10-K

 

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

 

FORM 10-K

 

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

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2017

OR

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

FOR THE TRANSITION PERIOD FROM            TO           

COMMISSION FILE NUMBER 0-11204

 

AMERISERV FINANCIAL, INC.

(Exact name of registrant as specified in its charter)

 

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	15907-0430
(Address of principal executive offices)	(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	Name Of Each Exchange On Which Registered
Common Stock, Par Value $0.01 Per Share	The NASDAQ Stock Market LLC
8.45% Beneficial Unsecured Securities, Series A (AmeriServ Financial Capital Trust I)	The NASDAQ Stock Market LLC

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

 

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

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

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

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

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

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

Large accelerated filer o	Accelerated filer o	Non-accelerated filer o	Smaller reporting company þ
Emerging growth company o

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes þ 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 prices of such common equity, as of the business day of the registrant’s most recently completed second fiscal quarter. The aggregate market value was $69,492,588 as of June 30, 2017.

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. There were 18,128,247 shares outstanding as of January 31, 2018.

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		11
Item 1B. Unresolved Staff Comments		11
Item 2. Properties		11
Item 3. Legal Proceedings		11
Item 4. Mine Safety Disclosures		11
PART II
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		12
Item 6. Selected Consolidated Financial Data		13
Item 7. Management’s Discussion and Analysis of Consolidated Financial Condition and Results of Operations		14
Item 7A. Quantitative and Qualitative Disclosures about Market Risk		34
Item 8. Financial Statements and Supplementary Data		36
Item 9. Changes in and Disagreements With Accountants On Accounting and Financial Disclosure		93
Item 9A. Controls and Procedures		93
Item 9B. Other Information		93
PART III
Item 10. Directors, Executive Officers, and Corporate Governance		94
Item 11. Executive Compensation		94
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		95
Item 13. Certain Relationships and Related Transactions, and Director Independence		95
Item 14. Principal Accountant Fees and Services		95
PART IV
Item 15. Exhibits, Financial Statement Schedules		96
Signatures		98

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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, 2017, the Company had, on a consolidated basis, total assets, deposits, and shareholders’ equity of $1.168 billion, $948 million, and $95 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 15 locations in Allegheny, Cambria, Centre, Somerset, and Westmoreland counties, Pennsylvania, 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 16 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 also a subsidiary of the Bank. The Company also operates loan production offices (LPOs) in Monroeville and Altoona in Pennsylvania, and in Hagerstown, Maryland.

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.

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

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

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 both a Management Enterprise Risk Committee with Board of Director representation and a Board Enterprise Risk Committee to help manage and monitor the Company’s risk position.

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. 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.

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Commercial Loans Secured by Real Estate

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

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. 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, short maturity agency securities, high quality corporate securities and select taxable municipal securities. Management strives to maintain a portfolio duration that is less than 60 months. All holdings must meet standards documented in its investment policy.

Investment securities classified as held to maturity are carried at amortized cost while investment securities classified as available for sale are reported at fair market value. The following table sets forth the cost basis and fair value of the Company’s investment portfolio as of the periods indicated:

Investment securities available for sale at:

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

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Investment securities held to maturity at:

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

DEPOSITS

The Bank has a stable core deposit base made up of traditional commercial bank products that exhibits little fluctuation, other than jumbo certificates of deposits (CDs), 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,
	2017					2016					2015
	(IN THOUSANDS, EXCEPT PERCENTAGES)
Demand:
Non-interest bearing	$	182,301		—%		$	182,732		—	%	$	171,175		—	%
Interest bearing		129,589		0.49			108,350		0.29			97,201		0.21
Savings		97,405		0.17			95,986		0.17			94,425		0.17
Money market		275,636		0.52			277,967		0.43			242,298		0.34
Other time		291,475		1.38			290,612		1.28			287,783		1.24
Total deposits	$	976,406		0.79	%	$	955,647		0.70	%	$	892,882		0.66	%

LOANS

The loan portfolio of the Company consisted of the following:

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

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

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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 on 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, quality non-salable loans, and bi-weekly mortgages. These loans are usually kept in the Bank’s portfolio. New portfolio production is predominately adjustable rate mortgages.

Non-performing Assets

The following table presents information concerning non-performing assets:

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

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

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

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

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AMERISERV FINANCIAL NON-BANKING SUBSIDIARIES

AMERISERV TRUST AND FINANCIAL SERVICES COMPANY

AmeriServ Trust and Financial Services Company is a trust company organized under Pennsylvania law in October 1992. Its staff of approximately 45 professionals administers assets valued at approximately $2.2 billion that are not recognized on the Company’s balance sheet at December 31, 2017. The Trust Company focuses on wealth management. Wealth management includes personal trust products and services such as personal portfolio investment management, estate planning and administration, custodial services and pre-need trusts. Also, institutional trust products and services such as 401(k) plans, defined benefit and defined contribution employee benefit plans, and individual retirement accounts are included in this segment. This segment also includes financial services, which include the sale of mutual funds, annuities, and insurance products. The wealth management business also includes the union collective investment funds, namely the ERECT and BUILD funds which are designed to use union pension dollars in construction projects that utilize union labor. The BUILD fund continues in the process of liquidation. At December 31, 2017, the Trust Company had total assets of $5.1 million and total stockholder’s equity of $5.1 million. In 2017, the Trust Company contributed earnings to the Company as its gross revenue amounted to $8.8 million and the net income contribution was $1.1 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, 2017, AmeriServ Life had total assets of $284,000.

MONETARY POLICIES

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

COMPETITION

Our subsidiaries face strong competition from other commercial banks, savings banks, credit unions, savings and loan associations, and other financial or investment service institutions for business in the communities they serve. 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. In addition, personal and corporate trust investment counseling services are offered by insurance companies, other firms, and individuals.

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

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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 6.8% average in 2016 to a 6.0% average in 2017. 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.

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 State College MSA decreased from a 4.1% average in 2016 to a 3.7% average in 2017 and remains the one of the lowest of all regions in the Commonwealth. A large percentage of the population in State College falls into the 18 to 34 year old age group, while potential customers in the Cambria/Somerset markets tend to be over 50 years of age.

The Company also has loan production offices in Monroeville in Allegheny County, Altoona in Blair County, Pennsylvania, and Hagerstown in Washington County, Maryland. Monroeville 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 Pittsburgh MSA decreased from a 5.7% average in 2016 to a 5.0% average in 2017.

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 unemployment rate in the Altoona MSA decreased from a 5.3% average in 2016 to a 4.8% average in 2017.

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

EMPLOYEES

The Company employed 321 people as of December 31, 2017 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%. Additionally, effective January 1, 2014, the Company implemented a soft freeze of its defined benefit pension plan for union employees. A soft freeze means that all existing union employees as of December 31, 2013 currently participating will remain in the defined benefit pension plan but any new union employees hired after January 1, 2014 will no longer be part of the defined benefit plan but instead will be offered retirement benefits under an enhanced 401(k) program. The Company has not experienced a work stoppage since 1979. The Company is one of an estimated ten union-represented banks nationwide.

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INDUSTRY REGULATION

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

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 minimal 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. The FDICIA imposes progressively more restrictive constraints on operations, management and capital distributions, depending on the category in which an institution is classified. Unless a bank is well capitalized, it is subject to restrictions on its ability to utilize brokered deposits and on other aspects of its operations. Generally, a bank is prohibited from paying any dividend or making any capital distribution or paying any management fee to its holding company if the bank would thereafter be undercapitalized.

As of December 31, 2017, 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 will be phased in over a four year period ending January 1, 2019 with minimum capital requirements becoming increasingly more strict each year of the transition. The new minimum capital to risk-adjusted assets requirements (which includes the impact of the capital conservation buffer applicable to each year) are as follows:

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

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

8

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

DIVIDEND RESTRICTIONS

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

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

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

SARBANES-OXLEY ACT OF 2002

The Sarbanes-Oxley 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 process 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,

9

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.

A provision of the Dodd-Frank Act eliminates 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.

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. You may also read and copy any document we file with the SEC at the SEC’s public reference room, located at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room.

Our 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.

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ITEM 1A. RISK FACTORS

Not applicable.

ITEM 1B. UNRESOLVED STAFF COMMENTS

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

ITEM 2. PROPERTIES

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

ITEM 3. LEGAL PROCEEDINGS

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

ITEM 4. MINE SAFETY DISCLOSURE

Not applicable.

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PART II

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

COMMON STOCK

As of January 31, 2018, the Company had 2,983 shareholders of record for its common stock. The Company’s common stock is traded on The NASDAQ Stock Market under the symbol “ASRV.” The following table sets forth the actual high and low closing prices and the cash dividends declared per share for the periods indicated:

	PRICES				CASH DIVIDENDS DECLARED
	HIGH		LOW
Year ended December 31, 2017:
First Quarter	$	4.00	$	3.60	$	0.015
Second Quarter		4.20		3.70		0.015
Third Quarter		4.05		3.80		0.015
Fourth Quarter		4.35		3.85		0.015
Year ended December 31, 2016
First Quarter	$	3.36	$	2.96	$	0.01
Second Quarter		3.27		2.95		0.01
Third Quarter		3.34		3.02		0.015
Fourth Quarter		3.80		3.15		0.015

The declaration of cash dividends on the Company’s common stock is at the discretion of the Board, and any decision to declare a dividend is based on a number of factors, including, but not limited to, earnings, prospects, financial condition, regulatory capital levels, applicable covenants under any credit agreements and other contractual restrictions, Pennsylvania law, federal and Pennsylvania bank regulatory law, and other factors deemed relevant. Additionally, on January 24, 2017, the Company’s Board of Directors approved a common stock repurchase program that called for AmeriServ Financial, Inc. to buy back up to 5% or approximately 945,000 shares of its outstanding common stock over an 18 month time period beginning on the day of announcement.

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

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

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

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ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

SELECTED FIVE-YEAR CONSOLIDATED FINANCIAL DATA

	AT OR FOR THE YEAR ENDED DECEMBER 31,
	2017			2016			2015			2014			2013
	(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
SUMMARY OF INCOME STATEMENT DATA:
Total interest income	$	44,356		$	41,869		$	41,881		$	40,441		$	39,343
Total interest expense		8,795			7,735			6,520			6,397			6,482
Net interest income		35,561			34,134			35,361			34,044			32,861
Provision (credit) for loan losses		800			3,950			1,250			375			(1,100	)
Net interest income after provision (credit) for loan losses		34,761			30,184			34,111			33,669			33,961
Total non-interest income		14,645			14,638			15,267			14,323			15,744
Total non-interest expense		40,766			41,615			41,038			43,371			42,223
Income before income taxes		8,640			3,207			8,340			4,621			7,482
Provision for income taxes		5,347			897			2,343			1,598			2,289
Net income	$	3,293		$	2,310		$	5,997		$	3,023		$	5,193
Net income available to common shareholders	$	3,293		$	2,295		$	5,787		$	2,813		$	4,984
PER COMMON SHARE DATA:
Basic earnings per share	$	0.18		$	0.12		$	0.31		$	0.15		$	0.26
Diluted earnings per share		0.18			0.12			0.31			0.15			0.26
Cash dividends declared		0.06			0.05			0.04			0.04			0.03
Book value at period end		5.25			5.05			5.19			4.97			4.91
BALANCE SHEET AND OTHER DATA:
Total assets	$	1,167,655		$	1,153,780		$	1,148,497		$	1,089,263		$	1,056,036
Loans and loans held for sale, net of unearned income		892,758			886,858			883,987			832,131			786,748
Allowance for loan losses		10,214			9,932			9,921			9,623			10,104
Investment securities available for sale		129,138			127,077			119,467			127,110			141,978
Investment securities held to maturity		38,752			30,665			21,419			19,840			18,187
Deposits		947,945			967,786			903,294			869,881			854,522
Total borrowed funds		115,701			78,645			117,058			93,965			79,640
Stockholders’ equity		95,102			95,395			118,973			114,407			113,307
Full-time equivalent employees		302			305			318			314			352
SELECTED FINANCIAL RATIOS:
Return on average assets		0.28	%		0.20	%		0.54	%		0.29	%		0.51	%
Return on average total equity		3.42			2.30			5.10			2.61			4.69
Loans and loans held for sale, net of unearned income, as a percent of deposits, at period end		94.18			91.64			97.86			95.66			92.07
Ratio of average total equity to average assets		8.24			8.79			10.65			10.92			10.86
Common stock cash dividends as a percent of net income available to common shareholders		33.80			41.18			13.03			26.73			11.36
Interest rate spread		3.14			3.08			3.33			3.36			3.39
Net interest margin		3.32			3.26			3.49			3.52			3.56
Allowance for loan losses as a percentage of loans, net of unearned income, at period end		1.15			1.12			1.13			1.16			1.29
Non-performing assets as a percentage of loans and other real estate owned, at period end		0.34			0.18			0.71			0.35			0.52
Net charge-offs as a percentage of average loans		0.06			0.44			0.11			0.11			0.18
Ratio of earnings to fixed charges and preferred dividends:(1)
Excluding interest on deposits		4.22X			2.26X			4.68X			3.30X			5.13X
Including interest on deposits		1.97			1.40			2.19			1.67			2.07
Cumulative one year interest rate sensitivity gap ratio, at period end		1.22			1.44			1.23			1.13			1.09

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

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

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

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

2017 SUMMARY OVERVIEW:

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

This new tax code arrived at a favorable time for AmeriServ. Our goal for 2017 was to re-establish the financial performance level that we reported in mid-2015. The result of this strong emphasis was that AmeriServ ended 2017 with the highest level of average loans for a full year on record. AmeriServ also ended 2017 with the highest level of average deposits on record, the highest level of total revenue on record and a reduced level of operating expenses. It is possible that had it not been necessary to recalculate the tax accounting process and accept a one-time charge against earnings, that 2017 may have been the best year since the restructure of the franchise in 2000.

That one-time charge resulted in AmeriServ announcing on January 23, 2018 net income for 2017 of $3,293,000 or $0.18 per common share. This was a 43% improvement in net income and a 50% improvement in earnings per share over 2016 which reported net income of $2,295,000 or $0.12 per share. Parenthetically, it is a fact that if the Tax Cut and Jobs Act had never occurred and the Company would not have been required to recognize an additional income tax charge of $2,624,000, AmeriServ would have reported net income of $5,917,000 or $0.32 per share for 2017. This was our year-long goal for 2017.

AmeriServ is growing stronger year over year, but challenges remain. AmeriServ has become a very active lender to small and mid-size businesses. AmeriServ finished 2017 for the fourth consecutive year with a record of lending over 90% of deposits into our regional markets. This means we are always seeking fresh deposits because it is our responsibility to provide affordable loans to the local and regional businesses and consumers who are the backbone of our local economies.

AmeriServ also has been a company with a higher level of overhead than most community banks our size. We are working to improve this through technical advances which allow for higher productivity. A relationship has been established with a company who is the largest provider of banking software in the U.S. The goal is to continue to improve productivity and to consequently further reduce expenses.

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

As has been our aim, we are setting forth in 2018 with all of the issues contained in the Tax Cut and Jobs Act as we know them today behind us. It is our job to use the new lower tax rate to build an even stronger and more profitable company. We will not chase the latest “fad.” Instead, we will continue to build strength in our balance sheet and then leverage that strength for the benefit of our customers and our shareholders. We think these are exciting times to be community bankers.

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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,
	2017			2016			2015
	(IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
Net income	$	3,293		$	2,310		$	5,997
Net income available to common shareholders		3,293			2,295			5,787
Diluted earnings per share		0.18			0.12			0.31
Return on average assets		0.28	%		0.20	%		0.54	%
Return on average equity		3.42			2.30			5.10

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

The Company reported net income available to common shareholders of $2.3 million, or $0.12 per diluted common share, for 2016. This represented a 61% decrease in earnings per share from 2015 where net income available to common shareholders totaled $5.8 million, or $0.31 per diluted share. This reduction reflects, 1.) a substantially higher than typical provision for loan losses and net loan charge offs that were recorded in the first quarter of 2016 to resolve the Company’s only meaningful direct loan exposure to the energy industry, 2.) a reduced level of net interest income that results from net interest margin compression, which is prevalent in the banking industry, as well as a lower level of loan prepayment fee income and additional interest expense related to the issuance of subordinated debt, and 3.) operating expenses increasing by $577,000, or 1.4% due to non-recurring costs for legal and accounting services that were necessary to address a trust operations trading error.

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

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

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2017 NET INTEREST PERFORMANCE OVERVIEW... The Company’s net interest income for the full year of 2017 increased by $1.4 million, or 4.2%, when compared to the full year of 2016. The Company’s net interest margin was 3.32% for the full year of 2017 representing a six basis point improvement from the full year of 2016. The 2017 increase in net interest income is a result of a higher level of total earning assets and favorable balance sheet positioning which contributed to the improved net interest margin performance. The Company continues to grow earning assets while also limiting increases in its cost of funds through disciplined deposit pricing. Specifically, the earning asset growth occurred in both the loan and investment securities portfolios. Investment securities averaged $173 million for the full year of 2017 which is $25.3 million, or 17.2%, higher than the full year 2016 average. Total loans averaged $894 million for the full year 2017 which is $6.2 million, or 0.7%, higher than the 2016 full year average.

The Company experienced growth in average deposits which we believe reflects the loyalty of our core deposit base that provides a strong foundation upon which this growth builds. Specifically, total deposits averaged $976 million in 2017 which is $20.8 million, or 2.2%, higher than the $956 million average for the full year of 2016 The deposit growth occurred in interest bearing deposits while the total non-interest bearing demand deposit account balances remained relatively stable between years. As a result of this strong deposit growth, the Company’s loan to deposit ratio ended the year at 91.5% which indicates that the Company has ample capacity to further grow its loan portfolio in 2018.

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

COMPONENT CHANGES IN NET INTEREST INCOME: 2017 VERSUS 2016... Regarding the separate components of net interest income, the Company’s total interest income in 2017 increased by $2.5 million when compared to 2016. Total average earnings assets in 2017 grew by $23.7 million due to increases in both average loans and average securities, which was complemented by a 15 basis point increase in the earning asset yield from 3.99% to 4.14%. Within the earning asset base, investment securities interest revenue increased by $1.1 million or 27.8% in 2017 due to a $25.3 million increase in the average investment securities portfolio. The yield on total investment securities increased by 24 basis points from 2.66% to 2.90%. The growth in the investment securities portfolio is the result of management electing to diversify the mix of the investment securities portfolio through purchases of high quality corporate and taxable municipal securities. This revised strategy for securities purchases was facilitated by the increase in national interest rates that resulted in improved opportunities to purchase additional securities and grow the portfolio. Total loan interest income increased by $1.4 million as the yield on the total loan portfolio increased by 12 basis points from 4.27% to 4.39%. Even though loan production slowed somewhat during the fourth quarter because of the uncertainty that existed in the market from potential borrowers due to the timing that corporate tax reform would be enacted, the loan portfolio still demonstrated an increase. This increase was the result of the successful results of the Company’s business development efforts, with an emphasis on generating all types of commercial business loans particularly through its loan production offices. Loan interest income increased by $1,356,000, or 3.6%, for the full year of 2017 when compared to last year. The higher loan interest income also results from new loans originating at higher yields due to the higher interest rates and also reflects the upward repricing of certain loans tied to LIBOR or the prime rate as both of these indices have moved up with the Federal Reserve’s decision to increase the target federal funds interest rate by 25 basis points three times in 2017.

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

16

products were the primary reasons for this growth. Specifically, total interest bearing deposits averaged $794 million in 2017 which is $21.2 million, or 2.7%, higher than the $773 million average for the full year of 2016. Deposit interest expense in 2017 increased by $855,000, or 15.8%, due to the higher balance of interest bearing deposits along with certain indexed money market accounts repricing upward after the Federal Reserve interest rate increases. The cost of interest bearing deposits increased by nine basis points in 2017 to 0.79% due to the impact of increasing national interest rates. Management continues to carefully price interest rates paid on all deposit categories. The Company experienced a $205,000 increase in the interest cost for borrowings in 2017 due to the immediate impact that the increases in the Federal Funds Rate had on the cost of overnight borrowed funds, FHLB term advances and a higher level of total borrowed funds. Total overnight borrowings increased by $7.9 million while their cost increased by 64 basis points to 1.21%. The Company also continued to utilize term advances from the FHLB, with maturities ranging between three and five years, to help fund earning asset growth and manage interest rate risk. The average balance of FHLB term advances decreased by $3.1 million while the average cost of these advances increased by 20 basis points to 1.52% as matured term advances were replaced by advances with higher interest rates. Total FHLB borrowed funds, including overnight borrowed funds, averaged $62.6 million or 5.4% of total average assets and increased by $4.9 million, or 8.4%. Overall, total interest bearing funding costs increased by nine basis points to 1.00%.

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

2016 NET INTEREST PERFORMANCE OVERVIEW... The Company’s net interest income for the full year of 2016 decreased by $1,227,000, or 3.5%, when compared to the full year of 2015. The Company’s net interest margin of 3.26% for the full year of 2016 was 23 basis points lower than the net interest margin of 3.49% for the full year of 2015. The 2016 reduction in net interest income has been significantly impacted by the following three factors: 1.) net interest margin compression that results from the prolonged low interest rate environment that exists in the economy and is pressuring community bank net interest margins, 2.) additional interest expense that was associated with the Company’s late fourth quarter 2015 issuance of subordinated debt, and 3.) a significantly lower level of loan prepayment fee income, which decreased by approximately $300,000 for full year of 2016. These factors more than offset the Company’s continued growth in earning assets and control of its cost of funds through disciplined deposit pricing. Specifically, the earning asset growth occurred in the loan portfolio as total loans averaged $888 million for the full year of 2016, which is $31 million, or 3.6%, higher than the $857 million average for the full year of 2015. This loan growth reflects the successful results of the Company’s business development efforts, with an emphasis on generating commercial loans and owner occupied commercial real estate loans particularly through its loan production offices. However, loan interest income is $134,000, or 0.4%, lower for the full year of 2016 when compared to the full year of 2015 due primarily to the previously mentioned decline in loan prepayment fees between years. Interest income on short-term investments and investment securities grew by $122,000 or 3.1% for the full year as the Company benefited from a higher balance of investment securities in 2016. Overall, total interest income decreased by $12,000, or 0.03%, in 2016.

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

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

COMPONENT CHANGES IN NET INTEREST INCOME: 2016 VERSUS 2015... Regarding the separate components of net interest income, the Company’s total interest income in 2016 decreased by $12,000 when compared to 2015. This is evidenced by a $36.9 million increase in average earning assets due to increases in both average loans and average securities, which was more than offset by a 15 basis point decline in the earning asset yield from 4.14% to 3.99%. Within the earning asset base, total loan interest income decreased by $134,000 as the yield on the total loan portfolio decreased by 17 basis points from 4.44% to 4.27%. The greater level of total average loans in 2016 was more than offset by the impact of new loans having yields that are below the rate on the maturing instruments that they are replacing. Also negatively impacting loan interest income in 2016 was the reduced level of loan prepayment fee income. Investment securities interest revenue increased by $47,000 in 2016 due to a $2.3 million increase in the average investment securities portfolio. However, the yield on total investment securities decreased by one basis points from 2.67% to 2.66% due to net interest margin compression as well as an increase in premium amortization on mortgage backed securities, which resulted from an increase in mortgage prepayment speeds in 2016.

The Company’s total interest expense for 2016 increased by $1.2 million, or 18.6%, when compared to 2015. Total interest bearing deposits increased by $51.2 million or 7.1% due to management’s ability to acquire new core deposit funding from outside our traditional market areas as well as our ongoing efforts to offer new loan customers deposit products. Total interest bearing deposit interest expense increased by $648,000 in 2016 due to the higher volume of interest bearing deposits and an increase of four basis points in the cost of interest bearing deposits to 0.70%. Management continues to carefully price interest rates paid on all deposit categories. The Company experienced a $567,000 increase in the interest cost for borrowings in 2016, with $515,000 of this increase attributable to the Company’s subordinated debt issuance which occurred late in December of 2015. The increase in borrowings interest expense is also reflective of a greater usage total average FHLB term advances. The Company has utilized term advances from the FHLB, with maturities ranging between three and five years, to help fund its earning asset growth and manage interest rate risk. The average balance of FHLB term advances has increased by $2.6 million while the average cost of these advances has increased by 11 basis point to 1.32%. Total FHLB borrowings, including overnight borrowed funds, averaged $57.8 million or 5.1% of total assets during 2016. Overall, total interest bearing funding costs increased by 10 basis points to 0.91%.

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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 approximately 34% is used to compute tax-equivalent yields.

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

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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.

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

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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 $250,000 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.

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

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

The Company continues to maintain excellent asset quality. Non-performing assets increased by $1.4 million since the prior year-end and now total $3.0 million. The continued successful ongoing problem credit resolution efforts of the Company is demonstrated in the table above as levels of non-accrual loans, non-performing assets, classified loans and low loan delinquency levels are below 1% of total loans. We continue to closely monitor the loan portfolio given the uneven recovery in the economy and the number of relatively large-sized commercial and CRE loans within the portfolio. As of December 31, 2017, the 25 largest credits represented 26.4% of total loans outstanding.

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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.

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

For 2017, the Company recorded an $800,000 provision for loan losses compared to a $3,950,000 provision for loan losses in 2016 or a decrease of $3.2 million between years. Both, the loan loss provision and net charge-offs were at more typical levels this year than the substantially higher levels that were necessary early last year to resolve a troubled loan exposure to the energy industry. The provision recorded in 2017 supported commercial loan growth and more than covered the low level of net loan charge-offs in 2017 resulting in the allowance for loan losses growing between years. The Company experienced net loan

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charge-offs of $518,000, or 0.06% of total loans in 2017 compared to net loan charge-offs of $3.9 million, or 0.44%, of total loans in 2016. Overall, the Company continued to maintain strong asset quality as its nonperforming assets totaled $3.0 million, or 0.34%, of total loans, at December 31, 2017. In summary, the allowance for loan losses provided 337% coverage of non-performing loans, and 1.15% of total loans, at December 31, 2017, compared to 612% coverage of non-performing loans, and 1.12% of total loans, at December 31, 2016. The Company presently expects that it will have a typical loan loss provision in 2018. The expected provision will be necessary to cover loan charge-offs and support the anticipated growth in the loan portfolio.

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

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,
	2017					2016					2015					2014					2013
	AMOUNT		PERCENT OF LOANS IN EACH CATEGORY TO TOTAL LOANS			AMOUNT		PERCENT OF LOANS IN EACH CATEGORY TO TOTAL LOANS			AMOUNT		PERCENT OF LOANS IN EACH CATEGORY TO TOTAL LOANS			AMOUNT		PERCENT OF LOANS IN EACH CATEGORY TO TOTAL LOANS			AMOUNT		PERCENT OF LOANS IN EACH CATEGORY TO TOTAL LOANS
			(IN THOUSANDS, EXCEPT PERCENTAGES)
Commercial	$	4,299		17.8	%	$	4,041		19.3	%	$	4,244		20.6	%	$	3,262		16.8	%	$	2,844		15.3	%
Commercial loans secured by real estate		3,666		52.0			3,584		50.4			3,449		47.9			3,902		49.6			4,885		52.6
Real estate-mortgage		1,102		28.0			1,169		28.1			1,173		29.3			1,310		31.3			1,260		30.1
Consumer		128		2.2			151		2.2			151		2.2			190		2.3			136		2.0
Allocation to general risk		1,019		—			987		—			904		—			959		—			979		—
Total	$	10,214		100.0	%	$	9,932		100.0	%	$	9,921		100.0	%	$	9,623		100.0	%	$	10,104		100.0	%

Even though residential real estate-mortgage loans comprise 28.0% of the Company’s total loan portfolio, only $1.1 million or 10.8% 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 real estate reflect the increased credit risk associated with this type of lending, the Company’s historical loss experience in these categories, and other qualitative factors. The stability in the part of the allowance allocated to each loan category reflects the continued strong asset quality of each sector.

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Based on the Company’s 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, 2017 to cover losses within the Company’s loan portfolio.

NON-INTEREST INCOME... Non-interest income for 2017 totalled $14.6 million, an increase of $7,000, or 0.1%, from 2016. Factors contributing to this higher level of non-interest income in 2017 included:

— a $258,000, or 10.2%, increase in other income as the Company benefited from additional revenue resulting from a more aggressive business development strategy within its Financial Services Division. Also, fee revenue from Trust and investment advisory fees increased by a $129,000, or 1.6% as the Company benefited from increasing market values for assets under management in 2017. Wealth management continues to be an important strategic focus as it contributed over 29% of the Company’s total revenue in 2017.

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

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

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

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

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

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

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

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

— a $93,000, or 8.0%, increase in mortgage loan sale gains and mortgage related fees due to increased refinance activity and a comparable level of new mortgage loan originations when compared to 2015.

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

NON-INTEREST EXPENSE... Non-interest expense for 2017 totalled $40.8 million, which represents an $849,000, or 2.0%, decrease from 2016. Factors contributing to the lower non-interest expense in 2017 included:

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

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

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

Non-interest expense for 2016 totalled $41.6 million, which represents a $577,000, or 1.4%, increase from 2015. Factors contributing to the higher non-interest expense in 2016 included:

— other expenses were up $544,000, or 11.5% and professional fees increased by $277,000, or 5.5% for the year as a result of non-recurring costs for legal and accounting services that were necessary to address a trust operations trading error.

— occupancy and equipment related expenses are lower by $244,000, or 5.2%, as a result of management’s continued efforts to improve efficiencies and control costs.

INCOME TAX EXPENSE... The Company recorded an income tax expense of $5.3 million, or an effective tax rate of 61.9%, in 2017. The higher income tax expense is due to the enactment into law of “H.R.1.”, known as the “Tax Cuts and Jobs Act”, which necessitated the revaluation of the Company’s deferred tax asset because of the new lower corporate tax rate. The revaluation required that the Company recognize additional income tax expense of $2.6 million which was recorded in December of 2017. Without this charge, the Company’s effective tax rate would have approximated 31.5% in 2017. In 2016, income tax expense totalled $897,000, or an effective tax rate of 28.0%. Beginning in 2018, we expect a reduction in the Company’s effective tax rate to approximately 20% which we believe will provide a meaningful boost to future earnings. The Company’s deferred tax asset was $6.0 million at December 31, 2017 and relates primarily to AMT carryforwards and the ALL.

