Ameriserv Financial Inc: Form 10-Q for the period ended Jun 30, 2026

THREE MONTHS ENDED JUNE 30, 2026 VS. THREE MONTHS ENDED JUNE 30, 2025

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

The Company reported second quarter 2026 net income of $2,738,000, or $0.16 per diluted common share. This performance represented a $3.0 million improvement from the second quarter of 2025 when the net loss totaled $282,000, or $0.02 per diluted common share. Record quarterly earnings were achieved in the second quarter of 2026 due to growth in total revenue and favorable asset quality trends. The increase in total revenue was primarily caused by meaningful improvement in net interest income as the second quarter 2026 net interest margin increased by 24-basis points from the prior year’s second quarter leading to a $942,000 increase in net interest income. In addition, the Company’s increased 2026 second quarter earnings reflected a lower provision for credit losses.

**…..NET INTEREST INCOME AND MARGIN…..**The Company’s net interest income represents the amount by which interest income on earning assets exceeds interest paid on interest bearing liabilities. Net interest income is a primary source of the Company’s earnings, and it is affected by interest rate fluctuations as well as changes in the amount and mix of earning assets and interest bearing liabilities.

The following table compares the Company’s net interest income performance for the second quarter of 2026 to the second quarter of 2025 (in thousands, except percentages):

The Company's net interest income in the second quarter of 2026 increased by $942,000, or 9.1%, from the prior year's second quarter while the net interest margin of 3.34% for the second quarter of 2026 represented a 24-basis point improvement from the second quarter of 2025. The increase reflects controlled balance sheet growth, as both total earning assets and total deposits were at higher average levels due to the Company’s effective balance sheet management. This, combined with effective pricing strategies, resulted in both the total earning asset yield and cost of interest-bearing funds improving between years. The Federal Reserve’s action to lower short-term interest rates during the latter portion of 2025 favorably impacted total interest-bearing deposits and borrowings costs. In addition, the U.S. Treasury yield curve demonstrated a more traditional steeper upward slope which favorably impacted earning asset yields. Management believes that the Company’s balance sheet is well positioned for further quarterly net interest income growth and net interest margin improvement.

Total average loans in the second quarter of 2026 declined from the 2025 second quarter average by $47.2 million, or 4.4%, due to increased loan payoff activity, particularly from the commercial real estate (CRE) portfolio, which exceeded loan originations. However, total loans continue to be above the $1.0 billion threshold, averaging $1.022 billion for the second quarter of 2026. Total loan interest income decreased by $331,000, or 2.2%, in the second quarter of 2026 compared to last year’s second quarter. This decline reflects the lower average loan balance more than offsetting the benefits of a better interest rate environment in 2026, and a portion of CRE loans, that were booked during the COVID pandemic when interest rates were low, repricing upward during 2026.

Investment securities, including the available for sale, held to maturity, and trading portfolios, averaged $303.3 million for the second quarter of 2026, which was $41.8 million, or 16.0%, higher than the $261.5 million average for the second quarter of last year. Additionally, short-term investments and bank deposits were higher by $21.1 million in the second quarter of 2026. These increases reflect the higher level of loan prepayment activity, as well as the strengthening of the Company’s liquidity position due to deposit growth. Therefore, more funds were available to invest in the securities portfolio during a time when security yields improved, making purchases more attractive. New investment security purchases were also necessary to replace cash flow from maturing securities to maintain appropriate balances for pledging purposes related to public fund deposits. The increased level of average investment securities along with improved yields for new securities purchased caused interest income from investments to increase by $624,000, or 24.2%, for the second quarter of 2026 compared to the same period in 2025. Overall, the average balance of total interest earning assets increased from last year’s second quarter average by $15.8 million, or 1.2%, while total interest income increased by $410,000, or 2.3%, from the second quarter of 2025.

On the liability side of the balance sheet, total average deposits of $1.27 billion for the second quarter of 2026 were $29.8 million, or 2.4%, higher than the 2025 second quarter average. The increase reflects the Company’s successful business development efforts. Additionally, the Company’s core deposit base continued to demonstrate the strength and stability that it has for many years due to customer loyalty and confidence in AmeriServ Financial Bank. The Company does not utilize brokered deposits as a funding source. The loan to deposit ratio averaged 80.5% in the second quarter of 2026, which indicates that the Company has ample capacity to continue to grow its loan portfolio and is well positioned to support its customers and community during times of economic volatility.

Total interest expense in the second quarter of 2026 decreased by $532,000, or 7.3%, when compared to the second quarter of 2025. Deposit interest expense decreased by $344,000, or 5.4%, despite total average interest-bearing deposits growing by $40.1 million, or 3.8%, compared to the second quarter of last year. Overall, total deposit cost (including the benefit of non-interest-bearing demand deposits which decreased slightly between years) averaged 1.92% in the second quarter of 2026, which was a 15-basis point improvement from the second quarter of 2025.

Total borrowings interest expense decreased by $188,000, or 21.2%, for the second quarter of 2026 when compared to the second quarter of 2025. The Company’s average utilization of overnight borrowed funds in the second quarter of 2026 was lower than the 2025 second quarter average level by $3.3 million, or 91.5%, due to the higher level of total average deposits. The decrease in borrowings interest expense also reflects the Federal Reserve’s 2025 action to ease monetary policy by 75-basis points which had an immediate and favorable impact on the cost of overnight borrowed funds. Additionally, advances from the Federal Home Loan Bank averaged $37.1 million for the second quarter of 2026, which was $13.8 million, or 27.0%, lower than the $50.9 million average for the 2025 second quarter.

