10-Q

 

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

 

FORM 10-Q

 

x	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the period ended September 30, 2017

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, PA	15907-0430
(Address of principal executive offices)	(Zip Code)

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

 

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

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

Large accelerated filer o	Accelerated filer o	Non-accelerated filer o
Smaller reporting company x	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 by Rule 12b-2 of the Exchange Act).Yes o No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Outstanding at November 1, 2017
Common Stock, par value $0.01	18,273,824

 

AmeriServ Financial, Inc.
 
INDEX

	Page No.
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements		1
Consolidated Balance Sheets (Unaudited) – September 30, 2017 and December 31, 2016		1
Consolidated Statements of Operations (Unaudited) – Three and nine months ended September 30, 2017 and 2016		2
Consolidated Statements of Comprehensive Income (Unaudited) – Three and nine months ended September 30, 2017 and 2016		3
Consolidated Statements of Cash Flows (Unaudited) – Nine months ended September 30, 2017 and 2016		4
Notes to Unaudited Consolidated Financial Statements		5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		32
Item 3. Quantitative and Qualitative Disclosure About Market Risk		49
Item 4. Controls and Procedures		49
PART II. OTHER INFORMATION
Item 1. Legal Proceedings		49
Item 1A. Risk Factors		49
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		49
Item 3. Defaults Upon Senior Securities		49
Item 4. Mine Safety Disclosures		49
Item 5. Other Information		49
Item 6. Exhibits		50

i

Item 1. Financial Statements

AmeriServ Financial, Inc.
 
CONSOLIDATED BALANCE SHEETS
(In thousands except shares)
(Unaudited)

	September 30, 2017			December 31, 2016
ASSETS
Cash and due from depository institutions	$	20,267		$	25,107
Interest bearing deposits		2,718			3,066
Short-term investments in money market funds		5,690			5,900
Total cash and cash equivalents		28,675			34,073
Investment securities:
Available for sale		129,446			127,077
Held to maturity (fair value $39,059 on September 30, 2017 and $30,420 on December 31, 2016)		38,997			30,665
Loans held for sale		1,780			3,094
Loans		896,648			884,240
Less: Unearned income		438			476
Allowance for loan losses		10,346			9,932
Net loans		885,864			873,832
Premises and equipment, net		12,658			11,694
Accrued interest income receivable		3,503			3,116
Goodwill		11,944			11,944
Bank owned life insurance		37,716			37,903
Net deferred tax asset		9,255			10,655
Federal Home Loan Bank stock		4,429			3,359
Federal Reserve Bank stock		2,125			2,125
Other assets		4,524			4,243
TOTAL ASSETS	$	1,170,916		$	1,153,780
LIABILITIES
Non-interest bearing deposits	$	182,396		$	188,808
Interest bearing deposits		784,525			778,978
Total deposits		966,921			967,786
Short-term borrowings		33,593			12,754
Advances from Federal Home Loan Bank		44,042			45,542
Guaranteed junior subordinated deferrable interest debentures, net		12,919			12,908
Subordinated debt, net		7,459			7,441
Total borrowed funds		98,013			78,645
Other liabilities		8,872			11,954
TOTAL LIABILITIES		1,073,806			1,058,385
SHAREHOLDERS’ EQUITY
Common stock, par value $0.01 per share; 30,000,000 shares authorized; 26,585,403 shares issued and 18,281,224 outstanding on September 30, 2017; 26,521,291 shares issued and 18,903,472 outstanding on December 31, 2016		266			265
Treasury stock at cost, 8,304,179 shares on September 30, 2017 and 7,617,819 on December 31, 2016		(77,586	)		(74,829	)
Capital surplus		145,704			145,535
Retained earnings		39,450			36,001
Accumulated other comprehensive loss, net		(10,724	)		(11,577	)
TOTAL SHAREHOLDERS’ EQUITY		97,110			95,395
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	1,170,916		$	1,153,780

 
 
See accompanying notes to unaudited consolidated financial statements.

1

AmeriServ Financial, Inc.
 
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)

	Three months ended September 30,				Nine months ended September 30,
	2017		2016		2017		2016
INTEREST INCOME
Interest and fees on loans	$	9,855	$	9,462	$	29,189	$	28,336
Interest bearing deposits		3		2		8		11
Short-term investments in money market funds		42		31		93		54
Investment securities:
Available for sale		973		779		2,819		2,324
Held to maturity		314		202		877		562
Total Interest Income		11,187		10,476		32,986		31,287
INTEREST EXPENSE
Deposits		1,618		1,391		4,558		3,975
Short-term borrowings		44		2		130		49
Advances from Federal Home Loan Bank		178		166		511		484
Guaranteed junior subordinated deferrable interest debentures		280		280		840		840
Subordinated debt		130		131		390		389
Total Interest Expense		2,250		1,970		6,429		5,737
NET INTEREST INCOME		8,937		8,506		26,557		25,550
Provision for loan losses		200		300		750		3,650
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		8,737		8,206		25,807		21,900
NON-INTEREST INCOME
Trust and investment advisory fees		2,045		2,035		6,292		6,234
Service charges on deposit accounts		409		433		1,168		1,252
Net gains on sale of loans		217		260		517		552
Mortgage related fees		69		132		227		293
Net realized gains on investment securities		56		60		115		177
Bank owned life insurance		143		169		594		505
Other income		690		572		2,033		1,827
Total Non-Interest Income		3,629		3,661		10,946		10,840
NON-INTEREST EXPENSE
Salaries and employee benefits		6,005		5,901		17,994		17,935
Net occupancy expense		634		656		1,947		2,083
Equipment expense		343		419		1,196		1,264
Professional fees		1,213		1,330		3,828		3,987
Supplies, postage and freight		161		181		516		530
Miscellaneous taxes and insurance		319		287		924		866
Federal deposit insurance expense		156		189		468		556
Other expense		1,283		1,393		3,643		3,885
Total Non-Interest Expense		10,114		10,356		30,516		31,106
PRETAX INCOME		2,252		1,511		6,237		1,634
Provision for income tax expense		701		446		1,949		474
NET INCOME		1,551		1,065		4,288		1,160
Preferred stock dividends		—		—		—		15
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS	$	1,551	$	1,065	$	4,288	$	1,145
PER COMMON SHARE DATA:
Basic:
Net income	$	0.08	$	0.06	$	0.23	$	0.06
Average number of shares outstanding		18,380		18,899		18,590		18,893
Diluted:
Net income	$	0.08	$	0.06	$	0.23	$	0.06
Average number of shares outstanding		18,481		18,957		18,689		18,947
Cash dividends declared	$	0.015	$	0.015	$	0.045	$	0.035

 
 
See accompanying notes to unaudited consolidated financial statements.

2

AmeriServ Financial, Inc.
 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
COMPREHENSIVE INCOME
Net income	$	1,551		$	1,065		$	4,288		$	1,160
Other comprehensive income, before tax:
Pension obligation change for defined benefit plan		396			263			870			1,030
Income tax effect		(135	)		(89	)		(297	)		(349	)
Unrealized holding gains (losses) on available for sale securities arising during period		176			(191	)		538			1,417
Income tax effect		(60	)		65			(182	)		(483	)
Reclassification adjustment for gains on available for sale securities included in net income		(56	)		(60	)		(115	)		(177	)
Income tax effect		19			20			39			60
Other comprehensive income		340			8			853			1,498
Comprehensive income	$	1,891		$	1,073		$	5,141		$	2,658

 
 
See accompanying notes to unaudited consolidated financial statements.

3

AmeriServ Financial, Inc.
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

	Nine months ended September 30,
	2017			2016
OPERATING ACTIVITIES
Net income	$	4,288		$	1,160
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Provision for loan losses		750			3,650
Depreciation expense		1,224			1,306
Net amortization of investment securities		346			342
Net realized gains on investment securities available for sale		(115	)		(177	)
Net gains on loans held for sale		(517	)		(552	)
Amortization of deferred loan fees		(117	)		(174	)
Origination of mortgage loans held for sale		(34,045	)		(42,549	)
Sales of mortgage loans held for sale		35,876			37,327
(Increase) decrease in accrued interest income receivable		(387	)		50
Decrease in accrued interest payable		(18	)		(18	)
Earnings on bank owned life insurance		(427	)		(505	)
Deferred income taxes		975			(280	)
Amortization of deferred issuance costs		29			29
Stock based compensation expense		170			89
Other, net		(2,492	)		(2,000	)
Net cash provided by (used in) operating activities		5,540			(2,302	)
INVESTING ACTIVITIES
Purchases of investment securities – available for sale		(27,581	)		(24,896	)
Purchases of investment securities – held to maturity		(9,465	)		(8,633	)
Proceeds from sales of investment securities – available for sale		8,143			8,966
Proceeds from maturities of investment securities – available for sale		17,341			18,750
Proceeds from maturities of investment securities – held to maturity		1,054			2,166
Purchases of regulatory stock		(12,894	)		(8,833	)
Proceeds from redemption of regulatory stock		11,824			10,106
Long-term loans originated		(122,029	)		(145,189	)
Principal collected on long-term loans		112,626			120,875
Loans purchased or participated		(6,121	)		(4,948	)
Loans sold or participated		2,800			18,900
Proceeds from sale of other real estate owned		60			99
Proceeds from life insurance policies		614			—
Purchases of premises and equipment		(2,188	)		(1,012	)
Net cash used in investing activities		(25,816	)		(13,649	)
FINANCING ACTIVITIES
Net (decrease) increase in deposit balances		(865	)		59,442
Net increase (decrease) in other short-term borrowings		20,839			(40,847	)
Principal borrowings on advances from Federal Home Loan Bank		9,500			7,042
Principal repayments on advances from Federal Home Loan Bank		(11,000	)		(6,000	)
Preferred stock redemption		—			(21,000	)
Purchase of treasury stock		(2,757	)		—
Common stock dividends		(839	)		(661	)
Preferred stock dividends		—			(15	)
Net cash provided by (used in) financing activities		14,878			(2,039	)
NET DECREASE IN CASH AND CASH EQUIVALENTS		(5,398	)		(17,990	)
CASH AND CASH EQUIVALENTS AT JANUARY 1		34,073			48,510
CASH AND CASH EQUIVALENTS AT SEPTEMBER 30	$	28,675		$	30,520

 
 
See accompanying notes to unaudited consolidated financial statements.

4

AmeriServ Financial, Inc.
 
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. Principles of Consolidation

The accompanying consolidated financial statements include the accounts of AmeriServ Financial, Inc. (the Company) and its wholly-owned subsidiaries, AmeriServ Financial Bank (the Bank), AmeriServ Trust and Financial Services Company (the Trust Company), and AmeriServ Life Insurance Company (AmeriServ Life). The Bank is a Pennsylvania state-chartered full service bank with 16 locations in Pennsylvania. The Trust Company offers a complete range of trust and financial services and administers assets valued at $2.1 billion that are not reported on the Company’s consolidated balance sheet at September 30, 2017. AmeriServ Life is a captive insurance company that engages in underwriting as a reinsurer of credit life and disability insurance.

In addition, the Parent Company is an administrative group that provides support in such areas as audit, finance, investments, loan review, general services, and marketing. Significant intercompany accounts and transactions have been eliminated in preparing the consolidated financial statements.

2. Basis of Preparation

The unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information. In the opinion of management, all adjustments consisting of normal recurring entries considered necessary for a fair presentation have been included. They are not, however, necessarily indicative of the results of consolidated operations for a full-year.

For further information, refer to the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

3. Recent Accounting Pronouncements

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.

5

AmeriServ Financial, Inc.
 
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

3. Recent Accounting Pronouncements  – (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.

In January 2017, the FASB issued ASU No. 2017-03 “Accounting Changes and Error Corrections (Topic 250) and Investments — Equity Method and Joint Ventures (Topic 323): Amendments to SEC Paragraphs Pursuant to Staff Announcements at the September 22, 2016 and November 17, 2016 EITF Meetings.” ASU 2017-03 provides amendments that add paragraph 250-10-S99-6 which includes the text of “SEC Staff Announcement: Disclosure of the Impact That Recently Issued Accounting Standards Will Have on the Financial Statements of a Registrant When Such Standards Are Adopted in a Future Period (in accordance with Staff Accounting Bulletin (SAB) Topic 11.M). This announcement applies to ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606); ASU No. 2016-02, Leases (Topic 842); and ASU 2016-03, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, and subsequent amendments. The Company has enhanced its disclosures regarding the impact that recently issued accounting standards adopted in a future period will have on its accounting and disclosures in this footnote.

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

6

AmeriServ Financial, Inc.
 
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

3. Recent Accounting Pronouncements  – (continued)

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.

4. 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 excluded for earnings per share purposes. The Company had 10,000 options to purchase common shares with an exercise price of $4.00 per share, outstanding at September 30, 2017, but were excluded from the computation of diluted earnings per common share because to do so would be antidilutive. For the 2016 period, options to purchase 147,968 common shares, at exercise prices ranging from $3.18 to $4.60, were outstanding but were not included in the computation of diluted earnings per common share because to do so would be antidilutive. Dividends on preferred shares are deducted from net income in the calculation of earnings per common share.

	Three months ended September 30,				Nine months ended September 30,
	2017		2016		2017		2016
	(In thousands, except per share data)
Numerator:
Net income	$	1,551	$	1,065	$	4,288	$	1,160
Preferred stock dividends		—		—		—		(15	)
Net income available to common shareholders	$	1,551	$	1,065	$	4,288	$	1,145
Denominator:
Weighted average common shares outstanding (basic)		18,380		18,899		18,590		18,893
Effect of stock options		101		58		99		54
Weighted average common shares outstanding (diluted)		18,481		18,957		18,689		18,947
Earnings per common share:
Basic	$	0.08	$	0.06	$	0.23	$	0.06
Diluted		0.08		0.06		0.23		0.06

5. 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 $975,000 in income tax payments in the first nine months of 2017 and $390,000 in the same 2016 period. The Company made total interest payments of $6,447,000 in the first nine months of 2017 compared to $5,755,000 in the same 2016 period. The Company had $59,000 non-cash transfers to other real estate owned (OREO) in the first nine months of 2017 compared to $151,000 non-cash transfers in the same 2016 period.

7

AmeriServ Financial, Inc.
 
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

6. Investment Securities

The cost basis and fair values of investment securities are summarized as follows (in thousands):

Investment securities available for sale (AFS):

	September 30, 2017
	Cost Basis		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
US Agency	$	5,435	$	1	$	(34	)	$	5,402
US Agency mortgage-backed securities		80,756		866		(382	)		81,240
Taxable municipal		7,203		30		(166	)		7,067
Corporate bonds		35,886		327		(476	)		35,737
Total	$	129,280	$	1,224	$	(1,058	)	$	129,446

Investment securities held to maturity (HTM):

	September 30, 2017
	Cost Basis		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
US Agency mortgage-backed securities	$	10,081	$	194	$	(23	)	$	10,252
Taxable municipal		22,873		222		(314	)		22,781
Corporate bonds and other securities		6,043		29		(46	)		6,026
Total	$	38,997	$	445	$	(383	)	$	39,059

Investment securities available for sale (AFS):

	December 31, 2016
	Cost Basis		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
US Agency	$	400	$	—	$	(2	)	$	398
US Agency mortgage-backed securities		88,738		1,132		(686	)		89,184
Taxable municipal		3,793		3		(174	)		3,622
Corporate bonds		34,403		194		(724	)		33,873
Total	$	127,334	$	1,329	$	(1,586	)	$	127,077

Investment securities held to maturity (HTM):

	December 31, 2016
	Cost Basis		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
US 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 Investor’s Service or Standard & Poor’s rating of “A.” At September 30, 2017, 57.8% of the portfolio was rated “AAA” as compared to 63.5% at December 31, 2016. Approximately 12.8% of the portfolio was either rated below “A” or unrated at September 30, 2017 as compared to 10.1% at December 31, 2016.

8

AmeriServ Financial, Inc.
 
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

6. Investment Securities  – (continued)

The Company sold $937,000 AFS securities in the third quarter of 2017 resulting in $56,000 of gross investment security gains and sold $8.1 million AFS securities in the first nine months of 2017 resulting in $115,000 of gross investment security gains. The Company sold $1.5 million AFS securities in the third quarter of 2016 resulting in $60,000 of gross investment security gains and sold $9.0 million AFS securities in the first nine months of 2016 resulting in $183,000 of gross investment security gains and $6,000 of gross investment security losses.

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 $114,589,000 at September 30, 2017 and $104,953,000 at December 31, 2016.

The following tables present information concerning investments with unrealized losses as of September 30, 2017 and December 31, 2016 (in thousands):

Total investment securities:

	September 30, 2017
	Less than 12 months					12 months or longer					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
US Agency	$	3,990	$	(33	)	$	399	$	(1	)	$	4,389	$	(34	)
US Agency mortgage-backed securities		38,127		(321	)		3,239		(84	)		41,366		(405	)
Taxable municipal		11,724		(377	)		2,172		(103	)		13,896		(480	)
Corporate bonds and other securities		12,414		(205	)		10,265		(317	)		22,679		(522	)
Total	$	66,255	$	(936	)	$	16,075	$	(505	)	$	82,330	$	(1,441	)

Total investment securities:

	December 31, 2016
	Less than 12 months					12 months or longer					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
US Agency	$	398	$	(2	)	$	—	$	—		$	398	$	(2	)
US 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 104 positions that are considered temporarily impaired at September 30, 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.

9

AmeriServ Financial, Inc.
 
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

6. Investment Securities  – (continued)

Contractual maturities of securities at September 30, 2017 are shown below (in thousands). Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without prepayment penalties. The duration of the total investment securities portfolio at September 30, 2017 is 44.2 months and is higher than the duration at December 31, 2016 which was 41.2 months. The duration remains within our internal established guideline range of 24 to 60 months which we believe is appropriate to maintain proper levels of liquidity, interest rate risk, market valuation sensitivity and profitability.

Total investment securities:

	September 30, 2017
	Available for sale				Held to maturity
	Cost Basis		Fair Value		Cost Basis		Fair Value
Within 1 year	$	1,400	$	1,399	$	2,000	$	1,975
After 1 year but within 5 years		11,706		11,718		1,551		1,533
After 5 years but within 10 years		45,805		45,999		14,562		14,639
After 10 years but within 15 years		27,738		27,609		14,924		14,824
Over 15 years		42,631		42,721		5,960		6,088
Total	$	129,280	$	129,446	$	38,997	$	39,059

7. Loans

The loan portfolio of the Company consists of the following (in thousands):

	September 30, 2017		December 31, 2016
Commercial	$	160,918	$	171,529
Commercial loans secured by real estate		469,348		446,598
Real estate – mortgage		246,881		245,765
Consumer		19,063		19,872
Loans, net of unearned income	$	896,210	$	883,764

Loan balances at September 30, 2017 and December 31, 2016 are net of unearned income of $438,000 and $476,000, respectively. Real estate-construction loans comprised 3.6% and 4.7% of total loans, net of unearned income at September 30, 2017 and December 31, 2016, respectively.

8. Allowance for Loan Losses

The following tables summarize the rollforward of the allowance for loan losses by portfolio segment for the three and nine month periods ending September 30, 2017 and 2016 (in thousands).

	Three months ended September 30, 2017
	Balance at June 30, 2017		Charge-Offs			Recoveries		Provision (Credit)			Balance at September 30, 2017
Commercial	$	3,825	$	(228	)	$	9	$	561		$	4,167
Commercial loans secured by real estate		4,487		—			3		(644	)		3,846
Real estate-mortgage		1,151		(109	)		72		50			1,164
Consumer		138		(42	)		50		(7	)		139
Allocation for general risk		790		—			—		240			1,030
Total	$	10,391	$	(379	)	$	134	$	200		$	10,346

10

AmeriServ Financial, Inc.
 
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

8. Allowance for Loan Losses  – (continued)

	Three months ended September 30, 2016
	Balance at June 30, 2016		Charge-Offs			Recoveries		Provision (Credit)			Balance at September 30, 2016
Commercial	$	4,322	$	(295	)	$	115	$	92		$	4,234
Commercial loans secured by real estate		3,274		(13	)		2		85			3,348
Real estate-mortgage		1,075		(104	)		24		77			1,072
Consumer		135		(57	)		8		53			139
Allocation for general risk		940		—			—		(7	)		933
Total	$	9,746	$	(469	)	$	149	$	300		$	9,726

	Nine months ended September 30, 2017
	Balance at December 31, 2016		Charge-Offs			Recoveries		Provision (Credit)		Balance at September 30, 2017
Commercial	$	4,041	$	(228	)	$	22	$	332	$	4,167
Commercial loans secured by real estate		3,584		(14	)		8		268		3,846
Real estate-mortgage		1,169		(263	)		165		93		1,164
Consumer		151		(138	)		112		14		139
Allocation for general risk		987		—			—		43		1,030
Total	$	9,932	$	(643	)	$	307	$	750	$	10,346

	Nine months ended September 30, 2016
	Balance at December 31, 2015		Charge-Offs			Recoveries		Provision (Credit)			Balance at September 30, 2016
Commercial	$	4,244	$	(3,648	)	$	126	$	3,512		$	4,234
Commercial loans secured by real estate		3,449		(13	)		38		(126	)		3,348
Real estate-mortgage		1,173		(150	)		86		(37	)		1,072
Consumer		151		(302	)		18		272			139
Allocation for general risk		904		—			—		29			933
Total	$	9,921	$	(4,113	)	$	268	$	3,650		$	9,726

The provision expense, charge-offs and recoveries were at more typical levels in the first nine months of 2017. The allocation amount to commercial loans secured by real estate (CRE) in the third quarter of 2017 reflects an improvement in the level of delinquency and the level of classified assets since the end of the second quarter of 2017 as one large CRE credit was upgraded and another transferred into non-accrual status (see further discussion in the loan quality section of the MD&A). The substantially higher than typical provision and net loan charge-offs in the first three months 2016 for the commercial portfolio was 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. With the bankruptcy changing from Chapter 11 (reorganization) to Chapter 7 (liquidation) late in the first quarter of 2016, 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.

11

AmeriServ Financial, Inc.
 
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

8. Allowance for Loan Losses  – (continued)

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

	At September 30, 2017
Loans:	Commercial		Commercial Loans Secured by Real Estate		Real Estate- Mortgage		Consumer		Allocation for General Risk		Total
Individually evaluated for impairment	$	1,458	$	2,465	$	—	$	—			$	3,923
Collectively evaluated for impairment		159,460		466,883		246,881		19,063				892,287
Total loans	$	160,918	$	469,348	$	246,881	$	19,063			$	896,210
Allowance for loan losses:
Specific reserve allocation	$	860	$	28	$	—	$	—	$	—	$	888
General reserve allocation		3,307		3,818		1,164		139		1,030		9,458
Total allowance for loan losses	$	4,167	$	3,846	$	1,164	$	139	$	1,030	$	10,346

	At December 31, 2016
Loans:	Commercial		Commercial Loans Secured by Real Estate		Real Estate- Mortgage		Consumer		Allocation for General Risk		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
Allowance for loan losses:
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 loan segment is effected by non-owner occupied commercial real estate (CRE) loans, which include loans secured by non-owner occupied nonfarm nonresidential properties, as a meaningful 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.

