​	​	285
Net realized gains (losses) on investment securities	​		118	​	​	(439)	​	​	115
Impairment charge on other investments	​		(500)	​	​	—	​	​	—
Bank owned life insurance	​		521	​	​	536	​	​	737
Other income	​		2,466	​	​	2,363	​	​	2,078
Total Non-Interest Income	​		14,773	​	​	14,224	​	​	14,645
NON-INTEREST EXPENSE	​	​	​	​	​	​	​	​	​
Salaries and employee benefits	​		25,429	​	​	24,358	​	​	23,920
Net occupancy expense	​		2,497	​	​	2,462	​	​	2,600
Equipment expense	​		1,510	​	​	1,464	​	​	1,585
Professional fees	​		4,885	​	​	5,039	​	​	5,058
Supplies, postage, and freight	​		605	​	​	674	​	​	676
Miscellaneous taxes and insurance	​		1,135	​	​	1,062	​	​	1,194
Federal deposit insurance expense	​		100	​	​	557	​	​	628
Other expense	​		5,654	​	​	5,257	​	​	5,065
Total Non-Interest Expense	​		41,815	​	​	40,873	​	​	40,726
PRETAX INCOME	​		7,600	​	​	9,445	​	​	8,680
Provision for income taxes	​		1,572	​	​	1,677	​	​	5,387
NET INCOME	​	$	6,028	​	$	7,768	​	$	3,293
PER COMMON SHARE DATA:	​	​	​	​	​	​	​	​	​
Basic:	​	​	​	​	​	​	​	​	​
Net income	​	$	0.35	​	$	0.43	​	$	0.18
Average number of shares outstanding	​		17,359	​	​	17,933	​	​	18,498
Diluted:	​	​	​	​	​	​	​	​	​
Net income	​	$	0.35	​	$	0.43	​	$	0.18
Average number of shares outstanding	​		17,440	​	​	18,037	​	​	18,600
Cash dividends declared	​	$	0.095	​	$	0.075	​	$	0.060

See accompanying notes to consolidated financial statements.

40

AMERISERV FINANCIAL, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

​	YEAR ENDED DECEMBER 31,
​	2019			2018			2017
​	(IN THOUSANDS)
COMPREHENSIVE INCOME (LOSS)	​	​	​	​	​	​	​	​	​
Net income	​	$	6,028	​	$	7,768	​	$	3,293
Other comprehensive income (loss), before tax:	​	​	​	​	​	​	​	​	​
Pension obligation change for defined benefit plan	​		(6,418)	​	​	(244)	​	​	1,303
Income tax effect	​		1,348	​	​	51	​	​	(442)
Unrealized holding gains (losses) on available for sale securities arising during period	​		4,072	​	​	(1,810)	​	​	(40)
Income tax effect	​		(855)	​	​	381	​	​	13
Reclassification adjustment for net realized (gains) losses on available for sale securities included in net income	​		(118)	​	​	439	​	​	(115)
Income tax effect	​		25	​	​	(92)	​	​	39
Other comprehensive income (loss)	​		(1,946)	​	​	(1,275)	​	​	758
Comprehensive income	​	$	4,082	​	$	6,493	​	$	4,051

See accompanying notes to consolidated financial statements.

41

AMERISERV FINANCIAL, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

​	YEAR ENDED DECEMBER 31,
​	2019			2018			2017
​	(IN THOUSANDS)
COMMON STOCK	​	​	​	​	​	​	​	​	​
Balance at beginning of period	​		266	​	​	266	​	​	265
New common shares issued for exercise of stock options	​		1	​	​	—	​	​	1
Balance at end of period	​		267	​	​	266	​	​	266
TREASURY STOCK	​	​	​	​	​	​	​	​	​
Balance at beginning of period	​		(80,579)	​	​	(78,233)	​	​	(74,829)
Treasury stock, purchased at cost (602,349, 533,352, and 839,337 shares in 2019, 2018, and 2017, respectively)	​		(2,550)	​	​	(2,346)	​	​	(3,404)
Balance at end of period	​		(83,129)	​	​	(80,579)	​	​	(78,233)
CAPITAL SURPLUS	​	​	​	​	​	​	​	​	​
Balance at beginning of period	​		145,782	​	​	145,707	​	​	145,535
New common shares issued for exercise of stock options (40,917, 24,408, and 64,112 shares in 2019, 2018, and 2017, respectively)	​		99	​	​	61	​	​	159
Stock option expense	​		7	​	​	14	​	​	13
Balance at end of period	​		145,888	​	​	145,782	​	​	145,707
RETAINED EARNINGS	​	​	​	​	​	​	​	​	​
Balance at beginning of period	​		46,733	​	​	40,312	​	​	36,001
Net income	​		6,028	​	​	7,768	​	​	3,293
Cash dividend declared on common stock ($0.095, $0.075, and $0.060 in 2019, 2018, and 2017 respectively)	​		(1,642)	​	​	(1,347)	​	​	(1,113)
Reclassification of certain income tax effects from accumulated other comprehensive income	​		—	​	​	—	​	​	2,131
Cumulative effect adjustment for change in accounting principal	​		640	​	​	—	​	​	—
Balance at end of period	​		51,759	​	​	46,733	​	​	40,312
ACCUMULATED OTHER COMPREHENSIVE LOSS, NET	​	​	​	​	​	​	​	​	​
Balance at beginning of period	​		(14,225)	​	​	(12,950)	​	​	(11,577)
Reclassification of certain income tax effects from accumulated other comprehensive income	​		—	​	​	—	​	​	(2,131)
Other comprehensive income (loss)	​		(1,946)	​	​	(1,275)	​	​	758
Balance at end of period	​		(16,171)	​	​	(14,225)	​	​	(12,950)
TOTAL STOCKHOLDERS’ EQUITY	​	$	98,614	​	$	97,977	​	$	95,102

See accompanying notes to consolidated financial statements.

42

AMERISERV FINANCIAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

​	YEAR ENDED DECEMBER 31
​	2019			2018			2017
​	(IN THOUSANDS)
OPERATING ACTIVITIES	​	​	​	​	​	​	​	​	​
Net income	​	$	6,028	​	$	7,768	​	$	3,293
Adjustments to reconcile net income to net cash provided by operating activities:	​	​	​	​	​	​	​	​	​
Provision (credit) for loan losses	​		800	​	​	(600)	​	​	800
Depreciation and amortization expense	​		1,873	​	​	1,530	​	​	1,665
Net amortization of investment securities	​		279	​	​	347	​	​	436
Net realized (gains) losses on investment securities – available for sale	​		(118)	​	​	439	​	​	(115)
Impairment charge on other investments	​		500	​	​	—	​	​	—
Net gains on loans held for sale	​		(865)	​	​	(489)	​	​	(679)
Amortization of deferred loan fees	​		(142)	​	​	(149)	​	​	(162)
Origination of mortgage loans held for sale	​		(49,460)	​	​	(28,916)	​	​	(45,637)
Sales of mortgage loans held for sale	​		46,304	​	​	31,683	​	​	46,285
Decrease (increase) in accrued interest receivable	​		40	​	​	114	​	​	(487)
Increase in accrued interest payable	​		546	​	​	302	​	​	114
Earnings on bank-owned life insurance	​		(521)	​	​	(536)	​	​	(571)
Deferred income taxes	​		179	​	​	2,665	​	​	4,303
Stock compensation expense	​		7	​	​	14	​	​	13
Net change in operating leases	​		(67)	​	​	—	​	​	—
Other, net	​		(493)	​	​	(6,188)	​	​	(1,737)
Net cash provided by operating activities	​		4,890	​	​	7,984	​	​	7,521
INVESTING ACTIVITIES	​	​	​	​	​	​	​	​	​
Purchase of investment securities – available for sale	​		(18,084)	​	​	(45,427)	​	​	(32,889)
Purchase of investment securities – held to maturity	​		(2,257)	​	​	(5,746)	​	​	(10,572)
Proceeds from maturities of investment securities – available for sale	​		23,559	​	​	16,299	​	​	22,311
Proceeds from maturities of investment securities – held to maturity	​		3,007	​	​	3,651	​	​	2,383
Proceeds from sales of investment securities – available for sale	​		3,374	​	​	9,466	​	​	8,143
Purchase of regulatory stock	​		(13,557)	​	​	(18,681)	​	​	(17,661)
Proceeds from redemption of regulatory stock	​		14,092	​	​	18,836	​	​	16,345
Long-term loans originated	​		(205,603)	​	​	(155,191)	​	​	(154,054)
Principal collected on long-term loans	​		185,054	​	​	181,582	​	​	147,752
Purchases of premises and equipment	​		(2,821)	​	​	(2,144)	​	​	(2,705)
Proceeds from sale of other real estate owned	​		214	​	​	46	​	​	108
Proceeds from life insurance policies	​		—	​	​	—	​	​	614
Net cash provided by (used in) investing activities	​		(13,022)	​	​	2,691	​	​	(20,225)
FINANCING ACTIVITIES	​	​	​	​	​	​	​	​	​
Net (decrease) increase in deposit balances	​		11,342	​	​	1,226	​	​	(19,841)
Net increase (decrease) in other short-term borrowings	​		(18,617)	​	​	(8,055)	​	​	36,330
Principal borrowings on advances from Federal Home Loan Bank	​		22,527	​	​	12,492	​	​	12,687
Principal repayments on advances from Federal Home Loan Bank	​		(15,580)	​	​	(12,000)	​	​	(12,000)
Principal payments on financing lease liabilities	​		(173)	​	​	—	​	​	—
Stock options exercised	​		99	​	​	61	​	​	160
Purchases of treasury stock	​		(2,550)	​	​	(2,346)	​	​	(3,404)
Common stock dividend paid	​		(1,642)	​	​	(1,347)	​	​	(1,113)
Net cash provided by (used in) financing activities	​		(4,594)	​	​	(9,969)	​	​	12,819
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	​		(12,726)	​	​	706	​	​	115
CASH AND CASH EQUIVALENTS AT JANUARY 1	​		34,894	​	​	34,188	​	​	34,073
CASH AND CASH EQUIVALENTS AT DECEMBER 31	​	$	22,168	​	$	34,894	​	$	34,188

See accompanying notes to consolidated financial statements.

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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 16 banking locations in five southwestern Pennsylvania 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 Company) offers a complete range of trust and financial services and administers assets valued at approximately $2.2 billion that are not recognized on the Company’s Consolidated Balance Sheets at December 31, 2019.

PRINCIPLES OF CONSOLIDATION:

The consolidated financial statements include the accounts of AmeriServ Financial, Inc. and its wholly-owned subsidiaries, AmeriServ Financial Bank (the Bank), Trust Company, and AmeriServ Life Insurance Company (AmeriServ Life). The Bank is a state-chartered full service bank with 15 locations in Pennsylvania and 1 location in Maryland. AmeriServ Life is a captive insurance company that engages in underwriting as a reinsurer of credit life and disability insurance.

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, 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’ 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 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

44

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.

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: (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; (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; (3) the impact of legislative and regulatory changes on the customer base of FHLB; and (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 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 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 fair 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.

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

45

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.

LEASES:

The Company has operating and financing leases for several branch locations and office space. 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 was 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, 2019, the Company had one short-term equipment lease which it has elected to not record on the Consolidated Balance Sheets.

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, classified and impaired commercial and commercial real estate loans 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) the present value of expected future cash flows discounted at the loan’s effective interest rate; (2) the observable market price of the impaired loan; or (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 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.

•

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,

46

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 charged 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 $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 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 line item of the Consolidated Balance Sheets.

BANK-OWNED LIFE INSURANCE:

The Company has purchased life insurance policies on certain 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.

INTANGIBLE ASSETS:

Goodwill arising from business combinations represents the value attributable to unidentifiable intangible elements in the business acquired. The Company accounts 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.

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

47

common stock equivalent shares in the calculation. Treasury shares are treated as retired for earnings per share purposes. Options to purchase 12,000, 5,000, and 10,000 shares of common stock were outstanding during 2019, 2018 and 2017, 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 $4.19-$4.22, $4.22, and $4.00 during 2019, 2018 and 2017, respectively.

​	YEAR ENDED DECEMBER 31,
​	2019			2018			2017
​	(IN THOUSANDS, EXCEPT PER SHARE DATA)
Numerator:	​	​	​	​	​	​	​	​	​
Net income	​	$	6,028	​	$	7,768	​	$	3,293
Denominator:	​	​	​	​	​	​	​	​	​
Weighted average common shares outstanding (basic)	​		17,359	​	​	17,933	​	​	18,498
Effect of stock options	​		81	​	​	104	​	​	102
Weighted average common shares outstanding (diluted)	​		17,440	​	​	18,037	​	​	18,600
Earnings per common share:	​	​	​	​	​	​	​	​	​
Basic	​	$	0.35	​	$	0.43	​	$	0.18
Diluted	​		0.35	​	​	0.43	​	​	0.18

STOCK-BASED COMPENSATION:

The Company uses the modified prospective method for accounting of stock-based compensation. The fair value of each option grant is estimated on the grant date using the Binomial option pricing model and the expense is recognized ratably over the service period. Forfeitures are recognized as they occur. See Note 20 for details on the assumptions used.

ACCUMULATED OTHER COMPREHENSIVE LOSS:

The Company presents the components of other comprehensive income (loss) in the Consolidated Statements of Comprehensive Income (Loss). 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 money market funds. The Company made $785,000 in income tax payments in 2019; $875,000 in 2018; and $1,075,000 in 2017. The Company had non-cash transfers to other real estate owned (OREO) in the amounts of  $75,000 in 2019; $166,000 in 2018; and $77,000 in 2017. As a result of the adoption of ASU 2016-02, Leases (Topic 842) as of January 1, 2019, the Company had non-cash transactions associated with the recognition of the right-of-use assets and lease liabilities. Specifically, the Company recognized a right-of-use asset and lease liability of  $932,000 related to operating leases and a right-of-use asset and lease liability of  $3.3 million related to financing leases. In addition, as a result of the adoption of ASU 2014-09, Revenue from Contracts with Customers (Topic 606), the Company had a non-cash transaction in the amount of  $640,000 associated with the recognition of a receivable for wealth management fees as of December 31, 2019. The Company also had a non-cash transfer of the AMT credit carryforward to other assets in the amount of  $287,000 in 2018. The Company made total interest payments of  $13,779,000 in 2019; $11,298,000 in 2018; and $8,681,000 in 2017.

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.

48

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 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. 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. These instruments and their offsetting positions are recorded in Other assets and Other liabilities on the Consolidated Balance Sheets.

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.

The service cost component of net periodic benefit cost is 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 is 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. Management believes this methodology an appropriate 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 18 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.

49

2.   RECENT ACCOUNTING PRONOUNCEMENTS

In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses: Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which changes the impairment model for most financial assets. This Update 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 Update 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 affected 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.

In November 2019, the FASB issued ASU 2019-10, Financial Instruments — Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842). This update defers the effective date of ASU 2016-13 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. The Company, as a smaller reporting company, continues to evaluate the impact that the Update will have on our consolidated financial statements. We are currently working with an industry leading third-party consultant and software provider to assist us in the implementation of this standard. We expect to recognize a one-time cumulative effect adjustment to the allowance for loan losses as of the beginning of the first reporting period in which the new standard is effective, but cannot yet determine the magnitude of any such one-time adjustment or the overall impact of the new guidance on the consolidated financial statements. The overall impact of the amendment will be affected by the portfolio composition and quality at the adoption date as well as economic conditions and forecasts at that time.

3.   ADOPTION OF ACCOUNTING STANDARDS

Effective January 1, 2018, the Company adopted ASU 2014-09, Revenue from Contracts with Customers — Topic 606 and all subsequent ASUs that modified ASC 606. The standard required a company to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers at the time the transfer of goods or services takes place. At the time of adoption, the Company completed an assessment of revenue streams and review of the related contracts potentially affected by the new standard and concluded that ASU 2014-09 did not materially change the method in which it recognizes revenue. However, in 2019, the change was determined to be material related to certain revenue recognized within our wealth management segment. As a result, the Company made a one-time cumulative effect adjustment to retained earnings of  $640,000, net of tax. Additional disclosures related to revenue recognition can be found in Note 4.

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. Additionally, in July 2018, the FASB issued ASU 2018-11, Leases (Topic 842) — Targeted Improvements, which, among other things, provides an additional transition method that would allow entities to not apply the guidance in ASU 2016-02 in the comparative periods presented in the financial statements and instead recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company adopted ASU 2016-02 and its related amendments as of January 1, 2019, which resulted in the recognition of operating and financing right-of-use assets totaling $932,000 and $3.3 million, respectively, as well as operating and financing lease liabilities totaling $932,000 and $3.3 million, respectively. The Company elected to adopt the

50

transition relief provisions from ASU 2018-11 and recorded the impact of adoption as of January 1, 2019, without restating any prior-year amounts or disclosures. The related policy elections made by the Company and the additional lease disclosures can be found in Notes 1 and 11. There was no cumulative effect adjustment to the opening balance of retained earnings required.

4.   REVENUE RECOGNITION

ASU 2014-09, Revenue from Contracts with Customers — Topic 606, requires the Company to recognize the amount of revenue to which it expects to be entitled for the transfer of promised 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 on loans and interest on investments, along with certain noninterest 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 not within the scope of Topic 606. These sources of revenue cumulatively comprise 80.2% of the total revenue of the Company.

Noninterest income within the scope 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  $825,000 has been established as of December 31, 2019 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 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.

51

The following presents non-interest income, segregated by revenue streams in-scope and out-of-scope of Topic 606, for the years ended December 31, 2019, 2018, and 2017 (in thousands).

​	AT DECEMBER 31,
​	2019			2018			2017
Non-interest income:	​	​	​	​	​	​	​	​	​
In-scope of Topic 606	​	​	​	​	​	​	​	​	​
Wealth management fees	​	$	9,730	​	$	9,659	​	$	9,170
Service charges on deposit accounts	​		1,271	​	​	1,420	​	​	1,581
Other	​		1,759	​	​	1,720	​	​	1,665
Non-interest income (in-scope of topic 606)	​		12,760	​	​	12,799	​	​	12,416
Non-interest income (out-of-scope of topic 606)	​		2,013	​	​	1,425	​	​	2,229
Total non-interest income	​	$	14,773	​	$	14,224	​	$	14,645

5.   CASH AND DUE FROM DEPOSITORY INSTITUTIONS

Included in “Cash and due from depository institutions” are required federal reserves of  $3.0 million and $3.6 million for December 31, 2019 and 2018, respectively, for facilitating the implementation of monetary policy by the Federal Reserve System. The required reserves are computed by applying prescribed ratios to the classes of average deposit balances. These are held in the form of vault cash and a depository amount held with the Federal Reserve Bank.

6.   INVESTMENT SECURITIES

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

Investment securities available for sale:

​	AT DECEMBER 31, 2019
​	COST BASIS			GROSS UNREALIZED GAINS			GROSS UNREALIZED LOSSES			FAIR VALUE
​	(IN THOUSANDS)
U.S. Agency	​	$	5,084	​	$	32	​	$	—	​	$	5,116
Municipal	​		14,678	​		509	​		(17)	​		15,170
Corporate bonds	​		39,769	​		342	​		(281)	​		39,830
U.S. Agency mortgage-backed securities	​		80,046	​		1,681	​		(94)	​		81,633
Total	​	$	139,577	​	$	2,564	​	$	(392)	​	$	141,749

Investment securities held to maturity:

​

AT DECEMBER 31, 2019

​

COST BASIS

GROSS UNREALIZED GAINS

GROSS UNREALIZED LOSSES

FAIR VALUE

​

(IN THOUSANDS)

U.S. Agency mortgage-backed securities

​

$

9,466

​

$

251

​

$

(4)

​

$

9,713

Municipal

​

​

24,438

​

​

941

​

​

(53)

​

​

25,326

Corporate bonds and other securities

​

​

6,032

​

​

58

​

​

(47)

​

​

6,043

Total

​

$

39,936

​

$

1,250

​

$

(104)

​

$

41,082

52

Investment securities available for sale:

​

AT DECEMBER 31, 2018

​

COST BASIS

GROSS UNREALIZED GAINS

GROSS UNREALIZED LOSSES

FAIR VALUE

​

(IN THOUSANDS)

U.S. Agency

​

$

7,685

​

$

4

​

$

(160)

​

$

7,529

Municipal

​

​

13,301

​

​

114

​

​

(234)

​

​

13,181

Corporate bonds

​

​

37,359

​

​

131

​

​

(996)

​

​

36,494

U.S. Agency mortgage-backed securities

​

​

90,169

​

​

516

​

​

(1,158)

​

​

89,527

Total

​

$

148,514

​

$

765

​

$

(2,548)

​

$

146,731

Investment securities held to maturity:

​

AT DECEMBER 31, 2018

​

COST BASIS

GROSS UNREALIZED GAINS

GROSS UNREALIZED LOSSES

FAIR VALUE

​

(IN THOUSANDS)

U.S. Agency mortgage-backed securities

​

$

9,983

​

$

78

​

$

(132)

​

$

9,929

Municipal

​

​

24,740

​

​

131

​

​

(404)

​

​

24,467

Corporate bonds and other securities

​

​

6,037

​

​

13

​

​

(122)

​

​

5,928

Total

​

$

40,760

​

$

222

​

$

(658)

​

$

40,324

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, 2019, 53.4% of the portfolio was rated AAA as compared to 57.5% at December 31, 2018. Approximately 9.1% and 10.0% of the portfolio was rated below A or unrated on December 31, 2019 and 2018, respectively. The Company and its subsidiaries, collectively, did not hold securities of any single issuer, excluding U.S. treasury and U.S. agencies, that exceeded 10% of shareholders’ equity at December 31, 2019.

The book value of securities, both available for sale and held to maturity, pledged to secure public and trust deposits was $117,076,000 at December 31, 2019 and $115,536,000 at December 31, 2018.

The Company realized $118,000 of gross investment security gains in 2019, $15,000 of gross investment security gains and $454,000 of gross investment security losses in 2018, and $115,000 of gross investment security gains in 2017. On a net basis, the realized gain for 2019 was $93,000 after factoring in tax expense of $25,000, the realized loss for 2018 was $347,000 after factoring in a tax benefit of  $92,000, and the realized gain for 2017 was $76,000 after factoring in tax expense of  $39,000. Proceeds from sales of investment securities available for sale were $3.4 million for 2019, $9.5 million for 2018, and $8.1 million during 2017.

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, 2019. 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 3.07 years. The weighted average expected maturity for available for sale securities at December 31, 2019 for U.S. agency, U.S. agency mortgage-backed, corporate bond, and municipal securities was 10.19, 4.36, 4.05, and 5.19 years, respectively. The weighted average expected maturity for held to maturity securities at December 31, 2019 for U.S. agency mortgage-backed, corporate bond/other securities, and municipal securities 4.62, 3.21, and 5.92 years, respectively.

53

Investment securities available for sale:

​

AT DECEMBER 31, 2019

​

U. S. AGENCY

MUNICIPAL

CORPORATE BONDS

U.S. AGENCY MORTGAGE- BACKED SECURITIES

TOTAL INVESTMENT SECURITIES AVAILABLE FOR SALE

​

(IN THOUSANDS, EXCEPT YIELDS)

COST BASIS

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Within 1 year

​

$

—

—%

​

$

500

2.25%

​

$

1,500

3.10%

​

$

—

—%

​

$

2,000

2.89%

After 1 year but within 5 years

​

​

—

—

​

​

3,121

3.09

​

​

18,695

3.43

​

​

1,200

2.46

​

​

23,016

3.33

After 5 years but within 10 years

​

​

2,557

2.93

​

​

11,057

3.26

​

​

19,574

4.11

​

​

7,882

2.99

​

​

41,070

3.59

After 10 years but within15 years

​

​

—

—

​

​

—

—

​

​

—

—

​

​

23,018

2.83

​

​

23,018

2.83

Over 15 years

​

​

2,527

2.68

​

​

—

—

​

​

—

—

​

​

47,946

2.90

​

​

50,473

2.89

Total

​

$

5,084

2.81

​

$

14,678

3.19

​

$

39,769

3.75

​

$

80,046

2.88

​

$

139,577

3.16

FAIR VALUE

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Within 1 year

​

$

—

​

​

$

500

​

​

$

1,503

​

​

$

—

​

​

$

2,003

​

After 1 year but within 5 years

​

​

—

​

​

​

3,179

​

​

​

18,755

​

​

​

1,213

​

​

​

23,147

​

After 5 years but within 10 years

​

​

2,570

​

​

​

11,491

​

​

​

19,572

​

​

​

8,075

​

​

​

41,708

​

After 10 years but within15 years

​

​

—

​

​

​

—

​

​

​

—

​

​

​

23,538

​

​

​

23,538

​

Over 15 years

​

​

2,546

​

​

​

—

​

​

​

—

​

​

​

48,807

​

​

​

51,353

​

Total

​

$

5,116

​

​

$

15,170

​

​

$

39,830

​

​

$

81,633

​

​

$

141,749

​

Investment securities held to maturity:

​

AT DECEMBER 31, 2019

​

U.S. AGENCY MORTGAGE- BACKED SECURITIES

MUNICIPAL

CORPORATE BONDS AND OTHER

TOTAL INVESTMENT SECURITIES HELD TO MATURITY

​

(IN THOUSANDS, EXCEPT YIELDS)

COST BASIS

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Within 1 year

​

$

—

—%

​

$

—

—%

​

$

—

—%

​

$

—

—%

After 1 year but within 5 years

​

​

1,977

2.50

​

​

2,567

3.33

​

​

3,000

2.95

​

​

7,544

2.96

After 5 years but within 10 years

​

​

—

—

​

​

16,506

3.37

​

​

3,032

4.40

​

​

19,538

3.53

After 10 years but within15 years

​

​

2,232

3.62

​

​

5,050

4.10

​

​

—

—

​

​

7,282

3.95

Over 15 years

​

​

5,257

3.30

​

​

315

3.50

​

​

—

—

​

​

5,572

3.31

Total

​

$

9,466

3.21

​

$

24,438

3.52

​

$

6,032

3.68

​

$

39,936

3.47

FAIR VALUE

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Within 1 year

​

$

—

​

​

$

—

​

​

$

—

​

​

$

—

​

After 1 year but within 5 years

​

​

2,009

​

​

​

2,644

​

​

​

2,953

​

​

​

7,606

​

After 5 years but within 10 years

​

​

—

​

​

​

17,153

​

​

​

3,090

​

​

​

20,243

​

After 10 years but within15 years

​

​

2,353

​

​

​

5,209

​

​

​

—

​

​

​

7,562

​

Over 15 years

​

​

5,351

​

​

​

320

​

​

​

—

​

​

​

5,671

​

Total

​

$

9,713

​

​

$

25,326

​

​

$

6,043

​

​

$

41,082

​

54

The following table presents information concerning investments with unrealized losses as of December 31, 2019 (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

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

U.S. Agency mortgage-backed securities

​

​

7,084

​

​

(23)

​

​

8,562

​

​

(75)

​

​

15,646

​

​

(98)

Municipal

​

​

2,269

​

​

(18)

​

​

1,123

​

​

(52)

​

​

3,392

​

​

(70)

Corporate bonds and other securities

​

​

7,797

​

​

(85)

​

​

11,783

​

​

(243)

​

​

19,580

​

​

(328)

Total

​

$

17,150

​

$

(126)

​

$

21,468

​

$

(370)

​

$

38,618

​

$

(496)

The following table presents information concerning investments with unrealized losses as of December 31, 2018 (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

​

$

244

​

$

(6)

​

$

5,631

​

$

(154)

​

$

5,875

​

$

(160)

U.S. Agency mortgage-backed securities

​

​

17,718

​

​

(177)

​

​

39,983

​

​

(1,113)

​

​

57,701

​

​

(1,290)

Municipal

​

​

6,601

​

​

(71)

​

​

15,880

​

​

(567)

​

​

22,481

​

​

(638)

Corporate bonds and other securities

​

​

15,221

​

​

(440)

​

​

17,038

​

​

(678)

​

​

32,259

​

​

(1,118)

Total

​

$

39,784

​

$

(694)

​

$

78,532

​

$

(2,512)

​

$

118,316

​

$

(3,206)

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 54 positions that are considered temporarily impaired at December 31, 2019. 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.

As of December 31, 2019, the Company reported $366,000 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 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. In 2019, the Company recorded a realized gain of  $13,000 and an unrealized loss of  $5,000 was recognized in income on these equity securities. 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.

55

7.   LOANS

The loan portfolio of the Company consisted of the following:

​	AT DECEMBER 31,
​	2019			2018
​	(IN THOUSANDS)
Commercial:	​	​	​	​	​	​
Commercial and industrial	​	$	173,922	​	$	158,279
Commercial loans secured by owner occupied real estate	​		91,655	​	​	91,905
Commercial loans secured by non-owner occupied real estate	​		363,635	​	​	356,543
Real estate – residential mortgage	​		235,239	​	​	237,964
Consumer	​		18,255	​	​	17,591
Loans, net of unearned income	​	$	882,706	​	$	862,282

Loan balances at December 31, 2019 and 2018 are net of unearned income of  $384,000 and $322,000, respectively. Real estate construction loans comprised 4.9% and 3.5% of total loans net of unearned income at December 31, 2019 and 2018, respectively. 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, 2019 and 2018, 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-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 $544,000 and $694,000 at December 31, 2019 and 2018, respectively.

8.   ALLOWANCE FOR LOAN LOSSES

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

​

BALANCE AT DECEMBER 31, 2018

CHARGE- OFFS

RECOVERIES

PROVISION (CREDIT)

BALANCE AT DECEMBER 31, 2019

Commercial

​

$

3,057

​

$

(9)

​

$

22

​

$

881

​

$

3,951

Commercial loans secured by non-owner occupied real estate

​

​

3,389

​

​

(63)

​

​

48

​

​

(255)

​

​

3,119

Real estate – residential mortgage

​

​

1,235

​

​

(98)

​

​

118

​

​

(96)

​

​

1,159

Consumer

​

​

127

​

​

(262)

​

​

52

​

​

209

​

​

126

Allocation for general risk

​

​

863

​

​

—

​

​

—

​

​

61

​

​

924

Total

​

$

8,671

​

$

(432)

​

$

240

​

$

800

​

$

9,279

56

​

BALANCE AT DECEMBER 31, 2017

CHARGE- OFFS

RECOVERIES

PROVISION (CREDIT)

BALANCE AT DECEMBER 31, 2018

Commercial

​

$

4,298

​

$

(574)

​

$

31

​

$

(698)

​

$

3,057

Commercial loans secured by non-owner occupied real estate

​

​

3,666

​

​

—

​

​

51

​

​

(328)

​

​

3,389

Real estate – residential mortgage

​

​

1,102

​

​

(380)

​

​

119

​

​

394

​

​

1,235

Consumer

​

​

128

​

​

(251)

​

​

61

​

​

189

​

​

127

Allocation for general risk

​

​

1,020

​

​

—

​

​

—

​

​

(157)

​

​

863

Total

​

$

10,214

​

$

(1,205)

​

$

262

​

$

(600)

​

$

8,671

​

BALANCE AT DECEMBER 31, 2016

CHARGE- OFFS

RECOVERIES

PROVISION

BALANCE AT DECEMBER 31, 2017

Commercial

​

$

4,041

​

$

(311)

​

$

27

​

$

541

​

$

4,298

Commercial loans secured by non-owner occupied real estate

​

​

3,584

​

​

(132)

​

​

56

​

​

158

​

​

3,666

Real estate – residential mortgage

​

​

1,169

​

​

(313)

​

​

207

​

​

39

​

​

1,102

Consumer

​

​

151

​

​

(172)

​

​

120

​

​

29

​

​

128

Allocation for general risk

​

​

987

​

​

—

​

​

—

​

​

33

​

​

1,020

Total

​

$

9,932

​

$

(928)

​

$

410

​

$

800

​

$

10,214

For 2019, the Company recorded an $800,000 provision expense for loan losses compared to a $600,000 provision recovery for 2018, or an increase of  $1.4 million between years. The 2019 provision expense reflects the growth within the loan portfolio and the increase in classified loans. The Company experienced net loan charge-offs of only $192,000, or 0.02% of total loans, in 2019 compared to net loan charge-offs of  $943,000, or 0.11% of total loans, in 2018. Overall, the Company continued to maintain strong asset quality as its nonperforming assets totaled $2.3 million, or only 0.26% of total loans, at December 31, 2019.

Specifically, the 2019 provision expense within the commercial segment was driven by the rating downgrade of a $6.5 million performing commercial and industrial loan to substandard as a result of the unexpected death of a borrower. This downgrade caused a $675,000 increase in the fourth quarter 2019 provision expense. This rating action was prudent due to the inherent uncertainties associated with a large estate liquidation. Recent updates related to this loan indicate that the estate is presently illiquid due to holds placed on deposit accounts and significant real estate holdings and other unique assets that will need to be unwound. As such there is heightened risk that this loan may move into non-performing status in 2020 as a result of payment delays.

Additionally, the 2019 provision credit within commercial loans secured by non-owner occupied real estate was driven, primarily, by a relaxation of the economic qualitative factors applied to the Pass rated portion of this loan segment.

For 2018, the Company recorded a $600,000 provision recovery compared to an $800,000 provision for loan losses in 2017, or a decrease of  $1.4 million between years. The 2018 provision recovery reflects our overall strong asset quality, reduced loan portfolio balance and the successful workout of several criticized loans. The Company experienced net loan charge-offs of  $943,000, or 0.11% of total loans, in 2018 compared to net loan charge-offs of  $51,800, or 0.06%, of total loans, in 2017. The higher 2018 net loan charge-offs reflect the final workout of several non-performing loans on which reserves had previously been established. Nonperforming assets totaled $1.4 million, or only 0.16%, of total loans, at December 31, 2018.

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

57

​	AT DECEMBER 31, 2019
Loans:	COMMERCIAL			COMMERCIAL LOANS SECURED BY NON-OWNER OCCUPIED REAL ESTATE			REAL ESTATE –  RESIDENTIAL MORTGAGE			CONSUMER			TOTAL
​	(IN THOUSANDS)
Individually evaluated for impairment	​	$	816	​	$	8	​	$	—	​	$	—	​	$	824
Collectively evaluated for impairment	​	​	264,761	​	​	363,627	​	​	235,239	​	​	18,255	​	​	881,882
Total loans	​	$	265,577	​	$	363,635	​	$	235,239	​	$	18,255	​	$	882,706

​	AT DECEMBER 31, 2019
Allowance for loan losses:	COMMERCIAL			COMMERCIAL LOANS SECURED BY NON-OWNER OCCUPIED REAL ESTATE			REAL ESTATE –  RESIDENTIAL MORTGAGE			CONSUMER			ALLOCATION FOR GENERAL RISK			TOTAL
​	(IN THOUSANDS)
Specific reserve allocation	​	$	84	​	$	8	​	$	—	​	$	—	​	$	—	​	$	92
General reserve allocation	​	​	3,867	​	​	3,111	​	​	1,159	​	​	126	​	​	924	​	​	9,187
Total allowance for loan losses	​	$	3,951	​	$	3,119	​	$	1,159	​	$	126	​	$	924	​	$	9,279

​	AT DECEMBER 31, 2018
Loans:	COMMERCIAL			COMMERCIAL LOANS SECURED BY NON-OWNER OCCUPIED REAL ESTATE			REAL ESTATE –  RESIDENTIAL MORTGAGE			CONSUMER			TOTAL
​	(IN THOUSANDS)
Individually evaluated for impairment	​	$	—	​	$	11	​	$	—	​	$	—	​	$	11
Collectively evaluated for impairment	​	​	250,184	​	​	356,532	​	​	237,964	​	​	17,591	​	​	862,271
Total loans	​	$	250,184	​	$	356,543	​	$	237,964	​	$	17,591	​	$	862,282

58

​	AT DECEMBER 31, 2018
​	COMMERCIAL			COMMERCIAL LOANS SECURED BY NON-OWNER OCCUPIED REAL ESTATE			REAL ESTATE –  RESIDENTIAL MORTGAGE			CONSUMER			ALLOCATION FOR GENERAL RISK			TOTAL
​	(IN THOUSANDS)
Allowance for loan losses:	​			​			​			​			​			​
Specific reserve allocation	​	$	—	​	$	11	​	$	—	​	$	—	​	$	—	​	$	11
General reserve allocation	​	​	3,057	​	​	3,378	​	​	1,235	​	​	127	​	​	863	​	​	8,660
Total allowance for loan losses	​	$	3,057	​	$	3,389	​	$	1,235	​	$	127	​	$	863	​	$	8,671

The segments of the Company’s loan portfolio are disaggregated into classes that allows management to monitor risk and performance. The loan classes 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. The commercial loan segment includes both the commercial and industrial and the owner occupied commercial real estate loan classes while the remaining segments are not separated into classes as management monitors risk in these 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.

Management evaluates for possible impairment any individual loan in the commercial or commercial real estate segment that is in nonaccrual 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.

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 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 Assigned Risk Department to support the value of the property.

When reviewing an appraisal associated with an existing real estate collateral dependent transaction, the Bank’s internal Assigned Risk Department must determine if there have been material changes to the

59

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;

•

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 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 Assigned Risk Department personnel rests with the Assigned Risk Department and not the originating account officer.

The following tables present impaired loans by 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, 2019
​	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	​	$	816	​	$	84	​	$	—	​	$	816	​	$	816
Commercial loans secured by non-owner occupied real estate	​	​	8	​	​	8	​	​	—	​	​	8	​	​	30
Total impaired loans	​	$	824	​	$	92	​	$	—	​	$	824	​	$	846

​	AT DECEMBER 31, 2018
​	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 loans secured by non-owner occupied real estate	​	$	11	​	$	11	​	$	—	​	$	11	​	$	33
Total impaired loans	​	$	11	​	$	11	​	$	—	​	$	11	​	$	33

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

60

​	YEAR ENDED DECEMBER 31,
​	2019			2018			2017
​	(IN THOUSANDS)
Average impaired balance:	​	​	​	​	​	​	​	​	​
Commercial	​	$	597	​	$	228	​	$	1,075
Commercial loans secured by non-owner occupied real estate	​		10	​	​	12	​	​	838
Average investment in impaired loans	​	$	607	​	$	240	​	$	1,913
Interest income recognized:	​	​	​	​	​	​	​	​	​
Commercial	​	$	30	​	$	—	​	$	12
Commercial loans secured by non-owner occupied real estate	​		—	​	​	—	​	​	—
Interest income recognized on a cash basis on impaired loans	​	$	30	​	$	—	​	$	12

Management uses a nine-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  $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 2019 required review of a minimum range of 50% to 55% 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 $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.

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

61

​	AT DECEMBER 31, 2019
​	PASS			SPECIAL MENTION			SUBSTANDARD			DOUBTFUL			TOTAL
​	(IN THOUSANDS)
Commercial and industrial	​	$	161,147	​	$	853	​	$	11,922	​	$	—	​	$	173,922
Commercial loans secured by owner occupied real estate	​	​	88,942	​	​	1,384	​	​	1,329	​	​	—	​	​	91,655
Commercial loans secured by non-owner occupied real estate	​	​	362,027	​	​	—	​	​	1,600	​	​	8	​	​	363,635
Total	​	$	612,116	​	$	2,237	​	$	14,851	​	$	8	​	$	629,212

​	AT DECEMBER 31, 2018
​	PASS			SPECIAL MENTION			SUBSTANDARD			DOUBTFUL			TOTAL
​	(IN THOUSANDS)
Commercial and industrial	​	$	154,510	​	$	2,089	​	$	1,680	​	$	—	​	$	158,279
Commercial loans secured by owner occupied real estate	​	​	86,997	​	​	3,769	​	​	1,139	​	​	—	​	​	91,905
Commercial loans secured by non-owner occupied real estate	​	​	349,954	​	​	6,316	​	​	262	​	​	11	​	​	356,543
Total	​	$	591,461	​	$	12,174	​	$	3,081	​	$	11	​	$	606,727

It is generally the policy of the Bank 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 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 Bank that the outstanding balance of any consumer loan that exceeds 90-days past due as to principal and/or interest is charged off. The following tables present the performing and non-performing outstanding balances of the residential and consumer portfolio classes.

​	AT DECEMBER 31, 2019
​	PERFORMING			NON-PERFORMING			TOTAL
​	(IN THOUSANDS)
Real estate – residential mortgage	​	$	233,760	​	$	1,479	​	$	235,239
Consumer	​	​	18,255	​	​	—	​	​	18,255
Total	​	$	252,015	​	$	1,479	​	$	253,494

​	AT DECEMBER 31, 2018
​	PERFORMING			NON-PERFORMING			TOTAL
​	(IN THOUSANDS)
Real estate – residential mortgage	​	$	236,754	​	$	1,210	​	$	237,964
Consumer	​	​	17,591	​	​	—	​	​	17,591
Total	​	$	254,345	​	$	1,210	​	$	255,555

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 nonaccrual loans.

