UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

XQuarterly Report Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

For the period ended June 30, 2001

Transaction Report Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

For the transaction 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 incorporation (I.R.S. Employer Identification No.)

or organization)



2681 Mosside Boulevard, Monroeville, PA 15146-3315

(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code (412) 666-8063



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 the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Class 	 	Outstanding at August 1, 2001

Common Stock, par value $0.01 		 8,515,038

per share











INDEX



Page No.

PART I. FINANCIAL INFORMATION:

Item 1.Quarterly Financial Statements

Consolidated Balance Sheets -

June 30, 2001, December 31, 2000,

and June 30, 2000	3

Consolidated Statements of Income -

Three and Six Months Ended June 30, 2001,

and 2000	4

Consolidated Statement of Changes

in Stockholders' Equity -

Six Months Ended

June 30, 2001 	6

Consolidated Statements of Cash Flows -

Six Months Ended

June 30, 2001, and 2000	7

Notes to Consolidated Financial

Statements	8



Item 2. Management's Discussion and Analysis

of Consolidated Financial Condition

and Results of Operations	18



Item 3. Quantitative and Qualitative Discussion About Market Risk	35

PART II.	OTHER INFORMATION:

Item 4. Submission of Matters to a Vote of Security Holders	36

Item 6. Exhibits and Reports on Form 8-K	36





THREE RIVERS BANCORP, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands)

|                                                                                                                                                                                                     | June 30,    | December 31, | June 30,   
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------- | ------------ | -----------
|                                                                                                                                                                                                     | _2001_      | 2000         | 2000       
|                                                                                                                                                                                                     | (Unaudited) |              | (Unaudited)
|ASSETS                                                                                                                                                                                               |             |              |            
|Cash and due from banks                                                                                                                                                                              | $ 22,562    | $ 15,471     | $ 17,656   
|Investment securities available for sale                                                                                                                                                             | 379,862     | 416,745      | 453,476    
|Loans                                                                                                                                                                                                | 509,474     | 488,956      | 477,069    
|Less: Unearned income                                                                                                                                                                                | 24          | 31           | 45         
|Allowance for loan losses                                                                                                                                                                            | 5,699       | 5,393        | 5,064      
|Net loans                                                                                                                                                                                            | 503,751     | 483,532      | 471,960    
|Premises and equipment                                                                                                                                                                               | 4,536       | 4,775        | 5,145      
|Accrued income receivable                                                                                                                                                                            | 6,429       | 6,465        | 6,976      
|Goodwill and core deposit intangibles                                                                                                                                                                | 2,256       | 2,446        | 2,640      
|Bank owned life insurance                                                                                                                                                                            | 13,245      | 12,942       | 12,699     
|Other assets                                                                                                                                                                                         | 3,313       | 4,685        | 17,137     
|TOTAL ASSETS                                                                                                                                                                                         | $ 935,954   | $ 947,061    | $ 987,689  
|                                                                                                                                                                                                     |             |              |            
|LIABILITIES                                                                                                                                                                                          |             |              |            
|Non-interest bearing deposits                                                                                                                                                                        | $ 91,691    | $ 86,181     | $ 86,687   
|Interest bearing deposits                                                                                                                                                                            | 537,503     | 545,809      | 523,504    
|Total deposits                                                                                                                                                                                       | 629,194     | 631,990      | 610,191    
|Federal funds purchased and securities sold under                                                                                                                                                    |             |              |            
|agreements to repurchase                                                                                                                                                                             | --          | 4,100        | 20,650     
|Other short-term borrowings                                                                                                                                                                          | --          | 5,066        | 4,000      
|Advances from Federal Home Loan Bank                                                                                                                                                                 | 235,201     | 234,876      | 294,876    
|Long-term debt                                                                                                                                                                                       | 592         | 633          | 1,962      
|Total borrowed funds                                                                                                                                                                                 | 235,793     | 244,675      | 321,488    
|                                                                                                                                                                                                     |             |              |            
|Other liabilities                                                                                                                                                                                    | 8,212       | 11,672       | 10,289     
|TOTAL LIABILITIES                                                                                                                                                                                    | 873,199     | 888,337      | 941,968    
|                                                                                                                                                                                                     |             |              |            
|STOCKHOLDERS' EQUITY                                                                                                                                                                                 |             |              |            
|Preferred stock, no par value; 5,000,000 shares
authorized; no shares issued or
outstanding for the periods presented                                                                                | -           | -            | -          
|Common stock, par value $.01 per share; 20,000,000 shares authorized; 6,677,350, 6,675,212 and 6,674,213 issued and outstanding on June 30, 2001, December 31, 2000 and June 30, 2000, respectively. | 67          | 67           | 67         
|Surplus                                                                                                                                                                                              | 22,504      | 22,487       | 22,479     
|Retained earnings                                                                                                                                                                                    | 42,175      | 40,819       | 40,147     
|Accumulated other comprehensive income (loss)                                                                                                                                                        | (1,991)     | (4,649)      | (16,972)   
|TOTAL STOCKHOLDERS' EQUITY                                                                                                                                                                           | 62,755      | 58,724       | 45,721     
|TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY                                                                                                                                                           | $ 935,954   | $ 947,061    | $ 987,689  

See accompanying notes to consolidated financial statements.

THREE RIVERS BANCORP, INC.

CONSOLIDATED STATEMENT OF INCOME

(In thousands, except per share data)

Unaudited

|                                                                           | Three Months Ended
June 30, | Six Months Ended
June 30,
|-------------------------------------------------------------------------- | --------------------------- | -------------------------
|                                                                           | 2001                        | 2000                     
|INTEREST INCOME                                                            |                             |                          
|Interest and fees on loans and loans held for sale:                        |                             |                          
|Taxable                                                                    | $ 9,961                     | $ 9,559                  
|Tax exempt                                                                 | 148                         | 193                      
|Deposits with banks                                                        | 5                           | 4                        
|Federal funds sold                                                         | 67                          | -                        
|Investment securities:                                                     |                             |                          
|Available for sale                                                         | 5,990                       | 7,629                    
|Total Interest Income                                                      | 16,171                      | 17,385                   
|                                                                           |                             |                          
|INTEREST EXPENSE                                                           |                             |                          
|Deposits                                                                   | 6,455                       | 5,568                    
|Federal funds purchased and securities
sold under agreements to repurchase | 4                           | 316                      
|Other short-term borrowings                                                | --                          | 449                      
|Advances from Federal Home Loan Bank                                       | 3,837                       | 4,307                    
|Long-term debt                                                             | 12                          | 49                       
|Total Interest Expense                                                     | 10,308                      | 10,689                   
|                                                                           |                             |                          
|NET INTEREST INCOME                                                        | 5,863                       | 6,696                    
|Provision for loan losses                                                  | 300                         | 150                      
|                                                                           |                             |                          
|NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES                        | 5,563                       | 6,546                    
|                                                                           |                             |                          
|NON-INTEREST INCOME                                                        |                             |                          
|Trust fees                                                                 | 30                          | 75                       
|Net realized loss on investment securities                                 | --                          | 1                        
|Net realized gain on loans held for sale                                   | 7                           | 15                       
|Wholesale cash processing fees                                             | 159                         | 145                      
|Service charges on deposit accounts                                        | 509                         | 489                      
|Bank owned life insurance                                                  | 153                         | 142                      
|Other income                                                               | 332                         | 313                      
|Total Non-Interest Income                                                  | 1,190                       | 1,180                    
|                                                                           |                             |                          
|NON-INTEREST EXPENSE                                                       |                             |                          
|Salaries and employee benefits                                             | 2,470                       | 2,416                    
|Net occupancy expense                                                      | 443                         | 443                      
|Equipment expense                                                          | 427                         | 434                      
|Professional fees                                                          | 412                         | 280                      
|Supplies, postage, and freight                                             | 237                         | 256                      
|Miscellaneous taxes and insurance                                          | 250                         | 183                      
|FDIC deposit insurance expense                                             | 29                          | 30                       
|Amortization of goodwill and core deposit intangibles                      | 95                          | 99                       
|Spin-off costs                                                             | --                          | 319                      
|OREO expense                                                               | --                          | 534                      
|Other expense                                                              | 743                         | 971                      
|Total Non-Interest Expense                                                 | $ 5,106                     | $ 5,965                  

See accompanying notes to consolidated financial statements.