12

AmeriServ Financial, Inc.
 
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

8. Allowance for Loan Losses  – (continued)

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 Loan Review 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.

13

AmeriServ Financial, Inc.
 
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

8. Allowance for Loan Losses  – (continued)

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 (in thousands).

	September 30, 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
Commercial	$	1,448	$	860	$	10	$	1,458	$	1,458
Commercial loans secured by real estate		151		28		2,314		2,465		2,499
Total impaired loans	$	1,599	$	888	$	2,324	$	3,923	$	3,957

	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
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 (in thousands).

	Three months ended September 30,				Nine months ended September 30,
	2017		2016		2017		2016
Average loan balance:
Commercial	$	1,302	$	821	$	816	$	992
Commercial loans secured by real estate		1,316		283		825		449
Average investment in impaired loans	$	2,618	$	1,104	$	1,641	$	1,441
Interest income recognized:
Commercial	$	9	$	1	$	24	$	9
Commercial loans secured by real estate		—		—		2		8
Interest income recognized on a cash basis on impaired loans	$	9	$	1	$	26	$	17

14

AmeriServ Financial, Inc.
 
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

8. Allowance for Loan Losses  – (continued)

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

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

	September 30, 2017
	Pass		Special Mention		Substandard		Doubtful		Total
Commercial	$	158,169	$	76	$	2,423	$	250	$	160,918
Commercial loans secured by real estate		448,766		16,524		4,044		14		469,348
Total	$	606,935	$	16,600	$	6,467	$	264	$	630,266

	December 31, 2016
	Pass		Special Mention		Substandard		Doubtful		Total
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

15

AmeriServ Financial, Inc.
 
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

8. Allowance for Loan Losses  – (continued)

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

	September 30, 2017
	Performing		Non-Performing
Real estate-mortgage	$	245,479	$	1,402
Consumer		19,056		7
Total	$	264,535	$	1,409

	December 31, 2016
	Performing		Non-Performing
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 (in thousands).

	September 30, 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
Commercial	$	159,529	$	1,228	$	—	$	161	$	1,389	$	160,918	$	—
Commercial loans secured by real estate		461,506		5,358		—		2,484		7,842		469,348		—
Real estate-mortgage		242,793		2,488		861		739		4,088		246,881		—
Consumer		18,978		73		12		—		85		19,063		—
Total	$	882,806	$	9,147	$	873	$	3,384	$	13,404	$	896,210	$	—

	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
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	$	—

16

AmeriServ Financial, Inc.
 
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

8. Allowance for Loan Losses  – (continued)

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

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

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

The Company uses a comprehensive methodology and procedural discipline to maintain an ALL to absorb inherent losses in the loan portfolio. The Company believes this is a critical accounting policy since it involves significant estimates and judgments. The allowance consists of three elements: 1) an allowance established on specifically identified problem loans, 2) formula driven general reserves established for loan categories based upon historical loss experience and other qualitative factors which include delinquency, non-performing and TDR loans, loan trends, economic trends, concentrations of credit, trends in loan volume, experience and depth of management, examination and audit results, effects of any changes in lending policies, and trends in policy, financial information, and documentation exceptions, and 3) a general risk reserve which provides support for variance from our assessment of the previously listed qualitative factors, provides protection against credit risks resulting from other inherent risk factors contained in the Company’s loan portfolio, and recognizes the model and estimation risk associated with the specific and formula driven allowances. The qualitative factors used in the formula driven general reserves are evaluated quarterly (and revised if necessary) by the Company’s management to establish allocations which accommodate each of the listed risk factors.

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

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

17

AmeriServ Financial, Inc.
 
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

9. Non-performing Assets Including Troubled Debt Restructurings (TDR)

The following table presents information concerning non-performing assets including TDR (in thousands, except percentages):

	September 30, 2017			December 31, 2016
Non-accrual loans
Commercial	$	461		$	496
Commercial loans secured by real estate		2,785			178
Real estate-mortgage		1,402			929
Consumer		7			—
Total		4,655			1,603
Other real estate owned
Real estate-mortgage		39			21
Total		39			21
TDR’s not in non-accrual		678			—
Total non-performing assets including TDR	$	5,372		$	1,624
Total non-performing assets as a percent of loans, net of unearned income, and other real estate owned		0.60	%		0.18	%

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

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 (in thousands).

	Three months ended September 30,				Nine months ended September 30,
	2017		2016		2017		2016
Interest income due in accordance with original terms	$	32	$	20	$	65	$	99
Interest income recorded		—		—		—		—
Net reduction in interest income	$	32	$	20	$	65	$	99

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;

18

AmeriServ Financial, Inc.
 
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

9. Non-performing Assets Including Troubled Debt Restructurings (TDR)  – (continued)

• 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.

The following table details the loans modified as TDRs during the nine month period ended September 30, 2017 (dollars in thousands).

Loans in non-accrual status	# of Loans		Current Balance		Concession Granted
Commercial loan		2	$	678		Extension of maturity date with interest only period

The following table details the loans modified as TDRs during the nine month period ended September 30, 2016 (dollars in thousands).

Loans in non-accrual status	# of Loans		Current Balance		Concession Granted
Commercial loan		2	$	507		Extension of maturity date with interest only period

In all instances where loans have been modified in troubled debt restructurings the pre- and post-modified balances are the same. The specific ALL reserve for loans modified as TDR’s was $390,000 and $507,000 as of September 30, 2017 and 2016, respectively. All TDR’s are individually evaluated for impairment and a related allowance is recorded, as needed.

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 an additional six consecutive monthly payments in accordance with the terms of the loan.

19

AmeriServ Financial, Inc.
 
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

9. Non-performing Assets Including Troubled Debt Restructurings (TDR)  – (continued)

The Company had no loans that were classified as TDR’s or were subsequently modified during each 12-month period prior to the current reporting periods, which begin January 1, 2017 and 2016 (nine month periods) and July 1, 2017 and 2016 (three month periods), respectively, and that subsequently defaulted during these reporting periods.

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.

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 Sheet. As of September 30, 2017 and December 31, 2016, a total of $39,000 and $21,000, respectively of residential real estate foreclosed assets were included in other assets. As of September 30, 2017, the Company had initiated formal foreclosure procedures on $297,000 of consumer residential mortgages.

10. Federal Home Loan Bank Borrowings

Total Federal Home Loan Bank (FHLB) borrowings and advances consist of the following (in thousands, except percentages):

	At September 30, 2017
Type	Maturing		Amount		Weighted Average Rate
Open Repo Plus		Overnight	$	33,593		0.94	%
Advances		2017		1,000		0.88
		2018		12,000		1.48
		2019		12,500		1.51
		2020		13,542		1.67
		2021 and over		5,000		1.68
Total advances				44,042		1.57
Total FHLB borrowings			$	77,635		1.30	%

	At December 31, 2016
Type	Maturing		Amount		Weighted Average Rate
Open Repo Plus		Overnight	$	12,754		0.74	%
Advances		2017		12,000		1.06
		2018		12,000		1.48
		2019		12,500		1.51
		2020		8,042		1.59
		2021 and over		1,000		1.60
Total advances				45,542		1.37
Total FHLB borrowings			$	58,296		1.23	%

The rate on Open Repo Plus advances can change daily, while the rates on the advances are fixed until the maturity of the advance. All FHLB stock along with an interest in certain residential mortgage 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.

20

AmeriServ Financial, Inc.
 
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

11. Preferred Stock

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, the Company redeemed the Series E Preferred Stock, at a redemption price of 100% of the liquidation amount plus accrued but unpaid dividends, after receiving approval from its federal banking regulator and the US Treasury.

12. Accumulated Other Comprehensive Loss

The following table presents the changes in each component of accumulated other comprehensive loss, net of tax, for the three and nine months ended September 30, 2017 and 2016 (in thousands):

	Three months ended September 30, 2017									Three months ended September 30, 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	$	30		$	(11,094	)	$	(11,064	)	$	1,791		$	(7,856	)	$	(6,065	)
Other comprehensive income (loss) before reclassifications		116			261			377			(126	)		174			48
Amounts reclassified from accumulated other comprehensive loss		(37	)		—			(37	)		(40	)		—			(40	)
Net current period other comprehensive income (loss)		79			261			340			(166	)		174			8
Ending balance	$	109		$	(10,833	)	$	(10,724	)	$	1,625		$	(7,682	)	$	(6,057	)

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

21

AmeriServ Financial, Inc.
 
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

12. Accumulated Other Comprehensive Loss  – (continued)

	Nine months ended September 30, 2017									Nine months ended September 30, 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	)
Other comprehensive income before reclassifications		356			573			929			934			681			1,615
Amounts reclassified from accumulated other comprehensive loss		(76	)		—			(76	)		(117	)		—			(117	)
Net current period other comprehensive income		280			573			853			817			681			1,498
Ending balance	$	109		$	(10,833	)	$	(10,724	)	$	1,625		$	(7,682	)	$	(6,057	)

(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 three and nine months ended September 30, 2017 and 2016 (in thousands):

	Amount reclassified from accumulated other comprehensive loss(1)
Details about accumulated other comprehensive loss components	For the three months ended September 30, 2017			For the three months ended September 30, 2016			Affected line item in the consolidated statement of operations
Realized gains on sale of securities
	$	(56	)	$	(60	)		Net realized gains on   investment securities
		19			20			Provision for income tax expense
	$	(37	)	$	(40	)		Net of tax
Total reclassifications for the period	$	(37	)	$	(40	)		Net income

(1) Amounts in parentheses indicate credits.

22

AmeriServ Financial, Inc.
 
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

12. Accumulated Other Comprehensive Loss  – (continued)

	Amount reclassified from accumulated other comprehensive loss(1)
Details about accumulated other comprehensive loss components	For the nine months ended September 30, 2017			For the nine months ended September 30, 2016			Affected line item in the consolidated statement of operations
Realized gains on sale of securities
	$	(115	)	$	(177	)		Net realized gains on   investment securities
		39			60			Provision for income tax expense
	$	(76	)	$	(117	)		Net of tax
Total reclassifications for the period	$	(76	)	$	(117	)		Net income

(1) Amounts in parentheses indicate credits.

13. Regulatory Capital

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

Quantitative measures established by regulation to ensure capital adequacy require the Company to maintain minimum amounts and ratios (set forth in the table below) of total and Tier 1 capital to risk-weighted assets, Tier 1 capital to average assets, and common equity Tier I capital (as defined in the regulations) to risk-weighted assets (RWA) (as defined). Additionally under Basel III rules, the decision was made to opt-out of including accumulated other comprehensive income in regulatory capital. As of September 30, 2017, the Bank was categorized as “Well Capitalized” under the regulatory framework for prompt corrective action promulgated by the Federal Reserve. The Company believes that no conditions or events have occurred that would change this conclusion as of such date. To be categorized as Well Capitalized, the Bank must maintain minimum Total Capital, Common Equity Tier 1 Capital, Tier 1 Capital, and Tier 1 leverage ratios as set forth in the table. Additionally, while not a regulatory capital ratio, the Company’s tangible common equity ratio was 7.35% at September 30, 2017 (in thousands, except ratios).

23

AmeriServ Financial, Inc.
 
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

13. Regulatory Capital  – (continued)

	AT SEPTEMBER 30, 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)	$	126,357		13.08	%	$	109,915		11.44	%		8.00	%		10.00	%
Tier 1 Common Equity (To Risk Weighted Assets)		95,839		9.92			98,695		10.28			4.50			6.50
Tier 1 Capital (To Risk Weighted Assets)		107,678		11.15			98,695		10.28			6.00			8.00
Tier 1 Capital (To Average Assets)		107,678		9.32			98,695		8.68			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.

14. 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 the first nine months of 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.

24

AmeriServ Financial, Inc.
 
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

14. DERIVATIVE HEDGING INSTRUMENTS  – (continued)

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 first nine months 2017 performance.

	HEDGE TYPE		AGGREGATE NOTIONAL AMOUNT			WEAIGHTED AVERAGE RATE RECEIVED/ (PAID)			REPRICING FREQUENCY		INCREASE (DECREASE) IN INTEREST EXPENSE
SWAP ASSETS		FAIR VALUE	$	17,057,388			3.42	%		MONTHLY	$	(72,920	)
SWAP LIABILITIES		FAIR VALUE		(17,057,388	)		(3.42	)		MONTHLY		72,920
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 September 30, 2017.

15. 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 local business commercial loans. Commercial banking to businesses includes commercial loans, business services, and CRE loans. The trust segment contains our wealth management businesses which include the Trust Company and West Chester Capital Advisors (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 union collective investment funds, primarily the ERECT fund which are designed to use union pension dollars in construction projects that utilize union labor. The investment/parent includes the net results of investment securities and borrowing activities, general corporate expenses not allocated to the business segments, interest expense on corporate debt, and centralized interest rate risk management. Inter-segment revenues were not material.

25

AmeriServ Financial, Inc.
 
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

15. Segment Results  – (continued)

The contribution of the major business segments to the Consolidated Statements of Operations for the three and nine months ended September 30, 2017 and 2016 were as follows (in thousands):

	Three months ended September 30, 2017						Nine months ended September 30, 2017
	Total revenue			Net income (loss)			Total revenue			Net income (loss)
Retail banking	$	6,443		$	794		$	19,138		$	2,159
Commercial banking		4,722			1,412			14,269			4,295
Trust		2,223			335			6,804			991
Investment/Parent		(822	)		(990	)		(2,708	)		(3,157	)
Total	$	12,556		$	1,551		$	37,503		$	4,288

	Three months ended September 30, 2016						Nine months ended September 30, 2016
	Total revenue			Net income (loss)			Total revenue			Net income (loss)
Retail banking	$	6,653		$	857		$	19,543		$	2,335
Commercial banking		4,757			1,352			14,123			1,884
Trust		2,125			195			6,504			740
Investment/Parent		(1,368	)		(1,339	)		(3,780	)		(3,799	)
Total	$	12,167		$	1,065		$	36,390		$	1,160

16. Commitments and Contingent Liabilities

The Company had various outstanding commitments to extend credit approximating $169.6 million and $160.5 million along with standby letters of credit of $10.3 million and $8.5 million as of September 30, 2017 and December 31, 2016, respectively. 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 Bank uses the same credit and collateral policies in making commitments and conditional obligations as for all other lending.

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.

26

AmeriServ Financial, Inc.
 
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

17. Pension Benefits

The Company has a noncontributory defined benefit pension plan covering certain 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. Plan assets are primarily debt securities (including US Treasury and Agency securities, corporate notes and bonds), listed common stocks (including shares of AmeriServ Financial, Inc. common stock which is limited to 10% of the plan’s assets), mutual funds, and short-term cash equivalent instruments. The net periodic pension cost for the three and nine months ended September 30, 2017 and 2016 were as follows (in thousands):

	Three months ended September 30,						Nine months ended September 30,
	2017			2016			2017			2016
Components of net periodic benefit cost
Service cost	$	390		$	368		$	1,170		$	1,104
Interest cost		326			344			978			1,032
Expected return on plan assets		(631	)		(563	)		(1,893	)		(1,689	)
Recognized net actuarial loss		367			314			1,101			942
Net periodic pension cost	$	452		$	463		$	1,356		$	1,389

The Company implemented a soft freeze of its defined benefit pension plan to provide that non-union employees hired on or after January 1, 2013 and union employees hired on or after January 1, 2014 are not eligible to participate in the pension plan. Instead, such employees are eligible to participate in a qualified 401(k) plan. This change was made to help reduce pension costs in future periods.

18. Disclosures about Fair Value Measurements

The following disclosures establish a hierarchal disclosure framework associated with the level of pricing observability utilized in measuring assets and liabilities at fair value. The three broad levels defined within this hierarchy are as follows:

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

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

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

Assets and Liability Measured on a Recurring Basis

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 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.

27

AmeriServ Financial, Inc.
 
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

18. Disclosures about Fair Value Measurements  – (continued)

The following tables present the assets reported on the Consolidated Balance Sheets at their fair value as of September 30, 2017 and December 31, 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 at fair value on a recurring basis are summarized below (in thousands):

	Fair Value Measurements at September 30, 2017 Using
	Total			(Level 1)		(Level 2)		(Level 3)
US Agency securities	$	5,402		$	—	$	5,402	$	—
US Agency mortgage-backed securities		81,240			—		81,240		—
Taxable municipal		7,067			—		7,067		—
Corporate bonds		35,737			—		35,737		—
Fair value swap asset		84			—		—		84
Fair value swap liability		(84	)		—		—		(84	)

	Fair Value Measurements at December 31, 2016 Using
	Total		(Level 1)		(Level 2)		(Level 3)
US Agency securities	$	398	$	—	$	398	$	—
US Agency mortgage-backed securities		89,184		—		89,184		—
Taxable municipal		3,622		—		3,622		—
Corporate bonds		33,873		—		33,873		—

Assets Measured on a Non-recurring Basis

Loans considered impaired are loans for which, based on current information and events, it is probable that the creditor will be unable to collect all amounts due according to the contractual terms of the loan agreement. As detailed in the allowance for loan loss footnote, 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 September 30, 2017, impaired loans with a carrying value of $3.9 million were reduced by a specific valuation allowance totaling $888,000 resulting in a net fair value of $3.0 million. At December 31, 2016, impaired loans with a carrying value of $674,000 were reduced by a specific valuation allowance totaling $527,000 resulting in a net fair value of $147,000.

Other real estate owned is measured at fair value based on appraisals, less estimated cost to sell. Valuations are periodically performed by management. Income and expenses from operations and changes in valuation allowance are included in the net expenses from OREO.

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

	Fair Value Measurements at September 30, 2017 Using
	Total		(Level 1)		(Level 2)		(Level 3)
Impaired loans	$	3,035	$	—	$	—	$	3,035
Other real estate owned		39		—		—		39

	Fair Value Measurements at December 31, 2016 Using
	Total		(Level 1)		(Level 2)		(Level 3)
Impaired loans	$	147	$	—	$	—	$	147
Other real estate owned		21		—		—		21

28

AmeriServ Financial, Inc.
 
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

18. Disclosures about Fair Value Measurements  – (continued)

September 30, 2017	Quantitative Information About Level 3 Fair Value Measurements
	Fair Value Estimate		Valuation Techniques		Unobservable Input		Range (Wgtd Ave)
Impaired loans	$	3,035		Appraisal of collateral(1),(3)		Appraisal adjustments(2)		40% to 77%(42%)
Other real estate owned		39		Appraisal of collateral(1),(3)		Appraisal adjustments(2) Liquidation expenses		43% to 45%(43%) 2% to 206%(64%)

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

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

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.

29

AmeriServ Financial, Inc.
 
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

18. Disclosures about Fair Value Measurements  – (continued)

Fair values have been determined by the Company using independent third party valuations that use the best available data (Level 2) and an estimation methodology (Level 3) the Company believes is suitable for each category of financial instruments. Management believes that cash, cash equivalents, and loans and deposits with floating interest rates have estimated fair values which approximate the recorded book balances. The estimation methodologies used, the estimated fair values based on US GAAP measurements, and recorded book balances at September 30, 2017 and December 31, 2016, were as follows (in thousands):

	September 30, 2017
	Carrying Value		Fair Value		(Level 1)		(Level 2)		(Level 3)
FINANCIAL ASSETS:
Cash and cash equivalents	$	28,675	$	28,675	$	28,675	$	—	$	—
Investment securities – AFS		129,446		129,446		—		129,446		—
Investment securities – HTM		38,997		39,059		—		36,105		2,954
Regulatory stock		6,554		6,554		6,554		—		—
Loans held for sale		1,780		1,801		1,801		—		—
Loans, net of allowance for loan loss and unearned income		885,864		884,359		—		—		884,359
Accrued interest income receivable		3,503		3,503		3,503		—		—
Bank owned life insurance		37,716		37,716		37,716		—		—
Fair value swap asset		84		84		—		—		84
FINANCIAL LIABILITIES:
Deposits with no stated maturities	$	707,566	$	707,566	$	707,566	$	—	$	—
Deposits with stated maturities		259,355		260,498		—		—		260,498
Short-term borrowings		33,593		33,593		33,593		—		—
All other borrowings		64,420		67,962		—		—		67,962
Accrued interest payable		1,622		1,622		1,622		—		—
Fair value swap liability		84		84		—		—		84

	December 31, 2016
	Carrying Value		Fair Value		(Level 1)		(Level 2)		(Level 3)
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		—		—

30

AmeriServ Financial, Inc.
 
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

18. Disclosures about Fair Value Measurements  – (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, is 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.

31

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (“M.D. & A.”)

…2017 THIRD QUARTER SUMMARY OVERVIEW… It is common knowledge that in the Northeastern region that the cold winters hamper economic activity. Then a good bit of the spring is devoted to repairing and replacing. However, as the thermometer recovers, so does the economy. The third quarter at AmeriServ demonstrated the impact of enterprises and consumers becoming actively engaged in their businesses. On October 17, 2017, AmeriServ announced net income of $1,551,000 or $0.08 per share. Those results are 12% higher than the second quarter of 2017 and 46% higher than the third quarter of 2016. Numbers like these do not just happen because it is summer. This kind of progress is the result of careful planning and execution by AmeriServ’s knowledgeable bankers.

The loan portfolio attained the second highest quarterly average level since the third quarter of 2016. Deposits on average in the third quarter of 2017 were at an all-time record and at $981 million are almost within reach of one billion for the first time ever. However, these are static numbers measured at a point in time but revenues were not static. Revenues measure the payments by third party customers for products and services. In the third quarter of 2017, AmeriServ recorded a 5% increase in gross revenues when compared with the third quarter of 2016. At the very same time through the first nine months of 2017, AmeriServ non-interest expenses have declined by almost $600,000. This combination of increasing revenues and declining expenses enabled AmeriServ to report its best quarter since the third quarter of 2015.

The Federal Reserve has begun to increase interest rates from the virtually zero level of the last eight years. While it has been an on again, off again proposition at the Fed, national interest rates have been on the increase since a year ago. Management took advantage of these higher rates to begin to reformat the securities portfolio. This process has produced a 31% increase in the securities portfolio revenue over the third quarter of 2016, while controlling the level of risk in the portfolio.

Banking is not a static industry, for it is a reflection of the dynamics at work in the national economy, the regional economy and the local economy. Each of these economies is a reflection of the millions of individual decisions by Americans pursuing their own separate initiatives. It then becomes the responsibility of the Board and this Management team to plot a course which accommodates these complexities. There is no formula which has ever been fool proof. Rather it is the daily balancing of risk against reward that decides the winners and losers.