62

​

AT DECEMBER 31, 2019

​

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 and industrial

​

$

173,922

​

$

—

​

$

—

​

$

—

​

$

—

​

$

173,922

​

$

—

Commercial loans secured by owner occupied real estate

​

​

91,538

​

​

117

​

​

—

​

​

—

​

​

117

​

​

91,655

​

​

—

Commercial loans secured by non-owner occupied real estate

​

​

363,635

​

​

—

​

​

—

​

​

—

​

​

—

​

​

363,635

​

​

—

Real estate – residential mortgage

​

​

231,022

​

​

2,331

​

​

864

​

​

1,022

​

​

4,217

​

​

235,239

​

​

—

Consumer

​

​

18,190

​

​

42

​

​

23

​

​

—

​

​

65

​

​

18,255

​

​

—

Total

​

$

878,307

​

$

2,490

​

$

887

​

$

1,022

​

$

4,399

​

$

882,706

​

$

—

​

AT DECEMBER 31, 2018

​

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 and industrial

​

$

158,279

​

$

—

​

$

—

​

$

—

​

$

—

​

$

158,279

​

$

—

Commercial loans secured by owner occupied real estate

​

​

91,905

​

​

—

​

​

—

​

​

—

​

​

—

​

​

91,905

​

​

—

Commercial loans secured by non-owner occupied real estate

​

​

355,963

​

​

580

​

​

—

​

​

—

​

​

580

​

​

356,543

​

​

—

Real estate – residential mortgage

​

​

232,465

​

​

3,651

​

​

472

​

​

1,376

​

​

5,499

​

​

237,964

​

​

—

Consumer

​

​

17,408

​

​

153

​

​

30

​

​

—

​

​

183

​

​

17,591

​

​

—

Total

​

$

856,020

​

$

4,384

​

$

502

​

$

1,376

​

$

6,262

​

$

862,282

​

$

—

An allowance for loan losses (“ALL”) is maintained to support 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, residential mortgage and small business portfolios. A historical charge-off factor is calculated utilizing a rolling 12 consecutive historical quarters for the commercial portfolios. This historical charge-off factor for the consumer, residential mortgage and small business portfolios are based on a three-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 estimates and judgments. The allowance consists of three elements: (1) an allowance

63

established on specifically identified problem loans, (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 policies, and trends in policy, financial information, and documentation exceptions, and (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.

9.   NON-PERFORMING ASSETS INCLUDING TROUBLED DEBT RESTRUCTURINGS

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, in-substance foreclosures and repossessed assets).

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

​	AT DECEMBER 31,
​	2019			2018
​	(IN THOUSANDS, EXCEPT PERCENTAGES)
Non-accrual loans:	​	​	​	​	​	​
Commercial loans secured by non-owner occupied real estate	​	$	8	​	$	11
Real estate – residential mortgage	​		1,479	​	​	1,210
Total	​		1,487	​	​	1,221
Other real estate owned:	​	​	​	​	​	​
Commercial loans secured by owner occupied real estate	​		—	​	​	157
Real estate – residential mortgage	​		37	​	​	—
Total	​		37	​	​	157
TDR’s not in non-accrual	​		815	​	​	—
Total non-performing assets including TDR	​	$	2,339	​	$	1,378
Total non-performing assets as a percent of loans, net of unearned income, and other real estate owned	​		0.26%	​	​	0.16%

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.

64

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

•

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 has insufficient cash flows to service their loan(s); 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 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 $92,000 and $11,000 as of December 31, 2019 and 2018, respectively.

The following table details the loans modified in TDRs during the year ended December 31, 2019 (dollars in thousands).

Loans in accrual status	# of Loans		Current Balance			Concession Granted
Commercial and industrial	​	2	​	$	816	Extension of maturity date with a below market interest rate
Loans in non-accrual status	​		​			​
Commercial loan secured by non-owner occupied real estate	​	1	​	​	8	Extension of maturity date

The following table details the loans modified in TDRs during the year ended December 31, 2018 (dollars in thousands).

Loans in non-accrual status	# of Loans		Current Balance			Concession Granted
Commercial loan secured by non-owner occupied real estate	​	1	​	$	11	Extension of maturity date

65

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’s in the previous 12 months and defaulted during the reporting periods ending December 31, 2019, 2018 or 2017, 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 is recorded at the lower of  (1) fair value minus estimated costs to sell or (2) carrying cost.

Foreclosed assets acquired in settlement of loans carried at fair value less estimated costs to sell are included in Other assets on the Consolidated Balance Sheets. As of December 31, 2019, a total of  $37,000 of residential real estate foreclosed assets were included in Other assets. As of December 31, 2018, there were no residential real estate foreclosed assets included in Other assets. As of December 31, 2019, the Company had initiated formal foreclosure procedures on $267,000 of consumer residential mortgages.

10.   PREMISES AND EQUIPMENT

An analysis of premises and equipment follows:

​	AT DECEMBER 31,
​	2019			2018
​	(IN THOUSANDS)
Land	​	$	1,198	​	$	1,198
Premises	​		27,711	​	​	27,160
Furniture and equipment	​		8,632	​	​	9,085
Leasehold improvements	​		1,174	​	​	461
Total at cost	​		38,715	​	​	37,904
Less: Accumulated depreciation and amortization	​		24,072	​	​	24,556
Premises and equipment, net	​	$	14,643	​	$	13,348

The Company recorded depreciation expense of  $1.5 million for 2019 and 2018 and $1.7 million for 2017.

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 $218,000, $221,000, and $216,000 for the years ended December 31, 2019, 2018, and 2017, respectively.

11.   LEASE COMMITMENTS

Due to the adoption of ASU 2016-02, Leases (Topic 842), the Company completed a comprehensive review and analysis of all its property and equipment contracts. As a result of this review, it was determined that the Company leases eight office locations under both operating and financing leases and one copy machine under a short-term lease. Several assumptions and judgments were made when applying the requirements of Topic 842 to the Company’s existing 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.

66

The following table presents the lease cost associated with both operating and financing leases for the year ended December 31, 2019 (in thousands). Total rent expense recorded during the years ended December 31, 2018 and 2017 was $415,000 and $571,000, respectively.

​	YEAR ENDED DECEMBER 31, 2019
Lease cost	​	​	​
Financing lease cost:	​	​	​
Amortization of right-of-use asset	​	$	258
Interest expense	​		117
Operating lease cost	​		117
Total lease cost	​	$	492

The following table presents the weighted-average remaining lease term and discount rate for the leases outstanding at December 31, 2019.

​	OPERATING		FINANCING
Weighted-average remaining term (years)	​	11.9	​	17.1
Weighted-average discount rate	​	3.46%	​	3.60%

The following table presents the undiscounted cash flows due related to operating and financing leases as of December 31, 2019, along with a reconciliation to the discounted amount recorded on the Consolidated Balance Sheets (in thousands).

​	OPERATING			FINANCING
Undiscounted cash flows due:	​	​	​	​	​	​
Within 1 year	​	$	118	​	$	296
After 1 year but within 2 years	​	​	120	​	​	275
After 2 years but within 3 years	​	​	98	​	​	277
After 3 years but within 4 years	​	​	69	​	​	274
After 4 years but within 5 years	​	​	69	​	​	236
After 5 years	​	​	589	​	​	3,007
Total undiscounted cash flows	​	​	1,063	​	​	4,365
Discount on cash flows	​	​	(198)	​	​	(1,202)
Total lease liabilities	​	$	865	​	$	3,163

12.   DEPOSITS

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

​	AT DECEMBER 31,
​	2019			2018
​	(IN THOUSANDS)
Demand:	​	​	​	​	​	​
Non-interest bearing	​	$	136,462	​	$	150,627
Interest bearing	​		177,767	​	​	169,151
Savings	​		95,933	​	​	97,406
Money market	​		208,343	​	​	221,398
Certificates of deposit in denominations of  $100,000 or more	​		38,770	​	​	34,841
Other time	​		303,238	​	​	275,748
Total deposits	​	$	960,513	​	$	949,171

67

The following table sets forth the balance of other time deposits and certificates of deposit of  $100,000 or more as of December 31, 2019 maturing in the periods presented:

YEAR:	OTHER TIME DEPOSITS			CERTIFICATES OF DEPOSIT OF $100,000 OR MORE			TOTAL
​	(IN THOUSANDS)
2020	​	$	143,337	​	$	33,445	​	$	176,782
2021	​	​	102,425	​	​	4,818	​	​	107,243
2022	​	​	19,740	​	​	107	​	​	19,847
2023	​	​	20,242	​	​	400	​	​	20,642
2024	​	​	11,473	​	​	—	​	​	11,473
2025 and after	​	​	6,021	​	​	—	​	​	6,021
Total	​	$	303,238	​	$	38,770	​	$	342,008

The aggregate amount of time deposit accounts (including certificates of deposit) that meet or exceed the FDIC insurance limit of  $250,000 at December 31, 2019 and 2018 are $69.0 million and $61.1 million, respectively.

13.   SHORT-TERM BORROWINGS

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

​	AT DECEMBER 31, 2019
​	FEDERAL FUNDS PURCHASED			SHORT-TERM BORROWINGS
​	(IN THOUSANDS, EXCEPT RATES)
Balance	​	$	—	​	$	22,412
Maximum balance at any month end	​	​	—	​	​	49,615
Average balance during year	​	​	58	​	​	11,030
Average rate paid for the year	​	​	3.04%	​	​	2.59%
Interest rate on year-end balance	​	​	—	​	​	1.81

​	AT DECEMBER 31, 2018
​	FEDERAL FUNDS PURCHASED			SHORT-TERM BORROWINGS
​	(IN THOUSANDS, EXCEPT RATES)
Balance	​	$	—	​	$	41,029
Maximum balance at any month end	​	​	—	​	​	82,932
Average balance during year	​	​	54	​	​	33,073
Average rate paid for the year	​	​	1.70%	​	​	2.17%
Interest rate on year-end balance	​	​	—	​	​	2.62

​	AT DECEMBER 31, 2017
​	FEDERAL FUNDS PURCHASED			OTHER SHORT-TERM BORROWINGS
​	(IN THOUSANDS, EXCEPT RATES)
Balance	​	$	—	​	$	49,084
Maximum balance at any month end	​	​	—	​	​	51,760
Average balance during year	​	​	54	​	​	16,918
Average rate paid for the year	​	​	0.95%	​	​	1.21%
Interest rate on year-end balance	​	​	—	​	​	1.54

68

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

These borrowing transactions have an average maturity of overnight.

14.

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

Advances from the FHLB consist of the following:

​	AT DECEMBER 31, 2019
MATURING	WEIGHTED AVERAGE YIELD		BALANCE
​	(IN THOUSANDS, EXCEPT RATES)
2020	​	1.75%	​	$	18,729
2021	​	2.28	​	​	9,496
2022	​	2.21	​	​	17,838
2023	​	2.48	​	​	5,568
2024	​	1.86	​	​	2,037
Total advances from FHLB	​	2.08	​	$	53,668

​	AT DECEMBER 31, 2018
MATURING	WEIGHTED AVERAGE YIELD		BALANCE
​	(IN THOUSANDS, EXCEPT RATES)
2019	​	1.51%	​	$	12,500
2020	​	1.74	​	​	16,729
2021	​	2.28	​	​	9,496
2022	​	2.86	​	​	6,996
2023	​	2.86	​	​	1,000
Total advances from FHLB	​	1.98	​	$	46,721

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 commercial and commercial real estate loans. The rate on open repo plus advances, which are typically overnight borrowings, can change daily, while the rates on the advances are fixed until the maturity of the advance. All FHLB stock along with an interest in certain residential mortgage, commercial real estate, and commercial 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, 2019, the Company had immediately available $358 million of overnight borrowing capability at the FHLB, $30 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, 2019 and 2018 was $13.0 million and $12.9 million, respectively.

69

Subordinated Debt:

On December 29, 2015, the Company completed a private placement of  $7.65 million in aggregate principal amount of fixed rate subordinated notes to certain accredited investors. The subordinated notes mature December 31, 2025 and have a 6.50% fixed interest rate for the entire term. This subordinated debt has been structured to qualify as Tier 2 capital under the Federal Reserve’s capital guidelines and will be non-callable for five years. The Company used the proceeds from this private placement and other cash on hand to redeem all $21 million of its issued and outstanding SBLF preferred stock on January 27, 2016. The net balance as of December 31, 2019 and 2018 was $7.5 million.

15.   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 values of the fair value swaps used for interest rate risk management represents the amount the Company would be expected to receive or pay to terminate such agreements. These fair values are based on an external derivative valuation model using data inputs as of the valuation date and classified Level 2.

70

The following table presents the assets and liability measured and reported on the Consolidated Balance Sheets on a recurring basis at their fair value as of December 31, 2019 and 2018, by level within the fair value hierarchy (in thousands).

​

FAIR VALUE MEASUREMENTS AT DECEMBER 31, 2019 USING

​

TOTAL

(LEVEL 1)

(LEVEL 2)

(LEVEL 3)

Equity securities

​

$

366

​

$

366

​

$

—

​

$

—

Available for sale securities:

​

​

​

​

​

​

​

​

​

​

​

​

U.S. Agency

​

​

5,116

​

​

—

​

​

5,116

​

​

—

Municipal

​

​

15,170

​

​

—

​

​

15,170

​

​

—

Corporate bonds

​

​

39,830

​

​

—

​

​

39,830

​

​

—

U.S. Agency mortgage-backed securities

​

​

81,633

​

​

—

​

​

81,633

​

​

—

Fair value swap asset

​

​

959

​

​

—

​

​

959

​

​

—

Fair value swap liability

​

​

(959)

​

​

—

​

​

(959)

​

​

—

​

FAIR VALUE MEASUREMENTS AT DECEMBER 31, 2018 USING

​

TOTAL

(LEVEL 1)

(LEVEL 2)

(LEVEL 3)

Available for sale securities:

​

​

​

​

​

​

​

​

​

​

​

​

U.S. Agency

​

$

7,529

​

$

—

​

$

7,529

​

$

—

Municipal

​

​

13,181

​

​

—

​

​

13,181

​

​

—

Corporate bonds

​

​

36,494

​

​

—

​

​

36,494

​

​

—

U.S. Agency mortgage-backed securities

​

​

89,527

​

​

—

​

​

89,527

​

​

—

Fair value swap asset

​

​

257

​

​

—

​

​

257

​

​

—

Fair value swap liability

​

​

(257)

​

​

—

​

​

(257)

​

​

—

Assets Measured and Recorded on a Non-Recurring Basis

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. At December 31, 2019, impaired loans with a carrying value of  $263,000 were reduced by a specific valuation allowance totaling $8,000 resulting in a net fair value of $255,000. At December 31, 2018, impaired loans with a carrying value of  $11,000 were reduced by a specific valuation allowance totaling $11,000 resulting in a net fair value of zero.

Other real estate owned is measured at fair value based on appraisals, less estimated costs to sell at the date of foreclosure. 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.

71

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

​

FAIR VALUE MEASUREMENTS AT DECEMBER 31, 2019 USING

​

TOTAL

(LEVEL 1)

(LEVEL 2)

(LEVEL 3)

Impaired loans

​

$

255

​

$

—

​

$

—

​

$

255

Other real estate owned

​

​

37

​

​

—

​

​

—

​

​

37

​

FAIR VALUE MEASUREMENTS AT DECEMBER 31, 2018 USING

​

TOTAL

(LEVEL 1)

(LEVEL 2)

(LEVEL 3)

Impaired loans

​

$

—

​

$

—

​

$

—

​

$

—

Other real estate owned

​

​

157

​

​

—

​

​

—

​

​

157

​	Quantitative Information About Level 3 Fair Value Measurements
December 31, 2019	Fair Value			Valuation Techniques	Unobservable Input	Range (Wgtd Ave)
Impaired loans	​	$	255	Appraisal of collateral(1)	Appraisal adjustments(2)	0% to 100% (3)%
Other real estate owned	​	​	37	Appraisal of collateral(1)	Appraisal adjustments(2) Liquidation expenses	0% to 57% (38)% 21% to 134% (30)%

​	Quantitative Information About Level 3 Fair Value Measurements
December 31, 2018	Fair Value			Valuation Techniques	Unobservable Input	Range (Wgtd Ave)
Impaired loans	​	$	—	Appraisal of collateral(1)	Appraisal adjustments(2)	100% (100)%
Other real estate owned	​	​	157	Appraisal of collateral(1)	Appraisal adjustments(2) Liquidation expenses	0% to 39% (8)% 21% to 195% (40)%

(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.

16.   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 use 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 payable, and short term borrowings have fair values which approximate the recorded carrying values. The fair value measurements for all of these financial instruments are Level 1 measurements.

The estimated fair values based on US GAAP measurements and recorded carrying values at December 31, 2019 and 2018, for the remaining financial instruments not required to be measured or reported at fair value were as follows:

72

​

AT DECEMBER 31, 2019

​

Carrying Value

Fair Value

(Level 1)

(Level 2)

(Level 3)

​

(IN THOUSANDS)

FINANCIAL ASSETS:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Investment securities – HTM

​

$

39,936

​

$

41,082

​

$

—

​

$

38,129

​

$

2,953

Loans held for sale

​

​

4,868

​

​

4,970

​

​

4,970

​

​

—

​

​

—

Loans, net of allowance for loan loss and unearned income

​

​

873,427

​

​

873,908

​

​

—

​

​

—

​

​

873,908

FINANCIAL LIABILITIES:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Deposits with no stated maturities

​

​

651,469

​

​

631,023

​

​

—

​

​

—

​

​

631,023

Deposits with stated maturities

​

​

309,044

​

​

310,734

​

​

—

​

​

—

​

​

310,734

All other borrowings(1)

​

​

74,134

​

​

76,323

​

​

—

​

​

—

​

​

76,323

​

AT DECEMBER 31, 2018

​

Carrying Value

Fair Value

(Level 1)

(Level 2)

(Level 3)

​

(IN THOUSANDS)

FINANCIAL ASSETS:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Investment securities – HTM

​

$

40,760

​

$

40,324

​

$

—

​

$

37,398

​

$

2,926

Loans held for sale

​

​

847

​

​

871

​

​

871

​

​

—

​

​

—

Loans, net of allowance for loan loss and unearned income

​

​

853,611

​

​

836,122

​

​

—

​

​

—

​

​

836,122

FINANCIAL LIABILITIES:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Deposits with no stated maturities

​

​

671,666

​

​

627,323

​

​

—

​

​

—

​

​

627,323

Deposits with stated maturities

​

​

277,505

​

​

277,010

​

​

—

​

​

—

​

​

277,010

All other borrowings(1)

​

​

67,148

​

​

69,692

​

​

—

​

​

—

​

​

69,692

(1)

All other borrowings include advances from Federal Home Loan Bank, guaranteed junior subordinated deferrable interest debentures, and subordinated debt.

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.

17.   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. The expense for income taxes is summarized below and includes both federal and applicable state corporate income taxes:

​	YEAR ENDED DECEMBER 31,
​	2019			2018			2017
​	(IN THOUSANDS)
Current	​	$	1,393	​	$	(988)	​	$	1,084
Deferred	​		179	​	​	2,665	​	​	1,679
Change in corporate tax rate	​		—	​	​	—	​	​	2,624
Income tax expense	​	$	1,572	​	$	1,677	​	$	5,387

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

73

​	YEAR ENDED DECEMBER 31,
​	2019					2018					2017
​	AMOUNT			RATE		AMOUNT			RATE		AMOUNT			RATE
​	(IN THOUSANDS, EXCEPT PERCENTAGES)
Income tax expense based on federal statutory rate	​	$	1,596	​	21.0%	​	$	1,983	​	21.0%	​	$	2,951	​	34.0%
Tax exempt income	​		(131)	​	(1.4)	​	​	(131)	​	(1.4)	​	​	(283)	​	(3.3)
Other	​		107	​	1.1	​	​	(175)	​	(1.8)	​	​	95	​	1.0
Change in corporate tax rate	​		—	​	—	​	​	—	​	—	​	​	2,624	​	30.4
Total expense for income taxes	​	$	1,572	​	20.7%	​	$	1,677	​	17.8%	​	$	5,387	​	62.1%

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

​	AT DECEMBER 31,
​	2019			2018
​	(IN THOUSANDS)
DEFERRED TAX ASSETS:	​	​	​	​	​	​
Allowance for loan losses	​	$	1,949	​	$	1,821
Unfunded commitment reserve	​		215	​	​	187
Unrealized investment security losses	​		—	​	​	374
Premises and equipment	​		1,129	​	​	1,056
Accrued pension obligation	​		1,093	​	​	144
Other	​		230	​	​	255
Total tax assets	​		4,616	​	​	3,837
DEFERRED TAX LIABILITIES:	​	​	​	​	​	​
Investment accretion	​		(82)	​	​	(90)
Unrealized investment security gains	​		(456)	​	​	—
Other	​		(102)	​	​	(110)
Total tax liabilities	​		(640)	​	​	(200)
Net deferred tax asset	​	$	3,976	​	$	3,637

At December 31, 2019 and 2018, 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 these assets.

As a result of the Tax Cuts and Jobs Act, the Company’s AMT tax credits that are not used to reduce regular taxes are eligible for a 50% refund in 2018 to 2020 and a 100% refund in 2021. Due to this change, the AMT tax credit has been fully utilized as of December 31, 2019. As of December 31, 2018, the AMT tax credit was reclassified to other assets and amounted to approximately $287,000.

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

​	YEAR ENDED DECEMBER 31,
​	2019			2018
​	(IN THOUSANDS)
Unrealized (gains) losses recognized in comprehensive income	​	$	(830)	​	$	288
Pension obligation of the defined benefit plan not yet recognized in income	​		1,348	​	​	51
Deferred provision for income taxes	​		(179)	​	​	(2,665)
Net increase (decrease)	​	$	339	​	$	(2,326)

74

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 2016 have been closed for purposes of examination by the Internal Revenue Service and the Pennsylvania Department of Revenue.

18.   EMPLOYEE BENEFIT PLANS

PENSION PLAN:

The Company has a noncontributory defined benefit pension plan covering all 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-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 401(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 at $1.3 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, 2019.

PENSION BENEFITS:

​	YEAR ENDED DECEMBER 31,
​	2019			2018
​	(IN THOUSANDS)
CHANGE IN BENEFIT OBLIGATION:	​	​	​	​	​	​
Benefit obligation at beginning of year	​	$	41,094	​	$	41,013
Service cost	​		1,470	​	​	1,482
Interest cost	​		1,569	​	​	1,273
Actuarial loss	​		7,758	​	​	823
Special/contractual termination benefits	​		—	​	​	63
Benefits paid	​		(2,330)	​	​	(3,560)
Benefit obligation at end of year	​		49,561	​	​	41,094
CHANGE IN PLAN ASSETS:	​	​	​	​	​	​
Fair value of plan assets at beginning of year	​		38,478	​	​	37,100
Actual return on plan assets	​		5,483	​	​	(1,062)
Employer contributions	​		3,200	​	​	6,000
Benefits paid	​		(2,330)	​	​	(3,560)
Fair value of plan assets at end of year	​		44,831	​	​	38,478
Funded status of the plan	​	$	(4,730)	​	$	(2,616)

75

​	YEAR ENDED DECEMBER 31,
​	2019			2018
​	(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	​	$	22,113	​	$	18,461
Total	​	$	22,113	​	$	18,461

​	YEAR ENDED DECEMBER 31,
​	2019			2018
​	(IN THOUSANDS)
ACCUMULATED BENEFIT OBLIGATION:	​	​	​	​	​	​
Accumulated benefit obligation	​	$	45,501	​	$	37,695

The weighted-average assumptions used to determine benefit obligations at December 31, 2019 and 2018 were as follows:

​	YEAR ENDED DECEMBER 31,
​	2019		2018
WEIGHTED AVERAGE ASSUMPTIONS:	​	​	​	​
Discount rate	​	3.20%	​	4.28%
Salary scale	​	2.50	​	2.50

​	YEAR ENDED DECEMBER 31,
​	2019			2018			2017
​	(IN THOUSANDS)
COMPONENTS OF NET PERIODIC BENEFIT COST:	​	​	​	​	​	​	​	​	​
Service cost	​	$	1,470	​	$	1,482	​	$	1,516
Interest cost	​		1,569	​	​	1,273	​	​	1,292
Expected return on plan assets	​		(3,025)	​	​	(2,798)	​	​	(2,539)
Special termination benefit liability	​		—	​	​	63	​	​	—
Recognized net actuarial loss	​		1,649	​	​	1,548	​	​	1,454
Net periodic pension cost	​	$	1,663	​	$	1,568	​	$	1,723

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.

​	YEAR ENDED DECEMBER 31,
​	2019			2018			2017
​	(IN THOUSANDS)
OTHER CHANGES IN PLAN ASSETS AND BENEFIT OBLIGATIONS RECOGNIZED IN OTHER COMPREHENSIVE LOSS	​	​	​	​	​	​	​	​	​
Net (gain) loss	​	$	5,300	​	$	4,683	​	$	(822)
Recognized loss	​		(1,649)	​	​	(1,548)	​	​	(1,454)
Total recognized in other comprehensive loss before tax effect	​	$	3,651	​	$	3,135	​	$	(2,276)
Total recognized in net benefit cost and other comprehensive loss before tax effect	​	$	5,314	​	$	4,703	​	$	(553)

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The estimated net loss for the defined benefit pension plan that will be amortized from accumulated other comprehensive loss into net periodic benefit cost over the next year is $2,499,000.

The weighted-average assumptions used to determine net periodic benefit cost for the years ended December 31, 2019, 2018 and 2017 were as follows:

​	YEAR ENDED DECEMBER 31,
​	2019		2018		2017
WEIGHTED AVERAGE ASSUMPTIONS:	​	​	​	​	​	​
Discount rate	​	4.28%	​	3.63%	​	4.12%
Expected return on plan assets	​	7.50	​	7.50	​	7.75
Rate of compensation increase	​	2.50	​	2.50	​	2.50

The Company has assumed a 7.50% long-term expected return on plan assets. This assumption was based upon the plan’s historical investment performance over a longer-term period of 15 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 60% of plan assets.

PLAN ASSETS:

The plan’s measurement date is December 31, 2019. This plan’s asset allocation at December 31, 2019 and 2018, by asset category are as follows:

​	YEAR ENDED DECEMBER 31,
​	2019		2018
ASSET CATEGORY:	​	​	​	​
Cash and cash equivalents	​	1%	​	49%
Domestic equities	​	8	​	7
Mutual funds/ETFs	​	82	​	42
International equities	​	1	​	—
Corporate bonds	​	8	​	2
Total	​	100%	​	100%

The major categories of assets in the Company’s Pension Plan as of year-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,
​	2019			2018
​	(IN THOUSANDS)
Level 1:	​	​	​	​	​	​
Cash and cash equivalents	​	$	186	​	$	18,939
Domestic equities	​		3,782	​	​	2,841
Mutual funds/ETFs	​		36,469	​	​	15,808
International equities	​		620	​	​	—
Level 2:	​	​	​	​	​	​
Corporate bonds	​		3,774	​	​	890
Total fair value of plan assets	​	$	44,831	​	$	38,478

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

77

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. 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 relatively 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 but the plan typically targets a range of equity investments between 50% and 60% of the plan assets. This means that fixed income and cash investments typically approximate 40% to 50% of the plan assets. The plan is also able to invest in ASRV common stock up to a maximum level of 10% of the market value of the plan assets (at December 31, 2019, 2.8% 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.

CASH FLOWS:

The Company presently expects that the contribution to be made to the Plan in 2020 will be approximately $4.0 million.

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)
2020	​	$	4,096
2021	​	​	3,910
2022	​	​	4,317
2023	​	​	3,949
2024	​	​	4,205
Years 2025 – 2029	​	​	15,975

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. 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 $604,000, $503,000 and $469,000 for the years ended December 31, 2019, 2018 and 2017, respectively. The fair value of plan assets includes $924,000 pertaining to the value of the Company’s common stock and Trust Preferred securities that are held by the plan at December 31, 2019.

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

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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, 2019, the Company reported a deferred compensation liability of  $366,000 within Other liabilities on the Consolidated Balance Sheets. In 2019, the Company recognized $9,000 of deferred compensation plan expense which is reported within Other expense on the Consolidated Statements of Operations. See Note 6 (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.

19.   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 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, 2019, the Company had various outstanding commitments to extend credit approximating $195.5 million and standby letters of credit of  $14.7 million, compared to commitments to extend credit of  $177.8 million and standby letters of credit of  $16.7 million at December 31, 2018. Standby letters of credit had terms ranging from 1 to 5 years with annual extension options available. Standby letters of credit of approximately $9.2 million were secured as of December 31, 2019 and approximately $11.0 million at December 31, 2018. The carrying amount of the liability for AmeriServ obligations related to unfunded commitments and standby letters of credit was $1,025,000 at December 31, 2019 and $889,000 at December 31, 2018.

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 operations or cash flows.

20.   STOCK COMPENSATION PLANS

The Company uses the modified prospective method for accounting for stock-based compensation and recognized $9,000 of pretax compensation expense for the year 2019, $17,000 in 2018 and $20,000 in 2017.

During 2011, the Company’s Board adopted, and its shareholders approved, the AmeriServ Financial, Inc. 2011 Stock Incentive Plan (the Plan) authorizing the grant of options or restricted stock covering 800,000

79

shares of common stock. This Plan replaced the expired 2001 Stock Option 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 will 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-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.

A summary of the status of the Company’s Stock Incentive Plan at December 31, 2019, 2018, and 2017, and changes during the years then ended is presented in the table and narrative following:

​	YEAR ENDED DECEMBER 31
​	2019					2018					2017
​	SHARES		WEIGHTED AVERAGE EXERCISE PRICE			SHARES		WEIGHTED AVERAGE EXERCISE PRICE			SHARES		WEIGHTED AVERAGE EXERCISE PRICE
Outstanding at beginning of year	​	336,313	​	$	2.91	​	360,721	​	$	2.85	​	417,566	​	$	2.76
Granted	​	7,000	​		4.19	​	5,000	​	​	4.22	​	17,500	​	​	3.96
Exercised	​	(40,917)	​		2.45	​	(24,408)	​	​	2.49	​	(64,112)	​	​	2.49
Forfeited	​	(5,748)	​		2.44	​	(5,000)	​	​	1.92	​	(10,233)	​	​	3.10
Outstanding at end of year	​	296,648	​		3.02	​	336,313	​	​	2.91	​	360,721	​	​	2.85
Exercisable at end of year	​	282,565	​		2.96	​	307,814	​	​	2.86	​	308,301	​	​	2.79
Weighted average fair value of options granted in current year	​	​	​	$	0.62	​	​	​	$	0.56	​	​	​	$	1.12

A total of 282,565 of the 296,648 options outstanding at December 31, 2019, are exercisable and have exercise prices between $1.70 and $4.22, with a weighted average exercise price of  $2.96 and a weighted average remaining contractual life of 4.03 years. The remaining 14,083 options that are not yet exercisable have exercise prices between $3.90 and $4.22, with a weighted average exercise price of  $4.14 and a weighted average remaining contractual life of 8.64 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 2019, 2018, and 2017.

​	YEAR ENDED DECEMBER 31
PRICING MODEL ASSUMPTION RANGES	2019		2018		2017
Risk-free interest rate	​	2.65%	​	3.13%	2.23 – 2.38%
Expected lives in years	​	10	​	10	10
Expected volatility	​	15.75%	​	15.59%	28.09 – 28.84%
Expected dividend rate	​	1.91%	​	1.90%	1.50%

The intrinsic value of stock options exercised was $71,000, $42,000, and $91,000 in 2019, 2018, and 2017, respectively.

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21.   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, 2019, 2018, and 2017 (in thousands):

​	YEAR ENDING DECEMBER 31, 2019									YEAR ENDING DECEMBER 31, 2018									YEAR ENDING DECEMBER 31, 2017
​	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)			Net Unrealized Gains and Losses on Investment Securities AFS(1)			Defined Benefit Pension Items(1)			Total(1)
Beginning balance	​	$	(1,409)	​	$	(12,816)	​	$	(14,225)	​	$	(327)	​	$	(12,623)	​	$	(12,950)	​	$	(171)	​	$	(11,406)	​	$	(11,577)
Reclassification of certain income tax effects from accumulated other comprehensive loss	​		—	​		—	​		—	​	​	—	​	​	—	​	​	—	​	​	(53)	​	​	(2,078)	​	​	(2,131)
Other comprehensive income (loss) before reclassifications	​		3,217	​		(6,373)	​		(3,156)	​	​	(1,429)	​	​	(1,416)	​	​	(2,845)	​	​	(27)	​	​	1,071	​	​	1,044
Amounts reclassified from accumulated other comprehensive loss	​		(93)	​		1,303	​		1,210	​	​	347	​	​	1,223	​	​	1,570	​	​	(76)	​	​	(210)	​	​	(286)
Net current period other comprehensive income (loss)	​		3,124	​		(5,070)	​		(1,946)	​	​	(1,082)	​	​	(193)	​	​	(1,275)	​	​	(156)	​	​	(1,217)	​	​	(1,373)
Ending balance	​	$	1,715	​	$	(17,886)	​	$	(16,171)	​	$	(1,409)	​	$	(12,816)	​	$	(14,225)	​	$	(327)	​	$	(12,623)	​	$	(12,950)

(1)

Amounts in parentheses indicate debits on the Consolidated Balance Sheets.

The following table presents the amounts reclassified out of each component of accumulated other comprehensive loss for the periods ending December 31, 2019, 2018, and 2017 (in thousands):

​	Amount reclassified from accumulated other comprehensive loss(1)									​
Details about accumulated other comprehensive loss components	YEAR ENDING DECEMBER 31, 2019			YEAR ENDING DECEMBER 31, 2018			YEAR ENDING DECEMBER 31, 2017			Affected line item in the statement of operations
Realized (gains) losses on sale of securities	​	$	(118)	​	$	439	​	$	(115)	Net realized (gains) losses on investment securities
​	​		25	​	​	(92)	​	​	39	Provision for income taxes
​	​	$	(93)	​	$	347	​	$	(76)	Net of tax
Amortization of estimated defined benefit pension plan loss(2)	​	$	1,649	​	$	1,548	​	$	(318)	Other expense
​	​		(346)	​	​	(325)	​	​	108	Provision for income taxes
​	​	$	1,303	​	$	1,223	​	$	(210)	Net of tax
Total reclassifications for the period	​	$	1,210	​	$	1,570	​	$	(286)	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 18 for additional details).

22.   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 has an indefinite life and is not amortized.

81

Instead such intangible is evaluated for impairment at the reporting unit level at least annually. Any resulting impairment would be reflected as a non-interest expense. Of the Company’s goodwill of $11.9 million, $9.5 million is allocated to the community banking segment and $2.4 million relates to the WCCA acquisition which is included in the wealth management segment. The balance of the Company’s goodwill at December 31, 2019 and 2018 was $11.9 million.

23.   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 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.

To accommodate the needs of our customers and support the Company’s asset/liability positioning, we may enter into interest rate swap agreements with customers and a large financial institution that specializes in these types of 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 offsetting fixed rate swaps with Pittsburgh National Bank (PNC). 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 PNC 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 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. For the years ended December 31, 2019 and 2018, the Company received $120,000 and $25,000, respectively, in fees on the interest rate swap transactions.

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 15.

The following table summarizes the interest rate swap transactions that impacted the Company’s 2019 and 2018 performance (in thousands, except percentages).

DECEMBER 31, 2019
​	HEDGE TYPE	AGGREGATE NOTIONAL AMOUNT			WEIGHTED AVERAGE RATE RECEIVED/(PAID)		REPRICING FREQUENCY	INCREASE (DECREASE) IN INTEREST EXPENSE
Swap assets	Fair Value	​	$	31,668	​	4.44%	Monthly	​	$	(18)
Swap liabilities	Fair Value	​	​	(31,668)	​	(4.44)	Monthly	​	​	18
Net exposure	​	​	​	—	​	—	​	​	​	—

DECEMBER 31, 2018
​	HEDGE TYPE	AGGREGATE NOTIONAL AMOUNT			WEIGHTED AVERAGE RATE RECEIVED/(PAID)		REPRICING FREQUENCY	INCREASE (DECREASE) IN INTEREST EXPENSE
Swap assets	Fair Value	​	$	19,825	​	4.31%	Monthly	​	$	(41)
Swap liabilities	Fair Value	​	​	(19,825)	​	(4.31)	Monthly	​	​	41
Net exposure	​	​	​	—	​	—	​	​	​	—

The Company monitors and controls all derivative products with a comprehensive Board of Directors approved 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

82

advance by the Investment Asset/Liability Committee (ALCO) of the Board of Directors, unless otherwise approved, as per the terms, with the Board of Directors approved Hedging Policy. The Company had no caps or floors outstanding at December 31, 2019 and 2018. None of the Company’s derivatives are designated as hedging instruments.

24.   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 community banking, 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 wealth management segment includes the Trust Company, West Chester Capital Advisors (WCCA), our registered investment advisory firm, and Financial Services. Wealth management activities 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 Services include the sale of mutual funds, annuities, and insurance products. The wealth management businesses also include the union collective investment funds, primarily the 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 corporate debt, and centralized interest rate risk management. Inter-segment revenues were not material.

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

​

YEAR ENDED DECEMBER 31, 2019

​

COMMUNITY BANKING

WEALTH MANAGEMENT

INVESTMENT/​ PARENT

TOTAL

​

(IN THOUSANDS)

Net interest income

​

$

40,865

​

$

81

​

$

(5,504)

​

$

35,442

Provision for loan loss

​

​

800

​

​

—

​

​

—

​

​

800

Non-interest income

​

​

5,407

​

​

9,736

​

​

(370)

​

​

14,773

Non-interest expense

​

​

31,856

​

​

7,340

​

​

2,619

​

​

41,815

Income (loss) before income taxes

​

​

13,616

​

​

2,477

​

​

(8,493)

​

​

7,600

Income tax expense (benefit)

​

​

2,715

​

​

593

​

​

(1,736)

​

​

1,572

Net income (loss)

​

$

10,901

​

$

1,884

​

$

(6,757)

​

$

6,028

Total assets

​

$

981,787

​

$

10,361

​

$

179,036

​

$

1,171,184

83

​

YEAR ENDED DECEMBER 31, 2018

​

COMMUNITY BANKING

WEALTH MANAGEMENT

INVESTMENT/​ PARENT

TOTAL

​

(IN THOUSANDS)

Net interest income

​

$

39,195

​

$

71

​

$

(3,772)

​

$

35,494

Credit provision for loan loss

​

​

(600)

​

​

—

​

​

—

​

​

(600)

Non-interest income

​

​

4,832

​

​

9,651

​

​

(259)

​

​

14,224

Non-interest expense

​

​

30,809

​

​

7,319

​

​

2,745

​

​

40,873

Income (loss) before income taxes

​

​

13,818

​

​

2,403

​

​

(6,776)

​

​

9,445

Income tax expense

​

​

2,764

​

​

554

​

​

(1,641)

​

​

1,677

Net income (loss)

​

$

11,054

​

$

1,849

​

$

(5,135)

​

$

7,768

Total assets

​

$

966,910

​

$

9,345

​

$

184,425

​

$

1,160,680

​

YEAR ENDED DECEMBER 31, 2017

​

COMMUNITY BANKING

WEALTH MANAGEMENT

INVESTMENT/ PARENT

TOTAL

​

(IN THOUSANDS)

Net interest income

​

$

39,183

​

$

61

​

$

(3,683)

​

$

35,561

Provision for loan loss

​

​

800

​

​

—

​

​

—

​

​

800

Non-interest income

​

​

5,370

​

​

9,170

​

​

105

​

​

14,645

Non-interest expense

​

​

31,139

​

​

7,054

​

​

2,533

​

​

40,726

Income (loss) before income taxes

​

​

12,614

​

​

2,177

​

​

(6,111)

​

​

8,680

Income tax expense (benefit)

​

​

4,023

​

​

812

​

​

552

​

​

5,387

Net income (loss)

​

$

8,591

​

$

1,365

​

$

(6,663)

​

$

3,293

Total assets

​

$

993,689

​

$

8,703

​

$

165,263

​

$

1,167,655

25.   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, Tier 1 capital, and common equity Tier 1 capital to risk-weighted assets and Tier 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, 2019 and 2018, the Company was categorized as Well Capitalized under the regulatory framework for prompt corrective action promulgated by the Federal Reserve. The Company believes that no conditions or events have occurred that would change this conclusion. To be categorized as well capitalized, the Company must maintain minimum total risk-based, common equity Tier 1 risk-based, Tier 1 risk-based, and Tier 1 leverage ratios as set forth in the table.

84

​

AT DECEMBER 31, 2019

​

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)

​

$

132,544

​

13.49%

​

$

119,477

​

12.23%

​

8.00%

​

10.00%

Tier 1 Common Equity (To Risk Weighted Assets)

​

​

102,841

​

10.47

​

​

109,173

​

11.17

​

4.50

​

6.50

Tier 1 Capital (To Risk Weighted Assets)

​

​

114,729

​

11.68

​

​

109,173

​

11.17

​

6.00

​

8.00

Tier 1 Capital (To Average Assets)

​

​

114,729

​

9.87

​

​

109,173

​

9.50

​

4.00

​

5.00

​

AT DECEMBER 31, 2018

​

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)

​

$

129,178

​

13.53%

​

$

115,451

​

12.14%

​

8.00%

​

10.00%

Tier 1 Common Equity (To Risk Weighted Assets)

​

​

100,258

​

10.50

​

​

105,891

​

11.14

​

4.50

​

6.50

Tier 1 Capital (To Risk Weighted Assets)

​

​

112,130

​

11.74

​

​

105,891

​

11.14

​

6.00

​

8.00

Tier 1 Capital (To Average Assets)

​

​

112,130

​

9.71

​

​

105,891

​

9.28

​

4.00

​

5.00

*

Applies to the Bank only.