SEGMENT RESULTS... Retail banking’s net income contribution was $2.7 million in 2017 and decreased from the $3.0 million contribution in 2016 and $3.0 million in 2015. The decrease in 2017 reflects a higher volume of fixed rate residential mortgage loans being sold in the secondary market resulting in a lower volume held on our balance sheet. Interest expense is also higher between years due to higher deposit totals and certain indexed money market accounts repriced upward with the increases in the fed funds rate. Favorably impacting the retail segment’s income was a lower level of non-interest expense due to the Company’s focus on reducing and controlling costs which resulted in lower employee and occupancy expenses due to a branch consolidation. Finally, FDIC insurance expense and miscellaneous expenses are lower in 2017.

The commercial banking segment reported net income of $5.8 million in 2017 compared to net income of $3.3 million in 2016 and $5.4 million in 2015. The net income contribution for 2017 increased due to the lower provision for loan losses. The higher loan loss provision in 2016 was necessary to resolve the troubled energy sector loan that had a significant negative impact to reported net income in 2016. Also, a decrease in classified assets and the level of delinquency during the year contributed to the lower provision expense. Growth in commercial real estate loans over the past year also contributed to the higher level of net income. In addition to the growth experienced in the CRE portfolio the commercial banking segment also benefitted from a lower level of non-interest expense due to the closure of a loan production office and additional operation efficiencies.

The trust segment’s net income contribution was $1.4 million in 2017 compared to $1.1 million in 2016 and $1.3 million in 2015. The increase to total income occurred as expenses returned to a more normal level after additional costs were necessary in 2016 to address a trust operations trading error. Also, the higher level of net income results from continued effective management of existing customer accounts as asset market values have improved. Finally, income from the Financial Services business unit increased as wealth management continues to be an important strategic focus of the Company. Additionally, and slightly offsetting the favorable items mentioned above was additional investment in talent, which contributed to higher salaries

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and benefits expense. Overall, the fair market value of trust assets under administration totaled $2.186 billion at December 31, 2017, an increase of $193 million, or 9.7%, from the December 31, 2016 total of $1.993 billion.

The investment/parent segment reported a net loss of $6.7 million in 2017, which was higher than the net loss of $5.2 million in 2016 and $3.8 million in 2015. The increased loss between years is solely reflective of the higher income tax expense that resulted from the additional income tax charge of $2.6 million recorded in December of 2017 and is related to corporate income tax reform. This additional tax expense more than offset the favourable impact of the higher level of investment securities on the Company’s balance sheet in 2017 that resulted from the Company’s strategic decision to purchase more high quality corporate and taxable municipal securities. This segment continues to feel the most earnings pressure from the continued low interest rate environment. The Company did generate investment security gains of $115,000 in 2017 and $177,000 in 2016 from the sale of certain low balance, rapidly prepaying mortgage backed securities which had a favorable impact on earnings in this segment.

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

BALANCE SHEET... The Company’s total consolidated assets of $1.168 billion at December 31, 2017 grew by $13.9 million or 1.2% from the $1.154 billion level at December 31, 2016. This asset growth was due primarily to a $10.1 million or 6.4% increase in total investment securities in 2017. The growth in the investment securities portfolio is the result of management electing to diversify the mix of the investment securities portfolio through purchases of high quality corporate and taxable municipal securities. This revised strategy for securities purchases was facilitated by the increase in national interest rates that resulted in improved opportunities to purchase additional securities and grow the portfolio. This investment securities increase was partially offset by a $1.0 million decrease in short term investments. Total loan growth of $5.9 million or 0.7% between years was lower than what is typically experienced as loan production slowed in the second half of the year because of the uncertainty in the market from potential regarding the timing that corporate tax reform would be enacted. The loan growth that did occur was due to continued successful results of the Company’s intensive sales calling efforts with an emphasis on generating commercial loans and owner occupied CRE loans particularly through its loan production offices.

The Company’s deposits at period end declined by $19.8 million and was offset by an increase in FHLB borrowings ($37 million). The increase in FHLB borrowings occurred in overnight borrowed funds. The FHLB term advances, with maturities between 3 and 5 years, remained relatively stable at $46 million as the Company has utilized these advances to help mitigate interest rate risk. Other liabilities decreased by $3.0 million due to a decrease in the Company’s pension liability. Total stockholders’ equity decreased by $293,000 since year-end 2016 due to the impact of the Company returning more capital to its shareholders through the common stock repurchase program. This along with the negative impact that the additional income tax charge had on total equity more than offset retained earnings growth. The Company continues to be considered well capitalized for regulatory purposes with a risk based capital ratio of 13.21% and an asset leverage ratio of 9.32% at December 31, 2017. The Company’s book value per common share was $5.25, its tangible book value per common share was $4.59 and its tangible common equity to tangible assets ratio was 7.20% at December 31, 2017.

LIQUIDITY... The Company’s liquidity position has been strong during the last several years. Our core retail deposit base has grown over the past four years and has been adequate to fund the Company’s operations. Cash flow from maturities, prepayments and amortization of securities was also 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, 2017, the Company’s loan to deposit ratio was 91.5%. Given current commercial loan pipelines and the continued development of our three 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 increased by $115,000 from December 31, 2016, to December 31, 2017, due to $12.7 million of cash provided by financing activities and $7.7 million of cash provided by operating activities. This was offset

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by $20.2 million of cash used in investing activities. Within investing activities, cash advanced for new loan fundings and purchases totalled $166.4 million and was $6.3 million higher than the $160.1 million of cash received from loan principal payments and sales. Within financing activities, deposits decreased by $19.8 million. Total FHLB borrowings increased as advances, both short-term and long term, were increased by $37.0 million. Early in the first quarter of 2016, the Company redeemed the $21 million preferred stock issued to the US Treasury under the SBLF program.

The holding company had a total of $9.9 million of cash, short-term investments, and investment securities at December 31, 2017. Additionally, dividend payments from our subsidiaries can also provide ongoing cash to the holding company. At December 31, 2017, our subsidiary Bank had $2.7 million of cash available for immediate dividends to the holding company under applicable regulatory formulas. As such, the holding company has strong liquidity to meet its trust preferred debt service requirements, its subordinated debt interest payments, its common stock dividends, and support its common stock repurchase program, which in total should approximate $3.3 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 $42 million and $38 million at December 31, 2017 and 2016, 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 assets secured by one- to four-family residential real estate. At December 31, 2017, the Company had $371 million of overnight borrowing availability at the FHLB, $34 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 asset leverage ratio was 9.32% and the risk based capital ratio was 13.21% at December 31, 2017. We anticipate that we will maintain our strong capital ratios throughout 2018. On January 24, 2017, the Company’s Board of Directors approved a common stock repurchase program that called for AmeriServ Financial, Inc. to buy back up to 5% or approximately 945,000 shares of its outstanding common stock over an 18 month time period beginning on the day of announcement. The shares may be purchased from time to time in open market, privately negotiated, or block transactions. This common stock repurchase program does not obligate the Company to acquire any specific number of shares and may be modified, suspended or discontinued at any time. During 2017, the Company returned $3.4 million of capital to its shareholders through the repurchase of 839,337 shares of its common stock in 2017. This represents approximately 89% of the authorized common stock repurchase program. Capital generated from earnings will be utilized to pay the common stock cash dividend, support the stock repurchase program and will also support controlled balance sheet growth. Our common dividend payout ratio for the full year 2017 was 33.7%. Total Parent Company cash was $9.9 million at December 31, 2017.

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 will be phased in over a four year period ending January 1, 2019 with minimum capital requirements becoming increasingly more strict each year of the transition. The new minimum capital requirements for each ratio, both, initially on January 1, 2015 and at the end of the transition on January 1, 2019, are as follows: A common equity tier 1 capital ratio of 4.5%

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initially and 7.0% at January 1, 2019; a tier 1 capital ratio of 6.0% and 8.50%; a total capital ratio of 8.0% and 10.50%; and a tier 1 leverage ratio of 5.00% and 5.00%. Under the new rules, in order to avoid limitations on capital distributions (including dividend payments and certain discretionary bonus payments to executive officers), a banking organization must hold a capital conservation buffer above its minimum risk-based capital requirements, which increases over the transition period, from 0.625% of total risk weighted assets in 2016 to 2.5% in 2019. The Company continues to be committed to maintaining strong capital levels that exceed regulatory requirements while also supporting balance sheet growth and providing a return to our shareholders.

The Company’s capital position will be more than adequate to meet the revised regulatory capital requirements.

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 on an ongoing basis.

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

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

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When December 31, 2017 is compared to December 31, 2016, the Company’s cumulative GAP ratio through one year indicates that the Company’s balance sheet is still asset sensitive with some improvement noted between years. We continue to see loan customer preference for fixed rate loans given the overall low level of interest rates. Also, we have extended some term advances with the FHLB to help manage our interest rate risk position. Overall, the low level of short interest rates makes this table more difficult to analyze since there is little room for certain deposit liabilities to reprice downward further.

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

The following table presents an analysis of the sensitivity inherent in the Company’s net interest income and market value of portfolio equity. The interest rate scenarios in the table compare the Company’s base forecast, which was prepared using a flat interest rate scenario, to scenarios that reflect immediate interest rate changes of 100 and 200 basis points. Note that we suspended the 200 basis point downward rate shock since it has little value due to the absolute low level 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		1.4	%		18.7	%
100 bp increase		1.0			11.0
100 bp decrease		(1.1	)		(16.5	)

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 and scheduled repricing of loans tied to LIBOR or prime. Also, the Company expects that it will not have to reprice its core deposit accounts up as quickly when interest rates rise. 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 1.25% to 1.50%. 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, 2017, 78% of the portfolio is classified as available for sale and 22% 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 133 securities that are temporarily impaired at December 31, 2017. The Company reviews its securities quarterly and has asserted that at December 31, 2017, 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 newly originated fixed-rate 30-year mortgage loans into the secondary market (excluding construction and any jumbo loans). The Company also sells 15-year fixed-rate mortgage loans into the secondary market as well, depending on market conditions. For the year 2017, 82% of all residential mortgage loan production was sold into the secondary market.

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The amount of loans outstanding by category as of December 31, 2017, 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.

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

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

CONTRACTUAL OBLIGATIONS... The following table presents, as of December 31, 2017, significant fixed and determinable contractual obligations to third parties by payment date. Further discussion of the nature of each obligation is included in the referenced note to the consolidated financial statements.

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

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

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

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amounts. The Company uses the same credit and collateral policies in making commitments and conditional obligations as for all other lending. The Company had various outstanding commitments to extend credit approximating $165.1 million and standby letters of credit of $10.0 million as of December 31, 2017. The Company can also use various interest rate contracts, such as interest rate swaps, caps, floors and swaptions to help manage interest rate and market valuation risk exposure, which is incurred in normal recurrent banking activities. As of December 31, 2017, the Company had $34 million in interest rate swaps outstanding.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES... The accounting and reporting policies of the Company are in accordance with GAAP and conform to general practices within the banking industry. Accounting and reporting policies for the ALL, 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.

ACCOUNT — Allowance for loan losses

BALANCE SHEET REFERENCE — Allowance for loan losses

INCOME STATEMENT REFERENCE — Provision for loan losses

DESCRIPTION

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

Commercial and CRE loans are the largest category of credits and the most sensitive to changes in assumptions and judgments underlying the determination of the ALL. Approximately $8.0 million, or 78%, of the total ALL at December 31, 2017 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

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

Goodwill arising from business combinations represents the value attributable to unidentifiable intangible elements in the business acquired. The Company’s goodwill relates to value inherent in the banking and wealth management businesses, and the value is dependent upon the Company’s ability to provide quality, cost-effective services in the face of free competition from other market participants on a regional basis. This ability relies upon continuing investments in processing systems, the development of value-added service features and the ease of use of the Company’s services. As such, goodwill value is supported ultimately by revenue that is driven by the volume of business transacted and the loyalty of the Company’s deposit and customer base over a longer time frame. The quality and value of a Company’s assets is also an important factor to consider when performing goodwill impairment testing. A decline in earnings as a result of a lack of growth or the inability to deliver cost-effective value added services over sustained periods can lead to 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, 2017, 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.

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ACCOUNT — Investment Securities

BALANCE SHEET REFERENCE — Investment securities

INCOME STATEMENT REFERENCE — Net realized gains on investment securities

DESCRIPTION

Available-for-sale and held-to-maturity securities are reviewed quarterly for possible other-than-temporary impairment. The review includes an analysis of the facts and circumstances of each individual investment such as the severity of loss, the length of time the fair value has been below cost, the expectation for that security’s performance, the creditworthiness of the issuer and the Company’s intent and ability to hold the security to recovery. A decline in value that is considered to be other-than-temporary is recorded as a loss within non-interest income in the Consolidated Statements of Operations. At December 31, 2017, 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 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:

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

• Customer Service — It is the existing and prospective customer that the Company must satisfy. This means good products and fair prices. But it also means quick response time and professional competence. It means speedy problem resolution and a minimizing of bureaucratic frustrations. The Company is training and motivating its staff to meet these standards while providing customers with more banking options that involve leading technologies such as computers, smartphones, and tablets to conduct business.

• Revenue Growth — It is necessary for the Company to focus on growing revenues. This means loan growth, deposit growth and fee growth. It also means close coordination among all customer service areas so our revenue producing products can be tailored to meet the needs of existing and prospective customers. The Company’s Strategic Plan contains action plans in each of these areas particularly on increasing loans through several loan production offices. The Strategic Plan also states that purchases of investment securities will become more diverse and include high quality corporate and taxable municipal securities while continuing to purchase federal agency mortgage backed securities that provide a return consistent with the market as well as asset cash flow liquidity. An examination of the peer bank database provides ample proof that a well-executed community banking business model can generate a reliable and rewarding revenue stream.

33

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

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

Such factors include the following: (i) the effect of changing regional and national economic conditions; (ii) the effects of trade, monetary and fiscal policies and laws, including interest rate policies of the Federal Reserve; (iii) significant changes in interest rates and prepayment speeds; (iv) inflation, stock and bond market, and monetary fluctuations; (v) credit risks of commercial, real estate, consumer, and other lending activities; (vi) changes in federal and state banking and financial services laws and regulations; (vii) the presence in the Company’s market area of competitors with greater financial resources than the Company; (viii) the timely development of competitive new products and services by the Company and the acceptance of those products and services by customers and regulators (when required); (ix) the willingness of customers to substitute competitors’ products and services for those of the Company and vice versa; (x) changes in consumer spending and savings habits; (xi) unanticipated regulatory or judicial proceedings; 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

34

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 Financial Condition and Results of Operations — Interest Rate Sensitivity.”

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

35

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

AMERISERV FINANCIAL, INC.
 
CONSOLIDATED BALANCE SHEETS

	AT DECEMBER 31,
	2017			2016
	(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
Cash and due from depository institutions	$	26,234		$	25,107
Interest bearing deposits		2,698			3,066
Short-term investments in money market funds		5,256			5,900
Cash and cash equivalents		34,188			34,073
Investment securities:
Available for sale		129,138			127,077
Held to maturity (fair value $38,811 at December 31, 2017 and $30,420 at December 31, 2016)		38,752			30,665
Loans held for sale		3,125			3,094
Loans		890,032			884,240
Less: Unearned income		399			476
Allowance for loan losses		10,214			9,932
Net loans		879,419			873,832
Premises and equipment, net		12,734			11,694
Accrued interest income receivable		3,603			3,116
Goodwill		11,944			11,944
Bank owned life insurance		37,860			37,903
Net deferred tax asset		5,963			10,655
Federal Home Loan Bank stock		4,675			3,359
Federal Reserve Bank stock		2,125			2,125
Other assets		4,129			4,243
TOTAL ASSETS	$	1,167,655		$	1,153,780
LIABILITIES
Non-interest bearing deposits	$	183,603		$	188,808
Interest bearing deposits		764,342			778,978
Total deposits		947,945			967,786
Short-term borrowings		49,084			12,754
Advances from Federal Home Loan Bank		46,229			45,542
Guaranteed junior subordinated deferrable interest debentures		12,923			12,908
Subordinated debt		7,465			7,441
Total borrowed funds		115,701			78,645
Other liabilities		8,907			11,954
TOTAL LIABILITIES		1,072,553			1,058,385
STOCKHOLDERS’ EQUITY
Common stock, par value $0.01 per share; 30,000,000 shares authorized: 26,585,403 shares issued and 18,128,247 shares outstanding on December 31, 2017; 26,521,291 shares issued and 18,903,472 shares outstanding on December 31, 2016		266			265
Treasury stock at cost, 8,457,156 shares on December 31, 2017 and 7,617,819 shares on December 31, 2016		(78,233	)		(74,829	)
Capital surplus		145,707			145,535
Retained earnings		40,312			36,001
Accumulated other comprehensive loss, net		(12,950	)		(11,577	)
TOTAL STOCKHOLDERS’ EQUITY		95,102			95,395
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,167,655		$	1,153,780

 
 
See accompanying notes to consolidated financial statements.

36

AMERISERV FINANCIAL, INC.
 
CONSOLIDATED STATEMENTS OF OPERATIONS

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

 
 
See accompanying notes to consolidated financial statements.

37

AMERISERV FINANCIAL, INC.
 
CONSOLIDATED STATEMENTS OF OPERATIONS – (continued)

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

 
 
See accompanying notes to consolidated financial statements.

38

AMERISERV FINANCIAL, INC.
 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

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

 
 
See accompanying notes to consolidated financial statements.

39

AMERISERV FINANCIAL, INC.
 
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

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

 
 
See accompanying notes to consolidated financial statements.

40

AMERISERV FINANCIAL, INC.
 
CONSOLIDATED STATEMENTS OF CASH FLOWS

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

 
 
See accompanying notes to consolidated financial statements.

41

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 15 banking locations in five southwestern Pennsylvania counties. 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 Sheet at December 31, 2017.

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. 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

42

AMERISERV FINANCIAL, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  – (continued)

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

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 by management. The stock’s value is determined by the ultimate recoverability of the par value rather than by recognizing temporary declines. The determination of whether the par value will ultimately be recovered is influenced by criteria such as the following: (a) The significance of the decline in net assets of the FHLB as compared to the capital stock amount and the length of time any such situation has persisted (b) Commitments by the FHLB to make payments required by law or regulation and the level of such payments in relation to the operating performance (c) The impact of legislative and regulatory changes on the customer base of FHLB and (d) 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 fixed-rate residential mortgage loans are classified as held for sale, because it is management’s intent to sell these residential mortgage loans. The residential mortgage loans held for sale are carried at the lower of aggregate cost or market 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.

43

AMERISERV FINANCIAL, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  – (continued)

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 loans with aggregate balances over $250,000 to determine if any specific reserve allocations are required on an individual loan basis. 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 $250,000 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

44

AMERISERV FINANCIAL, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  – (continued)

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

ALLOWANCE FOR UNFUNDED LOAN COMMITMENTS AND LETTERS OF CREDIT:

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

TRUST FEES:

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

BANK-OWNED LIFE INSURANCE:

The Company has purchased life insurance policies on certain 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 10,000, 51,273, and 58,788 shares of common stock were outstanding during 2017, 2016 and 2015, respectively, but were not included in the computation of diluted earnings per common share because to do so would be anti-dilutive. Exercise prices of anti-dilutive options to purchase common stock outstanding were $4.00, $3.23-$4.60, and $3.23-$4.70 during 2017, 2016 and 2015, respectively. Dividends on preferred shares are deducted from net income in the calculation of earnings per common share.

45

AMERISERV FINANCIAL, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  – (continued)

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

STOCK-BASED COMPENSATION:

The Company uses the modified prospective method for accounting of stock-based compensation. The Company recognized $13,000, $20,000 and $29,000 of pretax compensation expense for the years 2017, 2016 and 2015, respectively. The fair value of each option grant is estimated on the grant date using the Black-Scholes option pricing model. See Note 18 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. 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 $1,075,000 in income tax payments in 2017; $375,000 in 2016; and $1,554,000 in 2015. The Company had non-cash transfers to other real estate owned (OREO) in the amounts of $77,000 in 2017; $172,000 in 2016; and $189,000 in 2015. The Company made total interest payments of $8,681,000 in 2017; $7,746,000 in 2016; and $6,575,000 in 2015.

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

46

AMERISERV FINANCIAL, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  – (continued)

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

The Company periodically enters into derivative instruments to meet the financing, interest rate and equity risk management needs of its customers. 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. In conjunction with the annual measurement of the funded status of Company’s pension plan at December 31, 2016, management elected to change the manner in which the service cost and interest cost components of net periodic benefit cost will be determined in 2017 and beyond. Previously, the service cost and interest cost components were determined by multiplying the single equivalent rate described above and the aggregate discounted cash flows of the plan’s service cost and projected benefit obligations.

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

Management believes this new methodology, which represents a change in an accounting estimate, is a better 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 14 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.

47

AMERISERV FINANCIAL, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  – (continued)

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

RECENT ACCOUNTING STANDARDS:

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

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

48

AMERISERV FINANCIAL, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  – (continued)

In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses: Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), 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 effected 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. The Company is currently evaluating the impact that the Update will have on our 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. We are currently evaluating third-party vendor solutions to assist us in the application of this standard.

In March 2017, the FASB issued ASU 2017-07, Compensation — Retirement Benefits (Topic 715). The amendments in this Update require that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost as defined in paragraphs 715-30-35-4 and 715-60-35-9 are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. If a separate line item or items are used to present the other components of net benefit cost, that line item or items must be appropriately described. If a separate line item or items are not used, the line item or items used in the income statement to present the other components of net benefit cost must be disclosed. This Update is not expected to have a significant impact on the Company’s financial statements.

In March 2017, the FASB issued ASU 2017-08, Receivables — Nonrefundable Fees and Other Costs (Subtopic 310-20). The amendments in this Update shorten the amortization period for certain callable debt securities held at a premium. Specifically, the amendments require the premium to be amortized to the earliest call date. The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. For public business entities, the amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity should apply the amendments in this Update on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. Additionally, in the period of adoption, an entity should provide disclosures about a change in accounting principle. This Update is not expected to have a significant impact on the Company’s financial statements.

In February 2018, the FASB issued ASU 2018-02, Income Statement — Reporting Comprehensive Income (Topic 220). On December 22, 2017, the U.S. federal government enacted a tax bill, H.R.1, An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018 (Tax Cuts and Jobs Act), which requires deferred tax liabilities and assets to be adjusted for the effect of a change in tax laws. The amendments in this Update allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act.

49

AMERISERV FINANCIAL, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  – (continued)

The amendments in this Update are effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption of the amendments in this Update is permitted. The amendments in this Update should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. The Company has elected to early adopt this standard as of December 31, 2017, which resulted in a one-time cumulative effect adjustment of $2.1 million between retained earnings and accumulated other comprehensive loss on the Consolidated Balance Sheets. The adjustment had no impact on net income or any prior periods presented.

2.  CASH AND DUE FROM DEPOSITORY INSTITUTIONS

Included in “Cash and due from depository institutions” are required federal reserves of $5,000 for December 31, 2017 and $6,000 for December 31, 2016, 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.

3.  INVESTMENT SECURITIES

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

Investment securities available for sale:

	AT DECEMBER 31, 2017
	COST BASIS		GROSS UNREALIZED GAINS		GROSS UNREALIZED LOSSES			FAIR VALUE
	(IN THOUSANDS)
U.S. Agency	$	6,612	$	—	$	(40	)	$	6,572
Taxable municipal		7,198		27		(189	)		7,036
Corporate bonds		35,886		322		(424	)		35,784
U.S. Agency mortgage-backed securities		79,854		611		(719	)		79,746
Total	$	129,550	$	960	$	(1,372	)	$	129,138

Investment securities held to maturity:

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

50

AMERISERV FINANCIAL, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3.  INVESTMENT SECURITIES  – (continued)

Investment securities available for sale:

	AT DECEMBER 31, 2016
	COST BASIS		GROSS UNREALIZED GAINS		GROSS UNREALIZED LOSSES			FAIR VALUE
	(IN THOUSANDS)
U.S. Agency	$	400	$	—	$	(2	)	$	398
Taxable municipal		3,793		3		(174	)		3,622
Corporate bonds		34,403		194		(724	)		33,873
U.S. Agency mortgage-backed securities		88,738		1,132		(686	)		89,184
Total	$	127,334	$	1,329	$	(1,586	)	$	127,077

Investment securities held to maturity:

	AT DECEMBER 31, 2016
	COST BASIS		GROSS UNREALIZED GAINS		GROSS UNREALIZED LOSSES			FAIR VALUE
	(IN THOUSANDS)
U.S. Agency mortgage-backed securities	$	11,177	$	180	$	(79	)	$	11,278
Taxable municipal		13,441		70		(348	)		13,163
Corporate bonds and other securities		6,047		15		(83	)		5,979
Total	$	30,665	$	265	$	(510	)	$	30,420

Maintaining investment quality is a primary objective of the Company’s investment policy which, subject to certain limited exceptions, prohibits the purchase of any investment security below a Moody’s Investors Service or Standard & Poor’s rating of A. At December 31, 2017, 57.8% of the portfolio was rated AAA as compared to 63.5% at December 31, 2016. 9.7% of the portfolio was rated below A or unrated on December 31, 2017. 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, 2017.

The book value of securities, both available for sale and held to maturity, pledged to secure public and trust deposits, and certain Federal Home Loan Bank borrowings was $117,181,000 at December 31, 2017 and $104,953,000 at December 31, 2016.

The Company realized $115,000 of gross investment security gains in 2017 and 183,000 of gross investment security gains and $6,000 of gross investment security losses in 2016, and $107,000 of gross investment gains and $36,000 of gross investment security losses in 2015. On a net basis, the realized gain for 2017 was $76,000 after factoring in tax expense of $39,000 and the realized gain for 2016 was $117,000 after factoring in tax expense of $60,000, and the realized gain for 2015 was $46,000 after factoring in tax expense of $25,000. Proceeds from sales of investment securities available for sale were $8.1 million for 2017, $9.0 million for 2016, and $3.6 million during 2015.

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

51

AMERISERV FINANCIAL, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3.  INVESTMENT SECURITIES  – (continued)

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

Investment securities available for sale:

	AT DECEMBER 31, 2017
	U. S. AGENCY					U.S. AGENCY MORTGAGE-BACKED SECURITIES					CORPORATE BONDS AND OTHER				TOTAL INVESTMENT SECURITIES AVAILABLE FOR SALE
	(IN THOUSANDS, EXCEPT YIELDS)
COST BASIS
Within 1 year	$	400		1.03	%	$	1		6.00	%	$	—		—%	$	401		1.04	%
After 1 year but within 5 years		—		—			848		2.09			10,938		2.99		11,786		2.93
After 5 years but within 10 years		3,230		2.75			14,623		2.91			30,646		3.64		48,499		3.36
After 10 years but within 15 years		—		—			24,516		2.30			1,500		3.98		26,016		2.39
Over 15 years		2,982		2.69			39,866		2.52			—		—		42,848		2.53
Total	$	6,612		2.62		$	79,854		2.52		$	43,084		3.49	$	129,550		2.84
FAIR VALUE
Within 1 year	$	399				$	1				$	—			$	400
After 1 year but within 5 years		—					843					10,924				11,767
After 5 years but within 10 years		3,220					14,859					30,477				48,556
After 10 years but within 15 years		—					24,301					1,419				25,720
Over 15 years		2,953					39,742					—				42,695
Total	$	6,572				$	79,746				$	42,820			$	129,138

Investment securities held to maturity:

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

52

AMERISERV FINANCIAL, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3.  INVESTMENT SECURITIES  – (continued)

The following tables present information concerning investments with unrealized losses as of December 31, 2017 (in thousands):

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

The following tables present information concerning investments with unrealized losses as of December 31, 2016 (in thousands):

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

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 133 positions that are considered temporarily impaired at December 31, 2017. Management generally views changes in fair value caused by changes in interest rates as temporary; therefore, these securities have not been classified as other-than-temporarily impaired. Management has also concluded that based on current information we expect to continue to receive scheduled interest payments as well as the entire principal balance. Furthermore, management does not intend to sell these securities and does not believe it will be required to sell these securities before they recover in value or mature.

4.  LOANS

The loan portfolio of the Company consisted of the following:

	AT DECEMBER 31,
	2017		2016
	(IN THOUSANDS)
Commercial	$	159,192	$	171,529
Commercial loans secured by real estate		463,780		446,598
Real estate-mortgage		247,278		245,765
Consumer		19,383		19,872
Loans, net of unearned income	$	889,633	$	883,764

53

AMERISERV FINANCIAL, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4.  LOANS  – (continued)

Loan balances at December 31, 2017 and 2016 are net of unearned income of $399,000 and $476,000, respectively. Real estate construction loans comprised 4.1% and 4.7% of total loans net of unearned income at December 31, 2017 and 2016, 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, 2017 and 2016, 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 $554,000 and $578,000 at December 31, 2017 and 2016, respectively.

5.  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, 2016		CHARGE- OFFS			RECOVERIES		PROVISION (CREDIT)			BALANCE AT DECEMBER 31, 2017
Commercial	$	4,041	$	(278	)	$	27	$	509		$	4,299
Commercial loans secured by real estate		3,584		(165	)		14		233			3,666
Real estate-mortgage		1,169		(313	)		250		(4	)		1,102
Consumer		151		(172	)		119		30			128
Allocation for general risk		987		—			—		32			1,019
Total	$	9,932	$	(928	)	$	410	$	800		$	10,214

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

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

54

AMERISERV FINANCIAL, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5.  ALLOWANCE FOR LOAN LOSSES  – (continued)

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

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

	AT DECEMBER 31, 2017
	(IN THOUSANDS)
Loans:	COMMERCIAL		COMMERCIAL LOANS SECURED BY REAL ESTATE		REAL ESTATE- MORTGAGE		CONSUMER		TOTAL
Individually evaluated for impairment	$	1,212	$	547	$	—	$	—	$	1,759
Collectively evaluated for impairment		157,980		463,233		247,278		19,383		887,874
Total loans	$	159,192	$	463,780	$	247,278	$	19,383	$	889,633

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

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

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

55

AMERISERV FINANCIAL, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5.  ALLOWANCE FOR LOAN LOSSES  – (continued)

The segments of the Company’s loan portfolio are disaggregated to a level that allows management to monitor risk and performance. The loan segments used are consistent with the internal reports evaluated by the Company’s management and Board of Directors to monitor risk and performance within various segments of its loan portfolio and therefore, no further disaggregation into classes is necessary. The overall risk profile for the commercial and commercial real estate loan segments are impacted by non-owner occupied CRE loans, which include loans secured by non-owner occupied nonfarm nonresidential properties, as a meaningful but closely monitored portion of the commercial portfolio is centered in these types of accounts. 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 with a loan balance in excess of $100,000 that is in nonaccrual status or classified as a Troubled Debt Restructure (TDR). Loans are considered to be impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in evaluating impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. The Company does not separately evaluate individual consumer and residential mortgage loans for impairment, unless such loans are part of a larger relationship that is impaired, or are classified as a TDR.