The table that follows provides an analysis of net interest income on a tax-equivalent basis (non-GAAP) for the three-month periods ended June 30, 2026 and 2025 setting forth (i) average assets, liabilities, and shareholders’ equity, (ii) interest income earned on interest earning assets and interest expense paid on interest bearing liabilities, (iii) average yields earned on interest earning assets and average rates paid on interest bearing liabilities, (iv) the Company’s interest rate spread (the difference between the average yield earned on interest earning assets and the average rate paid on interest bearing liabilities), and (v) the Company’s net interest margin (net interest income as a percentage of average total interest earning assets). For purposes of this table, loan balances include non-accrual loans and interest income on loans includes loan fees or amortization of such fees which have been deferred. Regulatory stock is included within available for sale investment securities for this analysis. Additionally, a tax rate of 21% was used to compute tax-equivalent interest income and yields (non-GAAP). The tax equivalent adjustments to interest income on loans, municipal securities, and trading securities for the three months ended June 30, 2026 and 2025 was $51,000 and $14,000, respectively, which is reconciled to the corresponding GAAP measure at the bottom of the table. Differences between the net interest spread and margin from a GAAP basis to a tax-equivalent basis were not material.

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

**…..PROVISION FOR CREDIT LOSSES…..**The Company recorded a $294,000 provision for credit losses recovery in the second quarter of 2026 after recognizing a $3.1 million provision for credit losses in the second quarter of 2025, resulting in a favorable shift of $3.4 million. The provision for credit losses recovery in the second quarter of 2026 reflected $286,000 provision recovery on loans resulting from the continuing favorable trend for historical loss rates along with a softening of reserve requirements due to the contraction in the size of the loan portfolio. In addition, a $20,000 provision recovery was recognized in the second quarter of 2026 for the investment securities portfolio primarily related to the call of a held to maturity corporate security. The large provision for credit losses in the second quarter of 2025 was necessary to resolve a large non-performing loan which also included a related $2.8 million charge-down.

**…..NON-INTEREST INCOME…..**Non-interest income for the second quarter of 2026 totaled $4.6 million and increased by $471,000, or 11.5%, from the second quarter of 2025 performance. Factors contributing to the higher level of non-interest income for the quarter included:

• wealth management fees increased by $312,000, or 11.2%, due to market appreciation of customer assets as the equity markets moved to record levels in the second quarter of 2026; and
• a $118,000, or 48.4%, increase in bank owned life insurance (BOLI) revenue due to the receipt of a larger death claim in 2026.

**…..NON-INTEREST EXPENSE…..**Non-interest expense for the second quarter of 2026 totaled $12.8 million and increased by $1.1 million, or 9.3%, from the prior year’s second quarter. Factors contributing to the higher level of non-interest expense for the quarter included:

• a $520,000, or 57.6%, increase in professional fees due to additional expenses related to expanded consulting services provided to the Company by SB Value Partners in accordance with its consulting arrangement;
• a $336,000, or 4.7%, increase in salaries and employee benefits due primarily to annual salary increases; and
• an $81,000, or 12.4%, increase in other expense due to the recognition of workout expenses related to a loan relationship secured by an owner-occupied CRE property.

**…..INCOME TAX EXPENSE…..**The Company recorded income tax expense of $661,000, or an effective tax rate of 19.4%, in the second quarter of 2026. This compares to a credit for income taxes of $70,000 in the second quarter of 2025.

SIX MONTHS ENDED JUNE 30, 2026 VS. SIX MONTHS ENDED JUNE 30, 2025

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

For the six-month period ended June 30, 2026, the Company reported net income of $4,532,000, or $0.27 per diluted common share. This represented a 170% increase in earnings per share from the six-month period of 2025 when net income totaled $1,626,000, or $0.10 per diluted common share. An increase in total revenue was caused by meaningful improvement in net interest income for the first six months of 2026 because of effective balance sheet management. Specifically, the Company’s net interest margin increased by 24-basis points for the first six months of 2026 leading to a $1.8 million increase in net interest income which is important since it represents approximately 72% of total revenue. Additionally, improved wealth management fees contributed to growth in non-interest income. The Company’s earnings performance in the first half of 2026 was also favorably impacted by a lower provision for credit losses reflecting improvement in asset quality. Overall, the improvement in the Company’s financial performance through the first six months of 2026 exceeded earnings through the first six months of 2025 by $2.9 million, or 179%, and resulted from increased total revenue and a lower provision for credit losses which more than offset higher non-interest expense.

Management believes that the Company is well positioned for organic growth in the second half of 2026 as a result of its strong liquidity and solid capital positions. The Company will continue to diligently focus on both revenue growth and expense control to further improve its operating efficiency

**…..NET INTEREST INCOME AND MARGIN…..**The following table compares the Company’s net interest income performance for the first six months of 2026 to the first six months of 2025 (in thousands, except percentages):

The Company's net interest income for the first six months of 2026 increased by $1.8 million, or 9.0%, when compared to the first six months of 2025. The Company’s net interest margin of 3.30% for the six months of 2026 represented a 24-basis point increase. As previously discussed for the quarterly comparison, along with the sharply improved net interest margin performance, the increase reflects controlled balance sheet growth, as both total earning assets and total deposits are at higher average levels due to effective balance sheet management. This, combined with effective pricing strategies, resulted in both the total earning asset yield and cost of interest-bearing funds improving between years. The Federal Reserve’s action to lower short-term interest rates during the latter portion of 2025 favorably impacted total interest-bearing deposits and borrowings costs. Also, the U.S. Treasury yield curve demonstrated a more traditional steeper upward slope which favorably impacted earning asset yields. Management believes the net interest margin will continue to improve through the second half of 2026.