Additionally, while not a regulatory capital ratio, the Company’s tangible common equity ratio (non-GAAP) was 7.48% and 7.49% for 2019 and 2018, respectively. See the discussion of the tangible common equity ratio under the Balance Sheet section of the MD&A.

26.   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:

85

BALANCE SHEETS

​	AT DECEMBER 31,
​	2019			2018
​	(IN THOUSANDS)
ASSETS	​	​	​	​	​	​
Cash	​	$	100	​	$	100
Short-term investments in money market funds	​		2,544	​	​	3,711
Cash and cash equivalents	​		2,644	​	​	3,811
Investment securities available for sale	​		3,758	​	​	4,747
Equity investment in banking subsidiary	​		104,843	​	​	103,647
Equity investment in non-banking subsidiaries	​		7,830	​	​	6,745
Other assets	​		978	​	​	208
TOTAL ASSETS	​	$	120,053	​	$	119,158
LIABILITIES	​	​	​	​	​	​
Guaranteed junior subordinated deferrable interest debentures	​	$	12,955	​	$	12,939
Subordinated debt	​		7,511	​	​	7,488
Other liabilities	​		973	​	​	754
TOTAL LIABILITIES	​		21,439	​	​	21,181
STOCKHOLDERS’ EQUITY	​	​	​	​	​	​
Total stockholders’ equity	​		98,614	​	​	97,977
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	​	$	120,053	​	$	119,158

86

STATEMENTS OF OPERATIONS

​	YEAR ENDED DECEMBER 31,
​	2019			2018			2017
​	(IN THOUSANDS)
INCOME	​	​	​	​	​	​	​	​	​
Inter-entity management and other fees	​	$	2,556	​	$	2,430	​	$	2,315
Dividends from banking subsidiary	​		3,800	​	​	3,500	​	​	2,850
Dividends from non-banking subsidiaries	​		1,105	​	​	1,190	​	​	840
Interest, dividend and other income	​		186	​	​	119	​	​	163
TOTAL INCOME	​		7,647	​	​	7,239	​	​	6,168
EXPENSE	​	​	​	​	​	​	​	​	​
Interest expense	​		1,642	​	​	1,642	​	​	1,642
Salaries and employee benefits	​		2,614	​	​	2,610	​	​	2,416
Other expense	​		1,707	​	​	1,733	​	​	1,618
TOTAL EXPENSE	​		5,963	​	​	5,985	​	​	5,676
INCOME BEFORE INCOME TAXES AND EQUITY IN UNDISTRIBUTED EARNINGS OF SUBSIDIARIES	​		1,684	​	​	1,254	​	​	492
Benefit for income taxes	​		(676)	​	​	(722)	​	​	(1,114)
Equity in undistributed earnings of subsidiaries	​		3,668	​	​	5,792	​	​	1,687
NET INCOME	​	$	6,028	​	$	7,768	​	$	3,293
COMPREHENSIVE INCOME	​	$	4,082	​	$	6,493	​	$	4,051

87

STATEMENTS OF CASH FLOWS

​	YEAR ENDED DECEMBER 31,
​	2019			2018			2017
​	(IN THOUSANDS)
OPERATING ACTIVITIES	​	​	​	​	​	​	​	​	​
Net income	​	$	6,028	​	$	7,768	​	$	3,293
Adjustment to reconcile net income to net cash provided by operating activities:	​	​	​	​	​	​	​	​	​
Equity in undistributed earnings of subsidiaries	​		(3,668)	​	​	(5,792)	​	​	(1,687)
Stock compensation expense	​		7	​	​	14	​	​	13
Other – net	​		(427)	​	​	433	​	​	1,325
NET CASH PROVIDED BY OPERATING ACTIVITIES	​		1,940	​	​	2,423	​	​	2,944
INVESTING ACTIVITIES	​	​	​	​	​	​	​	​	​
Purchase of investment securities – available for sale	​		—	​	​	(1,002)	​	​	(1,002)
Proceeds from maturity and sales of investment securities – available for sale	​		1,085	​	​	1,462	​	​	1,699
NET CASH PROVIDED BY INVESTING ACTIVITIES	​		1,085	​	​	460	​	​	697
FINANCING ACTIVITIES	​	​	​	​	​	​	​	​	​
Purchases of treasury stock	​		(2,550)	​	​	(2,346)	​	​	(3,404)
Common stock dividends paid	​		(1,642)	​	​	(1,347)	​	​	(1,113)
NET CASH USED IN FINANCING ACTIVITIES	​		(4,192)	​	​	(3,693)	​	​	(4,517)
NET DECREASE IN CASH AND CASH EQUIVALENTS	​		(1,167)	​	​	(810)	​	​	(876)
CASH AND CASH EQUIVALENTS AT JANUARY 1	​		3,811	​	​	4,621	​	​	5,497
CASH AND CASH EQUIVALENTS AT DECEMBER 31	​	$	2,644	​	$	3,811	​	$	4,621

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. Cash may also be upstreamed to the parent company by the subsidiaries as an inter-entity management fee. The subsidiary Bank had a combined $108,228,000 of restricted surplus and retained earnings at December 31, 2019.

88

27.   SELECTED QUARTERLY CONSOLIDATED FINANCIAL DATA (unaudited)

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

​

2019 QUARTER ENDED

​

DEC. 31

SEPT. 30

JUNE 30

MARCH 31

​

(IN THOUSANDS, EXCEPT PER SHARE DATA)

Interest income

​

$

12,405

​

$

12,433

​

$

12,765

​

$

12,164

Interest expense

​

​

3,445

​

​

3,669

​

​

3,704

​

​

3,507

Net interest income

​

​

8,960

​

​

8,764

​

​

9,061

​

​

8,657

Provision (credit) for loan losses

​

​

975

​

​

225

​

​

—

​

​

(400)

Net interest income after provision (credit) for loan losses

​

​

7,985

​

​

8,539

​

​

9,061

​

​

9,057

Non-interest income

​

​

3,416

​

​

4,095

​

​

3,657

​

​

3,605

Non-interest expense

​

​

10,563

​

​

10,503

​

​

10,456

​

​

10,293

Income before income taxes

​

​

838

​

​

2,131

​

​

2,262

​

​

2,369

Provision for income taxes

​

​

169

​

​

442

​

​

470

​

​

491

Net income

​

$

669

​

$

1,689

​

$

1,792

​

$

1,878

Basic earnings per common share

​

$

0.04

​

$

0.10

​

$

0.10

​

$

0.11

Diluted earnings per common share

​

​

0.04

​

​

0.10

​

​

0.10

​

​

0.11

Cash dividends declared per common share

​

​

0.025

​

​

0.025

​

​

0.025

​

​

0.020

​

2018 QUARTER ENDED

​

DEC. 31

SEPT. 30

JUNE 30

MARCH 31

​

(IN THOUSANDS, EXCEPT PER SHARE DATA)

Interest income

​

$

12,125

​

$

12,149

​

$

11,603

​

$

11,217

Interest expense

​

​

3,346

​

​

3,040

​

​

2,745

​

​

2,469

Net interest income

​

​

8,779

​

​

9,109

​

​

8,858

​

​

8,748

Provision (credit) for loan losses

​

​

(700)

​

​

—

​

​

50

​

​

50

Net interest income after provision (credit) for loan losses

​

​

9,479

​

​

9,109

​

​

8,808

​

​

8,698

Non-interest income

​

​

3,322

​

​

3,586

​

​

3,681

​

​

3,635

Non-interest expense

​

​

10,374

​

​

10,096

​

​

10,292

​

​

10,111

Income before income taxes

​

​

2,427

​

​

2,599

​

​

2,197

​

​

2,222

Provision for income taxes

​

​

499

​

​

270

​

​

453

​

​

455

Net income

​

$

1,928

​

$

2,329

​

$

1,744

​

$

1,767

Basic earnings per common share

​

$

0.11

​

$

0.13

​

$

0.10

​

$

0.10

Diluted earnings per common share

​

​

0.11

​

​

0.13

​

​

0.10

​

​

0.10

Cash dividends declared per common share

​

​

0.020

​

​

0.020

​

​

0.020

​

​

0.015

89

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of AmeriServ Financial Inc. and subsidiaries (the “Company”) as of December 31, 2019 and 2018; 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, 2019; and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019, 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, 2019, based on criteria established in Internal Control — Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013, and our report dated March 2, 2020, expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. 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 audits in accordance with the standards of the PCAOB. Those standards require 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. 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 disclosures in 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 our opinion.

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

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

Cranberry Township, Pennsylvania
March 2, 2020

90

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, 2019, based on criteria established in Internal 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, 2019, based on criteria established in Internal 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 sheets of the Company as of December 31, 2019 and 2018, 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, 2019, of the Company; and our report dated March 2, 2020, 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.

91

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, 2020

92

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, 2019, 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, 2019, 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, 2019.

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, 2019.

/s/ JEFFREY A. STOPKO	/s/ MICHAEL D. LYNCH
Jeffrey A. Stopko President & Chief Executive Officer	Michael D. Lynch Senior Vice President & Chief Financial Officer

Johnstown, PA
March 2, 2020

93

STATEMENT OF MANAGEMENT RESPONSIBILITY

March 2, 2020

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	/s/ MICHAEL D. LYNCH
Jeffrey A. Stopko President & Chief Executive Officer	Michael D. Lynch Senior Vice President & Chief Financial Officer

94

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, 2019, 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, 2019.

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, 2019 is included in Item 8.

ITEM 9B.   OTHER INFORMATION

None.

95

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 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.

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 stock incentive plans as of December 31, 2019.

Equity Compensation Plan Information
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)
Equity compensation plans approved by security holders	​	296,648	​	$	3.02	​	444,668
Equity compensation plans not approved by security holders	​	0	​	​	0	​	0
Total	​	296,648	​	$	3.02	​	444,668

Information required by this section is presented in the “Principal Owners” and “Security Ownership of 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.

96

PART IV

ITEM 15.   EXHIBITS AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULES

CONSOLIDATED FINANCIAL STATEMENTS FILED:

The consolidated financial statements listed below are from this 2019 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	39
Consolidated Statements of Operations	40
Consolidated Statements of Comprehensive Income (Loss)	41
Consolidated Statements of Changes in Stockholders’ Equity	42
Consolidated Statements of Cash Flows	43
Notes to Consolidated Financial Statements	44
Report of Independent Registered Public Accounting Firm	90
Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting	91
Report of Management’s Assessment of Internal Control Over Financial Reporting	93
Statement of Management Responsibility	94

CONSOLIDATED FINANCIAL STATEMENT SCHEDULES:

These schedules are not required or are not applicable under SEC accounting regulations and therefore have been omitted.

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	Bylaws, as amended and restated effective October 17, 2019.	Exhibit 3.2 to the Current Report on Form 8-K filed on October 21, 2019
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	AmeriServ Financial, Inc. 2011 Stock Incentive Plan	Appendix A to the Definitive Proxy Statement, filed under Schedule 14A, filed on March 21, 2011
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	Employment Agreement, dated February 19, 2016, between AmeriServ Financial, Inc. and Michael D. Lynch.	Exhibit 10.1 to the Current Report on Form 8-K filed on February 24, 2016
21.1	Subsidiaries of the Registrant.	Attached
23.1	Consent of Independent Registered Public Accounting Firm	Attached

97

EXHIBIT NUMBER	DESCRIPTION	PRIOR FILING OR EXHIBIT PAGE NUMBER HEREIN
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	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	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	Certification pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.	Attached
101	The following information from AMERISERV FINANCIAL, INC.’s Annual Report on Form 10-K for the year ended December 31, 2019, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income (Loss), (iv) Consolidated Statements of Changes in Stockholders’ Equity, (v) Consolidated Statements of Cash Flows, and (vi) Notes to the Consolidated Financial Statements.	Attached

98

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:

/s/ Jeffrey A. Stopko

Jeffrey A. Stopko
President & CEO

Date: March 2, 2020

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 20, 2020:

/s/ Allan R. Dennison Allan R. Dennison	Chairman Director	/s/ Michael D. Lynch Michael D. Lynch	SVP & CFO
/s/ Jeffrey A. Stopko Jeffrey A. Stopko	President & CEO Director	/s/ Margaret A. O’Malley Margaret A. O’Malley	Director
/s/ J. Michael Adams, Jr. J. Michael Adams, Jr.	Director	/s/ Mark E. Pasquerilla Mark E. Pasquerilla	Director
/s/ Craig G. Ford Craig G. Ford	Director	/s/ Sara A. Sargent Sara A. Sargent	Director
/s/ Kim W. Kunkle Kim W. Kunkle	Director	/s/ Robert L. Wise Robert L. Wise	Director

99

AMERISERV FINANCIAL, INC.

AMERISERV FINANCIAL BANK OFFICE LOCATIONS

HEADQUARTERS

Main Office Johnstown
216 Franklin Street
Johnstown, PA 15901
1-800-837-BANK (2265)

Carrolltown
101 South Main Street
Carrolltown, PA 15722

Central City
104 Sunshine Avenue
Central City, PA 15926

Derry
112 South Chestnut Street
Derry, PA 15627

East Hills Drive Up
1213 Scalp Avenue
Johnstown, PA 15904

Eighth Ward
1059 Franklin Street
Johnstown, PA 15905

Hagerstown
12806 Shank Farm Way
Hagerstown, MD 21742

Lovell Park
179 Lovell Avenue
Ebensburg, PA 15931

Nanty Glo
1383 Shoemaker Street
Nanty Glo, PA 15943

North Atherton
1857 North Atherton Street
State College, PA 16803

Northern Cambria
4206 Crawford Avenue
Suite 1
Northern Cambria, PA 15714

Pittsburgh
United Steelworkers Building
60 Boulevard of the Allies
Suite 100
Pittsburgh, PA 15222

Seward
6858 Route 711
Suite 1
Seward, PA 15954

Somerset
108 West 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

AMERISERV LOAN PRODUCTION LOCATIONS

Altoona
3415 Pleasant Valley Boulevard
Pleasant Valley Shopping Center
Altoona, PA 16602

Wilkins Township
201 Penn Center Boulevard
Suite 200
Pittsburgh, PA 15235

24-hr ATM available at all branches except Pittsburgh where there is no ATM available

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 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	Virtu Financial, Inc. 1 Liberty Plaza New York, NY 10006 Telephone: (888) 931-4357
Raymond James & Associates 222 S. Riverside Plaza, 7th Floor Chicago, IL 60606 Telephone: (312) 655-2961	​

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 Box 43078
Providence, RI 02940-3078
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 at JStopko@AmeriServ.com. The Company also maintains a website (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.

AMERISERV FINANCIAL, INC.

AMERISERV FINANCIAL, INC.

Board of Directors	​	General Officers
J. Michael Adams, Jr. Chief Counsel to the Pennsylvania DCED Allan R. Dennison Non-Executive Chairman of the Board of all Subsidiaries Craig G. Ford Non-Executive Vice 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 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. & GPU International, Inc. & GPU Energy, Inc.	Jeffrey A. Stopko, CPA President & Chief Executive Officer Frank E. Adams Senior Vice President & Chief Loan Review Officer Susan Tomera Angeletti Senior Vice President, Director — Corporate 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 Laura L. Fiore Vice President, Deputy Auditor Anthony M. Gojmerac Vice President, Purchasing & Facilities Officer Wendy M. Gressick Vice President, Deputy Loan Review Officer Tammie L. Slavick Vice President, Financial & Profitability Analysis Sharon M. Callihan Corporate Secretary

AMERISERV FINANCIAL, INC.

AMERISERV FINANCIAL BANK

Board of Directors	General Officers	​
J. Michael Adams, Jr. Chief Counsel to the Pennsylvania DCED Allan R. Dennison Non-Executive Chairman of the Board of all Subsidiaries Craig G. Ford Non-Executive Vice 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 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. & GPU International, Inc. & GPU Energy, Inc.	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 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 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 Carie L. Braniff Vice President, Corporate Security Officer Robert J. Cabala Vice President, Commercial Relationship Manager George T. Chaney II Vice President, Portfolio Manager Jennifer L. Devan Vice President, Chief Compliance Officer Bernard A. Eckenrode Vice President, Commercial Relationship Manager	Mitchell D. Edwards Vice President, Commercial Relationship Manager Jason D. Eminhizer Vice President, Commercial Relationship Manager Christine E. Fisher Vice President, Business Services Anthony M. Gojmerac Vice President, Purchasing & Facilities Officer Chelsea M. Hartnett Vice President, Manager Credit Analysis Daniel L. Herr Vice President, Portfolio Manager Kevin H. Justice Vice President, Commercial Relationship Manager, Hagerstown Bruce A. Mabon Vice President, Collections & Assigned Risk Manager Patrick R. Miles Vice President, Commercial Relationship Manager, Altoona Elizabeth R. Shank Vice President, Deposit Operations Manager Cynthia L. Stewart Vice President, Manager Loan Administration Shana Stiles Vice President, BSA & Assistant Corporate Services Manager Charlene J. Tessari Vice President, Application & IT Risk Management Catherine M. Torok Vice President, Chief Information Security Officer Michelle D. Wyandt Vice President, Supervisor Credit Analysis

AMERISERV FINANCIAL, INC.

AMERISERV TRUST & FINANCIAL SERVICES COMPANY	​	WEST CHESTER CAPITAL ADVISORS
Board of Directors	​	Board of Directors
J. Michael Adams, Jr. Chief Counsel to the Pennsylvania DCED Richard W. Bloomingdale President, PA AFL-CIO Allan R. Dennison Non-Executive Chairman of the Board of all Subsidiaries Craig G. Ford Non-Executive Vice 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 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. & GPU International, Inc. & GPU Energy, Inc. General Officers James T. Huerth President & Chief Executive Officer David A. Finui Executive Vice President, Director — Wealth and Capital Management	Nicholas E. Debias, Jr., CTA Senior Vice President, Senior Wealth Management Advisor Bettina D. Fochler Senior Vice President, Chief Credit Officer Wayne Kessler Senior Vice President, Area Executive Johnstown 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 Timothy E. Walters Senior Vice President, Diversified Services — Wealth Advisor 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 Dennis E. Hunt Vice President, Retirement Services Officer David M. Margetan Vice President, Retirement Services Officer 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. Chief Counsel to the Pennsylvania DCED Allan R. Dennison Non-Executive Chairman of the Board of all Subsidiaries Craig G. Ford Non-Executive Vice 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. & GPU International, Inc. & 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 Johnstown, PA 15901-1911

EX-21.1

EXHIBIT 21.1​

SUBSIDIARIES OF THE REGISTRANT

NAME	PERCENT OF OWNERSHIP	JURISDICTION OF ORGANIZATION
AmeriServ Financial Bank 216 Franklin Street Johnstown, PA 15901-1911	100%	Commonwealth of Pennsylvania
AmeriServ Life Insurance Company 101 N. First Avenue #2460 Phoenix, AZ 85003	100%	State of Arizona
AmeriServ Trust and Financial Services Company 216 Franklin Street Johnstown, PA 15901-1911	100%	Commonwealth of Pennsylvania

EX-23.1

EXHIBIT 23.1​

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statements File No. 333-176869 and File No. 333-67600, on Form S-8 of AmeriServ Financial, Inc. of our report dated March 2, 2020, relating to our audit of the consolidated financial statements and internal control over financial reporting, which appears in the Annual Report to Stockholders, which is incorporated in this Annual Report on Form 10-K of AmeriServ Financial, Inc. for the year ended December 31, 2019.

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

Cranberry Township, Pennsylvania
March 2, 2020

EX-31.1

EXHIBIT 31.1​

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER
PURSUANT TO RULES 13a-14 AND 15d-14 OF THE SECURITIES EXCHANGE ACT OF
1934 AND SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Jeffrey A. Stopko, certify that:

1.

I have reviewed this annual report on Form 10-K of AmeriServ Financial, Inc. (ASF);

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of ASF as of, and for, the periods presented in this report;

4.

ASF’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for ASF and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to ASF, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

(c)

Evaluated the effectiveness of ASF’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in ASF’s internal control over financial reporting that occurred during ASF’s most recent fiscal quarter (ASF’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, ASF’s internal control over financial reporting; and

5.

ASF’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to ASF’s auditors and the audit committee of ASF’s board of directors:

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect ASF’s ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in ASF’s internal control over financial reporting.

Date: March 2, 2020 /s/Jeffrey A. Stopko ​ Jeffrey A. Stopko
President & CEO

EX-31.2

EXHIBIT 31.2​

CERTIFICATION OF THE CHIEF FINANCIAL OFFICER
PURSUANT TO RULES 13a-14 AND 15d-14 OF THE SECURITIES EXCHANGE ACT OF
1934 AND SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Michael D. Lynch, certify that:

1.

I have reviewed this annual report on Form 10-K of AmeriServ Financial, Inc. (ASF);

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of ASF as of, and for, the periods presented in this report;

4.

ASF’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for ASF and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to ASF, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

(c)

Evaluated the effectiveness of ASF’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in ASF’s internal control over financial reporting that occurred during ASF’s most recent fiscal quarter (ASF’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, ASF’s internal control over financial reporting; and

5.

ASF’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to ASF’s auditors and the audit committee of ASF’s board of directors:

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect ASF’s ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in ASF’s internal control over financial reporting.

Date: March 2, 2020 /s/Michael D. Lynch ​ Michael D. Lynch
Senior Vice President & CFO

EX-32.1

EXHIBIT 32.1​

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of AmeriServ Financial, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2019, as filed with the Securities and Exchange Commission on the date hereof  (the “Report”), I, Jeffrey A. Stopko, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:

1).

The Report fully complies with the requirements of section 13(a) or 15 (d) of the Securities Exchange Act of 1934; and

2).

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/Jeffrey A. Stopko

Jeffrey A. Stopko
President and Chief Executive Officer

March 2, 2020

EX-32.2

EXHIBIT 32.2​

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of AmeriServ Financial, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2019, as filed with the Securities and Exchange Commission on the date hereof  (the “Report”), I, Michael D. Lynch, Senior Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:

1).

The Report fully complies with the requirements of section 13(a) or 15 (d) of the Securities Exchange Act of 1934; and

2).

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/Michael D. Lynch

Michael D. Lynch
Senior Vice President and Chief Financial Officer

March 2, 2020

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
OPERATING ACTIVITIES
Net income	$ 6,028	$ 7,768	$ 3,293
Adjustments to reconcile net income to net cash provided by operating activities:
Provision (credit) for loan losses	800	(600)	800
Depreciation and amortization expense	1,873	1,530	1,665
Net amortization of investment securities	279	347	436
Net realized (gains) losses on investment securities - available for sale	(118)	439	(115)
Impairment charge on other investments	500	0	0
Net gains on loans held for sale	(865)	(489)	(679)
Amortization of deferred loan fees	(142)	(149)	(162)
Origination of mortgage loans held for sale	(49,460)	(28,916)	(45,637)
Sales of mortgage loans held for sale	46,304	31,683	46,285
Decrease (increase) in accrued interest receivable	40	114	(487)
Increase in accrued interest payable	546	302	114
Earnings on bank-owned life insurance	(521)	(536)	(571)
Deferred income taxes	179	2,665	4,303
Stock compensation expense	7	14	13
Net change in operating leases	(67)	0	0
Other, net	(493)	(6,188)	(1,737)
Net cash provided by operating activities	4,890	7,984	7,521
INVESTING ACTIVITIES
Purchase of investment securities - available for sale	(18,084)	(45,427)	(32,889)
Purchase of investment securities - held to maturity	(2,257)	(5,746)	(10,572)
Proceeds from maturities of investment securities - available for sale	23,559	16,299	22,311
Proceeds from maturities of investment securities - held to maturity	3,007	3,651	2,383
Proceeds from sales of investment securities - available for sale	3,374	9,466	8,143
Purchase of regulatory stock	(13,557)	(18,681)	(17,661)
Proceeds from redemption of regulatory stock	14,092	18,836	16,345
Long-term loans originated	(205,603)	(155,191)	(154,054)
Principal collected on long-term loans	185,054	181,582	147,752
Purchase of premises and equipment	(2,821)	(2,144)	(2,705)
Proceeds from sale of other real estate owned	214	46	108
Proceeds from life insurance policies	0	0	614
Net cash provided by (used in) investing activities	(13,022)	2,691	(20,225)
FINANCING ACTIVITIES
Net (decrease) increase in deposit balances	11,342	1,226	(19,841)
Net increase (decrease) in other short-term borrowings	(18,617)	(8,055)	36,330
Principal borrowings on advances from Federal Home Loan Bank	22,527	12,492	12,687
Principal repayments on advances from Federal Home Loan Bank	(15,580)	(12,000)	(12,000)
Principal payments on financing lease liabilities	(173)	0	0
Stock options exercised	99	61	160
Purchase of treasury stock	(2,550)	(2,346)	(3,404)
Common stock dividends	(1,642)	(1,347)	(1,113)
Net cash provided by (used in) financing activities	(4,594)	(9,969)	12,819
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	(12,726)	706	115
CASH AND CASH EQUIVALENTS AT JANUARY 1	34,894	34,188	34,073
CASH AND CASH EQUIVALENTS AT DECEMBER 31	$ 22,168	$ 34,894	$ 34,188

XML

CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Interest and fees on loans:
Taxable	$ 42,832	$ 40,938	$ 39,122
Tax exempt	101	90	95
Interest bearing deposits	24	20	11
Short-term investments in money market funds	293	201	130
Investment securities:
Available for sale	5,090	4,527	3,800
Held to maturity	1,427	1,318	1,198
Total Interest Income	49,767	47,094	44,356
INTEREST EXPENSE
Deposits	11,189	8,443	6,255
Short-term borrowings	288	720	206
Advances from Federal Home Loan Bank	1,090	797	694
Financing lease liabilities	117	0	0
Guaranteed junior subordinated deferrable interest debentures	1,121	1,120	1,120
Subordinated debt	520	520	520
Total Interest Expense	14,325	11,600	8,795
NET INTEREST INCOME	35,442	35,494	35,561
Provision (credit) for loan losses	800	(600)	800
NET INTEREST INCOME AFTER PROVISION (CREDIT) FOR LOAN LOSSES	34,642	36,094	34,761
NON-INTEREST INCOME
Wealth management fees	9,730	9,659	9,170
Service charges on deposit accounts	1,271	1,420	1,581
Net gains on loans held for sale	865	489	679
Mortgage related fees	302	196	285
Net realized gains (losses) on investment securities	118	(439)	115
Impairment charge on other investments	(500)	0	0
Bank owned life insurance	521	536	737
Other income	2,466	2,363	2,078
Total Non-Interest Income	14,773	14,224	14,645
NON-INTEREST EXPENSE
Salaries and employee benefits	25,429	24,358	23,920
Net occupancy expense	2,497	2,462	2,600
Equipment expense	1,510	1,464	1,585
Professional fees	4,885	5,039	5,058
Supplies, postage and freight	605	674	676
Miscellaneous taxes and insurance	1,135	1,062	1,194
Federal deposit insurance expense	100	557	628
Other expense	5,654	5,257	5,065
Total Non-Interest Expense	41,815	40,873	40,726
PRETAX INCOME	7,600	9,445	8,680
Provision for income taxes	1,572	1,677	5,387
NET INCOME	$ 6,028	$ 7,768	$ 3,293
Basic:
Net income	$ 0.35	$ 0.43	$ 0.18
Average number of shares outstanding	17,359	17,933	18,498
Diluted:
Net income	$ 0.35	$ 0.43	$ 0.18
Average number of shares outstanding	17,440	18,037	18,600
Cash dividends declared	$ 0.095	$ 0.075	$ 0.060

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COMMITMENTS AND CONTINGENT LIABILITIES

12 Months Ended

Dec. 31, 2019

COMMITMENTS AND CONTINGENT LIABILITIES

Commitments and Contingent Liabilities

19. 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 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, 2019, the Company had various outstanding commitments to extend credit approximating $195.5 million and standby letters of credit of $14.7 million, compared to commitments to extend credit of $177.8 million and standby letters of credit of $16.7 million at December 31, 2018.

Standby letters of credit had terms ranging from 1 to 5 years with annual extension options available. Standby letters of credit of approximately $9.2 million were secured as of December 31, 2019 and approximately $11.0 million at December 31, 2018. The carrying amount of the liability for AmeriServ obligations related to unfunded commitments and standby letters of credit was $1,025,000 at December 31, 2019 and $889,000 at December 31, 2018.

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 operations or cash flows.

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DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS

12 Months Ended

Dec. 31, 2019

DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS

DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS

15. 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 values of the fair value swaps used for interest rate risk management represents the amount the Company would be expected to receive or pay to terminate such agreements. These fair values are based on an external derivative valuation model using data inputs as of the valuation date and classified Level 2.

The following table presents the assets and liability measured and reported on the Consolidated Balance Sheets on a recurring basis at their fair value as of December 31, 2019 and 2018, by level within the fair value hierarchy (in thousands).

	FAIR VALUE MEASUREMENTS AT DECEMBER 31, 2019 USING
	TOTAL		(LEVEL 1)		(LEVEL 2)		(LEVEL 3)
Equity securities	$	366	$	366	$	—	$	—
Available for sale securities:
U.S. Agency		5,116		—		5,116		—
Municipal		15,170		—		15,170		—
Corporate bonds		39,830		—		39,830		—
U.S. Agency mortgage-backed securities		81,633		—		81,633		—
Fair value swap asset		959		—		959		—
Fair value swap liability		(959)		—		(959)		—

	FAIR VALUE MEASUREMENTS AT DECEMBER 31, 2018 USING
	TOTAL		(LEVEL 1)		(LEVEL 2)		(LEVEL 3)
Available for sale securities:
U.S. Agency	$	7,529	$	—	$	7,529	$	—
Municipal		13,181		—		13,181		—
Corporate bonds		36,494		—		36,494		—
U.S. Agency mortgage-backed securities		89,527		—		89,527		—
Fair value swap asset		257		—		257		—
Fair value swap liability		(257)		—		(257)		—

Assets Measured and Recorded on a Non-Recurring Basis

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. At December 31, 2019, impaired loans with a carrying value of $263,000 were reduced by a specific valuation allowance totaling $8,000 resulting in a net fair value of $255,000. At December 31, 2018, impaired loans with a carrying value of $11,000 were reduced by a specific valuation allowance totaling $11,000 resulting in a net fair value of zero.

Other real estate owned is measured at fair value based on appraisals, less estimated costs to sell at the date of foreclosure. 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.

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

	FAIR VALUE MEASUREMENTS AT DECEMBER 31, 2019 USING
	TOTAL		(LEVEL 1)		(LEVEL 2)		(LEVEL 3)
Impaired loans	$	255	$	—	$	—	$	255
Other real estate owned		37		—		—		37

	FAIR VALUE MEASUREMENTS AT DECEMBER 31, 2018 USING
	TOTAL		(LEVEL 1)		(LEVEL 2)		(LEVEL 3)
Impaired loans	$	—	$	—	$	—	$	—
Other real estate owned		157		—		—		157

December 31, 2019	Quantitative Information About Level 3 Fair Value Measurements
			Valuation	Unobservable
	Fair Value		Techniques	Input	Range (Wgtd Ave)
Impaired loans	$	255	Appraisal of	Appraisal	0% to 100% (3)	%
			collateral (1)	adjustments(2)
Other real estate owned		37	Appraisal of	Appraisal	0% to 57% (38)	%
			collateral (1)	adjustments(2)
				Liquidation	21% to 134% (30)	%
				expenses

December 31, 2018	Quantitative Information About Level 3 Fair Value Measurements
			Valuation	Unobservable
	Fair Value		Techniques	Input	Range (Wgtd Ave)
Impaired loans	$	—	Appraisal of	Appraisal	100% (100)	%
			collateral (1)	adjustments(2)
Other real estate owned		157	Appraisal of	Appraisal	0% to 39% (8)	%
			collateral (1)	adjustments(2)
				Liquidation	21% to 195% (40)	%
				expenses

(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.

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STOCK COMPENSATION PLANS - Additional information (Details) - USD ($)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Stock or Unit Option Plan Expense	$ 9,000	$ 17,000	$ 20,000
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized	800,000
Share-based Compensation Arrangement by Share-based Payment Award, Purchase Price of Common Stock, Percent	100.00%
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period	10 years
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	3 years
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number	296,648	336,313	360,721	417,566
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Intrinsic Value	$ 71,000	$ 42,000	$ 91,000
Range One [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, Number of Exercisable Options	282,565
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, Lower Range Limit	$ 1.70
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, Upper Range Limit	4.22
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, Exercisable Options, Weighted Average Exercise Price	$ 2.96
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, Exercisable Options, Weighted Average Remaining Contractual Term	4 years 11 days
Range Two [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, Number of Exercisable Options	14,083
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, Lower Range Limit	$ 3.90
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, Upper Range Limit	4.22
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, Exercisable Options, Weighted Average Exercise Price	$ 4.14
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, Exercisable Options, Weighted Average Remaining Contractual Term	8 years 7 months 21 days

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EMPLOYEE BENEFIT PLANS - Additional information (Details) - USD ($)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2014	Dec. 31, 2013
Defined Benefit Plan Disclosure [Line Items]
Minimum number of annual hours	1,000
Maximum percent of plan assets comprised of AmeriServ Financial, Inc. common stock	10.00%
Defined contribution plan maximum annual contribution per union employee percent	4.00%
Defined contribution plan, employer matching contribution, percent of match				6.00%	2.00%
Defined contribution plan, maximum annual contributions per employee, percent				3.00%	1.00%
Defined contribution plan, cost	$ 604,000	$ 503,000	$ 469,000
Defined benefit plan, expected amortization of gain (loss), next fiscal year	2,499,000
Other expense
Defined Benefit Plan Disclosure [Line Items]
Deferred compensation plan expense	9,000
Other liabilities
Defined Benefit Plan Disclosure [Line Items]
Deferred compensation liability	$ 366,000
Domestic equities [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined benefit plan, plan assets, target allocation, percentage	60.00%
Domestic equities [Member] | Minimum
Defined Benefit Plan Disclosure [Line Items]
Defined benefit plan, plan assets, target allocation, percentage	50.00%
Domestic equities [Member] | Maximum
Defined Benefit Plan Disclosure [Line Items]
Defined benefit plan, plan assets, target allocation, percentage	60.00%
Debt Securities [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Plan Assets, Employer, Related Party, Amount	$ 1,300,000
Debt Securities [Member] | Minimum
Defined Benefit Plan Disclosure [Line Items]
Defined benefit plan, plan assets, target allocation, percentage	40.00%
Debt Securities [Member] | Maximum
Defined Benefit Plan Disclosure [Line Items]
Defined benefit plan, plan assets, target allocation, percentage	50.00%
Defined Benefit Pension Items [Member]
Defined Benefit Plan Disclosure [Line Items]
Maximum percent of plan assets comprised of AmeriServ Financial, Inc. common stock	10.00%
Expected return on plan assets	7.50%	7.50%	7.75%
Defined benefit plan percent of assets comprised of entity common stock	2.80%
Defined benefit plan, expected future employer contributions, next fiscal year	$ 4,000,000
401(k) PLAN | Debt Securities [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Plan Assets, Employer, Related Party, Amount	$ 924,000

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NON-PERFORMING ASSETS INCLUDING TROUBLED DEBT RESTRUCTURINGS (Tables)

12 Months Ended

Dec. 31, 2019

NON-PERFORMING ASSETS INCLUDING TROUBLED DEBT RESTRUCTURINGS

Schedule of nonperforming assets including trouble debt restructurings

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

	AT DECEMBER 31,
	2019			2018
	(IN THOUSANDS, EXCEPT
	PERCENTAGES)
Non-accrual loans:
Commercial loans secured by non-owner occupied real estate	$	8		$	11
Real estate – residential mortgage		1,479			1,210
Total		1,487			1,221
Other real estate owned:
Commercial loans secured by owner occupied real estate		—			157
Real estate – residential mortgage		37			—
Total		37			157
TDR’s not in non-accrual		815			—
Total non-performing assets including TDR	$	2,339		$	1,378
Total non-performing assets as a percent of loans, net of unearned income, and other real estate owned		0.26	%		0.16	%

Schedule of troubled debt restructurings on financing receivables

The following table details the loans modified in  TDRs during the year ended December 31, 2019 (dollars in thousands).

Loans in accrual status	# of Loans	Current Balance		Concession Granted
Commercial and industrial	2	$	816	Extension of maturity date with a below market interest rate
Loans in non-accrual status
Commercial loan secured by non-owner occupied real estate	1		8	Extension of maturity date

The following table details the loans modified in TDRs during the year ended December 31, 2018 (dollars in thousands).