Once the determination has been made that a loan is impaired, the determination of whether a specific allocation of the allowance is necessary is measured by comparing the recorded investment in the loan to the fair value of the loan using one of three methods: (a) the present value of expected future cash flows discounted at the loan’s effective interest rate; (b) the loan’s observable market price; or (c) the fair value of the collateral less selling costs for collateral dependent loans. The method is selected on a loan-by-loan basis, with management primarily utilizing 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 collateral real estate 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;

56

AMERISERV FINANCIAL, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5.  ALLOWANCE FOR LOAN LOSSES  – (continued)

• natural disasters;

• the inventory of competing properties;

• new improvements to, or lack of maintenance of, the subject property or competing properties upon physical inspection by the Bank;

• changes in underlying economic and market assumptions, such as material changes in current and projected vacancy, absorption rates, capitalization rates, lease terms, rental rates, sales prices, concessions, construction overruns and delays, zoning changes, etc.; and/or

• environmental contamination.

The 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 class, segregated by those for which a specific allowance was required and those for which a specific allowance was not necessary.

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

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

57

AMERISERV FINANCIAL, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5.  ALLOWANCE FOR LOAN LOSSES  – (continued)

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

	YEAR ENDED DECEMBER 31,
	2017		2016		2015
	(IN THOUSANDS)
Average impaired balance:
Commercial	$	1,075	$	718	$	1,271
Commercial loans secured by real estate		838		356		866
Consumer		—		—		9
Average investment in impaired loans	$	1,913	$	1,074	$	2,146
Interest income recognized:
Commercial	$	28	$	14	$	10
Commercial loans secured by real estate		34		8		17
Consumer		—		—		—
Interest income recognized on a cash basis on impaired loans	$	62	$	22	$	27

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 follow bank regulatory definitions. The Special Mention category includes assets that are currently protected but are potentially weak, resulting in an undue and unwarranted credit risk, but not to the point of justifying a Substandard classification. Loans in the Substandard category have well-defined weaknesses that jeopardize the liquidation of the debt, and have a distinct possibility that some loss will be sustained if the weaknesses are not corrected. All loans greater than 90 days past due, or for which any portion of the loan represents a specific allocation of the allowance for loan losses are placed in Substandard or Doubtful.

To help ensure that risk ratings are accurate and reflect the present and future capacity of borrowers to repay a loan as agreed, the Company has a structured loan rating process, which dictates that, at a minimum, credit reviews are mandatory for all commercial and commercial mortgage loan relationships with aggregate balances in excess of $250,000 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 2017 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 $1,000,000, 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.

58

AMERISERV FINANCIAL, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5.  ALLOWANCE FOR LOAN LOSSES  – (continued)

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

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

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

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 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 portfolios.

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

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

59

AMERISERV FINANCIAL, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5.  ALLOWANCE FOR LOAN LOSSES  – (continued)

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

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

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

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

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

Management tracks the historical net charge-off activity at each risk rating grade level for the entire commercial portfolio and at the aggregate level for the consumer and residential mortgage portfolios. A historical charge-off factor is calculated utilizing a rolling 12 consecutive historical quarters for the commercial portfolios. The historical charge-off factors for the consumer and residential mortgage 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

60

AMERISERV FINANCIAL, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5.  ALLOWANCE FOR LOAN LOSSES  – (continued)

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

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

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

6.  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 tables present information concerning non-performing assets including TDR:

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

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.

61

AMERISERV FINANCIAL, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

• the borrower must be experiencing financial difficulties; and

• the 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); and

• the borrower is unable to obtain refinancing from other sources at a market rate similar to rates available to a non-troubled debtor.

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

• the borrower is granted an interest rate reduction to a level below market rates for debt with similar risk; or

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

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

Any loan modification where the borrower’s aggregate exposure is at least $250,000 and where the loan currently maintains a criticized or classified risk rating, i.e. Special Mention, Substandard or Doubtful, or where the loan will be assigned a criticized or classified rating after the modification is evaluated to determine the need for TDR classification. The specific ALL reserve for loans modified as TDR’s was $748,000 and $527,000 as of December 31, 2017 and 2016, respectively.

The following table details the TDRs at December 31, 2017 (dollars in thousands).

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

62

AMERISERV FINANCIAL, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

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

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

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

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

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

There were no loans that were modified as TDR’s in the previous 12 months and defaulted during the reporting periods ending December 31, 2017, 2016 or 2015, 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.

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

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

Foreclosed assets acquired in settlement of loans carried at fair value less estimated costs to sell are included in the other assets on the Consolidated Balance Sheets. As of December 31, 2017 and 2016, a total of $18,000 and $21,000, respectively of residential real estate foreclosed assets were included in other assets. As of December 31, 2017, the Company had initiated formal foreclosure procedures on $74,000 of consumer residential mortgages.

63

AMERISERV FINANCIAL, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7.  PREMISES AND EQUIPMENT

An analysis of premises and equipment follows:

	AT DECEMBER 31,
	2017		2016
	(IN THOUSANDS)
Land	$	1,198	$	1,198
Premises		25,745		24,670
Furniture and equipment		8,664		7,949
Leasehold improvements		483		708
Total at cost		36,090		34,525
Less: Accumulated depreciation and amortization		23,356		22,831
Premises and equipment, net	$	12,734	$	11,694

The Company recorded depreciation expense was $1.7 million for 2017 and $1.8 million for both 2016 and 2015.

8.  DEPOSITS

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

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

Interest expense on deposits consisted of the following:

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

The following table sets forth the balance of other time deposits and certificates of deposit of $100,000 or more as of December 31, 2017 maturing in the periods presented:

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

64

AMERISERV FINANCIAL, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8.  DEPOSITS  – (continued)

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

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

The aggregate amount of time deposit accounts (including certificates of deposit) that meet or exceed the FDIC insurance limit at December 31, 2017 and 2016 are $49.7 million and $45.8 million, respectively.

9.  SHORT-TERM BORROWINGS

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

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

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

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

65

AMERISERV FINANCIAL, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9.  SHORT-TERM BORROWINGS  – (continued)

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

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

10.  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, 2017
MATURING	WEIGHTED AVERAGE YIELD		BALANCE
	(IN THOUSANDS, EXCEPT RATES)
2018		1.48	$	12,000
2019		1.51		12,500
2020		1.74		16,729
2021		1.75		5,000
Total advances from FHLB		1.61	$	46,229

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

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

Guaranteed Junior Subordinated Deferrable Interest Debentures:

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

66

AMERISERV FINANCIAL, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Subordinated Debt:

On December 29, 2015, 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, 2017 and 2016 was $7.5 million and $7.4 million, respectively.

11.  DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS

The following disclosures establish a hierarchal framework associated with the level of pricing observability utilized in measuring assets and liabilities at fair value. 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.

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 value of the swap asset is 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 reported on the Consolidated Balance Sheets at their fair value as of December 31, 2017 and 2016, by level within the fair value hierarchy. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

Assets and Liability Measured on a Recurring Basis:

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

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

67

AMERISERV FINANCIAL, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11.  DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS  – (continued)

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

Assets Measured on a Non-recurring Basis:

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

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

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

Loans considered impaired are loans for which, based on current information and events, it is probable that the creditor will be unable to collect all amounts due according to the contractual terms of the loan agreement. Impaired loans are reported at 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, 2017, impaired loans with a carrying value of $1.8 million were reduced by specific valuation allowance totaling $909,000 resulting in a net fair value of $850,000. At December 31, 2016, impaired loans with a carrying value of $674,000 were reduced by specific valuation allowance totaling $527,000 resulting in a net fair value of $147,000.

OREO is measured at fair value based on appraisals, less cost 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.

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

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

(1) Fair Value is generally determined through independent appraisals of the underlying collateral, which generally include various level 3 inputs which are not identifiable.

(2) Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses.

(3) Includes qualitative adjustments by management and estimated liquidation expenses.

68

AMERISERV FINANCIAL, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12.  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 uses 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, and loans and deposits with floating interest rates have estimated fair values which approximate the recorded carrying values. The estimation methodologies used, the estimated fair values based on US GAAP measurements, and recorded carrying values at December 31, 2017 and 2016, were as follows:

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

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

69

AMERISERV FINANCIAL, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

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

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

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

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

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

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

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

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

70

AMERISERV FINANCIAL, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13.  INCOME TAXES

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

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

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

	YEAR ENDED DECEMBER 31,
	2017						2016						2015
	AMOUNT			RATE			AMOUNT			RATE			AMOUNT			RATE
	(IN THOUSANDS, EXCEPT PERCENTAGES)
Income tax expense based on federal statutory rate	$	2,938			34.0	%	$	1,090			34.0	%	$	2,836			34.0	%
Tax exempt income		(283	)		(3.3	)		(255	)		(7.9	)		(574	)		(6.9	)
Other		68			0.8			62			1.9			81			1.0
Change in corporate tax rate		2,624			30.4			—			—			—			—
Total expense for income taxes	$	5,347			61.9	%	$	897			28.0	%	$	2,343			28.1	%

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

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

71

AMERISERV FINANCIAL, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13.  INCOME TAXES  – (continued)

At December 31, 2017 and 2016, the Company had no valuation allowance established against its deferred tax assets as we believe the Company will generate sufficient future taxable income to fully utilize alternative minimum tax (AMT) credits.

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

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

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

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 2014 have been closed for purposes of examination by the Internal Revenue Service and the Pennsylvania Department of Revenue.

14.  EMPLOYEE BENEFIT PLANS

PENSION PLANS:

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 401K 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

72

AMERISERV FINANCIAL, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

14.  EMPLOYEE BENEFIT PLANS  – (continued)

at $1.2 million and is limited to 10% of the plan’s assets), mutual funds, and short-term cash equivalent instruments. The following actuarial tables are based upon data provided by an independent third party as of December 31, 2017.

PENSION BENEFITS:

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

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

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

The weighted-average assumptions used to determine benefit obligations at December 31, 2017 and 2016 were as follows:

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

73

AMERISERV FINANCIAL, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

14.  EMPLOYEE BENEFIT PLANS  – (continued)

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

	YEAR ENDED DECEMBER 31,
	2017			2016			2015
	(IN THOUSANDS)
OTHER CHANGES IN PLAN ASSETS AND BENEFIT OBLIGATIONS RECOGNIZED IN OTHER COMPREHENSIVE LOSS
Net (gain) loss	$	(822	)	$	6,505		$	1,221
Recognized loss		(1,454	)		(1,333	)		(1,386	)
Total recognized in other comprehensive loss before tax effect	$	(2,276	)	$	5,172		$	(165	)
Total recognized in net benefit cost and other comprehensive loss before tax effect	$	(553	)	$	7,128		$	1,989

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 $1,561,000.

The weighted-average assumptions used to determine net periodic benefit cost for the years ended December 31, 2017, 2016 and 2015 were as follows:

	YEAR ENDED DECEMBER 31,
	2017			2016			2015
WEIGHTED AVERAGE ASSUMPTIONS:
Discount rate		4.12	%		4.20	%		4.00	%
Expected return on plan assets		7.75			7.75			8.00
Rate of compensation increase		2.50			2.50			2.50

The Company has assumed a 7.75% 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.

74

AMERISERV FINANCIAL, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

14.  EMPLOYEE BENEFIT PLANS  – (continued)

PLAN ASSETS:

The plan’s measurement date is December 31, 2017. This plan’s asset allocations at December 31, 2017 and 2016, by asset category are as follows:

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

The major categories of assets in the Company’s Pension Plan as of yearend 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,
	2017		2016
	(IN THOUSANDS)
Level 1:
Cash and cash equivalents	$	44	$	2,454
Domestic equities		4,340		3,067
Mutual funds/ETFs		30,470		23,310
International equities		1,322		307
Level 2:
Corporate bonds		924		1,533
Total fair value of plan assets	$	37,100	$	30,671

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

75

AMERISERV FINANCIAL, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

14.  EMPLOYEE BENEFIT PLANS  – (continued)

market value of the plan assets (at December 31, 2017, 3.4% 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 2018 will be approximately $3.5 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)
2018	$	2,698
2019		2,692
2020		2,817
2021		2,832
2022		3,116
Years 2023 – 2027		14,988

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 $469,000, $447,000 and $433,000 for the years ended December 31, 2017, 2016 and 2015, respectively. The fair value of plan assets includes $1.1 million pertaining to the value of the Company’s common stock and Trust Preferred securities that are held by the plan at December 31, 2017.

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

15.  LEASE COMMITMENTS

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

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

76

AMERISERV FINANCIAL, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

15.  LEASE COMMITMENTS  – (continued)

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

16.  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, and fixed assets.

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

The Company’s exposure to credit loss in the event of nonperformance by the other party to these commitments to extend credit and standby letters of credit is represented by their contractual amounts. The Company uses the same credit and collateral policies in making commitments and conditional obligations as for all other lending. At December 31, 2017, the Company had various outstanding commitments to extend credit approximating $165.1 million and standby letters of credit of $10.0 million, compared to commitments to extend credit of $160.5 million and standby letters of credit of $8.5 million at December 31, 2016. Standby letters of credit had terms ranging from 1 to 2 years with annual extension options available. Standby letters of credit of approximately $5.1 million were secured as of December 31, 2017 and approximately $3.9 million at December 31, 2016. The carrying amount of the liability for AmeriServ obligations related to unfunded commitments and standby letters of credit was $915,000 at December 31, 2017 and $890,000 at December 31, 2016.

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 operation or cash flows.

17.  PREFERRED STOCK

SBLF:

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

77

AMERISERV FINANCIAL, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

17.  PREFERRED STOCK  – (continued)

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

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

18.  STOCK COMPENSATION PLANS

The Company uses the modified prospective method for accounting for stock-based compensation and recognized $13,000 of pretax compensation expense for the year 2017, $20,000 in 2016 and $29,000 in 2015.

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 was not 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, 2017, 2016, and 2015, and changes during the years then ended is presented in the table and narrative following:

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

78

AMERISERV FINANCIAL, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

18.  STOCK COMPENSATION PLANS  – (continued)

A total of 308,301 of the 360,721 options outstanding at December 31, 2017, are exercisable and have exercise prices between $1.53 and $4.00, with a weighted average exercise price of $2.85 and a weighted average remaining contractual life of 5.03 years. The remaining 52,420 options that are not yet exercisable have exercise prices between $2.96 and $4.00, with a weighted average exercise price of $3.22 and a weighted average remaining contractual life of 7.90 years. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions used for grants in 2017, 2016, and 2015.

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

19.  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, 2017 and 2016 (in thousands):

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

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

79

AMERISERV FINANCIAL, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

19.  ACCUMULATED OTHER COMPREHENSIVE LOSS  – (continued)

The following table presents the amounts reclassified out of each component of accumulated other comprehensive loss for the periods ending December 31, 2017 and 2016 (in thousands):

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

(1) Amounts in parentheses indicate credits.

(2) These accumulated other comprehensive loss components are included in the computation of net periodic benefit cost (see Note 14 for additional details).

20.  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 retail banking segment and $2.4 million relates to the WCCA acquisition which is included in the trust segment. The balance of the Company’s goodwill at December 31, 2017 and 2016 was $11.9 million, respectively.

21.  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 entered into interest rate swap agreements with customers and a large financial institution that specializes in these types of transactions in 2017. These arrangements involve the exchange of interest payments based on the notional amounts. The Company entered into floating rate loans and fixed rate swaps with our customers. Simultaneously, the Company entered into an offsetting fixed rate swaps with PNC. 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

80

AMERISERV FINANCIAL, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

21.  DERIVATIVE HEDGING INSTRUMENTS  – (continued)

intermediary for its customers, changes in the fair value of the underlying derivative contracts offset each other and do not significantly impact the Company’s results of operations. The Company received $139,000 in fees on the transactions.

The following table summarizes the interest rate swap transactions that impacted the Company’s 2017 performance.

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

The Company monitors and controls all derivative products with a comprehensive Board of Director 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. The Company had no caps or floors outstanding at December 31, 2017.

22.  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 retail banking, commercial banking, trust, 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.

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, and CRE loans. The trust segment contains our wealth management businesses which include the Trust Company, WCCA, our registered investment advisory firm and financial services. Wealth management includes personal trust products and services such as personal portfolio investment management, estate planning and administration, custodial services and pre-need trusts. Also, institutional trust products and services such as 401(k) plans, defined benefit and defined contribution employee benefit plans, and individual retirement accounts are included in this segment. Financial services include the sale of mutual funds, annuities, and insurance products. The wealth management businesses also includes the BUILD funds which are union collective investment funds which are designed to use union pension dollars in construction projects that utilize union labor. The investment/parent includes the net results of investment securities and borrowing activities, general corporate expenses not allocated to the business segments, interest expense on guaranteed junior subordinated deferrable interest debentures, and centralized interest rate risk management. Inter-segment revenues were not material.

81

AMERISERV FINANCIAL, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

22.  SEGMENT RESULTS  – (continued)

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

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

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

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

82

AMERISERV FINANCIAL, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

23.  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 financial statements.

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 and Tier I capital to risk-weighted assets, and of Tier I capital to average assets. As of December 31, 2017 and 2016, the Federal Reserve categorized the Company as Well Capitalized under the regulatory framework for prompt corrective action. 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 I risk-based, Tier I risk-based, and Tier I leverage ratios as set forth in the table. Additionally, while not a regulatory capital ratio, the Company’s tangible common equity ratio was 7.20% and 7.31% for 2017 and 2016, respectively.

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

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

* Applies to the Bank only.

83

AMERISERV FINANCIAL, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

23.  REGULATORY CAPITAL  – (continued)

On July 2, 2013, the Federal Reserve approved final rules that substantially amend the regulatory risk-based capital rules applicable to the Company and the Bank. The final rules implement the “Basel III” regulatory capital reforms, as well as certain changes required by the Dodd-Frank Act, which will require institutions to, among other things, have more capital and a higher quality of capital by increasing the minimum regulatory capital ratios, and requiring capital buffers. The new rules became effective for the Company on January 1, 2015, with an implementation period that stretches to 2019. For a more detailed discussion see the Capital Resources section of the MD&A.

24.  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,
	2017		2016
	(IN THOUSANDS)
ASSETS
Cash	$	100	$	100
Short-term investments in money market funds		4,521		5,397
Investment securities available for sale		5,307		6,041
Equity investment in banking subsidiary		99,408		97,158
Equity investment in non-banking subsidiaries		6,444		5,168
Other assets		499		2,665
TOTAL ASSETS	$	116,279	$	116,529
LIABILITIES
Guaranteed junior subordinated deferrable interest debentures	$	12,923	$	12,908
Subordinated debt		7,465		7,441
Other liabilities		789		785
TOTAL LIABILITIES		21,177		21,134
STOCKHOLDERS’ EQUITY
Total stockholders’ equity		95,102		95,395
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	116,279	$	116,529

84

AMERISERV FINANCIAL, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

24.  PARENT COMPANY FINANCIAL INFORMATION  – (continued)

STATEMENTS OF OPERATIONS

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

85

AMERISERV FINANCIAL, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

24.  PARENT COMPANY FINANCIAL INFORMATION  – (continued)

STATEMENTS OF CASH FLOWS

	YEAR ENDED DECEMBER 31,
	2017			2016			2015
	(IN THOUSANDS)
OPERATING ACTIVITIES
Net income	$	3,293		$	2,310		$	5,997
Adjustment to reconcile net income to net cash (used in) provided by operating activities:
Equity in undistributed earnings of subsidiaries		(1,687	)		(629	)		(1,168	)
Stock compensation expense		13			20			29
Other – net		1,325			1,463			842
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES		2,944			3,164			5,700
INVESTING ACTIVITIES
Purchase of investment securities – available for sale		(1,002	)		(996	)		(1,533	)
Proceeds from maturity and sales of investment securities – available for sale		1,699			3,396			4,669
Proceeds from life insurance policies		—			—			719
NET CASH PROVIDED BY INVESTING ACTIVITIES		697			2,400			3,855
FINANCING ACTIVITIES
Subordinated debt issuance, net		—			—			7,418
Preferred stock redemption		—			(21,000	)		—
Preferred stock dividends paid		—			(15	)		(210	)
Purchases of treasury stock		(3,404	)		—			—
Common stock dividends paid		(1,113	)		(945	)		(754	)
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES		(4,517	)		(21,960	)		6,454
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(876	)		(16,396	)		16,009
CASH AND CASH EQUIVALENTS AT JANUARY 1		5,497			21,893			5,884
CASH AND CASH EQUIVALENTS AT DECEMBER 31	$	4,621		$	5,497		$	21,893

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 $110,300,000 of restricted surplus and retained earnings at December 31, 2017.

86

AMERISERV FINANCIAL, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

25.  SELECTED QUARTERLY CONSOLIDATED FINANCIAL DATA (unaudited)

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

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

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

87

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 sheet of AmeriServ Financial Inc. and subsidiaries (the “Company”) as of December 31, 2017 and 2016; the related consolidated statements of operations, comprehensive income, changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2017; 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, 2017 and 2016, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

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

Basis for Opinion

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 Public Company Accounting Oversight Board (United States) (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, 2018

88

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

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

Opinion on Internal Control over Financial Reporting

We have audited AmeriServ Financial Inc. and subsidiaries’ (the “Company”) internal control over financial reporting as of December 31, 2017, based on criteria established 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, 2017, 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 sheet of the Company as of December 31, 2017 and 2016, and the related consolidated statements of operations, comprehensive income, changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2017, of the Company and in our report dated March 2, 2018, expressed an unqualified opinion.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting in the accompanying Report on Management’s Assessment of Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

89

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ S.R. Snodgrass, P.C.
 
Cranberry Township, Pennsylvania
March 2, 2018

90

REPORT ON MANAGEMENT’S ASSESSMENT OF
INTERNAL CONTROL OVER FINANCIAL REPORTING

We, as management of AmeriServ Financial, Inc., are responsible for establishing and maintaining effective internal control over financial reporting that is designed to produce reliable financial statements in conformity with United States generally accepted accounting principles. The system of internal control over financial reporting as it relates to the financial statements is evaluated for effectiveness by management and tested for reliability through a program of internal audits. Actions are taken to correct potential deficiencies as they are identified. Any system of internal control, no matter how well designed, has inherent limitations, including the possibility that a control can be circumvented or overridden and misstatements due to error or fraud may occur and not be detected. Also, because of changes in conditions, internal control effectiveness may vary over time. Accordingly, even an effective system of internal control will provide only reasonable assurance with respect to financial statement preparation.

Management assessed the Company’s system of internal control over financial reporting as of December 31, 2017, in relation to criteria for effective internal control over financial reporting as described in “2013 Internal Control — Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management concludes that, as of December 31, 2017, its system of internal control over financial reporting is effective and meets the criteria of the “2013 Internal Control — Integrated Framework”. S.R. Snodgrass, P.C., independent registered public accounting firm, has issued an audit report on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2017.

Management is responsible for compliance with the federal and state laws and regulations concerning dividend restrictions and federal laws and regulations concerning loans to insiders designated by the Federal Reserve as safety and soundness laws and regulations.

Management has assessed compliance by the Company with the designated laws and regulations relating to safety and soundness. Based on the assessment, management believes that the Company complied, in all significant respects, with the designated laws and regulations related to safety and soundness for the year ended December 31, 2017.

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

Johnstown, PA
March 2, 2018

91

STATEMENT OF MANAGEMENT RESPONSIBILITY

February 15, 2018
 
To the Stockholders and
Board of Directors of
AmeriServ Financial, Inc.

Management of AmeriServ Financial, Inc. and its subsidiaries have prepared the consolidated financial statements and other information in the Annual Report and Form 10-K in accordance with United States generally accepted accounting principles and are responsible for its accuracy.

In meeting its responsibility, management relies on internal accounting and related control systems, which include selection and training of qualified personnel, establishment and communication of accounting and administrative policies and procedures, appropriate segregation of responsibilities, and programs of internal audit. These systems are designed to provide reasonable assurance that financial records are reliable for preparing financial statements and maintaining accountability for assets and that assets are safeguarded against unauthorized use or disposition. Such assurance cannot be absolute because of inherent limitations in any internal control system.

Management also recognizes its responsibility to foster a climate in which Company affairs are conducted with the highest ethical standards. The Company’s Code of Conduct, furnished to each employee and director, addresses the importance of open internal communications, potential conflicts of interest, compliance with applicable laws, including those related to financial disclosure, the confidentiality of proprietary information, and other items. There is an ongoing program to assess compliance with these policies.

The Audit Committee of the Company’s Board of Directors consists solely of independent directors. The Audit Committee meets periodically with management and the independent auditors to discuss audit, financial reporting, and related matters. S.R. Snodgrass P.C. and the Company’s internal auditors have direct access to the Audit Committee.

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

92

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures.  As of December 31, 2017, an evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, on the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the Exchange Act)). Based on that evaluation, the Company’s management, including the Chief Executive Officer and Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective as of December 31, 2017.

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, 2017 is included in Item 8.

ITEM 9B. OTHER INFORMATION

None.

93

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.

94

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, 2017.

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		360,721	$	2.79		448,170
Equity compensation plans not approved by security holders		0		0		0
Total		360,721	$	2.79		448,170

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.

95

PART IV

ITEM 15. EXHIBITS AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULES

CONSOLIDATED FINANCIAL STATEMENTS FILED:

The consolidated financial statements listed below are from this 2017 Form 10-K and Part II — Item 8. Page references are to this Form 10-K.

CONSOLIDATED FINANCIAL STATEMENTS:

AmeriServ Financial, Inc. and Subsidiaries
Consolidated Balance Sheets		36
Consolidated Statements of Operations		37
Consolidated Statements of Comprehensive Income (Loss)		39
Consolidated Statements of Changes in Stockholders’ Equity		40
Consolidated Statements of Cash Flows		41
Notes to Consolidated Financial Statements		42
Report of Independent Registered Public Accounting Firm		88
Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting		89
Report of Management’s Assessment of Internal Control Over Financial Reporting		91
Statement of Management Responsibility		92

CONSOLIDATED FINANCIAL STATEMENT SCHEDULES:

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

96

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 December 30, 2014.	Exhibit 3.2 to the Current Report on Form 8-K filed on January 2, 2015
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
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, 2017, formatted in XBRL (eTensible Business Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Cash Flows, and (iv) Notes to the Consolidated Financial Statements.	Attached

97

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: February 15, 2018

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on February 15, 2018:

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

98

AMERISERV FINANCIAL, INC.

AMERISERV FINANCIAL
BANK OFFICE LOCATIONS

* Main Office Downtown
216 Franklin Street
PO Box 520
Johnstown, PA 15907-0520
1-800-837-BANK (2265)

* Westmont Office
110 Plaza Drive
Johnstown, PA 15905-1211

* University Heights Office
1404 Eisenhower Boulevard
Johnstown, PA 15904-3218

* Eighth Ward Office
1059 Franklin Street
Johnstown, PA 15905-4303

* Carrolltown Office
101 South Main Street
Carrolltown, PA 15722-0507

* Northern Cambria Office
4206 Crawford Avenue
Suite 1 Northern Cambria, PA 15714-1342

* Lovell Park Office
179 Lovell Avenue
Ebensburg, PA 15931-1864

* Nanty Glo Office
1383 Shoemaker Street
Nanty Glo, PA 15943-1254

 

* Seward Office
1 Roadway Plaza
6858 Route 711 Suite One
Seward, PA 15954-3130

* Windber Office
1501 Somerset Avenue
Windber, PA 15963-1745

* Central City Office
104 Sunshine Avenue
Central City, PA 15926-1129

* Somerset Office
108 W. Main Street
Somerset, PA 15501-2035

* Derry Office
112 South Chestnut Street
Derry, PA 15627-1938

* East Hills Drive-up,
1213 Scalp Avenue
Johnstown, PA 15904-

Pittsburgh Office
United Steelworkers Bldg
60 Boulevard of the Allies
Suite 100
Pittsburgh, PA 15222-1232

* North Atherton Office
1857 N. Atherton Street
State College, PA 16803-1521

* = 24-Hour ATM Banking
Available

 

REMOTE ATM
BANKING LOCATIONS

** Main Office,
216 Franklin Street,
Johnstown

AMERISERV LOAN
PRODUCTION LOCATIONS

Main Office Downtown
216 Franklin Street
PO Box 520
Johnstown, PA 15907-0520

Altoona Office
3415 Pleasant Valley Boulevard
Pleasant Valley Shopping Center
Altoona, PA 16602-4321

Hagerstown Office
1829 Howell Road
Suite 3
Hagerstown, MD 21740-6606

Monroeville LPO
201 Penn Center Boulevard
Suite 200
Pittsburgh, PA 15235-5507

State College Loan Store
1857 N. Atherton Street
State College, PA 16803-1521

99

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:

Sandler O’Neill & Partners, L.P. 1251 Avenue of the Americas 6th Floor New York, NY 10020 Telephone: (800) 635-6860	Keefe Bruyette & Woods, Inc. 787 Seventh Avenue Equitable Bldg — 4th Floor New York, NY 10019 Telephone: (800) 966-1559
Stifel Nicolaus 7111 Fairway Drive, STE 301 Palm Beach Gardens, FL 33418 Telephone: (561) 615-5300	KCG 300 Vesey Street New York, NY 10282 Telephone: (888) 931-4357
Citadel Securities LLC 131 South Dearborn Street Chicago, IL 60603 Telephone: (312) 395-2100	UBS Securities LLC 5600 Walnut Street Pittsburgh, PA 15232 Telephone: (412) 665-9900

CORPORATE OFFICES

The corporate offices of AmeriServ Financial, Inc. are located at 216 Franklin Street, Johnstown, PA 15901. Mailing address:

P.O. Box 430
Johnstown, PA 15907-0430
(814) 533-5300

AGENTS

The transfer agent and registrar for AmeriServ Financial, Inc.’s common stock is:

Computershare Investor Services
P O 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.

100

AMERISERV FINANCIAL, INC.

AMERISERV FINANCIAL, INC.

Board of Directors

J. Michael Adams, Jr.
  Attorney-at-Law
   Mike Adams & Associates, LLC

Allan R. Dennison
  Non-executive Vice Chairman,
  Retired President & Chief
  Executive Officer AmeriServ
  Financial Bank, and
  Non-executive Vice Chairman
  of the Board of all Subsidiaries

Daniel R. DeVos
  Retired President & CEO,
  Concurrent Technologies
  Corporation

Bruce E. Duke, III M.D.
  Retired Surgeon, Conemaugh
  Health Initiatives

Craig G. Ford
  Non-executive Chairman,
  Former President & CEO,
  AmeriServ Financial, Inc.,
  AmeriServ Financial Bank, and
  Non-executive Chairman of the
  Board of all Subsidiaries

 

Kim W. Kunkle
  President & CEO,
  Laurel Holdings, Inc.