CONTINUED ON NEXT PAGE





















CONSOLIDATED STATEMENT OF INCOME

CONTINUED FROM PREVIOUS PAGE

(In thousands, except per share data)

Unaudited

|                                                                        | Three Months Ended
June 30, | Six Months Ended
June 30,
|----------------------------------------------------------------------- | --------------------------- | -------------------------
|                                                                        | 2001                        | 2000                     
|                                                                        |                             |                          
|INCOME BEFORE INCOME TAXES                                              | $ 1,647                     | $ 1,761                  
|Provision for income taxes                                              | 221                         | 501                      
|                                                                        |                             |                          
|INCOME FROM CONTINUING OPERATIONS                                       | $ 1,426                     | $ 1,260                  
|Loss from discontinued Mortgage Banking
Operations, net of income taxes | -                           | -                        
|NET INCOME                                                              | $1,426                      | $1,260                   
|                                                                        |                             |                          
|PER COMMON SHARE DATA:                                                  |                             |                          
|Basic:                                                                  |                             |                          
|Income from continuing operations                                       | $ 0.21                      | $ 0.19                   
|Net income                                                              | 0.21                        | 0.19                     
|Average shares outstanding                                              | 6,750,240                   | 6,669,754                
|Diluted:                                                                |                             |                          
|Income from continuing operations                                       | $ 0.21                      | $ 0.19                   
|Net income                                                              | 0.21                        | 0.19                     
|Average shares outstanding                                              | 6,766,754                   | 6,670,513                
|Cash dividends declared                                                 | $ 0.12                      | $ 0.12                   

.











































See accompanying notes to consolidated financial statements

































































THREE RIVERS BANCORP, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY



Unaudited





|                                       | Preferred
Stock | Common
Stock | Surplus  | Retained
Earnings | Accumulated
Other
Comprehensive
Income | Total   
|-------------------------------------- | --------------- | ------------ | -------- | ----------------- | -------------------------------------- | --------
|                                       |                 |              |          |                   |                                        |         
|Balance, January 1,
2001               | $ -             | $ 67         | $ 22,487 | $ 40,819          | $ (4,649)                              | $ 58,724
|Net Income                             | -               | -            | -        | 2,958             | -                                      | 2,958   
|Other comprehensive income,
net of tax | -               | -            | -        | -                 | 2,658                                  | 2,658   
|Comprehensive income                   |                 |              |          |                   |                                        | 5,616   
|Dividends declared                     | -               | -            | -        | (1,602)           | -                                      | (1,602) 
|Stock options exercised (2,138 shares) | -               | -            | 17       | -                 | -                                      | 17      
|Balance, June 30, 2001                 | $ -             | $ 67         | $ 22,504 | $ 42,175          | $ (1,991)                              | $ 62,755

See accompanying notes to consolidated financial statements.



















































































THREE RIVERS BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Unaudited

|                                                                      | Six Months Ended June 30,
|--------------------------------------------------------------------- | -------------------------
|                                                                      | 2001                     
|OPERATING ACTIVITIES                                                  |                          
|Net income                                                            | $ 2,958                  
|Loss from discontinued mortgage banking operations                    | --                       
|Income from continuing operations                                     | 2,958                    
|Adjustments to reconcile net income to net cash                       |                          
|provided by operating activities:                                     |                          
|Provision for loan losses                                             | 450                      
|Depreciation and amortization                                         | 27                       
|Amortization expense of goodwill and core deposit intangibles         | 190                      
|Net accretion of investment securities                                | 88                       
|Net realized losses on investment securities                          | 3                        
|Net realized gains on loans and loans held for sale                   | (7)                      
|Decrease in accrued income receivable                                 | 36                       
|Increase (decrease) in accrued expense payable                        | (199)                    
|Net decrease (increase) in other assets                               | 197                      
|Net decrease in other liabilities                                     | (3,261)                  
|Net cash provided by operating activities                             | 482                      
|                                                                      |                          
|INVESTING ACTIVITIES                                                  |                          
|Purchases of investment securities and other short-term investments - |                          
|available for sale                                                    | (8,520)                  
|Proceeds from maturities of investment securities and                 |                          
|other short-term investments - available for sale                     | 28,432                   
|Proceeds from sales of investment securities and                      |                          
|other short-term investments - available for sale                     | 20,970                   
|Long-term loans originated                                            | (97,362)                 
|Principal collected on long-term loans                                | 74,611                   
|Loans sold or participated                                            | 1,362                    
|Net decrease in credit card receivable and other short-term loans     | 1,062                    
|Purchases of premises and equipment                                   | (358)                    
|Sale/retirement of premises and equipment                             | --                       
|Net cash provided by investing activities                             | 20,197                   
|                                                                      |                          
|FINANCING ACTIVITIES                                                  |                          
|Net (decrease) increase in deposits                                   | (2,796)                  
|Net (decrease) increase in federal funds purchased, securities sold   |                          
|under agreements to repurchase, and other short-term borrowings       | (9,166)                  
|Net principal repayments of advances from                             |                          
|Federal Home Loan Bank                                                | --                       
|Repayments of long-term debt                                          | (41)                     
|Common stock dividends paid                                           | (1,602)                  
|Proceeds from stock options exercised                                 | 17                       
|Net cash used by financing activities                                 | (13,588)                 
|                                                                      |                          
|NET INCREASE (DECREASE) IN CASH EQUIVALENTS                           | 7,091                    
|CASH EQUIVALENTS AT JANUARY 1                                         | 15,471                   
|CASH EQUIVALENTS AT JUNE 30                                           | $ 22,562                 

See accompanying notes to consolidated financial statements.

















NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Organization

On April 1, 2000, 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. ("Three Rivers Bancorp, Inc." or "the Company") was formed. On this date, Three Rivers Bank was spun-off from USBANCORP, 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 USBANCORP as a 1 for 2 stock dividend based on their existing USBANCORP ownership. Standard Mortgage Company ("SMC"), a mortgage banking company, a subsidiary of Three Rivers Bank, was internally spun-off from Three Rivers Bank to the USBANCORP 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.

For the spin-off of Three Rivers Bank to be considered "tax-free", USBANCORP, 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.

The merger is intended to satisfy the capital raising requirements of the original private letter ruling. However, because the merger closed subsequent to April 1, 2001 (see Note #13 "Subsequent Events"), USBANCORP, Inc., on April 19, 2001, applied to the IRS for a supplemental ruling that the merger satisfies the requirements set forth in the original private letter ruling. In response, the IRS issued a supplemental ruling approving the acquisition as satisfying the capital raising requirements set forth in the original private letter ruling. Pursuant to this IRS decision, the shareholders of USBANCORP, Inc. who received the stock of the Company in the spin-off are deemed to have received a non-taxable dividend from USBANCORP, Inc.











2. Basis of Presentation

The consolidated financial statements include the accounts of Three Rivers Bancorp, Inc. and its wholly owned subsidiary, Three Rivers Bank and Trust Company ("Three Rivers Bank"). Intercompany accounts and transactions have been eliminated in preparing the consolidated financial statements.

The unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments that are of a normal recurring nature and are considered necessary for a fair presentation have been included. They are not, however, necessarily indicative of the results of consolidated operations for a full-year.

For further information, refer to the consolidated financial statements and accompanying notes included in the Company's annual financial statements for the year ended December 31, 2000, filed with the Securities and Exchange Commission as part of Three Rivers Bancorp, Inc.'s Form 10K filing.

Basic earnings per share includes, only the weighted average common shares outstanding. Diluted earnings per share includes, the weighted average common shares outstanding and any dilutive common stock equivalent shares in the calculation.

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. The Company's results are included in the consolidated federal income tax return of USBANCORP, Inc. through March 31, 2000. For the portion of the year beginning April 1, 2000, the Company will file its own consolidated federal income tax return with the Internal Revenue Service. During the first six months of 2001, the Company made payments of $1,050,000 for federal income taxes. During the first quarter 2000, the Company made payments to USBANCORP, Inc. for federal income taxes, which totaled $1,382,000. During the second quarter of 2000, the Company made payments totaling $575,000 for federal income taxes. Total interest expense paid amounted to $21,021,000 in 2001's first six months compared to $21,895,000 in the same 2000 period.

















