10-K 1 w56980ke10-k.txt FORM 10-K FOR THREE RIVERS BANCORP, INC. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (MARK ONE) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO COMMISSION FILE NUMBER 0-29083 THREE RIVERS BANCORP, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) PENNSYLVANIA 25-1843375 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 2681 MOSSIDE BOULEVARD, MONROEVILLE, PA 15146-3315 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (412) 666-8063 SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: COMMON STOCK, $0.01 PAR VALUE (TITLE OF CLASS) 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. [X] Yes [ ] No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of the voting stock held by non-affiliates of the registrant as of February 28, 2002 was approximately $91,207,328.85. The number of shares of Common Stock outstanding on February 28, 2002 was 8,535,773. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- FORM 10-K INDEX PART I Item 1. Business.................................................... 2 Item 2. Properties.................................................. 10 Item 3. Legal Proceedings........................................... 11 Item 4. Submission of Matters to a Vote of Security Holders......... 11 PART II Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters....................................... 11 Item 6. Selected Consolidated Financial Data........................ 11 Item 7. Management's Discussion and Analysis of Consolidated Financial Condition and Results of Operations............. 13 Item 7A Quantitative and Qualitative Disclosures about Market Risk...................................................... 30 Item 8. Consolidated Financial Statements and Supplementary Data.... 31 Item 9. Changes In and Disagreements With Accountants On Accounting and Financial Disclosure.................................. 62 PART III Item 10. Directors and Executive Officers of the Registrant.......... 62 Item 11. Executive Compensation...................................... 62 Item 12. Security Ownership of Certain Beneficial Owners and Management................................................ 62 Item 13. Certain Relationships and Related Transactions.............. 62 PART IV Item 14. Exhibits, Consolidated Financial Statement Schedules, and Reports on Form 8-K....................................... 62 Signatures.................................................. 65

1 PART I ITEM 1. BUSINESS GENERAL Three Rivers Bancorp, Inc. (the "Company") is a registered bank holding company organized under the Pennsylvania Business Corporation Law and is registered under the Bank Holding Company Act of 1956, as amended (the "BHCA.") The Company became a holding company upon acquiring all of the outstanding shares of Three Rivers Bank (the "Bank") on April 1, 2000 from Ameriserv Financial, Inc., formerly known as USBANCORP, Inc. On April 1, 2000, Ameriserv Financial, Inc. executed its approved Board of Directors plan to split it's banking subsidiaries into two separate publicly traded companies and Three Rivers Bancorp, Inc. was formed. On this date, Three Rivers Bank was spun-off from Ameriserv Financial, Inc. and into the Company. Under the tax-free spin-off plan, 100% of the shares of Three Rivers Bancorp, Inc., were distributed as a dividend to the shareholders of Ameriserv Financial as a 1 for 2 stock dividend based on their existing Ameriserv Financial ownership. Standard Mortgage Company ("SMC"), a mortgage banking company, a subsidiary of Three Rivers Bank, was internally spun-off from Three Rivers Bank to Ameriserv Financial prior to consummation of the Three Rivers Bank spin-off. As a result of the spin-off of SMC, on April 1, 2000, total assets and equity at Three Rivers Bank decreased by $10,159,000, the net equity of SMC. The results of operations from SMC are reported as discontinued operations, net of income tax, for all periods presented. For the spin-off of Three Rivers Bank to be considered "tax-free", Ameriserv Financial, Inc. petitioned to and received from the Internal Revenue Service a private letter ruling. This private letter ruling contains certain commitments on the part of the Company including no change in control for a two-year period and a requirement to raise capital within one year after the spin-off. The requirement to raise capital could include issuing capital stock in connection with a business combination. Pursuant to the definitive agreement signed by the Company and The Pennsylvania Capital Bank ("PA Capital Bank) on February 1, 2001, the Company completed its acquisition of PA Capital Bank on July 1, 2001. On that date, the Company acquired all the stock of PA Capital Bank and merged PA Capital Bank into Three Rivers Bank, a wholly owned subsidiary of the Company (the "Bank"). The acquisition was accounted for under the purchase method of accounting. The transaction pricing was calculated using an underlying exchange ratio of 4.61. The price of the Company's stock at February 1, 2001, the determination date, was $9.00, which created a value of $41.50 a share for PA Capital Bank's stock. Each PA Capital Bank shareholder received 90% of the deal price in the Company's stock and 10% in cash. The total merger consideration given for PA Capital Bank's nets assets totaled $20.0 million. This consisted of the issuance of 1,837,677 shares of the Company's stock and $3.4 million in cash. The cash component was comprised of a $1.8 million payment to PA Capital Bank shareholders and a $1.6 million payment to cash out existing PA Capital Bank stock option holders. The acquisition added cash of approximately $43.4 million, loans receivable with a fair value of $83.7 million, investment securities and other assets of $12.7, deposits with a fair value of $123.5 million and other liabilities of $279,000. As a result of the transaction, $4.8 million of core deposit intangible ($3.1 million net of taxes) was recorded and will be amortized over 11 years. For further discussion see Note #23 of the Company's Consolidated Financial Statements. The Company's principal activities consist of owning and operating Three Rivers Bank. At December 31, 2001, the Company had, on a consolidated basis, total assets, deposits, and shareholders' equity of $1.023 billion, $774 million and $82 million, respectively. The Company and its subsidiary entity derive substantially all of their income from banking and bank-related services. The Company functions primarily as a coordinating and servicing unit for its subsidiary entity in general management and financial and strategic planning. The Company, as a bank holding company, is regulated under the BHCA, and is supervised by the Board of Governors of the Federal Reserve System (the "Board"). 2 THREE RIVERS BANCORP INC. BANKING SUBSIDIARY: THREE RIVERS BANK Three Rivers Bank is a state bank chartered under the Pennsylvania Banking Code of 1965, as amended. Through 25 locations in Allegheny, Westmoreland and Washington Counties, Pennsylvania, Three Rivers Bank conducts a general retail banking business consisting of granting commercial, consumer, construction, mortgage and student loans, and offering checking, interest bearing demand, savings and time deposit services. It also operates 25 ATMs that are affiliated with MAC, a regional ATM network, and Plus System, a national ATM network. Three Rivers Bank also offers wholesale banking services to merchants, governmental units, and other large commercial accounts. Such services include balancing services, lock box accounts, and providing coin and currency. Additionally, TRB Financial Services Corporation, a wholly owned subsidiary of Three Rivers Bank was formed on August 5, 1997. TRB Financial Services Corporation engages in the sale of annuities and mutual funds. Pursuant to a definitive agreement entered into by the Company and PA Capital Bank, on July 1, 2001 PA Capital Bank was effectively merged into Three Rivers Bank (for further discussion see Note #23 to the Company's Consolidated Financial Statements). Three Rivers Bank's deposit base is such that loss of one depositor or a related group of depositors would not have a materially adverse effect on its business. In addition, the loan portfolio is also diversified so that one industry or group of related industries does not comprise a material portion of the loan portfolio. Three Rivers Bank's business is not seasonal nor does it have any risks attendant to foreign sources. As a state chartered, federally-insured bank and trust company which is not a member of the Federal Reserve System, Three Rivers Bank is subject to supervision and regular examination by the Pennsylvania Department of Banking and the Federal Deposit Insurance Corporation. Various federal and state laws and regulations govern many aspects of its banking operations. The following is a summary of key data (dollars in thousands) and ratios at and for the year ended December 31, 2001: Headquarters................................................ Monroeville, PA Chartered................................................... 1965 Total Assets (99.9% of the Company's total)................. $1,022,518 Total Investment Securities (100.0% of Company's total)..... $380,598 Total Loans (net of unearned income) (100.0% of the Company's total).......................................... $557,897 Total Deposits (100.0% of the Company's total).............. $774,253 Total Net Income (104.0% of the Company's total)............ $7,459 Asset Leverage Ratio........................................ 6.41% 2001 Return on Average Assets............................... 0.75% 2001 Return on Average Equity............................... 10.33% Total Full-time Equivalent Employees (100.0% of the Company's total).......................................... 256 Number of Offices (100.0% of the Company's total)........... 25

3 EXECUTIVE OFFICERS Information relative to current executive officers of the Company or its subsidiaries is listed in the following table:

Mr. Dunkle became Chairman and CEO of Three Rivers Bancorp, Inc. on April 1, 2000 when Three Rivers Bank was spun-off from Ameriserv Financial, Inc. and into the newly formed Three Rivers Bancorp, Inc. In February 1994, Mr. Dunkle was appointed Chairman, President and Chief Executive Officer of Ameriserv Financial, Inc. In April 1998, Mr. Dunkle was appointed as President and Chief Executive Officer of U.S. Bank and Executive Vice President and Secretary of Ameriserv Financial, Inc. Prior to joining Ameriserv Financial, Mr. Dunkle served the five previous years as Executive Vice President of Commonwealth National Bank in Harrisburg, Pennsylvania. Mr. Vail has served as Three Rivers Bancorp, Inc.'s President and Chief Operating Officer since its organization on April 1, 2000. Mr. Vail is also the President and Chief Operating Officer of Three Rivers Bank. Mr. Vail has served as the President and Chief Executive Officer of Three Rivers Bank from 1985 to March 2000. Prior to 1985, Mr. Vail held positions with Fayette Bank and Trust Company, Burnett Bank in Florida and the Yough Valley National Bank of Connellsville, where he served as Executive Vice President. Mr. King is Senior Vice President of Bank Operations and Support Services, a position he has held since 1998. Mr. King joined Three Rivers Bank in 1972 and has held various positions at the bank, including: Management Trainee, Branch Manager, Branch Manager, Branch Coordinator, Assistant Cashier, Assistant Vice President and Vice President of Marketing. Mr. Locher has served as Three Rivers Bancorp, Inc.'s Senior Vice President and Chief Lending Officer since 1996. Mr. Locher joined Three Rivers Bank in 1990 as a commercial loan officer. Prior to joining the Bank, Mr. Locher was a commercial loan review officer for the Bank's former parent company, Ameriserv Financial, Inc. Prior to joining Ameriserv Financial, Inc., Mr. Locher was employed by Dominion Bank in Roanoke, Virginia as a participant in their management training program. Mr. Eramo has served as Three Rivers Bancorp, Inc.'s Senior Vice President and Chief Financial Officer since its organization on April 1, 2000. Prior to that, Mr. Eramo served as Vice President and Manger of Specialized Accounting for Ameriserv Financial, Inc. Prior to joining Ameriserv Financial, Inc., Mr. Eramo was Vice President and Chief Financial Officer of Sentry Savings and Loan in Stamford, Connecticut. Mr. McKeown has served as Three Rivers Bancorp, Inc.'s Senior Vice President and Chief Credit Officer since its organization on April 1, 2000. Prior to that, Mr. McKeown served in the same capacity for Ameriserv Financial, Inc. since 1986. Prior to that, Mr. McKeown was employed by Equibank in commercial lending, loan review and credit. 4 MONETARY POLICIES Commercial banks are affected by policies of various regulatory authorities including the Federal Reserve System. An important function of the Federal Reserve System is to regulate the national supply of bank credit. Among the instruments of monetary policy used by the Board of Governors are: open market operations in U.S. Government securities, changes in the discount rate on member bank borrowings, and changes in reserve requirements on bank deposits. These means are used in varying combinations to influence overall growth of bank loans, investments, and deposits, and may also affect interest rate charges on loans or interest paid for deposits. The monetary policies of the Board of Governors have had a significant effect on the operating results of commercial banks in the past and are expected to continue to do so in the future. COMPETITION The subsidiary entity faces strong competition from other commercial banks, savings banks, savings and loan associations, credit unions and several other financial or investment service institutions for business in the communities they serve. Several of these institutions are affiliated with major banking and financial institutions, such as Mellon Bank Corporation, Citizens Bank, PNC Financial Services Group, Inc., Dollar Bank, and National City Bank which are substantially larger and have greater financial resources than Three Rivers Bank, the Company's sole subsidiary. As the financial services industry continues to consolidate, the scope of potential competition affecting the subsidiary entity will also increase. For most of the services that the subsidiary entities perform, there is also competition from credit unions and issuers of commercial paper and money market funds. Such institutions, as well as brokerage houses, consumer finance companies, insurance companies, and pension trusts, are important competitors for various types of financial services. In addition, personal and corporate trust investment counseling services are offered by insurance companies, other firms, and individuals. MARKET AREA Three Rivers Bancorp, Inc.'s primary market area is Western Pennsylvania, specifically, having 16 offices in Allegheny County with emphasis on the Mon-Valley. Three River's newest office added in 2001 is located in downtown Pittsburgh. Three Rivers Bancorp also has three offices in Westmoreland County near the Allegheny County border and three offices in Washington County; two in the City of Washington and along in the southeast boundary of Washington and Allegheny counties. Three Rivers Bancorp, Inc.'s primary market area is the Pittsburgh Metropolitan Statistical Area. The Pittsburgh MSA consists of Allegheny, Beaver, Butler, Fayette, Washington, and Westmoreland Counties of Pennsylvania. This MSA saw slow down in job growth during 2001, with preliminary data showing 0.10% growth for 2001. The unemployment rate average 4.4% in 2001; however, it finished the year at 4.8%. After three good years, single family housing permit growth weekend in 2001. The slowdown in single family permits was more the offset by an increase in multi-family permits. Low mortgage interest rates assisted fairly strong home sales in 2001. EMPLOYEES The Company employed approximately 256 persons as of December 31, 2001, in full- and part-time positions. COMMITMENTS AND LINES OF CREDIT The Company's banking subsidiary is obligated under commercial, standby, and trade-related irrevocable letters of credit aggregating $6.5 million at December 31, 2001. In addition, the subsidiary bank has issued lines of credit to customers generally for periods of up to one year. Borrowings under such lines of credit are usually for the working capital needs of the borrower. At December 31, 2001, the Company's banking subsidiary had unused loan commitments of approximately $123.0 million. 5 STATISTICAL DISCLOSURES FOR BANK HOLDING COMPANIES The following Guide 3 information is included in this Form 10-K as listed below: I. Distribution of Assets, Liabilities, and Stockholders' Equity; Interest Rates and Interest Differential Information. Information required by this section is presented on pages 18, 25, 26 and 27. II. Investment Portfolio Information required by this section is presented on pages 6, 7 and 39. III. Loan Portfolio Information required by this section appears on pages 7, 8, 40 and 41. IV. Summary of Loan Loss Experience Information required by this section is presented on pages 21, 22, 23 and 40. V. Deposits Information required by this section follows on pages 9, 42 and 43. VI. Return on Equity and Assets Information required by this section is presented on page 12 and 13. VII. Short-Term Borrowings Information required by this section is presented on page 10. INVESTMENT PORTFOLIO Investment securities held to maturity are carried at amortized cost while investment securities classified as available for sale are reported at fair value. At December 31, 2001, 100% of the securities portfolio was classified as available for sale. The following table sets forth the book and market value of the Company's investment portfolio as of the periods indicated: Investment Securities Available for Sale at:

With the entire portfolio being classified as available for sale, the Company has greater flexibility to manage the securities portfolio to better achieve overall balance sheet rate sensitivity goals and provide liquidity to fund loan growth if needed. The mark to market of the available for sale portfolio does inject more volatility in the book value of equity but has no impact on regulatory capital. The total securities portfolio decreased by approximately $42.1 million between December 31, 2001, and December 31, 2000, and decreased by $124.8 million between year ended 2000 and 1999. The decline in 2001 and 2000 is attributed to the use of cashflows from investment security sales, maturities and principal repayments to paydown higher costing borrowings. 6 At December 31, 2001, investment securities having a book value of $258.2 million were pledged as collateral for public funds, and FHLB borrowings. The Company and its subsidiary, collectively, did not hold securities of any single issuer, excluding U.S. Treasury and U.S. Agencies, that exceeded 10% of shareholders' equity at December 31, 2001. Maintaining investment quality is a primary objective of the Company's investment policy which, subject to certain minor exceptions, prohibits the purchase of any investment security below a Moody's Investor Service or Standard & Poor's rating of "A." At December 31, 2001, 98.6% of the portfolio was rated "AAA" compared to 97.8% at December 31, 2000. Less than 1.1% was rated below "A" or unrated at December 31, 2001. LOAN PORTFOLIO The following table sets forth the Company's loans by major category as of the dates set forth below:

--------------- (1) At December 31, 2001 and 2000, real estate-construction loans constituted 3.2% and 2.6% of the Company's total loans, net of unearned income, respectively. Total loans, net of unearned income, increased by $77.0 million, or 15.7%, between December 31, 2000, and December 31, 2001. This growth occurred in commercial and commercial loans secured by real estate, which increased by $33.2 million, or 74.5%, and $58.8 million, or 24.7%, respectively. This growth, however, was partially offset by decreases in the remaining loan categories. The higher loan totals in commercial loans and commercial loans secured by real estate in general resulted from the loans acquired in conjunction with the PA Capital Bank acquisition of approximately $83 million. Additionally, the increase in these loan categories resulted from increased production from both middle market and small business lending (loans less than $250,000). This improved new loan production was due primarily to more effective sales efforts, which have included an intensive customer-calling program and existing customers being a source of additional relationships and referrals. Other factors contributing to the loan growth were a stable economic environment. Total residential mortgage loans decreased $12.0 million, or 6.6%, between 2001 and 2000 as principal prepayments, which primarily resulted from the declining interest rate environment, exceeded new loan originations. Additionally, the Company is selling the majority of new fixed-rate mortgage products to assist in asset/liability positioning and to reduce the Company's overall dependence on residential mortgage loans. Total consumer loans declined by $3.1 million or 12.1% in 2001, $7.6 million or 22.9% in 2000, $1.5 million or 4.4% in 1999 and increased $3.2 million or 10.1% in 1998. The overall drop was due to the net run-off in the consumer loan portfolio and the Company scaling back its consumer loan operation. 7 The amount of loans outstanding by category as of December 31, 2001, which are due in (i) one year or less, (ii) more than one year through five years, and (iii) over five years, are shown in the following table. Loan balances are also categorized according to their sensitivity to changes in interest rates.

The loan maturity information is based upon original loan terms and is not adjusted for principal paydowns and "rollovers." In the ordinary course of business, loans maturing within one year may be renewed, in whole or in part, as to principal amount at interest rates prevailing at the date of renewal. At December 31, 2001, 63.7% of total loans were fixed-rate, which was comparable with the prior year total of 61.4%. The stability in the fixed-rate percentage between years reflects continued customer preference for fixed-rate loans in this overall low interest rate environment. To mitigate the interest rate risk associated with fixed rate loans, many of the commercial loans have prepayment penalties. Also, a good portion of the commercial real estate loan growth has occurred in the five to ten year fixed-rate area. For additional information regarding interest rate sensitivity, see "Management's Discussion and Analysis of Consolidated Financial Condition and Results of Operations -- Interest Rate Sensitivity." COMMERCIAL This category includes credit extensions to commercial and industrial borrowers. These credits are typically secured by business assets, including accounts receivable, inventory and equipment. Advance rates on accounts are limited to 80% of eligible receivables and 50% of raw materials and finished goods inventory. Overall balance sheet strength and profitability are considered when analyzing these credits, with special attention given to current and historical cash flow coverage. Policy permits flexibility in determining acceptable coverage ratios. In general, new customer cash flow coverage ratios are 1.2 to 1 and existing customer ratios seldom fall below 1.1 to 1. Personal guarantees are frequently required, however, as the strength of the borrower increases our ability to obtain personal guarantees decreases. In addition to economic risk, this category is subject to risk of weak borrower management and industry risk, all of which are considered at underwriting. COMMERCIAL LOANS SECURED BY REAL ESTATE This category includes various types of loans, including acquisition and construction of investment property, owner-occupied and operating property. Maximum term, minimum cash flow coverage, leasing requirements, maximum amortization and maximum loan to value ratios are controlled by Credit Policy and follow industry guidelines and norms and regulatory limitations. Personal guarantees are always required during the construction phase on construction credits and are frequently obtained on mid to smaller 8 commercial real estate loans. In addition to economic risk, this category is subject to geographic and portfolio concentration risk, which are monitored and considered at underwriting. REAL ESTATE -- MORTGAGE This category includes mortgages that are secured by residential property. Underwriting of loans within this category is pursuant to Federal Home Loan Mortgage Corporation ("Freddie Mac") underwriting guidelines, with the exception of Community Reinvestment Act ("CRA") loans, which have more liberal standards. The major risk in this category is that a significant downward economic trend could increase unemployment and cause payment defaults. CONSUMER This category includes consumer installment loans and revolving credit plans. Underwriting standards identify undesirable loans, repayment terms and debt coverage ratios. Loans with debt to income coverage of 45% or less are considered satisfactory. Loans between 46% and 50% require special approval, and loans over 50% are exceptions to policy. The major risk in this category is that a significant downward economic trend could increase unemployment and cause payment defaults. DEPOSITS The following table sets forth the average balance of the Company's deposits and the average rates paid thereon for the past three calendar years:

Total deposits increased by $90.6 million or, 15.0%, in 2001 due to $128 million of deposits acquired in conjunction with the PA Capital Bank Purchase. Additionally, the increase in average balance also results from the Company's effort to raise funding for the repayment of higher costing Federal Home Loan Bank ("FHLB") borrowings. The growth in demand deposits over each of the past two years reflects the success of new business generated in conjunction with the increased commercial lending activity. The following table indicates the maturities and amounts of certificates of deposit issued in denominations of $100,000 or more as of December 31, 2001:

9 FEDERAL FUNDS PURCHASED, SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE, AND OTHER SHORT-TERM BORROWINGS The outstanding balances and related information for federal funds purchased, securities sold under agreements to repurchase, and other short-term borrowings are summarized as follows:

Average amounts outstanding during the year represent daily averages. Average interest rates represent interest expense divided by the related average balances. Collateral related to securities sold under agreements to repurchase are maintained within the Company's investment portfolio. These borrowing transactions range from overnight to one year in maturity. The average maturity was 92 days at the end of 2000 and 87 days at the end of 1999. ITEM 2. PROPERTIES The principal offices of the Company and Three Rivers Bank occupy a two-story building at 2681 Mosside Boulevard in Monroeville. The Company and its subsidiary bank occupy the main office as well as 13 other locations that are owned. Eleven additional locations are leased with terms expiring from February 28, 2003, to April 30, 2011. 10 ITEM 3. LEGAL PROCEEDINGS The Company is subject to a number of asserted and unasserted potential legal claims encountered in the normal course of business. In the opinion of both management and legal counsel, there is no present basis to conclude that the resolution of these claims will have a material adverse effect on the Company's consolidated financial position. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matter was submitted by the Company to its shareholders through the solicitation of proxies or otherwise during the fourth quarter of the fiscal year covered by this report. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS As of January 31, 2002, the Company had 4,936 shareholders of record of its Common Stock. COMMON STOCK Three Rivers Bancorp, Inc.'s Common Stock began trading on the NASDAQ National Market System on April 1, 2000 under the symbol "TRBC." The following table sets forth the high and low closing prices and the cash dividends declared per share for the periods indicated:

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA The following table sets forth the consolidated financial data of the Company for the years 2001 and 2000 and the Bank only for all prior periods. The years 1997 thru 1999 exclude the balance sheet data and results of operations of SMC, the Bank's wholly owned subsidiary that was spun off to Ameriserv Financial, Inc. on April 1, 2000 in conjunction with Ameriserv Financial, Inc.'s spin-off of the Bank. The following selected consolidated financial data should be read in conjunction with the audited Consolidated Financial Statements included herein under Item 8. The capital structure that existed when the Bank operated as part of Ameriserv Financial, Inc. during the years 1997 thru 1999 is not representative of the capital structure of the Company as a separate, independent company in 2000 and 2001. Accordingly, cash dividends declared have not been presented and per share data for earnings is based on an assumed distribution of one share of Three Rivers Bancorp, Inc. common stock for every two shares of Ameriserv Financial, Inc. common stock outstanding. 11

