Riverview Financial (RIVE) 10-K 2019 FY Annual report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM10-K

(Mark One)

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

For the fiscal year ended December 31, 2019

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

For the transition period from                to                

Commission file number:001-38627

Riverview Financial Corporation

(Exact name of registrant as specified in its charter)

Pennsylvania	38-3917371
State or other jurisdiction of incorporation or organization	(I.R.S. Employer Identification No.)

3901 North Front Street,

Harrisburg, PA 17110

(Address of principal executive offices) (Zip Code)

(717)957-2196

Registrant’s telephone number, including area code

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

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

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

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

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

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of RegulationS-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, a smaller reporting company, 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.

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

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

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

The aggregate market value of the registrant’s voting andnon-voting common stock held bynon-affiliates of the registrant, on June 30, 2019, the last day of the registrant’s most recently completed second fiscal quarter, was approximately $93,607,399 (based on the closing sales price of the registrant’s common stock on that date).

The number of shares of the registrant’s voting common stock outstanding as of February 28, 2020 was 7,877,659 shares. The number of shares of the registrant’snon-voting common stock outstanding as of February 28, 2020 was 1,348,809 shares.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive proxy statement to be filed in connection with solicitation of proxies for its 2020 annual meeting of shareholders, within 120 days of the end of registrant’s fiscal year, are incorporated by reference into Part III of this Annual Report on Form10-K.

Riverview Financial Corporation

Form 10K

For the Year Ended December 31, 2019

TABLE OF CONTENTS

		Page Number
PART I
Item 1.	Business		3
Item 1A.	Risk Factors		12
Item 1B.	Unresolved Staff Comments		12
Item 2.	Properties		12
Item 3.	Legal Proceedings		13
Item 4.	Mine Safety Disclosures		13
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		13
Item 6.	Selected Financial Data		13
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		14
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		37
Item 8.	Financial Statements and Supplementary Data		38
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure		86
Item 9A.	Controls and Procedures		86
Item 9B.	Other Information		88
PART III
Item 10.	Directors, Executive Officers and Corporate Governance		88
Item 11.	Executive Compensation		88
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		88
Item 13.	Certain Relationships and Related Transactions, and Director Independence		88
Item 14.	Principal Accounting Fees and Services		88
PART IV
Item 15.	Exhibits, Financial Statement Schedules		89
SIGNATURES			93

1

Cautionary Note Regarding Forward-Looking Statements.

This Annual Report on Form10-K may contain 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, financial conditions, results of operations and expectations of Riverview Financial Corporation and its direct and indirect subsidiaries. These forward-looking statements are generally identified by use of the words such as “may”, “should”, “will”, “could”, “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project”, “plan”, “goal”, “strategy”, “likely”, “seek”, “future”, “target”, “preliminary”, “range” or similar expressions. All statements in this report, other than statements of historical facts, are forward-looking statements.

Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following:

• the effect of changes in market interest rates and the relative balances of rate-sensitive assets to rate-sensitive liabilities on net interest margin and net interest income;

• increases innon-performing assets, which may require Riverview Financial Corporation to increase the allowance for credit losses, charge off loans and incur elevated collection and carrying costs related to suchnon-performing assets;

• the impact of adverse economic conditions, particularly in the Riverview Financial Corporation market area, on the performance of its loan portfolio and the demand for its products and services;

• the effects of changes in interest rates on demand for Riverview Financial Corporation’s products and services;

• the effects of changes in interest rates or disruptions in liquidity markets on Riverview Financial Corporation’s sources of funding;

• the impact of legislative and regulatory changes and the increasing amount of time and resources spent on compliance;

• 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;

• our ability to attract and retain deposits;

• the effect of competition on deposit and loan rates, growth and on the net interest margin;

• changes in the values of real estate and other collateral securing the loan portfolio, particularly in our market area;

• the failure to identify and to address cyber-security risks;

• the ability to keep pace with technological changes and related costs;

• our ability to successfully enter new markets or successfully integrate acquired entities, if any;

• the ability to attract and retain talented personnel;

• capital and liquidity strategies, including Riverview Financial Corporation’s ability to comply with applicable capital and liquidity requirements, and its ability to generate capital internally or raise capital on favorable terms;

• Riverview Financial Corporation’s reliance on its subsidiaries for substantially all revenues and its ability to pay dividends or other distributions;

• the effects of changes in relevant accounting principles and guidelines on Riverview Financial Corporation’s financial condition; and

• the impact of the inability and failure of third party service providers to perform their contractual obligations.

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Any forward-looking statement made by us in this document is based only on information currently available to us and speaks only as of the date on which it is made. Riverview Financial Corporation undertakes no obligation, other than as required by law, to update or revise any forward-looking statements as a result of new information, future events or otherwise.

Part I

Item 1. Business.

General

Riverview Financial Corporation (the “Company”) was formed in 2013 as a bank holding company incorporated under the laws of Pennsylvania. The Company is regulated by the Board of Governors of the Federal Reserve System (“Federal Reserve Board”) or (“FRB”). The Company provides a full range of financial services through its wholly-owned bank subsidiary, Riverview Bank (the “Bank”), which is its sole operating segment. The Company had approximately 276 employees as of December 31, 2019.

The Bank is a state-chartered bank and trust company regulated by the Pennsylvania Department of Banking and Securities (“DOB”) and the Federal Deposit Insurance Corporation (“FDIC”) that offers financial services through 27 community banking offices and three limited purpose offices.

Effective October 1, 2017, the Company merged with CBT Financial Corp. (“CBT”) and its subsidiary, CBT Bank, merged with and into the Bank. The merger of equals with CBT added approximately $382.5 million in loans and $438.8 million in deposits to the consolidated Company.

Unless the context indicates otherwise, all references in this annual report to the “Company”, “Bank”, “we”, “us” and “our” refer to Riverview Financial Corporation, its direct and indirect subsidiaries and its and their respective predecessors.

We primarily generate income through interest income derived from our loan and securities portfolios. Other income is generated primarily from transaction fees, trust and wealth management fees, mortgage banking fees and service charges on deposit accounts. Our primary costs are interest paid on deposits and borrowings and general operating expenses. We provide a variety of commercial and retail banking and financial services to businesses,non-profit organizations, governmental and municipal agencies, professional customers, and retail customers, on a personalized basis.

Market Areas

The Bank’s market area consists of Berks, Blair, Bucks, Centre, Clearfield, Cumberland, Dauphin, Huntingdon, Lebanon, Lehigh, Lycoming, Perry, Schuylkill and Somerset Counties in Central Pennsylvania.

Products and Services

The Bank offers a variety of consumer and commercial banking products and services throughout its market area. Our primary lending products are real estate, commercial and consumer loans. Our primary deposit products are NOW, demand deposit accounts, and certificate of deposit accounts. We also offer ATM access, investment accounts, trust department services and other various lending, depository and related financial services.

Lending Activities

We provide a full range of retail and commercial lending products designed to meet the borrowing needs of consumers and small- andmedium-sized businesses in our market area. A significant amount of our loans are made to customers located within our market area. We have no foreign loans or highly leveraged transaction loans, as defined by the Federal Reserve Board. Although we participate in loans originated by other banks, we have originated the majority of the loans in our portfolio.

Our primary commercial products are loans to small- and medium- sized businesses. Our consumer products includeone-to-four family residential mortgages, consumer, automobile, home equity, educational and lines of credit loans. Our retail lending products include the following types of loans, among others: residential real estate; automobiles; manufactured housing; personal; student; and home equity. Our commercial lending products include the following types of loans, among others: commercial real estate; working capital; equipment and other commercial needs; construction; and agricultural and mineral rights. The terms offered on a loan vary depending on the type of loan and credit-worthiness of the borrower. We fund our loans, primarily, from our various deposit products which include certificates of deposits, savings, money market and various demand deposit accounts that are offered to both consumer and commercial customers.

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Payment risk is a function of the economic climate in which our lending activities are conducted. Economic downturns in the economy generally, or in a particular sector, could cause cash flow problems for our customers, impairing their ability to repay loans we make to them. We attempt to minimize this risk by avoiding loan concentrations to a single customer or a group of similar customer types, the loss of any one or more of whom would have a materially adverse effect on our financial condition. One element of interest rate risk arises from making fixed rate loans in an environment of changing interest rates. We attempt to mitigate this risk by making adjustable rate loans and by limiting repricing terms to five years or less for commercial customers requiring fixed rate loans.

Our lending activity also exposes us to the risk that any collateral we take as security is not adequate. We attempt to manage collateral risk by avoiding loan concentrations to particular types of borrowers, by perfecting liens on collateral and by obtaining appraisals on property prior to extending loans. We attempt to mitigate our exposure to these and other types of lending risks by stratifying authorization requirements by loan size and complexity.

We are not dependent upon a single customer, or a few customers, the loss of one or more of which would have a materially adverse effect on our operations. In the ordinary course of our business, our operations and earnings are not materially affected by seasonal changes or by Federal, state or local environmental laws or regulations.

We intend to continue to evaluate commercial real estate, commercial business and governmental lending opportunities, including small business lending. We continue to proactively monitor and manage existing credit relationships.

We have not engaged insub-prime residential mortgage lending, which is defined as mortgage loans advanced to borrowers who do not qualify for market interest rates because of problems with their credit history. We focus our lending efforts within our market area.

Deposit Activities

Our primary source of funds is the cash flow provided by our financing activities, mainly deposit gathering. We offer a variety of deposit accounts with a range of interest rates and terms, including, among others: money market accounts; NOW accounts; savings accounts; certificates of deposit; individual retirement accounts, and demand deposit accounts. These deposits are primarily obtained from areas surrounding our branch offices. We rely primarily on marketing, product innovation, technology, service and long-standing relationships with customers to attract and retain deposits. Other deposit related services include: mobile and online banking; remote deposit capture; automatic clearing house transactions; cash management services; automated teller machines; point of sale transactions; safe deposit boxes; night depository services; direct deposit; and official check services.

Trust, Wealth Management and Brokerage Services

Through our trust department, we offer a broad range of fiduciary and investment services. Our trust and investment services include:

• investment management;

• IRA trustee services;

• estate administration;

• living trusts;

• trustee under will;

• guardianships;

• life insurance trusts;

• custodial services / IRA custodial services;

• corporate trusts; and

• pension and profit sharing plans.

We provide a comprehensive array of wealth management products and services through Riverview Wealth Management and Trust Management divisions to individuals, small businesses and nonprofit entities. These products and services include the following, among others: investment portfolio management; brokerage; estate planning assistance; annuities; business succession planning; insurance; education funding strategies; and tax planning assistance.

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We have a third-party marketing agreement with a broker-dealer that allows us to offer a full range of securities, brokerage services and annuity sales to our customers. We have three dedicated locations that provide such investor services as well as accommodating customer meetings by appointment within our retail banking offices. Through these divisions, our clients have access to a wide array of financial products including stocks, bonds, mutual funds, annuities and insurance.

Competition

The banking and financial services industries are highly competitive. Within its geographic region, the Bank faces direct competition from other commercial banks, varying in size from local community banks to larger regional and nationwide banks, credit unions andnon-bank entities. As a result of the wide availability of electronic delivery channels, the Bank also faces competition from financial institutions that do not have a physical presence in its geographic markets.

Many of our competitors are substantially larger in terms of assets and available resources. Certain of these institutions have significantly higher lending limits than we do and may provide various services to their customers that we presently do not. In addition, we experience competition for deposits from mutual funds and broker dealers, while consumer discount, mortgage and insurance companies compete with us for various types of loans. Credit unions, finance companies and mortgage companies enjoy certain competitive advantages over us, as they are not subject to the same regulatory restrictions and taxation as commercial banks. Principal methods of competing for bank products, permitted nonbanking services and financial activities include price, nature of product, quality of service, convenience of location, and availability of banking convenience technology, including telephone andweb-based banking services.

In our market area, interest rates on deposits, especially time deposits, and interest rates and fees charged to customers on loans are very competitive. In the current economic environment, we are experiencing increased competition in view of our loan demand and deposit gathering.

We believe that our most significant competitive advantage originates from our business philosophy, which includes offering direct access to senior management and other officers, providing friendly, informed and courteous service, local and timely decision making, flexible and reasonable operating procedures, and consistently applied credit policies. In addition, our success has been, and will continue to be, a result of our emphasis on community involvement and customer relationships. With consolidation continuing in the financial industry, and particularly in our market area, smaller community banks like us are gaining opportunities to increase market share as larger institutions reduce their emphasis on, or exit, the markets.

Seasonality

Generally, our operations are not seasonal in nature. Our deposit activities, however, have been somewhat influenced by fiscal funding appropriations related to municipalities and school districts in our market areas, which are to some extent seasonal in nature.

Supervision and Regulation

We are extensively regulated and examined under federal and state laws. Generally, these laws and regulations are intended to protect consumers, not shareholders. The following is a summary description of certain provisions of law that affect the regulation of bank holding companies and banks. This discussion is qualified in its entirety by reference to applicable laws and regulations. Changes in laws and regulations may have a material effect on our business and prospects.

The Company is a bank holding company within the meaning of the Bank Holding Company Act (“BHCA”) and is subject to regulation, supervision, and examination by the Board of Governors of the Federal Reserve System (“Federal Reserve Board”) or (“FRB”). We are required to file annual and quarterly reports with the FRB and to provide the FRB with such additional information as the FRB may require. The FRB also conducts periodic examinations of the Company. In addition, under the Pennsylvania Banking Code of 1965 of the Pennsylvania Department of Banking and Securities (“DOB”), the DOB has the authority to examine the books, records and affairs of the Company and to require any documentation deemed necessary to ensure compliance with the Pennsylvania Banking Code.

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With certain limited exceptions, we are required to obtain prior approval from the FRB before acquiring direct or indirect ownership or control of more than 5% of any voting securities or substantially all assets of a bank or bank holding company, or before merging or consolidating with another bank holding company. Additionally, with certain exceptions, any person or entity proposing to acquire control through direct or indirect ownership of 25% or more of our voting securities (or 10% or more under certain circumstances) is required to give 60 days’ written notice of the acquisition to the FRB, which may prohibit the transaction, and to publish notice to the public.

The Bank is primarily regulated by the DOB and the FDIC. The DOB may prohibit an institution, over which it has supervisory authority, from engaging in activities or investments that the agency believes constitute unsafe or unsound banking practices. Federal banking regulators have extensive enforcement authority over the institutions they regulate to prohibit or correct activities that violate law, regulation or a regulatory agreement or which are deemed to constitute unsafe or unsound practices.

Enforcement actions may include:

• the appointment of a conservator or receiver;

• the issuance of a cease and desist order;

• the termination of deposit insurance, the imposition of civil money penalties on the institution, its directors, officers, employees and institution affiliated parties;

• the issuance of directives to increase capital;

• the issuance of formal and informal agreements and orders;

• the removal of or restrictions on directors, officers, employees and institution-affiliated parties; and

• the enforcement of any such mechanisms through restraining orders or any other court actions.

We are subject to certain restrictions on extensions of credit to executive officers, directors, principal shareholders or any related interests of such persons which generally require that such credit extensions be made on substantially the same terms as are available to third parties dealing with us, and do not involve more than the normal risk of repayment or present other unfavorable features. Other laws limit the maximum amount that we may loan to any one customer as a percentage of our capital levels.

PermittedNon-Banking Activities

Generally, a bank holding company may not engage in any activities other than banking, managing or controlling its bank and other authorized subsidiaries, or providing service to those subsidiaries. With prior approval of the FRB, we may acquire more than 5% of the assets or outstanding shares of a company engaging innon-bank activities determined by the FRB to be closely related to the business of banking or of managing or controlling banks. The FRB provides expedited procedures for expansion into approved categories ofnon-bank activities. A bank holding company that meets certain specified criteria may elect to be regulated as a “financial holding company” and thereby engage in a broader array of nonbanking financial activities, including insurance and investment banking.

Limitations on Dividends and Other Payments and Transactions

Our ability to pay dividends is largely dependent upon the receipt of dividends from the Bank. The Company relies on dividends from the Bank for its own ability to pay dividends to shareholders. Both federal and state laws impose restrictions on the ability of both the Company and the Bank to pay dividends.

Subsidiary banks of a bank holding company are subject to certain quantitative and qualitative restrictions on extensions of credit to the bank holding company or its subsidiaries, and on the use of their securities as collateral for loans. These regulations and restrictions may limit the Company’s ability to obtain funds from the Bank for its cash needs, including funds for the payment of dividends, interest and operating expenses. Further, subject to certain exceptions, a bank holding company and its subsidiaries are prohibited from engaging in certaintie-in arrangements relating to any extension of credit, the lease or sale of property, or furnishing of services.

Under FRB regulations, a bank holding company is expected to act as a source of financial strength to its subsidiary banks and to make capital injections into a troubled subsidiary bank. The FRB may charge the bank holding company with engaging in unsafe and unsound practices for failure to commit resources to a subsidiary bank when required. A required capital injection may be called for at a time when the holding company does not have the resources to provide it. In addition, depository institutions insured by the FDIC can be held liable for any losses incurred, or reasonably anticipated to be incurred, in connection with the default of or assistance provided to a commonly controlled FDIC-insured depository institution. Such cross-guarantee liabilities generally are superior in priority to the obligation of the depository institutions to its shareholders, due solely to their status as shareholders, and obligations to other affiliates.

6

Pennsylvania Law

As a Pennsylvania bank holding company, the Company is subject to various restrictions on its activities as set forth in Pennsylvania law. This is in addition to those restrictions set forth in federal law. Under Pennsylvania law, a bank holding company that desires to acquire a bank or bank holding company that has its principal place of business in Pennsylvania must obtain permission from the DOB.

Risk-Based Capital Requirements

The federal banking regulators have adopted risk-based capital regulations to facilitate assessing capital adequacy of a bank’s operations for assets reported on the balance sheet and transactions, such as letters of credit and recourse agreements, which are recorded asoff-balance sheet items. Under these guidelines, nominal dollar amounts of assets and credit-equivalent amounts ofoff-balance sheet items are multiplied by one of several risk adjustment percentages, which range from 0% for assets with low credit risk, such as certain US Treasury securities, to 100% or more for assets with relatively high credit risk.

A bank’s risk-based capital ratios are obtained by dividing its qualifying capital by its total risk adjusted assets. The regulators measure risk-adjusted assets, which includeoff-balance-sheet items, against both total qualifying capital, Common Equity Tier 1 capital, and Tier 1 capital.

“Common Equity Tier 1 Capital” includes common equity and minority interest in equity accounts of consolidated subsidiaries, less goodwill and other intangibles, subject to certain exceptions and retained earnings.

“Tier 1”, or core capital, includes common equity,non-cumulative preferred stock and minority interest in equity accounts of consolidated subsidiaries, less goodwill and other intangibles, subject to certain exceptions.

“Tier 2”, or supplementary capital, includes, among other things, limited life preferred stock, hybrid capital instruments, mandatory convertible securities, qualifying subordinated debt, and the allowance for loan and lease losses, subject to certain limitations less restricted deductions. The inclusion of elements of Tier 2 capital is subject to certain other requirements and limitations of the federal banking agencies.

In July 2013, the federal banking agencies issued final rules to implement the Basel III regulatory capital reforms and changes required by federal law. The final rules established the following capital requirements:

A minimum ratio of common equity tier 1 capital to risk-weighted assets of 4.5%.

A minimum ratio of tier 1 capital to risk-weighted assets of 6%.

A minimum ratio of total capital to risk-weighted assets of 8%.

A minimum leverage ratio of 4%.

In addition, the final rules established a common equity tier 1 capital conservation buffer of 2.5% of risk-weighted assets applicable to all insured banks. If a bank fails to hold capital above the minimum capital ratios and the capital conservation buffer, it is subject to certain restrictions on capital distributions and discretionary bonus payments to executives. Thephase-in period for the capital conservation buffers for all banks began on January 1, 2016, with the full buffer applicable on January 1, 2019.

Under the rules, community banks were permitted to make aone-time election not to include Accumulated Other Comprehensive Income (“AOCI”) in regulatory capital and instead use the previously existing treatment that excluded most AOCI components from regulatory capital. Theopt-out election was required to be made in the first call filed after the institution became subject to the final rule. The Bank“opted-out” of the inclusion of the components of AOCI in regulatory capital.

Failure to meet applicable capital guidelines could subject a banking organization to a variety of enforcement actions including:

• limitations on its ability to pay dividends;

• the issuance by the applicable regulatory authority of a capital directive to increase capital;

• or the termination of deposit insurance by the FDIC, as well as the measures described under FDICIA as applicable to undercapitalized institutions under the prompt corrective action regulation.

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In addition, future changes in regulations or practices could further reduce the amount of capital recognized for purposes of capital adequacy. Such a change could affect the ability of the Bank to grow and could restrict the amount of profits, if any, available for the payment of dividends to the Company.

At December 31, 2019, the Bank complied with the foregoing requirements with a common equity tier 1 risk-based capital ratio of 11.5%, tier 1 leverage capital ratio of 9.1%, tier 1 risk-based capital ratio of 11.5% and a total capital ratio of 12.4%.

Legislation enacted in May 2018 required the federal banking agencies, including the FDIC, to establish a “community bank leverage ratio” of between 8 to 10% of average total consolidated assets for qualifying institutions with assets of less than $10 billion. Institutions with capital meeting the specified requirements and electing to follow the alternative framework are deemed to comply with the applicable regulatory capital requirements, including the risk-based requirements. In November 2019, the federal regulators issued a final rule that set the optional “community bank leverage ratio” at 9%, effective January 1, 2020.

Prompt Corrective Action Regulations

Under prompt corrective action regulations, the FDIC is authorized and, under certain circumstances, required, to take supervisory actions against undercapitalized banks. The extent of supervisory action depends upon the degree of the institution’s undercapitalization. For this purpose, a bank is placed in one of the following five categories based on its capital level:

• well-capitalized (at least 5% leverage capital, 8% Tier 1 risk-based capital, 10% total risk-based capital and 6.5% common equity Tier 1 risk-based capital);

• adequately capitalized (at least 4% leverage capital, 6% Tier 1 risk-based capital, 8% total risk-based capital and 4.5% common equity Tier 1 risk-based capital);

• undercapitalized (less than 4% leverage capital, 6% Tier 1 risk-based capital, 8% total risk-based capital or 4.5% common equity Tier 1 risk-based capital);

• significantly undercapitalized (less than 3% leverage capital, 4% Tier 1 risk-based capital, 6% total risk-based capital or 3% common equity Tier 1 risk-based capital); and

• critically undercapitalized (less than 2% tangible capital).

The regulations provide that a capital restoration plan must be filed with the FDIC within 45 days of the date a bank receives notice that it is “undercapitalized,” “significantly undercapitalized” or “critically undercapitalized.” Any holding company for the bank required to submit a capital restoration plan must guarantee the lesser of an amount equal to 5% of the bank’s assets at the time it was notified or deemed to be undercapitalized by the FDIC, or the amount necessary to restore the bank to adequately capitalized status. This guarantee remains in place until the FDIC notifies the bank that it has maintained adequately capitalized status for each of four consecutive calendar quarters, and the FDIC has the authority to require payment and collect payment under the guarantee. Various restrictions, including on growth and capital distributions, also apply to “undercapitalized” institutions. If an “undercapitalized” institution fails to submit an acceptable capital plan, it is treated as “significantly undercapitalized.” “Significantly undercapitalized” institutions must comply with one or more additional restrictions including, but not limited to, an order by the FDIC to sell sufficient voting stock to become adequately capitalized, requirements to reduce total assets, cease receipt of deposits from correspondent banks or dismiss officers or directors and restrictions on interest rates paid on deposits, compensation of executive officers and capital distributions by the parent holding company. The FDIC may also take any one of a number of discretionary supervisory actions against undercapitalized institutions, including the issuance of a capital directive and the replacement of senior executive officers and directors. Critically undercapitalized institutions are subject to the appointment of a receiver or conservator within specified timeframes.

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At December 31, 2019, the Bank met the criteria for being considered “well-capitalized”.

The previously referenced final rule establishing an elective “community bank leverage ratio” regulatory capital requirement provides that a qualifying institution whose capital exceeds the community bank leverage ratio and opts to use that framework will be considered “well-capitalized” for purposes of prompt corrective action.

Interest Rate Risk

Regulatory agencies include in their evaluations of a bank’s capital adequacy, an assessment of the bank’s interest rate risk exposure. The standards for measuring the adequacy and effectiveness of a banking organization’s interest rate risk management includes a measurement of board of directors and senior management oversight, and a determination of whether a banking organization’s procedures for comprehensive risk management are appropriate to the circumstances of the specific banking organization. We utilize internal interest rate risk models to measure and monitor interest rate risk. Finally, regulatory agencies, as part of the scope of their periodic examinations, evaluate our interest rate risk.

Commercial Real Estate Guidance

In December 2015, the federal banking agencies released a statement entitled “Statement on Prudent Risk Management for Commercial Real Estate Lending” (the “CRE Statement”). In the CRE Statement, the agencies express concerns with institutions that ease commercial real estate underwriting standards, direct financial institutions to maintain underwriting discipline and exercise risk management practices to identify, measure and monitor lending risks, and indicate that they will continue to pay special attention to commercial real estate lending activities and concentrations going forward. The agencies previously issued guidance in December 2006, entitled “Interagency Guidance on Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices”, which states that an institution is potentially exposed to significant commercial real estate concentration risk, and should employ enhanced risk management practices, where total commercial real estate loans represents 300% or more of its total capital and the outstanding balance of such institution’s commercial real estate loan portfolio has increased by 50% or more during the prior 36 months.

Deposit Insurance

The Bank’s deposits are insured up to applicable limits by the Deposit Insurance Fund of the FDIC. Deposit insurance per account owner is $250,000.

The FDIC charges insured depository institutions premiums to maintain the Deposit Insurance Fund. Under the FDIC’s risk-based assessment system, institutions deemed less risky pay lower assessments. Assessments for institutions of less than $10 billion of assets are based on financial measures and supervisory ratings derived from statistical modeling estimating the probability of failure within three years. That system, effective July 1, 2016, replaced the previous system under which institutions were placed in risk categories.

Federal law required the FDIC to revise its procedures to base its assessments upon each insured institution’s total assets less tangible equity instead of deposits. The FDIC finalized a rule, effective April 1, 2011, that set the assessment range at 2.5 to 45 basis points of total assets less tangible equity. In conjunction with the Deposit Insurance Fund reserve ratio achieving 1.15%, the assessment range (inclusive of possible adjustments) was reduced for insured institutions of less than $10 billion in total assets to 1.5 basis points to 30 basis points, effective July 1, 2016.

Federal legislation raised the minimum target Deposit Insurance Fund ratio from 1.15% of estimated insured deposits to 1.35% of estimated insured deposits. The FDIC was required to seek to achieve the 1.35% ratio by September 30, 2020. The law required insured institutions with assets of $10 billion or more to fund the increase from 1.15% to 1.35% and, effective July 1, 2016, such institutions were subject to a surcharge to achieve that goal. The FDIC indicated that the 1.35% ratio was exceeded in November 2018. Insured institutions of less than $10 billion of assets are receiving credits for the portion of their assessments that contributed to increasing the reserve ratio between 1.15% and 1.35%. The FDIC has established a long-range target fund ratio of 2%.

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The Federal Deposit Insurance Corporation has authority to increase insurance assessments. A significant increase in insurance premiums would likely have an adverse effect on the operating expenses and results of operations of the Bank. Management cannot predict what insurance assessment rates will be in the future.

Community Reinvestment Act (“CRA”)

Under the CRA, the Bank has a continuing and affirmative obligation, consistent with its safe and sound operation, to ascertain and meet the credit needs of its entire community, includinglow- and moderate-income areas. CRA is designed to create a system for bank regulatory agencies to evaluate a depository institution’s record in meeting the credit needs of its community. CRA regulations were completely revised as of July 1, 1995, to establish performance-based standards for use in examining for compliance. Assessment by bank regulators of CRA compliance focuses on three tests: (i) a lending test, to evaluate the institution’s record of making loans, including community development loans, in its designated assessment areas; (ii) an investment test, to evaluate the institution’s record of investing in community development projects, affordable housing, and programs benefiting low or moderate income individuals and areas and small businesses; and (iii) a service test, to evaluate the institution’s delivery of banking services throughout its CRA assessment area, including low and moderate income areas. The Bank had its last completed CRA compliance examination conducted November 4, 2019 and received a “satisfactory” rating.