3. 	Recent Accounting Pronouncement

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 (i.e., the acquisition date is July 1, 2001 or after).



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 $6.4 million of goodwill recorded on July 1, 2001 as a result of the PA Capital acquisition.  The Company has no other goodwill recorded on its balance sheet that would be impacted by the provisions of Statement 142.

1. Derivative Transactions
2. Comprehensive Income

Comprehensive income totaled $531,000 million and $1.3 million for the three months ended June 30, 2001 and 2000, respectively, and $5.6 million and $2.6 million for the six months ended June 30, 2001 and 2000, respectively. Differences between comprehensive income and net income for these periods result entirely from investment security unrealized holding gains, net of income taxes.

6. Investment Securities

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 estimated 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. The change in the estimated fair value of the available for sale portfolio does inject more volatility in the book value of equity, but has no impact on regulatory capital. 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. The book and estimated fair values of investment securities are summarized as follows (in thousands):

Investment securities available for sale:

June 30, 2001

|                            |           | Gross      | Gross      |          
|--------------------------- | --------- | ---------- | ---------- | ---------
|                            | Book      | Unrealized | Unrealized | Market   
|                            | Value     | Gains      | Losses     | Value    
|U.S. Treasury               | $ 4,039   | $ 86       | $ --       | $ 4,125  
|U.S. Agency                 | 9,908     | 11         | --         | 9,919    
|State and municipal         | 29,081    | 28         | (611)      | 28,498   
|U.S. Agency mortgage-backed |           |            |            |          
|securities                  | 318,334   | 846        | (3,012)    | 316,168  
|Other securities            | 21,786    | 3          | (637)      | 21,152   
|Total                       | $ 383,148 | $ 974      | $ (4,260)  | $ 379,862



securities.

Maintaining investment quality is a primary objective of the Company's investment policy which, subject to certain limited exceptions, prohibits the purchase of any investment security below a Moody's Investor's Service or Standard & Poor's rating of "A." At June 30, 2001, 97.5% of the portfolio was rated "AAA" compared to 98.0% at June 30, 2000. Less than 1.1% of the portfolio was rated below "A" or unrated on June 30, 2001.

7.	 Loans

The loan portfolio of the Company consists of the following (in thousands):

|                              | June 30,  | December 31, | June 30, 
|----------------------------- | --------- | ------------ | ---------
|                              | 2001      | 2000         | 2000     
|Commercial                    | $ 50,650  | $ 44,569     | $ 55,871 
|Commercial loans secured      |           |              |          
|by real estate                | 261,398   | 237,830      | 207,030  
|Real estate - mortgage        | 172,998   | 181,066      | 186,997  
|Consumer                      | 24,428    | 25,491       | 27,171   
|Loans                         | 509,474   | 488,956      | 477,069  
|Less: Unearned income         | 24        | 31           | 45       
|Loans, net of unearned income | $ 509,450 | $ 488,925    | $ 477,024

Real estate-construction loans were not material at these presented dates and comprised 3.0% of total loans net of unearned income at June 30, 2001. The Company

has no credit exposure to foreign countries or highly leveraged transactions.













8.	Allowance for Loan Losses

An analysis of the changes in the allowance for loan losses follows (in thousands, except ratios):

|                                             | Three Months Ended | Six Months Ended
|-------------------------------------------- | ------------------ | ----------------
|                                             | June 30,           | June 30,        
|                                             | 2001               | 2000            
|Balance at beginning of period               | $ 5,494            | $ 5,027         
|Charge-offs:                                 |                    |                 
|Commercial                                   | 64                 | 26              
|Real estate-mortgage                         | 45                 | 79              
|Consumer                                     | 20                 | 40              
|Total charge-offs                            | 129                | 145             
|Recoveries:                                  |                    |                 
|Commercial                                   | --                 | 1               
|Real estate-mortgage                         | 26                 | 29              
|Consumer                                     | 8                  | 2               
|Total recoveries                             | 34                 | 32              
|                                             |                    |                 
|Net charge-offs                              | 95                 | 113             
|Provision for loan losses                    | 300                | 150             
|Balance at end of period                     | $ 5,699            | $ 5,064         
|                                             |                    |                 
|As a percent of average loans and loans held |                    |                 
|for sale, net of unearned income:            |                    |                 
|Annualized net charge-offs                   | 0.08%              | 0.10%           
|Annualized provision for loan losses         | 0.24               | 0.13            
|Allowance as a percent of loans and loans    |                    |                 
|held for sale, net of unearned income        | 1.12               | 1.06            
|Total classified loans                       | $24,728            | $11,366         

9.

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). All loans, except for loans that are insured for credit loss, are placed on non-accrual status upon becoming 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.





The following table presents information concerning non-performing assets (in thousands, except percentages):



|                            | June 30, | December 31 | June 30,
|--------------------------- | -------- | ----------- | --------
|                            | 2001     | 2000        | 2000    
|                            |          |             |         
|Non-accrual loans           | $ 2,394  | $ 2,324     | $ 1,825 
|Loans past due 90           |          |             |         
|days or more                | 62       | 201         | 805     
|Other real estate owned     | 103      | 70          | 5,021   
|Total non-performing assets | $ 2,559  | $ 2,595     | $ 7,651 
|Total non-performing        |          |             |         
|assets as a percent         |          |             |         
|of loans and loans          |          |             |         
|held for sale, net          |          |             |         
|of unearned income,         |          |             |         
|and other real estate owned | 0.50%    | 0.53%       | 1.62%   

The Company is unaware of any additional loans which 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.

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 (in thousands).

|                                  | Three Months Ended
June 30, | Six Months Ended
June 30,
|--------------------------------- | --------------------------- | -------------------------
|                                  | 2001                        | 2000                     
|Interest income due in accordance |                             |                          
|with original terms               | $ 16                        | $ 15                     
|Interest income recorded          | --                          | (3)                      
|Net reduction in interest income  | $ 16                        | $ 12                     

10.

The Company's balance sheet shows both tangible assets (such as loans, buildings, and investments) and intangible assets (such as core deposit intangibles). The Company now carries $2.3 million of core deposit intangible assets on its balance sheet. The majority of these intangible assets came from the 1998 acquisition of two National City Branch offices in Allegheny County with $27 million in deposits, and the 1999 acquisition of a First Western Branch with $21 million in deposits. A reconciliation of the Company's intangible asset balances is as follows (in thousands):







|Balance at December 31, 2000 | $ 2,446
|---------------------------- | -------
|Amortization expense         | (190)  
|Balance at June 30, 2001     | $ 2,256

The Company is amortizing core deposit intangibles over periods ranging from five to ten years, using the straight-line method of amortization. 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 (in thousands):



|Remaining 2001 | $ 190 
|-------------- | ------
|2002           | 380   
|2003           | 380   
|2004           | 380   
|2005           | 380   
|2006 and after | 546   
|Total          | $2,256

11.

Total FHLB borrowings consist of the following at June 30, 2001, (in thousands, except percentages):



|               |           | Weighted
|-------------- | --------- | --------
|               |           | Average 
|Maturing       | Amount    | Rate    
|               |           |         
|2001           | $ 79,201  | 5.65%   
|2002           | 6,000     | 7.25    
|2005           | 50,000    | 7.06    
|2010 and after | 100,000   | 6.01    
|               |           |         
|               | $ 235,201 | 6.14%   

All of the above borrowings bear a fixed-rate of interest. As of June 30, 2001, there is a $40 million Open Repo Plus advance, included in the 2001 category, with a rate of 4.39% and a maturity date of July 25, 2001. This Repo is hedged by an interest rate swap as described in Note #4 and MD&A. All FHLB stock along with an interest in mortgage loans and mortgage-backed securities, with an aggregate statutory value equal to the amount of the advances, have been pledged as collateral with the Federal Home Loan Bank of Pittsburgh to support these borrowings. Upon maturity of the Repo borrowing on July 25, 2001, the Company elected not to enter into a new Repo agreement (see Note #13).