Similar to the trend noted for the quarterly comparison, total average loans in the first six months of 2026 declined from the 2025 six-month average by $42.3 million, or 4.0%, due to increased loan payoff activity, particularly from the CRE portfolio, which exceeded loan originations. Total loan interest income decreased by $433,000, or 1.5%, in the first six months of 2026 compared to the first six months of 2025. This decline was due to the lower average loan balance more than offsetting the benefits of a better interest rate environment in 2026, and a portion of CRE loans, that were booked during the COVID pandemic when interest rates were low, repricing upward during the first half of 2026.

Total investment securities, including the available for sale, held to maturity, and trading portfolios, averaged $291.1 million for the first six months of 2026, which was $37.0 million, or 14.6%, higher than the $254.1 million average for the first six months of 2025. Additionally, short-term investments and bank deposits were higher by $19.1 million in the first half of 2026. These increases reflect the higher level of loan prepayment activity, as well as the strengthening of the Company’s liquidity position during the fourth quarter of 2025 and throughout the first half of 2026 due to deposit growth. Therefore, as previously discussed for the quarterly comparison, more funds were available to invest in the securities portfolio during a time when security yields improved, making purchases more attractive. As a result, the securities portfolio grew by $43.5 million, or 17.0%, since December 31, 2025. The higher balances and improved yields for new securities purchased caused interest income from investments to increase by $1.1 million, or 21.3%, for the first six months of 2026 compared to last year’s first six months. Overall, through six months of 2026, the average balance of total interest earning assets increased from last year’s average by $13.7 million, or 1.0%, while total interest income increased by $890,000, or 2.6%, from the first half of 2025 due to the increased revenue contribution from the investment securities portfolio.

On the liability side of the balance sheet, total average deposits through the first six months of 2026 were $27.1 million, or 2.2%, higher when compared to the first six months of 2025 due to the Company’s successful business development efforts. Additionally, as previously mentioned, the Company’s core deposit base continued to demonstrate the strength and stability that it has for many years indicating what we believe is customer loyalty and confidence in AmeriServ Financial Bank. The Company does not utilize brokered deposits as a funding source.

Total interest expense decreased by $949,000, or 6.6%, for the first six months of 2026 when compared to the same time period of 2025. Deposit interest expense declined by $549,000, or 4.4%, through the first six months of 2026 despite total average interest-bearing deposits growing by $39.6 million, or 3.8%, compared to the first six months of last year. The decrease in deposit interest expense reflects management’s effective deposit pricing strategies along with the benefit of the Federal Reserve easing monetary policy during the final four months of 2025. Overall, total deposit cost (including the benefit of non-interest-bearing demand deposits which declined between years) averaged 1.92% in the first six months of 2026, which was a 14-basis point improvement from the first six months of 2025.

Total borrowings interest expense declined by $400,000, or 21.6%, for the first six months of 2026 when compared to the same time period of 2025. The Company’s utilization of overnight borrowed funds for the six months of 2026 was lower than the first half of 2025, resulting in the average decreasing by $4.4 million, or 88.5%, due to the higher level of total average deposits. Also, management elected not to replace the majority of maturing Federal Home Loan Bank (FHLB) term advances during the full year of 2025 and did not replace any during the first half of 2026 because of the strength of the Company’s liquidity position. Therefore, the total average balance of advances from the FHLB during the first half of 2026 decreased by $13.0 million, or 24.5%, from the same period of last year. The decrease in borrowings interest expense also reflects the Federal Reserve’s 2025 action to ease monetary policy by 75-basis points which had an immediate and favorable impact on the cost of overnight borrowed funds.

The table that follows provides an analysis of net interest income on a tax-equivalent basis (non-GAAP) for the six-month periods ended June 30, 2026 and 2025. For a detailed discussion of the components and assumptions included in the table, see the paragraph on page 41 before the quarterly table. The tax equivalent adjustments to interest income on loans, municipal securities, and trading securities for the six months ended June 30, 2026 and 2025 was $99,000 and $21,000, respectively, which is reconciled to the corresponding GAAP measure at the bottom of the table. Differences between the net interest spread and margin from a GAAP basis to a tax-equivalent basis were not material.

Six months ended June 30 (In thousands, except percentages)

**…..PROVISION FOR CREDIT LOSSES…..**For the first six months of 2026, the Company recognized a $77,000 provision for credit losses recovery after recognizing a $3.0 million provision for credit losses in the first six months of 2025, resulting in a net favorable change of $3.1 million. The $2,000 provision recovery for loans in the first half of 2026 reflected a continuing favorable trend for historical loss rates along with a softening of reserve requirements due to the contraction in the size of the loan portfolio. In addition, the Company recorded an $82,000 provision recovery for unfunded commitments due to a decline in outstanding loan commitments. Both of these items were partially offset by a $7,000 provision expense for the investment securities portfolio. The provision expense for the investment securities portfolio was comprised of an increase for available for sale securities due to the creation of a partial reserve for a senior debt corporate bond and a reduction for held to maturity securities due to the call of a corporate bond.

