BANKINg ON COmmUNIT y
A healthy economy is dependent upon a banking
system which provides access to basic financial
services. Access to fairly-priced loans, a safe and
sound repository for savings, and secure and robust payment
systems are basic financial services universally necessary for
consumer and businesses alike. That fact is understood.
Less understood is the fact that underlying the national
economy are thousands of diverse economic communities, often
with specific industries and cultural heritages which have unique
financial service needs or preferred service delivery systems.
Community Banks recognize that specific localities and
cultures have customized needs that are best met by community
bankers who understand those needs. Those bankers also
know that meeting their communities’ needs plays a critical
role in the regional, state-wide and national economy.
Community Bankers know their customers and their
customers know their bankers.
Community Bankers are your church choir director, your
son’s little league coach and your daughter’s dance class
assistant. They are Rotarians, Kiwanians, and library and
hospital volunteers. In short, they are a big part of the social
and economic fabric of their hometowns. And we need them.
charles cole MeMorial hosPital Pool| coudersPort, Pa
Photo Credit: Curt Weinhold
com·mu·ni·ty
noun
1. a social group of any size whose
members reside in a specific locality, share
government, and often have a common
cultural and historical heritage.
Potter couNty courthouse BeNches
coudersPort, Pa
Photo Credit: Curt Weinhold
I
J
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A
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.
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2
0
1
5
2015
ANNUAL
REPORT
JUNIATA VALLEy FINANCIAL CORP.
218 Bridge Street | mifflintown, PA 17059 | www.jvbonline.com
002CSN60AB
Nickel Plate traiN at lewistowN statioN
Photo Credit: Nathaniel Thierwechter
MiffliN couNty field
Photo Credit: Nathaniel Thierwechter
BANKINg ON COmmUNIT y
A healthy economy is dependent upon a banking
system which provides access to basic financial
services. Access to fairly-priced loans, a safe and
sound repository for savings, and secure and robust payment
systems are basic financial services universally necessary for
consumer and businesses alike. That fact is understood.
Less understood is the fact that underlying the national
economy are thousands of diverse economic communities, often
with specific industries and cultural heritages which have unique
financial service needs or preferred service delivery systems.
Community Banks recognize that specific localities and
cultures have customized needs that are best met by community
bankers who understand those needs. Those bankers also
know that meeting their communities’ needs plays a critical
role in the regional, state-wide and national economy.
Community Bankers know their customers and their
customers know their bankers.
Community Bankers are your church choir director, your
son’s little league coach and your daughter’s dance class
assistant. They are Rotarians, Kiwanians, and library and
hospital volunteers. In short, they are a big part of the social
and economic fabric of their hometowns. And we need them.
charles cole MeMorial hosPital Pool| coudersPort, Pa
Photo Credit: Curt Weinhold
com·mu·ni·ty
noun
1. a social group of any size whose
members reside in a specific locality, share
government, and often have a common
cultural and historical heritage.
Potter couNty courthouse BeNches
coudersPort, Pa
Photo Credit: Curt Weinhold
I
J
U
N
A
T
A
V
A
L
L
E
y
I
F
I
N
A
N
C
A
L
C
O
R
P
.
A
N
N
U
A
L
R
E
P
O
R
T
2
0
1
5
2015
ANNUAL
REPORT
JUNIATA VALLEy FINANCIAL CORP.
218 Bridge Street | mifflintown, PA 17059 | www.jvbonline.com
002CSN60AB
Nickel Plate traiN at lewistowN statioN
Photo Credit: Nathaniel Thierwechter
MiffliN couNty field
Photo Credit: Nathaniel Thierwechter
JUNIATA VALLEy FINANCIAL CORP. | ANNUAL REPORT 2015
JUNIATA VALLEy FINANCIAL CORP. | ANNUAL REPORT 2015
JUVF UNdERSTANdS ThIS BUSINESS
The Juniata Valley Bank opened its doors in 1867, in
We added our Richfield branch through acquisition
mifflintown, PA, Juniata County. Nearly one hundred years
in 2006 and, on November 30th, 2015, we closed the
later, from 1962 through 1967, our bank grew through
acquisition of First National Bank of Port Allegany and
acquisition of The First National Bank of millerstown, Farmers
formally entered the Northern Tier with three new banking
National Bank of mcAlisterville, The Port Royal National Bank
locations in mcKean and Potter Counties.
and finally the Tuscarora State Bank of Blairs mills.
After all these years, we have proudly maintained high-
In 1998, The Juniata Valley Bank merged with the
touch personal service in all these varied communities.
Lewistown Trust Company, extending
its
footprint
throughout mifflin County with four additional branches.
ThIS BUSINESS IS ChANgINg
But
in every community,
regardless of size and
demographics...the need for innovative delivery systems
continues to grow. JVB is committed to providing robust
electronic services responsively designed to facilitate
electronic banking from any device. Our customers can
look forward to an enhanced internet banking website in
2016 with even greater access to loan and deposit services.
MaiN street | Port allegaNy, Pa
Photo Credit: Susan Carlson
JuNiata couNty, Pa| riverscaPe
Photo Credit: Nathaniel Thierwechter
“community banking has a special
meaning to our shareholders.
our belief in the value of community
banking and our ability to successfully
execute a community banking business
strategy throughout varied pennsylvania
regions is the essence of how we are
building shareholder value.”
and liabilities and managing risk, helping to assure the long-
term growth and health of your financial company.
We look forward to 2016 and the challenges and opportunities
the opportunities for the satisfaction of our customers, the
professional gratification of our dedicated employees, and the
enrichment of our shareholders.
COmmUNITy BANKINg
FOR OUR ShAREhOLdERS
“Community Banking has a special meaning to our shareholders.
Our belief in the value of Community Banking and our ability to
successfully execute a Community Banking business strategy
throughout varied Pennsylvania regions is the essence of how
we are building shareholder value.”
We will continue to adapt our banking model to the changing
needs and demands of our consumer and business clients;
however, acquisition remains a strategic focus. Through this
strategy, we can leverage our capital and overhead to deliver
stronger returns to our bottom line. Additionally, new markets
provide expanded opportunities to drive fee-based products
and services to a larger customer base.
dIRECTORy OF OFFICERS OF JVB
ExECUTIVE
Marcie A. Barber..................................................................President, Chief Executive Officer
BRANCh AdmINISTRATION
Patricia J. Yearick .............. Senior Vice President, Community Banking Division Manager
JoAnn N. McMinn ............................................................................... Executive Vice President,
Chief Financial Officer
Joseph W. Lashway....................... Senior Vice President, Northern Tier Division Manager
Cynthia L. Bosworth ....................... Northern Tier Branch Administrator and Loan Officer
Danyelle M. Pannebaker ............................................................................. Executive Assistant
AdmINISTRATION
Tina J. Smith........................................Senior Vice President, Director of Human Resources
Suzanne E. Booher ........................................................Vice President, Director of Marketing
and Facilities Management
Brent M. Miller ..................................................................Vice President, Compliance Officer
Kathy Hutchinson .........................................................Vice President, Compliance Specialist
and Security/BSA Officer
FINANCE
Kristi J. Burdge .............................................Assistant Vice President, Accounting Manager
Renee D. Williamson ..............................................................Financial Information Manager
LENdINg
Corbett J. Monica .................................. Senior Vice President, Lending Division Manager
William T. Campbell, Jr. ..............................................Vice President, Relationship Manager
Christine D. Coscia ....................................... Northern Tier Assistant Branch Administrator
and Loan Officer
Lora J. Rankin .............................................................................................Collections Manager
Jane A. Harrier ..............................................................................................Loan Administrator
blairs mills office
Wayne S. McCoy ............................................... Vice President, Community Office Manager
burnham office
Leann M. Fisher ................................................. Vice President, Community Office Manager
coudersport office
Kelly L. Bruno .................................................................................Community Office Manager
gardenview office
Larry B. Cottrill, Jr. ............................................ Vice President, Community Office Manager
Denise M. Rothrock .......................................................................... Assistant Office Manager
lillibridge office
Danielle H. Bennett ......................................................................Community Office Manager
it holds for JUVF. We intend to meet the challenges and leverage
Lisa K. Hobbs .......................................................................Northern Tier Compliance Officer
Thoughtful acquisition also provides an opportunity to
enhance both sides of our balance sheet by diversifying assets
marcie A. Barber | President and CEO
TOTAL ASSETS AT yEAR ENd (In Thousands)
$600,000
$580,000
$560,000
$540,000
$520,000
$500,000
$480,000
$460,000
$440,000
$420,000
$400,000
2009
2008
$442,109
$428,084
2010
$435,753
2006
$415,931
2007
$420,146
2014
$480,529
2011
$447,433
2012
2013
$448,869
$448,782
$583,928
2015
Jeffrey A. Herr ..............................................................Vice President, Relationship Manager
Scott E. Nace ................................................................Vice President, Relationship Manager
mcalisterville office
Leslie A. Miller ................................................... Vice President, Community Office Manager
H. Fred Wallace ............................................................Vice President, Relationship Manager
Kelly M. Neimond ............................................................................. Assistant Office Manager
Jon R. Yarger .....................................................Vice President, Consumer Lending Manager
Betty D. Ryan ................................ Vice President, Secondary Mortgage Market Manager
Pamela K. Parson ........................................................... Vice President, Collections Manager
Christine L. Burlew ............................................................. Vice President, Collections Officer
Lisa M. Snyder .............................................Vice President, Credit Administration Manager
mifflintown & mountain view offices
Annette M. Price ................................................ Vice President, Community Office Manager
millerstown office
Thomas P. O’Connell ........................................ Vice President, Community Office Manager
Matthew J. Waddell ...........................................................Vice President, Portfolio Manager
Lisa M. Freet ..................................................................................... Assistant Office Manager
OPERATIONS
Steven T. Kramm .......................................................................................Senior Vice President,
Operations/Technology Division Manager
S. Marlene Hubler .................................................................. Computer Operations Manager
Kelly L. Yetter ....................................................... Electronic and Business Banking Manager
Curtis M. Crouse ....................................................................................Network Administrator
Beverly M. McClellan ..............................................................................................Data Analyst
Tammy L Miller ........................................................................... Deposit Operations Manager
TRUST ANd INVESTmENT SERVICES
Donald E. Shawley ....................................................................................Senior Vice President,
Trust and Investment Services Division Manager
Cynthia L. Williams .......................................................................Vice President, Trust Officer
Paul M. Grego............................................................Vice President, Trust Investment Officer
Jonathan F. King ...................................................................Financial Services Representative
monument square office
Lee Ellen Foose ................................................ Vice President, Community Office Manager
Stacey K. McMurtrie ......................................................................... Assistant Office Manager
port allegany office
Shelly S. Morey ..............................................................................Community Office Manager
port royal office
Barbara I. Seaman ......................................... Vice President, Community Office Manager
richfield office
Brenda A. Brubaker .......................................... Vice President, Community Office Manager
wal-mart office
Kristi A. Dippery ................................................................................ Assistant Office Manager
water street office
Christine L. Searer ...........................Assistant Vice President, Community Office Manager
JuNiata couNty courthouse | MiffliNtowN, Pa
Photo Credit: Nathaniel Thierwechter
eMBassy theatre | lewistowN, Pa
Photo Credit: Nathaniel Thierwechter
acadeMia PoMeroy covered Bridge | Port royal, Pa
Photo Credit: Sandy Sieber
JUNIATA VALLEy FINANCIAL CORP.
ANNUAL REPORT 2015
JUNIATA VALLEy FINANCIAL CORP. | ANNUAL REPORT 2015
JUNIATA VALLEy FINANCIAL CORP. | ANNUAL REPORT 2015
JUVF UNdERSTANdS ThIS BUSINESS
The Juniata Valley Bank opened its doors in 1867, in
We added our Richfield branch through acquisition
mifflintown, PA, Juniata County. Nearly one hundred years
in 2006 and, on November 30th, 2015, we closed the
later, from 1962 through 1967, our bank grew through
acquisition of First National Bank of Port Allegany and
acquisition of The First National Bank of millerstown, Farmers
formally entered the Northern Tier with three new banking
National Bank of mcAlisterville, The Port Royal National Bank
locations in mcKean and Potter Counties.
and finally the Tuscarora State Bank of Blairs mills.
After all these years, we have proudly maintained high-
In 1998, The Juniata Valley Bank merged with the
touch personal service in all these varied communities.
Lewistown Trust Company, extending
its
footprint
throughout mifflin County with four additional branches.
ThIS BUSINESS IS ChANgINg
But
in every community,
regardless of size and
demographics...the need for innovative delivery systems
continues to grow. JVB is committed to providing robust
electronic services responsively designed to facilitate
electronic banking from any device. Our customers can
look forward to an enhanced internet banking website in
2016 with even greater access to loan and deposit services.
MaiN street | Port allegaNy, Pa
Photo Credit: Susan Carlson
JuNiata couNty, Pa| riverscaPe
Photo Credit: Nathaniel Thierwechter
“community banking has a special
meaning to our shareholders.
our belief in the value of community
banking and our ability to successfully
execute a community banking business
strategy throughout varied pennsylvania
regions is the essence of how we are
building shareholder value.”
and liabilities and managing risk, helping to assure the long-
term growth and health of your financial company.
We look forward to 2016 and the challenges and opportunities
the opportunities for the satisfaction of our customers, the
professional gratification of our dedicated employees, and the
enrichment of our shareholders.
COmmUNITy BANKINg
FOR OUR ShAREhOLdERS
“Community Banking has a special meaning to our shareholders.
Our belief in the value of Community Banking and our ability to
successfully execute a Community Banking business strategy
throughout varied Pennsylvania regions is the essence of how
we are building shareholder value.”
We will continue to adapt our banking model to the changing
needs and demands of our consumer and business clients;
however, acquisition remains a strategic focus. Through this
strategy, we can leverage our capital and overhead to deliver
stronger returns to our bottom line. Additionally, new markets
provide expanded opportunities to drive fee-based products
and services to a larger customer base.
dIRECTORy OF OFFICERS OF JVB
ExECUTIVE
Marcie A. Barber..................................................................President, Chief Executive Officer
BRANCh AdmINISTRATION
Patricia J. Yearick .............. Senior Vice President, Community Banking Division Manager
JoAnn N. McMinn ............................................................................... Executive Vice President,
Chief Financial Officer
Joseph W. Lashway....................... Senior Vice President, Northern Tier Division Manager
Cynthia L. Bosworth ....................... Northern Tier Branch Administrator and Loan Officer
Danyelle M. Pannebaker ............................................................................. Executive Assistant
AdmINISTRATION
Tina J. Smith........................................Senior Vice President, Director of Human Resources
Suzanne E. Booher ........................................................Vice President, Director of Marketing
and Facilities Management
Brent M. Miller ..................................................................Vice President, Compliance Officer
Kathy Hutchinson .........................................................Vice President, Compliance Specialist
and Security/BSA Officer
FINANCE
Kristi J. Burdge .............................................Assistant Vice President, Accounting Manager
Renee D. Williamson ..............................................................Financial Information Manager
LENdINg
Corbett J. Monica .................................. Senior Vice President, Lending Division Manager
William T. Campbell, Jr. ..............................................Vice President, Relationship Manager
Christine D. Coscia ....................................... Northern Tier Assistant Branch Administrator
and Loan Officer
Lora J. Rankin .............................................................................................Collections Manager
Jane A. Harrier ..............................................................................................Loan Administrator
blairs mills office
Wayne S. McCoy ............................................... Vice President, Community Office Manager
burnham office
Leann M. Fisher ................................................. Vice President, Community Office Manager
coudersport office
Kelly L. Bruno .................................................................................Community Office Manager
gardenview office
Larry B. Cottrill, Jr. ............................................ Vice President, Community Office Manager
Denise M. Rothrock .......................................................................... Assistant Office Manager
lillibridge office
Danielle H. Bennett ......................................................................Community Office Manager
it holds for JUVF. We intend to meet the challenges and leverage
Lisa K. Hobbs .......................................................................Northern Tier Compliance Officer
Thoughtful acquisition also provides an opportunity to
enhance both sides of our balance sheet by diversifying assets
marcie A. Barber | President and CEO
TOTAL ASSETS AT yEAR ENd (In Thousands)
$600,000
$580,000
$560,000
$540,000
$520,000
$500,000
$480,000
$460,000
$440,000
$420,000
$400,000
2009
2008
$442,109
$428,084
2010
$435,753
2006
$415,931
2007
$420,146
2014
$480,529
2011
$447,433
2012
2013
$448,869
$448,782
$583,928
2015
Jeffrey A. Herr ..............................................................Vice President, Relationship Manager
Scott E. Nace ................................................................Vice President, Relationship Manager
mcalisterville office
Leslie A. Miller ................................................... Vice President, Community Office Manager
H. Fred Wallace ............................................................Vice President, Relationship Manager
Kelly M. Neimond ............................................................................. Assistant Office Manager
Jon R. Yarger .....................................................Vice President, Consumer Lending Manager
Betty D. Ryan ................................ Vice President, Secondary Mortgage Market Manager
Pamela K. Parson ........................................................... Vice President, Collections Manager
Christine L. Burlew ............................................................. Vice President, Collections Officer
Lisa M. Snyder .............................................Vice President, Credit Administration Manager
mifflintown & mountain view offices
Annette M. Price ................................................ Vice President, Community Office Manager
millerstown office
Thomas P. O’Connell ........................................ Vice President, Community Office Manager
Matthew J. Waddell ...........................................................Vice President, Portfolio Manager
Lisa M. Freet ..................................................................................... Assistant Office Manager
OPERATIONS
Steven T. Kramm .......................................................................................Senior Vice President,
Operations/Technology Division Manager
S. Marlene Hubler .................................................................. Computer Operations Manager
Kelly L. Yetter ....................................................... Electronic and Business Banking Manager
Curtis M. Crouse ....................................................................................Network Administrator
Beverly M. McClellan ..............................................................................................Data Analyst
Tammy L Miller ........................................................................... Deposit Operations Manager
TRUST ANd INVESTmENT SERVICES
Donald E. Shawley ....................................................................................Senior Vice President,
Trust and Investment Services Division Manager
Cynthia L. Williams .......................................................................Vice President, Trust Officer
Paul M. Grego............................................................Vice President, Trust Investment Officer
Jonathan F. King ...................................................................Financial Services Representative
monument square office
Lee Ellen Foose ................................................ Vice President, Community Office Manager
Stacey K. McMurtrie ......................................................................... Assistant Office Manager
port allegany office
Shelly S. Morey ..............................................................................Community Office Manager
port royal office
Barbara I. Seaman ......................................... Vice President, Community Office Manager
richfield office
Brenda A. Brubaker .......................................... Vice President, Community Office Manager
wal-mart office
Kristi A. Dippery ................................................................................ Assistant Office Manager
water street office
Christine L. Searer ...........................Assistant Vice President, Community Office Manager
JuNiata couNty courthouse | MiffliNtowN, Pa
Photo Credit: Nathaniel Thierwechter
eMBassy theatre | lewistowN, Pa
Photo Credit: Nathaniel Thierwechter
acadeMia PoMeroy covered Bridge | Port royal, Pa
Photo Credit: Sandy Sieber
JUNIATA VALLEy FINANCIAL CORP.
ANNUAL REPORT 2015
2015 AnnuAl RepoRt
TABLE OF CONTENTS
Message from the President ------------------------------------------------------------------------------------ Inside Front Cover
Five-Year Financial Summary - Selected Financial Data ------------------------------------------------------------------------ 2
Management's Discussion and Analysis of Financial Condition and Results of Operations ----------------------------- 3
Report on Management's Assessment of Internal Control over Financial Reporting ----------------------------------- 44
Report of Independent Registered Public Accounting Firm on Effectiveness
of Internal Control over Financial Reporting ------------------------------------------------------------------------------ 45
Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements ---------------- 46
Financial Statements
Consolidated Statements of Financial Condition -------------------------------------------------------------------------- 47
Consolidated Statements of Income ----------------------------------------------------------------------------------------- 48
Consolidated Statements of Comprehensive Income--------------------------------------------------------------------- 49
Consolidated Statements of Stockholders' Equity ------------------------------------------------------------------------ 50
Consolidated Statements of Cash Flows ------------------------------------------------------------------------------------ 51
Notes to Consolidated Financial Statements ------------------------------------------------------------------------------- 53
Common Stock Market Prices and Dividends ----------------------------------------------------------------------------------104
Corporate Information -------------------------------------------------------------------------------------------------------------104
Corporate Officers, Directors and Business Development Boards ---------------------------------------------------------106
Officers of The Juniata Valley Bank ---------------------------------------------------------------------------- Inside Back Cover
The Juniata Valley Bank, as an independent community bank, will endeavor to identify customers' financial
needs and exceed their expectations in delivering quality products and services at a fair price to assure
shareholders an above average return and employees competitive salaries and benefits. The business of the
bank will be conducted with integrity and responsiveness to the communities served.
Five-YeAR FinAnciAl SummARY - Selected FinAnciAl dAtA
BALANCE SHEET INFORMATION
(In thousands of dollars, except share and per share data)
at December 31
Assets
Deposits
Loans, net of allowance for loan losses
Investments
Goodwill
Short-term borrowings
Long-term debt
Stockholders’ equity
Number of shares outstanding
Average for the year
Assets
Stockholders’ equity
Weighted average shares outstanding
INCOME STATEMENT INFORMATION
2015
2014
2013
2012
2011
$ 583,928
457,126
374,565
156,186
5,381
35,057
22,500
59,962
4,798,086
$ 480,529
380,884
292,521
145,629
2,046
20,544
22,500
49,856
4,187,441
$ 448,782
379,645
275,511
128,262
2,046
13,797
-
49,984
4,196,266
$ 448,869
386,751
274,219
124,911
2,046
5,436
-
50,297
4,218,361
$ 447,433
386,665
286,750
114,077
2,046
3,500
-
49,720
4,228,218
489,323
51,131
4,240,319
470,660
50,704
4,192,761
450,031
49,571
4,210,336
454,057
49,766
4,231,404
447,323
50,355
4,241,286
Years Ended December 31
Total interest income
Total interest expense
Net interest income
Provision for loan losses
Other income
Other expenses
Income before income taxes
Federal income tax expense
Net income
PER SHARE DATA
Earnings per share - basic
Earnings per share - diluted
Cash dividends
Book value
FINANCIAL RATIOS
$
17,379
2,042
$
16,932
2,598
$
16,734
2,900
$
18,170
3,648
$ 20,033
4,591
15,337
502
4,505
16,199
3,141
83
14,334
357
4,334
13,570
4,741
525
13,834
415
4,233
13,146
4,506
505
14,522
1,411
4,592
13,077
4,626
978
15,442
364
3,946
12,802
6,222
1,542
$
3,058
$
4,216
$
4,001
$
3,648
$
4,680
$
$
$
0.72
0.72
0.88
12.50
1.01
1.01
0.88
11.91
0.95
0.95
0.88
11.91
$
$
0.86
0.86
0.88
11.92
1.10
1.10
0.86
11.76
Return on average assets
Return on average equity
Dividend payout
Average equity to average assets
Loans to deposits (year end)
0.62%
5.98
120.57
10.45
81.94
0.90%
8.31
87.52
10.77
76.80
0.89%
8.07
92.65
11.02
72.57
0.80%
7.33
102.08
10.96
70.90
1.05%
9.29
77.95
11.26
74.16
2
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
mAnAGement’S diScuSSion And AnAlYSiS
oF FinAnciAl condition And ReSultS oF opeRAtionS
FORWARD LOOKING STATEMENTS
The information contained in this Annual Report contains forward looking statements (as such term is
defined in the Securities Exchange Act of 1934 and the regulations thereunder) including statements which are
not historical facts or that reflect trends or management’s intentions, plans, beliefs, expectations or opinions.
Such forward looking statements are subject to risks and uncertainties and may be affected by various factors
which may cause actual results to differ materially from those in the forward looking statements including,
without limitation:
•
•
the impact of adverse changes in the economy and real estate markets, including protracted periods of
low-growth and sluggish loan demand;
the effect of market interest rates, particularly a continuing period of low market interest rates, and
relative balances of rate-sensitive assets to rate-sensitive liabilities, on net interest margin and net
interest income;
•
the effect of competition on rates of deposit and loan growth and net interest margin;
•
•
increases in non-performing assets, which may result in increases in the allowance for credit losses, loan
charge-offs and elevated collection and carrying costs related to such non-performing assets;
other income growth, including the impact of regulatory changes which have reduced debit card
interchange revenue; investment securities gains and losses, including other than temporary declines in
the value of securities which may result in charges to earnings;
•
the level of other expenses, including salaries and employee benefit expenses;
•
the increasing time and expense associated with regulatory compliance and risk management; the
uncertainty and lack of clear regulatory guidance associated with the delay in implementing many of the
regulations mandated by the Dodd Frank Act;
•
capital and liquidity strategies, including the expected impact of the capital and liquidity requirements
modified by the Basel III standards; and
•
integration costs and cost savings related to business combinations.
Certain of these risks, uncertainties and other factors are discussed in this Annual Report or in the Company’s
Annual Report on Form 10-K for the year ended December 31, 2015, a copy of which may be obtained from the
Company upon request and without charge (except for the exhibits thereto).