12. 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 capital amounts and classification are also subject to qualitative judgments 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 1 capital to risk-weighted assets, and of Tier 1 capital to average assets. Management believes that as of June 30, 2001, the Company meets all capital adequacy requirements to which it is subject.



As of June 30, 2001, and 2000, as well as, December 31, 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 1 risk-based, and Tier 1 leverage ratios as set forth in the table. There are no conditions or events since notification that management believes have changed the Company's classification category.



|As of June 30, 2001                      | Actual   | For Capital Adequacy Purposes | To Be Well Capitalized Under Prompt Corrective Action Provisions
|---------------------------------------- | -------- | ----------------------------- | ----------------------------------------------------------------
|                                         | Amount   | Ratio                         | Amount                                                          
|                                         |          | (In thousands, except ratios) |                                                                 
|Total Capital (to Risk Weighted Assets)  |          |                               |                                                                 
|Three Rivers Bancorp, Inc.               | $ 68,189 | 12.83%                        | $ 42,510                                                        
|Three Rivers Bank                        | 63,538   | 11.96                         | 42,500                                                          
|Tier 1 Capital (to Risk Weighted Assets) |          |                               |                                                                 
|Three Rivers Bancorp, Inc.               | 62,490   | 11.76                         | 21,255                                                          
|Three Rivers Bank                        | 57,839   | 10.89                         | 21,250                                                          
|Tier 1 Capital (to Average Assets)       |          |                               |                                                                 
|Three Rivers Bancorp, Inc.               | 62,490   | 6.66                          | 37,523                                                          
|Three Rivers Bank                        | 57,839   | 6.17                          | 37,425                                                          

13.

Pennsylvania Capital Bank 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'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'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 comprised of a $1.8 million payment to PA Capital 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's net assets totaled $13.9 million, which included loans receivable with a fair value of $81.6 million and deposits with a fair value of $123.5 million. 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 mark to market 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 $6.4 million, which will be accounted for in accordance with Statement #142 as discussed in Note #3.

FHLB Repo Maturity

As of June 30, 2001, the Company had a $40 million FHLB Repo advance, as described in Note #4 and Note #11, that hedges an interest rate swap agreement. As a result of the hedge being 100% effective, 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 on July 25, 2001. Going forward, changes in the fair value of the swap, which matures October 25, 2001, will be reflected in earnings. The changes in the fair value of the swap approximate the changes in the net cash due on the swap for any given period. Accordingly, the charge recognized on July 25, 2001 will be offset by changes in the fair value of the swap thru October 25, 2001.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS

("M.D.& A.")

COMPARISON OF FINANCIAL CONDITION AT JUNE 30, 2001 AND DECEMBER 31, 2000

.....BALANCE SHEET OVERVIEW..... The Company's total consolidated assets were $936 million at June 30, 2001, compared with $947 million at December 31, 2000, which represents a decrease of $11 million. During the first six months of 2001, total loans increased $20.8 million as loan originations exceeded principal paydowns. Total investment securities decreased $36.9 million during the first six months of 2001 as a result of the Company selling $12.5 million worth of FHLB stock from the portfolio in addition to normal principal repayments. Cash and due from banks increased $7.1 million, or 45.8%, during the first six months of 2001.

Total deposits decreased by $2.8 million, or 0.4%, since December 31, 2000. The Company's total borrowed funds position decreased $8.9 million, or 3.6%, during the period. Total equity increased by $4.0 million due to an increase in comprehensive income, which was partially offset by $1.6 million in dividends.

.....LOAN QUALITY.....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 involved forgiving a portion of interest or principal on any loans at a rate materially less than that of market rates: (in thousands, except percentages):

|                                   | June 30, | December 31, | June 30,
|---------------------------------- | -------- | ------------ | --------
|                                   | 2001     | 2000         | 2000    
|Total loan delinquency (past due   |          |              |         
|30 to 89 days)                     | $ 4,485  | $5,329       | $ 2,975 
|Total non-accrual loans            | 2,394    | 2,324        | 1,825   
|Total non-performing assets*       | 2,559    | 2,595        | 7,651   
|Loan delinquency, as a percentage  |          |              |         
|of total loans and loans held      |          |              |         
|for sale, net of unearned income   | 0.88%    | 1.09%        | 0.62%   
|Non-accrual loans, as a percentage |          |              |         
|of total loans and loans held      |          |              |         
|for sale, net of unearned income   | 0.47     | 0.48         | 0.38    
|Non-performing assets, as a        |          |              |         
|percentage of total loans and      |          |              |         
|loans held for sale, net of        |          |              |         
|unearned income, and other         |          |              |         
|real estate owned                  | 0.50     | 0.53         | 1.62    

*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 some of which 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 upon becoming 90 days past due in either principal or interest.



Between June 30, 2001, and December 31, 2000, total loan delinquency decreased $844,000, causing the delinquency ratio to decrease 21 basis points to 0.88%. Total non-performing assets decreased by $36,000 since December 31,2000 causing the non-performing assets to total loans, net of unearned income, and OREO ratio to decrease to 0.47%.

.....ALLOWANCE FOR LOAN LOSSES.....As a financial institution which 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 Company consistently applies a comprehensive methodology and procedural discipline which is updated on a quarterly basis 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 certain higher risk 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 which are 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 upon an average of the most recent actual three-year historical charge-off experience for consumer loans.
- the application of formula driven reserve allocations 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.

When it is determined that the prospects for recovery of the principal of a loan have significantly diminished, the loan or the determined uncollectible portion is immediately charged against the allowance account; subsequent recoveries, if any, are credited to the allowance account. 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, as circumstances warrant, each of its commercial and commercial mortgage loans to determine if a loan is impaired. At a minimum, credit reviews are mandatory for all commercial and commercial mortgage loans with balances in excess of $500,000 within each calendar year. 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

The following table sets forth changes in the allowance for loan losses and certain ratios for the periods ended (in thousands, except percentages):

|                               | June 30, | December 31, | June 30,
|------------------------------ | -------- | ------------ | --------
|                               | 2001     | 2000         | 2000    
|Allowance for loan losses      | $ 5,699  | $ 5,393      | $ 5,064 
|Allowance for loan losses as a |          |              |         
|percentage of each of          |          |              |         
|the following:                 |          |              |         
|total loans and loans          |          |              |         
|held for sale,                 |          |              |         
|net of unearned income         | 1.12%    | 1.10%        | 1.06%   
|total delinquent loans         |          |              |         
|(past due 30 to 89 days)       | 127.07   | 101.20       | 170.22  
|total non-accrual loans        | 238.05   | 232.06       | 277.48  
|total non-performing assets    | 222.70   | 207.82       | 105.50  

Since December 31, 2000, the balance in the allowance for loan losses has increased $306,000 while the balance of total loans increased by $20.8 million. The increase in the allowance for loan losses is the result of the increase in outstanding loan levels, as well as a shift of the loan portfolio from 1-4 family mortgage loans to loans that are more commercial in nature. The Company's allowance for loan losses at June 30, 2001, was 238% of non-accrual loans.

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 $478,000 at June 30, 2001, and $633,000 at June 30, 2000, being specifically identified as impaired and a corresponding allocation reserve of $200,000 at June 30, 2001 and $50,000 at June 30, 2000. The average outstanding balance for loans being specifically identified as impaired was $486,000 for the first six months of 2001 compared to $604,000 for the first six months of 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 the first six months of 2001 or 2000.

The following table 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 discussed above. This allocation, however, is not necessarily indicative of the specific amount or specific loan category in which future losses may ultimately occur (in thousands, except percentages):

June 30, 2001

|               |         | Percent of |         | Percent of |         | Percent of
|-------------- | ------- | ---------- | ------- | ---------- | ------- | ----------
|               |         | Loans in   |         | Loans in   |         | Loans in  
|               |         | Each       |         | Each       |         | Each      
|               |         | Category   |         | Category   |         | Category  
|               | Amount  | To Loans   | Amount  | to Loans   | Amount  | to Loans  
|Commercial     | $ 571   | 9.9%       | $ 605   | 9.1%       | $ 425   | 11.7%     
|Commercial     |         |            |         |            |         |           
|loans secured  |         |            |         |            |         |           
|by real estate | 4,415   | 51.3       | 4,103   | 48.7       | 2,005   | 43.4      
|Real estate -  |         |            |         |            |         |           
|mortgage       | 280     | 34.0       | 300     | 37.0       | 260     | 39.2      
|Consumer       | 127     | 4.8        | 139     | 5.2        | 169     | 5.7       
|Allocation to  |         |            |         |            |         |           
|General risk   | 306     | -          | 246     | -          | 2,205   | -         
|Total          | $ 5,699 | 100.0%     | $ 5,393 | 100.0%     | $ 5,064 | 100.0%    



Although real estate-mortgage loans comprise approximately 34% of the Company's total loan portfolio, only $280,000 or 4.9% of the total allowance for loan losses is allocated against this loan category. The real estate-mortgage loan allocation is based upon the Company's five-year historical average of actual loan charge-offs experienced in that category. 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 and the Company's historical loss experienced in these categories.