**…..NON-INTEREST INCOME…..**Non-interest income for the first six months of 2026 totaled $8.5 million and increased by $317,000, or 3.9%, from the first six months of 2025 performance. Factors contributing to the higher level of non-interest income for the six-month period included:

• wealth management fees increased by $308,000, or 5.5%, which is attributed market appreciation of customer assets as the equity markets moved to record levels in the second quarter of 2026. Overall, the fair market value of wealth management assets totaled $2.8 billion at June 30, 2026 and increased by $75 million, or 2.8%, since December 31, 2025; and
• a $92,000, or 18.1%, increase in BOLI revenue resulting from the receipt of a larger death claim in 2026.

**…..NON-INTEREST EXPENSE…..**Non-interest expense for the first six months of 2026 totaled $25.2 million and increased by $1.7 million, or 7.2%, from the prior year’s first six months. Factors contributing to the higher level of non-interest expense for the six-month period included:

• a $1.0 million, or 63.0%, increase in professional fees due to additional expenses related to expanded consulting services provided to the Company by SB Value Partners in accordance with its consulting arrangement;
• a $338,000, or 2.4%, increase in salaries and employee benefits due primarily to annual salary increases; and
• a $155,000, or 12.3%, increase in other expense driven primarily by the recognition of additional workout expenses related to a loan relationship secured by an owner-occupied CRE property.

**…..INCOME TAX EXPENSE…..**The Company recorded an income tax expense of $1.1 million, or an effective tax rate of 19.3%, in the first half of 2026. This compares to an income tax expense for the first half of 2025 of $408,000, or an effective tax rate of 20.1%. The higher level of income tax expense this year was due to the increased level of pre-tax income.

**…..BALANCE SHEET…..**The Company’s total consolidated assets were $1.5 billion at June 30, 2026, which increased by $8.3 million, or 0.6%, from the December 31, 2025 asset level. This change was related primarily to higher levels of investment securities and other assets which were partially offset by reduced levels of cash and cash equivalents and loans and loans held for sale. Investment securities, including held to maturity, available for sale and trading, increased by $43.5 million, or 17.0%, as the Company’s liquidity position strengthened throughout the first half of 2026 allowing more funds to be available to invest in the securities portfolio. Other assets increased $4.3 million, or 9.6%, due to increases in the positive balance of the accrued pension liability, the market value for the interest rate swaps, and prepaid expenses as well as amounts receivable from the issuers of two called investment securities. Since the excess liquidity from deposit growth was directed to the investment securities portfolio during the first half of 2026, cash and cash equivalents decreased by $22.8 million, or 44.9%. Finally, loans and loans held for sale decreased by $17.2 million, or 1.7%, due to payoff activity exceeding loan originations.

Total deposits increased by $13.2 million, or 1.1%, in the first six months of 2026. Management believes this demonstrates customer confidence as well as the strength and loyalty of the Company’s core deposit base. As of June 30, 2026, the 25 largest depositors represented 29.5% of total deposits, which increased from December 31, 2025 when it was 28.5%. As of June 30, 2026 and December 31, 2025, the estimated amount of uninsured deposits was $497.0 million and $476.2 million, respectively. The estimate of uninsured deposits was done at the single account level and does not take into account total customer balances in the Bank. It should be noted that approximately 60% of these uninsured deposits relate to public funds from municipalities, government entities, and school districts which by law are required to be collateralized by investment securities or FHLB letters of credit to protect these depositor funds. FHLB term advances were reduced by $8.4 million, or 18.9%, since year-end 2025 as a result of the higher level of deposits.

The Company’s total shareholders’ equity increased by $3.8 million, or 3.2%, during the first half of 2026. The increase in capital was the result of the Company’s earnings performance during the first six months of 2026 more than offsetting its common stock dividend payments to shareholders along with the positive impact on accumulated other comprehensive loss from the revaluation of the pension obligation. In addition, capital was increased as a result of the issuance of common stock under the amended and restated consulting agreement with SB Value Partners. These increases were partially offset by the decline in the market value of the available for sale investment securities portfolio which had an unfavorable impact on accumulated other comprehensive loss.

The Bank continues to be considered well capitalized for regulatory purposes with a community bank leverage ratio of 9.46% at June 30, 2026. See the discussion of the capital requirements under the Capital Resources section below. As of June 30, 2026, the Company’s book value per common share was $7.26 and its tangible book value per common share was $6.45(1). In addition, the Company’s equity to assets ratio was 8.42% and its tangible common equity to tangible assets ratio was 7.55%(1) at June 30, 2026. The tangible common equity ratio increased by 21-basis points when compared to December 31, 2025.

(1) Non-GAAP financial information, see “Reconciliation of Non-GAAP Financial Measures” later in this MD&A.

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

(1) Non-performing loans are comprised of loans that are on a non-accrual basis and loans that are contractually past due 90 days or more as to interest and principal payments.

(2) Total classified loans include non-performing residential mortgage and consumer loans.