OVERVIEW
This discussion concerns Juniata Valley Financial Corp. (“Company” or “Juniata”) and its wholly owned
subsidiary, The Juniata Valley Bank (“Bank”). The overview is intended to provide a context for the following
Management’s Discussion and Analysis of Financial Condition and Results of Operations. Management’s
Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our
3
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015 consolidated financial statements, including the notes thereto, included in this annual report. We have attempted
to identify the most important matters on which our management focuses in evaluating our financial condition
and operating performance and the short-term and long-term opportunities, challenges and risks (including
material trends and uncertainties) which we face. We also discuss the actions we are taking to address these
opportunities, challenges and risks. The Overview is not intended as a summary of, or a substitute for review of,
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
NATuRE OF OpERATIONS
Juniata is a bank holding company that delivers financial services within its market, primarily central
Pennsylvania. The Company owns one bank, the Bank, which provides retail and commercial banking services
through 15 offices in Juniata, Mifflin, Perry, Huntingdon, McKean, Potter and Centre counties. On November 30,
2015, Juniata acquired FNBPA Bancorp, Inc. (“FNBPA”), a Pennsylvania corporation. Under the terms of a merger
agreement between the parties, FNBPA merged with, and into Juniata, with Juniata continuing as the surviving
entity. Simultaneously with the consummation of the foregoing merger, First National Bank of Port Allegany
(“FNB”), a nationally chartered bank and wholly-owned subsidiary of FNBPA, merged with and into The Juniata
Valley Bank, a Pennsylvania state-chartered bank and wholly-owned subsidiary of Juniata. The trade name “JVB
Northern Tier” is used to reference the former offices and service area of FNB. Additionally, Juniata owns 39.16%
of Liverpool Community Bank (“LCB”), carried as an unconsolidated subsidiary and accounted for under the
equity method of accounting.
The Bank provides a full range of consumer and commercial services. Consumer services include Internet,
mobile and telephone banking, an automated teller machine network, personal checking accounts, interest
checking accounts, savings accounts, insured money market accounts, debit cards, certificates of deposit, club
accounts, secured and unsecured installment loans, construction and mortgage loans, safe deposit facilities, credit
lines with overdraft checking protection, individual retirement accounts, health savings accounts, on-line bill
payment and other on-line and mobile services. Commercial banking services include small and high-volume
business checking accounts, on-line account management services, ACH origination, payroll direct deposit,
commercial lines and letters of credit, commercial term and demand loans and repurchase agreements. The Bank
also provides a variety of trust, asset management and estate services. The Bank offers annuities, mutual funds,
stock and bond brokerage services and long-term care insurance products through an arrangement with a
broker-dealer and insurance brokers. Management believes the Company has a relatively stable deposit base with
no major seasonal depositor or group of depositors. Most of the Company’s commercial customers are small and
mid-sized businesses in central Pennsylvania.
ECONOMIC AND INDuSTRy-WIDE FACTORS RELEVANT TO JuNIATA
As a financial services organization, Juniata’s core business is most influenced by the movement of interest
rates. Lending and investing is done daily, using funding from deposits and borrowings, resulting in net interest
income, the most significant portion of operating results. Through the use of asset/liability management tools,
the Company continually evaluates the effects that possible changes in interest rates could have on operating
results and balance sheet growth. Using this information, along with analysis of competitive factors, management
designs and prices its products and services.
General economic conditions are relevant to Juniata’s business. In addition, economic factors impact customers’
needs for financing, thus affecting loan growth. Additionally, changes in the economy can directly impact the
credit strength of existing and potential borrowers.
4
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
FOCuS OF MANAGEMENT
The management of Juniata believes that it is important to know who and what we are in order to be
successful. We must be aligned in our efforts to achieve goals. We’ve identified the four characteristics that define
the Company and the personnel that support it. We are
Management seeks to be the preeminent financial institution in its market area and measures its success by five
key elements.
ShAREhOLDER SATISFACTION
Committed
Connected
Capable
Caring
and
,
,
.
committed
Above all else, management is
both stock value appreciation and dividend returns. Remaining
identify the financial needs of our market and to deliver those products and services
profitably grow the balance sheet and enhance core earnings, while maintaining capital and liquidity levels well
exceeding all regulatory guidelines.
CuSTOMER RELATIONShIpS
to maximizing the value of our shareholders’ investment, through
to our communities will allow us to
capably
. In doing so, we will
connected
committed
to maximizing customer satisfaction. We are sensitive to the expanding array of financial
We are
services and financial service providers available to our customers, both locally and globally. We are committed to
fostering a complete customer relationship by helping clients identify their current and future financial needs
and offering practical and affordable solutions to both. As our customers’ lifestyles change, the channels through
connection
which we deliver our services must change as well. One element of the Company’s strategic plan is to provide
through every means available, wherever we are needed, whether through a stand-alone branch,
in-store boutique, ATM or via on-line and mobile banking anywhere internet or cell phone signals can be
received.
BALANCE ShEET GROWTh
capable
of profitable balance sheet growth. Rapid growth should not be a substitute for careful fiscal
We are
and strategic management. It is our goal to continue quality growth despite intense competition by paying careful
attention to the needs of our customers. We will continue to maintain high credit standards, knowing that lending
under the right circumstances is the proper way to maintain soundness and profitability. We believe we
consistently pay fair market rates on all deposits, and have invested wisely and conservatively in compliance with
self-imposed standards, minimizing risk of asset impairment. We aspire to increase our market share within the
current communities that we serve, and to expand in contiguous areas through acquisition and investment.
As part of our strategic plan for growth, we continue to actively seek opportunities for acquisitions of branches
or stakes in other financial institutions, similar to those that have occurred in prior years. Late in 2015, we
consummated one such acquisition and are in the process of integrating the operation of our JVB Northern
Tier region.
OpERATING RESuLTS
capable
We are
of producing profitability ratios that exceed those of many of our peers. Recognizing that net
interest margins have narrowed for banks in general and that they may not return to the ranges experienced in
the past, we also focus on the importance of providing fee-generating services in which customers find value.
Offering a broad array of services prevents us from becoming too reliant on one form of revenue. It has also been
our philosophy to spend conservatively and to implement operating efficiencies where possible to keep non-
interest expense from escalating in areas that can be controlled. In 2015, we continued to make advances in
technological resources, placing data and information in the hands of our customers and employees, committed
to optimizing the customer experience.
5
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015 CONNECTION TO ThE COMMuNITy
We are active corporate citizens of the communities we serve. Although the world of banking has transitioned
to global availability through electronics, we believe that our community banking philosophy is not only still
valid, but essential. Despite technological advances, banking is still a personal business, particularly in the rural
areas we serve. We believe that our customers shop for services and value a relationship with an institution
involved in the same community, with the same interests in its prosperity. We have a foundation and a history in
each of the communities we serve. Management takes an active role in local business and industry development
organizations to help attract and retain commerce in our market area. We provide businesses, large and small,
with financial tools and financing needed to grow and prosper. We have always been committed to responsible
lending practices. We invest locally by including local municipal bonds in our investment portfolio and
participating in funding for such projects as low income and elderly housing. We support charitable programs
that benefit the local communities, not only with monetary contributions, but also through the personal
involvement of our caring employees.
JuniAtA’S oppoRtunitieS
SOuNDNESS AND STABILITy
Our financial condition is strong. We enjoy strong capital and liquidity ratios that significantly exceed
regulatory guidelines. Our business model includes a plan for growth without sacrificing profitability or integrity.
We believe an opportunity exists for banks such as ours to offer the trusted, personal service of a locally managed
institution that has roots in the community reaching back more than 140 years.
ExpANSION OF CuSTOMER BASE
Our strategic focus is based on leveraging our collective knowledge of the Company’s primary and contiguous
markets to identify lending or fee-based opportunities consistent with our risk parameters and profitability
targets. We continue to develop our sales team through mentoring and by making employee education
paramount. We continually seek and implement back-room efficiencies. We recognize change is taking place in a
world where convenience and mobility are priorities for consumers and businesses when choosing a financial
institution with whom to do business. We offer full-featured secure mobile banking that includes remote check
deposit for use on home computers and all mobile devices for consumers. For businesses, we provide options for
cash management and remote deposit. We offer identity protection to the families of our customers, which we
believe to be a true value-added service, with features that go far beyond traditional banking services, and sets
us apart from other financial institutions in our market area. On November 30, 2015, with the acquisition of
FNBPA, we expanded our market into the northern tier region of Pennsylvania and are actively integrating the
JVB brand there.
DELIVERy SySTEM ENhANCEMENTS
4
1
We seek to continually enhance our customer delivery system, both through technology and physical facilities.
We actively seek opportunities to expand our branch network through acquisitions. We believe that it is
imperative that our customers have convenient and easy access to personal financial services that complement
their particular lifestyle, whether it is through electronic or personal delivery. We achieved an early entry into the
mobile banking arena in 2011 and have since expanded on-line delivery each year following, including consumer
remote deposit and Touch ID. Our suite of on-line services now include the convenience of on-line loan
6
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015 applications for residential mortgages, home equity, vehicle and other personal loans. On-line and mobile banking
features include full bill-pay and monetary transfers between internal and external accounts. In 2015, we
replaced our ATM network with all new highly functional state-of-the art machines. Our new Customer Resource
Center became operational in 2015, providing dedicated service to all customer inquiries. In 2016, we will be
introducing remote deposit for our small business customers through our business mobile app. Also in 2016,
on-line deposit account opening will become available. The roll-out of a fully re-designed JVBonline.com website
is planned for 2016 as well.
JuniAtA’S chAllenGeS
NET INTEREST MARGIN COMpRESSION
Low market interest rates have pressured the net interest margin for most banks, including Juniata, in recent
years. Loans have been originated, acquired or repriced at lower rates, reducing the average rate earned on those
assets. While the average rate paid on interest-bearing liabilities, such as deposits and borrowings, has also
declined, the decline has not always occurred at the same pace as the decline in the average rate earned on
interest-earning assets, which can result in a narrowing of the net interest margin. We believe that this will
continue to be a challenge until general market rates rise more significantly.
COMpETITION
Each year, competition becomes more intense and global in nature. To meet this challenge, we attempt to stay
in close contact with our customers, monitoring their satisfaction with our services through surveys, personal
visits and networking in the communities we serve. We strive to meet or exceed our customers’ expectations and
deliver consistent high-quality service. We believe that our customers have become acutely aware of the value of
local service, and we strive to maintain their confidence.
RATE ENVIRONMENT
We intend to continue making what we believe to be rational pricing decisions for loans, deposits and non-
deposit products. This strategy can be difficult to maintain, as many of our peers appear to continue pricing for
growth, rather than long-term profitability and stability. We believe that a strategy of “growth for the sake of
growth” results in lower profitability, and such actions by large groups of banks have had an adverse impact on
the entire financial services industry. We intend to maintain our core pricing principles, which we believe protect
and preserve our future as a sound community financial services provider, proven by results.
REGuLATED COMpANy
5
1
The Company is subject to banking regulation, as well as regulation by the Securities and Exchange
Commission (“SEC”) and, as such, must comply with many laws, including the USA Patriot Act, the Sarbanes-Oxley
Act of 2002 (“Sarbanes-Oxley”) and the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Management has established a Disclosure Committee for Financial Reporting, an internal group at Juniata that
seeks to ensure that current and potential investors in the Company receive full and complete information
concerning our financial condition. Juniata has incurred direct and indirect costs associated with compliance with
the SEC’s filing and reporting requirements imposed on public companies by the Sarbanes-Oxley Act, as well as
adherence to new and existing banking regulations and stronger corporate governance requirements. Regulatory
burdens continue to increase as evidenced by the provisions in the Dodd-Frank Act that impact the Company in
the areas of corporate governance, capital requirements and restrictions on fees that may be charged to consumers.
7
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015 ApplicAtion oF cRiticAl AccountinG policieS
The Company’s consolidated financial statements are prepared based upon the application of accounting
principles generally accepted in the United States of America (“GAAP”), the most significant of which are
described in Note 2 to our consolidated financial statements – Summary of Significant Accounting Policies.
Certain of these policies, particularly with respect to allowance for loan losses and the investment portfolio,
require numerous estimates and economic assumptions, based upon information available as of the date of the
consolidated financial statements. As such, over time, they may prove inaccurate or vary and may significantly
affect the Company’s reported results and financial position in future periods.
The accounting policy for establishing the allowance for loan losses relies to a greater extent on the use of
estimates than other areas and, as such, has a greater possibility of producing results that could be different from
those currently reported. Changes in underlying factors, assumptions or estimates in the allowance for loan
losses could have a material impact on the Company’s future financial condition and results of operations. The
section of this Annual Report to Shareholders entitled “Allowance for Loan Losses” provides management’s
analysis of the Company’s allowance for loan losses and related provision expense. The allowance for loan losses
is maintained at a level believed adequate by management to absorb probable losses in the loan portfolio.
Management’s determination of the adequacy of the allowance for loan losses is based upon an evaluation of
individual credits in the loan portfolio, historical loan loss experience, current economic conditions and other
relevant factors. This determination is inherently subjective, as it requires material estimates, including the
amounts and timing of future cash flows expected to be received on impaired loans that may be susceptible to
significant change.
In addition, regulatory agencies, as an integral part of their examination process, periodically review the
Company’s allowance for loan losses and may require the Company to recognize additions to the allowance for
loan losses based on their judgments about information available to them at the time of their examination, which
may not be currently available to management.
Considerations used by management to determine other-than-temporary impairment status of individual
holdings within the investment securities portfolio are based partially upon estimations of fair value and
potential for recovery. As market conditions and perception can unpredictably affect the value of individual
investments in the future, these determinations could have a material impact on the Company’s future financial
condition and results of operations.
8
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
ReSultS oF opeRAtionS
2015 FINANCIAL pERFORMANCE OVERVIEW
Net income for Juniata in 2015 was $3,058,000, representing a 27.4% decrease as compared to net income for
2014. The comparability of the results of operations for 2015 were significantly impacted by the acquisition of
FNBPA Bancorp, Inc. (“FNBPA”) on November 30, 2015. Juniata incurred $1,806,000 of non-recurring expense in
conjunction with the acquisition of FNBPA during 2015. Exclusive of these expenses and the corresponding tax
impact, net income for the year ended December 31, 2015 was $4,369,000, an increase of $153,000, or 3.6%,
over net income of $4,216,000 in 2014. Operating results for the year included those of FNBPA beginning on
December 1, 2015.
Earnings per share on a fully diluted basis decreased from $1.01 in 2014 to $0.72, in 2015. When adjusted for
the impact of tax-effected non-recurring merger and acquisition costs, earnings per share was $1.03 in 2015. The
net interest margin, on a fully tax-equivalent basis, increased from 3.48% in 2014 to 3.56% in 2015. The ratio of
non-interest income (excluding gains on sales of securities) to average assets remained unchanged at 0.92% in
both 2015 and 2014, while the ratio of non-interest expense to average assets increased by 43 basis points to
3.31%. Of the increase in the non-interest expense ratio, 37 basis points related to the non-recurring merger and
acquisition costs. Five-year historical ratios are presented below, followed by a reconciliation of non-GAAP
comparative disclosures for the most recent three years.
2015
0.62%
5.98
3.88
0.59
3.56
2013
0.89%
8.07
4.09
0.71
3.53
2014
0.90%
8.31
3.94
0.60
3.48
2012
0.80%
7.33
4.39
0.88
3.68
2011
1.05%
9.29
4.91
1.13
3.97
Return on average assets
Return on average equity
Yield on earning assets
Cost to fund earning assets
Net interest margin (fully tax equivalent)
Non-interest income (excluding gains on
sales or calls of securities and securities
impairment charges) to average assets
Non-interest expense to average assets
Net non-interest expense to average assets
Non-GAAP presentation of comparative net income
and performance ratios
Net Income, as reported
Merger and acquisition costs
Tax impact of merger and acquisition costs
Net income, exclusive of merger and acquisition
costs, net of corresponding tax impact
Return on average assets, adjusted
Return on average equity, adjusted
Earnings per share, adjusted
0.92
3.31
2.39
0.92
2.88
1.96
0.94
2.92
1.98
1.01
2.88
1.87
0.88
2.86
1.98
2015
3,058
1,806
(495)
4,369
0.89%
8.54%
1.03
$
$
$
2014
4,216
-
-
4,216
0.90%
8.31%
1.01
$
$
$
2013
4,001
-
-
4,001
0.89%
8.07%
0.95
$
$
$
Juniata strives to attain consistently high earnings levels each year by protecting the core (repeatable) earnings
base through conservative growth strategies that minimize stockholder and balance-sheet risk, while serving its
rural Pennsylvania customer base. This approach has helped achieve solid performances year after year. The
Company considers the return on assets (“ROA”) ratio to be a key indicator of its success and constantly
scrutinizes the broad categories of the income statement that impact this profitability indicator. Summarized
below are the components of net income (in thousands of dollars) and the contribution of each to ROA for 2015
and 2014.
9
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
Net interest income
Provision for loan losses
$
15,337
(502)
3.13%
(0.10)
$
14,334
(357)
3.05%
(0.08)
2015
% of Average
Assets
2014
% of Average
Assets
Customer service fees
Debit card fee income
BOLI
Trust fees
Commissions from sales of non-deposit products
Income from unconsolidated subsidiary
Insurance-related gains
Security gains
Mortgage banking income
Other noninterest income
Total noninterest income
Employee expense
Occupancy and equipment
Data processing expense
Director compensation
Professional fees
Taxes, other than income
FDIC insurance premiums
(Loss) gain on sales of other real estate owned
Intangible amortization
Merger and acquisition expense
Amortization of investment in partnership
Other noninterest expense
Total noninterest expense
Income tax expense
Net income
Average assets
NET INTEREST INCOME
1,563
866
378
396
347
238
98
13
190
416
4,505
(7,911)
(1,558)
(1,589)
(192)
(430)
(368)
(318)
14
(51)
(1,806)
(479)
(1,511)
(16,199)
0.32
0.18
0.08
0.08
0.07
0.05
0.02
0.00
0.04
0.09
0.92
(1.62)
(0.32)
(0.32)
(0.04)
(0.09)
(0.08)
(0.06)
0.00
(0.01)
(0.37)
(0.10)
(0.31)
(3.31)
1,278
847
391
438
352
236
165
9
214
404
4,334
(7,320)
(1,463)
(1,545)
(205)
(396)
(340)
(310)
(22)
(45)
-
(479)
(1,445)
(13,570)
0.27
0.18
0.08
0.09
0.07
0.05
0.04
0.00
0.05
0.09
0.92
(1.56)
(0.31)
(0.33)
(0.04)
(0.08)
(0.07)
(0.07)
(0.00)
(0.01)
0.00
(0.10)
(0.31)
(2.88)
(83)
3,058
(0.02)
0.62%
489,323
(525)
4,216
(0.11)
0.90%
470,660
$
$
$
$
Net interest income is the amount by which interest income on earning assets exceeds interest expense on
interest bearing liabilities. Net interest income is the most significant component of revenue, comprising
approximately 77% of total revenues (the total of net interest income and non-interest income, exclusive of
security gains) for 2015. Interest spread measures the absolute difference between average rates earned and
average rates paid. Because some interest earning assets are tax-exempt, an adjustment is made for analytical
purposes to place all assets on a fully tax-equivalent basis. Net interest margin is the percentage of net return on
average earning assets on a fully tax-equivalent basis and provides a measure of comparability of a financial
institution’s performance.
Both net interest income and net interest margin are impacted by interest rate changes, changes in the
relationships between various rates and changes in the composition of the average balance sheet. Additionally,
product pricing, product mix and customer preferences dictate the composition of the balance sheet and the
resulting net interest income. Table 1 shows average asset and liability balances, average interest rates and
interest income and expense for the years 2015, 2014 and 2013. Table 2 further shows changes attributable to
the volume and rate components of net interest income.
10
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
TABLE 1
AVERAGE BALANCE ShEETS AND NET INTEREST INCOME ANALySIS
Year Ended December 31
2015
2014
2013
Average
Balance(1)
Interest
Yield/
Rate
Average
Balance(1)
Interest
Yield/
Rate
Average
Balance(1)
Interest
Yield/
Rate
(Dollars in thousands)
ASSETS
Interest earning assets:
Loans:
Taxable (5)
Tax-exempt
Total loans (8)
Investment securities:
Taxable
Tax-exempt
Total investment
securities
Interest bearing deposits
Federal funds sold
Total interest earning assets
Non-interest earning assets:
Cash and due from banks
Allowance for loan losses
Premises and equipment
Other assets (7)
Total assets
$ 280,920
25,208
306,128
$ 13,894
751
14,645
4.95%
2.98
4.78
$ 260,613
20,995
281,608
$ 13,840
625
14,465
5.31%
2.98
5.14
$ 258,116
18,621
276,737
$ 14,310
558
14,868
112,459
28,687
2,267
465
141,146
597
32
447,903
2,732
2
0
17,379
2.02
1.62
1.94
0.34
0.25
3.88
7,417
(2,349)
6,506
29,846
$ 489,323
111,649
34,203
145,852
1,368
455
429,283
7,618
(2,313)
6,314
29,758
$ 470,660
1,950
513
2,463
3
1
16,932
1.75
1.50
1.69
0.23
0.22
3.94
1,267
583
1,850
16
0
16,734
91,972
37,210
129,182
2,834
-
408,753
8,557
(2,679)
6,305
29,095
$ 450,031
5.54%
3.00
5.37
1.38
1.57
1.43
0.56
0.00
4.09
LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest bearing liabilities:
Demand deposits (2)
Savings deposits
Time deposits
Other, including short
and long-term
borrowings, and other
$ 98,618
74,268
130,843
161
76
1,440
0.16
0.10
1.10
$
97,920
65,275
147,745
163
65
2,128
0.17
0.10
1.44
$
94,338
59,926
161,677
160
69
2,642
0.17
0.12
1.63
interest bearing liabilities 44,941
365
0.81
27,589
242
0.88
8,848
29
0.33
Total interest bearing
liabilities
348,670
2,042
0.59
338,529
2,598
0.77
324,789
2,900
0.89
Non-interest bearing liabilities:
Demand deposits
Other
Stockholders’ equity
Total liabilities and
84,295
5,227
51,131
stockholders’ equity
$ 489,323
Net interest income
Net margin on
interest earning assets (3)
Net interest income and margin -
Tax equivalent basis (4)
77,399
4,028
50,704
$ 470,660
71,006
4,665
49,571
$ 450,031
$ 15,337
$ 14,334
$ 13,834
3.42%
3.34%
3.38%
$ 15,964
3.56%
$ 14,920
3.48%
$ 14,422
3.53%
Notes:
(1) Average balances were calculated using a daily average.
(2) Includes interest-bearing demand and money market accounts.
(3) Net margin on interest earning assets is net interest income divided by average interest earning assets.
(4) Interest on obligations of states and municipalities is not subject to federal income tax. In order to make the net yield
comparable on a fully taxable basis, a tax equivalent adjustment is applied against the tax-exempt income utilizing a
federal tax rate of 34%.
11
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
TABLE 2
RATE/VOLuME ANALySIS OF NET INTEREST INCOME
(dollars in thousands)
ASSETS
Interest earning assets:
Loans:
Taxable (5)
Tax-exempt
Total loans (8)
Investment securities:
Taxable
Tax-exempt
Total investment securities
Interest bearing deposits
2015 compared to 2014
Increase (Decrease) Due To (6)
2014 compared to 2013
Increase (Decrease) Due To (6)
Volume
Rate
Total
Volume
Rate
Total
$ 1,039
126
1,165
$ (985)
-
(985)
$
54
126
180
$ 137
71
208
$ (607)
(4)
(611)
$
(470)
67
(403)
14
(87)
(73)
(2)
(1)
1,089
303
39
342
1
-
(642)
317
(48)
269
(1)
(1)
447
303
(46)
257
(6)
1
460
380
(24)
356
(7)
-
(262)
683
(70)
613
(13)
1
198
Federal funds sold
Total interest earning assets
LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest bearing liabilities:
Demand deposits (2)
Savings deposits
Time deposits
Other, including short-term
borrowings, and other
1
9
(225)
(3)
2
(463)
(2)
11
(688)
6
6
(216)
(3)
(10)
(298)
3
(4)
(514)
interest bearing liabilities
Total interest bearing liabilities
Net interest income
142
(73)
$ 1,162
(19)
(483)
$ (159)
123
(556)
$ 1,003
119
(85)
545
$
94
(217)
(45)
$
213
(302)
500
$
(5) Non-accruing loans are included in the above table until they are charged off.
(6) The change in interest due to rate and volume has been allocated to volume and rate changes in proportion to the
relationship of the absolute dollar amounts of the change in each.
(7) Includes net unrealized gains (losses) on securities available for sale: $897 in 2015, $(38) in 2014 and $86 in 2013.
(8) Interest income includes loan fees of $93, $153 and $185, in 2015, 2014 and 2013, respectively.