Bank Secrecy Act, USA Patriot Act of 2001 (“Patriot Act”), and Related Rules and Regulations

The Patriot Act contained anti-money laundering and financial transparency laws and imposes various regulations, including standards for verifying client identification at account opening, and rules to promote cooperation among financial institutions, regulators and law enforcement entities in identifying parties that may be involved in terrorism or money laundering. Among other requirements, the Patriot Act and the related regulations imposed the following requirements with respect to financial institutions:

• Establishment of anti-money laundering programs;

• Establishment of a program specifying procedures for obtaining identifying information from customers seeking to open new accounts, including verifying the identity of customers within a reasonable period of time;

• Establishment of enhanced due diligence policies, procedures and controls designed to detect and report money laundering; and

• Prohibition on correspondent accounts for foreign shell banks and compliance with recordkeeping obligations with respect to correspondent accounts of foreign banks.

Failure to comply with the Patriot Act’s requirements could have serious legal, financial, regulatory and reputational consequences. In addition, bank regulators will consider a holding company’s effectiveness in combating money laundering when ruling on BHCA and Bank Merger Act applications.

In May 2018, a Financial Crimes Enforcement Network rule requiring banks to implement strengthened customer due diligence requirements took effect. Among other requirements, the rules contain explicit customer due diligence requirements and require banks to identify and verify the identity of beneficial owners of legal entity customers, subject to certain exclusions and exemptions.

Consumer Lending Laws

Bank regulatory agencies are increasingly focusing attention on consumer protection laws and regulations. Such laws and regulations include:

• Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers;

• Real Estate Settlement Procedures Act, requiring that borrowers for mortgage loans forone- to four-family residential real estate receive various disclosures, including good faith estimates of settlement costs, lender servicing and escrow account practices, and prohibiting certain practices that increase the cost of settlement services;

• Home Mortgage Disclosure Act, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves;

• Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit;

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• Fair Credit Reporting Act, governing the use and provision of information to credit reporting agencies;

• Fair Lending laws;

• Unfair or Deceptive Acts or Practices laws and regulations;

• Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies; and

• Truth in Savings Act.

The operations of the Bank are further subject to the:

• Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records;

• Electronic Funds Transfer Act and Regulation E promulgated thereunder, which govern automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services;

• Check Clearing for the 21st Century Act (also known as “Check 21”), which gives “substitute checks,” such as digital check images and copies made from that image, the same legal standing as the original paper check; and

• The Gramm-Leach-Bliley Act, which places limitations on the sharing of consumer financial information by financial institutions with unaffiliated third parties. Specifically, the Gramm-Leach-Bliley Act requires all financial institutions offering financial products or services to retail customers to provide such customers with the financial institution’s privacy policy and provide such customers the opportunity to “opt out” of the sharing of certain personal financial information with unaffiliated third parties.

Holding Company Capital Regulations

Federal law required the Federal Reserve Board to apply consolidated capital requirements to bank holding companies that are no less stringent than those applicable to the institutions themselves. Consolidated regulatory capital requirements identical to those applicable to the subsidiary depository institutions applied to bank holding companies as of January 1, 2015. As is the case with institutions themselves, the capital conservation buffer for bank holding companies was phased in between 2016 and 2019. However, legislation enacted in May 2018 required the FRB to raise the threshold of its “small holding company” exception to the applicability of consolidated holding company capital requirements from $1 billion of consolidated assets to $3 billion of consolidated assets. That change became effective in August 2018. Consequently, holding companies with less than $3 billion of consolidated assets, including the Company, are generally not subject to the requirements unless otherwise advised by the FRB.

Dividends and Stock Repurchases

The Federal Reserve Board has issued a policy statement regarding the payment of dividends and the repurchase of shares of common stock by bank holding companies. In general, the policy provides that dividends should be paid only out of current earnings and only if the prospective rate of earnings retention by the holding company appears consistent with the organization’s capital needs, asset quality and overall financial condition. Regulatory guidance provides for prior regulatory review of capital distributions in certain circumstances, such as where the company’s net income for the past four quarters, net of dividends previously paid over that period, is insufficient to fully fund the dividend. The guidance also provides for prior regulatory review where the company’s overall rate of earnings retention is inconsistent with the company’s capital needs and overall financial condition. The ability of a holding company to pay dividends may be restricted if a subsidiary bank becomes undercapitalized. The policy statement also provides for regulatory review prior to a holding company redeeming or repurchasing regulatory capital instruments when the holding company is experiencing financial weaknesses or redeeming or repurchasing common stock or perpetual preferred stock that would result in a net reduction in the amount of such equity instruments outstanding as of the end of a quarter compared with the beginning of the quarter in which the redemption or repurchase occurred. These regulatory policies could affect the ability of the company to pay dividends, repurchase shares of common stock or otherwise engage in capital distributions.

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Federal Reserve System

FRB regulations require depository institutions to maintain cash reserves against their transaction accounts (primarily NOW and demand deposit accounts). As of the reporting date, a reserve of 3% is to be maintained against aggregate transaction accounts between $16.3 million and $124.2 million (subject to adjustment annually by the FRB) plus a reserve of 10% (subject to adjustment by the FRB between 8% and 14%) against that portion of total transaction accounts in excess of $124.2 million. The first $16.3 million of otherwise reservable balances (subject to adjustment by the FRB) is exempt from the reserve requirements. The Bank is in compliance with the foregoing requirements.

Required reserves must be maintained in the form of vault cash, an account at a Federal Reserve Bank or a pass-through account as defined by the FRB. Pursuant to the Emergency Economic Stabilization Act of 2008, the Federal Reserve Banks pay interest on depository institution required and excess reserve balances.

Future Legislation

Proposed legislation is introduced in almost every legislative session that would dramatically affect the regulation of the banking industry. We cannot predict if any such legislation will be adopted nor if adopted how it would affect our business. History has demonstrated that new legislation or changes to existing laws or regulations usually results in greater compliance burden and therefore generally increases the cost of doing business.

Employees

As of December 31, 2019, we had 276 employees. We are not parties to any collective bargaining agreements and we consider our employee relations to be good.

Availability of Securities Filings

Effective February 11, 2015, the Company became a reporting company and was required to file certain periodic reports under the Securities and Exchange Act of 1934 as required by Section 15(d) of that act. Effective August 10, 2018, the Company registered its stock under Section 12(b) of the Exchange Act and thereby became required to file certain additional periodic reports under the Exchange Act. We file the required annual, quarterly, and current reports, proxy statements, and other documents with the Securities and Exchange Commission (“SEC”). The SEC maintains an Internet website that contains reports, proxy and information statements, and other information regarding issuers, including us, that file electronically with the SEC. The public can obtain any documents that we file with the SEC athttp://www.sec.gov.

In addition, we maintain an Internet website atwww.riverviewbankpa.com. We make available, free of charge, through the “Investor Relations” link on our Internet website, our annual report on Form10-K, quarterly reports on Form10-Q, current reports onForm 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

Item 1A. Risk Factors.

Not required for smaller reporting companies.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

Our corporate headquarter is located at 3901 North Front Street, Harrisburg, Pennsylvania, and includes our executive offices as well as portions of our finance, information services, credit, and branch administration departments. Portions of our deposit operations, human resource administration, as well as trust service offices are located at 2638 Woodglen Road, Pottsville, Pennsylvania. Portions of our loan operations, credit administration, Bank Secrecy Act (“BSA”) compliance and IT departments are located at 200 Front Street, Marysville, Pennsylvania. Additionally, compliance and portions of finance operations, human resource administration and operations, loan and deposit operations, credit administration and trust operations and services are located at 11 North Second Street, Clearfield, Pennsylvania. Each of these facilities is owned by the Bank.

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The Bank operates 27 community banking offices and three limited purpose offices within Berks, Blair, Bucks, Centre, Clearfield, Cumberland, Dauphin, Huntingdon, Lebanon, Lehigh, Lycoming, Perry, Schuylkill and Somerset Counties in Pennsylvania. Fourteen of the branch offices are leased by the Bank, while the remaining facilities are owned. All retail banking offices have ATMs and are equipped with closed circuit security monitoring.

We consider our properties to be suitable and adequate for our current and immediate future purposes.

Item 3. Legal Proceedings.

In the opinion of the Company, after review with legal counsel, as of December 31, 2019, there were no proceedings pending to which the Company is party to or to which its property is subject, which, if determined to be adverse to the Company, would be material in relation to the Company’s consolidated financial condition. In addition, as of December 31, 2019, no material proceedings are pending or are known to be threatened or contemplated against the Company by governmental authorities.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

As of February 28, 2020, there were approximately 1,065 registered holders of our common stock, no par value. Our common stock trades on the Nasdaq Global Market under the symbol “RIVE”.

The Company has paid cash dividends since its formation in 2008 and currently is paying $0.075 per shares quarterly. The payment of future dividends is dependent upon earnings, financial position, appropriate restrictions under applicable laws and other factors relevant at the time our board of directors considers any declaration of dividends. For information relating to dividend restrictions applicable to the Company and the Bank, refer to the consolidate financial statements and notes to these statements as Item 8 to this report and incorporated in their entirety by reference under this Item 5.

The Company did not repurchase any shares of its common stock during the year ended December 31, 2019.

Item 6. Selected Financial Data.

Not required for smaller reporting companies

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Management’s Discussion and Analysis

(Dollars in thousands, except per share data)

Management’s Discussion and Analysis appearing on the following pages should be read in conjunction with the Consolidated Financial Statements contained in this Annual Report on Form10-K.

Forward-Looking Discussion:

In addition to the historical information contained in this document, the discussion presented may contain and, from time to time, may make, certain statements that constitute forward-looking statements. Words such as “expects,” “anticipates,” “believes,” “estimates” and other similar expressions or future or conditional verbs such as “will,” “should,” “would” and “could” are intended to identify such forward-looking statements. These statements are not historical facts, but instead represent the current expectations, plans or forecasts of the Company and its subsidiary regarding its future operating results, financial position, asset quality, credit reserves, credit losses, capital levels, dividends, liquidity, service charges, cost savings, effective tax rate, impact of changes in fair value of financial assets and liabilities, impact of new accounting and regulatory guidance, legal proceedings and other matters relating to us and the securities that we may offer from time to time. These statements are not guarantees of future results or performance and involve certain risks, uncertainties and assumptions that are difficult to predict, change over time and are often beyond our control. Actual outcomes and results may differ materially from those expressed in, or implied by, forward-looking statements.

You should not place undue reliance on any forward-looking statements, which speak only as of the date they are made, and we undertake no obligation to update any forward-looking statement to reflect the impact of circumstances or events that arise after the date the forward-looking statement was made. 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.

Critical Accounting Policies:

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of consolidated financial statements in conformity with GAAP requires us to establish critical accounting policies and make accounting estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements, as well as the reported amounts of revenues and expenses during those reporting periods.

For a discussion of the recent Accounting Standards Updates (“ASU”) issued by the Financial Accounting Standards Board (“FASB”), refer to Note 1 entitled “Summary of significant accounting policies — Recent accounting standards”, in the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report.

An accounting estimate requires assumptions about uncertain matters that could have a material effect on the consolidated financial statements if a different amount within a range of estimates was used or if estimates changed from period to period. Readers of this report should understand that estimates are made considering facts and circumstances at a point in time, and changes in those facts and circumstances could produce results that differ from when those estimates were made. Significant estimates that are particularly susceptible to material change within the near term relate to the determination of the allowance for loan losses, the valuation of deferred tax assets and the impairment of goodwill. Actual amounts could differ from those estimates.

We maintain the allowance for loan losses at a level we believe adequate to absorb probable credit losses related to individually evaluated loans, as well as probable incurred losses inherent in the remainder of the loan portfolio as of the balance sheet date. The balance in the allowance for loan losses account is based on past events and current economic conditions.

The allowance for loan losses account consists of an allocated element and an unallocated element. The allocated element consists of a specific portion for the impairment of loans individually evaluated and a formula portion for loss contingencies on those loans collectively evaluated. The unallocated element, if any, is used to cover inherent losses that exist as of the evaluation date, but which have not been identified as part of the allocated allowance using our impairment evaluation methodology due to limitations in the process.

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We monitor the adequacy of the allocated portion of the allowance quarterly and adjust the allowance as necessary through normal operations. This ongoing evaluation reduces potential differences between estimates and actual observed losses. The determination of the level of the allowance for loan losses is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. Accordingly, management cannot ensure that charge-offs in future periods will not exceed the allowance for loan losses or that additional increases in the allowance for loan losses will not be required, resulting in an adverse impact on operating results.

Deferred tax assets and liabilities are recognized for the estimated future tax effects of temporary differences by applying enacted statutory tax rates to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. The amount of deferred tax assets is reduced, if necessary, to the amount that, based on available evidence, will more likely than not be realized. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes.

Goodwill is evaluated at least annually for impairment, or more frequently if conditions indicate potential impairment exists. Any impairment losses arising from such testing are reported in the income statement in the current period as a separate line item within operations.

For a further discussion of our critical accounting policies refer to Note 1 entitled “Summary of significant accounting policies” in the Notes to Consolidated Financial Statements to this Annual Report. This Note lists the significant accounting policies used by us in the development and presentation of the consolidated financial statements. This MD&A, the Notes to Consolidated Financial Statements and other financial statement disclosures identify and address key variables and other qualitative and quantitative factors that are necessary to understand and evaluate our financial position, results of operations and cash flows.

Operating Environment:

The banking industry operating performance declined in 2019 as net income for all Federal Deposit Insurance Corporation (“FDIC”)-insured banks totaled $233.1 billion, a decrease of $3.6 billion, or 1.5%, from 2018. The leading factors for the industry were declining margins, as the net interest margin declined four basis points to 3.36% in 2019 from 3.40% in 2018, and higher loan loss provisions, which were up $5.0 billion, or 9.9%, over the prior year.

The United States economy continued to grow at a strong pace in 2019, albeit a slower rate as compared to 2018. The gross domestic product (“GDP”), the value of all goods and services produced in the Nation, increased at an annual rate of 2.3% in 2019, as compared to 2.9% in 2018. The deceleration in real GDP in 2019, compared to 2018, primarily reflected decelerations in nonresidential fixed investment and personal consumption expenditures and a downturn in exports, which were partly offset by accelerations in both state and local and federal government spending. Inflationary concerns abated in 2019 as the Federal Reserve Board’s Federal Open Market Committee’s (“FOMC”) preferred measure of inflation, the personal consumption expenditures price index excluding food and energy decreased to 1.2% in 2019, a reduction from 1.9% in 2018 and was below the FOMC’s benchmark of 2.0%. In reversing course from 2018, the FOMC decreased rates three times in 2019 for a total of 75 basis points based on expectations there was emerging weakness in the economy. Current forecasts show an FOMC stance that ranges from neutral to accommodative regarding 2020 overnight rates.

FOMC actions have a direct impact on our business and profitability and are monitored closely by management. A declining rate cycle may reduce the Company’s cost of funds as competitive rates decline and help reduce earnings variability in future cycles as depositors choose to extend the overall duration of their deposits. An additional benefit of a lower rate environment is that asset quality may be positively impacted as borrowers with adjustable rate loans may more easily cover debt service in the future as payments decrease. We continually monitor adjustable rate relationships through stress testing over various rate scenarios. Conversely, reductions in general market rates have an adverse impact on the yield on earning assets and compress net interest income as fixed rate borrowers wish to renegotiation higher rates on existing loans. Moreover, there is a possibility we may lose customers to competitors if we are unable or unwilling to provide lower term rates.

Employment conditions overall improved in the United States in 2019. The number of people employed increased at a greater pace as compared to the increase in the civilian labor force in 2018. As a result, the annual unemployment rate for the United States fell to a fifty-year low at 3.5% in 2019 from 3.9% in 2018. Average hourly earnings continued to grow at an average rate of 3.1% throughout 2019.

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Employment conditions in 2019 weakened for the Commonwealth of Pennsylvania as evidenced by an increase in the unemployment rate to 4.6% at December 31, 2019 from 3.9% at December 31, 2018. With respect to the markets we serve, the unemployment rate increased in all the counties in which we have office locations. The average unemployment rate for counties in our market area increased to 5.0% in 2019 from 4.0% in 2018. The lowest 2019 unemployment rate within the counties we serve were in Centre and Cumberland at 3.4%. Continued increases in unemployment rates could unfavorably impact the rate of economic growth in our market, the growth of loans and deposits, asset quality and overall profitability.

National, Pennsylvania and our market area’snon-seasonally adjusted annual unemployment rates at December 31, 2019 and 2018 are summarized as follows:

	2019			2018
United States		3.5	%		3.9	%
Pennsylvania		4.6			3.9
Berks County		4.4			3.7
Blair County		5.0			3.9
Bucks County		3.8			3.3
Centre County		3.4			2.9
Clearfield County		6.5			5.0
Cumberland County		3.4			2.9
Dauphin County		4.1			3.5
Huntingdon County		8.0			5.5
Lebanon County		4.1			3.5
Lehigh County		4.7			4.0
Lycoming County		5.6			4.6
Perry County		4.1			3.3
Schuylkill County		5.7			4.8
Somerset County		6.6			5.2

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Review of Financial Position:

Riverview Financial Corporation, (“Riverview” or the “Company”), 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”).

Riverview Bank, with 27 community banking offices and three limited purpose offices, 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, Cumberland, Dauphin, Huntingdon, Lebanon, Lehigh, Lycoming, Perry, Schuylkill and Somerset Counties.

The Bank is state-chartered under the jurisdiction of the Pennsylvania Department of Banking and Securities and the Federal Deposit Insurance Corporation. The Bank’s primary product is loans to small- andmedium-sized businesses. Other lending products includeone-to-four family residential mortgages and consumer loans. The Bank primarily funds its loans by offering interest-bearing transaction accounts to commercial enterprises and individuals. Other deposit product offerings include certificates of deposits and various demand deposit accounts. The Bank offers a broad range of financial advisory, investment and fiduciary services through its wealth management and trust operating divisions.

The wealth management and trust divisions did not meet the quantitative thresholds for required segment disclosure in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The Bank’s 27 community banking offices, all similar with respect to economic characteristics, share a majority of the following aggregation criteria: (i) products and services; (ii) operating processes; (iii) customer bases; (iv) delivery systems; and (v) regulatory oversight. Accordingly, they were aggregated into a single operating segment.

The Company faces competition primarily from commercial banks, thrift institutions and credit unions within the northern, central and southwestern Pennsylvania markets, many of which are substantially larger in terms of assets and capital. In addition, mutual funds and security brokers compete for various types of deposits, and consumer, mortgage, leasing and insurance companies compete for various types of loans and leases. Principal methods of competing for banking and permitted nonbanking services include price, nature of product, quality of service and convenience of location.

The Company and the Bank are subject to regulations of certain federal and state regulatory agencies and undergo periodic examinations.

Total assets, loans and deposits were $1.1 billon, $852.1 million and $940.5 million, respectively, at December 31, 2019. Comparatively, total assets, loans and deposits were $1.1 billon, $893.2 million and $1.0 billion, respectively, at December 31, 2018. Construction lending increased $22.3 million, while business lending, including commercial and commercial real estate decreased $46.0 million, and retail lending, including residential mortgages and consumer loans decreased $17.4 million during 2019. Investment securities decreased $13.4 million, or 12.8%, in 2019. Noninterest-bearing deposits decreased $15.2 million, and interest-bearing deposits decreased $48.9 million in 2019.

The loan portfolio consisted of $574.6 million of business loans, including commercial and commercial real estate loans, $61.8 million in construction loans, and $215.7 million in retail loans, including residential mortgage and consumer loans at December 31, 2019. Total investment securities were $91.2 million at December 31, 2019, all of which were classified asavailable-for sale. Total deposits consisted of $147.4 million in noninterest-bearing deposits and $793.1 million in interest-bearing deposits at December 31, 2019.

Stockholders’ equity equaled $118.1 million, or $12.81 per share, at December 31, 2019, and $113.9 million or $12.49 per share, at December 31, 2018. Dividends declared for 2019 amounted to $0.35 per share, representing an annual yield of 2.8% based on the closing price of the Company’s common stock of $12.49 per share on December 31, 2019.

Nonperforming assets equaled $5,080 or 0.60% of loans, net and foreclosed assets at December 31, 2019, an improvement from $7,202, or 0.81%, at December 31, 2018. The allowance for loan losses equaled $7,516, or 0.88%, of loans, net, at December 31, 2019, compared to $6,348, or 0.71%, of loans, net atyear-end 2018. The increase in the ratio of the allowance for loan losses as a percentage of loans, net, was the result of an increase in the provision for loan losses and a reduction in loan balances. Loanscharged-off, net of recoveries equaled $1,238, or 0.14%, of average loans in 2019, compared to $573, or 0.06%, of average loans in 2018.

Investment Portfolio:

Our investment portfolio provides a source of liquidity needed to meet expected loan demand and generates a reasonable return in order to increase our profitability. Additionally, we utilize the investment portfolio to meet pledging requirements. At December 31, 2019, our portfolio consisted primarily of taxable andtax-exempt state and municipal bonds and mortgage-backed securities, which provide a source of income and liquidity.

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Our investment portfolio is subject to various risk elements that may negatively impact our liquidity and profitability. The greatest risk element affecting our portfolio is market risk or interest rate risk (“IRR”). Understanding IRR, along with other inherent risks and their potential effects, is essential in effectively managing the investment portfolio.

Market risk or IRR relates to the inverse relationship between bond prices and market yields. It is defined as the risk that increases in general market interest rates will result in market value depreciation. A marked reduction in the value of the investment portfolio could subject us to liquidity strains and reduced earnings if we are unable or unwilling to sell these investments at a loss. Moreover, the inability to liquidate these assets could require us to seek alternative funding, which may further reduce profitability and expose us to greater risk in the future. In addition, since our entire investment portfolio is designated asavailable-for-sale and carried at estimated fair value, with net unrealized gains and losses reported as a separate component of stockholders’ equity, market value depreciation could negatively impact our capital position.

During 2019, the FOMC decreased its target federal funds rate 25 basis points three times, totaling 75 basis points for the year. The FOMC has indicated that labor markets remain strong and economic activity has been rising at a moderate rate, and although household spending has been rising at a strong pace, business fixed investment and exports remain weak. Our investment portfolio consists primarily of fixed-rate bonds. As a result, changes in general market interest rates have a significant influence on the fair value of our portfolio. Specifically, the parts of the yield curve most closely related to our investments include the2-year and7-year U.S. Treasury securities. The yield on the2-year U.S. Treasury note affects the values of our U.S. Government agency and U.S. Governments-sponsored enterprises mortgage-backed securities, whereas the7-year U.S. Treasury note influences the value of taxable andtax-exempt state and municipal obligations. The yield on the2-year U.S. Treasury decreased from 2.48% atyear-end 2018 to 1.58% atyear-end 2019. The yield on the7-year U.S. Treasury decreased 76 basis points from 2.59% at December 31, 2018, to 1.83% at December 31, 2019. Since bond prices move inversely to yields, we reported net unrealized holding gains, included as a separate component of stockholders’ equity of $534, net of income taxes of $142, at December 31, 2019, compared to net unrealized holding losses, included as a separate component of stockholders’ equity of $1,725, net of income taxes of $458, at December 31, 2018.

In order to monitor the potential effects that interest rate fluctuations could have on the value of our investments, we perform stress test modeling on the portfolio. Stress tests conducted on our portfolio at December 31, 2019, indicated that should there be a parallel increase in the yield curve over one year by 100, 200 and 300 basis points, we would anticipate declines of 3.5%, 7.3% and 11.1% in the market value of our portfolio.

The carrying values of the major classifications of investment securities and their respective percentages of total investment securities for the past three years are summarized as follows:

Distribution of investment securities

	2019					2018					2017
December 31	Amount		%			Amount		%			Amount		%
State and municipals:
Taxable	$	24,824		27.20	%	$	33,278		31.79	%	$	35,002		37.56	%
Tax-exempt		4,333		4.75			12,776		12.21			16,308		17.50
Mortgage-backed securities:
U.S. Government agencies		36,134		39.60			23,670		22.61			22,817		24.48
U.S. Government-sponsored enterprises		22,645		24.82			26,195		25.02			10,089		10.82
Corporate debt obligations		3,311		3.63			8,758		8.37			8,985		9.64
Total	$	91,247		100.00	%	$	104,677		100.00	%	$	93,201		100.00	%

Investment securities decreased $13.5 million to $91.2 million at December 31, 2019 from $104.7 million at December 31, 2018. At December 31, 2019, the entire investment portfolio was classified asavailable-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 purchases totaled $32.1 million in 2019 as compared with $31.0 million in 2018. Repayments of investment securities totaled $17.3 million in 2019 and $12.8 million in 2018. Proceeds from the sale of investment securitiesavailable-for-sale totaled $30.2 million in 2019 and consisted of five U.S. Treasury securities, three corporate bonds, 16 taxable municipal securities, 10tax-exempt municipal securities and three mortgage-backed government agency securities. This compares to proceeds of $4.8 million from the sale of investment securitiesavailable-for-sale in 2018, which consisted of U.S. Treasury securities. Gross gains of $321 and gross losses of $343, resulted in a net loss of $22 that was recognized from the sale of investment securities in 2019. Gross gains of $40 and no gross losses, resulting in a net gain of $40, were recognized from the sale of investment securities in 2018.

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The composition of the investment portfolio changed during 2019. U.S. Government agency and U.S. Government-sponsored enterprise mortgage-backed securities comprised 64.4% of the total portfolio atyear-end 2019 compared to 47.6% at the end of 2018.Tax-exempt municipal obligations decreased as a percentage of the total portfolio to 4.8% atyear-end 2019 from 12.2% at the end of 2018, while taxable municipal securities decreased to 27.2% of the total portfolio atyear-end 2019 from 31.8% at the end of 2018. Corporate debt comprised 3.6% of the portfolio at the end of 2019 from 8.4% at year ended 2018. As a result of the changes that occurred within the portfolio during 2019, the average life and the modified duration of the investment portfolio decreased to 3.7 years and 3.4 years, respectively, at December 31, 2019 as compared with 6.5 years and 5.3 years at December 31, 2018.

There were no other-than-temporary impairments (“OTTI”) recognized for the years ended December 31, 2019 and 2018. For additional information related to OTTI refer to Note 3 entitled “Investment securities” in the Notes to Consolidated Financial Statements to this Annual Report.

Investment securities averaged $99.9 million and equaled 9.8% of average earning assets in 2019, compared to $94.3 million and equaled 8.9% of average earning assets in 2018. Thetax-equivalent yield on the investment portfolio increased 15 basis points to 2.99% in 2019 from 2.84% in 2018. In addition to measuring our performance using the book yield, we monitor and evaluate our investment portfolio with respect to total return in comparison to national benchmarks. Total return is a comprehensive industry-wide approach measuring investment portfolio performance. This measure is superior to measuring performance strictly on the basis of yield since it not only considers income earned similar to the yield approach, but also includes the reinvestment income on repayments and capital gains and losses, whether realized or unrealized. The total return of our investment portfolio declined to 2.53% at December 31, 2019 from 3.43% at December 31, 2018.

At December 31, 2019 and 2018, there were no securities of any individual issuer, except for U.S. Government agencies and U.S. Government-sponsored enterprises, that exceeded 10.0% of stockholders’ equity.