Margaret A. O’Malley
  Attorney-at-Law
  Yost & O’Malley

Mark E. Pasquerilla
  President, Pasquerilla
  Enterprises L.P.

Sara A. Sargent
  Owner/President,
  The Sargent’s Group

Thomas C. Slater
  Retired Owner,
  President & Director,
  Slater Laboratories, Inc.

Jeffrey A. Stopko, CPA
  President & Chief Executive
  Officer AmeriServ
  Financial, Inc. &
   AmeriServ Financial Bank

Robert L. Wise
  Retired President,
  Pennsylvania Electric Company,
  GPU Genco, Inc. and GPU
  International, Inc. and GPU
  Energy, Inc.

 

General Officers

Jeffrey A. Stopko, CPA
  President & Chief Executive
  Officer

Susan Tomera Angeletti
  Senior Vice President,
  Director of Marketing &
  Alternative Delivery

Michael D. Lynch
  Senior Vice President,
  Chief Financial Officer,
  Chief Investment Officer &
  Chief Risk Officer

James P. Ziance
  Senior Vice President &
  Chief Internal Auditor

Frank E. Adams
  Vice President &
  Chief Loan Review Officer

Anthony M. Gojmerac
  Vice President, Purchasing &
   Facilities Officer

William D. Layton
  Vice President & Manager of
  Regulatory Accounting

Sharon M. Callihan
  Corporate Secretary

AMERISERV FINANCIAL, INC.

AMERISERV FINANCIAL BANK

Board of Directors

J. Michael Adams, Jr.
  Attorney-at-Law
  Mike Adams & Associates, LLC

Allan R. Dennison
  Non-executive Vice Chairman,
  Retired President &
  Chief Executive Officer
  AmeriServ Financial Bank, and
  Non-executive Vice Chairman of
  the Board of all Subsidiaries

Daniel R. DeVos
  Retired President & CEO,
  Concurrent Technologies
  Corporation

Bruce E. Duke, III, M.D.
  Retired Surgeon, Conemaugh
  Health Initiatives

Craig G. Ford
  Non-executive Chairman,
  Former President & CEO,
  AmeriServ Financial, Inc.,
  AmeriServ Financial Bank, and
  Non-executive Chairman of the
  Board of all Subsidiaries

Kim W. Kunkle
  President & CEO,
  Laurel Holdings, Inc.

Margaret A. O’Malley
  Attorney-at-Law
  Yost & O’Malley

Mark E. Pasquerilla
  President, Pasquerilla
  Enterprises L.P.

Sara A. Sargent
  Owner/President,
  The Sargent’s Group

Thomas C. Slater
  Retired Owner, President &
  Director, Slater
  Laboratories, Inc.

Jeffrey A. Stopko, CPA
  President & Chief Executive
  Officer AmeriServ
  Financial, Inc. &
   AmeriServ Financial Bank

Robert L. Wise
  Retired President,
  Pennsylvania Electric Company,
  GPU Genco, Inc. and
  GPU International, Inc. and
  GPU Energy, Inc.

General Officers

Jeffrey A. Stopko, CPA
  President & Chief
  Executive Officer

Michael R. Baylor
  Executive Vice President &
  Chief Commercial Banking Officer

Jack W. Babich
  Senior Vice President, Chief
  Human Resources Officer &
  Corporate Services Officer

Michael A. Bodnar
  Senior Vice President, Area
  Executive & Commercial Real
  Estate Manager

Russell B. Flynn
  Senior Vice President, Retail
  Lending

Bettina D. Fochler
  Senior Vice President, Chief Credit
  Officer

Wayne A. Kessler
  Senior Vice President, Area
  Executive Johnstown

Michael D. Lynch
  Senior Vice President, Chief
  Financial Officer, Chief Investment
  Officer & Chief Risk Officer

Kerri L. Mueller
  Senior Vice President Retail
  Banking

Matthew C. Rigo
  Senior Vice President, Area
  Executive, Wilkins Township

J. Seth Smith
  Senior Vice President, Area
  Executive State College

Robert E. Werner, III
  Senior Vice President & Chief
  Information Officer

Todd C. Allison
  Vice President & Director of
  Information Technology

Michael S. Andrascik
  Vice President, Bank Security
  Officer

Thomas R. Boyd, Jr.
  Vice President, Commercial
  Relationship Manager II

Jennifer L. Devan
  Vice President, Chief Compliance
  Officer

Bernard A. Eckenrode
  Vice President, Commercial
  Relationship Manager II

Mitchell D. Edwards
  Vice President, Commercial
  Relationship Manager III

Jason D. Eminhizer
  Vice President, Commercial
  Relationship Manager II

Christine E. Fisher
  Vice President, Business Services

Anthony M. Gojmerac
  Vice President, Purchasing &
  Facilities Officer

Daniel L. Herr
  Vice President, Portfolio Manager

Kevin H. Justice
  Vice President, Commercial
  Relationship Manager II,
  Hagerstown

Bruce A. Mabon
  Vice President, Collection &
  Assigned Risk Manager
  Patrick R.   Miles Vice President,
  Commercial Relationship
  Manager II Altoona

Elizabeth R. Shank
  Vice President, Deposit Operations
  Manager

Cynthia L. Stewart   
  Vice President, Manager Loan
  Administration

Charlene J. Tessari
  Vice President, Application and
  IT Risk Management

Michelle D. Wyandt
  Vice President, Supervisor Credit
  Analysis

AMERISERV FINANCIAL, INC.

AMERISERV TRUST &
FINANCIAL SERVICES
COMPANY

Board of Directors

J. Michael Adams, Jr.
  Attorney-at-Law
  Mike Adams & Associates, LLC

Allan R. Dennison
  Non-executive Vice Chairman,
  Retired President & Chief
  Executive Officer AmeriServ
  Financial Bank, and
  Non-executive Vice Chairman of
  the Board of all Subsidiaries

Craig G. Ford
  Non-executive Chairman,
  Former President & CEO,
  AmeriServ Financial, Inc.,
  AmeriServ Financial Bank, and
  Non-executive Chairman of the
  Board of all Subsidiaries

Richard W. Bloomingdale
  President, PA AFL-CIO

James T. Huerth
  President & Chief Executive
  Officer AmeriServ Trust &
  Financial Services Company

George B. Kaufman
  Attorney-at-Law

Kim W. Kunkle
  President & CEO,
  Laurel Holdings, Inc.

Mark E. Miller
  Director of Support Services,
  Somerset Hospital & President,
  Pine Grill, Inc.

Margaret A. O’Malley
  Attorney-at-Law Yost &
  O’Malley

Sara A. Sargent
  Owner/President
  The Sargent’s Group

Jeffrey A. Stopko, CPA
  President & Chief Executive
  Officer AmeriServ Financial, Inc.
  & AmeriServ Financial Bank

Robert L. Wise
  Retired President,
  Pennsylvania Electric Company,
  GPU Genco, Inc. and GPU
  International, Inc. and GPU
  Energy, Inc.

General Officers

James T. Huerth
  President & Chief Executive
  Officer

Nicholas E. Debias, Jr., CTA
  Senior Vice President, Senior
  Wealth Management Advisor

David A. Finui
  Senior Vice President, Personal
  Trust & Financial Services
  Manager

Bettina D. Fochler
  Senior Vice President,
  Chief Credit Officer

Michael D. Lynch
  Senior Vice President, Treasurer

Ernest L. Petersen, III
  Senior Vice President,
  Chief Administrative Officer &
  Diversified Services Manager

Christopher C. Sheedy
  Senior Vice President & Trust
  Specialty Real Estate Director

Kathleen M. Wallace
  Senior Vice President,
  Retirement Services Manager

Mary Ann Brustle
  Vice President Risk Management
  &Trust Compliance Officer

Sharon E. Delic
  Vice President, Retirement
  Services Officer

Michael P. Geiser
  Vice President, Trust Operations
  Manager

John T. Krupa
  Vice President, Wealth
  Management Advisor

David M. Margetan
  Vice President, Retirement
  Services Officer

Justin F. Maser
  Vice President, Portfolio Manager

Monica M. Papuga
  Vice President, Senior Trust
  Accounting Officer

Trust Company Office

  216 Franklin Street
  AmeriServ Financial Bank
  Building PO Box 520
  Johnstown, PA 15907-0520

WEST CHESTER
CAPITAL ADVISORS

Board of Directors

J. Michael Adams, Jr.
  Attorney-at-Law
  Mike Adams & Associates, LLC

Allan R. Dennison
  Non-executive Vice Chairman,
  Retired President &
  Chief Executive Officer
  AmeriServ Financial Bank,
  and Non-executive Vice Chairman
  of the Board of all Subsidiaries

Craig G. Ford
  Non-executive Chairman, Former
  President & CEO, AmeriServ
  Financial, Inc., AmeriServ
  Financial Bank, and
  Non-executive Chairman
  of the Board of all Subsidiaries

James T. Huerth
  President & Chief Executive
  Officer AmeriServ Trust &
  Financial Services Company

Steven M. Krawick, AAMS, CMFC
  President & Chief Executive
  Officer West Chester Capital
  Advisors

Jeffrey A. Stopko, CPA
  President & Chief Executive Officer
  AmeriServ Financial, Inc. &
  AmeriServ Financial Bank

Robert L. Wise
  Retired President,
  Pennsylvania Electric Company,
  GPU Genco, Inc. and GPU
  International, Inc. and GPU
  Energy, Inc.

General Officers

Steven M. Krawick, AAMS, CMFC
  President & Chief Executive
  Officer

Michael D. Lynch
  Senior Vice President, Chief
  Financial Officer & Treasurer

Frank J. Lapinsky
  Vice President, Chief
  Administrative
  Officer & Portfolio Manager

Mary F. Stanek
  Vice President, Portfolio Manager

Office Location

  216 Franklin Street
  AmeriServ Financial Bank
  Building PO Box 520 Johnstown,
  PA 15907-0520

EX-21.1

EXHIBIT 21.1

SUBSIDIARIES OF THE REGISTRANT

NAME	PERCENT OF OWNERSHIP	JURISDICTION OF ORGANIZATION
AmeriServ Financial Bank 216 Franklin Street P.O. Box 520 Johnstown, PA 15907-0520	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 P.O. Box 520 Johnstown, PA 15907-0520	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 Nos. 333-176869 and 333-67600 of AmeriServ Financial, Inc. on Form S-8 and Registration Statements File Nos. 033-56604, 333-129009, 333-50225, 333-120022, and 333-121215 of AmeriServ Financial, Inc. on Form S-3 of our report dated March 2, 2018, 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, 2017.

/s/ S.R. Snodgrass, P.C.
 
Cranberry Township, Pennsylvania
March 2, 2018

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, 2018	/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, 2018	/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, 2017, 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, 2018

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, 2017, 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, 2018

XML

Document And Entity Information - USD ($)	12 Months Ended
	Dec. 31, 2017	Jan. 31, 2018	Jun. 30, 2017
Document Information [Line Items]
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2017
Document Fiscal Year Focus	2017
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 Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Public Float			$ 69,492,588
Trading Symbol	ASRV
Entity Common Stock, Shares Outstanding		18,128,247

XML

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands		Dec. 31, 2017	Dec. 31, 2016
ASSETS
Cash and due from depository institutions		$ 26,234	$ 25,107
Interest bearing deposits		2,698	3,066
Short-term investments in money market funds		5,256	5,900
Cash and cash equivalents		34,188	34,073
Investment securities:
Available for sale		129,138	127,077
Held to maturity (fair value $38,811 at December 31, 2017 and $30,420 at December 31, 2016)		38,752	30,665
Loans held for sale		3,125	3,094
Loans		890,032	884,240
Less: Unearned income		399	476
Allowance for loan losses		10,214	9,932
Net loans		879,419	873,832
Premises and equipment, net		12,734	11,694
Accrued interest income receivable		3,603	3,116
Goodwill		11,944	11,944
Bank owned life insurance		37,860	37,903
Net deferred tax asset		5,963	10,655
Federal Home Loan Bank stock		4,675	3,359
Federal Reserve Bank stock		2,125	2,125
Other assets		4,129	4,243
TOTAL ASSETS		1,167,655	1,153,780
LIABILITIES
Non-interest bearing deposits		183,603	188,808
Interest bearing deposits		764,342	778,978
Total deposits		947,945	967,786
Short-term borrowings		49,084	12,754
Advances from Federal Home Loan Bank		46,229	45,542
Guaranteed junior subordinated deferrable interest debentures		12,923	12,908
Subordinated debt		7,465	7,441
Total borrowed funds		115,701	78,645
Other liabilities		8,907	11,954
TOTAL LIABILITIES		1,072,553	1,058,385
STOCKHOLDERS' EQUITY
Common stock, par value $0.01 per share; 30,000,000 shares authorized: 26,585,403 shares issued and 18,128,247 shares outstanding on December 31, 2017; 26,521,291 shares issued and 18,903,472 shares outstanding on December 31, 2016		266	265
Treasury stock at cost, 8,457,156 shares on December 31, 2017 and 7,617,819 shares on December 31, 2016		(78,233)	(74,829)
Capital surplus		145,707	145,535
Retained earnings		40,312	36,001
Accumulated other comprehensive loss, net	[1]	(12,950)	(11,577)
TOTAL STOCKHOLDERS’ EQUITY		95,102	95,395
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$ 1,167,655	$ 1,153,780

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

XML

CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Held to maturity securities, fair value	$ 38,811	$ 30,420
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	30,000,000	30,000,000
Common stock, shares issued	26,585,403	26,521,291
Common stock, shares outstanding	18,128,247	18,903,472
Treasury stock, shares	8,457,156	7,617,819

XML

CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Interest and fees on loans:
Taxable	$ 39,122	$ 37,786	$ 37,923
Tax exempt	95	75	72
Interest bearing deposits	11	13	8
Short-term investments in money market funds	130	84	14
Investment securities:
Available for sale	3,800	3,132	3,250
Held to maturity	1,198	779	614
Total Interest Income	44,356	41,869	41,881
INTEREST EXPENSE
Deposits	6,255	5,400	4,752
Short-term borrowings	206	52	86
Advances from Federal Home Loan Bank	694	644	558
Guaranteed junior subordinated deferrable interest debentures	1,120	1,120	1,120
Subordinated debt	520	519	4
Total Interest Expense	8,795	7,735	6,520
Net Interest Income	35,561	34,134	35,361
Provision for loan losses	800	3,950	1,250
Net Interest Income after Provision for Loan Losses	34,761	30,184	34,111
NON-INTEREST INCOME
Trust and investment advisory fees	8,462	8,333	8,344
Service charges on deposit accounts	1,581	1,674	1,750
Net gains on loans held for sale	679	884	767
Mortgage related fees	285	367	391
Net realized gains on investment securities	115	177	71
Bank owned life insurance	737	675	1,617
Other income	2,786	2,528	2,327
Total Non-Interest Income	14,645	14,638	15,267
NON-INTEREST EXPENSE
Salaries and employee benefits	24,127	24,034	24,042
Net occupancy expense	2,600	2,782	2,941
Equipment expense	1,585	1,688	1,773
Professional fees	5,058	5,280	5,003
Supplies, postage, and freight	676	705	726
Miscellaneous taxes and insurance	1,234	1,146	1,157
Federal deposit insurance expense	628	709	669
Other expense	4,858	5,271	4,727
Total Non-Interest Expense	40,766	41,615	41,038
PRETAX INCOME	8,640	3,207	8,340
Provision for income taxes	5,347	897	2,343
NET INCOME	3,293	2,310	5,997
Preferred stock dividends	0	15	210
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS	$ 3,293	$ 2,295	$ 5,787
Basic:
Net income	$ 0.18	$ 0.12	$ 0.31
Average number of shares outstanding	18,498	18,896	18,863
Diluted:
Net income	$ 0.18	$ 0.12	$ 0.31
Average number of shares outstanding	18,600	18,955	18,933
Cash dividends declared	$ 0.06	$ 0.05	$ 0.04

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017		Dec. 31, 2016		Dec. 31, 2015
COMPREHENSIVE INCOME (LOSS)
Net income	$ 3,293		$ 2,310		$ 5,997
Other comprehensive loss, before tax:
Pension obligation change for defined benefit plan	1,303		(4,612)		579
Income tax effect	(442)		1,569		(197)
Unrealized holding losses on available for sale securities arising during period	(40)		(1,305)		(1,498)
Income tax effect	13		443		509
Reclassification adjustment for net realized gains on available for sale securities included in net income	(115)	[1]	(177)	[1]	(71)
Income tax effect	39	[1]	60	[1]	25
Other comprehensive income (loss)	758		(4,022)		(653)
Comprehensive income (loss)	$ 4,051		$ (1,712)		$ 5,344

[1] Amounts in parentheses indicate credits.

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CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($) $ in Thousands	Total		Preferred Stock [Member]	Common Stock [Member]	Treasury Stock [Member]	Capital Surplus [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Loss, Net [Member]
Balance at Dec. 31, 2014			$ 21,000	$ 264	$ (74,829)	$ 145,256	$ 29,618	$ (6,902)
Redemption of all preferred shares outstanding			0
New common shares issued				1		156
Treasury stock, 839,337 shares purchased at cost					0
Stock option expense						29
Net income	$ 5,997						5,997
Cash dividend declared on common stock							(754)
Cash dividend declared on preferred stock							(210)
Reclassification of certain income tax effects from accumulated other comprehensive income							0	0
Other comprehensive income (loss)	(653)							(653)
Balance at Dec. 31, 2015	118,973		21,000	265	(74,829)	145,441	34,651	(7,555)
Redemption of all preferred shares outstanding			(21,000)
New common shares issued				0		74
Treasury stock, 839,337 shares purchased at cost					0
Stock option expense						20
Net income	2,310						2,310
Cash dividend declared on common stock							(945)
Cash dividend declared on preferred stock							(15)
Reclassification of certain income tax effects from accumulated other comprehensive income	0	[1]					0	0
Other comprehensive income (loss)	(4,022)							(4,022)
Balance at Dec. 31, 2016	95,395		0	265	(74,829)	145,535	36,001	(11,577)
Redemption of all preferred shares outstanding			0
New common shares issued				1		159
Treasury stock, 839,337 shares purchased at cost					(3,404)
Stock option expense						13
Net income	3,293						3,293
Cash dividend declared on common stock							(1,113)
Cash dividend declared on preferred stock							0
Reclassification of certain income tax effects from accumulated other comprehensive income	(2,131)	[1]					2,131	(2,131)
Other comprehensive income (loss)	758							758
Balance at Dec. 31, 2017	$ 95,102		$ 0	$ 266	$ (78,233)	$ 145,707	$ 40,312	$ (12,950)

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

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CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Parenthetical)	12 Months Ended
	Dec. 31, 2017 shares
Treasury stock, purchased at cost, shares	839,337

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CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
OPERATING ACTIVITIES
Net income	$ 3,293	$ 2,310	$ 5,997
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses	800	3,950	1,250
Depreciation and amortization expense	1,665	1,803	1,790
Net amortization of investment securities	436	488	342
Net realized gains on investment securities - available for sale	(115)	(177)	(71)
Net gains on loans held for sale	(679)	(884)	(767)
Amortization of deferred loan fees	(162)	(231)	(249)
Origination of mortgage loans held for sale	(45,637)	(59,252)	(51,759)
Sales of mortgage loans held for sale	46,285	60,045	54,574
Decrease (increase) in accrued interest receivable	(487)	(59)	70
Increase (decrease) in accrued interest payable	114	(11)	(55)
Earnings on bank-owned life insurance	(571)	(675)	(690)
Deferred income taxes	4,303	414	888
Stock compensation expense	173	94	186
Amortization of long term debt issuance costs	39	39	0
Other, net	(1,776)	(1,186)	(1,674)
Net cash provided by operating activities	7,681	6,668	9,832
INVESTING ACTIVITIES
Purchase of investment securities - available for sale	(32,889)	(42,844)	(22,241)
Purchase of investment securities - held to maturity	(10,572)	(12,038)	(6,237)
Proceeds from maturities of investment securities - available for sale	22,311	24,574	24,532
Proceeds from maturities of investment securities - held to maturity	2,383	2,693	4,601
Proceeds from sales of investment securities - available for sale	8,143	8,966	3,570
Purchases of regulatory stock	(17,661)	(10,911)	(19,320)
Proceeds from redemption of regulatory stock	16,345	12,180	18,740
Long-term loans originated	(154,054)	(196,998)	(246,304)
Principal collected on long-term loans	157,258	189,505	183,380
Participations purchased	(11,804)	(17,192)	(15,019)
Participations sold	2,800	18,900	23,774
Net increase in other short-term loans	(502)	(875)	(627)
Purchases of premises and equipment	(2,705)	(1,380)	(881)
Proceeds from sale of other real estate owned	108	235	579
Proceeds from life insurance policies	614	0	1,598
Net cash used in investing activities	(20,225)	(25,185)	(49,855)
FINANCING ACTIVITIES
Net (decrease) increase in deposit balances	(19,841)	64,492	33,339
Net increase (decrease) in other short-term borrowings	36,330	(35,994)	9,868
Principal borrowings on advances from Federal Home Loan Bank	12,687	9,542	10,000
Principal repayments on advances from Federal Home Loan Bank	(12,000)	(12,000)	(4,000)
Subordinated debt issuance, net	0	0	7,418
Purchases of treasury stock	(3,404)	0	0
Preferred stock redemption	0	(21,000)	0
Preferred stock dividend paid	0	(15)	(210)
Common stock dividend paid	(1,113)	(945)	(754)
Net cash provided by financing activities	12,659	4,080	55,661
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	115	(14,437)	15,638
CASH AND CASH EQUIVALENTS AT JANUARY 1	34,073	48,510	32,872
CASH AND CASH EQUIVALENTS AT DECEMBER 31	$ 34,188	$ 34,073	$ 48,510

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Dec. 31, 2017

Accounting Policies [Abstract]

Significant Accounting Policies [Text Block]

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 15 banking locations in five southwestern Pennsylvania counties. 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 Sheet at December 31, 2017.

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. 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 by management. The stock’s value is determined by the ultimate recoverability of the par value rather than by recognizing temporary declines. The determination of whether the par value will ultimately be recovered is influenced by criteria such as the following: (a) The significance of the decline in net assets of the FHLB as compared to the capital stock amount and the length of time any such situation has persisted (b) Commitments by the FHLB to make payments required by law or regulation and the level of such payments in relation to the operating performance (c) The impact of legislative and regulatory changes on the customer base of FHLB and (d) 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 fixed-rate residential mortgage loans are classified as held for sale, because it is management’s intent to sell these residential mortgage loans. The residential mortgage loans held for sale are carried at the lower of aggregate cost or market 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.

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 loans with aggregate balances over $250,000 to determine if any specific reserve allocations are required on an individual loan basis. 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 $250,000 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 section of the Consolidated Balance Sheets.

TRUST FEES:

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

BANK-OWNED LIFE INSURANCE:

The Company has purchased life insurance policies on certain 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 10,000, 51,273, and 58,788 shares of common stock were outstanding during 2017, 2016 and 2015, respectively, but were not included in the computation of diluted earnings per common share because to do so would be anti-dilutive. Exercise prices of anti-dilutive options to purchase common stock outstanding were $4.00, $3.23-$4.60, and $3.23-$4.70 during 2017, 2016 and 2015, respectively. Dividends on preferred shares are deducted from net income in the calculation of earnings per common share.

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

STOCK-BASED COMPENSATION:

The Company uses the modified prospective method for accounting of stock-based compensation. The Company recognized $13,000, $20,000 and $29,000 of pretax compensation expense for the years 2017, 2016 and 2015, respectively. The fair value of each option grant is estimated on the grant date using the Black-Scholes option pricing model. See Note 18 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. 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 $1,075,000 in income tax payments in 2017; $375,000 in 2016; and $1,554,000 in 2015. The Company had non-cash transfers to other real estate owned (OREO) in the amounts of $77,000 in 2017; $172,000 in 2016; and $189,000 in 2015. The Company made total interest payments of $8,681,000 in 2017; $7,746,000 in 2016; and $6,575,000 in 2015.

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. In conjunction with the annual measurement of the funded status of Company’s pension plan at December 31, 2016, management elected to change the manner in which the service cost and interest cost components of net periodic benefit cost will be determined in 2017 and beyond. Previously, the service cost and interest cost components were determined by multiplying the single equivalent rate described above and the aggregate discounted cash flows of the plan’s service cost and projected benefit obligations.

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

Management believes this new methodology, which represents a change in an accounting estimate, is a better 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 14 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.

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

RECENT ACCOUNTING STANDARDS:

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

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

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 effected 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. The Company is currently evaluating the impact that the Update will have on our 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. We are currently evaluating third-party vendor solutions to assist us in the application of this standard.

In March 2017, the FASB issued ASU 2017-07, Compensation — Retirement Benefits (Topic 715). The amendments in this Update require that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost as defined in paragraphs 715-30-35-4 and 715-60-35-9 are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. If a separate line item or items are used to present the other components of net benefit cost, that line item or items must be appropriately described. If a separate line item or items are not used, the line item or items used in the income statement to present the other components of net benefit cost must be disclosed. This Update is not expected to have a significant impact on the Company’s financial statements.

In March 2017, the FASB issued ASU 2017-08, Receivables — Nonrefundable Fees and Other Costs (Subtopic 310-20). The amendments in this Update shorten the amortization period for certain callable debt securities held at a premium. Specifically, the amendments require the premium to be amortized to the earliest call date. The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. For public business entities, the amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity should apply the amendments in this Update on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. Additionally, in the period of adoption, an entity should provide disclosures about a change in accounting principle. This Update is not expected to have a significant impact on the Company’s financial statements.

In February 2018, the FASB issued ASU 2018-02, Income Statement — Reporting Comprehensive Income (Topic 220). On December 22, 2017, the U.S. federal government enacted a tax bill, H.R.1, An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018 (Tax Cuts and Jobs Act), which requires deferred tax liabilities and assets to be adjusted for the effect of a change in tax laws. The amendments in this Update allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. The amendments in this Update are effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption of the amendments in this Update is permitted. The amendments in this Update should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. The Company has elected to early adopt this standard as of December 31, 2017, which resulted in a one-time cumulative effect adjustment of $2.1 million between retained earnings and accumulated other comprehensive loss on the Consolidated Balance Sheets. The adjustment had no impact on net income or any prior periods presented.

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CASH AND DUE FROM DEPOSITORY INSTITUTIONS

12 Months Ended

Dec. 31, 2017

Cash and Cash Equivalents [Abstract]

Cash and Cash Equivalents Disclosure [Text Block]

2.  CASH AND DUE FROM DEPOSITORY INSTITUTIONS

Included in “Cash and due from depository institutions” are required federal reserves of $5,000 for December 31, 2017 and $6,000 for December 31, 2016, 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.

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INVESTMENT SECURITIES

12 Months Ended

Dec. 31, 2017

Investments [Abstract]

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

3.  INVESTMENT SECURITIES

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

Investment securities available for sale:

	AT DECEMBER 31, 2017
	COST BASIS		GROSS UNREALIZED GAINS		GROSS UNREALIZED LOSSES			FAIR VALUE
	(IN THOUSANDS)
U.S. Agency	$	6,612	$	—	$	(40	)	$	6,572
Taxable municipal		7,198		27		(189	)		7,036
Corporate bonds		35,886		322		(424	)		35,784
U.S. Agency mortgage-backed securities		79,854		611		(719	)		79,746
Total	$	129,550	$	960	$	(1,372	)	$	129,138

Investment securities held to maturity:

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

Investment securities available for sale:

	AT DECEMBER 31, 2016
	COST BASIS		GROSS UNREALIZED GAINS		GROSS UNREALIZED LOSSES			FAIR VALUE
	(IN THOUSANDS)
U.S. Agency	$	400	$	—	$	(2	)	$	398
Taxable municipal		3,793		3		(174	)		3,622
Corporate bonds		34,403		194		(724	)		33,873
U.S. Agency mortgage-backed securities		88,738		1,132		(686	)		89,184
Total	$	127,334	$	1,329	$	(1,586	)	$	127,077

Investment securities held to maturity:

	AT DECEMBER 31, 2016
	COST BASIS		GROSS UNREALIZED GAINS		GROSS UNREALIZED LOSSES			FAIR VALUE
	(IN THOUSANDS)
U.S. Agency mortgage-backed securities	$	11,177	$	180	$	(79	)	$	11,278
Taxable municipal		13,441		70		(348	)		13,163
Corporate bonds and other securities		6,047		15		(83	)		5,979
Total	$	30,665	$	265	$	(510	)	$	30,420

Maintaining investment quality is a primary objective of the Company’s investment policy which, subject to certain limited exceptions, prohibits the purchase of any investment security below a Moody’s Investors Service or Standard &; Poor’s rating of A. At December 31, 2017, 57.8% of the portfolio was rated AAA as compared to 63.5% at December 31, 2016. 9.7% of the portfolio was rated below A or unrated on December 31, 2017. 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, 2017.

The book value of securities, both available for sale and held to maturity, pledged to secure public and trust deposits, and certain Federal Home Loan Bank borrowings was $117,181,000 at December 31, 2017 and $104,953,000 at December 31, 2016.

The Company realized $115,000 of gross investment security gains in 2017 and 183,000 of gross investment security gains and $6,000 of gross investment security losses in 2016, and $107,000 of gross investment gains and $36,000 of gross investment security losses in 2015. On a net basis, the realized gain for 2017 was $76,000 after factoring in tax expense of $39,000 and the realized gain for 2016 was $117,000 after factoring in tax expense of $60,000, and the realized gain for 2015 was $46,000 after factoring in tax expense of $25,000. Proceeds from sales of investment securities available for sale were $8.1 million for 2017, $9.0 million for 2016, and $3.6 million during 2015.

The following table sets forth the contractual maturity distribution of the investment securities, cost basis and fair market values, and the weighted average yield for each type and range of maturity as of December 31, 2017. Yields are not presented on a tax-equivalent basis, but are based upon the cost basis and are weighted for the scheduled maturity. The Company’s consolidated investment securities portfolio had an effective duration of approximately 3.69 years. The weighted average expected maturity for available for sale securities at December 31, 2017 for U.S. Agency, U.S. Agency Mortgage-Backed and Corporate Bond securities was 10.38, 4.60 and 5.44 years, respectively. The weighted average expected maturity for held to maturity securities at December 31, 2017 for U.S. Agency Mortgage-Backed and Corporate Bonds/Taxable Municipals and other securities were 4.57 and 6.51 years.