12
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
On average, total loans outstanding in 2015 increased from 2014 by 8.7%, to $306,128,000. Average yields on
loans decreased by 36 basis points in 2015 when compared to 2014. As shown in the preceding Rate – Volume
Analysis of Net Interest Income Table 2, the decrease in yield reduced interest income on loans by approximately
$985,000, while the increase in volume increased interest income by $1,165,000, resulting in an aggregate
increase in interest recorded on loans of $180,000. While the prime rate had remained unchanged at 3.25% from
December of 2008 through mid-December 2015, most new and refinanced portfolio loans were priced at lower
rates than maturing loans during 2015, contributing to the decrease in overall yield. Because the acquisition of
FNBPA was consummated on November 30, 2015, the increase in average loans outstanding for 2015 was
affected only slightly by the loans acquired in the business combination, increasing average loan balances by
approximately $3,822,000. The remaining increase of $24,520,000 was attributable to increased loan demand
and participations with other banks.
During 2015, cash flows from maturities, sales and repayments of investment securities were primarily used to
fund a portion of the loan growth and to reinvest in the investment portfolio. Additionally, the acquired
investment portfolio from the merger, approximately $35.5 million, was immediately sold with proceeds used to
fund the cash needs of the merger and reinvest into securities with characteristics consistent with the Company’s
investment policy. The portfolio reinvestment was principally focused on government sponsored agency
mortgage backed securities with relatively short weighted average lives and similar risk characteristics to
government sponsored agency bonds and investments that can be used for pledging requirements. As a result,
while average balances of investment securities decreased by $4,706,000, and this volume decrease accounted
for a $73,000 decrease in interest income as compared to 2014, the improvement in the overall yield of the
investment portfolio between 2014 and 2015 further increased net interest income by $342,000.
In total, yield on earning assets in 2015 was 3.88% as compared to 3.94% in 2014, a decrease of 6 basis points.
On a fully tax equivalent basis, yield on earning assets decreased from 4.08% in 2014 to 4.02% in 2015.
Average interest bearing liabilities increased by $10,141,000 in 2015, as compared to 2014. Within the
categories of interest bearing liabilities, deposits decreased on average by $7,211,000, and borrowings increased
by $17,352,000 on average, in order to fund the increase in earning assets. Deposits assumed in the merger with
FNBPA increased interest-bearing liabilities on average by approximately $4,888,000 in 2015, and non-interest
bearing deposits by approximately $1,809,000. In total, average interest bearing transaction accounts and savings
accounts increased $9,691,000 while average time deposits decreased $16,902,000. This shift away from time
deposits continued a trend that has been occurring for several years. Management believes this trend reflects the
consumers’ response to historical low interest rates. In 2015, time deposits accounted for 43.1% of total interest-
bearing deposits. During 2014 and 2013, time deposits represented 47.5% and 51.2%, respectively, of all
interest-bearing deposits. Changes in total interest-bearing liabilities reduced interest expense by $73,000 in
2015 as compared to 2014, while decreases in interest rates further reduced interest expense by $483,000. Non-
interest bearing liabilities used to fund earning assets included demand deposits, which increased $6,896,000 on
average. The percentage of interest earning assets funded by non-interest bearing liabilities was approximately
22.2% in 2015 versus 21.1% in 2014. The total cost to fund earning assets (computed by dividing the total
interest expense by the total average earning assets) in 2015 was 0.46%, as compared to 0.60% in 2014.
Net interest income was $15,337,000 for 2015, an increase of $1,003,000 when compared to 2014. Increases in
volumes contributed $1,162,000 toward the improved net interest income, partially offset by a $159,000
reduction of net interest income due to rate changes.
13
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
pROVISION FOR LOAN LOSSES
Juniata’s provision for loan losses is determined as a result of an analysis of the adequacy level of the allowance
for loan losses. In order to closely reflect the potential losses within the current loan portfolio based upon current
information known, the Company carries no unallocated allowance. Using the process of analysis described in
“Application of Critical Accounting Policies” earlier in this discussion, the Company determined that a provision of
$502,000 was appropriate for 2015, an increase of $145,000 when compared to 2014 when the total loan loss
provision was $357,000. The higher provision in 2015 primarily resulted from the increase in loan volumes in
2015; in 2015, the provision exceeded net charge-offs by $98,000. The discussion included in the Loans and
Allowance for Loan Losses in the section below titled “Financial Condition” explains the information and analysis
used to arrive at the provision for 2015.
NON-INTEREST INCOME
The Company remains committed to providing comprehensive services and products to meet the current and
future financial needs of our customers. We believe that our responsiveness to customers’ needs surpasses that of
our competitors, and we measure our success by the customer acceptance of fee-based services. We continually
explore avenues to enhance product offerings in areas beneficial to customers. We offer a variety of options for
financing to home-buyers that includes a secondary market lending program, providing significant fee income.
We continue to add new features and services for our electronic banking clientele. In 2014, we made fraud
protection services available to all consumer depositors. We provide alternative investment opportunities
through an arrangement with a broker dealer, and integrate the delivery of non–traditional products with our
Trust and Wealth Management Division. This arrangement enables us to meet the investment needs of a varied
customer base and to better identify our clients’ needs for traditional trust services.
Fee-generated non-interest revenues consist of customer service fees derived from deposit accounts, trust
relationships and sales of non-deposit products. In 2015, revenues from these services totaled $2,306,000,
representing an increase of $238,000, or 10.5%, from 2014 revenues, primarily due to increases in fees earned
from customer deposit services. Total fees from customer deposits increased by $285,000, or 22.3%, due
primarily to fees earned from the new deposit product line introduced in 2014. Fees from estate settlements
increased by $32,000 in 2015 as compared to 2014, and non-estate fees decreased by $74,000, due to the final
settlement of several trust accounts in 2014. Variance in fees from estate settlements occurs because estate
settlements occur sporadically and are not necessarily consistent year to year. Non-estate fees are repeatable
revenues that generally increase and decrease in relation to movements in interest rates as market values of trust
assets under management increase or decrease and as new relationships are established. Commissions from
sales of non-deposit products decreased in 2015, in comparison to 2014, by $5,000.
0
2
Fees and income derived from the origination, sale and servicing of residential mortgage loans (mortgage
banking income) was $190,000 in 2015, a decrease of $24,000, or 11.2%, compared to 2014, as refinancing
activity declined. Other non-interest-related fees derived from loan activity decreased by $15,000 when
comparing 2015 to 2014. Gains of $98,000 and $165,000 were recorded in 2015 and 2014, respectively, as a
result of life insurance claims
14
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
The Company owns 39.16% of the stock of Liverpool Community Bank (“LCB”) and accounts for its ownership
through the equity method. As such, 39.16% of the income of LCB is recorded by Juniata as non-interest income.
As a result of this investment, $238,000 was recorded as income in 2015, compared to $236,000 in 2014.
Earnings on bank-owned life insurance and annuities decreased in 2015 by $13,000, or 3.3%, when compared to
the previous year, because investment in BOLI was lower and crediting rates were reduced.
As a percentage of average assets, non-interest income (excluding securities gains and losses) was 0.92% in
both 2015 and 2014.
NON-INTEREST ExpENSE
Management strives to control non-interest expense where possible in order to achieve maximum
operating results.
In 2015, total non-interest expense increased by $2,629,000, or 19.4%, when compared to 2014. The primary
driver in the change in non-interest expense was attributable to non-recurring merger and acquisition costs of
$1,806,000 recorded in 2015. Exclusive of these costs, non-interest expense increased by $823,000, or 13.4%.
Compensation expense for 2015 increased by $219,000 as compared to 2014, due to a number of offsetting
factors, including an increase in full-time equivalent employment (due to the addition of personnel from JVB
Northern Tier), lower commissions paid for sales of non-deposit products, and lower levels of accruals for
employee incentive bonus, pursuant to the Company’s Employee Annual Incentive Plan. Costs of employee
benefits was $372,000 higher in 2015 than in 2014. Payroll taxes increased, as a result of higher employee
compensation costs, and the cost of providing medical coverage within the Company’s self-funded plan were
higher by $275,000. Additionally, costs associated with maintaining the Company’s defined benefit plans
increased by $62,000 in 2015 versus 2014 and employer contributions to the defined contribution plan increased
by $27,000.
Data processing expense increased by $44,000 in 2015 as compared to 2014, as new electronic delivery
services were initiated for the benefit of consumer and business customers. Occupancy and equipment expense
increased in the aggregate by $95,000, or 6.5%, due to maintenance and repairs in facilities and equipment. Costs
associated with loan documentation and foreclosure activities (included in “other non-interest expense)
increased in 2015 as compared to 2014 by $74,000.
Amortization expense associated with the Bank’s investment in a low-income housing project, which first
became applicable during the second quarter of 2013, was more than offset by the recording of the benefit of the
tax credit from the project in both 2015 and 2014. Amortization was $479,000 in each of the years 2015 and
2014. Amortization is scheduled to continue through 2023 at similar amounts.
Small variances in director compensation, professional fees, net gains and losses on sales of assets,
amortization of intangibles and FDIC insurance essentially offset each other.
As a percentage of average assets, non-interest expense was 3.31% in 2015 as compared to 2.88% in 2014.
Exclusive of merger and acquisition expenses the ratio was 2.94% in 2015.
15
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
INCOME TAxES
Income tax expense for 2015 amounted to $83,000 versus $525,000 in 2014. Both periods included the effect
of a tax credit in the amounts of $570,000 and $575,000, respectively. The tax credit was available to the
Company as a result of an equity investment in a low income housing project. The effective tax rate in 2015 was
2.6% versus 11.1% in 2014. See Note 16 of Notes to Consolidated Financial Statements for further information
on income taxes.
NET INCOME
For comparative purposes, the following table sets forth earnings, in thousands of dollars, and selected
earnings ratios for the past three years.
As reported
Net Income
Return on average assets
Return on average equity
OuTLOOK FOR 2016
$
$
2015
3,058
0.62%
5.98%
2014
4,216 $
0.90%
8.31%
2013
4,001
0.89%
8.07%
Despite the 25 basis point increase in mid-December 2015, the national prime rate and the federal funds rate
have remained at a historically low levels since 2008. We expect, and are prepared for, the interest rate
environment to begin to change more significantly in 2016. And, because experience also tells us that rate
movement can occur quickly and significantly, we are managing our interest sensitive assets and liabilities with
an understanding of the rate risk involved with rapidly rising rates. We enter 2016 with non-performing loans at
the lowest level since 2010 and expect to see further reductions by year-end as problem credits are resolved. Our
net interest margin remains a primary component of profitability; however, we continue to focus on
opportunities for fee services, and look forward to providing services in the Northern Tier region that were not
included in FNBPA’s product line, such as trust and wealth management. We will maintain the conservative
lending and investing philosophies and responsible deposit pricing that have resulted in our healthy net interest
margin and solid balance sheet and apply those philosophies to our new market in the Northern Tier. We expect
that the increased legal lending limit will provide new opportunities for expanding our loan customer base
throughout the organization.
Also necessary to our success is the satisfaction level of our customers and employees. In recent years, we have
introduced many new avenues of service delivery through technology, and continue to evaluate new technology.
In 2015, we replaced our ATM network with new state-of-the art machines, designed with high-level
functionality. Also in 2015, we enhanced our consumer mobile banking apps with remote deposit, enabling quick
and easy deposit of checks, and will soon offer the same functionality to our small business owners. Consumer
mobile banking was further enhanced with Touch ID, giving our customers even faster, more responsive mobile
banking experience. We added to our online banking the ease and convenience of consumer loan applications.
Lastly, our new Customer Resource Center group was formed and is now our dedicated resource for all manner of
customer inquiries.
Increasing our customer base and connection with our customers is a priority. In 2015, we expanded our
marketing efforts through various campaigns. We believe that it is imperative that our customers have convenient
and easy access to personal financial services that complement their changing lifestyles, whether through
electronic or personal delivery. Convenience and mobility remain priorities for a large segment of the population
in deciding with whom one will do business, and thus we have made it our priority to provide such convenience.
16
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
In recent years, attempts to defraud consumers have continued to grow. For several years we have had
mechanisms in place to detect and thwart fraud attempts against our customers before monetary loss. We believe
our customers value the service. In 2014, we went beyond fraud detection on singular deposit accounts and now
provide the opportunity for full ID protection for families of our depositors. This service accompanies a complete
new line-up of accounts, designed to support the lifestyles and needs of our clientele. While over 80% of our
consumer account holders are taking advantage of this service, we plan to market more broadly its features and
benefits to further increase deposit market share, particularly in our new Northern Tier region.
Additionally, in 2015, our business development plan continued to expand and reward more horizontal
integration, extending the opportunities for cross selling across departmental lines. We strive to be the financial
services provider of choice to those within our market area.
Management is aware of the challenges facing us in the coming year. We are positioned to reward our
stockholders with a good return on their investment in our Company while maintaining strong capital and
liquidity levels. The confidence of our stockholders and the trust of our community are vital to our ongoing success.
17
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
2014
FinAnciAl peRFoRmAnce oveRview
Net income for Juniata in 2014 was $4,216,000, representing a 5.4% increase as compared to net income for
2013. Earnings per share on a fully diluted basis increased by 6.3%, from $0.95 in 2013 to $1.01 in 2014. The net
interest margin, on a fully tax-equivalent basis, decreased from 3.53% in 2013 to 3.48% in 2014. The ratio of
non-interest income (excluding gains on sales of securities) to average assets decreased by 2 basis points, while
the ratio of non-interest expense to average assets decreased by 4 basis points to 2.88%.
Summarized below are the components of net income (in thousands of dollars) and the contribution of each to
ROA for 2014 and 2013.
2014
2013
Net interest income
Provision for loan losses
Customer service fees
Debit card fee income
BOLI
Trust fees
Commissions from sales of non-deposit products
Income from unconsolidated subsidiary
Security gains (losses)
Mortgage banking income
Other noninterest income
Total noninterest income
Employee expense
Occupancy and equipment
Data processing expense
Director compensation
Professional fees
Taxes, other than income
FDIC insurance premiums
(Loss) gain on sales of other real estate owned
Intangible amortization
Amortization of investment in partnership
Other noninterest expense
Total noninterest expense
Income tax expense
Net income
Average assets
% of Average
Assets
% of Average
Assets
$
14,334
(357)
3.05%
(0.08)
$
13,834
(415)
3.07%
(0.09)
1,278
847
391
438
352
236
9
214
569
4,334
(7,320)
(1,463)
(1,545)
(205)
(396)
(340)
(310)
(22)
(45)
(479)
(1,445)
(13,570)
0.27
0.18
0.08
0.09
0.07
0.05
0.00
0.05
0.12
0.92
(1.56)
(0.31)
(0.33)
(0.04)
(0.08)
(0.07)
(0.07)
(0.00)
(0.01)
(0.10)
(0.31)
(2.88)
1,290
822
416
355
375
237
(2)
338
402
4,233
(7,028)
(1,433)
(1,450)
(223)
(388)
(483)
(331)
39
(45)
(448)
(1,356)
(13,146)
0.29
0.18
0.09
0.08
0.08
0.05
(0.00)
0.08
0.09
0.94
(1.56)
(0.32)
(0.32)
(0.05)
(0.09)
(0.11)
(0.07)
0.01
(0.01)
(0.10)
(0.30)
(2.92)
(525)
4,216
(0.11)
0.90%
$
(505)
4,001
(0.11)
0.89%
470,660
$
450,031
$
$
18
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
NET INTEREST INCOME
On average, total loans outstanding in 2014 increased from 2013 by 1.8%, to $281,608,000. Average yields on
loans decreased by 23 basis points in 2014 when compared to 2013. As shown in the preceding Rate – Volume
Analysis of Net Interest Income Table 2, the decrease in yield reduced interest income on loans by approximately
$611,000, while the increase in volume increased interest income by $208,000, resulting in an aggregate decrease
in interest recorded on loans of $403,000.
During 2014, the investment portfolio was restructured and increased. A portion of cash available from
maturities, sales and repayments of investment securities, along with long-term debt, was used to invest in
government sponsored agency mortgage backed securities with relatively short weighted average lives and
similar risk characteristics to the former portfolio. Average balances of investment securities increased by
$16,670,000, and this volume increase accounted for a $257,000 increase in interest income as compared to
2013. The improvement in the overall yield of the investment portfolio between 2013 and 2014 further increased
net interest income by $356,000.
In total, yield on earning assets in 2014 was 3.94% as compared to 4.09% in 2013, a decrease of 15 basis
points. On a fully tax equivalent basis, yield on earning assets decreased from 4.24% in 2013 to 4.08% in 2014.
Average interest bearing liabilities increased by $13,740,000 in 2014, as compared to 2013. Within the
categories of interest bearing liabilities, deposits decreased on average by $5,001,000, and borrowings increased
by $18,741,000 on average, in order to fund the increase in earning assets. During 2014, the most significant
change in interest bearing deposits was in time deposit balances, which decreased on average by $13,932,000,
while interest-bearing demand and savings accounts increased on average by $8,931,000. This shift continued a
trend that has been occurring for several years. Management believes this trend away from time deposits reflects
the consumers’ response to historically low interest rates. In 2014, time deposits accounted for 47.5% of total
interest-bearing deposits. In 2013 and 2012, time deposits represented 51.2% and 53.4%, respectively, of all
interest-bearing deposits. Changes in total interest-bearing liabilities reduced interest expense by $85,000 in
2014 as compared to 2013, while decreases in interest rates further reduced interest expense by $217,000. Non-
interest bearing liabilities used to fund earning assets included demand deposits, which increased $6,393,000 on
average. The percentage of interest earning assets funded by non-interest bearing liabilities was approximately
21.1% in 2014 versus 20.5% in 2013. The total cost to fund earning assets (computed by dividing the total
interest expense by the total average earning assets) in 2014 was 0.60%, as compared to 0.71% in 2013.
Net interest income was $14,334,000 for 2014, an increase of $500,000 when compared to 2013. Increases in
volumes contributed $545,000 toward the improved net interest income, partially offset by a $45,000 reduction
of net interest income due to rate changes.
pROVISION FOR LOAN LOSSES
Management performed an analysis following the process described in “Application of Critical Accounting
Policies” earlier in this discussion, and determined that a provision of $357,000 was appropriate for 2014, a
decrease of $58,000 when compared to 2013 when the total loan loss provision was $415,000. The lower
provision in 2014 primarily resulted from an analysis of the values of collateral securing certain impaired loans,
which improved during 2014 with the reduction of impaired loans; in 2014, the provision exceeded net charge-
offs by $93,000.
19
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
NON-INTEREST INCOME
In 2014, revenues from fee-generated services (customer service fees derived from deposit accounts, trust
relationships and sales of non-deposit products) totaled $2,068,000, representing an increase of $48,000,
or 2.4%, from 2013 revenues, primarily due to increases in fees earned from trust services. Total fees for trust
services increased by $83,000, or 23.4%, due primarily to fees earned from the final settlement of trust accounts.
Fees from estate settlements decreased by $7,000 in 2014 as compared to 2013, and non-estate fees increased
by $90,000. Commissions from sales of non-deposit products decreased in 2014, by $23,000, as a result of
fewer sales.
Fees and income derived from the origination, sale and servicing of residential mortgage loans (mortgage
banking income) was $214,000 in 2014, a decrease of $124,000, or 36.7%, compared to 2013, when more
refinancing activity occurred. Other non-interest-related fees derived from loan activity increased by $37,000
when comparing 2014 to 2013. A gain of $165,000 was recorded in 2014 as a result of a life insurance claim. No
such activity occurred in 2013.
From the investment in LCB, $236,000 was recorded as income in 2014, compared to $237,000 in 2013.
Earnings on bank-owned life insurance and annuities decreased in 2014 by $25,000, or 6.0%, when compared to
the previous year, because investment in BOLI was lower and crediting rates were reduced.
As a percentage of average assets, non-interest income (excluding securities gains and losses) was 0.92% in
2014 as compared to 0.94% in 2013.
NON-INTEREST ExpENSE
In 2014, total non-interest expense increased by $424,000, or 3.2%, when compared to 2013. The primary
driver in the change in non-interest expense was attributable to the cost of employee compensation.
Compensation expense for 2014 increased by $463,000 as compared to 2013, due to a number of factors,
including an increase in full-time equivalent employment, higher commissions paid for sales of non-deposit
products, and higher levels of accruals for employee incentive bonus, pursuant to the Company’s Employee
Annual Incentive Plan. Costs of employee benefits was $171,000 lower in 2014 than in 2013. An increase in
payroll taxes, resulting from higher employee compensation costs, was offset by lower medical coverage expenses
within the Company’s self-funded plan and lower cost of accounting for the frozen defined benefit plan. On
December 31, 2012, the Company froze its defined benefit plan to future service accruals while at the same time
significantly enhancing the defined contribution plan employer match for its employees.
Data processing expense increased by $95,000 in 2014 as compared to 2013, as new electronic delivery
services were initiated for the benefit of consumer and business customers. Expense for taxes, other than income
taxes, declined by $143,000 when comparing 2014 to 2013 as a result of a change in the computation of
Pennsylvania Bank Shares Tax.
Amortization expense associated with the Bank’s investment in a low-income housing project, which first
became applicable during the second quarter of 2013, was more than offset by the recording of the benefit of the
tax credit from the project in both 2014 and 2013. Amortization was $479,000 in 2014 and $448,000 in 2013.
Amortization is scheduled to continue through 2023 at similar amounts.
20
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
Small variances in occupancy, equipment, director compensation, professional fees and FDIC insurance
essentially offset each other, while sales of properties carried as other real estate owned generated net losses of
$22,000 in 2014, as compared to net gains of $39,000 for 2013.
As a percentage of average assets, non-interest expense was 2.88% in 2014 as compared to 2.92% in 2013.
INCOME TAxES
Income tax expense for 2014 amounted to $525,000 versus $505,000 in 2013. Both periods included the effect
of a tax credit in the amounts of $575,000 and $556,000, respectively. The tax credit was available to the
Company as a result of an equity investment in a low income housing project. The effective tax rate in 2014 was
11.1% versus 11.2% in 2013. See Note 16 of Notes to Consolidated Financial Statements for further information
on income taxes.
21
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
FinAnciAl condition
BALANCE ShEET SuMMARy
Juniata functions as a financial intermediary and, as such, its financial condition is best analyzed in terms of
changes in its uses and sources of funds, and is most meaningful when analyzed in terms of changes in daily
average balances. The table below sets forth average daily balances for the last three years and the dollar change
and percentage change for the past two years.
TABLE 3
ChANGES IN uSES AND SOuRCES OF FuNDS
(Dollars in thousands)
Funding Uses:
$
Taxable loans
Tax-exempt loans
Taxable securities
Tax-exempt securities
Interest bearing deposits
Federal funds sold
Total interest earning
assets
Investment in:
Unconsolidated subsidiary
Low income housing
BOLI and annuities
Goodwill and intangible
2015
Average
Balance
280,920
25,208
112,459
28,687
597
32
Increase (Decrease)
Amount
%
2014
Average
Balance
Increase (Decrease)
Amount
%
2013
Average
Balance
$ 20,307
4,213
810
(5,516)
(771)
(423)
7.8%
$
20.1
0.7
(16.1)
(56.4)
(93.0)
260,613
20,995
111,649
34,203
1,368
455
$ 2,497
2,374
19,677
(3,007)
(1,466)
455
1.0%
12.7
21.4
(8.1)
(51.7)
-
$ 258,116
18,621
91,972
37,210
2,834
-
447,903
18,620
4.3
429,283
20,530
5.0
408,753
4,443
3,625
14,960
207
(433)
203
4.9
(10.7)
1.4
4,236
4,058
14,757
176
69
141
4.3
1.7
1.0
4,060
3,989
14,616
assets
2,422
277
12.9
2,145
(176)
(7.6)
2,321
Other non-interest
earning assets
Unrealized gains (losses)
on securities
Less: Allowance for
loan losses
Funding Sources:
Total uses
Interest bearing
demand deposits
Savings deposits
Time deposits
under $100,000
Time deposits over
$100,000
Repurchase agreements
Short-term borrowings
Long-term debt
Other interest bearing
liabilities
Total interest bearing
liabilities
Demand deposits
Other liabilities
Stockholders’ equity
17,422
(1,110)
(6.0)
18,532
(353)
(1.9)
18,885
897
935
(2,460.5)
(38)
(124)
(144.2)
86
(2,349)
(36)
1.6
(2,313)
366
(13.7)
(2,679)
$
489,323
$
18,663
4.0%
$
470,660 $ 20,629
4.6%
$
450,031
$
98,618
74,268
$
698
8,993
0.7 %
$
13.8
97,920 $ 3,582
5,349
65,275
3.8%
8.9
$
94,338
59,926
105,804
(12,890)
(10.9)
118,694
(10,723)
(8.3)
129,417
25,039
4,716
16,309
22,500
(4,012)
451
11,306
5,548
(13.8)
10.6
226.0
32.7
29,051
4,265
5,003
16,952
(3,209)
(67)
1,804
16,952
(9.9)
(1.5)
56.4
-
32,260
4,332
3,199
-
1,416
47
3.4
1,369
52
3.9
1,317
348,670
84,295
5,227
51,131
10,141
6,896
1,199
427
3.0
8.9
29.8
0.8
338,529
77,399
4,028
50,704
13,740
6,393
(637)
1,133
4.2
9.0
(13.7)
2.3
324,789
71,006
4,665
49,571
Total sources
$
489,323
$
18,663
4.0%
$
470,660 $ 20,629
4.6 % $
450,031
22
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
Overall, total average assets increased by $18,663,000, or 4.0%, for the year 2015 compared to 2014, following
an increase of $20,629,000, or 4.6%, in 2014 over average assets in 2013. The ratio of average earning assets to
total average assets was consistent at 91% in each of the last three years, while the ratio of average interest-
bearing liabilities to total average assets decreased slightly from 72% in 2013 and 2014 to 71% in 2015.