Given these larger forces at work, AmeriServ is and should conduct itself as a financial franchise in transition. It has grown from a weak source of loans in its markets to an active lender. AmeriServ has now completed over four consecutive years when it has loaned over 90% of its deposits to smaller and mid-sized local and regional business and consumers. This is a full 10% more than similar sized community banks in the United States. We believe lending to small businesses is our role in keeping the economy recovering from its series of negative events.

Also during those same four years of active lending, AmeriServ’s loan losses have been less than a third of the losses of similar sized community banks in the United States.

Concurrently, AmeriServ’s stand-alone Trust and Wealth Management Company has been transitioning. It now has approximately $2 billion of assets under management and administration. More than half of that $2 billion is investments in retirement savings programs. AmeriServ provides investment guidance, safekeeping and administrative support so that our friends and neighbors can devote their energies to their professions and careers. It is a very positive program and one which we are proud to watch grow.

During the first nine months of 2017, the AmeriServ Board of Directors conducted a complete review of its structure and activities. The Board confirmed its committee-oriented management structure. It defined its role as one of oversight and not of management. It is clear that the role of the Board is to represent not themselves but every AmeriServ shareholder. The full Board discussed this report of the Corporate Governance Committee and adopted it unanimously on July 15, 2017. This vote has set in motion a transition within the Board to be certain that the interest of the shareholders should be pre-eminent throughout the Company.

32

The economy has been continuing its slow recovery so this has been a good time to analyze the course and to structure the Company to be both relevant and rewarding in the days ahead. A new strategic plan, a reconstituted Board of Directors, and a rededication to continue the improvements in profitability have resulted. The positive impact has been demonstrated by the third quarter results. The eight cents level of earnings per share during the quarter provides a solid base for the hope of continued growth in earnings.

THREE MONTHS ENDED SEPTEMBER 30, 2017 VS. THREE MONTHS ENDED SEPTEMBER 30, 2016

…PERFORMANCE OVERVIEW… The following table summarizes some of the Company’s key performance indicators (in thousands, except per share and ratios).

	Three months ended September 30, 2017			Three months ended September 30, 2016
Net income	$	1,551		$	1,065
Net income available to common shareholders		1,551			1,065
Diluted earnings per share		0.08			0.06
Return on average assets (annualized)		0.53	%		0.37	%
Return on average equity (annualized)		6.37	%		4.27	%

The Company reported third quarter 2017 net income available to common shareholders of $1,551,000, or $0.08 per diluted common share. This earnings performance represented an increase of $486,000, or 45.6%, from the third quarter of 2016 where net income available to common shareholders totaled $1,065,000, or $0.06 per diluted common share. The improved earnings in the third quarter of 2017 resulted from a favorable combination of increased total revenue, reduced non-interest expense and a controlled loan loss provision. The balance sheet is well positioned for higher interest rates as demonstrated in the form of increased net interest income in the third quarter of 2017. Additionally, the Company benefited from several profitability improvement initiatives.

…NET INTEREST INCOME AND MARGIN… The Company’s net interest income represents the amount by which interest income on average earning assets exceeds interest paid on average interest bearing liabilities. Net interest income is a primary source of the Company’s earnings, and it is effected by interest rate fluctuations as well as changes in the amount and mix of average earning assets and average interest bearing liabilities. The following table compares the Company’s net interest income performance for the third quarter of 2017 to the third quarter of 2016 (in thousands, except percentages):

	Three months ended September 30, 2017			Three months ended September 30, 2016			$ Change		% Change
Interest income	$	11,187		$	10,476		$	711		6.8	%
Interest expense		2,250			1,970			280		14.2
Net interest income	$	8,937		$	8,506		$	431		5.1
Net interest margin		3.28	%		3.15	%		0.13		N/M

N/M — not meaningful

The Company’s net interest income in the third quarter of 2017 increased by $431,000, or 5.1%, from the prior year’s third quarter while the net interest margin was 3.28% for the quarter representing an improvement of 13 basis points. The 2017 increase in net interest income is a result of a higher level of total earning assets and favorable balance sheet positioning which has 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, for the quarter, the earning asset growth occurred in the investment securities portfolio while the loan portfolio remained relatively stable. Total investment securities averaged $175 million in the third quarter of 2017 which is $26.2 million, or 17.6%, higher than the $149 million average for the third quarter of 2016. 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

33

additional securities and grow the portfolio. As a result, interest on investments increased between the third quarter of 2017 and the third quarter of 2016 by $318,000 or 31.4%. Total loans averaged $892 million in the third quarter of 2017 which was comparable with the 2016 third quarter average of $893 million. The slight decrease in the loan portfolio when comparing the third quarter average in 2017 to last year’s third quarter average was the result of accelerated prepayment activity along with new commercial loan production funding occurring late in the 2017 quarter. Loan interest income increased by $393,000, or 4.2%, between the third quarter of 2017 and the third quarter of 2016. The higher loan interest income 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 in December of 2016, March of 2017, and again in June of 2017. Also contributing to the higher level of total loan interest income was increased income from loan charges. Overall, total interest income increased by $711,000, or 6.8%, in the third quarter of 2017.

Total interest expense for the third quarter of 2017 increased by $280,000, or 14.2%, when compared to 2016, due to higher levels of both deposit and borrowing interest expense. The Company experienced growth in 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 products were the primary reasons for this growth. Specifically, total deposits averaged $981 million for the third quarter of 2017 which is $4.1 million, or 0.4%, higher than the $977 million average for the third quarter of 2016. Deposit interest expense for the third quarter of 2017 increased by $227,000, or 16.3%, due to the higher balance of deposits along with certain indexed money market accounts repricing upward after the Federal Reserve interest rate increases. As a result of the solid deposit growth, the Company’s loan to deposit ratio averaged 91.3% at September 30, 2017 which indicates that the Company has ample room to further grow its loan portfolio. The Company experienced a $53,000 increase in the interest cost for borrowings in the third quarter of 2017 due to a higher level of total borrowed funds and the immediate impact that the increases in the Federal Funds Rate had on the cost of overnight borrowed funds. In the third quarter of 2017, total average FHLB borrowed funds of $59.2 million increased by $8.0 million, or 15.7% from the prior year quarter.

The table that follows provides an analysis of net interest income on a tax-equivalent basis for the three month periods ended September 30, 2017 and September 30, 2016 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) the Company’s 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) the Company’s net interest margin (net interest income as a percentage of average total interest earning assets). For purposes of these tables, loan balances do 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. Additionally, a tax rate of 34% is used to compute tax-equivalent yields.

34

Three months ended September 30 (In thousands, except percentages)

	2017									2016
	Average Balance			Interest Income/ Expense			Yield/ Rate			Average Balance			Interest Income/ Expense			Yield/ Rate
Interest earning assets:
Loans and loans held for sale, net of unearned income	$	892,198		$	9,865			4.35	%	$	893,143		$	9,469			4.17	%
Interest bearing deposits		1,026			3			1.26			1,065			2			0.59
Short-term investment in money market funds		8,921			42			1.86			20,797			31			0.58
Investment securities – AFS		136,084			973			2.86			121,567			779			2.56
Investment securities – HTM		38,700			314			3.25			27,041			202			2.99
Total investment securities		174,784			1,287			2.95			148,608			981			2.64
Total interest earning assets/interest income		1,076,929			11,197			4.11			1,063,613			10,483			3.89
Non-interest earning assets:
Cash and due from banks		22,082									21,675
Premises and equipment		12,467									11,887
Other assets		67,240									68,660
Allowance for loan losses		(10,537	)								(9,794	)
TOTAL ASSETS	$	1,168,181								$	1,156,041
Interest bearing liabilities:
Interest bearing deposits:
Interest bearing demand	$	131,493		$	180			0.54	%	$	111,040		$	84			0.29	%
Savings		98,184			41			0.17			96,593			41			0.17
Money markets		277,948			380			0.54			285,358			308			0.43
Time deposits		292,054			1,017			1.38			302,610			958			1.26
Total interest bearing deposits		799,679			1,618			0.80			795,601			1,391			0.70
Short-term borrowings		13,179			44			1.29			1,309			2			0.53
Advances from Federal Home Loan Bank		45,997			178			1.53			49,852			166			1.32
Guaranteed junior subordinated deferrable interest debentures		13,085			280			8.57			13,085			280			8.57
Subordinated debt		7,650			130			6.80			7,650			131			6.88
Total interest bearing liabilities/interest expense		879,590			2,250			1.02			867,497			1,970			0.90
Non-interest bearing liabilities:
Demand deposits		181,356									181,365
Other liabilities		10,628									7,931
Shareholders’ equity		96,607									99,248
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	1,168,181								$	1,156,041
Interest rate spread								3.09									2.99
Net interest income/Net interest margin					8,947			3.28	%					8,513			3.15	%
Tax-equivalent adjustment					(10	)								(7	)
Net Interest Income				$	8,937								$	8,506

35

…PROVISION FOR LOAN LOSSES… The Company recorded a $200,000 provision for loan losses in the third quarter of 2017 compared to a $300,000 provision for loan losses in the third quarter of 2016. The provision recorded in the third quarter of 2017 supported commercial loan growth, a higher level of criticized loans and a lower level of net charge-offs than what was experienced during the third quarter of 2016. Although net loan charge-offs were higher than the loan loss provision for the third quarter of 2017, the provision through nine months has more than doubled the level of net charge-offs experienced during this same time period. This lower level of net charge-offs in relation to the provision through nine-months as well as a reduction in classified assets and the level of total delinquency since the end of the second quarter of this year were the contributing factors for the lower provision during the third quarter of 2017. The net result was a higher loan loss allowance in 2017 compared to last year. Overall, the Company continued to maintain strong asset quality as its nonperforming assets totaled $5.4 million, or 0.60%, of total loans, at September 30, 2017. Total non-performing assets did increase by $3.0 million since the end of the second quarter due primarily to the transfer of one commercial credit exposure into non-accrual status. It is believed that the Company’s loss exposure on this loan is limited because it is well secured and has a low loan to value ratio. In summary, the allowance for loan losses provided 194% coverage of non-performing loans, and 1.15% of total loans, at September 30, 2017, compared to 620% coverage of non-performing loans, and 1.12% of total loans, at December 31, 2016.

…NON-INTEREST INCOME… Non-interest income for the third quarter of 2017 totaled $3.6 million and decreased $32,000, or 0.9%, from the third quarter 2016 performance. Factors contributing to this lower level of non-interest income for the quarter included:

• a $118,000 increase in other income was primarily due to revenue from our financial services business unit increasing by $87,000 as wealth management continues to be an important strategic focus of the Company;

• a $63,000 decrease in mortgage related fees was due to a reduced level of residential mortgage refinancing activity which caused a corresponding $43,000 reduction in revenue from residential mortgage loan sales into the secondary market;

• a $26,000 decrease in bank owned life insurance income; and

• a $24,000 decrease in services charges on deposit accounts was due to a reduced level of overdraft fee income;

…NON-INTEREST EXPENSE… Non-interest expense for the third quarter of 2017 totaled $10.1 million and decreased by $242,000, or 2.3%, from the prior year’s third quarter. Factors contributing to the lower non-interest expense in the quarter included:

• a $117,000 or 8.8% decrease in professional fees and a $110,000 decrease in other expense as both of these expense categories were higher in 2016 due to costs associated with the resolution of a trust operations trading error;

• a $104,000, or 1.8%, increase in salaries and employee benefits due to higher health care costs and additional investment in personnel talent, particularly within our wealth management subsidiary. These higher costs more than offset a decrease in pension expense; and

• a combined $98,000 decrease in equipment & occupancy expenses was due to the Company’s ongoing profitability improvement initiatives.

36

NINE MONTHS ENDED SEPTEMBER 30, 2017 VS. NINE MONTHS ENDED SEPTEMBER 30, 2016

…PERFORMANCE OVERVIEW… The following table summarizes some of the Company’s key performance indicators (in thousands, except per share and ratios).

	Nine months ended September 30, 2017			Nine months ended September 30, 2016
Net income	$	4,288		$	1,160
Net income available to common shareholders		4,288			1,145
Diluted earnings per share		0.23			0.06
Return on average assets (annualized)		0.49	%		0.14	%
Return on average equity (annualized)		5.98	%		1.54	%

The Company reported net income available to common shareholders of $4,288,000, or $0.23 per diluted common share. This represents a significant improvement of $3.1 million from the nine-month period of 2016 where net income available to common shareholders totaled $1,145,000, or $0.06 per diluted common share. The improved earnings in the first nine months of 2017 resulted from a favorable combination of total revenue growth, a reduction in non-interest expense and a controlled loan loss provision. The balance sheet is well positioned for higher interest rates as demonstrated in the form of increased net interest income in the first nine months of 2017. Additionally, the Company benefitted from several profitability improvement initiatives.

…NET INTEREST INCOME AND MARGIN… The following table compares the Company’s net interest income performance for the first nine months of 2017 to the first nine months of 2016 (in thousands, except percentages):

	Nine months ended September 30, 2017			Nine months ended September 30, 2016			$ Change		% Change
Interest income	$	32,986		$	31,287		$	1,699		5.4	%
Interest expense		6,429			5,737			692		12.1
Net interest income	$	26,557		$	25,550		$	1,007		3.9
Net interest margin		3.27	%		3.23	%		0.04		N/M

N/M – not meaningful

The Company’s net interest income for the first nine months of 2017 increased by $1.0 million, or 3.9%, when compared to the first nine months of 2016. The Company’s net interest margin was 3.27% for the first nine months of 2017 representing an improvement of four basis points from the first nine months of 2016. The 2017 increase in net interest income is a result of a higher level of total earning assets and a favorable balance sheet positioning which has 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 total investment securities and the total loan portfolios. Total loans averaged $894 million which is $6.4 million, or 0.7%, higher than the 2016 nine month average. Investment securities have averaged $172 million for the nine-month time period which is $26.8 million, or 18.5%, higher than the nine month 2016 average. 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. As a result, interest on investments increased in the first nine months of 2017 from the same time period in 2016 by $846,000 or 28.7%. The growth in total loans reflects 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 $853,000, or 3.0%, in the first nine months of 2017 when compared to last year. The higher loan interest income 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 in December of 2016, March of 2017, and again in June of

37

2017. The Company has also benefitted from a higher level of income from loan charges. Overall, total interest income increased by $1.7 million, or 5.4%, in the first nine months of 2017.

Total interest expense increased by $692,000, or 12.1%, in the first nine months of 2017 when compared to 2016, due to higher levels of both deposit and borrowing interest expense. The Company experienced growth in 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 $977 million for the first nine months of 2017 which is $29.9 million, or 3.2%, higher than the $947 million average for the first nine months of 2016. Deposit interest expense through nine months in 2017 increased by $583,000, or 14.7%, due to the higher balance of deposits along with certain indexed money market accounts repricing upward after the Federal Reserve interest rate increases. As a result of the solid deposit growth, the Company’s loan to deposit ratio averaged 91.5% in the first nine months of 2017 which indicates that the Company has ample room to further grow its loan portfolio. The Company experienced a $109,000 increase in the interest cost for borrowings in the first nine months of 2017 primarily due to the immediate impact that the increases in the Federal Funds Rate had on the cost of overnight borrowed funds. In the first nine months of 2017, total average FHLB borrowed funds of $61.2 million remained relatively stable, increasing slightly by $339,000, or 0.6%.

The table that follows provides an analysis of net interest income on a tax-equivalent basis for the nine month periods ended September 30, 2017 and September 30, 2016 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) the Company’s 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) the Company’s net interest margin (net interest income as a percentage of average total interest earning assets). For purposes of these tables, loan balances do 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. Additionally, a tax rate of 34% is used to compute tax-equivalent yields.

38

Nine months ended September 30 (In thousands, except percentages)

	2017									2016
	Average Balance			Interest Income/ Expense			Yield/ Rate			Average Balance			Interest Income/ Expense			Yield/ Rate
Interest earning assets:
Loans and loans held for sale, net of unearned income	$	894,088		$	29,219			4.33	%	$	887,681		$	28,358			4.22	%
Interest bearing deposits		1,029			8			1.03			1,871			11			0.71
Short-term investment in money market funds		8,049			93			1.52			12,987			54			0.55
Investment securities – AFS		135,131			2,819			2.78			120,710			2,324			2.57
Investment securities – HTM		36,854			877			3.17			24,482			562			3.06
Total investment securities		171,985			3,696			2.87			145,192			2,886			2.65
Total interest earning assets/interest income		1,075,151			33,016			4.08			1,047,731			31,309			3.96
Non-interest earning assets:
Cash and due from banks		22,214									19,883
Premises and equipment		12,095									11,982
Other assets		67,552									68,351
Allowance for loan losses		(10,290	)								(9,777	)
TOTAL ASSETS	$	1,166,722								$	1,138,170
Interest bearing liabilities:
Interest bearing deposits:
Interest bearing demand	$	129,923		$	450			0.46	%	$	106,983		$	231			0.29	%
Savings		97,852			122			0.17			96,149			119			0.16
Money markets		276,958			1,047			0.51			275,226			876			0.42
Time deposits		290,598			2,939			1.35			286,966			2,749			1.28
Total interest bearing deposits		795,331			4,558			0.77			765,324			3,975			0.69
Short-term borrowings		15,390			130			1.13			11,480			49			0.56
Advances from Federal Home Loan Bank		45,785			511			1.49			49,356			484			1.31
Guaranteed junior subordinated deferrable interest debentures		13,085			840			8.57			13,085			840			8.57
Subordinated debt		7,650			390			6.80			7,650			389			6.78
Total interest bearing liabilities/interest expense		877,241			6,429			0.98			846,895			5,737			0.90
Non-interest bearing liabilities:
Demand deposits		181,924									182,003
Other liabilities		11,630									8,683
Shareholders’ equity		95,927									100,589
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	1,166,722								$	1,138,170
Interest rate spread								3.10									3.06
Net interest income/Net interest margin					26,587			3.27	%					25,572			3.23	%
Tax-equivalent adjustment					(30	)								(22	)
Net Interest Income				$	26,557								$	25,550

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…PROVISION FOR LOAN LOSSES… The Company recorded a $750,000 provision for loan losses compared to a $3,650,000 provision for loan losses in 2016 or a decrease of $2.9 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, a higher level of criticized loans and more than covered the low level of net loan charge-offs incurred in the first nine months of 2017. For the nine-month timeframe, the Company experienced net loan charge-offs of $336,000, or 0.05% of total loans in 2017 compared to net loan charge-offs of $3.8 million, or 0.58%, of total loans in 2016. Overall, the Company continued to maintain strong asset quality as its nonperforming assets totaled $5.4 million, or 0.60%, of total loans, at September 30, 2017.

…NON-INTEREST INCOME… Non-interest income for the first nine months of 2017 totaled $10.9 million and increased $106,000, or 1.0%, from the first nine months 2016 performance. Factors contributing to this higher level of non-interest income in 2017 included:

• a $206,000 increase in other income was primarily due to revenue increasing from our financial services business unit by $240,000 as wealth management continues to be an important strategic focus of the Company. Slightly offsetting the higher financial services business unit revenue was reduced miscellaneous income after the Company benefitted last year from funds received from our debit card vendor from a branding agreement;

• an $89,000 increase in bank owned life insurance was due to the second quarter receipt of a death claim;

• an $84,000 decrease in services charges on deposit accounts due to a reduced level of overdraft fee revenue;

• a $66,000 decrease in mortgage related fees and a corresponding $35,000 decrease in revenue from residential mortgage loan sales into the secondary market as a result of reduced residential mortgage refinance activity;

• a $62,000 decrease in gains realized on the sale of investment securities in the first nine months of 2017 as the Company sold certain lower coupon mortgage backed securities to reinvest in the portfolio. In addition to a slightly lower volume of total securities sold in 2017, the increases to national interest rates experienced since last year unfavorably impacted the market value of the existing securities portfolio and resulted in a lower level of gains recognized from security sales; and

• a $58,000 increase in trust and investment advisory fees was due to a higher level of fee income that resulted from the effective management of client accounts as asset market values improved.

…NON-INTEREST EXPENSE… Non-interest expense for the first nine months of 2017 totaled $30.5 million and decreased by $590,000, or 1.9%, from the prior year’s first nine months. Factors contributing to the lower non-interest expense in 2017 included:

• a $242,000 decrease in other expense and a corresponding $159,000 decrease in professional fees were primarily due to costs associated with the resolution of a trust operations trading error in 2016. Also favorably impacting other expense during 2017 were lower costs for check card and ATM processing, software related expense, and a credit recognized to the Company’s unfunded commitment reserve and reduced costs for fraud loss. Slightly offsetting these favorable items within other expense was an increase in Pennsylvania shares tax expense;

• a $136,000 decrease in occupancy expenses and a $68,000 decrease in equipment costs are reflective of the Company’s ongoing efforts to become more efficient by reducing and controlling non-interest expenses. Specifically, a branch consolidation and the closure on an unprofitable loan production office were the primary reasons for these decreases;

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• an $88,000 decrease in FDIC insurance expense was due to a change in the calculation formula that benefitted smaller community banks; and

• a $59,000 increase in salaries and employee benefits was due to higher health care costs and incentive compensation which more than offset a lower level of total salaries expense and reduced pension costs. There were six fewer full time equivalent employees on average during the first nine months of 2017 due to the previously disclosed branch consolidation in the State College Market and closure of an unprofitable loan production office in Harrisonburg, Virginia.

…INCOME TAX EXPENSE… The Company recorded an income tax expense of $1.9 million, or an effective tax rate of 31.2%, in the first nine months of 2017. This compares to the income tax expense of $474,000, or an effective tax rate of 29.0% for the first nine months of 2016. The higher income tax expense and effective tax rate was due to the Company’s increased earnings.

…SEGMENT RESULTS… Retail banking’s net income contribution was $794,000 in the third quarter of 2017 and $2.2 million for the first nine months of 2017 which was down by $63,000 and $176,000 from the net income contribution for the same 2016 periods. These decreases to both time periods 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 as certain indexed money market accounts repricing upward with the increases to the fed funds rate. Favorably impacting the retail segments income in both time periods 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 the State College branch consolidation. Finally, FDIC insurance expense and miscellaneous expenses are also lower in 2017.

The commercial banking segment reported net income of $1.4 million in the third quarter of 2017 and $4.3 million for the first nine months of 2017 which was $60,000 and $2.4 million higher when compared to the same of 2016 results. The higher level of income for the first nine months of 2017 was 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. Growth in commercial real estate loans over the past year also contributed to the higher level of net income for both the nine month and quarterly time periods. In addition to the growth experienced in the CRE portfolio, which contributed to the higher level of income quarter versus quarter, the commercial banking segments also benefitted from a lower level of non-interest expense due to the closure of the Harrisonburg, Virginia loan production office and additional operation efficiencies. Also, a decrease in classified assets and the level of delinquency since the second quarter of this year contributed to the lower provision expense.