The maturity distribution based on amortized cost, fair value and weighted-average,tax-equivalent yield of the investment portfolio at December 31, 2019, is summarized as follows. The weighted-average yield, based on amortized cost, has been computed fortax-exempt state and municipals on atax-equivalent basis using the prevailing federal statutory tax rate. The distributions are based on contractual maturity. Expected maturities may differ from contractual maturities because borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

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Maturity distribution of investment securities

	Within one year					After one but within five years					After five but within ten years					After ten years					Total
December 31, 2019	Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield
Amortized Cost:
State and municipals:
Taxable	$	1,094		4.92	%	$	1,147		4.42	%	$	8,738		3.55	%	$	13,386		3.34	%	$	24,365		3.54	%
Tax-exempt							25		5.81			500		3.75			3,735		4.16			4,260		4.12
Mortgage-backed securities:
U.S. Government agencies												14,007		2.59			22,017		2.31			36,024		2.42
U.S. Government-sponsored enterprises							7,584		2.96			9,980		2.83			4,858		2.30			22,422		2.76
Corporate debt obligations							3,500		1.68													3,500		1.68
Total	$	1,094		4.92	%	$	12,256		2.74	%	$	33,225		2.93	%	$	43,996		2.78	%	$	90,571		2.86	%
Fair Value:
State and municipals:
Taxable	$	1,114				$	1,168				$	8,874				$	13,668				$	24,824
Tax-exempt							25					500					3,808					4,333
Mortgage-backed securities:
U.S. Government agencies												14,062					22,072					36,134
U.S. Government-sponsored enterprises							7,671					10,141					4,833					22,645
Corporate debt obligations							3,311															3,311
Total	$	1,114				$	12,175				$	33,577				$	44,381				$	91,247

Loan Portfolio:

Economic factors and how they affect loan demand are important to us and the overall banking industry, as lending is a primary business activity. Loans are the most significant component of earning assets and they generate the greatest amount of revenue for us. Similar to the investment portfolio there are risks inherent in the loan portfolio that must be understood and considered in managing the lending function. These risks include IRR, credit concentrations and fluctuations in demand. Changes in economic conditions and interest rates affect these risks, which influence loan demand, the composition of the loan portfolio and profitability of the lending function. The composition of the loan portfolio atyear-end for the past five years is summarized as follows:

Distribution of loan portfolio

	2019					2018					2017					2016					2015
December 31	Amount		%			Amount		%			Amount		%			Amount		%			Amount		%
Commercial	$	118,658		13.93	%	$	122,919		13.76	%	$	140,116		14.65	%	$	51,166		12.50	%	$	46,076		11.24	%
Real estate:
Construction		61,831		7.26			39,556		4.43			34,405		3.60			8,605		2.10			18,599		4.54
Commercial		455,901		53.50			497,597		55.71			526,230		55.05			212,550		51.93			205,500		50.14
Residential		207,354		24.33			221,115		24.76			240,626		25.17			130,874		31.97			135,106		32.97
Consumer		8,365		0.98			11,997		1.34			14,594		1.53			6,148		1.50			4,564		1.11
Loans, net		852,109		100.00	%		893,184		100.00	%		955,971		100.00	%		409,343		100.00	%		409,845		100.00	%
Less: allowance for loan loss		7,516					6,348					6,306					3,732					4,365
Net loans	$	844,593				$	886,836				$	949,665				$	405,611				$	405,480

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Loans, net decreased $41.1 million in 2019 to $852.1 million at December 31, 2019 as compared with $893.2 million at December 31, 2018. The reduction in loan volumes was a result of payoffs of large loans resulting from the sale of the underlying collateral and, merger related attrition, including payoffs of acquired purchase credit impaired loans and management’s steadfast adherence to strong credit quality underwriting standards and pricing discipline. Business loans, including commercial loans and commercial real estate loans, were $574.6 million, or 67.4%, of loans, net at December 31, 2019, and $620.5 million, or 69.5%, atyear-end 2018. Construction lending was $61.8 million, or 7.3% of loans, net at December 31, 2019 and $39.6 million, or 4.4% of loans, net at December 31, 2018. Residential mortgages and consumer loans totaled $215.7 million, or 25.3%, of loans, net atyear-end 2019 and $233.1 million, or 26.1%, atyear-end 2018. Loan balances declined by $41.1 million, or 4.6%, in 2019, realizing decreases of $15.1 million in the first quarter, $5.8 million in the third quarter and $31.4 million in the fourth quarter, offset by a $11.2 million increase in the second quarter.

Loans averaged $879.3 million in 2019 compared to $928.4 million in 2018. Taxable loans averaged $843.1 million, whiletax-exempt loans averaged $36.2 million in 2019. The decrease in average loans year-over-year was attributable to payoffs of large loans resulting from the sale of the underlying collateral and, merger related attrition, including payoffs of acquired purchase credit impaired loans and management’s steadfast adherence to strong credit quality underwriting standards and pricing discipline. The loan portfolio continues to play a prominent role in our earning asset mix. As a percentage of earning assets, average loans equaled 86.7% in 2019 as compared with 88.0% in 2018.

The prime rate decreased 75 basis points in 2019 to 4.75% at year end from 5.50% at the beginning of the year. Thetax-equivalent yield on our loan portfolio decreased three basis points to 5.24% in 2019 from 5.27% in 2018. Included in loan interest income in 2019 was the recognition of fair value accretion of $3.2 million on acquired loans, which increased thetax-equivalent net interest margin by 32 basis points. Excluding accretion on acquired loans, the tax equivalent yield on the loan portfolio improved 16 basis points to 4.87% in 2019 from 4.71% in 2018.

The maturity distribution and sensitivity information of the loan portfolio by major classification at December 31, 2019, is summarized as follows:

Maturity distribution and interest sensitivity of loan portfolio

December 31, 2019	Within one year		After one but within five years		After five years		Total
Maturity schedule:
Commercial	$	16,860	$	35,425	$	66,373	$	118,658
Real estate:
Construction		9,782		14,300		37,749		61,831
Commercial		24,246		107,328		324,327		455,901
Residential		22,809		55,770		128,775		207,354
Consumer		2,159		2,827		3,379		8,365
Total	$	75,856	$	215,650	$	560,603	$	852,109
Predetermined interest rates	$	35,809	$	91,938	$	79,603	$	207,350
Floating or adjustable interest rates		40,047		123,712		481,000		644,759
Total	$	75,856	$	215,650	$	560,603	$	852,109

As previously mentioned, there are numerous risks inherent in the mortgage loan portfolio. We manage the portfolio by employing sound credit policies and utilizing various modeling techniques in order to limit the effects of such risks. In addition, we utilize private mortgage insurance (“PMI”) to mitigate credit risk in the loan portfolio.

In an attempt to limit IRR and liquidity strains, we continually examine the maturity distribution and interest rate sensitivity of the loan portfolio. Given the potential for rates to rise in the future, we continued to place emphasis on originating short term fixed-rate and adjustable-rate loans. Fixed-rate loans represented 24.3% of the loan portfolio at December 31, 2019, compared to floating or adjustable-rate loans at 75.7%. Approximately 45.7% of the loan portfolio is expected to reprice within the next 12 months.

Additionally, our secondary market mortgage banking program provides us with an additional source of liquidity and a means to limit our exposure to IRR. Through this program, we are able to competitively price conformingone-to-four family residential mortgage loans without taking on IRR which would result from retaining these long-term, low fixed-rate loans on our books. The loans originated are subsequently sold in the secondary market, with the sales price locked in at the time of commitment, thereby greatly reducing our exposure to IRR.

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In addition to the risks inherent in our portfolio in the normal course of business, we are also party to financial instruments withoff-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, and may involve, to varying degrees, elements of credit risk and IRR in excess of the amount recognized in the consolidated financial statements.

Credit risk is the principal risk associated with these instruments. Our involvement and exposure to credit loss in the event that the instruments are fully drawn upon and the customer defaults is represented by the contractual amounts of these instruments. In order to control credit risk associated with entering into commitments and issuing letters of credit, we employ the same credit quality and collateral policies in making commitments that we use in other lending activities.

We evaluate each customer’s creditworthiness on acase-by-case basis, and if deemed necessary, obtain collateral and personal guarantees. The amount and nature of the collateral obtained, or personal guarantees are based on our credit evaluation and overall assessment of risk.

The contractual amounts ofoff-balance sheet commitments atyear-end for the past three years are summarized as follows:

Distribution ofoff-balance sheet commitments

December 31	2019		2018		2017
Commitments to extend credit	$	105,403	$	96,431	$	52,706
Unused portions of lines of credit		66,114		59,512		72,157
Standby and performance letters of credit		4,726		5,789		4,871
Total	$	176,243	$	161,732	$	129,734

We record a valuation allowance foroff-balance sheet credit losses, if deemed necessary, separately as a liability. The valuation allowance amounted to $89 and $73 at December 31, 2019 and 2018, respectively. We do not anticipate that losses, if any, that may occur as a result of fundingoff-balance sheet commitments, would have a material adverse effect on our operating results or financial position.

Asset Quality:

We are committed to developing and maintaining sound, quality assets through our credit risk management policies and procedures. Credit risk is the risk to earnings or capital which arises from a borrower’s failure to meet the terms of their loan agreement. We manage credit risk by diversifying the loan portfolio and applying policies and procedures designed to foster sound lending practices. These policies include certain standards that assist lenders in making judgments regarding the character, capacity, cash flow, capital structure and collateral of the borrower.

With regard to managing our exposure to credit risk, we have established maximumloan-to-value ratios for commercial mortgage loans not to exceed 80.0% of the lower of cost or appraised value. With regard to residential mortgages, customers withloan-to-value ratios between 80.0% and 100.0% are generally required to obtain PMI. The 80.0%loan-to-value threshold provides a cushion in the event the property is devalued. PMI is used to protect us from loss in the eventloan-to-value ratios exceed 80.0% and the customer defaults on the loan. Appraisals are performed by an independent appraiser engaged by us, not the customer, who is either state certified or state licensed depending upon collateral type and loan amount.

With respect to lending procedures, loan relationship managers, centralized underwriters, working with independent credit department analysts in the case of self-employed borrowers or commercial entities, must determine the borrower’s ability to repay the credit based on prevailing and expected market conditions prior to requesting approval for the loan. The Board of Directors establishes and reviews, at least annually, the lending authority for all approving authorities. Credits beyond centralized underwriting or joint officer signature authorities are elevated to an Officer’s Loan Committee and, if necessary, to a Director’s Loan Committee, for approval. All credit decisions attempt to assure the quality of the loan portfolio through careful analysis of credit applications, adherence to credit policies, and the examination of outstanding loans and delinquencies. These procedures assist in the early detection and timelyfollow-up of problem loans.

Credit risk is also managed by quarterly loan quality reviews of our loan portfolio by the asset quality committee as well as an annual loan portfolio review conducted by an independent loan review company. These reviews aid us in identifying deteriorating financial conditions of borrowers, allowing us to proactively develop plans to either assist customers in remedying these situations or exit a relationship.

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Nonperforming assets consist of nonperforming loans and foreclosed assets. Nonperforming loans include nonaccrual loans, troubled debt restructured loans and accruing loans past due 90 days or more. For a discussion of our policy regarding nonperforming assets and the recognition of interest income on impaired loans, refer to the notes entitled, “Summary of significant accounting policies — Nonperforming assets,” and “Loans, net and allowance for loan losses” in the Notes to Consolidated Financial Statements to this Annual Report.

Information concerning nonperforming assets for the past five years is summarized as follows. The table includes credits classified for regulatory purposes and all material credits that cause us to have serious doubts as to the borrower’s ability to comply with present loan repayment terms.

Distribution of nonperforming assets

December 31	2019			2018			2017			2016			2015
Nonaccruing loans:
Commercial	$	1,159		$	1,141		$	75		$	356		$	1,143
Real estate:
Construction
Commercial		459			702			363			359			1,118
Residential		669			886			1,307			671			921
Consumer
Total		2,287			2,729			1,745			1,386			3,182
Accruing troubled debt restructured loans:
Commercial		100			107			702			617			644
Real estate:
Construction
Commercial		577			752			2,670			3,229			3,305
Residential		1,989			2,054			2,106			1,959			2,717
Consumer
Total		2,666			2,913			5,478			5,805			6,666
Accruing loans past due 90 days or more:
Commercial					82
Real estate:
Construction					247
Commercial					170			150
Residential		18			290			533			357			89
Consumer		27			50			9			2
Total		45			839			692			359			89
Total nonperforming loans		4,998			6,481			7,915			7,550			9,937
Other real estate owned		82			721			236			625			885
Total nonperforming assets	$	5,080		$	7,202		$	8,151		$	8,175		$	10,822
Ratios:
Nonperforming loans to total loans, net		0.59	%		0.73	%		0.83	%		1.84	%		2.42	%
Nonperforming assets to total loans, net and OREO		0.60	%		0.81	%		0.85	%		1.99	%		2.63	%

We experienced a decrease in nonperforming assets of $2,122, or 29.5%, to $5,080, or 0.60%, of loans, net of unearned income and foreclosed assets at December 31, 2019, from $7,202, or 0.81%, of loans, net of unearned income and foreclosed assets at December 31, 2018. The improvement resulted from decreases of $247 in accruing troubled debt restructured loans, $639 in other real estate owned, $442 in nonaccrual loans and $794 in accruing loans past due 90 days or more. Nonperforming loans at December 31, 2019 and December 31, 2018 exclude $1,772 and $3,825, respectively, of loans acquired with deteriorated credit quality, which were recorded at their fair value at acquisition. For further discussion of assets classified as nonperforming assets, refer to the note entitled, “Loans, net and the allowance for loan losses”, in the Notes to the Consolidated Financial Statements to this Annual Report.

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We maintain the allowance for loan losses at a level we believe adequate to absorb probable credit losses related to individually evaluated loans, as well as probable incurred losses inherent in the remainder of the loan portfolio as of the balance sheet date. The balance in the allowance for loan losses account is based on past events and current economic conditions. We employ the FFIEC Interagency Policy Statement, as amended 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 for loans specifically identified to be individually evaluated for impairment and the requirements of FASB ASC 450, 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 our Chief Credit Officer identifies those loans to be individually evaluated for impairment and those to be collectively evaluated for impairment utilizing a standard criterion. Internal risk ratings 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 to assure directional consistency of the allowance for loan loss account. Regulators, in reviewing the loan portfolio as part of the scope of a regulatory examination, may require us to increase our allowance for loan losses or take other actions that would require increases to our allowance for loan losses.

For a further discussion of our accounting policies for determining the amount of the allowance and a description of the systematic analysis and procedural discipline applied, refer to the note entitled, “Summary of significant accounting policies — Allowance for loan losses”, in the Notes to Consolidated Financial Statements to this Annual Report.

A reconciliation of the allowance for loan losses and an illustration of charge-offs and recoveries by major loan category for the past five years are summarized as follows:

Reconciliation of allowance for loan losses

December 31	2019			2018			2017			2016			2015
Allowance for loan losses at beginning of year	$	6,348		$	6,306		$	3,732		$	4,365		$	3,792
Loanscharged-off:
Commercial		1,128			206			43			767			650
Real estate:
Construction								78			249
Commercial		254									65			187
Residential		26			104			38			68			60
Consumer		476			437			58			25			35
Total		1,884			747			217			1,174			932
Loan recovered:
Commercial		484			11			5			70			8
Real estate:
Construction
Commercial		6			6			10						19
Residential		7			31			17			7
Consumer		149			126			25			11			6
Total		646			174			57			88			33
Net loanscharged-off		1,238			573			160			1,086			899
Provision for loan losses		2,406			615			2,734			453			1,472
Allowance for loan losses at end of year	$	7,516		$	6,348		$	6,306		$	3,732		$	4,365
Net charge-offs to average loans		0.14	%		0.06	%		0.03	%		0.27	%		0.26	%
Allowance for loan losses to total loans, net		0.88	%		0.71	%		0.66	%		0.91	%		1.07	%

The allowance for loan losses increased $1,168 to $7,516 at December 31, 2019, from $6,348 at the end of 2018. The increase resulted from a provision for loan losses of $2,406, which was partially offset by net loanscharged-off of $1,238. The increase in the loan loss provision to $2,406 in 2019 from $615 in 2018 was the result of higher historical loss factors due to an increase in net charge-offs primarily associated with legacy purchased loans. The allowance for loan losses, as a percentage of loans, net of unearned income, was 0.88% at the end of 2019, compared to 0.71% at the end of 2018. The increase in this ratio compared to that of the prioryear-end was a result of an increase in the provision for loan losses and a reduction in loan balances.

Past due loans not satisfied through repossession, foreclosure or related actions are evaluated individually to determine if all or part of the outstanding balance should be charged against the allowance for loan losses account. Any subsequent recoveries are credited to the allowance account. Net loanscharged-off increased $665 to $1,238 in 2019 from $573 in 2018. Net charge-offs, as a percentage of average loans outstanding, equaled 0.14% in 2019 and 0.06% in 2018.

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Allocation of the allowance for loan losses

The allocation of the allowance for loan losses compared to the percentage of loans by major loan category for the past five years is summarized as follows:

	2019					2018					2017						2016					2015
December 31	Amount		%			Amount		%			Amount		%				Amount		%			Amount		%
Allocated allowance:
Specific:																��
Commercial	$	712		0.27	%	$	382		0.16	%	$	56		0.14	%		$	8		0.24	%	$	700		0.44	%
Real Estate:
Construction
Commercial		218		0.32			78		0.54			76		1.04				140		0.96			8		1.15
Residential				0.27			28		0.30			92		0.37						0.61			7		0.74
Consumer
Total specific		930		0.86			488		1.00			224		1.55				148		1.81			715		2.33
Formula:
Commercial		1,241		13.66			780		13.60			1,150		14.52				621		12.26			598		10.80
Real Estate:
Construction		473		7.26			404		4.43			379		3.60				160		2.10			202		4.54
Commercial		2,897		53.18			3,220		55.17			2,887		54.00				1,970		50.97			2,219		48.99
Residential		1,820		24.06			1,258		24.46			1,248		24.80				789		31.36			606		32.23
Consumer		155		0.98			50		1.34			37		1.53				44		1.50			25		1.11
Total formula		6,586		99.14			5,712		99.00			5,701		98.45				3,584		98.19			3,650		97.67
Total allocated allowance		7,516		100.00	%		6,200		100.00	%		5,925		100.00	%			3,732		100.00	%		4,365		100.00	%
Unallocated allowance							148					381
Total	$	7,516				$	6,348				$	6,306					$	3,732				$	4,365

The allocated element of the allowance for loan losses account increased $1,316 to $7,516 at December 31, 2019, compared to $6,200 at December 31, 2018. The specific portion and formula portion of the allowance for loan losses increased from the end of 2018. The specific portion of the allowance for impairment of loans individually evaluated under FASB ASC 310 increased $442 to $930 at December 31, 2019, from $488 at December 31, 2018. The formula portion of the allowance for loans collectively evaluated for impairment under FASB ASC 450, increased $874 to $6,586 at December 31, 2019, from $5,712 at December 31, 2018. The increase in the specific portion of the allowance was the result the addition of a specific allowance related to one commercial real estate loan and one commercial loan offset partially by thecharge-off of the allocation for two commercial loans. The increase in the formula portion was due to higher historical loss factors due to an increase in net charge-offs primarily associated with legacy purchased loans and changes in qualitative factors used to evaluate the portfolios. There was no unallocated reserve balance at December 31, 2019 and a $148 unallocated element at December 31, 2018. The unallocated balance is used to cover inherent losses that exist as of the evaluation date, but which have not been identified as part of the allocated allowance using the above impairment evaluation methodology due to limitations in the process. One such limitation is the imprecision of accurately estimating the impact current economic conditions will have on historical loss rates. Variations in the magnitude of impact may cause estimated credit losses associated with the current portfolio to differ from historical loss experience, resulting in an allowance that is higher or lower than the anticipated level. Management establishes the unallocated element of the allowance by considering a number of environmental risks similar to those used to determine the qualitative factors. Management continually monitors trends in historical and qualitative factors, including trends in the volume, composition and credit quality within the portfolio. The reasonableness of the unallocated element is evaluated through monitoring trends in its level to determine if changes from period to period are directionally consistent with changes in the loan portfolio.

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The coverage ratio, the allowance for loan losses account as a percentage of nonperforming loans, is an industry ratio used to test the ability of the allowance account to absorb potential losses arising from nonperforming loans. The coverage ratio was 150.4% at December 31, 2019 and 97.9% at December 31, 2018. We believe that our allowance was adequate to absorb probable credit losses at December 31, 2019.

Deposits:

Our deposit base is the primary source of funds to support our operations. We offer a variety of deposit products to meet the needs of our individual and commercial customers. Total deposits decreased $64.1 million in 2019. Noninterest-bearing deposits decreased $15.2 million, and interest-bearing deposits decreased $48.9 million in 2019. Noninterest-bearing deposits represented 15.7% of total deposits, while interest-bearing deposits accounted for 84.3% of total deposits at December 31, 2019. Total deposits decreased $3.6 million, or 0.4%, in the first quarter, $21.3 million, or 2.1%, in the second quarter, $10.1 million, or 1.0%, in the third quarter and $29.1 million, or 3.0%, in the fourth quarter.

Interest-bearing transaction accounts, which include money market accounts, NOW accounts, and savings accounts, decreased $20.7 million in 2019. The decrease in interest-bearing transaction accounts during 2019 consisted of decreases of $11.8 million in money market accounts and $12.3 million in NOW accounts, offset by an increase of $3.3 million in savings accounts. Total time deposits decreased $28.1 million to $285.8 million at December 31, 2019 from $313.9 million at December 31, 2018. The decrease in deposits was primarily related to the decreased need to compete for deposits as a result of the decrease in loans in 2019.

The average amount of, and the rate paid on major classifications of deposits for the past three years are summarized as follows:

Deposit distribution

	2019					2018					2017
Year ended December 31	Average Balance		Average Rate			Average Balance		Average Rate			Average Balance		Average Rate
Interest-bearing:
Money market accounts	$	112,536		0.91	%	$	118,175		0.94	%	$	104,698		0.79	%
NOW accounts		272,323		0.65			273,953		0.62			158,504		0.42
Savings accounts		133,087		0.14			148,441		0.08			114,731		0.14
Time deposits		300,103		1.70			316,418		1.34			171,834		1.07
Total interest-bearing		818,049		0.99	%		856,987		0.84	%		549,767		0.63	%
Noninterest-bearing		156,925					159,751					94,906
Total deposits	$	974,974				$	1,016,738				$	644,673

Total deposits averaged $975.0 million in 2019, decreasing $41.7 million, or 4.1%, compared to 2018. The decrease in average deposits was primarily attributable to a decreased need for funding due to a reduction in loan volume. Average noninterest-bearing deposits decreased $2.8 million, while average interest-bearing accounts declined $38.9 million. Average interest-bearing transaction deposits, including money market, NOW and savings accounts, decreased $22.6 million, and average total time deposits decreased $16.3 million comparing 2019 with 2018.

Our cost of interest-bearing deposits increased 15 basis points to 0.99% in 2019 from 0.84% in 2018. Specifically, the cost of interest-bearing transaction accounts increased four basis points to 0.58%, while the cost of time deposits increased 36 basis points to 1.70% comparing 2019 and 2018.

Volatile deposits, defined as time deposits $100 or more, averaged $110.4 million in 2019, a decrease of $5.5 million, or 4.7%, from $115.9 million in 2018. Our average cost of these funds increased 54 basis points to 1.73% in 2019 from 1.19% in 2018. This type of funding is considered to be volatile since it is susceptible to withdrawal by the depositor as they are particularly price sensitive and are therefore not considered to be a reliable source of long-term liquidity.

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Maturities of time deposits $100 or more for the past three years are summarized as follows:

Maturity distribution of time deposits $100 or more

December 31	2019		2018		2017
Within three months	$	17,410	$	9,044	$	8,938
After three months but within six months		18,992		10,308		16,193
After six months but within twelve months		21,627		19,316		18,584
After twelve months		49,656		77,394		70,734
Total	$	107,685	$	116,062	$	114,449

In addition to deposit gathering, we have in place secondary sources of liquidity to fund operations through exercising existing credit arrangements with the Federal Home Loan Bank of Pittsburgh(“FHLB-Pgh”), Atlantic Community Bankers Bank and Pacific Coast Bankers Bank. For a further discussion of our borrowings and their terms, refer to the notes entitled, “Short-term borrowings” and “Long-term debt,” in the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report.

Market Risk Sensitivity:

Market risk is the risk to our earnings and/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 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 the underlying economic value of our assets, liabilities andoff-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. Interest rate changes affect earnings by changing net interest income and the level of other interest-sensitive income and operating expenses. 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.

The FOMC decreased its target federal funds rate by a total of 75 basis points in 2019. No action was taken at the December 2019 meeting as the FOMC indicated that risks and indicators are balanced. The FOMC has signaled that it may slow or delay its future monetary actions until the latter part of 2020. As a result, the timing and the magnitude of future monetary policy actions that will impact the current interest rate environment are uncertain. Given these conditions, IRR and the ability to effectively manage it are extremely critical to both bank management and regulators. The FFIEC, through its advisory guidance, reiterates the importance of effective corporate governance, policies and procedures, risk measuring and monitoring systems, stress testing and internal controls related to the IRR exposure of depository institutions. According to the guidance, bank regulators believe the current financial market and economic conditions present significant risk management challenges to all financial institutions. Although bank regulators recognize that some degree of IRR is inherent in banking, they expect institutions to have sound risk management practices in place to measure, monitor and control IRR exposure. The guidance states that the adequacy and effectiveness of an institution’s IRR management process, and the level of IRR exposure, are critical factors in the bank regulators’ evaluation of an institution’s sensitivity to changes in interest rates and capital adequacy. Material weaknesses in risk management processes or high levels of IRR exposure relative to capital will require corrective action. We believe our risk management practices regarding IRR were suitable and adequate given the level of IRR exposure at December 31, 2019.

The Asset/Liability Committee (“ALCO”), comprised of members of executive and 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 utilizing several 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”), rate sensitive liabilities (“RSL”) and overall operating results and financial position.

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With respect to evaluating our exposure to IRR on earnings, we utilize a gap analysis model that considers repricing frequencies of RSA and RSL. 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 an RSA/RSL ratio greater than 1.0. A negative gap occurs when the amount of RSL repricing is greater than the amount of RSA and is indicated by an RSA/RSL ratio 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 interest rate sensitivity gap position, illustrating RSA and RSL at their related carrying values, is summarized as follows. The distributions in the table are based on a combination of maturities, call provisions, repricing frequencies and prepayment patterns. Adjustable-rate assets and liabilities are distributed based on the repricing frequency of the instrument. Mortgage instruments are distributed in accordance with estimated cash flows, assuming there is no change in the current interest rate environment.

Interest rate sensitivity

December 31, 2019	Due within three months		Due after three months but within twelve months		Due after one year but within five years		Due after five years			Total
Rate-sensitive assets:
Interest-bearing deposits in other banks	$	38,510								$	38,510
Investment securities		7,628	$	23,080	$	32,645	$	27,894			91,247
Loans held for sale		81									81
Loans, net		251,848		137,356		405,069		57,836			852,109
Total rate-sensitive assets	$	298,067	$	160,436	$	437,714	$	85,730		$	981,947
Rate-sensitive liabilities:
Money market accounts	$	101,373								$	101,373
NOW accounts		5,952	$	17,856	$	95,234	$	154,756			273,798
Savings accounts		2,065		6,195		33,037		90,853			132,150
Time deposits		44,325		98,718		136,612		6,099			285,754
Long-term debt		6,971									6,971
Total rate-sensitive liabilities	$	160,686	$	122,769	$	264,883	$	251,708		$	800,046
Rate-sensitivity gap:
Period	$	137,381	$	37,667	$	172,831	$	(165,978	)
Cumulative	$	137,381	$	175,048	$	347,879	$	181,901		$	181,901
RSA/RSL ratio:
Period		1.85		1.31		1.65		0.34
Cumulative		1.85		1.62		1.63		1.23			1.23

At December 31, 2019, we had cumulativeone-year RSA/RSL ratios of 1.62. As previously mentioned, this positive gap position indicated that if interest rates increase, our earnings would likely be favorably impacted. Given the current balanced economic conditions, the focus of Riverview’s ALCO committee has been to maintain a positive gap position to safeguard future earnings from the potential risk of rising rates. 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 credible 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 aone-day position and variations occur daily as we adjust our rate sensitivity throughout the year. Finally, assumptions must be made in constructing such a table. For example, the conservative nature of our Asset/Liability Management Policy assigns money market accounts to the “Due within three months” repricing interval. In reality, these accounts may reprice less frequently and in different magnitudes than changes in general market interest rate levels.

