AMERISERV FINANCIAL INC PA

Previous wording

**…..NET INTEREST INCOME AND MARGIN…..**The Company’s net interest income represents the amount by which interest income on earning assets exceeds interest paid on interest bearing liabilities. Net interest income is a primary source of the Company’s earnings, and it is affected by interest rate fluctuations as well as changes in the amount and mix of earning assets and interest bearing liabilities. The following table compares the Company’s net interest income performance for the first quarter of 2024 to the first quarter of 2023 (in thousands, except percentages):

Current wording

**…..NET INTEREST INCOME AND MARGIN…..**The Company’s net interest income represents the amount by which interest income on earning assets exceeds interest paid on interest bearing liabilities. Net interest income is a primary source of the Company’s earnings, and it is affected by interest rate fluctuations as well as changes in the amount and mix of earning assets and interest bearing liabilities. The following table compares the Company’s net interest income performance for the second quarter of 2024 to the second quarter of 2023 (in thousands, except percentages):

Previous wording

The Company's net interest income in the first quarter of 2024 decreased by $775,000, or 8.1%, from the prior year's first quarter while the net interest margin of 2.70% for the first quarter of 2024 represents a 33-basis point decrease from the first quarter of 2023. The decrease reflects net interest margin compression which has been prevalent in the banking industry since the Federal Reserve began tightening monetary policy in an effort to control inflation. Additionally, contributing to net interest margin compression is the inverted U.S. Treasury yield curve. While the Company’s net interest margin percentage in the first quarter of 2024 compares unfavorably to last year’s first quarter, it did improve since the fourth quarter of 2023 by seven basis points. This improvement reversed a declining trend that existed for five consecutive quarters and reflects the Federal Reserve keeping interest rates stable since July 2023 along with the impact of management’s pricing of loans and deposits.

Current wording

The Company's net interest income in the second quarter of 2024 decreased by $235,000, or 2.6%, from the prior year's second quarter while the net interest margin of 2.74% for the second quarter of 2024 represents a 15-basis point decrease from the second quarter of 2023. The decrease reflects net interest margin compression which has been prevalent in the banking industry since the Federal Reserve began tightening monetary policy in an effort to control inflation. Additionally, contributing to net interest margin compression was the inverted U.S. Treasury yield curve. While the Company’s net interest margin percentage in the second quarter of 2024 compares unfavorably to last year’s second quarter, it did improve for a second consecutive quarter and is 11-basis points higher than the fourth quarter of 2023. This improvement reflects the Federal Reserve keeping interest rates stable since July 2023 along with the impact of management’s pricing of loans and deposits.

Previous wording

Total average loans in the first quarter of 2024 were higher than the 2023 first quarter average by $43.3 million, or 4.4%. Strong loan pipelines during 2023 resulted in the loan portfolio demonstrating growth throughout the year. So far in 2024, payoff activity has surpassed loan originations which is consistent with what occurred during the first quarter of 2023 and has resulted in an $11.8 million, or 1.1%, decline in total loans since December 31, 2023. Overall, total loans continue to be above the $1.0 billion threshold averaging $1.030 billion for the 2024 first quarter. The higher interest rate environment along with the higher average total loans outstanding resulted in total loan interest income improving by $1.5 million, or 12.2%, for the first quarter of 2024 when compared to the first quarter of 2023.

Current wording

Total average loans in the second quarter of 2024 were higher than the 2023 second quarter average by $43.6 million, or 4.4%. Strong loan pipelines during 2023 resulted in the loan portfolio demonstrating growth throughout the year. During the second quarter of 2024, new loan originations exceeded payoff activity and resulted in total loan volumes, on an end of period basis, increasing since March 31, 2024. Overall, total loans continue to be above the $1.0 billion threshold averaging $1.030 billion for the 2024 second quarter. The higher interest rate environment along with the higher average total loans outstanding resulted in total loan interest income improving by $1.4 million, or 11.1%, for the second quarter of 2024 when compared to the second quarter of 2023.

Previous wording

Total investment securities averaged $256.7 million for the first quarter of 2024, which is $9.3 million, or 3.5%, lower than the $266.0 million average for the first quarter of last year. The decrease reflects management’s 2023 strategy to allocate more cash flow from the securities portfolio to higher yielding loans while the Company controlled the amount of high cost overnight borrowed funds. While yields on new security purchases exceeded the overall average yield of the existing securities portfolio, the spread between overnight borrowings and the yield on new securities ranged from negative to only marginally positive causing the slowdown in purchasing activity during 2023 and into 2024. Thus, new investment security purchases were primarily used to replace cash flow from maturing securities to maintain appropriate balances for pledging purposes related to public funds deposits. The improved yields for new securities purchases along with management’s execution of a late December 2023 investment portfolio repositioning strategy caused interest income from investments to increase by $140,000, or 6.2%. This repositioning strategy resulted in an approximate 2.1% yield improvement on $16.8 million of securities. Overall, the 2024 first quarter balance of total

Current wording

Total investment securities averaged $256.5 million for the second quarter of 2024, which is $5.2 million, or 2.0%, lower than the $261.8 million average for the second quarter of last year. The decrease reflects management’s strategy to allocate more cash flow from the securities portfolio to higher yielding loans while the Company controlled the amount of high cost overnight borrowed funds. Thus, new investment security purchases were primarily used to replace cash flow from maturing securities to maintain appropriate balances for pledging purposes related to public funds deposits. The improved yields for new securities purchases along with management’s execution of a late December 2023 investment portfolio repositioning strategy caused interest income from investments to increase by $249,000, or 11.3%. Overall, the 2024 second quarter balance of total average interest earning assets increased over last year’s second quarter by $38.0 million, or 3.0%, while total interest income increased by $1.6 million, or 11.0%, since the second quarter of 2023.

Previous wording

On the liability side of the balance sheet, total average deposits of $1.160 billion for the first quarter of 2024 were $10.4 million, or 0.9%, higher than the 2023 first quarter average. The increase reflects the Company’s successful business development efforts which more than offset a portion of the funds from the government stimulus programs leaving the balance sheet and greater pricing competition in the market to retain deposits because of the higher interest rates. The Company’s core deposit base continued to demonstrate the strength and stability that it has had for many years. On March 31, 2024, total deposits grew by $18.2 million, or 1.6%, since December 31, 2023, demonstrating customer loyalty and confidence in AmeriServ Financial Bank. The Company does not utilize brokered deposits as a funding source. In addition to its loyal core deposit base, the Company has several other sources of liquidity, including a significant unused borrowing capacity at the Federal Home Loan Bank (FHLB), overnight lines of credit at correspondent banks and access to the Federal Reserve Discount Window. The loan to deposit ratio averaged 88.8% in the first quarter of 2024, which indicates that the Company has ample capacity to continue to grow its loan portfolio and is well positioned to support our customers and our community during times of economic volatility.