Investment securities available for sale:

	AT DECEMBER 31, 2017
	U. S. AGENCY				U.S. AGENCY MORTGAGE-BACKED SECURITIES				CORPORATE BONDS AND OTHER			TOTAL INVESTMENT SECURITIES AVAILABLE FOR SALE
	(IN THOUSANDS, EXCEPT YIELDS)
COST BASIS
Within 1 year	$	400	1.03	%	$	1	6.00	%	$	—	—%	$	401	1.04	%
After 1 year but within 5 years		—	—			848	2.09			10,938	2.99		11,786	2.93
After 5 years but within 10 years		3,230	2.75			14,623	2.91			30,646	3.64		48,499	3.36
After 10 years but within 15 years		—	—			24,516	2.30			1,500	3.98		26,016	2.39
Over 15 years		2,982	2.69			39,866	2.52			—	—		42,848	2.53
Total	$	6,612	2.62		$	79,854	2.52		$	43,084	3.49	$	129,550	2.84
FAIR VALUE
Within 1 year	$	399			$	1			$	—		$	400
After 1 year but within 5 years		—				843				10,924			11,767
After 5 years but within 10 years		3,220				14,859				30,477			48,556
After 10 years but within 15 years		—				24,301				1,419			25,720
Over 15 years		2,953				39,742				—			42,695
Total	$	6,572			$	79,746			$	42,820		$	129,138

Investment securities held to maturity:

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

The following tables present information concerning investments with unrealized losses as of December 31, 2017 (in thousands):

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

The following tables present information concerning investments with unrealized losses as of December 31, 2016 (in thousands):

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

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 133 positions that are considered temporarily impaired at December 31, 2017. 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.

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LOANS

12 Months Ended

Dec. 31, 2017

Loans [Abstract]

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

4.  LOANS

The loan portfolio of the Company consisted of the following:

	AT DECEMBER 31,
	2017		2016
	(IN THOUSANDS)
Commercial	$	159,192	$	171,529
Commercial loans secured by real estate		463,780		446,598
Real estate-mortgage		247,278		245,765
Consumer		19,383		19,872
Loans, net of unearned income	$	889,633	$	883,764

Loan balances at December 31, 2017 and 2016 are net of unearned income of $399,000 and $476,000, respectively. Real estate construction loans comprised 4.1% and 4.7% of total loans net of unearned income at December 31, 2017 and 2016, 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, 2017 and 2016, 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 $554,000 and $578,000 at December 31, 2017 and 2016, respectively.

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ALLOWANCE FOR LOAN LOSSES

12 Months Ended

Dec. 31, 2017

Allowance for Loan Losses [Abstract]

Allowance for Credit Losses [Text Block]

5.  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, 2016		CHARGE- OFFS			RECOVERIES		PROVISION (CREDIT)			BALANCE AT DECEMBER 31, 2017
Commercial	$	4,041	$	(278	)	$	27	$	509		$	4,299
Commercial loans secured by real estate		3,584		(165	)		14		233			3,666
Real estate-mortgage		1,169		(313	)		250		(4	)		1,102
Consumer		151		(172	)		119		30			128
Allocation for general risk		987		—			—		32			1,019
Total	$	9,932	$	(928)		$	410	$	800		$	10,214

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

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

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

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

	AT DECEMBER 31, 2017
	(IN THOUSANDS)
Loans:	COMMERCIAL		COMMERCIAL LOANS SECURED BY REAL ESTATE		REAL ESTATE- MORTGAGE		CONSUMER		TOTAL
Individually evaluated for impairment	$	1,212	$	547	$	—	$	—	$	1,759
Collectively evaluated for impairment		157,980		463,233		247,278		19,383		887,874
Total loans	$	159,192	$	463,780	$	247,278	$	19,383	$	889,633

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

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

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

The segments of the Company’s loan portfolio are disaggregated to a level that allows management to monitor risk and performance. The loan segments used are consistent with the internal reports evaluated by the Company’s management and Board of Directors to monitor risk and performance within various segments of its loan portfolio and therefore, no further disaggregation into classes is necessary. The overall risk profile for the commercial and commercial real estate loan segments are impacted by non-owner occupied CRE loans, which include loans secured by non-owner occupied nonfarm nonresidential properties, as a meaningful but closely monitored portion of the commercial portfolio is centered in these types of accounts. 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 with a loan balance in excess of $100,000 that is in nonaccrual status or classified as a Troubled Debt Restructure (TDR). Loans are considered to be impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in evaluating impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. The Company does not separately evaluate individual consumer and residential mortgage loans for impairment, unless such loans are part of a larger relationship that is impaired, or are classified as a TDR.

Once the determination has been made that a loan is impaired, the determination of whether a specific allocation of the allowance is necessary is measured by comparing the recorded investment in the loan to the fair value of the loan using one of three methods: (a) the present value of expected future cash flows discounted at the loan’s effective interest rate; (b) the loan’s observable market price; or (c) the fair value of the collateral less selling costs for collateral dependent loans. The method is selected on a loan-by-loan basis, with management primarily utilizing 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 collateral real estate 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 class, segregated by those for which a specific allowance was required and those for which a specific allowance was not necessary.

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

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

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

	YEAR ENDED DECEMBER 31,
	2017		2016		2015
	(IN THOUSANDS)
Average impaired balance:
Commercial	$	1,075	$	718	$	1,271
Commercial loans secured by real estate		838		356		866
Consumer		—		—		9
Average investment in impaired loans	$	1,913	$	1,074	$	2,146
Interest income recognized:
Commercial	$	28	$	14	$	10
Commercial loans secured by real estate		34		8		17
Consumer		—		—		—
Interest income recognized on a cash basis on impaired loans	$	62	$	22	$	27

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 follow bank regulatory definitions. The Special Mention category includes assets that are currently protected but are potentially weak, resulting in an undue and unwarranted credit risk, but not to the point of justifying a Substandard classification. Loans in the Substandard category have well-defined weaknesses that jeopardize the liquidation of the debt, and have a distinct possibility that some loss will be sustained if the weaknesses are not corrected. All loans greater than 90 days past due, or for which any portion of the loan represents a specific allocation of the allowance for loan losses are placed in Substandard or Doubtful.

To help ensure that risk ratings are accurate and reflect the present and future capacity of borrowers to repay a loan as agreed, the Company has a structured loan rating process, which dictates that, at a minimum, credit reviews are mandatory for all commercial and commercial mortgage loan relationships with aggregate balances in excess of $250,000 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 2017 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 $1,000,000, 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 loan portfolio summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard and Doubtful within the internal risk rating system.

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

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

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 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 portfolios.

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

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

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

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

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

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

Management tracks the historical net charge-off activity at each risk rating grade level for the entire commercial portfolio and at the aggregate level for the consumer and residential mortgage portfolios. A historical charge-off factor is calculated utilizing a rolling 12 consecutive historical quarters for the commercial portfolios. The historical charge-off factors for the consumer and residential mortgage 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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NON-PERFORMING ASSETS INCLUDING TROUBLED DEBT RESTRUCTURINGS

12 Months Ended

Dec. 31, 2017

Nonperforming Assets Including Troubled Debt Restructurings [Abstract]

Non Performing Assets Including Troubled Debt Restructurings TDR [Text Block]

6.  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 tables present information concerning non-performing assets including TDR:

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

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); and

• the borrower is unable to obtain refinancing from other sources at a market rate similar to rates available to a non-troubled debtor.

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

• the borrower is granted an interest rate reduction to a level below market rates for debt with similar risk; or

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

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

Any loan modification where the borrower’s aggregate exposure is at least $250,000 and where the loan currently maintains a criticized or classified risk rating, i.e. Special Mention, Substandard or Doubtful, or where the loan will be assigned a criticized or classified rating after the modification is evaluated to determine the need for TDR classification. The specific ALL reserve for loans modified as TDR’s was $748,000 and $527,000 as of December 31, 2017 and 2016, respectively.

The following table details the TDRs at December 31, 2017 (dollars in thousands).

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

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

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

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

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

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

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

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

There were no loans that were modified as TDR’s in the previous 12 months and defaulted during the reporting periods ending December 31, 2017, 2016 or 2015, 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.

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

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

Foreclosed assets acquired in settlement of loans carried at fair value less estimated costs to sell are included in the other assets on the Consolidated Balance Sheets. As of December 31, 2017 and 2016, a total of $18,000 and $21,000, respectively of residential real estate foreclosed assets were included in other assets. As of December 31, 2017, the Company had initiated formal foreclosure procedures on $74,000 of consumer residential mortgages.

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PREMISES AND EQUIPMENT

12 Months Ended

Dec. 31, 2017

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment Disclosure [Text Block]

7.  PREMISES AND EQUIPMENT

An analysis of premises and equipment follows:

	AT DECEMBER 31,
	2017		2016
	(IN THOUSANDS)
Land	$	1,198	$	1,198
Premises		25,745		24,670
Furniture and equipment		8,664		7,949
Leasehold improvements		483		708
Total at cost		36,090		34,525
Less: Accumulated depreciation and amortization		23,356		22,831
Premises and equipment, net	$	12,734	$	11,694

The Company recorded depreciation expense was $1.7 million for 2017 and $1.8 million for both 2016 and 2015. 

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DEPOSITS

12 Months Ended

Dec. 31, 2017

Deposits [Abstract]

Deposit Liabilities Disclosures [Text Block]

8.  DEPOSITS

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

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

Interest expense on deposits consisted of the following:

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

The following table sets forth the balance of other time deposits and certificates of deposit of $100,000 or more as of December 31, 2017 maturing in the periods presented:

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

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

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

The aggregate amount of time deposit accounts (including certificates of deposit) that meet or exceed the FDIC insurance limit at December 31, 2017 and 2016 are $49.7 million and $45.8 million, respectively.

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SHORT-TERM BORROWINGS

12 Months Ended

Dec. 31, 2017

Short-term Debt [Abstract]

Short-term Debt [Text Block]

9.  SHORT-TERM BORROWINGS

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

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

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

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

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

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

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

12 Months Ended

Dec. 31, 2017

Long-term Debt, Unclassified [Abstract]

Long-term Debt [Text Block]

10.  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, 2017
MATURING	WEIGHTED AVERAGE YIELD		BALANCE
	(IN THOUSANDS, EXCEPT RATES)
2018		1.48	$	12,000
2019		1.51		12,500
2020		1.74		16,729
2021		1.75		5,000
Total advances from FHLB		1.61	$	46,229

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

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

Guaranteed Junior Subordinated Deferrable Interest Debentures:

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

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, 2017 and 2016 was $7.5 million and $7.4 million, respectively.

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DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS

12 Months Ended

Dec. 31, 2017

Disclosures about Fair Value Measurements [Abstract]

Fair Value, Measurement Inputs, Disclosure [Text Block]

11.  DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS

The following disclosures establish a hierarchal framework associated with the level of pricing observability utilized in measuring assets and liabilities at fair value. 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.

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 value of the swap asset is 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 reported on the Consolidated Balance Sheets at their fair value as of December 31, 2017 and 2016, by level within the fair value hierarchy. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

Assets and Liability Measured on a Recurring Basis:

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

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

  

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

Assets Measured on a Non-recurring Basis:

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

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

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

Loans considered impaired are loans for which, based on current information and events, it is probable that the creditor will be unable to collect all amounts due according to the contractual terms of the loan agreement. Impaired loans are reported at 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, 2017, impaired loans with a carrying value of $1.8 million were reduced by specific valuation allowance totaling $909,000 resulting in a net fair value of $850,000. At December 31, 2016, impaired loans with a carrying value of $674,000 were reduced by specific valuation allowance totaling $527,000 resulting in a net fair value of $147,000.

OREO is measured at fair value based on appraisals, less cost 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.

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

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

(1) Fair Value is generally determined through independent appraisals of the underlying collateral, which generally include various level 3 inputs which are not identifiable.

(2) Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses.

(3) Includes qualitative adjustments by management and estimated liquidation expenses.

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DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

12 Months Ended

Dec. 31, 2017

Disclosures About Fair Value Of Financial Instruments [Abstract]

Financial Instruments Disclosure [Text Block]

12.  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 uses 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, and loans and deposits with floating interest rates have estimated fair values which approximate the recorded carrying values. The estimation methodologies used, the estimated fair values based on US GAAP measurements, and recorded carrying values at December 31, 2017 and 2016, were as follows:

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

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

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

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

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

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

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

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

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

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

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

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

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INCOME TAXES

12 Months Ended

Dec. 31, 2017

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

13.  INCOME TAXES

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

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

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

	YEAR ENDED DECEMBER 31,
	2017						2016						2015
	AMOUNT			RATE			AMOUNT			RATE			AMOUNT			RATE
	(IN THOUSANDS, EXCEPT PERCENTAGES)
Income tax expense based on federal statutory rate	$	2,938			34.0	%	$	1,090			34.0	%	$	2,836			34.0	%
Tax exempt income		(283	)		(3.3	)		(255	)		(7.9	)		(574	)		(6.9	)
Other		68			0.8			62			1.9			81			1.0
Change in corporate tax rate		2,624			30.4			—			—			—			—
Total expense for income taxes	$	5,347			61.9	%	$	897			28.0	%	$	2,343			28.1	%

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

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

At December 31, 2017 and 2016, the Company had no valuation allowance established against its deferred tax assets as we believe the Company will generate sufficient future taxable income to fully utilize alternative minimum tax (AMT) credits.

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

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

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

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 2014 have been closed for purposes of examination by the Internal Revenue Service and the Pennsylvania Department of Revenue.

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EMPLOYEE BENEFIT PLANS

12 Months Ended

Dec. 31, 2017

Compensation and Retirement Disclosure [Abstract]

Pension and Other Postretirement Benefits Disclosure [Text Block]

14.  EMPLOYEE BENEFIT PLANS

PENSION PLANS:

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 401K 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 $1.2 million and is limited to 10% of the plan’s assets), mutual funds, and short-term cash equivalent instruments. The following actuarial tables are based upon data provided by an independent third party as of December 31, 2017.

PENSION BENEFITS:

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

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

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

The weighted-average assumptions used to determine benefit obligations at December 31, 2017 and 2016 were as follows:

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

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

	YEAR ENDED DECEMBER 31,
	2017			2016			2015
	(IN THOUSANDS)
OTHER CHANGES IN PLAN ASSETS AND BENEFIT OBLIGATIONS RECOGNIZED IN OTHER COMPREHENSIVE LOSS
Net (gain) loss	$	(822	)	$	6,505		$	1,221
Recognized loss		(1,454	)		(1,333	)		(1,386	)
Total recognized in other comprehensive loss before tax effect	$	(2,276	)	$	5,172		$	(165	)
Total recognized in net benefit cost and other comprehensive loss before tax effect	$	(553	)	$	7,128		$	1,989

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 $1,561,000.

The weighted-average assumptions used to determine net periodic benefit cost for the years ended December 31, 2017, 2016 and 2015 were as follows:

	YEAR ENDED DECEMBER 31,
	2017			2016			2015
WEIGHTED AVERAGE ASSUMPTIONS:
Discount rate		4.12	%		4.20	%		4.00	%
Expected return on plan assets		7.75			7.75			8.00
Rate of compensation increase		2.50			2.50			2.50

The Company has assumed a 7.75% 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, 2017. This plan’s asset allocations at December 31, 2017 and 2016, by asset category are as follows:

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

The major categories of assets in the Company’s Pension Plan as of yearend 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,
	2017		2016
	(IN THOUSANDS)
Level 1:
Cash and cash equivalents	$	44	$	2,454
Domestic equities		4,340		3,067
Mutual funds/ETFs		30,470		23,310
International equities		1,322		307
Level 2:
Corporate bonds		924		1,533
Total fair value of plan assets	$	37,100	$	30,671

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, 2017, 3.4% 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 2018 will be approximately $3.5 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)
2018	$	2,698
2019		2,692
2020		2,817
2021		2,832
2022		3,116
Years 2023 – 2027		14,988

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 $469,000, $447,000 and $433,000 for the years ended December 31, 2017, 2016 and 2015, respectively. The fair value of plan assets includes $1.1 million pertaining to the value of the Company’s common stock and Trust Preferred securities that are held by the plan at December 31, 2017.

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

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LEASE COMMITMENTS

12 Months Ended

Dec. 31, 2017

Leases, Operating [Abstract]

Leases of Lessee Disclosure [Text Block]

15.  LEASE COMMITMENTS

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

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

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

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COMMITMENTS AND CONTINGENT LIABILITIES

12 Months Ended

Dec. 31, 2017

Commitments and Contingent Liabilities [Abstract]

Commitments and Contingencies Disclosure [Text Block]

16.  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, and fixed assets.

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

The Company’s exposure to credit loss in the event of nonperformance by the other party to these commitments to extend credit and standby letters of credit is represented by their contractual amounts. The Company uses the same credit and collateral policies in making commitments and conditional obligations as for all other lending. At December 31, 2017, the Company had various outstanding commitments to extend credit approximating $165.1 million and standby letters of credit of $10.0 million, compared to commitments to extend credit of $160.5 million and standby letters of credit of $8.5 million at December 31, 2016. Standby letters of credit had terms ranging from 1 to 2 years with annual extension options available. Standby letters of credit of approximately $5.1 million were secured as of December 31, 2017 and approximately $3.9 million at December 31, 2016. The carrying amount of the liability for AmeriServ obligations related to unfunded commitments and standby letters of credit was $915,000 at December 31, 2017 and $890,000 at December 31, 2016.

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 operation or cash flows.

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PREFERRED STOCK

12 Months Ended

Dec. 31, 2017

Preferred Stock [Abstract]

Preferred Stock [Text Block]

17.  PREFERRED STOCK

SBLF:

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

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

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STOCK COMPENSATION PLANS

12 Months Ended

Dec. 31, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

18.  STOCK COMPENSATION PLANS

The Company uses the modified prospective method for accounting for stock-based compensation and recognized $13,000 of pretax compensation expense for the year 2017, $20,000 in 2016 and $29,000 in 2015.

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 was not 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, 2017, 2016, and 2015, and changes during the years then ended is presented in the table and narrative following:

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

A total of 308,301 of the 360,721 options outstanding at December 31, 2017, are exercisable and have exercise prices between $1.53 and $4.00, with a weighted average exercise price of $2.85 and a weighted average remaining contractual life of 5.03 years. The remaining 52,420 options that are not yet exercisable have exercise prices between $2.96 and $4.00, with a weighted average exercise price of $3.22 and a weighted average remaining contractual life of 7.90 years. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions used for grants in 2017, 2016, and 2015.

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

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ACCUMULATED OTHER COMPREHENSIVE LOSS

12 Months Ended

Dec. 31, 2017

Accumulated Comprehensive Loss [Abstract]

Comprehensive Income (Loss) Note [Text Block]

19.  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, 2017 and 2016 (in thousands):

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

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

The following table presents the amounts reclassified out of each component of accumulated other comprehensive loss for the periods ending December 31, 2017 and 2016 (in thousands):

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

(1) Amounts in parentheses indicate credits.

(2) These accumulated other comprehensive loss components are included in the computation of net periodic benefit cost (see Note 14 for additional details).

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INTANGIBLE ASSETS

12 Months Ended

Dec. 31, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets Disclosure [Text Block]

20.  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 retail banking segment and $2.4 million relates to the WCCA acquisition which is included in the trust segment. The balance of the Company’s goodwill at December 31, 2017 and 2016 was $11.9 million, respectively.

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DERIVATIVE HEDGING INSTRUMENTS

12 Months Ended

Dec. 31, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities Disclosure [Text Block]

21.  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 entered into interest rate swap agreements with customers and a large financial institution that specializes in these types of transactions in 2017. These arrangements involve the exchange of interest payments based on the notional amounts. The Company entered into floating rate loans and fixed rate swaps with our customers. Simultaneously, the Company entered into an offsetting fixed rate swaps with PNC. 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. The Company received $139,000 in fees on the transactions.

The following table summarizes the interest rate swap transactions that impacted the Company’s 2017 performance.

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

The Company monitors and controls all derivative products with a comprehensive Board of Director 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. The Company had no caps or floors outstanding at December 31, 2017.

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SEGMENT RESULTS

12 Months Ended

Dec. 31, 2017

Segment Results [Abstract]

Segment Reporting Disclosure [Text Block]

22.  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 retail banking, commercial banking, trust, 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.

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, and CRE loans. The trust segment contains our wealth management businesses which include the Trust Company, WCCA, our registered investment advisory firm and financial services. Wealth management includes personal trust products and services such as personal portfolio investment management, estate planning and administration, custodial services and pre-need trusts. Also, institutional trust products and services such as 401(k) plans, defined benefit and defined contribution employee benefit plans, and individual retirement accounts are included in this segment. Financial services include the sale of mutual funds, annuities, and insurance products. The wealth management businesses also includes the BUILD funds which are union collective investment funds which are designed to use union pension dollars in construction projects that utilize union labor. The investment/parent includes the net results of investment securities and borrowing activities, general corporate expenses not allocated to the business segments, interest expense on guaranteed junior subordinated deferrable interest debentures, and centralized interest rate risk management. Inter-segment revenues were not material.

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

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

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

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

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REGULATORY CAPITAL

12 Months Ended

Dec. 31, 2017

Regulatory Capital [Abstract]

Regulatory Capital Requirements under Banking Regulations [Text Block]

23.  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 financial statements.

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 and Tier I capital to risk-weighted assets, and of Tier I capital to average assets. As of December 31, 2017 and 2016, the Federal Reserve categorized the Company as Well Capitalized under the regulatory framework for prompt corrective action. 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 I risk-based, Tier I risk-based, and Tier I leverage ratios as set forth in the table. Additionally, while not a regulatory capital ratio, the Company’s tangible common equity ratio was 7.20% and 7.31% for 2017 and 2016, respectively.

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

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

* Applies to the Bank only.

On July 2, 2013, the Federal Reserve approved final rules that substantially amend the regulatory risk-based capital rules applicable to the Company and the Bank. The final rules implement the “Basel III” regulatory capital reforms, as well as certain changes required by the Dodd-Frank Act, which will require institutions to, among other things, have more capital and a higher quality of capital by increasing the minimum regulatory capital ratios, and requiring capital buffers. The new rules became effective for the Company on January 1, 2015, with an implementation period that stretches to 2019. For a more detailed discussion see the Capital Resources section of the MD&;A.

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PARENT COMPANY FINANCIAL INFORMATION

12 Months Ended

Dec. 31, 2017

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

Condensed Financial Information of Parent Company Only Disclosure [Text Block]

24.  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,
	2017		2016
	(IN THOUSANDS)
ASSETS
Cash	$	100	$	100
Short-term investments in money market funds		4,521		5,397
Investment securities available for sale		5,307		6,041
Equity investment in banking subsidiary		99,408		97,158
Equity investment in non-banking subsidiaries		6,444		5,168
Other assets		499		2,665
TOTAL ASSETS	$	116,279	$	116,529
LIABILITIES
Guaranteed junior subordinated deferrable interest debentures	$	12,923	$	12,908
Subordinated debt		7,465		7,441
Other liabilities		789		785
TOTAL LIABILITIES		21,177		21,134
STOCKHOLDERS’ EQUITY
Total stockholders’ equity		95,102		95,395
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	116,279	$	116,529

STATEMENTS OF OPERATIONS

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

STATEMENTS OF CASH FLOWS

	YEAR ENDED DECEMBER 31,
	2017			2016			2015
	(IN THOUSANDS)
OPERATING ACTIVITIES
Net income	$	3,293		$	2,310		$	5,997
Adjustment to reconcile net income to net cash (used in) provided by operating activities:
Equity in undistributed earnings of subsidiaries		(1,687	)		(629	)		(1,168	)
Stock compensation expense		13			20			29
Other – net		1,325			1,463			842
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES		2,944			3,164			5,700
INVESTING ACTIVITIES
Purchase of investment securities – available for sale		(1,002	)		(996	)		(1,533	)
Proceeds from maturity and sales of investment securities – available for sale		1,699			3,396			4,669
Proceeds from life insurance policies		—			—			719
NET CASH PROVIDED BY INVESTING ACTIVITIES		697			2,400			3,855
FINANCING ACTIVITIES
Subordinated debt issuance, net		—			—			7,418
Preferred stock redemption		—			(21,000	)		—
Preferred stock dividends paid		—			(15	)		(210	)
Purchases of treasury stock		(3,404	)		—			—
Common stock dividends paid		(1,113	)		(945	)		(754	)
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES		(4,517	)		(21,960	)		6,454
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(876	)		(16,396	)		16,009
CASH AND CASH EQUIVALENTS AT JANUARY 1		5,497			21,893			5,884
CASH AND CASH EQUIVALENTS AT DECEMBER 31	$	4,621		$	5,497		$	21,893

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 $110,300,000 of restricted surplus and retained earnings at December 31, 2017.

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SELECTED QUARTERLY CONSOLIDATED FINANCIAL DATA

12 Months Ended

Dec. 31, 2017

Quarterly Financial Information Disclosure [Abstract]

Quarterly Financial Information [Text Block]

25.  SELECTED QUARTERLY CONSOLIDATED FINANCIAL DATA (unaudited)

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

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

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

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

12 Months Ended

Dec. 31, 2017

Accounting Policies [Abstract]

Business And Nature Of Operations [Policy Text Block]

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 15 banking locations in five southwestern Pennsylvania counties. 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 Sheet at December 31, 2017.

Consolidation, Policy [Policy Text Block]

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. 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, Policy [Policy Text Block]

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 [Policy Text Block]

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 by management. The stock’s value is determined by the ultimate recoverability of the par value rather than by recognizing temporary declines. The determination of whether the par value will ultimately be recovered is influenced by criteria such as the following: (a) The significance of the decline in net assets of the FHLB as compared to the capital stock amount and the length of time any such situation has persisted (b) Commitments by the FHLB to make payments required by law or regulation and the level of such payments in relation to the operating performance (c) The impact of legislative and regulatory changes on the customer base of FHLB and (d) The liquidity position of the FHLB. Management evaluated the stock and concluded that the stock was not impaired for the periods presented herein.

Finance, Loan and Lease Receivables, Held-for-investment, Policy [Policy Text Block]

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.

Loans and Leases Receivable, Origination Fees, Discounts or Premiums, and Direct Costs to Acquire Loans Policy [Policy Text Block]

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.

Finance, Loan and Lease Receivables, Held-for-sale, Policy [Policy Text Block]

LOANS HELD FOR SALE:

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

Fair Value Transfer, Policy [Policy Text Block]

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.

Property, Plant and Equipment, Policy [Policy Text Block]

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.

Finance, Loan and Lease Receivables, Held-for-investment, Allowance and Nonperforming Loans, Policy [Policy Text Block]

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 loans with aggregate balances over $250,000 to determine if any specific reserve allocations are required on an individual loan basis. 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 $250,000 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.

Off-Balance-Sheet Credit Exposure, Policy [Policy Text Block]

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 section of the Consolidated Balance Sheets.

Revenue Recognition, Services, Management Fees [Policy Text Block]

TRUST FEES:

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

Life Settlement Contracts, Policy [Policy Text Block]

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.

Goodwill and Intangible Assets, Policy [Policy Text Block]

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 Share, Policy [Policy Text Block]

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 10,000, 51,273, and 58,788 shares of common stock were outstanding during 2017, 2016 and 2015, respectively, but were not included in the computation of diluted earnings per common share because to do so would be anti-dilutive. Exercise prices of anti-dilutive options to purchase common stock outstanding were $4.00, $3.23-$4.60, and $3.23-$4.70 during 2017, 2016 and 2015, respectively. Dividends on preferred shares are deducted from net income in the calculation of earnings per common share.

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

Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block]

STOCK-BASED COMPENSATION:

The Company uses the modified prospective method for accounting of stock-based compensation. The Company recognized $13,000, $20,000 and $29,000 of pretax compensation expense for the years 2017, 2016 and 2015, respectively. The fair value of each option grant is estimated on the grant date using the Black-Scholes option pricing model. See Note 18 for details on the assumptions used.

Comprehensive Income, Policy [Policy Text Block]

ACCUMULATED OTHER COMPREHENSIVE LOSS:

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

Cash and Cash Equivalents, Policy [Policy Text Block]

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 $1,075,000 in income tax payments in 2017; $375,000 in 2016; and $1,554,000 in 2015. The Company had non-cash transfers to other real estate owned (OREO) in the amounts of $77,000 in 2017; $172,000 in 2016; and $189,000 in 2015. The Company made total interest payments of $8,681,000 in 2017; $7,746,000 in 2016; and $6,575,000 in 2015.

Income Tax, Policy [Policy Text Block]

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.

Derivatives, Policy [Policy Text Block]

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 and Other Postretirement Plans, Policy [Policy Text Block]

PENSION:

Pension costs and liabilities are dependent on assumptions used in calculating such amounts. These assumptions include discount rates, benefits earned, interest costs, expected return on plan assets, mortality rates, and other factors. In accordance with GAAP, actual results that differ from the assumptions are accumulated and amortized over future periods and, therefore, generally affect recognized expense and the recorded obligation of future periods. While management believes that the assumptions used are appropriate, differences in actual experience or changes in assumptions may affect the Company’s pension obligations and future expense. In conjunction with the annual measurement of the funded status of Company’s pension plan at December 31, 2016, management elected to change the manner in which the service cost and interest cost components of net periodic benefit cost will be determined in 2017 and beyond. Previously, the service cost and interest cost components were determined by multiplying the single equivalent rate described above and the aggregate discounted cash flows of the plan’s service cost and projected benefit obligations.

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

Management believes this new methodology, which represents a change in an accounting estimate, is a better 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 14 of the Notes to Consolidated Financial Statements.

Fair Value Measurement, Policy [Policy Text Block]

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.

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

New Accounting Pronouncements, Policy [Policy Text Block]

RECENT ACCOUNTING STANDARDS:

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

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

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 effected 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. The Company is currently evaluating the impact that the Update will have on our 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. We are currently evaluating third-party vendor solutions to assist us in the application of this standard.

In March 2017, the FASB issued ASU 2017-07, Compensation — Retirement Benefits (Topic 715). The amendments in this Update require that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost as defined in paragraphs 715-30-35-4 and 715-60-35-9 are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. If a separate line item or items are used to present the other components of net benefit cost, that line item or items must be appropriately described. If a separate line item or items are not used, the line item or items used in the income statement to present the other components of net benefit cost must be disclosed. This Update is not expected to have a significant impact on the Company’s financial statements.