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We utilize a simulation model to address the failure of the static gap model to address the dynamic changes in the balance sheet composition or prevailing interest rates and to enhance our asset/liability management. This model creates pro forma net interest income scenarios under various interest rate shocks. Given an immediate parallel shift in general market rates of plus 100 basis points, our projected net interest income for the 12 months ending December 31, 2020, would increase 3.08% from model results using current interest rates.

We will continue to monitor our IRR position in 2020 and employ deposit and loan pricing strategies, as well as directing the reinvestment of loan and investment cash flow to maintain a favorable 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 our asset/liability management program.

Liquidity:

Liquidity management is essential to our continuing operations as it gives us the ability to meet our financial obligations as they come due, as well as to take advantage of new business opportunities as they arise. Our 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.

Our liquidity position is impacted by several factors which include, among others, loan origination volumes, loan and investment maturity structure and cash flows, demand for core deposits and certificate of deposit maturity structure and retention. We manage these liquidity risks daily, thus enabling us to effectively monitor fluctuations in our position and adapt our position according to market influence and balance sheet trends. We also forecast future liquidity needs and develop strategies to ensure adequate liquidity at all times.

Historically, core deposits have been our primary source of liquidity because of their stability and lower cost, in general, than other types of funding. Providing additional sources of funds are loan and investment payments and prepayments and the ability to sell bothavailable-for-sale securities and mortgage loans held for sale. As a final source of liquidity, we have available borrowing arrangements with various financial intermediaries, including theFHLB-Pgh. At December 31, 2019, our maximum borrowing capacity with theFHLB-Pgh was $433.3 million, of which $32.7 million was utilized to issue letters of credit to collateralize public funds. We believe our liquidity is adequate to meet both present and future financial obligations and commitments on a timely basis.

We maintain a Contingency Funding Plan to address liquidity in the event of a funding crisis. Examples of some of the causes of a liquidity crisis include, among others, natural disasters, war, events causing reputational harm, and severe and prolonged asset quality problems. The plan recognizes the need to provide alternative funding sources in times of crisis that go beyond our core deposit base. As a result, we have created a funding program that ensures the availability of various alternative wholesale funding sources that can be used whenever appropriate. Identified alternative funding sources include:

• FHLB-Pgh advances;

• Federal Reserve Bank discount window;

• Repurchase agreements;

• Brokered deposits; and

• Federal funds purchased.

Based on our liquidity position at December 31, 2019, we do not anticipate the need to have a material reliance on any of these sources in the near term.

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We employ a number of analytical techniques in assessing the adequacy of our liquidity position. One such technique is the use of ratio analysis to illustrate our reliance on noncore funds to fund our investments and loans maturing after 2019. At December 31, 2019, our noncore funds consisted of time deposits in denominations of $250 or more, short-term borrowings and long-term debt. Large denomination time deposits are not considered to be a strong source of liquidity since they are interest rate sensitive and are considered to be highly volatile. At December 31, 2019, our net noncore funding dependence ratio, the difference between noncore funds and short-term investments to long-term assets, was (1.03%). Our net short-term noncore funding dependence ratio, noncore funds maturing within one year, less short-term investments to long-term assets equaled 1.89%. Comparatively, our ratios equaled 0.65% and 1.73% at the end of 2018, which indicated a low reliance on noncore funds. We believe that by supplying adequate volumes of short-term investments and implementing competitive pricing strategies on deposits, we can ensure adequate liquidity to support future growth.

The Consolidated Statements of Cash Flows present the change in cash and cash equivalents from operating, investing and financing activities. Cash and cash equivalents consist of cash on hand, cash items in the process of collection, noninterest-bearing and interest-bearing deposits with other banks and federal funds sold. Cash and cash equivalents decreased $3,468 for the year ended December 31, 2019, whereas, for the year ended December 31, 2018, cash and cash equivalents increased $28,030. During 2019, cash provided used in financing activities exceeded cash provided by operating and investing activities.

Operating activities provided net cash of $5,256 in 2019 and $11,755 in 2018. Net income, adjusted for the effects of noncash expenses such as depreciation, amortization and accretion of tangible and intangible assets and investment securities, mortgage loans originated for sale, bank owned life insurance investment income and the provision for loan losses, is the primary source of funds from operations.

Our primary investing activities involve transactions related to our investment and loan portfolios. Net cash provided by investing activities totaled $57,746 in 2019 and $52,676 in 2018. Net cash provided by lending activities was $42,901 in 2019, and $66,698 in 2018. Activities related to our investment portfolio provided net cash of $15,482 in 2019 and used net cash of $13,312 in 2018.

Net cash used by financing activities equaled $66,470 in 2019 and $36,401 in 2018. Deposit gathering, which is our predominant financing activity, decreased $64,113 in 2019 and $21,887 in 2018. In addition, no cash was used to pay down short- and long-term borrowings in 2019 as compared with cash of $12,341 used in 2018.

We anticipate our liquidity position to be stable in 2020. We are expecting positive loan demand throughout 2020 and anticipate funding this demand through deposit growth, payments and prepayments on loans and investments and advances from theFHLB-Pgh. If economic conditions were to weaken it may result in increased interest in bank deposits, as consumers continue to save rather than spend. However, we cannot predict the economic climate or the savings habits of consumers. Should economic conditions continue to improve, deposit gathering may be negatively impacted as depositors seek alternative investments in the market. Regardless of economic conditions and stock market fluctuations, we believe that through constant monitoring and adherence to our liquidity plan, we believe we will have the means to provide adequate cash to fund normal operations in 2020.

Capital Adequacy:

We believe a strong capital position is essential to our continued growth and profitability. We strive to maintain a relatively high level of capital to provide our depositors and stockholders with a margin of safety. In addition, a strong capital base allows us to take advantage of profitable opportunities, support future growth and provide protection against any unforeseen losses.

Our ALCO reviews our capital position quarterly. As part of its review, the ALCO considers: (i) the current and expected capital requirements, including the maintenance of capital ratios in excess of minimum regulatory guidelines; (ii) potential changes in the market value of our securities due to interest rate changes and effect on capital; (iii) projected organic and inorganic asset growth; (iv) the anticipated level of net earnings and capital position, taking into account the projected asset/liability position and exposure to changes in interest rates; (v) significant deteriorations in asset quality; and (vi) the source and timing of additional funds to fulfill future capital requirements.

To assure capital adequacy, our Board of Directors annually reviews and approves a Capital Plan. Among other specific objectives, this comprehensive plan: (i) attempts to ensure that we remain well capitalized under the regulatory framework for prompt corrective action; (ii) evaluates our capital adequacy exposure through risk assessment; (iii) establishes event triggers and action plans to ensure capital adequacy; and (iv) identifies realistic and readily available alternative sources for augmenting capital if higher capital levels are required.

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On August 30, 2018, the Federal Reserve enacted changes to Regulation Y to increase the threshold to qualify as a small holding company from $1 billion to $3 billion. As a result, and for the foreseeable future, the Company will not be subject to capital ratio computations and limitations on dividends. Our ability to declare and pay dividends in the future is based on our operating results, financial and economic conditions, capital and growth objectives, appropriate dividend restrictions and other relevant factors. We rely on dividends received from our subsidiary, Riverview Bank, for payment of dividends to stockholders. The Bank’s ability to pay dividends is subject to federal and state regulations. For a further discussion on our ability to declare and pay dividends in the future and dividend restrictions, refer to the note entitled, “Regulatory matters,” in the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report.

Risk-based capital rules became effective January 1, 2015 requiring us to maintain a “capital conservation buffer” of 250 basis points in excess of the “minimum capital ratio.” The minimum capital ratio is equal to the prompt corrective action adequately capitalized threshold ratio. The capital conservation buffer was phased in over four years beginning on January 1, 2016, with a maximum buffer of 0.625% of risk weighted assets for 2016, 1.25% for 2017, 1.875% for 2018, and 2.5% for 2019 and thereafter. The phased in minimum ratios for 2019 include a common equity Tier 1 to risk-weighted assets ratio of 7.0%, Tier 1 capital to risk-weighted assets ratio of 8.5% and a Total capital to risk-weighted assets ratio of 10.5%. For a further discussion of the incorporation of the revised regulatory requirements into the prompt corrective action framework, refer to the section entitled, “Supervision and Regulatory – Risk-Based Capital Requirements,” in Part I of this Annual Report.

Bank regulatory agencies consider capital to be a significant factor in ensuring the safety of depositors’ accounts. These agencies have adopted minimum capital adequacy requirements that include mandatory and discretionary supervisory actions for noncompliance. The Bank’s Tier I and total risk-based capital ratios are strong and have consistently exceeded the well capitalized regulatory capital ratios of 8.0% and 10.0% required for well capitalized institutions. The Bank’s ratio of Tier 1 capital to risk-weighted assets andoff-balance sheet items was 11.5% at December 31, 2019, and 10.7% at December 31, 2018. The total risk-based capital ratio was 12.4% at December 31, 2019 and 11.4% at December 31, 2018. In addition, the Bank is required to maintain a minimum common equity Tier 1 capital to risk-weighted assets ratio in order to be considered well capitalized of 6.5%. The Bank’s common equity Tier I capital to risk-weighted assets ratio was 11.5% at December 31, 2019 and 10.7% at December 31, 2018. The Bank’s Leverage ratio, which equaled 9.1% at December 31, 2019, and 8.4% at December 31, 2018, exceeded the minimum of 5.0% for well capitalized adequacy purposes. Based on the most recent notification from the FDIC, the Bank was categorized as well capitalized at December 31, 2019 and 2018. There are no conditions or negative events since this notification that we believe have changed the Bank’s category. For a further discussion of these risk-based capital standards and supervisory actions for noncompliance, refer to the note entitled, “Regulatory matters,” in the Notes to Consolidated Financial Statements to this Annual Report.

Stockholders’ equity was $118.1 million, or $12.81 per share, at December 31, 2019, and $113.9 million, or $12.49 per share, at December 31, 2018. Stockholders’ equity increased primarily due to a reduction in accumulated other comprehensive loss and the retention of earnings during 2019. Average stockholders’ equity to average total assets equaled 10.41% in 2019 and 9.61% in 2018. We declared dividends of $0.35 per share in 2019 and $0.30 in 2018. The dividend payout ratio, dividends declared as a percent of net income, equaled 74.9% in 2019 and 25.2% in 2018.

Review of Financial Performance:

For the year ended December 31, 2019, Riverview reported net income of $4.3 million, or $0.47 per basic and diluted weighted average common share, compared to a net income of $10.9 million, or $1.19 per basic and diluted weighted average common share, for the year-ended December 31, 2018. Return on average assets and return on average equity were 0.38% and 3.69% for the year ended December 31, 2019 and 0.94% and 9.81% for the year ended December 31, 2018.

Net Interest Income:

Net interest income is the fundamental source of earnings for commercial banks. Moreover, 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, 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 and 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 interest rates; and

• The level of nonperforming assets.

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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, net interest income as a percentage of average 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 liabilities.Tax-exempt loans and investments carry pretax yields lower than their taxable counterparts. Therefore, to make the analysis of net interest income more comparable,tax-exempt income and yields are reported in this analysis on atax-equivalent basis using the prevailing federal statutory tax rate.

Similar to all banks, we consider the maintenance of an adequate net interest margin to be of primary concern. The current economic environment has been challenging for the banking industry with respect to historically low interest rates and competition. No assurance can be given as to how general market conditions will change or how such changes will affect net interest income. Therefore, we believe through prudent deposit and loan pricing practices, careful investing, and constant monitoring of nonperforming assets, our net interest margin will remain strong.

We analyze interest income and interest expense by segregating rate and volume components of earning assets and interest-bearing liabilities. The impact changes in the interest rates earned and paid on assets and liabilities, along with changes in the volumes of earning assets and interest-bearing liabilities, have on net interest income are summarized as follows. The net change or mix component, attributable to the combined impact of rate and volume changes within earning assets and interest-bearing liabilities’ categories, has been allocated proportionately to the change due to rate and the change due to volume.

Net interest income changes due to rate and volume

	2019 vs 2018 Increase (decrease) attributable to									2018 vs 2017 Increase (decrease) attributable to
	Total			Rate			Volume			Total			Rate			Volume
Interest income:
Loans:
Taxable	$	(2,866	)	$	(265	)	$	(2,601	)	$	21,259		$	4,774		$	16,485
Tax-exempt		62			60			2			268			(183	)		451
Investments:
Taxable		459			73			386			118			(181	)		299
Tax-exempt		(152	)		99			(251	)		60			(124	)		184
Interest-bearing deposits		191			108			83			454			150			304
Federal funds sold		(20	)					(20	)		8			9			(1	)
Total interest income		(2,326	)		75			(2,401	)		22,167			4,445			17,722
Interest expense:
Money market accounts		(89	)		(35	)		(54	)		282			168			114
NOW accounts		74			84			(10	)		1,049			415			634
Savings accounts		76			88			(12	)		(50	)		(86	)		36
Time deposits		836			1,069			(233	)		2,419			558			1,861
Short-term borrowings		(30	)					(30	)		(200	)		65			(265	)
Long-term debt		(232	)		174			(406	)		345			248			97
Total interest expense		635			1,380			(745	)		3,845			1,368			2,477
Net interest income	$	(2,961	)	$	(1,305	)	$	(1,656	)	$	18,322		$	3,077		$	15,245

For the years ended December 31,tax-equivalent net interest income was $41,260 in 2019 and $44,221 in 2018. The decrease in net interest income was a result of both unfavorable volume and rate variances caused primarily by reductions in loan volumes and an increase in the cost of funds.Tax-equivalent interest income decreased $2,326 and interest expense increased $635, resulting in a decrease intax-equivalent net interest income of $2,961.

We experienced an unfavorable volume variance primarily caused by a decline in average loan volumes. Average loans, net decreased $49.2 million, which causedtax-equivalent loan interest income to decrease $2,599. Average investments increased $5.6 million, resulting in an increase in interest income of $135. Average interest-earning deposits in other banks increased $4.2 million, resulting in an increase in interest income of $83, while average federal funds sold decreased $20.0 million causing interest income to decrease $20. Average interest-bearing liabilities declined $46.7 million to $825.0 million in 2019 from $871.7 million in 2018. Average interest-bearing transaction accounts, including money market, NOW and savings accounts declined $22.6 million and caused a $76 decrease in interest expense. Time deposits averaged $16.3 million less in 2019 creating an additional reduction of $233. There were no short-term borrowings in 2019, which had the impact of less interest expense by $30, while long-term debt averaged $6 million less and decreased interest expense by $406 comparing 2019 and 2018.

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In addition, an unfavorable rate variance caused net interest income to decline $1,305. The rate variance was caused primarily by an increase of 13 basis points in fund costs to 1.04% in 2019 from 0.91% in 2018. The increase in the fund costs accounted for a $1,380 increase in interest expense in 2019. We experienced increases in the rates paid on all major categories of interest-bearing deposits with the exception of money market accounts. Specifically, the cost of money market accounts decreased three basis points resulting in a reduction in interest expense of $35 comparing 2019 and 2018. The cost of NOW accounts increased three basis points and caused interest expense to increase $84. Savings account costs increased six basis points resulting in an $88 increase in interest expense. With regard to time deposits, the average rate paid for time deposits increased 36 basis points resulting in a $1,069 increase in interest expense. Long-term debt costs increased to 7.41% in 2019 compared to 5.78% in 2018, which resulted in an increase in interest expense of $174.

The average balances of assets and liabilities, corresponding interest income and expense, and resulting average yields or rates paid are summarized as follows. Investment averages includeavailable-for-sale securities at amortized cost. Income on investment securities and loans is adjusted to atax-equivalent basis using the prevailing federal statutory tax rates in 2019 and 2018.

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Summary of net interest income

	2019							2018
	Average Balance		Interest Income/ Expense		Average Interest Rate			Average Balance		Interest Income/ Expense		Average Interest Rate
Assets:
Earning assets:
Loans:
Taxable	$	843,080	$	44,867		5.32	%	$	892,331	$	47,733		5.35	%
Tax-exempt		36,191		1,239		3.42			36,120		1,177		3.26
Investments:
Taxable		92,980		2,735		2.94			79,731		2,276		2.85
Tax-exempt		6,968		253		3.63			14,519		405		2.79
Interest-bearing deposits		35,473		766		2.16			31,307		575		1.84
Federal funds sold									1,285		20		1.56
Total earning assets		1,014,692		49,860		4.91	%		1,055,293		52,186		4.95	%
Less: allowance for loan losses		6,759							6,436
Other assets		106,450							104,019
Total assets	$	1,114,383						$	1,152,876
Liabilities and Stockholders’ Equity:
Interest-bearing liabilities:
Money market accounts	$	112,536		1,024		0.91	%	$	118,175		1,113		0.94	%
NOW accounts		272,323		1,783		0.65			273,953		1,709		0.62
Savings accounts		133,087		191		0.14			148,441		115		0.08
Time deposits		300,103		5,088		1.70			316,418		4,252		1.34
Short-term borrowings									1,799		30		1.67
Long-term debt		6,932		514		7.41			12,912		746		5.78
Total interest-bearing liabilities		824,981		8,600		1.04	%		871,698		7,965		0.91	%
Noninterest-bearing deposits		156,925							159,751
Other liabilities		16,423							10,692
Stockholders’ equity		116,054							110,735
Total liabilities and stockholders’ equity	$	1,114,383						$	1,152,876
Net interest income/spread			$	41,260		3.87	%			$	44,221		4.04	%
Net interest margin						4.07	%						4.19	%
Tax-equivalent adjustments:
Loans			$	260						$	247
Investments				53							85
Total adjustments			$	313						$	332

34

	2017
	Average Balance		Interest Income/ Expense		Average Interest Rate
Assets:
Earning assets:
Loans:
Taxable	$	574,116	$	26,474		4.61	%
Tax-exempt		22,973		909		3.96
Investments:
Taxable		69,707		2,158		3.10
Tax-exempt		8,670		345		3.98
Interest-bearing deposits		11,901		121		1.02
Federal funds sold		1,367		12		0.88
Total earning assets		688,734		30,019		4.36	%
Less: allowance for loan losses		4,704
Other assets		67,897
Total assets	$	751,927
Liabilities and Stockholders’ Equity:
Interest-bearing liabilities:
Money market accounts	$	104,698		831		0.79	%
NOW accounts		158,504		660		0.42
Savings accounts		114,731		165		0.14
Time deposits		171,834		1,833		1.07
Short-term borrowings		19,106		230		1.20
Long-term debt		10,669		401		3.76
Total interest-bearing liabilities		579,542		4,120		0.71	%
Noninterest-bearing deposits		94,906
Other liabilities		7,003
Stockholders’ equity		70,476
Total liabilities and stockholders’ equity	$	751,927
Net interest income/spread			$	25,899		3.65	%
Net interest margin						3.76	%
Tax-equivalent adjustments:
Loans			$	309
Investments				117
Total adjustments			$	426

Note: Average balances were calculated using average daily balances. Average balances for loans include nonaccrual loans. Loan fees are included in interest income on loans.

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, volume 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 made monthly provisions to the allowance totaling $2,406 in 2019 and $615 in 2018. The primary causes for the increase were higher historical loss factors due to an increase in net charge-offs primarily associated with legacy purchased loans. Based on our most recent evaluation at December 31, 2019, we believe that the allowance was adequate to absorb any known or potential losses in our portfolio.

35

Noninterest Income:

Noninterest income decreased $366 or 4.1%, to $8,514 in 2019 from $8,880 in 2018. The primary reason for the decrease was a result of a reduction in service charges, fees and commissions from lower recognition levels ofone-time fees. Service charges, fees and commissions decreased $511 to $5,186 in 2019 from $5,697 in 2018. Wealth management income increased $129 and commissions and fees on fiduciary activities increased $165 comparing 2019 and 2018 as a result of the expansion of clients serviced in those areas. Mortgage banking income decreased $74 to $567 as a result of a lower amount of loans originated for sale in 2019. Bank owned life insurance decreased $13 to $763 in 2019. In 2019 there was a net loss of $22 on sale of investment securities as compared to a net gain of $40 in 2018.

Noninterest Expense:

In general, noninterest expense is categorized into three main groups, salary and employee benefit expense, occupancy and equipment expense and other expenses. Salary and employee benefit expenses are costs associated with providing salaries, employer payroll taxes and benefits to our employees. Occupancy and equipment expenses, or the costs related to the maintenance of facilities and equipment, include depreciation, general maintenance and repairs, real estate taxes, rental expense offset by any rental income, insurance, common area maintenance expenses, and utility costs. Other expenses include general operating expenses such as marketing, other taxes, stationery and supplies, contractual services, insurance, including FDIC assessment and loan collection costs. 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.

The major components of noninterest expense for the past three years are summarized as follows:

Noninterest expense

Year ended December 31	2019		2018		2017
Salaries and employee benefits expense:
Salaries and payroll taxes	$	20,218	$	18,759	$	13,313
Employee benefits		3,627		3,305		1,883
Salaries and employee benefits expense		23,845		22,064		15,196
Occupancy and equipment expenses:
Occupancy expense		2,727		2,472		1,849
Equipment expense		1,630		1,681		1,422
Occupancy and equipment expenses		4,357		4,153		3,271
Other expenses:
Amortization of intangible assets		773		867		538
Net cost of operating other real estate		67		48		172
Advertising		812		647		456
Professional fees		1,406		892		1,503
FDIC insurance and assessments		259		609		443
Telecommunications and processing fees		5,039		4,436		1,884
Director fees		610		685		705
Bank shares tax		759		736		372
Stationary and supplies		430		497		344
Other		3,711		3,291		3,676
Other expenses		13,866		12,708		10,093
Total noninterest expense	$	42,068	$	38,925	$	28,560

Noninterest expense was $42,068 for the year ended December 31, 2019 compared to $38,925 for the year ended December 31, 2018. There were no merger related expenses included in noninterest expense in 2019 as compared with $553 included in 2018.

Salaries and employee benefits expense constitute the majority of our noninterest expenses, accounting for 56.7% of total noninterest expense. Salaries and employee benefits expense increased $1,781, or 8.1%, to $23,845 in 2019 from $22,064 in 2018. Salaries and payroll taxes increased $1,459 while employee benefits expense increased $322. The increase in salaries and payroll taxes was a result of recognizing $2,912 in nonrecurring expenses from the execution of an executive separation agreement and retirement and severance accruals in 2019.

36

Occupancy and equipment expense increased $204, or 4.9%, to $4,357 in 2019 from $4,153 in 2018. Specifically, building-related costs increased $255, while equipment-related costs decreased $51. Additions to leased facilities for newly opened community banking offices along with offices to support the lending teams were primarily responsible for the increase in occupancy costs. Expenses related to branch closures in line with the implementation of our branch repositioning strategy and disposals of obsolete equipment also impacted the increase in occupancy expense.

Other expenses increased $1,158, or 9.1%, to $13,866 in 2019 from $12,708 in 2018. Increases in other expenses were related to the elimination of duplicative processes and other expenses designed to foster efficiency within the Company.

Income Taxes:

Our income tax expense was $701 in 2019 compared to $2,371 in 2018. The level of income tax expense is primarily related to the amount of taxable income generated. The Company’s tax expense was also influenced bytax-exempt income on loans and investments and bank owned life insurance investment income, which allowed us to mitigate our tax burden.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Not required for smaller reporting companies.

37

Item 8. Financial Statements and Supplementary Data.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Stockholders and the Board of Directors of Riverview Financial Corporation

Harrisburg, Pennsylvania

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheet of Riverview Financial Corporation (the “Company”) as of December 31, 2019, the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for the year then ended, and the related notes (collectively referred to as the “financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control – Integrated Framework: (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2019, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control – Integrated Framework: (2013) issued by COSO.

Basis for Opinions

The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audit of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control Over Financial Reporting

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

38

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

/s/ Crowe LLP

We have served as the Company’s auditor since 2019.

Washington, D.C.

March 16, 2020

39

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of Riverview Financial Corporation

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of Riverview Financial Corporation (the “Company”) as of December 31, 2018, and the related consolidated statements of income, comprehensive income (loss), changes in stockholders’ equity and cash flows for the year ended December 31, 2018, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018, and the results of its operations and cash flows for the year ended December 31, 2018, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement whether due to error or fraud.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.

/s/ Dixon Hughes Goodman LLP

We have served as the Company’s auditor from 2016 to 2019.

Gaithersburg, Maryland

March 14, 2019

40

Riverview Financial Corporation

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share data)

December 31	2019			2018
Assets:
Cash and due from banks	$	11,838		$	16,708
Interest-bearing deposits in other banks		38,510			37,108
Investment securitiesavailable-for-sale		91,247			104,677
Loans held for sale		81			637
Loans, net		852,109			893,184
Less: allowance for loan losses		7,516			6,348
Net loans		844,593			886,836
Premises and equipment, net		17,852			18,208
Accrued interest receivable		2,414			3,010
Goodwill		24,754			24,754
Intangible assets		2,736			3,509
Other assets		45,929			42,156
Total assets	$	1,079,954		$	1,137,603
Liabilities:
Deposits:
Noninterest-bearing	$	147,405		$	162,574
Interest-bearing		793,075			842,019
Total deposits		940,480			1,004,593
Short-term borrowings
Long-term debt		6,971			6,892
Accrued interest payable		435			484
Other liabilities		13,958			11,724
Total liabilities		961,844			1,023,693
Stockholders’ equity:
Common stock, no par value, authorized 20,000,000 shares, issued and outstanding: 2019; 9,216,616 shares; 2018; 9,121,555 shares		102,206			101,134
Capital surplus		112			332
Retained earnings		16,140			15,063
Accumulated other comprehensive loss		(348	)		(2,619	)
Total stockholders’ equity		118,110			113,910
Total liabilities and stockholders’ equity	$	1,079,954		$	1,137,603

See notes to consolidated financial statements.

41

Riverview Financial Corporation

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(Dollars in thousands, except per share data)

Year Ended December 31		2019			2018
Interest income:
Interest and fees on loans:
Taxable		$	44,867		$	47,733
Tax-exempt			979			930
Interest on investment securities:
Taxable			2,735			2,276
Tax-exempt			200			320
Interest on interest-bearing deposits in other banks			766			575
Interest on federal funds sold						20
Total interest income			49,547			51,854
Interest expense:
Interest on deposits			8,086			7,189
Interest on short-term borrowings						30
Interest on long-term debt			514			746
Total interest expense			8,600			7,965
Net interest income			40,947			43,889
Provision for loan losses			2,406			615
Net interest income after provision for loan losses			38,541			43,274
Noninterest income:
Service charges, fees and commissions			5,186			5,697
Commission and fees on fiduciary activities			1,080			915
Wealth management income			940			811
Mortgage banking income			567			641
Bank owned life insurance investment income			763			776
Net gain (loss) on sale of investment securitiesavailable-for-sale			(22	)		40
Total noninterest income			8,514			8,880
Noninterest expense:
Salaries and employee benefits expense			23,845			22,064
Net occupancy and equipment expense			4,357			4,153
Amortization of intangible assets			773			867
Net cost of operating other real estate			67			48
Other expenses			13,026			11,793
Total noninterest expense			42,068			38,925
Income before income taxes			4,987			13,229
Income tax expense			701			2,371
Net income			4,286			10,858
Other comprehensive income (loss):
Unrealized gain (loss) on investment securitiesavailable-for-sale			2,837			(1,012	)
Reclassification adjustment for net (gain) loss on sales included in net income			22			(40	)
Change in pension liability			16			(265	)
Income tax expense (benefit) related to other comprehensive income (loss)			604			(277	)
Other comprehensive income (loss), net of income taxes			2,271			(1,040	)
Comprehensive income		$	6,557		$	9,818
Per share data:
Net income:
Basic		$	0.47		$	1.19
Diluted		$	0.47		$	1.19
Average common shares outstanding:
Basic			9,167,415			9,096,142
Diluted	��		9,181,752			9,148,297
Dividends declared		$	0.35		$	0.30

See notes to consolidated financial statements.