Although Juniata’s investment in its unconsolidated subsidiary, investment in a low income elderly housing
project and its bank owned life insurance and annuities are not classified as interest-earning assets, income is
derived directly from those assets. These instruments have represented 4.7% and 4.9% of total average assets in
2015 and 2014, respectively. A more detailed discussion of the Company’s earning assets and interest bearing
liabilities will follow in the Sections titled “Loans”, “Investments”, “Deposits” and “Market/Interest Rate Risk”.
LOANS
Loans outstanding at the end of each year consisted of the following (in thousands):
December 31,
Commercial, financial and agricultural
Real estate - commercial
Real estate - construction
Real estate - mortgage
Obligations of states and political subdivisions
Personal
Total
$
2015
34,171
127,213
26,672
164,617
17,524
6,846
$ 377,043
$
2014
23,738
90,000
20,713
140,676
15,730
4,044
$294,901
$
2013
26,281
74,471
19,681
140,459
12,702
4,204
$277,798
$
2012
19,296
69,187
18,092
153,122
12,769
5,034
$277,500
2011
$ 19,417
60,774
17,508
176,548
8,780
6,654
$289,681
From year-end 2014 to year-end 2015, total loans outstanding increased by $82,142,000, following an increase
of $17,103,000 in 2014 when compared to year-end 2013. The following table summarizes how the ending
balances (in thousands) changed annually in each of the last three years.
Loans
Beginning balance
Net new loans (repayments)
Loans acquired through merger, net of fair value adjustments
Loans charged off
Loans transferred to other real estate owned and
other adjustments to carrying value
Net change
Ending balance
2015
$ 294,901
38,004
45,372
(415)
2014
$ 277,798
17,891
-
(275)
2013
$ 277,500
2,359
-
(1,431)
(819)
82,142
$ 377,043
(513)
17,103
$ 294,901
(630)
298
$ 277,798
The loan portfolio was comprised of approximately 45% consumer loans and 55% commercial loans (including
construction) on December 31, 2015 as compared to 49% consumer loans and 51% commercial loans on
December 31, 2014. Management believes that diversification in the loan portfolio is important and performs a
loan concentration analysis on a quarterly basis. The highest loan concentration by activity type was commercial
real estate loans secured by income-producing property, with debt service on this category of loans being reliant
upon the cash flow generated by the property. In the aggregate, loans in this category had outstanding balances of
$43,476,000 at December 31, 2015, or 80.1% of the Bank’s capital. Components of this concentration group with
balances considered for general reserve purposes are as follows:
Operators of Non-Residential Buildings
Operators of Apartment Buildings
Operators of Dwellings other than apts
Hotels and Motels
Total
23
Outstanding Balance % of Bank Capital
16.99%
18.18%
30.30%
14.62%
80.10%
9,223,009
9,869,586
16,445,365
7,937,825
43,475,785
$
$
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
Given the reserves allocated to this sector over the past several years and the continuing softness in the market,
management has assigned an additional concentration risk factor to this group of loans when analyzing the
adequacy of the Allowance for Loan Losses. See Note 7 of Notes to Consolidated Financial Statements.
During 2015 and 2014, exclusive of the loans acquired through the acquisition of FNBPA, there was growth in
the commercial, commercial real estate and construction lines of business, primarily as a result of participation
opportunities with other banks as well as new business development. This growth was offset somewhat by the
decrease in loans to states and political subdivisions and residential real estate loans, as the secondary market
continued to offer more appealing fixed rates and longer terms to borrowers. Growth was further offset by
payments and charge-downs of non-performing loans. Juniata is willing, able and continues to lend to qualifying
businesses and individuals and is optimistic about increasing opportunities for loans in the newly acquired JVB
Northern Tier region. Management also believes that the economic climate is improving and is resulting in loan
growth. Our business model closely aligns lenders and community office managers’ efforts to effectively develop
referrals and existing customer relationships. Continued emphasis is placed on responsiveness and personal
attention given to customers, which we believe differentiates the Bank from its competition. Nearly all
commercial loans are either variable or adjustable rate loans, while non-mortgage consumer loans generally have
fixed rates for the duration of the loan.
Juniata strives to offer fair, competitive rates and to provide optimal service in order to attract loan growth.
Emphasis will continue to be placed upon attracting the entire customer relationship of our borrowers.
The loan portfolio carries the potential risk of past due, non-performing or, ultimately, charged-off loans. The
Bank attempts to manage this risk through credit approval standards and aggressive monitoring and collection
efforts. Where prudent, the Bank secures commercial loans with collateral consisting of real and/or tangible
personal property. Management further believes that non-performing loans will continue to decline in 2016. The
Company maintains a dedicated credit administration division, in response to the need for heightened credit
review, both in the loan origination process and in the ongoing risk assessment process. With stringent credit
standards in place, Juniata’s lending strategy stresses quality growth, diversified by product. A standardized
credit policy is in place throughout the Company, and the credit committee of the Board of Directors reviews and
approves all loan requests for amounts that exceed management’s approval levels. The Company makes credit
judgments based on a customer’s existing debt obligations, collateral, ability to pay and general economic trends.
See Note 3 of Notes to Consolidated Financial Statements.
The allowance for loan losses has been established in order to absorb probable losses on existing loans. A
quarterly provision or credit is charged to earnings to maintain the allowance at adequate levels. Charge-offs and
recoveries are recorded as adjustments to the allowance. The allowance for loan losses at December 31, 2015
was 0.66% of total loans, net of unearned interest, as compared to 0.81% of total loans, net of unearned interest,
at the end of 2014. Loans that Juniata acquired through the combination with FNBPA on November 30, 2015 are
recorded at fair value with no carryover of the related allowance for loan losses, thus resulting in a lower
allowance as a percentage of total loans. The allowance increased $98,000 when compared to December 31,
2014, as a result of net charge-offs of $404,000 offset by the provision of $502,000. Net charge-offs for 2015 and
2014 were 0.13% and 0.09% of average loans, respectively.
24
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
At December 31, 2015, non-performing loans (as defined in Table 4 below), as a percentage of the allowance
for loan losses, were 148.9% as compared to 237.2% at December 31, 2014. Non-performing loans were 0.98%
of loans as of December 31, 2015, and 1.91% of loans as of December 31, 2014. Management believes that the
decreasing levels of nonperforming loans in 2014 and 2015 will continue into 2016. All $3,690,000 of non-
performing loans at December 31, 2015 are collateralized with real estate.
TABLE 4
NON-pERFORMING LOANS
Nonaccrual loans
Accruing loans past due 90 days or more,
exclusive of loans acquired with
credit deterioration
Restructured loans in default and non-accruing
Total non-performing loans
2015
2014
$
3,688
$
4,880
2013
(In thousands)
5,952
$
2012
2011
$
8,846
$
7,947
2
-
3,690
$
400
366
5,646
$
251
-
6,203
$
742
-
9,588
2,743
-
$ 10,690
$
Loans on which the accrual of interest has been discontinued are designated as non-accrual loans. Accrual of
interest on loans is generally discontinued when the contractual payment of principal or interest has become 90
days past due or reasonable doubt exists as to the full, timely collection of principal or interest. However, it is the
Company’s policy to continue to accrue interest on loans over 90 days past due as long as (1) they are guaranteed
or well secured and (2) there is an effective means of timely collection in process. When a loan is placed on non-
accrual status, all unpaid interest credited to income in the current year is reversed against current period
income, and unpaid interest accrued in prior years is charged against the allowance for loan losses. Interest
received on nonaccrual loans generally is either applied against principal or reported as interest income,
according to management’s judgment as to the collectability of principal. Generally, accruals are resumed on
loans only when the obligation is brought fully current with respect to interest and principal, has performed in
accordance with the contractual terms for a reasonable period of time and the ultimate collectability of the total
contractual principal and interest is no longer in doubt. The Company’s nonaccrual and charge-off policies are
the same, regardless of loan type. During 2015, gross interest income that would have been recorded if loans on
nonaccrual status had been current was $336,000, of which $74,000 was collected and included in net income.
ALLOWANCE FOR LOAN LOSSES
The amount of allowance for loan losses is determined through a critical quantitative and qualitative analysis
performed by management that includes significant assumptions and estimates. It is maintained at a level
deemed sufficient to absorb probable estimated losses within the loan portfolio, and supported by detailed
documentation. To assess potential credit weaknesses, it is critical to analyze observable trends that may
be occurring.
Management systematically monitors the loan portfolio and the adequacy of the allowance for loan losses on a
quarterly basis to provide for probable losses inherent in the portfolio. The Bank’s methodology for maintaining
the allowance is highly structured and contains two components: a component for loans that are deemed to be
impaired and a component for contingencies.
25
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
Component for impaired loans:
A loan is considered to be impaired when, based on current information and events, it is probable that the
Company will be unable to collect the scheduled payments of principal or interest when due according to the
contractual terms of the loan agreement. Factors considered by management in determining impairment include
payment status, collateral value and the probability of collecting scheduled principal and interest payments when
due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as
impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case
basis, taking into consideration all of the circumstances surrounding the loans and the borrower, including the
length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall
in relation to the principal and interest owed. Impairment is measured on a loan by loan basis by the present
value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market
price or the fair value of the collateral if the loan is collateral dependent.
The estimated fair values of substantially all of the Company’s impaired loans are measured based on the
estimated fair value of the loan’s collateral. For commercial loans secured with real estate, estimated fair values
are determined primarily through third-party appraisals. When a real estate secured loan becomes impaired, a
decision is made regarding whether an updated certified appraisal of the real estate is necessary. This decision is
based on various considerations, including the age of the most recent appraisal, the loan-to-value ratio based on
the current appraisal and the condition of the property. Appraised values may be discounted to arrive at the
estimated selling price of the collateral, which is considered to be the estimated fair value. The discounts also
include the estimated costs to sell the property. For commercial loans secured by non-real estate collateral,
estimated fair values are determined based on the borrower’s financial statements, inventory reports, aging
accounts receivable, equipment appraisals or invoices. Indications of value from these sources are generally
discounted based on the age of the financial information or the quality of the assets. For such loans that are
classified as impaired, an allowance is established when the discounted cash flows (or collateral value or
observable market price) of the impaired loan is lower than the carrying value of that loan. The Company
generally does not separately identify individual consumer segment loans for impairment analysis, unless such
loans are subject to a restructuring agreement.
Loans whose terms are modified are classified as troubled debt restructurings if the Company grants
borrowers concessions and it is deemed that those borrowers are experiencing financial difficulty. Concessions
granted under a troubled debt restructuring generally involve a below-market interest rate based on the loan’s
risk characteristics or an extension of a loan’s stated maturity date. Nonaccrual troubled debt restructurings are
restored to accrual status if principal and interest payments, under the modified terms, are current for a
sustained period of time after modification. Loans classified as troubled debt restructurings are designated
as impaired.
As of December 31, 2015, 40 loans, with aggregate outstanding balances of $4,962,000, were evaluated for
impairment. A collateral analysis was performed on each of these 40 loans in order to establish a portion of the
reserve needed to carry impaired loans at no higher than fair value. As a result of this analysis, no loans were
determined to have insufficient collateral, and no specific reserves were established. Also included as impaired
loans are loans in the amount of $1,464,000 that were acquired with credit impairment.
26
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015 Component for contingencies:
A contingency is an existing condition, or set of circumstances, involving uncertainty as to possible gain or
loss to the Company that will ultimately be resolved when one or more future events occur or fail to occur.
These conditions may be considered in relation to individual loans or in relation to groups of similar types of
loans. If the conditions are met, a provision is made even though the particular loans that are uncollectible may
not be identifiable.
The component of the allowance for contingencies relates to other loans that have been segmented into risk
rated categories as follows:
•
•
•
•
•
•
Commercial, financial and agricultural
Real estate – commercial
Real estate - construction
Real estate – mortgage
Obligations of states and political subdivisions
Personal
Contingency allowance evaluation consists of several key elements. The borrower’s overall financial condition,
repayment sources, guarantors and value of collateral, if appropriate, are evaluated quarterly or when credit
deficiencies arise, such as delinquent loan payments. Credit quality risk ratings include regulatory classifications
of special mention, substandard, doubtful and loss. Loans classified as special mention have potential weaknesses
that deserve management’s close attention. If uncorrected, the potential weaknesses may result in deterioration
of the repayment prospects. Loans classified as substandard have one or more well-defined weaknesses that
jeopardize the liquidation of the debt. Substandard loans include loans that are inadequately protected by the
current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified as
doubtful have all the weaknesses inherent in loans classified as substandard with the added characteristic that
collection or liquidation in full, on the basis of current conditions and facts, is highly improbable. Loans classified
as a loss are considered uncollectible and are charged to the allowance for loan losses. Loans not classified are
rated pass. Specific reserves may be established for larger, individual classified loans as a result of this evaluation,
as discussed above. Remaining loans are categorized into large groups of smaller balance homogeneous loans and
are collectively evaluated for impairment. This computation is generally based on historical loss experience
adjusted for qualitative factors. The historical loss experience is averaged over a ten-year period for each of the
portfolio segments. The ten-year timeframe was selected in order to capture activity over a wide range of
economic conditions and has been consistently used for the past seven years. The qualitative risk factors are
reviewed for relevancy each quarter and include:
•
•
•
•
•
•
National, regional and local economic and business conditions, as well as the condition of various market
segments, including the underlying collateral for collateral dependent loans;
Nature and volume of the portfolio and terms of loans;
Experience, ability and depth of lending and credit management and staff;
Volume and severity of past due, classified and nonaccrual loans, as well as other loan modifications;
Existence and effect of any concentrations of credit and changes in the level of such concentrations; and
Effect of external factors, including competition.
27
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015 Each factor is assigned a value to reflect improving, stable or declining conditions based on management’s best
judgment using relevant information available at the time of the evaluation. Adjustments to the factors are
supported through documentation of changes in conditions in a narrative accompanying the allowance for loan
loss calculation.
A summary of activity in the allowance for loan loss for the last five years (in thousands) is shown below.
The area most affected by charge-offs in each of the five years presented was real estate – mortgages, whose
balances accounted for approximately 44% of the total loan portfolio at December 31, 2015. In 2015, the
Company recorded net charge-offs of $404,000. Due to charge-offs and successful resolution of other troubled
debt, non-performing loans decreased by $1,956,000, or 34.6%, at December 31, 2015 compared to December
31, 2014. The increase in the required allowance needed to adequately reserve for loan losses was due to the
growth in loans, exclusive of loans acquired. Management’s analysis indicated that an adequate loan loss
allowance was $2,478,000 at December 31, 2015.
Balance of allowance - beginning of period
Loans charged off:
Commercial, financial and agricultural
Real estate - commercial
Real estate - construction
Real estate - mortgage
Personal
Total charge-offs
Recoveries of loans previously charged off:
Commercial, financial and agricultural
Real estate - commercial
Real estate - mortgage
Personal
Total recoveries
Years Ended December 31,
2015
$
2,380
$
2014
2,287
$
2013
3,281
2012
2,931
2011
2,824
$
$
11
66
24
305
9
415
7
-
1
3
11
20
92
18
125
20
275
4
5
-
2
11
4
-
117
1,281
29
1,431
13
-
-
9
22
25
-
193
852
1
1,071
8
-
-
2
10
18
37
-
205
22
282
2
-
10
13
25
Net charge-offs
Provision for loan losses
Balance of allowance - end of period
404
502
2,478
$
264
357
2,380
$
1,409
415
2,287
$
1,061
1,411
3,281
$
257
364
2,931
$
Ratio of net charge-offs during period to
average loans outstanding
0.13%
0.09%
0.51%
0.38%
0.09%
28
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
The following tables show how the allowance for loan losses is allocated among the various types of
outstanding loans and the percent of loans by type to total loans.
Commercial, financial and agricultural
Real estate - commercial
Real estate - construction
Real estate - mortgage
Obligations of states and political subdivisions
Personal
Allocation of the Allowance for Loan Losses (in thousands)
December 31,
2015
264
836
191
1,140
-
47
2,478
$
$
2014
222
665
155
1,300
-
38
2,380
$
$
$
$
2013
253
534
212
1,246
-
42
2,287
$
$
2012
179
463
202
2,387
-
50
3,281
$
$
2011
195
455
442
1,771
-
68
2,931
Commercial, financial and agricultural
Real estate - commercial
Real estate - construction
Real estate - mortgage
Obligations of states and political subdivisions
Personal
INVESTMENTS
2015
9.1%
33.7%
7.1%
43.7%
4.6%
1.8%
100.0%
Percent of Loan Type to Total Loans
2014
2013
2012
8.0%
30.5%
7.0%
47.8%
5.3%
1.4%
100.0%
9.5%
26.8%
7.1%
50.5%
4.6%
1.5%
100.0%
7.0%
24.9%
6.5%
55.2%
4.6%
1.8%
100.0%
2011
6.7%
21.0%
6.0%
61.0%
3.0%
2.3%
100.0%
Total investments, defined to include all interest earning assets except loans (i.e. investment securities available
for sale (at fair value), federal funds sold, interest bearing deposits, Federal Home Loan Bank stock and other
interest-earning assets), totaled $156,259,000 on December 31, 2015, representing an increase of $10,620,000
when compared to year-end 2014. The following table summarizes how the ending balances (in thousands)
changed annually in each of the last three years.
Beginning balance
Purchases of investment securities
Investments acquired through merger
Sales, calls and maturities of investment securities
Adjustment in market value of AFS securities
Amortization/Accretion
Federal Home Loan Bank stock, net change
Federal funds sold, net change
Interest bearing deposits with others, net change
Net change
2015
$ 145,639
68,094
35,458
(92,989)
(296)
(764)
704
-
413
10,620
2014
$ 128,305
66,451
-
(50,533)
1,573
(634)
759
-
(282)
17,334
2013
$ 125,047
45,446
-
(38,973)
(2,325)
(440)
241
-
(691)
3,258
Ending balance
$ 156,259
$ 145,639
$ 128,305
29
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
On average, investments decreased by $5,900,000, or 3.4%, during 2015, following an increase of $15,659,000,
or 11.9%, during 2014. The decrease in 2015 was experienced as cash flows from maturing bonds and mortgage
backed securities were used to fund loan growth. The increase in 2014 resulted from a restructuring of a portion
of the investment securities portfolio, funded partly by issuing long-term debt.
The investment area is managed according to internally established guidelines and quality standards. Juniata
segregates its investment securities portfolio into two classifications: those held to maturity and those available
for sale. Juniata classifies all new marketable investment securities as available for sale, and currently holds no
securities in the held to maturity or trading classifications. At December 31, 2015, the market value of the entire
securities portfolio was greater than amortized cost by $132,000 as compared to December 31, 2014, when
market value was greater than amortized cost by $435,000. The weighted average life of the investment portfolio
was 3.7 years on December 31, 2015 versus 2.8 years on December 31, 2014. The weighted average maturity has
remained short in order to achieve a desired level of liquidity. Table 5, “Maturity Distribution”, in this
Management’s Discussion and Analysis of Financial Condition shows the remaining maturity or earliest possible
repricing for investment securities. The following table sets forth the maturities of securities (in thousands) and
the weighted average yields of such securities by contractual maturities or call dates. Yields on obligations of
states and public subdivisions are presented on a tax-equivalent basis.
December 31, 2015
Weighted
Average
Yield
Fair
Value
December 31, 2014
Weighted
Average
Yield
Fair
Value
December 31, 2013
Fair
Value
Weighted
Average
Yield
Securities
Type and maturity
Obligations of U.S. Government
agencies and corporations
Within one year
After one year but within five years
After five years but within ten years
$
$
1,003
2.13%
24,264 1.34%
7,465 2.07%
32,732 1.53%
Obligations of state and political subdivisions
Within one year
After one year but within five years
After five years but within ten years
After ten years
Mortgage-backed securities
Within one year
After one year but within five years
After five years but within ten years
After ten years
5,771 1.97%
16,151 2.64%
7,282 3.42%
331 1.85%
29,535 2.66%
-
-
242 1.35%
5,059 2.27%
2.16%
82,440
87,741 2.16%
4,566
38,723
6,812
50,101
9,934
16,853
8,748
338
35,873
-
537
3,417
51,475
55,429
1.96%
1.28%
1.44%
1.37%
1.71%
2.14%
3.27%
1.83%
2.29%
-
2.08%
1.58%
2.13%
2.10%
$
4,192
47,578
26,508
78,278
8,314
26,098
7,182
338
41,932
878
1,003
2,588
-
0.77%
1.26%
1.50%
1.32%
2.36%
1.94%
3.11%
1.82%
2.23%
2.86%
2.63%
2.09%
4,469
2.36%
Equity securities
2,319
$ 152,327
1,500
$ 142,903
1,367
$ 126,046
30
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
BANK OWNED LIFE INSuRANCE AND ANNuITIES
The Company periodically insures the lives of certain bank officers in order to provide split-dollar life
insurance benefits to some key officers and to offset the cost of providing post-retirement benefits through non-
qualified plans. Some annuities are also owned to provide cash streams that match certain post-retirement
liabilities. See Note 9 of Notes to Consolidated Financial Statements. The following table summarizes how the
cash surrender values (in thousands) of these instruments changed annually in each of the last three years.
Beginning balance
BOLI increase in cash surrender value
BOLI receipt of death benefit
Annuities net (decrease) increase in cash surrender value
Net change
Ending balance
INVESTMENT IN uNCONSOLIDATED SuBSIDIARy
$
$
2015
14,807
362
(259)
(5)
98
2014
14,848
386
(450)
23
(41)
2013
$ 14,402
426
-
20
446
$
14,905
$
14,807
$ 14,848
The Company owns 39.16% of the outstanding common stock of Liverpool Community Bank (LCB), Liverpool,
Pennsylvania. This investment is accounted for under the equity method of accounting. The investment was
carried at $4,553,000 as of December 31, 2015. The Company increases its investment in LCB for its share of
earnings and decreases its investment by any dividends received from LCB. The investment is evaluated quarterly
for impairment. A loss in value of the investment which is determined to be other than a temporary decline
would be recognized as a loss in the period in which such determination is made. Evidence of a loss in value
might include, but would not necessarily be limited to, absence of an ability to recover the carrying amount of the
investment or inability of LCB to sustain an earnings capacity which would justify the current carrying value of
the investment. The carrying amount at December 31, 2015 represented an increase of $184,000 when
compared to December 31, 2014. In connection with this investment, two representatives of Juniata serve on the
Board of Directors of LCB.
GOODWILL AND INTANGIBLE ASSETS
Branch Acquisition
On September 8, 2006, the Company acquired a branch office in Richfield, PA. Goodwill at December 31, 2015
and 2014 was $2,046,000. Core deposit intangible was $29,000 net of amortization of $402,000 at December 31,
2015 and $74,000 net of amortization of $375,000 at December 31, 2014. The core deposit intangible is being
amortized over a ten-year period on a straight line basis. Goodwill is not amortized, but is measured annually for
impairment. Core deposit intangible amortization expense of $45,000 was recorded in each of the years 2015,
2014 and 2013. Intangible amortization expense projected for the remaining year in 2016 is estimated to
be $29,000.
FNBPA Acquisition
On November 30, 2015, the Company completed its acquisition of FNBPA and as a result, recorded goodwill of
$3,335,000. In addition, core deposit intangible in the amount of $303,000 was recorded and will be amortized
over a ten-year period using a sum of the year’s digits basis. Core deposit intangible amortization expense
recorded in 2015 was $4,000 and for the succeeding five years beginning 2016 is estimated to be $55,000,
$49,000, $44,000, $38,000 and $33,000 per year, respectively, and $80,000 in total for years after 2020. Other
intangible assets were identified and recorded as of November 30, 2015,in the amount of $40,000 and will be
31
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
amortized on a straight line basis over two years, through November 30, 2017. Expense recognized in 2015 was
$2,000, and is projected to be $20,000 and $18,000 for 2016 and 2017, respectively. Core deposit and other
intangible assets, net of amortization, was $337,000 as of December 31, 2015.
The Company originates and sells residential mortgage loans into the secondary market, but retains the
servicing on the loans. The mortgage servicing rights are valued based on the present value of estimated future
cash flows on pools of mortgages stratified by rate and maturity date. The computed value is carried as an
intangible asset. As of December 31, 2015, the fair value of mortgage servicing rights was $205,000, compared to
$193,000 on December 31, 2014.
DEFERRED TAxES
The Company accounts for income taxes under the asset/liability method. Deferred tax assets and liabilities are
recognized for the future consequences attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax bases, as well as operating loss and tax credit
carry-forwards, if applicable. A valuation allowance is established against deferred tax assets when, in the
judgment of management, it is more likely than not that such deferred tax assets will not become realizable.