In March 2017, the FASB issued ASU 2017-08, Receivables — Nonrefundable Fees and Other Costs (Subtopic 310-20). The amendments in this Update shorten the amortization period for certain callable debt securities held at a premium. Specifically, the amendments require the premium to be amortized to the earliest call date. The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. For public business entities, the amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity should apply the amendments in this Update on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. Additionally, in the period of adoption, an entity should provide disclosures about a change in accounting principle. This Update is not expected to have a significant impact on the Company’s financial statements.

In February 2018, the FASB issued ASU 2018-02, Income Statement — Reporting Comprehensive Income (Topic 220). On December 22, 2017, the U.S. federal government enacted a tax bill, H.R.1, An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018 (Tax Cuts and Jobs Act), which requires deferred tax liabilities and assets to be adjusted for the effect of a change in tax laws. The amendments in this Update allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. The amendments in this Update are effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption of the amendments in this Update is permitted. The amendments in this Update should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. The Company has elected to early adopt this standard as of December 31, 2017, which resulted in a one-time cumulative effect adjustment of $2.1 million between retained earnings and accumulated other comprehensive loss on the Consolidated Balance Sheets. The adjustment had no impact on net income or any prior periods presented.

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

12 Months Ended

Dec. 31, 2017

Accounting Policies [Abstract]

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

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

XML

INVESTMENT SECURITIES (Tables)

12 Months Ended

Dec. 31, 2017

Investments [Abstract]

Schedule of Available-for-sale Securities Reconciliation [Table Text Block]

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

Investment securities available for sale:

	AT DECEMBER 31, 2017
	COST BASIS		GROSS UNREALIZED GAINS		GROSS UNREALIZED LOSSES			FAIR VALUE
	(IN THOUSANDS)
U.S. Agency	$	6,612	$	—	$	(40	)	$	6,572
Taxable municipal		7,198		27		(189	)		7,036
Corporate bonds		35,886		322		(424	)		35,784
U.S. Agency mortgage-backed securities		79,854		611		(719	)		79,746
Total	$	129,550	$	960	$	(1,372	)	$	129,138

Investment securities held to maturity:

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

Investment securities available for sale:

	AT DECEMBER 31, 2016
	COST BASIS		GROSS UNREALIZED GAINS		GROSS UNREALIZED LOSSES			FAIR VALUE
	(IN THOUSANDS)
U.S. Agency	$	400	$	—	$	(2	)	$	398
Taxable municipal		3,793		3		(174	)		3,622
Corporate bonds		34,403		194		(724	)		33,873
U.S. Agency mortgage-backed securities		88,738		1,132		(686	)		89,184
Total	$	127,334	$	1,329	$	(1,586	)	$	127,077

Investment securities held to maturity:

	AT DECEMBER 31, 2016
	COST BASIS		GROSS UNREALIZED GAINS		GROSS UNREALIZED LOSSES			FAIR VALUE
	(IN THOUSANDS)
U.S. Agency mortgage-backed securities	$	11,177	$	180	$	(79	)	$	11,278
Taxable municipal		13,441		70		(348	)		13,163
Corporate bonds and other securities		6,047		15		(83	)		5,979
Total	$	30,665	$	265	$	(510	)	$	30,420

Schedule of Contractual Maturities of Securities [Table Text Block]

Investment securities available for sale:

	AT DECEMBER 31, 2017
	U.S. AGENCY				U.S. AGENCY MORTGAGE- BACKED SECURITIES				CORPORATE BONDS AND OTHER			TOTAL INVESTMENT SECURITIES AVAILABLE FOR SALE
	(IN THOUSANDS, EXCEPT YIELDS)
COST BASIS
Within 1 year	$	400	1.03	%	$	1	6.00	%	$	—	—%	$	401	1.04	%
After 1 year but within 5 years		—	—			848	2.09			10,938	2.99		11,786	2.93
After 5 years but within 10 years		3,230	2.75			14,623	2.91			30,646	3.64		48,499	3.36
After 10 years but within 15 years		—	—			24,516	2.30			1,500	3.98		26,016	2.39
Over 15 years		2,982	2.69			39,866	2.52			—	—		42,848	2.53
Total	$	6,612	2.62		$	79,854	2.52		$	43,084	3.49	$	129,550	2.84
FAIR VALUE
Within 1 year	$	399			$	1			$	—		$	400
After 1 year but within 5 years		—				843				10,924			11,767
After 5 years but within 10 years		3,220				14,859				30,477			48,556
After 10 years but within 15 years		—				24,301				1,419			25,720
Over 15 years		2,953				39,742				—			42,695
Total	$	6,572			$	79,746			$	42,820		$	129,138

Investment securities held to maturity:

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

Schedule of Unrealized Loss on Investments [Table Text Block]

The following tables present information concerning investments with unrealized losses as of December 31, 2017 (in thousands):

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

The following tables present information concerning investments with unrealized losses as of December 31, 2016 (in thousands):

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

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LOANS (Tables)

12 Months Ended

Dec. 31, 2017

Loans [Abstract]

Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block]

The loan portfolio of the Company consisted of the following:

	AT DECEMBER 31,
	2017		2016
	(IN THOUSANDS)
Commercial	$	159,192	$	171,529
Commercial loans secured by real estate		463,780		446,598
Real estate-mortgage		247,278		245,765
Consumer		19,383		19,872
Loans, net of unearned income	$	889,633	$	883,764

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ALLOWANCE FOR LOAN LOSSES (Tables)

12 Months Ended

Dec. 31, 2017

Allowance for Loan Losses [Abstract]

Allowance for Credit Losses on Financing Receivables [Table Text Block]

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

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

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

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

Schedule of Primary Segments of Loan Portfolio [Table Text Block]

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

	AT DECEMBER 31, 2017
	(IN THOUSANDS)
Loans:	COMMERCIAL		COMMERCIAL LOANS SECURED BY REAL ESTATE		REAL ESTATE- MORTGAGE		CONSUMER		TOTAL
Individually evaluated for impairment	$	1,212	$	547	$	—	$	—	$	1,759
Collectively evaluated for impairment		157,980		463,233		247,278		19,383		887,874
Total loans	$	159,192	$	463,780	$	247,278	$	19,383	$	889,633

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

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

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

Impaired Financing Receivables [Table Text Block]

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

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

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

Schedule of Average Recorded Investment in Impaired Loans and Related Interest Income Recognized [Table Text Block]

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

	YEAR ENDED DECEMBER 31,
	2017		2016		2015
	(IN THOUSANDS)
Average impaired balance:
Commercial	$	1,075	$	718	$	1,271
Commercial loans secured by real estate		838		356		866
Consumer		—		—		9
Average investment in impaired loans	$	1,913	$	1,074	$	2,146
Interest income recognized:
Commercial	$	28	$	14	$	10
Commercial loans secured by real estate		34		8		17
Consumer		—		—		—
Interest income recognized on a cash basis on impaired loans	$	62	$	22	$	27

Financing Receivable Credit Quality Indicators [Table Text Block]

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

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

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

Schedule of Financing Receivable Performing and Nonperforming [Table Text Block]

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

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

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

Past Due Financing Receivables [Table Text Block]

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

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

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

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NON-PERFORMING ASSETS INCLUDING TROUBLED DEBT RESTRUCTURINGS (Tables)

12 Months Ended

Dec. 31, 2017

Nonperforming Assets Including Troubled Debt Restructurings [Abstract]

Schedule Of Nonperforming Assets Including Trouble Debt Restructurings [Table Text Block]

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

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

Schedule of Financing Receivables, Non Accrual Status [Table Text Block]

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

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

Troubled Debt Restructurings on Financing Receivables [Table Text Block]

The following table details the TDRs at December 31, 2017 (dollars in thousands).

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

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

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

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

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

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

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PREMISES AND EQUIPMENT (Tables)

12 Months Ended

Dec. 31, 2017

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment [Table Text Block]

An analysis of premises and equipment follows:

	AT DECEMBER 31,
	2017		2016
	(IN THOUSANDS)
Land	$	1,198	$	1,198
Premises		25,745		24,670
Furniture and equipment		8,664		7,949
Leasehold improvements		483		708
Total at cost		36,090		34,525
Less: Accumulated depreciation and amortization		23,356		22,831
Premises and equipment, net	$	12,734	$	11,694

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DEPOSITS (Tables)

12 Months Ended

Dec. 31, 2017

Deposits [Abstract]

Schedule Of Deposit Liabilities [Table Text Block]

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

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

Interest Income and Interest Expense Disclosure [Table Text Block]

Interest expense on deposits consisted of the following:

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

Schedule Of Maturities Of Time Deposits [Table Text Block]

The following table sets forth the balance of other time deposits and certificates of deposit of $100,000 or more as of December 31, 2017 maturing in the periods presented:

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

Schedule Of Maturities Of Time Deposits Of One Hundred Thousand Or More [Table Text Block]

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

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

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SHORT-TERM BORROWINGS (Tables)

12 Months Ended

Dec. 31, 2017

Short-term Debt [Abstract]

Schedule of Short-term Debt [Table Text Block]

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

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

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

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

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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, 2017

Long-term Debt, Unclassified [Abstract]

Schedule of Federal Home Loan Bank, Advances, by Branch of FHLB Bank [Table Text Block]

Advances from the FHLB consist of the following:

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

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

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DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS (Tables)

12 Months Ended

Dec. 31, 2017

Disclosures about Fair Value Measurements [Abstract]

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block]

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

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

  

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

Fair Value, Assets and Liabilities Measured on Nonrecurring Basis [Table Text Block]

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

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

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

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

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

(1) Fair Value is generally determined through independent appraisals of the underlying collateral, which generally include various level 3 inputs which are not identifiable.

(2) Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses.

(3) Includes qualitative adjustments by management and estimated liquidation expenses.

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DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

12 Months Ended

Dec. 31, 2017

Disclosures About Fair Value Of Financial Instruments [Abstract]

Fair Value, by Balance Sheet Grouping [Table Text Block]

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

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

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INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2017

Income Tax Disclosure [Abstract]

Schedule of Components of Income Tax Expense (Benefit) [Table Text Block]

The expense for income taxes is summarized below:

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

Schedule of Effective Income Tax Rate Reconciliation [Table Text Block]

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

	YEAR ENDED DECEMBER 31,
	2017						2016						2015
	AMOUNT			RATE			AMOUNT			RATE			AMOUNT			RATE
	(IN THOUSANDS, EXCEPT PERCENTAGES)
Income tax expense based on federal statutory rate	$	2,938			34.0	%	$	1,090			34.0	%	$	2,836			34.0	%
Tax exempt income		(283	)		(3.3	)		(255	)		(7.9	)		(574	)		(6.9	)
Other		68			0.8			62			1.9			81			1.0
Change in corporate tax rate		2,624			30.4			—			—			—			—
Total expense for income taxes	$	5,347			61.9	%	$	897			28.0	%	$	2,343			28.1	%

Schedule of Deferred Tax Assets and Liabilities [Table Text Block]

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

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

Schedule Of Changes In Deferred Taxes [Table Text Block]

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

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

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EMPLOYEE BENEFIT PLANS (Tables)

12 Months Ended

Dec. 31, 2017

Compensation and Retirement Disclosure [Abstract]

Schedule of Defined Benefit Plans Disclosures [Table Text Block]

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

Schedule of Amounts in Accumulated Other Comprehensive Income (Loss) to be Recognized over Next Fiscal Year [Table Text Block]

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

Schedule of Accumulated and Projected Benefit Obligations [Table Text Block]

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

Schedule Of Assumptions Used To Calculate Benefit Obligations [Table Text Block]

The weighted-average assumptions used to determine benefit obligations at December 31, 2017 and 2016 were as follows:

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

Schedule of Net Benefit Costs [Table Text Block]

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

Schedule of Defined Benefit Plan Amounts Recognized in Other Comprehensive Income (Loss) [Table Text Block]

	YEAR ENDED DECEMBER 31,
	2017			2016			2015
	(IN THOUSANDS)
OTHER CHANGES IN PLAN ASSETS AND BENEFIT OBLIGATIONS RECOGNIZED IN OTHER COMPREHENSIVE LOSS
Net (gain) loss	$	(822	)	$	6,505		$	1,221
Recognized loss		(1,454	)		(1,333	)		(1,386	)
Total recognized in other comprehensive loss before tax effect	$	(2,276	)	$	5,172		$	(165	)
Total recognized in net benefit cost and other comprehensive loss before tax effect	$	(553	)	$	7,128		$	1,989

Schedule Of Assumptions Used To Calculate Net Periodic Benefit Cost [Table Text Block]

The weighted-average assumptions used to determine net periodic benefit cost for the years ended December 31, 2017, 2016 and 2015 were as follows:

	YEAR ENDED DECEMBER 31,
	2017			2016			2015
WEIGHTED AVERAGE ASSUMPTIONS:
Discount rate		4.12	%		4.20	%		4.00	%
Expected return on plan assets		7.75			7.75			8.00
Rate of compensation increase		2.50			2.50			2.50

Schedule of Allocation of Plan Assets [Table Text Block]

The plan’s measurement date is December 31, 2017. This plan’s asset allocations at December 31, 2017 and 2016, by asset category are as follows:

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

Schedule Of Fair Value Of Plan Assets [Table Text Block]

The major categories of assets in the Company’s Pension Plan as of yearend 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,
	2017		2016
	(IN THOUSANDS)
Level 1:
Cash and cash equivalents	$	44	$	2,454
Domestic equities		4,340		3,067
Mutual funds/ETFs		30,470		23,310
International equities		1,322		307
Level 2:
Corporate bonds		924		1,533
Total fair value of plan assets	$	37,100	$	30,671

Schedule of Expected Benefit Payments [Table Text Block]

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

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

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LEASE COMMITMENTS (Tables)

12 Months Ended

Dec. 31, 2017

Leases, Operating [Abstract]

Schedule of Future Minimum Rental Payments for Operating Leases [Table Text Block]

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

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

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STOCK COMPENSATION PLANS (Tables)

12 Months Ended

Dec. 31, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block]

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

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

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions used for grants in 2017, 2016, and 2015.

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

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ACCUMULATED OTHER COMPREHENSIVE LOSS (Tables)

12 Months Ended

Dec. 31, 2017

Accumulated Comprehensive Loss [Abstract]

Schedule of Accumulated Other Comprehensive Income (Loss) [Table Text Block]

The following table presents the changes in each component of accumulated other comprehensive loss, net of tax, for the periods ending December 31, 2017 and 2016 (in thousands):

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

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

Schedule Of Amounts Reclassified Out Of Accumulated Other Comprehensive Loss [Table Text Block]

The following table presents the amounts reclassified out of each component of accumulated other comprehensive loss for the periods ending December 31, 2017 and 2016 (in thousands):

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

(1) Amounts in parentheses indicate credits.

(2) These accumulated other comprehensive loss components are included in the computation of net periodic benefit cost (see Note 14 for additional details).

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DERIVATIVE HEDGING INSTRUMENTS (Tables)

12 Months Ended

Dec. 31, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Interest Rate Derivatives [Table Text Block]

The following table summarizes the interest rate swap transactions that impacted the Company’s 2017 performance.

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

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SEGMENT RESULTS (Tables)

12 Months Ended

Dec. 31, 2017

Segment Results [Abstract]

Schedule of Segment Reporting Information, by Segment [Table Text Block]

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

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

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

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

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REGULATORY CAPITAL (Tables)

12 Months Ended

Dec. 31, 2017

Regulatory Capital [Abstract]

Schedule of Compliance with Regulatory Capital Requirements under Banking Regulations [Table Text Block]

Additionally, while not a regulatory capital ratio, the Company’s tangible common equity ratio was 7.20% and 7.31% for 2017 and 2016, respectively.

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

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

* Applies to the Bank only.

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PARENT COMPANY FINANCIAL INFORMATION (Tables)

12 Months Ended

Dec. 31, 2017

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

Condensed Balance Sheet [Table Text Block]

BALANCE SHEETS

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

Condensed Income Statement [Table Text Block]

STATEMENTS OF OPERATIONS

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

Condensed Cash Flow Statement [Table Text Block]

STATEMENTS OF CASH FLOWS

	YEAR ENDED DECEMBER 31,
	2017			2016			2015
	(IN THOUSANDS)
OPERATING ACTIVITIES
Net income	$	3,293		$	2,310		$	5,997
Adjustment to reconcile net income to net cash (used in) provided by operating activities:
Equity in undistributed earnings of subsidiaries		(1,687	)		(629	)		(1,168	)
Stock compensation expense		13			20			29
Other – net		1,325			1,463			842
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES		2,944			3,164			5,700
INVESTING ACTIVITIES
Purchase of investment securities – available for sale		(1,002	)		(996	)		(1,533	)
Proceeds from maturity and sales of investment securities – available for sale		1,699			3,396			4,669
Proceeds from life insurance policies		—			—			719
NET CASH PROVIDED BY INVESTING ACTIVITIES		697			2,400			3,855
FINANCING ACTIVITIES
Subordinated debt issuance, net		—			—			7,418
Preferred stock redemption		—			(21,000	)		—
Preferred stock dividends paid		—			(15	)		(210	)
Purchases of treasury stock		(3,404	)		—			—
Common stock dividends paid		(1,113	)		(945	)		(754	)
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES		(4,517	)		(21,960	)		6,454
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(876	)		(16,396	)		16,009
CASH AND CASH EQUIVALENTS AT JANUARY 1		5,497			21,893			5,884
CASH AND CASH EQUIVALENTS AT DECEMBER 31	$	4,621		$	5,497		$	21,893

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SELECTED QUARTERLY CONSOLIDATED FINANCIAL DATA (Tables)

12 Months Ended

Dec. 31, 2017

Quarterly Financial Information Disclosure [Abstract]

Schedule of Quarterly Financial Information [Table Text Block]

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

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

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

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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, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Numerator:
Net income	$ (995)	$ 1,551	$ 1,389	$ 1,348	$ 1,150	$ 1,065	$ 1,362	$ (1,267)	$ 3,293	$ 2,310	$ 5,997
Preferred stock dividends									0	15	210
Net income available to common shareholders									$ 3,293	$ 2,295	$ 5,787
Denominator:
Weighted average common shares outstanding (basic)									18,498	18,896	18,863
Effect of stock options									102	59	70
Weighted average common shares outstanding (diluted)									18,600	18,955	18,933
Earnings per common share:
Basic	$ (0.05)	$ 0.08	$ 0.07	$ 0.07	$ 0.06	$ 0.06	$ 0.07	$ (0.07)	$ 0.18	$ 0.12	$ 0.31
Diluted	$ (0.05)	$ 0.08	$ 0.07	$ 0.07	$ 0.06	$ 0.06	$ 0.07	$ (0.07)	$ 0.18	$ 0.12	$ 0.31

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Textual)	12 Months Ended
	Dec. 31, 2017 USD ($) $ / shares shares	Dec. 31, 2016 USD ($) $ / shares shares	Dec. 31, 2015 USD ($) $ / shares shares
Summary Of Significant Accounting Policies [Line Items]
Number of Stores	15
Assets Held-in-trust, Total	$ 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
Financing Receivable Allowance For Credit Losses Threshold For Individually Evaluating Of Impairment	$ 250,000
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | shares	10,000	51,273	58,788
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Weighted Average Exercise Price | $ / shares	$ 2.79	$ 2.69	$ 2.58
Stock or Unit Option Plan Expense	$ 13,000	$ 20,000	$ 29,000
Income Taxes Paid	1,075,000	375,000	1,554,000
Real Estate Owned, Transfer from Real Estate Owned	77,000	172,000	189,000
Interest Paid, Total	8,681,000	$ 7,746,000	$ 6,575,000
One-time Cumulative Effect Adjustment	2,100,000
Minimum [Member]
Summary Of Significant Accounting Policies [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Weighted Average Exercise Price | $ / shares		$ 3.23	$ 3.23
Maximum [Member]
Summary Of Significant Accounting Policies [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Weighted Average Exercise Price | $ / shares		$ 4.60	$ 4.70
Commercial Portfolio Segment [Member]
Summary Of Significant Accounting Policies [Line Items]
Financing Receivable Allowance For Credit Losses Threshold For Individually Evaluating Of Impairment	250,000
Small Business Loans [Member]
Summary Of Significant Accounting Policies [Line Items]
Financing Receivable Allowance For Credit Losses Threshold For Collectively Evaluating Of Impairment	$ 250,000
Building [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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CASH AND DUE FROM DEPOSITORY INSTITUTIONS (Details Textual) - USD ($)	Dec. 31, 2017	Dec. 31, 2016
Restricted Cash and Cash Equivalents	$ 5,000	$ 6,000

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INVESTMENT SECURITIES (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Available-For-Sale-Securities-And-Held-To-Maturity-Securities
Investment securities available for sale, Cost Basis	$ 129,550	$ 127,334
Investment securities available for sale, Gross Unrealized Gains	960	1,329
Investment securities available for sale, Gross Unrealized Losses	(1,372)	(1,586)
Available for Sale, Fair Value, Total	129,138	127,077
Investment securities held to maturity, Cost Basis	38,752	30,665
Investment securities held to maturity, Gross Unrealized Gains	390	265
Investment securities held to maturity, Gross Unrealized Losses	(331)	(510)
Held to Maturity, Fair Value, Total	38,811	30,420
U.S. Agency [Member]
Available-For-Sale-Securities-And-Held-To-Maturity-Securities
Investment securities available for sale, Cost Basis	6,612	400
Investment securities available for sale, Gross Unrealized Gains	0	0
Investment securities available for sale, Gross Unrealized Losses	(40)	(2)
Available for Sale, Fair Value, Total	6,572	398
U.S. Agency mortgage-backed securities [Member]
Available-For-Sale-Securities-And-Held-To-Maturity-Securities
Investment securities available for sale, Cost Basis	79,854	88,738
Investment securities available for sale, Gross Unrealized Gains	611	1,132
Investment securities available for sale, Gross Unrealized Losses	(719)	(686)
Available for Sale, Fair Value, Total	79,746	89,184
Investment securities held to maturity, Cost Basis	9,740	11,177
Investment securities held to maturity, Gross Unrealized Gains	149	180
Investment securities held to maturity, Gross Unrealized Losses	(45)	(79)
Held to Maturity, Fair Value, Total	9,844	11,278
Taxable Municipal [Member]
Available-For-Sale-Securities-And-Held-To-Maturity-Securities
Investment securities available for sale, Cost Basis	7,198	3,793
Investment securities available for sale, Gross Unrealized Gains	27	3
Investment securities available for sale, Gross Unrealized Losses	(189)	(174)
Available for Sale, Fair Value, Total	7,036	3,622
Investment securities held to maturity, Cost Basis	22,970	13,441
Investment securities held to maturity, Gross Unrealized Gains	203	70
Investment securities held to maturity, Gross Unrealized Losses	(238)	(348)
Held to Maturity, Fair Value, Total	22,935	13,163
Corporate bonds [Member]
Available-For-Sale-Securities-And-Held-To-Maturity-Securities
Investment securities available for sale, Cost Basis	35,886	34,403
Investment securities available for sale, Gross Unrealized Gains	322	194
Investment securities available for sale, Gross Unrealized Losses	(424)	(724)
Available for Sale, Fair Value, Total	35,784	33,873
Corporate bonds and other securities [Member]
Available-For-Sale-Securities-And-Held-To-Maturity-Securities
Investment securities held to maturity, Cost Basis	6,042	6,047
Investment securities held to maturity, Gross Unrealized Gains	38	15
Investment securities held to maturity, Gross Unrealized Losses	(48)	(83)
Held to Maturity, Fair Value, Total	$ 6,032	$ 5,979

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INVESTMENT SECURITIES (Details 1) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Contractual maturities of securities
Available for Sale, Cost Basis, Within 1 year	$ 401
Available for Sale, Cost Basis, After 1 year but within 5 years	11,786
Available for Sale, Cost Basis, After 5 years but within 10 years	48,499
Available for Sale, Cost Basis, After 10 years but within 15 years	26,016
Available for Sale, Cost Basis, Over 15 years	42,848
Available for Sale, Cost Basis, Total	$ 129,550
Available for Sale, Within 1 year, Yield	1.04%
Available for Sale, After 1 year but within 5 years, Yield	2.93%
Available for Sale, After 5 year but within 10 years, Yield	3.36%
Available for Sale, After 10 years but within 15 years, Yield	2.39%
Available for Sale, Over 15 years, Yield	2.53%
Available for Sale, Yield, Total	2.84%
Available for Sale, Fair Value, Within 1 year	$ 400
Available for Sale, Fair Value, After 1 year but within 5 years	11,767
Available for Sale, Fair Value, After 5 years but within 10 years	48,556
Available for Sale, Fair Value, After 10 years but within 15 years	25,720
Available for Sale, Fair Value, Over 15 years	42,695
Available for Sale, Fair Value, Total	129,138	$ 127,077
Held to Maturity, Cost Basis, Within 1 year	2,000
Held to Maturity, Cost Basis, After 1 year but within 5 years	2,439
Held to Maturity, Cost Basis, After 5 years but within 10 years	14,878
Held to Maturity, Cost Basis, After 10 years but within 15 years	14,247
Held to Maturity, Cost Basis, Over 15 years	5,188
Held to Maturity, Cost Basis, Total	38,752	30,665
Held to Maturity, Fair Value, Within 1 year	1,976
Held to Maturity, Fair Value, After 1 year but within 5 years	2,411
Held to Maturity, Fair Value, After 5 years but within 10 years	14,890
Held to Maturity, Fair Value, After 10 years but within 15 years	14,282
Held to Maturity, Fair Value, Over 15 years	5,252
Held to Maturity, Fair Value, Total	$ 38,811	$ 30,420
Held to Maturity, Within 1 year, Yield	1.78%
Held to Maturity, After 1 year but within 5 years, Yield	2.24%
Held to Maturity, After 5 years but within 10 years, Yield	3.42%
Held to Maturity, After 10 years but within 15 years, Yield	3.58%
Held to Maturity, Over 15 years, Yield	3.34%
Held to Maturity, Yield, Total	3.31%
U.S. Agency [Member]
Contractual maturities of securities
Available for Sale, Cost Basis, Within 1 year	$ 400
Available for Sale, Cost Basis, After 1 year but within 5 years	0
Available for Sale, Cost Basis, After 5 years but within 10 years	3,230
Available for Sale, Cost Basis, After 10 years but within 15 years	0
Available for Sale, Cost Basis, Over 15 years	2,982
Available for Sale, Cost Basis, Total	$ 6,612
Available for Sale, Within 1 year, Yield	1.03%
Available for Sale, After 1 year but within 5 years, Yield	0.00%
Available for Sale, After 5 year but within 10 years, Yield	2.75%
Available for Sale, After 10 years but within 15 years, Yield	0.00%
Available for Sale, Over 15 years, Yield	2.69%
Available for Sale, Yield, Total	2.62%
Available for Sale, Fair Value, Within 1 year	$ 399
Available for Sale, Fair Value, After 1 year but within 5 years	0
Available for Sale, Fair Value, After 5 years but within 10 years	3,220
Available for Sale, Fair Value, After 10 years but within 15 years	0
Available for Sale, Fair Value, Over 15 years	2,953
Available for Sale, Fair Value, Total	6,572
U.S. Agency mortgage-backed securities [Member]
Contractual maturities of securities
Available for Sale, Cost Basis, Within 1 year	1
Available for Sale, Cost Basis, After 1 year but within 5 years	848
Available for Sale, Cost Basis, After 5 years but within 10 years	14,623
Available for Sale, Cost Basis, After 10 years but within 15 years	24,516
Available for Sale, Cost Basis, Over 15 years	39,866
Available for Sale, Cost Basis, Total	$ 79,854
Available for Sale, Within 1 year, Yield	6.00%
Available for Sale, After 1 year but within 5 years, Yield	2.09%
Available for Sale, After 5 year but within 10 years, Yield	2.91%
Available for Sale, After 10 years but within 15 years, Yield	2.30%
Available for Sale, Over 15 years, Yield	2.52%
Available for Sale, Yield, Total	2.52%
Available for Sale, Fair Value, Within 1 year	$ 1
Available for Sale, Fair Value, After 1 year but within 5 years	843
Available for Sale, Fair Value, After 5 years but within 10 years	14,859
Available for Sale, Fair Value, After 10 years but within 15 years	24,301
Available for Sale, Fair Value, Over 15 years	39,742
Available for Sale, Fair Value, Total	79,746
Held to Maturity, Cost Basis, Within 1 year	0
Held to Maturity, Cost Basis, After 1 year but within 5 years	688
Held to Maturity, Cost Basis, After 5 years but within 10 years	2,081
Held to Maturity, Cost Basis, After 10 years but within 15 years	2,604
Held to Maturity, Cost Basis, Over 15 years	4,367
Held to Maturity, Cost Basis, Total	9,740
Held to Maturity, Fair Value, Within 1 year	0
Held to Maturity, Fair Value, After 1 year but within 5 years	677
Held to Maturity, Fair Value, After 5 years but within 10 years	2,075
Held to Maturity, Fair Value, After 10 years but within 15 years	2,685
Held to Maturity, Fair Value, Over 15 years	4,407
Held to Maturity, Fair Value, Total	$ 9,844
Held to Maturity, Within 1 year, Yield	0.00%
Held to Maturity, After 1 year but within 5 years, Yield	2.11%
Held to Maturity, After 5 years but within 10 years, Yield	2.49%
Held to Maturity, After 10 years but within 15 years, Yield	3.30%
Held to Maturity, Over 15 years, Yield	3.07%
Held to Maturity, Yield, Total	2.94%
Corporate Bonds And Other Securities [Member]
Contractual maturities of securities
Available for Sale, Cost Basis, Within 1 year	$ 0
Available for Sale, Cost Basis, After 1 year but within 5 years	10,938
Available for Sale, Cost Basis, After 5 years but within 10 years	30,646
Available for Sale, Cost Basis, After 10 years but within 15 years	1,500
Available for Sale, Cost Basis, Over 15 years	0
Available for Sale, Cost Basis, Total	$ 43,084
Available for Sale, Within 1 year, Yield	0.00%
Available for Sale, After 1 year but within 5 years, Yield	2.99%
Available for Sale, After 5 year but within 10 years, Yield	3.64%
Available for Sale, After 10 years but within 15 years, Yield	3.98%
Available for Sale, Over 15 years, Yield	0.00%
Available for Sale, Yield, Total	3.49%
Available for Sale, Fair Value, Within 1 year	$ 0
Available for Sale, Fair Value, After 1 year but within 5 years	10,924
Available for Sale, Fair Value, After 5 years but within 10 years	30,477
Available for Sale, Fair Value, After 10 years but within 15 years	1,419
Available for Sale, Fair Value, Over 15 years	0
Available for Sale, Fair Value, Total	42,820
Held to Maturity, Cost Basis, Within 1 year	2,000
Held to Maturity, Cost Basis, After 1 year but within 5 years	1,751
Held to Maturity, Cost Basis, After 5 years but within 10 years	12,797
Held to Maturity, Cost Basis, After 10 years but within 15 years	11,643
Held to Maturity, Cost Basis, Over 15 years	821
Held to Maturity, Cost Basis, Total	29,012
Held to Maturity, Fair Value, Within 1 year	1,976
Held to Maturity, Fair Value, After 1 year but within 5 years	1,734
Held to Maturity, Fair Value, After 5 years but within 10 years	12,815
Held to Maturity, Fair Value, After 10 years but within 15 years	11,597
Held to Maturity, Fair Value, Over 15 years	845
Held to Maturity, Fair Value, Total	$ 28,967
Held to Maturity, Within 1 year, Yield	1.78%
Held to Maturity, After 1 year but within 5 years, Yield	2.29%
Held to Maturity, After 5 years but within 10 years, Yield	3.57%
Held to Maturity, After 10 years but within 15 years, Yield	3.64%
Held to Maturity, Over 15 years, Yield	4.75%
Held to Maturity, Yield, Total	3.43%

