UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form

10-Q

☒	Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the quarterly period ended ~~September 30, 2017~~

March 31, 2021

☐	Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the transition period from

~~333-201017~~

001-38627

(Commission File Number)

RIVERVIEW FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)


Pennsylvania		38-3917371
(State of incorporation)		(IRS Employer Identification Number)

3901 North Front Street, Harrisburg, PA		17110
(Address of principal executive offices)		(Zip code)

(717)

957-2196

(Registrant’s telephone number, including area code)

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~~or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes

☒ No ☐

Indicate by check mark whether the registrant has submitted electronically ~~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

☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, ~~or a~~ smaller reporting company, ~~as defined~~or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule12b-2 of the Exchange Act.

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

Indicate by check mark whether the registrant is a shell company as defined in Rule12b-2 of the Exchange Act. Yes ☐ No

☒

~~APPLICABLE ONLY TO CORPORATE ISSUERS:~~

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


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	RIVE	Nasdaq Global Market

Indicate the number of shares outstanding of the registrant’s common stock, as of the latest practicable date: ~~9,026,395~~9,350,961 at ~~October 30, 2017.~~

April 29, 2021.

Table of Contents

RIVERVIEW FINANCIAL CORPORATION

FORM

10-Q

For the Quarter Ended ~~September 30, 2017~~

March 31, 2021


Contents		Page No.
PART I.	FINANCIAL INFORMATION:
Item 1.	Financial Statements (Unaudited)
	Consolidated Balance Sheets at ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016~~2020		3
	Consolidated Statements of Income and Comprehensive Income ~~(Loss)~~ for the Three ~~and Nine~~ Months Ended ~~September 30, 2017~~ March 31, 2021 and ~~2016~~2020		4
	Consolidated Statements of Changes in Stockholders’ Equity for the ~~Nine~~Three Months Ended ~~September 30, 2017~~ March 31, 2021 and ~~2016~~2020		5
	Consolidated Statements of Cash Flows for the ~~Nine~~Three Months Ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~2020		6
	Notes to Consolidated Financial Statements		7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		2623
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		35
Item 4.	Controls and Procedures		35
PART II	OTHER ~~INFORMATION~~INFORMATION:
Item 1.	Legal Proceedings		3635
Item 1A.	Risk Factors		36
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		36
Item 3.	Defaults upon Senior Securities		36
Item 4.	Mine Safety Disclosures		36
Item 5.	Other Information		36
Item 6.	Exhibits		36
	Signatures		37

Table of Contents

Riverview Financial Corporation

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME ~~(LOSS)~~ (UNAUDITED)

(Dollars in thousands, except per share data)

   Three Months Ended Nine Months Ended
September 30,
   2017 2016 2017 2016
Interest income:

Interest and fees on loans:

Taxable
   $ 5,717 $ 4,598 $ 14,991 $ 13,362
Tax-exempt
   146 87 361 261
Interest and dividends on investment securitiesavailable-for-sale:

Taxable
   477 539 1,607 1,375
Tax-exempt
   47 53 140 280
Dividends
   1 3 8
Interest on interest-bearing deposits in other banks
   31 13 78 41
Interest on federal funds sold
   2 12 2


Total interest income
   6,420 5,291 17,192 15,329


Interest expense:

Interest on deposits
   821 447 2,021 1,375
Interest on short-term borrowings
   112 3 197 59
Interest on long-term debt
   75 77 228 214


Total interest expense
   1,008 527 2,446 1,648


Net interest income
   5,412 4,764 14,746 13,681
Provision for loan losses
   610 29 1,734 284


Net interest income after provision for loan losses
   4,802 4,735 13,012 13,397


Noninterest income:

Service charges, fees and commissions
   270 315 899 933
Commission and fees on fiduciary activities
   31 34 92 88
Wealth management income
   179 194 631 531
Mortgage banking income
   205 210 434 401
Bank owned life insurance investment income
   107 118 254 276
Net gain on sale of investment securitiesavailable-for-sale
   43 152 106 484


Total noninterest income
   835 1,023 2,416 2,713


Noninterest expense:

Salaries and employee benefits expense
   2,928 2,334 8,521 6,611
Net occupancy and equipment expense
   615 538 1,895 1,617
Amortization of intangible assets
   71 95 306 247
Net cost of operation of other real estate owned
   (13 ) 83 161 214
Other expenses
   1,566 1,283 4,488 4,004


Total noninterest expense
   5,167 4,333 15,371 12,693


Income (loss) before income taxes
   470 1,425 57 3,417
Income tax expense (benefit)
   69 454 44 838


Net income (loss)
   401 971 13 2,579


Other comprehensive income:

Unrealized gain (loss) on investment securitiesavailable-for-sale
   (50 ) (148 ) 1,708 940
Reclassification adjustment for net (gain) loss on sale of investment securitiesavailable-for-sale included in net income (loss)
   (43 ) (152 ) (106 ) (484 )


Other comprehensive income (loss)
   (93 ) (300 ) 1,602 456
Income tax expense (benefit) related to other comprehensive income
   (32 ) (102 ) 544 155


Other comprehensive income (loss), net of income taxes
   (61 ) (198 ) 1,058 301


Comprehensive income
   $ 340 $ 773 $ 1,071 $ 2,880


Per share data:

Net income:

Basic
   $ 0.08 $ 0.30 $ 0.03 $ 0.80
Diluted
   $ 0.08 $ 0.30 $ 0.03 $ 0.80
Average common shares outstanding:

Basic
   4,880,676 3,224,053 4,002,165 3,214,967
Diluted
   4,945,456 3,244,688 4,060,813 3,237,553
Dividends declared
   $ 0.14 $ 0.14 $ 0.41 $ 0.41


For the three months ended March 31,	2021			2020
Interest income:
Interest and fees on loans:
Taxable	$	10,348		$	9,782
Tax-exempt		176			245
Interest on investment securities available-for-sale:
Taxable		494			535
Tax-exempt		152			37
Interest on interest-bearing deposits in other banks		9			89

Total interest income		11,179			10,688

Interest expense:
Interest on deposits		923			1,789
Interest on short-term borrowings					5
Interest on long-term debt		646			123

Total interest expense		1,569			1,917

Net interest income		9,610			8,771
Provision for loan losses					1,800

Net interest income after provision for loan losses		9,610			6,971

Noninterest income:
Service charges, fees and commissions		1,474			1,381
Commission and fees on fiduciary activities		260			213
Wealth management income		214			220
Mortgage banking income		151			108
Bank owned life insurance investment income		178			193
Net gain (loss) on sale of investment securities available-for-sale		246			815

Total noninterest income		2,523			2,930

Noninterest expense:
Salaries and employee benefits expense		4,467			5,056
Net occupancy and equipment expense		1,190			1,180
Amortization of intangible assets		132			170
Net cost (benefit) of operation of other real estate owned		(29	)		(11	)
Other expenses		2,627			2,817

Total noninterest expense		8,387			9,212

Income before income taxes		3,746			689
Income tax expense		686			56

Net income		3,060			633

Other comprehensive income (loss):
Unrealized gain (loss) on investment securities available-for-sale	$	(3,029	)	$	1,053
Reclassification adjustment for net gain on sale of investment securities available-for-sale included in net income		(246	)		(815	)
Change in cash flow hedge		657
Income tax expense (benefit) related to other comprehensive income		(550	)		50

Other comprehensive income (loss), net of income taxes		(2,068	)		188

Comprehensive income	$	992		$	821

Per share data:
Net income:
Basic	$	0.33		$	0.07
Diluted	$	0.33		$	0.07
Average common shares outstanding:
Basic		9,341,291			9,223,445
Diluted		9,341,533			9,233,060
Dividends declared	$	0.00		$	0.08

See notes to consolidated financial statements.

Table of Contents

Riverview Financial Corporation

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Dollars in thousands, except per share data)

For the Nine Months Ended September 30,
   2017 2016
Cash flows from operating activities:

Net income (loss)
   $ 13 $ 2,579
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Depreciation of premises and equipment
   586 533
Provision for loan losses
   1,734 284
Stock based compensation
   23 31
Net amortization of investment securitiesavailable-for-sale
   315 389
Net cost of operation of other real estate owned
   161 214
Net gain on sale of investment securitiesavailable-for-sale
   (106 ) (484 )
Amortization of purchase adjustment on loans
   (127 ) (704 )
Amortization of intangible assets
   306 247
Deferred income taxes
   (47 ) 384
Proceeds from sale of loans originated for sale
   20,733 18,329
Net gain on sale of loans originated for sale
   (434 ) (401 )
Loans originated for sale
   (20,166 ) (17,654 )
Bank owned life insurance investment income
   (254 ) (276 )
Net change in:

Accrued interest receivable
   (269 ) (107 )
Other assets
   (1,255 ) (208 )
Accrued interest payable
   21 (16 )
Other liabilities
   (638 ) (196 )


Net cash provided by (used in) operating activities
   596 2,944


Cash flows from investing activities:

Investment securitiesavailable-for-sale:

Purchases
   (40,916 )
Proceeds from repayments
   1,805 7,420
Proceeds from sales
   15,827 37,526
Proceeds from the sale of other real estate owned
   613 1,129
Net decrease in restricted equity securities
   (341 ) 1,489
Net (increase) decrease in loans
   (151,072 ) 9,996
Business disposition (acquisition), net of cash
   329 (894 )
Purchases of premises and equipment
   (548 ) (447 )
Purchases of bank owned life insurance
   (5,017 ) (27 )
Proceeds from bank owned life insurance
   279


Net cash provided by (used in) investing activities
   (138,404 ) 15,555


Cash flows from financing activities:

Net increase in deposits
   122,390 10,651
Net increase (decrease) in short-term borrowings
   5,750 (36,575 )
Repayment of long-term debt
   (5,251 ) (143 )
Proceeds from long-term debt
   600 2,050
Issuance under ESPP, 401k and DRP plans
   373 274
Issuance of common stock
   15,941
Proceeds from exercise of stock options
   61
Cash dividends paid
   (2,010 ) (1,327 )


Net cash provided by (used in) financing activities
   137,854 (25,070 )


Net increase (decrease) in cash and cash equivalents
   46 (6,571 )
Cash and cash equivalents - beginning
   19,120 22,688


Cash and cash equivalents - ending
   $ 19,166 $ 16,117


Supplemental disclosures:

Cash paid during the period for:

Interest
   $ 2,425 $ 1,664


Income taxes
   $ $


Noncash items from investing activities:

Other real estate acquired in settlement of loans
   $ 293 $ 1,348


For the Three Months Ended March 31,	2021			2020
Cash flows from operating activities:
Net income	$	3,060		$	633
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization of premises and equipment		340			320
Provision for loan losses					1,800
Stock based compensation		65			22
Net amortization of investment securities available-for-sale		411			169
Net cost (benefit) of operation of other real estate owned		(29	)		(11	)
Net gain on sale of investment securities available-for-sale		(246	)		(815	)
Accretion of purchase adjustment on loans		(22	)		(132	)
Amortization of intangible assets		132			170
Amortization of assumed discount on long-term debt		22			21
Amortization of long-term debt issuance costs		25
Deferred income taxes		391			53
Proceeds from sale of loans originated for sale		5,928			2,791
Net gain on sale of loans originated for sale		(151	)		(108	)
Loans originated for sale		(3,941	)		(2,874	)
Bank owned life insurance investment income		(178	)		(193	)
Net change in:
Accrued interest receivable		27			(175	)
Other assets		(435	)		(2	)
Accrued interest payable		309			(11	)
Other liabilities		(1,561	)		(1,275	)

Net cash provided operating activities		4,147			383

Cash flows from investing activities:
Investment securities available-for-sale:
Purchases		(68,371	)		(7,317	)
Proceeds from repayments		2,865			3,878
Proceeds from sales		9,898			27,168
Proceeds from the sale of other real estate owned		232			68
Net (increase) decrease in restricted equity securities		(15	)		(867	)
Net (increase) decrease in loans		47,377			(36,594	)
Purchases of premises and equipment		(184	)		(1,343	)

Net cash used in investing activities		(8,198	)		(15,007	)

Cash flows from financing activities:
Net increase in deposits		65,468			18,023
Repayment of long-term debt		(48,168	)
Proceeds from long-term debt					20,000
Issuance under ESPP, 401k and DRP plans		134			180
Cash dividends paid					(692	)

Net cash provided by financing activities		17,434			37,511

Net increase in cash and cash equivalents		13,383			22,887
Cash and cash equivalents—beginning		49,781			50,348

Cash and cash equivalents—ending	$	63,164		$	73,235

Supplemental disclosures:
Cash paid during the period for:
Interest	$	1,260		$	1,928

Supplemental schedule of noncash investing and financing activities:
Other real estate acquired in settlement of loans	$			$	321

See notes to consolidated financial statements.

Table of Contents

Riverview Financial Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

1. Summary of significant accounting policies:

Nature of Operations

Riverview Financial Corporation, (the “Company” or “Riverview”), a bank holding company incorporated under the laws of Pennsylvania, provides a full range of financial services through its wholly-owned subsidiary, Riverview Bank (the “Bank”). ~~The Company services its retail and commercial customers through 17 community banking~~

Riverview Bank, with 25

full-service offices and ~~three~~

3 (3)

limited purpose offices, ~~located within~~is a full service commercial bank offering a wide range of traditional banking services and financial advisory, insurance and investment services to individuals, municipalities, and small-to-medium sized businesses in the Pennsylvania market areas of Berks, Blair, Bucks, Centre, Clearfield, Dauphin, Huntingdon, Lebanon, Lehigh, Lycoming, ~~Northumberland,~~ Perry, Schuylkill, and Somerset ~~Counties in Pennsylvania.~~

Counties. The Wealth and Trust Management divisions of the Bank provide trust and investment advisory services to the general public and businesses.

Basis of presentation:

The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP’) for interim financial information and with the instructions to

Form10-Q

and Article 8 of

Regulation S-X.

In the opinion of management, all normal recurring adjustments necessary for a fair presentation of the financial position and results of operations for the periods presented have been included. All significant intercompany balances and transactions have been eliminated in consolidation. Certain prior period amounts have been reclassified to conform towith the current year’s presentation. These reclassifications did not have any effect on the operating results or financial position of the Company. The operating results and financial position of the Company for the three and nine months ended and as of September 30, 2017, are not necessarily indicative of the results of operations and financial position that may be expected in the future. The condensed consolidated balance sheet at December 31, ~~2016~~2020 has been derived from the audited financial statements at that date but does not include all of the information and disclosures required by GAAP for complete financial statements. Accordingly, these unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s ~~2016~~2020 Annual Report on

Form10-K,

filed on March ~~29, 2017.~~

11, 2021.

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. ~~Significant~~These estimates ~~that are particularly susceptible to material change~~and assumptions affect the amounts reported in the ~~near term relate to~~financial statements and the determination of the allowance for loan losses, fair value of financial instruments, the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans, the valuation of deferred tax assets, the determination of other-than-temporary impairment losses on securities and impairment of goodwill.disclosures provided. Actual results could differ from those estimates.

~~Recent~~

The operating results and financial position of the Company for the three months ended as of March 31, 2021, are not necessarily indicative of the results of operations and financial position that may be expected in the future. This is especially true given the outbreak of the Coronavirus

(“COVID-19”)

pandemic which may adversely affect the Company’s business results of operations and financial condition for an indefinite period.

The impact of the pandemic on Riverview’s financial results is evolving and uncertain. Net interest income and

non-interest

income may decrease, and credit-related losses may increase in the future if economic activity slows due to

COVID-19.

We believe that we may experience a material adverse effect on our business, results of operations and financial condition as a result of the

COVID-19

pandemic for an indefinite period. Material adverse impacts may include all or a combination of valuation impairments on Riverview’s intangible assets, investments, loans, or deferred taxes.

Accounting Standards

Adopted in 2021

In ~~January 2016,~~August 2018, the FASB issued ASU

No. ~~2016-01,~~ ~~“Financial Instruments - Overall~~2018-14,

“Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic~~825-10):~~ ~~Recognition~~

715-20)

— Disclosure Framework — Changes to the Disclosure Requirements for Defined Benefit Plans”. Subtopic

715-20

addresses the disclosure of other accounting and ~~Measurement of Financial Assets and Financial Liabilities”. The amendments in ASU2016-01,~~ ~~among~~reporting requirements related to single-employer defined benefit pension or other things: require equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income; require public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; require separate presentation of financial assets and liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables); and eliminate the requirement for public business entities to disclose the methods and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost.postretirement benefit plans. The amendments in this Update remove disclosures that no longer are considered cost-beneficial, clarify the specific requirements of disclosures, and add disclosure requirements identified as relevant. Although narrow in scope, the amendments are considered an important part of the Board’s efforts to improve the effectiveness of disclosures in the notes to financial statements by applying concepts in the FASB Concepts Statement, Conceptual Framework for Financial Reporting — Chapter 8: Notes to Financial Statements. The amendments in this Update apply to all employers that sponsor defined benefit pension

or other postretirement plans. The ASU ~~are~~is effective for ~~public companies for~~all entities in fiscal years beginning after December 15, ~~2017, including interim periods within those fiscal years. The Company is currently assessing the impact that ASU2016-01~~ will have on its consolidated financial statements. The Company does not expect the adoption of the new accounting guidance to have a material effect on its consolidated financial statements, and expects the fair values of financial instruments disclosed in the footnotes to conform to a market participant’s view for measurement and disclosure purposes.

~~In February 2016, the FASB issued ASUNo. 2016-02,~~ ~~“Leases (Topic 842)”. Among other things, in the amendments in ASU2016-02,~~ lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and a~~right-of-use~~ asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Under the new guidance, lessor accounting is largely unchanged. Certain targeted improvements were made to align, where necessary, lessor accounting with the lessee accounting model and Topic 606, Revenue from Contracts with Customers. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018,2020, including interim periods within those fiscal years. Early application is permitted upon issuance. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any

transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. The Company is currently assessing the impact that ASU~~2016-02~~ ~~will have on its consolidated financial statements.~~

~~In March 2016, the FASB issued ASUNo. 2016-07,~~ “Investments - Equity Method and Joint Ventures (Topic 323): Simplifying the Transition to the Equity Method of Accounting”. The amendments in this ASU eliminate the requirement that when an investment qualifies for use of the equity method as a result of an increase in the level of ownership interest or degree of influence, an investor must adjust the investment, results of operations, and retained earnings retroactively on a~~step-by-step~~ basis as if the equity method had been in effect during all previous periods that the investment had been held. The amendments require that the equity method investor add the cost of acquiring the additional interest in the investee to the current basis of the investor’s previously held interest and adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting. Therefore, upon qualifying for the equity method of accounting, no retroactive adjustment of the investment is required. In addition, the amendments in this ASU require that an entity that has an~~available-for-sale~~ equity security that becomes qualified for the equity method of accounting recognize through earnings the unrealized holding gain or loss in accumulated other comprehensive income at the date the investment becomes qualified for use of the equity method. The amendments were effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. The amendments should be applied prospectively upon their effective date to increases in the level of ownership interest or degree of influence that result in the adoption of the equity method. Early adoption is permitted. The adoption of ~~ASUNo. 2016-07~~the guidance did not have a material effect on ~~our consolidated~~the Company’s financial ~~statements.~~

position, results of operations or disclosures.

Table of Contents

In ~~March 2016,~~December 2019, the FASB issued ASU

No. ~~2016-09,~~ ~~“Compensation - Stock Compensation (Topic 718): Improvements~~2019-12,

“Income Taxes”, an update to ~~Employee Shares-Based Payment Accounting”. The amendments in this ASU~~ simplify ~~several aspects of~~ the accounting for ~~share-based payment award transactions including:~~ income ~~tax consequences; classification~~taxes by removing certain exceptions in Topic 740 Income Taxes. In addition, ASU

No. 2019-12

improves consistent application of ~~awards as either equity or liabilities;~~other areas of guidance within Topic 740 by clarifying and ~~classification on the statement of cash flows.~~amending existing guidance. The ~~amendments were~~new guidance is effective ~~for public companies for annual periods~~fiscal years beginning after December 15, ~~2016, and interim periods within those annual periods.~~2020. The adoption of ~~ASUNo. 2016-09~~the guidance did not have a material effect on ~~our consolidated~~the Company’s financial ~~statements.~~

position, results of operations or disclosures.

Recent Accounting Standards

In June 2016, the FASB issued ASU

No. 2016-13, ~~“Financial~~

“Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. ASU No.

2016-13 requires

an entity to utilize a new impairment model known as the current expected credit loss (“CECL”) model to estimate its lifetime “expected credit loss” and record an allowance that, when deducted from the amortized cost basis of the financial asset, presents the net amount expected to be collected on the financial asset. The CECL model is expected to result in earlier recognition of credit losses. ASU

No. 2016-13

also requires new disclosures for financial assets measured at amortized cost, loans, and

available-for-sale

debt securities. In November 2018, the FASB issued ASU No.

2018-19—Codification

Improvements to Topic 326, Financial Instruments—Credit Losses. The ~~updated~~amendments clarify that receivables arising from operating leases are not within the scope of Subtopic

326-20.

Instead, impairment of receivables arising from operating leases should be accounted for in accordance with Topic 842, Leases. In May 2019, the FASB issued ASU

No. 2019-05

“Financial Instruments-Credit Losses (Topic 326)-Targeted Transition Relief” which amends ASU

No. 2016-13

to allow companies to irrevocably elect, upon adoption of ASU No,

2016-13,

the fair value option on financial instruments that were previously recorded at amortized cost and are within the scope of ASC

326-20

if the instruments are eligible for the fair value option under ASC

825-10.

The fair value option election does not apply to

held-to-maturity

debt securities. Entities are required to make this election on an

instrument-by-instrument

basis. In November 2019, the FASB issued ASU

No. 2019-11,

“Codification Improvements to Topic 326, Financial Instruments—Credit Losses”, which provides specific improvements and clarifications to the guidance in Topic 326. Addresses expected recoveries for purchased financial assets with credit deterioration, transition relief for troubled debt restructurings, disclosures related to accrued interest receivables, financial assets secured by collateral maintenance provisions, and conforming cross-references to Subtopic

805-20.