At June 30, 2001, management of the Company believes the allowance for loan losses is adequate to cover estimated losses within the Company's loan portfolio. Although the allowance is allocated to specific components of the loan portfolio, it is available to cover any losses regardless of the component of the loan portfolio.















COMPARISON OF THE RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2001 AND 2000

.....PERFORMANCE OVERVIEW..... Three Rivers Bancorp, Inc. was spun off from USBANCORP, Inc. on April 1, 2000. Accordingly, the following results for the three months ended June 30, 2001 and 2000 represent quarters in which Three Rivers Bancorp, Inc operated as an independent 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 the USBANCORP as a 1 for 2 stock dividend based on their existing USBANCORP ownership. Standard Mortgage Company (SMC), a mortgage banking company, a subsidiary of Three Rivers Bank, was internally spun-off from Three Rivers Bank to the USBANCORP prior to consummation of the Three Rivers Bank spin-off.

As a result of the spin-off, second quarter 2000 results were negatively affected by $319,000 of spin-off related costs, which negatively effected earnings per share by $0.03.

The Company's income from continuing operations for the second quarter of 2001 totaled $1.4 million or $0.21 per share on a diluted basis. The second quarter 2001 results are higher when compared with the $1.3 million or $0.19 per diluted share for the second quarter of 2000.

The Company's return on equity (ROE) averaged 9.00% for the second quarter of 2001 compared to 11.01% ROE in the second quarter of 2000.

Net interest income decreased by $833,000, or 12.4%, as a result of declining interest rates causing compression in the net interest margin from 2.80% in the second quarter of 2000 to 2.60% in the second quarter of 2001. The Company's equity base has been positively affected by an increase in other comprehensive income due to an increase in value of the Company's available for sale securities portfolio. The following table summarizes some of the Company's key performance indicators (in thousands, except per share and ratios):



|                                          | Three Months Ended | Three Months Ended
|----------------------------------------- | ------------------ | ------------------
|                                          | June 30, 2001      | June 30, 2000     
|Income from continuing operations         | $ 1,426            | $ 1,260           
|Diluted earnings per share                | 0.21               | 0.19              
|Return on average equity                  | 9.00%              | 11.01%            
|Return on average assets                  | 0.61               | 0.51              
|Average diluted common shares outstanding | 6,767              | 6,671             

.....NET INTEREST INCOME AND MARGIN.....

|                                   | Three Months Ended
June 30, | Net      |          
|---------------------------------- | --------------------------- | -------- | ---------
|                                   | 2001                        | 2000     | Change   
|Interest Income                    | $ 16,171                    | $ 17,385 | $ (1,214)
|Interest Expense                   | 10,308                      | 10,689   | (381)    
|Net interest income                | 5,863                       | 6,696    | (833)    
|Tax-equivalent adjustment          | 105                         | 125      | (20)     
|Net tax-equivalent interest income | $ 5,968                     | $ 6,821  | $ (853)  
|                                   |                             |          |          
|Net interest margin                | 2.60%                       | 2.80%    | (0.20)%  

N/M - Not meaningful

Three Rivers Bancorp's net interest income on a tax-equivalent basis decreased by $853,000, or 12.5%, due primarily to compression of the net interest margin percentage. Total average earning assets decreased $58.2 million during the second quarter 2001 compared to the same period of 2000. This resulted from a $93.7 million, or 19.3%, decrease in investment securities, which was partially offset by an increase in total loans of $30.8 million, or 6.5%.

The income reduction from this decrease in earning assets was coupled with a 20 basis point decline in the net interest margin to 2.60%. The drop in the net interest margin reflects a 9 basis point decrease in the earning asset yield, as well as a 27 basis point increase in the cost of funds. During the second quarter, the Company used the cash flow from mortgage backed securities to pay down FHLB Borrowings, which reduced interest rate risk and decreased further margin compression as a result of the leverage program the Company has had in place over the last five years.

A leverage program is one strategy the Company may use 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...Regarding the separate components of net interest income, the Company's total tax-equivalent interest income for the second quarter of 2001 decreased by $1.2 million or 7.0%when compared to the same 2000 period. This decrease was due to the $58.2 million or 6.1% decrease in total average earning assets. Within the earning asset base, the yield on the total loan portfolio decreased by 24 basis points to 7.97% due to the downward repricing of floating-rate loans. The yield on total investment securities decreased by 17 basis points to 6.17% due to the increased prepayments and the corresponding increase in the amortization of premiums.

The Company's total interest expense for the second quarter of 2001 decreased by $381,000, or 3.6% when compared to the same 2000 period. This lower interest expense was due to the decrease in average interest bearing liabilities of $73.3 million, or 8.6%. This, however, was partially offset by a 27 basis point increase in the yield on interest bearing liabilities, to an average of 5.32% for the second quarter of 2001.

The decrease in interest-bearing liabilities results from a decrease in borrowed funds of $111.3 million, or 32.0%, which was partially offset by an increase in total deposits of $38.0 million, or 7.6%. The increase in total deposits is primarily the result of special rate incentives offered by the Bank to increase the certificate of deposit portfolio. As a result, certificate of deposits increased $48.7 million, or 14.1%. 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. FHLB advances had an average cost of 6.54% in the second quarter of 2001 which was 72 basis points higher than their cost in the prior year second quarter and 175 basis points greater than the average cost of deposits which was 4.79% in the second quarter. Overall, the Company's total cost of funds increased by 27 basis points to 5.32%.

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 a $40 million hedge transaction which helps fix the variable funding costs associated with the use of short-term borrowings to fund earning assets. (See further discussion under Note# 4 and Note# 13.) The Company also has asset liability policy parameters which limit the maximum amount of borrowings to 40% of total assets. For the second quarter of 2001, the level of short-term borrowed funds and FHLB advances to total assets averaged 25.1%. At quarter end, the Company had borrowed funds to total assets of 25.1%, which is within the parameters set by the Board of Directors of the Company. The Company plans to continue to use cash flow from mortgage-backed securities and increasing deposits to pay down borrowings during the next several quarters.

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'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'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.



