Current wording

On the liability side of the balance sheet, total average deposits of $1.163 billion for the second quarter of 2024 were $5.3 million, or 0.5%, higher than the 2023 second quarter average. The increase reflects the Company’s successful business development efforts which more than offset a portion of the funds from the government stimulus programs leaving the balance sheet and greater pricing competition in the market to retain deposits because of the higher interest rates. The Company’s core deposit base continued to demonstrate the strength and stability that it has had for many years. In addition to its loyal core deposit base, the Company has several other sources of liquidity, including a significant unused borrowing capacity at the Federal Home Loan Bank (FHLB), overnight lines of credit at correspondent banks and access to the Federal Reserve Discount Window. The Company does not utilize brokered deposits as a funding source. The loan to deposit ratio averaged 88.5% in the second quarter of 2024, which indicates that the Company has ample capacity to continue to grow its loan portfolio and is well positioned to support our customers and our community during times of economic volatility.

Previous wording

Total interest expense in the first quarter of 2024 increased by $2.4 million, or 48.0%, when compared to the first quarter of 2023, due to higher deposit and borrowings interest expense. Deposit interest expense was higher by $2.0 million, or 48.0%, while the first quarter 2024 average volume of total interest-bearing deposits grew from the 2023 first quarter average by $28.7 million, or 3.0%. The rising national interest rates in 2023 resulted in certain deposit products, particularly public funds, which are tied to a market index, repricing upward with the move in short-term interest rates causing interest expense to increase. Additionally, increased market competition resulted in the Company raising rates on certain shorter-term certificates of deposit to retain funds. Another factor contributing to net interest margin compression was an unfavorable deposit mix shift as the first quarter 2024 average of non-interest bearing demand deposits declined by $18.3 million, or 9.3%, while, as mentioned above, total interest-bearing deposits increased by $28.7 million, or 3.0%. For interest rate risk management purposes and to offset a portion of the unfavorable impact that rising funding costs are having on net interest income, management proactively executed $70 million of interest rate hedge transactions during 2023 to fix the cost of certain deposits that are indexed and move with short-term interest rates. These hedging transactions reduced the Company’s negative variability of net interest income in a rising interest rate environment and helped slow net interest margin compression. Overall, total deposit cost averaged 2.15% for the first quarter of 2024, which is 67 basis points higher than total deposit cost of 1.48% for the first quarter of 2023.

Current wording

Total interest expense in the second quarter of 2024 increased by $1.9 million, or 32.3%, when compared to the second quarter of 2023, due to higher deposit and borrowings interest expense. Deposit interest expense was higher by $1.4 million, or 27.3%, while the second quarter 2024 average volume of total interest-bearing deposits grew from the 2023 second quarter average by $23.8 million, or 2.5%. The rising national interest rates in 2023 resulted in certain deposit products, particularly public funds, which are tied to a market index, repricing upward with the move in short-term interest rates causing interest expense to increase. Additionally, increased market competition resulted in the Company raising rates on certain shorter-term certificates of deposit to retain funds. Another factor contributing to net interest margin compression was an unfavorable deposit mix shift as the second quarter 2024 average of non-interest bearing demand deposits declined by $18.5 million, or 9.3%, while, as mentioned above, total interest-bearing deposits increased. For interest rate risk management purposes and to offset a portion of the unfavorable impact that rising funding costs are having on net interest income, management proactively executed $70 million of interest rate hedge transactions during 2023 to fix the cost of certain deposits that are indexed and move with short-term interest rates. Overall, total deposit cost averaged 2.21% for the second quarter of 2024, which is 47-basis points higher than total deposit cost of 1.74% for the second quarter of 2023.

Previous wording

The table that follows provides an analysis of net interest income on a tax-equivalent basis (non-GAAP) for the three-month periods ended March 31, 2024 and 2023 setting forth (i) average assets, liabilities, and shareholders’ 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 this table, loan balances include non-accrual loans, and interest income on loans includes loan fees or amortization of such fees which have been deferred. Regulatory stock is included within available for sale investment securities for this analysis. Additionally, a tax rate of 21% was used to compute tax-equivalent interest income and yields (non-GAAP). The tax equivalent adjustments to interest income on loans and municipal securities for the three months ended March 31, 2024 and 2023 was $6,000 and $3,000, respectively, which is

Current wording

The table that follows provides an analysis of net interest income on a tax-equivalent basis (non-GAAP) for the three-month periods ended June 30, 2024 and 2023 setting forth (i) average assets, liabilities, and shareholders’ 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 this table, loan balances include non-accrual loans, and interest income on loans includes loan fees or amortization of such fees which have been deferred. Regulatory stock is included within available for sale investment securities for this analysis. Additionally, a tax rate of 21% was used to compute tax-equivalent interest income and yields (non-GAAP). The tax equivalent adjustments to interest income on loans and municipal securities for the three months ended June 30, 2024 and 2023 was $6,000 and $4,000, respectively, which is reconciled to the corresponding GAAP measure at the bottom of the table. Differences between the net interest spread and margin from a GAAP basis to a tax-equivalent basis were not material.

Previous wording

**…..NON-INTEREST INCOME…..**Non-interest income for the first quarter of 2024 totaled $4.9 million and decreased by $560,000, or 10.2%, from the first quarter of 2023 performance. Factors contributing to the lower level of non-interest income for the quarter included:

Current wording

**…..NON-INTEREST INCOME…..**Non-interest income for the second quarter of 2024 totaled $4.4 million and increased by $510,000, or 13.2%, from the second quarter of 2023 performance. Factors contributing to the higher level of non-interest income for the quarter included:

Previous wording

**…..NON-INTEREST EXPENSE…..**Non-interest expense for the first quarter of 2024 totaled $11.9 million and decreased by $99,000, or 0.8%, from the prior year’s first quarter. Factors contributing to the lower level of non-interest expense for the quarter included:

Current wording

**…..NON-INTEREST EXPENSE…..**Non-interest expense for the second quarter of 2024 totaled $13.3 million and increased by $120,000, or 0.9%, from the prior year’s second quarter. Factors contributing to the higher level of non-interest expense for the quarter included:

Previous wording

Total borrowings interest expense increased by $415,000, or 48.1%, when comparing the first quarter of 2024 and the first quarter of 2023. The increase primarily results from the impact that the higher interest rates had on total borrowings cost. While the Company has utilized fewer overnight borrowed funds so far in 2024, the level of advances from the Federal Home Loan Bank have increased. Total fed funds purchased and other short-term borrowings averaged $33.6 million for the first quarter of 2024 after averaging $40.7 million for the first quarter of 2023. Advances from the Federal Home Loan Bank averaged $47.9 million in the first quarter of 2024 which is $30.2 million, or 170.9%, higher than the $17.7 million average in the first quarter of 2023. The increase in term advances results from management increasing its usage of this product to lock in lower rates than overnight borrowings due to the inversion in the yield curve. Therefore, the increase to borrowings interest expense in 2024 reflects a greater utilization of FHLB term borrowings.