The increase in accruing loan delinquency since year-end 2025 was attributable to a higher level of delinquency within the non-owner occupied commercial real estate retail loan class which was partially offset by a decrease in residential mortgage loan delinquency. Non-performing loans decreased from $8.3 million at December 31, 2025 to $7.7 million at June 30, 2026 due to the partial charge-down of a CRE loan secured by retail property as well as paydown activity on a large non-accrual loan relationship. Risk rating upgrade activity and, to a lesser extent, the aforementioned charge-down and paydown activity contributed to the decrease in classified loans. Specifically, classified loans decreased $1.8 million, or 16.1%, from December 31, 2025 and totaled $9.5 million at June 30, 2026.

Non-performing loans represented 0.76% of total loans as of June 30, 2026. The Company recognized net loan charge-offs of $230,000, or 0.05% of total average loans, in the first six months of 2026 compared to net loan charge-offs of $3.0 million, or 0.56% of total average loans, in the first six months of 2025.

We also continue to closely monitor the loan portfolio given the number of relatively large-sized commercial and commercial real estate loans within the portfolio. As of June 30, 2026, the 25 largest credits represented 25.8% of total loans outstanding, which increased from December 31, 2025 when it was 24.6%.

Commercial Real Estate Loan Exposure

A significant portion of the Company's loan portfolio consists of commercial real estate loans, including owner occupied properties, non-owner-occupied properties, and other commercial properties. These types of loans are generally viewed as having more risk of default than residential real estate loans and depend on cash flows from the owner’s business or the property’s tenants to service the debt. The borrower’s cash flows may be affected significantly by general economic conditions, a downturn in the local economy or in occupancy rates in the market where the property is located, any of which could increase the likelihood of default. Commercial real estate loans also typically have larger loan balances, and therefore, the deterioration of one or a few of these loans could cause a significant increase in the percentage of the Company's non-performing loans. An increase in non-performing loans could result in a loss of earnings from these loans, an increase in the provision for credit losses for loans, and an increase in charge-offs, all of which could have a material adverse effect on the Company's business, financial condition, and results of operations.

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

There is a particular regulatory emphasis on ensuring that a subsidiary bank has appropriate levels of capital to support its non-owner occupied commercial real estate loan concentration, which for the Bank stood at 335% as of June 30, 2026. It should be noted that this ratio declined from 352% at December 31, 2025 due to the growth of total regulatory capital in the first six months of 2026 combined with a decrease in the outstanding balance of non-owner occupied commercial real estate loans. Further, non-owner occupied commercial real estate loans represented 50.0% and 50.4% of total loans as of June 30, 2026 and December 31, 2025, respectively.

The commercial real estate loan segment includes the non-owner occupied commercial real estate loan classes of retail, multi-family, and other. The following table presents the Company’s non-owner occupied commercial real estate loan portfolio by property type.

(In thousands)

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

The allowance for loan credit losses decreased since December 31, 2025 by $232,000, or 1.8%, to $12.9 million at June 30, 2026. The reduction in the allowance balance was the result of an improvement in asset quality and a decrease in outstanding loan balances since year-end 2025. Overall, the Company continues to maintain solid coverage of total loans as the allowance for loan credit losses provided 1.27% coverage of total loans at June 30, 2026. Additionally, at June 30, 2026, the allowance for loan credit losses provided 167% coverage of non-performing loans.

The allowance for credit losses on the investment securities portfolio was comprised of $30,000 on available for sale (AFS) securities and $67,000 on held to maturity (HTM) securities as of June 30, 2026. This compares to no reserve on AFS securities and $90,000 on HTM securities as of December 31, 2025. The increase in the reserve on AFS securities reflects a partial reserve established for a senior debt corporate bond that was deemed to be credit impaired during the first half of 2026. The decrease in the reserve on HTM securities reflects the call of a corporate bond. The decrease in the allowance for credit losses on unfunded commitments since year-end 2025 resulted primarily from a decline in outstanding loan commitments.

**…..LIQUIDITY…..**The Company’s liquidity position continued to strengthen during the first half of 2026 due to loan prepayment activity as well as deposit growth. Specifically, total average deposits were $27.1 million, or 2.2%, higher when compared to the 2025 first six-month average. The increase reflects the Company’s successful business development efforts. The Company’s core deposit base continued to demonstrate the strength and stability that it has had for many years. As of June 30, 2026, total deposits grew by $13.2 million, or 1.1%, since December 31, 2025, demonstrating customer loyalty and confidence in AmeriServ Financial Bank. In addition to its loyal core deposit base, the Company has several other sources of liquidity, including a significant unused borrowing capacity at the Federal Home Loan Bank (FHLB), overnight lines of credit at correspondent banks and access to the Federal Reserve Discount Window. The Company does not utilize brokered deposits as a funding source. Overall, deposit volumes continue to remain at a high level. The core deposit base is adequate to fund the Company’s operations. Cash flow from maturities, prepayments and amortization of securities can also be used to help fund loan growth.