Three Months Ended June 30

|                                                                                                        | 2001 Actual |          | 2000 Actual
|------------------------------------------------------------------------------------------------------- | ----------- | -------- | -----------
|                                                                                                        |             | Interest |            
|                                                                                                        | Average     | Income/  | Yield/     
|                                                                                                        | Balance     | Expense  | Rate       
|Interest earning assets:                                                                                |             |          |            
|Loans and loans held
for sale, net of
unearned income                                                   | $ 503,359   | $ 10,145 | 7.97%      
|Deposits with banks                                                                                     | 697         | 5        | 2.63       
|Federal funds sold                                                                                      | 6,114       | 67       | 4.36       
|Total investment securities                                                                             | 392,596     | 6,059    | 6.17       
|Total interest earning
Assets/interest income                                                           | 902,766     | 16,276   | 7.18       
|Non-interest earning assets:                                                                            |             |          |            
|Cash and due from banks                                                                                 | 14,453      |          |            
|Premises and equipment                                                                                  | 4,764       |          |            
|Other assets                                                                                            | 23,970      |          |            
|Allowance for loan losses                                                                               | (5,621)     |          |            
|TOTAL ASSETS                                                                                            | $ 940,332   |          |            
|                                                                                                        |             |          |            
|Interest bearing liabilities:                                                                           |             |          |            
|Interest bearing deposits:                                                                              |             |          |            
|Interest bearing demand                                                                                 | $ 41,482    | $ 82     | 0.79%      
|Savings                                                                                                 | 57,815      | 269      | 1.87       
|Money markets                                                                                           | 46,774      | 338      | 2.80       
|Other time                                                                                              | 394,136     | 5,764    | 5.87       
|Total interest bearing deposits                                                                         | 540,207     | 6,453    | 4.79       
|Short term borrowings:                                                                                  |             |          |            
|Federal funds purchased, securities sold under agreements to repurchase and other short-term borrowings | 392         | 4        | 4.05       
|Advances from Federal
Home Loan Bank                                                                    | 235,273     | 3,838    | 6.54       
|Long-term debt                                                                                          | 576         | 13       | 8.84       
|Total interest bearing
liabilities/interest expense                                                     | 776,448     | 10,308   | 5.32       
|Non-interest bearing liabilities:                                                                       |             |          |            
|Demand deposits                                                                                         | 89,631      |          |            
|Other liabilities                                                                                       | 10,887      |          |            
|Stockholders' equity                                                                                    | 63,366      |          |            
|TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY                                                              | $ 940,332   |          |            
|Interest rate spread                                                                                    |             |          | 1.86       
|Net interest income/
net interest margin                                                                |             | 5,968    | 2.60%      
|Tax-equivalent adjustment                                                                               |             | (105)    |            
|Net Interest Income                                                                                     |             | $ 5,863  |            







.....PROVISION FOR LOAN LOSSES.....

.....NON-INTEREST INCOME.....Non-interest income for the second quarter of 2001 totaled $1.2 million which represents a $10,000, or 0.8%, increase when compared to the same 2000 quarter.

.....NON-INTEREST EXPENSE.....Non-interest expense for the second quarter of 2001 totaled $5.1 million which represents a $859,000, or 14.4%, decrease when compared to the same 2000 quarter. This decrease was primarily due to the following items:

- as a result of the spin-off on April 1, 2000, the Company incurred $319,000 of related expenses in the second quarter of 2000.
- a $534,000 decrease in OREO expense, which is primarily the result of a $478,000 write down of an Other Real Estate Owned property during the second quarter of 2000 that was acquired through a foreclosure on a commercial real estate loan.
- a $228,000, or 23.5%, decrease in other expenses during the second quarter 2001 compared to the second quarter 2000. The decrease is primarily the result of a decrease in expenses incurred for services provided by USBANCORP, Inc. of $208,000.
- the above decreases, however, were partially offset by a $132,000, or 47.1%, increase in professional fees and a $67,000, or 36.6%, increase in miscellaneous taxes and insurance. Professional fees increased as a result of the formation of the Company, while the increase in miscellaneous taxes resulted from an increase in the liability for Pennsylvania shares tax.

.....INCOME TAX EXPENSE.....The Company's provision for income taxes for the second quarter of 2001 decreased $280,000 to $221,000 from the quarter ending June 30, 2000 as a result of a refund from USBANCORP, Inc., which offset the tax provision for the quarter ended June 30, 2001, for federal income tax overpayments made during the 1998 and 1999 tax years. During that time, Three Rivers Bank was a consolidated entity of USBANCORP, Inc., and as outlined by the tax separation agreement entered into by the Companies at spin-off, the Company is entitled to Three Rivers Bank's portion of such overpayments. The Company's tax-free asset holdings consist primarily of municipal investment securities, bank owned life insurance, and commercial loan tax anticipation notes. Net deferred income taxes of $1.3 million have been provided as of June 30, 2001, on the differences between taxable income for financial and tax reporting purposes.

.....NET OVERHEAD BURDEN.....The Company's efficiency ratio (non-interest expense divided by total revenue) decreased to 71.33% for the three months ended June 30, 2001 compared to 74.6% for the same period of 2000. Factors 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 the second quarter of 2000. This, however, was partially offset by the compression experienced in the net interest margin during the three months ended June 30, 2001.

COMPARISON OF THE RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2000

.....PERFORMANCE OVERVIEW.....Three Rivers Bancorp, Inc. was spun off from USBANCORP, Inc. on April 1, 2000. Accordingly, the following results for the six months ended June 30, 2001 include a period in which Three Rivers Bancorp, Inc operated as an independent company, while the results for the six months ended June 30, 2000 represent a period in which the Company operated as a subsidiary of USBANCORP, Inc. for the three months ended March 31, 2000.

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 the USBANCORP as a 1 for 2 stock dividend based on their existing USBANCORP ownership. Standard Mortgage Company (SMC), a mortgage banking company and subsidiary of Three Rivers Bank, was internally spun-off from Three Rivers Bank to the USBANCORP prior to consummation of the Three Rivers Bank spin-off.

As a result of the spin-off, the pre-tax results of the first six months of 2000 were negatively affected by $777,000 of spin-off related costs, which negatively effected earnings per share by $0.08. During the first quarter of 2000, the Internal Revenue Service completed its examination of USBANCORP, 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 for the first six months of 2000 of only $24,000.

The Company's income from continuing operations for the first six months of 2001 totaled $3.0 million or $0.44 per share on a diluted basis. The results from the first six months of 2001 are lower when compared to the results of the first six months of 2000, exclusive of the aforementioned spin-off costs, of $3.2 million or $0.48 per diluted share for the first six months of 2000.

The Company's return on equity (ROE) averaged 9.45% for the first six months of 2001 compared to 10.66% ROE reported in the first six months of 2000.

Net interest income decreased by $1.9 million, or 14.1%, as a result of declining interest rates causing compression in the net interest margin from 2.82% in the first six months of 2000 to 2.63% in the first six months of 2001. The Company's equity base has been positively affected by an increase in other comprehensive income due to an increase in value of the Company's available for sale securities portfolio. The following table summarizes some of the Company's key performance indicators (in thousands, except per share and ratios):





|                                          | Six Months Ended | Six Months Ended
|----------------------------------------- | ---------------- | ----------------
|                                          | June 30, 2001    | June 30, 2000   
|Income from continuing operations         | $ 2,958          | $ 2,710         
|Diluted earnings per share                | 0.44             | 0.41            
|Return on average equity                  | 9.45%            | 10.66%          
|Return on average assets                  | 0.63             | 0.53            
|Average diluted common shares outstanding | 6,688            | 6,670           

.....NET INTEREST INCOME AND MARGIN.....

|                                   | Six Months Ended
June 30, | Net      |          
|---------------------------------- | ------------------------- | -------- | ---------
|                                   | 2001                      | 2000     | Change   
|Interest Income                    | $ 32,662                  | $ 35,485 | $ (2,823)
|Interest Expense                   | 20,822                    | 21,700   | (878)    
|Net interest income                | 11,840                    | 13,785   | (1,945)  
|Tax-equivalent adjustment          | 211                       | 330      | (119)    
|Net tax-equivalent interest income | $ 12,051                  | $ 14,115 | $ (2,064)
|                                   |                           |          |          
|Net interest margin                | 2.63%                     | 2.82%    | (0.19)%  

N/M - Not meaningful

Three Rivers Bancorp's net interest income on a tax-equivalent basis decreased by $1.9 million, or 14.1%, due primarily to compression of the net interest margin percentage. Total average earning assets decreased $83.9 million during the first six months of 2001 compared to the same period of 2000. This resulted from a $106.2 million, or 20.8%, decrease in investment securities, which was partially offset by an increase in total loans of $19.3 million, or 4.1%.

The income reduction from this decrease in earning assets was coupled with a 19 basis point decline in the net interest margin to 2.63%. The drop in the net interest margin reflects a 4 basis point increase in the earning asset yield, but was more than offset by a 42 basis point increase in the cost of funds. During the first six months of 2001, the Company used the cash flow from mortgage backed securities to pay down FHLB Borrowings, which reduced interest rate risk and decreased further margin compression as a result of the leverage program the Company has had in place over the last five years.

A leverage program is one strategy the Company may use 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...Regarding the separate components of net interest income, the Company's total tax-equivalent interest income for the first six months of 2001 decreased by $2.9 million or 8.2%when compared to the same 2000 period. This decrease was due to the $83.9 million or 8.5% decrease in total average earning assets. Within the earning asset base, the yield on the total loan portfolio decreased by 2 basis points to 8.16% 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 17 basis points to 6.20% due to the increased prepayments and the corresponding increase in the amortization of premiums.