Current wording

Total borrowings interest expense increased by $911,000, or 56.5%, when comparing the first half of 2024 and the first half of 2023. The increase primarily results from the impact that the higher interest rates had on total borrowings cost. The Company’s utilization of overnight borrowed funds so far in 2024 has been relatively consistent with the 2023 level while the level of advances from the FHLB have increased. Total short-term borrowings averaged $31.0 million for the first six months of 2024 after averaging $32.8 million for the first six months of 2023. Advances from the FHLB averaged $49.3 million in the first half of 2024 which is $31.3 million, or 174.7%, higher than the $17.9 million average in the first half of 2023. Management’s strategy to increase term advances to lock in lower rates than overnight borrowings due to the inversion in the yield curve has favorably impacted net interest income.

Previous wording

Additionally, contributing to this portion of the recovery was a favorable adjustment to the loss and qualitative factors used to calculate the allowance for loan losses in accordance with ASC 326,Financial Instruments – Credit Losses (CECL). Within the investment portfolio, a $435,000 recovery was recognized on a $926,000 reserve that was established in the first quarter of 2023 for a Signature Bank subordinated debt investment after this bond was successfully sold in the first quarter of 2024. These recoveries more than offset a $116,000 reserve established for an available for sale corporate security and an additional $53,000 that was contributed to the reserve for HTM securities in accordance with CECL.

Current wording

**…..PROVISION FOR CREDIT LOSSES…..**For the first six months of 2024, the Company recognized a $123,000 provision for credit losses recovery after recognizing $1.2 million of provision expense in the first six months of 2023, resulting in a net favorable change of $1.3 million. The provision for credit losses recovery for the six-month timeframe of 2024 reflects recoveries recognized for both the loan and securities portfolios. Specifically, a $110,000 recovery from the loan portfolio occurred primarily due to a favorable adjustment to the loss and qualitative factors used to calculate the allowance for credit losses in accordance with ASC 326,Financial Instruments – Credit Losses (CECL). Within the investment portfolio, a $435,000 recovery was recognized on a $926,000 reserve that was established in the first quarter of 2023 for a Signature Bank subordinated debt investment after the bond was successfully sold in the first

Previous wording

**…..INCOME TAX EXPENSE…..**The Company recorded income tax expense of $483,000, or an effective tax rate of 20.2%, in the first quarter of 2024. This compares to income tax expense of $372,000, or an effective tax rate of 19.7%, for the first quarter of 2023.

Current wording

**…..INCOME TAX EXPENSE…..**The Company recorded an income tax expense of $374,000, or an effective tax rate of 19.7%, in the first six months of 2024. This compares to an income tax expense of $311,000, or an effective tax rate of 19.0%, for the first six months of 2023. The higher level of income tax expense this year is due to the increased level of pre-tax income.

Previous wording

**…..SEGMENT RESULTS.…..**The community banking segment reported a net income contribution of $5,021,000 in the three months of 2024 which was $1,353,000 higher than the net income contribution in the first three months of 2023. The increase between time periods results from the strength that this segment provides to the Company which was determined by a thorough funds transfer pricing analysis. In short, a funds transfer pricing analysis determines how funding (deposits) and use of this funding (loans) by each segment contributes to the overall profitability of the Company by providing an estimated positive or negative dollar value of the segment’s contribution to the Company. Overall, the funds transfer pricing analysis indicated that the community banking segment provided an additional $1.1 million benefit to the Company in the three months of 2024 when compared to the three months of 2023. Despite this benefit that community banking provides, this segment was unfavorably impacted from net interest margin compression as total deposit interest expense increased to a higher level than the increase to total loan interest income by $510,000. Net interest margin compression has been prevalent in the banking industry since the Federal Reserve began tightening monetary policy in an effort to control inflation combined with an inverted U.S. Treasury yield curve. Another factor contributing to the net interest margin compression experienced by the Company was an unfavorable deposit mix shift as exhibited by the three-month average of non-interest-bearing demand deposits declining by $18.3 million, or 9.3%, while total interest-bearing deposits increased by $28.7 million, or 3.0%. The improvement is due to the Federal Reserve keeping interest rates stable since July 2023 along with the impact of management’s pricing of loans and deposits. This segment benefitted from a higher level of total average loans in the first three months of 2024 by $43.3 million, or 4.4%. Growth occurred in all major categories. Overall, total loan interest income improved by $1.5 million, or 12.2%, for the first three months of 2024 when compared to the first three months of last year. Deposit interest expense was higher by $2.0 million, or 48.0%, while, as mentioned above, the 2024 three-month average volume of total interest-bearing deposits increased by $28.7 million, or 3.0%. The higher national interest rates along with increased market competition to retain and attract deposits contributed to deposit costs increasing. This segment was favorably impacted by the Company recording a $291,000 recovery for the allowance for credit losses on our loan portfolio and unfunded commitments in the first three months of 2024 compared to $284,000 of provision expense for credit losses on loans and unfunded commitments in last year’s first three months. This was discussed previously in the Provision for Credit Losses section within this document. Non-interest income increased due to th…

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Current wording

**…..SEGMENT RESULTS.…..**The community banking segment reported a net income contribution of $8,985,000 in the six months of 2024 which was $1,160,000 higher than the net income contribution in the first six months of 2023. The increase between time periods results from the strength that this segment provides to the Company which was determined by a thorough funds transfer pricing analysis. In short, a funds transfer pricing analysis determines how funding (deposits) and use of this funding (loans) by each segment contributes to the overall profitability of the Company by providing an estimated positive or negative dollar value of the segment’s contribution to the Company. Overall, the funds transfer pricing analysis indicated that the community banking segment provided an additional $1.5 million benefit to the Company in the six months of 2024 when compared to the six months of 2023. Despite this benefit that community banking provides, this segment was unfavorably impacted from net interest margin compression as total deposit interest expense increased to a higher level than the increase to total loan interest income by $493,000. Contributing to the net interest margin compression experienced by the Company was an unfavorable deposit mix shift as exhibited by the six-month average of non-interest-bearing demand deposits declining by $18.4 million, or 9.3%, while total interest-bearing deposits increased by $26.3 million, or 2.7%. This segment benefitted from a higher level of total average loans in the first six months of 2024 by $43.5 million, or 4.4%. Growth occurred primarily in the commercial real estate category with modest growth occurring in residential mortgage and home equity loans. Overall, total loan interest income improved by $2.9 million, or 11.6%, for the first six months of 2024 when compared to the first six months of last year. Deposit interest expense was higher by $3.4 million, or 36.6%, while, as mentioned above, the 2024 six-month average volume of total interest-bearing deposits increased by $26.3 million, or 2.7%. The higher national interest rates along with increased market competition to retain and attract deposits contributed to deposit costs increasing. This segment was favorably impacted by the Company recording a $111,000 recovery for the allowance for credit losses on our loan portfolio and unfunded commitments in the first six months of 2024 compared to $301,000 of provision expense for credit losses on loans and unfunded commitments in last year’s first six months. This was discussed previously in the Provision for Credit Losses section within this document. Non-interest income increased due to the Company recognizing a $250,000 signing bonus that resulted from successful negotiations related to the renewal of an expiring contract with Visa. Also, this segment was favorably impacted by a positive adjustment to the fair market value of an interest rate swap related risk participation agreement as well as the re…