Further demonstrating the strength of the Company’s liquidity position, average short-term investments and bank deposits grew in the first six months of 2026 compared to the first six months of last year, increasing by $19.1 million. Advances from the FHLB averaged $39.9 million in the first half of 2026 which was $13.0 million, or 24.5%, lower than the $52.9 million average in the first half of 2025. Management continues to monitor the changing economic conditions and adjust pricing strategies accordingly which largely determines customer behavior and the level of total deposits as well as shifts within the total deposit mix. Also, diligent monitoring and management of our short-term investment position and our level of overnight borrowed funds remains a priority. Given the high cost of overnight borrowed funds, management has been effectively controlling the usage of this funding source. The Company’s utilization of overnight borrowed funds so far in 2026 has been lower than the 2025 level. Total short-term borrowings averaged $577,000 for the first six months of 2026 after averaging $5.0 million for the first six months of 2025. Loan growth and prudent investment in securities are critical to achieve the best return on the normal level of earning asset cash flow that occurs each month. Due to the Company’s strengthened liquidity position, more funds were available to invest in the securities portfolio during a time when security yields improved, making purchases so far in 2026 more attractive. In addition, loan pipelines are currently at a typical level. Total average loans in the first six months of 2026 were lower than the 2025 first six-month average by $42.3 million, or 4.0%. We strive to operate our loan to deposit ratio in a range of 80% to

100%. The Company’s loan to deposit ratio averaged 80.5% in the second quarter of 2026, which indicates that the Company has ample capacity to continue to grow its loan portfolio and is well positioned to support its customers and community during times of economic volatility. We are also strongly positioned to service the existing loan pipeline and grow the loan to deposit ratio while remaining within the guideline parameters.

Liquidity can also be analyzed by utilizing the Consolidated Statements of Cash Flows. Cash and cash equivalents decreased by $22.8 million from December 31, 2025, to $28.0 million at June 30, 2026, due to $25.8 million of net cash used in investing activities and $759,000 of net cash used in operating activities which more than offset $3.7 million of net cash provided by financing activities. Within investing activities, cash advanced for new loans originated totaled $62.4 million while cash received from loan principal payments was $80.0 million leading to a net decrease in loans of $17.6 million. Additionally, investment security purchases exceeded maturities resulting in a net increase in securities of $43.1 million. Within financing activities, total borrowings on advances from FHLB decreased by $8.4 million while total deposits increased by $13.2 million.

The holding company had $6.2 million of cash, short-term investments, and investment securities at June 30, 2026, which represented a $801,000 increase from the holding company’s cash position since December 31, 2025. Dividend payments from our subsidiary provide ongoing cash to the holding company. At June 30, 2026, our subsidiary Bank had $10.9 million of cash available for immediate dividends to the holding company under applicable regulatory formulas. Additionally, the holding company has a $3 million line of credit with an unrelated financial institution which can be used for general corporate purposes. There were no borrowings under the line at June 30, 2026. Overall, we believe that the holding company has sufficient liquidity to meet its subordinated debt interest payments and its dividend payments on its common stock.

Financial institutions must maintain liquidity to meet day-to-day requirements of depositors and borrowers, take advantage of market opportunities, and provide a cushion against unforeseen needs. Liquidity needs can be met by either reducing assets or increasing liabilities. Sources of asset liquidity are provided by short-term investments, interest bearing deposits with banks, and federal funds sold. These assets totaled $28.0 million and $50.9 million at June 30, 2026 and December 31, 2025, respectively. Maturing and repaying loans, as well as the monthly cash flow associated with mortgage-backed securities and security maturities are other significant sources of asset liquidity for the Company.

Liability liquidity can be met by attracting deposits with competitive rates, using repurchase agreements, buying federal funds, or utilizing the facilities of the Federal Reserve or the FHLB systems. The Company utilizes a variety of these methods of liability liquidity. Additionally, the Company’s subsidiary bank is a member of the FHLB, which provides the opportunity to obtain short-term to longer-term advances based upon the Company’s investment in certain residential mortgage, commercial real estate, and commercial and industrial loans. At June 30, 2026, the Company had $268 million of overnight borrowing availability at the FHLB, $41 million of short-term borrowing availability at the Federal Reserve Bank and $35 million of unsecured federal funds lines with correspondent banks. The Company believes it has ample liquidity available to fund outstanding loan commitments if they were fully drawn upon.

**…..CAPITAL RESOURCES…..**The community bank leverage ratio (CBLR) is an alternative capital framework available to certain community banking organizations, consistent with section 201 of the Economic Growth, Regulatory Relief, and Consumer Protection Act. In order to qualify for the CBLR, the following criteria must be met:

• a leverage ratio of greater than 9%. It should be noted that effective July 1, 2026, the CBLR framework was revised to lower the minimum leverage ratio to 8%;
• less than $10 billion in average total consolidated assets;
• off-balance sheet exposures of 25% or less of total consolidated assets;
• trading assets plus trading liabilities of 5% or less of total consolidated assets; and
• not subject to the advanced approaches capital framework.

Based on evaluation of the criteria above, the Bank is considered a qualifying community banking organization and has elected to opt into the CBLR framework. The following table summarizes the calculation of the Bank’s tier 1 leverage ratio, calculated as tier 1 capital divided by average total consolidated assets, as of June 30, 2026 and December 31, 2025 (in thousands, except ratios).

Our current focus is on preserving capital to support customer lending and allow the Company to take advantage of business opportunities as they arise. We currently believe that we have sufficient capital and earnings power to continue to pay our common stock cash dividend at its current rate of $0.03 per quarter. The Company had a book value of $7.26 per common share and a tangible book value of $6.45(1) per common share on June 30, 2026. In addition, our common equity ratio was 8.42% and our tangible common equity ratio was 7.55%(1). At June 30, 2026, the Company had approximately 17.0 million common shares outstanding.

(1) Non-GAAP financial information, see “Reconciliation of Non-GAAP Financial Measures” later in this MD&A.