The Company's total interest expense for the first six months of 2001 decreased by $877,000, or 4.0% when compared to the same 2000 period. This lower interest expense was due to the decrease in average interest bearing liabilities of $97.4 million, or 11.1%. This, however, was partially offset by a 42 basis point increase in the yield on interest bearing liabilities, to an average of 5.40% for the first six months of 2001.

The decrease in interest-bearing liabilities results from a decrease in borrowed funds of $143.6 million, or 37.7%, which was partially offset by an increase in total deposits of $46.1 million, or 9.3%. The increase in total deposits is primarily the result of special rate incentives offered by the Bank to increase the certificate of deposit portfolio. As a result, certificate of deposits increased $57.9 million, or 17.1%. 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. FHLB advances had an average cost of 6.54% in the first six months of 2001, which was 76 basis points higher than their cost in the prior year first six months and 164 basis points greater than the average cost of deposits which was 4.90% in the first six months of 2001. Overall, the Company's total cost of funds increased by 42 basis points to 5.40%.

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 a $40 million hedge transaction which helps fix the variable funding costs associated with the use of short-term borrowings to fund earning assets. (See further discussion under Note# 4 and Note# 13.) The Company also has asset liability policy parameters which limit the maximum amount of borrowings to 40% of total assets. For the first six months of 2001, the level of short-term borrowed funds and FHLB advances to total assets averaged 25.2%. The Company plans to continue to use cash flow from mortgage-backed securities and increasing deposits to pay down borrowings during the next several quarters.





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'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'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.

Six Months Ended June 30

|                                                                                                        | 2001 Actual |          | 2000 Actual
|------------------------------------------------------------------------------------------------------- | ----------- | -------- | -----------
|                                                                                                        |             | Interest |            
|                                                                                                        | Average     | Income/  | Yield/     
|                                                                                                        | Balance     | Expense  | Rate       
|Interest earning assets:                                                                                |             |          |            
|Loans and loans held
for sale, net of
unearned income                                                   | $ 493,398   | $ 20,266 | 8.16%      
|Deposits with banks                                                                                     | 589         | 10       | 3.37       
|Federal funds sold                                                                                      | 3,809       | 87       | 4.57       
|Total investment securities                                                                             | 403,572     | 12,510   | 6.20       
|Total interest earning
assets/interest income                                                           | 901,368     | 32,873   | 7.29       
|Non-interest earning assets:                                                                            |             |          |            
|Cash and due from banks                                                                                 | 14,099      |          |            
|Premises and equipment                                                                                  | 4,765       |          |            
|Other assets                                                                                            | 23,343      |          |            
|Allowance for loan losses                                                                               | (5,537)     |          |            
|TOTAL ASSETS                                                                                            | $ 938,038   |          |            
|                                                                                                        |             |          |            
|Interest bearing liabilities:                                                                           |             |          |            
|Interest bearing deposits:                                                                              |             |          |            
|Interest bearing demand                                                                                 | $ 41,358    | $ 163    | 0.79%      
|Savings                                                                                                 | 57,682      | 557      | 1.95       
|Money markets                                                                                           | 46,464      | 701      | 3.04       
|Other time                                                                                              | 395,628     | 11,715   | 5.97       
|Total interest bearing deposits                                                                         | 541,132     | 13,136   | 4.90       
|Short term borrowings:                                                                                  |             |          |            
|Federal funds purchased, securities sold under agreements to repurchase and other short-term borrowings | 1,322       | 37       | 5.64       
|Advances from Federal
Home Loan Bank                                                                    | 235,140     | 7,623    | 6.54       
|Long-term debt                                                                                          | 597         | 26       | 8.59       
|Total interest bearing
liabilities/interest expense                                                     | 778,191     | 20,822   | 5.40       
|Non-interest bearing liabilities:                                                                       |             |          |            
|Demand deposits                                                                                         | 86,611      |          |            
|Other liabilities                                                                                       | 10,657      |          |            
|Stockholders' equity                                                                                    | 62,579      |          |            
|TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY                                                              | $ 938,038   |          |            
|Interest rate spread                                                                                    |             |          | 1.89       
|Net interest income/
net interest margin                                                                |             | 12,051   | 2.63%      
|Tax-equivalent adjustment                                                                               |             | (211)    |            
|Net Interest Income                                                                                     |             | $ 11,840 |            

.....PROVISION FOR LOAN LOSSES.....

.....NON-INTEREST INCOME.....Non-interest income for the first six months of 2001 totaled $2.3 million, which represents a $479,000, or 26.6%, increase when compared to the same 2000 period. This increase was primarily due to the recognition of a net loss' from security sales of $501,000 during the first six months of 2000.

.....NON-INTEREST EXPENSE.....Non-interest expense for the first six months of 2001 totaled $10.2 million which represents a $2.4 million, or 19.1%, 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 related expenses in the first six months of 2000.
- a $1.4 million decrease in OREO expense, which is primarily the result of a $1.2 million write down of an Other Real Estate Owned property during the first six months of 2000 that was acquired through a foreclosure on a commercial real estate loan.
- a $437,000, or 21.9%, decrease in other expenses during the first six months of 2001 compared to the same 2000 period. The decrease is primarily the result of a decrease in expenses incurred for services provided by USBANCORP, Inc. of $376,000.
- the above decreases, however, were partially offset by a $185,000, or 33.8%, increase in professional fees and a $115,000, or 33.0%, increase in miscellaneous taxes and insurance. Professional fees increased as a result of the formation of the Company, while the increase in miscellaneous taxes resulted from an increase in the liability for Pennsylvania shares tax.

.....INCOME TAX EXPENSE.....The Company's provision for income taxes for the first six months of 2001 increased $536,000 to $560,000 from the six months ended June 30, 2000 as a result of the Company changing it's first quarter 2000 income tax liability estimate by approximately $750,000, which resulted in a negative provision. This resulted from an Internal Revenue Service examination of USBANCORP, Inc.'s tax returns thru 1997, which included the Company. Additionally, a refund from USBANCORP, Inc. offset the tax provision for the six months ended June 30, 2001 for federal income tax overpayments made during the 1998 and 1999 tax years. During that time, Three Rivers Bank was a consolidated entity of USBANCORP, Inc., and as outlined by the tax separation agreement entered into by the Companies at spin-off, the Company is entitled to Three Rivers Bank's portion of such overpayments. The Company's tax-free asset holdings consist primarily of municipal investment securities, bank owned life insurance, and commercial loan tax anticipation notes. Net deferred income taxes of $1.3 million have been provided as of June 30, 2001, on the differences between taxable income for financial and tax reporting purposes.

.....NET OVERHEAD BURDEN.....The Company's efficiency ratio (non-interest expense divided by total revenue) decreased to 70.84% for the six months ended June 30, 2001 compared to 78.9% for the same period of 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 the six months of 2000. Furthermore, the efficiency ratio for the first six months of 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 the six months ended June 30, 2000. This, however, was partially offset by the compression experienced in the net interest margin during the six months ended June 30, 2001.

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 Three Rivers Bancorp 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 (in thousands, except for the GAP ratios):



|                                         | June 30,
2001 | December 31,
2000 | June 30,
2000
|---------------------------------------- | ------------- | ----------------- | -------------
|Six month cumulative GAP                 |               |                   |              
|RSA.................................     | $ 252,190     | $ 241,289         | $ 237,699    
|RSL.................................     | (327,942)     | (236,417)         | (346,979)    
|Off-balance sheet hedges.....            | (40,000)      | (40,000)          | 40,000       
|GAP..................................... | $ (35,752)    | $ 44,872          | $ (69,280)   
|GAP ratio..........................      | 0.88X         | 1.23X             | 0.77X        
|GAP as a % of total assets...            | (3.82)%       | 4.74%             | (7.01)%      
|One year cumulative GAP                  |               |                   |              
|RSA.................................     | $ 363,368     | $ 329,646         | $ 320,821    
|RSL.................................     | (362,825)     | (380,962)         | (430,456)    
|Off-balance sheet hedges.........        | --            | --                | 40,000       
|GAP.................................     | $ 543         | $ (51,316)        | $ (69,635)   
|GAP ratio..........................      | 1.00X         | 0.87X             | 0.82X        
|GAP as a % of total assets...            | 0.06%         | (5.42)%           | (7.05)%      
|                                         |               |                   |              



When June 30, 2001, is compared to December 31, 2000, both the Company's six month and one year cumulative GAP ratios remained relatively unchanged.