42

Riverview Financial Corporation

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Dollars in thousands, except per share data)    

For the two years ended December 31,	Common Stock		Capital Surplus			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total
Balance, January 1, 2019	$	101,134	$	332		$	15,063		$	(2,619	)	$	113,910
Net income							4,286						4,286
Other comprehensive income, net of income taxes										2,271			2,271
Compensation cost of option grants
Issuance under ESPP, 401k and Dividend Reinvestment plans: 57,356 shares		644											644
Exercise of stock options: 22,776 shares		241		(33	)								208
Issuance of restricted stock awards: 14,929 shares		187		(187	)
Dividends declared, $0.35 per share							(3,209	)					(3,209	)
Balance, December 31, 2019	$	102,206	$	112		$	16,140		$	(348	)	$	118,110
Balance, January 1, 2018	$	100,476	$	423		$	6,936		$	(1,579	)	$	106,256
Net income							10,858						10,858
Other comprehensive loss, net of income taxes										(1,040	)		(1,040	)
Compensation cost of option grants				9									9
Issuance under ESPP, 401k and Dividend Reinvestment plans: 40,791 shares		517											517
Exercise of stock options: 11,401 shares		141		(100	)								41
Dividends declared, $0.30 per shares							(2,731	)					(2,731	)
Balance, December 31, 2018	$	101,134	$	332		$	15,063		$	(2,619	)	$	113,910

See notes to consolidated financial statements.

43

Riverview Financial Corporation

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands, except per share data)

Year Ended December 31	2019			2018
Cash flows from operating activities:
Net income	$	4,286		$	10,858
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization of premises and equipment		1,248			1,219
Provision for loan losses		2,406			615
Stock based compensation					9
Net amortization of investment securitiesavailable-for-sale		785			824
Net cost of operation of other real estate owned		67			48
Net loss (gain) on sale of investment securitiesavailable-for-sale		22			(40	)
Amortization of purchase adjustment on loans		(3,245	)		(5,191	)
Amortization of intangible assets		773			867
Amortization of assumed discount on long-term debt		79
Deferred income taxes		1,009			2,340
Proceeds from sale of loans originated for sale		17,032			23,967
Net gain on sale of loans originated for sale		(567	)		(641	)
Loans originated for sale		(15,909	)		(23,709	)
Bank owned life insurance investment income		(763	)		(776	)
Net change in:
Accrued interest receivable		596			227
Other assets		(856	)		568
Accrued interest payable		(49	)		16
Other liabilities		(1,658	)		554
Net cash provided by operating activities		5,256			11,755
Cash flows from investing activities:
Investment securitiesavailable-for-sale:
Purchases		(32,058	)		(30,981	)
Proceeds from repayments		17,308			12,844
Proceeds from sales		30,232			4,825
Proceeds from the sale of other real estate owned		753			174
Net decrease in restricted equity securities		64			252
Net decrease in loans		42,901			66,698
Purchases of premises and equipment		(1,545	)		(1,115	)
Proceeds from sale of equipment		113
Purchase of bank owned life insurance		(22	)		(21	)
Net cash provided by investing activities		57,746			52,676
Cash flows from financing activities:
Net decrease in deposits		(64,113	)		(21,887	)
Net decrease in short-term borrowings					(6,000	)
Repayment of long-term debt					(6,341	)
Proceeds from long-term debt
Issuance under DRP, 401k and ESPP plans		644			517
Issuance of common stock
Proceeds from exercise of options		208			41
Cash dividends paid		(3,209	)		(2,731	)
Net cash used in financing activities		(66,470	)		(36,401	)
Net increase (decrease) in cash and cash equivalents		(3,468	)		28,030
Cash and cash equivalents—beginning		53,816			25,786
Cash and cash equivalents—ending	$	50,348		$	53,816

44

Supplemental disclosures:
Cash paid during the period for:
Interest	$	8,649	$	7,949
Federal income taxes			$	300
Lease liabilities arising from obtainingright-of-use assets	$	3,892
Noncash items from investing activities:
Other real estate acquired in settlement of loans	$	181	$	707
Noncash items from investing and operating activities:
Noncash transfer of owned propertiesavailable-for-sale	$	540

See notes to consolidated financial statements.

45

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”).

Riverview Bank, with 27 full service offices and three limited purpose offices, 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, Cumberland, Dauphin, Huntingdon, Lebanon, Lehigh, Lycoming, Perry, Schuylkill and Somerset Counties.

The Bank is state-chartered under the jurisdiction of the Pennsylvania Department of Banking and Securities and the Federal Deposit Insurance Corporation. The Bank’s primary product is loans to small- andmedium-sized businesses. Other lending products includeone-to-four family residential mortgages and consumer loans. The Bank primarily funds its loans by offering interest-bearing transaction accounts to commercial enterprises and individuals. Other deposit product offerings include certificates of deposits and various demand deposit accounts. The Bank offers a broad range of financial advisory, investment and fiduciary services through its wealth management and trust operating divisions.

The wealth management and trust divisions did not meet the quantitative thresholds for required segment disclosure in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The Bank’s thirty community banking offices, all similar with respect to economic characteristics, share a majority of the following aggregation criteria: (i) products and services; (ii) operating processes; (iii) customer bases; (iv) delivery systems; and (v) regulatory oversight. Accordingly, they were aggregated into a single operating segment.

The Company faces competition primarily from commercial banks, thrift institutions and credit unions within the Central, Northern and Southwestern Pennsylvania markets, many of which are substantially larger in terms of assets and capital. In addition, mutual funds and security brokers compete for various types of deposits, and consumer, mortgage, leasing and insurance companies compete for various types of loans and leases. Principal methods of competing for banking and permitted nonbanking services include price, nature of product, quality of service and convenience of location.

The Company and the Bank are subject to regulations of certain federal and state regulatory agencies and undergo periodic examinations.

Basis of presentation:

The consolidated financial statements of the Company have been prepared in conformity with GAAP, RegulationS-X and reporting practices applied in the banking industry. All significant intercompany balances and transactions have been eliminated in consolidation. The Company also presents herein condensed parent company only financial information regarding Riverview Financial Corporation (“Parent Company”). Prior period amounts are reclassified when necessary to conform with the current year’s presentation. Such reclassifications had no effect on financial position or results of operations.

The Company has evaluated events and transactions occurring subsequent to the balance sheet date of December 31, 2019, for items that should potentially be recognized or disclosed in these consolidated financial statements. The evaluation was conducted through the date these consolidated financial statements were issued.

Estimates:

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 estimates that are particularly susceptible to material change in the near term relate to 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, determination of other-than-temporary impairment losses on securities, impairment of goodwill and fair value of assets acquired and liabilities assumed in business combinations. Actual results could differ from those estimates.

46

Investment securities:

Investment securities are classified and accounted for as eitherheld-to-maturity,available-for-sale, or trading account securities based on management’s intent at the time of acquisition. Management is required to reassess the appropriateness of such classifications at each reporting date. The Company classifies debt securities asheld-to maturity when management has the positive intent and ability to hold such securities to maturity.Held-to-maturity securities are stated at cost, adjusted for amortization of premium and accretion of discount. Investment securities are designated asavailable-for-sale when they are to be held for indefinite periods of time as management intends to use such securities to implement asset/liability strategies or to sell them in response to changes in interest rates, prepayment risk, liquidity requirements, or other circumstances identified by management.Available-for-sale securities are reported at fair value, with unrealized gains and losses, net of income taxes, excluded from earnings and reported in a separate component of stockholders’ equity. Estimated fair values for investment securities are based on market prices from a national pricing service. Realized gains and losses are computed using the specific identification method and are included in noninterest income. Premiums are amortized, and discounts are accreted using the interest method over the contractual lives of investment securities. Investment securities that are bought and held principally for the purpose of selling them in the near term, in order to generate profits from market appreciation, are classified as trading account securities. Trading account securities are carried at market value. Interest on trading account securities is included in interest income. Profits or losses on trading account securities are included in noninterest income. All of the Company’s investment securities were classified asavailable-for-sale in 2019 and 2018. Transfers of securities between categories are recorded at fair value at the date of the transfer, with the accounting treatment of unrealized gains or losses determined by the category into which the security is transferred.

Management evaluates each investment security at least quarterly, to determine if a decline in fair value below its amortized cost is an other-than-temporary impairment (“OTTI”), and more frequently when economic or market concerns warrant an evaluation. Factors considered in determining whether an other-than-temporary impairment was incurred include: (i) the length of time and the extent to which the fair value has been less than amortized cost; (ii) the financial condition and near-term prospects of the issuer; (iii) whether a decline in fair value is attributable to adverse conditions specifically related to the security or specific conditions in an industry or geographic area; (iv) the credit-worthiness of the issuer of the security; (v) whether dividend or interest payments have been reduced or have not been made; (vi) an adverse change in the remaining expected cash flows from the security such that the Company will not recover the amortized cost of the security; (vii) whether management intends to sell the security; and (viii) if it is more likely than not that management will be required to sell the security before recovery. If a decline is judged to be other-than-temporary, the individual security is written-down to fair value with the credit related component of the write-down included in earnings and thenon-credit related component included in other comprehensive income or loss. The assessment of whether an other-than-temporary impairment exists involves a high degree of subjectivity and judgment and is based on information available to management at a point in time.

Loans held for sale:

Loans held for sale consist ofone-to-four family residential mortgages originated and intended for sale in the secondary market with servicing rights released. The loans are carried in aggregate at the lower of cost or estimated market value, based upon current delivery prices in the secondary mortgage market. Gains or losses on the sale of these loans are recognized in noninterest income at the time of sale using the specific identification method. Loan origination fees, net of certain direct loan origination costs, are included in net gains or losses upon the sale of the related mortgage loan. These loans are generally sold without servicing rights retained and without recourse.

Loans, net:

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are stated at their outstanding unpaid principal balances, net of deferred fees or costs. Interest income is accrued on the principal amount outstanding. Loan origination fees, net of certain direct origination costs, are deferred and recognized over the contractual life of the related loan as an adjustment to yield using the effective interest method. Premiums and discounts on purchased loans are amortized as adjustments to interest income using the effective interest method. Delinquency fees are recognized in income when chargeable, assuming collectability is reasonably assured.

Transfers of financial assets, which include loan participation sales, are accounted for as sales, when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when: (i) the assets have been isolated from the Company; (ii) the transferee obtains the right, free of conditions that constrain it from taking advantage of that right, to pledge or exchange the transferred assets and (iii) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

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The loan portfolio is segmented into business, construction and retail loans. Business loans consist of commercial and commercial real estate loans. Construction loans consist of both commercial and residential loans. Retail loans consist of residential real estate and other consumer loans.

The Company makes commercial loans for real estate development and other business purposes required by the customer base. The Company’s credit policies determine advance rates against the different forms of collateral that can be pledged against commercial loans. Typically, the majority of loans will be limited to a percentage of their underlying collateral values such as real estate values, equipment, eligible accounts receivable and inventory. Individual loan advance rates may be higher or lower depending upon the financial strength of the borrower and/or term of the loan. The assets financed through commercial loans are used within the business for its ongoing operation. Repayment of these kinds of loans generally comes from the cash flow of the business or the ongoing conversion of assets. Commercial real estate loans include long-term loans financing commercial properties. Repayment of these loans is dependent upon either the ongoing cash flow of the borrowing entity or the resale of or lease of the subject property. Commercial real estate loans typically require a loan to value of not greater than 80% and vary in terms. Commercial and commercial real estate loans generally have higher credit risk compared to residential mortgage loans and consumer loans, as they typically involve larger loan balances concentrated with single borrowers or groups of borrowers. In addition, the payment expectations on loans secured by income-producing properties typically depend on the successful operations of the related business and thus may be subject to a greater extent to adverse conditions in the real estate market and in the general economy.

Loans secured by commercial real estate generally have larger balances and involve a greater degree of risk thanone-to-four family residential mortgage loans. Of primary concern in commercial real estate lending is the borrower’s and any guarantor’s creditworthiness and the feasibility and cash flow potential of the financed project. Additional considerations include: location, market and geographic concentrations, loan to value, strength of guarantors and quality of tenants. Payments on loans secured by income properties often depend on successful operation and management of the properties. As a result, repayment of such loans may be subject, to a greater extent than residential real estate loans, to adverse conditions in the real estate market or the economy. To monitor cash flows on income properties, we require borrowers and loan guarantors, if any, to provide annual consolidated financial statements on commercial real estate loans and rent rolls where applicable. In reaching a decision on whether to make a commercial real estate loan, we consider and review a cash flow analysis of the borrower and guarantor, when applicable, and considers the net operating income of the property, the borrower’s expertise, credit history and profitability and the value of the underlying property. An environmental report is obtained when the possibility exists that hazardous materials may have existed on the site, or the site may have been impacted by adjoining properties that handled hazardous materials.

Residential mortgages, including home equity loans, are secured by the borrower’s residential real estate in either a first or second lien position. Residential mortgages have varying loan rates depending on the financial condition of the borrower and the loan to value ratio. Residential mortgages may have amortizations up to 30 years.

Consumer loans include installment loans, car loans, and overdraft lines of credit. The majority of these loans are secured. Consumer loans may entail greater risk than do residential mortgage loans, particularly in the case of consumer loans that are unsecured or secured by assets that depreciate rapidly, such as motor vehicles. In the latter case, repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment for the outstanding loan and a small remaining deficiency often does not warrant further substantial collection efforts against the borrower. Consumer loan collections depend on the borrower’s continuing financial stability, and therefore are likely to be adversely affected by various factors, including job loss, divorce, illness or personal bankruptcy. Furthermore, the application of various federal and state laws, including federal and state insolvency laws, may limit the amount that can be recovered on such loans.

Leases:

On January 1, 2019, the Company adopted ASU2016-02, “Leases”. The Company’s primary leasing activities relate to certain real estate leases entered into in support of the Company’s branch and back office operations. The Company’s branch locations operating under lease agreements have all been designated as operating leases. In addition, the Company leases certain equipment under operating leases. The Company does not have leases designated as finance leases.

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The Company determines if an arrangement is a lease at inception. Operating leases are included in operating leaseright-of-use (“ROU”) assets and operating lease liabilities in the consolidated balance sheets. ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The operating lease ROU asset also includes any leasepre-payments made and excludes lease incentives. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The Company has lease agreements with lease andnon-lease components, which the Company has elected to account for separately as thenon-lease component amounts are readily determinable under most leases.

Off-balance sheet financial instruments:

In the ordinary course of business, the Company enters intooff-balance sheet financial instruments consisting of commitments to extend credit, unused portions of lines of credit and standby letters of credit. These financial instruments are recorded in the consolidated financial statements when they are funded. Fees on commercial letters of credit and on unused available lines of credit are recorded as service charges, fees and commissions and are included in noninterest income when earned. The Company records an allowance foroff-balance sheet credit losses, if deemed necessary, separately as a liability.

Nonperforming assets:

Nonperforming assets consist of nonperforming loans and other real estate owned. Nonperforming loans include nonaccrual loans, troubled debt restructured loans and accruing loans past due 90 days or more. Past due status is based on contractual terms of the loan. Generally, a loan is classified as nonaccrual when it is determined that the collection of all or a portion of interest or principal is doubtful or when a default of interest or principal has existed for 90 days or more, unless the loan is well secured and in the process of collection. When a loan is placed on nonaccrual, interest accruals are discontinued, and uncollected accrued interest is reversed against income in the current period. Interest collections after a loan has been placed on nonaccrual status are credited to the principal balance. Interest earned that would have been recognized is credited to income over the remaining life of the loan using the effective yield method if the nonaccrual loan is returned to performing status. A nonaccrual loan is returned to performing status when the loan is current as to principal and interest and has performed according to the contractual terms for a minimum of six months.

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 can generally fall within the following categories:

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

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

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

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

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

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 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 — 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 — 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 — A loan that is inadequately protected by the current sound worth and paying capacity of the obligor or of 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.

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• 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 — 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 in the future.

Other real estate owned is comprised of properties acquired through foreclosure proceedings orin-substance foreclosures. A loan is classified asin-substance foreclosure when the Company has taken possession of the collateral regardless of whether formal foreclosure proceedings take place. Other real estate owned is included in other assets and recorded at fair value less cost to sell at the time of acquisition, establishing a new cost basis. Any excess of the loan balance over the recorded value is charged to the allowance for loan losses. Subsequent declines in the recorded values of the properties prior to their disposal and costs to maintain the assets are included in other expenses. Any gain or loss realized upon disposal of other real estate owned is included in noninterest expense.

Allowance for loan losses:

The allowance for loan losses represents management’s estimate of losses inherent in the loan portfolio as of the balance sheet date. The allowance for loan losses account is maintained through a provision for loan losses charged to earnings. Loans, or portions of loans, determined to be confirmed losses are charged against the allowance account and subsequent recoveries, if any, are credited to the account. A loss is considered confirmed when information available at the financial statement date indicates the loan, or a portion thereof, is uncollectible. Nonaccrual, troubled debt restructured, and loans deemed impaired at the time of acquisition are reviewed monthly to determine if carrying value reductions are warranted or if these classifications should be changed. Consumer loans are considered losses andcharged-off when they are 120 days past due.

Management evaluates the adequacy of the allowance for loan losses account quarterly. This assessment is based on pastcharge-off experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of underlying collateral, composition of the loan portfolio, current economic conditions and other relevant factors. This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant revision as more information becomes available. Regulators, in reviewing the loan portfolio as part of the scope of a regulatory examination, may require the Company to increase its allowance for loan losses or take other actions that would require the Company to increase its allowance for loan losses.

The allowance for loan losses is maintained at a level believed to be adequate to absorb probable credit losses related to specifically identified loans, as well as probable incurred losses inherent in the remainder of the loan portfolio as of the balance sheet date. The allowance for loan losses consists of an allocated element and an unallocated element. The allocated element consists of a specific allowance for impaired loans individually evaluated under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 310, “Receivables,” and a formula portion for loss contingencies on those loans collectively evaluated under FASB ASC 450, “Contingencies.”

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. All amounts due according to the contractual terms means that both the contractual interest and principal payments of a loan will be collected as scheduled in the loan agreement. Factors considered by management in determining impairment include payment status, ability to pay and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on acase-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. The Company recognizes interest income on impaired loans, including the recording of cash receipts for nonaccrual, restructured loans or accruing loans depending on the status of the impaired loan. Loans considered impaired under FASB ASC 310 are measured for impairment 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. If 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, is less than the recorded investment in the loan, a specific allowance for the loan will be established.

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The formula portion of the allowance for loan losses relates to large pools of smaller-balance homogeneous loans and those identified loans considered not individually impaired having similar characteristics as these loan pools. Loss contingencies for each of the major loan pools are determined by applying a total loss factor to the current balance outstanding for each individual pool. The total loss factor is comprised of a historical loss factor using a loss migration method plus qualitative factors, which adjust the historical loss factor for changes in trends, conditions and other relevant factors that may affect repayment of the loans in these pools as of the evaluation date. Loss migration involves determining the percentage of each pool that is expected to ultimately result in loss based on historical loss experience. Historical loss factors are based on the ratio of net loanscharged-off to loans, net, for each of the major groups of loans evaluated and measured for impairment under FASB ASC 450. The historical loss factor for each pool is an average of the Company’s historical netcharge-off ratio for the most recent rolling eight quarters. Management adjusts these historical loss factors by qualitative factors that represent a number of environmental risks that may cause estimated credit losses associated with the current portfolio to differ from historical loss experience. These environmental risks include: (i) changes in lending policies and procedures including underwriting standards and collection,charge-off and recovery practices; (ii) changes in the composition and volume of the portfolio; (iii) changes in national, local and industry conditions, including the effects of such changes on the value of underlying collateral for collateral-dependent loans; (iv) changes in the volume and severity of classified loans including past due, nonaccrual, troubled debt restructures and other loan modifications; (v) changes in the levels of, and trends in, charge-offs and recoveries; (vi) the existence and effect of any concentrations of credit and changes in the level of such concentrations; (vii) changes in the experience, ability and depth of lending management and other relevant staff; (viii) changes in the quality of the loan review system and the degree of oversight by the board of directors; and (ix) the effect of external factors such as competition and legal and regulatory requirements on the level of estimated credit losses in the current loan portfolio. Each environmental risk factor is assigned a value to reflect improving, stable or declining conditions based on management’s best judgment using relevant information available at the time of the evaluation. Adjustments to the factors are supported through documentation of changes in conditions in a narrative accompanying the allowance for loan loss calculation.

The unallocated element, if any, is used to cover inherent losses that exist as of the evaluation date, but which have not been identified as part of the allocated allowance using the above impairment evaluation methodology due to limitations in the process. One such limitation is the imprecision of accurately estimating the impact current economic conditions will have on historical loss rates. Variations in the magnitude of impact may cause estimated credit losses associated with the current portfolio to differ from historical loss experience, resulting in an allowance that is higher or lower than the anticipated level. Management establishes the unallocated element of the allowance by considering environmental risks similar to the ones used for determining the qualitative factors. Management continually monitors trends in historical and qualitative factors, including trends in the volume, composition and credit quality of the portfolio. The reasonableness of the unallocated element is evaluated through monitoring trends in its level to determine if changes from period to period are directionally consistent with changes in the loan portfolio.

Management believes the level of the allowance for loan losses was adequate to absorb probable credit losses as of December 31, 2019.

Premises and equipment, net:

Land is stated at cost. Premises, equipment and leasehold improvements are stated at cost less accumulated depreciation and amortization. The cost of routine maintenance and repairs is expensed as incurred. The cost of major replacements, renewals and betterments is capitalized. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation and amortization are eliminated, and any resulting gain or loss is reflected in noninterest income. Depreciation and amortization are computed principally using the straight-line method based on the following estimated useful lives of the related assets, or in the case of leasehold improvements, to the expected terms of the leases, if shorter:

Premises and leasehold improvements	7 – 50 years
Leasehold improvements	10 – 30 years
Furniture, fixtures and equipment	3 – 10 years

Business combinations, goodwill and other intangible assets, net:

The Company accounts for its acquisitions using the purchase accounting method. Purchase accounting requires the total purchase price to be allocated to the estimated fair values of assets acquired and liabilities assumed, including certain intangible assets that must be recognized. Typically, this allocation results in the purchase price exceeding the fair value of net assets acquired, which is recorded as goodwill. Core deposit intangibles are a measure of the value of checking, money market and savings deposits acquired in business combinations accounted for under the purchase method. Core deposit intangibles and other identified intangibles with finite useful lives are amortized using the sum of the year’s digits over their estimated useful lives of up to ten years.

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Loans that the Company acquires in connection with acquisitions are recorded at fair value with no carryover of the related allowance for credit losses. Fair value of the loans involves estimating the amount and timing of principal and interest cash flows expected to be collected on the loans and discounting those cash flows at a market rate of interest. 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 thenon-accretable discount. Thenon-accretable discount includes estimated future credit losses expected to be incurred over the life of the loan. Subsequent decreases to the expected cash flows will require the Company to evaluate the need for an additional allowance for credit losses. Subsequent improvement in expected cash flows will result in the reversal of a corresponding amount of thenon-accretable discount which the Company will then reclassify as accretable discount that will be recognized into interest income over the remaining life of the loan. Acquired loans that met the criteria for nonaccrual of interest prior to the acquisition may be considered performing upon acquisition, regardless of whether the customer is contractually delinquent. As such, the Company may no longer consider the loan to be nonaccrual or nonperforming and may accrue interest on these loans, including the impact of any accretable discount. In addition, charge-offs on such loans would be first applied to thenon-accretable difference portion of the fair value adjustment.

The Company accounts for performing loans acquired in business combinations using the contractual cash flows method of recognizing discount accretion based on the acquired loans’ contractual cash flows. Purchased performing loans are recorded at fair value, including a credit discount. The fair value discount is accreted as an adjustment to yield over the estimated lives of the loans. There is no allowance for loan losses established at the acquisition date for purchased performing loans. A provision for loan losses is recorded for any further deterioration in these loans subsequent to the acquisition.

Customer list intangibles are also included in intangible assets as a result of the purchase of the wealth management companies. These intangibles are amortized as an expense over ten years using the sum of the years’ amortization method.

Goodwill and other intangible assets are tested for impairment annually during the fourth quarter of each year or when circumstances arise indicating impairment may have occurred. In making this assessment that impairment has occurred, management considers a number of factors including, but not limited to, operating results, business plans, economic projections, anticipated future cash flows, and current market data. There are inherent uncertainties related to these factors and management’s judgment in applying them to the analysis of impairment. Changes in economic and operating conditions, as well as other factors, could result in impairment in future periods. Any impairment losses arising from such testing would be reported in the Consolidated Statements of Income and Comprehensive Income as a separate line item within operations. There were no impairment losses recognized as a result of periodic impairment testing in each of thetwo-years ended December 31, 2019 and 2018.

Restricted equity securities:

As a member of the Federal Home Loan Bank of Pittsburgh(“FHLB-Pgh”),and Atlantic Community Bankers Bank (“ACBB”). the Company is required to purchase and hold stock in these entities to satisfy membership and borrowing requirements. This stock is restricted in that it can only be redeemed by these entities or to another member institution and all redemptions of stock must be at par. As a result of these restrictions, restricted equity stock is unlike other investment securities as there is no trading market in it and the transfer price is determined by theFHLB-Pgh and ACBB membership rules and not by market participants. Therefore, it is accounted for at historical cost and evaluated for impairment. The carrying value of restricted stock is included in other assets.

Bank owned life insurance:

The Company invests in bank owned life insurance (“BOLI”) as a source of funding for employee benefit expenses. BOLI involves the purchasing of life insurance by the Bank on certain of its directors and employees. The Bank is the owner and beneficiary of the policies. This life insurance investment is carried at the cash surrender value of the underlying policies and is included in other assets. Income from increases in cash surrender value of the policies is included in noninterest income.

Pension and post-retirement benefit plans:

The Company sponsors various pension plans covering substantially all employees. The Company also provides post-retirement benefit plans other than pensions, consisting principally of life insurance benefits, to eligible retirees. The liabilities and annual income or expense of the Company’s pension and other post-retirement benefit plans are determined using methodologies that involve several actuarial assumptions, the most significant of which are the discount rate and the long-term rate of asset return, based on the market-related value of assets. The fair values of plan assets are determined based on prevailing market prices or estimated fair value for investments with no available quoted prices.

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Statements of Cash Flows:

The Consolidated Statements of Cash Flows are presented using the indirect method. For purposes of cash flow, cash and cash equivalents include cash on hand, cash items in the process of collection, noninterest-bearing and interest-bearing deposits in other banks and federal funds sold.

Fair value of financial instruments:

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.

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.

The following methods and assumptions were used by the Company to construct the summary table in Note 13 containing the fair values and related carrying amounts of financial instruments:

Cash and cash equivalents: The carrying values of cash and cash equivalents as reported on the balance sheet approximate fair value.

Investment securitiesavailable-for-sale: The fair values of debt securities are based on pricing from a matrix pricing model.

Loans held for sale: The fair values of loans held for sale are based upon current delivery prices in the secondary mortgage market.

Net Loans: Exit price observations are obtained from an independent third-party using its proprietary valuation model and methodology and may not reflect actual or prospective market valuations. The valuation is based on the probability of default, loss given default, recovery delay, prepayment, and discount rate assumptions. The new methodology is a result of the adoption of ASUNo. 2016-01.

Adjustable-rate loans that reprice 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.

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In conjunction with the mergers, the loans purchased were recorded at their acquisition date fair value. In order to record the loans at fair value, management made three different types of fair value adjustments. A market rate adjustment was made to adjust for the movement in market interest rates, irrespective of credit adjustments, compared to the stated rates of the acquired loans. A credit adjustment was made on pools of homogeneous loans representing the changes in credit quality of the underlying borrowers from the loan inception to the acquisition date. The credit adjustment on distressed loans represents the portion of the loan balance that has been deemed uncollectible based on the management’s expectations of future cash flows for each respective loan.