--------------- (1) The ratio of earnings to fixed charges and preferred dividends is computed by dividing the sum of income before taxes, fixed charges, and preferred dividends by the sum of fixed charges and preferred dividends. Fixed charges represent interest expense and are shown as both excluding and including interest on deposits. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS ("M. D. & A.") The following discussion and analysis of financial condition and results of operations of Three Rivers Bancorp, Inc. should be read in conjunction with the consolidated financial statements including the related notes thereto, included elsewhere herein. RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999 PERFORMANCE OVERVIEW. At March 31, 2000, Three Rivers Bank was a wholly owned subsidiary of Ameriserv Financial, Inc., formerly known as USBANCORP, Inc. On April 1, 2000, Ameriserv Financial, Inc. executed its approved Board of Directors plan to split Ameriserv Financial, Inc.'s banking subsidiaries into two separate publicly traded companies. Under the tax-free spin-off plan, 100% of the shares of Three Rivers Bancorp, Inc. were distributed as a dividend to the shareholders of Ameriserv Financial, Inc. as a 1 for 2 stock dividend based on their existing Ameriserv Financial, Inc. ownership. Standard Mortgage Company (SMC), a mortgage banking company and subsidiary or Three Rivers Bank, was internally spun-off from Three Rivers Bank to Ameriserv Financial, Inc. prior to consummation of the Three Rivers Bank spin-off. As a result of the spin-off, the pre-tax results of 2000 were negatively affected by $777,000 of spin-off related costs, which negatively affected after-tax 13 earnings per share by $0.08. During the first quarter of 2000, the Internal Revenue Service completed its examination of Ameriserv Financial, Inc.'s federal income tax returns (of which the Company was included) through the 1997 tax year. As a result of a change in the estimate of the Company's income tax liability, the Company reversed tax expense accruals of $750,000, resulting in an income tax provision in 2000 of only $936,000. Pursuant to the definitive agreement signed by the Company and The Pennsylvania Capital Bank ("PA Capital Bank") on February 1, 2001, the Company completed its acquisition of PA Capital Bank on July 1, 2001. On that date, the Company acquired all the stock of PA Capital Bank and merged PA Capital Bank into Three Rivers Bank, a wholly owned subsidiary of the Company (the "Bank"). The acquisition was accounted for under the purchase method of accounting. The transaction pricing was calculated using an underlying exchange ratio of 4.61. The price of the Company's stock at February 1, 2001, the determination date, was $9.00, which created a value of $41.50 a share for PA Capital Bank's stock. Each PA Capital Bank shareholder received 90% of the deal price in the Company's stock and 10% in cash. The total merger consideration given for PA Capital Bank's nets assets totaled $20.0 million. This consisted of the issuance of 1,837,677 shares of the Company's stock and $3.4 million in cash. The cash component was comprised of a $1.8 million payment to PA Capital Bank shareholders and a $1.6 million payment to cash out existing PA Capital Bank stock option holders. The acquisition added cash of approximately $43.4 million, loans receivable with a fair value of $83.7 million, investment securities and other assets of $12.7, deposits with a fair value of $123.5 million and other liabilities of $279,000. As a result of the transaction, $4.8 million of core deposit intangible ($3.1 million net of taxes) was recorded and will be amortized over 11 years. For further discussion see Note #23 of the Company's Consolidated Financial Statements. The Company's income from continuing operations for 2001 totaled $7.2 million or $0.94 per share on a diluted basis compared to income from continuing operations and exclusive of the aforementioned spin-off costs for 2000 was $5.5 million or $0.83 on a diluted per share basis. These increases resulted from an increase in net interest margin, the acquisition of PA Capital Bank, sale of investment securities and a decrease in non-interest expense. For 1999, income from continuing operations totaled $9.9 million or $1.48 per share on a diluted basis. When 2001 is compared to 2000, the Company's diluted earnings per share increased by $0.11 or 13.3% while income from continuing operations increased by $1.7 million or 30.9%. When 2000 is compared to 1999, the Company's diluted earnings per share decreased by $0.65 or 43.9% while income from continuing operations declined by $4.5 million or 45.0% The Company's total return on average total equity decreased to 9.7% for 2001 compared to 10.3% for 2000 and 17.9% for 1999. Without the effects of accumulated other comprehensive income, which was actually a loss in all quarters but one, return on average equity would have been 9.59% and 7.94% in 2001 and 2000, respectively. The decrease in non-interest expense was a key factor that positively impacted the Company's financial performance in 2001 when compared to 2000. Total non-interest expense was $2.5 million, or 10.4%, lower in 2001. The Company's financial performance was further enhanced by a $824,000 or 19.3% increase in non-interest income. These positive effects, however, were partially offset by an increase in provision from loan losses of $450,000. When comparing 2001 to 2000, the Company experienced a slight increase in net interest income of $245,000, or 0.9%. The decline in total revenue, which includes both net interest income and non-interest income, was a key factor that negatively impacted the Company's financial performance in 2000 as compared to 1999. Specifically, net interest income decreased by $3.6 million or 12.3% while total non-interest income decreased by $1.4 million or 24.6% when compared to 1999. In addition to this $5.0 million decrease in total revenue, the Company's financial performance was further negatively affected by higher non-interest expense and an increase in the provision for loan losses. Total non-interest expense was $2.8 million or 13.3% higher in 2000 while the provision for loan losses increased by $300,000. 14 The following table summarizes some of the Company's key performance indicators for each of the past three years.

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; it is affected by interest rate fluctuations as well as changes in the amount and mix of earning assets and interest bearing liabilities. It is the Company's philosophy to strive to optimize net interest margin performance in varying interest rate environments. The following table summarizes the Company's net interest income performance for each of the past three years:

2001 NET INTEREST PERFORMANCE OVERVIEW. Three Rivers Bancorp, Inc.'s net interest income on a tax-equivalent basis increased by $131,000, or 0.5%, due primarily to an increase of the net interest margin percentage. Total average earning assets were $17.1 million, or 1.8%, lower in 2001 due to a $96.2 million, or 19.8%, decrease in investment securities. This decrease, however, was partially offset by a $57.6 million, or 12.1%, increase in average total loans, which resulted from the loans acquired in the PA Capital Bank acquisition. The total interest income reduction from this decrease in earning assets was partially offset be a 10 basis point increase in the net interest margin to 2.83%. As a result, total interest income on a tax equivalent basis decreased $3.5 million, or 5.0%, from 2000. The increase in the net interest margin percentage resulted from the lower interest rate environment during 2001. The increase in the net interest margin reflects a 24 basis point decrease in the earning asset yield, but was partially offset by a 16 basis point decrease in the cost of funds. The Company has, however, in 2001, sold approximately $103 million in securities to help reduce interest rate risk and decrease further margin compression as a result of the leverage program Three Rivers Bank has had in place over the last six years. The overall growth in the earning asset base was one strategy used by the Company to leverage its capital. The maximum amount of leveraging the Company can perform is controlled by internal policy requirements to maintain a minimum asset leverage ratio of no less than 6.0% (see further discussion under Capital Resources) and to limit net interest income variability to +/-7.5% and net income variability to +/-15% over a twelve month period. (See further discussion under Interest Rate Sensitivity). COMPONENT CHANGES IN NET INTEREST INCOME: 2001 VERSUS 2000. Regarding the separate components of net interest income, the Company's total tax-equivalent interest income for the twelve months of 2001 decreased by $3.5 million or 5.0% when compared to the same 2000 period. This decrease resulted from a 15 decline in average earning assets of $17.1 million or 1.8% from the prior year. In addition to the negative effect of this decrease, interest income for the twelve months of 2001 was further negatively affected by a 24 basis point decrease in the earning asset yield. Within the earning asset base, the yield on the total loan portfolio decreased 36 basis points to 7.93% due to the downward repricing of floating-rate loans and the overall decline in the interest rate environment. The yield on total investment securities decreased by 23 basis points to 6.12% due to the increased prepayments and the corresponding increase in the amortization of premiums. The Company's total interest expense for the twelve months of 2001 decreased by $3.7 million or 8.3% when compared to the same 2000 period. This lower interest expense was due to the decrease in average interest bearing liabilities of $43.6 million, or 5.1%. Total interest expense was further impacted by a 16 basis point decrease in the yield on interest bearing liabilities, to an average of 5.04% for twelve months of 2001. The decrease in average interest-bearing liabilities results from a decrease in borrowed funds of $120.7 million, or 36.1%, which was partially offset by an increase in total deposits of $77.2 million, or 14.9%. The increase in average total deposits is primarily the result of deposits acquired in connection with the PA Capital Bank acquisition and the result of special rate incentives offered by the Bank to increase the certificate of deposit portfolio. As a result, certificate of deposits increased $43.8 million, or 12.1%. The proceeds received from investment security principal and interest receipts as well as from the growth of the deposit base were used to pay down the higher costing borrowings as well as to fund loan originations. The decline in average interest bearing liabilities included a 16 basis point decrease in the rate paid on interest bearing liabilities, to an average of 5.04% for the twelve months of 2001. FHLB advances had an average cost of 6.54% in the twelve months of 2001, which was 57 basis points higher than their cost in the prior year and 204 basis points greater than the average cost of deposits, which was 4.50% in the twelve months of 2001. It is recognized that interest rate risk does exist from this use of borrowed funds to leverage the balance sheet. To neutralize a portion of this risk, the Company has executed hedging transactions which help fix the variable funding costs associated with the use of short-term borrowings to fund earning assets. (See further discussion under Note #18 to the Company's Consolidated Financial Statements.) The Company also has asset liability policy parameters, which limit the maximum amount of borrowings to 40% of total assets. For the twelve months ended December 31, 2001, the level of short-term borrowed funds and FHLB advances to total assets averaged 21.5%. At December 31, 2001, the Company had borrowed funds to total assets of 15.3%, which is within the parameters set by the Company. The Company plans to use cash flow from mortgage- backed securities and increasing deposits to pay down borrowings during the next several quarters. Management's goal is to maintain borrowings to no more than 20% of total assets. 2000 NET INTEREST PERFORMANCE OVERVIEW. Three Rivers Bancorp, Inc.'s net interest income on a tax-equivalent basis decreased by $4.0 million, or 13.1%, due primarily to compression of the net interest margin. Total average earning assets were $28.1 million, or 2.8%, lower in the 2000 due to a $39.8 million, or 7.6%, decrease in investment securities. This decrease, however, was partially offset by a $11.6 million, or 2.5%, increase in total loans. The Company was able to achieve solid loan growth in commercial real estate loans of $31 million, or 14.9%, when compared to December 31, 1999. During the same period the comparably lower yielding residential real estate loans decreased by $12.8 million or 6.6%. Although average earning assets significantly decreased, the Company experienced only a slight decline in total interest income on a tax equivalent basis of $789,000, or 1.1%, from 1999. This resulted from investing in higher yielding assets, while divesting in those that yielded less. This change in the composition of earning assets was more than offset by a 34 basis point decline in the net interest margin to 2.73%. The drop in the net interest margin reflects an 11 basis point increase in the earning asset yield, but was more than offset by a 55 basis point increase in the cost of funds. The Company has, however, in 2000, sold $88 million in securities to help reduce interest rate risk and decrease further margin compression as a result of the leverage program Three Rivers Bank has had in place over the last five years. COMPONENT CHANGES IN NET INTEREST INCOME: 2000 VERSUS 1999. Regarding the separate components of net interest income, the Company's total tax-equivalent interest income for the twelve months of 2000 decreased by $789,000 or 1.1% when compared to the same 1999 period. This decrease resulted from a decline in average earning assets of $28.1 million or 2.8% from the prior year. The negative effect of this decrease, 16 however, was partially offset by repositioning the balance sheet so that there was increased investment in the higher yielding loan portfolio while divesting in the lower yielding investment security portfolio. Within the earning asset base, the yield on the total loan portfolio increased 19 basis points to 8.29% due to the upward repricing of floating-rate loans and the shift in the loan portfolio to the higher yielding commercial and commercial real estate loans. The yield on total investment securities increased by one basis point to 6.35% due to the slow down of prepayments and the corresponding decrease in the amortization of premiums. The Company's total interest expense for the twelve months of 2000 increased by $3.2 million or 7.9% when compared to the same 1999 period. This higher interest expense was due to a 55 basis point increase in the rate paid on interest bearing liabilities, to an average of 5.20% for the twelve months of 2000. The higher interest rate paid, however, was partially offset by a $32.0 million, or 3.6%, decrease in average interest bearing liabilities. The decline in interest bearing liabilities included a $50 million decrease in FHLB Advances, which was partially offset by growth in total deposits of $33 million, or 6.8%. The funding from deposit growth, along with cash flow from investment securities were used to paydown the higher costing borrowings. FHLB advances had an average cost of 5.97% in the twelve months of 2000, which was 51 basis points higher than their cost in the prior year and 133 basis points greater than the average cost of deposits, which was 4.64% in the twelve months of 2000. Overall, the Company's total cost of funds increased by 55 basis points to 5.20%. The table that follows provides an analysis of net interest income on a tax-equivalent basis setting forth (i) average assets, liabilities and stockholders' equity, (ii) interest income earned on interest earning assets and interest expense paid on interest bearing liabilities, (iii) average yields earned on interest earning assets and average rates paid on interest bearing liabilities, (iv) Three Rivers Bancorp, Inc.'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) Three Rivers Bancorp, Inc.'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, as well as, interest recorded on non-accrual loans as cash is received. Additionally, a tax rate of approximately 35% is used to compute tax equivalent yields.