In December 2018, the federal bank regulatory agencies approved a final rule that modifies their regulatory capital rules and provides institutions the option to phase in over a three-year period any

day-one

regulatory capital effects of the new accounting standard. The Company has formed an internal management committee and engaged a third-party vendor to assist with the transition to the guidance set forth in this update. The committee is currently evaluating the impact of this update on the Company’s Consolidated Financial Statements, but the allowance for credit losses (“ACL”) is expected to increase upon adoption since the allowance will be required to cover the full expected life of the portfolio. The extent of this increase is still being evaluated and will depend on economic conditions and the composition of the loan and lease portfolio at the time of adoption. Management is currently evaluating the preliminary modeling results, including a qualitative framework to account for the drivers of credit losses that are not captured by the quantitative model. In October 2019, the FASB affirmed its previously proposed amendment to delay the effective date for small reporting public companies to interim and annual reporting periods beginning after December 15, ~~2019,~~2022, including interim periods within those fiscal years. Early adoption is permitted. ~~Entities~~The Company currently expects as of January 1, 2023 to recognize a

one-time

cumulative effect adjustment to increase the ACL with an offsetting reduction to the retained earnings component of equity.

In March 2020, the FASB issued ASU

No. 2020-04,

“Reference Rate Reform (Topic 848)”. In response to concerns about structural risks of interbank offered rates (“IBORs”), and, particularly, the risk of cessation of the London Interbank Offered Rate (“LIBOR”), regulators around the world have undertaken reference rate reform initiatives to identify alternative reference rates that are more observable or transaction-based and less susceptible to manipulation. The amendments in this Update provide optional guidance for a limited time to ease the potential burden in accounting for or recognizing the effects of reference rate reform on financial reporting. ASU

2020-04

provides optional expedients and exceptions for applying GAAP to loan and lease agreements, derivative contracts, and other transactions affected by the anticipated transition away from LIBOR toward new interest rate benchmarks. For transactions that are modified because of reference rate reform and that meet certain scope guidance (i) modifications of loan agreements should be accounted for by prospectively adjusting the effective interest rate and the modification will ~~apply the standard’s provisions~~be considered “minor” so that any existing unamortized origination fees/costs would carry forward and continue to be amortized and (ii) modifications of lease agreements should be accounted for as a ~~cumulative-effect adjustment~~continuation of the existing agreement with no reassessments of the lease classification and the discount rate or remeasurements of lease payments that otherwise would be required for modifications not accounted for as separate contracts. ASU

2020-04

also provides numerous optional expedients for derivative accounting. ASU

2020-04

is effective March 12, 2020 through December 31, 2022. An entity may elect to ~~retained earnings~~apply ASU

2020-04

for contract modifications as of January 1, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the ~~beginning~~date that the financial statements are available to be issued. Once elected for a Topic or an Industry Subtopic within the Codification, the amendments in this ASU must be applied prospectively for all eligible contract modifications for that Topic or Industry Subtopic. In

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January 2021, the FASB issued ASU 2021-01, “Reference Rate Reform (Topic 848): Scope.” ASU 2021-01 clarifies that certain optional expedients and exceptions in ASC 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. ASU 2021-01 also amends the expedients and exceptions in ASC 848 to capture the incremental consequences of the ~~first reporting period in which~~scope clarification and to tailor the existing guidance to derivative instruments affected by the discounting transition. ASU 2021-01 was effective upon issuance and generally can be applied through December 31, 2022. The adoption of the guidance is adopted. We have dedicated staff and resources in place evaluating the Company’s options including evaluating the appropriate model options and collecting and reviewing loan data for use in these models. The Company is currently still assessing the impact that this new guidance will have on its consolidated financial statements.

~~In August 2016, the FASB issued ASUNo. 2016-15,~~ “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments”. The update addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. This new accounting guidance will be effective for interim and annual reporting periods beginning after December 15, 2019. The Company does not ~~expect the adoption of the new accounting guidance~~expected to have a material effect on the ~~statement of cash flow.~~

~~In December 2016, the FASB issued ASUNo. 2016-20,~~ ~~“Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers”.ASU 2016-20~~ ~~updates the new revenue standard by clarifying issues that have arisen fromASU 2014-09,~~ but does not change the core principle of the new standard. The issues addressed in this ASU include: (i) Loan guarantee fees; (ii) Impairment testing of contract costs; (iii) Interaction of impairment testing with guidance in other topics; (iv) Provisions for losses on construction-type and production-type contracts; (v) Scope of Topic 606; (vi) Disclosure of remaining performance obligations; (vii) Disclosure of prior-period performance obligations; (viii) Contract modifications; (ix) Contract asset vs. receivable; (x) Refund liability; (xi) Advertising costs; (xii) Fixed-odds wagering contracts in the casino industry; and (xiii) Cost capitalization for advisors to private funds and public funds. The updated guidance is effective for interim and annual reporting periods beginning after December 15, 2017. The amendments can be applied retrospectively to each prior reporting period or retrospectively with the cumulative effect of initially applying this new guidance recognized at the date of initial application. Our revenue is comprised of net interest income on financial assets and financial liabilities, which is explicitly excluded from the scope of~~ASU 2014-09,~~ ~~andnon-interest~~ ~~income.ASU 2016-20~~ ~~and2014-09~~ ~~could require us to change how we recognize certain revenue streams withinnon-interest~~ ~~income, however, we do not expect these changes to have a significant impact on our financial statements. We continue to evaluate the impact ofASU 2016-20~~ ~~and2014-09~~ ~~on our Company and expect to adopt the standard in the first quarter of 2018 with a cumulative effect adjustment to opening retained earnings, if such adjustment is deemed to be significant.~~

~~In January 2017, FASB issued ASUNo. 2017-01,~~ “Business Combinations (Topic 805): Clarifying the Definition of a Business”. The ASU clarifies the definition of a business to assist with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The amendments in this update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The guidance is not expected to have a significant impact on the Company’s financial ~~positions,~~position, results of operations or disclosures.

~~In January 2017, the FASB issued ASUNo. 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 2015 22, 2016 and November 17, 2016 EITF Meetings”. The ASU adds an SEC paragraph to ASUs~~2014-09,2016-02~~ ~~and2016-13~~ which specifies the SEC staff view that a registrant should evaluate ASUs that have not yet been adopted to determine the appropriate disclosure about the potential material effects of those ASUs on the financial statements when adopted. The guidance also specifies the SEC staff view on financial statement disclosures when the company does not know or cannot reasonably estimate the impact that adoption of the ASUs will have on the financial statements. The ASU also conforms to SEC guidance on accounting for tax benefits resulting from investments in affordable housing projects to the guidance in ASU~~2014-01,~~ Investments - Equity Method and Joint Ventures (Topic 323). The amendments in this update are effective upon issuance. The guidance did not have a significant impact on our consolidated financial statements.

~~In January 2017, FASB issued ASUNo. 2017-04,~~ “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment”. The ASU simplifies the subsequent measurement of goodwill and eliminates Step 2 from the goodwill impairment test. The Company should perform its goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value. The impairment charge is limited to the amount of goodwill allocated to that reporting unit. The amendments in this update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for goodwill impairment tests performed on testing dates after January 1, 2017. The guidance is not expected to have a significant impact on the Company’s financial positions, results of operations or disclosures.

~~In February 2017, the FASB issued ASUNo. 2017-05,~~ “Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Topic 610): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets”. The amendments clarify that a financial asset is within the scope of Topic 610 if it meets the definition of an in substance nonfinancial asset. The amendments also define the term in substance nonfinancial asset. The amendments clarify that nonfinancial assets within the scope of Topic 610 may include nonfinancial assets transferred within a legal entity to a counterparty. For example, a parent may transfer control of nonfinancial assets by transferring ownership interests in a consolidated subsidiary. A contract that includes the transfer of ownership interests in one or more consolidated subsidiaries is within the scope of Topic 610 if substantially all of the fair value of the assets that are promised to the counterparty in a contract is concentrated in nonfinancial assets. The amendments clarify that an entity should identify each distinct nonfinancial asset or in substance nonfinancial asset promised to a counterparty and derecognize each asset when a counterparty obtains control of it. The guidance is effective for public business entities for annual periods beginning after December 15, 2017 and interim periods therein. Entities may use either a full or modified approach to adopt the ASU. The Company is assessing ASU~~2017-05~~ ~~and does not expect it to have a material impact on its accounting and disclosures.~~

~~In March 2017, the FASB issued ASU2017-07,~~ “Compensation - Retirement Benefits (Topic 715)”, which requires employers that offer or maintain defined benefit plans to disaggregate the service component from the other components of net benefit cost and provides guidance on presentation of the service component and the other components of net benefit cost in the statement of operations. The guidance is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. The Company is currently evaluating the potential impact of this standard on its consolidated financial statements.

~~In March 2017, FASB issued ASUNo. 2017-08,~~ “Receivables - Nonrefundable Fees and Other Costs (Topic 310), Premium Amortization on Purchased Callable Debt Securities”. These amendments 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. The guidance is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted, including adoption in an interim period. If an entity early adopts in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The amendments should be applied on a modified retrospective basis, with a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. The Company is assessing the impact of ASU~~2017-08~~ ~~on its accounting and disclosures.~~

~~In May 2017, the FASB issued ASU2017-09,~~ “Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting”. This ASU clarifies which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. Specifically, an entity would not apply modification accounting if the fair value, vesting

conditions, and classification of the awards are the same immediately before and after the modification. This ASU is effective for fiscal years beginning after December 15, 2017, and interims periods within those fiscal years. The Company does not expect the adoption of the guidance to have a material impact on our consolidated financial statements.

~~In August 2017, FASB issued ASU2017-12,~~ “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.” The amendments in the Update better align an entity’s risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. To meet that objective, the amendments expand and refine hedge accounting for both nonfinancial and financial risk components and align the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. 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. The guidance is not expected to have a significant impact on the Company’s financial positions, results of operations or disclosures.

2. Other comprehensive income (loss):

The components of other comprehensive income (loss) and their related tax effects are reported in the Consolidated Statements of Income and Comprehensive Income (Loss). The accumulated other comprehensive income (loss) included in the Consolidated Balance Sheets relates to net unrealized gains and losses on investment securities

available-for-sale

and benefit plan and derivative adjustments.

The components of accumulated other comprehensive income (loss) included in stockholders’ equity at ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016~~2020 is as follows:

   September 30,
2017    December 31,
2016
Net unrealized loss on investment securitiesavailable-for-sale
   $ (911 )    $ (2,513 )
Related income taxes
   (310 )    (854 )




Net of income taxes
   (601 )    (1,659 )




Benefit plan adjustments
   (815 )    (815 )
Related income taxes
   (277 )    (277 )




Net of income taxes
   (538 )    (538 )




Accumulated other comprehensive income (loss)
   $ (1,139 )    $ (2,197 )


	March 31, 2021			December 31, 2020
Net unrealized gain (loss) on investment securities available-for-sale	$	(1,313	)	$	1,962
Income tax expense (benefit)		(276	)		412

Net of income taxes		(1,037	)		1,550

Benefit plan adjustments		(951	)		(951	)
Income tax expense (benefit)		(200	)		(200	)

Net of income taxes		(751	)		(751	)

Derivative fair value adjustment		829			172
Income tax expense (benefit)		174			36

Net of income taxes		655			136

Accumulated other comprehensive income (loss)	$	(1,133	)	$	935

Other comprehensive income (loss) and related tax effects for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~2020 is as follows:

Three months ended September 30,
   2017    2016
Unrealized loss on investment securitiesavailable-for-sale
   $ (50 )    $ (148 )
Net gain on the sale of investment securitiesavailable-for-sale ⁽¹⁾
   (43 )    (152 )




Other comprehensive loss before taxes
   (93 )    (300 )
Income tax expense (benefit)
   (32 )    (102 )




Other comprehensive loss
   $ (61 )    $ (198 )




Nine months ended September 30,
   2017    2016
Unrealized gain on investment securitiesavailable-for-sale
   $ 1,708    $ 940
Net gain on the sale of investment securitiesavailable-for-sale ⁽¹⁾
   (106 )    (484 )




Other comprehensive income before taxes
   1,602    456
Income tax expense (benefit)
   544    155




Other comprehensive income
   $ 1,058    $ 301


Three months ended March 31,	2021			2020

Unrealized gain (loss) on investment securities available-for-sale	$	(3,029	)	$	1,053
Net (gain) loss on the sale of investment securities available-for-sale (1)		(246	)		(815	)
Net change in cash flow hedge		657

Other comprehensive income (loss) before taxes		(2,618	)		238
Income tax expense (benefit)		(550	)		50

Other comprehensive income (loss)	$	(2,068	)	$	188

⁽¹⁾	Represents amounts reclassified out of accumulated other comprehensive income and included in gains on sale of investment securities on the consolidated statements of income and comprehensive income.

3. Earnings per share:

Basic earnings per share is computed by dividing net income (loss) ~~allocated to common stockholders~~ divided by the weighted-average number of common shares outstanding during the period. ~~Net income (loss) allocated to common stockholders is net income (loss) adjusted for preferred stock dividends including dividends declared, less income (loss) allocated to participating securities.~~ Diluted earnings per share reflect additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income that would result from the assumed issuance.

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The following table provides a reconciliation between the computation of basic earnings per share and diluted earnings per share for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2021 and ~~2016:~~

Three months ended September 30,
   2017    2016
Numerator:

Net income (loss)
   $ 401    $ 971
Dividends on preferred stock





Net income (loss) available to common stockholders
   $ 401    $ 971
Undistributed loss allocated to preferred stockholders





Income (loss) allocated to common stockholders
   $ 401    $ 971




Denominator:

Basic
   4,880,676    3,224,053
Dilutive options
   64,780    20,635




Diluted
   4,945,456    3,244,688




Earnings per share:

Basic
   $ 0.08    $ 0.30
Diluted
   $ 0.08    $ 0.30
Nine months ended September 30,
   2017    2016
Numerator:

Net income (loss)
   $ 13    $ 2,579
Dividends on preferred stock
   (371 )




Net income (loss) available to common stockholders
   $ (358 )    $ 2,579
Undistributed loss allocated to preferred stockholders
   475




Income (loss) allocated to common stockholders
   $ 117    $ 2,579




Denominator:

Basic
   4,002,165    3,214,967
Dilutive options
   58,648    22,586




Diluted
   4,060,813    3,237,553




Earnings per share:

Basic
   $ 0.03    $ 0.80
Diluted
   $ 0.03    $ 0.80

~~There~~2020:


Three months ended March 31,	2021		2020
Numerator:
Net income	$	3,060	$	633

Denominator:
Basic		9,341,291		9,223,445
Dilutive options		242		9,615

Diluted		9,341,533		9,233,060

Earnings per share:
Basic	$	0.33	$	0.07
Diluted	$	0.33	$	0.07

For the three months ended March 31, 2021 there were ~~25,300~~151,300 outstanding stock options ~~for the three and nine months ended September 30, 2016~~ that were excluded from the ~~diluted~~dilutive earnings per share calculation because of their ~~antidilutive effect.~~

~~On January 20, 2017, Riverview announced~~effect was antidilutive. For the three months ended March 31, 2020, there were 37,200 outstanding stock options that ~~it entered into agreements with accredited investors and qualified institutional buyers to raise approximately $17.0 million in common and preferred equity, before expenses, through~~were excluded from the ~~private placement of 269,885 shares of its no par value common stock at a price of $10.50~~dilutive earnings per share ~~and 1,348,809 shares of a newly created Series A convertible, perpetual preferred stock (the “Series A preferred stock”) at a price of $10.50 per share.~~

~~Effective as of the close of business on June 22, 2017, the Company filed an amendment to the Articles of Incorporation to authorize a class ofnon-voting~~ ~~common stock after obtaining shareholder approval on June 21, 2017. As a result, each share of Series A preferred stock~~calculation because their effect was ~~automatically converted into one share ofnon-voting~~ ~~common stock as of the effective date. Thenon-voting~~ ~~common stock has the same relative rights as, and is identical in all respects with, each other share of common stock of the Company, except that holders ofnon-voting~~ ~~common stock do not have voting rights.~~

The additional capital allowed Riverview to acquire CBT Financial Corp, Clearfield, Pennsylvania, in a stock transaction valued at approximately $54.6 million effective October 1, 2017. This merger created a community banking franchise with approximately $1.2 billion of assets and provides enhanced products and services through 33 banking locations covering 12 Pennsylvania counties.

antidilutive.

4. Investment securities:

The amortized cost and fair value of investment securities

available-for-sale

aggregated by investment category at ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016~~2020 are summarized as follows:

September 30, 2017
   Amortized
Cost    Gross
Unrealized
Gains    Gross
Unrealized
Losses    Fair
Value
State and municipals:

Taxable
   $ 35,424    $ 392    $ 684    $ 35,132
Tax-exempt
   5,746    55       5,801
Mortgage-backed securities:

U.S. Government agencies
   1,567       31    1,536
U.S. Government-sponsored enterprises
   5,516    12    105    5,423
Corporate debt obligations
   9,532       550    8,982








Total
   $ 57,785    $ 459    $ 1,370    $ 56,874








December 31, 2016
   Amortized
Cost    Gross
Unrealized
Gains    Gross
Unrealized
Losses    Fair
Value
U.S. Treasury securities
   $ 5,088       $ 67    $ 5,021
State and municipals:

Taxable
   44,045    $ 234    1,885    42,394
Tax-exempt
   5,748    3    77    5,674
Mortgage-backed securities:

U.S. Government agencies
   1,905       15    1,890
U.S. Government-sponsored enterprises
   9,115    28    247    8,896
Corporate debt obligations
   9,542       492    9,050
Equity securities, financial services
   183    5       188








Total
   $ 75,626    $ 270    $ 2,783    $ 73,113


March 31, 2021	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
U.S. Treasury securities	$	19,396			$	418	$	18,978
State and municipals:
Taxable		23,779	$	238		959		23,058
Tax-exempt		44,599		84		1,131		43,552
Mortgage-backed securities:
U.S. Government agencies		35,693		929		237		36,385
U.S. Government-sponsored enterprises		20,459		280		42		20,697
Corporate debt obligations		13,250		29		86		13,193

Total	$	157,176	$	1,560	$	2,873	$	155,863


December 31, 2020	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
State and municipals:
Taxable	$	22,317	$	400	$	143	$	22,574
Tax-exempt		17,988		423		16		18,395
Mortgage-backed securities:
U.S. Government agencies		26,051		940				26,991
U.S. Government-sponsored enterprises		24,627		442		17		25,052
Corporate debt obligations		10,750		56		123		10,683

Total	$	101,733	$	2,261	$	299	$	103,695

Table of Contents

The maturity distribution of the fair value, which is the net carrying amount, of the debt securities classified as

available-for-sale

at ~~September 30, 2017,~~March 31, 2021, is summarized as follows:

September 30, 2017
   Fair
Value
Within one year
   $ 173
After one but within five years
   2,281
After five but within ten years
   9,316
After ten years
   38,146


   49,916
Mortgage-backed securities
   6,958


Total
   $ 56,874


March 31, 2021	Fair Value
Within one year	$	56
After one but within five years		933
After five but within ten years		40,219
After ten years		57,573

		98,781
Mortgage-backed securities		57,082

Total	$	155,863

Securities with a ~~carrying~~fair value of ~~$56,874~~$99,013 and ~~$47,576~~$71,676 at ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016,~~2020, respectively, were pledged to secure public deposits ~~and repurchase agreements~~ as required or permitted by law.

Securities and short-term investment activities are conducted with a diverse group of government entities, corporations and state and local municipalities. The counterparty’s creditworthiness and type of collateral is evaluated on a

case-by-case

basis. At ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016,~~2020, there were no significant concentrations of credit risk from any one issuer, with the exception of U.S. Government agencies and sponsored enterprises that exceeded 10.0 percent of stockholders’ equity.

The fair value and gross unrealized losses of investment securities with unrealized losses for which an other-than-temporary impairment (“OTTI”) has not been recognized at ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016,~~2020, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position, are summarized as follows:

   Less Than 12 Months    12 Months or More    Total
September 30, 2017
   Fair
Value    Unrealized
Losses    Fair
Value    Unrealized
Losses    Fair
Value    Unrealized
Losses
State and municipals:

Taxable
   $ 10,533    $ 227    $ 13,463    $ 457    $ 23,996    $ 684
Tax-exempt

Mortgage-backed securities:

U.S. Government agencies
   1,536    31          1,536    31
U.S. Government-sponsored enterprises
   3,317    58    1,757    47    5,074    105
Corporate debt obligation
   3,761    239    5,221    311    8,982    550












Total
   $ 19,147    $ 555    $ 20,441    $ 815    $ 39,588    $ 1,370












   Less Than 12 Months    12 Months or More    Total
December 31, 2016
   Fair
Value    Unrealized
Losses    Fair
Value    Unrealized
Losses    Fair
Value    Unrealized
Losses
U.S. Treasury securities
   $ 5,021    $ 67          $ 5,021    $ 67
U.S. Government-sponsored enterprises

State and municipals:

Taxable
   30,895    1,876    $ 282    $ 9    31,177    1,885
Tax-exempt
   3,998    77          3,998    77
Mortgage-backed securities:

U.S. Government agencies
   1,891    15          1,891    15
U.S. Government-sponsored enterprises
   7,412    247          7,412    247
Corporate debt obligation
   9,050    492          9,050    492












Total
   $ 58,267    $ 2,774    $ 282    $ 9    $ 58,549    $ 2,783


	Less Than 12 Months				12 Months or More		Total
March 31, 2021	Fair Value		Unrealized Losses		Fair Value	Unrealized Losses	Fair Value		Unrealized Losses
U.S. Treasury securities	$	18,978	$	418			$	18,978	$	418
State and municipals:
Taxable		16,261		959				16,261		959
Tax-exempt		39,131		1,131				39,131		1,131
Mortgage-backed securities:
U.S. Government agencies		10,182		237				10,182		237
U.S. Government-sponsored enterprises		5,758		42				5,758		42
Corporate debt obligations		6,664		86				6,664		86

Total	$	96,974	$	2,873			$	96,974	$	2,873


	Less Than 12 Months				12 Months or More				Total
December 31, 2020	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
State and municipals:
Taxable	$	11,586	$	143	$		$		$	11,586	$	143
Tax-exempt		1,737		16						1,737		16
Mortgage-backed securities:
U.S. Government agencies		5,960		17						5.960		17
U.S. Government-sponsored enterprises
Corporate debt obligations						3,378		123		3,378		123

Total	$	19,283	$	176	$	3,378	$	123	$	22,661	$	299

The Company had 4566 investment securities, consisting of 30three U.S. Treasury securities, 15 taxable state and municipal obligations, ~~11 mortgage-backed securities~~38

tax-exempt

state and ~~four~~municipal obligations, 2 U.S. Government agencies, 4 U.S. Government-sponsored enterprises and 4 corporate debt ~~obligations~~obligation that were in unrealized loss positions at ~~September 30, 2017.~~March 31, 2021. Of these securities, ~~16 taxable state and municipal obligation, two mortgage-backed~~none of the securities ~~and two corporate debt obligations~~ were in a continuous unrealized loss position for twelve months or more. Management does not consider the unrealized losses on the debt securities, ~~as a result of~~resulting from changes in interest rates, to be OTTI based on historical evidence that indicates the cost of these securities is

recoverable within a reasonable period of time in relation to normal cyclical changes in the market rates of interest. Moreover, because there has been no material change in the credit quality of the issuers or other events or circumstances that may cause a significant adverse impact on the fair value of these securities, and management does not intend to sell these securities and it is unlikely that the Company will be required to sell these securities before recovery of their amortized cost basis, which may be maturity, the Company does not consider the unrealized losses to be OTTI at ~~September 30, 2017.~~March 31, 2021. There was no OTTI recognized for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2021 and ~~2016.~~

2020.