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Previous wording

The wealth management segment’s net income contribution increased by $318,000 in the first three months of 2024 from the first three months of 2023. The increase reflects the strong performance from the Financial Services division that resulted from new business growth. Also, wealth management fees increased due to the improving market conditions particularly for equity securities as the major market indexes rose to record highs during the first quarter of 2024. Overall, the fair market value of wealth management assets totaled $2.6 billion at March 31, 2024 and increased by $249.0 million, or 10.6%, since March 31, 2023. Also contributing to the higher level of net income for this segment were lower levels of salaries expense and health care costs. Overall, wealth management revenues reached a historically high level. Partially offsetting the improvement in wealth management revenue for the three-month period were higher levels of incentive compensation and professional fees.

Current wording

The wealth management segment’s net income contribution increased by $1.0 million in the first six months of 2024 from the first six months of 2023. The increase reflects the strong performance from the Financial Services division that resulted from new business growth. Also, wealth management fees increased due to the improving market conditions particularly for equity securities as the major market indexes continue their ascent to record highs in 2024. Overall, the fair market value of wealth management assets totaled $2.6 billion at June 30, 2024 and increased by $133.8 million, or 5.5%, since June 30, 2023. Also contributing to the higher level of net income for this segment were lower levels of salaries expense and health care costs. Overall, wealth management revenues reached a historically high level. Partially offsetting the improvement in wealth management revenue for the six-month period was a higher level of incentive compensation.

Previous wording

The investment/parent segment reported a net loss of $3,883,000 in the three months of 2024 which is greater than the net loss of $2,601,000 in the first three months of 2023 by $1,282,000. The funds transfer pricing analysis within this segment caused the loss reported within this segment to be higher due to the inverted yield curve and the higher funding costs on our balance sheet. Also contributing to the higher net loss for this segment was the $1.7 million gain recognized during the first quarter of 2023 from the sale of the Class B common stock of Visa Inc. that the Bank owned which was only partially offset by a $1.4 million favorable shift from the Bank recognizing a $435,000 provision recovery from the subordinated debt investment with Signature Bank after a $926,000 provision expense was recognized on this same

Current wording

The investment/parent segment reported a net loss of $8,915,000 in the six months of 2024 which is greater than the net loss of $6,917,000 in the first six months of 2023 by $1,998,000. The funds transfer pricing analysis caused the loss reported within this segment to be higher due to the inverted yield curve and the higher funding costs on our balance sheet. Also contributing to the higher net loss for this segment was the $1.7 million gain recognized during the first quarter of 2023 from the sale of the Class B common stock of Visa Inc. while there was no such gain in 2024. This segment did experience a $1.4 million favorable shift from the Bank recognizing a $435,000 provision recovery in 2024 from the subordinated debt investment with Signature Bank after a $926,000 provision expense was recognized on this same investment in the first quarter of 2023. This segment was unfavorably impacted by the recognition of $360,000 of provision expense in 2024 to establish a reserve for an available for sale (AFS) corporate security. This segment was

Previous wording

investment in the first quarter of 2023. This segment was also unfavorably impacted by $415,000 of additional total borrowings interest expense due to the higher average balance of FHLB term borrowings. Favorably impacting net income for this segment were lower expenses by $344,000 for legal and professional services costs and an increased level of interest income from investment securities by $150,000 as the higher interest rates and a portfolio restructuring in late 2023 resulted in an improved overall total securities yield.

Current wording

also unfavorably impacted by $911,000 of additional total borrowings interest expense due to the higher average balance of FHLB term borrowings. Professional fees in both 2024 and 2023 were impacted by litigation and responses to the actions of an activist shareholder. These activist related costs amounted to $1.5 million for the first six months of 2024 compared to activist costs of $1.7 million for the first six months of 2023. Favorably impacting net income for this segment was an increased level of interest income from investment securities by $389,000 as the higher interest rates and a portfolio restructuring in late 2023 resulted in an improved overall total securities yield.

Previous wording

**…..BALANCE SHEET…..**The Company’s total consolidated assets were $1.4 billion at March 31, 2024, which declined by $5.1 million, or 0.4%, from the December 31, 2023 asset level. This change was related, primarily, to reduced total loans which were partially offset by increased levels of cash and cash equivalents, investment securities, leases, and other assets. Specifically, total loans decreased $11.8 million, or 1.1%, as payoff activity so far in 2024 has surpassed loan originations. During 2023 and into 2024, the spread between overnight borrowings and the yield on new investment securities ranged from negative to only marginally positive causing a slowdown in purchasing activity. Thus, the $729,000, or 0.3%, increase in investment securities was used to replace cash flow from maturing securities to maintain appropriate balances for pledging purposes related to public funds deposits. The slowdown in loan originations and investment security purchases along with an increase in total deposits led to a $3.4 million, or 24.4%, increase in cash and cash equivalents. The $1.2 million, or 38.1%, increase in the right-of-use asset for operating and financing leases resulted from the execution of two new leases for office locations and one new lease of equipment during the first quarter of 2024. Finally, other assets increased $2.0 million, or 5.3%, due to an increase in the market values for the interest rate swaps and hedges as well as amounts prepaid for state shares tax.

Current wording

**…..BALANCE SHEET…..**The Company’s total consolidated assets were $1.4 billion at June 30, 2024, which increased by $13.8 million, or 1.0%, from the December 31, 2023 asset level. This change was related, primarily, to increased levels of cash and cash equivalents, investment securities, total loans, leases, and other assets. Specifically, total loans increased by $857,000, or 0.1%, as so far in 2024, new loan originations have only slightly exceeded payoff activity. Investment securities increased by $735,000, or 0.3%, as new investment security purchases have been primarily limited to the replacement of cash flow from maturing securities in order to maintain appropriate balances for pledging purposes related to public funds deposits. The marginal growth in loans and investment securities along with an increase in total deposits led to a $4.4 million, or 31.1%, increase in cash and cash equivalents. The $1.1 million, or 34.8%, increase in the right-of-use asset for operating and financing leases resulted from the execution of two new leases for office locations and one new lease for equipment during 2024. Finally, other assets increased $6.6 million, or 18.0%, due to an increase in the positive balance of the accrued pension liability, an increase in the market values for the interest rate swaps and hedges, as well as amounts prepaid for state shares tax.