The trust segment reported net income of $335,000 in the third quarter of 2017 and $991,000 for the first nine months of 2017 which was $140,000 higher than the 2016 quarter and $251,000 higher than the first nine months of 2016. The increases 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 and benefits expense.

The investment/parent segment reported a net loss of $1.0 million in the third quarter of 2017 and a net loss of $3.2 million for the first nine months of 2017, which resulted in a lower loss by $349,000 and $642,000 from the 2016 results for the same periods. The decreased loss between years is reflective of the higher level of investment securities on the Company’s balance sheet resulting from the Company’s strategic decision to purchase more high quality corporate and taxable municipal securities in 2017. Even with this improvement, this segment continues to feel the most earnings pressure from the continued low interest rate environment.

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…BALANCE SHEET… The Company’s total consolidated assets were $1.171 billion at September 30, 2017, which increased by $17.1 million, or 1.5%, from the December 31, 2016 asset level. The increase was driven by the growth in loans and investment securities. Specifically, total loans grew by $12.4 million, or 1.4%, during the period and was complemented by an additional $10.7 million, or 6.8%, growth in investment securities.

Total deposits decreased by $865,000, or 0.1% in the first nine months of 2017. Total FHLB borrowings have increased by $19.3 million since year-end 2016. The FHLB term advances declined by $1.5 million and now total $44 million as the Company has utilized these advances to help manage interest rate risk and favorably position our balance sheet for a rising rate environment. The Company’s total shareholders’ equity increased by $1.7 million over the first nine months of 2017 due to the retention of earnings more than offsetting our common dividend payment to shareholders and the impact of our common stock buyback program.

The Company continues to be considered well capitalized for regulatory purposes with a total capital ratio of 13.08%, and a common equity tier 1 capital ratio of 9.92% at September 30, 2017. (See the discussion of the Basel III capital requirements under the “Capital Resources” section.) The Company’s book value per common share was $5.31, its tangible book value per common share was $4.66, and its tangible common equity to tangible assets ratio was 7.35% at September 30, 2017.

…LOAN QUALITY… The following table sets forth information concerning the Company’s loan delinquency, non-performing assets, and classified assets (in thousands, except percentages):

	September 30, 2017			December 31, 2016			September 30, 2016
Total accruing loan delinquency (past due 30 to 89 days)	$	9,052		$	3,278		$	3,194
Total non-accrual loans		4,654			1,603			1,753
Total non-performing assets including TDR*		5,372			1,624			1,907
Accruing loan delinquency, as a percentage of total loans, net of unearned income		1.01	%		0.37	%		0.36	%
Non-accrual loans, as a percentage of total loans, net of unearned income		0.52			0.18			0.20
Non-performing assets, as a percentage of total loans, net of unearned income, and other real estate owned		0.60			0.18			0.21
Non-performing assets as a percentage of total assets		0.46			0.14			0.17
As a percent of average loans, net of unearned income:
Annualized net charge-offs		0.05			0.44			0.58
Annualized provision for loan losses		0.11			0.44			0.55
Total classified loans (loans rated substandard or doubtful)	$	8,140		$	6,038		$	5,203

* 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 a troubled debt restructuring and (iv) other real estate owned.

Overall, the Company continued to maintain strong asset quality in the first nine months of 2017 as evidenced by low levels of non-accrual loans and non-performing assets. However, total non-performing assets did increase since the end of the second quarter of 2017 due to the transfer of one CRE loan association into non-accrual status which had previously been classified as delinquent. It is believed that the Company’s loss exposure on this credit is limited because it is well secured and has a low loan to value ratio. Overall, total loan delinquency levels and classified assets decreased during the third quarter of 2017 but remain higher than the December 31, 2016 level. The credits that caused delinquency to increase since year end 2016 do not relate to cash flow underperformance but rather appears to be related to cash flow difficulties that certain borrowers are experiencing on a broader basis. We continue to actively work with the borrowers and take the necessary steps to ensure that the cash flow generated from these properties is being appropriately applied to

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the debt service on these loans. It is believed that the Company’s loss exposure to these delinquent credits is limited since the loans are secured and have low loan to value ratios.

We also continue to closely monitor the loan portfolio given the continued slow recovery in the regional economy and the number of relatively large-sized commercial and commercial real estate loans within the portfolio. As of September 30, 2017, the 25 largest credits represented 27.2% of total loans outstanding, which represents a slight increase from the third quarter 2016 when it was 27.1%.

…ALLOWANCE FOR LOAN LOSSES… The following table sets forth the allowance for loan losses and certain ratios for the periods ended (in thousands, except percentages):

	September 30, 2017			December 31, 2016			September 30, 2016
Allowance for loan losses	$	10,346		$	9,932		$	9,726
Allowance for loan losses as a percentage of each of the following total loans, net of unearned income		1.15	%		1.12	%		1.10	%
total accruing delinquent loans (past due 30 to 89 days)		114.30			302.99			304.51
total non-accrual loans		222.30			619.59			554.82
total non-performing assets		192.59			611.58			510.02

The Company recorded a $750,000 provision for loan losses in the first nine months of 2017 compared to a $3.7 million provision for loan losses in the first nine months of 2016 or a decrease of $2.9 million between periods. The loan loss provision was at a more typical level in 2017 and supports the continuing loan growth and the previously discussed higher level of criticized loans when compared to 2016. The provision more than covered the low level of net loan charge-offs incurred during the nine months.

…LIQUIDITY… The Company’s liquidity position has been strong during the last several years. Our core retail deposit base has grown over the past five years and has been more than adequate to fund the Company’s operations. Payments and prepayments from the loan portfolios, as well as, cash flow from maturities, prepayments and amortization of securities was also used to help fund loan growth over the past few years. We strive to operate our loan to deposit ratio in a range of 80% to 100%. For the first nine months of 2017, the Company’s loan to deposit ratio has averaged 91.5%. We are optimistic that we can increase the loan to deposit ratio in 2018 given commercial loan pipelines, continued growth from our loan production offices and our focus on small business lending. However, we expect that total loans will remain relatively flat in the fourth quarter of 2017 due to several large expected loan pay-offs.

Liquidity can be analyzed by utilizing the Consolidated Statement of Cash Flows. Cash and cash equivalents decreased by $5.4 million from December 31, 2016 to September 30, 2017, due to $25.8 million of cash used in investing activities offset by $5.5 million of cash provided by operating activities and $14.9 million provided by financing activities. Within investing activities, cash utilized for new investment security purchases totaled $37.0 which more than exceeded cash provided from investment security maturities and sales by $10.5 million. Cash advanced for new loan fundings and purchases (excluding residential mortgages sold in the secondary market) totaled $128.2 million and was $12.7 million higher than the $115.4 million of cash received from loan principal payments and participations sold. Within financing activities, deposits decreased by $865,000. As a result of this deposit decline, total borrowings increased as advances of short-term borrowings and purchases of FHLB term advances increased by $30.3 million. At September 30, 2017, the Company had immediately available $389 million of overnight borrowing capacity at the FHLB and $35 million of unsecured federal funds lines with correspondent banks.

The holding company had $10.7 million of cash, short-term investments, and investment securities at September 30, 2017. Additionally, dividend payments from our subsidiaries also provide ongoing cash to the holding company. At September 30, 2017, our subsidiary Bank had $3.4 million of cash available for immediate dividends to the holding company under applicable regulatory formulas. Management follows a policy that limits dividend payments from the Trust Company to 75% of annual net income. Overall, we

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believe that 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.

…CAPITAL RESOURCES… The Bank meaningfully exceeds all regulatory capital ratios for each of the periods presented and is considered well capitalized. The Company’s common equity tier 1 ratio was 9.92%, the tier 1 capital ratio was 11.15%, and the total capital ratio was 13.08% at September 30, 2017. The Company’s tier 1 leverage was 9.32% at September 30, 2017. We anticipate that we will maintain our strong capital ratios throughout the remainder of 2017. Capital generated from earnings will be utilized to pay the common stock cash dividend, buyback shares under our stock repurchase program and will also support controlled balance sheet growth. There is a particular emphasis on ensuring that the subsidiary bank has appropriate levels of capital to support its non-owner occupied commercial real estate loan concentration which stood at 354% of regulatory capital at September 30, 2017.

On January 24, 2017, the Company’s Board of Directors approved a new common stock repurchase program which calls for AmeriServ Financial, Inc. to buy back up to 5% or approximately 945,000 shares of its outstanding common stock during the next 18 months. 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 the first nine months of 2017, the Company was able to repurchase 686,360 shares of its common stock and return $2.8 million of capital to its shareholders through this program. As of September 30, 2017, the Company had approximately 18.3 million shares of its common stock outstanding. Overall, the Company was able to return 83.9% of its earnings through the first nine months of 2017 to its shareholders through accretive stock buybacks and cash dividends.

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 4.50% initially and 7.00% at January 1, 2019; a tier 1 capital ratio of 6.00% and 8.50%; a total capital ratio of 8.00% 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 2.50% 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.

…INTEREST RATE SENSITIVITY… 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
200bp increase		2.3	%		21.7	%
100bp increase		1.6			12.9
100bp decrease		(2.0	)		(18.0	)

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The Company believes that its overall interest rate risk position is well controlled. The variability of net interest income is positive in the upward rate shocks due to the Company’s short duration investment securities portfolio, the scheduled repricing of loans tied to LIBOR or prime, and the extension of a portion of borrowed funds. Also, the Company expects that it will not have to reprice its core deposit accounts up as quickly as 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 approximately 1.25%. 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.

…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 had various outstanding commitments to extend credit approximating $169.6 million and standby letters of credit of $10.3 million as of September 30, 2017. 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.

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

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.

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Commercial and commercial real estate loans are the largest category of credits and the most sensitive to changes in assumptions and judgments underlying the determination of the allowance for loan loss. Approximately $8.0 million, or 77%, of the total allowance for loan losses at September 30, 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 TDR loans, concentrations of credit, trends in loan volume, experience and depth of management, examination and audit results, effects of any changes in lending policies and trends in policy, financial information and documentation exceptions. To the extent actual outcomes differ from management estimates, additional provision for loan losses may be required that would adversely impact earnings in future periods.

ACCOUNT — Goodwill
BALANCE SHEET REFERENCE — Goodwill
INCOME STATEMENT REFERENCE — Goodwill impairment
DESCRIPTION

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

The fair value of acquired assets and liabilities, including the resulting goodwill, was based either on quoted market prices or provided by other third party sources, when available. When third party information was not available, estimates were made in good faith by management primarily through the use of internal cash flow modeling techniques. The assumptions that were used in the cash flow modeling were subjective and are susceptible to significant changes. The Company routinely utilizes the services of an independent third party that is regarded within the banking industry as an expert in valuing core deposits to monitor the ongoing 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 tax expense
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.

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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 September 30, 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.

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 September 30, 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 and taxable municipal securities. The Company believes the unrealized losses are primarily a result of increases in market yields from the time of purchase. In general, as market yields rise, the value of securities will decrease; as market yields fall, the fair value of securities will increase. Management generally views changes in fair value caused by changes in interest rates as temporary; therefore, these securities have not been classified as other-than-temporarily impaired. Management has also concluded that based on current information we expect to continue to receive scheduled interest payments as well as the entire principal balance. Furthermore, management does not intend to sell these securities and does not believe it will be required to sell these securities before they recover in value.

…FORWARD LOOKING STATEMENT…

THE STRATEGIC FOCUS:

The challenge for the future is to improve earnings performance toward 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. 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.

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• 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 between all customer service areas so that revenue producing products can be presented to existing and prospective customers to meet their banking needs. The Company’s Strategic Plan contains action plans in each of these areas particularly on increasing loans through our loan production offices. There will be a particular focus on small business commercial lending. 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.

• 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’s also recently completed three additional initiatives that will further reduce non-interest expenses and improve the Company’s future profitability. Specifically, at the end of the first quarter of 2016, the Company 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 is fully realizing in the 2017.

This Form 10-Q 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-Q, 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-Q. 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.

48

Item 3.…QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK… The Company manages market risk, which for the Company is primarily interest rate risk, through its asset liability management process and committee, see further discussion in Interest Rate Sensitivity section of the M.D. & A.

Item 4.…CONTROLS AND PROCEDURES… (a) Evaluation of Disclosure Controls and Procedures. The Company’s management carried out an evaluation, under the supervision and with the participation of the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and the operation of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2017, pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, the Chief Executive Officer along with the Chief Financial Officer concluded that the Company’s disclosure controls and procedures as of September 30, 2017, are effective.

(b) Changes in Internal Controls. There have been no changes in AmeriServ Financial Inc.’s internal controls over financial reporting that occurred during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Part II Other Information

Item 1. Legal Proceedings

There are no material proceedings to which the Company or any of our subsidiaries are a party or by which, to the Company’s’ knowledge, we, or any of our subsidiaries, are threatened. All legal proceedings presently pending or threatened against the Company or our subsidiaries involve routine litigation incidental to our business or that of the subsidiary involved and are not material in respect to the amount in controversy.

Item 1A. Risk Factors

Not Applicable

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Following are the Company’s monthly common stock purchases during the third 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
July 1 – 31, 2017		33,400	$	4.02		33,400		445,644
August 1 – 31, 2017		123,631		4.05		123,631		322,013
September 1 – 30, 2017		63,373		3.99		63,373		258,640
Total		220,404	$	4.03		220,404

In first six months of 2017, the Company was able to repurchase 465,956 shares at an average price of $4.01. On a year to date basis the Board of Director approved repurchase plan had a total of 686,360 shares repurchased at an average price of $4.02. This represents approximately 73% of the authorized repurchase plan.

Item 3. Defaults Upon Senior Securities

None

Item 4. Mine Safety Disclosures

None

Item 5. Other Information

None

49

Item 6. Exhibits

3.1	Amended and Restated Articles of Incorporation as amended through August 11, 2011 (Incorporated by reference to 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 on May 18, 2017 (Incorporated by reference to Exhibit 3.2 to the Current report on Form 8-K filed on May 23, 2017).
15.1	Report of S.R. Snodgrass, P.C. regarding unaudited interim financial statement information.
15.2	Awareness Letter of S.R. Snodgrass, P.C.
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.
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.
32.1	Certification pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.
101	The following information from AMERISERV FINANCIAL, INC.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, formatted in XBRL (eTensible Business Reporting Language): (i) Consolidated Balance Sheets (unaudited), (ii) Consolidated Statements of Operations (unaudited), (iii) Consolidated Statements of Comprehensive Income (unaudited), (iv) Consolidated Statements of Cash Flows (unaudited), and (iv) Notes to the Unaudited Consolidated Financial Statements.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

AmeriServ Financial, Inc.
Registrant

Date: November 3, 2017	/s/ Jeffrey A. Stopko Jeffrey A. Stopko President and Chief Executive Officer
Date: November 3, 2017	/s/ Michael D. Lynch Michael D. Lynch Senior Vice President and Chief Financial Officer

50

EX-15.1

Exhibit 15.1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Audit Committee
AmeriServ Financial, Inc.

We have reviewed the accompanying consolidated balance sheet of AmeriServ Financial, Inc. and subsidiaries as of September 30, 2017, the related consolidated statements of operations and comprehensive income for the three-month and nine-month periods ended September 30, 2017 and 2016, the related consolidated statement of changes in stockholders’ equity for the nine-month period ended September 30, 2017, and the related consolidated statements of cash flows for the nine-month periods ended September 30, 2017 and 2016. These consolidated financial statements are the responsibility of AmeriServ Financial, Inc.’s management.

We conducted our review in accordance with standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the accompanying consolidated financial statements for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of AmeriServ Financial, Inc. as of December 31, 2016, and the related consolidated statements of operations, comprehensive income, changes in stockholders’ equity, and cash flows for the year then ended (not presented herein), and in our report dated March 3, 2017, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2016, is fairly stated, in all material respects, in relation to the balance sheet from which it has been derived.

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

Cranberry Township, Pennsylvania
November 3, 2017

EX-15.2

Exhibit 15.2

November 3, 2017

AmeriServ Financial, Inc.
216 Franklin Street
P.O. Box 520
Johnstown, Pennsylvania 15907-0520

We have reviewed, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the unaudited interim financial information of AmeriServ Financial, Inc. and subsidiaries for the three-month and nine-month periods ended September 30, 2017 and 2016, as indicated in our report dated November 3, 2017; because we did not perform an audit, we expressed no opinion on that information.

We are aware that our reports referred to above, which were included in your Quarterly Reports on Form 10-Q for the quarter ended September 30, 2017, are incorporated by reference in the following Registration Statements:

Registration Statement No. 333-176869 on Form S-8
Registration Statement No. 333-67600 on Form S-8
Registration Statement No. 033-56604 on Form S-3
Registration Statement No. 333-129009 on Form S-3
Registration Statement No. 333-121215 on Form S-3
Registration Statement No. 333-120022 on Form S-3
Registration Statement No. 333-50225 on Form S-3

We also are aware that the aforementioned reports, pursuant to Rule 436(c) under the Securities Act of 1933, are not considered a part of the Registration Statement prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of Sections 7 and 11 of that Act.

Sincerely,

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

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 quarterly report on Form 10-Q 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: November 3, 2017	/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 quarterly report on Form 10-Q 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: November 3, 2017	/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 Quarterly Report of AmeriServ Financial, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 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
November 3, 2017

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 Quarterly Report of AmeriServ Financial, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 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
November 3, 2017

XML

Document And Entity Information - shares	9 Months Ended
	Sep. 30, 2017	Nov. 01, 2017
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2017
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q3
Entity Registrant Name	AMERISERV FINANCIAL INC /PA/
Entity Central Index Key	0000707605
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Trading Symbol	ASRV
Entity Common Stock, Shares Outstanding		18,273,824

XML

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands		Sep. 30, 2017	Dec. 31, 2016
ASSETS
Cash and due from depository institutions		$ 20,267	$ 25,107
Interest bearing deposits		2,718	3,066
Short-term investments in money market funds		5,690	5,900
Total cash and cash equivalents		28,675	34,073
Investment securities:
Available for sale		129,446	127,077
Held to maturity (fair value $39,059 on September 30, 2017 and $30,420 on December 31, 2016)		38,997	30,665
Loans held for sale		1,780	3,094
Loans		896,648	884,240
Less: Unearned income		438	476
Allowance for loan losses		10,346	9,932
Net loans		885,864	873,832
Premises and equipment, net		12,658	11,694
Accrued interest income receivable		3,503	3,116
Goodwill		11,944	11,944
Bank owned life insurance		37,716	37,903
Net deferred tax asset		9,255	10,655
Federal Home Loan Bank stock		4,429	3,359
Federal Reserve Bank stock		2,125	2,125
Other assets		4,524	4,243
TOTAL ASSETS		1,170,916	1,153,780
LIABILITIES
Non-interest bearing deposits		182,396	188,808
Interest bearing deposits		784,525	778,978
Total deposits		966,921	967,786
Short-term borrowings		33,593	12,754
Advances from Federal Home Loan Bank		44,042	45,542
Guaranteed junior subordinated deferrable interest debentures, net		12,919	12,908
Subordinated debt, net		7,459	7,441
Total borrowed funds		98,013	78,645
Other liabilities		8,872	11,954
TOTAL LIABILITIES		1,073,806	1,058,385
SHAREHOLDERS’ EQUITY
Common stock, par value $0.01 per share; 30,000,000 shares authorized; 26,585,403 shares issued and 18,281,224 outstanding on September 30, 2017; 26,521,291 shares issued and 18,903,472 outstanding on December 31, 2016		266	265
Treasury stock at cost, 8,304,179 shares on September 30, 2017 and 7,617,819 on December 31, 2016		(77,586)	(74,829)
Capital surplus		145,704	145,535
Retained earnings		39,450	36,001
Accumulated other comprehensive loss, net	[1]	(10,724)	(11,577)
TOTAL SHAREHOLDERS’ EQUITY		97,110	95,395
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		$ 1,170,916	$ 1,153,780

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

XML

CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Held to maturity securities, fair value	$ 39,059	$ 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	18,281,224	18,903,472
Treasury stock, shares	8,304,179	7,617,819

XML

CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
INTEREST INCOME
Interest and fees on loans	$ 9,855	$ 9,462	$ 29,189	$ 28,336
Interest bearing deposits	3	2	8	11
Short-term investments in money market funds	42	31	93	54
Investment securities:
Available for sale	973	779	2,819	2,324
Held to maturity	314	202	877	562
Total Interest Income	11,187	10,476	32,986	31,287
INTEREST EXPENSE
Deposits	1,618	1,391	4,558	3,975
Short-term borrowings	44	2	130	49
Advances from Federal Home Loan Bank	178	166	511	484
Guaranteed junior subordinated deferrable interest debentures	280	280	840	840
Subordinated debt	130	131	390	389
Total Interest Expense	2,250	1,970	6,429	5,737
NET INTEREST INCOME	8,937	8,506	26,557	25,550
Provision for loan losses	200	300	750	3,650
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	8,737	8,206	25,807	21,900
NON-INTEREST INCOME
Trust and investment advisory fees	2,045	2,035	6,292	6,234
Service charges on deposit accounts	409	433	1,168	1,252
Net gains on sale of loans	217	260	517	552
Mortgage related fees	69	132	227	293
Net realized gains on investment securities	56	60	115	177
Bank owned life insurance	143	169	594	505
Other income	690	572	2,033	1,827
Total Non-Interest Income	3,629	3,661	10,946	10,840
NON-INTEREST EXPENSE
Salaries and employee benefits	6,005	5,901	17,994	17,935
Net occupancy expense	634	656	1,947	2,083
Equipment expense	343	419	1,196	1,264
Professional fees	1,213	1,330	3,828	3,987
Supplies, postage and freight	161	181	516	530
Miscellaneous taxes and insurance	319	287	924	866
Federal deposit insurance expense	156	189	468	556
Other expense	1,283	1,393	3,643	3,885
Total Non-Interest Expense	10,114	10,356	30,516	31,106
PRETAX INCOME	2,252	1,511	6,237	1,634
Provision for income tax expense	701	446	1,949	474
NET INCOME	1,551	1,065	4,288	1,160
Preferred stock dividends	0	0	0	15
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS	$ 1,551	$ 1,065	$ 4,288	$ 1,145
Basic:
Net income	$ 0.08	$ 0.06	$ 0.23	$ 0.06
Average number of shares outstanding	18,380	18,899	18,590	18,893
Diluted:
Net income	$ 0.08	$ 0.06	$ 0.23	$ 0.06
Average number of shares outstanding	18,481	18,957	18,689	18,947
Cash dividends declared	$ 0.015	$ 0.015	$ 0.045	$ 0.035

XML

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands		3 Months Ended		9 Months Ended
		Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
COMPREHENSIVE INCOME
Net income		$ 1,551	$ 1,065	$ 4,288	$ 1,160
Other comprehensive income, before tax:
Pension obligation change for defined benefit plan		396	263	870	1,030
Income tax effect		(135)	(89)	(297)	(349)
Unrealized holding gains (losses) on available for sale securities arising during period		176	(191)	538	1,417
Income tax effect		(60)	65	(182)	(483)
Reclassification adjustment for gains on available for sale securities included in net income	[1]	(56)	(60)	(115)	(177)
Income tax effect	[1]	19	20	39	60
Other comprehensive income	[2]	340	8	853	1,498
Comprehensive income		$ 1,891	$ 1,073	$ 5,141	$ 2,658

[1] Amounts in parentheses indicate credits.