The Company had 8016 investment securities, consisting of ~~three U.S. Treasury notes, 49~~9 taxable state ~~and~~ municipal obligations, ~~seven~~3

tax-exempt

state ~~and~~ municipal obligations, 173 mortgage-backed securities and ~~four~~1 corporate ~~debt obligations~~obligation that were in unrealized loss positions at December 31, ~~2016.~~2020. Of these securities, one ~~taxable state and municipal~~corporate obligation was in a continuous unrealized loss position for twelve months or more.

5. Loans, net

and allowance for loan losses:

The major classifications of loans outstanding, net of deferred loan origination fees and costs at ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016~~2020 are summarized as follows. Net deferred

loan costs were ~~$781~~

$649 at March 31, 2021 and ~~$1,077~~net deferred loan costs were $701 at ~~September 30, 2017 and~~ December 31, ~~2016.~~

   September 30,
2017    December 31,
2016
Commercial
   $ 74,389    $ 51,166
Real estate:

Construction
   9,754    8,605
Commercial
   337,688    212,550
Residential
   131,741    130,874
Consumer
   6,615    6,148




Total
   $ 560,187    $ 409,343

2020.


	March 31, 2021		December 31, 2020
Commercial	$	327,191	$	359,080
Real estate:
Construction		78,277		73,402
Commercial		489,652		502,495
Residential		190,857		197,596
Consumer		5,847		6,666

Total	$	1,091,824	$	1,139,239

The ~~changes~~Company participated in the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), Paycheck Protection Program (“PPP”), a multi-billion dollar specialized

low-interest

loan program funded by the U.S. Treasury Department and administered by the U.S. Small Business Administration. The PPP provides borrower guarantees for lenders, as well as loan forgiveness incentives for borrowers that utilize the loan proceeds to cover employee compensation-related business operating costs. As of March 31, 2021, the Company had PPP loans totaling $214,365, net of unearned loan fees of $4,974, included in commercial loans.

PPP loans totaled $251,810, net of unearned fees of $5,075 as of December 31, 2020. The Company is utilizing the Federal Reserve’s Paycheck Protection Program Liquidity Facility (“PPPLF”) to meet the funding needs of its borrowers of PPP loans.

The change in the allowance for loan losses account by major ~~classification of~~ loan classifications for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2021 and ~~2016 are~~2020 is summarized as follows:

   Real Estate
September 30, 2017
   Commercial Construction Commercial Residential Consumer Unallocated    Total
Allowance for loan losses:

Beginning Balance July 1, 2017
   $ 757 $ 192 $ 2,965 $ 828 $ 49 $ 43    $ 4,834
Charge-offs
   (24 ) (18 )    (42 )
Recoveries
   1 1    2
Provisions
   421 (3 ) (56 ) 127 (4 ) 125    610




Ending balance
   $ 1,155 $ 189 $ 2,909 $ 937 $ 46 $ 168    $ 5,404




   Real Estate
September 30, 2017
   Commercial Construction Commercial Residential Consumer Unallocated    Total
Allowance for loan losses:

Beginning Balance January 1, 2017
   $ 629 $ 160 $ 2,110 $ 789 $ 44    $ 3,732
Charge-offs
   (34 ) (34 ) (7 )    (75 )
Recoveries
   1 3 7 2    13
Provisions
   559 29 796 175 7 $ 168    1,734




Ending balance
   $ 1,155 $ 189 $ 2,909 $ 937 $ 46 $ 168    $ 5,404




   Real Estate
September 30, 2016
   Commercial Construction Commercial Residential Consumer Unallocated    Total
Allowance for loan losses:

Beginning Balance July 1, 2016
   $ 558 $ 170 $ 2,100 $ 745 $ 36    $ 3,609
Charge-offs
   (1 ) (1 ) (25 ) (8 )    (35 )
Recoveries
   25 1 1 7    34
Provisions
   (72 ) (13 ) 38 69 5 $ 2    29




Ending balance
   $ 510 $ 157 $ 2,138 $ 790 $ 40 $ 2    $ 3,637

   Real Estate
September 30, 2016
   Commercial Construction Commercial Residential Consumer Unallocated    Total
Allowance for loan losses:

Beginning Balance January 1, 2016
   $ 1,298 $ 202 $ 2,227 $ 613 $ 25    $ 4,365
Charge-offs
   (724 ) (250 ) (65 ) (33 ) (24 )    (1,096 )
Recoveries
   70 1 3 10    84
Provisions
   (134 ) 204 (24 ) 207 29 $ 2    284




Ending balance
   $ 510 $ 157 $ 2,138 $ 790 $ 40 $ 2    $ 3,637


				Real Estate
March 31, 2021	Commercial			Construction			Commercial		Residential			Consumer			Unallocated		Total
Allowance for loan losses:
Beginning Balance, January 1, 2021	$	1,705		$	1,117		$	6,494	$	2,427		$	142		$	315	$	12,200
Charge-offs		(9	)		(37	)							(48	)				(94	)
Recoveries								1		2			31					34
Provisions		(303	)		54			298		(193	)		2		$	142

Ending balance	$	1,393		$	1,134		$	6,793	$	2,236		$	127		$	457	$	12,140


				Real Estate
March 31, 2020	Commercial			Construction		Commercial			Residential			Consumer			Unallocated		Total
Allowance for loan losses:
Beginning Balance, January 1, 2020	$	1,953		$	473	$	3,115		$	1,820		$	155				$	7,516
Charge-offs		(899	)				(95	)					(130	)				(1,124	)
Recoveries		2					1						56					59
Provisions		615			222		896			(107	)		71		$	103		1,800

Ending balance	$	1,671		$	695	$	3,917		$	1,713		$	152		$	103	$	8,251

The allocation of the allowance for loan losses and ~~the~~ related loans by ~~major~~ classifications of loans at ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016~~2020 is summarized as follows:

      Real Estate
September 30, 2017
   Commercial    Construction    Commercial    Residential    Consumer    Unallocated    Total
Allowance for loan losses:

Ending balance
   $ 1,155    $ 189    $ 2,909    $ 937    $ 46    $ 168    $ 5,404














Ending balance: individually evaluated for impairment
   25       194    54          273














Ending balance: collectively evaluated for impairment
   $ 1,130    $ 189    $ 2,715    $ 884    $ 45    $ 168    $ 5,131














Loans receivable:

Ending balance
   $ 74,389    $ 9,754    $ 337,688    $ 131,741    $ 6,615       $ 560,187














Ending balance: individually evaluated for impairment
   799       3,671    2,462          6,932














Ending balance: collectively evaluated for impairment
   $ 73,590    $ 9,754    $ 334,017    $ 129,279    $ 6,615       $ 553,255














      Real Estate
December 31, 2016
   Commercial    Construction    Commercial    Residential    Consumer    Unallocated    Total
Allowance for loan losses:

Ending balance
   $ 629    $ 160    $ 2,110    $ 789    $ 44       $ 3,732














Ending balance: individually evaluated for impairment
   8       140             148














Ending balance: collectively evaluated for impairment
   $ 621    $ 160    $ 1,970    $ 789    $ 44       $ 3,584














Loans receivable:

Ending balance
   $ 51,166    $ 8,605    $ 212,550    $ 130,874    $ 6,148       $ 409,343














Ending balance: individually evaluated for impairment
   966       3,924    2,515          7,405














Ending balance: collectively evaluated for impairment
   $ 50,200    $ 8,605    $ 208,626    $ 128,359    $ 6,148       $ 401,938


			Real Estate
March 31, 2021	Commercial		Construction		Commercial		Residential		Consumer		Unallocated		Total
Allowance for loan losses:
Ending balance	$	1,393	$	1,134	$	6,793	$	2,236	$	127	$	457	$	12,140

Ending balance:
individually evaluated for impairment						724								724

Ending balance:
collectively evaluated for impairment		1,393		1,134		6,069		2,236		127		457		11,416

Ending balance:
purchased credit impaired loans	$		$		$		$		$		$		$

Loans receivable:
Ending balance	$	327,191	$	78,277	$	489,652	$	190,857	$	5,847	$		$	1,091,824

Ending balance:
individually evaluated for impairment		1,677		970		6,546		2,386						11,579

Ending balance:
collectively evaluated for impairment		325,514		77,307		482,768		188,317		5,847				1,079,753

Ending balance:
purchased credit impaired loans	$		$		$	338	$	154	$		$		$	492

Table of Contents


			Real Estate
December 31, 2020	Commercial		Construction		Commercial		Residential		Consumer		Unallocated		Total
Allowance for loan losses:
Ending balance	$	1,705	$	1,117	$	6,494	$	2,427	$	142	$	315	$	12,200

Ending balance:
individually evaluated for impairment

Ending balance:
collectively evaluated for impairment		1,705		1,117		6,494		2,427		142		315		12,200

Ending balance:
purchased credit impaired loans	$		$		$		$		$		$		$

Loans receivable:
Ending balance	$	359,080	$	73,402	$	502,495	$	197,596	$	6,666	$		$	1,139,239

Ending balance:
individually evaluated for impairment		1,565				6,444		2,494						10,503

Ending balance:
collectively evaluated for impairment		357,515		73,402		495,674		194,939		6,666				1,128,196

Ending balance:
purchased credit impaired loans	$		$		$	377	$	163	$		$		$	540

The Company segments loans into risk categories based on relevant information about the ability of borrowers to service their debt such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. ~~Loans~~

Non-homogeneous

loans are individually analyzed for credit risk by classifying them within the Company’s internal risk rating system. The Company’s risk rating classifications are defined as follows:

~~Pass -~~

Pass—A loan to borrowers with acceptable credit quality and risk that is not adversely classified as Substandard, Doubtful, Loss or designated as Special Mention.

Special ~~Mention -~~ Mention—A loan that has potential weaknesses that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or in the institution’s credit position at some future date. Special Mention loans are not adversely classified since they do not expose the Company to sufficient risk to warrant adverse classification.

~~Substandard -~~

Substandard—A loan that is inadequately protected by the current sound worth and paying capacity of the obligor or by the collateral pledged, if any. Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.

~~Doubtful -~~

Doubtful—A loan classified as Doubtful has all the weaknesses inherent in one classified Substandard with the added characteristic that the weaknesses make the collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

~~Loss -~~

Loss—A loan classified as Loss is considered uncollectible and of such little value that its continuance as a bankable loan is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this basically worthless asset even though partial recovery may ~~be effected~~occur in the future. Homogeneous loans not meeting the criteria above are considered pass rated loans and evaluated based on delinquency performance.

Table of Contents

The following tables present the major ~~classification~~classifications of loans summarized by the aggregate pass rating and the classified ratings of special mention, substandard and doubtful within the Company’s internal risk rating system at ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016:~~

September 30, 2017
   Pass    Special
Mention    Substandard    Doubtful    Total
Commercial
   $ 70,549    $ 2,277    $ 1,563       $ 74,389
Real estate:

Construction
   9,344    410          9,754
Commercial
   326,203    7,753    3,732       337,688
Residential
   130,001    28    1,712       131,741
Consumer
   6,615             6,615










Total
   $ 542,712    $ 10,468    $ 7,007       $ 560,187










December 31, 2016:
   Pass    Special
Mention    Substandard    Doubtful    Total
Commercial
   $ 47,765    $ 1,604    $ 1,797       $ 51,166
Real estate:

Construction
   8,605             8,605
Commercial
   200,636    8,063    3,851       212,550
Residential
   129,320    28    1,526       130,874
Consumer
   6,148             6,148










Total
   $ 392,474    $ 9,695    $ 7,174       $ 409,343

~~Information concerning~~2020:


March 31, 2021	Pass		Special Mention		Substandard		Doubtful	Total
Commercial	$	322,223	$	2,957	$	2,011	$	$	327,191
Real estate:
Construction		68,818		129		9,330			78,277
Commercial		435,173		26,608		27,871			489,652
Residential		185,630		1,136		4,091			190,857
Consumer		5,847							5,847

Total	$	1,017,691	$	30,830	$	43,303	$	$	1,091,824


December 31, 2020	Pass		Special Mention		Substandard		Doubtful	Total
Commercial	$	353,758	$	3,147	$	2,175	$	$	359,080
Real estate:
Construction		63,838		1,817		7,747			73,402
Commercial		451,190		29,180		22,125			502,495
Residential		191,775		2,670		3,151			197,596
Consumer		6,666							6,666

Total	$	1,067,227	$	36,814	$	35,198	$	$	1,139,239

The following tables present the classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans ~~by major loan classification at September 30, 2017~~as of March 31, 2021 and December 31, ~~2016 is summarized as follows:~~

   September 30,
2017    December 31,
2016
Commercial
   $ 199    $ 356
Real estate:

Construction

Commercial
   704    359
Residential
   862    671
Consumer





Total
   $ 1,765    $ 1,386

~~The major classifications~~2020. Purchase credit impaired (“PCI”) loans are excluded from the aging and nonaccrual loan schedules.


	Accrual Loans
March 31, 2021	30-59 Days Past Due		60-89 Days Past Due		90 or More Days Past Due		Total Past Due		Current		Nonaccrual Loans		Total Loans
Commercial	$	34	$	21	$		$	55	$	326,325	$	811	$	327,191
Real estate:
Construction		34						34		77,272		971		78,277
Commercial		252						252		489,033		29		489,314
Residential		881		21		161		1,063		188,623		1,017		190,703
Consumer		14		6		4		24		5,823				5,847

Total	$	1,215	$	48	$	165	$	1,428	$	1,087,076	$	2,828	$	1,091,332

Purchased credit impaired loans														492

Total Loans													$	1,091,824


	Accrual Loans
December 31, 2020	30-59 Days Past Due		60-89 Days Past Due		90 or More Days Past Due		Total Past Due		Current		Nonaccrual Loans		Total Loans
Commercial	$	64	$	1	$		$	65	$	358,496	$	519	$	359,080
Real estate:
Construction										73,402				73,402
Commercial		1,238		4,063				5,301		496,785		32		502,118
Residential		2,125		2,993		146		5,264		191,299		870		197,433
Consumer		22		20		10		52		6,614				6,666

Total	$	3,449	$	7,077	$	156	$	10,682	$	1,126,596	$	1,421	$	1,138,699

Purchased credit impaired loans														540

Total Loans													$	1,139,239

Table of ~~loans by past due status at September 30, 2017 and December 31, 2016 are summarized as follows:~~

September 30, 2017
   30-59 Days
Past Due    60-89 Days
Past Due    Greater
than 90
Days    Total Past
Due    Current    Total
Loans    Loans > 90
Days and
Accruing
Commercial
   $ 1,603    $ 24    $ 11    $ 1,638    $ 72,751    $ 74,389
Real estate:

Construction
               9,754    9,754
Commercial
   569       235    804    336,884    337,688
Residential
   818    297    440    1,555    130,186    131,741
Consumer
   3    1       4    6,611    6,615














Total
   $ 2,993    $ 322    $ 686    $ 4,001    $ 556,186    $ 560,187














December 31, 2016
   30-59 Days
Past Due    60-89 Days
Past Due    Greater
than 90
Days    Total Past
Due    Current    Total
Loans    Loans > 90
Days and
Accruing
Commercial
   $ 580    $    $ 214    $ 794    $ 50,372    $ 51,166
Real estate:

Construction
   22          22    8,583    8,605
Commercial
   784    97    11    892    211,658    212,550
Residential
   905    256    592    1,753    129,121    130,874    $ 357
Consumer
   6       2    8    6,140    6,148    2














Total
   $ 2,297    $ 353    $ 819    $ 3,469    $ 405,874    $ 409,343    $ 359

Contents

The following tables summarize information concerning impaired loans as of and for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2021 and ~~September 30, 2016,~~2020, and as of and for the year ended, December 31, ~~2016~~2020, by major loan classification:

            This Quarter    Year-to-Date
September 30, 2017
   Recorded
Investment    Unpaid
Principal
Balance    Related
Allowance    Average
Recorded
Investment    Interest
Income
Recognized    Average
Recorded
Investment    Interest
Income
Recognized
With no related allowance:

Commercial
   $ 724    $ 724       $ 798    $ 8    $ 803    $ 23
Real estate:

Construction

Commercial
   2,753    2,753       2,760    32    2,992    90
Residential
   2,274    2,292       2,304    28    2,408    87
Consumer















Total
   5,751    5,769       5,862    68    6,203    200














With an allowance recorded:

Commercial
   75    75    $ 25    78       76    1
Real estate:

Construction

Commercial
   918    918    194    820    8    798    20
Residential
   188    326    54    189    2    126    6
Consumer















Total
   1,181    1,319    273    1,087    10    1,000    27














Commercial
   799    799    25    876    8    879    24
Real estate:

Construction

Commercial
   3,671    3,671    194    3,580    40    3,790    110
Residential
   2,462    2,618    54    2,493    30    2,534    93
Consumer















Total
   $ 6,932    $ 7,088    $ 273    $ 6,949    $ 78    $ 7,203    $ 227

            For the Year Ended
December 31, 2016
   Recorded
Investment    Unpaid
Principal
Balance    Related
Allowance    Average
Recorded
Investment    Interest
Income
Recognized
With no related allowance:

Commercial
   $ 225    $ 225       $ 225
Real estate:

Construction

Commercial
   3,094    3,094       3,168    147
Residential
   2,515    2,652       2,747    130
Consumer











Total
   5,834    5,971       6,140    277










With an allowance recorded:

Commercial
   741    741    $ 8    761    30
Real estate:

Construction

Commercial
   830    830    140    840
Residential

Consumer











Total
   1,571    1,571    148    1,601    30










Commercial
   966    966    8    986    30
Real estate:

Construction

Commercial
   3,924    3,924    140    4,008    147
Residential
   2,515    2,652       2,747    130
Consumer











Total
   $ 7,405    $ 7,542    $ 148    $ 7,741    $ 307

            This Quarter    Year-to-Date
September 30, 2016
   Recorded
Investment    Unpaid
Principal
Balance    Related
Allowance    Average
Recorded
Investment    Interest
Income
Recognized    Average
Recorded
Investment    Interest
Income
Recognized
With no related allowance:

Commercial
   $ 838    $ 838       $ 843    $ 8    $ 849    $ 22
Real estate:

Construction

Commercial
   3,438    3,438       3,455    20    3,823    110
Residential
   2,709    2,846       2,907    34    2,942    102
Consumer















Total
   6,985    7,122       7,205    62    7,614    234














With an allowance recorded:

Commercial
   126    126    $ 2    128       132
Real estate:

Construction

Commercial
   298    298    55    269       231
Residential
   119    119    33    119    2    120    4
Consumer















Total
   543    543    90    516    2    483    4














Commercial
   964    964    2    971    8    981    22
Real estate:

Construction

Commercial
   3,736    3,736    55    3,724    20    4,054    110
Residential
   2,828    2,965    33    3,026    36    3,062    106
Consumer















Total
   $ 7,528    $ 7,665    $ 90    $ 7,721    $ 64    $ 8,097    $ 238


								This Quarter
March 31, 2021		Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance:	��
Commercial		$	1,677	$	1,787			$	1,621	$	41
Real estate:
Construction			970		970				485
Commercial			914		914				3,868		34
Residential			2,540		2,670				2,599		33
Consumer

Total			6,101		6,341				8,573		108

With an allowance recorded:
Commercial
Real estate:
Construction
Commercial			5,970		5,970	$	724		2,985		48
Residential
Consumer

Total			5,970		5,970		724		2,985		48

Commercial			1,677		1,787				1,621		41
Real estate:
Construction			970		970				485
Commercial			6,884		6,884		724		6,853		82
Residential			2,540		2,670				2,599		33
Consumer

Total		$	12,071	$	12,311	$	724	$	11,558	$	156



		Recorded Investment		Unpaid Principal Balance		Related Allowance		For the Year Ended
December 31, 2020		Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance:


Commercial		$	1,565	$	1,675			$	1,356	$	416
Real estate:
Construction
Commercial			6,821		6,821				4,392		311
Residential			2,657		2,787				2,493		146
Consumer

Total			11,043		11,283				8,241		873

With an allowance recorded:
Commercial									561
Real estate:
Construction
Commercial									391		65
Residential
Consumer

Total									952		65

Commercial			1,565		1,675				1,917		416
Real estate:
Construction
Commercial			6,821		6,821				4,783		376
Residential			2,657		2,787				2,493		146
Consumer

Total		$	11,043	$	11,283			$	9,193	$	938

Table of Contents

For the three ~~and nine~~ months ended ~~September 30,~~March 31, interest income related to impaired loans, would have been ~~$23~~$28 in 2021 and ~~$77~~$21 in ~~2017 and $90 and $317 in 2016~~2020 had the loans been current and the terms of the loans not been modified.

Included in the commercial loan and commercial and residential real estate categories are troubled debt restructurings that are classified as impaired. Troubled debt restructurings totaled $5,593 at September 30, 2017, $6,208 at December 31, 2016 and $6,342 at September 30, 2016.

Troubled debt restructured loans are loans with original terms, interest rate, or both, that have been modified as a result of a deterioration in the borrower’s financial condition and a concession has been granted that the Company would not otherwise consider. Unless on nonaccrual, interest income on these loans is recognized when earned, using the interest method. The Company offers a variety of modifications to borrowers that would be considered concessions. The modification categories offered generally fall within the following categories:

Rate ~~Modification -~~ Modification—A modification in which the interest rate is changed to a below market rate.

Term ~~Modification -~~ Modification—A modification in which the maturity date, timing of payments or frequency of payments is changed.

Interest Only ~~Modification -~~ Modification—A modification in which the loan is converted to interest only payments for a period of time.

Payment ~~Modification -~~ Modification—A modification in which the dollar amount of the payment is changed, other than an interest only modification described above.

Combination ~~Modification -~~ Modification—Any other type of modification, including the use of multiple categories above.