Previous wording

Total deposits increased by $18.2 million, or 1.6%, in the first three months of 2024. This demonstrates customer confidence and the strength and loyalty of our core deposit base. As of March 31, 2024, the 25 largest depositors represented 22.9% of total deposits, which is an increase from December 31, 2023, when it was 22.4%. As of March 31, 2024 and December 31, 2023, the estimated amount of uninsured deposits was $395.9 million and $384.5 million, respectively. The estimate of uninsured deposits was done at the single account level and does not take into account total customer balances in the Bank. It should be noted that approximately 50% of these uninsured deposits relate to public funds from municipalities, government entities, and school districts which by law are required to be collateralized by investment securities or FHLB letters of credit to protect these depositor funds. Total borrowings have decreased by $23.5 million, or 20.3%, since year-end 2023. This change was driven by a decrease in short-term borrowings which was partially offset by an increase in FHLB term advances. Specifically, short-term borrowings decreased by $29.5 million, or 72.0%. Given the high cost of overnight borrowed funds, management has been effectively controlling the usage of this funding source. In addition, the inversion in the yield curve has caused FHLB term advances to have rates that are lower than the cost of overnight borrowed funds. Therefore, management increased usage of FHLB term advances in the first quarter of 2024 leading to an increase in this line item of $4.9 million, or 10.9%.

Current wording

Total deposits increased by $12.0 million, or 1.0%, in the first six months of 2024. We believe this demonstrates customer confidence and the strength and loyalty of our core deposit base. As of June 30, 2024, the 25 largest depositors represented 24.1% of total deposits, which is an increase from December 31, 2023, when it was 22.4%. As of June 30, 2024 and December 31, 2023, the estimated amount of uninsured deposits was $397.4 million and $384.5 million, respectively. The estimate of uninsured deposits was done at the single account level and does not take into account total customer balances in the Bank. It should be noted that approximately 50% of these uninsured deposits relate to public funds from municipalities, government entities, and school districts which by law are required to be collateralized by investment securities or FHLB letters of credit to protect these depositor funds. Total borrowings remained relatively consistent since year-end 2023 as a decrease in short-term borrowings was offset by an increase in FHLB term advances. Specifically, short-term borrowings decreased by $6.4 million, or 15.6%. Given the high cost of overnight borrowed funds, management has been effectively controlling the usage of this funding source. In addition, the inversion in the yield curve has caused FHLB term advances to have rates that are lower than the cost of overnight borrowed funds. Therefore, management increased usage of FHLB term advances in the first six months of 2024 leading to an increase of $6.4 million, or 14.2%.

Previous wording

The Company’s total shareholders’ equity increased by $1.7 million, or 1.6%, during the first three months of 2024. The increase in capital is the result of the Company’s earnings performance during the first quarter of 2024 more than offsetting our common stock dividend payments to shareholders. In addition, the improved market value adjustment on the interest rate hedges had a positive impact on accumulated other comprehensive loss which more than offset the reduced market value of the available for sale investment securities portfolio and the pension adjustment.

Current wording

The Company’s total shareholders’ equity increased by $1.4 million, or 1.4%, during the first six months of 2024. The increase in capital is the result of the Company’s earnings performance during the first half of 2024 more than offsetting our common stock dividend payments to shareholders. In addition, the pension adjustment and improved market value adjustment on the interest rate hedges had a positive impact on accumulated other comprehensive loss which more than offset the reduced market value of the available for sale investment securities portfolio. Partially offsetting these positive items was the execution of a Stock Repurchase Agreement pursuant to which the Company repurchased, at current market price, 628,003 shares of common stock from Driver Opportunity Partners, in connection with a settlement agreement, reducing capital by $1.5 million.

Previous wording

The Company continues to be considered well capitalized for regulatory purposes with a total capital ratio of 13.10%, and a common equity tier 1 capital ratio of 9.53% at March 31, 2024. See the discussion of the Basel III capital requirements under the Capital Resources section below. As of March 31, 2024, the Company’s book value per common share was $6.06 and its tangible book value per common share was $5.26(1). When compared to December 31, 2023, book value per common share and tangible book value per common share improved by $0.10 per common share. The improvement in the Company’s book value and tangible book value per share in the first three months of 2024 compared to last year-end reflects the improvement in earnings performance as well as a positive market value adjustment for the interest rate hedges which more than offset a decrease in the fair value of the Company’s available for sale investment securities and a negative pension adjustment. The tangible common equity to tangible assets ratio was 6.58%(1) at March 31, 2024 and increased by 14-basis points when compared to December 31, 2023.

Current wording

The Company continues to be considered well capitalized for regulatory purposes with a total capital ratio of 12.77%, and a common equity tier 1 capital ratio of 9.23% at June 30, 2024. See the discussion of the Basel III capital requirements under the Capital Resources section below. As of June 30, 2024, the Company’s book value per common share was $6.28 and its tangible book value per common share was $5.45(1). When compared to March 31, 2024, book value per common share increased by $0.22, or 3.6%, and tangible book value per common share increased by $0.19 per common share, or 3.6%. The improvement in the Company’s book value and tangible book value per share during the second quarter of 2024 is largely due to the accretive repurchase of our common stock from the activist investor. The tangible common equity to tangible assets ratio was 6.47%(1) at June 30, 2024 and increased by three-basis points when compared to December 31, 2023.

Previous wording

The slight increase in accruing loan delinquency since year-end 2023 is attributable to an increase in commercial real estate loan delinquency which was partially offset by a decrease in consumer and residential mortgage loan delinquency. Non-performing assets decreased from $12.4 million at December 31, 2023 to $12.2 million at March 31, 2024 primarily due to a reduction in non-accrual commercial real estate loans. Non-performing assets were at 1.18% of total loans as of March 31, 2024. The Company recognized net loan charge-offs of $121,000, or 0.05% of total average loans, in the first quarter of 2024 which is relatively consistent with net loan charge-offs of $116,000, or 0.05% of total average loans, in the first quarter of 2023. Classified loans decreased $426,000, or 1.7%, from December 31, 2023 and totaled $24.6 million at March 31, 2024 as a result of normal paydown activity.

Current wording

The increase in accruing loan delinquency since year-end 2023 is attributable to an increase in commercial real estate loan delinquency due in part to slow payments on a $3.6 million urban office loan. Non-performing assets increased from $12.4 million at December 31, 2023 to $12.8 million at June 30, 2024 primarily due to one commercial real estate loan that was over 90 days past due which was partially offset by a reduction in non-accrual residential mortgage and consumer loans. Non-performing assets were at 1.23% of total loans as of June 30, 2024. The Company recognized net loan charge-offs of $332,000, or 0.06% of total average loans, in the first six months of 2024 compared to net loan charge-offs of $61,000, or 0.01% of total average loans, in the first six months of 2023. Classified loans decreased $2.5 million, or 10.0%, from December 31, 2023 and totaled $22.5 million at June 30, 2024 as a result of the foreclosure and transfer to OREO of a commercial office building which secured a classified commercial real estate loan as well as normal paydown activity.