The average balance and yield on taxable securities was $361.5 million and 6.26%, $450.5 million and 6.40%, and $466.5 million and 6.35% for 2001, 2000, and 1999, respectively. The average balance and tax-equivalent yield on tax-exempt securities was $29.1 million and 5.52%, $36.3 million and 5.72%, and $60.1 million and 6.25% for 2001, 2000, and 1999, respectively. Net interest income may also be analyzed by segregating the volume and rate components of interest income and interest expense. The table below sets forth an analysis of volume and rate changes in net interest income on a tax-equivalent basis. For purposes of this table, changes in interest income and interest expense are allocated to volume and rate categories based upon the respective percentage changes in average balances and average rates. Changes in net interest income that could not be specifically identified as either a rate or volume change were allocated proportionately to changes in volume and changes in rate. 18

INVESTMENT MATURITY. The following table sets forth the contractual maturity distribution of the investment securities, book and market values, and the weighted average yield for each type and range of maturity as of December 31, 2001. Yields are not presented on a tax-equivalent basis, but are based upon book value and are weighted for the scheduled maturity. Average maturities are based upon the original contractual maturity dates with the exception of mortgage-backed securities and asset-backed securities for which the modified durations were used. At December 31, 2001, the Company's consolidated investment securities portfolio had a modified duration of approximately 3.65 years. Investment securities available for sale:

--------------- (1) Other investment securities include corporate notes and bonds, asset-backed securities, and equity securities. LOAN QUALITY. Three Rivers Bancorp, Inc.'s written lending policies require underwriting, loan documentation, and credit analysis standards to be met prior to funding any loan, with approval at appropriate level, and continued periodic credit review after funding is required. Credit reviews are mandatory for all commercial loans and for all commercial mortgages in excess of $500,000 within an 18-month period. In addition, due to the smaller balances of individual installment loans, sampling techniques are used on a continuing basis for credit reviews in these loan areas. The following table sets forth information concerning Three Rivers Bancorp, Inc.'s loan delinquency and other non-performing assets. At all dates presented, the Company had no troubled debt restructurings which involve forgiving a portion of interest or principal on any loans or had not made any loans at a rate materially less than that of market rates:

--------------- (1) Non-performing assets are comprised of (i) loans that are on a non-accrual basis, (ii) loans that are contractually past due 90 days or more as to interest and principal payments of which some are insured for credit loss, and (iii) other real estate owned. All loans, except for loans that are insured for credit loss, are placed on non-accrual status immediately upon becoming 90 days past due in either principal or interest. Between December 31, 2000 and December 31, 2001, total loan delinquency increased by $1.5 million causing the delinquency ratio to increase to 1.20%. Residential mortgage loans comprise $4.5 million and $3.0 million of total delinquencies as of December 31, 2001 and December 31, 2000, respectively. Total non-accrual loans and non-performing assets were relatively consistent between years. 20 Between December 31, 1999, and December 31, 2000, total loan delinquency increased by $1.3 million causing the delinquency ratio to rise to 1.09%. Total non-performing assets decreased by $6.4 million since year-end 1999 causing the non-performing assets to total loans ratio to decrease to 0.53%. This decrease is due entirely to a $6 million construction loan on a completed assisted living facility that the Company took possession of in the fourth quarter of 1999 and recorded as other real estate owned. This property was sold in the fourth quarter of 2000. The sale was funded by Three Rivers Bank provided financing. During 2000 and 1999, the Company incurred charges of $2.4 million and $500,000, respectively to adjust the book value of the property to estimated fair market value. ALLOWANCE AND PROVISION FOR LOAN LOSSES. The Company uses a comprehensive methodology and procedural discipline to maintain an allowance for loan losses to absorb inherent losses in the loan portfolio. The allowance can be summarized into two elements; 1) reserves established on specifically identified problem loans, and 2) formula driven general reserves established for loan categories based upon historical loss experience and other qualitative factors which include delinquency and non-performing loan trends, concentrations of credit, trends in loan volume, experience and depth of management, examination and audit results, effects of any changes in lending policies, and trends in policy exceptions. It should be noted that the qualitative factors used in the formula driven general reserves are evaluated quarterly (and revised if necessary) by the Company's management to establish allocations which accommodate each of the listed risk factors. As a financial institution that assumes lending and credit risks as a principal element of its business, the Company anticipates that credit losses will be experienced in the normal course of business. Accordingly, the methodology applied by the Company, which is updated on a quarterly basis at the subsidiary bank level, is used to determine both the adequacy of the allowance for loan losses and the necessary provision for loan losses to be charged against earnings. This methodology includes: - A detailed review of all criticized and impaired loans to determine if any specific reserve allocations are required on an individual loan basis. The specific reserve established for these criticized and impaired loans is based on careful analysis of the loan's performance, the related collateral value, cash flow considerations and the financial capability of any guarantor. - The application of formula driven reserve allocations for remaining commercial and commercial real-estate loans are calculated by using a three-year migration analysis of net losses incurred within each risk grade for the entire commercial loan portfolio. The difference between estimated and actual losses is reconciled through the dynamic nature of the migration analysis. - The application of formula driven reserve allocations to installment and mortgage loans is based upon historical charge-off experience for those loan types. The residential mortgage loan allocation is based upon the Company's five-year historical average of actual loan charge-offs experienced in that category. The same methodology is used to determine the allocation for consumer loans except the allocation is based on an average of the most recent actual three-year historical charge-off experience for consumer loans. The application of formula driven reserve allocations to all outstanding loans is based upon review of historical losses and qualitative factors, which include but are not limited to, economic trends, delinquencies, concentrations of credit, trends in loan volume, experience and depth of management, examination and audit results, effects of any changes in lending policies and trends in policy exceptions. After completion of this process, a formal meeting of the Loan Loss Reserve Committee is held to make qualitative adjustments to the formula driven results and evaluate the adequacy of the provision. The Company believes that the procedural discipline, systematic methodology, and comprehensive documentation of this quarterly process is in full compliance with all regulatory requirements and provides appropriate support for accounting purposes. 21 The following table sets forth changes in the allowance for loan losses and certain ratios for the periods ended:

The Company recorded a provision for loan losses of $1,050,000 in 2001, $600,000 in 2000 and $300,000 in 1999. When expressed as a percentage of average loans, the provision has increased from 0.06% to 0.20% over this three-year period. Factors contributing to the increased loan loss provision in 2001 included higher loan balances and continued growth of higher risk commercial and commercial real-estate loans. The Company's net charge-offs amounted to $390,000 or 0.07% of average loans in 2001, $228,000 or 0.05% of average loans in 2000, and $1.4 million or 0.30% in 1999. Overall, the Company's allowance for loan losses was 22 208% of non-performing assets and 247% of non-accrual loans at December 31, 2001. The increase in the non-performing assets coverage ratio from 1999 is due to the previously mentioned decrease in other real estate owned. Three Rivers Bancorp, Inc.'s management is unable to determine in what loan category future charge-offs and recoveries may occur. The following schedule sets forth the allocation of the allowance for loan losses among various categories. This allocation is determined by using the consistent quarterly procedural discipline that was previously discussed. The entire allowance for loan losses is available to absorb future loan losses in any loan category.

Even though real estate-mortgage loans comprise 30% of the Company's total loan portfolio, only $264,000 or 3.3% of the total allowance for loan losses is allocated against this loan category. The real estate-mortgage loan allocation is based primarily upon the Company's five-year historical average of actual loan charge-offs experienced in that category and other qualitative factors. The disproportionately higher allocations for commercial loans and commercial loans secured by real estate reflect the increased credit risk associated with this type of lending. The increase in allocated reserves to the commercial loans secured by real estate at December 31, 2001, versus December 31, 2000, is driven by the continued growth of this portfolio. At December 31, 2001, the commercial real-estate loan balance grew by 24.7% over the December 31, 2000, balance. Other factors considered by the Company that led to increased allocations to the commercial real-estate portfolios were the potential adverse effects of the falling interest rate environment that continued in 2001, the continued increase in concentration risk in single borrowers and the overall growth in the average size associated with these credits. Based on the Company's loan loss reserves methodology and the related assessment of the inherent risk factors contained within the Company's loan portfolio, management believes that the allowance for loan losses was adequate for each of the fiscal years presented in the table above. NON-INTEREST INCOME. Non-interest income for 2001 totaled $5.1 million, which represented a $824,000, or 19.3%, increase when compared to the same 2000 period. This increase was primarily due to the following items: - a $758,000 increase in gains realized on investment security sales. The Company sold approximately $103 million in securities during 2001 and used the proceeds to pay down short-term advances from the FHLB. These sales resulted in a net gain of $297,000, while the sales in 2000 resulted in a net loss of $461,000. - an increase in wholesale cash processing fees of $174,000, or 31.0%, as a result of the Company processing additional activity that resulted from an expanded customer base. 23 - these increases, however, were partially offset by a decrease in trust fees of $96,000, or 44.4%, as a result of the Company entering into an agreement in which it receives a flat monthly fee for trust referrals, and no longer has its own trust department. Non-interest income for 2000 totaled $4.3 million, which represented a $1.4 million or 24.6% decrease when compared to 1999. This decrease was primarily due to the following items: - a $734,000 decrease in gains realized on investment security sales. The Company sold approximately $88 million in securities during 2000 and used the proceeds to pay down short-term advances from the FHLB. These sales resulted in a net loss of $461,000. - a $755,000 decrease in trust fees as the Company entered into an agreement in which it receives a flat monthly fee for trust referrals. - these decreases, however, were partially offset by an increase in service charges on deposit accounts of $122,000, or 6.6%, as a result of the Company amending its fee structure. NON-INTEREST EXPENSE. Non-interest expense for 2001 totaled $21.3 million, which represented a $2.5 million, or 10.4%, decrease when compared to the same 2000 period. This decrease was primarily due to the following items: - as a result of the spin-off on April 1, 2000, the Company incurred $777,000 of non-recurring spin-off costs during 2000. The expense is primarily the result of stock registration and professional fees. - a $2.5 million decrease in OREO expense, which is primarily the result of a $2.4 million write down of an Other Real Estate Owned property during 2000. This property was acquired through a foreclosure on a commercial real estate loan in 1999 and was sold in the fourth quarter of 2000. - a $629,000, or 15.7%, decrease in other expenses during 2001 compared to the same 2000 period. The decrease is primarily the result of a decrease in expenses incurred for services provided by Ameriserv Financial, Inc. of approximately $790,000. - the above decreases in the components of non-interest expense, however, were partially offset by a $130,000, or 10.3%, increase in professional fees and a $299,000, or 41.4%, increase in miscellaneous taxes and insurance. Professional fees increased as a result of increased activity at the holding company level, while the increase in miscellaneous taxes resulted from an increase in the liability for Pennsylvania shares tax. Additionally, salaries and employee benefits increased $482,000, or 5.0%, during 2001 when compared to 2000. This increase results from an increase in full time equivalent employees and normal salary increases Non-interest expense for 2000 totaled $23.8 million, which represented a $2.8 million, or 13.3%, increase when compared to the same 1999 period. This increase was primarily due to the following items: - as a result of the spin-off, the Company had $777,000 of non-recurring spin-off costs. The expense is primarily the result of stock registration and professional fees. - a net $313,000 increase in salary and employee benefits resulted from the spin-off necessitating new positions and the elimination of others at the beginning of the second quarter. - a $2.3 million increase in OREO expense, which is primarily the result of a write down of an Other Real Estate Owned property, that was acquired through a foreclosure on a commercial real estate loan. - the above increases in the components of non-interest expense are partially offset by a $591,000, or 12.8%, decrease in other expenses for 2000 as compared to the same period in 1999. The decrease is the result of a decrease in advertising expenditures of $314,000 and a reduction of expenses incurred for services provided by Ameriserv Financial, Inc. of $511,000. These decreases, however, were partially offset by increases in software amortization of $97,000 and charges incurred for the early redemption of the Bank's financing subsidiary, Community First Capital Corp., of $85,000. 24 NET OVERHEAD BURDEN. The Company's efficiency ratio (non-interest expense divided by total revenue) decreased to 67.0% in 2001 when compared to 77.1% for 2000. Contributing to the lower efficiency ratio in 2001 is a decreased level of non-interest expense that resulted from spin-off costs and OREO charges recognized during 2000. Furthermore, the efficiency ratio for 2001 was positively impacted by a higher level of non-interest income, which resulted from the net realized losses incurred from investment security sales during 2000. Additionally, the increase experienced in the net interest margin during 2001 contributed to lowering the efficiency ratio. INCOME TAX EXPENSE. The Company's provision for income taxes for 2001 was $1.9 million reflecting an effective tax rate of 20.6%. The Company's income tax provision and effective tax rate were $936,000 or 15.8% in 2000 and $4.1 million or 29.1% in 1999. The lower income tax expense and effective tax rate in 2000 compared to 2001 and 1999 was due to a reduced level of pre-tax income combined with a change in estimate of the Company's income tax liability of approximately $750,000 as a result of an Internal Revenue Service examination of the Company's 1995-1997 tax returns. COMPARISON OF FINANCIAL CONDITION AT DECEMBER 31, 2001 AND DECEMBER 31, 2000 The Company's total consolidated assets were $1.023 billion at December 31, 2001, compared with $947 million at December 31, 2000, which represents an increase of $75.7 million or 8.0%. This increase resulted primarily from the PA Capital Bank acquisition, which increased total assets $147 million. During 2001, total loans increased by approximately $76.9 million or 15.7% as a result of the purchased PA Capital Bank loans of $83.7 million, which were primarily commercial loans and commercial loans secured by real estate. Additionally, loan principal paydowns exceeded originations for the twelve month period. Total investment securities decreased by $36.1 million as a result of principal repayments received and sale activity exceeding purchases. Cash balances at December 31, 2001 increased $30.6 million or 198.0% from prior year-end. This increase primarily resulted from the net cash received from the PA Capital Bank acquisition of $40 million. Total deposits increased by $142.3 million or 22.5% since December 31, 2000. This increase resulted primarily from $128 million in deposits received from the PA Capital Bank acquisition. The Company's total borrowed funds position decreased by $88.2 million, or 36.0%. Total equity increased by $23.7 million due to the issuance of additional shares in connection with the PA Capital Bank acquisition, which increased total equity by $16.3 million, and an increase in other comprehensive income as a result of an increase in the market value of the available for sale securities portfolio. SIGNIFICANT ACCOUNTING POLICIES IMPACTING THE COMPANY The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States, which requires the Company to make estimates and assumptions (see Note 1 to the consolidated financial statements). The company believes that of it's significant accounting policies; the following involves a higher degree of judgment and complexity than other estimates presented herein. Allowance for Loan Losses -- The allowance for loan losses is based on management's estimate of an amount that is adequate to absorb losses in the existing loan portfolio. The allowance for loan loss is established through a provision for loss based on management's evaluation of the risk inherent in the loan portfolio, the composition of the portfolio, specific impaired loans and current economic conditions. Such evaluation, which includes a review of all loans on which full collectibility may not be reasonably assured, considers among other matters, the estimated net realizable value or the fair value of the underlying collateral, economic conditions, historical loan loss experience, management's estimate of probable credit losses and other factors that warrant recognition in providing for an adequate loan loss allowance. RISK MANAGEMENT OVERVIEW. Risk identification and management are essential elements for the successful management of the Company. In the normal course of business, the Company is subject to various types of risk, including interest rate, credit, and liquidity risk. The Company controls and monitors these risks with policies, procedures, and various levels of managerial and Board oversight. The Company's objective is to optimize profitability while managing and controlling risk within Board approved policy limits. 25 The Company has developed a comprehensive Risk Management Policy to assist Executive Management and the Board of Directors and in clarifying their tolerance for risk as well as describing a methodology for determining the proper level of controls to manage those risks. This clarification allows the line managers to achieve their business objectives while managing risks within acceptable limits. This Policy is intended to provide all parties, who are responsible for the management of risk, with a single source that can be used to gain an understanding of the formalized risk management process that has been established by the Company. Interest rate risk is the sensitivity of net interest income and the market value of financial instruments to the magnitude, direction, and frequency of changes in interest rates. Interest rate risk results from various repricing frequencies and the maturity structure of assets, liabilities, and off-balance sheet positions. The Company uses its asset liability management policy and hedging policy to control and manage interest rate risk. Credit risk represents the possibility that a customer may not perform in accordance with contractual terms. Credit risk results from extending credit to customers, purchasing securities, and entering into certain off-balance sheet financial instruments. The Company's primary credit risk occurs in the loan portfolio. The Company uses its credit policy and disciplined approach to evaluating the adequacy of the allowance for loan losses to control and manage credit risk. The Company's investment policy and hedging policy strictly limit the amount of credit risk that may be assumed in the investment portfolio and through off-balance sheet activities. INTEREST RATE SENSITIVITY. Asset/liability management involves managing the risks associated with changing interest rates and the resulting impact on the Company's net interest income, net income and capital. The management and measurement of interest rate risk at the Company is performed by using the following tools: 1) Simulation modeling which analyzes the impact of interest rate changes on net interest income, net income and capital levels over specific future time periods. The simulation modeling forecasts earnings under a variety of scenarios that incorporate changes in the absolute level of interest rates, the shape of the yield curve, prepayments and changes in the volumes and rates of various loan and deposit categories. The simulation modeling also incorporates all off balance sheet hedging activity as well as assumptions about reinvestment and the repricing characteristics of certain assets and liabilities without stated contractual maturities, 2) Static "GAP" analysis which analyzes the extent to which interest rate sensitive assets and interest rate sensitive liabilities are matched at specific points in time, and 3) Market value of portfolio equity sensitivity analysis. The overall interest rate risk position and strategies are reviewed by senior management and the Company's Board of Directors on an ongoing basis. The following table presents a summary of the Company's static GAP positions at December 31, 2001:

When December 31, 2001, is compared to December 31, 2000, both the Company's six month and one year cumulative GAP ratios are less positive due largely to increased liability sensitivity resulting from an increase in the Company's money market deposit accounts, of which approximately $53 million was acquired in the PA Capital Bank acquisition. A portion of the Company's funding base is low cost core deposit accounts that do not have a specific maturity date. The accounts that comprise these low cost core deposits include passbook savings accounts, money market accounts, NOW accounts, and daily interest savings accounts. At December 31, 2001, the balance in these accounts totaled $374 million or 36.6% of total assets. Within the above static GAP table, approximately $153 million or 40.9% of these core deposits are assumed to be rate sensitive liabilities that reprice in one year or less; this assumption is based upon historical experience in varying interest rate environments and is reviewed annually for reasonableness. The Company recognizes that the pricing of these accounts is somewhat inelastic when compared to normal rate movements. There are some inherent limitations in using static GAP analysis to measure and manage interest rate risk. For instance, certain assets and liabilities may have similar maturities or periods to repricing but the magnitude or degree of the repricing may vary significantly with changes in market interest rates. As a result of these GAP limitations, management places primary emphasis on simulation modeling to manage and measure interest rate risk. The Company's asset liability management policy seeks to limit net interest income variability over a twelve month period to +/-7.5% and net income variability to +/-15.0% based upon varied economic rate forecasts which include interest rate movements of up to 200 basis points and alterations of the shape of the yield curve. Additionally, the Company also uses market value sensitivity measures to further evaluate the balance sheet exposure to changes in interest rates. Market value of portfolio equity sensitivity analysis captures the dynamic aspects of long-term interest rate risk across all time periods by incorporating the net present value of expected cash flows from the Company's assets and liabilities. The Company monitors the trends in market value of portfolio equity sensitivity analysis on a quarterly basis. The following table presents an analysis of the sensitivity inherent in the Company's net interest income, net income and market value of portfolio equity. The interest rate scenarios in the table compare the Company's base forecast or most likely rate scenario at December 31, 2001, to scenarios that reflect ramped 27 increases and decreases in interest rates of 200 basis points along with performance in a stagnant rate scenario with interest rates held flat at the December 31, 2001, levels. The Company's most likely rate scenario is based upon published economic consensus estimates that currently forecast a decrease in interest rates over the next twelve-month period. Each rate scenario contains unique prepayment and repricing assumptions that are applied to the Company's expected balance sheet composition which was developed under the most likely interest rate scenario.

As indicated in the table, the least variability of the Company's net interest income and net income over the next twelve month period was 0.5% and a 1.2% respectively, under a downward rate shock forecast reflecting a 200 basis point decrease in interest rates. The noted variability under this forecast was within the Company's ALCO policy limits. The variability of market value of portfolio equity was 2.5% under this interest rate scenario. Finally, this sensitivity analysis is limited by the fact that it does not include any balance sheet repositioning actions the Company may take should severe movements in interest rates occur such as lengthening or shortening the duration of the securities portfolio or entering into additional off-balance sheet hedging transactions. These actions would likely reduce the variability of each of the factors identified in the above table in the more extreme interest rate shock forecasts. Within the investment portfolio at December 31, 2001, 100% of the portfolio is classified as available for sale. The available for sale classification provides management with greater flexibility to manage the securities portfolio to better achieve overall balance sheet rate sensitivity goals and provide liquidity to fund loan growth if needed. The mark to market of the available for sale securities does inject more volatility in the book value of equity but has no impact on regulatory capital. Furthermore, it is the Company's intent to continue to diversify its loan portfolio to increase liquidity and rate sensitivity and to better manage the Company's long-term interest rate risk by continuing to sell newly originated fixed-rate 30-year mortgage loans. LIQUIDITY. Liquidity risk represents the inability to generate cash or otherwise obtain funds at reasonable rates to satisfy commitments to borrowers, as well as, the obligations to depositors and debtholders. The Company uses its asset/liability management policy and contingency funding plan to control and manage liquidity risk. Financial institutions must maintain liquidity to meet day-to-day requirements of depositor and borrower customers, 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 investment securities, time deposits with banks, federal funds sold, banker's acceptances, and commercial paper. These assets totaled $71.3 million at December 31, 2001, compared to $33.2 million at December 31, 2000. Maturing and repaying loans, as well as the monthly cash flow associated with mortgage-backed securities are other significant sources of asset liquidity for the Company. Liquidity needs 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 Federal Home Loan Bank systems. The Company's subsidiary utilizes a variety of these methods of liability liquidity. At December 31, 2001, the Company's subsidiary had approximately $20 million of unused lines of credit available under informal arrangements with correspondent banks compared to $30 million at December 31, 2000. These lines of credit enable the Company's subsidiary to purchase funds for short-term needs at current market rates. Additionally, the Company's subsidiary bank is a member of the Federal Home Loan Bank, which provides the opportunity to obtain intermediate to longer term advances up to approximately 80% of their investment in 28 assets secured by one-to-four family residential real estate. The Company estimates a remaining current total available Federal Home Loan Bank aggregate borrowing capacity of approximately $305 million. Liquidity can be analyzed by utilizing the Consolidated Statement of Cash Flows. Cash equivalents increased by $30.6 million from December 31, 2000 to December 30, 2001. During the twelve months of 2001 there was $101.1 million of net cash provided by investing activities and $7.0 million of net cash provided by operating activities. This was partially offset by $77.5 million of net cash used by financing activities. Within investing activities, purchases of investment securities exceeded cash proceeds received from security sales by $22.2 million. Cash received from loan principal payments totaled $193.3 million and exceeded the cash advanced for new loan fundings by $7.4 million. Additionally, the Company received $40.0 million in connection with the acquisition of PA Capital Bank. Within financing activities, net deposits increased by $14.0 million. The Company used $3.4 million of cash to pay common dividends to shareholders. Management believes that the Company maintains overall liquidity sufficient to satisfy its deposit requirements and meet its customers' credit needs. CAPITAL RESOURCES. As presented in Note #20 to the Company's Consolidated Financial Statements, the Company exceeds all regulatory capital ratios for each of the periods presented. Furthermore, the Company's subsidiary bank is considered "well capitalized" under all applicable FDIC regulations. It is the Company's intent to maintain the FDIC "well capitalized" classification for its subsidiary to ensure the lowest deposit insurance premium. The Company targets an operating range of 6.0% to 6.5% for the asset leverage ratio because management and the Board of Directors believe that this level provides an optimal balance between regulatory capital requirements and shareholder value needs. Strategies the Company uses to manage its capital ratios include common dividend payments and earning asset growth. The Company's declared Common Stock cash dividend per share was $0.48 for the year ended December 31, 2001. Based on the December 31, 2001 stock price, the dividend yield on the Company's common stock approximates 3.84%. The Company's Board of Directors believes that a better than peer common dividend is a key component of total shareholder return, particularly for retail shareholders. The Company's Dividend Reinvestment and Common Stock Purchase Plan provides each record holder of Common Stock with a simple and convenient method of purchasing additional shares without payment of any brokerage commissions, service charges or other similar expense. A participant in the Plan may purchase shares of Common Stock by electing either to (1) reinvest dividends on all of his or her shares of Common Stock or (2) make optional cash payments of not less than $10 and up to a maximum of $2,000 per month and continue to receive regular dividend payments on his or her other shares. A participant may withdraw from the Plan at any time. Under the Plan, purchases of shares of Common Stock are made on the open market using the average market price, which is the weighted average purchase price of shares purchased for the Plan in the market for the relevant investment date. FORWARD-LOOKING STATEMENT. This annual report 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," "plan" or similar expressions. These forward-looking statements are based upon current expectations and are subject to risk and uncertainties. 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 Board of Governors of the Federal Reserve System; (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 29 and regulations; (vii) the presence in the Company's market area of competitors with greater financial resources than the Company; (viii) the timely development of competitive new products and services by the Company and the acceptance of those products and services by customers and regulators (when required); (ix) the willingness of customers to substitute competitors' products and services for those of the Company and vice versa; (x) changes in consumer spending and savings habits; (xi) unanticipated regulatory or judicial proceedings; and (xii) other external developments which could materially impact the Company's operational and financial performance. The foregoing list of important factors is not exclusive, and neither such list nor any forward-looking statement takes into account the impact that any future acquisition may have on the Company and on any such forward-looking statement. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK For information regarding the market risk of the Company's financial instruments, see "Interest Rate Sensitivity" in the MD&A presented on page 26. The Company's principal market risk exposure is to interest rates. 30 ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA CONSOLIDATED BALANCE SHEETS

See accompanying notes to consolidated financial statements. 31 CONSOLIDATED STATEMENTS OF INCOME

See accompanying notes to consolidated financial statements. 32 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

See accompanying notes to consolidated financial statements. 33 CONSOLIDATED STATEMENTS OF CASH FLOWS