Included in the commercial loan and commercial and residential real estate categories are troubled debt restructures that are classified as impaired. Troubled debt restructures totaled $9,960 at March 31, 2021, $9,985 at December 31, 2020 and $2,680 at March 31, 2020.

There were no0 loans modified as troubled debt ~~restructuring for~~restructures during the

three

months ended March 31, 2021 and 2020.

During the three months ended ~~September 30, 2017 and two loans modified as troubled debt restructuring for the nine months ended September 30, 2017 in the amount of $138. These loans are residential real estate~~March 31, 2021, there were

defaults on restructured loans. One loan was modified by court order in a confirmed Chapter 13 bankruptcy plan to reduce the principal balance, with payments to be received through the plan on the lower balance at a reduced rate of interest. One loan was matured with payments to date although financial information indicated questionable repayment ability. An extension was granted under a forbearance agreement at an increase rate of interest due to past due real estate taxes. There were no loans modified as troubled debt restructuring for the three and nine months ending September 30, 2016. There were no commitments to extend additional funds to borrowers

having loans considered troubled debt restructurings at September 30, 2017. There were two residential real estate properties held in other real estate owned totaling $144 at September 30, 2017. There were 12 residential real estate properties in the process of foreclosure totaling $682 at September 30, 2017.

During the three months ~~ending September 30, 2017,~~ended March 31, 2020, there was ~~one~~

default on loans restructured within the last 12 months. During the nine months ending September 30, 2017, there were five defaults on loans restructured within the last twelve months totaling $1,374. These loans were comprised of four residential real estate loans and onefor a commercial real estate ~~loan. As of September 30, 2017, the defaults were cured on three of the four residential real estate loans with one residential real estate~~ loan ~~remaining past due in the30-69~~ ~~day category. During the three months and nine months ended September 30, 2016, there were no defaults~~totaling $368 on loans ~~restructured within the last 12 months.~~

Purchased loans are initially recorded at their acquisition date fair values. The carryover of the allowance for loan losses is prohibited as any credit losses in the loans are included in the determination of the fair value of the loans at the acquisition date. Fair values for purchased loans are based on a cash flow methodology that involves assumptions and judgments as to credit risk, default rates, loss severity, collateral values, discount rates, payment speeds, and prepayment risk.

As part of its acquisition due diligence process, the Bank reviews the acquired institution’s loan grading system and the associated risk rating for loans. In performing this review, the Bank considers cash flows, debt service coverage, delinquency status, accrual status, and collateral for the loan. This process allows the Bank to clearly identify the population of acquired loans that had evidence of deterioration in credit quality since origination and for which it was probable, at acquisition, that the Bank would be unable to collect all contractually required payments. All such loans identified by the Bank are considered to be within the scope of ASC~~310-30,~~ ~~“Loan and Debt Securities Acquired with Deteriorated Credit Quality” and are identified as “Purchased Credit Impaired Loans”.~~

As a result of the merger with Citizens, effective December 31, 2015, the Bank identified ten purchased credit impaired (“PCI”) loans. As part of the consolidation with Union, effective November 1, 2013, the Bank identified fourteen PCI loans. For all PCI loans, the excess of cash flows expected at acquisition over the estimated fair value is referred to as the accretable discount and is recognized into interest income over the remaining life of the loan. The difference between contractually required payments at acquisition and the cash flows expected to be collected at acquisition is referred to as the~~non-accretable~~ ~~discount. Thenon-accretable~~ discount represents estimated future credit losses expected to be incurred over the life of the loan. Subsequent decreases to the expected cash flows require the Bank to evaluate the need for an allowance for loan losses on these loans. Subsequent improvements in expected cash flows result in the reversal of a corresponding amount of the~~non-accretable~~ discount which the Bank then reclassifies as an accretable discount that is recognized into interest income over the remaining life of the loan. The Bank’s evaluation of the amount of future cash flows that it expects to collect is based on a cash flow methodology that involves assumptions and judgments as to credit risk, collateral values, discount rates, payment speeds, and prepayment risk. Charge-offs of the principal amount on purchased impaired loans are first applied to the~~non-accretable~~ ~~discount.~~

For purchased loans that are not deemed impaired at acquisition, credit discounts representing principal losses expected over the life of the loans are a component of the initial fair value, and the discount is accreted to interest income over the life of the asset. Subsequent to the purchase date, the method used to evaluate the sufficiency of the credit discount is similar to originated loans, and if necessary, additional reserves are recognized in the allowance for loan losses.

~~The following is a summary of the loans acquired in the Union and Citizens mergers, as of the dates of the consolidation:~~

   Purchased
Credit
Impaired
Loans    Purchased
Non-
Impaired
Loans    Total
Purchased
Loans
Contractually required principal and interest at acquisition
   $ 11,184    $ 174,484    $ 185,668
Contractual cash flows not expected to be collected
   (5,724 )    (23,009 )    (28,733 )






Expected cash flows at acquisition
   5,460    151,475    156,935
Interest component of expected cash flows
   (603 )    (23,119 )    (23,722 )






Basis in acquired loans at acquisition - estimated fair value
   $ 4,857    $ 128,356    $ 133,213

~~The unpaid principal balances and the related carrying amount of Union and Citizens acquired loans as of September 30, 2017 and December 31, 2016 were as follows:~~

   September 30,
2017    December 31,
2016
Credit impaired purchased loans evaluated individually for incurred credit losses

Outstanding balance
   $ 1,216    $ 1,401
Carrying Amount
   730    887
Other purchased loans evaluated collectively for incurred credit losses

Outstanding balance
   72,449    84,743
Carrying Amount
   71,864    83,670
Total Purchased Loans

Outstanding balance
   73,665    86,144
Carrying Amount
   $ 72,594    $ 84,557

~~As of the indicated dates, the changes in the accretable discount related to the purchased credit impaired loans were as follows:~~

   Three Months Ended
September 30,    Nine Months Ended
September 30,
   2017    2016    2017    2016
Balance - beginning of period
   $ 313    $ 457    $ 370    $ 524
Accretion recognized during the period
   (32 )    (410 )    (76 )    (539 )
Net reclassification fromnon-accretable to accretable
   (2 )    326    (15 )    388








Balance - end of period
   $ 279    $ 373    $ 279    $ 373

restructured.

The Company is a party to financial instruments with

off-balance

sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, unused portions of lines of credit and standby letters of credit. Those instruments involve, to varying degrees, elements of credit risk ~~in excess of~~over and above the amount recognized in the consolidated balance sheets.

~~Unused~~

Table of Contents

Distribution of

off-balance

sheet commitments ~~at September 30, 2017, totaled $86,876, consisting of $48,695 in commitments~~


	March 31, 2021		December 31, 2020
Unused portion of lines of credit	$	100,153	$	92,848
Construction loans		14,906		24,751
Commitments to extend credit		5,740		10,275
Deposit overdraft protection		17,909		18,117
Standby and performance letters of credit		7,313		6,577

Total	$	146,021	$	152,568

The Company’s exposure to ~~extend~~ credit $34,521 in unused portions of lines of credit and $3,660 in standby letters of credit. Due to fixed maturity dates, specified conditions within these instruments, and the ultimate needs of our customers, many will expire without being drawn upon. We believe that amounts actually drawn upon can be fundedloss in the ~~normal course~~event of ~~operations~~nonperformance by the other party to the off-balance sheet financial instruments is represented by the contractual amounts of those instruments. The Company follows the same credit policies in making commitments and ~~therefore,~~conditional obligations as it does for on-balance sheet instruments. We record a valuation allowance for off-balance sheet credit losses, if deemed necessary, separately as a liability. The valuation allowance amounted to

at March 31, 2021 and December 31, 2020, respectively. We do not ~~represent~~anticipate that losses, if any, that may occur as a ~~significant liquidity risk to us. In comparison, unused~~result of funding

off-balance

sheet commitments, ~~at December 31, 2016, totaled $58,475, consisting of $27,829 in commitments to extend credit, $26,729 in unused portions of lines of credit and $3,917 in standby letters of credit.~~

would have a material adverse effect on our operating results or financial position.

6. Other assets:

The components of other assets at ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016~~2020 are summarized as follows:

   September 30,
2017    December 31,
2016
Other real estate owned
   $ 144    $ 625
Bank owned life insurance
   17,128    11,857
Restricted equity securities
   2,186    1,845
Deferred tax assets
   6,904    7,402
Other assets
   3,339    2,083




Total
   $ 29,701    $ 23,812


	March 31, 2021		December 31, 2020

Other real estate owned	$	219	$	422
Bank owned life insurance		31,603		31,425
Restricted equity securities		1,774		1,759
Deferred tax assets		4,066		3,907
Lease right-of-use assets		2,133		2,278
Other assets		9,866		8,629

Total	$	49,661	$	48,420

7. Fair value estimates:

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosure under GAAP. Fair value estimates are calculated without attempting to estimate the value of anticipated future business and the value of certain assets and liabilities that are not considered financial. Accordingly, such assets and liabilities are excluded from disclosure requirements.

In accordance with FASB ASC 820, “Fair Value Measurements and Disclosures”, fair value is the price that would be received to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets. In many cases, these values cannot be realized in immediate settlement of the instrument.

Current fair value guidance provides a consistent definition of fair value, which focuses on exit price in an orderly transaction that is not a forced liquidation or distressed sale between participants at the measurement date under current market conditions. If there has been a significant decrease in the volume and level of activity for the asset or liability, a change in valuation technique or the use of multiple valuation techniques may be appropriate. In such instances, determining the price at which willing market participants would transact at the measurement date under current market conditions depends on the facts and circumstances and requires the use of significant judgment. The fair value is a reasonable point within the range that is most representative of fair value under current market conditions.

Table of Contents

In accordance with GAAP, the Company groups its assets and liabilities generally measured at fair value into three levels based on market information or other fair value estimates in which the assets and liabilities are traded or valued, and the reliability of the assumptions used to determine fair value. These levels include:

Level 1: Unadjusted quoted prices of identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

An asset’s or liability’s placement in the fair value hierarchy is based on the lowest level of input that is significant to the fair value estimate.

The following methods and assumptions were used by the Company to calculate fair values and related carrying amounts of ~~financial instruments:~~

~~Cash~~assets and ~~cash equivalents:~~ ~~The carrying values of cash and cash equivalents as reported~~liabilities measured at fair value on ~~the balance sheet approximate fair value.~~

a recurring basis:

Investment securities:

The fair values ~~of U.S.~~for U. S. Treasury securities and marketable equity securities are based on quoted market prices from active exchange markets. The fair values of debt securities are based on pricing from a matrix pricing model.

~~Loans held for sale:~~ ~~The carrying value of loans held for sale as reported on the balance sheet approximate fair value.~~

~~Net loans:~~ ~~For adjustable-rate loans thatre-price~~ ~~frequently and with no significant credit risk, fair values are based on carrying values. The fair values of othernon-impaired~~ loans are estimated using discounted cash flow analysis, using interest rates currently offered in the market for loans with similar terms to borrowers of similar credit risk. Fair values for impaired loans are estimated using discounted cash flow analysis determined by the loan review function or underlying collateral values, where applicable.

~~Accrued interest receivable:~~ ~~The carrying value of accrued interest receivable as reported on the balance sheet approximates fair value.~~

~~Restricted equity securities:~~~~The carrying values of restricted equity securities approximate fair value, due to the lack of marketability for these securities.~~

~~Deposits:~~ The fair values of noninterest-bearing deposits and savings, NOW and money market accounts are the amounts payable on demand at the reporting date. The fair value estimates do not include the benefit that results from such~~low-cost~~ funding provided by the deposit liabilities compared to the cost of borrowing funds in the market. For fixed-rate time deposits, the present value of future cash flows is used to estimate fair values. The discount rates used are the current rates offered for time deposits with similar maturities.

~~Short-term borrowings:~~ ~~The carrying values of short-term borrowings approximate fair value.~~

~~Long-term debt:~~

Interest rate swap hedges

: The fair value of ~~fixed-rate long-term debt~~interest rate swaps is based on ~~the present value of future cash flows. The discount rate used is the current rate offered for long-term debt with the same maturity.~~

~~Accrued interest payable:~~ ~~The carrying value of accrued interest payable as reported on the balance sheet approximates fair value.~~

~~Off-balance~~ ~~sheet financial instruments:~~

The majority of commitments to extend credit, unused portions of lines of credit and standby letters of credit carry current market interest rates if converted to loans. Because such commitments are generally unassignable by either the Company or the borrower, they only have value to the Company and the borrower. Nonean external derivative model using input data of the ~~commitments are subject to undue credit risk. The estimated fair values ofoff-balance~~ sheet financial instruments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing. The fair value of~~off-balance~~ ~~sheet financial instruments was not material at September 30, 2017 and December 31, 2016.~~

valuation date.

Assets and liabilities measured at fair value on a recurring basis at ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016~~2020 are summarized as follows:

   Fair Value Measurement Using
September 30, 2017
   Amount    Quoted Prices in
Active Markets for
Identical Assets
(Level 1)    Significant
Other Observable
Inputs
(Level 2)    Significant
Unobservable
Inputs
(Level 3)
State and Municipals:

Taxable
   $ 35,132       $ 35,132
Tax-exempt
   5,801       5,801
Mortgage-backed securities:

U.S. Government agencies
   1,536       1,536
U.S. Government-sponsored enterprises
   5,423       5,423
Corporate debt obligations
   8,982       8,982








Total
   $ 56,874    $    $ 56,874








   Fair Value Measurement Using
December 31, 2016
   Amount    Quoted Prices in
Active Markets for
Identical Assets
(Level 1)    Significant
Other Observable
Inputs
(Level 2)    Significant
Unobservable
Inputs
(Level 3)
U.S. Treasury securities
   $ 5,021       $ 5,021
State and municipals:

Taxable
   42,394       42,394
Tax-exempt
   5,674       5,674
Mortgage-backed securities:

U.S. Government agencies
   1,890       1,890
U.S. Government-sponsored enterprises
   8,896       8,896
Corporate debt obligations
   9,050       9,050
Equity securities, financial services
   188    $ 188








Total
   $ 73,113    $ 188    $ 72,925


	Fair Value Measurement Using
March 31, 2021	Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)

U.S. Treasury securities	$	18,978	$	18,978
State and Municipals:
Taxable		23,058			$	23,058
Tax-exempt		43,552				43,552
Mortgage-backed securities:
U.S. Government agencies		36,385				36,385
U.S. Government-sponsored enterprises		20,697				20,697
Corporate debt obligations		13,193				13,193

Total	$	155,863	$	18,978	$	136,885

Interest rate swap hedg e	$	829			$	829

Table of Contents


December 31, 2020	Fair Value Measurement Using
December 31, 2020	Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
State and municipals:
Taxable	$	22,574		$	22,574
Tax-exempt		18,395			18,395
Mortgage-backed securities:
U.S. Government agencies		26,991			26,991
U.S. Government-sponsored enterprises		25,052			25,052
Corporate debt obligations		10,683			10,683

Total	$	103,695		$	103,695

Interest rate swap hedg e	$	172		$	172

Other real estate owned

: Assets acquired through loan foreclosure are recorded at fair value less estimated costs to sell, with any difference between the fair value of the property and the carrying value of the loan recorded as a

charge-off.

If the fair value is higher than the carrying amount of the loan, the excess is recognized first as a recovery and then as noninterest income. Subsequent changes in value are reported as adjustments to the carrying amount and are recorded in noninterest expense. The carrying value of other real estate owned is not

re-measured

to fair value on a recurring basis but is subject to fair value adjustments when the carrying value differs from the fair value, less estimated selling costs. Fair value is based on recent real estate appraisals, current sale value assessments by real estate agents or pending offers to acquire by independent buyers and is updated at least annually. The Company classifies other real estate owned in level 3 of the fair value hierarchy.

Impaired loans

: The fair value of impaired loans is specifically reviewed for purposes of determining the appropriate amount of impairment to be allocated to the ALLL. Fair value is generally measured based on the value of the collateral securing the loans. Collateral may include but is not necessarily limited to real estate, personal or business assets including vehicles, equipment, inventory, accounts receivable or marketable securities. The value of real estate collateral is determined utilizing an income or market valuation approach based on an appraisal conducted by an independent, licensed third-party appraiser (Level 3). The value of business equipment is based on an outside appraisal, if deemed significant, or the net book value on the applicable borrower financial statements. Likewise, values for inventory, accounts receivable or marketable security collateral are based on borrower financial statement balances or aging reports on a discounted basis as appropriate or custodian account statements (Level 3). Impaired loans are measured at fair value on a nonrecurring basis. Any fair value adjustments are recorded in the period incurred as provision for loan and lease losses on the Consolidated Statements of Income.

Assets and liabilities measured at fair value on a nonrecurring basis at ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016~~2020 are summarized as follows:

   Fair Value Measurement Using
September 30, 2017
   Amount    (Level 1)
Quoted Prices
in Active
Markets for
Identical
Assets    (Level 2)
Significant
Other
Observable
Inputs    (Level 3)
Significant
Unobservable
Inputs
Loans held for sale
   $ 519       $ 519
Other real estate owned
   144          $ 144
Impaired loans, net of related allowance
   908          908








Total
   $ 1,571       $ 519    $ 1,052








   Fair Value Measurement Using
December 31, 2016
   Amount    (Level 1)
Quoted Prices
in Active
Markets for
Identical
Assets    (Level 2)
Significant
Other
Observable
Inputs    (Level 3)
Significant
Unobservable
Inputs
Loans held for sale
   $ 652       $ 652
Other real estate owned
   625          $ 625
Impaired loans, net of related allowance
   1,424          1,424








Total
   $ 2,701       $ 652    $ 2,049

~~Fair values~~


	Fair Value Measurement Using
March 31, 2021	Amount		(Level 1) Quoted Prices in Active Markets for Identical Assets	(Level 2) Significant Other Observable Inputs	(Level 3) Significant Unobservable Inputs

Other real estate owned	$	219			$	219
Impaired loans, net of related allowance		5,246				5,246

Total	$	5,465			$	5,465

Table of ~~impaired loans are based on the present value of expected future cash flows discounted at the loan’s effective interest rate or the fair value of the collateral if the loan is collateral dependent.~~

Fair value of other real estate owned is generally determined through independent appraisals of the underlying collateral, which generally include various Level 3 inputs which are not identifiable. Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses. The range and weighted average of liquidation expenses and other appraisal adjustments are presented as a percent of the appraisal.

Contents


December 31, 2020	Fair Value Measurement Using
December 31, 2020	Amount		(Level 1) Quoted Prices in Active Markets for Identical Assets	(Level 2) Significant Other Observable Inputs	(Level 3) Significant Unobservable Inputs
Other real estate owned	$	422			$	422

Total	$	422			$	422

The following tables present additional quantitative information about assets measured at fair value on a nonrecurring basis and for which the Company utilized Level 3 inputs to determine fair value at ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016:~~


	~~Quantitative Information about Level 3 Fair Value Measurements~~
~~September 30, 2017~~	~~Fair Value~~ ~~Estimate~~	~~Valuation Techniques~~	~~Unobservable Input~~	~~Range~~ ~~(Weighted Average)~~
~~Other real estate owned~~	~~$144~~	~~Appraisal of collateral~~	~~Appraisal adjustments~~		~~14.0% to 41.0% (32.4)%~~
			~~Liquidation expenses~~		~~7.0% to 7.0% (7.0)%~~
~~Impaired loans~~	~~$908~~	~~Appraisal of collateral~~	~~Appraisal adjustments~~		~~0.0% to 0.0% (0.0)%~~
			~~Liquidation expenses~~		~~7.0% to 7.0% (7.0)%~~

	~~Quantitative Information about Level 3 Fair Value Measurements~~
~~December 31, 2016~~	~~Fair Value~~ ~~Estimate~~	~~Valuation Techniques~~	~~Unobservable Input~~	~~Range~~ ~~(Weighted Average)~~
~~Other real estate owned~~	~~$625~~	~~Appraisal of collateral~~	~~Appraisal adjustments~~		~~22.0% to 82.0% (45.0)%~~
			~~Liquidation expenses~~		~~3.0% to 6.0% (5.0)%~~
~~Impaired loans~~	~~$1,424~~	~~Discounted cash flow~~	~~Discount rate adjustments~~		~~3.75% to 5.50% (4.3)%~~
			~~Liquidation expenses~~		~~3.0% to 7.0% (4.5)%~~

~~Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various Level 3 Inputs which are not identifiable.~~

Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses. The range and weighted average of liquidation expenses and other appraisal adjustments are presented as a percent of the appraisal.

2020.