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INVESTMENT SECURITIES (Details 2) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Information concerning investments with unrealized losses
Less than 12 months, Fair Value	$ 58,486	$ 83,997
Less than 12 months, Unrealized Losses	(472)	(1,797)
12 months or longer, Fair Value	44,406	8,338
12 months or longer, Unrealized Losses	(1,231)	(299)
Total, Fair Value	102,892	92,335
Total, Unrealized Losses	(1,703)	(2,096)
U.S. Agency [Member]
Information concerning investments with unrealized losses
Less than 12 months, Fair Value	5,923	398
Less than 12 months, Unrealized Losses	(39)	(2)
12 months or longer, Fair Value	399	0
12 months or longer, Unrealized Losses	(1)	0
Total, Fair Value	6,322	398
Total, Unrealized Losses	(40)	(2)
U.S. Agency mortgage-backed securities [Member]
Information concerning investments with unrealized losses
Less than 12 months, Fair Value	36,783	49,918
Less than 12 months, Unrealized Losses	(253)	(703)
12 months or longer, Fair Value	22,625	1,576
12 months or longer, Unrealized Losses	(511)	(62)
Total, Fair Value	59,408	51,494
Total, Unrealized Losses	(764)	(765)
Taxable Municipal [Member]
Information concerning investments with unrealized losses
Less than 12 months, Fair Value	8,657	13,301
Less than 12 months, Unrealized Losses	(109)	(522)
12 months or longer, Fair Value	7,727	0
12 months or longer, Unrealized Losses	(318)	0
Total, Fair Value	16,384	13,301
Total, Unrealized Losses	(427)	(522)
Corporate bonds and other securities [Member]
Information concerning investments with unrealized losses
Less than 12 months, Fair Value	7,123	20,380
Less than 12 months, Unrealized Losses	(71)	(570)
12 months or longer, Fair Value	13,655	6,762
12 months or longer, Unrealized Losses	(401)	(237)
Total, Fair Value	20,778	27,142
Total, Unrealized Losses	$ (472)	$ (807)

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INVESTMENT SECURITIES (Details Textual) - USD ($)	3 Months Ended	12 Months Ended
	Mar. 31, 2017	Dec. 31, 2017		Dec. 31, 2016		Dec. 31, 2015	Dec. 31, 2005
Investments [Line Items]
Gross investment gains		$ 115,000		$ 183,000		$ 107,000
Gross investment losses				(6,000)			$ (36,000)
Other Comprehensive Income (Loss), Reclassification Adjustment from AOCI for Sale of Securities, Net of Tax		76,000		117,000		46,000
Other Comprehensive Income (Loss), Reclassification Adjustment from AOCI for Sale of Securities, Tax		39,000	[1]	60,000	[1]	25,000
Investment Securities:
Consolidated investment securities portfolio modified, years	3 years 8 months 8 days
Proceeds from sales of investment securities — available for sale		8,143,000		8,966,000		$ 3,570,000
Book value of securities available for sale and held to maturity		$ 117,181,000		$ 104,953,000
Held-to-maturity, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions		133
Corporate bonds [Member]
Investment Securities:
Available For Sale Securities Debt Maturities Weighted Average Maturity Term		5 years 5 months 8 days
U.S. Agency [Member]
Investments [Line Items]
Portfolio rated		10.00%
Investment Securities:
Available For Sale Securities Debt Maturities Weighted Average Maturity Term		10 years 4 months 17 days
Held To Maturity Securities Weighted Average Maturity Term		4 years 6 months 25 days
U.S. Agency mortgage-backed securities [Member]
Investment Securities:
Available For Sale Securities Debt Maturities Weighted Average Maturity Term		4 years 7 months 6 days
Held To Maturity Securities Weighted Average Maturity Term		6 years 6 months 4 days
Standard & Poor's, AAA Rating [Member]
Investments [Line Items]
Portfolio rated		57.80%		63.50%
Standard & Poor's, A Rating [Member]
Investments [Line Items]
Portfolio rated		9.70%

[1] Amounts in parentheses indicate credits.

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LOANS (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, net of unearned income	$ 889,633	$ 883,764
Commercial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, net of unearned income	159,192	171,529
Commercial loans secured by real estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, net of unearned income	463,780	446,598
Real estate-mortgage [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, net of unearned income	247,278	245,765
Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, net of unearned income	$ 19,383	$ 19,872

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LOANS (Details Textual) - USD ($)	Dec. 31, 2017	Dec. 31, 2016
Financing Receivable, Impaired [Line Items]
Real estate-construction loans, percentage	4.10%	4.70%
Loan balances net of unearned income	$ 399,000	$ 476,000
Loans and Leases Receivable, Related Parties	$ 554,000	$ 578,000

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ALLOWANCE FOR LOAN LOSSES (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Accounts, Notes, Loans and Financing Receivable [Line Items]
Balance at Beginning of Period	$ 9,932	$ 9,921	$ 9,623
Charge-Offs	(928)	(4,296)	(1,361)
Recoveries	410	357	409
Provision (Credit)	800	3,950	1,250
Balance at End of Period	10,214	9,932	9,921
Commercial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Balance at Beginning of Period	4,041	4,244	3,262
Charge-Offs	(278)	(3,648)	(170)
Recoveries	27	140	101
Provision (Credit)	509	3,305	1,051
Balance at End of Period	4,299	4,041	4,244
Commercial loans secured by real estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Balance at Beginning of Period	3,584	3,449	3,902
Charge-Offs	(165)	(13)	(250)
Recoveries	14	40	111
Provision (Credit)	233	108	(314)
Balance at End of Period	3,666	3,584	3,449
Real estate-mortgage [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Balance at Beginning of Period	1,169	1,173	1,310
Charge-Offs	(313)	(291)	(753)
Recoveries	250	147	171
Provision (Credit)	(4)	140	445
Balance at End of Period	1,102	1,169	1,173
Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Balance at Beginning of Period	151	151	190
Charge-Offs	(172)	(344)	(188)
Recoveries	119	30	26
Provision (Credit)	30	314	123
Balance at End of Period	128	151	151
Allocation for general risk [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Balance at Beginning of Period	987	904	959
Charge-Offs	0	0	0
Recoveries	0	0	0
Provision (Credit)	32	83	(55)
Balance at End of Period	$ 1,019	$ 987	$ 904

XML

ALLOWANCE FOR LOAN LOSSES (Details 1) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Loans:
Individually evaluated for impairment	$ 1,759	$ 674
Collectively evaluated for impairment	887,874	883,090
Total loans	889,633	883,764
Allowance for loan losses:
Specific reserve allocation	909	527
General reserve allocation	9,305	9,405
Total allowance for loan losses	10,214	9,932	$ 9,921	$ 9,623
Commercial [Member]
Loans:
Individually evaluated for impairment	1,212	496
Collectively evaluated for impairment	157,980	171,033
Total loans	159,192	171,529
Allowance for loan losses:
Specific reserve allocation	909	496
General reserve allocation	3,390	3,545
Total allowance for loan losses	4,299	4,041	4,244	3,262
Commercial loans secured by real estate [Member]
Loans:
Individually evaluated for impairment	547	178
Collectively evaluated for impairment	463,233	446,420
Total loans	463,780	446,598
Allowance for loan losses:
Specific reserve allocation	0	31
General reserve allocation	3,666	3,553
Total allowance for loan losses	3,666	3,584	3,449	3,902
Real estate-mortgage [Member]
Loans:
Individually evaluated for impairment	0	0
Collectively evaluated for impairment	247,278	245,765
Total loans	247,278	245,765
Allowance for loan losses:
Specific reserve allocation	0	0
General reserve allocation	1,102	1,169
Total allowance for loan losses	1,102	1,169	1,173	1,310
Consumer [Member]
Loans:
Individually evaluated for impairment	0	0
Collectively evaluated for impairment	19,383	19,872
Total loans	19,383	19,872
Allowance for loan losses:
Specific reserve allocation	0	0
General reserve allocation	128	151
Total allowance for loan losses	128	151	151	190
Allocation for general risk [Member]
Allowance for loan losses:
Specific reserve allocation	0	0
General reserve allocation	1,019	987
Total allowance for loan losses	$ 1,019	$ 987	$ 904	$ 959

XML

ALLOWANCE FOR LOAN LOSSES (Details 2) - USD ($)	Dec. 31, 2017	Dec. 31, 2016
Accounts, Notes, Loans and Financing Receivable [Line Items]
Recorded Investment	$ 1,759,000	$ 674,000
Related Allowance	909,000	527,000
Unpaid Principal Balance	1,815,000	726,000
Commercial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Recorded Investment	353,000	496,000
Unpaid Principal Balance	354,000	517,000
Commercial loans secured by real estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Recorded Investment	1,406,000	178,000
Unpaid Principal Balance	1,461,000	209,000
Impaired Loans with Specific Allowance [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Recorded Investment	1,201,000	658,000
Related Allowance	909,000	527,000
Impaired Loans with Specific Allowance [Member] | Commercial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Recorded Investment	342,000	496,000
Related Allowance	342,000	496,000
Impaired Loans with Specific Allowance [Member] | Commercial loans secured by real estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Recorded Investment	859,000	162,000
Related Allowance	567,000	31,000
Impaired Loans with No Specific Allowance [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Recorded Investment	558,000	16,000
Impaired Loans with No Specific Allowance [Member] | Commercial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Recorded Investment	11,000	0
Impaired Loans with No Specific Allowance [Member] | Commercial loans secured by real estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Recorded Investment	$ 547,000	$ 16,000

XML

ALLOWANCE FOR LOAN LOSSES (Details 3) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Average impaired balance:
Average investment in impaired loans	$ 1,913	$ 1,074	$ 2,146
Interest income recognized:
Interest income recognized on a cash basis on impaired loans	62	22	27
Commercial [Member]
Average impaired balance:
Average investment in impaired loans	1,075	718	1,271
Interest income recognized:
Interest income recognized on a cash basis on impaired loans	28	14	10
Commercial loans secured by real estate [Member]
Average impaired balance:
Average investment in impaired loans	838	356	866
Interest income recognized:
Interest income recognized on a cash basis on impaired loans	34	8	17
Consumer [Member]
Average impaired balance:
Average investment in impaired loans	0	0	9
Interest income recognized:
Interest income recognized on a cash basis on impaired loans	$ 0	$ 0	$ 0

XML

ALLOWANCE FOR LOAN LOSSES (Details 4) - Commercial Portfolio Segment [Member] - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
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	$ 622,972	$ 618,127
Commercial [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	159,192	171,529
Commercial loans secured by 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	463,780	446,598
Pass [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	606,468	604,434
Pass [Member] | Commercial [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	156,449	168,116
Pass [Member] | Commercial loans secured by 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	450,019	436,318
Special Mention [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	12,328	8,584
Special Mention [Member] | Commercial [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	500	1,087
Special Mention [Member] | Commercial loans secured by 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	11,828	7,497
Substandard [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	3,633	4,597
Substandard [Member] | Commercial [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	1,999	1,830
Substandard [Member] | Commercial loans secured by 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	1,634	2,767
Doubtful [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	543	512
Doubtful [Member] | Commercial [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	244	496
Doubtful [Member] | Commercial loans secured by 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	$ 299	$ 16

XML

ALLOWANCE FOR LOAN LOSSES (Details 5) - Consumer Portfolio Segment [Member] - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Performing [Member]
Performing and non-performing outstanding balances of the residential and consumer portfolios
Loan portfolio	$ 265,404	$ 264,708
Performing [Member] | Real estate-mortgage [Member]
Performing and non-performing outstanding balances of the residential and consumer portfolios
Loan portfolio	246,021	244,836
Performing [Member] | Consumer [Member]
Performing and non-performing outstanding balances of the residential and consumer portfolios
Loan portfolio	19,383	19,872
Non-Performing [Member]
Performing and non-performing outstanding balances of the residential and consumer portfolios
Loan portfolio	1,257	929
Non-Performing [Member] | Real estate-mortgage [Member]
Performing and non-performing outstanding balances of the residential and consumer portfolios
Loan portfolio	1,257	929
Non-Performing [Member] | Consumer [Member]
Performing and non-performing outstanding balances of the residential and consumer portfolios
Loan portfolio	$ 0	$ 0

XML

ALLOWANCE FOR LOAN LOSSES (Details 6) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans
Current	$ 879,558	$ 879,366
Past Due	10,075	4,398
Total loans	889,633	883,764
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
Past Due	7,687	3,264
60-89 Days Past Due [Member]
Classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans
Past Due	1,250	637
90 Days Past Due [Member]
Classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans
Past Due	1,138	497
Commercial [Member]
Classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans
Current	159,181	171,292
Past Due	11	237
Total loans	159,192	171,529
90 Days Past Due and Still Accruing	0	0
Commercial [Member] | 30-59 Days Past Due [Member]
Classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans
Past Due	0	237
Commercial [Member] | 60-89 Days Past Due [Member]
Classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans
Past Due	0	0
Commercial [Member] | 90 Days Past Due [Member]
Classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans
Past Due	11	0
Commercial loans secured by real estate [Member]
Classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans
Current	457,722	446,477
Past Due	6,058	121
Total loans	463,780	446,598
90 Days Past Due and Still Accruing	0	0
Commercial loans secured by 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
Past Due	5,238	121
Commercial loans secured by 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
Past Due	534	0
Commercial loans secured by real estate [Member] | 90 Days Past Due [Member]
Classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans
Past Due	286	0
Real estate-mortgage [Member]
Classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans
Current	243,393	241,802
Past Due	3,885	3,963
Total loans	247,278	245,765
90 Days Past Due and Still Accruing	0	0
Real estate-mortgage [Member] | 30-59 Days Past Due [Member]
Classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans
Past Due	2,373	2,856
Real estate-mortgage [Member] | 60-89 Days Past Due [Member]
Classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans
Past Due	671	610
Real estate-mortgage [Member] | 90 Days Past Due [Member]
Classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans
Past Due	841	497
Consumer [Member]
Classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans
Current	19,262	19,795
Past Due	121	77
Total loans	19,383	19,872
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
Past Due	76	50
Consumer [Member] | 60-89 Days Past Due [Member]
Classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans
Past Due	45	27
Consumer [Member] | 90 Days Past Due [Member]
Classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans
Past Due	$ 0	$ 0

XML

ALLOWANCE FOR LOAN LOSSES (Details Textual) - USD ($)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Accounts, Notes, Loans and Financing Receivable [Line Items]
Individual loan balance is classified as nonaccrual status or troubled debt restructure	$ 100,000
Debt Instrument Non Performing Assets	$ 3,000,000
Percentage for Total Loans	0.34%
Allowance for Loan and Lease Losses, Adjustments, Net	$ 800,000	$ 3,950,000	$ 1,250,000
Financing Receivable, Allowance for Credit Losses, Period Increase (Decrease)	3,200,000
Allowance for Loan and Lease Losses Write-offs, Net	$ 518,000	$ 3,900,000
Allowance For Loan And Lease Losses Write Off Percentage	0.06%	0.44%
Commercial Loan [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Threshold for individually evaluating loans	$ 250,000
Allowance for Loan and Lease Losses, Adjustments, Net	509,000	$ 3,305,000	$ 1,051,000
Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Minimum individual loan balance requiring quarterly review	1,000,000
Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Threshold for individually evaluating loans	250,000
Doubtful [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Minimum individual loan balance requiring quarterly review	$ 100,000
Minimum [Member] | Commercial Loan [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Minimum percent of portfolio to be reviewed	50.00%
Maximum [Member] | Commercial Loan [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Minimum percent of portfolio to be reviewed	55.00%

XML

NON-PERFORMING ASSETS INCLUDING TROUBLED DEBT RESTRUCTURINGS (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Non-performing assets including TDR
Non-accrual loans	$ 3,016	$ 1,603
Other real estate owned	18	21
Total restructured loans not in non-accrual (TDR)	0	0
Total non-performing assets including TDR	$ 3,034	$ 1,624
Total non-performing assets as a percent of loans, net of unearned income, and other real estate owned	0.34%	0.18%
Commercial [Member]
Non-performing assets including TDR
Non-accrual loans	$ 353	$ 496
Commercial loans secured by real estate [Member]
Non-performing assets including TDR
Non-accrual loans	1,406	178
Real estate-mortgage [Member]
Non-performing assets including TDR
Non-accrual loans	1,257	929
Other real estate owned	$ 18	$ 21

XML

NON-PERFORMING ASSETS INCLUDING TROUBLED DEBT RESTRUCTURINGS (Details 1) $ in Thousands	12 Months Ended
	Dec. 31, 2017 USD ($) integer	Dec. 31, 2016 USD ($) integer	Dec. 31, 2015 USD ($) integer
Loans in accrual status [Member] | Commercial loans secured by real estate [Member]
Schedule of TDRs
Number of loans | integer			1
Current Balance | $			$ 156
Concession Granted			Extension of maturity date
Loans in non-accrual status [Member] | Commercial loans secured by real estate [Member]
Schedule of TDRs
Number of loans | integer	2	1	6
Current Balance | $	$ 587	$ 16	$ 4,320
Concession Granted	Extension of maturity date	Extension of maturity date	Extension of maturity date
Loans in non-accrual status [Member] | Commercial Loan [Member]
Schedule of TDRs
Number of loans | integer	2	2
Current Balance | $	$ 343	$ 496
Concession Granted	Extension of maturity date	Extension of maturity date

XML

NON-PERFORMING ASSETS INCLUDING TROUBLED DEBT RESTRUCTURINGS (Details 2) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Schedule of Interest Income
Interest income due in accordance with original terms	$ 103	$ 118	$ 94
Interest income recorded	(75)	0	0
Net reduction in interest income	$ 28	$ 118	$ 94

XML

NON-PERFORMING ASSETS INCLUDING TROUBLED DEBT RESTRUCTURINGS (Details Textual) - USD ($)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Aggregate of multiple consecutive maturity date extensions delay in payment, days	120 days
Borrowers aggregate exposure for loan modification minimum	$ 250,000
Timely payments on contract terms for minimum consecutive months prior to consideration for removing loan from TDR status	6 years
Minimum consecutive months payment for removing the loan from non-accrual status	6 months
ALL reserve for TDR's	$ 748,000	$ 527,000
Mortgage Loans in Process of Foreclosure, Amount	74,000
Residential Real Estate [Member]
Other Assets, Noncurrent	$ 18,000	$ 21,000

XML

PREMISES AND EQUIPMENT (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Property, Plant and Equipment [Line Items]
Cost	$ 36,090	$ 34,525
Less: Accumulated depreciation and amortization	23,356	22,831
Premises and equipment, net	12,734	11,694
Land [Member]
Property, Plant and Equipment [Line Items]
Cost	1,198	1,198
Premises [Member]
Property, Plant and Equipment [Line Items]
Cost	25,745	24,670
Furniture and equipment [Member]
Property, Plant and Equipment [Line Items]
Cost	8,664	7,949
Leasehold Improvements [Member]
Property, Plant and Equipment [Line Items]
Cost	$ 483	$ 708

XML

PREMISES AND EQUIPMENT (Details Textual) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Property, Plant and Equipment [Line Items]
Depreciation	$ 1.7	$ 1.8	$ 1.8

XML

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

XML

DEPOSITS (Details 1) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Interest bearing demand	$ 638	$ 317	$ 199
Savings	162	159	156
Money market	1,446	1,198	817
Certificates of deposit in denominations of $100,000 or more	319	283	266
Other time	3,690	3,443	3,314
Total interest expense	$ 6,255	$ 5,400	$ 4,752

XML

DEPOSITS (Details 2) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
OTHER TIME DEPOSITS
2018	$ 102,529
2019	47,133
2020	38,932
2021	18,796
2022	9,532
2023 and after	12,078
Total	229,000
CERTIFICATES OF DEPOSIT OF $100,000 OR MORE
2018	24,194
2019	2,295
2020	3,707
2021	0
2022	0
2023 and after	101
Total	$ 30,297	$ 27,427

XML

DEPOSITS (Details 3) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Three months or less	$ 6,649
Over three through six months	9,511
Over six through twelve months	8,034
Over twelve months	6,103
Total	$ 30,297	$ 27,427

XML

DEPOSITS (Details Textual) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Time Deposits	$ 229,000
FDIC Insurance Limit [Member]
Time Deposits	$ 49,700	$ 45,800

XML

SHORT-TERM BORROWINGS (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Federal Funds Purchased [Member]
Short-term Debt [Line Items]
Balance	$ 0	$ 0	$ 0
Maximum indebtedness at any month end	645	0	0
Average balance during year	$ 54	$ 0	$ 0
Average rate paid for the year	0.95%	0.00%	0.00%
Interest rate on year-end balance	0.00%	0.00%	0.00%
Short-Term Borrowings [Member]
Short-term Debt [Line Items]
Balance	$ 49,084	$ 12,754	$ 48,748
Maximum indebtedness at any month end	51,760	56,686	65,071
Average balance during year	$ 16,972	$ 9,030	$ 24,582
Average rate paid for the year	1.21%	0.58%	0.35%
Interest rate on year-end balance	1.54%	0.74%	0.43%

XML

SHORT-TERM BORROWINGS (Details Textual)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Short-term Debt [Line Items]
Average maturity	3 days	3 days	3 days

XML

ADVANCES FROM FEDERAL HOME LOAN BANK, GUARANTEED JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES AND SUBORDINATED DEBT (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
WEIGHTED AVERAGE YIELD
2017		1.06%
2018	1.48%	1.48%
2019	1.51%	1.51%
2020	1.74%	1.59%
2021	1.75%	1.60%
Total advances from FHLB	1.61%	1.37%
BALANCE
2017		$ 12,000
2018	$ 12,000	12,000
2019	12,500	12,500
2020	16,729	8,042
2021	5,000	1,000
Total advances from FHLB	$ 46,229	$ 45,542

XML

ADVANCES FROM FEDERAL HOME LOAN BANK, GUARANTEED JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES AND SUBORDINATED DEBT (Details Textual) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2005	Dec. 31, 2004	Dec. 31, 2017	Dec. 31, 2016	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			$ 371,000
Federal Home Loan Bank, Advances, General Debt Obligations, Maximum Amount Available			35,000
Junior Subordinated Notes			12,923	$ 12,908
Subordinated Debt [Member]
Debt Instrument, Face Amount							$ 7,650
Debt Instrument, Interest Rate, Stated Percentage						6.50%
Cash					$ 21,000
Long-term Debt			7,500	7,400
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	$ 22,500
Junior Subordinated Notes			12,900	$ 12,900
Federal Reserve Bank [Member]
Federal Home Loan Bank, Advances, General Debt Obligations, Maximum Amount Available			$ 34,000

XML

DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale	$ 129,138	$ 127,077
Fair value swap liability	(92)
U.S. Agency Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale	6,572	398
Taxable Municipal Bonds [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale	7,036	3,622
Corporate Bond Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale	35,784	33,873
U.S. Agency mortgage-backed securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale	79,746	89,184
Fair value swap asset [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale	92
Level 1 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Fair value swap liability	0
Level 1 [Member] | U.S. Agency Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale	0	0
Level 1 [Member] | Taxable Municipal Bonds [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale	0	0
Level 1 [Member] | Corporate Bond Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale	0	0
Level 1 [Member] | U.S. Agency mortgage-backed securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale	0	0
Level 1 [Member] | Fair value swap asset [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale	0
Level 2 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Fair value swap liability	0
Level 2 [Member] | U.S. Agency Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale	6,572	398
Level 2 [Member] | Taxable Municipal Bonds [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale	7,036	3,622
Level 2 [Member] | Corporate Bond Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale	35,784	33,873
Level 2 [Member] | U.S. Agency mortgage-backed securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale	79,746	89,184
Level 2 [Member] | Fair value swap asset [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale	0
Level 3 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Fair value swap liability	(92)
Level 3 [Member] | U.S. Agency Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale	0	0
Level 3 [Member] | Taxable Municipal Bonds [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale	0	0
Level 3 [Member] | Corporate Bond Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale	0	0
Level 3 [Member] | U.S. Agency mortgage-backed securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale	0	$ 0
Level 3 [Member] | Fair value swap asset [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale	$ 92

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DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS (Details 1) - USD ($) $ in Thousands		12 Months Ended
		Dec. 31, 2017	Dec. 31, 2016
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Impaired loans		$ 1,759	$ 674
Fair Value Measurements, Nonrecurring Basis [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Impaired loans		850	147
Other real estate owned		18	21
Fair Value Measurements, Nonrecurring Basis [Member] | Impaired Loans [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Impaired loans		$ 850	$ 147
Valuation Techniques	[1]	Appraisal of collateral	Appraisal of collateral
Appraisal of Adjustment	[2]	54.00%	45.00%
Fair Value Measurements, Nonrecurring Basis [Member] | Other Real Estate Owned [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Other real estate owned		$ 18	$ 21
Valuation Techniques	[1],[3]	Appraisal of collateral	Appraisal of collateral
Appraisal of Adjustment	[2]	29.00%	42.00%
Liquidation expenses	[2]	79.00%	37.00%
Fair Value Measurements, Nonrecurring Basis [Member] | Minimum [Member] | Impaired Loans [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Appraisal of Adjustment	[2]	21.00%	40.00%
Fair Value Measurements, Nonrecurring Basis [Member] | Minimum [Member] | Other Real Estate Owned [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Appraisal of Adjustment	[2]	16.00%	20.00%
Liquidation expenses	[2]	2.00%	3.00%
Fair Value Measurements, Nonrecurring Basis [Member] | Maximum [Member] | Impaired Loans [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Appraisal of Adjustment	[2]	75.00%	99.00%
Fair Value Measurements, Nonrecurring Basis [Member] | Maximum [Member] | Other Real Estate Owned [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Appraisal of Adjustment	[2]	64.00%	77.00%
Liquidation expenses	[2]	206.00%	199.00%
Fair Value Measurements, Nonrecurring Basis [Member] | Level 1 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Impaired loans		$ 0	$ 0
Other real estate owned		0	0
Fair Value Measurements, Nonrecurring Basis [Member] | Level 2 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Impaired loans		0	0
Other real estate owned		0	0
Fair Value Measurements, Nonrecurring Basis [Member] | Level 3 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Impaired loans		850	147
Other real estate owned		$ 18	$ 21

[1] Fair Value is generally determined through independent appraisals of the underlying collateral, which generally include various level 3 inputs which are not identifiable.

[2] Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses.

[3] Includes qualitative adjustments by management and estimated liquidation expenses.