See accompanying notes to consolidated financial statements. 34 THREE RIVERS BANCORP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AT AND FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 BUSINESS AND NATURE OF OPERATIONS: Three Rivers Bancorp, Inc. (the "Company") is a bank holding company headquartered in Monroeville, Pennsylvania. Through its banking subsidiary the Company operates 25 banking offices in three southwestern Pennsylvania counties. These offices provide a full range of consumer, mortgage and commercial financial products. ORGANIZATION On April 1, 2000, Ameriserv Financial, Inc., formerly known as USBANCORP, Inc., executed its approved Board of Directors plan to split it's banking subsidiaries into two separate publicly traded companies and Three Rivers Bancorp, Inc. was formed. On this date, Three Rivers Bank ("the Bank") was spun-off from Ameriserv Financial, Inc. and into the Company. Under the tax-free spin-off plan, 100% of the shares of Three Rivers Bancorp, Inc., were distributed as a dividend to the shareholders of Ameriserv Financial as a 1 for 2 stock dividend based on their existing Ameriserv Financial ownership. Standard Mortgage Company ("SMC"), a mortgage banking company, a subsidiary of Three Rivers Bank, was internally spun-off from Three Rivers Bank to Ameriserv Financial prior to consummation of the Three Rivers Bank spin-off. As a result of the spin-off of SMC, on April 1, 2000, total assets and equity at Three Rivers Bank decreased by $10,159,000, the net equity of SMC. On the consolidated income statement, the results of operations of SMC prior to April 1, 2000 are reflected as discontinued mortgage banking operations, net of income taxes. The notes to the consolidated financial statements exclude the financial position and results of operations of the discontinued mortgage banking operation. For the spin-off of Three Rivers Bank to be considered "tax-free", Ameriserv Financial, Inc. petitioned to and received from the Internal Revenue Service a private letter ruling. This private letter ruling contains certain commitments on the part of the Company including no change in control for a two-year period and a requirement to raise capital within one year after the spin-off. The requirement to raise capital could include issuing capital stock in connection with a business combination. On February 1, 2001, the Company and The Pennsylvania Capital Bank ("PA Capital Bank") announced that they signed a definitive agreement for the Company to acquire all the stock of PA Capital Bank and to merge PA Capital Bank into Three Rivers Bank. This acquisition was completed on July 1, 2001 (see Note #23), and pursuant to a supplemental IRS ruling, the acquisition was approved to satisfy the capital raising requirements set forth in the original private letter ruling. In accordance with this decision, the shareholders of Ameriserv Financial, Inc. who received the stock of the Company in the spin-off are deemed to have received a non-taxable dividend from Ameriserv Financial, Inc. The acquisition was accounted under the purchase method. 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation: The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Three Rivers Bank including its principal subsidiaries TRB Financial Services Company and TRB Realty Corporation. Intercompany accounts and transactions have been eliminated in preparing the consolidated financial statements. 35 THREE RIVERS BANCORP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results may differ from these estimates. Cash and Cash Equivalents: On a consolidated basis, cash equivalents include cash and due from banks, interest-bearing deposits with banks, and federal funds sold and securities purchased under agreements to resell. Investment Securities: Securities are classified at the time of purchase as investment securities held to maturity if it is management's intent and the Company has the ability to hold the securities until maturity. These held to maturity securities are carried on the Company's books at cost, adjusted for amortization of premium and accretion of discount, which is computed using the level yield method which approximates the effective interest method. Securities are classified as available for sale if it is management's intent at the time of purchase to hold the securities for an indefinite period of time and/or to use the securities as part of the Company's asset/liability management strategy. Securities classified as available for sale include securities that may be sold to effectively manage interest rate risk exposure, prepayment risk, and other factors (such as liquidity requirements). These available for sale securities are reported at fair value with unrealized aggregate appreciation (depreciation) excluded from income and credited (charged) to a separate component of shareholders' equity on a net of tax basis. Any securities classified as trading assets are reported at fair value with unrealized aggregate appreciation (depreciation) included in current income. The Company presently does not engage in trading activity. Realized gain or loss on securities sold was computed upon the adjusted cost of the specific securities sold. As of December 31, 2001 and 2000, the Company's entire investment portfolio is classified as available for sale. Loans: Interest income is recognized using methods that approximate a level yield related to principal amounts outstanding. The Company's subsidiary discontinues the accrual of interest income when loans, except for loans that are insured for credit loss, become 90 days past due in either principal or interest. In addition, if circumstances warrant, the accrual of interest may be discontinued prior to 90 days. In all cases, payments received on non-accrual loans are credited to principal until full recovery of principal has been recognized; it is only after full recovery of principal that any additional payments received are recognized as interest income. The only exception to this policy is for residential mortgage loans wherein interest income is recognized on a cash basis as payments are received. A non-accrual loan is placed on accrual status after becoming current and remaining current for twelve consecutive payments (except for residential mortgage loans which only have to become current). A loan is considered impaired when it is probable the Company will be unable to collect all principal and interest due in accordance with contractual terms. Loan Fees: Loan origination and commitment fees, net of associated direct costs, are deferred and amortized into interest and fees on loans over the loan or commitment period. Fee amortization is determined by either the straight-line method, or the effective interest method, which do not differ materially. 36 THREE RIVERS BANCORP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Premises and Equipment: Premises and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is charged to operations over the estimated useful lives of the premises and equipment using the straight-line method. Useful lives of up to 45 years for buildings and up to 12 years for equipment are utilized. Leasehold improvements are amortized using the straight-line method over the terms of the respective leases or useful lives of the improvements, whichever is shorter. Maintenance, repairs, and minor alterations are charged to current operations as expenditures are incurred. Bank Owned Life Insurance: In 1995, the Company established a life insurance policy on a group of employees. This policy is carried on the balance sheet at its cash surrender value. Changes in the cash surrender value of the policy are recorded to non-interest income. As cash surrender values of death benefits are received, the Company reduces the asset value. Allowance for Loan Losses and Charge-Off Procedures: The allowance for loan losses is based on management's evaluation of potential losses in the loan portfolio, which includes an assessment of past experience, current economic conditions, known and inherent risks in the loan portfolio, the estimated value of underlying collateral and changes in the composition of the loan portfolio. While allocations are made to specific loans and pools of loans, the total reserve is available for all credit losses. Additions are made to the allowance through periodic provisions charged to income and recovery of principal on loans previously charged off. Losses of principal are charged to the allowance when the loss actually occurs or when a determination is made that a loss is probable. In addition, non-accrual and large delinquent loans are reviewed monthly to determine potential losses. Consumer loans are considered losses when they are 90 days past due, except loans that are insured for credit loss. The Company's policy is to individually review the credit quality of, at a minimum, all commercial and commercial mortgage loans with balances in excess of $500,000 within an 18 month period. All other loans not reviewed by the $500,000 threshold are reviewed as circumstances warrant. The Company has also identified two pools of small dollar value homogeneous loans that are evaluated collectively for impairment. These separate pools are for residential mortgage loans and consumer loans. Individual loans within these pools are reviewed and removed from the pool if factors such as significant delinquency in payments of 90 days or more, bankruptcy, or other negative economic concerns indicate impairment. Earnings Per Common Share: Earnings per share are calculated in accordance with Statement of Financial Accounting Standards No. 128, "Earnings Per Share," which requires that both basic and diluted earnings per share be presented. Basic earnings per share are based on the weighted-average number of common shares outstanding during each period. Diluted earnings per share are based on basic shares as determined above plus incremental shares that would be issued upon the assumed exercise of in-the-money stock options using the treasury stock method. Income Taxes: Deferred tax assets or liabilities are computed based on the difference between the financial statement and income tax bases of assets and liabilities using the enacted marginal tax rate. Deferred income tax expenses or credits are based on the changes in the asset or liability from period to period. 37 THREE RIVERS BANCORP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Interest Rate Contracts: The Company uses various interest rate contracts, such as interest rate swaps, caps and floor, to help manage interest rate risk, which is incurred in normal recurrent banking activities. Interest rate swaps are agreements with a counterparty to exchange periodic fixed and floating interest payments calculated on a notional amount. The floating rate is based on a money market index, primarily short-term LIBOR. Purchased interest rate caps or floors are agreements where, for a fee, the counterparty agrees to pay the Company the amount, if any, by which a specified market interest rate exceeds or is less than a defined rate applied to a notional amount, respectively. As required, the Company adopted the provisions of SFAS 133 on January 1, 2001. The adoption had no material affect on the financial position or results of operations of the Company. This statement requires the Company to recognize all derivative instruments as either assets or liabilities on the balance sheet at fair value. The accounting for changes in fair value of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and further, on the type of hedging relationship. For those derivative instruments that are designated and qualify as hedging instruments, the Company must designate the hedging instrument, based on the exposure being hedged, as either a fair value hedge or a cash flow hedge. For derivatives that are designated as fair value hedges, the gain or loss on derivatives as well as the gain or loss on the hedged items are recognized in current earnings. For derivatives designated as cash flow hedges, the effective portions of the gain or loss on derivatives are reported as a component of accumulated other comprehensive income and reclassified into earnings in the same period during which the hedged transaction affects earnings. The remaining gain or loss on the derivatives in excess of the hedged future cash flows, if any, is recognized in current earnings. For derivatives not designated as hedges, the gain or loss is recognized in current earnings. Business Combinations: In July 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 141, Business Combinations. Statement 141 eliminates the pooling-of-interests method of accounting for business combinations except for qualifying business combinations that were initiated prior to July 1, 2001. Statement 141 also includes new criteria to recognize intangible assets separately from goodwill. The requirements of Statement 141 are effective for any business combination accounted for by the purchase method that is completed after June 30, 2001, and has been applied in the acquisition of PA Capital Bank as completed on July 1, 2001, see Note #23. In July 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets. Under Statement 142, goodwill and intangible assets with indefinite lives are no longer amortized but are reviewed annually, or more frequently if impairment indicators arise, for impairment. Separable intangible assets that are not deemed to have an indefinite life will continue to be amortized over their useful lives. The amortization provisions of Statement 142 requiring nonamortization of goodwill and indefinite lived intangible assets apply to goodwill and indefinite lived intangible assets acquired after June 30, 2001. However, the impairment provisions of Statement 142 apply to these assets upon adoption of Statement 142. With respect to goodwill and intangible assets acquired prior to July 1, 2001, companies are required to adopt Statement 142 in their fiscal year beginning after December 15, 2001. The Company will apply the nonamortization provisions of Statement 142 to the goodwill recorded on July 1, 2001 as a result of the PA Capital Bank acquisition. The Company has no other goodwill recorded on its balance sheet that would be impacted by the provisions of Statement 142. 38 THREE RIVERS BANCORP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Reclassification of Prior Periods: Certain items previously presented have been reclassified to conform with current year presentation. 2. CASH AND DUE FROM BANKS Cash and due from banks at December 31, 2001 and 2000, included $1,755,000 and $5,387,000, respectively, of reserves required to be maintained under Federal Reserve Bank regulations. 3. INVESTMENT SECURITIES The cost and market values of investment securities are summarized as follows: Investment securities available for sale:

--------------- (1) Other investment securities include corporate notes and bonds, asset-backed securities, and equity securities. Investment securities available for sale:

All purchased investment securities are recorded on settlement date, which is not materially different from the trade date. Realized gains and losses are calculated by the specific identification method. The book value of securities pledged to secure public and trust deposits, as required by law, was $258,190,000 at December 31, 2001, and $353,286,000 at December 31, 2000. The Company realized $461,000 and $217,000 of gross investment security gains and $164,000 and $678,000 of gross investment security losses on available for sale securities in 2001 and 2000, respectively. 39 THREE RIVERS BANCORP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 4. LOANS The loan portfolio of the Company consisted of the following:

Real estate construction loans comprised 3.2% and 2.6% of total loans net of unearned income at December 31, 2001 and 2000, respectively. The Company has no direct credit exposure to foreign countries. Most of the Company's loan activity is with customers located in the southwestern Pennsylvania geographic area. As of December 31, 2001, loans to customers engaged in similar activities and having similar economic characteristics, as defined by standard industrial classifications, did not exceed 10% of total loans. 5. ALLOWANCE FOR LOAN LOSSES An analysis of the changes in the allowance for loan losses follows:

6. NON-PERFORMING ASSETS Non-performing assets are comprised of (i) loans which are on a non-accrual basis, (ii) loans which are contractually past due 90 days or more as to interest or principal payments some of which are insured for credit loss, and (iii) other real estate owned (real estate acquired through foreclosure and in-substance foreclosures). 40 THREE RIVERS BANCORP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table presents information concerning non-performing assets:

As of December 31, 2001, the Company is unaware of any additional loans that are required to either be charged-off or added to the non-performing asset totals disclosed above. Other real estate owned is recorded at the lower of 1) fair value minus estimated costs to sell, or 2) carrying cost. For impaired loans, the measurement of impairment may be based upon: 1) the present value of expected future cash flows discounted at the loan's effective interest rate; 2) the observable market price of the impaired loan; or 3) the fair value of the collateral of a collateral dependent loan. The Company had loans totaling $733,000 and $588,000 being specifically identified as impaired and a corresponding allocation reserve of $425,000 and $150,000 as of December 31, 2001 and December 31, 2000, respectively. The average outstanding balance for loans being specifically identified as impaired was $752,000 for 2001 and $597,000 for 2000. All of the impaired loans are collateral dependent; therefore the fair value of the collateral of the impaired loans is evaluated in measuring the impairment. There was no interest income recognized on impaired loans during 2001 or 2000. The following table sets forth, for the periods indicated, (i) the gross interest income that would have been recorded if non-accrual loans had been current in accordance with their original terms and had been outstanding throughout the period or since origination if held for part of the period, (ii) the amount of interest income actually recorded on such loans, and (iii) the net reduction in interest income attributable to such loans.