Quantitative Information about Level 3 Fair Value Measurements

March 31, 2021

Fair Value
Estimate

Valuation Techniques

Unobservable Input

Range
(Weighted Average)

Other real estate owned

219

Appraisal of collateral

Appraisal adjustments

0.0% to 3.0% (3.0%)

Liquidation expenses

10.0% to 10.0% (10.0%)

Impaired loans

5,246

Appraisal of collateral

Appraisal adjustments

0.0% to 0.0% (0.0%)

Liquidation expenses

7.0% to 7.0% (7.0%)

Quantitative Information about Level 3 Fair Value Measurements

December 31, 2020

Fair Value
Estimate

Valuation Techniques

Unobservable Input

Range
(Weighted Average)

Other real estate owned

422

Appraisal of collateral

Appraisal adjustments

20.0% to 14.0% (8.4%)

Liquidation expenses

10.0% to 10.0% (10.0%)

The carrying and fair values of the Company’s financial instruments at ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016~~2020 and their placement within the fair value hierarchy are as follows:

      Fair Value Hierarchy
September 30, 2017
   Carrying
Amount    Fair Value    Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)    Significant
Other
Observable
Inputs
(Level 2)    Significant
Unobservable
Inputs
(Level 3)
Financial assets:

Cash and cash equivalents
   $ 8,425    $ 8,425    $ 8,425
Investment securities
   56,874    56,874       $ 56,874
Loans held for sale
   519    519       519
Net loans
   554,783    553,818          $ 553,818
Accrued interest receivable
   1,995    1,995       1,995
Restricted equity securities
   2,186    2,186    2,186
Financial liabilities:

Deposits
   $ 574,950    $ 562,256       $ 562,256
Short-term borrowings
   37,250    37,250       37,250
Long-term debt
   6,503    6,503       6,503
Accrued interest payable
   213    213       213
      Fair Value Hierarchy
December 31, 2016
   Carrying
Amount    Fair Value    Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)    Significant
Other
Observable
Inputs
(Level 2)    Significant
Unobservable
Inputs
(Level 3)
Financial assets:

Cash and cash equivalents
   $ 19,120    $ 19,120    $ 19,120
Investment securitiesavailable-for-sale
   73,113    73,113    188    $ 72,925
Loans held for sale
   652    652       652
Net loans
   405,611    407,561          $ 407,561
Accrued interest receivable
   1,726    1,726       1,726
Restricted equity securities
   1,845    1,845    1,845
Financial liabilities:

Deposits
   $ 452,560    $ 438,744       $ 438,744
Short-term borrowings
   31,500    31,500       31,500
Long-term debt
   11,154    11,148       11,148
Accrued interest payable
   192    192       192


	Carrying Amount		Fair Value Hierarchy
March 31, 2021	Carrying Amount		Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Financial assets:
Cash and cash equivalents	$	63,164	$	63,164	$	63,164
Investment securities		155,863		155,863		18,978	$	136,885
Loans held for sale		2,502		2,502				2,502
Net loans (1)		1,079,684		1,061,911					$	1,061,911
Accrued interest receivable		4,189		4,189				572		3,617
Restricted equity securities		1,774		1,774
Financial liabilities:
Deposits	$	1,080,928	$	1,083,439			$	1,083,439
Long-term debt		180,644		183,561				183,561
Accrued interest payable		1,347		1,347				1,347
Interest rate swap hedges		829		829				829

Table of Contents


	Carrying Amount		Fair Value Hierarchy
December 31, 2020	Carrying Amount		Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Financial assets:
Cash and cash equivalents	$	49,781	$	49,781	$	49,781
Investment securities available-for-sale		103,695		103,695			$	103,695
Loans held for sale		4,338		4,338				4,338
Net loans (1)		1,127,039		1,116,618					$	1,116,618
Accrued interest receivable		4,216		4,216				578		3,638
Restricted equity securities		1,759		1,759
Financial liabilities:
Deposits	$	1,015,460	$	1,018,529			$	1,018,529
Long-term debt		228,765		231,748				231,748
Accrued interest payable		1,038		1,038				1,038
Interest rate swap hedges		172		172				172

(1)	The carrying amount is net of unearned income and the allowance for loan losses in accordance with the adoption of ASU No. 2016-01 where the fair value of loans as of March 31, 2021 and December 31, 2021 was measured using an exit price notion.

8. Subsequent Events:

In preparing these consolidated financial statements, the Company evaluated the events and transactions that occurred from the date of the financial statements through the date these consolidated financial statements were issued and has not identified any events that require recognition or disclosure in the consolidated financial statements. On January 15, 2021, the Company announced the execution of a definitive agreement whereby AmeriServ Financial, Inc. will acquire Citizens Neighborhood Bank’s (“CNB”), an operating division of Riverview Bank, branch and deposit customers in Meyersdale, Pennsylvania, as well as the deposit customers of CNB’s leased branch in the Borough of Somerset. The transaction is scheduled to close on May 21, 2021. At March 31, 2021, the related deposits totaled $44,713 million and will be acquired for a 3.71% deposit premium and are considered as held for assumption within total deposits.

Table of Contents

Riverview Financial Corporation

MANAGEMENT’S DISCUSSION AND ANALYSIS

(Dollars in thousands, except per share data)

~~Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations~~

Item 2.

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

The following discussion and analysis should be read in conjunction with the unaudited consolidated interim financial statements contained in Part I, Item 1 of this report, and with our audited consolidated financial statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” presented in our Annual Report on

Form10-K

for the year ended December 31, ~~2016.~~

2020.

Cautionary Note Regarding Forward-Looking Statements:

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to risks and uncertainties. These statements are based on assumptions and may describe future plans, strategies and expectations of Riverview Financial Corporation and its direct and indirect subsidiaries. These forward-looking statements are generally identified by use of the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project” or similar expressions. All statements in this report, other than statements of historical facts, are forward-looking statements.

Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Important factors that could cause our actual results to differ materially from those in the forward-looking statements include, but are not limited to: our ability to achieve the intended benefits of acquisitions and integration of previously acquired businesses; restructuring initiatives; changes in interest rates; economic conditions, particularly in our market area; legislative and regulatory changes and the ability to comply with the significant laws and regulations governing the banking and financial services business; monetary and fiscal policies of the U.S. government, including policies of the U.S. Department of Treasury and the Federal Reserve System; credit risk associated with lending activities and changes in the quality and composition of our loan and investment portfolios; demand for loan and other products; deposit flows; competition; changes in the values of real estate and other collateral securing the loan portfolio, particularly in our market area; changes in relevant accounting principles and guidelines; and inability of third party service providers to perform.

Most recently, the risk factors associated with the onset of

COVID-19

could continue to have a material adverse effect on significant estimates, operations, and business results of Riverview.

These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Except as required by applicable law or regulation, Riverview Financial Corporation does not undertake, and specifically disclaims any obligation, to release publicly the result of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of the statements or to reflect the occurrence of anticipated or unanticipated events.

Notes to the Consolidated Financial Statements referred to in the Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) are incorporated by reference into the MD&A. Certain prior period amounts have been reclassified to conform with the current year’s presentation and did not have any effect on the operating results or financial position of the Company.

Critical Accounting Policies:

Disclosure of our significant accounting policies are included in Note 1 to the ~~consolidated financial statements~~Consolidated Financial Statements of the Annual Report on

Form10-K

for the year ended December 31, ~~2016.~~2020. Some of these policies are particularly sensitive requiring significant judgments, estimates and assumptions. Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties and could potentially result in materially different results under different assumptions and conditions. We believe that the most critical accounting policies upon which our financial condition and results of operation depend, and which involve the most complex subjective decisions or assessments, are included in Note 1 to the consolidated financial statements in the Company’s Annual Report on

Form10-K

for the fiscal year ended December 31, ~~2016~~2020, as filed with the Securities and Exchange Commission on March ~~29, 2017.~~

11, 2021.

Operating Environment:

~~The United States economy grew at a stronger pace in the third quarter of 2017 compared to the same period last year but declined slightly from the second quarter of 2017. The~~

Economic growth measured as gross domestic product (“GDP”), the value of all goods and services produced in the United States, increased at an annualized rate of ~~3.0%~~6.4% in the ~~third~~first quarter of ~~2017~~2021. This was an increase over the 4.3% growth realized in the fourth quarter of 2020 and shows a continued recovery from COVID-19 related contractions indicating government stimulus programs continue to provide forward momentum. Increases were seen in personal consumption expenditures, nonresidential fixed investment, federal government spending, residential fixed investment, and state and local government spending that were partly offset by decreases in private inventory investment and exports.

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The impact of the virus has been felt nationally and within our primary market area as unemployment rates have been elevated. The unemployment rate declined sharply in the United States to 6.0% in March 2021 from 6.7% in December 2020 but was still elevated compared to ~~2.8%~~4.4% in March 2020. The average unemployment rate for counties in our market area increased to 7.1% in March 2021 compared to 6.5% in December 2020. The resulting impacts of the pandemic on consumer and business customers, including the sudden significant increase in the ~~third~~unemployment rate, has caused changes in consumer and business spending, borrowing needs and saving habits, which has affected the demand for loans and other products and services we offer, as well as the creditworthiness of potential and current borrowers and delinquency rates. Our business and consumer customers are experiencing varying degrees of financial distress and will likely adversely affect borrowers’ ability to timely pay interest and principal on their loans and the value of the collateral securing their obligations. This in turn may influence the recognition of credit losses in our loan portfolios.

Inflationary pressure continues to increase as Federal stimulus programs continue to provide funds to the personal and business sectors. The Personal Consumption Expenditures (“PCE”) index increased 3.5% in the first quarter of ~~2016 and 3.1%~~2021 compared to an increase of 1.5% in the ~~second~~fourth quarter of ~~2017. The consumer price index for~~2020. While supply-side limitations will reduce consumption and increase inflationary pressure in the ~~last 12 months rose 2.2% ending September, 2017. This inflation measure has been accelerating since June, 2017 when it was 1.6%. The~~short-term, limitations to and/or cessation of supplemental unemployment programs and PPP loans will have a larger impact on future Federal Open Market Committee (“FOMC”) ~~last changed rates on June 14, 2017 where it increased~~actions related to short-term interest rates. Prior year monetary policy actions by the ~~federal funds~~FOMC to decrease the target Federal Funds rate ~~for the second time in 2017~~ to a range of ~~1.00%~~0% to ~~1.25%. The FOMC has continued~~0.25% have adversely impacted the Company’s net interest margin and will continue to take the stance that the current target range is accommodative and it may take additional monetary policy actions in the near term to increase general market rates. Accordingly, these interest rate increases may have an adverse impactcompress earnings on ~~our loan growth, asset quality and fund costs.~~

earning assets.

Review of Financial Position:

Total assets increased ~~$138,331, or 25.5%,~~$17,286 to ~~$681,379~~$1,374,840 at ~~September 30, 2017,~~March 31, 2021, from ~~$543,048~~$1,357,554 at December 31, ~~2016.~~2020. Loans, net, ~~increased~~decreased to ~~$560,187~~$1,091,824 at ~~September 30, 2017,~~March 31, 2021, compared to ~~$409,343~~$1,139,239 at December 31, ~~2016, an increase~~2020, a decrease of ~~$150,844, or 36.9%.~~$47,415. The ~~increase~~decrease in ~~net~~ loans was due primarily to SBA forgiveness on PPP loans. Business lending, including commercial and commercial real estate loans, decreased $44,732, retail lending, including residential mortgages and consumer loans, decreased $7,558, and construction lending increased $4,875 during ~~2017 was attributable to~~ the ~~hiring of multiple teams of seasoned lenders having established customer relationships in new and existing markets.~~three months ended March 31, 2021. Investment securities ~~decreased $16,239,~~increased $52,168, or ~~22.2%~~50.3%, in the ~~nine~~three months ended ~~September 30, 2017.~~March 31, 2021. Noninterest-bearing deposits increased ~~$2,282,~~$23,760, while interest-bearing deposits increased ~~$120,108 in~~$41,708 during the ~~nine~~three months ended ~~September 30, 2017.~~March 31, 2021. Total stockholders’ equity increased ~~$15,459, or 36.9%,~~$1,191, to ~~$57,379~~$98,623 at ~~September 30, 2017~~March 31, 2021 from ~~$41,920~~$97,432 at

year-end ~~2016. On January 20, 2017,~~

2020. The increase in stockholders’ equity was caused primarily by the ~~Company announced the successful completion~~recognition of net income offset partially by a $17.0 million private placement of common and preferred securities. The additional capital not only afforded the Company the ability to significantly grow its loan portfolio but more notably the capital raise allowed us to acquire CBT Financial Corp., the parent company of CBT Bank,change in a stock transaction valued at approximately $54,568 effective October 1, 2017. This action formed a community banking franchise with approximately $1.2 billion in assets and provides enhanced products and services through 33 banking locations covering 12 Pennsylvania counties.accumulated other comprehensive income. For the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2021, total assets averaged ~~$611,477,~~$1,364,225, an increase of ~~$75,143~~$278,880 from ~~$536,334~~$1,085,345 for the same period in ~~2016. For the third quarter of 2017, total assets, loans, net and deposits increased $55,761, $62,753 and $48,994, respectively, compared to the prior quarter.~~

2020.

Investment Portfolio:

The Company’s entire investment portfolio is held as

available-for-sale,

which allows for greater flexibility in using the investment portfolio for liquidity purposes by allowing securities to be sold when favorable market opportunities exist. Investment securities

available-for-sale

totaled ~~$56,874~~$155,863 at ~~September 30, 2017, a decrease~~March 31, 2021, an increase of ~~$16,239,~~$52,168, or ~~22.2%~~50.3%, from ~~$73,113~~$103,695 at December 31, ~~2016.~~

2020. Activity in the investment portfolio during the first quarter of 2021, included purchases of $68,371, sales of $9,898 and repayments of $2,865. As a result of modest loan demand in the first quarter of 2021 excess funds from SBA forgiveness were utilized to increase the investment portfolio. Purchases consisted of $19,391 of U.S. Treasury securities, $6,000 of corporate bonds, and $10,420 of U. S. Government mortgage-backed securities and $32,560 of state and municipal obligations. The

tax-equivalent

yield on the bonds purchased in the first quarter of 2021 was 1.72%. In an effort to reduce cash flow timing risk, we sold $3,483 of corporate bonds, $4,335 of

tax-exempt

state and municipal obligations and $2,080 of U.S. Government-sponsored enterprises. The net gain on the sale amounted to $246 in the three months ended March 31, 2021 compared to a net gain of $815 recognized for the same period last year.

For the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2021, the investment portfolio averaged ~~$71,251, a decrease~~$132,992, an increase of ~~$814~~$50,964 compared to ~~$72,065~~$82,028 for the same period last year. The

tax-equivalent

yield on the investment portfolio ~~increased seven~~decreased 76 basis points to ~~3.42%~~2.09% for the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2021, from ~~3.35%~~2.85% for the comparable period of ~~2016. Moreover, thetax-equivalent~~ ~~yield for the third quarter of 2017 decreased 14 basis points from 3.47% for the second quarter of 2017.~~

2020.

Securities

available-for-sale

are carried at fair value, with unrealized gains or losses net of deferred income taxes reported in the accumulated other comprehensive income (loss) component of stockholders’ equity. We reported a net unrealized ~~holding loss, included as a separate component~~losses of ~~stockholders’ equity~~$1,313, net of ~~$601,~~deferred income tax of $276 at March 31, 2021. This compares with net unrealized gains of $1,962, net of deferred income taxes of ~~$310, at September 30, 2017, and $1,659, net of deferred income taxes of $854,~~$412 at December 31, ~~2016.~~

2020. The ~~Asset/Liability Committee (“ALCO”) reviews~~change in the ~~performance and risk elements~~unrealized holding gain was the result of the investment portfolio quarterly. Through active balance sheet management and analysis of the securities portfolio, we endeavor to maintain sufficient liquidity to satisfy depositor requirements and meet the credit needs of our customers.

increases in general market rates.

Loan Portfolio:

~~Loan growth increased significantly in 2017.~~

Loans, net, ~~increased~~decreased to ~~$560,187~~$1,091,824 at ~~September 30, 2017~~March 31, 2021 from ~~$409,343~~$1,139,239 at December 31, ~~2016, an increase~~2020, a decrease of ~~$150,844,~~$47,415, or ~~36.9%~~4.2%. ~~We experienced~~The decrease in the loan portfolio was attributable to the forgiveness of PPP loans totaling $55,903 and a decrease in organic loan growth ~~in all major sectors~~ of ~~loans.~~$9,970, offset partially by the origination of PPP loans of $18,458. Business loans, including commercial ~~construction~~ and commercial real

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estate loans, ~~increased $149,510,~~decreased $44,732, or ~~54.9%~~5.2%, to ~~$421,831~~$816,843 at ~~September 30, 2017~~March 31, 2021 from ~~$272,321~~$861,575 at December 31, ~~2016.~~2020. Retail loans, including residential real estate and consumer loans, ~~increased $1,334,~~decreased $7,558, or ~~1.0%~~3.7%, to ~~$138,356~~$196,704 at ~~September 30, 2017~~March 31, 2021 from ~~$137,022~~$204,262 at~~year-end~~ ~~2016.~~

December 31, 2020. Construction lending increased $4,875, or 6.6%, to $78,277 at March 31, 2021 from $73,402 at December 31, 2020. PPP loans, net of unearned loan fees, totaled $214,365 at March 31, 2021 and $251,810 at December 31, 2020.

For the ~~third quarter of 2017, loans, net grew $55,438, or 11.0%. Business loans increased $50,191, while retail loans increased $5,247 during the third quarter of 2017.~~

~~For the nine~~three months ended ~~September 30, 2017,~~March 31, 2021, loans ~~net~~ averaged ~~$478,033,~~$1,122,546, an increase of ~~$75,155, or 18.7%~~$248,126 compared to ~~$402,878~~$874,420 for the same period ~~of 2016.~~in 2020. The

tax-equivalent

yield on the loan portfolio was ~~4.35%~~3.82% for the ~~nine~~three months ended ~~September 30, 2017, a 21 basis~~ March 31, 2021, an

82-basis

point decrease from 4.64% for the comparable period last year. The~~tax-equivalent~~ decrease in loan yield was caused by declines in general market rates, reductions in loan accretion and lower yielding PPP loans. Concerns about the spread of

COVID-19

and its anticipated negative impact on economic activity, severely disrupted domestic financial markets prompting the Federal Open Market Committee of the Federal Reserve Board to aggressively cut the target Federal Funds rate by

150-basis

points in the first half of 2020. Loan accretion included in loan interest income in the first three months of 2021 related to acquired loans was $22 compared to $132 for the same period in 2020. The yield earned on PPP loans from interest and fees was 2.65% for the three months ended March 31, 2021.

The economic slowdown associated with

COVID-19

may have an adverse impact on the growth and asset quality of our loan portfolio, ~~increase three basis points during~~especially those industry segments being severely impacted by the ~~third quarter~~pandemic. Specifically, we have identified the following industries, by the amount of ~~2017 from the 4.35%tax-equivalent~~ ~~yield~~aggregate loans and percentage of total loans as of March 31, 2021 in ~~the second quarter of 2017.~~

our loan portfolio that may have increased exposure to this pandemic event:


	March 31, 2021
Industry:	Amount		% of Total Loans
Mining, Quarry, Oil and Gas	$	2,482		0.23	%
Construction-Land Subdivision		20,004		1.83	%
Manufacturing		18,064		1.65	%
Wholesale Trade		3,916		0.36	%
Automobile Dealers		1,975		0.18	%
Non-Residential Rentals and Leasing		254,703		23.33	%
Residential Rental and Leasing		113,388		10.39	%
Health Care		17,145		1.57	%
Arts, Entertainment and Recreation		6,288		0.58	%
Hospitality		66,914		6.13	%
Restaurants		8,168		0.75	%

	$	513,047		47.00	%

In addition to the risks inherent in our loan portfolio in the normal course of business, we are also a party to financial instruments with

off-balance

sheet risk to meet the financing needs of our customers. These instruments include legally binding commitments to extend credit, unused portions of lines of credit and commercial letters of credit made under the same underwriting standards as

on-balance

sheet instruments, and may involve, to varying degrees, elements of credit risk and interest rate risk (“IRR”) in excess of the amount recognized in the consolidated financial statements.

~~Off-balance~~ ~~sheet commitments at September 30, 2017, totaled $86,876, consisting~~ With the onset of ~~$48,695 in commitments to extend credit, $34,521 in~~the

COVID-19

pandemic, we are continually monitoring draws on unused portions of lines of credit and ~~$3,660 in standby letters~~construction loans.

The contractual amounts of credit. Due to fixed maturity dates, specified conditions within these instruments, and the ultimate needs of our customers, many will expire without being drawn upon. We believe that amounts actually drawn upon can be funded in the normal course of operations and therefore, do not represent a significant liquidity risk to us. In comparison,

off-balance

sheet commitments at March 31, 2021 and December 31, ~~2016, totaled $58,475, consisting~~2020 are summarized as follows:


	March 31, 2021		December 31, 2020
Unused portion of lines of credit	$	100,153	$	92,848
Construction loans		14,906		24,751
Commitments to extend credit		5,740		10,275
Deposit overdraft protection		17,909		18,117
Standby and performance letters of credit		7,313		6,577

Total	$	146,021	$	152,568

Table of ~~$27,829 in commitments to extend credit, $26,729 in unused portions of lines of credit and $3,917 in standby letters of credit.~~

Contents

Asset Quality:

National, Pennsylvania and our market area unemployment rates at ~~September 30, 2017~~March 31, 2021 and ~~2016~~2020 are summarized as follows:

   September 30,
2017 September 30,
2016
United States
   4.2% 4.9%
Pennsylvania (statewide)
   4.8% 5.5%
Berks County
   4.8% 5.0%
Dauphin County
   4.7% 4.8%
Lebanon
   4.4% 4.4%
Lycoming
   5.5% 6.3%
Northumberland County
   5.3% 5.9%
Perry County
   4.4% 4.6%
Schuylkill County
   5.9% 6.1%
Somerset County
   5.8% 6.3%

~~Employment conditions in 2017 improved~~


	2021			2020
United States		6.0	%		4.4	%
Pennsylvania		7.3	%		5.6	%
Berks County		7.6	%		5.5	%
Blair County		6.7	%		5.7	%
Bucks County		6.1	%		4.8	%
Centre County		4.9	%		4.1	%
Clearfield County		8.0	%		7.4	%
Dauphin County		7.2	%		4.9	%
Huntingdon County		8.8	%		8.7	%
Lebanon County		6.3	%		4.8	%
Lehigh County		7.3	%		5.6	%
Lycoming County		7.8	%		6.8	%
Perry County		5.5	%		4.7	%
Schuylkill County		7.8	%		6.5	%
Somerset County		7.9	%		7.7	%

Unemployment rates despite improving since the onset of the pandemic were still higher at the end of the first quarter of 2021 compared to the end of first quarter of 2021 for the ~~United States,~~Nation, Commonwealth of Pennsylvania and ~~all of the Counties~~within every county in which we have branch locations. The average unemployment rate for all our counties increased to 7.1% in March 2021 from 5.9% in March 2020. The lowest unemployment rate in ~~2017~~2021 for all the ~~Counties~~counties we serve was ~~4.4%~~4.9% which was in ~~Lebanon~~Centre County, and ~~Perry Counties. The decrease~~the highest recorded rate being 8.8% in Huntingdon County. High levels or increases in unemployment rates may have a ~~positive~~negative impact on economic growth within these areas and could have a corresponding effect on our business by ~~increasing~~decreasing loan demand and ~~improving~~weakening asset quality.

~~Our asset quality improved in the nine months ended September 30, 2017.~~

Nonperforming assets ~~decreased $1,098, or 13.4%~~increased $1,189 to ~~$7,077~~$13,151 at ~~September 30, 2017,~~March 31, 2021 from ~~$8,175~~$11,962 at December 31, ~~2016. We experienced a decrease in restructured loans, accruing loans past due 90 days or more and foreclosed assets, which more than offset~~2020. The majority of the increase resulted from a commercial real estate loan totaling $971 and two commercial loans totaling $314 moved to

non-accrual

status. This was partially offset by a reduction in ~~nonaccrual loans.~~other real estate owned of $203. As a percentage of loans, net and foreclosed assets, nonperforming assets equaled ~~1.3%~~1.20% at ~~September 30, 2017~~March 31, 2021 compared to ~~2.0%~~1.05% at December 31, ~~2016.~~

2020.