Previous wording

We also continue to closely monitor the loan portfolio given the number of relatively large-sized commercial and commercial real estate loans within the portfolio. As of March 31, 2024, the 25 largest credits represented 22.7% of total loans outstanding, which remained unchanged since December 31, 2023.

Current wording

We also continue to closely monitor the loan portfolio given the number of relatively large-sized commercial and commercial real estate loans within the portfolio. As of June 30, 2024, the 25 largest credits represented 23.0% of total loans outstanding, which is a slight increase from December 31, 2023 when it was 22.7%.

Previous wording

growth and exposures. If the Company's banking regulators determine that our commercial real estate lending activities are particularly risky and are subject to such heightened scrutiny, the Company may incur significant additional costs or be required to restrict certain of our commercial real estate lending activities. Furthermore, failures in the Company's risk management policies, procedures and controls could adversely affect our ability to manage this portfolio going forward and could result in an increased rate of delinquencies in, and increased losses from, this portfolio, which could have a material adverse effect on the Company's business, financial condition, and results of operations.

Current wording

The banking regulatory agencies have recently expressed concerns about weaknesses in the current commercial real estate market. Banking regulators generally give commercial real estate lending greater scrutiny and may require banks with higher levels of commercial real estate loans to implement enhanced risk management practices, including stricter underwriting, internal controls, risk management policies, more granular reporting, and portfolio stress testing, as well as possibly higher levels of allowances for credit losses and capital levels as a result of commercial real estate lending growth and exposures. If the Company's banking regulators determine that our commercial real estate lending activities are particularly risky and are subject to such heightened scrutiny, the Company may incur significant additional costs or be required to restrict certain of our commercial real estate lending activities. Furthermore, failures in the Company's risk management policies, procedures and controls could adversely affect our ability to manage this portfolio going forward and could result in an increased rate of delinquencies in, and increased losses from, this portfolio, which could have a material adverse effect on the Company's business, financial condition, and results of operations.

Previous wording

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 369% at March 31, 2024. It should be noted that this ratio improved from 375% at December 31, 2023 due to contraction in non-owner occupied commercial real estate loan balances as well as an increase in total regulatory capital. Further, non-owner occupied commercial real estate loans represented 49.6% and 49.3% of total loans as of March 31, 2024 and December 31, 2023, respectively.

Current wording

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 380% as of June 30, 2024. It should be noted that this ratio increased from 375% at December 31, 2023 due to the growth in non-owner occupied commercial real estate loan balances out pacing the increase in total regulatory capital. Further, non-owner occupied commercial real estate loans represented 49.9% and 49.3% of total loans as of June 30, 2024 and December 31, 2023, respectively.

Previous wording

The allowance for loan credit losses declined since December 31, 2023 by $414,000, or 2.8%, to $14.6 million at March 31, 2024. Even with this modest decrease, the allowance for loan credit losses is $2.5 million, or 20.7%, higher than the allowance for loan credit losses at March 31, 2023. The increase since last year’s first quarter end is due to the Company strengthening its allowance for loan credit losses during the fourth quarter of 2023. Overall, the Company

Current wording

The allowance for loan credit losses declined since December 31, 2023 by $442,000, or 2.9%, to $14.6 million at June 30, 2024. Even with this modest decrease, the allowance for loan credit losses is $2.4 million, or 19.6%, higher than the allowance for loan credit losses at June 30, 2023. The increase since last year’s second quarter end is due to the Company strengthening its allowance for loan credit losses during the fourth quarter of 2023. Overall, the Company continues to maintain solid coverage of both total loans and non-performing assets as the allowance for loan credit losses provided 114% coverage of non-performing assets and 1.41% of total loans at June 30, 2024.

Previous wording

The allowance for credit losses on the investment securities portfolio was comprised of $116,000 on available for sale securities and $90,000 on held to maturity securities as of March 31, 2024. This compares to $926,000 on available for sale securities and $37,000 on held to maturity securities as of December 31, 2023. The allowance for credit losses on available for sale securities decreased $810,000, or 87.5%, since year-end 2023 due to the successful sale of the Signature Bank subordinated debt investment during the first quarter of 2024.

Current wording

The allowance for credit losses on the investment securities portfolio was comprised of $360,000 on available for sale securities and $100,000 on held to maturity securities as of June 30, 2024. This compares to $926,000 on available for sale securities and $37,000 on held to maturity securities as of December 31, 2023. The allowance for credit losses on available for sale securities decreased $566,000, or 61.1%, since year-end 2023 due to the successful sale of the Signature Bank subordinated debt investment which was partially offset by the establishment of an allowance for credit losses on another corporate available for sale security that was deemed to be credit impaired in 2024.

Previous wording

**…..LIQUIDITY…..**The Company’s liquidity position continues to be strong. Total average deposits are $10.4 million, or 0.9%, higher when compared to the 2023 first three-month average. The increase reflects the Company’s successful business development efforts which more than offset a portion of the funds from the government stimulus programs leaving the balance sheet and greater pricing competition in the market to retain deposits because of the higher interest rates. The Company’s core deposit base continued to demonstrate the strength and stability that it has had for many years. On March 31, 2024, total deposits grew by $18.2 million, or 1.6%, since December 31, 2023, demonstrating customer loyalty and confidence in AmeriServ Financial Bank. The Company does not utilize brokered deposits as a funding source. In addition to its loyal core deposit base, the Company has several other sources of liquidity, including a significant unused borrowing capacity at the Federal Home Loan Bank (FHLB), overnight lines of credit at correspondent banks and access to the Federal Reserve Discount Window. Overall, deposit volumes continue to remain at a high level. The core deposit base is adequate to fund the Company’s operations. Cash flow from maturities, prepayments and amortization of securities is used to help fund loan growth.

Current wording

**…..LIQUIDITY…..**The Company’s liquidity position continues to be strong. Total average deposits were $7.8 million, or 0.7%, higher when compared to the 2023 first six-month average. The increase reflects the Company’s successful business development efforts which more than offset a portion of the funds from the government stimulus programs leaving the balance sheet and greater pricing competition in the market to retain deposits because of the higher interest rates. The Company’s core deposit base continued to demonstrate the strength and stability that it has had for many years. On June 30, 2024, total deposits grew by $12.0 million, or 1.0%, since December 31, 2023, demonstrating customer loyalty and confidence in AmeriServ Financial Bank. In addition to its loyal core deposit base, the Company has several other sources of liquidity, including a significant unused borrowing capacity at the Federal Home Loan Bank (FHLB), overnight lines of credit at correspondent banks and access to the Federal Reserve Discount Window. The Company does not utilize brokered deposits as a funding source. Overall, deposit volumes continue to remain at a high level. The core deposit base is adequate to fund the Company’s operations. Cash flow from maturities, prepayments and amortization of securities is used to help fund loan growth.