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 the first twelve months of the forecast 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 June 30, 2001, to scenarios which reflect ramped 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 June 30, 2001, levels. The Company's most likely rate scenario is based upon published economic consensus estimates. Each rate scenario contains unique prepayment and repricing assumptions which are applied to the Company's expected balance sheet composition which was developed under the most likely interest rate scenario.







|Interest Rate
Scenario | Variability of Net Interest Income | Variability of Net Income | Change In Market Value of Portfolio Equity
|---------------------- | ---------------------------------- | ------------------------- | ------------------------------------------
|                       |                                    |                           |                                           
|Base                   | 0%                                 | 0%                        | 0%                                        
|Flat                   | 0.2                                | 0.4                       | (0.7)                                     
|200bp increase         | 0.2                                | 0.7                       | (37.9)                                    
|200bp decrease         | (1.7)                              | (4.4)                     | (35.8)                                    

As indicated in the table, the maximum negative variability of Three Rivers Bancorp's net interest income and net income over the next twelve month period was (1.7%) and (4.4%) respectively, under a downward rate shock forecast reflecting a 200 basis point decrease in interest rates. The variability of market value of portfolio equity was (35.8%) under this interest rate scenario. The off-balance sheet borrowed funds hedge transactions also helped reduce the variability of forecasted net interest income, net income, and market value of portfolio equity in a rising interest rate environment. 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.

LIQUIDITY

Liquidity can be analyzed by utilizing the Consolidated Statement of Cash Flows. Cash equivalents increased by $7.1 million from December 31, 2000 to June 30, 2001. During the first six months of 2001 there was $20.2 million of net cash provided by investing activities and $482,000 of net cash provided by operating activities. This was partially offset by $13.6 million of net cash used by financing activities. Within investing activities, sales of investment securities exceeded cash proceeds needed for security purchases by $12.5 million. Cash advanced for new loan fundings totaled $97.4 million and exceeded the cash received from loan principal payments by $22.8 million. Within financing activities, net deposits decreased by $2.8 million due primarily to the run-off of certificates of deposits. 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# 12 the Company exceeds all regulatory capital ratios at June 30, 2001. Furthermore, the Company is considered "well capitalized" under all applicable FDIC regulations. It is the Company's intent to maintain the FDIC "well capitalized" classification to ensure the lowest deposit insurance premium.

The Company's Board of Directors believes that dividends are a key component of total shareholder return, particularly for retail shareholders. During the first six months of 2001, the Company declared a $0.24 per share dividend. The second quarter dividend was paid during the third quarter.

FORWARD LOOKING STATEMENT

This Form 10-Q contains various forward-looking statements and includes assumptions concerning the Company's beliefs, plans, objectives, goals, expectations, 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) that 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) risk resulting from the spin-off and the operation of Three Rivers Bancorp as a separate independent company, (ii) the effect of changing regional and national economic conditions; (iii) the effects of trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System; (iv) significant changes in interest rates and prepayment speeds; (v) inflation, stock and bond market, and monetary fluctuations; (vi) credit risks of commercial, real estate, consumer, and other lending activities; (vii) changes in federal and state banking and financial services laws and regulations; (viii) the presence in the Company's market area of competitors with greater financial resources than the Company; (ix) 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); (x) the willingness of customers to substitute competitors' products and services for those of the Company and vice versa; (xi) changes in consumer spending and savings habits; (xii) unanticipated regulatory or judicial proceedings; and (xiii) 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 3. Quantitative and Qualitative Discussion About Market Risk

Refer to Management's Discussion and Analysis, pages 22 thru 25, 28 thru 31 and Interest Rate Sensitivity section on page 32 for discussion about Quantitative and Qualitative Market Risk.

Part II Other Information

Item 4. Submission of Matters to a Vote of Security Holders

On June 15, 2001, the Company held its Annual Meeting of Shareholders. The matters submitted to a vote of stockholders were approved, and the stockholder votes thereon are summarized as follows:

Election for the issuance of shares of the Company's common stock in connection with the merger of The Pennsylvania Capital Bank (Proposal One)

|For       | Against | Abstain | Not Voted
|--------- | ------- | ------- | ---------
|          |         |         |          
|4,180,738 | 55,845  | 27,493  | 997,909  

Election of Directors

|Nominee                   | For       | Against
|------------------------- | --------- | -------
|                          |           |        
|Clifford A. Barton        | 5,064,716 | 197,269
|Terry K. Dunkle           | 5,039,754 | 222,231
|J. Terrence Farrell       | 5,071,247 | 190,738
|Marylouise Fennell, Ed.D. | 5,058,497 | 203,488

Election of Ernst & Young LLP as independent auditors for the Company in 2001

|For       | Against | Abstain
|--------- | ------- | -------
|          |         |        
|5,204,849 | 48,317  | 8,819  

No other proposals were considered at the annual meeting.

Item 6. Exhibits and Reports on Form 8-K

(a) 	Exhibits. The following exhibits are being filed as a part of this Quarterly Report on Form 10-Q:

2.1	Agreement and Plan of Reorganization and Plan of Merger (Incorporated by reference to Exhibit 2.1 to the Form 8-K, filed on February 1, 2001, of Three Rivers Bancorp, Inc., File No. 000-29083).

1. Independent Accountants Review Report

27.1	Financial Data Schedule

(b) Reports on Form 8-K: The following reports on Form 8-K were filed during the quarter ended June 30, 2001:







Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Three Rivers Bancorp, Inc.

Registrant

Date: August 14, 2001 				/s/ Terry K. Dunkle______

Terry K. Dunkle

Chairman, President and

Chief Executive Officer



Date: August 14, 2001 				/s/ Anthony M.V. Eramo__

Anthony M.V. Eramo

Vice President and

Chief Financial Officer





STATEMENT OF MANAGEMENT RESPONSIBILITY







August 10, 2001







To the Stockholders and

Board of Directors of

Three Rivers Bancorp, Inc.



Management of Three Rivers Bancorp, Inc. and its subsidiaries have prepared the consolidated financial statements and other information in the Form 10-Q in accordance with accounting principles generally accepted in the United States and are responsible for its accuracy.

In meeting its responsibilities, management relies on internal accounting and related control and monitoring 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 propriety 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 accountants to discuss audit, financial reporting, and related matters. The Company's external and 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 &					Vice President &

Chief Executive Officer					Chief Financial Officer

Independent Accountants' Review Report



The Audit Committee of the Board of Directors

Three Rivers Bancorp, Inc.

We have reviewed the accompanying consolidated balance sheets of Three Rivers Bancorp, Inc. and subsidiaries (the Company) as of June 30, 2001 and 2000, and the related consolidated statements of income for the three and six months then ended, and the consolidated statements of cash flows and changes in stockholders' equity for the six months ended June 30, 2001. These consolidated financial statements are the responsibility of the Company's management.

We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data, and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States, which will be performed for the full year with the objective of expressing an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to the accompanying consolidated financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States.







/s/ Ernst & Young

Pittsburgh Pennsylvania

August 10, 2001





















August 10, 2001



The Audit Committee of the Board of Directors

Three Rivers Bancorp, Inc.

We are aware of the incorporation by reference in the Registration Statement (Form S-8 No. 333-39160) pertaining to the Three Rivers Bancorp, Inc. Stock Option Plan, the Registration Statement (Form S-8 No. 333-39166) pertaining to the Three Rivers Bancorp, Inc. Long-Term Incentive Plan, and the Registration Statement (Form S-8 No. 333-52798) pertaining to the Three Rivers Bancorp, Inc. 401(k) Plan of our report dated August 10, 2001 relating to the unaudited consolidated interim financial statements of Three Rivers Bancorp, Inc. that are included in its Form 10-Q for the quarter ended June 30, 2001.





/s/ Ernst & Young LLP

Pittsburgh, Pennsylvania