**…..INTEREST RATE SENSITIVITY…..**The following table presents an analysis of the sensitivity inherent in the Company’s net interest income and market value of portfolio equity. The interest rate scenarios in the table compare the Company’s base forecast, which was prepared using a flat interest rate scenario, to scenarios that reflect immediate interest rate changes of 100 and 200 basis points. Each rate scenario contains unique prepayment and repricing assumptions that are applied to the Company’s existing balance sheet that was developed under the flat interest rate scenario.

The Company believes that its overall interest rate risk position is well controlled. The fed funds rate was unchanged from year-end 2025 as the Federal Reserve has not taken further action to change interest rates so far in 2026. As of June 30, 2026, the fed funds rate was at a targeted range of 3.50% to 3.75%.

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

The market value of portfolio equity increases in the upward rate shocks due to the improved value of the Company’s core deposit base. Negative variability of market value of portfolio equity occurs in the downward rate shocks due to a reduced value for core deposits.

**…..OFF BALANCE SHEET ARRANGEMENTS…..**The Company incurs off-balance sheet risks in the normal course of business in order to meet the financing needs of its customers. These risks derive from commitments to extend credit and standby letters of credit. Such commitments and standby letters of credit involve, to varying degrees, elements of credit risk. The Company had various outstanding commitments to extend credit approximating $217.3 million and standby letters of credit of $8.8 million as of June 30, 2026. The Company’s exposure to credit loss in the event of nonperformance by the other party to these commitments to extend credit and standby letters of credit is represented by their contractual amounts. The Company uses the same credit and collateral policies in making commitments and conditional obligations as for all other lending.

**…..RECONCILIATION OF NON-GAAP FINANCIAL MEASURES…..**This document contains certain financial information determined by methods other than in accordance with generally accepted accounting principles in the United States (GAAP). The tangible common equity ratio and tangible book value per share are considered to be non-GAAP measures and are calculated by dividing tangible common equity by tangible assets or shares outstanding. The Company believes that these non-GAAP financial measures provide information to investors that is useful in understanding its financial condition. This non-GAAP data should be considered in addition to results prepared in accordance with GAAP, and is not a substitute for, or superior to, GAAP results. Limitations associated with non-GAAP financial measures include the risks that persons might disagree as to the appropriateness of items included in these measures, and, because not all companies use the same calculation of tangible common equity and tangible assets, this presentation may not be comparable to other similarly titled measures calculated by other companies.

The following table sets forth the calculation of the Company’s tangible common equity ratio and tangible book value per share at June 30, 2026 and December 31, 2025 (in thousands, except share and ratio data):

**…..CRITICAL ACCOUNTING POLICIES AND ESTIMATES…..**The accounting and reporting policies of the Company are in accordance with Generally Accepted Accounting Principles (GAAP) and conform to general practices within the banking industry. Accounting and reporting policies for the pension liability, allowance for credit losses (related to investment securities, loans, and unfunded commitments), and derivatives (interest rate swaps/hedges) are deemed critical because they involve the use of estimates and require significant management judgments. Application of assumptions different than those used by the Company could result in material changes in the Company’s financial position or results of operation.

ACCOUNT — Pension liability

BALANCE SHEET REFERENCE — Other assets

INCOME STATEMENT REFERENCE — Salaries and employee benefits and Other expense

DESCRIPTION

Pension costs and liabilities are dependent on assumptions used in calculating such amounts. These assumptions include discount rates, benefits earned, interest costs, expected return on plan assets, mortality rates, and other factors. In accordance with GAAP, actual results that differ from the assumptions are accumulated and amortized over future periods and, therefore, generally affect recognized expense and the recorded obligation of future periods. While management believes that the assumptions used are appropriate, differences in actual experience or changes in assumptions may affect the Company’s pension obligations and future expense. Additionally, pension expense can also be impacted by settlement accounting charges if the amount of employee selected lump sum distributions exceed the total amount of service and interest component costs of the net periodic pension cost in a particular year. Our pension benefits are described further in Note 15 of the Notes to Unaudited Consolidated Financial Statements.

ACCOUNT — Allowance for Credit Losses

BALANCE SHEET REFERENCE — Investment securities, net of allowance for credit losses, Allowance for credit losses – loans, Other liabilities

INCOME STATEMENT REFERENCE — (Recovery) provision for credit losses

DESCRIPTION

The Company measures the current expected credit losses (CECL) on financial assets measured at amortized cost, including loans and held to maturity (HTM) securities, and off-balance sheet credit exposures such as unfunded commitments. In addition, ASC 326 requires credit losses on available for sale (AFS) debt securities to be presented as an allowance rather than as a write-down when management does not intend to sell or believes that it is not more likely than not, they will be required to sell the security.

The Company measures expected credit losses on held to maturity debt securities, which are comprised of U.S. government agency and mortgage-backed securities as well as municipal, corporate, and other bonds. The Company’s agency and mortgage-backed securities are issued by U.S. government entities and agencies and are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major rating agencies, and have a long history of no credit losses. As such, no allowance for credit losses has been established for these securities. The allowance for credit losses on the municipal, corporate, and other bonds within the held to maturity securities portfolio is calculated using the PD/LGD method. The calculation is completed on a quarterly basis using the default studies provided by an industry leading source.

The Company measures expected credit losses on available for sale debt securities when the Company does not intend to sell, or when it is not more likely than not that it will be required to sell, the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. For available for sale debt securities that do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, the Company considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this evaluation indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost, a credit loss exists and an allowance for credit losses is recorded for the credit loss, equal to the amount that the fair value is less than the amortized cost basis. At times, based on management judgment, the Company may establish an allowance for credit losses in excess of the amount that the fair value is less than the amortized cost basis based on the specific circumstances surrounding the security.