41 THREE RIVERS BANCORP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 7. PREMISES AND EQUIPMENT An analysis of premises and equipment follows:

Depreciation expense was $970,000, $787,000 and $891,000 during 2001, 2000 and 1999, respectively. During December of 2001, the Company signed an agreement to sell the Braddock office for $10,000, which is expected to close in the third quarter of 2002. Prior to the sales agreement, the Braddock office premise and land had a book value of $123,000. Accordingly, the Company recognized a charge of $113,000 in 2001, which is included in miscellaneous expense, to write-down the book value to the fair market value (sales price). The sale consists of the premise and land only. In 2002, the Company plans to open an additional branch in a nearby location to replace this sale. 8. DEPOSITS The following table sets forth the balance of the Company's deposits:

42 THREE RIVERS BANCORP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Interest expense on deposits consisted of the following:

The following table sets forth the balance of other time deposits maturing in the periods presented:

9. ADVANCES FROM FEDERAL HOME LOAN BANK AND OTHER LONG-TERM DEBT Advances from the Federal Home Loan Bank consist of the following:

The $150 million of advances maturing in 2005 and after are subject to prepayment penalties and call provisions set forth by the FHLB. The following table summarizes the call provisions for the components of the advances maturing after 2005:

43 THREE RIVERS BANCORP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) All Federal Home Loan Bank stock, along with an interest in unspecified mortgage loans and mortgage-backed securities, with an aggregate book value equal to the amount of the advances, have been pledged as collateral to the Federal Home Loan Bank of Pittsburgh. The Company's long-term debt of $512,000 at December 31, 2001 is scheduled to mature for the years subsequent to December 31, 2001 as follows: $108,000 in 2002; $118,000 in 2003; $129,000 in 2004; $142,000 in 2005; and $15,000 in 2006. 10. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS SFAS #107, "Disclosures about Fair Value of Financial Instruments," requires all entities to disclose the estimated fair value of its financial instrument assets and liabilities. For the Company, as for most financial institutions, approximately 95% of its assets and liabilities are considered financial instruments. Many of the Company's financial instruments, however, lack an available trading market characterized by a willing buyer and willing seller engaging in an exchange transaction. Therefore, significant estimations and present value calculations were used by the Company for the purpose of this disclosure. Estimated fair values have been determined by the Company using the best available data and an estimation methodology suitable for each category of financial instruments. Management believes that cash, cash equivalents, and loans and deposits with floating interest rates have estimated fair values which approximate the recorded book balances. Financial instruments actively traded in a secondary market have been valued using quoted available market prices. Financial instruments with stated maturities have been valued using a present value discounted cash flow with a discount rate approximating current market for similar assets and liabilities. The net loan portfolio has been valued using a present value discounted cash flow. The discount rate used in these calculations is based upon the treasury yield curve adjusted for non-interest operating costs, credit loss, and assumed prepayment risk. Financial instrument liabilities with no stated maturities have an estimated fair value equal to both the amount payable on demand and the recorded book balance. The estimated fair values and carrying values at December 31, 2001 and 2000, were as follows:

Changes in assumptions or estimation methodologies may have a material effect on these estimated fair values. The Company's remaining assets and liabilities, which are not considered financial instruments, have not been valued differently than has been customary with historical cost accounting. Management believes that reasonable comparability of these disclosed fair values between financial institutions may not be likely due to the wide range of permitted valuation techniques and numerous estimates which must be made given the absence of active secondary markets for many of the financial instruments. This lack of uniform valuation methodologies also introduces a greater degree of subjectivity to these estimated fair values. 44 THREE RIVERS BANCORP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 11. INCOME TAXES The provision for federal income taxes is summarized below:

The reconciliation between the federal statutory tax rate and the Company's effective consolidated income tax rate is as follows:

Deferred income taxes result from temporary differences in the recognition of revenue and expense for tax and financial reporting purposes. The following table presents the impact on income tax expense of the principal timing differences and the tax effect of each:

45 THREE RIVERS BANCORP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) At December 31, 2001 and 2000, deferred taxes are included in the accompanying consolidated balance sheet. The following table highlights the major components comprising the deferred tax assets and liabilities for each of the periods presented:

12. PENSION AND PROFIT SHARING PLANS The Company has a trusteed, noncontributory defined benefit pension plan covering all employees who work at least 1,000 hours per year and who have not yet reached age 60 at their employment date. The benefits of the plan are based upon the employee's years of service and average annual earnings for the highest five consecutive calendar years during the final ten year period of employment. The Company's funding policy has been to contribute annually an amount within the statutory range of allowable minimum and maximum actuarially determined tax-deductible contributions. Plan assets are primarily debt securities (including U.S. Agency and Treasury securities, corporate notes and bonds), listed common stocks (including shares of Three Rivers Bancorp, Inc. common stock), mutual funds, and short-term cash equivalent instruments. Pension Benefits:

46 THREE RIVERS BANCORP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table represents the components of the net periodic benefit cost and the weighted-average assumptions used for the years ended December 31, 2001, 2000 and 1999:

Three Rivers Bank also has a trusteed 401(k) plan with contributions made by Three Rivers Bank matching those by eligible employees up to a maximum of 50% of the first 6% of their annual salary. All employees of Three Rivers Bank who work over 1,000 hours per year are eligible to participate in the plan on January 1 following six months of service. Three Rivers Bank's contribution to this 401(k) plan was $148,000 in 2001 and $144,000 in 2000. As of December 31, 2001, the Company's defined benefit pension plan included 68,350 shares of the Company's common stock with a market value of $854,375 while the 401(k) plan included 71,888 shares with 47 THREE RIVERS BANCORP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) a market value of $898,600. During 2001, the Company's defined benefit pension plan and 401(k) plan received dividends relating to the Company's common stock of $32,808 and $27,610, respectively. Except for the above pension benefits, the Company has no significant additional exposure for any other post-retirement benefits. 13. LEASE COMMITMENTS The Company's obligation for future minimum lease payments on operating leases at December 31, 2001, is as follows:

In addition to the amounts set forth above, certain of the leases require payments by the Company for taxes, insurance, and maintenance. Rent expense included in total non-interest expense amounted to $666,000, $513,000 and $474,000, in 2001, 2000, and 1999, respectively. 14. RELATED PARTY TRANSACTION During 2001, 2000 and 1999 Ameriserv Financial, Inc., performed certain accounting, data processing, audit and loan review services for the Company. In 1999 the cost for these services were allocated based on the Bank's asset size as prescribed by Ameriserv Financial, Inc.'s inter-entity billing policy. As a result of the April 1, 2000 spin-off, an agreement was negotiated with Ameriserv Financial, Inc. to continue to perform some of these services. The 2001, 2000 and 1999 expense for the services provided is considered equivalent to the market value of these services had they been obtained from an unaffiliated party. For the years ended December 31, 2001, 2000 and 1999, the expense for these services totaled $610,000, $1.5 million and $2.0 million, respectively. In the ordinary course of business, the subsidiary bank has transactions, including loans, with their officers, directors, and their affiliated companies. These transactions were on substantially the same terms as those prevailing at the time for comparable transactions with unaffiliated parties and do not involve more than the normal credit risk. These loans totaled $947,000 and $628,000 at December 31, 2001 and 2000, respectively. An analysis of these related party loans follows:

48 THREE RIVERS BANCORP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 15. COMMITMENTS AND CONTINGENT LIABILITIES The Company's banking subsidiary incurs off-balance sheet risks in the normal course of business in order to meet the financing needs of their customers. These risks derive from commitments to extend credit and standby letters of credit. Such commitments and standby letters of credit involve, to varying degrees, elements of credit risk in excess of the amount recognized in the consolidated financial statements. Commitments to extend credit are obligations to lend to a customer as long as there is no violation of any condition established in the loan agreement. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Because many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The banking subsidiary evaluates each customer's creditworthiness on a case-by-case basis. Collateral that secures these types of commitments is the same as for other types of secured lending such as accounts receivable, inventory, and fixed assets. Standby letters of credit are conditional commitments issued by the banking subsidiary to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements, including normal business activities, bond financings, and similar transactions. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers. Letters of credit are issued both on an unsecured and secured basis. Collateral securing these types of transactions is similar to collateral securing the subsidiary banks' commercial loans. 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 banking subsidiary uses the same credit and collateral policies in making commitments and conditional obligations as for all other lending. The Company had outstanding various commitments to extend credit approximating $122,959,000 and standby letters of credit of $6,515,000 as of December 31, 2001. Additionally, the Company is also subject to a number of asserted and unasserted potential claims encountered in the normal course of business. In the opinion of management and legal counsel, neither the resolution of these claims nor the funding of these credit commitments will have a material adverse effect on the Company's consolidated financial position. 16. STOCK COMPENSATION PLANS Upon the spin-off of Three Rivers Bank and the simultaneous creation of the Company, the Company's Board of Directors adopted an Incentive Stock Option Plan authorizing the grant of options covering 600,000 shares of common stock. Although the Company plan began April 1, 2000, options to purchase Ameriserv Financial, Inc. common stock, which had been previously granted to the Company's management, were converted to options to purchase the Company's common stock. Under the Plan, options can be granted (the "Grant Date") to employees with executive, managerial, technical, or professional responsibility, as selected by a committee of the Board of Directors. The Company accounts for this Plan under APB Opinion #25, "Accounting for Stock Issued to Employees." The option price at which a stock option may be exercised shall be not less than 100% of the fair market value per share of common stock on the Grant Date. The maximum term of any option granted under the Plan cannot exceed 10 years. Generally, under the Plan on or after the first anniversary of the Grant Date, one-third of such options may be exercised. On or after the second anniversary of the Grant Date, two-thirds of such options may be exercised minus the aggregate number of such options previously exercised. On or after the third anniversary of the Grant Date, the remainder of the options may be exercised. Had compensation cost for these plans been determined consistent with SFAS 49 THREE RIVERS BANCORP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) #123, "Accounting for Stock-Based Compensation," the Company's net income and earnings per share would have changed to the following pro forma amounts:

Because SFAS #123 method of accounting has not been applied to options granted prior to January 1, 1995, the resulting pro forma compensation cost may not be representative of that to be expected in future years. A summary of the status of the Company's Stock Option Plan at December 31, 2001 and December 31, 2000 and changes during the year are presented in the table and narrative following:

A total of 203,526 of the 317,876 options outstanding at December 31, 2001 are exercisable and have exercise prices between $7.63 and $28.43, with a weighted average exercise price of $11.90 and a weighted average remaining contractual life of 4.3 years. The remaining 114,350 options have exercise prices between $8.25 and $18.87, with a weighted average exercise price of $10.04 and a weighted average remaining contractual life of 9.2 years. During 2001, one option grant totaling 58,500 shares was issued with an exercise price of $10.82. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions used for grants in 2001: risk-free interest rates of 4.39%; expected dividend yield of 4.48%; expected lives of seven years; expected volatility of 30.6%. 50 THREE RIVERS BANCORP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 17. GOODWILL AND CORE DEPOSIT INTANGIBLE ASSETS The Company's balance sheet shows both tangible assets (such as loans, buildings, and investments) and intangible assets (such as goodwill and core deposit intangibles). The Company recorded $6.0 million of goodwill and $4.8 million of core deposit intangibles, in conjunction with the PA Capital Bank acquisition discussed in Note #23, on its balance sheet. The remaining core deposit intangibles relate to branch acquisitions occurring in 1998 and 1999. The Company is amortizing core deposit intangibles over periods ranging from five to eleven years, using the straight-line method of amortization. The amortization expense of these intangible assets reduced 2001 diluted earnings per share by $0.05. It is important to note that this intangible amortization expense is not a future cash outflow. The following table reflects the future amortization expense of the intangible assets:

18. INTEREST RATE CONTRACTS The Company uses various interest rate contracts, such as interest rate swaps, caps and floors, to help manage interest rate and market valuation risk exposure, which is incurred in normal recurrent banking activities. A summary of the Company's off-balance sheet derivative transactions are as follows: Borrowed Funds Hedges: In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended, which is required to be adopted in years after June 15, 2000. The Company has adopted the new statement effective January 1, 2001. The statement requires the Company to recognize all derivatives on the balance sheet at fair value. Derivatives that are not designated as hedges must be adjusted to fair value through earnings. If the derivative is designated as a hedge, depending on the nature of the hedge, changes in derivatives' fair value will be either offset against the changes in fair value or expected future cash flows of the hedged assets, liabilities or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative's change in fair value will be immediately recognized in earnings. The Company uses various interest rate contracts, such as interest rate swaps, caps and floors, to help manage interest rate and market valuation risk exposure, which is incurred in normal banking activities. These interest rate contracts function as hedges against specific assets or liabilities in the Consolidated Balance Sheet. The Company monitors and controls all derivative products with a comprehensive Board of Director approved hedging policy. This policy permits a total maximum notional amount outstanding of $300 million for interest rate swaps, and interest rate caps/floors. The Company had no interest rate floors outstanding at any time during the years ended December 31, 2001, or December 31, 2000. As of December 31, 2001, the Company had no derivative transactions outstandings. However, during 2001, the Company had one derivative transaction outstanding in the form of an interest rate swap agreement. 51 THREE RIVERS BANCORP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Prior to July 25, 2001, this swap agreement effectively hedged a $40 million FHLB Repo advance. Accordingly, there was no effect on the income statement for the change in the fair value of the hedge and the related Repo advance. However, on July 25, 2001, the FHLB Repo advance, which served as the underlying debt obligation of the swap agreement, matured and, as a result of having additional liquidity resulting from the PA Capital Bank acquisition, was not replaced with an additional FHLB Repo advance. Therefore, effective July 25, 2001, hedge accounting was terminated. As a result of the debt payoff, the Company recognized a charge to earnings of $277,000 in the third quarter of 2001, which was recorded as a charge to other non-interest expense. Changes in the fair value of the swap, which matured October 25, 2001, are reflected in earnings. The changes in the fair value of the swap from July 25, 2001 thru October 25, 2001 approximated the changes in the net cash due on the swap during this same period. 19. SEGMENT RESULTS The financial performance of the Company is also monitored by an internal funds transfer pricing profitability measurement system which produces line of business results and key performance measures. The Company's major business units include community banking, mortgage banking, trust/financial services, and investment/funding center. The reported results reflect the underlying economics of the business segments. Expenses for centrally provided services are allocated based upon activity and volume based rules of those services provided. Capital has been allocated among the businesses on a risk-adjusted basis. The business lines are match-funded and interest rate risk is centrally managed and accounted for within the investment/funding center business segment. The key performance measures the Company focuses on for each business segment are net income and risk-adjusted return on equity. The contribution of the major business segments to the consolidated results for the past two years is summarized in the following table.