Loans in non-accrual status	# of Loans	Current Balance		Concession Granted
Commercial loan secured by non-owner occupied real estate	1	$	11	Extension of maturity date

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DERIVATIVE HEDGING INSTRUMENTS (Details) - USD ($)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Derivative, Notional Amount	$ 0	$ 0
Derivative Instruments Weighted Average Interest Rate Received Paid	0.00%	0.00%
Increase (Decrease) in Interest Expense	$ 0	$ 0
Derivative Financial Instruments, Liabilities [Member] | Swap [Member]
Derivative, Swap Type	Fair Value	Fair Value
Derivative Liability, Notional Amount	$ (31,668)	$ (19,825)
Derivative Instruments Weighted Average Interest Rate Received Paid	(4.44%)	(4.31%)
Derivative Instruments, Repricing Frequency	Monthly	Monthly
Increase (Decrease) in Interest Expense	$ 18,000	$ 41,000
Derivative Financial Instruments, Assets [Member] | Swap [Member]
Derivative, Swap Type	Fair Value	Fair Value
Derivative Asset, Notional Amount	$ 31,668	$ 19,825
Derivative Instruments Weighted Average Interest Rate Received Paid	4.44%	4.31%
Derivative Instruments, Repricing Frequency	Monthly	Monthly
Increase (Decrease) in Interest Expense	$ (18,000)	$ (41,000)

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SHORT-TERM BORROWINGS (Tables)

12 Months Ended

Dec. 31, 2019

SHORT-TERM BORROWINGS

Schedule of short-term borrowings

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

	AT DECEMBER 31, 2019
	FEDERAL
	FUNDS			SHORT-TERM
	PURCHASED			BORROWINGS
	(IN THOUSANDS, EXCEPT RATES)
Balance	$	—		$	22,412
Maximum balance at any month end		—			49,615
Average balance during year		58			11,030
Average rate paid for the year		3.04	%		2.59	%
Interest rate on year-end balance		—			1.81

	AT DECEMBER 31, 2018
	FEDERAL
	FUNDS			SHORT-TERM
	PURCHASED			BORROWINGS
	(IN THOUSANDS, EXCEPT RATES)
Balance	$	—		$	41,029
Maximum balance at any month end		—			82,932
Average balance during year		54			33,073
Average rate paid for the year		1.70	%		2.17	%
Interest rate on year-end balance		—			2.62

	AT DECEMBER 31, 2017
	FEDERAL			OTHER
	FUNDS			SHORT-TERM
	PURCHASED			BORROWINGS
	(IN THOUSANDS, EXCEPT RATES)
Balance	$	—		$	49,084
Maximum balance at any month end		—			51,760
Average balance during year		54			16,918
Average rate paid for the year		0.95	%		1.21	%
Interest rate on year-end balance		—			1.54

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INCOME TAXES - Change in net deferred tax assets and liabilities (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
INCOME TAXES
Unrealized (gains) losses recognized in comprehensive income	$ (830)	$ 288
Pension obligation of the defined benefit plan not yet recognized in income	1,348	51	$ (442)
Deferred provision for income taxes	(179)	(2,665)	(1,679)
Net decrease	339	(2,326)
Effective Income Tax Rate Reconciliation, Change in Enacted Tax Rate, Amount	$ 0	$ 0	$ 2,624

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LOANS (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
LOANS
Loans, net of unearned income	$ 882,706	$ 862,282
Commercial and Industrial [Member]
LOANS
Loans, net of unearned income	173,922	158,279
Commercial loans secured by owner occupied real estate [Member]
LOANS
Loans, net of unearned income	91,655	91,905
Commercial loans secured by non-owner occupied real estate [Member]
LOANS
Loans, net of unearned income	363,635	356,543
Real estate - residential mortgage [Member]
LOANS
Loans, net of unearned income	235,239	237,964
Consumer [Member]
LOANS
Loans, net of unearned income	$ 18,255	$ 17,591

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INVESTMENT SECURITIES - Cost basis and fair values of investment securities (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Information concerning investments with unrealized losses
Investment securities available for sale, Cost Basis	$ 139,577	$ 148,514
Investment securities available for sale, Gross Unrealized Gains	2,564	765
Investment securities available for sale, Gross Unrealized Losses	(392)	(2,548)
Available for Sale, Fair Value, Total	141,749	146,731
Investment securities held to maturity, Cost Basis	39,936	40,760
Investment securities held to maturity, Gross Unrealized Gains	1,250	222
Investment securities held to maturity, Gross Unrealized Losses	(104)	(658)
Held to Maturity, Fair Value, Total	41,082	40,324
U.S. Agency
Information concerning investments with unrealized losses
Investment securities available for sale, Cost Basis	5,084	7,685
Investment securities available for sale, Gross Unrealized Gains	32	4
Investment securities available for sale, Gross Unrealized Losses		(160)
Available for Sale, Fair Value, Total	5,116	7,529
Municipal
Information concerning investments with unrealized losses
Investment securities available for sale, Cost Basis	14,678	13,301
Investment securities available for sale, Gross Unrealized Gains	509	114
Investment securities available for sale, Gross Unrealized Losses	(17)	(234)
Available for Sale, Fair Value, Total	15,170	13,181
Investment securities held to maturity, Cost Basis	24,438	24,740
Investment securities held to maturity, Gross Unrealized Gains	941	131
Investment securities held to maturity, Gross Unrealized Losses	(53)	(404)
Held to Maturity, Fair Value, Total	25,326	24,467
Corporate bonds [Member]
Information concerning investments with unrealized losses
Investment securities available for sale, Cost Basis	39,769	37,359
Investment securities available for sale, Gross Unrealized Gains	342	131
Investment securities available for sale, Gross Unrealized Losses	(281)	(996)
Available for Sale, Fair Value, Total	39,830	36,494
U.S. Agency mortgage-backed securities
Information concerning investments with unrealized losses
Investment securities available for sale, Cost Basis	80,046	90,169
Investment securities available for sale, Gross Unrealized Gains	1,681	516
Investment securities available for sale, Gross Unrealized Losses	(94)	(1,158)
Available for Sale, Fair Value, Total	81,633	89,527
Investment securities held to maturity, Cost Basis	9,466	9,983
Investment securities held to maturity, Gross Unrealized Gains	251	78
Investment securities held to maturity, Gross Unrealized Losses	(4)	(132)
Held to Maturity, Fair Value, Total	9,713	9,929
Corporate bonds and other securities [Member]
Information concerning investments with unrealized losses
Investment securities held to maturity, Cost Basis	6,032	6,037
Investment securities held to maturity, Gross Unrealized Gains	58	13
Investment securities held to maturity, Gross Unrealized Losses	(47)	(122)
Held to Maturity, Fair Value, Total	$ 6,043	$ 5,928

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DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS - Schedule of estimated fair value and recorded carrying value (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
FINANCIAL ASSETS: Carrying Value
Investment securities - HTM, Carrying Value	$ 39,936	$ 40,760
Loans held for sale	4,868	847
Loans, net of allowance for loan loss and unearned income, Carrying Value	873,427	853,611
Investment securities - HTM, Fair Value	41,082	40,324
Loans held for sale, Fair Value	4,970	871
Loans, net of allowance for loan loss and unearned income, Fair Value	873,908	836,122
FINANCIAL LIABILITIES: Carrying Value
Deposits with no stated maturities, Carrying Value	651,469	671,666
Deposits with stated maturities, Carrying Value	309,044	277,505
All other borrowings, Carrying Value	74,134	67,148
Deposits with no stated maturities, Fair Value	631,023	627,323
Deposits with stated maturities, Fair Value	310,734	277,010
All other borrowings, Fair Value	$ 76,323	69,692
Assets and liabilities considered financial instruments, percentage	90.00%
Level 1 [Member]
FINANCIAL ASSETS: Carrying Value
Investment securities - HTM, Fair Value	$ 0	0
Loans held for sale, Fair Value	4,970	871
Loans, net of allowance for loan loss and unearned income, Fair Value	0	0
FINANCIAL LIABILITIES: Carrying Value
Deposits with no stated maturities, Fair Value	0	0
Deposits with stated maturities, Fair Value	0	0
All other borrowings, Fair Value	0	0
Level 2 [Member]
FINANCIAL ASSETS: Carrying Value
Investment securities - HTM, Fair Value	38,129	37,398
Loans held for sale, Fair Value	0	0
Loans, net of allowance for loan loss and unearned income, Fair Value	0	0
FINANCIAL LIABILITIES: Carrying Value
Deposits with no stated maturities, Fair Value	0	0
Deposits with stated maturities, Fair Value	0	0
All other borrowings, Fair Value	0	0
Level 3 [Member]
FINANCIAL ASSETS: Carrying Value
Investment securities - HTM, Fair Value	2,953	2,926
Loans held for sale, Fair Value	0	0
Loans, net of allowance for loan loss and unearned income, Fair Value	873,908	836,122
FINANCIAL LIABILITIES: Carrying Value
Deposits with no stated maturities, Fair Value	631,023	627,323
Deposits with stated maturities, Fair Value	310,734	277,010
All other borrowings, Fair Value	$ 76,323	$ 69,692

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ADVANCES FROM FEDERAL HOME LOAN BANK, GUARANTEED JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES AND SUBORDINATED DEBT (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
WEIGHTED AVERAGE YIELD
2020	1.75%	1.51%
2021	2.28%	1.74%
2022	2.21%	2.28%
2023	2.48%	2.86%
2024	1.86%	2.86%
Total advances from FHLB	2.08%	1.98%
BALANCE
2020	$ 18,729	$ 12,500
2021	9,496	16,729
2022	17,838	9,496
2023	5,568	6,996
2024	2,037	1,000
Total advances from FHLB	$ 53,668	$ 46,721

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ADOPTION OF ACCOUNTING STANDARDS (Details) - USD ($)	12 Months Ended
	Dec. 31, 2019	Jan. 01, 2019	Dec. 31, 2018
Operating lease right-of-use asset	$ 846,000		$ 0
Financing lease right-of-use asset	3,078,000		0
Operating Lease, Liability	865,000		0
Finance Lease, Liability	3,163,000		$ 0
ASU 2016-02
Operating lease right-of-use asset		$ 932,000
Financing lease right-of-use asset		3,300,000
Operating Lease, Liability		932,000
Finance Lease, Liability		$ 3,300,000
Wealth Management [Member] | ASU 2014-09
Cumulative Effect on Retained Earnings, Net of Tax	$ 640,000

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PARENT COMPANY FINANCIAL INFORMATION (Tables)

12 Months Ended

Dec. 31, 2019

PARENT COMPANY FINANCIAL INFORMATION

Schedule of parent company information of balance sheets

BALANCE SHEETS

	AT DECEMBER 31,
	2019		2018
	(IN THOUSANDS)
ASSETS
Cash	$	100	$	100
Short-term investments in money market funds		2,544		3,711
Cash and cash equivalents		2,644		3,811
Investment securities available for sale		3,758		4,747
Equity investment in banking subsidiary		104,843		103,647
Equity investment in non-banking subsidiaries		7,830		6,745
Other assets		978		208
TOTAL ASSETS	$	120,053	$	119,158
LIABILITIES
Guaranteed junior subordinated deferrable interest debentures	$	12,955	$	12,939
Subordinated debt		7,511		7,488
Other liabilities		973		754
TOTAL LIABILITIES		21,439		21,181
STOCKHOLDERS’ EQUITY
Total stockholders’ equity		98,614		97,977
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	120,053	$	119,158

Schedule of parent company information of statements of operations

STATEMENTS OF OPERATIONS

	YEAR ENDED DECEMBER 31,
	2019		2018		2017
	(IN THOUSANDS)
INCOME
Inter-entity management and other fees	$	2,556	$	2,430	$	2,315
Dividends from banking subsidiary		3,800		3,500		2,850
Dividends from non-banking subsidiaries		1,105		1,190		840
Interest, dividend and other income		186		119		163
TOTAL INCOME		7,647		7,239		6,168
EXPENSE
Interest expense		1,642		1,642		1,642
Salaries and employee benefits		2,614		2,610		2,416
Other expense		1,707		1,733		1,618
TOTAL EXPENSE		5,963		5,985		5,676
INCOME BEFORE INCOME TAXES AND EQUITY IN UNDISTRIBUTED EARNINGS OF SUBSIDIARIES		1,684		1,254		492
Benefit for income taxes		(676)		(722)		(1,114)
Equity in undistributed earnings of subsidiaries		3,668		5,792		1,687
NET INCOME	$	6,028	$	7,768	$	3,293
COMPREHENSIVE INCOME	$	4,082	$	6,493	$	4,051

Schedule of parent company information of statements of cash flows

STATEMENTS OF CASH FLOWS

	YEAR ENDED DECEMBER 31,
	2019		2018		2017
	(IN THOUSANDS)
OPERATING ACTIVITIES
Net income	$	6,028	$	7,768	$	3,293
Adjustment to reconcile net income to net cash provided by operating activities:
Equity in undistributed earnings of subsidiaries		(3,668)		(5,792)		(1,687)
Stock compensation expense		7		14		13
Other – net		(427)		433		1,325
NET CASH PROVIDED BY OPERATING ACTIVITIES		1,940		2,423		2,944
INVESTING ACTIVITIES
Purchase of investment securities – available for sale		—		(1,002)		(1,002)
Proceeds from maturity and sales of investment securities – available for sale		1,085		1,462		1,699
NET CASH PROVIDED BY INVESTING ACTIVITIES		1,085		460		697
FINANCING ACTIVITIES
Purchases of treasury stock		(2,550)		(2,346)		(3,404)
Common stock dividends paid		(1,642)		(1,347)		(1,113)
NET CASH USED IN FINANCING ACTIVITIES		(4,192)		(3,693)		(4,517)
NET DECREASE IN CASH AND CASH EQUIVALENTS		(1,167)		(810)		(876)
CASH AND CASH EQUIVALENTS AT JANUARY 1		3,811		4,621		5,497
CASH AND CASH EQUIVALENTS AT DECEMBER 31	$	2,644	$	3,811	$	4,621

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ACCUMULATED OTHER COMPREHENSIVE LOSS (Tables)

12 Months Ended

Dec. 31, 2019

ACCUMULATED OTHER COMPREHENSIVE LOSS

Schedule of accumulated other comprehensive loss, net of tax

The following table presents the changes in each component of accumulated other comprehensive loss, net of tax, for the periods ending December 31, 2019, 2018, and 2017 (in thousands):

	YEAR ENDING DECEMBER 31, 2019						YEAR ENDING DECEMBER 31, 2018						YEAR ENDING DECEMBER 31, 2017
	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	$	(1,409)	$	(12,816)	$	(14,225)	$	(327)	$	(12,623)	$	(12,950)	$	(171)	$	(11,406)	$	(11,577)
Reclassification of certain income tax effects from accumulated other comprehensive loss		—		—		—		—		—		—		(53)		(2,078)		(2,131)
Other comprehensive income (loss) before reclassifications		3,217		(6,373)		(3,156)		(1,429)		(1,416)		(2,845)		(27)		1,071		1,044
Amounts reclassified from accumulated other comprehensive loss		(93)		1,303		1,210		347		1,223		1,570		(76)		(210)		(286)
Net current period other comprehensive income (loss)		3,124		(5,070)		(1,946)		(1,082)		(193)		(1,275)		(156)		(1,217)		(1,373)
Ending balance	$	1,715	$	(17,886)	$	(16,171)	$	(1,409)	$	(12,816)	$	(14,225)	$	(327)	$	(12,623)	$	(12,950)

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

Schedule of reclassification out of accumulated other comprehensive loss

The following table presents the amounts reclassified out of each component of accumulated other comprehensive loss for the periods ending December 31, 2019, 2018, and 2017 (in thousands):

	Amount reclassified from accumulated
	other comprehensive loss(1)
	YEAR ENDING		YEAR ENDING		YEAR ENDING		Affected line item in the
Details about accumulated other comprehensive loss components	DECEMBER 31, 2019		DECEMBER 31, 2018		DECEMBER 31, 2017		statement of operations
Realized (gains) losses on sale of securities
	$	(118)	$	439	$	(115)	Net realized (gains) losses on investment securities
		25		(92)		39	Provision for income taxes
	$	(93)	$	347	$	(76)	Net of tax
Amortization of estimated defined benefit pension plan loss(2)
	$	1,649	$	1,548	$	(318)	Other expense
		(346)		(325)		108	Provision for income taxes
	$	1,303	$	1,223	$	(210)	Net of tax
Total reclassifications for the period	$	1,210	$	1,570	$	(286)	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 18 for additional details).

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EMPLOYEE BENEFIT PLANS - Asset allocation (Details) - Defined Benefit Pension Items [Member]	Dec. 31, 2019	Dec. 31, 2018
ASSET CATEGORY:
Asset allocations	100.00%	100.00%
Cash and Cash Equivalents [Member]
ASSET CATEGORY:
Asset allocations	1.00%	49.00%
Domestic equities [Member]
ASSET CATEGORY:
Asset allocations	8.00%	7.00%
Mutual funds/ETFs
ASSET CATEGORY:
Asset allocations	82.00%	42.00%
International equities
ASSET CATEGORY:
Asset allocations	1.00%	0.00%
Corporate bonds
ASSET CATEGORY:
Asset allocations	8.00%	2.00%

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INCOME TAXES - Additional information (Details) - USD ($)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Tax Credit Carryforward, Amount		$ 287,000
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent	21.00%	21.00%	34.00%
Tax Credit Carry forward Percentage	100.00%
Alternative Minimum Tax Credits [Member]
Tax Credit Carry forward Percentage	50.00%

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EMPLOYEE BENEFIT PLANS - Weighted-average assumptions used to determine benefit obligations (Details)	Dec. 31, 2019	Dec. 31, 2018
WEIGHTED AVERAGE ASSUMPTIONS:
Discount rate	3.20%	4.28%
Salary scale	2.50%	2.50%

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LOANS - Additional information (Details) - USD ($)	Dec. 31, 2019	Dec. 31, 2018
LOANS
Real estate-construction loans, percentage	4.90%	3.50%
Loan balances net of unearned income	$ 384,000	$ 322,000
Loans and Leases Receivable, Related Parties	$ 544,000	$ 694,000

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NON-PERFORMING ASSETS INCLUDING TROUBLED DEBT RESTRUCTURINGS - Loans in accrual and non-accrual status (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Loans in accrual status [Member] | Commercial and Industrial [Member]
Schedule of TDRs
Number of loans	2
Current Balance	$ 816
Concession Granted	Extension of maturity date with a below market interest rate
Loans in non-accrual status [Member] | Commercial loans secured by non-owner occupied real estate [Member]
Schedule of TDRs
Number of loans	1	1
Current Balance	$ 8	$ 11
Concession Granted	Extension of maturity date	Extension of maturity date

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LEASE COMMITMENTS (Details) - USD ($)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
LEASE COMMITMENTS
Amortization of right-of-use asset	$ 258,000
Interest expense	117,000	$ 0	$ 0
Operating lease cost	117,000	$ 415,000	$ 571,000
Total lease cost	$ 492,000

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ALLOWANCE FOR LOAN LOSSES - Investment in impaired loans and related interest income (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Average loan balance:
Average investment in impaired loans	$ 607	$ 240	$ 1,913
Interest income recognized:
Interest income recognized on a cash basis on impaired loans	30		12
Commercial [Member]
Average loan balance:
Average investment in impaired loans	597	228	1,075
Interest income recognized:
Interest income recognized on a cash basis on impaired loans	30		12
Commercial loans secured by non-owner occupied real estate [Member]
Average loan balance:
Average investment in impaired loans	$ 10	$ 12	$ 838

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PARENT COMPANY FINANCIAL INFORMATION - Additional information (Details)	Dec. 31, 2019 USD ($)
PARENT COMPANY FINANCIAL INFORMATION
Dividend Payments Restrictions Schedule, Statutory Capital and Surplus	$ 108,228,000

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ALLOWANCE FOR LOAN LOSSES - Additional information (Details) - USD ($)	3 Months Ended	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Individually Evaluated for Impairment	$ 824,000	$ 824,000	$ 11,000
Debt Instrument Non Performing Assets		$ 2,300,000	$ 1,400,000
Non-performing assets as a percent of loans	0.26%	0.26%	0.16%
Financing Receivable, Allowance for Credit Losses, Period Increase (Decrease)	$ 675,000	$ 1,400,000	$ (1,400,000)
Allowance for Loan and Lease Losses Write-offs, Net		$ 192,000	$ 943,000	$ 51,800
Allowance For Loan And Lease Losses Write Off Percentage		0.02%	0.11%	0.06%
Commercial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Individually Evaluated for Impairment	816,000	$ 816,000	$ 0
Minimum aggregate balances for commercial loan relationship under structure loan rating process	1,000,000	1,000,000
Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Minimum individual loan balance requiring quarterly review	2,000,000	2,000,000
Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable Threshold For Individually Evaluating Of Impairment	250,000	250,000
Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable Threshold For Individually Evaluating Of Impairment	250,000	250,000
Substandard [Member] | Commercial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Outstanding balance of commercial loan, downgraded		6,500,000
Doubtful [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Minimum individual loan balance requiring quarterly review	100,000	$ 100,000
Minimum | Commercial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Minimum percent of portfolio to be reviewed		50.00%
Minimum | Consumer and Residential Mortgage Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Individually Evaluated for Impairment	$ 150,000	$ 150,000
Maximum | Commercial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Minimum percent of portfolio to be reviewed		55.00%

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REGULATORY CAPITAL - Additional Information (Details)	Dec. 31, 2019	Dec. 31, 2018
REGULATORY CAPITAL
Tangible Capital to Tangible Assets	7.48%	7.49%

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DEPOSITS - Deposits and certificates of deposit (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
OTHER TIME DEPOSITS
2020	$ 143,337
2021	102,425
2022	19,740
2023	20,242
2024	11,473
2025 and after	6,021
Total	303,238
CERTIFICATES OF DEPOSIT OF $100,000 OR MORE
2020	33,445
2021	4,818
2022	107
2023	400
2024	0
2025 and after	0
Total	38,770	$ 34,841
TOTAL
2020	176,782
2021	107,243
2022	19,847
2023	20,642
2024	11,473
2025 and after	6,021
Total	$ 342,008

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LEASE COMMITMENTS

12 Months Ended

Dec. 31, 2019

LEASE COMMITMENTS

LEASE COMMITMENTS

11. LEASE COMMITMENTS

Due to the adoption of ASU 2016-02, Leases (Topic 842), the Company completed a comprehensive review and analysis of all its property and equipment contracts.  As a result of this review, it was determined that the Company leases eight office locations under both operating and financing leases and one copy machine under a short-term lease.  Several assumptions and judgments were made when applying the requirements of Topic 842 to the Company’s existing 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 operating and financing leases for the year ended December 31, 2019 (in thousands).  Total rent expense recorded during the years ended December 31, 2018 and 2017 was $415,000 and $571,000, respectively.

	YEAR ENDED DECEMBER 31, 2019
Lease cost
Financing lease cost:
Amortization of right-of-use asset	$	258
Interest expense		117
Operating lease cost		117
Total lease cost	$	492

The following table presents the weighted-average remaining lease term and discount rate for the leases outstanding at December 31, 2019.

	OPERATING		FINANCING
Weighted-average remaining term (years)	11.9		17.1
Weighted-average discount rate	3.46	%	3.60	%

The following table presents the undiscounted cash flows due related to operating and financing leases as of December 31, 2019, along with a reconciliation to the discounted amount recorded on the Consolidated Balance Sheets.

	OPERATING		FINANCING
Undiscounted cash flows due:
Within 1 year	$	118	$	296
After 1 year but within 2 years		120		275
After 2 years but within 3 years		98		277
After 3 years but within 4 years		69		274
After 4 years but within 5 years		69		236
After 5 years		589		3,007
Total undiscounted cash flows		1,063		4,365
Discount on cash flows		(198)		(1,202)
Total lease liabilities	$	865	$	3,163

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LOANS

12 Months Ended

Dec. 31, 2019

LOANS

LOANS

7. LOANS

The loan portfolio of the Company consisted of the following:

	AT DECEMBER 31,
	2019		2018
	(IN THOUSANDS)
Commercial:
Commercial and industrial	$	173,922	$	158,279
Commercial loans secured by owner occupied real estate		91,655		91,905
Commercial loans secured by non-owner occupied real estate		363,635		356,543
Real estate − residential mortgage		235,239		237,964
Consumer		18,255		17,591
Loans, net of unearned income	$	882,706	$	862,282

Loan balances at December 31, 2019 and 2018 are net of unearned income of $384,000 and $322,000, respectively. Real estate construction loans comprised 4.9% and 3.5% of total loans net of unearned income at December 31, 2019 and 2018, respectively. 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, 2019 and 2018, 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-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 $544,000 and $694,000 at December 31, 2019 and 2018, respectively.

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ADOPTION OF ACCOUNTING STANDARDS

12 Months Ended

Dec. 31, 2019

ADOPTION OF ACCOUNTING STANDARDS

ADOPTION OF ACCOUNTING STANDARDS

3. ADOPTION OF ACCOUNTING STANDARDS

Effective January 1, 2018, the Company adopted ASU 2014-09, Revenue from Contracts with Customers – Topic 606 and all subsequent ASUs that modified ASC 606.  The standard required a company to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers at the time the transfer of goods or services takes place.  At the time of adoption, the Company completed an assessment of revenue streams and review of the related contracts potentially affected by the new standard and concluded that ASU 2014-09 did not materially change the method in which it recognizes revenue.  However, in 2019, the change was determined to be material related to certain revenue recognized within our wealth management segment.  As a result, the Company made a one-time cumulative effect adjustment to retained earnings of $640,000, net of tax.  Additional disclosures related to revenue recognition can be found in Note 4.

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.  Additionally, in July 2018, the FASB issued ASU 2018-11, Leases (Topic 842) – Targeted Improvements, which, among other things, provides an additional transition method that would allow entities to not apply the guidance in ASU 2016-02 in the comparative periods presented in the financial statements and instead recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption.  The Company adopted ASU 2016-02 and its related amendments as of January 1, 2019, which resulted in the recognition of operating and financing right-of-use assets totaling  $932,000 and $3.3 million, respectively, as well as operating and financing lease liabilities totaling $932,000 and $3.3 million, respectively.  The Company elected to adopt the transition relief provisions from ASU 2018-11 and recorded the impact of adoption as of January 1, 2019, without restating any prior-year amounts or disclosures.  The related policy elections made by the Company and the additional lease disclosures can be found in Notes 1 and 11.  There was no cumulative effect adjustment to the opening balance of retained earnings required.

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SEGMENT RESULTS

12 Months Ended

Dec. 31, 2019

SEGMENT RESULTS

Segment Results

24. 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 community banking, 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 wealth management segment includes the Trust Company, West Chester Capital Advisors (WCCA), our registered investment advisory firm, and Financial Services. Wealth management activities 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 Services include the sale of mutual funds, annuities, and insurance products. The wealth management businesses also include the union collective investment funds, primarily the 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 corporate debt, and centralized interest rate risk management. Inter-segment revenues were not material.

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

	YEAR ENDED DECEMBER 31, 2019
	COMMUNITY		WEALTH		INVESTMENT/
	BANKING		MANAGEMENT		PARENT		TOTAL
	(IN THOUSANDS)
Net interest income	$	40,865	$	81	$	(5,504)	$	35,442
Provision for loan loss		800		—		—		800
Non-interest income		5,407		9,736		(370)		14,773
Non-interest expense		31,856		7,340		2,619		41,815
Income (loss) before income taxes		13,616		2,477		(8,493)		7,600
Income tax expense (benefit)		2,715		593		(1,736)		1,572
Net income (loss)	$	10,901	$	1,884	$	(6,757)	$	6,028
Total assets	$	981,787	$	10,361	$	179,036	$	1,171,184

	YEAR ENDED DECEMBER 31, 2018
	COMMUNITY		WEALTH		INVESTMENT/
	BANKING		MANAGEMENT		PARENT		TOTAL
	(IN THOUSANDS)
Net interest income	$	39,195	$	71	$	(3,772)	$	35,494
Credit provision for loan loss		(600)		—		—		(600)
Non-interest income		4,832		9,651		(259)		14,224
Non-interest expense		30,809		7,319		2,745		40,873
Income (loss) before income taxes		13,818		2,403		(6,776)		9,445
Income tax expense		2,764		554		(1,641)		1,677
Net income (loss)	$	11,054	$	1,849	$	(5,135)	$	7,768
Total assets	$	966,910	$	9,345	$	184,425	$	1,160,680

	YEAR ENDED DECEMBER 31, 2017
	COMMUNITY		WEALTH		INVESTMENT/
	BANKING		MANAGEMENT		PARENT		TOTAL
	(IN THOUSANDS)
Net interest income	$	39,183	$	61	$	(3,683)	$	35,561
Provision for loan loss		800		—		—		800
Non-interest income		5,370		9,170		105		14,645
Non-interest expense		31,139		7,054		2,533		40,726
Income (loss) before income taxes		12,614		2,177		(6,111)		8,680
Income tax expense (benefit)		4,023		812		552		5,387
Net income (loss)	$	8,591	$	1,365	$	(6,663)	$	3,293
Total assets	$	993,689	$	8,703	$	165,263	$	1,167,655

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

12 Months Ended

Dec. 31, 2019

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BUSINESS AND NATURE OF OPERATIONS:

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 16 banking locations in five southwestern Pennsylvania 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 Company) offers a complete range of trust and financial services and administers assets valued at approximately $2.2 billion that are not recognized on the Company’s Consolidated Balance Sheets at December 31, 2019.

PRINCIPLES OF CONSOLIDATION:

PRINCIPLES OF CONSOLIDATION:

The consolidated financial statements include the accounts of AmeriServ Financial, Inc. and its wholly-owned subsidiaries, AmeriServ Financial Bank (the Bank), Trust Company, and AmeriServ Life Insurance Company (AmeriServ Life). The Bank is a state-chartered full service bank with 15 locations in Pennsylvania and 1 location in Maryland. AmeriServ Life is a captive insurance company that engages in underwriting as a reinsurer of credit life and disability insurance.

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, income taxes, investment securities, pension, and the fair value of financial instruments.

INVESTMENT SECURITIES:

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’ 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 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.

FEDERAL HOME LOAN BANK STOCK:

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: (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; (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; (3) the impact of legislative and regulatory changes on the customer base of FHLB; and (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:

LOANS:

Interest income is recognized using the level yield method related to principal amounts outstanding. The Company 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 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:

LOANS HELD FOR SALE:

Certain newly originated 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 fair value.

TRANSFERS OF FINANCIAL ASSETS:

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.

PREMISES AND EQUIPMENT:

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.

LEASES:

LEASES:

The Company has operating and financing leases for several branch locations and office space.  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 was 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, 2019, the Company had one short-term equipment lease which it has elected to not record on the Consolidated Balance Sheets.

ALLOWANCE FOR LOAN LOSSES AND CHARGE-OFF PROCEDURES:

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, classified and impaired commercial and commercial real estate loans 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) the present value of expected future cash flows discounted at the loan’s effective interest rate; (2) the observable market price of the impaired loan; or (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 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.

—   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 charged 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 $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 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:

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 line item of the Consolidated Balance Sheets.

BANK-OWNED LIFE INSURANCE:

BANK-OWNED LIFE INSURANCE:

The Company has purchased life insurance policies on certain 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.

INTANGIBLE ASSETS:

INTANGIBLE ASSETS:

Goodwill arising from business combinations represents the value attributable to unidentifiable intangible elements in the business acquired. The Company accounts 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.

EARNINGS PER COMMON SHARE:

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 retired for earnings per share purposes. Options to purchase 12,000,  5,000, and 10,000 shares of common stock were outstanding during 2019, 2018 and 2017, 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 $4.19-$4.22,  $4.22, and $4.00 during 2019, 2018 and 2017, respectively.

	YEAR ENDED DECEMBER 31,
	2019		2018		2017
	(IN THOUSANDS, EXCEPT PER SHARE DATA)
Numerator:
Net income	$	6,028	$	7,768	$	3,293
Denominator:
Weighted average common shares outstanding (basic)		17,359		17,933		18,498
Effect of stock options		81		104		102
Weighted average common shares outstanding (diluted)		17,440		18,037		18,600
Earnings per common share:
Basic	$	0.35	$	0.43	$	0.18
Diluted		0.35		0.43		0.18

STOCK-BASED COMPENSATION:

STOCK-BASED COMPENSATION:

The Company uses the modified prospective method for accounting of stock-based compensation. The fair value of each option grant is estimated on the grant date using the Binomial option pricing model and the expense is recognized ratably over the service period. Forfeitures are recognized as they occur. See Note 20 for details on the assumptions used.

ACCUMULATED OTHER COMPREHENSIVE LOSS:

ACCUMULATED OTHER COMPREHENSIVE LOSS:

The Company presents the components of other comprehensive income (loss) in the Consolidated Statements of Comprehensive Income (Loss). 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:

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 money market funds. The Company made $785,000 in income tax payments in 2019; $875,000 in 2018; and $1,075,000 in 2017. The Company had non-cash transfers to other real estate owned (OREO) in the amounts of $75,000 in 2019; $166,000 in 2018; and $77,000 in 2017. As a result of the adoption of ASU 2016-02, Leases (Topic 842) as of January 1, 2019, the Company had non-cash transactions associated with the recognition of the right-of-use assets and lease liabilities.  Specifically, the Company recognized a right-of-use asset and lease liability of $932,000 related to operating leases and a right-of-use asset and lease liability of $3.3 million related to financing leases.  In addition, as a result of the adoption of ASU 2014-09, Revenue from Contracts with Customers (Topic 606), the Company had a non-cash transaction in the amount of $640,000 associated with the recognition of a receivable for wealth management fees as of December 31, 2019. The Company also had a non-cash transfer of the AMT credit carryforward to other assets in the amount of $287,000 in 2018. The Company made total interest payments of $13,779,000 in 2019; $11,298,000 in 2018; and $8,681,000 in 2017.

INCOME TAXES:

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:

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 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. 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. These instruments and their offsetting positions are recorded in Other assets and Other liabilities on the Consolidated Balance Sheets.

PENSION:

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.

The service cost component of net periodic benefit cost is 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 is 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.  Management believes this methodology an appropriate 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 18 of the Notes to Consolidated Financial Statements.

FAIR VALUE OF FINANCIAL INSTRUMENTS:

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.

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EMPLOYEE BENEFIT PLANS - Changes in obligations and assets (Details) - Defined Benefit Pension Items [Member] - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
CHANGE IN BENEFIT OBLIGATION:
Benefit obligation at beginning of year	$ 41,094	$ 41,013
Service cost	1,470	1,482	$ 1,516
Interest cost	1,569	1,273	1,292
Actuarial loss	7,758	823
Special/contractual termination benefits	0	63	0
Benefits paid	(2,330)	(3,560)
Benefit obligation at end of year	49,561	41,094	41,013
CHANGE IN PLAN ASSETS:
Fair value of plan assets at beginning of year	38,478	37,100
Actual return on plan assets	5,483	(1,062)
Employer contributions	3,200	6,000
Benefits paid	(2,330)	(3,560)
Fair value of plan assets at end of year	44,831	38,478	$ 37,100
Funded status of the plan	$ (4,730)	$ (2,616)

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EMPLOYEE BENEFIT PLANS - Component of net periodic benefit cost (Details) - Defined Benefit Pension Items [Member] - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Components of net periodic benefit cost
Service cost	$ 1,470	$ 1,482	$ 1,516
Interest cost	1,569	1,273	1,292
Expected return on plan assets	(3,025)	(2,798)	(2,539)
Special termination benefit liability	0	63	0
Recognized net actuarial loss	1,649	1,548	1,454
Net periodic pension cost	$ 1,663	$ 1,568	$ 1,723

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REGULATORY CAPITAL (Tables)

12 Months Ended

Dec. 31, 2019

REGULATORY CAPITAL

Schedule of compliance with regulatory capital requirements under banking regulations

The Company believes that no conditions or events have occurred that would change this conclusion. To be categorized as well capitalized, the Company must maintain minimum total risk-based, common equity Tier 1 risk-based, Tier 1 risk-based, and Tier 1 leverage ratios as set forth in the table.

	AT DECEMBER 31, 2019
											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)	$	132,544	13.49	%	$	119,477	12.23	%	8.00	%	10.00	%
Tier 1 Common Equity (To Risk Weighted Assets)		102,841	10.47			109,173	11.17		4.50		6.50
Tier 1 Capital (To Risk Weighted Assets)		114,729	11.68			109,173	11.17		6.00		8.00
Tier 1 Capital (To Average Assets)		114,729	9.87			109,173	9.50		4.00		5.00

	AT DECEMBER 31, 2018
											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)	$	129,178	13.53	%	$	115,451	12.14	%	8.00	%	10.00	%
Tier 1 Common Equity (To Risk Weighted Assets)		100,258	10.50			105,891	11.14		4.50		6.50
Tier 1 Capital (To Risk Weighted Assets)		112,130	11.74			105,891	11.14		6.00		8.00
Tier 1 Capital (To Average Assets)		112,130	9.71			105,891	9.28		4.00		5.00

*Applies to the Bank only.

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EMPLOYEE BENEFIT PLANS - Segregation of assets by the level of valuations inputs (Details) - Defined Benefit Pension Items [Member] - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Defined Benefit Plan, Information about Plan Assets [Abstract]
Defined Benefit Plan, Plan Assets, Amount	$ 44,831	$ 38,478	$ 37,100
Cash and Cash Equivalents [Member] | Level 1 [Member]
Defined Benefit Plan, Information about Plan Assets [Abstract]
Defined Benefit Plan, Plan Assets, Amount	186	18,939
Domestic equities [Member] | Level 1 [Member]
Defined Benefit Plan, Information about Plan Assets [Abstract]
Defined Benefit Plan, Plan Assets, Amount	3,782	2,841
International equities | Level 1 [Member]
Defined Benefit Plan, Information about Plan Assets [Abstract]
Defined Benefit Plan, Plan Assets, Amount	620	0
Mutual funds/ETFs | Level 1 [Member]
Defined Benefit Plan, Information about Plan Assets [Abstract]
Defined Benefit Plan, Plan Assets, Amount	36,469	15,808
Corporate bonds | Level 2 [Member]
Defined Benefit Plan, Information about Plan Assets [Abstract]
Defined Benefit Plan, Plan Assets, Amount	$ 3,774	$ 890

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STOCK COMPENSATION PLANS (Tables)

12 Months Ended

Dec. 31, 2019

STOCK COMPENSATION PLANS

Schedule of company's stock incentive plan

A summary of the status of the Company’s Stock Incentive Plan at December 31, 2019, 2018, and 2017, and changes during the years then ended is presented in the table and narrative following:

	YEAR ENDED DECEMBER 31,
	2019			2018			2017
		WEIGHTED			WEIGHTED			WEIGHTED
		AVERAGE			AVERAGE			AVERAGE
	SHARES	EXERCISE PRICE		SHARES	EXERCISE PRICE		SHARES	EXERCISE PRICE
Outstanding at beginning of year	336,313	$	2.91	360,721	$	2.85	417,566	$	2.76
Granted	7,000		4.19	5,000		4.22	17,500		3.96
Exercised	(40,917)		2.45	(24,408)		2.49	(64,112)		2.49
Forfeited	(5,748)		2.44	(5,000)		1.92	(10,233)		3.10
Outstanding at end of year	296,648		3.02	336,313		2.91	360,721		2.85
Exercisable at end of year	282,565		2.96	307,814		2.86	308,301		2.79
Weighted average fair value of options granted in current year		$	0.62		$	0.56		$	1.12

Schedule of fair value of each option grant

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 2019, 2018, and 2017.

	YEAR ENDED DECEMBER 31
PRICING MODEL ASSUMPTION RANGES	2019		2018		2017
Risk-free interest rate	2.65	%	3.13	%	2.23–2.38	%
Expected lives in years	10		10		10
Expected volatility	15.75	%	15.59	%	28.09–28.84	%
Expected dividend rate	1.91	%	1.90	%	1.50	%

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PARENT COMPANY FINANCIAL INFORMATION - STATEMENTS OF CASH FLOWS (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
OPERATING ACTIVITIES
Net income	$ 669	$ 1,689	$ 1,792	$ 1,878	$ 1,928	$ 2,329	$ 1,744	$ 1,767	$ 6,028	$ 7,768	$ 3,293
Adjustment to reconcile net income to net cash (used in) provided by operating activities:
Stock compensation expense, net of tax									7	14	13
Other - net									(493)	(6,188)	(1,737)
INVESTING ACTIVITIES
Proceeds from Maturities, Prepayments and Calls of Debt Securities, Available-for-sale									23,559	16,299	22,311
FINANCING ACTIVITIES
Common stock dividends paid									(1,642)	(1,347)	(1,113)
NET DECREASE IN CASH AND CASH EQUIVALENTS									(12,726)	706	115
CASH AND CASH EQUIVALENTS AT JANUARY 1				34,894				34,188	34,894	34,188	34,073
CASH AND CASH EQUIVALENTS AT DECEMBER 31	22,168				34,894				22,168	34,894	34,188
Parent Company [Member]
OPERATING ACTIVITIES
Net income									6,028	7,768	3,293
Adjustment to reconcile net income to net cash (used in) provided by operating activities:
Equity in undistributed earnings of subsidiaries									(3,668)	(5,792)	(1,687)
Stock compensation expense, net of tax									7	14	13
Other - net									(427)	433	1,325
NET CASH PROVIDED BY OPERATING ACTIVITIES									1,940	2,423	2,944
INVESTING ACTIVITIES
Purchase of investment securities - available for sale									0	(1,002)	(1,002)
Proceeds from Maturities, Prepayments and Calls of Debt Securities, Available-for-sale									1,085	1,462	1,699
NET CASH PROVIDED BY INVESTING ACTIVITIES									1,085	460	697
FINANCING ACTIVITIES
Purchases of treasury stock									(2,550)	(2,346)	(3,404)
Common stock dividends paid									(1,642)	(1,347)	(1,113)
NET CASH USED IN FINANCING ACTIVITIES									(4,192)	(3,693)	(4,517)
NET DECREASE IN CASH AND CASH EQUIVALENTS									(1,167)	(810)	(876)
CASH AND CASH EQUIVALENTS AT JANUARY 1				$ 3,811				$ 4,621	3,811	4,621	5,497
CASH AND CASH EQUIVALENTS AT DECEMBER 31	$ 2,644				$ 3,811				$ 2,644	$ 3,811	$ 4,621

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REGULATORY CAPITAL (Details) - USD ($) $ in Thousands		Dec. 31, 2019	Dec. 31, 2018
Summarized regulatory capital ratio of company
Total Capital (To RWA), Actual Amount		$ 119,477	$ 115,451
Tier 1 Common Equity (To RWA), Actual Amount		109,173	105,891
Tier 1 Capital (To RWA), Actual Amount		109,173	105,891
Tier 1 Capital (To Average Assets), Actual Amount		$ 109,173	$ 105,891
Total Capital (To RWA), Actual Ratio		12.23%	12.14%
Tier 1 Common Equity (To RWA), Actual Ratio		11.17%	11.14%
Tier 1 Capital (To RWA), Actual Ratio		11.17%	11.14%
Tier 1 Capital (To Average Assets), Actual Ratio		9.50%	9.28%
Total Capital (To RWA), Minimum Required For Capital Adequacy Purpose		8.00%	8.00%
Tier 1 Common Equity (To RWA), Minimum Required For Capital Adequacy Purpose		4.50%	4.50%
Tier 1 Capital (To RWA), Minimum Required For Capital Adequacy Purpose		6.00%	6.00%
Tier 1 Capital (To Average Assets), Minimum Required For Capital Adequacy Purpose		4.00%	4.00%
Total Capital (To RWA), To Be Will Capitalized Under Prompt Corrective Action Regulations	[1]	10.00%	10.00%
Tier 1 Common Equity (To RWA), To Be Will Capitalized Under Prompt Corrective Action Regulations	[1]	6.50%	6.50%
Tier 1 Capital (To RWA), To Be Well Capitalized Under Prompt Corrective Action Regulations	[1]	8.00%	8.00%
Tier 1 Capital (To Average Assets), To Be Will Capitalized Under Prompt Corrective Action Regulations	[1]	5.00%	5.00%
Parent Company [Member]
Summarized regulatory capital ratio of company
Total Capital (To RWA), Actual Amount		$ 132,544	$ 129,178
Tier 1 Common Equity (To RWA), Actual Amount		102,841	100,258
Tier 1 Capital (To RWA), Actual Amount		114,729	112,130
Tier 1 Capital (To Average Assets), Actual Amount		$ 114,729	$ 112,130
Total Capital (To RWA), Actual Ratio		13.49%	13.53%
Tier 1 Common Equity (To RWA), Actual Ratio		10.47%	10.50%
Tier 1 Capital (To RWA), Actual Ratio		11.68%	11.74%
Tier 1 Capital (To Average Assets), Actual Ratio		9.87%	9.71%

[1] Applies to the Bank only.