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

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
OPERATING ACTIVITIES
Net income	$ 4,288	$ 1,160
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Provision for loan losses	750	3,650
Depreciation expense	1,224	1,306
Net amortization of investment securities	346	342
Net realized gains on investment securities available for sale	(115)	(177)
Net gains on loans held for sale	(517)	(552)
Amortization of deferred loan fees	(117)	(174)
Origination of mortgage loans held for sale	(34,045)	(42,549)
Sales of mortgage loans held for sale	35,876	37,327
(Increase) decrease in accrued interest income receivable	(387)	50
Decrease in accrued interest payable	(18)	(18)
Earnings on bank owned life insurance	(427)	(505)
Deferred income taxes	975	(280)
Amortization of deferred issuance costs	29	29
Stock based compensation expense	170	89
Other, net	(2,492)	(2,000)
Net cash provided by (used in) operating activities	5,540	(2,302)
INVESTING ACTIVITIES
Purchases of investment securities - available for sale	(27,581)	(24,896)
Purchases of investment securities - held to maturity	(9,465)	(8,633)
Proceeds from sales of investment securities - available for sale	8,143	8,966
Proceeds from maturities of investment securities - available for sale	17,341	18,750
Proceeds from maturities of investment securities - held to maturity	1,054	2,166
Purchases of regulatory stock	(12,894)	(8,833)
Proceeds from redemption of regulatory stock	11,824	10,106
Long-term loans originated	(122,029)	(145,189)
Principal collected on long-term loans	112,626	120,875
Loans purchased or participated	(6,121)	(4,948)
Loans sold or participated	2,800	18,900
Proceeds from sale of other real estate owned	60	99
Proceeds from life insurance policies	614	0
Purchases of premises and equipment	(2,188)	(1,012)
Net cash used in investing activities	(25,816)	(13,649)
FINANCING ACTIVITIES
Net (decrease) increase in deposit balances	(865)	59,442
Net increase (decrease) in other short-term borrowings	20,839	(40,847)
Principal borrowings on advances from Federal Home Loan Bank	9,500	7,042
Principal repayments on advances from Federal Home Loan Bank	(11,000)	(6,000)
Preferred stock redemption	0	(21,000)
Purchase of treasury stock	(2,757)	0
Common stock dividends	(839)	(661)
Preferred stock dividends	0	(15)
Net cash provided by (used in) financing activities	14,878	(2,039)
NET DECREASE IN CASH AND CASH EQUIVALENTS	(5,398)	(17,990)
CASH AND CASH EQUIVALENTS AT JANUARY 1	34,073	48,510
CASH AND CASH EQUIVALENTS AT SEPTEMBER 30	$ 28,675	$ 30,520

XML

Principles of Consolidation

9 Months Ended

Sep. 30, 2017

Principles of Consolidation [Abstract]

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

1. Principles of Consolidation

The accompanying consolidated financial statements include the accounts of AmeriServ Financial, Inc. (the Company) and its wholly-owned subsidiaries, AmeriServ Financial Bank (the Bank), AmeriServ Trust and Financial Services Company (the Trust Company), and AmeriServ Life Insurance Company (AmeriServ Life). The Bank is a Pennsylvania state-chartered full service bank with 16 locations in Pennsylvania. The Trust Company offers a complete range of trust and financial services and administers assets valued at $2.1 billion that are not reported on the Company’s consolidated balance sheet at September 30, 2017. AmeriServ Life is a captive insurance company that engages in underwriting as a reinsurer of credit life and disability insurance.

In addition, the Parent Company is an administrative group that provides support in such areas as audit, finance, investments, loan review, general services, and marketing. Significant intercompany accounts and transactions have been eliminated in preparing the consolidated financial statements.

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Basis of Preparation

9 Months Ended

Sep. 30, 2017

Basis of Preparation [Abstract]

Basis of Accounting [Text Block]

2. Basis of Preparation

The unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information. In the opinion of management, all adjustments consisting of normal recurring entries considered necessary for a fair presentation have been included. They are not, however, necessarily indicative of the results of consolidated operations for a full-year.

For further information, refer to the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

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Recent Accounting Pronouncements

9 Months Ended

Sep. 30, 2017

Recent Accounting Pronouncements [Abstract]

New Accounting Pronouncements and Changes in Accounting Principles [Text Block]

3. Recent Accounting Pronouncements

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.

In January 2017, the FASB issued ASU No. 2017-03 “Accounting Changes and Error Corrections (Topic 250) and Investments — Equity Method and Joint Ventures (Topic 323): Amendments to SEC Paragraphs Pursuant to Staff Announcements at the September 22, 2016 and November 17, 2016 EITF Meetings.” ASU 2017-03 provides amendments that add paragraph 250-10-S99-6 which includes the text of “SEC Staff Announcement: Disclosure of the Impact That Recently Issued Accounting Standards Will Have on the Financial Statements of a Registrant When Such Standards Are Adopted in a Future Period (in accordance with Staff Accounting Bulletin (SAB) Topic 11.M). This announcement applies to ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606); ASU No. 2016-02, Leases (Topic 842); and ASU 2016-03, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, and subsequent amendments. The Company has enhanced its disclosures regarding the impact that recently issued accounting standards adopted in a future period will have on its accounting and disclosures in this footnote.

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.

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Earnings Per Common Share

9 Months Ended

Sep. 30, 2017

Earnings Per Common Share [Abstract]

Earnings Per Share [Text Block]

4. 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 excluded for earnings per share purposes. The Company had 10,000 options to purchase common shares with an exercise price of $4.00 per share, outstanding at September 30, 2017, but were excluded from the computation of diluted earnings per common share because to do so would be antidilutive. For the 2016 period, options to purchase 147,968 common shares, at exercise prices ranging from $3.18 to $4.60, were outstanding but were not included in the computation of diluted earnings per common share because to do so would be antidilutive. Dividends on preferred shares are deducted from net income in the calculation of earnings per common share.

	Three months ended September 30,				Nine months ended September 30,
	2017		2016		2017		2016
	(In thousands, except per share data)
Numerator:
Net income	$	1,551	$	1,065	$	4,288	$	1,160
Preferred stock dividends		—		—		—		(15	)
Net income available to common shareholders	$	1,551	$	1,065	$	4,288	$	1,145
Denominator:
Weighted average common shares outstanding (basic)		18,380		18,899		18,590		18,893
Effect of stock options		101		58		99		54
Weighted average common shares outstanding (diluted)		18,481		18,957		18,689		18,947
Earnings per common share:
Basic	$	0.08	$	0.06	$	0.23	$	0.06
Diluted		0.08		0.06		0.23		0.06

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Consolidated Statement of Cash Flows

9 Months Ended

Sep. 30, 2017

Supplemental Cash Flow Elements [Abstract]

Cash Flow, Supplemental Disclosures [Text Block]

5. 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 $975,000 in income tax payments in the first nine months of 2017 and $390,000 in the same 2016 period. The Company made total interest payments of $6,447,000 in the first nine months of 2017 compared to $5,755,000 in the same 2016 period. The Company had $59,000 non-cash transfers to other real estate owned (OREO) in the first nine months of 2017 compared to $151,000 non-cash transfers in the same 2016 period.

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Investment Securities

9 Months Ended

Sep. 30, 2017

Investments [Abstract]

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

6. Investment Securities

The cost basis and fair values of investment securities are summarized as follows (in thousands):

Investment securities available for sale (AFS):

	September 30, 2017
	Cost Basis		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
US Agency	$	5,435	$	1	$	(34	)	$	5,402
US Agency mortgage-backed securities		80,756		866		(382	)		81,240
Taxable municipal		7,203		30		(166	)		7,067
Corporate bonds		35,886		327		(476	)		35,737
Total	$	129,280	$	1,224	$	(1,058	)	$	129,446

Investment securities held to maturity (HTM):

	September 30, 2017
	Cost Basis		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
US Agency mortgage-backed securities	$	10,081	$	194	$	(23	)	$	10,252
Taxable municipal		22,873		222		(314	)		22,781
Corporate bonds and other securities		6,043		29		(46	)		6,026
Total	$	38,997	$	445	$	(383	)	$	39,059

Investment securities available for sale (AFS):

	December 31, 2016
	Cost Basis		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
US Agency	$	400	$	—	$	(2	)	$	398
US Agency mortgage-backed securities		88,738		1,132		(686	)		89,184
Taxable municipal		3,793		3		(174	)		3,622
Corporate bonds		34,403		194		(724	)		33,873
Total	$	127,334	$	1,329	$	(1,586	)	$	127,077

Investment securities held to maturity (HTM):

	December 31, 2016
	Cost Basis		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
US 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 Investor’s Service or Standard & Poor’s rating of “A.” At September 30, 2017, 57.8% of the portfolio was rated “AAA” as compared to 63.5% at December 31, 2016. Approximately 12.8% of the portfolio was either rated below “A” or unrated at September 30, 2017 as compared to 10.1% at December 31, 2016.

The Company sold $937,000 AFS securities in the third quarter of 2017 resulting in $56,000 of gross investment security gains and sold $8.1 million AFS securities in the first nine months of 2017 resulting in $115,000 of gross investment security gains. The Company sold $1.5 million AFS securities in the third quarter of 2016 resulting in $60,000 of gross investment security gains and sold $9.0 million AFS securities in the first nine months of 2016 resulting in $183,000 of gross investment security gains and $6,000 of gross investment security losses.

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 $114,589,000 at September 30, 2017 and $104,953,000 at December 31, 2016.

The following tables present information concerning investments with unrealized losses as of September 30, 2017 and December 31, 2016 (in thousands):

Total investment securities:

	September 30, 2017
	Less than 12 months					12 months or longer					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
US Agency	$	3,990	$	(33	)	$	399	$	(1	)	$	4,389	$	(34	)
US Agency mortgage-backed securities		38,127		(321	)		3,239		(84	)		41,366		(405	)
Taxable municipal		11,724		(377	)		2,172		(103	)		13,896		(480	)
Corporate bonds and other securities		12,414		(205	)		10,265		(317	)		22,679		(522	)
Total	$	66,255	$	(936	)	$	16,075	$	(505	)	$	82,330	$	(1,441	)

Total investment securities:

	December 31, 2016
	Less than 12 months					12 months or longer					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
US Agency	$	398	$	(2	)	$	—	$	—		$	398	$	(2	)
US 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 104 positions that are considered temporarily impaired at September 30, 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.

Contractual maturities of securities at September 30, 2017 are shown below (in thousands). Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without prepayment penalties. The duration of the total investment securities portfolio at September 30, 2017 is 44.2 months and is higher than the duration at December 31, 2016 which was 41.2 months. The duration remains within our internal established guideline range of 24 to 60 months which we believe is appropriate to maintain proper levels of liquidity, interest rate risk, market valuation sensitivity and profitability.

Total investment securities:

	September 30, 2017
	Available for sale				Held to maturity
	Cost Basis		Fair Value		Cost Basis		Fair Value
Within 1 year	$	1,400	$	1,399	$	2,000	$	1,975
After 1 year but within 5 years		11,706		11,718		1,551		1,533
After 5 years but within 10 years		45,805		45,999		14,562		14,639
After 10 years but within 15 years		27,738		27,609		14,924		14,824
Over 15 years		42,631		42,721		5,960		6,088
Total	$	129,280	$	129,446	$	38,997	$	39,059

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Loans

9 Months Ended

Sep. 30, 2017

Loans [Abstract]

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

7. Loans

The loan portfolio of the Company consists of the following (in thousands):

 

	September 30, 2017		December 31, 2016
Commercial	$	160,918	$	171,529
Commercial loans secured by real estate		469,348		446,598
Real estate – mortgage		246,881		245,765
Consumer		19,063		19,872
Loans, net of unearned income	$	896,210	$	883,764

Loan balances at September 30, 2017 and December 31, 2016 are net of unearned income of $438,000 and $476,000, respectively. Real estate-construction loans comprised 3.6% and 4.7% of total loans, net of unearned income at September 30, 2017 and December 31, 2016, respectively.

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Allowance for Loan Losses

9 Months Ended

Sep. 30, 2017

Allowance for Loan Losses [Abstract]

Allowance for Credit Losses [Text Block]

8. Allowance for Loan Losses

The following tables summarize the rollforward of the allowance for loan losses by portfolio segment for the three and nine month periods ending September 30, 2017 and 2016 (in thousands).

 

	Three months ended September 30, 2017
	Balance at June 30, 2017		Charge-Offs			Recoveries		Provision (Credit)			Balance at September 30, 2017
Commercial	$	3,825	$	(228	)	$	9	$	561		$	4,167
Commercial loans secured by real estate		4,487		—			3		(644	)		3,846
Real estate-mortgage		1,151		(109	)		72		50			1,164
Consumer		138		(42	)		50		(7	)		139
Allocation for general risk		790		—			—		240			1,030
Total	$	10,391	$	(379	)	$	134	$	200		$	10,346

	Three months ended September 30, 2016
	Balance at June 30, 2016		Charge-Offs			Recoveries		Provision (Credit)			Balance at September 30, 2016
Commercial	$	4,322	$	(295	)	$	115	$	92		$	4,234
Commercial loans secured by real estate		3,274		(13	)		2		85			3,348
Real estate-mortgage		1,075		(104	)		24		77			1,072
Consumer		135		(57	)		8		53			139
Allocation for general risk		940		—			—		(7	)		933
Total	$	9,746	$	(469	)	$	149	$	300		$	9,726

	Nine months ended September 30, 2017
	Balance at December 31, 2016		Charge-Offs			Recoveries		Provision (Credit)		Balance at September 30, 2017
Commercial	$	4,041	$	(228	)	$	22	$	332	$	4,167
Commercial loans secured by real estate		3,584		(14	)		8		268		3,846
Real estate-mortgage		1,169		(263	)		165		93		1,164
Consumer		151		(138	)		112		14		139
Allocation for general risk		987		—			—		43		1,030
Total	$	9,932	$	(643	)	$	307	$	750	$	10,346

	Nine months ended September 30, 2016
	Balance at December 31, 2015		Charge-Offs			Recoveries		Provision (Credit)			Balance at September 30, 2016
Commercial	$	4,244	$	(3,648	)	$	126	$	3,512		$	4,234
Commercial loans secured by real estate		3,449		(13	)		38		(126	)		3,348
Real estate-mortgage		1,173		(150	)		86		(37	)		1,072
Consumer		151		(302	)		18		272			139
Allocation for general risk		904		—			—		29			933
Total	$	9,921	$	(4,113	)	$	268	$	3,650		$	9,726

    The provision expense, charge-offs and recoveries were at more typical levels in the first nine months of 2017. The allocation amount to commercial loans secured by real estate (CRE) in the third quarter of 2017 reflects an improvement in the level of delinquency and the level of classified assets since the end of the second quarter of 2017 as one large CRE credit was upgraded and another transferred into non-accrual status (see further discussion in the loan quality section of the MD&A). The substantially higher than typical provision and net loan charge-offs in the first three months 2016 for the commercial portfolio was 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. With the bankruptcy changing from Chapter 11 (reorganization) to Chapter 7 (liquidation) late in the first quarter of 2016, 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.

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

	At September 30, 2017
Loans:	Commercial		Commercial Loans Secured by Real Estate		Real Estate- Mortgage		Consumer		Allocation for General Risk		Total
Individually evaluated for impairment	$	1,458	$	2,465	$	—	$	—			$	3,923
Collectively evaluated for impairment		159,460		466,883		246,881		19,063				892,287
Total loans	$	160,918	$	469,348	$	246,881	$	19,063			$	896,210
Allowance for loan losses:
Specific reserve allocation	$	860	$	28	$	—	$	—	$	—	$	888
General reserve allocation		3,307		3,818		1,164		139		1,030		9,458
Total allowance for loan losses	$	4,167	$	3,846	$	1,164	$	139	$	1,030	$	10,346

	At December 31, 2016
Loans:	Commercial		Commercial Loans Secured by Real Estate		Real Estate- Mortgage		Consumer		Allocation for General Risk		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
Allowance for loan losses:
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 loan segment is effected by non-owner occupied commercial real estate (CRE) loans, which include loans secured by non-owner occupied nonfarm nonresidential properties, as a meaningful 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 Loan Review 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 (in thousands).

	September 30, 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
Commercial	$	1,448	$	860	$	10	$	1,458	$	1,458
Commercial loans secured by real estate		151		28		2,314		2,465		2,499
Total impaired loans	$	1,599	$	888	$	2,324	$	3,923	$	3,957

	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
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 (in thousands).

	Three months ended September 30,				Nine months ended September 30,
	2017		2016		2017		2016
Average loan balance:
Commercial	$	1,302	$	821	$	816	$	992
Commercial loans secured by real estate		1,316		283		825		449
Average investment in impaired loans	$	2,618	$	1,104	$	1,641	$	1,441
Interest income recognized:
Commercial	$	9	$	1	$	24	$	9
Commercial loans secured by real estate		—		—		2		8
Interest income recognized on a cash basis on impaired loans	$	9	$	1	$	26	$	17

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

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

 

	September 30, 2017
	Pass		Special Mention		Substandard		Doubtful		Total
Commercial	$	158,169	$	76	$	2,423	$	250	$	160,918
Commercial loans secured by real estate		448,766		16,524		4,044		14		469,348
Total	$	606,935	$	16,600	$	6,467	$	264	$	630,266

	December 31, 2016
	Pass		Special Mention		Substandard		Doubtful		Total
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 generally the policy of the bank that the outstanding balance of any consumer loan that exceeds 90-days past due as to principal and/or interest is charged off. The following tables present the performing and non-performing outstanding balances of the residential and consumer portfolios (in thousands).

	September 30, 2017
	Performing		Non- Performing
Real estate-mortgage	$	245,479	$	1,402
Consumer		19,056		7
Total	$	264,535	$	1,409

	December 31, 2016
	Performing		Non- Performing
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 (in thousands).

	September 30, 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
Commercial	$	159,529	$	1,228	$	—	$	161	$	1,389	$	160,918	$	—
Commercial loans secured by real estate		461,506		5,358		—		2,484		7,842		469,348		—
Real estate-mortgage		242,793		2,488		861		739		4,088		246,881		—
Consumer		18,978		73		12		—		85		19,063		—
Total	$	882,806	$	9,147	$	873	$	3,384	$	13,404	$	896,210	$	—

	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
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 support loan growth and cover charge-offs from the loan portfolio. The ALL is based on management’s continuing evaluation of the risk characteristics and credit quality of the loan portfolio, assessment of current economic conditions, diversification and size of the portfolio, adequacy of collateral, past and anticipated loss experience, and the amount of non-performing loans.

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

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

The Company uses a comprehensive methodology and procedural discipline to maintain an ALL to absorb inherent losses in the loan portfolio. The Company believes this is a critical accounting policy since it involves significant estimates and judgments. The allowance consists of three elements: 1) an allowance established on specifically identified problem loans, 2) formula driven general reserves established for loan categories based upon historical loss experience and other qualitative factors which include delinquency, non-performing and TDR loans, loan trends, economic trends, concentrations of credit, trends in loan volume, experience and depth of management, examination and audit results, effects of any changes in lending policies, and trends in policy, financial information, and documentation exceptions, and 3) a general risk reserve which provides support for variance from our assessment of the previously listed qualitative factors, provides protection against credit risks resulting from other inherent risk factors contained in the Company’s loan portfolio, and recognizes the model and estimation risk associated with the specific and formula driven allowances. The qualitative factors used in the formula driven general reserves are evaluated quarterly (and revised if necessary) by the Company’s management to establish allocations which accommodate each of the listed risk factors.

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

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

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Non-performing Assets Including Troubled Debt Restructurings (TDR)

9 Months Ended

Sep. 30, 2017

Nonperforming Assets Including Troubled Debt Restructurings [Abstract]

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

9. Non-performing Assets Including Troubled Debt Restructurings (TDR)

The following table presents information concerning non-performing assets including TDR (in thousands, except percentages):

	September 30, 2017			December 31, 2016
Non-accrual loans
Commercial	$	461		$	496
Commercial loans secured by real estate		2,785			178
Real estate-mortgage		1,402			929
Consumer		7			—
Total		4,655			1,603
Other real estate owned
Real estate-mortgage		39			21
Total		39			21
TDR’s not in non-accrual		678			—
Total non-performing assets including TDR	$	5,372		$	1,624
Total non-performing assets as a percent of loans, net of unearned income, and other real estate owned		0.60	%		0.18	%

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

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 (in thousands).

	Three months ended September 30,				Nine months ended September 30,
	2017		2016		2017		2016
Interest income due in accordance with original terms	$	32	$	20	$	65	$	99
Interest income recorded		—		—		—		—
Net reduction in interest income	$	32	$	20	$	65	$	99

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.

The following table details the loans modified as TDRs during the nine month period ended September 30, 2017 (dollars in thousands).

Loans in non-accrual status	# of Loans		Current Balance		Concession Granted
Commercial loan		2	$	678		Extension of maturity date with interest only period

The following table details the loans modified as TDRs during the nine month period ended September 30, 2016 (dollars in thousands).

Loans in non-accrual status	# of Loans		Current Balance		Concession Granted
Commercial loan		2	$	507		Extension of maturity date with interest only period

In all instances where loans have been modified in troubled debt restructurings the pre- and post-modified balances are the same. The specific ALL reserve for loans modified as TDR’s was $390,000 and $507,000 as of September 30, 2017 and 2016, respectively. All TDR’s are individually evaluated for impairment and a related allowance is recorded, as needed.

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 an additional six consecutive monthly payments in accordance with the terms of the loan.

The Company had no loans that were classified as TDR’s or were subsequently modified during each 12-month period prior to the current reporting periods, which begin January 1, 2017 and 2016 (nine month periods) and July 1, 2017 and 2016 (three month periods), respectively, and that subsequently defaulted during these reporting periods.

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.

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 Sheet. As of September 30, 2017 and December 31, 2016, a total of $39,000 and $21,000, respectively of residential real estate foreclosed assets were included in other assets. As of September 30, 2017, the Company had initiated formal foreclosure procedures on $297,000 of consumer residential mortgages.