Management has determined that there was no need for a valuation allowance for deferred taxes as of December
31, 2015 and 2014. As of December 31, 2015 and 2014, the Company recorded a net deferred tax asset of
$1,054,000 and $672,000, respectively, which was carried as a non-interest earning asset. Significant components
of the increase of $382,000 included:
1. Additions to deferred tax assets of $733,000 as a result of the business combination;
2. A carryforward of $80,000 for a tax credit for low income housing investment;
3. A decrease of $67,000 in the deferred tax asset relating to defined benefit liabilities;
4. A decrease of $189,000 in the deferred tax asset relating to loan origination costs and prepaid expense; and
5. A $122,000 decrease in the deferred tax asset relating to the allowance for loan losses.
The remainder of the difference was due to the various other changes in gross temporary tax differences. See
Note 16 of Notes to Consolidated Financial Statements.
OThER NON-INTEREST EARNING ASSETS
The following table summarizes the components of the non-interest earning asset category, and how the
ending balances (in thousands) changed annually in each of the last three years.
Beginning balance
Cash and due from banks
Premises and equipment, net
Other real estate owned
Investment in low income housing
Other receivables and prepaid expenses, including deferred tax assets
Net change
Ending balance
$
2015
20,879
3,628
376
385
(479)
1,097
5,007
$
2014
23,614
(1,813)
203
(49)
(143)
(933)
(2,735)
2013
$ 28,893
(5,691)
(142)
(147)
194
507
(5,279)
$
25,886
$
20,879
$ 23,614
32
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
DEpOSITS
At December 31, 2015, total deposits were $457,126,000, an increase of $76,242,000 from total deposits on
December 31, 2014. Deposits assumed from the FNBPA acquisition accounted for an increase of $77,392,000.
Otherwise, deposits decreased by $1,150,000 at December 31, 2015 as compared to December 31, 2014. From
year-end 2013 to year-end 2014, total deposits increased by $1,239,000. The following table summarizes how
the ending balances (in thousands) changed annually in each of the last three years.
Beginning balance
Demand deposits
Interest bearing demand deposits
Savings deposits
Time deposits, $100,000 and greater
Time deposits, other
Net change
2015 Exclusive
of Acquisition
FNBPA
Acquisition
8,709
(3,114)
8,344
(2,146)
(12,943)
(1,150)
20,261
21,845
19,149
5,277
10,860
77,392
2015
2014
$ 380,884
28,970
18,731
27,493
3,131
(2,083)
76,242
$ 379,645
3,086
5,808
6,669
(3,290)
(11,034)
1,239
2013
$ 386,751
3,293
(482)
4,379
(2,012)
(12,284)
(7,106)
Ending balance
$ 457,126
$ 380,884
$ 379,645
The following table shows (in thousands of dollars) the comparison of average core deposits and average time
deposits as a percentage of total deposits for each of the last three years.
2015
Average
Balance
Increase (Decrease)
Amount
%
Increase (Decrease)
Amount
%
2013
Average
Balance
Changes in Deposits
(Dollars in thousands)
2014
Average
Balance
Core transaction deposits:
Money market
$
Interest bearing demand
Savings
Demand
Total
Time deposits:
$100,000 and greater
Other
Total
33,688
64,930
74,268
84,295
257,181
$
(3,686)
4,384
8,993
6,896
16,587
(9.9)% $
7.2
13.8
8.9
6.9
37,374 $ (1,546)
5,128
60,546
5,349
65,275
6,393
77,399
15,324
240,594
(4.0)% $
9.3
8.9
9.0
6.8
38,920
55,418
59,926
71,006
225,270
25,039
105,804
130,843
(4,012)
(12,890)
(16,902)
(13.8)
(10.9)
(11.4)
29,051
118,694
147,745
(3,209)
(10,723)
(13,932)
(9.9)
(8.3)
(8.6)
32,260
129,417
161,677
Total deposits
$
388,024
$
(315)
(0.1)% $
388,339 $
1,392
0.4%
$ 386,947
Average deposits decreased $315,000, or 0.1%, to $388,024,000 in 2015 following an increase in 2014 of
$1,392,000, or 0.4%, to $388,339,000. Core transaction accounts increased by 6.9% and 6.8%, respectively, in
2015 and 2014. We believe that, over the past two years, because of the market uncertainties that accompany
uncertain economic periods, investors continued to move balances of available funds into safe, FDIC-insured
banking institutions and particularly into liquid transaction accounts. In both 2015 and 2014 however, funds
invested in time deposits declined. Due to the sustained low-interest rate environment, we believe many
investors are seeking higher yields than are available in time deposit products. We continue to provide
alternatives to such investors through the sale of our wealth management (non-deposit) products and are seeing
investors seeking dividend yields in the stock market as well.
33
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
The consumer continues to have a need for transaction accounts, and the Bank is continuing to focus on that
need in order to build deposit relationships. Our products are geared toward low-cost convenience and ease for
the customer. The Company’s strategy is to aggressively seek to grow customer relationships by staying in touch
with customers’ changing needs and new methods of connectivity, in an effort to increase deposit (and loan)
market share. The Bank offers identity protection services as an option for all consumer demand depositors. We
believe this product to be a valuable and essential tool necessary to combat the upsurge in fraud and identity
theft. This product is a unique benefit to our customers as there are no other banks in our immediate market that
offer a similar service.
The Bank competes in the marketplace with many sources that offer products that directly compete with
traditional banking products. In keeping with our desire to provide our customers with a full array of financial
services, we supplement the services traditionally offered by our Trust Department by staffing our community
offices with wealth management consultants that are licensed and trained to sell variable and fixed rate annuities,
mutual funds, stock brokerage services and long-term care insurance. Although the sale of these products can
reduce the Bank’s deposit levels, these products offer solutions for our customers that traditional bank products
cannot and allow us to more completely service our customer base. Fee income from the sale of non-deposit
products (primarily annuities and mutual funds) was $347,000 and $352,000 in 2015 and 2014, respectively,
representing approximately 7.7% and 8.1%, respectively, of total non-interest income.
OThER INTEREST BEARING LIABILITIES
Juniata funds its needs primarily with local deposits and when necessary, relies on external funding sources for
additional funding requirements. These funding sources include credit facilities at correspondent banks and the
Federal Home Loan Bank of Pittsburgh. Juniata’s average balances for all borrowings increased in 2015 by
$17,352,000, following an increase of $18,741,000 in 2014 as compared to 2013. The increase in 2015 was
related to the Company’s use of short-term borrowings to fund loan growth. The increase in 2014 was primarily
due to the issuance of long-term debt to provide funding for the loan growth and the restructuring of the
investment portfolio.
Changes in Borrowings
(Dollars in thousands)
Repurchase agreements
Short-term borrowings
Long-term debt
Other interest bearing
liabilities
pENSION pLAN
$
$
2015
Average
Balance
Increase (Decrease)
Amount
4,716
16,309
22,500
$
451
11,306
5,548
2014
Average
Balance
Increase (Decrease)
Amount
%
(1.5)% $
56.4
-
$
4,265 $
5,003
16,952
(67)
1,804
16,952
%
10.6%
226.0
32.7
1,416
44,941
47
17,352
$
3.4
62.9 %
$
1,369
52
27,589 $ 18,741
3.9
211.8%
$
2013
Average
Balance
4,332
3,199
-
1,317
8,848
The Company sponsors two noncontributory pension plans, the JVB Plan and the FNB Plan. The FNB Plan was
assumed by the Company as part of the merger with FNBPA and is expected to be merged into the JVB Plan in
2016. Both plans have unfunded liabilities, which together total $2,308,000 as of December 31, 2015. Through
the JVB Plan, the Company provides pension benefits to substantially all of its employees that were employed as
of December 31, 2007. Benefits are provided based upon an employee’s years of service and compensation
through December 31, 2012. Effective December 31, 2012, the JVB Plan was amended to cease future service
accruals after that date (frozen). The FNB Plan provides pension benefits to substantially all former FNBPA
employees that were employed prior to September 30, 2008 and was partially frozen at the time of the FNBPA
merger. Effective December 31, 2015, the FNBPA Plan was amended to cease future service accruals to previously
34
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
unfrozen participants and is now fully frozen ASC Topic 715 gives guidance on the allowable pension expense
that is recognized in any given year. In determining the appropriate amount of pension expense to recognize,
management must make subjective assumptions relating to amounts and rates that are inherently uncertain.
Please refer to Note 21 of Notes to Consolidated Financial Statements.
STOCKhOLDERS’ EquITy
Total stockholders’ equity increased by $10,106,000 in 2015. Common stock issued to FNBPA stockholders in
conjunction with the FNBPA acquisition increased stockholders’ equity by $10,637,000. Offsetting that increase
were dividend payments in excess of net income of $629,000. The Company is well-capitalized and had the
capacity to maintain the traditional dividend level in 2015 when net income was significantly affected by non-
recurring merger and acquisition costs. The remaining change in stockholders’ equity resulted from a number of
factors. The other comprehensive income associated with the company’s defined benefit plan, net of tax, caused
an increase of $194,000. In 2015, changes in assumptions applied to the actuarial calculation of the projected
benefit obligation resulted in the increase. It is the Company’s practice to use the most recently updated mortality
tables in the assumptions, which, when applied to the Company’s participant characteristics, resulted in an
increase. Additionally, the discount rate assumption used to determine the benefit obligations increased by 25
basis points as of December 31, 2015 compared to December 31, 2014. Substantially offsetting this change was a
decrease in fair values of investment securities at year-end 2015 as compared to year-end 2014, reducing equity
by $200,000. The following table summarizes how the components of equity (in thousands) changed annually in
each of the last three years.
Beginning balance
Net income
Dividends
Common stock issued to FNBPA stockholders
Stock-based compensation
Repurchase of stock, net of re-issuance
Net change in unrealized security gains
Defined benefit retirement plan adjustments, net of tax
Net change
$
2015
49,856
3,058
(3,687)
10,637
57
47
(200)
194
10,106
$
2014
49,984
4,216
(3,690)
-
47
(163)
1,047
(1,585)
(128)
2013
$ 50,297
4,001
(3,707)
-
30
(397)
(1,551)
1,311
(313)
Ending balance
$
59,962
$
49,856
$ 49,984
On average, stockholders’ equity in 2015 was $51,131,000, an increase of 0.8% from $50,704,000 in 2014. The
average in 2013 was $49,571,000. At December 31, 2015, Juniata held no shares of stock in treasury as compared
to 558,385 shares in 2014 at a cost of $10,746,000. The decrease was primarily a result of using treasury shares
for issuance to FNBPA shareholders in exchange for FNBPA shares in the merger. (See Note 17 of Notes to
Consolidated Financial Statements). Return on average equity decreased to 5.98% in 2015 from 8.31% in 2014.
Return on average equity was decreased in 2015 due to significant non-recurring merger and acquisition
expenses recorded. See the discussion in 2015 Financial Overview section.
The Company periodically repurchases shares of its common stock under the share repurchase program
approved by the Board of Directors. In September of 2008, the Board of Directors authorized the repurchase of
an additional 200,000 shares of its common stock through its share repurchase program. The program will
remain authorized until all approved shares are repurchased, unless terminated by the Board of Directors.
Repurchases have typically been accomplished through open market transactions and have complied with all
regulatory restrictions on the timing and amount of such repurchases. Shares repurchased have been added to
treasury stock and accounted for at cost. These shares may be reissued for stock option exercises, employee stock
35
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
purchase plan purchases, to fulfill dividend reinvestment program needs and to supply shares needed for
exchange in an acquisition. During 2015, 2014 and 2013, 3,504, 12,322 and 24,918 shares, respectively, were
repurchased in conjunction with this program. Remaining shares authorized in the program were 27,649 as of
December 31, 2015. On November 30, 2015, 555,555 treasury shares were reissued to former FNBPA
shareholders in conjunction with the acquisition of FNBPA.
In each of the years 2015, 2014 and 2013, Juniata declared dividends of $0.88 per common share. (See Note 17
of Notes to Consolidated Financial Statements regarding restrictions on dividends from the Bank to the
Company.) The dividend payout ratio was 120.6% and 87.5% in 2015 and 2014, respectively. The dividend
payout ratio in 2015 was unusually high due to the impact on net income of non-recurring merger expenses. In
January 2016, the Board of Directors declared a dividend of $0.22 per share to stockholders of record on
February 16, 2016, payable on March 1, 2016.
Juniata’s book value per share at December 31, 2015 was $12.50, as compared to $11.91 at each of December
31, 2014 and 2013. Juniata’s average equity to assets ratio for 2015, 2014 and 2013 was 10.45%, 10.77% and
11.02%, respectively. Refer also to the Capital Risk section in the Asset / Liability management discussion
that follows.
ASSET / LIABILITy MANAGEMENT OBJECTIVES
Management believes that optimal performance is achieved by maintaining overall risks at a low level.
Therefore, the objective of asset/liability management is to control risk and produce consistent, high quality
earnings independent of changing interest rates. The Company has identified five major risk areas
discussed below:
•
•
•
•
•
LIquIDITy RISK
Liquidity Risk
Capital Risk
Market / Interest Rate Risk
Investment Portfolio Risk
Economic Risk
Through liquidity risk management, we seek to maintain our ability to readily meet commitments to fund
loans, purchase assets and other securities and repay deposits and other liabilities. Liquidity management also
includes the ability to manage unplanned changes in funding sources and recognize and address changes in
market conditions that affect the quality of liquid assets. Juniata has developed a methodology for assessing its
liquidity risk through an analysis of its primary and total liquidity sources. Juniata relies on three main types of
liquidity sources: (1) asset liquidity, (2) liability liquidity and (3) off-balance sheet liquidity.
Asset liquidity refers to assets that we are quickly able to convert into cash, consisting of cash, federal funds
sold and securities. Short-term liquid assets generally consist of federal funds sold and securities maturing over
the next twelve months. The quality of our short-term liquidity is very good: as federal funds are unimpaired by
market risk and as bonds approach maturity, their value moves closer to par value. Liquid assets tend to reduce
earnings when there is not an immediate use for such funds, since normally these assets generate income at a
lower rate than loans or other longer-term investments.
Liability liquidity refers to funding obtained through deposits. The largest challenge associated with liability
liquidity is cost. Juniata’s ability to attract deposits depends primarily on several factors, including sales effort,
competitive interest rates and other conditions that help maintain consumer confidence in the stability of the
financial institution. Large certificates of deposit, public funds and brokered deposits are all acceptable means of
36
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
generating and providing funding. If the cost is favorable or fits the overall cost structure of the Bank, then these
sources have many benefits. They are readily available, come in large block size, have investor-defined maturities
and are generally low maintenance.
Off-balance sheet liquidity is closely tied to liability liquidity. Sources of off-balance sheet liquidity include
Federal Home Loan Bank borrowings, repurchase agreements and federal funds lines with correspondent banks.
These sources provide immediate liquidity to the Bank. They are available to be deployed when a need arises.
These instruments also come in large block sizes, have investor-defined maturities and generally require
low maintenance.
“Available liquidity” encompasses all three sources of liquidity when determining liquidity adequacy. It results
from the Bank’s access to short-term funding sources for immediate needs and long-term funding sources when
the need is determined to be permanent. Management uses both on-balance sheet liquidity and off-balance sheet
liquidity to manage its liquidity position. The Company’s liquidity strategy is to maintain an adequate volume of
high quality liquid instruments to facilitate customer liquidity demands. Management also maintains sufficient
capital, which provides access to the liability and off-balance sheet sides of the balance sheet for funding. An
active knowledge of debt funding sources is important to liquidity adequacy.
Contingency funding management involves maintaining contingent sources of immediate liquidity. Management
believes that it must consider an array of available sources in terms of volume, maturity, cash flows and pricing.
To meet demands in the normal course of business or for contingency, secondary sources of funding such as
public funds deposits, collateralized loans, sales of investment securities or sales of loan receivables are
considered.
It is the Company’s policy to maintain both a primary liquidity ratio and a total liquidity ratio of at least 10% of
total assets. The primary liquidity ratio equals liquid assets divided by total assets, where liquid assets equal the
sum of cash and due from banks, federal funds sold, interest-bearing deposits with other banks and available for
sale securities. Total liquidity is comprised of all components noted in primary liquidity plus securities classified
as held-to-maturity, if any. If either of these liquidity ratios falls below 10%, it is the Company’s policy to increase
liquidity in a timely manner to achieve the required ratio.
It is the Company’s policy to maintain available liquidity at a minimum of 10% of total assets and contingency
liquidity at a minimum of 7.5% of total assets.
Juniata is a member of the Federal Home Loan Bank (FHLB) of Pittsburgh, which provides short-term liquidity
and a source for long-term borrowings. The Bank uses this vehicle to satisfy temporary funding needs throughout
the year. The Company had short-term borrowings of $30,061,000 on December 31, 2015 and $15,950,000 on
December 31, 2014.
The Bank’s maximum borrowing capacity with the Federal Home Loan Bank of Pittsburgh (“FHLB”) was
$132,644,000 at December 31, 2015. In order to borrow additional amounts, the FHLB would require the Bank to
purchase additional FHLB Stock. The FHLB is a source of both short-term and long-term funding. The Bank must
maintain sufficient qualifying collateral to secure all outstanding advances.
Juniata needs to have liquid resources available to fulfill contractual obligations that require future cash
payments. The table below summarizes the Company’s significant contractual obligations to third parties (in
thousands of dollars), by type, that were fixed and determined at December 31, 2015. Further discussion of the
nature of each obligation is included in the referenced note to the consolidated financial statements.
37
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
CONTRACTuAL OBLIGATIONS
Certificates of deposits
Short-term borrowings and
security repurchase agreements
Long-term debt
Operating lease obligations
Other long-term liabilities
3rd party data processor contract
Supplemental retirement and
deferred compensation
Note
Reference
13
Total
$ 141,130
Less than
One Year
58,561
$
Payments Due by Period
Three to
One to
Five
Three
Years
Years
$
34,739
$
36,808
More than
Five
Years
$ 11,022
14
14
15
24
21
35,057
22,500
555
35,057
7,500
138
-
11,250
216
-
3,750
138
1,320
528
792
-
-
-
63
-
2,911
$ 203,473
263
$ 102,047
$
476
47,473
380
$ 41,076
1,792
$ 12,877
The schedule of contractual obligations (above) excludes expected defined benefit retirement payments that
will be paid from the plan assets, as referenced in Note 21 of Notes to Consolidated Financial Statements.
CApITAL RISK
The Company maintains sufficient core capital to protect depositors and stockholders and to take advantage of
business opportunities while ensuring that it has resources to absorb the risks inherent in the business. Federal
banking regulators have established capital adequacy requirements for banks and bank holding companies based
on risk factors, which require more capital backing for assets with higher potential credit risk than assets with
lower credit risk.
In December 2010, the Basel Committee released its final framework for strengthening international capital
and liquidity regulation, officially identified by the Basel Committee as “Basel III”. In July 2013, the FRB approved
final rules to implement the Basel III capital framework which revises the risk-based capital requirements
applicable to bank holding companies and depository institutions. The new minimum regulatory capital
requirements established by the U.S. Basel III Capital Rules became effective for the Company on January 1, 2015,
and will be fully phased in on January 1, 2019.
When fully phased in, Basel III requires financial institutions to maintain: (a) Common Equity Tier 1 (CET1) to
risk-weighted assets ratio of at least 4.5%, plus a 2.5% “capital conservation buffer” (which is added to the 4.5%
CET1 ratio as that buffer is phased in, effectively resulting in a minimum ratio of CET1 to risk-weighted assets of
at least 7.0%); (b) a minimum ratio of tier 1 capital to risk-weighted assets of at least 6.0%, plus the capital
conservation buffer (which is added to the 6.0% tier 1 capital ratio as that buffer is phased in, effectively
resulting in a minimum tier 1 capital ratio of 8.5% upon full implementation); (c) a minimum ratio of total (that
is, tier 1 plus tier 2) capital to risk-weighted assets of at least 8.0%, plus the capital conservation buffer (which is
added to the 8.0% total capital ratio as that buffer is phased in, effectively resulting in a minimum total capital
ratio of 10.5% upon full implementation); and (d) as a newly adopted international standard, a minimum
leverage ratio of 3.0%, calculated as the ratio of tier 1 capital balance sheet exposures plus certain off-balance
sheet exposures (computed as the average for each quarter of the month-end ratios for the quarter).
As a result of the new capital conservation buffer rules, once in effect, if the Company’s bank subsidiary (The
Juniata Valley Bank) fails to maintain the required minimum capital conservation buffer, the Company may be
38
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
unable to obtain capital distributions from it, which could negatively impact the Company’s ability to pay
dividends, service debt obligations or repurchase common stock. In addition, such a failure could result in a
restriction on the Company’s ability to pay certain cash bonuses to executive officers, negatively impacting the
Company’s ability to retain key personnel.
As of December 31, 2015, the Company believes its current capital levels would meet the fully phased-in
minimum capital requirements, including capital conservation buffer, as prescribed in the U.S. Basel III Capital
Rules. See Note 17 of Notes to the Consolidated Financial Statements.
MARKET / INTEREST RATE RISK
Market risk is the exposure to economic loss that arises from changes in the values of certain financial
instruments. The types of market risk exposures generally faced by financial institutions include equity market
price risk, interest rate risk, foreign currency risk and commodity price risk. Due to the nature of its operations,
only equity market price risk and interest rate risk are significant to the Company.
Equity market price risk is the risk that changes in the values of equity investments could have a material
impact on the financial position or results of operations of the Company. The Company’s equity investments
consist of common stocks of publicly traded financial institutions.
Declines and volatility in the values of financial institution stocks have significantly reduced the likelihood of
realizing significant gains in the near-term. Although the Company has realized occasional gains from this
portfolio in the past, the primary objective of the portfolio is to achieve value appreciation in the long term while
earning consistent, attractive after-tax yields from dividends. The carrying value of the financial institution
stocks accounted for 0.4% of the Company’s total assets as of December 31, 2015. Management performs an
impairment analysis on the entire investment portfolio, including the financial institution stocks on a quarterly
basis. No “other-than-temporary” impairment was identified or recorded on stocks in 2015, 2014 or 2013;
however, there is no assurance that declines in market values of the common stock portfolio in the future will not
result in subsequent “other-than-temporary” impairment charges, depending upon facts and circumstances
present.
The equity investments in the Corporation’s portfolio had a cost basis of $1,692,000 and a fair value of
$2,319,000 at December 31, 2015, resulting in net unrealized gains in this portfolio of $627,000 at December 31,
2015.
In addition to its equity portfolio, the Company’s investment management and trust services revenue could be
impacted by fluctuations in the securities markets. A portion of the Company’s trust revenue is based on the
value of the underlying investment portfolios. If securities values decline, the Company’s trust revenue could be
negatively impacted.
Interest rate risk creates exposure in two primary areas. First, changes in rates have an impact on the
Company’s liquidity position and could affect its ability to meet obligations and continue to grow. Second,
movements in interest rates can create fluctuations in the Company’s net interest income and changes in the
economic value of equity.
The primary objective of the Company’s asset-liability management process is to maximize current and future
net interest income within acceptable levels of interest rate risk while satisfying liquidity and capital
39
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
requirements. Management recognizes that a certain amount of interest rate risk is inherent, appropriate and
necessary to ensure profitability. A full simulation approach is used to assess earnings and capital at risk from
movements in interest rates. First, all rate-sensitive assets and rate-sensitive liabilities are segregated into their
respective repricing intervals to determine expected cash flows. Next, a multiplier (BETA) is assigned to rate
sensitive instruments to apply management’s repricing behavior. Management reprices differently in rising and
declining rates, so different Betas are used to better simulate, especially in regard to deposit pricing. Next,
interest income or expense is modeled by determining the impact based on amount of contribution remaining
over the following 12 months in the simulation. The model considers three major components of income
simulation consisting of (1) determining repricing cash flows, (2) modeling management’s repricing behavior,
and (3) accounting for the instruments positions within the 12 month simulation period. The net interest income
effect is determined on a static basis (as if no other factors were present). As the table below indicates, based
upon rate shock simulations on a static basis, the Company’s balance sheet is relatively rate-neutral as rates
decline. The modeled effects for increases and decreases to net interest income over a twelve-month period as a
result of this modeling approach are shown in the table below. Juniata’s rate risk policies provide for maximum
limits on net interest income that can be at risk for 100 through 400 basis point changes in interest rates, and
Juniata is in compliance with those policy limits.
Effect of Interest Rate Risk on Net Interest Income
(Dollars in thousands)
Change in Interest Rates (Basis Points)
400
300
200
100
0
(100)
(200)
(300)
(400)
$
Total Change in Net Interest Income
(5,793)
(4,345)
(825)
(387)
-
703
329
(160)
(1,033)
The net interest income at risk position remained within the guidelines established by the Company’s asset/
liability policy in each of the above scenarios.