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NON-PERFORMING ASSETS INCLUDING TROUBLED DEBT RESTRUCTURINGS (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Non-Performing assets including TDR
Non-accrual loans	$ 1,487	$ 1,221
Other real estate owned	37	157
TDR's not in non-accrual	815	0
Total non-performing assets including TDR	$ 2,339	$ 1,378
Total non-performing assets as a percent of loans, net of unearned income, and other real estate owned	0.26%	0.16%
Commercial loans secured by non-owner occupied real estate [Member]
Non-Performing assets including TDR
Non-accrual loans	$ 8	$ 11
Commercial loans secured by owner occupied real estate [Member]
Non-Performing assets including TDR
Other real estate owned	0	157
Real estate - residential mortgage [Member]
Non-Performing assets including TDR
Non-accrual loans	1,479	1,210
Other real estate owned	$ 37	$ 0

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DEPOSITS - Additional information (Details) - USD ($)	Dec. 31, 2019	Dec. 31, 2018
Time Deposits	$ 342,008,000
Time Deposits, at or Above FDIC Insurance Limit	250,000	$ 250,000
FDIC Insurance Limit [Member]
Time Deposits	$ 69,000,000	$ 61,100,000

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ALLOWANCE FOR LOAN LOSSES - Loan losses by portfolio segment (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Accounts, Notes, Loans and Financing Receivable [Line Items]
Balance at Beginning of Period	$ 8,671	$ 10,214	$ 9,932
Charge-Offs	(432)	(1,205)	(928)
Recoveries	240	262	410
Provision (Credit)	800	(600)	800
Balance at End of Period	9,279	8,671	10,214
Commercial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Balance at Beginning of Period	3,057	4,298	4,041
Charge-Offs	(9)	(574)	(311)
Recoveries	22	31	27
Provision (Credit)	881	(698)	541
Balance at End of Period	3,951	3,057	4,298
Commercial loans secured by non-owner occupied real estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Balance at Beginning of Period	3,389	3,666	3,584
Charge-Offs	(63)	0	(132)
Recoveries	48	51	56
Provision (Credit)	(255)	(328)	158
Balance at End of Period	3,119	3,389	3,666
Real estate - residential mortgage [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Balance at Beginning of Period	1,235	1,102	1,169
Charge-Offs	(98)	(380)	(313)
Recoveries	118	119	207
Provision (Credit)	(96)	394	39
Balance at End of Period	1,159	1,235	1,102
Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Balance at Beginning of Period	127	128	151
Charge-Offs	(262)	(251)	(172)
Recoveries	52	61	120
Provision (Credit)	209	189	29
Balance at End of Period	126	127	128
Allocation for General Risk [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Balance at Beginning of Period	863	1,020	987
Charge-Offs	0	0	0
Recoveries	0	0	0
Provision (Credit)	61	(157)	33
Balance at End of Period	$ 924	$ 863	$ 1,020

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NON-PERFORMING ASSETS INCLUDING TROUBLED DEBT RESTRUCTURINGS - Additional information (Details) - USD ($)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Aggregate of multiple consecutive maturity date extensions delay in payment, days	120 days
ALL reserve for TDR's	$ 92,000	$ 11,000
Residential Real Estate [Member]
Other Assets, Noncurrent	37,000	$ 0
Residential Mortgages [Member]
Mortgage Loans in Process of Foreclosure, Amount	$ 267,000

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LEASE COMMITMENTS - leases outstanding - (Details)	Dec. 31, 2019
LEASE COMMITMENTS
Operating Lease, Weighted-average remaining term	11 years 10 months 24 days
Financing Lease, Weighted-average remaining term	17 years 1 month 6 days
Operating Lease, Weighted-average discount rate	3.46%
Financing Lease, Weighted-average discount rate	3.60%

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ALLOWANCE FOR LOAN LOSSES - Commercial and commercial real estate loan portfolios (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Loan portfolio summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard and Doubtful within the internal risk rating system
Loan portfolio	$ 882,706	$ 862,282
Commercial Portfolio Segment [Member]
Loan portfolio summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard and Doubtful within the internal risk rating system
Loan portfolio	629,212	606,727
Commercial and Industrial [Member]
Loan portfolio summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard and Doubtful within the internal risk rating system
Loan portfolio	173,922	158,279
Commercial and Industrial [Member] | Commercial Portfolio Segment [Member]
Loan portfolio summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard and Doubtful within the internal risk rating system
Loan portfolio	173,922	158,279
Commercial loans secured by owner occupied real estate [Member]
Loan portfolio summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard and Doubtful within the internal risk rating system
Loan portfolio	91,655	91,905
Commercial loans secured by owner occupied real estate [Member] | Commercial Portfolio Segment [Member]
Loan portfolio summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard and Doubtful within the internal risk rating system
Loan portfolio	91,655	91,905
Commercial loans secured by non-owner occupied real estate [Member]
Loan portfolio summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard and Doubtful within the internal risk rating system
Loan portfolio	363,635	356,543
Commercial loans secured by non-owner occupied real estate [Member] | Commercial Portfolio Segment [Member]
Loan portfolio summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard and Doubtful within the internal risk rating system
Loan portfolio	363,635	356,543
Pass [Member] | Commercial Portfolio Segment [Member]
Loan portfolio summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard and Doubtful within the internal risk rating system
Loan portfolio	612,116	591,461
Pass [Member] | Commercial and Industrial [Member] | Commercial Portfolio Segment [Member]
Loan portfolio summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard and Doubtful within the internal risk rating system
Loan portfolio	161,147	154,510
Pass [Member] | Commercial loans secured by owner occupied real estate [Member] | Commercial Portfolio Segment [Member]
Loan portfolio summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard and Doubtful within the internal risk rating system
Loan portfolio	88,942	86,997
Pass [Member] | Commercial loans secured by non-owner occupied real estate [Member] | Commercial Portfolio Segment [Member]
Loan portfolio summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard and Doubtful within the internal risk rating system
Loan portfolio	362,027	349,954
Special Mention [Member] | Commercial Portfolio Segment [Member]
Loan portfolio summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard and Doubtful within the internal risk rating system
Loan portfolio	2,237	12,174
Special Mention [Member] | Commercial and Industrial [Member] | Commercial Portfolio Segment [Member]
Loan portfolio summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard and Doubtful within the internal risk rating system
Loan portfolio	853	2,089
Special Mention [Member] | Commercial loans secured by owner occupied real estate [Member] | Commercial Portfolio Segment [Member]
Loan portfolio summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard and Doubtful within the internal risk rating system
Loan portfolio	1,384	3,769
Special Mention [Member] | Commercial loans secured by non-owner occupied real estate [Member] | Commercial Portfolio Segment [Member]
Loan portfolio summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard and Doubtful within the internal risk rating system
Loan portfolio		6,316
Substandard [Member] | Commercial Portfolio Segment [Member]
Loan portfolio summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard and Doubtful within the internal risk rating system
Loan portfolio	14,851	3,081
Substandard [Member] | Commercial and Industrial [Member] | Commercial Portfolio Segment [Member]
Loan portfolio summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard and Doubtful within the internal risk rating system
Loan portfolio	11,922	1,680
Substandard [Member] | Commercial loans secured by owner occupied real estate [Member] | Commercial Portfolio Segment [Member]
Loan portfolio summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard and Doubtful within the internal risk rating system
Loan portfolio	1,329	1,139
Substandard [Member] | Commercial loans secured by non-owner occupied real estate [Member] | Commercial Portfolio Segment [Member]
Loan portfolio summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard and Doubtful within the internal risk rating system
Loan portfolio	1,600	262
Doubtful [Member] | Commercial Portfolio Segment [Member]
Loan portfolio summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard and Doubtful within the internal risk rating system
Loan portfolio	8	11
Doubtful [Member] | Commercial loans secured by non-owner occupied real estate [Member] | Commercial Portfolio Segment [Member]
Loan portfolio summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard and Doubtful within the internal risk rating system
Loan portfolio	$ 8	$ 11

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INVESTMENT SECURITIES

12 Months Ended

Dec. 31, 2019

INVESTMENT SECURITIES

INVESTMENT SECURITIES

6. INVESTMENT SECURITIES

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

Investment securities available for sale:

	AT DECEMBER 31, 2019
			GROSS		GROSS
			UNREALIZED		UNREALIZED		FAIR
	COST BASIS		GAINS		LOSSES		VALUE
	(IN THOUSANDS)
U.S. Agency	$	5,084	$	32	$	—	$	5,116
Municipal		14,678		509		(17)		15,170
Corporate bonds		39,769		342		(281)		39,830
U.S. Agency mortgage-backed securities		80,046		1,681		(94)		81,633
Total	$	139,577	$	2,564	$	(392)	$	141,749

Investment securities held to maturity:

	AT DECEMBER 31, 2019
			GROSS		GROSS
			UNREALIZED		UNREALIZED		FAIR
	COST BASIS		GAINS		LOSSES		VALUE
	(IN THOUSANDS)
U.S. Agency mortgage-backed securities	$	9,466	$	251	$	(4)	$	9,713
Municipal		24,438		941		(53)		25,326
Corporate bonds and other securities		6,032		58		(47)		6,043
Total	$	39,936	$	1,250	$	(104)	$	41,082

Investment securities available for sale:

	AT DECEMBER 31, 2018
			GROSS		GROSS
			UNREALIZED		UNREALIZED		FAIR
	COST BASIS		GAINS		LOSSES		VALUE
	(IN THOUSANDS)
U.S. Agency	$	7,685	$	4	$	(160)	$	7,529
Municipal		13,301		114		(234)		13,181
Corporate bonds		37,359		131		(996)		36,494
U.S. Agency mortgage-backed securities		90,169		516		(1,158)		89,527
Total	$	148,514	$	765	$	(2,548)	$	146,731

Investment securities held to maturity:

	AT DECEMBER 31, 2018
			GROSS		GROSS
			UNREALIZED		UNREALIZED		FAIR
	COST BASIS		GAINS		LOSSES		VALUE
	(IN THOUSANDS)
U.S. Agency mortgage-backed securities	$	9,983	$	78	$	(132)	$	9,929
Municipal		24,740		131		(404)		24,467
Corporate bonds and other securities		6,037		13		(122)		5,928
Total	$	40,760	$	222	$	(658)	$	40,324

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, 2019, 53.4% of the portfolio was rated AAA as compared to 57.5% at December 31, 2018. Approximately 9.1% and 10.0% of the portfolio was rated below A or unrated on December 31, 2019 and 2018, respectively. The Company and its subsidiaries, collectively, did not hold securities of any single issuer, excluding U.S. treasury and U.S. agencies, that exceeded 10% of shareholders’ equity at December 31, 2019.

The book value of securities, both available for sale and held to maturity, pledged to secure public and trust deposits was $117,076,000 at December 31, 2019 and $115,536,000 at December 31, 2018.

The Company realized $118,000 of gross investment security gains in 2019, $15,000 of gross investment security gains and $454,000 of gross investment security losses in 2018, and $115,000 of gross investment security gains in 2017. On a net basis, the realized gain for 2019 was $93,000 after factoring in tax expense of $25,000, the realized loss for 2018 was $347,000 after factoring in a tax benefit of $92,000, and the realized gain for 2017 was $76,000 after factoring in tax expense of $39,000. Proceeds from sales of investment securities available for sale were $3.4 million for 2019, $9.5 million for 2018, and $8.1 million during 2017.

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, 2019. 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 3.07 years. The weighted average expected maturity for available for sale securities at December 31, 2019 for U.S. agency, U.S. agency mortgage-backed, corporate bond, and municipal securities was 10.19,  4.36,  4.05, and 5.19 years, respectively. The weighted average expected maturity for held to maturity securities at December 31, 2019 for U.S. agency mortgage-backed, corporate bond/other securities, and municipal securities 4.62,  3.21, and 5.92 years, respectively.

Investment securities available for sale:

	AT DECEMBER 31, 2019
																	TOTAL
													U.S. AGENCY				INVESTMENT
													MORTGAGE-				SECURITIES
									CORPORATE				BACKED				AVAILABLE FOR
	U. S. AGENCY				MUNICIPAL				BONDS				SECURITIES				SALE
	(IN THOUSANDS, EXCEPT YIELDS)
COST BASIS
Within 1 year	$	—	—	%	$	500	2.25	%	$	1,500	3.10	%	$	—	—	%	$	2,000	2.89	%
After 1 year but within 5 years		—	—			3,121	3.09			18,695	3.43			1,200	2.46			23,016	3.33
After 5 years but within 10 years		2,557	2.93			11,057	3.26			19,574	4.11			7,882	2.99			41,070	3.59
After 10 years but within15 years		—	—			—	—			—	—			23,018	2.83			23,018	2.83
Over 15 years		2,527	2.68			—	—			—	—			47,946	2.90			50,473	2.89
Total	$	5,084	2.81		$	14,678	3.19		$	39,769	3.75		$	80,046	2.88		$	139,577	3.16
FAIR VALUE
Within 1 year	$	—			$	500			$	1,503			$	—			$	2,003
After 1 year but within 5 years		—				3,179				18,755				1,213				23,147
After 5 years but within 10 years		2,570				11,491				19,572				8,075				41,708
After 10 years but within15 years		—				—				—				23,538				23,538
Over 15 years		2,546				—				—				48,807				51,353
Total	$	5,116			$	15,170			$	39,830			$	81,633			$	141,749

Investment securities held to maturity:

	AT DECEMBER 31, 2019
	U.S. AGENCY
	MORTGAGE-												TOTAL INVESTMENT
	BACKED								CORPORATE				SECURITIES
	SECURITIES				MUNICIPAL				BONDS AND OTHER				HELD TO MATURITY
	(IN THOUSANDS, EXCEPT YIELDS)
COST BASIS
Within 1 year	$	—	—	%	$	—	—	%	$	—	—	%	$	—	—	%
After 1 year but within 5 years		1,977	2.50			2,567	3.33			3,000	2.95			7,544	2.96
After 5 years but within 10 years		—	—			16,506	3.37			3,032	4.40			19,538	3.53
After 10 years but within15 years		2,232	3.62			5,050	4.10			—	—			7,282	3.95
Over 15 years		5,257	3.30			315	3.50			—	—			5,572	3.31
Total	$	9,466	3.21		$	24,438	3.52		$	6,032	3.68		$	39,936	3.47
FAIR VALUE
Within 1 year	$	—			$	—			$	—			$	—
After 1 year but within 5 years		2,009				2,644				2,953				7,606
After 5 years but within 10 years		—				17,153				3,090				20,243
After 10 years but within15 years		2,353				5,209				—				7,562
Over 15 years		5,351				320				—				5,671
Total	$	9,713			$	25,326			$	6,043			$	41,082

The following table presents information concerning investments with unrealized losses as of December 31, 2019 (in thousands):

Total investment securities:	LESS THAN 12 MONTHS				12 MONTHS OR LONGER				TOTAL
	FAIR		UNREALIZED		FAIR		UNREALIZED		FAIR		UNREALIZED
	VALUE		LOSSES		VALUE		LOSSES		VALUE		LOSSES
U.S. Agency	$	—	$	—	$	—	$	—	$	—	$	—
U.S. Agency mortgage-backed securities		7,084		(23)		8,562		(75)		15,646		(98)
Municipal		2,269		(18)		1,123		(52)		3,392		(70)
Corporate bonds and other securities		7,797		(85)		11,783		(243)		19,580		(328)
Total	$	17,150	$	(126)	$	21,468	$	(370)	$	38,618	$	(496)

The following table presents information concerning investments with unrealized losses as of December 31, 2018 (in thousands):

Total investment securities:	LESS THAN 12 MONTHS				12 MONTHS OR LONGER				TOTAL
	FAIR		UNREALIZED		FAIR		UNREALIZED		FAIR		UNREALIZED
	VALUE		LOSSES		VALUE		LOSSES		VALUE		LOSSES
U.S. Agency	$	244	$	(6)	$	5,631	$	(154)	$	5,875	$	(160)
U.S. Agency mortgage-backed securities		17,718		(177)		39,983		(1,113)		57,701		(1,290)
Municipal		6,601		(71)		15,880		(567)		22,481		(638)
Corporate bonds and other securities		15,221		(440)		17,038		(678)		32,259		(1,118)
Total	$	39,784	$	(694)	$	78,532	$	(2,512)	$	118,316	$	(3,206)

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 54 positions that are considered temporarily impaired at December 31, 2019. 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.

As of December 31, 2019, the Company reported $366,000 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 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.  In 2019, the Company recorded a realized gain of $13,000 and an unrealized loss of $5,000 was recognized in income on these equity securities.  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.

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RECENT ACCOUNTING PRONOUNCEMENTS

12 Months Ended

Dec. 31, 2019

RECENT ACCOUNTING PRONOUNCEMENTS

RECENT ACCOUNTING PRONOUNCEMENTS

2. RECENT ACCOUNTING PRONOUNCEMENTS

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which changes the impairment model for most financial assets. This Update 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 Update 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 affected 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. 

In November 2019, the FASB issued ASU 2019-10, Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842).  This update defers the effective date of ASU 2016-13 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.  The Company, as a smaller reporting company, continues to evaluate the impact that the Update will have on our consolidated financial statements.  We are currently working with an industry leading third-party consultant and software provider to assist us in the implementation of this standard.  We expect to recognize a one-time cumulative effect adjustment to the allowance for loan losses as of the beginning of the first reporting period in which the new standard is effective, but cannot yet determine the magnitude of any such one-time adjustment or the overall impact of the new guidance on the consolidated financial statements.  The overall impact of the amendment will be affected by the portfolio composition and quality at the adoption date as well as economic conditions and forecasts at that time.

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PREMISES AND EQUIPMENT

12 Months Ended

Dec. 31, 2019

PREMISES AND EQUIPMENT

PREMISES AND EQUIPMENT

10. PREMISES AND EQUIPMENT

An analysis of premises and equipment follows:

	AT  DECEMBER 31,
	2019		2018
	(IN THOUSANDS)
Land	$	1,198	$	1,198
Premises		27,711		27,160
Furniture and equipment		8,632		9,085
Leasehold improvements		1,174		461
Total at cost		38,715		37,904
Less: Accumulated depreciation and amortization		24,072		24,556
Premises and equipment, net	$	14,643	$	13,348

The Company recorded depreciation expense of $1.5 million for 2019 and 2018 and $1.7 million for 2017.

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 $218,000,  $221,000, and $216,000 for the years ended December 31, 2019, 2018, and 2017, respectively.

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REGULATORY CAPITAL

12 Months Ended

Dec. 31, 2019

REGULATORY CAPITAL

Regulatory Capital

25.  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, Tier 1 capital, and common equity Tier 1 capital to risk-weighted assets and Tier 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, 2019 and 2018, the Company was categorized as Well Capitalized under the regulatory framework for prompt corrective action promulgated by the Federal Reserve. The Company believes that no conditions or events have occurred that would change this conclusion. To be categorized as well capitalized, the Company must maintain minimum total risk-based, common equity Tier 1 risk-based, Tier 1 risk-based, and Tier 1 leverage ratios as set forth in the table.

	AT DECEMBER 31, 2019
											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)	$	132,544	13.49	%	$	119,477	12.23	%	8.00	%	10.00	%
Tier 1 Common Equity (To Risk Weighted Assets)		102,841	10.47			109,173	11.17		4.50		6.50
Tier 1 Capital (To Risk Weighted Assets)		114,729	11.68			109,173	11.17		6.00		8.00
Tier 1 Capital (To Average Assets)		114,729	9.87			109,173	9.50		4.00		5.00

	AT DECEMBER 31, 2018
											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)	$	129,178	13.53	%	$	115,451	12.14	%	8.00	%	10.00	%
Tier 1 Common Equity (To Risk Weighted Assets)		100,258	10.50			105,891	11.14		4.50		6.50
Tier 1 Capital (To Risk Weighted Assets)		112,130	11.74			105,891	11.14		6.00		8.00
Tier 1 Capital (To Average Assets)		112,130	9.71			105,891	9.28		4.00		5.00

*Applies to the Bank only.

Additionally, while not a regulatory capital ratio, the Company’s tangible common equity ratio (non-GAAP) was 7.48% and 7.49% for 2019 and 2018, respectively. See the discussion of the tangible common equity ratio under the Balance Sheet section of the MD&A.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

12 Months Ended

Dec. 31, 2019

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Schedule of Earnings Per Common Share

	YEAR ENDED DECEMBER 31,
	2019		2018		2017
	(IN THOUSANDS, EXCEPT PER SHARE DATA)
Numerator:
Net income	$	6,028	$	7,768	$	3,293
Denominator:
Weighted average common shares outstanding (basic)		17,359		17,933		18,498
Effect of stock options		81		104		102
Weighted average common shares outstanding (diluted)		17,440		18,037		18,600
Earnings per common share:
Basic	$	0.35	$	0.43	$	0.18
Diluted		0.35		0.43		0.18

XML

Document And Entity Information - USD ($)	12 Months Ended
	Dec. 31, 2019	Jan. 31, 2020	Jun. 30, 2019
Cover [Abstract]
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	FY
Entity Registrant Name	AMERISERV FINANCIAL INC /PA/
Entity Central Index Key	0000707605
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Current Reporting Status	Yes
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Interactive Data Current	Yes
Entity Common Stock, Shares Outstanding		17,057,871
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Public Float			$ 65,717,632
Trading Symbol	ASRV

XML

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands		12 Months Ended
		Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
COMPREHENSIVE INCOME
Net income		$ 6,028	$ 7,768	$ 3,293
Other comprehensive income (loss), before tax:
Pension obligation change for defined benefit plan		(6,418)	(244)	1,303
Income tax effect		1,348	51	(442)
Unrealized holding gains (losses) on available for sale securities arising during period		4,072	(1,810)	(40)
Income tax effect		(855)	381	13
Reclassification adjustment for (gains) losses on available for sale securities included in net income	[1]	(118)	439	(115)
Income tax effect	[1]	25	(92)	39
Other comprehensive income (loss)		(1,946)	(1,275)	758
Comprehensive income		$ 4,082	$ 6,493	$ 4,051

[1] Amounts in parentheses indicate credits.

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Dec. 31, 2019

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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 16 banking locations in five southwestern Pennsylvania 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 Company) offers a complete range of trust and financial services and administers assets valued at approximately $2.2 billion that are not recognized on the Company’s Consolidated Balance Sheets at December 31, 2019.

PRINCIPLES OF CONSOLIDATION:

The consolidated financial statements include the accounts of AmeriServ Financial, Inc. and its wholly-owned subsidiaries, AmeriServ Financial Bank (the Bank), Trust Company, and AmeriServ Life Insurance Company (AmeriServ Life). The Bank is a state-chartered full service bank with 15 locations in Pennsylvania and 1 location in Maryland. AmeriServ Life is a captive insurance company that engages in underwriting as a reinsurer of credit life and disability insurance.

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, 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’ 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 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.

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: (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; (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; (3) the impact of legislative and regulatory changes on the customer base of FHLB; and (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 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 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 fair 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.

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.

LEASES:

The Company has operating and financing leases for several branch locations and office space.  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 was 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, 2019, the Company had one short-term equipment lease which it has elected to not record on the Consolidated Balance Sheets.

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, classified and impaired commercial and commercial real estate loans 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) the present value of expected future cash flows discounted at the loan’s effective interest rate; (2) the observable market price of the impaired loan; or (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 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.

—   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 charged 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 $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 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 line item of the Consolidated Balance Sheets.

BANK-OWNED LIFE INSURANCE:

The Company has purchased life insurance policies on certain 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.

INTANGIBLE ASSETS:

Goodwill arising from business combinations represents the value attributable to unidentifiable intangible elements in the business acquired. The Company accounts 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.

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 retired for earnings per share purposes. Options to purchase 12,000,  5,000, and 10,000 shares of common stock were outstanding during 2019, 2018 and 2017, 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 $4.19-$4.22,  $4.22, and $4.00 during 2019, 2018 and 2017, respectively.

	YEAR ENDED DECEMBER 31,
	2019		2018		2017
	(IN THOUSANDS, EXCEPT PER SHARE DATA)
Numerator:
Net income	$	6,028	$	7,768	$	3,293
Denominator:
Weighted average common shares outstanding (basic)		17,359		17,933		18,498
Effect of stock options		81		104		102
Weighted average common shares outstanding (diluted)		17,440		18,037		18,600
Earnings per common share:
Basic	$	0.35	$	0.43	$	0.18
Diluted		0.35		0.43		0.18

STOCK-BASED COMPENSATION:

The Company uses the modified prospective method for accounting of stock-based compensation. The fair value of each option grant is estimated on the grant date using the Binomial option pricing model and the expense is recognized ratably over the service period. Forfeitures are recognized as they occur. See Note 20 for details on the assumptions used.

ACCUMULATED OTHER COMPREHENSIVE LOSS:

The Company presents the components of other comprehensive income (loss) in the Consolidated Statements of Comprehensive Income (Loss). 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 money market funds. The Company made $785,000 in income tax payments in 2019; $875,000 in 2018; and $1,075,000 in 2017. The Company had non-cash transfers to other real estate owned (OREO) in the amounts of $75,000 in 2019; $166,000 in 2018; and $77,000 in 2017. As a result of the adoption of ASU 2016-02, Leases (Topic 842) as of January 1, 2019, the Company had non-cash transactions associated with the recognition of the right-of-use assets and lease liabilities.  Specifically, the Company recognized a right-of-use asset and lease liability of $932,000 related to operating leases and a right-of-use asset and lease liability of $3.3 million related to financing leases.  In addition, as a result of the adoption of ASU 2014-09, Revenue from Contracts with Customers (Topic 606), the Company had a non-cash transaction in the amount of $640,000 associated with the recognition of a receivable for wealth management fees as of December 31, 2019. The Company also had a non-cash transfer of the AMT credit carryforward to other assets in the amount of $287,000 in 2018. The Company made total interest payments of $13,779,000 in 2019; $11,298,000 in 2018; and $8,681,000 in 2017.

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 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. 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. These instruments and their offsetting positions are recorded in Other assets and Other liabilities on the Consolidated Balance Sheets.

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.

The service cost component of net periodic benefit cost is 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 is 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.  Management believes this methodology an appropriate 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 18 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.

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EMPLOYEE BENEFIT PLANS

12 Months Ended

Dec. 31, 2019

EMPLOYEE BENEFIT PLANS

EMPLOYEE BENEFIT PLANS

18. EMPLOYEE BENEFIT PLANS

PENSION PLAN:

The Company has a noncontributory defined benefit pension plan covering all 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-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 401 (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 at $1.3 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, 2019.

PENSION BENEFITS:

	YEAR ENDED DECEMBER 31,
	2019		2018
	(IN THOUSANDS)
CHANGE IN BENEFIT OBLIGATION:
Benefit obligation at beginning of year	$	41,094	$	41,013
Service cost		1,470		1,482
Interest cost		1,569		1,273
Actuarial loss		7,758		823
Special/contractual termination benefits		—		63
Benefits paid		(2,330)		(3,560)
Benefit obligation at end of year		49,561		41,094
CHANGE IN PLAN ASSETS:
Fair value of plan assets at beginning of year		38,478		37,100
Actual return on plan assets		5,483		(1,062)
Employer contributions		3,200		6,000
Benefits paid		(2,330)		(3,560)
Fair value of plan assets at end of year		44,831		38,478
Funded status of the plan	$	(4,730)	$	(2,616)

	YEAR ENDED DECEMBER 31,
	2019		2018
	(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	$	22,113	$	18,461
Total	$	22,113	$	18,461

	YEAR ENDED DECEMBER 31,
	2019		2018
	(IN THOUSANDS)
ACCUMULATED BENEFIT OBLIGATION:
Accumulated benefit obligation	$	45,501	$	37,695

The weighted-average assumptions used to determine benefit obligations at December 31, 2019 and 2018 were as follows:

	YEAR ENDED DECEMBER 31,
	2019		2018
WEIGHTED AVERAGE ASSUMPTIONS:
Discount rate	3.20	%	4.28	%
Salary scale	2.50		2.50

	YEAR ENDED DECEMBER 31,
	2019		2018		2017
	(IN THOUSANDS)
COMPONENTS OF NET PERIODIC BENEFIT COST:
Service cost	$	1,470	$	1,482	$	1,516
Interest cost		1,569		1,273		1,292
Expected return on plan assets		(3,025)		(2,798)		(2,539)
Special termination benefit liability		—		63		—
Recognized net actuarial loss		1,649		1,548		1,454
Net periodic pension cost	$	1,663	$	1,568	$	1,723

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.

	YEAR ENDED DECEMBER 31,
	2019		2018		2017
	(IN THOUSANDS)
OTHER CHANGES IN PLAN ASSETS AND BENEFIT OBLIGATIONS RECOGNIZED IN OTHER COMPREHENSIVE LOSS
Net (gain) loss	$	5,300	$	4,683	$	(822)
Recognized loss		(1,649)		(1,548)		(1,454)
Total recognized in other comprehensive loss before tax effect	$	3,651	$	3,135	$	(2,276)
Total recognized in net benefit cost and other comprehensive loss before tax effect	$	5,314	$	4,703	$	(553)

The estimated net loss for the defined benefit pension plan that will be amortized from accumulated other comprehensive loss into net periodic benefit cost over the next year is $2,499,000.

The weighted-average assumptions used to determine net periodic benefit cost for the years ended December 31, 2019, 2018 and 2017 were as follows:

	YEAR ENDED DECEMBER 31,
	2019		2018		2017
WEIGHTED AVERAGE ASSUMPTIONS:
Discount rate	4.28	%	3.63	%	4.12	%
Expected return on plan assets	7.50		7.50		7.75
Rate of compensation increase	2.50		2.50		2.50

The Company has assumed a 7.50% long-term expected return on plan assets. This assumption was based upon the plan’s historical investment performance over a longer-term period of 15 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 60% of plan assets.

PLAN ASSETS:

The plan’s measurement date is December 31, 2019. This plan’s asset allocation at December 31, 2019 and 2018, by asset category are as follows:

	YEAR ENDED DECEMBER 31,
	2019		2018
ASSET CATEGORY:
Cash and cash equivalents	1	%	49	%
Domestic equities	8		7
Mutual funds/ETFs	82		42
International equities	1		—
Corporate bonds	8		2
Total	100	%	100	%

The major categories of assets in the Company’s Pension Plan as of year-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,
	2019		2018
	(IN THOUSANDS)
Level 1:
Cash and cash equivalents	$	186	$	18,939
Domestic equities		3,782		2,841
Mutual funds/ETFs		36,469		15,808
International equities		620		—
Level 2:
Corporate bonds		3,774		890
Total fair value of plan assets	$	44,831	$	38,478

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. 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 relatively 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 but the plan typically targets a range of equity investments between 50% and 60% of the plan assets. This means that fixed income and cash investments typically approximate 40% to 50% of the plan assets. The plan is also able to invest in ASRV common stock up to a maximum level of 10% of the market value of the plan assets (at December 31, 2019, 2.8% 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.

CASH FLOWS:

The Company presently expects that the contribution to be made to the Plan in 2020 will be approximately $4.0 million.

ESTIMATED FUTURE BENEFIT PAYMENTS:

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

	ESTIMATED FUTURE
YEAR:	BENEFIT PAYMENTS
	(IN THOUSANDS)
2020	$	4,096
2021		3,910
2022		4,317
2023		3,949
2024		4,205
Years 2025-2029		15,975

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. 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 $604,000,  $503,000 and $469,000 for the years ended December 31, 2019, 2018 and 2017, respectively. The fair value of plan assets includes $924,000 pertaining to the value of the Company’s common stock and Trust Preferred securities that are held by the plan at December 31, 2019.

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, 2019, the Company reported a deferred compensation liability of $366,000 within Other liabilities on the Consolidated Balance Sheets. In 2019, the Company recognized $9,000 of deferred compensation plan expense which is reported within Other expense on the Consolidated Statements of Operations.   See Note 6 (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.

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

12 Months Ended

Dec. 31, 2019

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

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

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

Advances from the FHLB consist of the following:

	AT DECEMBER 31, 2019
	WEIGHTED
	AVERAGE YIELD		BALANCE
MATURING	(IN THOUSANDS, EXCEPT RATES)
2020	1.75	%	$	18,729
2021	2.28			9,496
2022	2.21			17,838
2023	2.48			5,568
2024	1.86			2,037
Total advances from FHLB	2.08		$	53,668

	AT DECEMBER 31, 2018
	WEIGHTED
	AVERAGE YIELD		BALANCE
MATURING	(IN THOUSANDS, EXCEPT RATES)
2019	1.51	%	$	12,500
2020	1.74			16,729
2021	2.28			9,496
2022	2.86			6,996
2023	2.86			1,000
Total advances from FHLB	1.98		$	46,721

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 commercial and commercial real estate loans. The rate on open repo plus advances, which are typically overnight borrowings, can change daily, while the rates on the advances are fixed until the maturity of the advance. All FHLB stock along with an interest in certain residential mortgage, commercial real estate, and commercial 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, 2019, the Company had immediately available $358 million of overnight borrowing capability at the FHLB, $30 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, 2019 and 2018 was $13.0 million and $12.9 million, respectively.

Subordinated Debt:

On December 29, 2015, the Company completed a private placement of $7.65 million in aggregate principal amount of fixed rate subordinated notes to certain accredited investors. The subordinated notes mature December 31, 2025 and have a 6.50% fixed interest rate for the entire term. This subordinated debt has been structured to qualify as Tier 2 capital under the Federal Reserve’s capital guidelines and will be non-callable for five years. The Company used the proceeds from this private placement and other cash on hand to redeem all $21 million of its issued and outstanding SBLF preferred stock on January 27, 2016. The net balance as of December 31, 2019 and 2018 was $7.5 million.

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INTANGIBLE ASSETS (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Goodwill [Line Items]
Goodwill	$ 11,944	$ 11,944
West Chester Capital Advisors [Member]
Goodwill [Line Items]
Goodwill	2,400
Retail Banking [Member]
Goodwill [Line Items]
Goodwill	$ 9,500

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PREMISES AND EQUIPMENT (Tables)

12 Months Ended

Dec. 31, 2019

PREMISES AND EQUIPMENT

Schedule of premises and equipment

An analysis of premises and equipment follows:

	AT  DECEMBER 31,
	2019		2018
	(IN THOUSANDS)
Land	$	1,198	$	1,198
Premises		27,711		27,160
Furniture and equipment		8,632		9,085
Leasehold improvements		1,174		461
Total at cost		38,715		37,904
Less: Accumulated depreciation and amortization		24,072		24,556
Premises and equipment, net	$	14,643	$	13,348

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ADVANCES FROM FEDERAL HOME LOAN BANK, GUARANTEED JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES AND SUBORDINATED DEBT (Tables)

12 Months Ended

Dec. 31, 2019

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

Schedule of federal home loan bank borrowings

Advances from the FHLB consist of the following:

	AT DECEMBER 31, 2019
	WEIGHTED
	AVERAGE YIELD		BALANCE
MATURING	(IN THOUSANDS, EXCEPT RATES)
2020	1.75	%	$	18,729
2021	2.28			9,496
2022	2.21			17,838
2023	2.48			5,568
2024	1.86			2,037
Total advances from FHLB	2.08		$	53,668

	AT DECEMBER 31, 2018
	WEIGHTED
	AVERAGE YIELD		BALANCE
MATURING	(IN THOUSANDS, EXCEPT RATES)
2019	1.51	%	$	12,500
2020	1.74			16,729
2021	2.28			9,496
2022	2.86			6,996
2023	2.86			1,000
Total advances from FHLB	1.98		$	46,721

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STOCK COMPENSATION PLANS - Pricing model assumption ranges (Details)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Risk-free interest rate	2.65%	3.13%
Expected lives in years	10 years	10 years	10 years
Expected volatility	15.75%	15.59%
Expected dividend rate	1.91%	1.90%	1.50%
Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Risk-free interest rate			2.23%
Expected volatility			28.09%
Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Risk-free interest rate			2.38%
Expected volatility			28.84%

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EMPLOYEE BENEFIT PLANS - Estimated future benefit payments (Details) - Defined Benefit Pension Items [Member] $ in Thousands	Dec. 31, 2019 USD ($)
Defined Benefit Plan, Expected Future Benefit Payment [Abstract]
2020	$ 4,096
2021	3,910
2022	4,317
2023	3,949
2024	4,205
Years 2025-2029	$ 15,975

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CASH AND DUE FROM DEPOSITORY INSTITUTIONS (Details) - USD ($) $ in Millions	Dec. 31, 2019	Dec. 31, 2018
CASH AND DUE FROM DEPOSITORY INSTITUTIONS
Restricted Cash and Cash Equivalents	$ 3.0	$ 3.6

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DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS - Schedule of assets measured and recorded at fair value on a non-recurring basis (Details) - USD ($)		12 Months Ended
		Dec. 31, 2019		Dec. 31, 2018
DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS
Impaired loan with carrying value		$ 263,000		$ 11,000
Specific valuation allowance		8,000		11,000
Impaired loans		255,000		0
Fair Value Measurements, Nonrecurring Basis [Member]
DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS
Impaired loans		255,000		0
Other real estate owned		$ 37,000		$ 157,000
Fair Value Measurements, Nonrecurring Basis [Member] | Impaired loans
DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS
Valuation Techniques	[1],[2]	Appraisal of collateral		Appraisal of collateral
Fair Value Measurements, Nonrecurring Basis [Member] | Other real estate owned
DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS
Valuation Techniques		Appraisal of collateral	[1],[2]	Appraisal of collateral
Fair Value Measurements, Nonrecurring Basis [Member] | Minimum | Impaired loans
DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS
Appraisal adjustments		0.00%
Fair Value Measurements, Nonrecurring Basis [Member] | Minimum | Other real estate owned
DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS
Appraisal adjustments		0.00%		0.00%
Liquidation expenses		21.00%		21.00%
Fair Value Measurements, Nonrecurring Basis [Member] | Maximum | Impaired loans
DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS
Appraisal adjustments		100.00%		100.00%
Fair Value Measurements, Nonrecurring Basis [Member] | Maximum | Other real estate owned
DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS
Appraisal adjustments		57.00%		39.00%
Liquidation expenses		134.00%		195.00%
Fair Value Measurements, Nonrecurring Basis [Member] | Wgtd Ave | Impaired loans
DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS
Appraisal adjustments		3.00%		100.00%
Fair Value Measurements, Nonrecurring Basis [Member] | Wgtd Ave | Other real estate owned
DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS
Appraisal adjustments		38.00%		8.00%
Liquidation expenses		30.00%		40.00%
Fair Value Measurements, Nonrecurring Basis [Member] | Level 1 [Member]
DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS
Impaired loans		$ 0		$ 0
Other real estate owned		0		0
Fair Value Measurements, Nonrecurring Basis [Member] | Level 2 [Member]
DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS
Impaired loans		0		0
Other real estate owned		0		0
Fair Value Measurements, Nonrecurring Basis [Member] | Level 3 [Member]
DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS
Impaired loans		255,000		0
Other real estate owned		$ 37,000		$ 157,000

[1] Appraisals may be adjusted by management for qualitative factors such as economic conditions.

[2] 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.