The allowance for credit losses (ACL) is a valuation reserve established and maintained by charges against income and is deducted from the amortized cost basis of loans to present the net amount expected to be collected on the loans. Loans, or portions thereof, are charged-off against the ACL when they are deemed uncollectible.

The ACL is an estimate of expected credit losses, measured over the contractual life of a loan, which considers our historical loss experience, current conditions and forecasts of future economic conditions. Determination of an appropriate ACL is inherently subjective and may have significant changes from period to period. The methodology for determining the ACL has two main components: evaluation of expected credit losses for certain groups of homogeneous loans that share similar risk characteristics and evaluation of loans that do not share risk characteristics with other loans.

The allowance for credit losses is calculated with the objective of maintaining reserve levels believed by management to be sufficient to absorb current expected credit losses. Management’s determination of the adequacy of the allowance is based on periodic evaluations of the credit portfolio and other relevant factors. However, this quarterly evaluation is inherently subjective as it requires material estimates. This process also considers economic conditions, for a reasonable and supportable forecast period of two years. All of these factors may be susceptible to significant change. To the extent actual outcomes differ from management estimates, additional provision for credit losses may be required that would adversely impact earnings in future periods.

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

ACCOUNT — Derivatives (interest rate swaps/hedges)

BALANCE SHEET REFERENCE — Other assets and Other liabilities

INCOME STATEMENT REFERENCE — Other income

DESCRIPTION

The Company periodically enters into derivative instruments to meet the financing, interest rate and equity risk management needs of its customers or the Bank.

The Company recognizes all derivatives as either assets or liabilities on the Consolidated Balance Sheets and measures those instruments at fair value. For derivatives designated as fair value hedges, changes in the fair value of the derivative and hedged item related to the hedged risk are recognized in earnings. Changes in fair value of derivatives designated and accounted for as cash flow hedges, to the extent they are effective as hedges, are recorded in other comprehensive loss, net of deferred taxes and are subsequently reclassified to earnings when the hedged transaction affects earnings. Any hedge ineffectiveness would be recognized in the income statement line item pertaining to the hedged item.

To accommodate the needs of our customers and support the Company’s asset/liability positioning, we may enter into interest rate swap agreements with customers and a large financial institution that specializes in these types of transactions. The Company enters into offsetting positions to minimize interest rate and equity risk to the Company. These derivative financial instruments are reported at fair value with any resulting gain or loss recorded in current period earnings in amounts that offset. These instruments and their offsetting positions are recorded in other assets and other liabilities on the Consolidated Balance Sheets.

…..FORWARD LOOKING STATEMENT…..

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

Such factors include the following: (i) the effect of changing regional and national economic conditions; (ii) the effects of trade, monetary and fiscal policies and laws, including interest rate policies of the Federal Reserve; (iii) significant changes in interest rates and prepayment speeds; (iv) inflation, stock and bond market, and monetary fluctuations; (v) credit risks of commercial, real estate, consumer, and other lending activities; (vi) changes in federal and state banking and financial services laws and regulations and supervisory actions by such regulators, including bank failures; (vii) the presence in the Company’s market area of competitors with greater financial resources than the Company; (viii) the timely development of competitive new products and services by the Company and the acceptance of those products and services by customers and regulators (when required); (ix) the willingness of customers to substitute competitors’ products and services for those of the Company and vice versa; (x) changes in consumer spending and savings habits; (xi) unanticipated regulatory or judicial proceedings; (xii) the ability to attract new or retain existing deposits or to retain or grow loans, including growth from unfunded closed loans; (xiii) the ability to generate future revenue growth or to control future growth in non-interest expense, including, but not limited to, those related to technological changes, including changes regarding artificial intelligence and cybersecurity, changes affecting oversight of the financial services industry, and changes intended to manage or mitigate climate and related environmental risks; (xiv) the impact of failure in, or breach of, our operational or security systems or those of third parties with whom we do business, including as a result of cyberattacks or an increase in the incidence of fraud, illegal payments, security breaches or other illegal acts impacting us or our customers; (xv) unanticipated effects to our banking platform, including risks and unanticipated costs related to a core system migration; and (xvi) other external developments which could materially impact the Company’s operational and financial performance.

The foregoing list of important factors is not exclusive, and neither such list nor any forward-looking statement takes into account the impact that any future acquisition may have on the Company and on any such forward-looking statement.

The Company manages market risk, which for the Company is primarily interest rate risk, through its asset liability management process and committee, see further discussion in the Interest Rate Sensitivity section of the MD&A.

(a) Evaluation of Disclosure Controls and Procedures. The Company’s management carried out an evaluation, under the supervision and with the participation of the President, Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and the operation of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of June 30, 2026, pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, the President, Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures as of June 30, 2026 are effective.

(b) Changes in Internal Controls. Effective June 19, 2026, AmeriServ Financial, Inc. migrated to a new core banking system. The Company designed new controls and modified existing controls as part of this system migration project. While the implementation of the new core banking system required adjustments to workflows and control design, management has monitored the transition closely and concluded that these changes did not adversely affect and are not reasonably likely to materially affect the Company’s internal controls over financial reporting (as defined in Rule 13a-15(f)).