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Federal Home Loan Bank Borrowings

9 Months Ended

Sep. 30, 2017

Federal Home Loan Bank Borrowings [Abstract]

Federal Home Loan Bank Advances, Disclosure [Text Block]

10. Federal Home Loan Bank Borrowings

Total Federal Home Loan Bank (FHLB) borrowings and advances consist of the following (in thousands, except percentages):

	At September 30, 2017
Type	Maturing		Amount		Weighted Average Rate
Open Repo Plus		Overnight	$	33,593		0.94	%
Advances		2017		1,000		0.88
		2018		12,000		1.48
		2019		12,500		1.51
		2020		13,542		1.67
		2021 and over		5,000		1.68
Total advances				44,042		1.57
Total FHLB borrowings			$	77,635		1.30	%

	At December 31, 2016
Type	Maturing		Amount		Weighted Average Rate
Open Repo Plus		Overnight	$	12,754		0.74	%
Advances		2017		12,000		1.06
		2018		12,000		1.48
		2019		12,500		1.51
		2020		8,042		1.59
		2021 and over		1,000		1.60
Total advances				45,542		1.37
Total FHLB borrowings			$	58,296		1.23	%

The rate on Open Repo Plus advances can change daily, while the rates on the advances are fixed until the maturity of the advance. All FHLB stock along with an interest in certain residential mortgage 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.

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Preferred Stock

9 Months Ended

Sep. 30, 2017

Preferred Stock [Abstract]

Preferred Stock [Text Block]

11. Preferred Stock

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, the Company redeemed the Series E Preferred Stock, at a redemption price of 100% of the liquidation amount plus accrued but unpaid dividends, after receiving approval from its federal banking regulator and the US Treasury.

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Accumulated Other Comprehensive Loss

9 Months Ended

Sep. 30, 2017

Accumulated Comprehensive Loss [Abstract]

Comprehensive Income (Loss) Note [Text Block]

12. Accumulated Other Comprehensive Loss

The following table presents the changes in each component of accumulated other comprehensive loss, net of tax, for the three and nine months ended September 30, 2017 and 2016 (in thousands):

	Three months ended September 30, 2017									Three months ended September 30, 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	$	30		$	(11,094	)	$	(11,064	)	$	1,791		$	(7,856	)	$	(6,065	)
Other comprehensive income (loss) before reclassifications		116			261			377			(126	)		174			48
Amounts reclassified from accumulated other comprehensive loss		(37	)		—			(37	)		(40	)		—			(40	)
Net current period other comprehensive income (loss)		79			261			340			(166	)		174			8
Ending balance	$	109		$	(10,833	)	$	(10,724	)	$	1,625		$	(7,682	)	$	(6,057	)

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

	Nine months ended September 30, 2017									Nine months ended September 30, 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	)
Other comprehensive income before reclassifications		356			573			929			934			681			1,615
Amounts reclassified from accumulated other comprehensive loss		(76	)		—			(76	)		(117	)		—			(117	)
Net current period other comprehensive income		280			573			853			817			681			1,498
Ending balance	$	109		$	(10,833	)	$	(10,724	)	$	1,625		$	(7,682	)	$	(6,057	)

(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 three and nine months ended September 30, 2017 and 2016 (in thousands):

	Amount reclassified from accumulated other comprehensive loss(1)
Details about accumulated other comprehensive loss components	For the three months ended September 30, 2017			For the three months ended September 30, 2016			Affected line item in the consolidated statement of operations
Realized gains on sale of securities
	$	(56	)	$	(60	)		Net realized gains on   investment securities
		19			20			Provision for income tax expense
	$	(37	)	$	(40	)		Net of tax
Total reclassifications for the period	$	(37	)	$	(40	)		Net income

(1) Amounts in parentheses indicate credits.

	Amount reclassified from accumulated other comprehensive loss(1)
Details about accumulated other comprehensive loss components	For the nine months ended September 30, 2017			For the nine months ended September 30, 2016			Affected line item in the consolidated statement of operations
Realized gains on sale of securities
	$	(115	)	$	(177	)		Net realized gains on   investment securities
		39			60			Provision for income tax expense
	$	(76	)	$	(117	)		Net of tax
Total reclassifications for the period	$	(76	)	$	(117	)		Net income

(1) Amounts in parentheses indicate credits.

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Regulatory Capital

9 Months Ended

Sep. 30, 2017

Regulatory Capital [Abstract]

Regulatory Capital Requirements under Banking Regulations [Text Block]

13. Regulatory Capital

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

Quantitative measures established by regulation to ensure capital adequacy require the Company to maintain minimum amounts and ratios (set forth in the table below) of total and Tier 1 capital to risk-weighted assets, Tier 1 capital to average assets, and common equity Tier I capital (as defined in the regulations) to risk-weighted assets (RWA) (as defined). Additionally under Basel III rules, the decision was made to opt-out of including accumulated other comprehensive income in regulatory capital. As of September 30, 2017, the Bank was categorized as “Well Capitalized” under the regulatory framework for prompt corrective action promulgated by the Federal Reserve. The Company believes that no conditions or events have occurred that would change this conclusion as of such date. To be categorized as Well Capitalized, the Bank must maintain minimum Total Capital, Common Equity Tier 1 Capital, Tier 1 Capital, and Tier 1 leverage ratios as set forth in the table. Additionally, while not a regulatory capital ratio, the Company’s tangible common equity ratio was 7.35% at September 30, 2017 (in thousands, except ratios).

	AT SEPTEMBER 30, 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)	$	126,357		13.08	%	$	109,915		11.44	%		8.00	%		10.00	%
Tier 1 Common Equity (To Risk Weighted Assets)		95,839		9.92			98,695		10.28			4.50			6.50
Tier 1 Capital (To Risk Weighted Assets)		107,678		11.15			98,695		10.28			6.00			8.00
Tier 1 Capital (To Average Assets)		107,678		9.32			98,695		8.68			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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DERIVATIVE HEDGING INSTRUMENTS

9 Months Ended

Sep. 30, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities Disclosure [Text Block]

14. 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 the first nine months of 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 first nine months 2017 performance.

	HEDGE TYPE		AGGREGATE NOTIONAL AMOUNT			WEAIGHTED AVERAGE RATE RECEIVED/ (PAID)			REPRICING FREQUENCY		INCREASE (DECREASE) IN INTEREST EXPENSE
SWAP ASSETS		FAIR VALUE	$	17,057,388			3.42	%		MONTHLY	$	(72,920	)
SWAP LIABILITIES		FAIR VALUE		(17,057,388	)		(3.42	)		MONTHLY		72,920
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 September 30, 2017.

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Segment Results

9 Months Ended

Sep. 30, 2017

Segment Results [Abstract]

Segment Reporting Disclosure [Text Block]

15. 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 local business commercial loans. Commercial banking to businesses includes commercial loans, business services, and CRE loans. The trust segment contains our wealth management businesses which include the Trust Company and West Chester Capital Advisors (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 union collective investment funds, primarily the ERECT fund which are designed to use union pension dollars in construction projects that utilize union labor. The investment/parent includes the net results of investment securities and borrowing activities, general corporate expenses not allocated to the business segments, interest expense on corporate debt, and centralized interest rate risk management. Inter-segment revenues were not material.

The contribution of the major business segments to the Consolidated Statements of Operations for the three and nine months ended September 30, 2017 and 2016 were as follows (in thousands):

	Three months ended September 30, 2017						Nine months ended September 30, 2017
	Total revenue			Net income (loss)			Total revenue			Net income (loss)
Retail banking	$	6,443		$	794		$	19,138		$	2,159
Commercial banking		4,722			1,412			14,269			4,295
Trust		2,223			335			6,804			991
Investment/Parent		(822	)		(990	)		(2,708	)		(3,157	)
Total	$	12,556		$	1,551		$	37,503		$	4,288

	Three months ended September 30, 2016						Nine months ended September 30, 2016
	Total revenue			Net income (loss)			Total revenue			Net income (loss)
Retail banking	$	6,653		$	857		$	19,543		$	2,335
Commercial banking		4,757			1,352			14,123			1,884
Trust		2,125			195			6,504			740
Investment/Parent		(1,368	)		(1,339	)		(3,780	)		(3,799	)
Total	$	12,167		$	1,065		$	36,390		$	1,160

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Commitments and Contingent Liabilities

9 Months Ended

Sep. 30, 2017

Commitments and Contingent Liabilities [Abstract]

Commitments and Contingencies Disclosure [Text Block]

16. Commitments and Contingent Liabilities

The Company had various outstanding commitments to extend credit approximating $169.6 million and $160.5 million along with standby letters of credit of $10.3 million and $8.5 million as of September 30, 2017 and December 31, 2016, respectively. 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 Bank uses the same credit and collateral policies in making commitments and conditional obligations as for all other lending.

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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Pension Benefits

9 Months Ended

Sep. 30, 2017

Pension Benefits [Abstract]

Pension and Other Postretirement Benefits Disclosure [Text Block]

17. Pension Benefits

The Company has a noncontributory defined benefit pension plan covering certain 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. Plan assets are primarily debt securities (including US Treasury and Agency securities, corporate notes and bonds), listed common stocks (including shares of AmeriServ Financial, Inc. common stock which is limited to 10% of the plan’s assets), mutual funds, and short-term cash equivalent instruments. The net periodic pension cost for the three and nine months ended September 30, 2017 and 2016 were as follows (in thousands):

	Three months ended September 30,						Nine months ended September 30,
	2017			2016			2017			2016
Components of net periodic benefit cost
Service cost	$	390		$	368		$	1,170		$	1,104
Interest cost		326			344			978			1,032
Expected return on plan assets		(631	)		(563	)		(1,893	)		(1,689	)
Recognized net actuarial loss		367			314			1,101			942
Net periodic pension cost	$	452		$	463		$	1,356		$	1,389

The Company implemented a soft freeze of its defined benefit pension plan to provide that non-union employees hired on or after January 1, 2013 and union employees hired on or after January 1, 2014 are not eligible to participate in the pension plan. Instead, such employees are eligible to participate in a qualified 401(k) plan. This change was made to help reduce pension costs in future periods.

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Disclosures about Fair Value Measurements

9 Months Ended

Sep. 30, 2017

Disclosures about Fair Value Measurements [Abstract]

Fair Value, Measurement Inputs, Disclosure [Text Block]

18. Disclosures about Fair Value Measurements

The following disclosures establish a hierarchal disclosure framework associated with the level of pricing observability utilized in measuring assets and liabilities at fair value. The three broad levels defined within this hierarchy are as follows:

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

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

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

Assets and Liability Measured on a Recurring Basis

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 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 following tables present the assets reported on the Consolidated Balance Sheets at their fair value as of September 30, 2017 and December 31, 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 at fair value on a recurring basis are summarized below (in thousands):

	Fair Value Measurements at September 30, 2017 Using
	Total			(Level 1)		(Level 2)		(Level 3)
US Agency securities	$	5,402		$	—	$	5,402	$	—
US Agency mortgage-backed securities		81,240			—		81,240		—
Taxable municipal		7,067			—		7,067		—
Corporate bonds		35,737			—		35,737		—
Fair value swap asset		84			—		—		84
Fair value swap liability		(84	)		—		—		(84	)

	Fair Value Measurements at December 31, 2016 Using
	Total		(Level 1)		(Level 2)		(Level 3)
US Agency securities	$	398	$	—	$	398	$	—
US Agency mortgage-backed securities		89,184		—		89,184		—
Taxable municipal		3,622		—		3,622		—
Corporate bonds		33,873		—		33,873		—

Assets Measured on a Non-recurring Basis

Loans considered impaired are loans for which, based on current information and events, it is probable that the creditor will be unable to collect all amounts due according to the contractual terms of the loan agreement. As detailed in the allowance for loan loss footnote, 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 September 30, 2017, impaired loans with a carrying value of $3.9 million were reduced by a specific valuation allowance totaling $888,000 resulting in a net fair value of $3.0 million. At December 31, 2016, impaired loans with a carrying value of $674,000 were reduced by a specific valuation allowance totaling $527,000 resulting in a net fair value of $147,000.

Other real estate owned is measured at fair value based on appraisals, less estimated cost to sell. Valuations are periodically performed by management. Income and expenses from operations and changes in valuation allowance are included in the net expenses from OREO.

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

	Fair Value Measurements at September 30, 2017 Using
	Total		(Level 1)		(Level 2)		(Level 3)
Impaired loans	$	3,035	$	—	$	—	$	3,035
Other real estate owned		39		—		—		39

	Fair Value Measurements at December 31, 2016 Using
	Total		(Level 1)		(Level 2)		(Level 3)
Impaired loans	$	147	$	—	$	—	$	147
Other real estate owned		21		—		—		21

September 30, 2017	Quantitative Information About Level 3 Fair Value Measurements
	Fair Value Estimate		Valuation Techniques		Unobservable Input		Range (Wgtd Ave)
Impaired loans	$	3,035		Appraisal of collateral(1),(3)		Appraisal adjustments(2)		40% to 77%(42%)
Other real estate owned		39		Appraisal of collateral(1),(3)		Appraisal adjustments(2) Liquidation expenses		43% to 45%(43%) 2% to 206%(64%)

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

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

DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

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

Fair values have been determined by the Company using independent third party valuations that use the best available data (Level 2) and an estimation methodology (Level 3) the Company believes is suitable for each category of financial instruments. Management believes that cash, cash equivalents, and loans and deposits with floating interest rates have estimated fair values which approximate the recorded book balances. The estimation methodologies used, the estimated fair values based on US GAAP measurements, and recorded book balances at September 30, 2017 and December 31, 2016, were as follows (in thousands):

	September 30, 2017
	Carrying Value		Fair Value		(Level 1)		(Level 2)		(Level 3)
FINANCIAL ASSETS:
Cash and cash equivalents	$	28,675	$	28,675	$	28,675	$	—	$	—
Investment securities – AFS		129,446		129,446		—		129,446		—
Investment securities – HTM		38,997		39,059		—		36,105		2,954
Regulatory stock		6,554		6,554		6,554		—		—
Loans held for sale		1,780		1,801		1,801		—		—
Loans, net of allowance for loan loss and unearned income		885,864		884,359		—		—		884,359
Accrued interest income receivable		3,503		3,503		3,503		—		—
Bank owned life insurance		37,716		37,716		37,716		—		—
Fair value swap asset		84		84		—		—		84
FINANCIAL LIABILITIES:
Deposits with no stated maturities	$	707,566	$	707,566	$	707,566	$	—	$	—
Deposits with stated maturities		259,355		260,498		—		—		260,498
Short-term borrowings		33,593		33,593		33,593		—		—
All other borrowings		64,420		67,962		—		—		67,962
Accrued interest payable		1,622		1,622		1,622		—		—
Fair value swap liability		84		84		—		—		84

	December 31, 2016
	Carrying Value		Fair Value		(Level 1)		(Level 2)		(Level 3)
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, is 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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Earnings Per Common Share (Tables)

9 Months Ended

Sep. 30, 2017

Earnings Per Common Share [Abstract]

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

Dividends on preferred shares are deducted from net income in the calculation of earnings per common share.

	Three months ended September 30,				Nine months ended September 30,
	2017		2016		2017		2016
	(In thousands, except per share data)
Numerator:
Net income	$	1,551	$	1,065	$	4,288	$	1,160
Preferred stock dividends		—		—		—		(15	)
Net income available to common shareholders	$	1,551	$	1,065	$	4,288	$	1,145
Denominator:
Weighted average common shares outstanding (basic)		18,380		18,899		18,590		18,893
Effect of stock options		101		58		99		54
Weighted average common shares outstanding (diluted)		18,481		18,957		18,689		18,947
Earnings per common share:
Basic	$	0.08	$	0.06	$	0.23	$	0.06
Diluted		0.08		0.06		0.23		0.06

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Investment Securities (Tables)

9 Months Ended

Sep. 30, 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 (in thousands):

Investment securities available for sale (AFS):

	September 30, 2017
	Cost Basis		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
US Agency	$	5,435	$	1	$	(34	)	$	5,402
US Agency mortgage-backed securities		80,756		866		(382	)		81,240
Taxable municipal		7,203		30		(166	)		7,067
Corporate bonds		35,886		327		(476	)		35,737
Total	$	129,280	$	1,224	$	(1,058	)	$	129,446

Investment securities held to maturity (HTM):

	September 30, 2017
	Cost Basis		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
US Agency mortgage-backed securities	$	10,081	$	194	$	(23	)	$	10,252
Taxable municipal		22,873		222		(314	)		22,781
Corporate bonds and other securities		6,043		29		(46	)		6,026
Total	$	38,997	$	445	$	(383	)	$	39,059

Investment securities available for sale (AFS):

	December 31, 2016
	Cost Basis		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
US Agency	$	400	$	—	$	(2	)	$	398
US Agency mortgage-backed securities		88,738		1,132		(686	)		89,184
Taxable municipal		3,793		3		(174	)		3,622
Corporate bonds		34,403		194		(724	)		33,873
Total	$	127,334	$	1,329	$	(1,586	)	$	127,077

Investment securities held to maturity (HTM):

	December 31, 2016
	Cost Basis		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
US 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 Unrealized Loss on Investments [Table Text Block]

The following tables present information concerning investments with unrealized losses as of September 30, 2017 and December 31, 2016 (in thousands):

Total investment securities:

	September 30, 2017
	Less than 12 months					12 months or longer					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
US Agency	$	3,990	$	(33	)	$	399	$	(1	)	$	4,389	$	(34	)
US Agency mortgage-backed securities		38,127		(321	)		3,239		(84	)		41,366		(405	)
Taxable municipal		11,724		(377	)		2,172		(103	)		13,896		(480	)
Corporate bonds and other securities		12,414		(205	)		10,265		(317	)		22,679		(522	)
Total	$	66,255	$	(936	)	$	16,075	$	(505	)	$	82,330	$	(1,441	)

Total investment securities:

	December 31, 2016
	Less than 12 months					12 months or longer					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
US Agency	$	398	$	(2	)	$	—	$	—		$	398	$	(2	)
US 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	)

Schedule of Contractual Maturities of Securities [Table Text Block]

Total investment securities:

	September 30, 2017
	Available for sale				Held to maturity
	Cost Basis		Fair Value		Cost Basis		Fair Value
Within 1 year	$	1,400	$	1,399	$	2,000	$	1,975
After 1 year but within 5 years		11,706		11,718		1,551		1,533
After 5 years but within 10 years		45,805		45,999		14,562		14,639
After 10 years but within 15 years		27,738		27,609		14,924		14,824
Over 15 years		42,631		42,721		5,960		6,088
Total	$	129,280	$	129,446	$	38,997	$	39,059

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Loans (Tables)

9 Months Ended

Sep. 30, 2017

Loans [Abstract]

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

The loan portfolio of the Company consists of the following (in thousands):

 

	September 30, 2017		December 31, 2016
Commercial	$	160,918	$	171,529
Commercial loans secured by real estate		469,348		446,598
Real estate – mortgage		246,881		245,765
Consumer		19,063		19,872
Loans, net of unearned income	$	896,210	$	883,764

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Allowance for Loan Losses (Tables)

9 Months Ended

Sep. 30, 2017

Allowance for Loan Losses [Abstract]

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

The following tables summarize the rollforward of the allowance for loan losses by portfolio segment for the three and nine month periods ending September 30, 2017 and 2016 (in thousands).

 

	Three months ended September 30, 2017
	Balance at June 30, 2017		Charge-Offs			Recoveries		Provision (Credit)			Balance at September 30, 2017
Commercial	$	3,825	$	(228	)	$	9	$	561		$	4,167
Commercial loans secured by real estate		4,487		—			3		(644	)		3,846
Real estate-mortgage		1,151		(109	)		72		50			1,164
Consumer		138		(42	)		50		(7	)		139
Allocation for general risk		790		—			—		240			1,030
Total	$	10,391	$	(379	)	$	134	$	200		$	10,346

	Three months ended September 30, 2016
	Balance at June 30, 2016		Charge-Offs			Recoveries		Provision (Credit)			Balance at September 30, 2016
Commercial	$	4,322	$	(295	)	$	115	$	92		$	4,234
Commercial loans secured by real estate		3,274		(13	)		2		85			3,348
Real estate-mortgage		1,075		(104	)		24		77			1,072
Consumer		135		(57	)		8		53			139
Allocation for general risk		940		—			—		(7	)		933
Total	$	9,746	$	(469	)	$	149	$	300		$	9,726

	Nine months ended September 30, 2017
	Balance at December 31, 2016		Charge-Offs			Recoveries		Provision (Credit)		Balance at September 30, 2017
Commercial	$	4,041	$	(228	)	$	22	$	332	$	4,167
Commercial loans secured by real estate		3,584		(14	)		8		268		3,846
Real estate-mortgage		1,169		(263	)		165		93		1,164
Consumer		151		(138	)		112		14		139
Allocation for general risk		987		—			—		43		1,030
Total	$	9,932	$	(643	)	$	307	$	750	$	10,346

	Nine months ended September 30, 2016
	Balance at December 31, 2015		Charge-Offs			Recoveries		Provision (Credit)			Balance at September 30, 2016
Commercial	$	4,244	$	(3,648	)	$	126	$	3,512		$	4,234
Commercial loans secured by real estate		3,449		(13	)		38		(126	)		3,348
Real estate-mortgage		1,173		(150	)		86		(37	)		1,072
Consumer		151		(302	)		18		272			139
Allocation for general risk		904		—			—		29			933
Total	$	9,921	$	(4,113	)	$	268	$	3,650		$	9,726

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 (in thousands).

	At September 30, 2017
Loans:	Commercial		Commercial Loans Secured by Real Estate		Real Estate- Mortgage		Consumer		Allocation for General Risk		Total
Individually evaluated for impairment	$	1,458	$	2,465	$	—	$	—			$	3,923
Collectively evaluated for impairment		159,460		466,883		246,881		19,063				892,287
Total loans	$	160,918	$	469,348	$	246,881	$	19,063			$	896,210
Allowance for loan losses:
Specific reserve allocation	$	860	$	28	$	—	$	—	$	—	$	888
General reserve allocation		3,307		3,818		1,164		139		1,030		9,458
Total allowance for loan losses	$	4,167	$	3,846	$	1,164	$	139	$	1,030	$	10,346

	At December 31, 2016
Loans:	Commercial		Commercial Loans Secured by Real Estate		Real Estate- Mortgage		Consumer		Allocation for General Risk		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
Allowance for loan losses:
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 (in thousands).

	September 30, 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
Commercial	$	1,448	$	860	$	10	$	1,458	$	1,458
Commercial loans secured by real estate		151		28		2,314		2,465		2,499
Total impaired loans	$	1,599	$	888	$	2,324	$	3,923	$	3,957

	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
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 (in thousands).