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SHORT-TERM BORROWINGS (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
SHORT-TERM BORROWINGS
Balance	$ 22,412	$ 41,029
Federal Funds Purchased [Member]
SHORT-TERM BORROWINGS
Balance	0	0	$ 0
Maximum balance at any month end	0	0	0
Average balance during year	$ 58	$ 54	$ 54
Average rate paid for the year	3.04%	1.70%	0.95%
Interest rate on year-end balance	0.00%	0.00%	0.00%
Short-Term Borrowings [Member]
SHORT-TERM BORROWINGS
Balance	$ 22,412	$ 41,029	$ 49,084
Maximum balance at any month end	49,615	82,932	51,760
Average balance during year	$ 11,030	$ 33,073	$ 16,918
Average rate paid for the year	2.59%	2.17%	1.21%
Interest rate on year-end balance	1.81%	2.62%	1.54%

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Additional information (Details)	12 Months Ended
	Dec. 31, 2019 USD ($) $ / shares shares	Dec. 31, 2018 USD ($) $ / shares shares	Dec. 31, 2017 USD ($) $ / shares shares	Jan. 01, 2019 USD ($)
Summary Of Significant Accounting Policies [Line Items]
Number of Stores	16
Assets under Management, Carrying Amount	$ 2,200,000,000
Federal Home Loan Bank Stock Par Value | $ / shares	$ 100
Threshold Period Past Due for Write-off of Financing Receivable	90 days
Description Of Accounting Treatment For Short Term Operating Lease	As of December 31, 2019, the Company had one short-term equipment lease which it has elected to not record on the Consolidated Balance Sheets.
Financing Receivable, Individually Evaluated for Impairment	$ 824,000	$ 11,000
Financing Receivable, Recorded Investment	$ 878,307,000	$ 856,020,000
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | shares	12,000	5,000	10,000
Income Taxes Paid	$ 785,000	$ 875,000	$ 1,075,000
Real Estate Owned, Transfer from Real Estate Owned	75,000	166,000	77,000
Operating Lease, Right-of-Use Asset	846,000	0
Operating Lease, Liability	865,000	0
Finance Lease, Right-of-Use Asset	3,078,000	0
Finance Lease, Liability	3,163,000	0
Total interest payments	$ 13,779,000	$ 11,298,000	$ 8,681,000
Share Based Compensation Arrangement By Share Based Payment Award Options Exercisable Price Of Anti Dilutive Option Amount | $ / shares		$ 4.22	$ 4.00
Non Cash Transfer Of Applicable Minimum Tax To Other Assets		$ 287,000
Minimum
Summary Of Significant Accounting Policies [Line Items]
Share Based Compensation Arrangement By Share Based Payment Award Options Exercisable Price Of Anti Dilutive Option Amount | $ / shares	$ 4.19
Maximum
Summary Of Significant Accounting Policies [Line Items]
Share Based Compensation Arrangement By Share Based Payment Award Options Exercisable Price Of Anti Dilutive Option Amount | $ / shares	$ 4.22
ASU 2016-02
Summary Of Significant Accounting Policies [Line Items]
Operating Lease, Right-of-Use Asset				$ 932,000
Operating Lease, Liability				932,000
Finance Lease, Right-of-Use Asset				3,300,000
Finance Lease, Liability				$ 3,300,000
Wealth Management [Member] | ASU 2014-09
Summary Of Significant Accounting Policies [Line Items]
Effect of adoption of revenue recognition standard - ASC Topic 606	$ 640,000
Commercial Portfolio Segment [Member]
Summary Of Significant Accounting Policies [Line Items]
Minimum aggregate balances for commercial loan relationship under structure loan rating process	1,000,000
Small Business Loans [Member] | Maximum
Summary Of Significant Accounting Policies [Line Items]
Financing Receivable, Recorded Investment	250,000
Consumer and Residential Mortgage Loans [Member] | Minimum
Summary Of Significant Accounting Policies [Line Items]
Financing Receivable, Individually Evaluated for Impairment	$ 150,000
Premises [Member]
Summary Of Significant Accounting Policies [Line Items]
Property, Plant and Equipment, Useful Life	30 years
Equipment [Member]
Summary Of Significant Accounting Policies [Line Items]
Property, Plant and Equipment, Useful Life	10 years

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INCOME TAXES - Deferred tax assets and liabilities (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
DEFERRED TAX ASSETS:
Allowance for loan losses	$ 1,949	$ 1,821
Unfunded commitment reserve	215	187
Unrealized investment security losses	0	374
Premises and equipment	1,129	1,056
Accrued pension obligation	1,093	144
Other	230	255
Total tax assets	4,616	3,837
DEFERRED TAX LIABILITIES:
Investment accretion	(82)	(90)
Unrealized investment security gains	(456)	0
Other	(102)	(110)
Total tax liabilities	(640)	(200)
Deferred Tax Assets, Net, Total	$ 3,976	$ 3,637

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INVESTMENT SECURITIES - Additional information (Details)		12 Months Ended
		Dec. 31, 2019 USD ($) position	Dec. 31, 2018 USD ($)	Dec. 31, 2017 USD ($)
INVESTMENT SECURITIES
Gross investment gains		$ 118,000	$ 15,000	$ 115,000
Gross investment losses			454,000
Other Comprehensive Income (Loss), Reclassification Adjustment from AOCI for Sale of Securities, Net of Tax		93,000	(347,000)	76,000
Other Comprehensive Income (Loss), Reclassification Adjustment from AOCI for Sale of Securities, Tax	[1]	$ 25,000	(92,000)	39,000
Investment Securities:
Consolidated investment securities portfolio modified, years		3 years 26 days
Proceeds from sales of investment securities - available for sale		$ 3,374,000	9,466,000	8,143,000
Book value of securities available for sale and held to maturity		$ 117,076,000	115,536,000
Available for sale Securities And Held To Maturity Securities In Unrealized Loss Positions | position		54
Debt and Equity Securities, Gain (Loss)		$ 118,000	$ (439,000)	$ 115,000
U.S. Agency
Investment Securities:
Available For Sale Securities Debt Maturities Weighted Average Maturity Term		10 years 2 months 9 days
U.S. Agency mortgage-backed securities
Investment Securities:
Available For Sale Securities Debt Maturities Weighted Average Maturity Term		4 years 4 months 10 days
Weighted Average Expected Maturity For Held To Maturity Securities		4 years 7 months 13 days
Corporate bonds [Member]
Investment Securities:
Available For Sale Securities Debt Maturities Weighted Average Maturity Term		4 years 18 days
Weighted Average Expected Maturity For Held To Maturity Securities		3 years 2 months 16 days
Municipal
Investment Securities:
Available For Sale Securities Debt Maturities Weighted Average Maturity Term		5 years 2 months 9 days
Weighted Average Expected Maturity For Held To Maturity Securities		5 years 11 months 1 day
Standard & Poor's, AAA Rating [Member]
INVESTMENT SECURITIES
Portfolio rated		53.40%	57.50%
Securities rated below A [Member]
INVESTMENT SECURITIES
Portfolio rated		9.10%	10.00%
Deferred Compensation, Share-based Payments [Member] | Assets Held With Rabbi Trust [Member]
Investment Securities:
Equity Securities, FV-NI		$ 366,000,000
Debt and Equity Securities, Gain (Loss)		13,000,000
Unrealized Loss on Securities		$ 5,000,000

[1] Amounts in parentheses indicate credits.

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PARENT COMPANY FINANCIAL INFORMATION - BALANCE SHEETS (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
ASSETS
Cash	$ 15,642	$ 27,970
Short-term investments in money market funds	3,771	4,184
Cash and cash equivalents	22,168	34,894
Investment securities available for sale	141,749	146,731
Other assets	6,074	6,379
TOTAL ASSETS	1,171,184	1,160,680	$ 1,167,655
LIABILITIES
Guaranteed junior subordinated deferrable interest debentures, net	12,955	12,939
Subordinated debt, net	7,511	7,488
Other liabilities	11,483	5,355
TOTAL LIABILITIES	1,072,570	1,062,703
STOCKHOLDERS' EQUITY
Total stockholders' equity	98,614	97,977	$ 95,102
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	1,171,184	1,160,680
Parent Company [Member]
ASSETS
Cash	100	100
Short-term investments in money market funds	2,544	3,711
Cash and cash equivalents	2,644	3,811
Investment securities available for sale	3,758	4,747
Other assets	978	208
TOTAL ASSETS	120,053	119,158
LIABILITIES
Guaranteed junior subordinated deferrable interest debentures, net	12,955	12,939
Subordinated debt, net	7,511	7,488
Other liabilities	973	754
TOTAL LIABILITIES	21,439	21,181
STOCKHOLDERS' EQUITY
Total stockholders' equity	98,614	97,977
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	120,053	119,158
Parent Company [Member] | Banking Subsidiary [Member]
ASSETS
Equity investment	104,843	103,647
Parent Company [Member] | Non Banking Subsidiaries [Member]
ASSETS
Equity investment	$ 7,830	$ 6,745

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DERIVATIVE HEDGING INSTRUMENTS - Additional Information (Details) - USD ($)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
DERIVATIVE HEDGING INSTRUMENTS
Proceeds from Fees Received	$ 120,000	$ 25,000
Derivative Notional Amount Outstanding	$ 500,000,000	$ 500,000,000

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SELECTED QUARTERLY CONSOLIDATED FINANCIAL DATA (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
SELECTED QUARTERLY CONSOLIDATED FINANCIAL DATA
Interest income	$ 12,405	$ 12,433	$ 12,765	$ 12,164	$ 12,125	$ 12,149	$ 11,603	$ 11,217	$ 49,767	$ 47,094	$ 44,356
Interest expense	3,445	3,669	3,704	3,507	3,346	3,040	2,745	2,469	14,325	11,600	8,795
Net interest income	8,960	8,764	9,061	8,657	8,779	9,109	8,858	8,748	35,442	35,494	35,561
Provision (credit) for loan losses	975	225	0	(400)	(700)	0	50	50	800	(600)	800
Net interest income after provision (credit) for loan losses	7,985	8,539	9,061	9,057	9,479	9,109	8,808	8,698	34,642	36,094	34,761
Non-interest income	3,416	4,095	3,657	3,605	3,322	3,586	3,681	3,635	14,773	14,224	14,645
Non-interest expense	10,563	10,503	10,456	10,293	10,374	10,096	10,292	10,111	41,815	40,873	40,726
Income before income taxes	838	2,131	2,262	2,369	2,427	2,599	2,197	2,222	7,600	9,445	8,680
Provision for income taxes	169	442	470	491	499	270	453	455	1,572	1,677	5,387
Net income (loss)	$ 669	$ 1,689	$ 1,792	$ 1,878	$ 1,928	$ 2,329	$ 1,744	$ 1,767	$ 6,028	$ 7,768	$ 3,293
Basic earnings per common share	$ 0.04	$ 0.10	$ 0.10	$ 0.11	$ 0.11	$ 0.13	$ 0.10	$ 0.10	$ 0.35	$ 0.43	$ 0.18
Diluted earnings per common share	0.04	0.10	0.10	0.11	0.11	0.13	0.10	0.10	0.35	0.43	0.18
Cash dividends declared per common share	$ 0.025	$ 0.025	$ 0.025	$ 0.020	$ 0.020	$ 0.020	$ 0.020	$ 0.015	$ 0.095	$ 0.075	$ 0.060

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ALLOWANCE FOR LOAN LOSSES - Present impaired loans by portfolio segment (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Accounts, Notes, Loans and Financing Receivable [Line Items]
Recorded Investment	$ 824	$ 11
Related Allowance	8	11
Unpaid Principal Balance	846	33
Commercial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Recorded Investment	816
Unpaid Principal Balance	816
Commercial loans secured by non-owner occupied real estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Recorded Investment	8	11
Unpaid Principal Balance	30	33
Impaired Loans with Specific Allowance [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Recorded Investment	824	11
Related Allowance	92	11
Impaired Loans with Specific Allowance [Member] | Commercial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Recorded Investment	816
Related Allowance	84
Impaired Loans with Specific Allowance [Member] | Commercial loans secured by non-owner occupied real estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Recorded Investment	8	11
Related Allowance	$ 8	$ 11

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PREMISES AND EQUIPMENT - Additional information (Details) - USD ($)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
PREMISES AND EQUIPMENT
Depreciation	$ 1,500,000	$ 1,500,000	$ 1,700,000
Director [Member]
PREMISES AND EQUIPMENT
Related Party Transaction, Amounts of Transaction	$ 218,000	$ 221,000	$ 216,000

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DEPOSITS (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Demand:
Non-interest bearing	$ 136,462	$ 150,627
Interest bearing	177,767	169,151
Savings	95,933	97,406
Money market	208,343	221,398
Certificates of deposit in denominations of $100,000 or more	38,770	34,841
Other time	303,238	275,748
Total deposits	$ 960,513	$ 949,171

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ALLOWANCE FOR LOAN LOSSES - Credit quality of the loan portfolio (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans
Current	$ 878,307	$ 856,020
Total Past Due	4,399	6,262
Total loans	882,706	862,282
90 Days Past Due and Still Accruing	0	0
30-59 Days Past Due [Member]
Classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans
Total Past Due	2,490	4,384
60-89 Days Past Due [Member]
Classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans
Total Past Due	887	502
90 Days Past Due [Member]
Classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans
Total Past Due	1,022	1,376
Commercial and Industrial [Member]
Classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans
Current	173,922	158,279
Total Past Due	0	0
Total loans	173,922	158,279
90 Days Past Due and Still Accruing	0	0
Commercial and Industrial [Member] | 30-59 Days Past Due [Member]
Classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans
Total Past Due	0	0
Commercial and Industrial [Member] | 60-89 Days Past Due [Member]
Classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans
Total Past Due	0	0
Commercial and Industrial [Member] | 90 Days Past Due [Member]
Classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans
Total Past Due	0	0
Commercial loans secured by owner occupied real estate [Member]
Classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans
Current	91,538	91,905
Total Past Due	117	0
Total loans	91,655	91,905
90 Days Past Due and Still Accruing	0	0
Commercial loans secured by owner occupied real estate [Member] | 30-59 Days Past Due [Member]
Classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans
Total Past Due	117	0
Commercial loans secured by owner occupied real estate [Member] | 60-89 Days Past Due [Member]
Classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans
Total Past Due	0	0
Commercial loans secured by owner occupied real estate [Member] | 90 Days Past Due [Member]
Classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans
Total Past Due	0	0
Commercial loans secured by non-owner occupied real estate [Member]
Classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans
Current	363,635	355,963
Total Past Due	0	580
Total loans	363,635	356,543
90 Days Past Due and Still Accruing	0	0
Commercial loans secured by non-owner occupied real estate [Member] | 30-59 Days Past Due [Member]
Classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans
Total Past Due	0	580
Commercial loans secured by non-owner occupied real estate [Member] | 60-89 Days Past Due [Member]
Classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans
Total Past Due	0	0
Commercial loans secured by non-owner occupied real estate [Member] | 90 Days Past Due [Member]
Classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans
Total Past Due	0	0
Real estate - residential mortgage [Member]
Classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans
Current	231,022	232,465
Total Past Due	4,217	5,499
Total loans	235,239	237,964
90 Days Past Due and Still Accruing	0	0
Real estate - residential mortgage [Member] | 30-59 Days Past Due [Member]
Classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans
Total Past Due	2,331	3,651
Real estate - residential mortgage [Member] | 60-89 Days Past Due [Member]
Classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans
Total Past Due	864	472
Real estate - residential mortgage [Member] | 90 Days Past Due [Member]
Classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans
Total Past Due	1,022	1,376
Consumer [Member]
Classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans
Current	18,190	17,408
Total Past Due	65	183
Total loans	18,255	17,591
90 Days Past Due and Still Accruing	0	0
Consumer [Member] | 30-59 Days Past Due [Member]
Classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans
Total Past Due	42	153
Consumer [Member] | 60-89 Days Past Due [Member]
Classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans
Total Past Due	23	30
Consumer [Member] | 90 Days Past Due [Member]
Classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans
Total Past Due	$ 0	$ 0

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EMPLOYEE BENEFIT PLANS - Accumulated benefit obligation (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Defined Benefit Pension Items [Member]
Defined Benefit Plan Disclosure [Line Items]
Accumulated benefit obligation	$ 45,501	$ 37,695

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SELECTED QUARTERLY CONSOLIDATED FINANCIAL DATA (Tables)

12 Months Ended

Dec. 31, 2019

SELECTED QUARTERLY CONSOLIDATED FINANCIAL DATA

Schedule of quarterly consolidated financial data

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

	2019 QUARTER ENDED
	DEC. 31		SEPT. 30		JUNE 30		MARCH 31
	(IN THOUSANDS, EXCEPT PER SHARE DATA)
Interest income	$	12,405	$	12,433	$	12,765	$	12,164
Interest expense		3,445		3,669		3,704		3,507
Net interest income		8,960		8,764		9,061		8,657
Provision (credit) for loan losses		975		225		—		(400)
Net interest income after provision (credit) for loan losses		7,985		8,539		9,061		9,057
Non-interest income		3,416		4,095		3,657		3,605
Non-interest expense		10,563		10,503		10,456		10,293
Income before income taxes		838		2,131		2,262		2,369
Provision for income taxes		169		442		470		491
Net income	$	669	$	1,689	$	1,792	$	1,878
Basic earnings per common share	$	0.04	$	0.10	$	0.10	$	0.11
Diluted earnings per common share		0.04		0.10		0.10		0.11
Cash dividends declared per common share		0.025		0.025		0.025		0.020

	2018 QUARTER ENDED
	DEC. 31		SEPT. 30		JUNE 30		MARCH 31
	(IN THOUSANDS, EXCEPT PER SHARE DATA)
Interest income	$	12,125	$	12,149	$	11,603	$	11,217
Interest expense		3,346		3,040		2,745		2,469
Net interest income		8,779		9,109		8,858		8,748
Provision (credit) for loan losses		(700)		—		50		50
Net interest income after provision (credit) for loan losses		9,479		9,109		8,808		8,698
Non-interest income		3,322		3,586		3,681		3,635
Non-interest expense		10,374		10,096		10,292		10,111
Income before income taxes		2,427		2,599		2,197		2,222
Provision for income taxes		499		270		453		455
Net income	$	1,928	$	2,329	$	1,744	$	1,767
Basic earnings per common share	$	0.11	$	0.13	$	0.10	$	0.10
Diluted earnings per common share		0.11		0.13		0.10		0.10
Cash dividends declared per common share		0.020		0.020		0.020		0.015

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EMPLOYEE BENEFIT PLANS - Weighted-average assumptions used to determine net periodic benefit cost (Details) - Defined Benefit Pension Items [Member]	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
WEIGHTED AVERAGE ASSUMPTIONS:
Discount rate	4.28%	3.63%	4.12%
Expected return on plan assets	7.50%	7.50%	7.75%
Rate of compensation increase	2.50%	2.50%	2.50%

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DERIVATIVE HEDGING INSTRUMENTS (Tables)

12 Months Ended

Dec. 31, 2019

DERIVATIVE HEDGING INSTRUMENTS

Schedule of interest rate swap transactions

The following table summarizes the interest rate swap transactions that impacted the Company’s 2019 and 2018 performance (in thousands, except percentages).

	DECEMBER 31, 2019
							INCREASE
		AGGREGATE		WEIGHTED			(DECREASE)
		NOTIONAL		AVERAGE RATE		REPRICING	IN INTEREST
	HEDGE TYPE	AMOUNT		RECEIVED/(PAID)		FREQUENCY	EXPENSE
Swap assets	Fair Value	$	31,668	4.44	%	Monthly	$	(18)
Swap liabilities	Fair Value		(31,668)	(4.44)		Monthly		18
Net exposure			—	—				—

	DECEMBER 31, 2018
							INCREASE
		AGGREGATE		WEIGHTED			(DECREASE)
		NOTIONAL		AVERAGE RATE		REPRICING	IN INTEREST
	HEDGE TYPE	AMOUNT		RECEIVED/(PAID)		FREQUENCY	EXPENSE
Swap assets	Fair Value	$	19,825	4.31	%	Monthly	$	(41)
Swap liabilities	Fair Value		(19,825)	(4.31)		Monthly		41
Net exposure			—	—				—

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INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2019

INCOME TAXES

Schedule of expense for income taxes, includes both federal and applicable state corporate 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. The expense for income taxes is summarized below and includes both federal and applicable state corporate income taxes:

	YEAR ENDED DECEMBER 31,
	2019		2018		2017
	(IN THOUSANDS)
Current	$	1,393	$	(988)	$	1,084
Deferred		179		2,665		1,679
Change in corporate tax rate		—		—		2,624
Income tax expense	$	1,572	$	1,677	$	5,387

Schedule of reconciliation between the federal statutory tax rate and the Company's effective consolidated income tax rate

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

	YEAR ENDED DECEMBER 31,
	2019				2018				2017
	AMOUNT		RATE		AMOUNT		RATE		AMOUNT		RATE
	(IN THOUSANDS, EXCEPT PERCENTAGES)
Income tax expense based on federal statutory rate	$	1,596	21.0	%	$	1,983	21.0	%	$	2,951	34.0	%
Tax exempt income		(131)	(1.4)			(131)	(1.4)			(283)	(3.3)
Other		107	1.1			(175)	(1.8)			95	1.0
Change in corporate tax rate		—	—			—	—			2,624	30.4
Total expense for income taxes	$	1,572	20.7	%	$	1,677	17.8	%	$	5,387	62.1	%

Schedule of deferred tax assets and liabilities

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

	AT DECEMBER 31,
	2019		2018
	(IN THOUSANDS)
DEFERRED TAX ASSETS:
Allowance for loan losses	$	1,949	$	1,821
Unfunded commitment reserve		215		187
Unrealized investment security losses		—		374
Premises and equipment		1,129		1,056
Accrued pension obligation		1,093		144
Other		230		255
Total tax assets		4,616		3,837
DEFERRED TAX LIABILITIES:
Investment accretion		(82)		(90)
Unrealized investment security gains		(456)		—
Other		(102)		(110)
Total tax liabilities		(640)		(200)
Net deferred tax asset	$	3,976	$	3,637

Schedule of change in net deferred tax assets and liabilities

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

	YEAR ENDED
	DECEMBER 31,
	2019		2018
	(IN THOUSANDS)
Unrealized (gains) losses recognized in comprehensive income	$	(830)	$	288
Pension obligation of the defined benefit plan not yet recognized in income		1,348		51
Deferred provision for income taxes		(179)		(2,665)
Net increase (decrease)	$	339	$	(2,326)

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DERIVATIVE HEDGING INSTRUMENTS

12 Months Ended

Dec. 31, 2019

DERIVATIVE HEDGING INSTRUMENTS

Derivative Hedging Instruments

23. 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 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.

To accommodate the needs of our customers and support the Company’s asset/liability positioning, we may enter into interest rate swap agreements with customers and a large financial institution that specializes in these types of 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 offsetting fixed rate swaps with Pittsburgh National Bank (PNC). 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 PNC 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 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. For the years ended December 31, 2019 and 2018, the Company received $120,000 and $25,000, respectively, in fees on the interest rate swap transactions.

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 15.

The following table summarizes the interest rate swap transactions that impacted the Company’s 2019 and 2018 performance (in thousands, except percentages).

	DECEMBER 31, 2019
							INCREASE
		AGGREGATE		WEIGHTED			(DECREASE)
		NOTIONAL		AVERAGE RATE		REPRICING	IN INTEREST
	HEDGE TYPE	AMOUNT		RECEIVED/(PAID)		FREQUENCY	EXPENSE
Swap assets	Fair Value	$	31,668	4.44	%	Monthly	$	(18)
Swap liabilities	Fair Value		(31,668)	(4.44)		Monthly		18
Net exposure			—	—				—

	DECEMBER 31, 2018
							INCREASE
		AGGREGATE		WEIGHTED			(DECREASE)
		NOTIONAL		AVERAGE RATE		REPRICING	IN INTEREST
	HEDGE TYPE	AMOUNT		RECEIVED/(PAID)		FREQUENCY	EXPENSE
Swap assets	Fair Value	$	19,825	4.31	%	Monthly	$	(41)
Swap liabilities	Fair Value		(19,825)	(4.31)		Monthly		41
Net exposure			—	—				—

The Company monitors and controls all derivative products with a comprehensive Board of Directors approved 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, unless otherwise approved, as per the terms, with the Board of Directors approved Hedging Policy. The Company had no caps or floors outstanding at December 31, 2019 and 2018. None of the Company’s derivatives are designated as hedging instruments.

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SELECTED QUARTERLY CONSOLIDATED FINANCIAL DATA

12 Months Ended

Dec. 31, 2019

SELECTED QUARTERLY CONSOLIDATED FINANCIAL DATA

SELECTED QUARTERLY CONSOLIDATED FINANCIAL DATA

27.  SELECTED QUARTERLY CONSOLIDATED FINANCIAL DATA (unaudited)

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

	2019 QUARTER ENDED
	DEC. 31		SEPT. 30		JUNE 30		MARCH 31
	(IN THOUSANDS, EXCEPT PER SHARE DATA)
Interest income	$	12,405	$	12,433	$	12,765	$	12,164
Interest expense		3,445		3,669		3,704		3,507
Net interest income		8,960		8,764		9,061		8,657
Provision (credit) for loan losses		975		225		—		(400)
Net interest income after provision (credit) for loan losses		7,985		8,539		9,061		9,057
Non-interest income		3,416		4,095		3,657		3,605
Non-interest expense		10,563		10,503		10,456		10,293
Income before income taxes		838		2,131		2,262		2,369
Provision for income taxes		169		442		470		491
Net income	$	669	$	1,689	$	1,792	$	1,878
Basic earnings per common share	$	0.04	$	0.10	$	0.10	$	0.11
Diluted earnings per common share		0.04		0.10		0.10		0.11
Cash dividends declared per common share		0.025		0.025		0.025		0.020

	2018 QUARTER ENDED
	DEC. 31		SEPT. 30		JUNE 30		MARCH 31
	(IN THOUSANDS, EXCEPT PER SHARE DATA)
Interest income	$	12,125	$	12,149	$	11,603	$	11,217
Interest expense		3,346		3,040		2,745		2,469
Net interest income		8,779		9,109		8,858		8,748
Provision (credit) for loan losses		(700)		—		50		50
Net interest income after provision (credit) for loan losses		9,479		9,109		8,808		8,698
Non-interest income		3,322		3,586		3,681		3,635
Non-interest expense		10,374		10,096		10,292		10,111
Income before income taxes		2,427		2,599		2,197		2,222
Provision for income taxes		499		270		453		455
Net income	$	1,928	$	2,329	$	1,744	$	1,767
Basic earnings per common share	$	0.11	$	0.13	$	0.10	$	0.10
Diluted earnings per common share		0.11		0.13		0.10		0.10
Cash dividends declared per common share		0.020		0.020		0.020		0.015

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INVESTMENT SECURITIES (Tables)

12 Months Ended

Dec. 31, 2019

INVESTMENT SECURITIES

Schedule of cost basis and fair values of investment securities

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

Investment securities available for sale:

	AT DECEMBER 31, 2019
			GROSS		GROSS
			UNREALIZED		UNREALIZED		FAIR
	COST BASIS		GAINS		LOSSES		VALUE
	(IN THOUSANDS)
U.S. Agency	$	5,084	$	32	$	—	$	5,116
Municipal		14,678		509		(17)		15,170
Corporate bonds		39,769		342		(281)		39,830
U.S. Agency mortgage-backed securities		80,046		1,681		(94)		81,633
Total	$	139,577	$	2,564	$	(392)	$	141,749

Investment securities held to maturity:

	AT DECEMBER 31, 2019
			GROSS		GROSS
			UNREALIZED		UNREALIZED		FAIR
	COST BASIS		GAINS		LOSSES		VALUE
	(IN THOUSANDS)
U.S. Agency mortgage-backed securities	$	9,466	$	251	$	(4)	$	9,713
Municipal		24,438		941		(53)		25,326
Corporate bonds and other securities		6,032		58		(47)		6,043
Total	$	39,936	$	1,250	$	(104)	$	41,082

Investment securities available for sale:

	AT DECEMBER 31, 2018
			GROSS		GROSS
			UNREALIZED		UNREALIZED		FAIR
	COST BASIS		GAINS		LOSSES		VALUE
	(IN THOUSANDS)
U.S. Agency	$	7,685	$	4	$	(160)	$	7,529
Municipal		13,301		114		(234)		13,181
Corporate bonds		37,359		131		(996)		36,494
U.S. Agency mortgage-backed securities		90,169		516		(1,158)		89,527
Total	$	148,514	$	765	$	(2,548)	$	146,731

Investment securities held to maturity:

	AT DECEMBER 31, 2018
			GROSS		GROSS
			UNREALIZED		UNREALIZED		FAIR
	COST BASIS		GAINS		LOSSES		VALUE
	(IN THOUSANDS)
U.S. Agency mortgage-backed securities	$	9,983	$	78	$	(132)	$	9,929
Municipal		24,740		131		(404)		24,467
Corporate bonds and other securities		6,037		13		(122)		5,928
Total	$	40,760	$	222	$	(658)	$	40,324

Schedule of investment securities

Investment securities available for sale:

	AT DECEMBER 31, 2019
																	TOTAL
													U.S. AGENCY				INVESTMENT
													MORTGAGE-				SECURITIES
									CORPORATE				BACKED				AVAILABLE FOR
	U. S. AGENCY				MUNICIPAL				BONDS				SECURITIES				SALE
	(IN THOUSANDS, EXCEPT YIELDS)
COST BASIS
Within 1 year	$	—	—	%	$	500	2.25	%	$	1,500	3.10	%	$	—	—	%	$	2,000	2.89	%
After 1 year but within 5 years		—	—			3,121	3.09			18,695	3.43			1,200	2.46			23,016	3.33
After 5 years but within 10 years		2,557	2.93			11,057	3.26			19,574	4.11			7,882	2.99			41,070	3.59
After 10 years but within15 years		—	—			—	—			—	—			23,018	2.83			23,018	2.83
Over 15 years		2,527	2.68			—	—			—	—			47,946	2.90			50,473	2.89
Total	$	5,084	2.81		$	14,678	3.19		$	39,769	3.75		$	80,046	2.88		$	139,577	3.16
FAIR VALUE
Within 1 year	$	—			$	500			$	1,503			$	—			$	2,003
After 1 year but within 5 years		—				3,179				18,755				1,213				23,147
After 5 years but within 10 years		2,570				11,491				19,572				8,075				41,708
After 10 years but within15 years		—				—				—				23,538				23,538
Over 15 years		2,546				—				—				48,807				51,353
Total	$	5,116			$	15,170			$	39,830			$	81,633			$	141,749

Investment securities held to maturity:

	AT DECEMBER 31, 2019
	U.S. AGENCY
	MORTGAGE-												TOTAL INVESTMENT
	BACKED								CORPORATE				SECURITIES
	SECURITIES				MUNICIPAL				BONDS AND OTHER				HELD TO MATURITY
	(IN THOUSANDS, EXCEPT YIELDS)
COST BASIS
Within 1 year	$	—	—	%	$	—	—	%	$	—	—	%	$	—	—	%
After 1 year but within 5 years		1,977	2.50			2,567	3.33			3,000	2.95			7,544	2.96
After 5 years but within 10 years		—	—			16,506	3.37			3,032	4.40			19,538	3.53
After 10 years but within15 years		2,232	3.62			5,050	4.10			—	—			7,282	3.95
Over 15 years		5,257	3.30			315	3.50			—	—			5,572	3.31
Total	$	9,466	3.21		$	24,438	3.52		$	6,032	3.68		$	39,936	3.47
FAIR VALUE
Within 1 year	$	—			$	—			$	—			$	—
After 1 year but within 5 years		2,009				2,644				2,953				7,606
After 5 years but within 10 years		—				17,153				3,090				20,243
After 10 years but within15 years		2,353				5,209				—				7,562
Over 15 years		5,351				320				—				5,671
Total	$	9,713			$	25,326			$	6,043			$	41,082

Schedule of investments with unrealized losses

The following table presents information concerning investments with unrealized losses as of December 31, 2019 (in thousands):

Total investment securities:	LESS THAN 12 MONTHS				12 MONTHS OR LONGER				TOTAL
	FAIR		UNREALIZED		FAIR		UNREALIZED		FAIR		UNREALIZED
	VALUE		LOSSES		VALUE		LOSSES		VALUE		LOSSES
U.S. Agency	$	—	$	—	$	—	$	—	$	—	$	—
U.S. Agency mortgage-backed securities		7,084		(23)		8,562		(75)		15,646		(98)
Municipal		2,269		(18)		1,123		(52)		3,392		(70)
Corporate bonds and other securities		7,797		(85)		11,783		(243)		19,580		(328)
Total	$	17,150	$	(126)	$	21,468	$	(370)	$	38,618	$	(496)

The following table presents information concerning investments with unrealized losses as of December 31, 2018 (in thousands):

Total investment securities:	LESS THAN 12 MONTHS				12 MONTHS OR LONGER				TOTAL
	FAIR		UNREALIZED		FAIR		UNREALIZED		FAIR		UNREALIZED
	VALUE		LOSSES		VALUE		LOSSES		VALUE		LOSSES
U.S. Agency	$	244	$	(6)	$	5,631	$	(154)	$	5,875	$	(160)
U.S. Agency mortgage-backed securities		17,718		(177)		39,983		(1,113)		57,701		(1,290)
Municipal		6,601		(71)		15,880		(567)		22,481		(638)
Corporate bonds and other securities		15,221		(440)		17,038		(678)		32,259		(1,118)
Total	$	39,784	$	(694)	$	78,532	$	(2,512)	$	118,316	$	(3,206)

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ALLOWANCE FOR LOAN LOSSES

12 Months Ended

Dec. 31, 2019

ALLOWANCE FOR LOAN LOSSES

ALLOWANCE FOR LOAN LOSSES

8. ALLOWANCE FOR LOAN LOSSES

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, 2018		OFFS		RECOVERIES		(CREDIT)		DECEMBER 31, 2019
Commercial	$	3,057	$	(9)	$	22	$	881	$	3,951
Commercial loans secured by non-owner occupied real estate		3,389		(63)		48		(255)		3,119
Real estate − residential mortgage		1,235		(98)		118		(96)		1,159
Consumer		127		(262)		52		209		126
Allocation for general risk		863		—		-		61		924
Total	$	8,671	$	(432)	$	240	$	800	$	9,279

	BALANCE AT		CHARGE-				PROVISION		BALANCE AT
	DECEMBER 31, 2017		OFFS		RECOVERIES		(CREDIT)		DECEMBER 31, 2018
Commercial	$	4,298	$	(574)	$	31	$	(698)	$	3,057
Commercial loans secured by non-owner occupied real estate		3,666		—		51		(328)		3,389
Real estate − residential mortgage		1,102		(380)		119		394		1,235
Consumer		128		(251)		61		189		127
Allocation for general risk		1,020		—		—		(157)		863
Total	$	10,214	$	(1,205)	$	262	$	(600)	$	8,671

	BALANCE AT		CHARGE-						BALANCE AT
	DECEMBER 31, 2016		OFFS		RECOVERIES		PROVISION		DECEMBER 31, 2017
Commercial	$	4,041	$	(311)	$	27	$	541	$	4,298
Commercial loans secured by non-owner occupied real estate		3,584		(132)		56		158		3,666
Real estate − residential mortgage		1,169		(313)		207		39		1,102
Consumer		151		(172)		120		29		128
Allocation for general risk		987		—		—		33		1,020
Total	$	9,932	$	(928)	$	410	$	800	$	10,214

For 2019, the Company recorded an $800,000 provision expense for loan losses compared to a $600,000 provision recovery for 2018, or an increase of $1.4 million between years. The 2019 provision expense reflects the growth within the loan portfolio and the increase in classified loans. The Company experienced net loan charge-offs of only $192,000, or 0.02% of total loans, in 2019 compared to net loan charge-offs of $943,000, or 0.11% of total loans, in 2018. Overall, the Company continued to maintain strong asset quality as its nonperforming assets totaled $2.3 million, or only 0.26% of total loans, at December 31, 2019.

Specifically, the 2019 provision expense within the commercial segment was driven by the rating downgrade of a $6.5 million performing commercial and industrial loan to substandard as a result of the unexpected death of a borrower.  This downgrade caused a $675,000 increase in the fourth quarter 2019 provision expense.  This rating action was prudent due to the inherent uncertainties associated with a large estate liquidation.  Recent updates related to this loan indicate that the estate is presently illiquid due to holds placed on deposit accounts and significant real estate holdings and other unique assets that will need to be unwound.  As such there is heightened risk that this loan may move into non-performing status in 2020 as a result of payment delays.

Additionally, the 2019 provision credit within commercial loans secured by non-owner occupied real estate was driven, primarily, by a relaxation of the economic qualitative factors applied to the Pass rated portion of this loan segment.

For 2018, the Company recorded a $600,000 provision recovery compared to an $800,000 provision for loan losses in 2017, or a decrease of $1.4 million between years. The 2018 provision recovery reflects our overall strong asset quality, reduced loan portfolio balance and the successful workout of several criticized loans.  The Company experienced net loan charge-offs of $943,000, or 0.11% of total loans, in 2018 compared to net loan charge-offs of $51,800, or 0.06%, of total loans, in 2017. The higher 2018 net loan charge-offs reflect the final workout of several non-performing loans on which reserves had previously been established. Nonperforming assets totaled $1.4 million, or only 0.16%, of total loans, at December 31, 2018.

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

	AT DECEMBER 31, 2019
	(IN THOUSANDS)
			COMMERCIAL LOANS
			SECURED BY NON-		REAL ESTATE −
			OWNER OCCUPIED		RESIDENTIAL
Loans:	COMMERCIAL		REAL ESTATE		MORTGAGE		CONSUMER		TOTAL
Individually evaluated for impairment	$	816	$	8	$	—	$	—	$	824
Collectively evaluated for impairment		264,761		363,627		235,239		18,255		881,882
Total loans	$	265,577	$	363,635	$	235,239	$	18,255	$	882,706

	AT DECEMBER 31, 2019
	(IN THOUSANDS)
			COMMERCIAL LOANS						ALLOCATION
			SECURED BY NON-		REAL ESTATE −				FOR
			OWNER OCCUPIED		RESIDENTIAL				GENERAL
Allowance for loan losses:	COMMERCIAL		REAL ESTATE		MORTGAGE		CONSUMER		RISK		TOTAL
Specific reserve allocation	$	84	$	8	$	—	$	—	$	—	$	92
General reserve allocation		3,867		3,111		1,159		126		924		9,187
Total allowance for loan losses	$	3,951	$	3,119	$	1,159	$	126	$	924	$	9,279

	AT DECEMBER 31, 2018
	(IN THOUSANDS)
			COMMERCIAL LOANS
			SECURED BY NON-		REAL ESTATE −
			OWNER OCCUPIED		RESIDENTIAL
Loans:	COMMERCIAL		REAL ESTATE		MORTGAGE		CONSUMER		TOTAL
Individually evaluated for impairment	$	—	$	11	$	—	$	—	$	11
Collectively evaluated for impairment		250,184		356,532		237,964		17,591		862,271
Total loans	$	250,184	$	356,543	$	237,964	$	17,591	$	862,282

	AT DECEMBER 31, 2018
	(IN THOUSANDS)
			COMMERCIAL LOANS						ALLOCATION
			SECURED BY NON-		REAL ESTATE −				FOR
			OWNER OCCUPIED		RESIDENTIAL				GENERAL
Allowance for loan losses:	COMMERCIAL		REAL ESTATE		MORTGAGE		CONSUMER		RISK		TOTAL
Specific reserve allocation	$	—	$	11	$	—	$	—	$	—	$	11
General reserve allocation		3,057		3,378		1,235		127		863		8,660
Total allowance for loan losses	$	3,057	$	3,389	$	1,235	$	127	$	863	$	8,671

The segments of the Company’s loan portfolio are disaggregated into classes that allows management to monitor risk and performance. The loan classes 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. The commercial loan segment includes both the commercial and industrial and the owner occupied commercial real estate loan classes while the remaining segments are not separated into classes as management monitors risk in these 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.

Management evaluates for possible impairment any individual loan in the commercial or commercial real estate segment that is in nonaccrual 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.

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 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 Assigned Risk Department to support the value of the property.

When reviewing an appraisal associated with an existing real estate collateral dependent transaction, the Bank’s internal 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;

§ 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 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 Assigned Risk Department personnel rests with the Assigned Risk Department and not the originating account officer.

The following tables present impaired loans by 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, 2019
					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	$	816	$	84	$	—	$	816	$	816
Commercial loans secured by non-owner occupied real estate		8		8		—		8		30
Total impaired loans	$	824	$	92	$	—	$	824	$	846

	AT DECEMBER 31, 2018
					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 loans secured by non-owner occupied real estate	$	11	$	11	$	—	$	11	$	33
Total impaired loans	$	11	$	11	$	—	$	11	$	33

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

	YEAR ENDED DECEMBER 31,
	2019		2018		2017
	(IN THOUSANDS)
Average impaired balance:
Commercial	$	597	$	228	$	1,075
Commercial loans secured by non-owner occupied real estate		10		12		838
Average investment in impaired loans	$	607	$	240	$	1,913
Interest income recognized:
Commercial	$	30	$	—	$	12
Commercial loans secured by non-owner occupied real estate		—		—		—
Interest income recognized on a cash basis on impaired loans	$	30	$	—	$	12

Management uses a nine-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 $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 2019 required review of a minimum range of 50% to 55% 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 $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.

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

	AT DECEMBER 31, 2019
			SPECIAL
	PASS		MENTION		SUBSTANDARD		DOUBTFUL		TOTAL
	(IN THOUSANDS)
Commercial and industrial	$	161,147	$	853	$	11,922	$	—	$	173,922
Commercial loans secured by owner occupied real estate		88,942		1,384		1,329		—		91,655
Commercial loans secured by non-owner occupied real estate		362,027		—		1,600		8		363,635
Total	$	612,116	$	2,237	$	14,851	$	8	$	629,212

	AT DECEMBER 31, 2018
			SPECIAL
	PASS		MENTION		SUBSTANDARD		DOUBTFUL		TOTAL
	(IN THOUSANDS)
Commercial and industrial	$	154,510	$	2,089	$	1,680	$	—	$	158,279
Commercial loans secured by owner occupied real estate		86,997		3,769		1,139		—		91,905
Commercial loans secured by non-owner occupied real estate		349,954		6,316		262		11		356,543
Total	$	591,461	$	12,174	$	3,081	$	11	$	606,727

It is generally the policy of the Bank 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 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 Bank that the outstanding balance of any consumer loan that exceeds 90‑days past due as to principal and/or interest is charged off. The following tables present the performing and non-performing outstanding balances of the residential and consumer portfolio classes.

	AT DECEMBER 31, 2019
			NON-
	PERFORMING		PERFORMING		TOTAL
	(IN THOUSANDS)
Real estate – residential mortgage	$	233,760	$	1,479	$	235,239
Consumer		18,255		—		18,255
Total	$	252,015	$	1,479	$	253,494

	AT DECEMBER 31, 2018
			NON-
	PERFORMING		PERFORMING		TOTAL
	(IN THOUSANDS)
Real estate – residential mortgage	$	236,754	$	1,210	$	237,964
Consumer		17,591		—		17,591
Total	$	254,345	$	1,210	$	255,555

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 nonaccrual loans.