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DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS (Details Textual) - USD ($)	Dec. 31, 2017	Dec. 31, 2016
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Carrying value of impaired loans	$ 1,759,000	$ 674,000
Specific valuation allowance	909,000	527,000
Net fair value of impaired loans	$ 850,000	$ 147,000

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DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
FINANCIAL ASSETS: Carrying Value
Cash and cash equivalents	$ 34,188	$ 34,073	$ 48,510	$ 32,872
Investment securities - AFS	129,138	127,077
Investment securities - HTM	38,752	30,665
Regulatory stock	6,800	5,484
Loans held for sale	3,125	3,094
Loans, net of allowance for loan loss and unearned income	879,419	873,832
Accrued interest income receivable	3,603	3,116
Bank owned life insurance	37,860	37,903
Fair value swap asset	92
Cash and cash equivalents	34,188	34,073
Investment securities - AFS	129,138	127,077
Investment securities - HTM	38,811	30,420
Regulatory stock	6,800	5,484
Loans held for sale	3,173	3,158
Loans, net of allowance for loan loss and unearned income	873,784	869,960
Accrued interest income receivable	3,603	3,116
Bank owned life insurance	37,860	37,903
Fair value swap asset	92
FINANCIAL LIABILITIES: Carrying Value
Deposits with no stated maturities	688,648	708,062
Deposits with stated maturities	259,297	259,724
Short-term borrowings	49,084	12,754
All other borrowings	66,617	65,891
Accrued interest payable	1,754	1,640
Fair value swap liability	92
Deposits with no stated maturities	688,648	708,062
Deposits with stated maturities	260,153	261,446
Short-term borrowings	49,084	12,754
All other borrowings	69,684	69,348
Accrued interest payable	1,754	1,640
Fair value swap liability	92
Level 1 [Member]
FINANCIAL ASSETS: Carrying Value
Cash and cash equivalents	34,188	34,073
Investment securities - AFS	0	0
Investment securities - HTM	0	0
Regulatory stock	6,800	5,484
Loans held for sale	3,173	3,158
Loans, net of allowance for loan loss and unearned income	0	0
Accrued interest income receivable	3,603	3,116
Bank owned life insurance	37,860	37,903
Fair value swap asset	0
FINANCIAL LIABILITIES: Carrying Value
Fair value swap liability	0
Deposits with no stated maturities	688,648	708,062
Deposits with stated maturities	0	0
Short-term borrowings	49,084	12,754
All other borrowings	0	0
Accrued interest payable	1,754	1,640
Fair value swap liability	0
Level 2 [Member]
FINANCIAL ASSETS: Carrying Value
Cash and cash equivalents	0	0
Investment securities - AFS	129,138	127,077
Investment securities - HTM	35,859	27,473
Regulatory stock	0	0
Loans held for sale	0	0
Loans, net of allowance for loan loss and unearned income	0	0
Accrued interest income receivable	0	0
Bank owned life insurance	0	0
Fair value swap asset	0
FINANCIAL LIABILITIES: Carrying Value
Fair value swap liability	0
Deposits with no stated maturities	0	0
Deposits with stated maturities	0	0
Short-term borrowings	0	0
All other borrowings	0	0
Accrued interest payable	0	0
Fair value swap liability	0
Level 3 [Member]
FINANCIAL ASSETS: Carrying Value
Cash and cash equivalents	0	0
Investment securities - AFS	0	0
Investment securities - HTM	2,952	2,947
Regulatory stock	0	0
Loans held for sale	0	0
Loans, net of allowance for loan loss and unearned income	873,784	869,960
Accrued interest income receivable	0	0
Bank owned life insurance	0	0
Fair value swap asset	92
FINANCIAL LIABILITIES: Carrying Value
Fair value swap liability	92
Deposits with no stated maturities	0	0
Deposits with stated maturities	260,153	261,446
Short-term borrowings	0	0
All other borrowings	69,684	69,348
Accrued interest payable	0	$ 0
Fair value swap liability	$ 92

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INCOME TAXES (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Current									$ 1,044	$ 483	$ 1,455
Deferred									1,679	414	888
Change in corporate tax rate									2,624	0	0
Income tax expense	$ 3,398	$ 701	$ 623	$ 625	$ 423	$ 446	$ 577	$ (549)	$ 5,347	$ 897	$ 2,343

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INCOME TAXES (Details 1) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
AMOUNT
Income tax expense based on federal statutory rate									$ 2,938	$ 1,090	$ 2,836
Tax exempt income									(283)	(255)	(574)
Other									68	62	81
Change in corporate tax rate									2,624	0	0
Total expense for income taxes	$ 3,398	$ 701	$ 623	$ 625	$ 423	$ 446	$ 577	$ (549)	$ 5,347	$ 897	$ 2,343
RATE
Income tax expense based on federal statutory rate									34.00%	34.00%	34.00%
Tax exempt income									(3.30%)	(7.90%)	(6.90%)
Other									0.80%	1.90%	1.00%
Change in corporate tax rate									30.40%	0.00%	0.00%
Total expense for income taxes									61.90%	28.00%	28.10%

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

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INCOME TAXES (Details 3) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Unrealized gains recognized in comprehensive income	$ 53	$ 507
Pension obligation of the defined benefit plan not yet recognized in income	(442)	1,569	$ (197)
Deferred provision for income taxes	(1,679)	(414)	(888)
Change in corporate tax rate	(2,624)	0	$ 0
Net increase (decrease)	$ (4,692)	$ 1,662

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INCOME TAXES (Details Textual) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Tax Credit Carryforward, Amount		$ 1,700
Effective Income Tax Rate Reconciliation, Change in Enacted Tax Rate, Amount		$ 2,624	$ 0	$ 0
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent		34.00%	34.00%	34.00%
Scenario, Plan [Member]
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent	21.00%

XML

EMPLOYEE BENEFIT PLANS (Details) - Pension Plans, Defined Benefit [Member] - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
CHANGE IN BENEFIT OBLIGATION:
Benefit obligation at beginning of year	$ 38,637	$ 33,117
Service cost	1,516	1,468	$ 1,557
Interest cost	1,292	1,430	1,341
Actuarial (gain) loss	1,588	4,578
Benefits paid	(2,020)	(1,956)
Benefit obligation at end of year	41,013	38,637	33,117
CHANGE IN PLAN ASSETS:
Fair value of plan assets at beginning of year	30,671	28,429
Actual return on plan assets	4,949	348
Employer contributions	3,500	3,850
Benefits paid	(2,020)	(1,956)
Fair value of plan assets at end of year	37,100	30,671	$ 28,429
Funded status of the plan	$ (3,913)	$ (7,966)

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EMPLOYEE BENEFIT PLANS (Details 1) - Pension Plans, Defined Benefit [Member] - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Amounts recognized in accumulated other comprehensive loss consists of:
Net actuarial loss	$ 15,326	$ 17,602
Total	$ 15,326	$ 17,602

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EMPLOYEE BENEFIT PLANS (Details 2) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Pension Plans, Defined Benefit [Member]
Defined Benefit Plan Disclosure [Line Items]
Accumulated benefit obligation	$ 37,594	$ 35,153

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EMPLOYEE BENEFIT PLANS (Details 3)	Dec. 31, 2017	Dec. 31, 2016
WEIGHTED AVERAGE ASSUMPTIONS:
Discount rate	3.63%	4.12%
Salary scale	2.50%	2.50%

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EMPLOYEE BENEFIT PLANS (Details 4) - Pension Plans, Defined Benefit [Member] - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
COMPONENTS OF NET PERIODIC BENEFIT COST:
Service cost	$ 1,516	$ 1,468	$ 1,557
Interest cost	1,292	1,430	1,341
Expected return on plan assets	(2,539)	(2,275)	(2,130)
Recognized net actuarial loss	1,454	1,333	1,386
Net periodic pension cost	$ 1,723	$ 1,956	$ 2,154

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EMPLOYEE BENEFIT PLANS (Details 5) - Pension Plans, Defined Benefit [Member] - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
OTHER CHANGES IN PLAN ASSETS AND BENEFIT OBLIGATIONS RECOGNIZED IN OTHER COMPREHENSIVE LOSS
Net (gain) loss	$ (822)	$ 6,505	$ 1,221
Recognized loss	(1,454)	(1,333)	(1,386)
Total recognized in other comprehensive loss before tax effect	(2,276)	5,172	(165)
Total recognized in net benefit cost and other comprehensive loss before tax effect	$ (553)	$ 7,128	$ 1,989

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EMPLOYEE BENEFIT PLANS (Details 6) - Pension Plans, Defined Benefit [Member]	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
WEIGHTED AVERAGE ASSUMPTIONS:
Discount rate	4.12%	4.20%	4.00%
Expected return on plan assets	7.75%	7.75%	8.00%
Rate of compensation increase	2.50%	2.50%	2.50%

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EMPLOYEE BENEFIT PLANS (Details 7) - Pension Plans, Defined Benefit [Member]	Dec. 31, 2017	Dec. 31, 2016
ASSET CATEGORY:
Asset allocations	100.00%	100.00%
Cash and Cash Equivalents [Member]
ASSET CATEGORY:
Asset allocations	0.00%	8.00%
Domestic equities [Member]
ASSET CATEGORY:
Asset allocations	12.00%	10.00%
Mutual funds/ETFs [Member]
ASSET CATEGORY:
Asset allocations	82.00%	76.00%
International equities [Member]
ASSET CATEGORY:
Asset allocations	4.00%	1.00%
Corporate bonds [Member]
ASSET CATEGORY:
Asset allocations	2.00%	5.00%

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EMPLOYEE BENEFIT PLANS (Details 8) - Pension Plans, Defined Benefit [Member] - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Defined Benefit Plan, Information about Plan Assets [Abstract]
Defined Benefit Plan, Fair Value of Plan Assets	$ 37,100	$ 30,671	$ 28,429
Cash and cash equivalents | Fair Value, Inputs, Level 1 [Member]
Defined Benefit Plan, Information about Plan Assets [Abstract]
Defined Benefit Plan, Fair Value of Plan Assets	44	2,454
Domestic equities | Fair Value, Inputs, Level 1 [Member]
Defined Benefit Plan, Information about Plan Assets [Abstract]
Defined Benefit Plan, Fair Value of Plan Assets	4,340	3,067
International equities | Fair Value, Inputs, Level 1 [Member]
Defined Benefit Plan, Information about Plan Assets [Abstract]
Defined Benefit Plan, Fair Value of Plan Assets	1,322	307
Mutual funds/ETFs | Fair Value, Inputs, Level 1 [Member]
Defined Benefit Plan, Information about Plan Assets [Abstract]
Defined Benefit Plan, Fair Value of Plan Assets	30,470	23,310
Corporate bonds | Fair Value, Inputs, Level 2 [Member]
Defined Benefit Plan, Information about Plan Assets [Abstract]
Defined Benefit Plan, Fair Value of Plan Assets	$ 924	$ 1,533

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EMPLOYEE BENEFIT PLANS (Details 9) - Pension Plans, Defined Benefit [Member] $ in Thousands	Dec. 31, 2017 USD ($)
Defined Benefit Plan, Expected Future Benefit Payments, Fiscal Year Maturity [Abstract]
2018	$ 2,698
2019	2,692
2020	2,817
2021	2,832
2022	3,116
Years 2023 - 2027	$ 14,988

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EMPLOYEE BENEFIT PLANS (Details Textual)	12 Months Ended
	Dec. 31, 2017 USD ($)	Dec. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)	Dec. 31, 2014	Dec. 31, 2013
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan Minimum Number Of Annual Employee Hours	1,000
Defined Benefit Plan Maximum Percent Of Assets Comprised Of Entity Common Stock	10.00%
Defined Contribution Plan Maximum Annual Contribution Per Union Employee Percent	4.00%	4.00%
Defined Contribution Plan Amount Of Entity Common Stock And Securities Held	$ 1,100,000
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 Recognized	469,000	$ 447,000	$ 433,000
Defined Benefit Plan, Expected Amortization of Gain (Loss), Next Fiscal Year	$ 1,561,000
Equity Securities [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Plan Assets, Target Allocation, Percentage	60.00%
Equity Securities [Member] | Minimum [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Plan Assets, Target Allocation, Percentage	50.00%
Equity Securities [Member] | Maximum [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Plan Assets, Target Allocation, Percentage	60.00%
Debt Securities [Member] | Minimum [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Plan Assets, Target Allocation, Percentage	40.00%
Debt Securities [Member] | Maximum [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Plan Assets, Target Allocation, Percentage	50.00%
Pension Plans, Defined Benefit [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Amount of Employer and Related Party Securities Included in Plan Assets	$ 1,200,000
Defined Benefit Plan Maximum Percent Of Assets Comprised Of Entity Common Stock	10.00%
Defined Benefit Plan, Assumptions Used Calculating Net Periodic Benefit Cost, Expected Long-term Return on Assets	7.75%	7.75%	8.00%
Defined Benefit Plan Percent Of Assets Comprised Of Entity Common Stock	3.40%
Defined Benefit Plan, Expected Future Employer Contributions, Next Fiscal Year	$ 3,500,000

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LEASE COMMITMENTS (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Operating Leased Assets [Line Items]
2018	$ 445
2019	277
2020	254
2021	254
2022	256
2023 and thereafter	1,558
Operating Leases, Rent Expense, Net, Total	$ 571	$ 767	$ 821

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COMMITMENTS AND CONTINGENT LIABILITIES (Details Textual) - USD ($)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Loss Contingencies [Line Items]
Carrying value of commitment	$ 915,000	$ 890,000
Commitments to extend credit [Member]
Loss Contingencies [Line Items]
Amount of commitment	165,100,000	160,500,000
Standby letters of credit [Member]
Loss Contingencies [Line Items]
Amount of commitment	10,000,000	8,500,000
Amount of commitments secured	$ 5,100,000	$ 3,900,000
Standby letters of credit [Member] | Maximum [Member]
Loss Contingencies [Line Items]
Term of commitment	2 years
Standby letters of credit [Member] | Minimum [Member]
Loss Contingencies [Line Items]
Term of commitment	1 year

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PREFERRED STOCK (Details Textual) - USD ($) $ in Millions	1 Months Ended
	Aug. 11, 2011	Jan. 27, 2016
Temporary Equity [Line Items]
Shares of stock issued	21,000
Aggregate proceeds	$ 21
Redemption price, percent of liquidation amount		100.00%

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STOCK COMPENSATION PLANS (Details) - $ / shares	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
SHARES
Outstanding at beginning of year	417,566	470,449	559,909
Granted	17,500	54,000	32,500
Exercised	(64,112)	(32,661)	(75,923)
Forfeited	(10,233)	(74,222)	(46,037)
Outstanding at end of year	360,721	417,566	470,449
Exercisable at end of year	308,301	328,062	336,555
WEIGHTED AVERAGE EXERCISE PRICE
Outstanding at beginning of year	$ 2.76	$ 2.74	$ 2.66
Granted	3.96	3.03	2.96
Exercised	2.49	2.27	2.07
Forfeited	3.10	3.04	3.04
Outstanding at end of year	2.85	2.76	2.74
Exercisable at end of year	2.79	2.69	2.58
Weighted average fair value of options granted in current year	$ 1.12	$ 0.93	$ 0.67

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STOCK COMPENSATION PLANS (Details 1)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Risk-free interest rate			1.97%
Expected lives in years	10 years	10 years	10 years
Expected volatility		29.00%	22.00%
Expected dividend rate	1.50%		1.35%
Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Risk-free interest rate	2.23%	1.56%
Expected volatility	28.09%
Expected dividend rate		1.35%
Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Risk-free interest rate	2.38%	1.73%
Expected volatility	28.84%
Expected dividend rate		1.81%

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STOCK COMPENSATION PLANS (Details Textual) - USD ($)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Stock or Unit Option Plan Expense	$ 13,000	$ 20,000	$ 29,000
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, Shares Authorized under Stock Option Plans, Exercise Price Range, Number of Exercisable Options, Beginning Balance	360,721
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, Beginning Balance	308,301
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, Lower Range Limit	$ 1.53
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, Upper Range Limit	4.00
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, Exercisable Options, Weighted Average Exercise Price	$ 2.85
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, Exercisable Options, Weighted Average Remaining Contractual Term	5 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, Beginning Balance	52,420
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, Lower Range Limit	$ 2.96
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, Upper Range Limit	4.00
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, Exercisable Options, Weighted Average Exercise Price	$ 3.22
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, Exercisable Options, Weighted Average Remaining Contractual Term	7 years 10 months 24 days

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ACCUMULATED OTHER COMPREHENSIVE LOSS (Details) - USD ($) $ in Thousands		12 Months Ended
		Dec. 31, 2017	Dec. 31, 2016
Accumulated Other Comprehensive Loss [Line Items]
Beginning balance	[1]	$ (11,577)	$ (7,555)
Reclassification of certain income tax effects from accumulated other comprehensive loss	[1]	(2,131)	0
Other comprehensive income (loss) before reclassifications	[1]	1,044	(4,425)
Amounts reclassified from accumulated other comprehensive loss	[1]	(286)	403
Net current period other comprehensive loss	[1]	(1,373)	(4,022)
Ending balance	[1]	(12,950)	(11,577)
Net Unrealized Gains and (Losses) on Investment Securities AFS [Member]
Accumulated Other Comprehensive Loss [Line Items]
Beginning balance	[1]	(171)	808
Reclassification of certain income tax effects from accumulated other comprehensive loss	[1]	(53)	0
Other comprehensive income (loss) before reclassifications	[1]	(27)	(862)
Amounts reclassified from accumulated other comprehensive loss	[1]	(76)	(117)
Net current period other comprehensive loss	[1]	(156)	(979)
Ending balance	[1]	(327)	(171)
Defined Benefit Pension Items [Member]
Accumulated Other Comprehensive Loss [Line Items]
Beginning balance	[1]	(11,406)	(8,363)
Reclassification of certain income tax effects from accumulated other comprehensive loss	[1]	(2,078)	0
Other comprehensive income (loss) before reclassifications	[1]	1,071	(3,563)
Amounts reclassified from accumulated other comprehensive loss	[1]	(210)	520
Net current period other comprehensive loss	[1]	(1,217)	(3,043)
Ending balance	[1]	$ (12,623)	$ (11,406)

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

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ACCUMULATED OTHER COMPREHENSIVE LOSS (Details 1) - USD ($) $ in Thousands		12 Months Ended
		Dec. 31, 2017		Dec. 31, 2016		Dec. 31, 2015
Unrealized gains and losses on sale of securities
Net realized gains on investment securities		$ 115	[1]	$ 177	[1]	$ 71
Provision for income taxes		39	[1]	60	[1]	$ 25
Net of tax	[1]	(76)		(117)
Amortization of defined benefit items
Recognized net actuarial loss	[1],[2]	(318)		788
Provision for income taxes	[1],[2]	108		(268)
Net of tax	[1],[2]	(210)		520
Total reclassifications for the period	[1],[2]	$ (286)		$ 403

[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 14 for additional details).

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INTANGIBLE ASSETS (Details Textual) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
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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DERIVATIVE HEDGING INSTRUMENTS (Details)	12 Months Ended
	Dec. 31, 2017 USD ($)
Derivative, Notional Amount	$ 0
Increase (Decrease) in Fair Value of Interest Rate Fair Value Hedging Instruments	$ 0
Derivative Instruments Weighted Average Interest Rate Received Paid	0.00%
Derivative Financial Instruments, Liabilities [Member] | Swap [Member]
Derivative, Swap Type	FAIR VALUE
Derivative, Notional Amount	$ (16,948,686)
Derivative Instruments, Repricing Frequency	MONTHLY
Increase (Decrease) in Fair Value of Interest Rate Fair Value Hedging Instruments	$ 110,778
Derivative Instruments Weighted Average Interest Rate Received Paid	(3.47%)
Derivative Financial Instruments, Assets [Member] | Swap [Member]
Derivative, Swap Type	FAIR VALUE
Derivative, Notional Amount	$ 16,948,686
Derivative Instruments, Repricing Frequency	MONTHLY
Increase (Decrease) in Fair Value of Interest Rate Fair Value Hedging Instruments	$ (110,778)
Derivative Instruments Weighted Average Interest Rate Received Paid	3.47%

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DERIVATIVE HEDGING INSTRUMENTS (Details Textual)	12 Months Ended
	Dec. 31, 2017 USD ($)
Proceeds from Fees Received	$ 139,000
Derivative Notional Amount Outstanding	$ 500,000,000

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SEGMENT RESULTS (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Contribution of segments to the consolidated results of operations
Net interest income	$ 9,004	$ 8,937	$ 8,899	$ 8,721	$ 8,584	$ 8,506	$ 8,486	$ 8,558	$ 35,561	$ 34,134	$ 35,361
Provision for loan loss	50	200	325	225	300	300	250	3,100	800	3,950	1,250
Non-interest income	3,699	3,629	3,755	3,562	3,798	3,661	3,742	3,437	14,645	14,638	15,267
Non-interest expense	10,250	10,114	10,317	10,085	10,509	10,356	10,039	10,711	40,766	41,615	41,038
Income (loss) before income taxes	2,403	2,252	2,012	1,973	1,573	1,511	1,939	(1,816)	8,640	3,207	8,340
Income tax expense	3,398	701	623	625	423	446	577	(549)	5,347	897	2,343
Net income (loss)	(995)	$ 1,551	$ 1,389	$ 1,348	1,150	$ 1,065	$ 1,362	$ (1,267)	3,293	2,310	5,997
Total assets	1,167,655				1,153,780				1,167,655	1,153,780	1,148,497
Retail banking [Member]
Contribution of segments to the consolidated results of operations
Net interest income									20,541	20,860	20,680
Provision for loan loss									122	175	192
Non-interest income									4,956	5,281	5,537
Non-interest expense									21,247	21,704	21,849
Income (loss) before income taxes									4,128	4,262	4,176
Income tax expense									1,381	1,252	1,160
Net income (loss)									2,747	3,010	3,016
Total assets	353,924				357,500				353,924	357,500	415,008
Commercial Banking [Member]
Contribution of segments to the consolidated results of operations
Net interest income									18,642	18,518	18,390
Provision for loan loss									678	3,775	1,058
Non-interest income									414	439	552
Non-interest expense									9,892	10,453	10,303
Income (loss) before income taxes									8,486	4,729	7,581
Income tax expense									2,642	1,387	2,167
Net income (loss)									5,844	3,342	5,414
Total assets	643,055				635,843				643,055	635,843	589,840
Trust [Member]
Contribution of segments to the consolidated results of operations
Net interest income									61	56	58
Provision for loan loss									0	0	0
Non-interest income									9,170	8,749	8,683
Non-interest expense									7,094	7,097	6,606
Income (loss) before income taxes									2,137	1,708	2,135
Income tax expense									772	581	726
Net income (loss)									1,365	1,127	1,409
Total assets	5,413				5,217				5,413	5,217	5,263
Investment/ Parent [Member]
Contribution of segments to the consolidated results of operations
Net interest income									(3,683)	(5,300)	(3,767)
Provision for loan loss									0	0	0
Non-interest income									105	169	495
Non-interest expense									2,533	2,361	2,280
Income (loss) before income taxes									(6,111)	(7,492)	(5,552)
Income tax expense									552	(2,323)	(1,710)
Net income (loss)									(6,663)	(5,169)	(3,842)
Total assets	$ 165,263				$ 155,220				$ 165,263	$ 155,220	$ 138,386

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REGULATORY CAPITAL (Details) - USD ($) $ in Thousands		Dec. 31, 2017	Dec. 31, 2016
Summarized regulatory capital ratio of company
Total Capital (To RWA), Actual Amount		$ 110,681	$ 107,618
Tier 1 Common Equity (To RWA), Actual Amount		99,552	96,796
Tier 1 Capital (To RWA), Actual Amount		99,552	96,796
Tier 1 Capital (To Average Assets), Actual Amount		$ 99,552	$ 96,796
Total Capital (To RWA), Actual Ratio		11.64%	11.35%
Tier 1 Common Equity (To RWA), Actual Ratio		10.47%	10.21%
Tier 1 Capital (To RWA), Actual Ratio		10.47%	10.21%
Tier 1 Capital (To Average Assets), Actual Ratio		8.75%	8.61%
Total Capital (To RWA), Minimun 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), Minimun Required For Capital Adequacy Purpose		6.00%	6.00%
Tier 1 Capital (To Average Assets), Minimun 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), TTo Be Will 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		$ 126,276	$ 125,131
Tier 1 Common Equity (To RWA), Actual Amount		95,882	95,028
Tier 1 Capital (To RWA), Actual Amount		107,682	106,868
Tier 1 Capital (To Average Assets), Actual Amount		$ 107,682	$ 106,868
Total Capital (To RWA), Actual Ratio		13.21%	13.15%
Tier 1 Common Equity (To RWA), Actual Ratio		10.03%	9.99%
Tier 1 Capital (To RWA), Actual Ratio		11.26%	11.23%
Tier 1 Capital (To Average Assets), Actual Ratio		9.32%	9.35%

[1] Applies to the Bank only.

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REGULATORY CAPITAL (Details Textual)	Dec. 31, 2017	Dec. 31, 2016
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Tangible Capital to Tangible Assets	7.20%	7.31%

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PARENT COMPANY FINANCIAL INFORMATION (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
ASSETS
Cash	$ 26,234	$ 25,107
Short-term investments in money market funds	5,256	5,900
Investment securities available for sale	129,138	127,077
Other assets	4,129	4,243
TOTAL ASSETS	1,167,655	1,153,780	$ 1,148,497
LIABILITIES
Guaranteed junior subordinated deferrable interest debentures	12,923	12,908
Subordinated debt	7,465	7,441
Other liabilities	8,907	11,954
TOTAL LIABILITIES	1,072,553	1,058,385
STOCKHOLDERS’ EQUITY
Total stockholders’ equity	95,102	95,395	$ 118,973
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	1,167,655	1,153,780
Parent Company [Member]
ASSETS
Cash	100	100
Short-term investments in money market funds	4,521	5,397
Investment securities available for sale	5,307	6,041
Other assets	499	2,665
TOTAL ASSETS	116,279	116,529
LIABILITIES
Guaranteed junior subordinated deferrable interest debentures	12,923	12,908
Subordinated debt	7,465	7,441
Other liabilities	789	785
TOTAL LIABILITIES	21,177	21,134
STOCKHOLDERS’ EQUITY
Total stockholders’ equity	95,102	95,395
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	116,279	116,529
Parent Company [Member] | Banking Subsidiary [Member]
ASSETS
Equity investment	99,408	97,158
Parent Company [Member] | Non Banking Subsidiaries [Member]
ASSETS
Equity investment	$ 6,444	$ 5,168

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PARENT COMPANY FINANCIAL INFORMATION (Details 1) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
INCOME
Interest, dividend and other income	$ 11,370	$ 11,187	$ 11,051	$ 10,748	$ 10,582	$ 10,476	$ 10,389	$ 10,422	$ 44,356	$ 41,869	$ 41,881
EXPENSE
Interest expense	2,366	2,250	2,152	2,027	1,998	1,970	1,903	1,864	8,795	7,735	6,520
Salaries and employee benefits									24,127	24,034	24,042
Other expense									4,858	5,271	4,727
INCOME BEFORE INCOME TAXES AND EQUITY IN UNDISTRIBUTED EARNINGS OF SUBSIDIARIES	2,403	2,252	2,012	1,973	1,573	1,511	1,939	(1,816)	8,640	3,207	8,340
Benefit for income taxes	3,398	701	623	625	423	446	577	(549)	5,347	897	2,343
NET INCOME	$ (995)	$ 1,551	$ 1,389	$ 1,348	$ 1,150	$ 1,065	$ 1,362	$ (1,267)	3,293	2,310	5,997
COMPREHENSIVE INCOME (LOSS)									4,051	(1,712)	5,344
Parent Company [Member]
INCOME
Inter-entity management and other fees									2,315	2,305	2,432
Interest, dividend and other income									163	214	669
TOTAL INCOME									6,168	6,169	9,176
EXPENSE
Interest expense									1,642	1,640	1,125
Salaries and employee benefits									2,416	2,314	2,302
Other expense									1,618	1,549	1,562
TOTAL EXPENSE									5,676	5,503	4,989
INCOME BEFORE INCOME TAXES AND EQUITY IN UNDISTRIBUTED EARNINGS OF SUBSIDIARIES									492	666	4,187
Benefit for income taxes									(1,114)	(1,015)	(642)
Equity in undistributed earnings of subsidiaries									1,687	629	1,168
NET INCOME									3,293	2,310	5,997
COMPREHENSIVE INCOME (LOSS)									4,051	(1,712)	5,344
Parent Company [Member] | Banking Subsidiary [Member]
INCOME
Dividends from subsidiaries									2,850	3,000	5,100
Parent Company [Member] | Non Banking Subsidiaries [Member]
INCOME
Dividends from subsidiaries									$ 840	$ 650	$ 975

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PARENT COMPANY FINANCIAL INFORMATION (Details 2) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
OPERATING ACTIVITIES
Net income	$ (995)	$ 1,551	$ 1,389	$ 1,348	$ 1,150	$ 1,065	$ 1,362	$ (1,267)	$ 3,293	$ 2,310	$ 5,997
Adjustment to reconcile net income to net cash (used in) provided by operating activities:
Stock compensation expense									173	94	186
Other - net									(1,776)	(1,186)	(1,674)
INVESTING ACTIVITIES
Proceeds from maturity and sales of investment securities - available for sale									22,311	24,574	24,532
Proceeds from life insurance policies									614	0	1,598
FINANCING ACTIVITIES
Preferred stock redemption									0	(21,000)	0
Preferred stock dividends paid									0	(15)	(210)
Common stock dividends paid									(1,113)	(945)	(754)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS									115	(14,437)	15,638
CASH AND CASH EQUIVALENTS AT JANUARY 1				34,073				48,510	34,073	48,510	32,872
CASH AND CASH EQUIVALENTS AT DECEMBER 31	34,188				34,073				34,188	34,073	48,510
Parent Company [Member]
OPERATING ACTIVITIES
Net income									3,293	2,310	5,997
Adjustment to reconcile net income to net cash (used in) provided by operating activities:
Equity in undistributed earnings of subsidiaries									(1,687)	(629)	(1,168)
Stock compensation expense									13	20	29
Other - net									1,325	1,463	842
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES									2,944	3,164	5,700
INVESTING ACTIVITIES
Purchase of investment securities - available for sale									(1,002)	(996)	(1,533)
Proceeds from maturity and sales of investment securities - available for sale									1,699	3,396	4,669
Proceeds from life insurance policies									0	0	719
NET CASH PROVIDED BY INVESTING ACTIVITIES									697	2,400	3,855
FINANCING ACTIVITIES
Subordinated debt issuance, net									0	0	7,418
Preferred stock redemption									0	(21,000)	0
Preferred stock dividends paid									0	(15)	(210)
Purchases of treasury stock									(3,404)	0	0
Common stock dividends paid									(1,113)	(945)	(754)
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES									(4,517)	(21,960)	6,454
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS									(876)	(16,396)	16,009
CASH AND CASH EQUIVALENTS AT JANUARY 1				$ 5,497				$ 21,893	5,497	21,893	5,884
CASH AND CASH EQUIVALENTS AT DECEMBER 31	$ 4,621				$ 5,497				$ 4,621	$ 5,497	$ 21,893

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PARENT COMPANY FINANCIAL INFORMATION (Details Textual)	Dec. 31, 2017 USD ($)
Dividend Payments Restrictions Schedule, Statutory Capital and Surplus	$ 110,300,000

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SELECTED QUARTERLY CONSOLIDATED FINANCIAL DATA (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Interest income	$ 11,370	$ 11,187	$ 11,051	$ 10,748	$ 10,582	$ 10,476	$ 10,389	$ 10,422	$ 44,356	$ 41,869	$ 41,881
Interest expense	2,366	2,250	2,152	2,027	1,998	1,970	1,903	1,864	8,795	7,735	6,520
Net interest income	9,004	8,937	8,899	8,721	8,584	8,506	8,486	8,558	35,561	34,134	35,361
Provision for loan losses	50	200	325	225	300	300	250	3,100	800	3,950	1,250
Net interest income after provision for loan losses	8,954	8,737	8,574	8,496	8,284	8,206	8,236	5,458	34,761	30,184	34,111
Non-interest income	3,699	3,629	3,755	3,562	3,798	3,661	3,742	3,437	14,645	14,638	15,267
Non-interest expense	10,250	10,114	10,317	10,085	10,509	10,356	10,039	10,711	40,766	41,615	41,038
Income before income taxes	2,403	2,252	2,012	1,973	1,573	1,511	1,939	(1,816)	8,640	3,207	8,340
Provision for income taxes	3,398	701	623	625	423	446	577	(549)	5,347	897	2,343
Net income (loss)	$ (995)	$ 1,551	$ 1,389	$ 1,348	$ 1,150	$ 1,065	$ 1,362	$ (1,267)	$ 3,293	$ 2,310	$ 5,997
Basic earnings (loss) per common share	$ (0.05)	$ 0.08	$ 0.07	$ 0.07	$ 0.06	$ 0.06	$ 0.07	$ (0.07)	$ 0.18	$ 0.12	$ 0.31
Diluted earnings (loss) per common share	(0.05)	0.08	0.07	0.07	0.06	0.06	0.07	(0.07)	0.18	0.12	0.31
Cash dividends declared per common share	$ 0.015	$ 0.015	$ 0.015	$ 0.015	$ 0.015	$ 0.015	$ 0.010	$ 0.010	$ 0.06	$ 0.05	$ 0.04