	Three months ended September 30,				Nine months ended September 30,
	2017		2016		2017		2016
Average loan balance:
Commercial	$	1,302	$	821	$	816	$	992
Commercial loans secured by real estate		1,316		283		825		449
Average investment in impaired loans	$	2,618	$	1,104	$	1,641	$	1,441
Interest income recognized:
Commercial	$	9	$	1	$	24	$	9
Commercial loans secured by real estate		—		—		2		8
Interest income recognized on a cash basis on impaired loans	$	9	$	1	$	26	$	17

Financing Receivable Credit Quality Indicators [Table Text Block]

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

 

	September 30, 2017
	Pass		Special Mention		Substandard		Doubtful		Total
Commercial	$	158,169	$	76	$	2,423	$	250	$	160,918
Commercial loans secured by real estate		448,766		16,524		4,044		14		469,348
Total	$	606,935	$	16,600	$	6,467	$	264	$	630,266

	December 31, 2016
	Pass		Special Mention		Substandard		Doubtful		Total
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 (in thousands).

	September 30, 2017
	Performing		Non- Performing
Real estate-mortgage	$	245,479	$	1,402
Consumer		19,056		7
Total	$	264,535	$	1,409

	December 31, 2016
	Performing		Non- Performing
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 (in thousands).

	September 30, 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
Commercial	$	159,529	$	1,228	$	—	$	161	$	1,389	$	160,918	$	—
Commercial loans secured by real estate		461,506		5,358		—		2,484		7,842		469,348		—
Real estate-mortgage		242,793		2,488		861		739		4,088		246,881		—
Consumer		18,978		73		12		—		85		19,063		—
Total	$	882,806	$	9,147	$	873	$	3,384	$	13,404	$	896,210	$	—

	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
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 (TDR) (Tables)

9 Months Ended

Sep. 30, 2017

Nonperforming Assets Including Troubled Debt Restructurings [Abstract]

Schedule Of Nonperforming Assets Including Trouble Debt Restructurings [Table Text Block]

The following table presents information concerning non-performing assets including TDR (in thousands, except percentages):

	September 30, 2017			December 31, 2016
Non-accrual loans
Commercial	$	461		$	496
Commercial loans secured by real estate		2,785			178
Real estate-mortgage		1,402			929
Consumer		7			—
Total		4,655			1,603
Other real estate owned
Real estate-mortgage		39			21
Total		39			21
TDR’s not in non-accrual		678			—
Total non-performing assets including TDR	$	5,372		$	1,624
Total non-performing assets as a percent of loans, net of unearned income, and other real estate owned		0.60	%		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 (in thousands).

	Three months ended September 30,				Nine months ended September 30,
	2017		2016		2017		2016
Interest income due in accordance with original terms	$	32	$	20	$	65	$	99
Interest income recorded		—		—		—		—
Net reduction in interest income	$	32	$	20	$	65	$	99

Troubled Debt Restructurings on Financing Receivables [Table Text Block]

The following table details the loans modified as TDRs during the nine month period ended September 30, 2017 (dollars in thousands).

Loans in non-accrual status	# of Loans		Current Balance		Concession Granted
Commercial loan		2	$	678		Extension of maturity date with interest only period

The following table details the loans modified as TDRs during the nine month period ended September 30, 2016 (dollars in thousands).

Loans in non-accrual status	# of Loans		Current Balance		Concession Granted
Commercial loan		2	$	507		Extension of maturity date with interest only period

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Federal Home Loan Bank Borrowings (Tables)

9 Months Ended

Sep. 30, 2017

Federal Home Loan Bank Borrowings [Abstract]

Schedule of Federal Home Loan Bank, Advances, by Branch of FHLB Bank [Table Text Block]

Total Federal Home Loan Bank (FHLB) borrowings and advances consist of the following (in thousands, except percentages):

	At September 30, 2017
Type	Maturing		Amount		Weighted Average Rate
Open Repo Plus		Overnight	$	33,593		0.94	%
Advances		2017		1,000		0.88
		2018		12,000		1.48
		2019		12,500		1.51
		2020		13,542		1.67
		2021 and over		5,000		1.68
Total advances				44,042		1.57
Total FHLB borrowings			$	77,635		1.30	%

	At December 31, 2016
Type	Maturing		Amount		Weighted Average Rate
Open Repo Plus		Overnight	$	12,754		0.74	%
Advances		2017		12,000		1.06
		2018		12,000		1.48
		2019		12,500		1.51
		2020		8,042		1.59
		2021 and over		1,000		1.60
Total advances				45,542		1.37
Total FHLB borrowings			$	58,296		1.23	%

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Accumulated Other Comprehensive Loss (Tables)

9 Months Ended

Sep. 30, 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 three and nine months ended September 30, 2017 and 2016 (in thousands):

	Three months ended September 30, 2017									Three months ended September 30, 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	$	30		$	(11,094	)	$	(11,064	)	$	1,791		$	(7,856	)	$	(6,065	)
Other comprehensive income (loss) before reclassifications		116			261			377			(126	)		174			48
Amounts reclassified from accumulated other comprehensive loss		(37	)		—			(37	)		(40	)		—			(40	)
Net current period other comprehensive income (loss)		79			261			340			(166	)		174			8
Ending balance	$	109		$	(10,833	)	$	(10,724	)	$	1,625		$	(7,682	)	$	(6,057	)

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

	Nine months ended September 30, 2017									Nine months ended September 30, 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	)
Other comprehensive income before reclassifications		356			573			929			934			681			1,615
Amounts reclassified from accumulated other comprehensive loss		(76	)		—			(76	)		(117	)		—			(117	)
Net current period other comprehensive income		280			573			853			817			681			1,498
Ending balance	$	109		$	(10,833	)	$	(10,724	)	$	1,625		$	(7,682	)	$	(6,057	)

(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 three and nine months ended September 30, 2017 and 2016 (in thousands):

	Amount reclassified from accumulated other comprehensive loss(1)
Details about accumulated other comprehensive loss components	For the three months ended September 30, 2017			For the three months ended September 30, 2016			Affected line item in the consolidated statement of operations
Realized gains on sale of securities
	$	(56	)	$	(60	)		Net realized gains on   investment securities
		19			20			Provision for income tax expense
	$	(37	)	$	(40	)		Net of tax
Total reclassifications for the period	$	(37	)	$	(40	)		Net income

(1) Amounts in parentheses indicate credits.

	Amount reclassified from accumulated other comprehensive loss(1)
Details about accumulated other comprehensive loss components	For the nine months ended September 30, 2017			For the nine months ended September 30, 2016			Affected line item in the consolidated statement of operations
Realized gains on sale of securities
	$	(115	)	$	(177	)		Net realized gains on   investment securities
		39			60			Provision for income tax expense
	$	(76	)	$	(117	)		Net of tax
Total reclassifications for the period	$	(76	)	$	(117	)		Net income

(1) Amounts in parentheses indicate credits.

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Regulatory Capital (Tables)

9 Months Ended

Sep. 30, 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 7.35% at September 30, 2017 (in thousands, except ratios).

	AT SEPTEMBER 30, 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)	$	126,357		13.08	%	$	109,915		11.44	%		8.00	%		10.00	%
Tier 1 Common Equity (To Risk Weighted Assets)		95,839		9.92			98,695		10.28			4.50			6.50
Tier 1 Capital (To Risk Weighted Assets)		107,678		11.15			98,695		10.28			6.00			8.00
Tier 1 Capital (To Average Assets)		107,678		9.32			98,695		8.68			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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DERIVATIVE HEDGING INSTRUMENTS (Tables)

9 Months Ended

Sep. 30, 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 first nine months 2017 performance.

	HEDGE TYPE		AGGREGATE NOTIONAL AMOUNT			WEAIGHTED AVERAGE RATE RECEIVED/ (PAID)			REPRICING FREQUENCY		INCREASE (DECREASE) IN INTEREST EXPENSE
SWAP ASSETS		FAIR VALUE	$	17,057,388			3.42	%		MONTHLY	$	(72,920	)
SWAP LIABILITIES		FAIR VALUE		(17,057,388	)		(3.42	)		MONTHLY		72,920
NET EXPOSURE				—			—					—

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Segment Results (Tables)

9 Months Ended

Sep. 30, 2017

Segment Results [Abstract]

Schedule of Segment Reporting Information, by Segment [Table Text Block]

The contribution of the major business segments to the Consolidated Statements of Operations for the three and nine months ended September 30, 2017 and 2016 were as follows (in thousands):

	Three months ended September 30, 2017						Nine months ended September 30, 2017
	Total revenue			Net income (loss)			Total revenue			Net income (loss)
Retail banking	$	6,443		$	794		$	19,138		$	2,159
Commercial banking		4,722			1,412			14,269			4,295
Trust		2,223			335			6,804			991
Investment/Parent		(822	)		(990	)		(2,708	)		(3,157	)
Total	$	12,556		$	1,551		$	37,503		$	4,288

	Three months ended September 30, 2016						Nine months ended September 30, 2016
	Total revenue			Net income (loss)			Total revenue			Net income (loss)
Retail banking	$	6,653		$	857		$	19,543		$	2,335
Commercial banking		4,757			1,352			14,123			1,884
Trust		2,125			195			6,504			740
Investment/Parent		(1,368	)		(1,339	)		(3,780	)		(3,799	)
Total	$	12,167		$	1,065		$	36,390		$	1,160

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Pension Benefits (Tables)

9 Months Ended

Sep. 30, 2017

Pension Benefits [Abstract]

Schedule of Net Benefit Costs [Table Text Block]

The net periodic pension cost for the three and nine months ended September 30, 2017 and 2016 were as follows (in thousands):

	Three months ended September 30,						Nine months ended September 30,
	2017			2016			2017			2016
Components of net periodic benefit cost
Service cost	$	390		$	368		$	1,170		$	1,104
Interest cost		326			344			978			1,032
Expected return on plan assets		(631	)		(563	)		(1,893	)		(1,689	)
Recognized net actuarial loss		367			314			1,101			942
Net periodic pension cost	$	452		$	463		$	1,356		$	1,389

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Disclosures about Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 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 September 30, 2017 Using
	Total			(Level 1)		(Level 2)		(Level 3)
US Agency securities	$	5,402		$	—	$	5,402	$	—
US Agency mortgage-backed securities		81,240			—		81,240		—
Taxable municipal		7,067			—		7,067		—
Corporate bonds		35,737			—		35,737		—
Fair value swap asset		84			—		—		84
Fair value swap liability		(84	)		—		—		(84	)

	Fair Value Measurements at December 31, 2016 Using
	Total		(Level 1)		(Level 2)		(Level 3)
US Agency securities	$	398	$	—	$	398	$	—
US Agency mortgage-backed securities		89,184		—		89,184		—
Taxable municipal		3,622		—		3,622		—
Corporate bonds		33,873		—		33,873		—

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, except range data):

	Fair Value Measurements at September 30, 2017 Using
	Total		(Level 1)		(Level 2)		(Level 3)
Impaired loans	$	3,035	$	—	$	—	$	3,035
Other real estate owned		39		—		—		39

	Fair Value Measurements at December 31, 2016 Using
	Total		(Level 1)		(Level 2)		(Level 3)
Impaired loans	$	147	$	—	$	—	$	147
Other real estate owned		21		—		—		21

September 30, 2017	Quantitative Information About Level 3 Fair Value Measurements
	Fair Value Estimate		Valuation Techniques		Unobservable Input		Range (Wgtd Ave)
Impaired loans	$	3,035		Appraisal of collateral(1),(3)		Appraisal adjustments(2)		40% to 77%(42%)
Other real estate owned		39		Appraisal of collateral(1),(3)		Appraisal adjustments(2) Liquidation expenses		43% to 45%(43%) 2% to 206%(64%)

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

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

Fair Value, by Balance Sheet Grouping [Table Text Block]

The estimation methodologies used, the estimated fair values based on US GAAP measurements, and recorded book balances at September 30, 2017 and December 31, 2016, were as follows (in thousands):

	September 30, 2017
	Carrying Value		Fair Value		(Level 1)		(Level 2)		(Level 3)
FINANCIAL ASSETS:
Cash and cash equivalents	$	28,675	$	28,675	$	28,675	$	—	$	—
Investment securities – AFS		129,446		129,446		—		129,446		—
Investment securities – HTM		38,997		39,059		—		36,105		2,954
Regulatory stock		6,554		6,554		6,554		—		—
Loans held for sale		1,780		1,801		1,801		—		—
Loans, net of allowance for loan loss and unearned income		885,864		884,359		—		—		884,359
Accrued interest income receivable		3,503		3,503		3,503		—		—
Bank owned life insurance		37,716		37,716		37,716		—		—
Fair value swap asset		84		84		—		—		84
FINANCIAL LIABILITIES:
Deposits with no stated maturities	$	707,566	$	707,566	$	707,566	$	—	$	—
Deposits with stated maturities		259,355		260,498		—		—		260,498
Short-term borrowings		33,593		33,593		33,593		—		—
All other borrowings		64,420		67,962		—		—		67,962
Accrued interest payable		1,622		1,622		1,622		—		—
Fair value swap liability		84		84		—		—		84

	December 31, 2016
	Carrying Value		Fair Value		(Level 1)		(Level 2)		(Level 3)
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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Principles of Consolidation (Details Textual) $ in Billions	Sep. 30, 2017 USD ($)
Number of locations	16
Trust and financial services and administers assets	$ 2.1

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Earnings Per Common Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Numerator:
Net income	$ 1,551	$ 1,065	$ 4,288	$ 1,160
Preferred stock dividends	0	0	0	(15)
Net income available to common shareholders	$ 1,551	$ 1,065	$ 4,288	$ 1,145
Denominator:
Weighted average common shares outstanding (basic)	18,380	18,899	18,590	18,893
Effect of stock options	101	58	99	54
Weighted average common shares outstanding (diluted)	18,481	18,957	18,689	18,947
Earnings per common share:
Basic	$ 0.08	$ 0.06	$ 0.23	$ 0.06
Diluted	$ 0.08	$ 0.06	$ 0.23	$ 0.06

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Earnings Per Common Share (Details Textual) - $ / shares	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Shares not included in computation of earnings per common share	10,000	147,968
Exercise price of common shares	$ 4.00
Minimum [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Exercise price of common shares		$ 3.18
Maximum [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Exercise price of common shares		$ 4.60

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Consolidated Statement of Cash Flows (Details Textual) - USD ($)	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Income tax payments	$ 975,000	$ 390,000
Total interest payments	6,447,000	5,755,000
Non-cash transfers to other real estate owned	$ 59,000	$ 151,000

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Investment Securities (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Available-For-Sale-Securities-And-Held-To-Maturity-Securities
Investment securities available for sale, Cost Basis	$ 129,280	$ 127,334
Investment securities available for sale, Gross Unrealized Gains	1,224	1,329
Investment securities available for sale, Gross Unrealized Losses	(1,058)	(1,586)
Available for Sale, Fair Value, Total	129,446	127,077
Investment securities held to maturity, Cost Basis	38,997	30,665
Investment securities held to maturity, Gross Unrealized Gains	445	265
Investment securities held to maturity, Gross Unrealized Losses	(383)	(510)
Held to Maturity, Fair Value, Total	39,059	30,420
U.S. Agency [Member]
Available-For-Sale-Securities-And-Held-To-Maturity-Securities
Investment securities available for sale, Cost Basis	5,435	400
Investment securities available for sale, Gross Unrealized Gains	1	0
Investment securities available for sale, Gross Unrealized Losses	(34)	(2)
Available for Sale, Fair Value, Total	5,402	398
U.S. Agency mortgage-backed securities [Member]
Available-For-Sale-Securities-And-Held-To-Maturity-Securities
Investment securities available for sale, Cost Basis	80,756	88,738
Investment securities available for sale, Gross Unrealized Gains	866	1,132
Investment securities available for sale, Gross Unrealized Losses	(382)	(686)
Available for Sale, Fair Value, Total	81,240	89,184
Investment securities held to maturity, Cost Basis	10,081	11,177
Investment securities held to maturity, Gross Unrealized Gains	194	180
Investment securities held to maturity, Gross Unrealized Losses	(23)	(79)
Held to Maturity, Fair Value, Total	10,252	11,278
Taxable Municipal [Member]
Available-For-Sale-Securities-And-Held-To-Maturity-Securities
Investment securities available for sale, Cost Basis	7,203	3,793
Investment securities available for sale, Gross Unrealized Gains	30	3
Investment securities available for sale, Gross Unrealized Losses	(166)	(174)
Available for Sale, Fair Value, Total	7,067	3,622
Investment securities held to maturity, Cost Basis	22,873	13,441
Investment securities held to maturity, Gross Unrealized Gains	222	70
Investment securities held to maturity, Gross Unrealized Losses	(314)	(348)
Held to Maturity, Fair Value, Total	22,781	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	327	194
Investment securities available for sale, Gross Unrealized Losses	(476)	(724)
Available for Sale, Fair Value, Total	35,737	33,873
Corporate bonds and other securities [Member]
Available-For-Sale-Securities-And-Held-To-Maturity-Securities
Investment securities held to maturity, Cost Basis	6,043	6,047
Investment securities held to maturity, Gross Unrealized Gains	29	15
Investment securities held to maturity, Gross Unrealized Losses	(46)	(83)
Held to Maturity, Fair Value, Total	$ 6,026	$ 5,979

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Investment Securities (Details 1) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Information concerning investments with unrealized losses
Less than 12 months, Fair Value	$ 66,255	$ 83,997
Less than 12 months, Unrealized Losses	(936)	(1,797)
12 months or longer, Fair Value	16,075	8,338
12 months or longer, Unrealized Losses	(505)	(299)
Total, Fair Value	82,330	92,335
Total, Unrealized Losses	(1,441)	(2,096)
U.S. Agency [Member]
Information concerning investments with unrealized losses
Less than 12 months, Fair Value	3,990	398
Less than 12 months, Unrealized Losses	(33)	(2)
12 months or longer, Fair Value	399	0
12 months or longer, Unrealized Losses	(1)	0
Total, Fair Value	4,389	398
Total, Unrealized Losses	(34)	(2)
U.S. Agency mortgage-backed securities [Member]
Information concerning investments with unrealized losses
Less than 12 months, Fair Value	38,127	49,918
Less than 12 months, Unrealized Losses	(321)	(703)
12 months or longer, Fair Value	3,239	1,576
12 months or longer, Unrealized Losses	(84)	(62)
Total, Fair Value	41,366	51,494
Total, Unrealized Losses	(405)	(765)
Taxable Municipal [Member]
Information concerning investments with unrealized losses
Less than 12 months, Fair Value	11,724	13,301
Less than 12 months, Unrealized Losses	(377)	(522)
12 months or longer, Fair Value	2,172	0
12 months or longer, Unrealized Losses	(103)	0
Total, Fair Value	13,896	13,301
Total, Unrealized Losses	(480)	(522)
Corporate bonds and other securities [Member]
Information concerning investments with unrealized losses
Less than 12 months, Fair Value	12,414	20,380
Less than 12 months, Unrealized Losses	(205)	(570)
12 months or longer, Fair Value	10,265	6,762
12 months or longer, Unrealized Losses	(317)	(237)
Total, Fair Value	22,679	27,142
Total, Unrealized Losses	$ (522)	$ (807)

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Investment Securities (Details 2) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Contractual maturities of securities
Available for Sale, Cost Basis, Within 1 year	$ 1,400
Available for Sale, Cost Basis, After 1 year but within 5 years	11,706
Available for Sale, Cost Basis, After 5 years but within 10 years	45,805
Available for Sale, Cost Basis, After 10 years but within 15 years	27,738
Available for Sale, Cost Basis, Over 15 years	42,631
Available for Sale, Cost Basis, Total	129,280
Available for Sale, Fair Value, Within 1 year	1,399
Available for Sale, Fair Value, After 1 year but within 5 years	11,718
Available for Sale, Fair Value, After 5 years but within 10 years	45,999
Available for Sale, Fair Value, After 10 years but within 15 years	27,609
Available for Sale, Fair Value, Over 15 years	42,721
Available for Sale, Fair Value, Total	129,446	$ 127,077
Held to Maturity, Cost Basis, Within 1 year	2,000
Held to Maturity, Cost Basis, After 1 year but within 5 years	1,551
Held to Maturity, Cost Basis, After 5 years but within 10 years	14,562
Held to Maturity, Cost Basis, After 10 years but within 15 years	14,924
Held to Maturity, Cost Basis, Over 15 years	5,960
Held to Maturity, Cost Basis, Total	38,997	30,665
Held to Maturity, Fair Value, Within 1 year	1,975
Held to Maturity, Fair Value, After 1 year but within 5 years	1,533
Held to Maturity, Fair Value, After 5 years but within 10 years	14,639
Held to Maturity, Fair Value, After 10 years but within 15 years	14,824
Held to Maturity, Fair Value, Over 15 years	6,088
Held to Maturity, Fair Value, Total	$ 39,059	$ 30,420

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Investment Securities (Details Textual) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Investments [Line Items]
Gross investment gains	$ 56,000	$ 60,000	$ 115,000	$ 183,000
Gross investment losses				6,000
Investment Securities:
Proceeds from sales of investment securities — available for sale	937,000	$ 1,500,000	8,143,000	$ 8,966,000
Book value of securities available for sale and held to maturity	$ 114,589,000		$ 114,589,000		$ 104,953,000
Held-to-maturity, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions	104		104
Standard & Poor's, AAA Rating [Member]
Investments [Line Items]
Portfolio rated	57.80%		57.80%		63.50%
Standard & Poor's, A Rating [Member]
Investments [Line Items]
Portfolio rated	12.80%		12.80%		10.10%
Maximum [Member]
Investment Securities:
Consolidated investment securities portfolio modified, years			60 months
Maximum [Member] | Standard & Poor's, A Rating [Member]
Investment Securities:
Consolidated investment securities portfolio modified, years			44 months 6 days
Minimum [Member]
Investment Securities:
Consolidated investment securities portfolio modified, years			24 months
Minimum [Member] | Standard & Poor's, A Rating [Member]
Investment Securities:
Consolidated investment securities portfolio modified, years			41 months 6 days

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Loans (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, net of unearned income	$ 896,210	$ 883,764
Commercial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, net of unearned income	160,918	171,529
Commercial loans secured by real estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, net of unearned income	469,348	446,598
Real estate-mortgage [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, net of unearned income	246,881	245,765
Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, net of unearned income	$ 19,063	$ 19,872

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Loans (Details Textual) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Financing Receivable, Impaired [Line Items]
Real estate-construction loans, percentage	3.60%	4.70%
Loan balances net of unearned income	$ 438	$ 476