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 suchlow-cost funding provided by the deposit liabilities compared to the cost of borrowing funds in the market. The carrying values of adjustable-rate, fixed-term time deposits approximate their fair values at the reporting date. 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: The fair value of fixed-rate long-term debt 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 of either the Company or the borrower, they only have value to the Company and the borrower. None 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 ofoff-balance sheet financial instruments was not material at December 31, 2019 and December 31, 2018.

Loss contingencies:

Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable, and an amount or range of loss can be reasonably estimated. Management does not believe there now are such matters that will have a material effect on the financial statements.

Advertising:

The Company follows the policy of charging marketing and advertising costs to expense as incurred. Advertising expense for the years ended December 31, 2019 and 2018 was $812 and $647, respectively.

Income taxes:

The Company accounts for income taxes in accordance with the income tax accounting guidance set forth in FASB ASC 740, “Income Taxes”. ASC 740 sets out a consistent framework to determine the appropriate level of tax reserves to maintain for uncertain tax positions.

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The calculation of the provision for income taxes is complex and requires the use of estimates and judgments. The Company has two accruals for income taxes: (i) an income tax payable representing the estimated net amount currently due to the federal government, net of any reserve for potential audit issues and any tax refunds; and (ii) a deferred federal income tax and related valuation accounts, representing the estimated impact of temporary differences between how the Company recognizes its assets and liabilities under GAAP, and how such assets and liabilities are recognized under federal tax law.

Deferred income taxes are provided on the balance sheet method whereby deferred tax assets are recognized for deductible temporary differences and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the effective date. A tax position is recognized as a benefit only if it is more likely than not that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that has a likelihood of being realized on examination of more than 50 percent. For tax positions not meeting the more likely than not threshold, no tax benefit is recorded. Under the more likely than not threshold guidelines, the Company believes no significant uncertain tax positions exist, either individually or in the aggregate, that would give rise to thenon-recognition of an existing tax benefit. The Company had no material unrecognized tax benefits or accrued interest and penalties for any year in thetwo-year period ended December 31, 2019.

As applicable, the Company recognizes accrued interest and penalties assessed as a result of a taxing authority examination through income tax expense. The Company files consolidated income tax returns in the United States of America and various states’ jurisdictions. With limited exception, the Company is no longer subject to federal and state income tax examinations by taxing authorities for years before 2016.

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 securitiesavailable-for-sale and benefit plan adjustments.

The components of accumulated other comprehensive income (loss) included in stockholders’ equity at December 31, 2019 and 2018 are as follows:

December 31	2019			2018
Net unrealized gain (loss) on investment securitiesavailable-for-sale	$	676		$	(2,183	)
Income tax expense (benefit)		142			(458	)
Net of income taxes		534			(1,725	)
Benefit plan adjustments		(1,117	)		(1,132	)
Income tax expense (benefit)		(235	)		(238	)
Net of income taxes		(882	)		(894	)
Accumulated other comprehensive loss	$	(348	)	$	(2,619	)

Other comprehensive income (loss) and related tax effects for the years ended December 31, 2019 and 2018 are as follows:

Year ended December 31	2019			2018
Unrealized gain (loss) on investment securitiesavailable-for-sale	$	2,837		$	(1,012	)
Net (gain) loss on the sale of investment securitiesavailable-for-sale(1)		22			(40	)
Benefit plans:
Amortization of actuarial loss (gain)(2)		104			81
Actuarial (loss) gain		(88	)		(346	)
Net change in benefit plan liabilities		16			(265	)
Other comprehensive income (loss) gain before taxes		2,875			(1,317	)
Income tax expense (benefit)		604			(277	)
Other comprehensive income (loss)	$	2,271		$	(1,040	)

55

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

(2) Represents amounts reclassified out of accumulated comprehensive income and included in the computation of net periodic pension expense. Refer to Note 15 included in these consolidated financial statements.

Earnings per share:

Basic earnings per share is computed by dividing net income allocated to common stockholders divided by the weighted-average number of common shares outstanding during the period. 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.

The following table provides a reconciliation between the computation of basic earnings per share and diluted earnings per share for the years ended December 31, 2019 and 2018:

For the Year Ended December 31	2019		2018
Numerator:
Net income	$	4,286	$	10,858
Denominator:
Basic		9,167,415		9,096,142
Dilutive options		14,337		52,155
Diluted		9,181,752		9,148,297
Earnings per share:
Basic	$	0.47	$	1.19
Diluted	$	0.47	$	1.19

Common stock equivalents outstanding that are anti-dilutive and thus excluded from the calculation of the diluted number of shares represented above were 23,700 in 2019 and 43,350 in 2018.

Stock-based compensation:

The Company recognizes all share-based payments to employees in the consolidated statement of operations based on their grant date fair values. The fair value of such equity instruments is recognized as an expense in the historical consolidated financial statements as services are performed. The Company uses the Black-Scholes model to estimate the fair value of stock options on the date of grant. The Black-Scholes model estimates the fair value of employee stock options using a pricing model which takes into consideration the exercise price of the option, the expected life of the option, the current market price and its expected volatility, the expected dividends on the stock and the current risk-free interest rate for the expected life of the option. The Company typically grants stock options to employees with an exercise price equal to the fair value of the shares at the date of grant. The fair value of restricted stock is equivalent to the fair value on the date of grant and is expensed over the vesting period.

Accounting Standards Adopted in 2019

In February 2016, the FASB issued an update ASUNo. 2016-02, “Leases”, which requires lessees to record most leases on their balance sheet and recognize leasing expenses in the income statement. Operating leases, except for short-term leases that are subject to an accounting policy election, will be recorded on the balance sheet for lessees by establishing a lease liability and correspondingright-of-use asset. All entities are required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. As the Company elected the transition option provided in ASUNo. 2018-11, the modified retrospective approach was applied on January 1, 2019 (as opposed to January 1, 2017). The Company elected the hindsight practical expedient, which allows entities to use hindsight when determining lease term and impairment ofright-of-use assets. The guidance in this ASU became effective January 1, 2019 at which time the Company recorded on the Consolidated Balance Sheet aright-of-use asset and lease liability of $3,719. In March 2019, the FASB issued ASUNo. 2019-01, which provided guidance improvements in determining fair value of underlying asset by lessors that are not manufacturers or dealers, presentation of the statement of cash flows for sales-type and direct financing leases, and transition disclosures. For further detail, see Note 9 – Leases.

56

In March 2017, the 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 adoption of ASUNo. 2017-08 on January 1, 2019 did not have a material effect on our consolidated financial statements.

Recent Accounting Standards

In June 2016, the FASB issued ASUNo. 2016-13, “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. ASUNo. 2016-13 also requires new disclosures for financial assets measured at amortized cost, loans andavailable-for-sale debt securities. In November 2018, the FASB issued ASU No.2018-19—Codification Improvements to Topic 326, Financial Instruments—Credit Losses. The amendments clarify that receivables arising from operating leases are not within the scope of Subtopic326-20. Instead, impairment of receivables arising from operating leases should be accounted for in accordance with Topic 842, Leases. In May 2019, the FASB issued ASUNo. 2019-05 “Financial Instruments-Credit Losses (Topic 326)-Targeted Transition Relief” which amends ASUNo. 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 ASC326-20 if the instruments are eligible for the fair value option under ASC825-10. The fair value option election does not apply toheld-to-maturity debt securities. Entities are required to make this election on aninstrument-by-instrument basis. In November, 2019, the FASB issued ASUNo. 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 Subtopic805-20. 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 anyday-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 ALLL 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, 2022, including interim periods within those fiscal years. Early adoption is permitted. The Company currently expects as of January 1, 2023 to recognize aone-time cumulative effect adjustment to increase the ALLL with an offsetting reduction to the retained earnings component of equity.

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 adoption of the new guidance is not expected to have a material effect on the Company’s financial position, results of operations or disclosures.

In January 2017, the 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, 2022, including interim periods within those fiscal years. Early adoption is permitted for goodwill impairment tests performed on testing dates after January 1, 2017. The adoption of the new guidance is not expected to have a material effect on the Company’s financial position, results of operations or disclosures.

57

In August 2018, the FASB issued ASU2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement”. The amendments in this Update improve the effectiveness of fair value measurement disclosures by modifying the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, based on the concepts in FASB Concepts Statement, Conceptual Framework for Financial Reporting—Chapter 8: Notes to Financial Statements, including the consideration of costs and benefits. The ASU is effective for all entities in fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. In addition, an entity may early adopt any of the removed or modified disclosures immediately and delay adoption of the new disclosures until the effective date. The adoption of the new guidance is not expected to have a material effect on the Company’s financial position, results of operations or disclosures.

In August 2018, the FASB issued ASUNo. 2018-14, “Compensation—Retirement Benefits—Defined Benefit Plans—General(Subtopic 715-20)—Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans”.Subtopic 715-20 addresses the disclosure of other accounting and reporting requirements related to single-employer defined benefit pension or other 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 is effective for all entities in fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Early adoption is permitted. The adoption of the new guidance is not expected to have a material effect on the Company’s financial position, results of operations or disclosures.

In August 2018, the FASB issued ASUNo. 2018-15, “Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract.” This guidance aligns the accounting for implementation costs related to a hosting arrangement that is a service contract with the guidance on capitalizing costs associated with developing or obtaininginternal-use software. Common examples of hosting arrangements include software as a service, platform or infrastructure as a service and other similar types of hosting arrangements. While capitalized costs related tointernal-use software is generally considered an intangible asset, costs incurred to implement a cloud computing arrangement that is a service contract would typically be characterized in the company’s financial statements in the same manner as other service costs (e.g., prepaid expense). The new guidance provides that an entity would be required to amortize capitalized implementation costs over the term of the hosting arrangement on a straight-line basis unless another systematic and rational basis is more representative of the pattern in which the entity expects to benefit from access to the hosted software. This update is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with earlier adoption permitted in any annual or interim period for which financial statements have not yet been issued or made available for issuance. The adoption of the new guidance is not expected to have a material effect on the Company’s financial position, results of operations or disclosures.

In April 2019, the FASB issued ASUNo. 2019-04, “Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments.” The guidance contains various improvements to ASUNo. 2016-01, including scope, fair value measurement alternative,held-to-maturity debt securities fair value disclosures, and remeasurement of equity securities at historical exchange rates. This guidance also contains clarification and improvements to ASUNo. 2016-13 and ASUNo. 2017-12, which are included as clarifying standards. The updated guidance is effective fiscal years beginning after December 15, 2019. The adoption of the new guidance is not expected to have a material effect on the Company’s financial position, results of operations or disclosures.

In December 2019, the FASB issued ASUNo. 2019-12, “Income Taxes”, an update to simplify the accounting for income taxes by removing certain exceptions in Topic 740 Income Taxes. In addition, ASUNo. 2019-12 improves consistent application of other areas of guidance within Topic 740 by clarifying and amending existing guidance. The new guidance is effective fiscal years beginning after December 15, 2020. The adoption of the new guidance is not expected to have a material effect on the Company’s financial position, results of operations or disclosures.

2. Cash and due from banks:

The Bank is required to maintain average reserve balances in cash or on deposit with the Federal Reserve Bank. There was no required reserve at December 31, 2019 and December 31, 2018. In addition, the Bank’s other correspondents may require average compensating balances as part of their agreements to provide services. The Bank maintains balances with correspondent banks that may exceed federal insured limits, which management considers to be a normal business risk.

58

3. Investment securities:

The amortized cost and fair value of investment securitiesavailable-for-sale aggregated by investment category at December 31, 2019 and 2018 are summarized as follows:

December 31, 2019	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
State and municipals:
Taxable	$	24,365	$	466	$	7	$	24,824
Tax-exempt		4,260		73				4,333
Mortgage-backed securities:
U.S. Government agencies		36,024		294		184		36,134
U.S. Government-sponsored enterprises		22,422		265		42		22,645
Corporate debt obligations		3,500				189		3,311
Total	$	90,571	$	1,098	$	422	$	91,247

December 31, 2018	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
State and municipals:
Taxable	$	34,025	$	145	$	892	$	33,278
Tax-exempt		12,970		2		196		12,776
Mortgage-backed securities:
U.S. Government agencies		23,715		61		106		23,670
U.S. Government-sponsored enterprises		26,635		11		451		26,195
Corporate debt obligations		9,515				757		8,758
Total	$	106,860	$	219	$	2,402	$	104,677

The Company had a net unrealized gain of $534, net of deferred income taxes of $142 at December 31, 2019, and a net unrealized loss of $1,725, net of deferred income taxes of $458 at December 31, 2018. Proceeds from the sale of investment securitiesavailable-for-sale amounted to $30,232 in 2019. Gross gains of $321 and gross losses of $343 were realized from the sale of securities in 2019. Income tax benefits applicable to net realized losses amounted to $5 in 2019. In 2018, proceeds from the sale of investment securitiesavailable-for-sale amounted to $4,825, with gross gains of $40 and no gross losses realized from sales.

The maturity distribution of the fair value, which is the net carrying amount of the debt securities classified asavailable-for-sale at December 31, 2019, is summarized as follows:

December 31, 2019	Fair Value
Within one year	$	1,114
After one but within five years		1,192
After five but within ten years		12,686
After ten years		17,476
		32,468
Mortgage-backed securities		58,779
Total	$	91,247

Securities with a carrying value of $63,389 and $71,797 at December 31, 2019 and 2018, respectively, were pledged to secure public deposits 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 acase-by-case basis. At December 31, 2019 and December 31, 2018, 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.

59

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 December 31, 2019 and 2018, 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
December 31, 2019	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
State and municipals:
Taxable	$	1.280	$	7	$		$		$	1,280	$	7
Tax-exempt
Mortgage-backed securities:
U.S. Government agencies		15,799		184						15,799		184
U.S. Government-sponsored enterprises						3,245		42		3,245		42
Corporate debt obligations						3,311		189		3,311		189
Total	$	17,079	$	191	$	6,556	$	231	$	23,635	$	422

	Less Than 12 Months				12 Months or More				Total
December 31, 2018	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
State and municipals:
Taxable	$	2,300	$	4	$	22,943	$	888	$	25,243	$	892
Tax-exempt		1,950		32		9,556		164		11,506		196
Mortgage-backed securities:
U.S. Government agencies		7,862		66		1,216		40		9,078		106
U.S. Government-sponsored enterprises		18,110		163		7,133		288		25,243		451
Corporate debt obligations						8,758		757		8,758		757
Total	$	30,222	$	265	$	49,606	$	2,137	$	79,828	$	2,402

The Company had 22 investment securities, consisting of two taxable state and municipal obligations, 19 mortgage-backed securities and one corporate obligation that were in unrealized loss positions at December 31, 2019. Of these securities, four mortgage-backed securities and one corporate obligation 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 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 any of the unrealized losses to be OTTI at December 31, 2019.

The Company had 92 investment securities, consisting of 39 taxable state and municipal obligations, 22tax-exempt municipal obligations, four corporate obligations and 27 mortgage-backed securities that were in unrealized loss positions at December 31, 2018. Of these securities, 35 taxable state and municipal obligations, 19tax-exempt municipal obligations, four corporate obligations and 13 mortgage-backed securities were in a continuous unrealized loss position for twelve months or more.

60

4. Loans, net and allowance for loan losses:

The major classifications of loans outstanding, net of deferred loan origination fees and costs at December 31, 2019 and 2018 are summarized as follows. Net deferred loan costs were $1,129 and $1,026 at December 31, 2019 and 2018, respectively.

December 31	2019		2018
Commercial	$	118,658	$	122,919
Real estate:
Construction		61,831		39,556
Commercial		455,901		497,597
Residential		207,354		221,115
Consumer		8,365		11,997
Total	$	852,109	$	893,184

Loans outstanding to directors, executive officers, principal stockholders or to their affiliates totaled $9,518 and $9,555 at December 31, 2019 and 2018, respectively. Advances and repayments during 2019, totaled $1,594 and $1,631, respectively. There were no related party loans that were classified as nonaccrual, past due, or restructured or considered a potential credit risk at December 31, 2019 and 2018.

At December 31, 2019, the majority of the Company’s loans were at least partially secured by real estate located in Central and Southwestern Pennsylvania. Therefore, a primary concentration of credit risk is directly related to the real estate market in these areas. Changes in the general economy, local economy or in the real estate market could affect the ultimate collectability of this portion of the loan portfolio. Management does not believe there are any other significant concentrations of credit risk that could affect the loan portfolio.

The changes in the allowance for loan losses account by major classification of loan for the years ended December 31, 2019 and 2018 are summarized as follows:

				Real Estate
December 31, 2019	Commercial			Construction		Commercial			Residential			Consumer			Unallocated			Total
Allowance for loan losses:
Beginning Balance January 1, 2019	$	1,162		$	404	$	3,298		$	1,286		$	50		$	148		$	6,348
Charge-offs		(1,128	)				(254	)		(26	)		(476	)					(1,884	)
Recoveries		484					6			7			149						646
Provisions		1,435			69		65			553			432			(148	)		2,406
Ending balance	$	1,953		$	473	$	3,115		$	1,820		$	155		$			$	7,516

				Real Estate
December 31, 2018	Commercial			Construction		Commercial		Residential			Consumer			Unallocated			Total
Allowance for loan losses:
Beginning Balance January 1, 2018	$	1,206		$	379	$	2,963	$	1,340		$	37		$	381		$	6,306
Charge-offs		(206	)						(104	)		(437	)					(747	)
Recoveries		11					6		31			126						174
Provisions		151			25		329		19			324			(233	)		615
Ending balance	$	1,162		$	404	$	3,298	$	1,286		$	50		$	148		$	6,348

61

The allocation of the allowance for loan losses and the related loans by major classifications of loans at December 31, 2019 and December 31, 2018 is summarized as follows:

			Real Estate
December 31, 2019	Commercial		Construction		Commercial		Residential		Consumer		Unallocated	Total
Allowance for loan losses:
Ending balance	$	1,953	$	473	$	3,115	$	1,820	$	155	$	$	7,516
Ending balance: individually evaluated for impairment		712				218							930
Ending balance: collectively evaluated for impairment		1,241		473		2,897		1,820		155			6,586
Ending balance: purchased credit impaired loans	$		$		$		$		$		$	$
Loans receivable:
Ending balance	$	118,658	$	61,831	$	455,901	$	207,354	$	8,365	$	$	852,109
Ending balance: individually evaluated for impairment		2,260				1,224		2,085					5,569
Ending balance: collectively evaluated for impairment		116,390		61,831		453,156		205,026		8,365			844,768
Ending balance: purchased credit impaired loans	$	8	$		$	1,521	$	243	$		$	$	1,772

			Real Estate
December 31, 2018	Commercial		Construction		Commercial		Residential		Consumer		Unallocated		Total
Allowance for loan losses:
Ending balance	$	1,162	$	404	$	3,298	$	1,286	$	50	$	148	$	6,348
Ending balance: individually evaluated for impairment		382				78		28						488
Ending balance: collectively evaluated for impairment		780		404		3,220		1,258		50		148		5,860
Ending balance: purchased credit impaired loans	$		$		$		$		$		$		$
Loans receivable:
Ending balance	$	122,919	$	39,556	$	497,597	$	221,115	$	11,997	$		$	893,184
Ending balance: individually evaluated for impairment		1,249				1,643		2,146						5,038
Ending balance: collectively evaluated for impairment		121,521		39,556		492,779		218,468		11,997				884,321
Ending balance: purchased credit impaired loans	$	149	$		$	3,175	$	501	$		$		$	3,825

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The following tables present the major classification 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 December 31, 2019 and 2018:

December 31, 2019:	Pass		Special Mention		Substandard		Doubtful	Total
Commercial	$	109,190	$	5,992	$	3,476	$	$	118,658
Real estate:
Construction		61,678		153					61,831
Commercial		430,771		9,271		15,859			455,901
Residential		203,381		1,437		2,536			207,354
Consumer		8,365							8,365
Total	$	813,385	$	16,853	$	21,871	$	$	852,109

December 31, 2018:	Pass		Special Mention		Substandard		Doubtful	Total
Commercial	$	109,609	$	9,123	$	4,187	$	$	122,919
Real estate:
Construction		39,265				291			39,556
Commercial		471,364		13,106		13,127			497,597
Residential		216,218		2,126		2,771			221,115
Consumer		11,997							11,997
Total	$	848,453	$	24,355	$	20,376	$	$	893,184

The following tables present the classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans as of December 31, 2019 and 2018. Purchased credit impaired loans are excluded from the aging and nonaccrual loan schedules.

	Accrual Loans
December 31, 2019	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	$	137	$		$		$	137	$	117,354	$	1,159	$	118,650
Real estate:
Construction		9						9		61,822				61,831
Commercial		147						147		453,774		459		454,380
Residential		3,402		820		18		4,240		202,202		669		207,111
Consumer		84		14		27		125		8,240				8,365
Total	$	3,779	$	834	$	45	$	4,658	$	843,392	$	2,287	$	850,337
Purchased credit impaired loans														1,772
Total Loans													$	852,109

	Accrual Loans
December 31, 2018	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	$	69	$	128	$	82	$	279	$	121,350	$	1,141	$	122,770
Real estate:
Construction		11		655		247		913		38,643				39,556
Commercial		467		538		170		1,175		492,545		702		494,422
Residential		4,537		1,322		290		6,149		213,579		886		220,614
Consumer		124		57		50		231		11,766				11,997
Total	$	5,208	$	2,700	$	839	$	8,747	$	877,883	$	2,729	$	889,359
Purchased credit impaired loans														3,825
Total Loans													$	893,184

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The following tables summarize information concerning impaired loans including purchase credit impaired loans as of and for the years ended December 31, 2019 and 2018, by major loan classification:

							For the Year Ended
December 31, 2019	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance:
Commercial	$	1,147	$	1,257			$	648	$	660
Real estate:
Construction
Commercial		1,963		1,963				3,124		1,456
Residential		2,329		2,467				2,397		173
Consumer
Total		5,439		5,687				6,169		2,289
With an allowance recorded:
Commercial		1,121		1,121	$	712		685
Real estate:
Construction
Commercial		782		936		218		658		17
Residential								91
Consumer
Total		1,903		2,057		930		1,434		17
Commercial		2,268		2,378		712		1,333		660
Real estate:
Construction
Commercial		2,745		2,899		218		3,782		1,473
Residential		2,329		2,467				2,488		173
Consumer
Total	$	7,342	$	7,744	$	930	$	7,603	$	2,306

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							For the Year Ended
December 31, 2018	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance:
Commercial	$	149	$	149			$	459	$	564
Real estate:
Construction
Commercial		4,284		4,284				6,382		2,846
Residential		2,466		2,466				2,875		460
Consumer
Total		6,899		6,899				9,716		3,870
With an allowance recorded:
Commercial		1,249		1,249	$	382		1,117		7
Real estate:
Construction
Commercial		534		534		78		676		17
Residential		181		319		28		184		3
Consumer
Total		1,964		2,102		488		1,977		27
Commercial		1,398		1,398		382		1,576		571
Real estate:
Construction
Commercial		4,818		4,818		78		7,058		2,863
Residential		2,647		2,785		28		3,059		463
Consumer
Total	$	8,863	$	9,001	$	488	$	11,693	$	3,897

For the years ended December 31, interest income, related to impaired loans, would have been $163 in 2019 and $99 in 2018 had the loans been current and the terms of the loans not been modified.

At and for the year ended December 31, 2019, there was one loan modified as troubled debt restructuring and 14 restructured loans totaling $2,701. There were no loans modified as troubled debt restructurings for the year ended December 31, 2018. At December 31, 2018, there were 14 restructured loans totaling $2,925.

The following tables present the number of loans and recorded investment in loans restructured and identified as troubled debt restructurings for the year ended December 31, 2019. Defaulted loans are those which are 30 days or more past due for payment under the modified terms.

December 31, 2019	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Recorded Investment
Troubled Debt Restructurings:
Residential real estate		1	$	23	$	23	$	28

During 2019, there was one default on loans restructured, totaling $221.

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.

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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 ASC310-30, Loan and Debt Securities Acquired with Deteriorated Credit Quality and are identified as “Purchased Credit Impaired Loans”.

As a result of the merger with CBT Financial Corp. (“CBT”), effective October 1, 2017, the Bank identified 37 purchased credit impaired (“PCI”) loans. As part of the merger with Citizens, effective December 31, 2015, the Bank identified 10 PCI loans. As a result of the consolidation with Union, effective November 1, 2013, the Bank identified 14 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 thenon-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 thenon-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 thenon-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 unpaid principal balances and the related carrying amount of acquired loans as of December 31, 2019 and December 31, 2018 were as follows:

	December 31, 2019		December 31, 2018
Credit impaired purchased loans evaluated individually for incurred credit losses:
Outstanding balance	$	2,850	$	7,491
Carrying Amount		1,772		3,825
Other purchased loans evaluated collectively for incurred credit losses:
Outstanding balance		240,574		315,013
Carrying Amount		240,798		314,328
Total Purchased Loans:
Outstanding balance		243,424		322,504
Carrying Amount	$	242,570	$	318,153

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

	Year Ended December 31,
	2019			2018
Balance—beginning of period	$	579		$	2,129
Additions
Accretion recognized during the period		(2,193	)		(3,791	)
Net reclassification fromnon-accretable to accretable		1,657			2,241
Balance—end of period	$	43		$	579

5.Off-balance sheet financial instruments:

The Company is a party to financial instruments withoff-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 the amount recognized in the consolidated balance sheets.

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The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit, unused portions of lines of credit and standby letters of credit is represented by the contractual amounts of those instruments. The Company follows the same credit policies in making commitments and conditional obligations as it does foron-balance sheet instruments. We record a valuation allowance foroff-balance sheet credit losses, if deemed necessary, separately as a liability. The allowance was $89 and $73 at December 31, 2019 and 2018, respectively.

The contractual amounts ofoff-balance sheet commitments at December 31, 2019 and 2018 are summarized as follows:

December 31,	2019		2018
Commitments to extend credit	$	105,403	$	96,431
Unused portions of lines of credit		66,114		59,512
Standby letters of credit		4,726		5,789
	$	176,243	$	161,732

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The Company evaluates each customer’s credit worthiness on acase-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation. Collateral held varies but may include personal or commercial real estate, accounts receivable, inventory and equipment.

Unused portions of lines of credit, including home equity and overdraft protection agreements, are commitments for possible future extensions of credit to existing customers. Unused portions of home equity lines are collateralized and generally have fixed expiration dates. Overdraft protection agreements are uncollateralized and usually do not carry specific maturity dates. Unused portions of lines of credit ultimately may not be drawn upon to the total extent to which the Company is committed.

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Generally, all standby letters of credit expire within twelve months. The credit risk involved in issuing standby letters of credit is essentially the same as that involved in extending other loan commitments. The Company requires collateral supporting these standby letters of credit as deemed necessary. The carrying value of the liability for the Company’s obligations under guarantees for standby letters of credit was not material at December 31, 2019 and 2018.

6. Premises and equipment, net:

Premises and equipment at December 31, 2019 and 2018 are summarized as follows:

December 31	2019		2018
Land	$	4,309	$	4,361
Premises and leasehold improvements		15,413		15,261
Furniture, fixtures and equipment		6,352		6,073
		26,074		25,695
Less: accumulated depreciation		8,222		7,487
	$	17,852	$	18,208

Depreciation and amortization included in noninterest expense amounted to $1,248 and $1,219 in 2019 and 2018, respectively.

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7. Intangible assets, net:

The gross carrying amount and accumulated amortization related to intangible assets at December 31, 2019 and 2018 are presented below:

	2019				2018
December 31	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Core deposit intangibles	$	4,558	$	2,289	$	4,558	$	1,667
Customer list intangible		1,082		671		1,082		541
Trade name intangibles		102		46		102		25
Total intangible assets	$	5,742	$	3,006	$	5,742	$	2,233

Amortization expense for intangible assets totaled $773 and $867 for the years ended 2019 and 2018, respectively.