	AT DECEMBER 31, 2019
													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	$	173,922	$	—	$	—	$	—	$	—	$	173,922	$	—
Commercial loans secured by owner occupied real estate		91,538		117		—		—		117		91,655		—
Commercial loans secured by non-owner occupied real estate		363,635		—		—		—		—		363,635		—
Real estate – residential mortgage		231,022		2,331		864		1,022		4,217		235,239		—
Consumer		18,190		42		23		—		65		18,255		—
Total	$	878,307	$	2,490	$	887	$	1,022	$	4,399	$	882,706	$	—

	AT DECEMBER 31, 2018
													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	$	158,279	$	—	$	—	$	—	$	—	$	158,279	$	—
Commercial loans secured by owner occupied real estate		91,905		—		—		—		—		91,905		—
Commercial loans secured by non-owner occupied real estate		355,963		580		—		—		580		356,543		—
Real estate – residential mortgage		232,465		3,651		472		1,376		5,499		237,964		—
Consumer		17,408		153		30		—		183		17,591		—
Total	$	856,020	$	4,384	$	502	$	1,376	$	6,262	$	862,282	$	—

An allowance for loan losses (“ALL”) is maintained to support 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, residential mortgage and small business portfolios. A historical charge-off factor is calculated utilizing a rolling 12 consecutive historical quarters for the commercial portfolios. This historical charge-off factor for the consumer, residential mortgage and small business portfolios are based on a three-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 estimates and judgments. The allowance consists of three elements: (1) an allowance established on specifically identified problem loans, (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 policies, and trends in policy, financial information, and documentation exceptions, and (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.

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REVENUE RECOGNITION

12 Months Ended

Dec. 31, 2019

REVENUE RECOGNITION

REVENUE RECOGNITION

4. REVENUE RECOGNITION

ASU 2014-09, Revenue from Contracts with Customers – Topic 606, requires the Company to recognize the amount of revenue to which it expects to be entitled for the transfer of promised 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 on loans and interest on investments, along with certain noninterest 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 not within the scope of Topic 606. These sources of revenue cumulatively comprise 80.2% of the total revenue of the Company.

Noninterest income within the scope 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 $825,000 has been established as of December 31, 2019 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 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 following presents non-interest income, segregated by revenue streams in-scope and out-of-scope of Topic 606, for the years ended December 31, 2019, 2018, and 2017 (in thousands).

	AT DECEMBER 31,
	2019		2018		2017
Non-interest income:
In-scope of Topic 606
Wealth management fees	$	9,730	$	9,659	$	9,170
Service charges on deposit accounts		1,271		1,420		1,581
Other		1,759		1,720		1,665
Non-interest income (in-scope of topic 606)		12,760		12,799		12,416
Non-interest income (out-of-scope of topic 606)		2,013		1,425		2,229
Total non-interest income	$	14,773	$	14,224	$	14,645

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STOCK COMPENSATION PLANS

12 Months Ended

Dec. 31, 2019

STOCK COMPENSATION PLANS

STOCK COMPENSATION PLANS

20. STOCK COMPENSATION PLANS

The Company uses the modified prospective method for accounting for stock-based compensation and recognized $9,000 of pretax compensation expense for the year 2019, $17,000 in 2018 and $20,000 in 2017.

During 2011, the Company’s Board adopted, and its shareholders approved, the AmeriServ Financial, Inc. 2011 Stock Incentive Plan (the Plan) authorizing the grant of options or restricted stock covering 800,000 shares of common stock. This Plan replaced the expired 2001 Stock Option 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 will 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-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.

A summary of the status of the Company’s Stock Incentive Plan at December 31, 2019, 2018, and 2017, and changes during the years then ended is presented in the table and narrative following:

	YEAR ENDED DECEMBER 31,
	2019			2018			2017
		WEIGHTED			WEIGHTED			WEIGHTED
		AVERAGE			AVERAGE			AVERAGE
	SHARES	EXERCISE PRICE		SHARES	EXERCISE PRICE		SHARES	EXERCISE PRICE
Outstanding at beginning of year	336,313	$	2.91	360,721	$	2.85	417,566	$	2.76
Granted	7,000		4.19	5,000		4.22	17,500		3.96
Exercised	(40,917)		2.45	(24,408)		2.49	(64,112)		2.49
Forfeited	(5,748)		2.44	(5,000)		1.92	(10,233)		3.10
Outstanding at end of year	296,648		3.02	336,313		2.91	360,721		2.85
Exercisable at end of year	282,565		2.96	307,814		2.86	308,301		2.79
Weighted average fair value of options granted in current year		$	0.62		$	0.56		$	1.12

A total of 282,565 of the 296,648 options outstanding at December 31, 2019, are exercisable and have exercise prices between $1.70 and $4.22, with a weighted average exercise price of $2.96 and a weighted average remaining contractual life of 4.03 years. The remaining 14,083 options that are not yet exercisable have exercise prices between $3.90 and $4.22, with a weighted average exercise price of $4.14 and a weighted average remaining contractual life of 8.64 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 2019, 2018, and 2017.

	YEAR ENDED DECEMBER 31
PRICING MODEL ASSUMPTION RANGES	2019		2018		2017
Risk-free interest rate	2.65	%	3.13	%	2.23–2.38	%
Expected lives in years	10		10		10
Expected volatility	15.75	%	15.59	%	28.09–28.84	%
Expected dividend rate	1.91	%	1.90	%	1.50	%

The intrinsic value of stock options exercised was $71,000,  $42,000, and $91,000 in 2019, 2018, and 2017, respectively.

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DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

12 Months Ended

Dec. 31, 2019

DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

16. 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 use 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 payable, and short term borrowings have fair values which approximate the recorded carrying values. The fair value measurements for all of these financial instruments are Level 1 measurements.

The estimated fair values based on US GAAP measurements and recorded carrying values at December 31, 2019 and 2018, for the remaining financial instruments not required to be measured or reported at fair value were as follows:

		AT DECEMBER 31, 2019
		Carrying
	Value			Fair Value		(Level 1)		(Level 2)		(Level 3)
		(IN THOUSANDS)
FINANCIAL ASSETS:
Investment securities – HTM	$	39,936	$	41,082	$	—	$	38,129	$	2,953
Loans held for sale		4,868		4,970		4,970		—		—
Loans, net of allowance for loan loss and unearned income		873,427		873,908		—		—		873,908
FINANCIAL LIABILITIES:
Deposits with no stated maturities		651,469		631,023		—		—		631,023
Deposits with stated maturities		309,044		310,734		—		—		310,734
All other borrowings (1)		74,134		76,323		—		—		76,323

		AT DECEMBER 31, 2018
		Carrying
		Value		Fair Value		(Level 1)		(Level 2)		(Level 3)
		(IN THOUSANDS)
FINANCIAL ASSETS:
Investment securities – HTM	$	40,760	$	40,324	$	—	$	37,398	$	2,926
Loans held for sale		847		871		871		—		—
Loans, net of allowance for loan loss and unearned income		853,611		836,122		—		—		836,122
FINANCIAL LIABILITIES:
Deposits with no stated maturities		671,666		627,323		—		—		627,323
Deposits with stated maturities		277,505		277,010		—		—		277,010
All other borrowings(1)		67,148		69,692		—		—		69,692

(1) All other borrowings include advances from Federal Home Loan Bank, guaranteed junior subordinated deferrable interest debentures, and subordinated debt.

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.

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DEPOSITS

12 Months Ended

Dec. 31, 2019

DEPOSITS

DEPOSITS

12. DEPOSITS

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

	AT  DECEMBER 31,
	2019		2018
	(IN THOUSANDS)
Demand:
Non-interest bearing	$	136,462	$	150,627
Interest bearing		177,767		169,151
Savings		95,933		97,406
Money market		208,343		221,398
Certificates of deposit in denominations of $100,000 or more		38,770		34,841
Other time		303,238		275,748
Total deposits	$	960,513	$	949,171

The following table sets forth the balance of other time deposits and certificates of deposit of $100,000 or more as of December 31, 2019 maturing in the periods presented:

			CERTIFICATES OF
			DEPOSIT
YEAR:	OTHER TIME DEPOSITS		OF $100,000 OR MORE			TOTAL
	(IN THOUSANDS)
2020	$	143,337	$	33,445	$	176,782
2021		102,425		4,818		107,243
2022		19,740		107		19,847
2023		20,242		400		20,642
2024		11,473		—		11,473
2025 and after		6,021		—		6,021
Total	$	303,238	$	38,770	$	342,008

The aggregate amount of time deposit accounts (including certificates of deposit) that meet or exceed the FDIC insurance limit of $250,000 at December 31, 2019 and 2018 are $69.0 million and $61.1 million, respectively.

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CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
CONSOLIDATED BALANCE SHEETS
Held to maturity securities, fair value	$ 41,082	$ 40,324
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	30,000,000	30,000,000
Common stock, shares issued	26,650,728	26,609,811
Common stock, shares outstanding	17,057,871	17,619,303
Treasury stock, shares	9,592,857	8,990,508

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CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Parenthetical) - $ / shares	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Treasury stock, purchased at cost, shares	602,349	533,352	839,337
New common shares issued for exercise of stock options, shares	40,917	24,408	64,112
Cash dividend declared per common share	$ 0.095	$ 0.075	$ 0.060

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INVESTMENT SECURITIES - Total investment securities (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Contractual maturities of securities
Available for Sale, Cost Basis, Within 1 year	$ 2,000
Available for Sale, Cost Basis, After 1 year but within 5 years	23,016
Available for Sale, Cost Basis, After 5 years but within 10 years	41,070
Available for Sale, Cost Basis, After 10 years but within 15 years	23,018
Available for Sale, Cost Basis, Over 15 years	50,473
Available for Sale, Cost Basis, Total	$ 139,577	$ 148,514
Available for Sale, Within 1 year, Yield	2.89%
Available for Sale, After 1 year but within 5 years, Yield	3.33%
Available for Sale, After 5 year but within 10 years, Yield	3.59%
Available for Sale, After 10 years but within 15 years, Yield	2.83%
Available for Sale, Over 15 years, Yield	2.89%
Available for Sale, Yield, Total	3.16%
Available for Sale, Fair Value, Within 1 year	$ 2,003
Available for Sale, Fair Value, After 1 year but within 5 years	23,147
Available for Sale, Fair Value, After 5 years but within 10 years	41,708
Available for Sale, Fair Value, After 10 years but within 15 years	23,538
Available for Sale, Fair Value, Over 15 years	51,353
Available for Sale, Fair Value, Total	141,749	146,731
Held to Maturity, Cost Basis, After 1 year but within 5 years	7,544
Held to Maturity, Cost Basis, After 5 years but within 10 years	19,538
Held to Maturity, Cost Basis, After 10 years but within 15 years	7,282
Held to Maturity, Cost Basis, Over 15 years	5,572
Held to Maturity, Cost Basis, Total	39,936	40,760
Held to Maturity, Fair Value, After 1 year but within 5 years	7,606
Held to Maturity, Fair Value, After 5 years but within 10 years	20,243
Held to Maturity, Fair Value, After 10 years but within 15 years	7,562
Held to Maturity, Fair Value, Over 15 years	5,671
Held to Maturity, Fair Value, Total	$ 41,082	40,324
Held to Maturity, After 1 year but within 5 years, Yield	2.96%
Held to Maturity, After 5 years but within 10 years, Yield	3.53%
Held to Maturity, After 10 years but within 15 years, Yield	3.95%
Held to Maturity, Over 15 years, Yield	3.31%
Held to Maturity, Yield, Total	3.47%
U.S. Agency
Contractual maturities of securities
Available for Sale, Cost Basis, After 5 years but within 10 years	$ 2,557
Available for Sale, Cost Basis, Over 15 years	2,527
Available for Sale, Cost Basis, Total	$ 5,084	7,685
Available for Sale, After 5 year but within 10 years, Yield	2.93%
Available for Sale, Over 15 years, Yield	2.68%
Available for Sale, Yield, Total	2.81%
Available for Sale, Fair Value, After 5 years but within 10 years	$ 2,570
Available for Sale, Fair Value, Over 15 years	2,546
Available for Sale, Fair Value, Total	5,116	7,529
Corporate Bonds And Other Securities
Contractual maturities of securities
Available for Sale, Cost Basis, Within 1 year	1,500
Available for Sale, Cost Basis, After 1 year but within 5 years	18,695
Available for Sale, Cost Basis, After 5 years but within 10 years	19,574
Available for Sale, Cost Basis, Total	$ 39,769
Available for Sale, Within 1 year, Yield	3.10%
Available for Sale, After 1 year but within 5 years, Yield	3.43%
Available for Sale, After 5 year but within 10 years, Yield	4.11%
Available for Sale, Yield, Total	3.75%
Available for Sale, Fair Value, Within 1 year	$ 1,503
Available for Sale, Fair Value, After 1 year but within 5 years	18,755
Available for Sale, Fair Value, After 5 years but within 10 years	19,572
Available for Sale, Fair Value, Total	39,830
Held to Maturity, Cost Basis, After 1 year but within 5 years	3,000
Held to Maturity, Cost Basis, After 5 years but within 10 years	3,032
Held to Maturity, Cost Basis, Total	6,032
Held to Maturity, Fair Value, After 1 year but within 5 years	2,953
Held to Maturity, Fair Value, After 5 years but within 10 years	3,090
Held to Maturity, Fair Value, Total	$ 6,043
Held to Maturity, After 1 year but within 5 years, Yield	2.95%
Held to Maturity, After 5 years but within 10 years, Yield	4.40%
Held to Maturity, Yield, Total	3.68%
U.S. Agency mortgage-backed securities
Contractual maturities of securities
Available for Sale, Cost Basis, After 1 year but within 5 years	$ 1,200
Available for Sale, Cost Basis, After 5 years but within 10 years	7,882
Available for Sale, Cost Basis, After 10 years but within 15 years	23,018
Available for Sale, Cost Basis, Over 15 years	47,946
Available for Sale, Cost Basis, Total	$ 80,046	90,169
Available for Sale, After 1 year but within 5 years, Yield	2.46%
Available for Sale, After 5 year but within 10 years, Yield	2.99%
Available for Sale, After 10 years but within 15 years, Yield	2.83%
Available for Sale, Over 15 years, Yield	2.90%
Available for Sale, Yield, Total	2.88%
Available for Sale, Fair Value, After 1 year but within 5 years	$ 1,213
Available for Sale, Fair Value, After 5 years but within 10 years	8,075
Available for Sale, Fair Value, After 10 years but within 15 years	23,538
Available for Sale, Fair Value, Over 15 years	48,807
Available for Sale, Fair Value, Total	81,633	89,527
Held to Maturity, Cost Basis, After 1 year but within 5 years	1,977
Held to Maturity, Cost Basis, After 10 years but within 15 years	2,232
Held to Maturity, Cost Basis, Over 15 years	5,257
Held to Maturity, Cost Basis, Total	9,466	9,983
Held to Maturity, Fair Value, After 1 year but within 5 years	2,009
Held to Maturity, Fair Value, After 10 years but within 15 years	2,353
Held to Maturity, Fair Value, Over 15 years	5,351
Held to Maturity, Fair Value, Total	$ 9,713	$ 9,929
Held to Maturity, After 1 year but within 5 years, Yield	2.50%
Held to Maturity, After 10 years but within 15 years, Yield	3.62%
Held to Maturity, Over 15 years, Yield	3.30%
Held to Maturity, Yield, Total	3.21%
Municipal
Contractual maturities of securities
Available for Sale, Cost Basis, Within 1 year	$ 500
Available for Sale, Cost Basis, After 1 year but within 5 years	3,121
Available for Sale, Cost Basis, After 5 years but within 10 years	11,057
Available for Sale, Cost Basis, Total	$ 14,678
Available for Sale, Within 1 year, Yield	2.25%
Available for Sale, After 1 year but within 5 years, Yield	3.09%
Available for Sale, After 5 year but within 10 years, Yield	3.26%
Available for Sale, Yield, Total	3.19%
Available for Sale, Fair Value, Within 1 year	$ 500
Available for Sale, Fair Value, After 1 year but within 5 years	3,179
Available for Sale, Fair Value, After 5 years but within 10 years	11,491
Available for Sale, Fair Value, Total	15,170
Held to Maturity, Cost Basis, After 1 year but within 5 years	2,567
Held to Maturity, Cost Basis, After 5 years but within 10 years	16,506
Held to Maturity, Cost Basis, After 10 years but within 15 years	5,050
Held to Maturity, Cost Basis, Over 15 years	315
Held to Maturity, Cost Basis, Total	24,438
Held to Maturity, Fair Value, After 1 year but within 5 years	2,644
Held to Maturity, Fair Value, After 5 years but within 10 years	17,153
Held to Maturity, Fair Value, After 10 years but within 15 years	5,209
Held to Maturity, Fair Value, Over 15 years	320
Held to Maturity, Fair Value, Total	$ 25,326
Held to Maturity, After 1 year but within 5 years, Yield	3.33%
Held to Maturity, After 5 years but within 10 years, Yield	3.37%
Held to Maturity, After 10 years but within 15 years, Yield	4.10%
Held to Maturity, Over 15 years, Yield	3.50%
Held to Maturity, Yield, Total	3.52%

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INCOME TAXES (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
INCOME TAXES
Current									$ 1,393	$ (988)	$ 1,084
Deferred									179	2,665	1,679
Change in corporate tax rate									0	0	2,624
Income Tax Expense (Benefit), Total	$ 169	$ 442	$ 470	$ 491	$ 499	$ 270	$ 453	$ 455	$ 1,572	$ 1,677	$ 5,387

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ADVANCES FROM FEDERAL HOME LOAN BANK, GUARANTEED JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES AND SUBORDINATED DEBT - Additional information (Details) - USD ($) $ in Thousands	24 Months Ended
	Dec. 31, 2005	Dec. 31, 2019	Dec. 31, 2018	Jan. 27, 2016	Dec. 31, 2015	Dec. 29, 2015	Apr. 28, 1998
Federal Home Loan Bank, Advances, General Debt Obligations, Amount of Available, Unused Funds		$ 358,000
Junior Subordinated Notes		12,955	$ 12,939
Subordinated Debt		7,511	7,488
Available Unsecured Federal Funds		35,000
Subordinated Debt [Member]
Debt Instrument, Face Amount						$ 7,650
Debt Instrument, Interest Rate, Stated Percentage					6.50%
Cash Redemption Of SBLF Preferred Stock				$ 21,000
Guaranteed Junior Subordinated Deferrable Interest Debentures [Member]
Debt Instrument, Face Amount							$ 34,500
Debt Instrument, Interest Rate, Stated Percentage							8.45%
Early Repayment of Subordinated Debt	$ 22,500
Junior Subordinated Notes		13,000	$ 12,900
Federal Reserve Bank [Member]
Availability Of Short term Borrowings Federal Reserve		$ 30,000

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REVENUE RECOGNITION (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
REVENUE RECOGNITION
Wealth management fees									$ 9,730	$ 9,659	$ 9,170
Service charges on deposit accounts									1,271	1,420	1,581
Other									1,759	1,720	1,665
Non-interest income (in-scope of topic 606)									12,760	12,799	12,416
Non-interest income (out-of-scope of topic 606)									2,013	1,425	2,229
Total Non-Interest Income	$ 3,416	$ 4,095	$ 3,657	$ 3,605	$ 3,322	$ 3,586	$ 3,681	$ 3,635	$ 14,773	$ 14,224	$ 14,645

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ALLOWANCE FOR LOAN LOSSES (Tables)

12 Months Ended

Dec. 31, 2019

ALLOWANCE FOR LOAN LOSSES

Schedule of Loan losses by portfolio segment

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, 2018		OFFS		RECOVERIES		(CREDIT)		DECEMBER 31, 2019
Commercial	$	3,057	$	(9)	$	22	$	881	$	3,951
Commercial loans secured by non-owner occupied real estate		3,389		(63)		48		(255)		3,119
Real estate − residential mortgage		1,235		(98)		118		(96)		1,159
Consumer		127		(262)		52		209		126
Allocation for general risk		863		—		-		61		924
Total	$	8,671	$	(432)	$	240	$	800	$	9,279

	BALANCE AT		CHARGE-				PROVISION		BALANCE AT
	DECEMBER 31, 2017		OFFS		RECOVERIES		(CREDIT)		DECEMBER 31, 2018
Commercial	$	4,298	$	(574)	$	31	$	(698)	$	3,057
Commercial loans secured by non-owner occupied real estate		3,666		—		51		(328)		3,389
Real estate − residential mortgage		1,102		(380)		119		394		1,235
Consumer		128		(251)		61		189		127
Allocation for general risk		1,020		—		—		(157)		863
Total	$	10,214	$	(1,205)	$	262	$	(600)	$	8,671

	BALANCE AT		CHARGE-						BALANCE AT
	DECEMBER 31, 2016		OFFS		RECOVERIES		PROVISION		DECEMBER 31, 2017
Commercial	$	4,041	$	(311)	$	27	$	541	$	4,298
Commercial loans secured by non-owner occupied real estate		3,584		(132)		56		158		3,666
Real estate − residential mortgage		1,169		(313)		207		39		1,102
Consumer		151		(172)		120		29		128
Allocation for general risk		987		—		—		33		1,020
Total	$	9,932	$	(928)	$	410	$	800	$	10,214

Schedule of Loan loss by the primary segments

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

	AT DECEMBER 31, 2019
	(IN THOUSANDS)
			COMMERCIAL LOANS
			SECURED BY NON-		REAL ESTATE −
			OWNER OCCUPIED		RESIDENTIAL
Loans:	COMMERCIAL		REAL ESTATE		MORTGAGE		CONSUMER		TOTAL
Individually evaluated for impairment	$	816	$	8	$	—	$	—	$	824
Collectively evaluated for impairment		264,761		363,627		235,239		18,255		881,882
Total loans	$	265,577	$	363,635	$	235,239	$	18,255	$	882,706

	AT DECEMBER 31, 2019
	(IN THOUSANDS)
			COMMERCIAL LOANS						ALLOCATION
			SECURED BY NON-		REAL ESTATE −				FOR
			OWNER OCCUPIED		RESIDENTIAL				GENERAL
Allowance for loan losses:	COMMERCIAL		REAL ESTATE		MORTGAGE		CONSUMER		RISK		TOTAL
Specific reserve allocation	$	84	$	8	$	—	$	—	$	—	$	92
General reserve allocation		3,867		3,111		1,159		126		924		9,187
Total allowance for loan losses	$	3,951	$	3,119	$	1,159	$	126	$	924	$	9,279

	AT DECEMBER 31, 2018
	(IN THOUSANDS)
			COMMERCIAL LOANS
			SECURED BY NON-		REAL ESTATE −
			OWNER OCCUPIED		RESIDENTIAL
Loans:	COMMERCIAL		REAL ESTATE		MORTGAGE		CONSUMER		TOTAL
Individually evaluated for impairment	$	—	$	11	$	—	$	—	$	11
Collectively evaluated for impairment		250,184		356,532		237,964		17,591		862,271
Total loans	$	250,184	$	356,543	$	237,964	$	17,591	$	862,282

	AT DECEMBER 31, 2018
	(IN THOUSANDS)
			COMMERCIAL LOANS						ALLOCATION
			SECURED BY NON-		REAL ESTATE −				FOR
			OWNER OCCUPIED		RESIDENTIAL				GENERAL
Allowance for loan losses:	COMMERCIAL		REAL ESTATE		MORTGAGE		CONSUMER		RISK		TOTAL
Specific reserve allocation	$	—	$	11	$	—	$	—	$	—	$	11
General reserve allocation		3,057		3,378		1,235		127		863		8,660
Total allowance for loan losses	$	3,057	$	3,389	$	1,235	$	127	$	863	$	8,671

Schedule of Present impaired loans by portfolio segment

The following tables present impaired loans by 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, 2019
					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	$	816	$	84	$	—	$	816	$	816
Commercial loans secured by non-owner occupied real estate		8		8		—		8		30
Total impaired loans	$	824	$	92	$	—	$	824	$	846

	AT DECEMBER 31, 2018
					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 loans secured by non-owner occupied real estate	$	11	$	11	$	—	$	11	$	33
Total impaired loans	$	11	$	11	$	—	$	11	$	33

Schedule of Investment in impaired loans and related interest income

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

	YEAR ENDED DECEMBER 31,
	2019		2018		2017
	(IN THOUSANDS)
Average impaired balance:
Commercial	$	597	$	228	$	1,075
Commercial loans secured by non-owner occupied real estate		10		12		838
Average investment in impaired loans	$	607	$	240	$	1,913
Interest income recognized:
Commercial	$	30	$	—	$	12
Commercial loans secured by non-owner occupied real estate		—		—		—
Interest income recognized on a cash basis on impaired loans	$	30	$	—	$	12

Schedule of Commercial and commercial real estate loan portfolios

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

	AT DECEMBER 31, 2019
			SPECIAL
	PASS		MENTION		SUBSTANDARD		DOUBTFUL		TOTAL
	(IN THOUSANDS)
Commercial and industrial	$	161,147	$	853	$	11,922	$	—	$	173,922
Commercial loans secured by owner occupied real estate		88,942		1,384		1,329		—		91,655
Commercial loans secured by non-owner occupied real estate		362,027		—		1,600		8		363,635
Total	$	612,116	$	2,237	$	14,851	$	8	$	629,212

	AT DECEMBER 31, 2018
			SPECIAL
	PASS		MENTION		SUBSTANDARD		DOUBTFUL		TOTAL
	(IN THOUSANDS)
Commercial and industrial	$	154,510	$	2,089	$	1,680	$	—	$	158,279
Commercial loans secured by owner occupied real estate		86,997		3,769		1,139		—		91,905
Commercial loans secured by non-owner occupied real estate		349,954		6,316		262		11		356,543
Total	$	591,461	$	12,174	$	3,081	$	11	$	606,727

Schedule of Residential and consumer portfolio

The following tables present the performing and non-performing outstanding balances of the residential and consumer portfolio classes.

	AT DECEMBER 31, 2019
			NON-
	PERFORMING		PERFORMING		TOTAL
	(IN THOUSANDS)
Real estate – residential mortgage	$	233,760	$	1,479	$	235,239
Consumer		18,255		—		18,255
Total	$	252,015	$	1,479	$	253,494

	AT DECEMBER 31, 2018
			NON-
	PERFORMING		PERFORMING		TOTAL
	(IN THOUSANDS)
Real estate – residential mortgage	$	236,754	$	1,210	$	237,964
Consumer		17,591		—		17,591
Total	$	254,345	$	1,210	$	255,555

Schedule of Credit quality of the loan portfolio

The following tables present the classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans.

	AT DECEMBER 31, 2019
													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	$	173,922	$	—	$	—	$	—	$	—	$	173,922	$	—
Commercial loans secured by owner occupied real estate		91,538		117		—		—		117		91,655		—
Commercial loans secured by non-owner occupied real estate		363,635		—		—		—		—		363,635		—
Real estate – residential mortgage		231,022		2,331		864		1,022		4,217		235,239		—
Consumer		18,190		42		23		—		65		18,255		—
Total	$	878,307	$	2,490	$	887	$	1,022	$	4,399	$	882,706	$	—

	AT DECEMBER 31, 2018
													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	$	158,279	$	—	$	—	$	—	$	—	$	158,279	$	—
Commercial loans secured by owner occupied real estate		91,905		—		—		—		—		91,905		—
Commercial loans secured by non-owner occupied real estate		355,963		580		—		—		580		356,543		—
Real estate – residential mortgage		232,465		3,651		472		1,376		5,499		237,964		—
Consumer		17,408		153		30		—		183		17,591		—
Total	$	856,020	$	4,384	$	502	$	1,376	$	6,262	$	862,282	$	—

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DEPOSITS (Tables)

12 Months Ended

Dec. 31, 2019

DEPOSITS

Schedule of company's deposits

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

	AT  DECEMBER 31,
	2019		2018
	(IN THOUSANDS)
Demand:
Non-interest bearing	$	136,462	$	150,627
Interest bearing		177,767		169,151
Savings		95,933		97,406
Money market		208,343		221,398
Certificates of deposit in denominations of $100,000 or more		38,770		34,841
Other time		303,238		275,748
Total deposits	$	960,513	$	949,171

Schedule of time deposit maturities

The following table sets forth the balance of other time deposits and certificates of deposit of $100,000 or more as of December 31, 2019 maturing in the periods presented:

			CERTIFICATES OF
			DEPOSIT
YEAR:	OTHER TIME DEPOSITS		OF $100,000 OR MORE			TOTAL
	(IN THOUSANDS)
2020	$	143,337	$	33,445	$	176,782
2021		102,425		4,818		107,243
2022		19,740		107		19,847
2023		20,242		400		20,642
2024		11,473		—		11,473
2025 and after		6,021		—		6,021
Total	$	303,238	$	38,770	$	342,008

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ACCUMULATED OTHER COMPREHENSIVE LOSS (Details) - USD ($) $ in Thousands		12 Months Ended
		Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance	[1]	$ (14,225)	$ (12,950)	$ (11,577)
Reclassification of certain income tax effects from accumulated other comprehensive loss	[1]	0	0	(2,131)
Other comprehensive income (loss) before reclassifications	[1]	(3,156)	(2,845)	1,044
Amounts reclassified from accumulated other comprehensive loss	[1],[2]	1,210	1,570	(286)
Net current period other comprehensive income (loss)	[1]	(1,946)	(1,275)	(1,373)
Net current period other comprehensive income (loss)		(1,946)	(1,275)	758
Ending balance	[1]	(16,171)	(14,225)	(12,950)
Net Unrealized Gains and (Losses) on Investment Securities AFS [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance	[1]	(1,409)	(327)	(171)
Reclassification of certain income tax effects from accumulated other comprehensive loss	[1]	0	0	(53)
Other comprehensive income (loss) before reclassifications	[1]	3,217	(1,429)	(27)
Amounts reclassified from accumulated other comprehensive loss	[1]	(93)	347	(76)
Net current period other comprehensive income (loss)	[1]	3,124	(1,082)	(156)
Ending balance	[1]	1,715	(1,409)	(327)
Defined Benefit Pension Items [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance	[1]	(12,816)	(12,623)	(11,406)
Reclassification of certain income tax effects from accumulated other comprehensive loss	[1]	0	0	(2,078)
Other comprehensive income (loss) before reclassifications	[1]	(6,373)	(1,416)	1,071
Amounts reclassified from accumulated other comprehensive loss	[1]	1,303	1,223	(210)
Net current period other comprehensive income (loss)	[1]	(5,070)	(193)	(1,217)
Ending balance	[1]	$ (17,886)	$ (12,816)	$ (12,623)

[1] Amounts in parentheses indicate debits on the Consolidated Balance Sheets.

[2] Amounts in parentheses indicate credits.

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COMMITMENTS AND CONTINGENT LIABILITIES (Details) - USD ($)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Loss Contingencies [Line Items]
Carrying value of commitment	$ 1,025,000	$ 889,000
Commitments to extend credit [Member]
Loss Contingencies [Line Items]
Amount of commitment	195,500,000	177,800,000
Standby letters of Credit [Member]
Loss Contingencies [Line Items]
Amount of commitment	14,700,000	16,700,000
Amount of commitments secured	$ 9,200,000	$ 11,000,000
Standby letters of Credit [Member] | Maximum
Loss Contingencies [Line Items]
Term of commitment	5 years
Standby letters of Credit [Member] | Minimum
Loss Contingencies [Line Items]
Term of commitment	1 year

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DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

12 Months Ended

Dec. 31, 2019

DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

Schedule of estimated fair value and recorded carrying value

		AT DECEMBER 31, 2019
		Carrying
	Value			Fair Value		(Level 1)		(Level 2)		(Level 3)
		(IN THOUSANDS)
FINANCIAL ASSETS:
Investment securities – HTM	$	39,936	$	41,082	$	—	$	38,129	$	2,953
Loans held for sale		4,868		4,970		4,970		—		—
Loans, net of allowance for loan loss and unearned income		873,427		873,908		—		—		873,908
FINANCIAL LIABILITIES:
Deposits with no stated maturities		651,469		631,023		—		—		631,023
Deposits with stated maturities		309,044		310,734		—		—		310,734
All other borrowings (1)		74,134		76,323		—		—		76,323

		AT DECEMBER 31, 2018
		Carrying
		Value		Fair Value		(Level 1)		(Level 2)		(Level 3)
		(IN THOUSANDS)
FINANCIAL ASSETS:
Investment securities – HTM	$	40,760	$	40,324	$	—	$	37,398	$	2,926
Loans held for sale		847		871		871		—		—
Loans, net of allowance for loan loss and unearned income		853,611		836,122		—		—		836,122
FINANCIAL LIABILITIES:
Deposits with no stated maturities		671,666		627,323		—		—		627,323
Deposits with stated maturities		277,505		277,010		—		—		277,010
All other borrowings(1)		67,148		69,692		—		—		69,692

(1) All other borrowings include advances from Federal Home Loan Bank, guaranteed junior subordinated deferrable interest debentures, and subordinated debt.

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INCOME TAXES

12 Months Ended

Dec. 31, 2019

INCOME TAXES

INCOME TAXES

17. 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. The expense for income taxes is summarized below and includes both federal and applicable state corporate income taxes:

	YEAR ENDED DECEMBER 31,
	2019		2018		2017
	(IN THOUSANDS)
Current	$	1,393	$	(988)	$	1,084
Deferred		179		2,665		1,679
Change in corporate tax rate		—		—		2,624
Income tax expense	$	1,572	$	1,677	$	5,387

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

	YEAR ENDED DECEMBER 31,
	2019				2018				2017
	AMOUNT		RATE		AMOUNT		RATE		AMOUNT		RATE
	(IN THOUSANDS, EXCEPT PERCENTAGES)
Income tax expense based on federal statutory rate	$	1,596	21.0	%	$	1,983	21.0	%	$	2,951	34.0	%
Tax exempt income		(131)	(1.4)			(131)	(1.4)			(283)	(3.3)
Other		107	1.1			(175)	(1.8)			95	1.0
Change in corporate tax rate		—	—			—	—			2,624	30.4
Total expense for income taxes	$	1,572	20.7	%	$	1,677	17.8	%	$	5,387	62.1	%

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

	AT DECEMBER 31,
	2019		2018
	(IN THOUSANDS)
DEFERRED TAX ASSETS:
Allowance for loan losses	$	1,949	$	1,821
Unfunded commitment reserve		215		187
Unrealized investment security losses		—		374
Premises and equipment		1,129		1,056
Accrued pension obligation		1,093		144
Other		230		255
Total tax assets		4,616		3,837
DEFERRED TAX LIABILITIES:
Investment accretion		(82)		(90)
Unrealized investment security gains		(456)		—
Other		(102)		(110)
Total tax liabilities		(640)		(200)
Net deferred tax asset	$	3,976	$	3,637

At December 31, 2019 and 2018, 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 these assets.

As a result of the Tax Cuts and Jobs Act, the Company’s AMT tax credits that are not used to reduce regular taxes are eligible for a 50% refund in 2018 to 2020 and a 100% refund in 2021. Due to this change, the AMT tax credit has been fully utilized as of December 31, 2019.  As of December 31, 2018, the AMT tax credit was reclassified to other assets and amounted to approximately $287,000.

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

	YEAR ENDED
	DECEMBER 31,
	2019		2018
	(IN THOUSANDS)
Unrealized (gains) losses recognized in comprehensive income	$	(830)	$	288
Pension obligation of the defined benefit plan not yet recognized in income		1,348		51
Deferred provision for income taxes		(179)		(2,665)
Net increase (decrease)	$	339	$	(2,326)

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 2016 have been closed for purposes of examination by the Internal Revenue Service and the Pennsylvania Department of Revenue.

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SHORT-TERM BORROWINGS

12 Months Ended

Dec. 31, 2019

SHORT-TERM BORROWINGS

SHORT-TERM BORROWINGS

13. SHORT-TERM BORROWINGS

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

	AT DECEMBER 31, 2019
	FEDERAL
	FUNDS			SHORT-TERM
	PURCHASED			BORROWINGS
	(IN THOUSANDS, EXCEPT RATES)
Balance	$	—		$	22,412
Maximum balance at any month end		—			49,615
Average balance during year		58			11,030
Average rate paid for the year		3.04	%		2.59	%
Interest rate on year-end balance		—			1.81

	AT DECEMBER 31, 2018
	FEDERAL
	FUNDS			SHORT-TERM
	PURCHASED			BORROWINGS
	(IN THOUSANDS, EXCEPT RATES)
Balance	$	—		$	41,029
Maximum balance at any month end		—			82,932
Average balance during year		54			33,073
Average rate paid for the year		1.70	%		2.17	%
Interest rate on year-end balance		—			2.62

	AT DECEMBER 31, 2017
	FEDERAL			OTHER
	FUNDS			SHORT-TERM
	PURCHASED			BORROWINGS
	(IN THOUSANDS, EXCEPT RATES)
Balance	$	—		$	49,084
Maximum balance at any month end		—			51,760
Average balance during year		54			16,918
Average rate paid for the year		0.95	%		1.21	%
Interest rate on year-end balance		—			1.54

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

These borrowing transactions have an average maturity of overnight.

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ACCUMULATED OTHER COMPREHENSIVE LOSS

12 Months Ended

Dec. 31, 2019

ACCUMULATED OTHER COMPREHENSIVE LOSS

Accumulated Other Comprehensive Loss

21. 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, 2019, 2018, and 2017 (in thousands):

	YEAR ENDING DECEMBER 31, 2019						YEAR ENDING DECEMBER 31, 2018						YEAR ENDING DECEMBER 31, 2017
	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	$	(1,409)	$	(12,816)	$	(14,225)	$	(327)	$	(12,623)	$	(12,950)	$	(171)	$	(11,406)	$	(11,577)
Reclassification of certain income tax effects from accumulated other comprehensive loss		—		—		—		—		—		—		(53)		(2,078)		(2,131)
Other comprehensive income (loss) before reclassifications		3,217		(6,373)		(3,156)		(1,429)		(1,416)		(2,845)		(27)		1,071		1,044
Amounts reclassified from accumulated other comprehensive loss		(93)		1,303		1,210		347		1,223		1,570		(76)		(210)		(286)
Net current period other comprehensive income (loss)		3,124		(5,070)		(1,946)		(1,082)		(193)		(1,275)		(156)		(1,217)		(1,373)
Ending balance	$	1,715	$	(17,886)	$	(16,171)	$	(1,409)	$	(12,816)	$	(14,225)	$	(327)	$	(12,623)	$	(12,950)

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

The following table presents the amounts reclassified out of each component of accumulated other comprehensive loss for the periods ending December 31, 2019, 2018, and 2017 (in thousands):

	Amount reclassified from accumulated
	other comprehensive loss(1)
	YEAR ENDING		YEAR ENDING		YEAR ENDING		Affected line item in the
Details about accumulated other comprehensive loss components	DECEMBER 31, 2019		DECEMBER 31, 2018		DECEMBER 31, 2017		statement of operations
Realized (gains) losses on sale of securities
	$	(118)	$	439	$	(115)	Net realized (gains) losses on investment securities
		25		(92)		39	Provision for income taxes
	$	(93)	$	347	$	(76)	Net of tax
Amortization of estimated defined benefit pension plan loss(2)
	$	1,649	$	1,548	$	(318)	Other expense
		(346)		(325)		108	Provision for income taxes
	$	1,303	$	1,223	$	(210)	Net of tax
Total reclassifications for the period	$	1,210	$	1,570	$	(286)	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 18 for additional details).

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CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands		Dec. 31, 2019	Dec. 31, 2018
ASSETS
Cash and due from depository institutions		$ 15,642	$ 27,970
Interest bearing deposits		2,755	2,740
Short-term investments in money market funds		3,771	4,184
Cash and cash equivalents		22,168	34,894
Investment securities:
Available for sale		141,749	146,731
Held to maturity (fair value $41,082 at December 31, 2019 and $40,324 at December 31, 2018)		39,936	40,760
Loans held for sale		4,868	847
Loans		883,090	862,604
Less: Unearned income		384	322
Allowance for loan losses		9,279	8,671
Net loans		873,427	853,611
Premises and equipment:
Operating lease right-of-use asset		846	0
Financing lease right-of-use asset		3,078	0
Other premises and equipment, net		14,643	13,348
Accrued interest income receivable		3,449	3,489
Goodwill		11,944	11,944
Bank owned life insurance		38,916	38,395
Net deferred tax asset		3,976	3,637
Federal Home Loan Bank stock		3,985	4,520
Federal Reserve Bank stock		2,125	2,125
Other assets		6,074	6,379
TOTAL ASSETS		1,171,184	1,160,680
LIABILITIES
Non-interest bearing deposits		136,462	150,627
Interest bearing deposits		824,051	798,544
Total deposits		960,513	949,171
Short-term borrowings		22,412	41,029
Advances from Federal Home Loan Bank		53,668	46,721
Operating lease liabilities		865	0
Financing lease liabilities		3,163	0
Guaranteed junior subordinated deferrable interest debentures, net		12,955	12,939
Subordinated debt		7,511	7,488
Total borrowed funds		100,574	108,177
Other liabilities		11,483	5,355
TOTAL LIABILITIES		1,072,570	1,062,703
SHAREHOLDERS' EQUITY
Common stock, par value $0.01 per share; 30,000,000 shares authorized: 26,650,728 shares issued and 17,057,871 shares outstanding on December 31, 2019; 30,000,000 shares authorized: 26,609,811 shares issued and 17,619,303 shares outstanding on December 31, 2018		267	266
Treasury stock at cost, 9,592,857 shares on December 31, 2019 and 8,990,508 shares on December 31, 2018		(83,129)	(80,579)
Capital surplus		145,888	145,782
Retained earnings		51,759	46,733
Accumulated other comprehensive loss, net	[1]	(16,171)	(14,225)
TOTAL SHAREHOLDERS' EQUITY		98,614	97,977
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		$ 1,171,184	$ 1,160,680

[1] Amounts in parentheses indicate debits on the Consolidated Balance Sheets.