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Allowance for Loan Losses (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Accounts, Notes, Loans and Financing Receivable [Line Items]
Balance at Beginning of Period	$ 10,391	$ 9,746	$ 9,932	$ 9,921
Charge-Offs	(379)	(469)	(643)	(4,113)
Recoveries	134	149	307	268
Provision (Credit)	200	300	750	3,650
Balance at End of Period	10,346	9,726	10,346	9,726
Commercial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Balance at Beginning of Period	3,825	4,322	4,041	4,244
Charge-Offs	(228)	(295)	(228)	(3,648)
Recoveries	9	115	22	126
Provision (Credit)	561	92	332	3,512
Balance at End of Period	4,167	4,234	4,167	4,234
Commercial loans secured by real estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Balance at Beginning of Period	4,487	3,274	3,584	3,449
Charge-Offs	0	(13)	(14)	(13)
Recoveries	3	2	8	38
Provision (Credit)	(644)	85	268	(126)
Balance at End of Period	3,846	3,348	3,846	3,348
Real estate-mortgage [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Balance at Beginning of Period	1,151	1,075	1,169	1,173
Charge-Offs	(109)	(104)	(263)	(150)
Recoveries	72	24	165	86
Provision (Credit)	50	77	93	(37)
Balance at End of Period	1,164	1,072	1,164	1,072
Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Balance at Beginning of Period	138	135	151	151
Charge-Offs	(42)	(57)	(138)	(302)
Recoveries	50	8	112	18
Provision (Credit)	(7)	53	14	272
Balance at End of Period	139	139	139	139
Allocation for general risk [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Balance at Beginning of Period	790	940	987	904
Charge-Offs	0	0	0	0
Recoveries	0	0	0	0
Provision (Credit)	240	(7)	43	29
Balance at End of Period	$ 1,030	$ 933	$ 1,030	$ 933

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Allowance for Loan Losses (Details 1) - USD ($) $ in Thousands	Sep. 30, 2017	Jun. 30, 2017	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Dec. 31, 2015
Loans:
Individually evaluated for impairment	$ 3,923		$ 674
Collectively evaluated for impairment	892,287		883,090
Total loans	896,210		883,764
Allowance for loan losses:
Specific reserve allocation	888		527
General reserve allocation	9,458		9,405
Total allowance for loan losses	10,346	$ 10,391	9,932	$ 9,726	$ 9,746	$ 9,921
Commercial [Member]
Loans:
Individually evaluated for impairment	1,458		496
Collectively evaluated for impairment	159,460		171,033
Total loans	160,918		171,529
Allowance for loan losses:
Specific reserve allocation	860		496
General reserve allocation	3,307		3,545
Total allowance for loan losses	4,167	3,825	4,041	4,234	4,322	4,244
Commercial loans secured by real estate [Member]
Loans:
Individually evaluated for impairment	2,465		178
Collectively evaluated for impairment	466,883		446,420
Total loans	469,348		446,598
Allowance for loan losses:
Specific reserve allocation	28		31
General reserve allocation	3,818		3,553
Total allowance for loan losses	3,846	4,487	3,584	3,348	3,274	3,449
Real estate-mortgage [Member]
Loans:
Individually evaluated for impairment	0		0
Collectively evaluated for impairment	246,881		245,765
Total loans	246,881		245,765
Allowance for loan losses:
Specific reserve allocation	0		0
General reserve allocation	1,164		1,169
Total allowance for loan losses	1,164	1,151	1,169	1,072	1,075	1,173
Consumer [Member]
Loans:
Individually evaluated for impairment	0		0
Collectively evaluated for impairment	19,063		19,872
Total loans	19,063		19,872
Allowance for loan losses:
Specific reserve allocation	0		0
General reserve allocation	139		151
Total allowance for loan losses	139	138	151	139	135	151
Allocation for general risk [Member]
Loans:
Individually evaluated for impairment
Collectively evaluated for impairment
Total loans
Allowance for loan losses:
Specific reserve allocation	0		0
General reserve allocation	1,030		987
Total allowance for loan losses	$ 1,030	$ 790	$ 987	$ 933	$ 940	$ 904

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Allowance for Loan Losses (Details 2) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Accounts, Notes, Loans and Financing Receivable [Line Items]
Recorded Investment	$ 3,923	$ 674
Related Allowance	888	527
Unpaid Principal Balance	3,957	726
Commercial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Recorded Investment	1,458	496
Unpaid Principal Balance	1,458	517
Commercial loans secured by real estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Recorded Investment	2,465	178
Unpaid Principal Balance	2,499	209
Impaired Loans with Specific Allowance [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Recorded Investment	1,599	658
Related Allowance	888	527
Impaired Loans with Specific Allowance [Member] | Commercial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Recorded Investment	1,448	496
Related Allowance	860	496
Impaired Loans with Specific Allowance [Member] | Commercial loans secured by real estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Recorded Investment	151	162
Related Allowance	28	31
Impaired Loans with No Specific Allowance [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Recorded Investment	2,324	16
Impaired Loans with No Specific Allowance [Member] | Commercial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Recorded Investment	10	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	$ 2,314	$ 16

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Allowance for Loan Losses (Details 3) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Average loan balance:
Average investment in impaired loans	$ 2,618	$ 1,104	$ 1,641	$ 1,441
Interest income recognized:
Interest income recognized on a cash basis on impaired loans	9	1	26	17
Commercial [Member]
Average loan balance:
Average investment in impaired loans	1,302	821	816	992
Interest income recognized:
Interest income recognized on a cash basis on impaired loans	9	1	24	9
Commercial loans secured by real estate [Member]
Average loan balance:
Average investment in impaired loans	1,316	283	825	449
Interest income recognized:
Interest income recognized on a cash basis on impaired loans	$ 0	$ 0	$ 2	$ 8

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Allowance for Loan Losses (Details 4) - Commercial Portfolio Segment [Member] - USD ($) $ in Thousands	Sep. 30, 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	$ 630,266	$ 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	160,918	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	469,348	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	606,935	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	158,169	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	448,766	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	16,600	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	76	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	16,524	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	6,467	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	2,423	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	4,044	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	264	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	250	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	$ 14	$ 16

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Allowance for Loan Losses (Details 5) - Consumer Portfolio Segment [Member] - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Performing [Member]
Performing and non-performing outstanding balances of the residential and consumer portfolios
Loan portfolio	$ 264,535	$ 264,708
Performing [Member] | Real estate-mortgage [Member]
Performing and non-performing outstanding balances of the residential and consumer portfolios
Loan portfolio	245,479	244,836
Performing [Member] | Consumer [Member]
Performing and non-performing outstanding balances of the residential and consumer portfolios
Loan portfolio	19,056	19,872
Non-Performing [Member]
Performing and non-performing outstanding balances of the residential and consumer portfolios
Loan portfolio	1,409	929
Non-Performing [Member] | Real estate-mortgage [Member]
Performing and non-performing outstanding balances of the residential and consumer portfolios
Loan portfolio	1,402	929
Non-Performing [Member] | Consumer [Member]
Performing and non-performing outstanding balances of the residential and consumer portfolios
Loan portfolio	$ 7	$ 0

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Allowance for Loan Losses (Details 6) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans
Current	$ 882,806	$ 879,366
Past Due	13,404	4,398
Total loans	896,210	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	9,147	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	873	637
90 Days Past Due [Member]
Classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans
Past Due	3,384	497
Commercial [Member]
Classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans
Current	159,529	171,292
Past Due	1,389	237
Total loans	160,918	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	1,228	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	161	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	461,506	446,477
Past Due	7,842	121
Total loans	469,348	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	5,358	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	0	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	2,484	0
Real estate-mortgage [Member]
Classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans
Current	242,793	241,802
Past Due	4,088	3,963
Total loans	246,881	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	2,488	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	861	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	739	497
Consumer [Member]
Classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans
Current	18,978	19,795
Past Due	85	77
Total loans	19,063	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	73	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	12	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

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Allowance for Loan Losses (Details Textual)	9 Months Ended
	Sep. 30, 2017 USD ($)
Accounts, Notes, Loans and Financing Receivable [Line Items]
Individual loan balance is classified as nonaccrual status or troubled debt restructure	$ 100,000
Commercial Loan [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Threshold for individually evaluating loans	250,000
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%

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Non-performing Assets Including Troubled Debt Restructurings (TDR) (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Non-performing assets including TDR
Non-accrual loans	$ 4,655	$ 1,603
Other real estate owned	39	21
TDR’s not in non-accrual	678	0
Total non-performing assets including TDR	$ 5,372	$ 1,624
Total non-performing assets as a percent of loans, net of unearned income, and other real estate owned	0.60%	0.18%
Commercial [Member]
Non-performing assets including TDR
Non-accrual loans	$ 461	$ 496
Commercial loans secured by real estate [Member]
Non-performing assets including TDR
Non-accrual loans	2,785	178
Real estate-mortgage [Member]
Non-performing assets including TDR
Non-accrual loans	1,402	929
Other real estate owned	39	21
Consumer [Member]
Non-performing assets including TDR
Non-accrual loans	$ 7	$ 0

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Non-performing Assets Including Troubled Debt Restructurings (TDR) (Details 1) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Schedule of Interest Income
Interest income due in accordance with original terms	$ 32	$ 20	$ 65	$ 99
Interest income recorded	0	0	0	0
Net reduction in interest income	$ 32	$ 20	$ 65	$ 99

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Non-performing Assets Including Troubled Debt Restructurings (TDR) (Details 2) $ in Thousands	9 Months Ended
	Sep. 30, 2017 USD ($)	Sep. 30, 2016 USD ($)
Schedule of TDRs
Number of loans	2	2
Current Balance	$ 678	$ 507
Concession Granted	Extension of maturity date with interest only period	Extension of maturity date with interest only period

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Non-performing Assets Including Troubled Debt Restructurings (TDR) (Details Textual) - USD ($)	9 Months Ended
	Sep. 30, 2017	Dec. 31, 2016	Sep. 30, 2016
Aggregate of multiple consecutive maturity date extensions delay in payment, days	120 days
Timely payments on contract terms for minimum consecutive months prior to consideration for removing loan from TDR status	6 months
Minimum consecutive months payment for removing the loan from non-accrual status	6 months
ALL reserve for TDR's	$ 390,000		$ 507,000
Mortgage Loans in Process of Foreclosure, Amount	297,000
Residential Real Estate [Member]
Other Assets, Noncurrent	$ 39,000	$ 21,000

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Federal Home Loan Bank Borrowings (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Federal Home Loan Bank (FHLB) borrowings and advances
Open Repo Plus	$ 33,593	$ 12,754
Advances 2017, Amount	1,000	12,000
Advances 2018, Amount	12,000	12,000
Advances 2019, Amount	12,500	12,500
Advances 2020, Amount	13,542	8,042
Advances 2021 and over, Amount	5,000	1,000
Advances from Federal Home Loan Bank	44,042	45,542
Total FHLB borrowings, Amount	$ 77,635	$ 58,296
Open Repo Plus Maturity Overnight, Weighted Average Rate	0.94%	0.74%
Advances Maturing 2017, Weighted Average Rate	0.88%	1.06%
Advances Maturing 2018, Weighted Average Rate	1.48%	1.48%
Advances Maturing 2019, Weighted Average Rate	1.51%	1.51%
Advances Maturing 2020, Weighted Average Rate	1.67%	1.59%
Advances Maturing 2021 and over, Weighted Average Rate	1.68%	1.60%
Total FHLB borrowings, Weighted Average Rate	1.30%	1.23%
Weighted Average [Member]
Federal Home Loan Bank (FHLB) borrowings and advances
Advances from Federal Home Loan Bank	$ 44,042	$ 45,542
Total advances, Weighted Average Rate	1.57%	1.37%

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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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Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Thousands		3 Months Ended		9 Months Ended
		Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Accumulated Other Comprehensive Loss [Line Items]
Beginning balance	[1]	$ (11,064)	$ (6,065)	$ (11,577)	$ (7,555)
Other comprehensive income (loss) before reclassifications	[1]	377	48	929	1,615
Amounts reclassified from accumulated other comprehensive loss	[1]	(37)	(40)	(76)	(117)
Net current period other comprehensive income (loss)	[1]	340	8	853	1,498
Ending balance	[1]	(10,724)	(6,057)	(10,724)	(6,057)
Net Unrealized Gains and (Losses) on Investment Securities AFS [Member]
Accumulated Other Comprehensive Loss [Line Items]
Beginning balance	[1]	30	1,791	(171)	808
Other comprehensive income (loss) before reclassifications	[1]	116	(126)	356	934
Amounts reclassified from accumulated other comprehensive loss	[1]	(37)	(40)	(76)	(117)
Net current period other comprehensive income (loss)	[1]	79	(166)	280	817
Ending balance	[1]	109	1,625	109	1,625
Defined Benefit Pension Items [Member]
Accumulated Other Comprehensive Loss [Line Items]
Beginning balance	[1]	(11,094)	(7,856)	(11,406)	(8,363)
Other comprehensive income (loss) before reclassifications	[1]	261	174	573	681
Amounts reclassified from accumulated other comprehensive loss	[1]	0	0	0	0
Net current period other comprehensive income (loss)	[1]	261	174	573	681
Ending balance	[1]	$ (10,833)	$ (7,682)	$ (10,833)	$ (7,682)

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

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Accumulated Other Comprehensive Loss (Details 1) - USD ($) $ in Thousands		3 Months Ended		9 Months Ended
		Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Realized gains on sale of securities
Net realized gains on investment securities	[1]	$ (56)	$ (60)	$ (115)	$ (177)
Provision for income tax expense	[1]	19	20	39	60
Net of tax	[1]	(37)	(40)	(76)	(117)
Amortization of defined benefit items
Total reclassifications for the period	[1]	$ (37)	$ (40)	$ (76)	$ (117)

[1] Amounts in parentheses indicate credits.

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Regulatory Capital (Details) - USD ($) $ in Thousands		Sep. 30, 2017	Dec. 31, 2016
Summarized regulatory capital ratio of company
Total Capital (To RWA), Actual Amount		$ 109,915	$ 107,618
Tier 1 Common Equity (To RWA), Actual Amount		98,695	96,796
Tier 1 Capital (To RWA), Actual Amount		98,695	96,796
Tier 1 Capital (To Average Assets), Actual Amount		$ 98,695	$ 96,796
Total Capital (To RWA), Actual Ratio		11.44%	11.35%
Tier 1 Common Equity (To RWA), Actual Ratio		10.28%	10.21%
Tier 1 Capital (To RWA), Actual Ratio		10.28%	10.21%
Tier 1 Capital (To Average Assets), Actual Ratio		8.68%	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		$ 126,357	$ 125,131
Tier 1 Common Equity (To RWA), Actual Amount		95,839	95,028
Tier 1 Capital (To RWA), Actual Amount		107,678	106,868
Tier 1 Capital (To Average Assets), Actual Amount		$ 107,678	$ 106,868
Total Capital (To RWA), Actual Ratio		13.08%	13.15%
Tier 1 Common Equity (To RWA), Actual Ratio		9.92%	9.99%
Tier 1 Capital (To RWA), Actual Ratio		11.15%	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)	Sep. 30, 2017
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Tangible Capital to Tangible Assets	7.35%

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DERIVATIVE HEDGING INSTRUMENTS (Details)	9 Months Ended
	Sep. 30, 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	$ (17,057,388)
Derivative Instruments, Repricing Frequency	MONTHLY
Increase (Decrease) in Fair Value of Interest Rate Fair Value Hedging Instruments	$ 72,920
Derivative Instruments Weighted Average Interest Rate Received Paid	(3.42%)
Derivative Financial Instruments, Assets [Member] | Swap [Member]
Derivative, Swap Type	FAIR VALUE
Derivative, Notional Amount	$ 17,057,388
Derivative Instruments, Repricing Frequency	MONTHLY
Increase (Decrease) in Fair Value of Interest Rate Fair Value Hedging Instruments	$ (72,920)
Derivative Instruments Weighted Average Interest Rate Received Paid	3.42%

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DERIVATIVE HEDGING INSTRUMENTS (Details Textual)	9 Months Ended
	Sep. 30, 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		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Contribution of segments to the consolidated results of operations
Total revenue	$ 12,556	$ 12,167	$ 37,503	$ 36,390
Net income (loss)	1,551	1,065	4,288	1,160
Retail banking [Member]
Contribution of segments to the consolidated results of operations
Total revenue	6,443	6,653	19,138	19,543
Net income (loss)	794	857	2,159	2,335
Commercial Banking [Member]
Contribution of segments to the consolidated results of operations
Total revenue	4,722	4,757	14,269	14,123
Net income (loss)	1,412	1,352	4,295	1,884
Trust [Member]
Contribution of segments to the consolidated results of operations
Total revenue	2,223	2,125	6,804	6,504
Net income (loss)	335	195	991	740
Investment/ Parent [Member]
Contribution of segments to the consolidated results of operations
Total revenue	(822)	(1,368)	(2,708)	(3,780)
Net income (loss)	$ (990)	$ (1,339)	$ (3,157)	$ (3,799)

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Commitments and Contingent Liabilities (Details Textual) - USD ($) $ in Millions	Sep. 30, 2017	Dec. 31, 2016
Commitments to extend credit [Member]
Loss Contingencies [Line Items]
Amount of commitment	$ 169.6	$ 160.5
Standby letters of credit [Member]
Loss Contingencies [Line Items]
Amount of commitment	$ 10.3	$ 8.5

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Pension Benefits (Details) - Pension Plans, Defined Benefit [Member] - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Components of net periodic benefit cost
Service cost	$ 390	$ 368	$ 1,170	$ 1,104
Interest cost	326	344	978	1,032
Expected return on plan assets	(631)	(563)	(1,893)	(1,689)
Recognized net actuarial loss	367	314	1,101	942
Net periodic pension cost	$ 452	$ 463	$ 1,356	$ 1,389

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Pension Benefits (Details Textual)	9 Months Ended
	Sep. 30, 2017
Pension Benefits [Line Items]
Minimum number of annual hours	1,000
Vesting term	5 years
Maximum percent of plan assets comprised of AmeriServ Financial, Inc. common stock	10.00%

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Disclosures about Fair Value Measurements (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale	$ 129,446	$ 127,077
Fair value swap liability	(84)
U.S. Agency Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale	5,402	398
Taxable Municipal Bonds [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale	7,067	3,622
Corporate Bond Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale	35,737	33,873
U.S. Agency mortgage-backed securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale	81,240	89,184
Fair value swap asset [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale	84
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	5,402	398
Level 2 [Member] | Taxable Municipal Bonds [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale	7,067	3,622
Level 2 [Member] | Corporate Bond Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale	35,737	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	81,240	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	(84)
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	$ 84

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Disclosures about Fair Value Measurements (Details 1) - USD ($) $ in Thousands		9 Months Ended	12 Months Ended
		Sep. 30, 2017	Dec. 31, 2016
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Impaired loans		$ 3,923	$ 674
Fair Value Measurements, Nonrecurring Basis [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Impaired loans		3,035	147
Other real estate owned		39	21
Fair Value Measurements, Nonrecurring Basis [Member] | Impaired Loans [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Impaired loans		$ 3,035	$ 147
Valuation Techniques	[1],[2]	Appraisal of collateral	Appraisal of collateral
Appraisal of Adjustment	[3]	42.00%	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		$ 39	$ 21
Valuation Techniques	[1],[2]	Appraisal of collateral	Appraisal of collateral
Appraisal of Adjustment	[3]	43.00%	42.00%
Liquidation expenses		64.00%	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	[3]	40.00%	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	[3]	43.00%	20.00%
Liquidation expenses		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	[3]	77.00%	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	[3]	45.00%	77.00%
Liquidation expenses		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		3,035	147
Other real estate owned		$ 39	$ 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] Includes qualitative adjustments by management and estimated liquidation expenses.

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

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Disclosures about Fair Value Measurements (Details 2) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016	Sep. 30, 2016	Dec. 31, 2015
FINANCIAL ASSETS: Carrying Value
Cash and cash equivalents	$ 28,675	$ 34,073	$ 30,520	$ 48,510
Investment securities - AFS	129,446	127,077
Investment securities - HTM	38,997	30,665
Regulatory stock	6,554	5,484
Loans held for sale	1,780	3,094
Loans, net of allowance for loan loss and unearned income	885,864	873,832
Accrued interest income receivable	3,503	3,116
Bank owned life insurance	37,716	37,903
Fair value swap asset	84
Cash and cash equivalents	28,675	34,073
Investment securities - AFS	129,446	127,077
Investment securities - HTM	39,059	30,420
Regulatory stock	6,554	5,484
Loans held for sale	1,801	3,158
Loans, net of allowance for loan loss and unearned income	884,359	869,960
Accrued interest income receivable	3,503	3,116
Bank owned life insurance	37,716	37,903
Fair value swap asset	84
FINANCIAL LIABILITIES: Carrying Value
Deposits with no stated maturities	707,566	708,062
Deposits with stated maturities	259,355	259,724
Short-term borrowings	33,593	12,754
All other borrowings	64,420	65,891
Accrued interest payable	1,622	1,640
Fair value swap liability	84
Deposits with no stated maturities	707,566	708,062
Deposits with stated maturities	260,498	261,446
Short-term borrowings	33,593	12,754
All other borrowings	67,962	69,348
Accrued interest payable	1,622	1,640
Fair value swap liability	84
Level 1 [Member]
FINANCIAL ASSETS: Carrying Value
Cash and cash equivalents	28,675	34,073
Investment securities - AFS	0	0
Investment securities - HTM	0	0
Regulatory stock	6,554	5,484
Loans held for sale	1,801	3,158
Loans, net of allowance for loan loss and unearned income	0	0
Accrued interest income receivable	3,503	3,116
Bank owned life insurance	37,716	37,903
Fair value swap asset	0
FINANCIAL LIABILITIES: Carrying Value
Fair value swap liability	0
Deposits with no stated maturities	707,566	708,062
Deposits with stated maturities	0	0
Short-term borrowings	33,593	12,754
All other borrowings	0	0
Accrued interest payable	1,622	1,640
Fair value swap liability	0
Level 2 [Member]
FINANCIAL ASSETS: Carrying Value
Cash and cash equivalents	0	0
Investment securities - AFS	129,446	127,077
Investment securities - HTM	36,105	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	2,954	2,947
Regulatory stock	0	0
Loans held for sale	0	0
Loans, net of allowance for loan loss and unearned income	884,359	869,960
Accrued interest income receivable	0	0
Bank owned life insurance	0	0
Fair value swap asset	84
FINANCIAL LIABILITIES: Carrying Value
Fair value swap liability	84
Deposits with no stated maturities	0	0
Deposits with stated maturities	260,498	261,446
Short-term borrowings	0	0
All other borrowings	67,962	69,348
Accrued interest payable	0	$ 0
Fair value swap liability	$ 84

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Disclosures about Fair Value Measurements (Details Textual) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2017	Dec. 31, 2016
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Carrying value of impaired loans	$ 3,923	$ 674
Specific valuation allowance	888	527
Net fair value of impaired loans	$ 3,000	$ 147
Assets and liabilities considered financial instruments, percentage	90.00%