Riverview estimates the amortization expense for amortizable intangibles as follows:

2020	$	676
2021		581
2022		479
2023		370
2024		280
Thereafter		350
	$	2,736

8. Other assets:

The components of other assets at December 31, 2019 and 2018 are summarized as follows:

December 31	2019		2018
Other real estate owned	$	82	$	721
Bank owned life insurance		30,647		29,862
Restricted equity securities		990		1,054
Deferred tax assets		4,272		5,884
Leaseright-of-use assets		3,856
Other assets		6,082		4,635
Total	$	45,929	$	42,156

9. Leases:

At December 31, 2019, the Company leased 14 of its 30 locations. The Company’s lease ROU assets and related lease liabilities were $3,856 and $3,892, respectively, and have remaining terms ranging from 1 to 34 years, including extension options that the Company is reasonably certain will be exercised. For the year ended December 31, 2019, operating lease cost totaled $188.

The table below summarizes other information related to our operating leases:

	Year Ended December 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	663
ROU assets obtained in exchange for lease liabilities	$	4,430
Weighted average remaining lease term—operating leases, in years		9.16
Weighted average discount rate—operating leases		3.00	%

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The following table outlines lease payment obligations as outlined in the Company’s lease agreements for each of the next five years and thereafter in addition to a reconcilement to the Company’s current lease liability.

2020	$	771
2021		754
2022		697
2023		485
2024		317
Thereafter		1,568
Total lease payments		4,592
Less imputed interest		700
	$	3,892

For the year ended December 31, 2019, the Company entered into three new lease arrangements. The lease ROU assets and related lease liabilities were $992.

10. Deposits:

The major components of interest-bearing and noninterest-bearing deposits at December 31, 2019 and 2018 are summarized as follows:

December 31	2019		2018
Interest-bearing deposits:
Money market accounts	$	101,373	$	113,220
Now accounts		273,798		286,082
Savings accounts		132,150		128,762
Time deposits		285,754		313,955
Total interest-bearing deposits		793,075		842,019
Noninterest-bearing deposits		147,405		162,574
Total deposits	$	940,480	$	1,004,593

The aggregate amount of time deposits that met or exceeded the FDIC insurance limit of $250 was $26,059 at December 31, 2019 and $33,044 at December 31, 2018.

The aggregate amounts of maturities for all time deposits at December 31, 2019, are summarized as follows:

2020	$	143,043
2021		53,248
2022		53,527
2023		23,744
2024		6,093
Thereafter		6,099
	$	285,754

The amount of related party deposits totaled $2,488 at December 31, 2019 and $1,476 at December 31, 2018.

The aggregate amount of deposits reclassified as loans was $169 at December 31, 2019, and $169 at December 31, 2018. Management evaluates transaction accounts that are overdrawn for collectability as part of its evaluation for credit losses.

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11. Short-term borrowings:

Short-term borrowings consists of overnight or less than30-day borrowings from theFHLB-Pgh, ACBB and Pacific Coast Bankers Bank (“PCBB”). The Company had no outstanding short-term borrowings at and for the year ended December 31, 2019. Short-term borrowings at and for the year ended December 31, 2018 is summarized as follows:

	At and for the year ended December 31, 2018
						Weighted			Weighted
				Maximum		Average			Average
	Ending	Average		Month-End		Rate for			Rate at End
	Balance	Balance		Balance		the Year			of the Year
FHLB-Pgh Open Repo Plus advances	$	$	1,693	$	17,100		1.65	%
ACBB advances			106		3,394		1.89	%
Total	$	$	1,799	$	20,494		1.67	%

The Bank has an agreement with theFHLB-Pgh which allows for borrowings up to its maximum borrowing capacity based on a percentage of qualifying collateral assets. At December 31, 2019, the Bank’s maximum borrowing capacity was $453,304. Advances with theFHLB-Pgh are secured under terms of a blanket collateral agreement by a pledge ofFHLB-Pgh stock and certain other qualifying collateral, such as investments and mortgage-backed securities and mortgage loans. Interest accrues daily on theFHLB-Pgh advances based on rates of theFHLB-Pgh discount notes. This rate resets each day.

The Bank also has unsecured line of credit agreements of $10,000 with ACBB and PCBB at December 31, 2019 and December 31, 2018. There were no amounts outstanding on these lines of credit at December 31, 2019 and 2018. Interest on these borrowings accrue daily based on the daily federal funds rate.

12. Long-term debt:

Long-term debt consisting of the following advances at December 31, 2019 and 2018 are as follows:

			Interest Rate
Loan Type	Due		Fixed	Adjustable			2019		2018
Subordinated debt		September 17, 2033			4.85	%	$	4,229	$	4,195
		September 15, 2035			3.43	%		2,742		2,697
							$	6,971	$	6,892

Maturities of long-term debt, by contractual maturity, in years subsequent to December 31, 2019 are as follows:

2020
2021
2022
2023
2024
Thereafter	$	6,971
	$	6,971

As a result of the merger with CBT, the Company assumed the subordinated debentures that were recorded as of the October 1, 2017 effective date. A trust formed by CBT issued $5,000 of floating rate trust preferred securities in 2003 as part of a pooled offering of such securities. The interest rate adjusts quarterly to the three-month LIBOR rate plus 2.95%. CBT issued subordinated debentures to the trust in exchange for ownership of all of the common securities of the trust and the proceeds of the offering; the debentures represent the sole asset of the trust. CBT became eligible to redeem the subordinated debentures, in whole but not in part, beginning in 2008 at a price of 100% of face value. The subordinated debentures must be redeemed no later than 2033. The interest rate on the subordinated debentures was 4.85% and 5.74% on December 31, 2019 and 2018.

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In 2005 a trust formed by CBT issued $4,000 of fixed rate trust preferred securities as part of a pooled offering of such securities. CBT issued subordinated debentures to the trust in exchange for ownership of all of the common securities of the trust and the proceeds of the offering; the debentures represent the sole asset of the trust. CBT became eligible to redeem the subordinated debentures, in whole but not in part, beginning in 2010 at a price of 100% of face value. CBT did not redeem the subordinated debentures and the rate converted to a floating rate of three-month LIBOR plus 1.54%. The subordinated debentures must be redeemed no later than 2035. The interest rate on the subordinated debentures was 3.43% and 4.33% on December 31, 2019 and 2018.

Interest payments on the debentures may be deferred at any time at the election of the Company for up to 20 consecutive quarterly periods. Interest on the debentures will accrue during the extension period, and all accrued principal and interest must be paid at the end of the extension period. During an extension period, the Company may not declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to any of the Company’s capital stock.

13. Fair value of financial instruments:

Assets and liabilities measured at fair value on a recurring basis at December 31, 2019 and 2018 are summarized as follows:

	Fair Value Measurement Using
December 31, 2019	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	$	24,824		$	24,824
Tax-exempt		4,333			4,333
Mortgage-backed securities:
U.S. Government agencies		36,134			36,134
U.S. Government-sponsored enterprises		22,645			22,645
Corporate debt obligations		3,311			3,311
Total	$	91,247		$	91,247

	Fair Value Measurement Using
December 31, 2018	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	$	33,278		$	33,278
Tax-exempt		12,776			12,776
Mortgage-backed securities:
U.S. Government agencies		23,670			23,670
U.S. Government-sponsored enterprises		26,195			26,195
Corporate debt obligations		8,758			8,758
Total	$	104,677	$	$	104,677

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Assets and liabilities measured at fair value on a nonrecurring basis at December 31, 2019 and 2018 are summarized as follows:

	Fair Value Measurement Using
December 31, 2019	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	$	82			$	82
Impaired loans, net of related allowance		973				973
Total	$	1,055			$	1,055

	Fair Value Measurement Using
December 31, 2018	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	$	721			$	721
Impaired loans, net of related allowance		1,476				1,476
Total	$	2,197			$	2,197

The following table presents additional quantitative information about assets measured at fair value on a nonrecurring basis and for which the Company has utilized Level 3 inputs to determine fair value:

	Quantitative Information about Level 3 Fair Value Measurements
December 31, 2019	Fair Value Estimate		Valuation Techniques		Unobservable Input	Range (Weighted Average)
Other real estate owned	$	82		Appraisal of collateral	Appraisal adjustments	42.0% to 60.0% (52.0%)
					Liquidation expenses	10.0% to 10.0% (10.0%)
Impaired loans	$	973		Appraisal of collateral	Appraisal adjustments	10.0% to 50.0% (22.0%)
					Liquidation expenses	9.5% to 12.3% (8.8%)

	Quantitative Information about Level 3 Fair Value Measurements
December 31, 2018	Fair Value Estimate		Valuation Techniques	Unobservable Input	Range (Weighted Average)
Other real estate owned	$	721	Appraisal of collateral	Appraisal adjustments	0.0% to 69.0% (28.4%)
				Liquidation expenses	0.0% to 7.0% (7.0%)
Impaired loans	$	1,476	Appraisal of collateral	Appraisal adjustments	0.0% to 0.0% (0.0%)
				Liquidation expenses	7.0% to 25.0% (10.3%)

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.

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The carrying and fair values of the Company’s financial instruments at December 31, 2019 and 2018 and their placement within the fair value hierarchy are as follows:

			Fair Value Hierarchy
December 31, 2019	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	$	50,348	$	50,348	$	50,348
Investment securitiesavailable-for-sale		91,247		91,247			$	91,247
Loans held for sale		81		81				81
Net loans		852,109		843,590					$	843,590
Accrued interest receivable		2,414		2,414				461		1,953
Restricted equity securities		990
Financial liabilities:
Deposits	$	940,480	$	940,546			$	940,546
Long-term borrowings		6,971		6,971				6,971
Accrued interest payable		435		435				435

			Fair Value Hierarchy
December 31, 2018	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	$	53,816	$	53,816	$	53,816
Investment securitiesavailable-for-sale		104,677		104,677			$	104,677
Loans held for sale		637		637				637
Net loans		886,836		872,455					$	872,455
Accrued interest receivable		3,010		3,010				663		2,347
Restricted equity securities		1,054		1,054		1,054
Financial liabilities:
Deposits	$	1,004,593	$	999,929			$	999,929
Long-term borrowings		6,892		6,892				6,892
Accrued interest payable		484		484				484

14. Revenue recognition:

On January 1, 2018, the Company adopted ASUNo. 2014-09 “Revenue from Contracts with Customers” (Topic 606) and all subsequent ASUs that modified Topic 606. Topic 606 does not apply to revenue associated with financial instruments, including revenue from loans and securities. In addition, certain noninterest income streams such as fees associated with mortgage servicing rights, financial guarantees, derivatives, and certain credit card fees are also not in scope of the new guidance. Topic 606 is applicable to noninterest revenue streams such as trust and asset management income, deposit related fees, interchange fees, merchant income, and other fees. However, the recognition of these revenue streams did not change significantly upon adoption of Topic 606. Substantially all of the Company’s revenue is generated from contracts with customers. Noninterest revenue streamsin-scope of Topic 606 are discussed below.

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Service Charges, Fees and Commissions

Service charges on deposit accounts consist of monthly service fees, check orders, and other deposit account related fees. The Company’s performance obligation for monthly service fees is generally satisfied, and the related revenue recognized, over the period in which the service is provided. Check orders and other deposit account related fees are largely transactional based, and therefore, the Company’s performance obligation is satisfied, and related revenue recognized, at a point in time. Payment for service charges on deposit accounts is primarily received immediately or in the following month through a direct charge to customers’ accounts.

Fees, exchange, and other service charges are primarily comprised of debit and credit card income, ATM fees, merchant services income, and other service charges. Debit and credit card income is primarily comprised of interchange fees earned whenever the Company’s debit and credit cards are processed through card payment networks such as Mastercard. Such income is presented net of network expenses as the Company acts as an agent in these transactions. ATM fees are primarily generated when a Company cardholder uses anon-Company ATM, or anon-Company cardholder uses a Company ATM. Merchant services income mainly represents fees charged to merchants to process their debit and credit card transactions, in addition to account management fees. Other service charges include revenue from processing wire transfers, bill pay service, cashier’s checks, and other services. The Company’s performance obligation for fees, exchange, and other service charges are largely satisfied, and related revenue recognized, when the services are rendered or upon completion. Payment is typically received immediately or in the following month.

Other noninterest income consists of other recurring revenue streams such as commissions from sales of mutual funds and other investments, investment advisor fees from wealth management products, safety deposit box rental fees, and other miscellaneous revenue streams. Commissions from the sale of mutual funds and other investments are recognized on trade date, which is when the Company has satisfied its performance obligation. The Company also receives periodic service fees or trailers from mutual fund companies typically based on a percentage of net asset value. Trailer revenue is recorded over time, usually monthly or quarterly, as net asset value is determined. Investment advisor fees from wealth management products is earned over time and based on an annual percentage rate of the net asset value. The investment advisor fees are charged to the customer’s account in advance on the first month of the quarter, and the revenue is recognized over the following three-month period. Safe deposit box rental fees are charged to the customer on an annual basis and recognized upon receipt of payment. The Company determined that since rentals and renewals occur fairly consistently over time, revenue is recognized on a basis consistent with the duration of the performance obligation.

Trust and Asset Management

Trust and asset management income is primarily comprised of fees earned from the management and administration of trusts and other customer assets. The Company’s performance obligation is generally satisfied over time and the resulting fees are recognized monthly, based upon themonth-end market value of the assets under management and the applicable fee rate. Payment is generally received a few days after month end through a direct charge to customers’ accounts. The Company does not earn performance-based incentives. Optional services such as real estate sales and tax return preparation services are also available to existing trust and asset management customers. The Company’s performance obligation for these transactional-based services is generally satisfied, and related revenue recognized, at a point in time (i.e., as incurred). Payment is received shortly after services are rendered.

The following presents noninterest income, segregated by revenue streamsin-scope andout-of-scope of Topic 606, for the years ended December 31, 2019 and 2018.

Year Ended December 31	2019		2018
Noninterest Income:
In-scope of Topic 606:
Service charges, fees and commissions	$	5,186	$	5,697
Trust and asset management		2,020		1,726
Noninterest income(in-scope of Topic 606)		7,206		7,423
Noninterest income(out-of-scope of Topic 606)		1,308		1,457
Total noninterest income	$	8,514	$	8,880

Contract Balances

A contract asset balance occurs when an entity performs a service for a customer before the customer pays consideration, resulting in a contract receivable, or before payment is due, resulting in a contract asset. A contract liability balance is an entity’s obligation to transfer a service to a customer for which the entity has already received payment (or payment is due) from the customer. The Company’s noninterest revenue streams are largely based on transactional activity, or standardmonth-end revenue accruals such as asset management fees based onmonth-end market values. Consideration is often received immediately or shortly after the Company satisfies its performance obligation and revenue is recognized. The Company does not typically enter into long-term revenue contracts with customers, and therefore, does not experience significant contract balances. As of December 31, 2019 and 2018, the Company did not have any significant contract balances.

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15. Employee Benefit Plans:

Defined Contribution Plan:

The Bank maintains a contributory 401(k) retirement plan for all eligible employees. Currently, the Bank’s policy is to match 100% of the employee’s voluntary contribution to the plan up to a maximum of 4% of the employees’ compensation. Additionally, the Bank may make discretionary contributions to the plan after considering current profits and business conditions. The amount charged to expense in 2019 and 2018 totaled $505 and $508, respectively. Of these amounts, no discretionary contributions were made in 2019 and 2018.

Director Emeritus Plan:

Effective November 2, 2011, a Director Emeritus Agreement (the “Agreement”) was entered into by and between the Company, the Bank and certain Directors. In order to promote orderly succession of the Company’s and Bank’s Board of Directors, the Agreement defines the benefits the Company is willing to provide upon the termination of service to those individuals who served as Directors of the Company and Bank as of December 31, 2011, where the Company will pay the Director $15 per year for services performed as a Director Emeritus, which may be increased at the sole discretion of the Board of Directors. The agreement further states that the benefit is to be paid to a Director Emeritus over five years, in 12 monthly installments:

• upon termination of service as a Director on or after the age of 65, provided the Director agrees to provide certain ongoing services for Riverview;

• upon termination of service as a Director due to a disability prior to age 65;

• upon a change of control; or

• upon the death of a Director after electing to be a Director Emeritus.

Expenses recorded under the terms of this agreement were $75 and $83 for the years ended December 31, 2019 and 2018, respectively.

Deferred Compensation Agreements:

The Bank maintains 12 Supplemental Executive Retirement Plan (“SERP”) agreements that provide specified benefits to certain key executives. The agreements were specifically designed to encourage key executives to remain as employees of the Bank. The agreements are unfunded, with benefits to be paid from the Bank’s general assets. After normal retirement, benefits are payable to the executive or his/her beneficiary in equal monthly installments for a period of 15 years for nine of the executives and 20 years for three of the executives. There are provisions for death benefits should a participant die before his/her retirement date. These benefits are also subject to change of control and other provisions.

The Bank maintains a “Director Deferred Fee Agreement” (“DDFA”) which allows electing directors to defer payment of their directors’ fees until a future date. In addition, the Bank maintains an “Executive Deferred Compensation Agreement” (“EDCA”) with 10 of its current and former executives. This agreement allows the executives of the Bank to defer payment of their base salary, bonus and performance-based compensation until a future date. For both types of deferred fee agreements during the deferral period, the estimated present value of the future benefits is accrued over the effective dates of the agreements using an interest factor that is evaluated and approved by the compensation committee of the Board of Directors on an annual basis. The agreements are unfunded, with benefits to be paid from the Bank’s general assets.

The accrued benefit obligations for all the plans total $4,862 at December 31, 2019 and $4,749 at December 31, 2018 and are included in other liabilities. Expenses relating to these plans totaled $643 and $332 in the years ended December 31, 2019 and 2018, respectively.

2009 Stock Option Plan:

The Company has a nonqualified stock option plan to advance the development, growth and financial condition of the Company. This plan provides incentives through participation in the appreciation of its common stock in order to secure, retain and motivate directors, officers and key employees and align such person’s interests with those of its shareholders. A total of 350,000 shares were originally authorized under the stock option plan.

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The vesting schedule for all option grants is a seven-year cliff, which means that the options are 100% vested in the seventh year following the grant date while the expiration date of all options is ten years following the grant date. The Plan states that upon the date of death of a participant, all awards granted pursuant to the agreement for that participant shall become fully vested and remain exercisable for the option grant’s remaining term. All stock options, except for 1,500 stock options granted during 2018, were fully vested and exercisable at December 31, 2019.

The following table summarizes the stock option activity for the years ended December 31, 2019 and 2018:

	2019					2018
	Option Grants			Weighted Average Exercise Price		Option Grants			Weighted Average Exercise Price
Outstanding – January 1,		263,480		$	10.62		298,246		$	10.56
Granted							6,500			12.88
Forfeited		(6,150	)		12.98		(5,750	)		10.60
Expired		(34,250	)		10.60
Exercised		(50,116	)		10.22		(35,516	)		10.57
Outstanding – December 31,		172,964		$	10.66		263,480		$	10.62
Options vested and exercisable atyear-end		171,464					256,980
Range of exercise price	$	9.75 - $13.05				$	9.75 - $13.05
Remaining contractual life		4.42 years					4.06 years

There were no stock options granted during 2019. The fair value of stock options granted during 2018 was estimated on the date of grant using the Black-Scholes option-pricing model and weighted average assumptions as follows:

	Option Grants March 16, 2018			Option Grants June 26, 2018
Number of options		5,000			1,500
Fair value per share	$	2.01		$	1.39
Dividend yield		4.24	%		3.28	%
Expected life		8.5 years			8.5 years
Expected volatility		23.26	%		14.02	%
Risk-free interest rate		2.78	%		2.83	%

During the year ended December 31, 2019, there were 50,116 stock options exercised with a total intrinsic value, the amount by which the stock price exceeded the exercise price, and fair value of approximately $52 and $574, respectively. Cash received from the exercise of stock options for the year ended December 31, 2019 was $208.

There was intrinsic value associated with 153,264 options outstanding at December 31, 2019, where the market value of the stock as of the close of business at year end was $12.49 per share as compared with the option exercise price of $9.75 for 21,664 options, $10.00 for 85,600 options, $10.35 for 12,500 options, $10.60 for 16,000 options, $11.94 for 15,000 options and $12.25 for 2,500 options. There was no intrinsic value associated with 19,700 options outstanding at December 31, 2019, where the market value of the stock as of the close of business at year end was $12.49 per share as compared with the option exercise price of $12.58 for 1,500 options and $13.05 for 18,200 options.

At December 31, 2018, there was intrinsic value associated with 220,130 options outstanding, where the market value of the stock as of the close of business at year end was $10.90 per share as compared with the option exercise price of $9.75 for 26,830 options, $10.00 for 92,800 options, $10.35 for 12,500 options and $10.60 for 88,000 options. There was no intrinsic value associated with 43,350 options outstanding at December 31, 2018, where the market value of the stock as of the close of business at year end was $10.90 per share as compared with the option exercise price of $12.25 for 2,500 options, $13.05 for 19,350 options, $11.94 for 15,000 options, $12.97 for 5,000 options and $12.58 for 1,500 options

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The Company accounts for these options in accordance with GAAP, which requires that the fair value of the equity awards be recognized as compensation expense over the period during which the employee is required to provide service in exchange for such an award. The Company policy has been to amortize compensation expense over the vesting period, or seven years. The Company recognized no compensation expense for stock options for the year ended December 31, 2019 and $9 for the year ended December 31, 2018. As of December 31, 2019, the Company had no unrecognized compensation expense associated with the stock options since all of the options granted prior to 2018 were fully vested in 2017 as a result of the change in control associated with the merger with CBT.

The plan expired January 7, 2019 so that no options were granted thereafter.

2019 Equity Incentive Plan:

The Company has anon-qualified equity incentive plan that was approved by the shareholders at the annual meeting held on June 13, 2019. The purpose of the plan is to promote the long-term success of the Company by providing a means to attract, retain and reward individuals who contribute to such success and to further align their interests with those of the Company’s shareholders through the ownership of common stock of the Company. The types of awards that may be granted under the Plan include: incentive stock options,non-qualified stock options, restricted stock awards, restricted stock units and performance awards. A total of 1,140,000 shares of common stock were reserved under the Plan, of which a maximum of 1,140,000 shares of common stock may be issued pursuant to grants of stock options but only a maximum of 570,000 shares of common stock may be issued pursuant to grants of restricted stock or restricted stock units. To the extent a restricted stock award or restricted stock unit is granted, the number of shares available as stock options will be reduced by two shares of each share represented by a restricted stock award agreement or restricted stock unit agreement. The maximum number of shares of common stock pursuant to any type of award available under the Plan that may be granted to any one employee shall not exceed 200,000 shares. A director may be granted an award ofnon-qualified stock options, restricted stock awards, restricted stock units, or a combination of such awards provided that the aggregate grant date fair value shall not exceed $50,000.

The duration of the Plan is 10 years from the approval date.

The following table summarizes the award activity for the year ended December 31, 2019:

	2019
	Restricted Stock Award Grants		Fair Market Value
Outstanding – January 1,		—
Granted		14,929	$	12.49
Outstanding – December 31,		14,929	$	12.49
Awards vested atyear-end		—
Remaining contractual life		2.17 years

Restricted stock awards were granted in 2019 and provide the participant with the right to vote the shares of restricted stock awarded and to receive dividends. The fair value of the restricted stock awards granted was the closing price of the Company’s common stock as of the date of grant. The expense associated with these grants totaled $187 and will be respectively expensed over the vesting period of one year for the 6,160 awards granted to directors and three years for the 8,769 awards granted to employees.

Employee Stock Purchase Plan:

The Company has an Employee Stock Purchase Plan (“ESPP”), whereby employees may purchase up to 170,000 shares of common stock of the Company, at a discount of up to a 15%. On April 15, 2015, the Company filed a Registration Statement on FormS-8, to register 75,000 shares of common stock that the Company may issue to the ESPP. Common shares acquired through the ESPP totaled 21,733 shares in 2019 and 18,650 shares in 2018.

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Defined Benefit Pension Plan and Post Retirement Benefit Plan:

As a result of the consolidation with Union, the Company took over Union’s noncontributory defined benefit pension plan, which substantially covered all Union employees. The plan benefits were based on average salary and years of service. Union elected to freeze all benefits earned under the plan effective January 1, 2007.

The Company also assumed responsibility of Citizens’ noncontributory defined benefit pension plan effective as of the December 31, 2015 merger date. The plan substantially covered all Citizens employees and the plan benefits were based on average salary and years of service. Citizens elected to freeze all benefits earned under the plan effective January 1, 2013.

As a result of the merger of equals effective October 1, 2017, the Company assumed responsibility of CBT’s postretirement benefits plan, which is an unfunded postretirement benefit plan covering health insurance costs and postretirement life insurance benefits for certain retirees.

The Company accounts for the defined benefit pension plan and the postretirement benefits plan in accordance with FASB ASC Topic 715, “Compensation-Retirement Plans”. This guidance requires the Company to recognize the funded status, which is the difference between the fair value of the plan assets and the projected benefit obligation of the benefit plan.

The following table presents the plans’ funded status and the amounts recognized in the Company’s consolidated financial statements for 2019 and 2018. The measurement date, for purposes of these valuations, was December 31, 2019 and 2018.

	Benefit Plans
	2019			2018
Obligations and funded status:
Change in benefit obligations:
Benefit obligation beginning January 1,	$	7,669		$	8,403
Interest cost		313			291
Benefits paid		(548	)		(546	)
Actuarial (gain)/loss		768			(479	)
Benefit obligation at end of year		8,202			7,669
Change in plan assets:
Fair value of plan assets at January 1,		6,310			7,191
Adjustment to asset value at January 1
Actual return on plan assets		1,108			(349	)
Contributions		1,411			8
Benefits paid		(548	)		(540	)
Fair value of plan assets at end of year		8,281			6,310
Funded status included in other liabilities	$	79		$	(1,359	)

Amounts related to the plan that have been recognized in accumulated other comprehensive loss but not yet recognized as a component of net periodic pension cost are as follows for the years ended December 31:

	Benefit Plans
	2019			2018
Net gain (loss)	$	(1,117	)	$	(1,132	)
Income tax expense (benefit)		(235	)		(238	)
Net amount recognized in other comprehensive income (loss)	$	(882	)	$	(894	)

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The amount of net periodic benefit credit expected to be accreted in 2020 is $155 for the pension plans.

Net periodic pension expense and postretirement benefit cost include the following components for the years ended December 31, 2019 and 2018:

	Pension Benefits
	2019			2018
Interest cost	$	310		$	291
Expected return on plan assets		(410	)		(486	)
Amortization of net loss		112			81
Net periodic pension cost (credit)	$	12		$	(114	)

	Postretirement Life Insurance Benefits
	2019			2018
Service cost (credit)	$	(7	)	$
Interest cost		2			2
Net periodic postretirement benefit cost (credit)	$	(5	)	$	2

The accumulated benefit obligation was $8,202 at December 31, 2019 and $7,669 at December 31, 2018 for the pension benefit and postretirement benefit plans.

	Pension Benefits
	Union						Citizens						Postretirement Life Insurance Benefits
	2019			2018			2019			2018			2019			2018
Discount rate		4.22	%		3.60	%		4.22	%		3.60	%		4.25	%		4.25	%
Expected long-term rate of return on plan assets		6.75	%		7.00	%		6.75	%		7.00	%

The following summarizes the actuarial assumptions used for the Company’s pension plan and postretirement benefits plan:

• For the pension plan, the selected long-term rate of return on plan assets was primarily based on the asset allocation of the plan’s assets. Analysis of the historic returns on these asset classes and projections of expected future returns were considered in setting the long-term rate of return.

• The benefit offered under the postretirement benefits plan is fixed; therefore, the accumulated postretirement benefit obligation is not impacted by health care cost trends or the rate of compensation increase.