Loans on nonaccrual status increased ~~$379~~$1,407 to ~~$1,765~~$2,828 at ~~September 30, 2017~~March 31, 2021 from ~~$1,386~~$1,421 at December 31, ~~2016.~~2020. The increase in nonaccrual loans was due to increases of ~~$345~~$968 in commercial real estate loans, ~~and $191~~$147 in residential ~~real estate~~ loans ~~partially offset by a $157 decrease~~and $292 in commercial loans. ~~Accruing troubled debt restructured loans declined $637, or 11.0%, to $5,168 at September 30, 2017 from $5,805 at December 31, 2016.~~ Accruing loans past due 90 days or more ~~declined $359, while other real estate owned~~increased $9 and accruing restructured loans decreased ~~$481~~$24 during ~~the nine months ended September 30, 2017.~~

~~For~~ the three months ended ~~September~~March 31, 2021.

In response to the

COVID-19

pandemic and its economic impact to our customers, we implemented short-term modification programs that comply with regulatory and accounting guidance to provide temporary payment relief to those borrowers directly impacted by

COVID-19

who were not more than 30 ~~2017, nonperforming assets improved to $7,077, a decrease of $64 from $7,141 at September 30, 2016. There were decreases in accruing troubled debt restructured loans, accruing loans~~days past due 90at the time we implemented our modification programs. These programs allow for a deferral of principal, or principal and interest payments for a maximum of 180 days on a cumulative and successive basis. The deferred payments, including interest accrued during the deferral period, if applicable, result in the extension of the loan due date by the number of months deferred.

As of March 31, 2021, 15 loans with outstanding balances totaling $18,611, or ~~more~~1.7% of total loans were currently deferring loan payments compared to 19 loans with outstanding balances totaling $21,854, or 1.9% of total loans at December 31, 2020. Depending on the circumstances and ~~other real estate owned, partially offset by an increase in nonaccrual loans.~~

~~Generally, maintaining a high loan~~request from the borrower, modifications were made to ~~deposit ratio is our primary goal in order~~defer all payments for loans requiring principal and interest payments, or to ~~maximize profitability. However, this objective is superseded by our attempts to ensure that asset quality remains strong. We~~defer principal payments only and continue to ~~focus our efforts on maintaining sound underwriting standards~~collect interest payments, or to defer all interest payments for ~~both commercial and consumer credit.~~

loans requiring interest only payments. The following table summarizes loans actively deferring payments under the above described modification program as of March 31, 2021, by loan classification:

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	Number of Loans		Amount		% of Outstanding Including PPP Loans			% of Outstanding Excluding PPP Loans			Weighted Average Loan to Value						Aggregate Deferred Payments
	Number of Loans		Amount		% of Outstanding Including PPP Loans			% of Outstanding Excluding PPP Loans			% of Total Loan Classification			% of Loans Modified			Principal		Interest
Commercial
Construction:
Commercial		1	$	973		1.96	%										$	30	$	49
Hospitality		1		1,501		5.26	%					69.04	%		75,28	%				33

Total		2		2,474		3.16	%											30		82

Commercial Real Estate:
Multi Family
Owner Occupied.
Non-Owner Occupied		2		2,032		0.80	%											85		29
Hospitality		3		13,479		37.77	%					68.07	%		65.71	%		604		358
Agricultural		1		154		0.58	%											103		10

Total		6		15,665		3.20	%											792		397

Residential Real Estate		7		473		0.25	%											16		16
Consumer

Total		15	$	18,612		1.70	%		2.12	%							$	838	$	495

We maintain the allowance for loan losses at a level we believe adequate to absorb probable credit losses related to specifically identified loans, as well as probable incurred loan losses inherent in the remainder of the loan portfolio as of the balance sheet date. The allowance for loan losses is based on past events and current economic conditions. We employ the Federal Financial Institutions Examination Council Interagency Policy Statement, as amended, ~~December 13, 2006,~~ and GAAP in assessing the adequacy of the allowance account.

Under GAAP, the adequacy of the allowance account is determined based on the provisions of FASB Accounting Standards Codification (“ASC”) 310, “Receivables”, for loans specifically identified to be individually evaluated for impairment and the requirements of FASB ASC 450, “Contingencies”, for large groups of smaller-balance homogeneous loans to be collectively evaluated for impairment.

We follow our systematic methodology in accordance with procedural discipline by applying it in the same manner regardless of whether the allowance is being determined at a high point or a low point in the economic cycle. Each quarter, the Chief Credit Officer identifies those loans to be individually evaluated for impairment and those loans collectively evaluated for impairment utilizing a standard criteria. Grades are assigned quarterly to loans identified to be individually evaluated. A loan’s grade may differ from period to period based on current conditions and events. However, we consistently utilize the same grading system each quarter. We consistently use loss experience from the latest eight quarters in determining the historical loss factor for each pool collectively evaluated for impairment. Qualitative factors are evaluated in the same manner each quarter and are adjusted within a relevant range of values based on current conditions. We continue to evaluate risks which may impact our loan portfolios. As a result of the coronavirus pandemic and resultant business shutdowns and unemployment spikes, we reviewed our loan portfolio segments, assessing the likely impact of

COVID-19

on each segment and established specific qualitative adjustment factors. As we weigh additional information on the potential impact of this event on our overall economic prospects coupled with our loan officers’ further assessments of the impact on individual borrowers, our delinquencies and loss estimates will be revised as needed, and these revisions could have a material impact on future provisions to the allowance for loan losses and results of operations. For additional disclosure related to the allowance for loan losses refer to the note entitled, “Loans, net and Allowance for Loan Losses”, in the Notes to Consolidated Financial Statements to this Quarterly Report.

The allowance for loan losses ~~increased $1,672~~decreased $60 to ~~$5,404~~$12,140 at ~~September 30, 2017,~~March 31, 2021, from ~~$3,732~~$12,200 at the end of ~~2016.~~2020. The ~~increase~~Company did not recognize a charge in the form of a provision for loan losses in the first quarter of 2021 based on the results from its adequacy modeling of the allowance ~~was~~for loan loss account at March 31, 2021. Exclusive of PPP loans, the portfolio declined this quarter which, along with decreased qualitative factors stemming primarily ~~attributable to~~from improved economic conditions, resulted in no provision for loan losses being recognized in the ~~significant loan growth in 2017.~~first quarter of 2021. For the ~~nine~~three months ended ~~September 30, 2017,~~March 31, net ~~charge-offs~~charge offs were ~~$62,~~$60, or 0.02%, of average loans outstanding ~~a $950 decrease~~in 2021 compared to ~~$1,012,~~$1,065, or ~~0.34%~~0.49%, of average loans outstanding ~~in the same period of 2016. Net charge-offs totaled $40 in the third quarter of 2017 as compared to $1~~ for the same period ~~last year.~~

in 2020.

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Deposits:

We attract the majority of our deposits from within our ~~eight county~~

13-county

market area ~~that stretches from Schuylkill County in the eastern part of Pennsylvania to Somerset County in the southwestern part of Pennsylvania~~ by offering various deposit products including demand deposit accounts, NOW accounts, business checking accounts, money market deposit accounts, savings accounts, club accounts and time deposits, including certificates of deposit and IRA’s. For the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2021, total deposits increased $65,468 to ~~$574,950~~$1,080,928 from ~~$452,560~~$1,015,460 at December 31, ~~2016.~~2020. Approximately

two-thirds

of the increase was due to the successful acquisition of a municipal relationship in the first quarter of 2021. Noninterest-bearing transaction accounts increased ~~$2,282,~~$23,760, while interest-bearing accounts increased ~~$120,108 in the nine months ended September 30, 2017. Interest-bearing~~$41,708. Specifically, interest-bearing transaction accounts, including ~~NOW,~~ money market, NOW and savings, ~~accounts,~~ increased ~~$104,949, or 40.7%, to $362,611 at September 30, 2017 from $257,662 at December 31, 2016. Total~~$45,411 and time deposits, ~~increased $15,159 to $136,125 at September 30, 2017 from $120,966 at December~~including certificates of deposit and individual retirement accounts decreased $3,703 for the three months ended March 31, ~~2016. Time deposits less than $100 increased $6,768, or 9.2%, while time deposits of $100 or more increased $8,391, or 17.6%.~~ 2021.

For the three months ended ~~September 30, 2017, total deposits increased $51,055 with growth in all categories except savings accounts.~~

~~For the nine months ended September 30,~~March 31, interest-bearing deposits averaged ~~$440,638~~$863,765 in ~~2017~~2021 compared to ~~$391,990~~$795,084 in ~~2016.~~2020. The cost of interest-bearing deposits was ~~0.61%~~0.43% in ~~2017~~2021 compared to ~~0.47%~~0.90% in 2016. For the nine months ended September 30, the overall cost of interest-bearing liabilities including the cost of borrowed funds, was 0.69% in 2017 compared to 0.53% in 2016. The cost of interest-bearing liabilities increased seven basis points when comparing the third quarter of 2017 with the second quarter of 2017.

~~Corresponding~~2020. Consistent with recent FOMC actions ~~interest~~to lower short-term rates ~~have increased from historic lows that existed for an extended period. All~~due to the onset of

COVID-19,

we also took action to lower deposit rates ~~have increased~~to fend off net interest margin contraction due to changes in yields on floating and ~~as such, customers have continued~~adjustable-rate loans. We anticipate deposit costs to ~~be attracted~~continue to ~~interest-bearingnon-maturity~~ ~~deposits to provide flexibility~~decrease in the ~~event~~short term based on the continued market rate impact of ~~additional increases in general market rates~~FOMC actions to lower its target federal funds rate in the ~~near term.~~

latter part of March 2020.

On January 15, 2021, the Company announced the execution of a definitive agreement whereby AmeriServ Financial, Inc. will acquire Citizens Neighborhood Bank’s (“CNB”), an operating division of Riverview Bank, branch and deposit customers in Meyersdale, Pennsylvania, as well as the deposit customers of CNB’s leased branch in the Borough of Somerset. The transaction is scheduled to close on May 21, 2021. At March 31, 2021, the related deposits totaled $44,713 million and will be acquired for a 3.71% deposit premium and are considered as held for assumption within total deposits.

Borrowings:

The Bank utilizes borrowings as a secondary source of liquidity for its asset/liability management. Advances are available from the Federal Home Loan Bank of Pittsburgh (“FHLB”) provided certain standards related to credit worthiness have been met. Repurchase and term agreements are also available from the FHLB.

Short-term borrowings are generally used to meet temporary funding needs and consist of federal funds purchased, securities sold under agreements to repurchase, and overnight and short-term borrowings from ~~the~~ Atlantic Community Bankers Bank (“ACBB”), Pacific Community Bankers Bank (“PCBB”) and the FHLB. At ~~September 30, 2017,~~March 31, 2021 and December 31, 2020, we did not have any short-term borrowings outstanding.

Long-term debt totaled ~~$37,250~~$180,644 at March 31, 2021 as compared to ~~$31,500~~$228,765 at December 31, ~~2016, all of which were borrowed under~~2020. For the ~~Bank’s Open Repo Plus line with the FHLB. The average cost of short-term borrowings was 118 basis points in the nine~~three months ended ~~September 30, 2017~~March 31, long-term debt averaged $209,781 in 2021 and ~~58 basis points during~~$11,817 in 2020. The large increase in average long-term debt is attributable to advances taken through the ~~same period last year. Long-term debt totaled $6,503~~Federal Reserve’s PPPLF, whereby loans originated through the PPP program can be pledged as security to facilitate advancements made through the program. As of March 31, 2021, we had outstanding borrowings through the program of $128,736 at ~~September 30, 2017 as~~a rate of 0.35%, compared to ~~$11,154~~outstanding borrowings of $176,904 at a rate of 0.35% at December 31, ~~2016.~~2020. The average cost of long-term debt was ~~3.11% in~~1.25% for the ~~nine~~three months ended ~~September 30, 2017 and 2.67%~~March 31, 2021, a decrease from 4.19% for the same period last year.

Market Risk Sensitivity:

Market risk is the risk to our earnings or financial position resulting from adverse changes in market rates or prices, such as interest rates, foreign exchange rates or equity prices. Our exposure to market risk is primarily interest rate risk (“IRR”) associated with our lending, investing and deposit-gathering activities. During the normal course of business, we are not exposed to foreign exchange risk or commodity price risk. Our exposure to IRR can be explained as the potential for change in our reported earnings and/or the market value of our net worth. Variations in interest rates affect earnings by changing net interest income and the level of other interest-sensitive income and operating expenses. Interest rate changes also affect the underlying economic value of our assets, liabilities, and

off-balance

sheet items. These changes arise because the present value of future cash flows, and often the cash flows themselves, change with interest rates. The effects of the changes in these present values reflect the change in our underlying economic value and provide a basis for the expected change in future earnings related to interest rates. IRR is inherent in the role of banks as financial intermediaries. However, a bank with a high degree of IRR may experience lower earnings, impaired liquidity, and capital positions, and most likely, a greater risk of insolvency. Therefore, banks must carefully evaluate IRR to promote safety and soundness in their activities.

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As a result of ~~economic uncertainty and a prolonged era~~the FOMC’s recent actions to lower short-term interest rates in order to mitigate the impact of ~~historically low market rates,~~the

COVID-19

pandemic on the economy, it has become increasing more challenging to manage IRR. ~~Due to these factors,~~ IRR and effectively managing it are very important to both ~~bank~~Bank management and regulators. Bank regulations require us to develop and maintain an IRR management program that is overseen by the Board of Directors and senior management, which involves a comprehensive risk management process ~~in order~~ to effectively identify, measure, monitor and control risk. Should bank regulatory agencies identify a material weakness in a bank’s risk management process or ~~high risk~~high-risk exposure relative to capital, bank regulatory agencies may take action to remedy these shortcomings. Moreover, the level of IRR exposure and the quality of a bank’s risk management process is a determining factor when evaluating capital adequacy.

The Asset Liability ~~committee~~Committee (“ALCO”), comprised of members of our ~~Board of Directors,~~ senior management and other appropriate officers, oversees our IRR management program. Specifically, ALCO analyzes economic data and market interest rate trends, as well as competitive pressures, and utilizes computerized modeling techniques to reveal potential exposure to IRR. This allows us to monitor and attempt to control the influence these factors may have on our rate-sensitive assets (“RSA”) and rate-sensitive liabilities (“RSL”), and overall operating results and financial position. One such technique utilizes a static gap model that considers repricing frequencies of RSA and RSL in order to monitor IRR. Gap analysis attempts to measure our interest rate exposure by calculating the net amount of RSA and RSL that reprice within specific time intervals. A positive gap occurs when the amount of RSA repricing in a specific period is greater than the amount of RSL repricing within that same time frame and is indicated by a RSA/RSL ratio greater than 1.0. AConversely, a negative gap occurs when the amount of RSL repricing is greater than the amount of RSA and is indicated by a RSA/RSL ratio of less than 1.0. A positive gap implies that earnings will be impacted favorably if interest rates rise and adversely if interest rates fall during the period. A negative gap tends to indicate that earnings will be affected inversely to interest rate changes.

Our cumulative

one-year

RSA/RSL ratio equaled ~~0.79~~1.50 at ~~September 30, 2017.~~March 31, 2021. Given the recent monetary policy actions of the FOMC based on uncertainty surrounding the timing of the recovery from the pandemic and the potential for rates to ~~increase in the future,~~remain at these low levels, the focus of ALCO has been to ~~move towards a positive static gap position.~~

reduce our exposure to the effects of repricing assets.

The current position at ~~September 30, 2017,~~March 31, 2021, indicates that the amount of ~~RSL~~RSA repricing within one year would exceed that of ~~RSA, thereby~~RSL, with declining rates causing ~~increases~~a slight decrease in ~~market rates, to slightly decrease~~ net interest income. However, these forward-looking statements are qualified in the aforementioned section entitled “Forward-Looking Discussion” in this Management’s Discussion and Analysis.

Static gap analysis, although a standard measuring tool, does not fully illustrate the impact of interest rate changes on future earnings. First, market rate changes normally do not equally or simultaneously affect all categories of assets and liabilities. Second, assets and liabilities that can contractually reprice within the same period may not do so at the same time or to the same magnitude. Third, the interest rate sensitivity table presents a

one-day

position. Variations occur daily as we adjust our rate sensitivity throughout the year. Finally, assumptions must be made in constructing such a table.

As the static gap report fails to address the dynamic changes in the balance sheet composition or prevailing interest rates, we utilize a simulation model to enhance our asset/liability management. This model is used to create pro forma net interest income scenarios under various interest rate shocks. ~~Model results at September 30, 2017, produced similar results from those indicated by theone-year~~ ~~static gap position.~~ Given an instantaneous and parallel shift in interest rates of plus and minus 100 basis points, our projected net interest income for the 12 months ending ~~September 30, 2018,~~March 31, 2021, would increase 2.7% and decrease ~~1.23%~~5.1% from model results using current interest rates. We will continue to monitor our IRR through employing deposit and loan pricing strategies and directing the reinvestment of loan and investment repayments ~~in order~~ to manage our IRR position.

Financial institutions are affected differently by inflation than commercial and industrial companies that have significant investments in fixed assets and inventories. Most of our assets are monetary in nature and change correspondingly with variations in the inflation rate. It is difficult to precisely measure the impact inflation has on us, however we believe that our exposure to inflation can be mitigated through asset/liability management.

Liquidity:

Liquidity management is essential to our continuing operations and enables us to meet financial obligations as they come due, as well as to take advantage of new business opportunities as they arise. Financial obligations include, but are not limited to, the following:

Funding new and existing loan commitments;

Payment of deposits on demand or at their contractual maturity;

Repayment of borrowings as they mature;

Payment of lease obligations; and

Payment of operating expenses.

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These obligations are managed daily, thus enabling us to effectively monitor fluctuations in our liquidity position and to adapt that position according to market influences and balance sheet trends. Future liquidity needs are forecasted, and strategies are developed to ensure adequate liquidity at all times.

Historically, core deposits have been the primary source of liquidity because of their stability and lower cost, in general, ~~than~~when compared to other types of ~~funding.~~funding sources. Providing additional sources of funds are loan and investment payments and prepayments and the ability to sell both ~~available for sale~~

available-for-sale

securities and mortgage loans held for sale. We believe liquidity is adequate to meet both present and future financial obligations and commitments on a timely basis.

As a result of the onset of the

COVID-19

pandemic, we have placed increased emphasis on solidifying, monitoring, and managing our liquidity position. We believe our liquidity position is strong. At March 31, 2021, we had available liquidity of $63,164 from cash and interest-bearing balances with other banks. Our investment securities portfolio is comprised primarily of highly liquid U.S. Government and Government-Sponsored Enterprises and high credit quality municipal securities. At March 31, 2021,

available-for-sale

investment securities totaled $155,863. Our secondary sources of liquidity consist of the available borrowing capacity at the Federal Home Loan Bank (“FHLB”), Atlantic Community Bankers Bank (“ACBB”) and Pacific Coast Bankers Bank (“PCBB”). At March 31, 2021, our available borrowing capacity was $395,535 at the FHLB, $10,000 at ACBB and $50,000 at PCBB.

With respect to monitoring and managing our liquidity, in addition to our normal quarterly liquidity reporting to the Risk Committee that includes stress testing under moderate, severe, and extreme scenarios, we have instituted a formalized monthly presentation using various metrics to assist the Board of Directors in assessing our liquidity position. With the changes in the industry related to

COVID-19,

we have focused on maintaining greater liquidity.

We employ ~~a number of~~several analytical techniques in assessing the adequacy of our liquidity position. One such technique is the use of ratio analysis to determine the extent of our reliance on noncore funds to fund our investments and loans maturing after ~~September 30, 2017.~~March 31, 2021. Our noncore funds at ~~September 30, 2017,~~March 31, 2021 were comprised of time deposits in denominations of $250 or more and other borrowings. These funds are not considered to be a strong source of liquidity since they are very interest rate sensitive and are considered ~~to be~~ highly volatile. At ~~September 30, 2017,~~March 31, 2021, our net noncore funding dependence ratio, the difference between noncore funds and short-term investments to long-term assets, was ~~6.80%~~11.81%, while our net short-term noncore funding ratio, noncore funds maturing within

one-year,

less short-term investments to assets equaled ~~6.54%~~(0.74)%. Comparatively, our ~~overall~~net noncore dependence ratio ~~improved fromyear-end~~ ~~2016 when it~~ was ~~6.85%. Similarly,~~14.6% while our net short-term noncore funding ratio was ~~7.36%~~0.94% at~~year-end,~~ ~~indicating that~~

year-end.

The decrease in the noncore funding dependence ratios is associated with lower borrowing to fund investment in PPP loans which is anticipated to reduce substantially as these loans continue to enter the forgiveness stage. In addition, as compared to peer levels, our reliance on short-term noncore funds ~~has decreased.~~

remains low.

The Consolidated Statements of Cash Flows present the changes in cash and cash equivalents from operating, investing, and financing activities. Cash and cash equivalents, consisting of cash on hand, cash items in the process of collection, deposit balances with other banks and federal funds sold, increased ~~$46~~$13,383 during the ~~nine~~three months ended ~~September 30, 2017. Cash and cash equivalents decreased $6,571~~March 31, 2021 as compared with an increase of $22,887 for the same period last year. For the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2021, we realized net cash inflows of ~~$596~~$4,147 from operating activities and ~~$137,854~~$17,434 from financing activities ~~were~~offset partially ~~offset~~ by a net cash ~~outflow~~outflows of ~~$138,404 from investing activities.~~$8,198. For the ~~same period of 2016,~~three months ended March 31, 2020, we realized net cash inflows of ~~$2,944~~$383 from operating activities and ~~$15,555~~$37,511 from financing activities offset partially by net cash outflows of $15,007 from investing ~~activities were more than offset by a net cash outflow of $25,070 from financing~~ activities.

Operating activities provided net cash of ~~$596~~$4,147 for the ~~nine~~three months ended ~~September 30, 2017 and provided net cash of $2,944~~March 31, 2021 compared to $383 for the same period last year. Net income, adjusted for the effects of gains and losses along with noncash transactions such as depreciation, amortization, and the provision for loan losses, is the primary source of funds from operations.

Investing activities primarily include transactions related to our lending activities and investment portfolio. Investing activities used net cash of ~~$138,404~~$8,198 for the ~~nine~~three months ended ~~September 30, 2017.~~March 31, 2021. For the comparable period in ~~2016,~~2020, investing activities ~~provided~~used net cash of ~~$15,555. In 2017, an increase in lending activities was~~$15,007. For the three months ended March 31, 2021, loan forgiveness from PPP loans offset by purchases of investment securities

available-for-sale

were the primary ~~factor causing~~factors for the net cash ~~outflow from~~used in investing activities. ~~Investment portfolio activities along with a decrease in lending were~~For the ~~predominant factors causing~~comparable period of 2020, loan originations more than offset net proceeds received on the ~~net cash inflow from investing activities in 2016.~~

sale of investment securities

available-for-sale.