Table 5, presented below, illustrates the maturity distribution of the Company’s interest-sensitive assets and
liabilities as of December 31, 2015. Earliest re-pricing opportunities for variable and adjustable rate products and
scheduled maturities for fixed rate products have been placed in the appropriate column to compute the
cumulative sensitivity ratio (ratio of interest-earning assets to interest-bearing liabilities). Securities with call
features are treated as though the call date is the maturity date. Through one year, the cumulative sensitivity ratio
is 0.54, indicating a liability-sensitive balance sheet, when measured on a static basis.
40
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
TABLE 5
MATuRITy DISTRIBuTION
Interest Earning Assets
Interest bearing deposits
Investment securities:
Debt securities - taxable
Debt securities - tax-exempt
Mortgage-backed securities
Stocks
Loans:
Commercial, financial, and agricultural
Real estate - construction
Other loans
Total Interest Earning Assets
Interest Bearing Liabilities
Demand deposits
Savings deposits
Certificates of deposit over $100,000
Time deposits
Securities sold under agreements to repurchase
Short-term borrowings
Long-term debt
Other interest bearing liabilities
Total Interest Bearing Liabilities
Gap
Cumulative Gap
Cumulative sensitivity ratio
Commercial, financial and agricultural
loans maturing after one year with:
Fixed interest rates
Variable interest rates
Total
AS OF DECEMBER 31, 2015
(Dollars in thousands)
Remaining Maturity / Earliest Possible Repricing
Within
One
Year
Over One
Year But
Within Five
Years
Over
Five
Years
Total
$
173
$
250
$
-
$
423
25,370
9,101
12,406
-
16,855
11,320
88,057
9,629
16,198
37,788
-
-
1,969
37,547
2,319
34,999
27,268
87,741
2,319
9,451
7,633
125,232
7,865
7,719
102,911
34,171
26,672
316,200
163,282
206,181
160,330
529,793
114,406
94,923
12,497
46,064
4,996
30,061
-
1,471
304,418
$ (141,136)
$ (141,136)
0.54
-
-
12,756
58,791
-
-
22,500
-
94,047
$ 112,134
(29,002)
$
0.93
-
-
5,583
5,439
-
-
-
-
11,022
$ 149,308
$ 120,306
114,406
94,923
30,836
110,294
4,996
30,061
22,500
1,471
409,487
$ 120,306
1.29
$
$
8,626
10,325
18,951
$
$
7,648
817
8,465
$ 16,274
11,142
$ 27,416
41
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
INVESTMENT pORTFOLIO RISK
Management considers its investment portfolio risk as the amount of appreciation or depreciation the
investment portfolio will sustain when interest rates change. The securities portfolio will decline in value when
interest rates rise and increase in value when interest rates decline. Securities with long maturities, excessive
optionality (as a result of call features) and unusual indexes tend to produce the most market risk during interest
rate movements. Rate shocks of minus 100 and plus 100, 200, 300 and 400 basis points were applied to the
securities portfolio to determine how Tier 1 capital would be affected if the securities portfolio had to be
liquidated and all gains and losses were recognized. The test revealed that, as of December 31, 2015, the risk-
based capital ratio would remain adequate under these scenarios.
ECONOMIC RISK
Economic risk is the risk that the long-term or underlying value of the Company will change if interest rates
change. Economic value of equity (EVE) represents the change in the value of the balance sheet without regard to
business continuity. Generally, banks are exposed to rising interest rates on an economic value of equity basis
because of the inherent mismatch between longer duration assets compared to shorter duration liabilities. Rate
shocks are applied to all financial assets and liabilities, using parallel and non-parallel rate shifts of 100 to 400
basis points to estimate the change in EVE under the various scenarios. As of December 31, 2015, a non-parallel
200 basis point increase shock in rates produced an estimated 9.8% decline in EVE, indicating a stable value well
within Juniata’s policy guidelines.
OFF-BALANCE ShEET ARRANGEMENTS
The Company has numerous off-balance sheet loan obligations that exist in order to meet the financing needs
of its customers. These financial instruments include commitments to extend credit, unused lines of credit and
letters of credit. Because many commitments are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash requirements. These instruments involve, to
varying degrees, elements of credit and interest rate risk that are not recognized in the consolidated financial
statements. The Company does not expect that these commitments will have an adverse effect on its
liquidity position.
Exposure to credit loss in the event of non-performance by the other party to the financial instrument for
commitments to extend credit and financial guarantees written is represented by the contractual notional
amount of those instruments. The Company uses the same credit policies in making these commitments as it
does for on-balance sheet instruments.
The Company had outstanding loan origination commitments aggregating $42,619,000 and $38,776,000 at
December 31, 2015 and 2014, respectively. In addition, the Company had $4,661,000 and $6,245,000 outstanding
in unused lines of credit commitments extended to its customers at December 31, 2015 and 2014, respectively.
Letters of credit are instruments issued by the Company that guarantee payment by the Bank to the beneficiary
in the event of default by the Company’s customer in the non-performance of an obligation or service. Most
letters of credit are extended for a one-year period. The credit risk involved in issuing letters of credit is
essentially the same as that involved in extending loan facilities to customers. The Company holds collateral
supporting those commitments for which collateral is deemed necessary. The amount of the liability as of
December 31, 2015 and 2014 for guarantees under letters of credit issued is not material.
42
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015 The maximum undiscounted exposure related to these guarantees at December 31, 2015 was $2,586,000, and
the approximate value of underlying collateral upon liquidation that would be expected to cover this maximum
potential exposure was $5,818,000.
In 2009, the Company executed an agreement to obtain technology outsourcing services through an outside
service bureau, and those services began in June 2010. The agreement provides for termination fees if the
Company cancels the services prior to the end of the 8-year commitment period. The termination fee would be an
amount equal to one hundred percent of the estimated remaining value of the terminated services if terminated
in the first contract year, ninety percent of the estimated remaining value of the terminated services if terminated
in the second contract year, eighty percent and seventy percent of the remaining value of the terminated services
if terminated in the third and fourth contract years, respectively, and sixty percent of the remaining value of the
terminated services if terminated in contract years five through eight. Termination fees are estimated to be
approximately $729,000 at December 31, 2015. Since the Company does not expect to terminate these services
prior to the end of the commitment period, no liability has been recorded at December 31, 2015.
The Company has no investment in or financial relationship with any unconsolidated entities that are
reasonably likely to have a material effect on liquidity or the availability of capital resources.
EFFECTS OF INFLATION
The performance of a bank is affected more by changes in interest rates than by inflation; therefore, the effect
of inflation is normally not as significant to the Company as it is to other businesses and industries. During
periods of high inflation, the money supply usually increases and banks normally experience above average
growth in assets, loans and deposits. A bank’s operating expenses may increase during inflationary times as the
price of goods and services increase.
A bank’s performance is also affected during recessionary periods. In times of recession, a bank usually
experiences a tightening on its earning assets and on its profits. A recession is usually an indicator of higher
unemployment rates, which could mean an increase in the number of nonperforming loans because of continued
layoffs and other deterioration of consumers’ financial condition.
43
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
REpORT ON MANAGEMENT’S ASSESSMENT OF INTERNAL
CONTROL OVER FINANCIAL REpORTING
Management is responsible for the preparation, integrity and fair presentation of the consolidated financial
statements included in this Annual Report on Form 10-K. The consolidated financial statements and notes
included in this annual report have been prepared in conformity with accounting principles generally accepted in
the United States of America, and as such, include some amounts that are based on management’s best estimates
and judgments.
The Company’s management is responsible for establishing and maintaining effective internal control over
financial reporting. The system of internal control over financial reporting, as it relates to the financial
statements, is evaluated for effectiveness by management and tested for reliability through a program of internal
audits and management testing and review. Actions are taken to correct potential deficiencies as they are
identified. Any system of internal control, no matter how well designed, has inherent limitations, including the
possibility that a control can be circumvented or overridden and misstatements due to error or fraud may occur
and not be detected. Also, because of changes in conditions, internal control effectiveness may vary over time.
Accordingly, even an effective system of internal control will provide only a reasonable assurance with respect to
financial statement preparation.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of
December 31, 2015. In making this assessment, it used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in
Internal Control-Integrated Framework (2013)
.
General guidance from the SEC staff provides that if a registrant consummates a business combination during
its fiscal year and it is not possible to conduct an assessment of the acquired business’s internal control over
financial reporting in the period between the consummation date and the date of management’s assessment,
management may exclude the acquired business from management’s report on internal control over financial
reporting. As previously described in this annual report, Juniata and FNBPA consummated their merger on
November 30, 2015. In accordance with the SEC staff guidance, our management excluded the former FNBPA,
now known as JVB Northern Tier, which represents the acquired business, from management’s report on internal
control over financial reporting as of December 31, 2015. JVB Northern Tier constituted approximately 15.5 % of
total assets of Juniata as of December 31, 2015 and 1.1 % and 2.0 % of Juniata’s total revenues and net income,
respectively, for the year then ended.
Based on our assessment, management concluded that as of December 31, 2015, the Company’s internal
Framework (2013).
control over financial reporting is effective and meets the criteria of the
Internal Control-Integrated
The independent registered public accounting firm that audited the consolidated financial statements included
in the annual report has issued an attestation report on the Company’s internal control over financial reporting.
Marcie A. Barber,
President and Chief Executive Officer
JoAnn N. McMinn,
Chief Financial Officer
44
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
REpORT OF INDEpENDENT REGISTERED puBLIC ACCOuNTING FIRM ON
EFFECTIVENESS OF INTERNAL CONTROL OVER FINANCIAL REpORTING
REpORT OF INDEpENDENT REGISTERED puBLIC ACCOuNTING FIRM
Board of Directors and Stockholders
Juniata Valley Financial Corp.
Mifflintown, Pennsylvania
We have audited Juniata Valley Financial Corp. and its wholly-owned subsidiary’s, The Juniata Valley Bank, (the “Company”)
internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control – Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s
management is responsible for maintaining effective internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting, included in the accompanying “Item 9A, Report on Management’s
Assessment of Internal Control over Financial Reporting.” Our responsibility is to express an opinion on the Company’s internal
control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control
over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the
assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could
have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
On November 30, 2015, FNBPA Bancorp, Inc. merged with and into Juniata Valley Financial Corp., with Juniata Valley Financial
Corp. being the surviving entity. In connection with the merger, First National Bank of Port Allegany, a wholly owned subsidiary of
FNBPA Bancorp, Inc. merged with and into The Juniata Valley Bank, a wholly owned subsidiary of Juniata Valley Financial Corp. with
The Juniata Valley Bank being the surviving entity. The former FNBPA Bancorp, Inc., now known as JVB Northern Tier, constituted
approximately 15.5 % of total assets of Juniata Valley Financial Corp. as of December 31, 2015 and 1.1 % and 2.0 % of its total
revenues and net income, respectively, for the year then ended. As indicated in the accompanying Item 9A, Management’s Report on
Internal Control over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over
financial reporting did not include the internal controls of JVB Northern Tier due to the timing of the merger. Our audit of internal
control over financial reporting of Juniata Valley Financial Corp. also did not include an evaluation of the internal control over
financial reporting of JVB Northern Tier.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December
31, 2015, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the
consolidated statements of financial condition as of December 31, 2015 and 2014 and the related consolidated statements of income,
comprehensive income, stockholders’ equity, and cash flows of Juniata Valley Financial Corp. and its wholly-owned subsidiary, The
Juniata Valley Bank for each of the three years in the period ended December 31, 2015, and our report dated March 15, 2016
expressed an unqualified opinion thereon.
/s/ BDO USA, LLP
Harrisburg, Pennsylvania
March 15, 2016
45
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
REpORT OF INDEpENDENT REGISTERED puBLIC ACCOuNTING FIRM ON
CONSOLIDATED FINANCIAL STATEMENTS
REpORT OF INDEpENDENT REGISTERED puBLIC ACCOuNTING FIRM
Board of Directors and Stockholders
Juniata Valley Financial Corp.
Mifflintown, Pennsylvania
We have audited the accompanying consolidated statements of financial condition of Juniata Valley Financial
Corp., and its wholly-owned subsidiary, The Juniata Valley Bank, (the “Company”) as of December 31, 2015 and
2014 and the related consolidated statements of income, comprehensive income, stockholders’ equity and cash
flows for each of the three years in the period ended December 31, 2015. These consolidated financial statements
are the responsibility of the Company’s management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the consolidated financial statements are free of material misstatement. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial
statements, assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall consolidated financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects,
the financial position of Juniata Valley Financial Corp. and its wholly-owned subsidiary, The Juniata Valley Bank
at December 31, 2015 and 2014, and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 2015, in conformity with accounting principles generally accepted in the
United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the Company’s internal control over financial reporting as of December 31, 2015, based on
criteria established in the Internal Control – Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 15, 2016, expressed
an unqualified opinion.
/s/ BDO USA, LLP
Harrisburg, Pennsylvania
March 15, 2016
46
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
JuNIATA VALLEy FINANCIAL CORp. AND SuBSIDIARy
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
ASSETS
Cash and due from banks
Interest bearing deposits with banks
Cash and cash equivalents
Interest bearing time deposits with banks
Securities available for sale
Restricted investment in Federal Home Loan Bank (FHLB) stock
Investment in unconsolidated subsidiary
Residential mortgage loans held for sale
Student loans held for sale
Total loans
Less: Allowance for loan losses
Total loans, net of allowance for loan losses
Premises and equipment, net
Other real estate owned
Bank owned life insurance and annuities
Investment in low income housing partnership
Core deposit and other intangible
Goodwill
Mortgage servicing rights
Accrued interest receivable and other assets
Total assets
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Deposits:
Non-interest bearing
Interest bearing
Total deposits
Securities sold under agreements to repurchase
Short-term borrowings
Long-term debt
Other interest bearing liabilities
Total liabilities
Accrued interest payable and other liabilities
Stockholders’ Equity:
Preferred stock, no par value:
Authorized - 500,000 shares, none issued
Common stock, par value $1.00 per share:
Authorized - 20,000,000 shares
Issued -
4,798,086 shares at December 31, 2015;
4,745,826 shares at December 31, 2014
Outstanding -
4,798,086 shares at December 31, 2015;
4,187,441 shares at December 31, 2014
Surplus
Retained earnings
Accumulated other comprehensive loss
Cost of common stock in Treasury:
Total stockholders’ equity
558,385 shares at December 31, 2014
Total liabilities and stockholders’ equity
See Notes to Consolidated Financial Statements
-
-
47
December 31,
2015
2014
(In Thousands, Except Share
and Per Share Data
$
$
10,385
73
10,458
6,757
10
6,767
350
152,327
3,509
4,553
125
1,683
377,043
(2,478)
374,565
6,909
617
14,905
3,368
366
5,381
205
4,607
583,928
-
142,903
2,726
4,369
-
-
294,901
(2,380)
292,521
6,533
232
14,807
3,847
74
2,046
193
3,511
$ 480,529
106,667
350,459
457,126
$
77,697
303,187
380,884
4,996
30,061
22,500
1,471
7,812
523,966
4,594
15,950
22,500
1,412
5,333
430,673
$
$
4,798
18,352
39,015
(2,203)
4,746
18,409
39,644
(2,197)
-
59,962
$ 583,928
(10,746)
49,856
$ 480,529
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
JuNIATA VALLEy FINANCIAL CORp. AND SuBSIDIARy
CONSOLIDATED STATEMENTS OF INCOME
Interest income:
Loans, including fees
Taxable securities
Tax-exempt securities
Other interest income
Interest expense:
Total interest income
Deposits
Securities sold under agreements to repurchase
Short-term borrowings
Long-term debt
Other interest bearing liabilities
Net interest income
Total interest expense
Net interest income after provision for loan losses
Provision for loan losses
Non-interest income:
Customer service fees
Debit card fee income
Earnings on bank owned life insurance and annuities
Trust fees
Commissions from sales of non-deposit products
Income from unconsolidated subsidiary
Fees derived from loan activity
Mortgage banking income
Gain (loss) on sales and calls of securities
Gain from life insurance proceeds
Total non-interest incom
Other non-interest income
Non-interest expense:
e
Employee compensation expense
Employee benefits
Occupancy
Equipment
Data processing expense
Director compensation
Professional fees
Taxes, other than income
FDIC Insurance premiums
(Gain) loss on sales of other real estate owned
Amortization of intangibles
Amortization of investment in low-income housing partnership
Merger and acquisition expense
Other non-interest expense
Income before income taxes
Total non-interest expense
Net income
Provision for income taxes
Earnings per share
Basic
Diluted
Cash dividends declared per share
Weighted average basic shares outstanding
Weighted average diluted shares outstanding
See Notes to Consolidated Financial Statements
48
Years Ended December 31,
2014
2013
2015
(In Thousands, Except per Share Data)
14,645
2,267
465
2
17,379
1,677
5
63
275
22
2,042
15,337
502
14,835
1,563
866
378
396
347
238
187
190
13
98
229
4,505
6,095
1,816
1,039
519
1,589
192
430
368
318
(14)
51
479
1,806
1,511
16,199
3,141
83
3,058
$
$
14,465
1,950
513
4
16,932
2,356
4
15
207
16
2,598
14,334
357
13,977
1,278
847
391
438
352
236
202
214
9
165
202
4,334
5,876
1,444
993
470
1,545
205
396
340
310
22
45
479
-
1,445
13,570
4,741
525
4,216
$
$
14,868
1,267
583
16
16,734
2,871
4
8
-
17
2,900
13,834
415
13,419
1,290
822
416
355
375
237
165
338
(2)
-
237
4,233
5,413
1,615
971
462
1,450
223
388
483
331
(39)
45
448
-
1,356
13,146
4,506
505
4,001
$
$
0.72
$
0.72
$
$
0.88
4,240,319
4,241,265
1.01
$
1.01
$
$
0.88
4,192,761
4,193,129
0.95
$
0.95
$
$
0.88
4,210,336
4,211,078
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
JuNIATA VALLEy FINANCIAL CORp. AND SuBSIDIARy
CONSOLIDATED STATEMENTS OF COMpREhENSIVE INCOME
( in thousands)
Net income
Other comprehensive income (loss):
Available for sale securities :
Unrealized holding loss arising during the period
Unrealized holding gains from unconsolidated subsidiary
Less reclassification adjustment for
gains included in net income (1) (3)
Unrecognized pension net loss (2) (3)
Unrecognized pension gain due to change in assumptions (2) (3)
Amortization of pension net actuarial loss (2) (3)
Other comprehensive loss
Total comprehensive income
Net income
Other comprehensive income (loss):
Available for sale securities :
Unrealized holding gains arising during the period
Unrealized holding gains from unconsolidated subsidiary
Less reclassification adjustment for
gains included in net income (1) (3)
Unrecognized pension net loss (2) (3)
Unrecognized pension loss due to change in assumptions (2) (3)
Amortization of pension net actuarial loss (2) (3)
Other comprehensive loss
Total comprehensive income
Net income
Other comprehensive income (loss):
Available for sale securities :
Unrealized holding losses arising during the period
Unrealized holding losses from unconsolidated subsidiary
Less reclassification adjustment for
losses included in net income (1) (3)
Unrecognized pension net gain (2) (3)
Unrecognized pension gain due to change in assumptions (2) (3)
Amortization of pension prior service income (2) (3)
Amortization of pension net actuarial loss (2) (3)
Other comprehensive loss
Total comprehensive income
Year ended December 31, 2015
Before
Tax
Effect
Tax
Amount
$
3,141
$
(83) $
Net-of-Tax
Amount
3,058
(291)
1
(13)
(571)
623
242
(9)
3,132
$
99
-
4
194
(212)
(82)
3
(80) $
(192)
1
(9)
(377)
411
160
(6)
3,052
$
Year ended December 31, 2014
Before
Tax
Effect
Tax
Amount
$
4,741
$
(525) $
Net-of-Tax
Amount
4,216
1,582
10
(9)
(144)
(2,297)
40
(818)
3,923
$
(539)
-
1,043
10
3
49
781
(14)
280
(245) $
(6)
(95)
(1,516)
26
(538)
3,678
$
Year ended December 31, 2013
Before
Tax
Effect
Tax
Amount
$
4,506
$
(505) $
Net-of-Tax
Amount
4,001
(2,325)
(18)
2
821
962
(1)
203
(356)
4,150
$
791
-
(1,534)
(18)
(1)
(279)
(327)
-
(68)
116
(389) $
1
542
635
(1)
135
(240)
3,761
$
(1) Amounts are included in (loss) gain on calls of securities on the Consolidated Statements of Income as a separate element within total
non-interest income.
(2) Amounts are included in the computation of net periodic benefit cost and are included in employee benefits expense on the
Consolidated Statements of Income as a separate element within total non-interest expense.
(3)
See Notes to Consolidated Financial Statements
Income tax amounts are included in the provision for income taxes on the Consolidated Statements of Income.
49
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
JuNIATA VALLEy FINANCIAL CORp. AND SuBSIDIARy
CONSOLIDATED STATEMENTS OF STOCKhOLDERS’ EquITy
Balance at January 1, 2013
Net income
Other comprehensive loss
Cash dividends at $0.88 per share
Stock-based compensation activity
Purchase of treasury stock
Treasury stock issued for stock
Balance at December 31, 2013
purchase plan
Net income
Other comprehensive loss
Cash dividends at $0.88 per share
Stock-based compensation activity
Purchase of treasury stock
Treasury stock issued for stock
Balance at December 31, 2014
purchase plan
Net income
Other comprehensive loss
Cash dividends at $0.88 per share
Stock-based compensation activity
Purchase of treasury stock
Treasury stock issued for stock
purchase and stock option plans
Common stock issued to
Balance at December 31, 2015
FNBPA stockholders
Years Ended December 31, 2015, 2014 and 2013
Number
of Shares
Outstanding
Common
Stock
Accumulated
Other
Stock
Surplus
Retained Comprehensive Treasury
Loss
Earnings
Stock
Total
Stockholders'
Equity
(Dollars in Thousands, Except Per Share Data)
4,218,361 $
4,746
$
18,346
(24,918)
2,823
4,196,266
(12,322)
30
4,746
(6)
18,370
47
3,497
4,187,441
(8)
4,746
18,409
(3,504)
6,334
57
(12)
$ 38,824
4,001
(3,707)
$
(1,419)
$ (10,200)
$
(240)
(445)
54
(10,591)
39,118
4,216
(3,690)
(1,659)
(538)
(222)
67
(2,197)
59
(10,746)
(6)
39,644
3,058
(3,687)
(63)
122
50,297
4,001
(240)
(3,707)
30
(445)
48
49,984
4,216
(538)
(3,690)
47
(222)
49,856
3,058
(6)
(3,687)
57
(63)
110
607,815
4,798,086 $
52
4,798
(102)
18,352
$
$ 39,015
$
(2,203)
$
10,687
-
10,637
59,962
$
See Notes to Consolidated Financial Statements
50
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
JuNIATA VALLEy FINANCIAL CORp. AND SuBSIDIARy
CONSOLIDATED STATEMENTS OF CASh FLOWS
Years Ended December 31,
2014
2013
2015
Operating Activities
Net income
:
(In Thousands)
$
3,058
$
4,216
$
4,001
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses
Depreciation
Net amortization of securities premiums
Net amortization of loan origination costs
Deferred net loan origination (costs) fees
Amortization of core deposit intangible
Amortization of investment in low income housing partnership
Net amortization of purchase fair value adjustments
Net realized (gain) loss on sales and calls of securities
Net (gain) loss on sales of other real estate owned
Earnings on bank owned life insurance and annuities
Deferred income tax (benefit) expense
Equity in earnings of unconsolidated subsidiary, net of dividends of $55, $48 and $47
Stock-based compensation expense
Mortgage loans originated for sale
Proceeds from loans sold to others
Gains on sales of loans
Gain from life insurance proceeds
Decrease (increase) in accrued interest receivable and other assets
Increase (decrease) in accrued interest payable and other liabilities
Net cash provided by operating activities
502
506
764
68
(139)
51
479
(3)
(13)
(14)
(378)
(66)
(183)
57
(3,385)
3,438
(190)
(98)
292
497
5,243
Investing activities:
Purchases of:
Securities available for sale
FHLB stock
Premises and equipment
Bank owned life insurance and annuities
Proceeds from:
Sales of securities available for sale
Maturities of and principal repayments on securities available for sale
Bank owned life insurance and annuities
Life insurance claim
Sale of other real estate owned
Sale of other assets
Net cash received from acquisition of FNBPA
Investment in low income housing partnership
Net decrease in interest bearing time deposits with banks
Net increase in loans
Financing activities:
Net cash used in investing activities
(67,047)
(704)
(463)
(54)
53,213
39,776
34
357
644
-
1,244
-
-
(38,004)
(11,004)
357
494
634
13
142
45
479
-
(9)
22
(391)
194
(188)
47
(3,759)
3,949
(214)
(165)
(41)
83
5,908
(66,451)
(759)
(697)
(60)
14,631
35,911
5
615
396
-
-
(336)
249
(17,891)
(34,387)
415
497
440
25
15
45
448
-
2
(39)
(416)
662
(190)
30
(8,173)
8,442
(338)
-
930
(997)
5,799
(45,446)
(241)
(355)
(68)
-
38,973
8
-
780
18
-
(642)
598
(2,359)
(8,734)
Net increase (decrease) in deposits
Net increase in short-term borrowings and securities sold
under agreements to repurchase
Issuance of long-term debt
Cash dividends
Purchase of treasury stock
Treasury stock issued for employee stock plans
Net cash provided by (used in) financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
(1,421)
1,239
(7,106)
14,513
-
(3,687)
(63)
110
9,452
3,691
6,767
10,458
6,747
22,500
(3,690)
(222)
59
26,633
(1,846)
8,613
6,767
8,361
-
(3,707)
(445)
48
(2,849)
(5,784)
14,397
8,613
$
$
$
51
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
Supplemental information:
Supplemental schedule of noncash investing and financing activities:
Interest paid
Income taxes paid
Transfer of loans to other real estate owned
Supplemental schedule of assets and liabilities in connection with merger:
Transfer of loans to other assets
Assets acquired:
Interest bearing time deposits with banks
Securities
Loans
Property and equipment
Accrued interest receivable
Core deposit and other intangible assets
Deferred income taxes
Other real estate owned
Other assets
Liabilities assumed:
Deposits
Pension liability
Accrued interest payable and other liabilities
$
$
$
$
$
$
2,104
100
901
-
$
$
2,584
50
369
-
$
$
2,967
695
594
18
350
35,458
47,055
419
550
343
732
114
31
85,052
77,665
1,248
81
78,994
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
See Notes to Consolidated Financial Statements
52
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
JuNIATA VALLEy FINANCIAL CORp. AND SuBSIDIARy
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
yEARS ENDED DECEMBER 31, 2015, 2014 AND 2013
1. NATuRE OF OpERATIONS
Juniata Valley Financial Corp. (“Juniata” or the “Company”) is a bank holding company operating in central
Pennsylvania, for the purpose of delivering financial services within its local market. Through its wholly-owned
banking subsidiary, The Juniata Valley Bank (the “Bank”), Juniata provides retail and commercial banking and
other financial services through 15 branch locations located in Juniata, Mifflin, Perry, McKean, Potter and
Huntingdon Counties. Additionally, in Mifflin, Juniata and Centre Counties, the Company maintains three offices
for loan production, trust services and wealth management sales. Each of the Company’s lines of business are
part of the same reporting segment, whose operating results are regularly reviewed and managed by a
centralized executive management group. As a result, the Company has only one reportable segment for financial
reporting purposes. The Bank provides a full range of banking services, including on-line and mobile banking, an
automatic teller machine network, checking accounts, identity protection products for consumers, savings
accounts, money market accounts, fixed rate certificates of deposit, club accounts, secured and unsecured
commercial and consumer loans, construction and mortgage loans, safe deposit facilities and credit loans with
overdraft checking protection. The Bank also provides a variety of trust services. The Company has a contractual
arrangement with a broker-dealer to allow the offering of annuities, mutual funds, stock and bond brokerage
services and long-term care insurance to its local market. Most of the Company’s commercial customers are small
and mid-sized businesses operating in the Bank’s local service area. The Bank operates under a state bank
charter and is subject to regulation by the Pennsylvania Department of Banking and the Federal Deposit
Insurance Corporation. Juniata is subject to regulation by the Board of Governors of the Federal Reserve Bank
and the Pennsylvania Department of Banking.