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

	Pension Benefits		Postretirement Life Insurance Benefits
2020	$	536	$	5
2021		526		5
2022		517		4
2023		505		4
2024		493		4
2025 – 2029		2,309		14
Total	$	4,886	$	36

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The Company’s pension plan asset allocations as of the year ends, by asset category, are as follows:

	Pension Benefits
	2019			2018
Cash and cash equivalents		1.64	%		0.70	%
Equity		37.34			34.53
Fixed income		61.02			64.77
Total		100.00	%		100.00	%

The fair value of the pension plan assets at December 31, 2019 and 2018 by asset category are as follows:

	2019
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash and cash equivalents	$	136	$	136
Mutual fund – equity:
Large-cap value		321		321
Large-cap core		343		343
Mid-cap core		375		375
Small-cap core		152		152
International growth		427		427
International value		214		214
Large cap growth		713		713
Small / midcap growth		202		202
Mutual funds/ETFs – fixed income:
Fixed income – core plus		1,928		1,928
Intermediate duration		656		656
Long duration – Government credit		1,812		1,812
Long U.S. Treasury – ETF		657		657
Common /collective trusts – equity:
Large cap value		345			$	345
Total assets	$	8,281	$	7,936	$	345

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	2018
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash and cash equivalents	$	44	$	44
Mutual fund – equity:
Large-cap value		233		233
Large-cap core		237		237
Mid-cap core		261		261
Small-cap core		115		115
International growth		461		461
Large cap growth		485		485
Small / midcap growth		141		141
Mutual funds/ETFs – fixed income:
Fixed income – core plus		1,443		1,443
Intermediate duration		483		483
Long duration – Government credit		1,555		1,555
Long U.S. Treasury – ETF		606		606
Common /collective trusts – equity:
Large cap value		246			$	246
Total assets	$	6,310	$	6,064	$	246

The valuation used is based on quoted market prices provided by an independent third party.

The Company does not expect to contribute to either of the plans in 2020.

16. Income taxes:

The current and deferred amounts of the provision for income taxes expense (benefit) for each of the years ended December 31, 2019 and 2018 are summarized as follows:

Year Ended December 31	2019			2018
Current	$	(308	)	$	31
Deferred		1,009			2,340
	$	701		$	2,371

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The components of the net deferred tax asset at December 31, 2019 and 2018 are summarized as follows:

December 31	2019		2018
Deferred tax assets:
Allowance for loan losses	$	1,535	$	1,121
Deferred compensation		1,021		1,007
Purchase accounting adjustments		64		827
Alternate minimum tax credit carryforwards		279		608
Benefit plans		247		238
Accrued expenses		405		242
Unrealized loss on investment securitiesavailable-for-sale				458
Low income housing credit carryforwards		1,063		1,063
Net operating loss carryforwards		714		761
Lease liabilities		817
Other				133
Total		6,145		6,458
Deferred tax liabilities:
Premises and equipment, net		577		574
Unrealized gain on investment securitiesavailable-for-sale		142
Lease right of use		810
Other		344
Total		1,873		574
Net deferred tax asset	$	4,272	$	5,884

Management believes that future taxable income will be sufficient to utilize deferred tax assets. Core earnings of the Company will continue to support the recognition of the deferred tax asset based on future growth projections.

A reconciliation between the amount of the effective income tax expense and the income tax expense that would have been provided at the federal statutory rate of 21.0 percent for the years ended December 31, 2019 and December 31, 2018 is summarized as follows:

Year Ended December 31	2019			2018
Federal income tax at statutory rate	$	1,047		$	2,778
Tax exempt interest		(248	)		(248	)
Bank owned life insurance income		(160	)		(163	)
Other, net		62			4
Total	$	701		$	2,371

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17. Parent company financial statements:

Condensed Balance Sheets

December 31	2019		2018
Assets
Cash and cash equivalents	$	722	$	249
Investment in bank subsidiary		124,560		120,607
Premises, net		73		73
Other assets		169		336
	$125,524		$121,265
Liabilities and stockholders’ equity
Long-term borrowings	$	6,971	$	6,892
Other liabilities		443		463
Total Liabilities		7,414		7,355
Stockholders’ equity		118,110		113,910
	$125,524		$121,265

Condensed Statements of Income and Comprehensive Income

December 31	2019			2018
Income, dividends from bank subsidiary	$	3,220		$	9,229
Interest expense		514			747
Income before equity in undistributed net income of subsidiary		2,706			8,482
Undistributed net income of subsidiary		1,683			2,350
Noninterest expense		257			164
Net income before income taxes	$	4,132		$	10,668
Income tax expense (benefit)		(154	)		(190	)
Net income	$	4,286		$	10,858
Total comprehensive income (loss)	$	6,557		$	9,818

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Condensed Statements of Cash Flows

Year Ended December 31	2019			2018
Cash flows from operating activities:
Net income (loss)	$	4,286		$	10,858
Adjustments to reconcile net income to net cash provided by operating activities:
Option expense					9
Undistributed net (income) loss of subsidiary		(1,683	)		(2,350	)
(Increase) decrease in accrued interest receivable and other assets		167			(135	)
Decrease in accrued interest payable and other liabilities		60			(45	)
Net cash provided by operating activities		2,830			8,337
Cash flows from investing activities:
Net cash used in investing activities
Cash flows from financing activities:
Repayment of long-term borrowings					(6,341	)
Proceeds from exercise of options		208			41
Proceeds from issuance of common stock		644			517
Dividends paid		(3,209	)		(2,731	)
Net cash provided by(used in) financing activities		(2,357	)		(8,514	)
Increase (decrease) in cash and cash equivalents		473			(177	)
Cash and cash equivalents – beginning		249			426
Cash and cash equivalents – ending	$	722		$	249

18. Regulatory matters:

In 2018, the Federal Reserve increased the asset limit to qualify as a small bank holding company from $1 billion to $3 billion. As a result, the Company met the eligibility criteria for a small bank holding company and was exempt from risk-based capital and leverage rules, including Basel III.

The Bank’s ability to pay a dividend up to the bank holding company in order to fund the payment of a dividend to shareholders is governed by Section 1302 of the Pennsylvania Banking Code of 1965 which states that the board of directors of an institution may only declare and pay dividends out of accumulated net earnings.

The amount of funds available for transfer from the Bank to the Company in the form of loans and other extensions of credit is also limited. Under Federal Regulation, transfers to any one affiliate are limited to 10.0 percent of capital and surplus. At December 31, 2019, the maximum amount available for transfer from the Bank to the Company in the form of loans amounted to $12,969. At December 31, 2019 and 2018, there were no loans outstanding, nor were any advances made during 2019 and 2018.

The Company and Bank are subject to certain regulatory capital requirements administered by the federal banking agencies, which are defined in Section 38 of the Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”). Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s and Bank’s consolidated financial statements. In the event an institution is deemed to be undercapitalized by such standards, FDICIA prescribes an increasing amount of regulatory intervention, including the required institution of a capital restoration plan and restrictions on the growth of assets, branches or lines of business. Further restrictions are applied to the significantly or critically undercapitalized institutions including restrictions on interest payable on accounts, dismissal of management and appointment of a receiver. For well capitalized institutions, FDICIA provides authority for regulatory intervention when the institution is deemed to be engaging in unsafe and unsound practices or receives a less than satisfactory examination report rating. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and Bank must meet specific capital guidelines that involve quantitative measures of their assets, liabilities and certainoff-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Prompt corrective action provisions are not applicable to bank holding companies.

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New risk-based capital rules became effective January 1, 2015 requiring the Bank to maintain a “capital conservation buffer” of 250 basis points in excess of the “minimum capital ratio.” The minimum capital ratio is equal to the prompt corrective action adequately capitalized threshold ratio. The capital conservation buffer will be phased in over four years beginning on January 1, 2016, with a maximum buffer of 0.625% of risk weighted assets for 2016, 1.25% for 2017, 1.875% for 2018, and 2.5% for 2019 and thereafter. Failure to maintain the required capital conservation buffer will result in limitations on capital distributions and on discretionary bonuses to executive officers.

The Bank was categorized as “well capitalized” under the regulatory guidance at December 31, 2019 and 2018, based on the most recent notification from the Federal Deposit Insurance Corporation. To be categorized as well capitalized, the Bank must maintain certain minimum Tier I risk-based, total risk-based, Tier I Leverage and Common equity Tier I risk-based capital ratios as set forth in the following tables. The Tier I Leverage ratio is defined as Tier I capital to total average assets less intangible assets. There are no conditions or events since the most recent notification that management believes have changed the Bank’s category.

The Bank’s capital ratios and the minimum ratios required for capital adequacy purposes and to be considered well capitalized under the prompt corrective action provisions are summarized below for the year ended December 31, 2019:

	Actual					Minimum Regulatory Capital Ratios under Basel III (with 2.5% capital conservation buffer phase-in)					Well Capitalized under Basel III
December 31, 2019:	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total risk-based capital (to risk-weighted assets:
Riverview Bank	$	104,010		12.4	%	$	88,132	³	10.5	%	$	83,936	³	10.0	%
Tier 1 capital (to risk-weighted assets):
Riverview Bank		96,405		11.5			71,345	³	8.5			67,148	³	8.0
Tier 1 capital (to average total assets):
Riverview Bank		96,405		9.1			42,489	³	4.0			53,112	³	5.0
Common equity tier 1 risk-based capital (to risk-weighted assets):
Riverview Bank		96,405		11.5			58,755	³	7.0			54,558	³	6.5

The Bank’s capital ratios and minimum ratios required for capital adequacy purposes and to be considered well capitalized under prompt corrective action provisions are summarized below for the year ended December 31, 2018:

	Actual					Minimum Regulatory Capital Ratios under Basel III (with 1.875% capital conservation buffer phase-in)					Well Capitalized under Basel III
December 31, 2018:	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total risk-based capital (to risk-weighted assets:
Riverview Bank	$	100,001		11.4	%	$	86,443	³	9.875	%	$	87,538	³	10.0	%
Tier 1 capital (to risk-weighted assets):
Riverview Bank		93,580		10.7			68,936	³	7.875			70,030	³	8.0
Tier 1 capital (to average total assets):
Riverview Bank		93,580		8.4			44,733	³	4.00			55,916	³	5.0
Common equity tier 1 risk-based capital (to risk-weighted assets):
Riverview Bank		93,580		10.7			55,805	³	6.375			56,900	³	6.5

19. Contingencies:

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 be material in relation to the Company’s consolidated 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.

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Neither the Company nor any of its property is subject to any material legal proceedings. Management, after consultation with legal counsel, does not anticipate that the ultimate liability, if any, arising out of pending and threatened lawsuits will have a material effect on the operating results or financial position of the Company.

20. 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.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Internal Controls

At December 31, 2019, the end of the period covered by this Annual Report on Form10-K, the President and Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”) evaluated the effectiveness of the Company’s disclosure controls and procedures as defined inRule 13a-15(e) under the Exchange Act. Based upon that evaluation, the CEO and CFO concluded that the disclosure controls and procedures, at December 31, 2019, 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.

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

We are responsible for the preparation and fair presentation of the accompanying consolidated balance sheets of Riverview Financial Corporation and subsidiary (the “Company”) as of December 31, 2019 and 2018, and the related consolidated statements of income and comprehensive income, changes in stockholders’ equity and cash flows for each of the years in thetwo-year period ended December 31, 2019 and 2018, in accordance with accounting principles generally accepted in the United States. This responsibility includes: establishing, implementing and maintaining adequate internal controls relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable under the circumstances. We are also responsible for compliance with the laws and regulations relating to safety and soundness that are designated by the Federal Deposit Insurance Corporation, Board of Governors of the Federal Reserve System and the Pennsylvania Department of Banking.

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

Our internal controls are designed to provide reasonable assurance that assets are safeguarded, and transactions are initiated, executed, recorded and reported in accordance with our intentions and authorizations and to comply with applicable laws and regulations. The internal control system includes an organizational structure that provides appropriate delegation of authority and segregation of duties, established policies and procedures and comprehensive internal audit and loan review programs. To enhance the reliability of internal controls, we recruit and train highly qualified personnel and maintain sound risk management practices. The internal control system is maintained through a monitoring process that includes a program of internal audits.

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Under Section 404 of the Sarbanes-Oxley Act of 2002, we are required to assess the effectiveness of our internal control over financial reporting at the end of each fiscal year and report, based on that assessment, whether the Company’s internal control over financial reporting is effective. Our assessment includes controls over initiating, recording, processing and reconciling account balances, classes of transactions and disclosure and related assertions included in the financial statements. Our assessment also includes controls related to the initiation and processing ofnon-routine andnon-systematic transactions, to the selection and application of appropriate accounting policies and to the prevention, identification and detection of fraud.

There are inherent limitations in any internal control system, including the possibility of human error and the circumvention or overriding of controls. Accordingly, even effective internal controls can provide only reasonable assurance with respect to financial statement preparation.

Furthermore, due to changes in conditions, the effectiveness of internal controls may vary over time. Our internal auditor reviews, evaluates and makes recommendations on policies and procedures, which serves as an integral, but independent, component of our internal control.

Our financial reporting and internal controls are under the general oversight of our board of directors, acting through its audit committee. The audit committee is composed entirely of independent directors. The independent registered public accounting firm and the internal auditor have direct and unrestricted access to the audit committee at all times. The audit committee meets periodically with us, the internal auditor and the independent registered public accounting firm to determine that each is fulfilling its responsibilities and to support actions to identify, measure and control risks and augment internal controls.

Our management, including our CEO and CFO, is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Our management, including our CEO and CFO, assessed the effectiveness of our internal controls over financial reporting, including controls over the preparation of regulatory financial statements in accordance with FDICIA requirements under Part 363, as of December 31, 2019 using the criteria established inInternal Control-Integrated Framework(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. These criteria are in the areas of control environment, risk assessment, control activities, information and communication, and monitoring. Our management’s assessment included extensive documenting, evaluating and testing the design and operating effectiveness of our internal control over financial reporting.

Based on its assertion, management believes that our internal control over financial reporting was effective as of December 31, 2019.

Management’s assertion on the effectiveness of internal control over financial reporting, includes controls over the preparation of financial statements in accordance with accounting principles generally accepted in the United States of America and financial statements for regulatory reporting purposes in accordance with FDICIA requirements under Part 363, as of December 31, 2019. Crowe LLP, the Company’s independent public accounting firm, issued an attestation on the effectiveness of the Company’s internal controls over financial reporting as stated in their report dated March 16, 2020.

/s/ Brett D. Fulk

Brett D. Fulk

President and Chief Executive Officer

(Principal Executive Officer)

March 16, 2020

/s/ Scott A. Seasock

Scott A. Seasock

Chief Financial Officer

(Principal Financial Officer and

Principal Accounting Officer)

March 16, 2020

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Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the fiscal quarter ended December 31, 2019, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information.

None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

We incorporate herein by reference the information appearing under the headings “Proposal 1: Election of Directors”; “Named Executive Officers”; “Corporate Governance – Code of Ethics”; “Meetings and Committees of the Board of Directors”; and “Audit Committee” by reference to the definitive proxy statement for our 2020 annual meeting of shareholders.

Item 11. Executive Compensation.

We incorporate herein by reference the information appearing under the headings “Executive Compensation” and “Corporate Governance – Directors’ Compensation” in the definitive proxy statement for our 2020 annual meeting of shareholders.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

We incorporate herein by reference the information appearing under the heading “Share Ownership” in the definitive proxy statement for our 2020 annual meeting of shareholders.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

We incorporate herein by reference the information appearing under the headings “Related Party Transactions” and “Corporate Governance – Director Independence” in the definitive proxy statement for our 2020 annual meeting of shareholders.

Item 14. Principal Accounting Fees and Services.

We incorporate herein by reference the information appearing under the heading “Independent Registered Public Accounting Firm” in the definitive proxy statement for our 2020 annual meeting of shareholders.

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PART IV

Item 15. Exhibits, Financial Statement Schedules.

(a)(1)	The following consolidated financial statements of the Company are filed as part of this Form10-K:
	(i)	Reports of Independent Registered Public Accounting Firm
	(ii)	Consolidated Balance Sheets as of December 31, 2019 and 2018
	(iii)	Consolidated Statements of Income and Comprehensive Income for the years ended December 31, 2019 and 2018
	(iv)	Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2019 and 2018
	(v)	Consolidated Statements of Cash Flows for the years ended December 31, 2019 and 2018
	(vi)	Notes to Consolidated Financial Statements

(a)(2)    Financial Statements Schedules. All financial statement schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and have therefore been omitted.

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(a)(3)Exhibits.

Exhibit No.	Description
3.1(i)	Amended and Restated Articles of Incorporation of Riverview Financial Corporation (Incorporated by reference to Exhibit 3.1(i) of Riverview’s Annual Report on Form10-K for the year ended December 31, 2017 filed on March 23, 2018.)
3.1(ii)	Amended and Restated Bylaws of Riverview Financial Corporation (Incorporated by reference to Exhibit 3.1 of Riverview’s Current Report on Form8-K filed with the Securities and Exchange Commission on May 23, 2019.)
4.1	Form of Common Stock Certificate of Riverview Financial Corporation (Incorporated by reference to Exhibit 4.1 to Amendment No.  1 to Riverview’s Registration Statement on FormS-4 filed with the Securities and Exchange Commission on January 20, 2015.)
4.2	Description of Riverview Financial Corporation’s Securities.
Executive Compensation
10.1*	Amended and Restated Executive Employment Agreement of Kirk D. Fox (Incorporated by reference to Exhibit 10.2 of Riverview’s Annual Report on Form10-K for the year ended December 31, 2008 filed on April 10, 2009.)
10.2*	Second Amended and Restated Executive Employment Agreement of Kirk D. Fox, dated November  16, 2011 (Incorporated by reference to Exhibit 10.18 of Riverview’s Amendment No. 2 to Registration Statement on FormS-4 filed on April 29, 2013.)
10.3	First Amendment to Second Amended and Restated Executive Employment Agreement of Kirk D. Fox adopted January  14, 2014 (Incorporated by reference to Exhibit 10.3 of Riverview’s Registration Statement on FormS-4 filed on June 29, 2017.)
10.4*	Noncompetition Agreement of Kirk D. Fox, dated November  16, 2011 (Incorporated by reference to Exhibit 10.20 of Riverview’s Amendment No. 2 to Registration Statementon Form S-4 filed on April 29, 2013.)
10.5	Separation Agreement and Release for Kirk D. Fox, dated January  2, 2019 (Incorporated by reference to Exhibit 10.1 of Riverview’s Current Report on Form8-K as filed with the Securities and Exchange Commission on January 2, 2019.)
10.6**	Supplemental Executive Retirement Agreement Plan for Kirk D. Fox, dated March  29, 2007 (Incorporated by reference to Exhibit 10.2 of First Perry Bancorp’s Registration Statement on FormS-4/A filed with the Securities and Exchange Commission on October 20, 2008.)
10.7	Amendment to Supplemental Executive Retirement Plan Agreement of Kirk D. Fox, dated June  18, 2008 (Incorporated by reference to Exhibit 10.6 of Riverview’s Registration Statement on FormS-4 filed on June 29, 2017.)
10.8*	Second Amendment to the Supplemental Executive Retirement Agreement Plan Agreement for Kirk D. Fox, dated March  29, 2007, amended June 18, 2008 and entered into between Kirk D. Fox and Riverview National Bank on September  2, 2009 (Incorporated by reference to Exhibit 10.11 of Riverview’s Quarterly Report on Form10-Q as filed with the Securities and Exchange Commission on November 12, 2009.)
10.9*	Riverview National Bank Executive Deferred Compensation Agreement for Kirk D. Fox, dated June  30, 2010 (Incorporated by reference to Exhibit 99.1 on Riverview’s Current Report on Form8-K filed July 1, 2010.)
10.10*	First Amendment to the Executive Deferred Compensation Agreement of Kirk Fox (Incorporated by reference to Exhibit 10.13 of Riverview’s Quarterly Report on Form10-Q as filed with the Securities and Exchange Commission on November 10, 2011.)
10.11*	Second Amendment to the Riverview National Bank Executive Deferred Compensation Agreement dated June  30, 2010 for Kirk Fox, entered into January 4, 2013 (Incorporated by reference to Exhibit 10.24 on Riverview’s Registration Statement on FormS-4 filed on April 29, 2013.)
10.12	Amended and Restated Executive Deferred Compensation Agreement of Kirk D. Fox, adopted January  14, 2014 (Incorporated by reference to Exhibit 10.11 of Riverview’s Registration Statement on FormS-4 filed on June 29, 2017.)
10.13	Executive Deferred Compensation Agreement #2 of Kirk D. Fox adopted December  24, 2015 (Incorporated by reference to Exhibit 10.12 of Riverview’s Registration Statement on FormS-4 filed on June 29, 2017.)
10.14	Third Amendment to the Riverview National Bank Executive Deferred Compensation Agreement dated June  30, 2010 for Kirk D. Fox, entered into December 24, 2015 (Incorporated by reference to Exhibit 10.13 of Riverview’s Registration Statement on FormS-4 filed on June 29, 2017.)

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Exhibit No.	Description
10.15*	Executive Employment Agreement of Brett D. Fulk, dated January  4, 2012 (Incorporated by reference to Exhibit 10.22 of Riverview’s Registration Statement on FormS-4 filed on April 29, 2013.)
10.16	First Amendment to Executive Employment Agreement of Brett D. Fulk adopted January  9, 2014 (Incorporated by reference to Exhibit 10.15 of Riverview’s Registration Statement on FormS-4 filed on June 29, 2017.)
10.17*	Supplemental Executive Retirement Plan Agreement for Brett Fulk, dated January  6, 2012 (Incorporated by reference to Exhibit 10.23 of Riverview’s Registration Statement on FormS-4 filed on April 29, 2013.)
10.18	Deferred Compensation Agreement of Brett Fulk, dated December  23, 2013 (Incorporated by reference to Exhibit 10.31 of Riverview’s Form10-K as filed with the Securities and Exchange Commission on March 31, 2014.)
10.19	Employment Agreement of Scott A. Seasock (Incorporated by reference to Exhibit 10.1 of Riverview’s Current Report on Form8-K as filed with the Securities and Exchange Commission on August 3, 2016.)
10.20*	Employment Agreement of Theresa M. Wasko (Incorporated by reference to Exhibit 10.3 of Riverview’s Annual Report on Form10-K for the year ended December 31, 2008 as filed with the Securities and Exchange Commission on April 10, 2009.)
10.21	Amendment to Employment Agreement of Theresa M. Wasko (Incorporated by reference to Exhibit 10.2 of Riverview’s Current Report on Form8-K as filed with the Securities and Exchange Commission on August 3, 2016.)
10.22	Amended and Restated Deferred Compensation Agreement of Robert Garst, dated June  22, 2015 (Incorporated by reference to Exhibit 10.23 of Riverview’s Registration Statement on FormS-4 filed on June 29, 2017.)
10.23	Supplemental Executive Retirement Plan Agreement for Kirk D. Fox, dated October  25, 2017 (Incorporated by reference to Exhibit 99.1 of Riverview’s Current Report on Form8-K filed October 30, 2017.)
10.24	Supplemental Executive Retirement Plan Agreement for Brett D. Fulk, dated October  25, 2017 (Incorporated by reference to Exhibit 99.1 of Riverview’s Current report on Form8-K filed October 30, 2017.)
Director Compensation
10.25*	Form of Director Deferred Fee Agreement for Kirk D. Fox (Incorporated by  reference to Exhibit 10.7 to Riverview’s Annual Report on Form 10K for the year ended December 31, 2008 as filed with the Securities  and Exchange Commission on April 10, 2009.)
10.26*	First Amendment to the Director Deferred Compensation Agreement of Kirk Fox (Incorporated by reference to Exhibit 10.15 of Riverview’s Form10-Q as filed with the Securities and Exchange Commission on November 10, 2011.)
10.27*	Director Emeritus Agreements, effective November  2, 2011, of Directors Arthur M. Feld, James G. Ford, II, Kirk D. Fox, David W. Hoover, Joseph D. Kerwin and David A. Troutman (Incorporated by reference to Exhibit 99.1 of Riverview’s Form8-K as filed with the Securities and Exchange Commission on November 21, 2011.)
10.28*	Director Emeritus Agreements, effective November 2, 2011, of Directors R. Keith Hite and John M.  Schrantz (Incorporated by reference to Exhibit 99.1 of Riverview’s Form8-K as filed with the Securities and Exchange Commission on December 22, 2011.)
10.29	Director Deferred Fee Agreement of William Yaag, dated December  26, 2013 (Incorporated by reference to Exhibit 10.32 of Riverview’s Form10-K as filed with the Securities and Exchange Commission on March 31, 2014.)

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Plan Documents
10.30*	2009 Stock Option Plan (Incorporated by reference to Exhibit 10.8 of Riverview’s Annual Report on Form10-K for the year ended December 31, 2008 as filed with the Securities and Exchange Commission on April 10, 2009.)
10.31	Riverview Financial Corporation Employee Stock Purchase Plan (Incorporated by reference to Exhibit 10.33 of Riverview’s Form10-K as filed with the Securities and Exchange Commission on March 31, 2014.)
10.32	Riverview Financial Corporation Equity and Cash Incentive Compensation Plan, dated February  22, 2018 (Incorporated by reference to Exhibit 10.35 of Riverview’s Form10-K as filed with the Securities and Exchange Commission on March 14, 2019.)
10.33	Riverview Financial Corporation 2019 Equity Incentive Plan (Incorporated by reference to Exhibit A to Riverview’s Proxy Statement for the Annual Meeting of Shareholders as filed with the Securities and Exchange Commission on April 23, 2019.)
10.34	Riverview Financial Corporation Executive Annual Incentive Plan (Incorporated by reference to Exhibit 10.1 of Riverview’s Form8-K as filed with the Securities and Exchange Commission on June 13, 2019.)
Other Material Contracts
10.35	Stock Purchase Agreement (Incorporated by reference to Exhibit 10.2 of Riverview’s Current Report on Form8-K filed January 18, 2017.)
10.36	Kirk Fox Waiver (Incorporated by reference to Exhibit 10.34 of Riverview’s Registration Statement on FormS-4 filed on June 29, 2017.)
10.37	Brett Fulk Waiver (Incorporated by reference to Exhibit 10.35 of Riverview’s Registration Statement on FormS-4 filed on June 29, 2017.)
21.1	Subsidiaries.
23.1	Consent of Independent Registered Public Accounting Firm – Crowe LLP.
23.2	Consent of Independent Registered Public Accounting Firm – Dixon Hughes Goodman LLP.
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 Rule 13a-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) furnished herewith.

* Filed by Riverview Financial’s predecessor, CIK# 0001452899.

** Filed by Riverview Financial’s predecessor, CIK# 0001445059.

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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.

Riverview Financial Corporation
By:	/s/ Brett D. Fulk
	Brett D. Fulk
	President and Chief Executive Officer
	(Principal Executive Officer)
	March 16, 2020
By:	/s/ Scott A. Seasock
	Scott A. Seasock
	Chief Financial Officer
	(Principal Financial Officer and Principal Accounting Officer)
	March 16, 2020

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints each of Brett D. Fulk and Scott A. Seasock as his or herattorney-in-fact, with the full power of substitution, for him or her in any and all capacities, to sign any amendments to this report, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that saidattorney-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof.

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

Name	Title	Date
/s/ John G. Soult, Jr. John G. Soult, Jr.	Director and Chairman of the Board	March 16, 2020
/s/ David W. Hoover David W. Hoover	Director and Vice-Chairman of the Board	March 16, 2020
/s/ Brett D. Fulk Brett D. Fulk	Director, Chief Executive Officer and President (Principal Executive Officer)	March 16, 2020
/s/ Scott A. Seasock Scott A. Seasock	Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)	March 16, 2020
/s/ Paula M. Cherry Paula M. Cherry	Director	March 16, 2020
/s/ Albert J. Evans Albert J. Evans	Director	March 16, 2020
/s/ Maureen M. Gathagan Maureen M. Gathagan	Director	March 16, 2020

93

Name	Title	Date
/s/ Howard R. Greenawalt Howard R. Greenawalt	Director	March 16, 2020
/s/ Joseph D. Kerwin Joseph D. Kerwin	Director	March 16, 2020
/s/ Kevin D. McMillen Kevin D. McMillen	Director	March 16, 2020
/s/ Timothy E. Resh Timothy E. Resh	Director	March 16, 2020
/s/ Marlene K. Sample Marlene K. Sample	Director	March 16, 2020
/s/ William E. Wood William E. Wood	Director	March 16, 2020

94