Previous wording

Average short-term investments remained relatively stable in the first three months of 2024 compared to the first three months of last year, decreasing slightly by $163,000, or 3.7%. Advances from the Federal Home Loan Bank averaged $47.9 million in the first quarter of 2024 which is $30.2 million, or 170.9%, higher than the $17.7 million average in the first quarter of 2023. The increase to term advances results from management increasing our usage of this product to lock in lower rates than overnight borrowings due to the inversion in the yield curve. Management continues to monitor the changing economic conditions and adjust pricing strategies accordingly which largely determines customer behavior and the level of total deposits as well as shifts within the total deposit mix. Also, diligent monitoring and management of our short-term investment position and our level of overnight borrowed funds remains a priority. Given the high cost of overnight borrowed funds, management has been effectively controlling the usage of this funding source. The Company has utilized fewer overnight borrowed funds so far in 2024. Total fed funds purchased and other short-term borrowings averaged $33.6 million for the first quarter of 2024 after averaging $40.7 million for the first quarter of 2023. Continued loan growth and prudent investment in securities are critical to achieve the best return on the normal level of earning asset cash flow that occurs each month. So far in 2024, purchases of securities have continued to follow the same trend exhibited during the full year of 2023. Securities purchases have been slow as more funds have been allocated to the loan portfolio. Loan pipelines are at slightly lower levels than what we have recently experienced. However, total average loans in the first quarter of 2024 were higher than the 2023 first quarter average by $43.3 million, or 4.4%. We strive to operate our loan to deposit ratio in a range of 80% to 100%. The Company’s loan to deposit ratio averaged 88.8% in the first quarter of 2024, which indicates that the Company has ample capacity to continue to grow its loan portfolio and is strongly positioned to support our customers and our community during times of economic volatility. We are also well positioned to service our existing loan pipeline and grow our loan to deposit ratio while remaining within our guideline parameters.

Current wording

Average short-term investments remained relatively stable in the first half of 2024 compared to the first half of last year, decreasing slightly by $265,000, or 6.5%. Advances from the Federal Home Loan Bank averaged $49.3 million in the first half of 2024 which is $31.3 million, or 174.7%, higher than the $17.9 million average in the first half of 2023. Management’s strategy to increase term advances to lock in lower rates than overnight borrowings due to the inversion in the yield curve has favorably impacted net interest income. Management continues to monitor the changing economic conditions and adjust pricing strategies accordingly which largely determines customer behavior and the level of total deposits as well as shifts within the total deposit mix. Also, diligent monitoring and management of our short-term investment position and our level of overnight borrowed funds remains a priority. Given the high cost of overnight borrowed funds, management has been effectively controlling the usage of this funding source. The Company’s utilization of overnight borrowed funds so far in 2024 has been relatively consistent with the 2023 level. Total fed funds purchased and other short-term borrowings averaged $31.0 million for the first half of 2024 after averaging $32.8 million for the first half of 2023. Continued loan growth and prudent investment in securities are critical to achieve the best return on the normal level of earning asset cash flow that occurs each month. So far in 2024, purchases of securities have continued to follow the same trend exhibited during the full year of 2023. Securities purchases have been slow as

Previous wording

Liquidity can also be analyzed by utilizing the Consolidated Statements of Cash Flows. Cash and cash equivalents increased by $3.4 million from December 31, 2023, to $17.4 million at March 31, 2024, due to $12.6 million of net cash provided by investing activities which more than offset $7.0 million of net cash used in financing activities and $2.2 million of net cash used in operating activities. Within investing activities, cash advanced for new loans originated totaled $40.0 million and was $12.4 million lower than the $52.4 million of cash received from loan principal payments. Within financing activities, total short-term borrowings decreased by $29.5 million, total FHLB borrowings increased by $4.9 million while total deposits increased by $18.2 million. Within operating activities, $2.1 million of mortgage loans held for sale were originated while $1.3 million of mortgage loans were sold into the secondary market.

Current wording

Liquidity can also be analyzed by utilizing the Consolidated Statements of Cash Flows. Cash and cash equivalents increased by $4.4 million from December 31, 2023, to $18.4 million at June 30, 2024, due to $9.4 million of net cash provided by financing activities which more than offset $4.6 million of net cash used in investing activities and $450,000 of net cash used in operating activities. Within investing activities, cash advanced for new loans originated totaled $85.0 million and was $2.9 million higher than the $82.1 million of cash received from loan principal payments. Within financing activities, total short-term borrowings decreased by $6.4 million, total FHLB borrowings increased by $6.4 million while total deposits increased by $12.0 million.

Previous wording

The holding company had $6.0 million of cash, short-term investments, and investment securities at March 31, 2024, which represents a $2.2 million decrease from the holding company’s cash position since December 31, 2023. Dividend payments from our subsidiaries provided ongoing cash to the holding company. At March 31, 2024, our subsidiary Bank had $2.6 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 believe that the holding company has sufficient liquidity to meet its subordinated debt interest payments and its dividend payments on its common stock.

Current wording

The holding company had $4.7 million of cash, short-term investments, and investment securities at June 30, 2024, which represents a $3.5 million decrease from the holding company’s cash position since December 31, 2023. Dividend payments from our subsidiaries provided ongoing cash to the holding company. At June 30, 2024, our subsidiary Bank had $1.6 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 believe that the holding company has sufficient liquidity to meet its subordinated debt interest payments and its dividend payments on its common stock.

Previous wording

Financial institutions must maintain liquidity to meet day-to-day requirements of depositors and borrowers, take advantage of market opportunities, and provide a cushion against unforeseen needs. Liquidity needs can be met by either reducing assets or increasing liabilities. Sources of asset liquidity are provided by short-term investments, interest bearing deposits with banks, and federal funds sold. These assets totaled $17.4 million and $14.0 million at March 31, 2024 and December 31, 2023, respectively. Maturing and repaying loans, as well as the monthly cash flow associated with mortgage-backed securities and security maturities are other significant sources of asset liquidity for the Company.

Current wording

Financial institutions must maintain liquidity to meet day-to-day requirements of depositors and borrowers, take advantage of market opportunities, and provide a cushion against unforeseen needs. Liquidity needs can be met by either reducing assets or increasing liabilities. Sources of asset liquidity are provided by short-term investments, interest bearing deposits with banks, and federal funds sold. These assets totaled $18.4 million and $14.0 million at June 30, 2024 and December 31, 2023, respectively. Maturing and repaying loans, as well as the monthly cash flow associated with mortgage-backed securities and security maturities are other significant sources of asset liquidity for the Company.