Financing activities provided net cash of ~~$137,854~~$17,434 for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~used~~ net cash of ~~$25,070~~$37,511 for the same period last year. ~~Deposit~~Liquidity was generated through funds from deposit gathering ~~is a predominant~~offset by repayments on long-term debt from the Federal Reserve Bank’s PPPLF secured borrowing arrangement for the purpose of financing ~~activity.~~PPP loans. During the ~~nine~~three months ended ~~September 30, 2017 and 2016,~~March 31, deposits increased ~~$122,390~~$65,468 in 2021 and ~~$10,651, respectively. Also impacting financing activities~~$18,023 in ~~2017 was a capital issuance which accounted for a net cash inflow of $15,941.~~

2020.

We believe that our future liquidity needs will be satisfied through maintaining an adequate level of cash and cash equivalents, by maintaining readily available access to traditional funding sources, and through proceeds received from the investment and loan portfolios. The current sources of funds are expected to enable us to meet all cash obligations as they come due.

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Capital:

Stockholders’ equity totaled ~~$57,379,~~$98,623, or ~~$11.73~~$10.55 per ~~common~~ share, at ~~September 30, 2017,~~March 31, 2021, and ~~$41,920,~~$97,432, or ~~$12.95~~$10.47 per ~~common~~ share, at December 31, ~~2016.~~2020. The net increase in stockholders’ equity in the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 was primarily a result of the ~~completion~~recognition of ~~the sale of approximately $17.0 million, before expenses,~~net income offset by a change in common and preferred equity to accredited investors and qualified institutional buyers through the private placement of 269,885 shares of common stock and 1,348,809 shares of a newly created series of convertible, perpetual preferred stock. All shares of convertible, perpetual preferred stock were subsequently converted to common nonvoting shares at an exchange ratio of 1:1. Stockholders’ equity was also affected by recognizing earnings of $13, cash dividend payments of $2,010, compensation costs of $23 relating to option grants, the issuance of common stock to Riverview’s ESPP, 401k and dividend reinvestment plans of $373, the issuance of common stock related to the exercise of stock options of $61, and other accumulated comprehensive ~~income of $1,058, resulting from net unrealized gains in the investment portfolio.~~

income.

Bank regulatory agencies consider capital to be a significant factor in ensuring the safety of a depositor’s accounts. These agencies have adopted minimum capital adequacy requirements that include mandatory and discretionary supervisory actions for noncompliance.

On November 13, 2019, the federal regulators finalized and adopted a regulatory capital rule establishing a new community bank leverage ratio (“CBLR”), which became effective on January 1, 2020. The ~~Bank’s Tier I~~intent of the CBLR is to provide a simple alternative measure of capital adequacy for electing qualifying depository institutions as directed under the Economic Growth, Regulatory Relief, and ~~total risk-based capital ratios are strong and have consistently exceeded~~Consumer Protection Act. Under the CBLR, if a qualifying depository institution elects to use such measure, such institutions will be considered well capitalized ~~regulatory capital ratios of 8.0% and 10.0% required for well capitalized institutions. The~~if its ratio of Tier 1 capital to ~~risk-weighted~~average total consolidated assets (i.e., leverage ratio) exceeds a 9.0% threshold, subject to a limited two quarter grace period, during which the leverage ratio cannot go 100 basis points below the then applicable threshold and will not be required to calculate and report risk-based capital ratios.

In April 2020, under the CARES Act, the 9.0% leverage ratio threshold was temporarily reduced to 8.0% in response to the

COVID-19

pandemic. The threshold increased to 8.5% in 2021 and will return to 9.0% in 2022. The Bank elected to begin using the CBLR for the first quarter of 2021 and intends to utilize this measure for the foreseeable future. Eligibility criteria to utilize the CBLR includes the following:

Total assets of less than $10 billion,

Total trading assets plus liabilities of 5.0% or less of consolidated assets,

Total

off-balance

sheet ~~items was 9.8% at September 30, 2017~~exposures of 25.0% or less of consolidated assets,

Cannot be an advanced approaches banking organization, and ~~9.9% at~~

Leverage ratio greater than 9.0%, or temporarily prescribed threshold established in response to

COVID-19.

As of March 31, 2021 and December 31, ~~2016. The total risk-based capital ratio was 10.7% at September 30, 2017 and 10.9% at December 31, 2016. In addition,~~2020, the Bank was categorized as well capitalized. Listed in the table below is ~~required to maintain~~ a ~~minimum common equity Tier 1~~comparison of the Bank’s actual capital to risk-weighted assets of 5.75% for the calendar year of 2017. The Bank’s common equity Tier I capital to risk-weighted assets ratio was 9.8% at September 30, 2017 and 9.9% at December 31, 2016. The Bank’s Leverage ratio, which equaled 8.3% at September 30, 2017 and 7.7% at December 31, 2016, exceededamounts with the minimum requirements for well capitalized banks, as defined above.


	Actual					Minimum Regulatory Capital Ratios under Basel III					Well Capitalized under Basel III
March 31, 2021:	Amount		Ratio			Amount		Ratio			Amount		Ratio
CBLR Framework
Tier 1 capital (to average total assets): (i.e., leverage ratio)	$	118,560		9.9	%		(1)		(1)		$	102,214	³	8.5	%

	Actual					Minimum Regulatory Capital Ratios under Basel III					Well Capitalized under Basel III
December 31, 2020:	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total risk-based capital (to risk-weighted assets)	$	126,108		14.2	%	$	93,462	³	10.5	%	$	89,011	³	10.0	%
Tier 1 capital (to risk-weighted assets)		114,967		12.9			75,659	³	8	.5		71,209	³	8	.0
Common equity tier 1 risk-based capital (to risk-weighted assets)		114,967		12.9			62,308	³	7	.0		57,857	³	6	.5
Tier 1 capital (to average total assets)		114,967		9.8			47,102	³	4	.0		58,877	³	5	.0

(1)	Under the CBLR Framework, capital adequacy amounts and ratios are not applicable as qualifying depositary institutions are evaluated solely on whether or not they are well capitalized.

In light of ~~4.0%~~the recent pandemic crisis and its potential adverse impact on capital adequacy within the financial industry, maintaining a high level of capital is of extreme importance to federal regulators as well as our management and Board of Directors. Our asset liability committee continually reviews our capital position. As part of its review, the ALCO considers:

The current and expected capital requirements, including the maintenance of capital ratios in excess of minimum regulatory guidelines;

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The market value of our securities and the resulting effect on capital;

Nonperforming asset levels and the effect deterioration in asset quality will have on capital;

Any planned asset growth;

The anticipated level of net earnings and capital position, taking into account the projected asset/liability position and exposure to changes in interest rates;

The source and timing of additional funds to fulfill future capital requirements.

Based on the heightened level of stress on capital caused by recent events, management maintains a capital plan approved by the Board of Directors. Our capital plan consists of the following areas of focus, among others:

Comprehensive risk assessment including consideration of the following risk elements, among others: credit; liquidity; earnings; economic value of equity; concentration; and economic, both national and local;

Assessing current regulatory capital adequacy levels;

Monitoring procedures consisting of stress testing, using both scenarios of previous historic data of financial crisis periods and the Federal Reserve Board’s Supervisory Capital Assessment Program (“SCAP”), and certain triggering events that would call into question the need to raise additional capital;

Identifying realistic and readily available alternative sources for augmenting capital if higher capital levels are required;

Evaluating dividend levels, and;

Providing a

ten-year

financial projection for analyzing capital adequacy.

Regulatory bodies recently issued guidance reminding bank management of the importance of taking capital preservation actions in these uncertain economic times and encouraging management to remain vigilant on how the current environment impacts their organization’s financial performance, need for capital, ~~adequacy purposes.~~ and ability to serve customers and communities throughout this crisis. In response to this guidance, the Board of Directors of Riverview decided on July 23, 2020, to suspend the payment of dividends in order to conserve capital. In concert with this guidance, on October 6, 2020, the Company completed the issuance of $25 million in subordinated debt at the bank holding company, which will be used to support the Bank on an

as-needed

basis. Subsequent to the issuance in the fourth quarter of 2020, management determined to downstream $15 million of the available $25 million from the bank holding company to the Bank in the form of additional capital.

Based on the most recent notification from the FDIC, the Bank was categorized as well capitalized ~~under regulatory capital guidelines.~~at March 31, 2021 and December 31, 2020. There are no conditions or negative events since this notification that we believe have changed the Bank’s ~~category.~~

well capitalized status.

Review of Financial Performance:

~~The Company~~

We reported net ~~earnings~~income of ~~$13~~$3,060, or ~~$0.03~~$0.33 per basic and diluted weighted average common share, for the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2021, compared to net income of ~~$2,579~~$633, or ~~$0.80~~$0.07 per basic and diluted weighted average common share, for the ~~comparable~~same period ~~of 2016.~~last year. The ~~net earnings recognized~~increase in the ~~nine~~Company’s earnings for the three months ended ~~September 30, 2017~~March 31, 2021 as compared to the same period in 2020 was ~~directly affected~~the result of the impact of ongoing efficiency initiatives, including branch office consolidations, an increase in loan income from ~~incurring certain costs involved~~the recognition of interest and fees earned on PPP loans and lower deposit costs. The Company implemented cost reduction strategies beginning in 2019, and those efforts continued through the end of the fourth quarter of 2020 by implementing ~~strategic~~additional efficiency initiatives aimed at substantially lowering operating costs. The

COVID-19

pandemic continues to ~~enhance shareholder value through asset growth provided by organic~~place additional pressure on the Bank’s earnings, causing increased emphasis on the need to improve operational efficiency to help mitigate margin compression and ~~inorganic opportunities. On~~noninterest income reductions. As a result, Riverview closed two branch offices in January ~~20, 2017, Riverview announced~~2021 and will be completing the ~~successful completion~~sale of two additional branches in May of 2021.

If the

COVID-19

pandemic persists, it will continue to have a ~~$17.0 million private placement~~severe effect on economic activity and may cause greater negative consequences for our customers which, in turn, could adversely affect the Company’s financial condition, liquidity and results of ~~common and preferred securities. The additional capital afforded Riverview the ability to significantly grow its loan portfolio through hiring multiple teams~~operations.

Table of experienced and established lenders to serve new and existing markets. More notably the capital raise allowed Riverview to announce on April 20, 2017, the execution of a definitive business combination agreement to form a strategic partnership with CBT Financial Corp, which was effective October 1, 2017. This action created a community banking franchise with approximately $1.2 billion of assets and provides enhanced products and services through 33 banking locations covering 12 Pennsylvania counties. Merger related costs included in noninterest expense totaled $375 for the nine months ended September 30, 2017.

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Net Interest Income:

Net interest income is the fundamental source of earnings for commercial banks. Fluctuations in the level of net interest income can have the greatest impact on net profits. Net interest income is defined as the difference between interest revenue, comprised of interest and fees earned on interest-earning assets, and interest expense, the cost of interest-bearing liabilities supporting those assets. The primary sources of earning assets are loans and investment securities, while interest-bearing deposits, short-term and long-term borrowings comprise interest-bearing liabilities. Net interest income is impacted by:

Variations in the volume, rate, and composition of earning assets and interest-bearing liabilities;

Changes in general market rates; and

The level of nonperforming assets.

Changes in net interest income are measured by the net interest spread and net interest margin. Net interest spread, the difference between the average yield earned on earning assets and the average rate incurred on interest-bearing liabilities, illustrates the effects changing interest rates have on profitability. Net interest margin, which is net interest income as a percentage of earning assets, is a more comprehensive ratio, as it reflects not only the spread, but also the change in the composition of interest-earning assets and ~~interest-~~

~~bearing~~interest-bearing liabilities.

Tax-exempt

loans and investments carry

pre-tax

yields lower than their taxable counterparts. Therefore, in order to make the analysis of net interest income more comparable,

tax-exempt

income and yields are reported herein on a

tax-equivalent

basis using the prevailing federal statutory tax rate of ~~34.0%~~21% in ~~2017~~2021 and ~~2016.~~

2020, respectively.

For the three months ended ~~September 30,~~March 31,

tax-equivalent

net interest income increased ~~$675~~$851 to ~~$5,511~~$9,697 in ~~2017~~2021 from ~~$4,836~~$8,846 in ~~2016.~~2020. For the quarter ended March 31,

tax-equivalent

interest income increased $503 while interest expense decreased $348.

Tax-equivalent

interest income increased to $11,266 in 2021 from $10,763 in 2020 caused by an increase in average earning assets of $304,701, offset partially by a decrease in the

tax-equivalent

yield on earning assets of 85 basis points. Net interest income generated from PPP loans amounted to $1,412 in the first quarter of 2021. Interest expense decreased to $1,569 in 2021 from $1,917 in 2020 as a result of a 36 basis point decrease in the cost of funds offset partially by an increase in average interest-bearing liabilities of $265,656. Interest expense on deposits decreased $866 to $923 for the three months ended March 31, 2021 from $1,789 for the same period last year. The

tax-equivalent

net interest margin for the three months ended March 31 was 3.04% in 2021 compared to 3.60% in 2020. The net interest spread decreased to ~~3.46%~~2.95% for the three months ended ~~September 30, 2017~~March 31, 2021 from ~~3.92%~~3.44% for the three months ended ~~September 30, 2016.~~March 31, 2020. The

tax-equivalent

yield on the loan portfolio decreased to 3.82% in 2021 compared to 4.64% in 2020. Th actions taken by the Federal Open Market Committee in March 2020 to reduce its target federal funds rate by 150 basis points impacted the loan portfolio yield as it had a corresponding adverse effect on our floating and adjustable rate loans and yields obtained on new loan originations. Also influencing the decline was recognizing the lower yield of 2.65% earned on the addition of PPP loans. Excluding income and fees earned on PPP loans, the

tax-equivalent

net interest margin ~~decreased to 3.57% for~~would have been 3.19% in the ~~third~~first quarter of ~~2017~~2021. Comparing the first three months of 2021 and 2020, the weighted average cost of funds decreased 36 basis points to 0.59% from ~~3.99% for~~0.95%. Money market, NOW account and time deposit costs declined 0.55%, 0.36% and 0.40%, respectively, and were the ~~comparable period of 2016. Thetax-equivalent~~major cause in lowering interest expense on deposits. In addition, the weighted average fund cost on long-term debt was 1.25% in 2021 compared to 4.19% in 2020. We expect that our net interest margin ~~for~~will continue to decrease as our rate sensitive assets decline at a frequency and magnitude greater than our fund costs given the ~~second quarter of 2017 was 3.58%.~~

~~For the three months ended September 30,tax-equivalent~~ ~~interest income on earning assets increased $1,156 to $6,519 in 2017 from $5,363 in 2016. The yield on earning assets, on a fullytax-equivalent~~ ~~basis, declined 21 basis points for the three months ended September 30, 2017 at 4.22% as compared to 4.43% for the three months ended September 30, 2016. Thetax-equivalent~~ yield on loans decreased 32 basis points for the third quarter of 2017 to 4.38% from 4.70% for the third quarter of 2016. Average loans increased to $537,740 for the quarter ended September 30, 2017 compared to $400,427 for the same period in 2016. The~~tax-equivalent~~ interest earned on loans was $5,938 for the three month period ended September 30, 2017 compared to $4,730 for the same period in 2016, an increase of $1,208. Comparing the third quarters of 2017 and 2016, tax equivalent interest income on investments decreased $72 as average volumes declined $6,292 and~~tax-equivalent~~ ~~yield decreased 11 basis points.~~

~~Total interest expense increased $481 to $1,008 for the three months ended September 30, 2017 from $527 for the three months ended September 30, 2016. Deposit costs increased to 0.67%~~uncertainty in the ~~third quarter~~market as a result of ~~2017 from 0.45% in~~ the ~~third quarter~~pandemic.

Table of 2016. The average volume of interest bearing liabilities increased to $524,506 for the three months ended September 30, 2017 as compared to $408,670 for the three months ended September 30, 2016. The cost of funds increased to 0.76% for the third quarter of 2017 as compared to 0.51% for the same period in 2016.

~~For the nine months ended September 30,tax-equivalent~~ net interest income increased $1,045 to $15,004 in 2017 from $13,959 in 2016. A favorable volume variance of $2,500 from average earning asset growth exceeding average growth in interest bearing liabilities more than offset an unfavorable rate variance of $1,455 from a decline in the net interest margin. The net interest spread decreased 30 basis points for the nine months ended September 30, 2017 to 3.47% from 3.77% for the nine months ended September 30, 2016. The~~tax-equivalent~~ ~~net interest margin for the nine months ended September 30 was 3.58% in 2017 compared to 3.85% in 2016.~~

~~For the nine months ended September 30, 2017,tax-equivalent~~ interest income increased $1,843 to $17,450 as compared to $15,607 for the nine months ended September 30, 2016. A positive volume variance in interest income of $2,673 attributable to changes in the average balance of earning assets was offset by a negative rate variance of $830 due to a reduction in the yield on earning assets. Average volumes of earning assets increased $76,137 comparing the nine months ended September 30, 2017 and 2016. The~~tax-equivalent~~ ~~yield on earning assets decreased 14 basis points in 2017 compared to 2016.~~

Total interest expense increased $798 to $2,446 for the nine months ended September 30, 2017 from $1,648 for the nine months ended September 30, 2016. A change in the volume of average interest bearing liabilities caused interest expense to increase $173. The average volume of interest bearing liabilities increased to $472,805 for the nine months ended September 30, 2017, as compared to $416,363 for the nine months ended September 30, 2016. In addition, we recognized an unfavorable rate variance of $625 from a 16 basis point increase in the overall cost of funds. Cost of funds increased to 0.69% for the nine months ended September 30, 2017 as compared to 0.53% for the same period in 2016.

Contents

The average balances of assets and liabilities, corresponding interest income and expense and resulting average yields or rates paid are summarized as follows. Average balances were calculated using average daily balances. Averages for earning assets include nonaccrual loans. Loan fees are included in interest income on loans. Investment averages include

available-for-sale

securities at amortized cost. Income on investment securities and loans is adjusted to a tax equivalent basis using the prevailing federal statutory tax ~~rate of 34%.~~

   Nine months ended
   September 30, 2017 September 30, 2016
   Average
Balance    Interest    Yield/
Rate Average
Balance    Interest    Yield/
Rate
Assets:

Earning assets:

Loans

Taxable
   $ 459,703    $ 14,991    4.36 % $ 390,602    $ 13,362    4.57 %
Tax exempt
   18,330    547    3.99 % 12,276    395    4.30 %
Investments

Taxable
   65,504    1,610    3.29 % 59,430    1,383    3.11 %
Tax exempt
   5,747    212    4.93 % 12,635    424    4.48 %
Interest bearing deposits
   9,975    78    1.05 % 9,348    41    0.59 %
Federal funds sold
   1,812    12    0.89 % 643    2    0.42 %









Total earning assets
   561,071    17,450    4.16 % 484,934    15,607    4.30 %
Less: allowance for loan losses
   4,409       3,928
Other assets
   54,815       55,328





Total assets
   $ 611,477       $ 536,334





Liabilities and Stockholders’ Equity:

Interest bearing liabilities:

Money market accounts
   $ 92,860    $ 548    0.79 % $ 45,263    $ 127    0.37 %
NOW accounts
   140,186    409    0.39 % 139,267    313    0.30 %
Savings accounts
   80,836    85    0.14 % 73,660    103    0.19 %
Time deposits less than $100
   76,244    538    0.94 % 78,740    466    0.79 %
Time deposits $100 or more
   50,512    441    1.17 % 55,060    366    0.89 %
Short term borrowings
   22,375    197    1.18 % 13,676    59    0.58 %
Long-term debt
   9,792    228    3.11 % 10,697    214    2.67 %









Total interest bearing liabilities
   472,805    2,446    0.69 % 416,363    1,648    0.53 %
Non-interest bearing demand deposits
   76,166       69,862
Other liabilities
   5,975       6,614
Stockholders’ equity
   56,531       43,495





Total liabilities and stockholders’ equity
   $ 611,477       $ 536,334









Net interest income/spread
      $ 15,004    3.47 %    $ 13,959    3.77 %





Net interest margin
         3.58 %       3.85 %
Tax-equivalent adjustments:

Loans
      $ 186       $ 134
Investments
      72       144





Total adjustments
      $ 258       $ 278

rate.


	Three months ended
	March 31, 2021							March 31, 2020
	Average Balance		Interest		Yield/ Rate			Average Balance		Interest		Yield/ Rate
Assets:
Earning assets:
Loans:
Taxable	$	1,095,594	$	10,348		3.83	%	$	838,825	$	9,782		4.69	%
Tax exempt		26,952		223		3.36	%		35,595		310		3.50	%
Investments:
Taxable		91,549		494		2.19	%		77,400		535		2.78	%
Tax exempt		41,443		192		1.88	%		4,628		47		4.08	%
Interest bearing deposits		36,101		9		0.10	%		30,490		89		1.17	%

Total earning assets		1,291,639		11,266		3.54	%		986,938		10,763		4.39	%
Less: allowance for loan losses		12,188							7,273
Other assets		84,774							105,680

Total assets	$	1,364,225						$	1,085,345

Liabilities and Stockholders’ Equity:
Interest bearing liabilities:
Money market accounts	$	148,513		43		0.12	%	$	102,072		171		0.67	%
NOW accounts		317,296		86		0.11	%		270,559		319		0.47	%
Savings accounts		163,890		32		0.08	%		133,267		60		0.18	%
Time deposits		234,066		762		1.32	%		289,186		1,239		1.72	%
Short term borrowings									989		5		2.03	%
Long-term debt		209,781		646		1.25	%		11,817		123		4.19	%

Total interest-bearing liabilities		1,073,546		1,569		0.59	%		807,890		1,917		0.95	%
Non-interest-bearing demand deposits		176,895							144,630
Other liabilities		14,861							13,668
Stockholders’ equity		98,923							119,157

Total liabilities and stockholders’ equity	$	1,364,225						$	1,085,345

Net interest income/spread			$	9,697		2.95	%			$	8,846		3.44	%

Net interest margin						3.04	%						3.60	%
Tax-equivalent adjustments:
Loans			$	47						$	65
Investments				40							10

Total adjustments			$	87						$	75

Provision for Loan Losses:

We evaluate the adequacy of the allowance for loan losses account on a quarterly basis utilizing our systematic analysis in accordance with procedural discipline. We take into consideration certain factors such as composition of the loan portfolio, volumes of nonperforming loans, volumes of net charge-offs, prevailing economic conditions and other relevant factors when determining the adequacy of the allowance for loan losses account. We make monthly provisions to the allowance for loan losses account in order to maintain the allowance at the appropriate level indicated by our evaluations. Based on our most current evaluation, we believe that the allowance is adequate to absorb any known and inherent losses in the portfolio as of ~~September 30, 2017.~~

~~For~~March 31, 2021.