2. SuMMARy OF SIGNIFICANT ACCOuNTING pOLICIES
The accounting policies of Juniata Valley Financial Corp. and its wholly owned subsidiary conform to
accounting principles generally accepted in the United States of America (“GAAP”) and to general financial
services industry practices. A summary of the more significant accounting policies applied in the preparation of
the accompanying consolidated financial statements follows.
Principles of consolidation
The consolidated financial statements include the accounts of Juniata Valley Financial Corp. and its wholly
owned subsidiary, The Juniata Valley Bank. All significant intercompany transactions and balances have been
eliminated.
Use of estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual results could differ from those
estimates. Material estimates that are particularly susceptible to significant change in the near term relate to
the determination of the allowance for loan losses, the determination of other-than-temporary impairment
on securities, impairment of goodwill and the value of assets acquired and liabilities assumed in
business combinations.
53
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
Basis of presentation
Certain amounts previously reported have been reclassified to conform to the consolidated financial statement
presentation for 2015. The reclassification had no effect on net income.
Significant group concentrations of credit risk
Most of the Company’s activities are with customers located within the Juniata Valley and the JVB Northern
Tier regions. Note 6 discusses the types of securities in which the Company invests. Note 7 discusses the types of
lending in which the Company engages.
As of December 31, 2015, credit exposure to operators of dwellings other than apartment buildings represented
31.7% of capital. Otherwise, there were no concentrations of credit to any particular industry equaling more than
25% of total capital. The Bank’s business activities are geographically concentrated in the counties of Juniata,
Mifflin, Perry, Huntingdon, Centre, Franklin, McKean, Potter and Snyder, Pennsylvania. The Bank has a diversified
loan portfolio; however, a substantial portion of its debtors’ ability to honor their obligations is dependent upon
the economy in central Pennsylvania.
Cash and cash equivalents
For purposes of reporting cash flows, cash and cash equivalents include cash on hand, amounts due from
banks, interest bearing demand deposits with banks and federal funds sold. Generally, federal funds are sold for
one-day periods.
Interest bearing time deposits with banks
Interest-bearing time deposits with banks consist of certificates of deposits in other banks with maturities
within five years.
Securities
Securities classified as available for sale, which include marketable investment securities, are stated at fair
value, with the unrealized gains and losses, net of tax, reported as a component of other comprehensive income
(loss). Securities classified as available for sale are those securities that the Company intends to hold for an
indefinite period of time but not necessarily to maturity. Any decision to sell a security classified as available for
sale would be based on various factors, including significant movement in interest rates, changes in maturity mix
of the Company’s assets and liabilities, liquidity needs, regulatory capital considerations and other similar
factors. Investment securities that management has the positive intent and ability to hold until maturity
regardless of changes in market conditions, liquidity needs or changes in general economic conditions are
classified as held to maturity and are stated at cost, adjusted for amortization of premium and accretion of
discount computed by the interest method over their contractual lives. Interest and dividends on investment
securities available for sale and held to maturity are recognized as income when earned. Premiums and discounts
are recognized in interest income using the interest method over the terms of the securities. Gains or losses on
the disposition of securities available for sale are based on the net proceeds and the adjusted carrying amount of
the securities sold, determined on a specific identification basis. The Company had no securities classified as held
to maturity at December 31, 2015 and 2014.
Accounting Standards Codification (ASC) Topic 320, Investments – Debt and Equity Securities, clarifies the
interaction of the factors that should be considered when determining whether a debt security is other-than-
temporarily impaired. For debt securities, management must assess whether (a) it has the intent to sell the
security and (b) it is more likely than not that it will be required to sell the security prior to its anticipated
recovery. These steps are taken before an assessment is made as to whether the entity will recover the cost basis
of the investment. For equity securities, consideration is given to management’s intention and ability to hold the
securities until recovery of unrealized losses in assessing potential other-than-temporary impairment. More
54
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
specifically, factors considered to determine other-than-temporary impairment status for individual equity
holdings include the length of time the stock has remained in an unrealized loss position, the percentage of
unrealized loss compared to the carrying cost of the stock, dividend reduction or suspension, market analyst
reviews and expectations, and other pertinent factors that would affect expectations for recovery or
further decline.
In instances when a determination is made that an other-than-temporary impairment exists and the entity
does not intend to sell the debt security and it is not more likely than not that it will be required to sell the debt
security prior to its anticipated recovery, the other-than-temporary impairment is separated into the amount of
the total other-than-temporary impairment related to a decrease in cash flows expected to be collected from the
debt security (the credit loss) and the amount of the total other-than-temporary impairment related to all other
factors. The amount of the total other-than-temporary impairment related to the credit loss is recognized in
earnings. The amount of the total other-than-temporary impairment related to all other factors is recognized in
other comprehensive (loss) income.
Management determines the appropriate classification of debt securities at the time of purchase and
re-evaluates such designation as of each balance sheet date.
Restricted Investment in Federal Home Loan Bank Stock
The Bank owns restricted stock investments in the Federal Home Loan Bank. Federal law requires a member
institution of the Federal Home Loan Bank to hold stock according to a predetermined formula. The stock is
carried at cost.
Management evaluates the restricted stock for impairment on an annual basis. Management’s determination of
whether these investments are impaired is based on management’s assessment of the ultimate recoverability of
the cost of these investments rather than by recognizing temporary declines in value. The determination of
whether a decline affects the ultimate recoverability of the cost of these investments is influenced by criteria such
as (1) the significance of the decline in net assets of the FHLB as compared to the capital stock amount for the
FHLB and the length of time this situation has persisted, (2) commitments by the FHLB to make payments
required by law or regulation and the level of such payments in relation to the operating performance of the
FHLB, and (3) the impact of legislative and regulatory changes on institutions and, accordingly, on the customer
base of the FHLB.
Management believes no impairment charge was necessary related to the FHLB restricted stock during 2015,
2014 or 2013.
Loans
Loans that the Company has the intent and ability to hold for the foreseeable future or until maturity or payoff
are stated at the outstanding unpaid principal balances, net of any deferred fees or costs and the allowance for
loan losses. Interest income on all loans, other than nonaccrual loans, is accrued over the term of the loans based
on the amount of principal outstanding. Unearned income is amortized to income over the life of the loans, using
the interest method.
The loan portfolio is segmented into commercial and consumer loans. Commercial loans are comprised of the
following classes of loans: (1) commercial, financial and agricultural, (2) commercial real estate, (3) real estate
construction, a portion of (4) mortgage loans and (5) obligations of states and political subdivisions. Consumer
loans are comprised of a portion of (4) mortgage loans and (6) personal loans.
Loans on which the accrual of interest has been discontinued are designated as non-accrual loans. Accrual of
interest on loans is generally discontinued when the contractual payment of principal or interest has become 90
55
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
days past due or reasonable doubt exists as to the full, timely collection of principal or interest. However, it is the
Company’s policy to continue to accrue interest on loans over 90 days past due as long as (1) they are guaranteed
or well secured and (2) there is an effective means of collection in process. When a loan is placed on non-accrual
status, all unpaid interest credited to income in the current year is reversed against current period income and
unpaid interest accrued in prior years is charged against the allowance for loan losses. Interest received on
nonaccrual loans generally is either applied against principal or reported as interest income, according to
management’s judgment as to the collectability of principal. Generally, accruals are resumed on loans only when
the obligation is brought fully current with respect to interest and principal, has performed in accordance with
the contractual terms for a reasonable period of time and the ultimate collectability of the total contractual
principal and interest is no longer in doubt.
The Company originates loans in the portfolio with the intent to hold them until maturity. At the time the
Company no longer intends to hold loans to maturity based on asset/liability management practices, the Company
transfers loans from its portfolio to held for sale at fair value. Any write-down recorded upon transfer is charged
against the allowance for loan losses. Any write-downs recorded after the initial transfers are recorded as a charge
to other non-interest expense. Gains or losses recognized upon sale are included in other non-interest income.
Loan origination fees and costs
Loan origination fees and related direct origination costs for a given loan are deferred and amortized over the
life of the loan on a level-yield basis as an adjustment to interest income over the contractual life of the loan. As of
December 31, 2015 and 2014, the amount of net unamortized origination fees carried as an adjustment to
outstanding loan balances was $152,000 and $234,000, respectively.
Allowance for credit losses
The allowance for credit losses consists of the allowance for loan losses and the reserve for unfunded lending
commitments. The allowance for loan losses (“allowance”) represents management’s estimate of losses inherent
in the loan portfolio as of the consolidated statement of financial condition date and is recorded as a reduction to
loans. The reserve for unfunded lending commitments represents management’s estimate of losses inherent in its
unfunded lending commitments and is recorded in other liabilities on the consolidated statement of financial
condition, when necessary. The amount of the reserve for unfunded lending commitments is not material to the
consolidated financial statements. The allowance for loan losses is increased by the provision for loan losses, and
decreased by charge-offs, net of recoveries. Loans deemed to be uncollectible are charged against the allowance
for loan losses, and subsequent recoveries, if any, are credited to the allowance.
4
4
For financial reporting purposes, the provision for loan losses charged to current operating income is based on
management’s estimates, and actual losses may vary from estimates. These estimates are reviewed and adjusted
at least quarterly and are reported in earnings in the periods in which they become known.
Loans included in any class are considered for charge-off when:
•
principal or interest has been in default for 120 days or more and for which no payment has been
received during the previous four months;
all collateral securing the loan has been liquidated and a deficiency balance remains;
a bankruptcy notice is received for an unsecured loan;
a confirming loss event has occurred; or
the loan is deemed to be uncollectible for any other reason.
•
•
•
•
The allowance for loan losses is maintained at a level considered adequate to offset probable losses on the
Company’s existing loans. The analysis of the allowance for loan losses relies heavily on changes in observable
trends that may indicate potential credit weaknesses. Management’s periodic evaluation of the adequacy of the
56
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
allowance is based on the Bank’s past loan loss experience, known and inherent risks in the portfolio, adverse
situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral,
composition of the loan portfolio, current economic conditions and other relevant factors. This evaluation is
inherently subjective as it requires material estimates that may be susceptible to significant revision as more
information becomes available.
In addition, regulatory agencies, as an integral part of their examination process, periodically review the
Company’s allowance for loan losses and may require the Company to recognize additions to the allowance for
loan losses based on their judgments about information available to them at the time of their examination, which
may not be currently available to management. Based on management’s comprehensive analysis of the loan
portfolio, management believes the level of the allowance for loan losses as of December 31, 2015 was adequate.
There are two components of the allowance: a specific component for loans that are deemed to be impaired;
and a general component for contingencies.
A loan is considered to be impaired when, based on current information and events, it is probable that the
Company will be unable to collect the scheduled payments of principal or interest when due according to the
contractual terms of the loan agreement. Factors considered by management in determining impairment include
payment status, collateral value and the probability of collecting scheduled principal and interest payments when
due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as
impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case
basis, taking into consideration all of the circumstances surrounding the loans and the borrower, including the
length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall
in relation to the principal and interest owed. Impairment is measured on a loan by loan basis by the present
value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market
price or the fair value of the collateral if the loan is collateral dependent.
The estimated fair values of substantially all of the Company’s impaired loans are measured based on the
estimated fair value of the loan’s collateral. For commercial loans secured with real estate, estimated fair values
are determined primarily through third-party appraisals. When a real estate secured loan becomes impaired, a
decision is made regarding whether an updated certified appraisal of the real estate is necessary. This decision is
based on various considerations, including the age of the most recent appraisal, the loan-to-value ratio based on
the current appraisal and the condition of the property. Appraised values may be discounted to arrive at the
estimated selling price of the collateral, which is considered to be the estimated fair value. The discounts also
include the estimated costs to sell the property. For commercial loans secured by non-real estate collateral,
estimated fair values are determined based on the borrower’s financial statements, inventory reports, aging
accounts receivable, equipment appraisals or invoices. Indications of value from these sources are generally
discounted based on the age of the financial information or the quality of the assets. For such loans that are
classified as impaired, an allowance is established when the discounted cash flows (or collateral value or
observable market price) of the impaired loan is lower than the carrying value of that loan. The Company
generally does not separately identify individual consumer segment loans for impairment analysis, unless such
loans are subject to a restructuring agreement.
Loans whose terms are modified are classified as troubled debt restructurings if the Company grants
borrowers concessions and it is deemed that those borrowers are experiencing financial difficulty. Concessions
granted under a troubled debt restructuring generally involve a below-market interest rate based on the loan’s
risk characteristics or an extension of a loan’s stated maturity date. Nonaccrual troubled debt restructurings are
57
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
restored to accrual status if principal and interest payments, under the modified terms, are current for a
sustained period of time after modification. Loans classified as troubled debt restructurings are designated
as impaired.
The component of the allowance for contingencies relates to other loans that have been segmented into risk
rated categories. The borrower’s overall financial condition, repayment sources, guarantors and value of
collateral, if appropriate, are evaluated quarterly or when credit deficiencies arise, such as delinquent loan
payments. Credit quality risk ratings include regulatory classifications of special mention, substandard, doubtful
and loss. Loans classified as special mention have potential weaknesses that deserve management’s close
attention. If uncorrected, the potential weaknesses may result in deterioration of the repayment prospects. Loans
classified as substandard have one or more well-defined weaknesses that jeopardize the liquidation of the debt.
Substandard loans include loans that are inadequately protected by the current net worth and paying capacity of
the obligor or of the collateral pledged, if any. Loans classified doubtful have all the weaknesses inherent in loans
classified substandard with the added characteristic that collection or liquidation in full, on the basis of current
conditions and facts, is highly improbable. Loans classified as a loss are considered uncollectible and are charged
to the allowance for loan losses. Loans not classified are rated pass. Specific reserves may be established for
larger, individual classified loans as a result of this evaluation, as discussed above. Remaining loans are
categorized into large groups of smaller balance homogeneous loans and are collectively evaluated for
impairment. This computation is generally based on historical loss experience adjusted for qualitative factors.
The historical loss experience is averaged over a ten-year period for each of the portfolio segments. The ten-year
timeframe was selected in order to capture activity over a wide range of economic conditions and has been
consistently used for the past seven years. The qualitative risk factors are reviewed for relevancy each quarter
and include:
•
•
•
•
•
•
National, regional and local economic and business conditions, as well as the condition of various market
segments, including the underlying collateral for collateral dependent loans;
Nature and volume of the portfolio and terms of loans;
Experience, ability and depth of lending and credit management and staff;
Volume and severity of past due, classified and nonaccrual loans, as well as other loan modifications;
Existence and effect of any concentrations of credit and changes in the level of such concentrations; and
Effect of external factors, including competition.
Each factor is assigned a value to reflect improving, stable or declining conditions based on management’s best
judgment using relevant information available at the time of the evaluation. Adjustments to the factors are
supported through documentation of changes in conditions in a narrative accompanying the allowance for loan
loss calculation.
Acquired Loans
Loans that Juniata acquires through business combinations are recorded at fair value with no carryover of the
related allowance for loan losses. Fair value of the loans involves estimating the amount and timing of principal
and interest cash flows expected to be collected on the loans and discounting those cash flows at a market rate
of interest.
The excess of cash flows expected at acquisition over the estimated fair value is referred to as the accretable
discount and is recognized into interest income over the remaining life of the loan. The difference between
contractually required payments at acquisition and the cash flows expected to be collected at acquisition is referred
to as the nonaccretable discount. The nonaccretable discount includes estimated future credit losses expected to be
58
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015 incurred over the life of the loan. Subsequent decreases to the expected cash flows will require Juniata to evaluate
the need for an additional allowance for credit losses. Subsequent improvement in expected cash flows will result in
the reversal of a corresponding amount of the nonaccretable discount which Juniata will then reclassify as
accretable discount that will be recognized into interest income over the remaining life of the loan.
Acquired loans that met the criteria for impaired or nonaccrual of interest prior to the acquisition may be
considered performing upon acquisition, regardless of whether the customer is contractually delinquent if
Juniata expects to fully collect the new carrying value (i.e. fair value) of the loans. As such, Juniata may no longer
consider the loan to be nonaccrual or nonperforming and may accrue interest on these loans, including the
impact of any accretable discount. In addition, charge-offs on such loans would be first applied to the
nonaccretable difference portion of the fair value adjustment.
Loans acquired through business combinations that do not meet the specific criteria of ASC 310-30, but for
which a discount is attributable at least in part to credit quality, are also accounted for in accordance with this
guidance. As a result, related discounts are recognized subsequently through accretion based on the contractual
cash flows of the acquired loans.
Loans Held for Sale
The Company also originates residential mortgage loans with the intent to sell. These individual loans are
normally funded by the buyer immediately. The Company maintains servicing rights on these loans. Mortgage
servicing rights are recognized as an asset upon the sale of a mortgage loan. A portion of the cost of the loan is
allocated to the servicing right based upon relative fair value. Servicing rights are intangible assets and are
carried at estimated fair value. Adjustments to fair value are recorded as non-interest income and included in
gain on sales of loans in the consolidated statements of income.
In a business combination, the Company may acquire loans which it intends to sell. These loans are assigned a
fair value by obtaining actual bids on the loans and adjusting for contingencies in the bids. These loans are
carried at lower of cost or market value until sold, adjusted periodically if conditions change before the
subsequent sale. Adjustments to fair value and gains or losses recognized upon sale are included in gains on sales
of loans which is a component of non-interest income.
Commercial, Financial and Agricultural Lending
The Company originates commercial, financial and agricultural loans primarily to businesses located in its
primary market area and surrounding areas. These loans are used for various business purposes, which include
short-term loans and lines of credit to finance machinery and equipment purchases, inventory and accounts
receivable. Generally, the maximum term for loans extended on machinery and equipment is shorter and does not
exceed the projected useful life of such machinery and equipment. Most business lines of credit are written with
a five year maturity, subject to an annual review.
Commercial loans are generally secured with short-term assets; however, in many cases, additional collateral,
such as real estate, is provided as additional security for the loan. Loan-to-value maximum values have been
established by the Company and are specific to the type of collateral. Collateral values may be determined using
invoices, inventory reports, accounts receivable aging reports, collateral appraisals, etc.
In underwriting commercial loans, an analysis of the borrower’s character, capacity to repay the loan, the
adequacy of the borrower’s capital and collateral, as well as an evaluation of conditions affecting the borrower, is
performed. Analysis of the borrower’s past, present and future cash flows is also an important aspect of the
Company’s analysis.
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Concentration analysis assists in identifying industry specific risk inherent in commercial, financial and
agricultural lending. Mitigants include the identification of secondary and tertiary sources of repayment and
appropriate increases in oversight.
Commercial, financial and agricultural loans generally present a higher level of risk than certain other types of
loans, particularly during slow economic conditions.
Commercial Real Estate Lending
The Company engages in commercial real estate lending in its primary market area and surrounding areas. The
Company’s commercial real estate portfolio is secured primarily by residential housing, commercial buildings,
raw land and hotels. Generally, commercial real estate loans have terms that do not exceed 20 years, have loan-to-
value ratios of up to 80% of the appraised value of the property and are typically secured by personal guarantees
of the borrowers.
As economic conditions deteriorate, the Company reduces its exposure in real estate loans with higher risk
characteristics. In underwriting these loans, the Company performs a thorough analysis of the financial condition
of the borrower, the borrower’s credit history, and the reliability and predictability of the cash flow generated by
the property securing the loan. Appraisals on properties securing commercial real estate loans originated by the
Company are performed by independent appraisers.
Commercial real estate loans generally present a higher level of risk than certain other types of loans,
particularly during slow economic conditions.
Real Estate Construction Lending
The Company engages in real estate construction lending in its primary market area and surrounding areas.
The Company’s real estate construction lending consists of commercial and residential site development loans, as
well as commercial building construction and residential housing construction loans.
The Company’s commercial real estate construction loans are generally secured with the subject property, and
advances are made in conformity with a pre-determined draw schedule supported by independent inspections.
Terms of construction loans depend on the specifics of the project, such as estimated absorption rates, estimated
time to complete, etc.
In underwriting commercial real estate construction loans, the Company performs a thorough analysis of the
financial condition of the borrower, the borrower’s credit history, the reliability and predictability of the cash
flow generated by the project using feasibility studies, market data, etc. Appraisals on properties securing
commercial real estate loans originated by the Company are performed by independent appraisers.
Real estate construction loans generally present a higher level of risk than certain other types of loans,
particularly during slow economic conditions. The difficulty of estimating total construction costs adds to the risk
as well.
Mortgage Lending
The Company’s real estate mortgage portfolio is comprised of consumer residential mortgages and business
loans secured by one-to-four family properties. One-to-four family residential mortgage loan originations,
including home equity installment and home equity lines of credit loans, are generated by the Company’s
60
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marketing efforts, its present customers, walk-in customers and referrals. These loans originate primarily within
the Company’s market area or with customers primarily from the market area.
The Company offers fixed-rate and adjustable rate mortgage loans with terms up to a maximum of 25-years for
both permanent structures and those under construction. The Company’s one-to-four family residential mortgage
originations are secured primarily by properties located in its primary market area and surrounding areas. The
majority of the Company’s residential mortgage loans originate with a loan-to-value of 80% or less. Home equity
installment loans are secured by the borrower’s primary residence with a maximum loan-to-value of 80% and a
maximum term of 15 years. Home equity lines of credit are secured by the borrower’s primary residence with a
maximum loan-to-value of 90% and a maximum term of 20 years.
In underwriting one-to-four family residential real estate loans, the Company evaluates the borrower’s ability
to make monthly payments, the borrower’s repayment history and the value of the property securing the loan.
The ability to repay is determined by the borrower’s employment history, current financial conditions, and credit
background. The analysis is based primarily on the customer’s ability to repay and secondarily on the collateral
or security. Most properties securing real estate loans made by the Company are appraised by independent fee
appraisers. The Company generally requires mortgage loan borrowers to obtain an attorney’s title opinion or title
insurance, and fire and property insurance (including flood insurance, if necessary) in an amount not less than
the amount of the loan. The Company does not engage in sub-prime residential mortgage originations.
Residential mortgage loans and home equity loans generally present a lower level of risk than certain other
types of consumer loans because they are secured by the borrower’s primary residence. Risk is increased when
the Company is in a subordinate position for the loan collateral.