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CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($) $ in Thousands	COMMON STOCK [Member]	TREASURY STOCK [Member]	CAPITAL SURPLUS [Member]	RETAINED EARNINGS [Member]	ACCUMULATED OTHER COMPREHENSIVE LOSS, NET [Member]	Total
Balance at beginning of period at Dec. 31, 2016	$ 265	$ (74,829)	$ 145,535	$ 36,001	$ (11,577)
New common shares issued for exercise of stock options	1		159
Treasury stock, purchased at cost (602,349, 533,352, and 839,337 shares in 2019, 2018, and 2017, respectively)		(3,404)
Stock option expense			13
Net income				3,293		$ 3,293
Cash dividend declared on common stock ($0.095, $0.075, and $0.060 in 2019, 2018, and 2017 respectively)				(1,113)
Reclassification of certain income tax effects from accumulated other comprehensive income				2,131	(2,131)
Cumulative effect adjustment for change in accounting principal				0
Other comprehensive income (loss)					758	758
Balance at end of period at Dec. 31, 2017	266	(78,233)	145,707	40,312	(12,950)	95,102
New common shares issued for exercise of stock options	0		61
Treasury stock, purchased at cost (602,349, 533,352, and 839,337 shares in 2019, 2018, and 2017, respectively)		(2,346)
Stock option expense			14
Net income				7,768		7,768
Cash dividend declared on common stock ($0.095, $0.075, and $0.060 in 2019, 2018, and 2017 respectively)				(1,347)
Reclassification of certain income tax effects from accumulated other comprehensive income				0	0
Cumulative effect adjustment for change in accounting principal				0
Other comprehensive income (loss)					(1,275)	(1,275)
Balance at end of period at Dec. 31, 2018	266	(80,579)	145,782	46,733	(14,225)	97,977
New common shares issued for exercise of stock options	1		99
Treasury stock, purchased at cost (602,349, 533,352, and 839,337 shares in 2019, 2018, and 2017, respectively)		(2,550)
Stock option expense			7
Net income				6,028		6,028
Cash dividend declared on common stock ($0.095, $0.075, and $0.060 in 2019, 2018, and 2017 respectively)				(1,642)
Reclassification of certain income tax effects from accumulated other comprehensive income				0	0
Cumulative effect adjustment for change in accounting principal				640
Other comprehensive income (loss)					(1,946)	(1,946)
Balance at end of period at Dec. 31, 2019	$ 267	$ (83,129)	$ 145,888	$ 51,759	$ (16,171)	$ 98,614

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INVESTMENT SECURITIES - Information concerning investments with unrealized losses (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Available-For-Sale-Securities-And-Held-To-Maturity-Securities
Less than 12 months, Fair Value	$ 17,150	$ 39,784
Less than 12 months, Unrealized Losses	(126)	(694)
12 months or longer, Fair Value	21,468	78,532
12 months or longer, Unrealized Losses	(370)	(2,512)
Total, Fair Value	38,618	118,316
Total, Unrealized Losses	(496)	(3,206)
U.S. Agency
Available-For-Sale-Securities-And-Held-To-Maturity-Securities
Less than 12 months, Fair Value		244
Less than 12 months, Unrealized Losses		(6)
12 months or longer, Fair Value		5,631
12 months or longer, Unrealized Losses		(154)
Total, Fair Value		5,875
Total, Unrealized Losses		(160)
U.S. Agency mortgage-backed securities
Available-For-Sale-Securities-And-Held-To-Maturity-Securities
Less than 12 months, Fair Value	7,084	17,718
Less than 12 months, Unrealized Losses	(23)	(177)
12 months or longer, Fair Value	8,562	39,983
12 months or longer, Unrealized Losses	(75)	(1,113)
Total, Fair Value	15,646	57,701
Total, Unrealized Losses	(98)	(1,290)
Municipal
Available-For-Sale-Securities-And-Held-To-Maturity-Securities
Less than 12 months, Fair Value	2,269	6,601
Less than 12 months, Unrealized Losses	(18)	(71)
12 months or longer, Fair Value	1,123	15,880
12 months or longer, Unrealized Losses	(52)	(567)
Total, Fair Value	3,392	22,481
Total, Unrealized Losses	(70)	(638)
Corporate bonds and other securities [Member]
Available-For-Sale-Securities-And-Held-To-Maturity-Securities
Less than 12 months, Fair Value	7,797	15,221
Less than 12 months, Unrealized Losses	(85)	(440)
12 months or longer, Fair Value	11,783	17,038
12 months or longer, Unrealized Losses	(243)	(678)
Total, Fair Value	19,580	32,259
Total, Unrealized Losses	$ (328)	$ (1,118)

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INCOME TAXES - Reconciliation (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
AMOUNT
Income tax expense based on federal statutory rate									$ 1,596	$ 1,983	$ 2,951
Tax exempt income									(131)	(131)	(283)
Other									107	(175)	95
Change in corporate tax rate									0	0	2,624
Income Tax Expense (Benefit), Total	$ 169	$ 442	$ 470	$ 491	$ 499	$ 270	$ 453	$ 455	$ 1,572	$ 1,677	$ 5,387
RATE
Income tax expense based on federal statutory rate									21.00%	21.00%	34.00%
Tax exempt income									(1.40%)	(1.40%)	(3.30%)
Other									1.10%	(1.80%)	1.00%
Change in corporate tax rate									0.00%	0.00%	30.40%
Total expense for income taxes									20.70%	17.80%	62.10%

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DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS - Schedule of assets and liability measured and recorded on the Consolidated Balance Sheets (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS
Equity securities	$ 366
Available for sale	141,749	$ 146,731
Fair value swap asset	959	257
Fair value swap liability	(959)	(257)
U.S. Agency
DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS
Available for sale	5,116	7,529
Municipal
DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS
Available for sale	15,170	13,181
Corporate bonds [Member]
DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS
Available for sale	39,830	36,494
U.S. Agency mortgage-backed securities
DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS
Available for sale	81,633	89,527
Level 1 [Member]
DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS
Equity securities	366
Fair value swap asset	0	0
Fair value swap liability	0	0
Level 1 [Member] | U.S. Agency
DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS
Available for sale	0	0
Level 1 [Member] | Municipal
DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS
Available for sale	0	0
Level 1 [Member] | Corporate bonds [Member]
DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS
Available for sale	0	0
Level 1 [Member] | U.S. Agency mortgage-backed securities
DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS
Available for sale	0	0
Level 2 [Member]
DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS
Fair value swap asset	959	257
Fair value swap liability	(959)	(257)
Level 2 [Member] | U.S. Agency
DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS
Available for sale	5,116	7,529
Level 2 [Member] | Municipal
DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS
Available for sale	15,170	13,181
Level 2 [Member] | Corporate bonds [Member]
DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS
Available for sale	39,830	36,494
Level 2 [Member] | U.S. Agency mortgage-backed securities
DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS
Available for sale	81,633	89,527
Level 3 [Member]
DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS
Equity securities	0
Fair value swap asset	0	0
Fair value swap liability	0	0
Level 3 [Member] | U.S. Agency
DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS
Available for sale	0	0
Level 3 [Member] | Municipal
DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS
Available for sale	0	0
Level 3 [Member] | Corporate bonds [Member]
DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS
Available for sale	0	0
Level 3 [Member] | U.S. Agency mortgage-backed securities
DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS
Available for sale	$ 0	$ 0

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REVENUE RECOGNITION - Additional information (Details)	12 Months Ended
	Dec. 31, 2019 USD ($)
Other assets
Wealth management fees receivable	$ 825,000
Revenue Associated With Financial Instruments [Member]
Percentage Of Entity Revenue	80.20%

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ACCUMULATED OTHER COMPREHENSIVE LOSS - Reclassification of component (Details) - USD ($) $ in Thousands		12 Months Ended
		Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Realized (gains) losses on sale of securities
Net realized (gains) losses on investment securities	[1]	$ (118)	$ 439	$ (115)
Provision for income taxes	[1]	25	(92)	39
Net of tax	[1]	(93)	347	(76)
Amortization of estimated defined benefit pension plan loss
Other expense	[1],[2]	1,649	1,548	(318)
Provision for income taxes	[1],[2]	(346)	(325)	108
Net of tax	[1],[2]	1,303	1,223	(210)
Total reclassifications for the period	[1],[3]	$ 1,210	$ 1,570	$ (286)

[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 18 for additional details).

[3] Amounts in parentheses indicate debits on the Consolidated Balance Sheets.

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DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS (Tables)

12 Months Ended

Dec. 31, 2019

DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS

Schedule of assets and liabilities measured and recorded at fair value on a recurring basis

The following table presents the assets and liability measured and reported on the Consolidated Balance Sheets on a recurring basis at their fair value as of December 31, 2019 and 2018, by level within the fair value hierarchy (in thousands).

	FAIR VALUE MEASUREMENTS AT DECEMBER 31, 2019 USING
	TOTAL		(LEVEL 1)		(LEVEL 2)		(LEVEL 3)
Equity securities	$	366	$	366	$	—	$	—
Available for sale securities:
U.S. Agency		5,116		—		5,116		—
Municipal		15,170		—		15,170		—
Corporate bonds		39,830		—		39,830		—
U.S. Agency mortgage-backed securities		81,633		—		81,633		—
Fair value swap asset		959		—		959		—
Fair value swap liability		(959)		—		(959)		—

	FAIR VALUE MEASUREMENTS AT DECEMBER 31, 2018 USING
	TOTAL		(LEVEL 1)		(LEVEL 2)		(LEVEL 3)
Available for sale securities:
U.S. Agency	$	7,529	$	—	$	7,529	$	—
Municipal		13,181		—		13,181		—
Corporate bonds		36,494		—		36,494		—
U.S. Agency mortgage-backed securities		89,527		—		89,527		—
Fair value swap asset		257		—		257		—
Fair value swap liability		(257)		—		(257)		—

Schedule of assets measured and recorded at fair value on a non-recurring basis

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

	FAIR VALUE MEASUREMENTS AT DECEMBER 31, 2019 USING
	TOTAL		(LEVEL 1)		(LEVEL 2)		(LEVEL 3)
Impaired loans	$	255	$	—	$	—	$	255
Other real estate owned		37		—		—		37

	FAIR VALUE MEASUREMENTS AT DECEMBER 31, 2018 USING
	TOTAL		(LEVEL 1)		(LEVEL 2)		(LEVEL 3)
Impaired loans	$	—	$	—	$	—	$	—
Other real estate owned		157		—		—		157

December 31, 2019	Quantitative Information About Level 3 Fair Value Measurements
			Valuation	Unobservable
	Fair Value		Techniques	Input	Range (Wgtd Ave)
Impaired loans	$	255	Appraisal of	Appraisal	0% to 100% (3)	%
			collateral (1)	adjustments(2)
Other real estate owned		37	Appraisal of	Appraisal	0% to 57% (38)	%
			collateral (1)	adjustments(2)
				Liquidation	21% to 134% (30)	%
				expenses

December 31, 2018	Quantitative Information About Level 3 Fair Value Measurements
			Valuation	Unobservable
	Fair Value		Techniques	Input	Range (Wgtd Ave)
Impaired loans	$	—	Appraisal of	Appraisal	100% (100)	%
			collateral (1)	adjustments(2)
Other real estate owned		157	Appraisal of	Appraisal	0% to 39% (8)	%
			collateral (1)	adjustments(2)
				Liquidation	21% to 195% (40)	%
				expenses

(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.

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STOCK COMPENSATION PLANS (Details) - $ / shares	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
SHARES
Outstanding at beginning of year	336,313	360,721	417,566
Granted	7,000	5,000	17,500
Exercised	(40,917)	(24,408)	(64,112)
Forfeited	(5,748)	(5,000)	(10,233)
Outstanding at end of year	296,648	336,313	360,721
Exercisable at end of year	282,565	307,814	308,301
WEIGHTED AVERAGE EXERCISE PRICE
Outstanding at beginning of year	$ 2.91	$ 2.85	$ 2.76
Granted	4.19	4.22	3.96
Exercised	2.45	2.49	2.49
Forfeited	2.44	1.92	3.10
Outstanding at end of year	3.02	2.91	2.85
Exercisable at end of year	2.96	2.86	2.79
Weighted average fair value of options granted in current year	$ 0.62	$ 0.56	$ 1.12

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LOANS (Tables)

12 Months Ended

Dec. 31, 2019

LOANS

Schedule of loan portfolio

The loan portfolio of the Company consisted of the following:

	AT DECEMBER 31,
	2019		2018
	(IN THOUSANDS)
Commercial:
Commercial and industrial	$	173,922	$	158,279
Commercial loans secured by owner occupied real estate		91,655		91,905
Commercial loans secured by non-owner occupied real estate		363,635		356,543
Real estate − residential mortgage		235,239		237,964
Consumer		18,255		17,591
Loans, net of unearned income	$	882,706	$	862,282

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LEASE COMMITMENTS (Tables)

12 Months Ended

Dec. 31, 2019

LEASE COMMITMENTS

Schedule of lease cost associated with both operating and financing leases

Total rent expense recorded during the years ended December 31, 2018 and 2017 was $415,000 and $571,000, respectively.

	YEAR ENDED DECEMBER 31, 2019
Lease cost
Financing lease cost:
Amortization of right-of-use asset	$	258
Interest expense		117
Operating lease cost		117
Total lease cost	$	492

Schedule of weighted average discount rates and the remaining term of the leases

The following table presents the weighted-average remaining lease term and discount rate for the leases outstanding at December 31, 2019.

	OPERATING		FINANCING
Weighted-average remaining term (years)	11.9		17.1
Weighted-average discount rate	3.46	%	3.60	%

Schedule of reconciliation to the discounted amount recorded on the consolidated balance sheets

The following table presents the undiscounted cash flows due related to operating and financing leases as of December 31, 2019, along with a reconciliation to the discounted amount recorded on the Consolidated Balance Sheets.

	OPERATING		FINANCING
Undiscounted cash flows due:
Within 1 year	$	118	$	296
After 1 year but within 2 years		120		275
After 2 years but within 3 years		98		277
After 3 years but within 4 years		69		274
After 4 years but within 5 years		69		236
After 5 years		589		3,007
Total undiscounted cash flows		1,063		4,365
Discount on cash flows		(198)		(1,202)
Total lease liabilities	$	865	$	3,163

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ALLOWANCE FOR LOAN LOSSES - Loan loss by the primary segments (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Loans:
Individually evaluated for impairment	$ 824	$ 11
Collectively evaluated for impairment	881,882	862,271
Total loans	882,706	862,282
Allowance for loan losses:
Specific reserve allocation	92	11
General reserve allocation	9,187	8,660
Total allowance for loan losses	9,279	8,671	$ 10,214	$ 9,932
Commercial [Member]
Loans:
Individually evaluated for impairment	816	0
Collectively evaluated for impairment	264,761	250,184
Total loans	265,577	250,184
Allowance for loan losses:
Specific reserve allocation	84	0
General reserve allocation	3,867	3,057
Total allowance for loan losses	3,951	3,057	4,298	4,041
Commercial loans secured by non-owner occupied real estate [Member]
Loans:
Individually evaluated for impairment	8	11
Collectively evaluated for impairment	363,627	356,532
Total loans	363,635	356,543
Allowance for loan losses:
Specific reserve allocation	8	11
General reserve allocation	3,111	3,378
Total allowance for loan losses	3,119	3,389	3,666	3,584
Real estate - residential mortgage [Member]
Loans:
Individually evaluated for impairment	0	0
Collectively evaluated for impairment	235,239	237,964
Total loans	235,239	237,964
Allowance for loan losses:
Specific reserve allocation	0	0
General reserve allocation	1,159	1,235
Total allowance for loan losses	1,159	1,235	1,102	1,169
Consumer [Member]
Loans:
Individually evaluated for impairment	0	0
Collectively evaluated for impairment	18,255	17,591
Total loans	18,255	17,591
Allowance for loan losses:
Specific reserve allocation	0	0
General reserve allocation	126	127
Total allowance for loan losses	126	127	128	151
Allocation for General Risk [Member]
Allowance for loan losses:
Specific reserve allocation	0	0
General reserve allocation	924	863
Total allowance for loan losses	$ 924	$ 863	$ 1,020	$ 987

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PREMISES AND EQUIPMENT (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
PREMISES AND EQUIPMENT
Cost	$ 38,715	$ 37,904
Less: Accumulated depreciation and amortization	24,072	24,556
Premises and equipment, net	14,643	13,348
Land [Member]
PREMISES AND EQUIPMENT
Cost	1,198	1,198
Premises [Member]
PREMISES AND EQUIPMENT
Cost	27,711	27,160
Furniture and equipment [Member]
PREMISES AND EQUIPMENT
Cost	8,632	9,085
Leasehold Improvements [Member]
PREMISES AND EQUIPMENT
Cost	$ 1,174	$ 461

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LEASE COMMITMENTS - Operating and financing leases - (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
LEASE COMMITMENTS
Operating lease, Within 1 year	$ 118
Operating lease, After 1 year but within 2 years	120
Operating lease, After 2 years but within 3 years	98
Operating lease, After 3 years but within 4 years	69
Operating lease, After 4 years but within 5 years	69
Operating lease, After 5 years	589
Total undiscounted cash flows	1,063
Discount on cash flows	(198)
Total lease liabilities	865	$ 0
Financing lease, Within 1 year	296
Financing lease, After 1 year but within 2 years	275
Financing lease, After 2 years but within 3 years	277
Financing lease, After 3 years but within 4 years	274
Financing lease, After 4 years but within 5 years	236
Financing lease, After 5 years	3,007
Total undiscounted cash flows	4,365
Discount on cash flows	(1,202)
Total lease liabilities	$ 3,163	$ 0

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ALLOWANCE FOR LOAN LOSSES - Residential and consumer portfolio (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Performing and non-performing outstanding balances of the residential and consumer portfolios
Loan portfolio	$ 882,706	$ 862,282
Real estate - residential mortgage [Member]
Performing and non-performing outstanding balances of the residential and consumer portfolios
Loan portfolio	235,239	237,964
Consumer [Member]
Performing and non-performing outstanding balances of the residential and consumer portfolios
Loan portfolio	18,255	17,591
Residential and Consumer
Performing and non-performing outstanding balances of the residential and consumer portfolios
Loan portfolio	253,494	255,555
Performing [Member] | Real estate - residential mortgage [Member]
Performing and non-performing outstanding balances of the residential and consumer portfolios
Loan portfolio	233,760	236,754
Performing [Member] | Consumer [Member]
Performing and non-performing outstanding balances of the residential and consumer portfolios
Loan portfolio	18,255	17,591
Performing [Member] | Residential and Consumer
Performing and non-performing outstanding balances of the residential and consumer portfolios
Loan portfolio	252,015	254,345
Non-Performing [Member] | Real estate - residential mortgage [Member]
Performing and non-performing outstanding balances of the residential and consumer portfolios
Loan portfolio	1,479	1,210
Non-Performing [Member] | Consumer [Member]
Performing and non-performing outstanding balances of the residential and consumer portfolios
Loan portfolio	0	0
Non-Performing [Member] | Residential and Consumer
Performing and non-performing outstanding balances of the residential and consumer portfolios
Loan portfolio	$ 1,479	$ 1,210

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PARENT COMPANY FINANCIAL INFORMATION - STATEMENTS OF OPERATIONS (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
INCOME
Interest, dividend and other income	$ 12,405	$ 12,433	$ 12,765	$ 12,164	$ 12,125	$ 12,149	$ 11,603	$ 11,217	$ 49,767	$ 47,094	$ 44,356
EXPENSE
Interest expense	3,445	3,669	3,704	3,507	3,346	3,040	2,745	2,469	14,325	11,600	8,795
Salaries and employee benefits									25,429	24,358	23,920
Other expense									5,654	5,257	5,065
INCOME BEFORE INCOME TAXES AND EQUITY IN UNDISTRIBUTED EARNINGS OF SUBSIDIARIES	838	2,131	2,262	2,369	2,427	2,599	2,197	2,222	7,600	9,445	8,680
Benefit for income taxes	169	442	470	491	499	270	453	455	1,572	1,677	5,387
NET INCOME	$ 669	$ 1,689	$ 1,792	$ 1,878	$ 1,928	$ 2,329	$ 1,744	$ 1,767	6,028	7,768	3,293
COMPREHENSIVE INCOME (LOSS)									4,082	6,493	4,051
Parent Company [Member]
INCOME
Inter-entity management and other fees									2,556	2,430	2,315
Interest, dividend and other income									186	119	163
TOTAL INCOME									7,647	7,239	6,168
EXPENSE
Interest expense									1,642	1,642	1,642
Salaries and employee benefits									2,614	2,610	2,416
Other expense									1,707	1,733	1,618
TOTAL EXPENSE									5,963	5,985	5,676
INCOME BEFORE INCOME TAXES AND EQUITY IN UNDISTRIBUTED EARNINGS OF SUBSIDIARIES									1,684	1,254	492
Benefit for income taxes									(676)	(722)	(1,114)
Equity in undistributed earnings of subsidiaries									3,668	5,792	1,687
NET INCOME									6,028	7,768	3,293
COMPREHENSIVE INCOME (LOSS)									4,082	6,493	4,051
Parent Company [Member] | Banking Subsidiary [Member]
INCOME
Dividends from subsidiaries									3,800	3,500	2,850
Parent Company [Member] | Non Banking Subsidiaries [Member]
INCOME
Dividends from subsidiaries									$ 1,105	$ 1,190	$ 840

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SEGMENT RESULTS (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Contribution of segments to the consolidated results of operations
Net interest income	$ 8,960	$ 8,764	$ 9,061	$ 8,657	$ 8,779	$ 9,109	$ 8,858	$ 8,748	$ 35,442	$ 35,494	$ 35,561
Provision for loan loss	975	225	0	(400)	(700)	0	50	50	800	(600)	800
Non-interest income	3,416	4,095	3,657	3,605	3,322	3,586	3,681	3,635	14,773	14,224	14,645
Non-interest expense	10,563	10,503	10,456	10,293	10,374	10,096	10,292	10,111	41,815	40,873	40,726
Income (loss) before income taxes	838	2,131	2,262	2,369	2,427	2,599	2,197	2,222	7,600	9,445	8,680
Income tax expense (benefit)	169	442	470	491	499	270	453	455	1,572	1,677	5,387
Net income (loss)	669	$ 1,689	$ 1,792	$ 1,878	1,928	$ 2,329	$ 1,744	$ 1,767	6,028	7,768	3,293
Assets	1,171,184				1,160,680				1,171,184	1,160,680	1,167,655
Community Banking [Member]
Contribution of segments to the consolidated results of operations
Net interest income									40,865	39,195	39,183
Provision for loan loss									800	(600)	800
Non-interest income									5,407	4,832	5,370
Non-interest expense									31,856	30,809	31,139
Income (loss) before income taxes									13,616	13,818	12,614
Income tax expense (benefit)									2,715	2,764	4,023
Net income (loss)									10,901	11,054	8,591
Assets	981,787				966,910				981,787	966,910	993,689
Wealth Management [Member]
Contribution of segments to the consolidated results of operations
Net interest income									81	71	61
Provision for loan loss									0	0	0
Non-interest income									9,736	9,651	9,170
Non-interest expense									7,340	7,319	7,054
Income (loss) before income taxes									2,477	2,403	2,177
Income tax expense (benefit)									593	554	812
Net income (loss)									1,884	1,849	1,365
Assets	10,361				9,345				10,361	9,345	8,703
Investment or Parent [Member]
Contribution of segments to the consolidated results of operations
Net interest income									(5,504)	(3,772)	(3,683)
Provision for loan loss									0	0	0
Non-interest income									(370)	(259)	105
Non-interest expense									2,619	2,745	2,533
Income (loss) before income taxes									(8,493)	(6,776)	(6,111)
Income tax expense (benefit)									(1,736)	(1,641)	552
Net income (loss)									(6,757)	(5,135)	(6,663)
Assets	$ 179,036				$ 184,425				$ 179,036	$ 184,425	$ 165,263

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SEGMENT RESULTS (Tables)

12 Months Ended

Dec. 31, 2019

SEGMENT RESULTS

Schedule of business segments

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

	YEAR ENDED DECEMBER 31, 2019
	COMMUNITY		WEALTH		INVESTMENT/
	BANKING		MANAGEMENT		PARENT		TOTAL
	(IN THOUSANDS)
Net interest income	$	40,865	$	81	$	(5,504)	$	35,442
Provision for loan loss		800		—		—		800
Non-interest income		5,407		9,736		(370)		14,773
Non-interest expense		31,856		7,340		2,619		41,815
Income (loss) before income taxes		13,616		2,477		(8,493)		7,600
Income tax expense (benefit)		2,715		593		(1,736)		1,572
Net income (loss)	$	10,901	$	1,884	$	(6,757)	$	6,028
Total assets	$	981,787	$	10,361	$	179,036	$	1,171,184

	YEAR ENDED DECEMBER 31, 2018
	COMMUNITY		WEALTH		INVESTMENT/
	BANKING		MANAGEMENT		PARENT		TOTAL
	(IN THOUSANDS)
Net interest income	$	39,195	$	71	$	(3,772)	$	35,494
Credit provision for loan loss		(600)		—		—		(600)
Non-interest income		4,832		9,651		(259)		14,224
Non-interest expense		30,809		7,319		2,745		40,873
Income (loss) before income taxes		13,818		2,403		(6,776)		9,445
Income tax expense		2,764		554		(1,641)		1,677
Net income (loss)	$	11,054	$	1,849	$	(5,135)	$	7,768
Total assets	$	966,910	$	9,345	$	184,425	$	1,160,680

	YEAR ENDED DECEMBER 31, 2017
	COMMUNITY		WEALTH		INVESTMENT/
	BANKING		MANAGEMENT		PARENT		TOTAL
	(IN THOUSANDS)
Net interest income	$	39,183	$	61	$	(3,683)	$	35,561
Provision for loan loss		800		—		—		800
Non-interest income		5,370		9,170		105		14,645
Non-interest expense		31,139		7,054		2,533		40,726
Income (loss) before income taxes		12,614		2,177		(6,111)		8,680
Income tax expense (benefit)		4,023		812		552		5,387
Net income (loss)	$	8,591	$	1,365	$	(6,663)	$	3,293
Total assets	$	993,689	$	8,703	$	165,263	$	1,167,655

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EMPLOYEE BENEFIT PLANS (Tables)

12 Months Ended

Dec. 31, 2019

EMPLOYEE BENEFIT PLANS

Schedule of pension benefits

PENSION BENEFITS:

	YEAR ENDED DECEMBER 31,
	2019		2018
	(IN THOUSANDS)
CHANGE IN BENEFIT OBLIGATION:
Benefit obligation at beginning of year	$	41,094	$	41,013
Service cost		1,470		1,482
Interest cost		1,569		1,273
Actuarial loss		7,758		823
Special/contractual termination benefits		—		63
Benefits paid		(2,330)		(3,560)
Benefit obligation at end of year		49,561		41,094
CHANGE IN PLAN ASSETS:
Fair value of plan assets at beginning of year		38,478		37,100
Actual return on plan assets		5,483		(1,062)
Employer contributions		3,200		6,000
Benefits paid		(2,330)		(3,560)
Fair value of plan assets at end of year		44,831		38,478
Funded status of the plan	$	(4,730)	$	(2,616)

Schedule of amounts not yet recognized as a component of periodic pension cost

	YEAR ENDED DECEMBER 31,
	2019		2018
	(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	$	22,113	$	18,461
Total	$	22,113	$	18,461

Schedule of accumulated benefit obligation

	YEAR ENDED DECEMBER 31,
	2019		2018
	(IN THOUSANDS)
ACCUMULATED BENEFIT OBLIGATION:
Accumulated benefit obligation	$	45,501	$	37,695

Schedule of weighted-average assumptions used to determine benefit obligations

The weighted-average assumptions used to determine benefit obligations at December 31, 2019 and 2018 were as follows:

	YEAR ENDED DECEMBER 31,
	2019		2018
WEIGHTED AVERAGE ASSUMPTIONS:
Discount rate	3.20	%	4.28	%
Salary scale	2.50		2.50

Schedule of net periodic pension cost

	YEAR ENDED DECEMBER 31,
	2019		2018		2017
	(IN THOUSANDS)
COMPONENTS OF NET PERIODIC BENEFIT COST:
Service cost	$	1,470	$	1,482	$	1,516
Interest cost		1,569		1,273		1,292
Expected return on plan assets		(3,025)		(2,798)		(2,539)
Special termination benefit liability		—		63		—
Recognized net actuarial loss		1,649		1,548		1,454
Net periodic pension cost	$	1,663	$	1,568	$	1,723

Schedule of other changes in plan assets and benefit obligations recognized in other comprehensive loss

	YEAR ENDED DECEMBER 31,
	2019		2018		2017
	(IN THOUSANDS)
OTHER CHANGES IN PLAN ASSETS AND BENEFIT OBLIGATIONS RECOGNIZED IN OTHER COMPREHENSIVE LOSS
Net (gain) loss	$	5,300	$	4,683	$	(822)
Recognized loss		(1,649)		(1,548)		(1,454)
Total recognized in other comprehensive loss before tax effect	$	3,651	$	3,135	$	(2,276)
Total recognized in net benefit cost and other comprehensive loss before tax effect	$	5,314	$	4,703	$	(553)

Schedule of weighted-average assumptions used to determine net periodic benefit cost

The weighted-average assumptions used to determine net periodic benefit cost for the years ended December 31, 2019, 2018 and 2017 were as follows:

	YEAR ENDED DECEMBER 31,
	2019		2018		2017
WEIGHTED AVERAGE ASSUMPTIONS:
Discount rate	4.28	%	3.63	%	4.12	%
Expected return on plan assets	7.50		7.50		7.75
Rate of compensation increase	2.50		2.50		2.50

Schedule of plan's asset allocations

The plan’s measurement date is December 31, 2019. This plan’s asset allocation at December 31, 2019 and 2018, by asset category are as follows:

	YEAR ENDED DECEMBER 31,
	2019		2018
ASSET CATEGORY:
Cash and cash equivalents	1	%	49	%
Domestic equities	8		7
Mutual funds/ETFs	82		42
International equities	1		—
Corporate bonds	8		2
Total	100	%	100	%

Schedule of fair value of plan assets

The major categories of assets in the Company’s Pension Plan as of year-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,
	2019		2018
	(IN THOUSANDS)
Level 1:
Cash and cash equivalents	$	186	$	18,939
Domestic equities		3,782		2,841
Mutual funds/ETFs		36,469		15,808
International equities		620		—
Level 2:
Corporate bonds		3,774		890
Total fair value of plan assets	$	44,831	$	38,478

Schedule of benefit payments

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

	ESTIMATED FUTURE
YEAR:	BENEFIT PAYMENTS
	(IN THOUSANDS)
2020	$	4,096
2021		3,910
2022		4,317
2023		3,949
2024		4,205
Years 2025-2029		15,975

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Numerator:
Net income	$ 669	$ 1,689	$ 1,792	$ 1,878	$ 1,928	$ 2,329	$ 1,744	$ 1,767	$ 6,028	$ 7,768	$ 3,293
Denominator:
Weighted average common shares outstanding (basic)									17,359	17,933	18,498
Effect of stock options									81	104	102
Weighted average common shares outstanding (diluted)									17,440	18,037	18,600
Earnings per common share:
Basic	$ 0.04	$ 0.10	$ 0.10	$ 0.11	$ 0.11	$ 0.13	$ 0.10	$ 0.10	$ 0.35	$ 0.43	$ 0.18
Diluted	$ 0.04	$ 0.10	$ 0.10	$ 0.11	$ 0.11	$ 0.13	$ 0.10	$ 0.10	$ 0.35	$ 0.43	$ 0.18

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EMPLOYEE BENEFIT PLANS - Amounts not recognized as components of net periodic pension cost (Details) - Defined Benefit Pension Items [Member] - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Amounts recognized in accumulated other comprehensive loss consists of:
Net actuarial loss	$ 22,113	$ 18,461
Total	$ 22,113	$ 18,461

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EMPLOYEE BENEFIT PLANS - Changes in plan assets and benefit obligations (Details) - Defined Benefit Pension Items [Member] - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
OTHER CHANGES IN PLAN ASSETS AND BENEFIT OBLIGATIONS RECOGNIZED IN OTHER COMPREHENSIVE LOSS
Net (gain) loss	$ 5,300	$ 4,683	$ (822)
Recognized loss	(1,649)	(1,548)	(1,454)
Total recognized in other comprehensive loss before tax effect	3,651	3,135	(2,276)
Total recognized in net benefit cost and other comprehensive loss before tax effect	$ 5,314	$ 4,703	$ (553)

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REVENUE RECOGNITION (Tables)

12 Months Ended

Dec. 31, 2019

REVENUE RECOGNITION

Schedule of non-interest income, segregated by revenue

The following presents non-interest income, segregated by revenue streams in-scope and out-of-scope of Topic 606, for the years ended December 31, 2019, 2018, and 2017 (in thousands).

	AT DECEMBER 31,
	2019		2018		2017
Non-interest income:
In-scope of Topic 606
Wealth management fees	$	9,730	$	9,659	$	9,170
Service charges on deposit accounts		1,271		1,420		1,581
Other		1,759		1,720		1,665
Non-interest income (in-scope of topic 606)		12,760		12,799		12,416
Non-interest income (out-of-scope of topic 606)		2,013		1,425		2,229
Total non-interest income	$	14,773	$	14,224	$	14,645

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INTANGIBLE ASSETS

12 Months Ended

Dec. 31, 2019

INTANGIBLE ASSETS

INTANGIBLE ASSETS

22. 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 has an indefinite life and is not amortized. Instead such intangible is evaluated for impairment at the reporting unit level at least annually. Any resulting impairment would be reflected as a non-interest expense. Of the Company’s goodwill of $11.9 million, $9.5 million is allocated to the community banking segment and $2.4 million relates to the WCCA acquisition which is included in the wealth management segment. The balance of the Company’s goodwill at December 31, 2019 and 2018 was $11.9 million.

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PARENT COMPANY FINANCIAL INFORMATION

12 Months Ended

Dec. 31, 2019

PARENT COMPANY FINANCIAL INFORMATION

PARENT COMPANY FINANCIAL INFORMATION

26. 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,
	2019		2018
	(IN THOUSANDS)
ASSETS
Cash	$	100	$	100
Short-term investments in money market funds		2,544		3,711
Cash and cash equivalents		2,644		3,811
Investment securities available for sale		3,758		4,747
Equity investment in banking subsidiary		104,843		103,647
Equity investment in non-banking subsidiaries		7,830		6,745
Other assets		978		208
TOTAL ASSETS	$	120,053	$	119,158
LIABILITIES
Guaranteed junior subordinated deferrable interest debentures	$	12,955	$	12,939
Subordinated debt		7,511		7,488
Other liabilities		973		754
TOTAL LIABILITIES		21,439		21,181
STOCKHOLDERS’ EQUITY
Total stockholders’ equity		98,614		97,977
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	120,053	$	119,158

STATEMENTS OF OPERATIONS

	YEAR ENDED DECEMBER 31,
	2019		2018		2017
	(IN THOUSANDS)
INCOME
Inter-entity management and other fees	$	2,556	$	2,430	$	2,315
Dividends from banking subsidiary		3,800		3,500		2,850
Dividends from non-banking subsidiaries		1,105		1,190		840
Interest, dividend and other income		186		119		163
TOTAL INCOME		7,647		7,239		6,168
EXPENSE
Interest expense		1,642		1,642		1,642
Salaries and employee benefits		2,614		2,610		2,416
Other expense		1,707		1,733		1,618
TOTAL EXPENSE		5,963		5,985		5,676
INCOME BEFORE INCOME TAXES AND EQUITY IN UNDISTRIBUTED EARNINGS OF SUBSIDIARIES		1,684		1,254		492
Benefit for income taxes		(676)		(722)		(1,114)
Equity in undistributed earnings of subsidiaries		3,668		5,792		1,687
NET INCOME	$	6,028	$	7,768	$	3,293
COMPREHENSIVE INCOME	$	4,082	$	6,493	$	4,051

STATEMENTS OF CASH FLOWS

	YEAR ENDED DECEMBER 31,
	2019		2018		2017
	(IN THOUSANDS)
OPERATING ACTIVITIES
Net income	$	6,028	$	7,768	$	3,293
Adjustment to reconcile net income to net cash provided by operating activities:
Equity in undistributed earnings of subsidiaries		(3,668)		(5,792)		(1,687)
Stock compensation expense		7		14		13
Other – net		(427)		433		1,325
NET CASH PROVIDED BY OPERATING ACTIVITIES		1,940		2,423		2,944
INVESTING ACTIVITIES
Purchase of investment securities – available for sale		—		(1,002)		(1,002)
Proceeds from maturity and sales of investment securities – available for sale		1,085		1,462		1,699
NET CASH PROVIDED BY INVESTING ACTIVITIES		1,085		460		697
FINANCING ACTIVITIES
Purchases of treasury stock		(2,550)		(2,346)		(3,404)
Common stock dividends paid		(1,642)		(1,347)		(1,113)
NET CASH USED IN FINANCING ACTIVITIES		(4,192)		(3,693)		(4,517)
NET DECREASE IN CASH AND CASH EQUIVALENTS		(1,167)		(810)		(876)
CASH AND CASH EQUIVALENTS AT JANUARY 1		3,811		4,621		5,497
CASH AND CASH EQUIVALENTS AT DECEMBER 31	$	2,644	$	3,811	$	4,621

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. Cash may also be upstreamed to the parent company by the subsidiaries as an inter-entity management fee. The subsidiary Bank had a combined $108,228,000 of restricted surplus and retained earnings at December 31, 2019.

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NON-PERFORMING ASSETS INCLUDING TROUBLED DEBT RESTRUCTURINGS

12 Months Ended

Dec. 31, 2019

NON-PERFORMING ASSETS INCLUDING TROUBLED DEBT RESTRUCTURINGS

NON-PERFORMING ASSETS INCLUDING TROUBLED DEBT RESTRUCTURINGS

9. NON-PERFORMING ASSETS INCLUDING TROUBLED DEBT RESTRUCTURINGS

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, in-substance foreclosures and repossessed assets).

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

	AT DECEMBER 31,
	2019			2018
	(IN THOUSANDS, EXCEPT
	PERCENTAGES)
Non-accrual loans:
Commercial loans secured by non-owner occupied real estate	$	8		$	11
Real estate – residential mortgage		1,479			1,210
Total		1,487			1,221
Other real estate owned:
Commercial loans secured by owner occupied real estate		—			157
Real estate – residential mortgage		37			—
Total		37			157
TDR’s not in non-accrual		815			—
Total non-performing assets including TDR	$	2,339		$	1,378
Total non-performing assets as a percent of loans, net of unearned income, and other real estate owned		0.26	%		0.16	%

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.

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

· 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 has insufficient cash flows to service their loan(s); 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 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 $92,000 and $11,000 as of December 31, 2019 and 2018, respectively.

The following table details the loans modified in  TDRs during the year ended December 31, 2019 (dollars in thousands).

Loans in accrual status	# of Loans	Current Balance		Concession Granted
Commercial and industrial	2	$	816	Extension of maturity date with a below market interest rate
Loans in non-accrual status
Commercial loan secured by non-owner occupied real estate	1		8	Extension of maturity date

The following table details the loans modified in TDRs during the year ended December 31, 2018 (dollars in thousands).

Loans in non-accrual status	# of Loans	Current Balance		Concession Granted
Commercial loan secured by non-owner occupied real estate	1	$	11	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’s in the previous 12 months and defaulted during the reporting periods ending December 31, 2019, 2018 or 2017, 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 is recorded at the lower of (1) fair value minus estimated costs to sell or (2) carrying cost.

Foreclosed assets acquired in settlement of loans carried at fair value less estimated costs to sell are included in Other assets on the Consolidated Balance Sheets. As of December 31, 2019, a total of $37,000 of residential real estate foreclosed assets were included in Other assets. As of December 31, 2018, there were no residential real estate foreclosed assets included in Other assets. As of December 31, 2019, the Company had initiated formal foreclosure procedures on $267,000 of consumer residential mortgages.

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CASH AND DUE FROM DEPOSITORY INSTITUTIONS

12 Months Ended

Dec. 31, 2019

CASH AND DUE FROM DEPOSITORY INSTITUTIONS

CASH AND DUE FROM DEPOSITORY INSTITUTIONS

5. CASH AND DUE FROM DEPOSITORY INSTITUTIONS

Included in “Cash and due from depository institutions” are required federal reserves of $3.0 million and $3.6 million for December 31, 2019 and 2018, respectively, for facilitating the implementation of monetary policy by the Federal Reserve System. The required reserves are computed by applying prescribed ratios to the classes of average deposit balances. These are held in the form of vault cash and a depository amount held with the Federal Reserve Bank.