The Company did not recognize a charge in the ~~three and nine months ended September 30,~~form of a provision for loan losses in the first quarter of 2021 based on the results from its adequacy modeling of the allowance for loan loss account at March 31, 2021. Comparatively, the provision for loan losses totaled ~~$610 and $1,734~~$1,800 for the same period in ~~2017, and $29 and $284 in 2016.~~2020. The 2020 increase in the provision ~~in 2017~~for loan losses was ~~a direct~~the combined result of organic loan ~~growth.~~

growth, excluding PPP loan balances outstanding, and changes in qualitative factors related to the allowance for loan losses reserve associated with increasing risks within the economy and our credit portfolio due to the effects of

COVID-19.

The pandemic effects are expected to continue to weigh heavily on businesses and their ability to service debt. Despite the positive signs with respect to the progress made with the pandemic, our future provisions may increase due to the growth of loan delinquencies and charge-offs resulting from

COVID-19

related financial stress.

Table of Contents

Noninterest Income:

~~Noninterest~~

For the three months ended March 31, noninterest income ~~for the third quarter decreased $188, or 18.4%, to $835~~totaled $2,523 in ~~2017~~2021, a decrease of $407 from ~~$1,023~~$2,930 in ~~2016.~~2020. The primary ~~cause of~~contributor to the overall decrease was ~~a $109 reduction~~$569 less in ~~net~~ gains ~~from~~on the sale of investment securities~~available-for-sale~~ ~~to $43~~ offset partially by increases in service charges, fees, and commissions of $93 and the ~~third quarter~~recognition of ~~2017 from $152 in the third quarter of 2016.~~

For the nine months ended September 30, noninterest income amounted to $2,416 in 2017, a decrease of $297 from $2,713 in 2016. The most significant factor for the decrease was a $378 decrease in net gains recognized on the sale of~~available-for-sale~~ ~~investment securities. Partially offsetting this decrease were improvements of $100 in wealth management income~~higher comparable trust and ~~$33 in~~ mortgage banking ~~income.~~

income of $47 and $43, respectively.

Noninterest Expenses:

In general, noninterest expense is categorized into three main groups: employee-related expenses, occupancy and equipment expenses and other expenses. Employee-related expenses are costs associated with providing salaries, including payroll taxes and benefits, to our employees. Occupancy and equipment expenses, the costs related to the maintenance of facilities and equipment, include depreciation, general maintenance and repairs, real estate taxes, lease expense and utility costs. Other expenses include general operating expenses such as advertising, contractual services, insurance, ~~including~~ FDIC ~~assessment,~~assessments, other taxes, and supplies. Several of these costs and expenses are variable, while the remainder are fixed. We utilize budgets and other related strategies ~~in an effort~~ to control the variable expenses.

Noninterest expense ~~increased $834, or 19.2%,~~decreased to ~~$5,167~~$8,387 for the three months ended ~~September 30, 2017,~~March 31, 2021, from ~~$4,333~~$9,212 for the same period last year. The ~~majority~~overall decrease was primarily due to a decrease of the increase was associated with an increase in salaries and employee benefits expense of $594 to $2,928 for the third quarter of 2017 from $2,334 for the third quarter of 2016. Net occupancy expense and other expenses increased $77 and $163 in the third quarter of 2017 as compared with the same period in 2016.

~~Noninterest expense increased $2,678, or 21.1%, to $15,371 for the nine months ended September 30, 2017, from $12,693 for the same period last year. The majority of the increase~~$589 in salaries and employee benefit ~~expense was a result of implementing~~expenses due to the lending team lift out initiative and related costs, as well as staffing two full service offices in Berks and Lycoming Counties, respectively. Additions to leased facilities for this newly opened community banking office along with offices to support the lending teams were primarily responsible for the $278, or 17.2% increase in occupancy and equipment costs. The majorityimplementation of the ~~increase~~reduction in ~~other~~force initiatives from branch closures and consolidation of departments. Other expenses decreased $190 comparing the ~~nine months ended September 30, 2017~~first quarters of 2021 and ~~2016 was a result of incurring merger related expenses related~~2020 due to implementing efficiency initiatives and selective expense reductions made during the ~~business combination with CBT Financial Corp.~~

COVID-19

shutdowns.

Income Taxes:

We recorded an income tax expense of ~~$69~~$686 for the three months ended ~~September 30, 2017,~~March 31, 2021 and $56 for the three months ended March 31, 2020. The increase in the income tax expense ~~of $454 for the same period last year. For the nine months ended September 30, income tax expense of $44 was recorded, as compared~~in 2021 is attributable to ~~an income tax expense of $838 for the comparable period of 2016.~~

recognizing higher taxable income.

Riverview Financial Corporation

I~~TEM~~ ~~3. QUANTITATIVE~~ AND Q~~UALITATIVE~~ D~~ISCLOSURESABOUT~~ M~~ARKET~~ R~~ISK~~

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

Not applicable to a smaller reporting company.

~~Item 4. Controls and Procedures.~~

Item 4.

Controls and Procedures.

(a) Evaluation of disclosure controls and procedures.

At ~~September 30, 2017,~~March 31, 2021, the end of the period covered by this Quarterly Report on Form

10-Q,

the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) evaluated the effectiveness of the Company’s disclosure controls and procedures as defined in

Rule 13a-15(e)

under the Exchange Act. Based upon that evaluation, the CEO and CFO concluded that the disclosure controls and procedures, at ~~September 30, 2017,~~March 31, 2021, were effective to provide reasonable assurance that information required to be disclosed in the Company’s reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and to provide reasonable assurance that information required to be disclosed in such reports is accumulated and communicated to the CEO and CFO to allow timely decisions regarding required disclosure.

(b) Changes in internal control.

There were no changes made in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART ~~II -~~ II—OTHER INFORMATION

~~Item 1. Legal Proceedings~~

Item 1.

Legal Proceedings

In the opinion of the Company, after review with legal counsel, there are no proceedings pending to which the Company is a party or to which its property is subject, which, if determined adversely to the Company, would have a material effect on the consolidated results of operations or financial condition. There are no proceedings pending other than ordinary, routine litigation incident to the business of the Company. In addition, no material proceedings are pending or are known to be threatened or contemplated against the Company by governmental authorities.

Table of Contents~~Item 1A. Risk Factors~~

Item 1A.

Risk Factors

Not required for smaller reporting companies.

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

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

None.

~~Item 3. Defaults upon Senior Securities~~

Item 3.

Defaults upon Senior Securities

Not applicable.

~~Item 4. Mine Safety Disclosures~~

Item 4.

Mine Safety Disclosures

Not applicable.

~~Item 5. Other Information~~

Item 5.

Other Information

Not applicable.

~~Item 6. Exhibits.~~

Item 6.

Exhibits

The following Exhibits are incorporated by reference hereto:



31.1		Section 302 Certification of the Chief Executive Officer (Pursuant to Rule13a-14(a)/15d-14(a)).

31.2		Section 302 Certification of the Chief Financial Officer (Pursuant to Rule13a-14(a)/15d-14(a)).

32.1		Chief Executive Officer’s §1350 Certification (Pursuant to Rule13a-14(b)/15d-14(b)).

32.2		Chief Financial Officer’s §1350 Certification (Pursuant to Rule13a-14(b)/15d-14(b)).

101		Interactive Data File (XBRL).

104		Cover Page Interactive Data File (embedded within the Inline XBRL document).

Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


By:	/s/ ~~Kirk~~Brett D. ~~Fox~~Fulk
	~~Kirk~~Brett D. ~~Fox~~Fulk
	President and Chief Executive Officer
	(Principal Executive Officer)

Date:		~~November 14, 2017~~ May 6, 2021


By:	/s/ Scott A. Seasock
	Scott A. Seasock
	Chief Financial Officer
	(Principal Financial Officer)

Date:		~~November 14, 2017~~May 6, 2021


	Preferred Stock			Common Stock		Capital Surplus		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total
Balance, January 1, 2016				$	28,681	$	180	$	13,550		$	(108	)	$	42,303
Net income									2,579						2,579
Other comprehensive income, net of income taxes												301			301
Compensation cost of option grants							31								31
Issuance under ESPP, 401k and Dividend Reinvestment plans: 23,923 shares					274										274
Dividends declared, $0.41 per share									(1,327	)					(1,327	)

Balance, September 30, 2016				$	28,955	$	211	$	14,802		$	193		$	44,161

Balance, January 1, 2017				$	29,052	$	220	$	14,845		$	(2,197	)	$	41,920
Net income									13						13
Other comprehensive income, net of income taxes												1,058			1,058
Compensation cost of option grants							23								23
Issuance of 269,885 common shares					2,658										2,658
Issuance of 1,348,809 preferred shares	$	13,283													13,283
Preferred shares converted into common shares		(13,283	)		13,283
Issuance under ESPP, 401k and Dividend Reinvestment plans: 29,840 shares					373										373
Exercise of stock options: 5,750 shares					61										61
Dividends declared: $0.41 per share									(2,010	)					(2,010	)

Balance, September 30, 2017	$			$	45,427	$	243	$	12,848		$	(1,139	)	$	57,379


	September 30, 2017			December 31, 2016
Assets:
Cash and due from banks	$	8,425		$	7,783
Interest-bearing deposits in other banks		10,741			11,337
Investment securitiesavailable-for-sale		56,874			73,113
Loans held for sale		519			652
Loans, net		560,187			409,343
Less: allowance for loan losses		5,404			3,732

Net loans		554,783			405,611
Premises and equipment, net		12,163			12,201
Accrued interest receivable		1,995			1,726
Goodwill		5,079			5,408
Intangible assets		1,099			1,405
Other assets		29,701			23,812

Total assets	$	681,379		$	543,048

Liabilities:
Deposits:
Noninterest-bearing	$	76,214		$	73,932
Interest-bearing		498,736			378,628

Total deposits		574,950			452,560
Short-term borrowings		37,250			31,500
Long-term debt		6,503			11,154
Accrued interest payable		213			192
Other liabilities		5,084			5,722

Total liabilities		624,000			501,128

Stockholders’ equity:
Preferred stock: no par value, authorized 3,000,000 shares; Series A convertible perpetual preferred stock
Common stock: no par value, authorized 20,000,000 shares; September 30, 2017, issued and outstanding 4,892,143 shares; December 31, 2016, issued and outstanding 3,237,859 shares		45,427			29,052
Capital surplus		243			220
Retained earnings		12,848			14,845
Accumulated other comprehensive loss		(1,139	)		(2,197	)

Total stockholders’ equity		57,379			41,920

Total liabilities and stockholders’ equity	$	681,379		$	543,048


	Three Months Ended						Nine Months Ended
September 30,	2017			2016			2017			2016
Interest income:
Interest and fees on loans:
Taxable	$	5,717		$	4,598		$	14,991		$	13,362
Tax-exempt		146			87			361			261
Interest and dividends on investment securitiesavailable-for-sale:
Taxable		477			539			1,607			1,375
Tax-exempt		47			53			140			280
Dividends					1			3			8
Interest on interest-bearing deposits in other banks		31			13			78			41
Interest on federal funds sold		2						12			2

Total interest income		6,420			5,291			17,192			15,329

Interest expense:
Interest on deposits		821			447			2,021			1,375
Interest on short-term borrowings		112			3			197			59
Interest on long-term debt		75			77			228			214

Total interest expense		1,008			527			2,446			1,648

Net interest income		5,412			4,764			14,746			13,681
Provision for loan losses		610			29			1,734			284

Net interest income after provision for loan losses		4,802			4,735			13,012			13,397

Noninterest income:
Service charges, fees and commissions		270			315			899			933
Commission and fees on fiduciary activities		31			34			92			88
Wealth management income		179			194			631			531
Mortgage banking income		205			210			434			401
Bank owned life insurance investment income		107			118			254			276
Net gain on sale of investment securitiesavailable-for-sale		43			152			106			484

Total noninterest income		835			1,023			2,416			2,713

Noninterest expense:
Salaries and employee benefits expense		2,928			2,334			8,521			6,611
Net occupancy and equipment expense		615			538			1,895			1,617
Amortization of intangible assets		71			95			306			247
Net cost of operation of other real estate owned		(13	)		83			161			214
Other expenses		1,566			1,283			4,488			4,004

Total noninterest expense		5,167			4,333			15,371			12,693

Income (loss) before income taxes		470			1,425			57			3,417
Income tax expense (benefit)		69			454			44			838

Net income (loss)		401			971			13			2,579

Other comprehensive income:
Unrealized gain (loss) on investment securitiesavailable-for-sale		(50	)		(148	)		1,708			940
Reclassification adjustment for net (gain) loss on sale of investment securitiesavailable-for-sale included in net income (loss)		(43	)		(152	)		(106	)		(484	)

Other comprehensive income (loss)		(93	)		(300	)		1,602			456
Income tax expense (benefit) related to other comprehensive income		(32	)		(102	)		544			155

Other comprehensive income (loss), net of income taxes		(61	)		(198	)		1,058			301

Comprehensive income	$	340		$	773		$	1,071		$	2,880

Per share data:
Net income:
Basic	$	0.08		$	0.30		$	0.03		$	0.80
Diluted	$	0.08		$	0.30		$	0.03		$	0.80
Average common shares outstanding:
Basic		4,880,676			3,224,053			4,002,165			3,214,967
Diluted		4,945,456			3,244,688			4,060,813			3,237,553
Dividends declared	$	0.14		$	0.14		$	0.41		$	0.41


For the Nine Months Ended September 30,	2017			2016
Cash flows from operating activities:
Net income (loss)	$	13		$	2,579
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation of premises and equipment		586			533
Provision for loan losses		1,734			284
Stock based compensation		23			31
Net amortization of investment securitiesavailable-for-sale		315			389
Net cost of operation of other real estate owned		161			214
Net gain on sale of investment securitiesavailable-for-sale		(106	)		(484	)
Amortization of purchase adjustment on loans		(127	)		(704	)
Amortization of intangible assets		306			247
Deferred income taxes		(47	)		384
Proceeds from sale of loans originated for sale		20,733			18,329
Net gain on sale of loans originated for sale		(434	)		(401	)
Loans originated for sale		(20,166	)		(17,654	)
Bank owned life insurance investment income		(254	)		(276	)
Net change in:
Accrued interest receivable		(269	)		(107	)
Other assets		(1,255	)		(208	)
Accrued interest payable		21			(16	)
Other liabilities		(638	)		(196	)

Net cash provided by (used in) operating activities		596			2,944

Cash flows from investing activities:
Investment securitiesavailable-for-sale:
Purchases					(40,916	)
Proceeds from repayments		1,805			7,420
Proceeds from sales		15,827			37,526
Proceeds from the sale of other real estate owned		613			1,129
Net decrease in restricted equity securities		(341	)		1,489
Net (increase) decrease in loans		(151,072	)		9,996
Business disposition (acquisition), net of cash		329			(894	)
Purchases of premises and equipment		(548	)		(447	)
Purchases of bank owned life insurance		(5,017	)		(27	)
Proceeds from bank owned life insurance					279

Net cash provided by (used in) investing activities		(138,404	)		15,555

Cash flows from financing activities:
Net increase in deposits		122,390			10,651
Net increase (decrease) in short-term borrowings		5,750			(36,575	)
Repayment of long-term debt		(5,251	)		(143	)
Proceeds from long-term debt		600			2,050
Issuance under ESPP, 401k and DRP plans		373			274
Issuance of common stock		15,941
Proceeds from exercise of stock options		61
Cash dividends paid		(2,010	)		(1,327	)

Net cash provided by (used in) financing activities		137,854			(25,070	)

Net increase (decrease) in cash and cash equivalents		46			(6,571	)
Cash and cash equivalents - beginning		19,120			22,688

Cash and cash equivalents - ending	$	19,166		$	16,117

Supplemental disclosures:
Cash paid during the period for:
Interest	$	2,425		$	1,664

Income taxes	$			$

Noncash items from investing activities:
Other real estate acquired in settlement of loans	$	293		$	1,348


	September 30, 2017			December 31, 2016
Net unrealized loss on investment securitiesavailable-for-sale	$	(911	)	$	(2,513	)
Related income taxes		(310	)		(854	)

Net of income taxes		(601	)		(1,659	)

Benefit plan adjustments		(815	)		(815	)
Related income taxes		(277	)		(277	)

Net of income taxes		(538	)		(538	)

Accumulated other comprehensive income (loss)	$	(1,139	)	$	(2,197	)


Three months ended September 30,	2017			2016
Unrealized loss on investment securitiesavailable-for-sale	$	(50	)	$	(148	)
Net gain on the sale of investment securitiesavailable-for-sale ⁽¹⁾		(43	)		(152	)

Other comprehensive loss before taxes		(93	)		(300	)
Income tax expense (benefit)		(32	)		(102	)

Other comprehensive loss	$	(61	)	$	(198	)


Nine months ended September 30,	2017			2016
Unrealized gain on investment securitiesavailable-for-sale	$	1,708		$	940
Net gain on the sale of investment securitiesavailable-for-sale ⁽¹⁾		(106	)		(484	)

Other comprehensive income before taxes		1,602			456
Income tax expense (benefit)		544			155

Other comprehensive income	$	1,058		$	301


September 30, 2017	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
State and municipals:
Taxable	$	35,424	$	392	$	684	$	35,132
Tax-exempt		5,746		55				5,801
Mortgage-backed securities:
U.S. Government agencies		1,567				31		1,536
U.S. Government-sponsored enterprises		5,516		12		105		5,423
Corporate debt obligations		9,532				550		8,982

Total	$	57,785	$	459	$	1,370	$	56,874


December 31, 2016	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
U.S. Treasury securities	$	5,088			$	67	$	5,021
State and municipals:
Taxable		44,045	$	234		1,885		42,394
Tax-exempt		5,748		3		77		5,674
Mortgage-backed securities:
U.S. Government agencies		1,905				15		1,890
U.S. Government-sponsored enterprises		9,115		28		247		8,896
Corporate debt obligations		9,542				492		9,050
Equity securities, financial services		183		5				188

Total	$	75,626	$	270	$	2,783	$	73,113


				Real Estate
September 30, 2016	Commercial			Construction			Commercial			Residential			Consumer			Unallocated		Total
Allowance for loan losses:
Beginning Balance January 1, 2016	$	1,298		$	202		$	2,227		$	613		$	25				$	4,365
Charge-offs		(724	)		(250	)		(65	)		(33	)		(24	)				(1,096	)
Recoveries		70			1						3			10					84
Provisions		(134	)		204			(24	)		207			29		$	2		284

Ending balance	$	510		$	157		$	2,138		$	790		$	40		$	2	$	3,637


September 30, 2017	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days		Total Past Due		Current		Total Loans		Loans > 90 Days and Accruing
Commercial	$	1,603	$	24	$	11	$	1,638	$	72,751	$	74,389
Real estate:
Construction										9,754		9,754
Commercial		569				235		804		336,884		337,688
Residential		818		297		440		1,555		130,186		131,741
Consumer		3		1				4		6,611		6,615

Total	$	2,993	$	322	$	686	$	4,001	$	556,186	$	560,187


December 31, 2016	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days		Total Past Due		Current		Total Loans		Loans > 90 Days and Accruing
Commercial	$	580	$		$	214	$	794	$	50,372	$	51,166
Real estate:
Construction		22						22		8,583		8,605
Commercial		784		97		11		892		211,658		212,550
Residential		905		256		592		1,753		129,121		130,874	$	357
Consumer		6				2		8		6,140		6,148		2

Total	$	2,297	$	353	$	819	$	3,469	$	405,874	$	409,343	$	359


							This Quarter				Year-to-Date
September 30, 2017	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance:
Commercial	$	724	$	724			$	798	$	8	$	803	$	23
Real estate:
Construction
Commercial		2,753		2,753				2,760		32		2,992		90
Residential		2,274		2,292				2,304		28		2,408		87
Consumer

Total		5,751		5,769				5,862		68		6,203		200

With an allowance recorded:
Commercial		75		75	$	25		78				76		1
Real estate:
Construction
Commercial		918		918		194		820		8		798		20
Residential		188		326		54		189		2		126		6
Consumer

Total		1,181		1,319		273		1,087		10		1,000		27

Commercial		799		799		25		876		8		879		24
Real estate:
Construction
Commercial		3,671		3,671		194		3,580		40		3,790		110
Residential		2,462		2,618		54		2,493		30		2,534		93
Consumer

Total	$	6,932	$	7,088	$	273	$	6,949	$	78	$	7,203	$	227


	Purchased Credit Impaired Loans			Purchased Non- Impaired Loans			Total Purchased Loans
Contractually required principal and interest at acquisition	$	11,184		$	174,484		$	185,668
Contractual cash flows not expected to be collected		(5,724	)		(23,009	)		(28,733	)

Expected cash flows at acquisition		5,460			151,475			156,935
Interest component of expected cash flows		(603	)		(23,119	)		(23,722	)

Basis in acquired loans at acquisition - estimated fair value	$	4,857		$	128,356		$	133,213


	September 30, 2017		December 31, 2016
Credit impaired purchased loans evaluated individually for incurred credit losses
Outstanding balance	$	1,216	$	1,401
Carrying Amount		730		887
Other purchased loans evaluated collectively for incurred credit losses
Outstanding balance		72,449		84,743
Carrying Amount		71,864		83,670
Total Purchased Loans
Outstanding balance		73,665		86,144
Carrying Amount	$	72,594	$	84,557


	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Balance - beginning of period	$	313		$	457		$	370		$	524
Accretion recognized during the period		(32	)		(410	)		(76	)		(539	)
Net reclassification fromnon-accretable to accretable		(2	)		326			(15	)		388

Balance - end of period	$	279		$	373		$	279		$	373


	September 30, 2017	September 30, 2016
United States	4.2%	4.9%
Pennsylvania (statewide)	4.8%	5.5%
Berks County	4.8%	5.0%
Dauphin County	4.7%	4.8%
Lebanon	4.4%	4.4%
Lycoming	5.5%	6.3%
Northumberland County	5.3%	5.9%
Perry County	4.4%	4.6%
Schuylkill County	5.9%	6.1%
Somerset County	5.8%	6.3%

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