Previous wording

Liability liquidity can be met by attracting deposits with competitive rates, using repurchase agreements, buying federal funds, or utilizing the facilities of the Federal Reserve or the FHLB systems. The Company utilizes a variety of these methods of liability liquidity. Additionally, the Company’s subsidiary bank is a member of the FHLB, which provides the opportunity to obtain short-term to longer-term advances based upon the Company’s investment in certain residential mortgage, commercial real estate, and commercial and industrial loans. At March 31, 2024, the Company had $323 million of overnight borrowing availability at the FHLB, $43 million of short-term borrowing availability at the Federal Reserve Bank and $35 million of unsecured federal funds lines with correspondent banks. The Company believes it has ample liquidity available to fund outstanding loan commitments if they were fully drawn upon.

Current wording

Liability liquidity can be met by attracting deposits with competitive rates, using repurchase agreements, buying federal funds, or utilizing the facilities of the Federal Reserve or the FHLB systems. The Company utilizes a variety of these methods of liability liquidity. Additionally, the Company’s subsidiary bank is a member of the FHLB, which provides the opportunity to obtain short-term to longer-term advances based upon the Company’s investment in certain residential mortgage, commercial real estate, and commercial and industrial loans. At June 30, 2024, the Company had $285 million of overnight borrowing availability at the FHLB, $38 million of short-term borrowing availability at the Federal Reserve Bank and $35 million of unsecured federal funds lines with correspondent banks. The Company believes it has ample liquidity available to fund outstanding loan commitments if they were fully drawn upon.

Previous wording

**…..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 capital ratio was 9.53%, the tier 1 capital ratio was 9.53%, and the total capital ratio was 13.10% at March 31, 2024. The Company’s tier 1 leverage ratio was 7.89% at March 31, 2024. We anticipate that we will maintain our strong capital ratios throughout the remainder of 2024.

Current wording

**…..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 capital ratio was 9.23%, the tier 1 capital ratio was 9.23%, and the total capital ratio was 12.77% at June 30, 2024. The Company’s tier 1 leverage ratio was 7.71% at June 30, 2024. We anticipate that we will maintain our strong capital ratios throughout the remainder of 2024.

Previous wording

The Basel III capital standards establish the minimum capital levels in addition to the well capitalized requirements under the federal banking regulations prompt corrective action. The capital rules also impose a 2.5% capital conservation buffer (CCB) on top of the three minimum risk-weighted asset ratios. Banking institutions that fail to meet the effective minimum ratios once the CCB is taken into account will be subject to constraints on capital distributions, including dividends and share repurchases, and certain discretionary executive compensation. The severity of the constraints depends on the amount of the shortfall and the institution’s “eligible retained income” (four quarter trailing net income, net of distributions and tax effects not reflected in net income). The Company and the Bank meet all capital requirements, including the CCB, and continue to be committed to maintaining strong capital levels that exceed regulatory requirements while also supporting balance sheet growth and providing a return to our shareholders.

Current wording

The Basel III capital standards establish the minimum capital levels in addition to the well capitalized requirements under the federal banking regulations prompt corrective action. The capital rules also impose a 2.5% capital conservation buffer (CCB) on top of the three minimum risk-weighted asset ratios. Banking institutions that fail to meet the effective minimum ratios once the CCB is taken into account will be subject to constraints on capital distributions, including dividends and share repurchases, and certain discretionary executive compensation. The severity of the constraints depends on the amount of the shortfall and the institution’s “eligible retained income” (four quarter trailing net income, net of distributions and tax effects not reflected in net income). The Company and the Bank meet all capital

Previous wording

Our focus is on preserving capital to support customer lending and allow the Company to take advantage of business opportunities as they arise. We currently believe that we have sufficient capital and earnings power to continue to pay our common stock cash dividend at its current rate of $0.03 per quarter. While the Company has frequently executed common stock buyback programs in the past, we presently do not have one in place due to our tangible common equity ratio being at 6.58%(1). At March 31, 2024, the Company had approximately 17.1 million common shares outstanding.

Current wording

Our focus is on preserving capital to support customer lending and allow the Company to take advantage of business opportunities as they arise. We currently believe that we have sufficient capital and earnings power to continue to pay our common stock cash dividend at its current rate of $0.03 per quarter. The Company had a book value of $6.28 per common share and a tangible book value of $5.45(1) per common share on June 30, 2024. In addition, our tangible common equity ratio was 6.47%(1). At June 30, 2024, the Company had approximately 16.5 million common shares outstanding.

Previous wording

Overall, the Company’s interest rate risk position is relatively neutral. The variability of net interest income is slightly negative in the upward rate scenarios as the Company is marginally more exposed to liabilities repricing upward to a greater extent than assets. Specifically, the cost of funds is immediately impacted when short-term national interest rates increase because certain deposit products and overnight borrowed funds move with the market. This was partially offset by the Company’s investment securities portfolio and the scheduled repricing of loans tied to an index, such as SOFR or prime. In addition to the interest rate hedges discussed above, the Company has effectively utilized interest rate swaps for interest rate risk management purposes. The interest rate swaps allow our customers to lock in fixed interest rates while the Company retains the benefit of interest rates moving with the market. Regarding interest bearing liabilities, the Company will continue its disciplined approach to price its core deposit accounts in a controlled but competitive manner and control the amount of overnight borrowed funds. 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 shocks due to a reduced value for core deposits.

Current wording

The variability of net interest income is negative in the upward rate scenarios as the Company is marginally more exposed to liabilities repricing upward to a greater extent than assets. Specifically, the cost of funds is immediately impacted when short-term national interest rates increase because certain deposit products and overnight borrowed funds move with the market. This was partially offset by the Company’s investment securities portfolio and the scheduled repricing of loans tied to an index, such as SOFR or prime. In addition to the interest rate hedges discussed above, the Company has effectively utilized interest rate swaps for interest rate risk management purposes. The interest rate swaps

Previous wording

**…..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 $253.1 million and standby letters of credit of $8.0 million as of March 31, 2024. 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.

Current wording

**…..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 $248.0 million and standby letters of credit of $8.2 million as of June 30, 2024. 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.

Previous wording

The Company estimates expected credit losses over the contractual period in which it is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable. The estimate includes

Current wording

The Company estimates expected credit losses over the contractual period in which it is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life.

Previous wording

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

Current wording

AmeriServ Financial is committed to improving shareholder value by striving for consistently improving financial performance; providing our customers with products and exceptional service for every step in their lifetime financial journey; cultivating an employee atmosphere rooted in trust, empowerment and growth; and serving our communities through employee involvement and a philanthropic spirit. We will strive to provide our shareholders with consistently improved financial performance; the products, services and know-how needed to forge lasting banking for life customer

Previous wording

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.

Current wording

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