Community banking includes the deposit-gathering branch franchise along with lending to both individuals and businesses. Lending activities include commercial and commercial real-estate loans, residential mortgage loans and direct consumer loans. The underlying assets and liabilities for the community banking segment include loans and deposits. The investment/funding center includes the net results of investment securities and borrowing activities, general corporate expenses not allocated to the business segments and centralized interest rate risk management. The underlying assets and liabilities for the investment/funding segment include investment securities and borrowings. The all other segment's primary businesses are trust and insurance, annuity and mutual fund sales and parent company activity. 20. CAPITAL The Company is subject to various capital requirements administered by the federal banking agencies. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company must meet specific capital guidelines that involve quantitative measures of the Company's assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Company's 52 THREE RIVERS BANCORP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) capital amounts and classification are also subject to qualitative judgements by the regulators about components, risk weightings, and other factors. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company's financial statements. Quantitative measures established by regulation to ensure capital adequacy require the Company to maintain minimum amounts and ratios (set forth in the table below) of total and Tier I capital to risk-weighted assets, and of Tier I capital to average assets. As of December 31, 2001, the Company met all capital adequacy requirements to which it was subject. As of December 31, 2001 and 2000, the Federal Reserve categorized the Company as "Well Capitalized" under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Company must maintain minimum total risk-based, Tier I risk- based, and Tier I leverage ratios as set forth in the table. There are no conditions or events since that notification that management believes have changed the Company's classification category.

53 THREE RIVERS BANCORP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 21. EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings per share. For 1999, per share data for earnings is based on an assumed distribution of one share of the Company's common stock for every two shares of Ameriserv Financial, Inc. common stock outstanding.

22. COMPREHENSIVE INCOME The components of comprehensive income are as follows:

54 THREE RIVERS BANCORP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 23. ACQUISITION Pursuant to the definitive agreement signed by the Company and The Pennsylvania Capital Bank ("PA Capital Bank) on February 1, 2001, the Company completed its acquisition of PA Capital Bank on July 1, 2001. On that date, the Company acquired all the stock of PA Capital Bank and merged PA Capital Bank into Three Rivers Bank. The acquisition was accounted for under the purchase method of accounting. The transaction pricing was calculated using an underlying exchange ratio of 4.61. The price of the Company's stock at February 1, 2001, the determination date, was $9.00, which created a value of $41.50 a share for PA Capital Bank's stock. Each PA Capital Bank shareholder received 90% of the deal price in the Company's stock and 10% in cash. The total merger consideration given for PA Capital Bank's net assets totaled $20.0 million. This consisted of the issuance of 1,837,677 shares of the Company's stock and $3.4 million in cash. The cash component was comprised of a $1.8 million payment to PA Capital Bank shareholders and a $1.6 million payment to cash out existing PA Capital Bank stock option holders. At the acquisition date, the fair value of PA Capital Bank's net assets totaled approximately $16 million, which included cash of $43.4 million, loans receivable with a fair value of $83.7 million, investment securities and other assets of $12.7, deposits with a fair value of $123.5 million and other liabilities of $279,000. As a result of the transaction, $4.8 million of core deposit intangible ($3.1 million net of taxes) was recorded and will be amortized over 11 years. Additionally, the fair value adjustments required by purchase accounting rules consisted of $582,000 (378,000 net of taxes) and will be amortized over eight years. Goodwill arising from the transaction totaled $6.0 million, which will be accounted for in accordance with Statement #142 as discussed in Note #1. Pro forma combined historical results of operations for the current year up to the most recent statement of financial condition date as though the Company and PA Capital Bank had been combined at the beginning of the year are presented below. These unaudited condensed pro forma combined statements of operations are presented as if the acquisition had been effective on January 1, 2001 and 2000, respectively. The unaudited condensed pro forma combined statements of operations include the estimated effect of pro forma adjustments that would have been realized had the acquisition actually occurred at the beginning of the respective periods.

55 THREE RIVERS BANCORP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

24. PARENT COMPANY FINANCIAL INFORMATION The Parent Company functions primarily as a coordinating and servicing unit for all subsidiary entities. Provided services include general management, credit policies and procedures, accounting and taxes, loan review, auditing, investment advisory, compliance, marketing, insurance risk management, general corporate services, and financial and strategic planning. The following financial information relates only to the Parent Company operations. As a result of the Company being newly formed on April 1, 2000 as a result of Three Rivers Bank being spun-off from Ameriserv Financial, Inc., no prior periods exist for comparative purposes: BALANCE SHEET

56 THREE RIVERS BANCORP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) STATEMENT OF INCOME

The ability of subsidiary banks to upstream cash to the Parent Company is restricted by regulations. Federal law prevents the Parent Company from borrowing from its subsidiary banks unless the loans are secured by specified assets. Further, such secured loans are limited in amount to ten percent of the subsidiary banks' capital and surplus. In addition, the subsidiary banks are subject to legal limitations on the amount of dividends that can be paid to their shareholder. The dividend limitation generally restricts dividend payments to a bank's retained net income for the current and preceding two calendar years. Cash may also be upstreamed to the Parent Company by the subsidiary banks as an inter-entity management fee. At December 31, 2001 and 2000, the subsidiary bank was permitted to upstream an additional $918,000 and $2.4 million, respectively, in cash dividends to the Parent Company. The subsidiary bank also had a combined 57 THREE RIVERS BANCORP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) $76.3 million and $60.9 million of restricted surplus and retained earnings at December 31, 2001 and December 31, 2000, respectively. 25. SELECTED QUARTERLY CONSOLIDATED FINANCIAL DATA (UNAUDITED) The following table sets forth certain unaudited quarterly consolidated financial data regarding the Company for the periods ending:

58 STATEMENT OF MANAGEMENT RESPONSIBILITY January 17, 2002 To the Stockholders and Board of Directors of Three Rivers Bancorp, Inc. Management of Three Rivers Bancorp, Inc. and its subsidiary has prepared the consolidated financial statements and other information in the Annual Report on Form 10-K in accordance with accounting principles generally accepted in the United States and are responsible for its accuracy. In meeting its responsibility, management relies on internal accounting and related control systems, which include selection and training of qualified personnel, establishment and communication of accounting and administrative policies and procedures, appropriate segregation of responsibilities, and programs of internal audit. These systems are designed to provide reasonable assurance that financial records are reliable for preparing financial statements and maintaining accountability for assets and that assets are safeguarded against unauthorized use or disposition. Such assurance cannot be absolute because of inherent limitations in any internal control system. Management also recognizes its responsibility to foster a climate in which Company affairs are conducted with the highest ethical standards. The Company's Code of Conduct, furnished to each employee and director, addresses the importance of open internal communications, potential conflicts of interest, compliance with applicable laws, including those related to financial disclosure, the confidentiality of proprietary information, and other items. There is an ongoing program to assess compliance with these policies. The Audit Committee of the Company's Board of Directors consists solely of outside directors. The Audit Committee meets periodically with management and the independent public accountants to discuss audit, financial reporting, and related matters. Ernst and Young LLP and the Company's internal auditors have direct access to the Audit Committee. /s/ TERRY K. DUNKLE /s/ ANTHONY M.V. ERAMO ----------------------------------------------------- ----------------------------------------------------- Terry K. Dunkle Anthony M.V. Eramo Chairman, President & CEO Senior Vice President & Chief Financial Officer

59 REPORT OF INDEPENDENT AUDITORS Shareholders and Board of Directors Three Rivers Bancorp, Inc. We have audited the accompanying consolidated balance sheets of Three Rivers Bancorp, Inc. and subsidiaries (the Company) as of December 31, 2001 and 2000 and the related consolidated statements of income, changes in stockholders' equity, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Three Rivers Bancorp, Inc. and subsidiaries at December 31, 2001 and 2000 and the consolidated results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States. /s/ ERNST AND YOUNG LLP -------------------------------------- Pittsburgh, Pennsylvania January 17, 2002 60 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Stockholders and Board of Directors of Three Rivers Bancorp, Inc.: We have audited the accompanying consolidated statements of income, comprehensive income, changes in stockholders' equity and cash flows of Three Rivers Bancorp, Inc. (a Pennsylvania corporation) and subsidiaries for the year ended December 31, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the results of the operations and the cash flows of Three Rivers Bancorp, Inc. and subsidiaries for the year ended December 31, 1999, in conformity with accounting principles generally accepted in the United States. /s/ ARTHUR ANDERSEN LLP -------------------------------------- Pittsburgh, Pennsylvania, January 21, 2000 61 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Previously reported on Form 8-K filed on May 24, 2000. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Relating to the principal occupations of directors of the Company, their ages, directorships in other companies and respective terms of office is set forth under the heading "Election of Directors" and "Continuing Directors" in the Proxy Statement and is incorporated herein by reference. Information relating to executive officers of the Company is set forth under the heading "Executive Officers" in Part I, Item I of this Form 10-K. ITEM 11. EXECUTIVE COMPENSATION Information relating to compensation of directors and executive officers is set forth under the heading "Compensation of Executive Officers" in the Proxy Statement and is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information relating to the beneficial ownership of the Company's common stock by all directors, each executive officer named in the "Summary Compensation Table" of the Proxy Statement and all executive officers and directors as a group is set forth under the heading "Ownership of Securities by Directors, Nominees and Officers" of the Proxy Statement and is incorporated by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information relating to transactions and relationships with certain directors and executive officers of the Company is set forth under the heading "Transactions with Directors and Officers" of the Proxy Statement and is incorporated by reference. PART IV ITEM 14. EXHIBITS CONSOLIDATED FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K CONSOLIDATED FINANCIAL STATEMENTS FILED: The consolidated financial statements listed below are set forth in Part II -- Item 8. Page references are to Part II -- Item 8. CONSOLIDATED FINANCIAL STATEMENTS: THREE RIVERS BANCORP, Inc. and Subsidiary Consolidated Balance Sheets, 31 Consolidated Statements of Income, 32 Consolidated Statements of Changes in Stockholders' Equity and Comprehensive Income, 33 Consolidated Statements of Cash Flows, 34 Notes to Consolidated Financial Statements, 35 Statement of Management Responsibility, 59 Reports of Independent Auditors, 60 & 61 CONSOLIDATED FINANCIAL STATEMENT SCHEDULES: These schedules are not required or are not applicable under Securities and Exchange Commission accounting regulations and therefore have been omitted. 62 REPORTS ON FORM 8-K: There were no reports on Form 8-K for the quarter ended December 31, 2001. EXHIBITS: The exhibits listed below are filed herewith or incorporated by reference to other filings.

64 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. THREE RIVERS BANCORP, Inc. (Registrant) By: /s/ TERRY K. DUNKLE ------------------------------------ Terry K. Dunkle Chairman, President and Chief Executive Officer Date: March 18, 2002 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 indicated on February 28, 2002: /s/ TERRY K. DUNKLE Chairman, President and Chief Executive ----------------------------------------------------- Officer; Director Terry K. Dunkle /s/ ANTHONY M.V. ERAMO Senior Vice President and Chief Financial ----------------------------------------------------- Officer Anthony M.V. Eramo /s/ JEROME M. ADAMS Director ----------------------------------------------------- Jerome M. Adams /s/ J. THOMAS ALLEN Director ----------------------------------------------------- J. Thomas Allen /s/ CLIFFORD A. BARTON Director ----------------------------------------------------- Clifford A. Barton /s/ MICHAEL F. BUTLER Director ----------------------------------------------------- Michael F. Butler /s/ J. TERRENCE FARRELL Director ----------------------------------------------------- J. Terrence Farrell /s/ MARYLOUISE FENNELL Director ----------------------------------------------------- Marylouise Fennell /s/ JAMES R. FERRY Director ----------------------------------------------------- James R. Ferry /s/ STEVEN J. GUY Director ----------------------------------------------------- Steven J. Guy

65 /s/ I.N. RENDALL HARPER, JR. Director ----------------------------------------------------- I.N. Rendall Harper, Jr. /s/ GERALD B. HINDY Director ----------------------------------------------------- Gerald B. Hindy /s/ RICHARD W. KAPPEL Director ----------------------------------------------------- Richard W. Kappel /s/ STEPHEN I. RICHMAN Director ----------------------------------------------------- Stephen I. Richman /s/ EDWARD W. SEIFERT Director ----------------------------------------------------- Edward W. Seifert /s/ W. HARRISON VAIL Director ----------------------------------------------------- W. Harrison Vail /s/ CHARLES A. WARDEN Director ----------------------------------------------------- Charles A. Warden /s/ CHARLES R. ZAPPALA Director ----------------------------------------------------- Charles R. Zappala

THREE RIVERS BANCORP INC 10-K