Obligations of States and Political Subdivisions
The Company lends to local municipalities and other tax-exempt organizations. These loans are primarily
tax-anticipation notes and, as such, carry little risk. Historically, the Company has never had a loss on any loan of
this type.
Personal Lending
The Company offers a variety of secured and unsecured personal loans, including vehicle loans, mobile home
loans and loans secured by savings deposits as well as other types of personal loans.
Personal loan terms vary according to the type and value of collateral and creditworthiness of the borrower. In
underwriting personal loans, a thorough analysis of the borrower’s willingness and financial ability to repay the
loan as agreed is performed. The ability to repay is determined by the borrower’s employment history, current
financial conditions and credit background.
Personal loans may entail greater credit risk than do residential mortgage loans, particularly in the case of
personal loans which are unsecured or are secured by rapidly depreciable assets, such as automobiles or
recreational equipment. In such cases, any repossessed collateral for a defaulted personal loan may not provide
an adequate source of repayment of the outstanding loan balance as a result of the greater likelihood of damage,
loss or depreciation. In addition, personal loan collections are dependent on the borrower’s continuing financial
stability and, thus are more likely to be affected by adverse personal circumstances. Furthermore, the application
of various federal and state laws, including bankruptcy and insolvency laws, may limit the amount which can be
recovered on such loans.
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Other real estate owned
Assets acquired in settlement of mortgage loan indebtedness are recorded as other real estate owned (OREO)
at fair value less estimated costs to sell, establishing a new cost basis. Costs to maintain the assets and
subsequent gains and losses attributable to their disposal are included in other expense as realized. No
depreciation or amortization expense is recognized. At December 31, 2015 and 2014, the carrying value of other
real estate owned was $617,000 and $232,000, respectively.
Goodwill and intangibles
The Company accounts for its business combinations using the purchase accounting method. Purchase
accounting requires the total purchase price to be allocated to the estimated fair values of assets acquired and
liabilities assumed, including certain intangible assets that must be recognized. Typically, this allocation results in
the purchase price exceeding the fair value of net assets acquired, which is recorded as goodwill. Core deposit
intangibles are a measure of the value of checking, money market and savings deposits acquired in business
combinations accounted for under the purchase method. Core deposit intangibles and other identified intangibles
with finite useful lives are amortized over their estimated useful lives.
Goodwill and other intangible assets are tested for impairment annually or when circumstances arise
indicating impairment may have occurred. In determining whether impairment has occurred, management
considers a number of factors including, but not limited to, the market value of the Company’s stock, operating
results, business plans, economic projections, anticipated future cash flows and current market data. There are
inherent uncertainties related to these factors and management’s judgment in applying them to the analysis of
impairment. Changes in economic and operating conditions, as well as other factors, could result in impairment
in future periods. Any impairment losses arising from such testing would be reported in the Consolidated
Statements of Income as a separate line item within operations. There were no impairment losses recognized as a
result of periodic impairment testing in each of the three years ended December 31, 2015.
Mortgage servicing rights
The Company originates residential mortgage loans with the intent to sell. These individual loans are normally
funded by the buyer immediately. The Company maintains servicing rights on these loans.
Mortgage servicing rights are recognized as an asset upon the sale of a mortgage loan. A portion of the cost of
the loan is allocated to the servicing right based upon relative fair value. Servicing rights are intangible assets and
are carried at estimated fair value. The carrying amount of mortgage servicing rights was $205,000 and $193,000
at December 31, 2015 and 2014, respectively. Adjustments to fair value are recorded as non-interest income and
included in gain on sales of loans in the consolidated statements of income.
The Company retains the servicing rights on certain mortgage loans sold to the FHLB and receives mortgage
banking fee income based upon the principal balance outstanding. Total loans serviced for the FHLB were
$21,841,000 and $20,960,000 at December 31, 2015 and 2014, respectively. The mortgage loans sold to the FHLB
and serviced by the Company are not reflected in the consolidated statements of financial condition.
Premises and equipment and depreciation
Premises and equipment are stated at cost less accumulated depreciation. Depreciation is computed
principally using the straight-line method over the estimated useful lives of the related assets, which range from
3 to 10 years for furniture and equipment and 25 to 50 years for buildings. Expenditures for maintenance and
repairs are charged against income as incurred. Costs of major additions and improvements are capitalized.
Amortization of leasehold improvements is computed on a straight line basis over the shorter of the assets’ useful
life or the related lease term.
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JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015 Trust assets and revenues
Assets held in a fiduciary capacity are not assets of the Bank or the Bank’s Trust Department and are, therefore,
not included in the consolidated financial statements. Trust revenues are recorded on the accrual basis.
Bank owned life insurance, annuities and split-dollar arrangements
The cash surrender value of bank owned life insurance and annuities is carried as an asset, and changes in cash
surrender value are recorded as non-interest income.
GAAP requires split-dollar life insurance arrangements to have a liability recognized related to the
postretirement benefits covered by an endorsement split-dollar life insurance arrangement. The accrued benefit
liability was $887,000 and $858,000 as of December 31, 2015 and 2014, respectively. Related expenses for 2015,
2014 and 2013 were $29,000, $66,000 and $54,000, respectively.
Investments in low-income housing partnerships
Juniata has invested as a limited partner in a partnership that provides low-income housing in Lewistown,
Pennsylvania. The carrying value of the investment in the limited partnership was $3,368,000 at December 31,
2015 and $3,847,000 at December 31, 2014. The partnership anticipates receiving $569,000 annually in low-
income housing tax credits over ten years, which began in 2013. Amortization of the investment using the cost
method is scheduled to occur over the same period as tax credits are earned. The maximum exposure to loss is
limited to the carrying value of its investment at year-end.
Income taxes
ASC Topic 740,
Income Taxes
The Company accounts for income taxes in accordance with income tax accounting guidance
.
Current income tax accounting guidance results in two components of income tax expense: current and
deferred. Current income tax expense reflects taxes to be paid or refunded for the current period by applying the
provisions of the enacted tax law to the taxable income or excess of deductions over revenues. The Company
determines deferred income taxes using the liability (or balance sheet) method. Under this method, the net
deferred tax asset or liability is based on the tax effects of the differences between the book and tax bases of
assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur.
Deferred income tax expense results from changes in deferred tax assets and liabilities between periods.
Deferred tax assets are reduced by a valuation allowance if, based on the weight of the evidence available, it is
more likely than not that some portion or all of a deferred tax asset will not be realized.
The Company accounts for uncertain tax positions if it is more likely than not, based on the technical merits,
that the tax position will be realized or sustained upon examination. The term more likely than not means a
likelihood of more than 50 percent; the terms examined and upon examination also include resolution of the
related appeals or litigation processes, if any. A tax position that meets the more-likely-than-not recognition
threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50
percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all
relevant information. The determination of whether or not a tax position has met the more-likely-than-not
recognition threshold considers the facts, circumstances and information available at the reporting date and is
subject to management’s judgment.
The Company recognizes interest and penalties on income taxes, if any, as a component of income tax expense.
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JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
Advertising
The Company follows the policy of charging costs of advertising to expense as incurred. Advertising expenses
were $222,000, $169,000 and $207,000 in 2015, 2014 and 2013, respectively.
Off-balance sheet financial instruments
In the ordinary course of business, the Bank has entered into off-balance sheet financial instruments consisting of
commitments to extend credit and letters of credit. Such financial instruments are recorded on the consolidated
statement of financial condition when they are funded.
Transfer of financial assets
Transfers of financial assets are accounted for as sales, when control over the assets has been surrendered.
Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the
Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that
right) to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control over
the transferred assets through an agreement to repurchase them before their maturity.
Stock-based compensation
The Company sponsors a stock option plan for certain key officers. Compensation expense for stock options
granted is measured using the fair value of the award on the grant date and is recognized over the vesting period.
The Company recognized $57,000, $47,000 and $30,000 of expense for the years ended December 31, 2015,
2014 and 2013, respectively, for stock-based compensation. The stock-based compensation expense amounts
were derived based on the fair value of options using the Black-Scholes option-pricing model. The following
weighted average assumptions were used to value options granted in the periods indicated.
Expected life of options
Risk-free interest rate
Expected volatility
Expected dividend yield
Segment reporting
2015
7.4 years
1.95 %
21.42 %
4.87 %
2014
7 years
2.14 %
21.39 %
4.83 %
2013
7 years
1.41 %
21.57 %
4.91 %
Management does not separately allocate expenses, including the cost of funding loan demand, between the
commercial, retail and trust operations of the Company. As such, discrete financial information is not available,
and segment reporting would not be meaningful.
Subsequent events
The Company has evaluated events and transactions occurring subsequent to the consolidated statement of
financial condition date of December 31, 2015, for items that should potentially be recognized or disclosed in the
consolidated financial statements. The evaluation was conducted through the date these consolidated financial
statements were issued.
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3. RECENT ACCOuNTING STANDARDS upDATE (ASu)
Accounting Standards Update 2016-02, Leases
Issued:
Summary:
February 2016
The new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU
asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be
classified as either finance or operating, with classification affecting the pattern of expense recognition in the
income statement.
Effective Date:
The new standard is effective for fiscal years beginning after December 15, 2018, including
interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for
capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period
presented in the financial statements, with certain practical expedients available. The Company is currently
evaluating the impact this Update will have on its consolidated financial position and results of operations.
Accounting Standards Update 2016-01, Measurement of Financial Instruments
Issued:
Summary:
January 2016
The amendments in this Update require all equity investments to be measured at fair value with
changes in the fair value recognized through net income (other than those accounted for under equity method of
accounting or those that result in consolidation of the investee). The amendments in this Update also require an
entity to present separately in other comprehensive income the portion of the total change in the fair value of a
liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the
liability at fair value in accordance with the fair value option for financial instruments. In addition the
amendments in this Update eliminate the requirement to disclose the fair value of financial instruments
measured at amortized cost for entities that are not public business entities and the requirement to disclose the
method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for
financial instruments measured at amortized cost on the balance sheet for public business entities.
Effective Date:
For public entities, the amendments in the Update are effective for fiscal years beginning after
December 15, 2017, including interim periods within those fiscal years. The Company is currently evaluating the
impact this Update will have on its consolidated financial position and results of operations.
Accounting Standards Update 2015-16, Business Combination (Topic 805): Simplifying the
Accounting for Measurement-Period Adjustments)
Issued:
Summary:
September 2015
ASU 2015-16 requires adjustments to provisional amounts that are identified during the
measurement period to be recognized in the reporting period in which the adjustment amounts are determined.
This includes any effect on earnings of changes in depreciation, amortization, or other income effects as a result
of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition
date. In addition, the amendments in the Update would require an entity to disclose (either on the face of the
income statement or in the notes) the nature and amount of measurement-period adjustments recognized in the
current period, including separately the amounts in current-period income statement line items that would have
been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as
of the acquisition date.
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JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015 Effective Date:
The amendments are effective for public business entities for fiscal years, and for interim periods
within those fiscal years, beginning after December 15, 2015. The Company is currently evaluating the impact of
this Update on its consolidated financial statements.
Accounting Standards Update 2014-04, Receivables – Troubled Debt Restructurings by Creditors (Subtopic
310-40): Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon
Foreclosure (a consensus of the FASB Emerging Issues Task Force)
Issued:
January 2014
Summary:
The Update clarifies that when an in substance repossession or foreclosure occurs, and a creditor is
considered to have received physical possession of residential real estate property collateralizing a consumer
mortgage loan, upon either (1) the creditor obtaining legal title to the residential real estate property upon
completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to
the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal
agreement.
Effective Date and Transition:
The Amendments in this Update are effective for public business entities for
annual periods and interim periods within those annual periods, beginning after December 15, 2014. The
adoption of this Update had no material effect on its consolidated financial condition or results of operations.
Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606)
Issued:
May 2014
Summary:
The amendments in this Update establish a comprehensive revenue recognition standard for virtually
all industries under U.S. GAAP, including those that previously followed industry-specific guidance such as the
real estate, construction and software industries. The revenue standard’s core principle is built on the contract
between a vendor and a customer for the provision of goods and services. It attempts to depict the exchange of
rights and obligations between the parties in the pattern of revenue recognition based on the consideration to
which the vendor is entitled. To accomplish this objective, the standard requires five basic steps: (i) identify the
contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the
transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v)
recognize revenue when (or as) the entity satisfies a performance obligation.
Effective Date and Transition:
Public entities will apply the new standard for annual reports beginning after
December 15, 2016, including interim periods therein. Three basic transition methods are available – full
retrospective, retrospective with certain practical expedients, and a cumulative effect approach. Under the third
alternative, an entity would apply the new revenue standard only to contracts that are incomplete under legacy
U.S. GAAP at the date of initial application (e.g. January 1, 2017) and recognize the cumulative effect of the new
standard as an adjustment to the opening balance of retained earnings. That is, prior years would not be restated
and additional disclosures would be required to enable users of the financial statements to understand the
impact of adopting the new standard in the current year compared to prior years that are presented under legacy
U.S. GAAP. Early adoption is prohibited under U.S. GAAP. The Company is evaluating the effects this Update will
have on the Company’s consolidated financial condition or results of operations.
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JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015 Accounting Standards Update 2015-14, Revenue from Contracts with Customers (Topic 606):
Deferral of the Effective Date
Issued:
Summary:
August 2015
ASU 2015-14 defers the effective date of the new revenue recognition standard by one year. As such, it
now takes effect for public entities in fiscal years beginning after December 15, 2017. All other entities have an
additional year. However, early adoption is permitted for any entity that chooses to adopt the new standard as of
the original effective date. Early adoption is permitted only as of annual reporting periods beginning after
December 15, 2016, including interim periods within that year. The Company is evaluating the effects this Update
will have on its consolidated financial condition or results of operations.
Accounting Standards Update 2014-14, Receivables – Troubled Debt Restructurings by Creditors
(Subtopic 310-40): Classification of Certain Government-Guaranteed Mortgage Loans upon Foreclosure (a
consensus of the FASB Emerging Issues Task Force)
Issued:
Summary:
August 2014
The amendments in this Update address a practice issue related to the classification of certain
foreclosed residential and nonresidential mortgage loans that are either fully or partially guaranteed under
government programs. Specifically, creditors should reclassify loans that meet certain conditions to “other
receivables” upon foreclosure, rather than reclassifying them to other real estate owned (OREO). The separate
other receivable recorded upon foreclosure is to be measured based on the amount of the loan balance (principal
and interest) the creditor expects to recover from the guarantor.
Effective Date and Transition:
The ASU is effective for public business entities for annual periods, and interim
periods within those annual periods, beginning after December 15, 2014. The adoption of this Update had no
material effect on the Company’s consolidated financial condition or results of operations.
4. MERGER
On November 30, 2015, Juniata consummated the merger with FNBPA Bancorp, Inc. (“FNBPA”), a Pennsylvania
corporation. FNBPA merged with, and into Juniata, with Juniata continuing as the surviving entity. Simultaneously
with the consummation of the foregoing merger, First National Bank of Port Allegany (“FNB”), a national banking
association and a wholly-owned subsidiary of FNBPA, merged with and into the Bank.
As part of this transaction, FNBPA shareholders received either 2.7813 shares of Juniata’s common stock or
$50.34 in cash in exchange for each share of FNBPA common stock. As a result, Juniata issued 607,815 shares of
common stock with an acquisition date fair value of approximately $10,637,000, based on Juniata’s closing stock
price of $17.50 on November 30, 2015, and cash of $2,208,000, including cash in lieu of fractional shares. The fair
value of total consideration paid was $12,845,000.
The assets and liabilities of FNB and FNBPA were recorded on the consolidated balances sheet at their
estimated fair value as of November 30, 2015, and their results of operations have been included in the
consolidated income statement since such date.
Included in the purchase price was goodwill and a core deposit intangible of $3,335,000 and $343,000,
respectively. The core deposit intangible will be amortized over a ten-year period using a sum of the year’s digits
basis. The goodwill will not be amortized, but will be measured annually for impairment or more frequently if
circumstances require.
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JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
Core deposit intangible amortization expense projected for the succeeding five years beginning 2016 is
estimated to be $55,000, $49,000, $44,000, $38,000 and $33,000 per year, respectively, and $80,000 in total for
years after 2020.
The allocation of the purchase price is as follows, in thousands of dollars:
Purchase price assigned to FNBPA common shares exchanged for 607,815 Juniata common shares
Purchase price assigned to FNBPA common shares exchanged for cash
Total purchase price
FNBPA net assets acquired:
Tangible common equity
Adjustments to reflect assets acquired and liabilities assumed at fair value:
Total fair value adjustments
Associated deferred income taxes
Fair value adjustment to net assets acquired, net of tax
Total FNBPA net assets acquired
Goodwill resulting from the merger
$ 10,637
2,208
12,845
9,854
(523)
179
(344)
9,510
3,335
$
While Juniata believes that accounting for the merger is complete, ASC 805 allows for adjustments to goodwill
for a period of up to one year after the merger date for information that becomes available that reflects
circumstances at the merger date. The following table summarizes the estimated fair value of the assets acquired
and liabilities assumed, in thousands of dollars.
Total purchase price
Net assets acquired
Cash and cash equivalents
Investment securities
Loans
Premises and equipment
Accrued interest receivable
Core deposit and other intangibles
Other real estate owned
Other assets
Deposits
Accrued interest payable
Other liabilities
Goodwill
$ 12,845
3,802
35,458
47,055
419
550
343
114
763
(77,665)
(13)
(1,316)
9,510
3,335
$
The fair value of the financial assets acquired included loans receivable with a gross amortized cost basis of
$47,797,000. The table below illustrates the fair value adjustments made to the amortized cost basis in order to
present a fair value of the loans acquired, in thousands of dollars.
Gross amortized cost basis at November 30, 2015
Market rate adjustment
Credit fair value adjustment on pools of homogeneous loans
Credit fair value adjustment on impaired loans
Fair value of purchased loans at November 30, 2015
$ 47,797
(110)
(73)
(559)
47,055
$
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The market rate adjustment represents the movement in market interest rates, irrespective of credit
adjustments, compared to the stated rates of the acquired loans. The credit adjustment made on pools of
homogeneous loans represents the changes in credit quality of the underlying borrowers from the loan inception
to the acquisition date. The credit adjustment on impaired loans is derived in accordance with ASC 310-30 and
represents the portion of the loan balances that has been deemed uncollectible based on the Company’s
expectations of future cash flows for each respective loan. The information about the acquired FNBPA impaired
loan portfolio as of November 30, 2015 is as follows, in thousands of dollars.
Contractually required principal and interest at acquisition
Contractual cash flows not expected to be collected (nonaccretable discount)
Expected cash flows at acquisition
Interest component of expected cash flows (accretable discount)
Fair value of acquired loans
$
$
2,488
(1,427)
1,061
(157)
904
The following table presents unaudited pro forma information, in thousands, as if the merger between Juniata
and FNBPA had been completed on January 1, 2014. The pro forma information does not necessarily reflect the
results of operations that would have occurred had Juniata merged with FNBPA at the beginning of 2014.
Supplemental pro forma earnings for 2015 were adjusted to exclude $1,637,000 of merger related costs
(exclusive of the corresponding tax impact) incurred in 2015; the results for 2014 were adjusted to include these
charges. The pro forma financial information does not include the impact of possible business model changes,
nor does it consider any potential impacts of current market conditions or revenues, expense efficiencies or
other factors.
Net interest income after loan loss provision
Noninterest income
Noninterest expense
Net income
Net income per common share
$
$
Years Ended
December 31,
2015
17,731
4,841
17,124
4,862
1.01
2014
$ 17,089
4,745
18,358
3,353
0.70
$
The amount of total revenue, consisting of interest income plus noninterest income, as well as the net income
specifically related to FNBPA for the period beginning December 1, 2015, included in the consolidated statements
of income of Juniata for the year ended December 31, 2015, was $242,000 and $61,000, respectively.
5. RESTRICTIONS ON CASh AND DuE FROM BANKS
The Bank is required to maintain cash reserve balances with the Federal Reserve Bank. The total required
reserve balances were $340,000 and $276,000 as of December 31, 2015 and 2014, respectively.
6. SECuRITIES
The Company’s investment portfolio includes primarily mortgage-backed securities issued by U.S. Government
sponsored agencies and backed by residential mortgages (approximately 58%), bonds issued by U.S. Government
sponsored agencies (approximately 21%) and municipalities (approximately 19%) as of December 31, 2015.
Most of the municipal bonds are general obligation bonds with maturities or pre-refunding dates within 5 years.
The remaining 2% of the portfolio includes a group of equity investments in other financial institutions.
69
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
The amortized cost and fair value of securities as of December 31, 2015 and 2014, by contractual maturity, are
shown below (in thousands). Expected maturities may differ from contractual maturities because the securities
may be called or prepaid with or without prepayment penalties.
Securities Available for Sale
Type and maturity
Obligations of U.S. Government agencies and corporations
Within one year
After one year but within five years
After five years but within ten years
Obligations of state and political subdivisions
Within one year
After one year but within five years
After five years but within ten years
After ten years
Mortgage-backed securities
Equity securities
Total
Securities Available for Sale
Type and maturity
Obligations of U.S. Government agencies and corporations
Within one year
After one year but within five years
After five years but within ten years
Obligations of state and political subdivisions
Within one year
After one year but within five years
After five years but within ten years
After ten years
Mortgage-backed securities
Equity securities
Total
December 31, 2015
Gross
Gross
Amortized
Cost
Fair
Value
Unrealized Unrealized
Gains
Losses
$
$
1,000
24,489
7,495
32,984
1,003
24,264
7,465
32,732
$
$
3
19
7
29
5,756
16,070
7,204
330
29,360
88,159
1,692
$ 152,195
5,771
16,151
7,282
331
29,535
87,741
2,319
$ 152,327
$
15
101
78
1
195
213
645
1,082
$
-
(244)
(37)
(281)
-
(20)
-
-
(20)
(631)
(18)
(950)
December 31, 2014
Gross
Gross
Amortized
Cost
Fair
Value
Unrealized Unrealized
Gains
Losses
$
$
4,510
39,110
6,996
50,616
4,566
38,723
6,812
50,101
$
$
56
31
1
88
9,903
16,822
8,609
340
35,674
55,123
1,055
$ 142,468
9,934
16,853
8,748
338
35,873
55,429
1,500
142,903
$
$
31
78
143
-
252
367
475
1,182
$
-
(418)
(185)
(603)
-
(47)
(4)
(2)
(53)
(61)
(30)
(747)
Certain obligations of the U.S. Government and state and political subdivisions are pledged to secure public
deposits, securities sold under agreements to repurchase and for other purposes as required or permitted by
law. The carrying value of the pledged assets was $45,101,000 and $30,770,000 at December 31, 2015 and
2014, respectively.
70
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
In addition to cash received from the scheduled maturities of securities, some investment securities available
for sale are sold at current market values during the course of normal operations. Following is a summary of
proceeds received from all investment securities transactions and the resulting realized gains and losses
(in thousands):
Gross proceeds from sales of securities
Securities available for sale:
Gross realized gains from sold and called securities
Gross realized losses from sold and called securities
Years Ended December 31,
2015
53,213
83
(70)
$
$
2014
14,631
43
(34)
$
$
2013
-
-
(2)
$
$
The following table shows gross unrealized losses and fair value, aggregated by category and length of time that
individual securities have been in a continuous unrealized loss position, at December 31, 2015
(in thousands):
Unrealized Losses at December 31, 2015
Less than 12 Months
Fair
Value
Unrealized
Losses
12 Months or More
Total
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
$ 10,887
$
(102) $
12,814
$
(179)
$
23,701
$
(281)
7,469
57,454
75,810
62
(13)
(631)
(746)
(3)
692
-
13,506
75
(7)
-
(186)
(15)
8,161
57,454
89,316
137
(20)
(631)
(932)
(18)
Obligations of U.S. Government
agencies and corporations
Obligations of state and political
subdivisions
Mortgage-backed securities
Debt securities
Equity securities
Total temporarily
impaired securities
$ 75,872
$
(749) $
13,581
$
(201)
$
89,453
$
(950)
At December 31, 2015, 16 U.S. Government and agency securities had unrealized losses that, in the aggregate,
did not exceed 1% of amortized cost. Seven of these securities have been in a continuous loss position for 12
months or more.
At December 31, 2015, 21 obligations of state and political subdivision bonds had unrealized losses that, in the
aggregate, did not exceed 1% of amortized cost. Two of these securities have been in a continuous loss position
for 12 months or more.
At December 31, 2015, 16 mortgage-backed securities had an unrealized loss that did not exceed 1% of
amortized cost. None of these securities has been in a continuous loss position for 12 months or more.
The mortgage-backed securities in the Company’s portfolio are government sponsored enterprise (GSE) pass-
through instruments issued by the Federal National Mortgage Association (FNMA), which guarantees the timely
payment of principal on these investments.
The unrealized losses noted above are considered to be temporary impairments. The decline in the values of
the debt securities is due only to interest rate fluctuations, rather than erosion of issuer credit quality. As a result,
the payment of contractual cash flows, including principal repayment, is not at risk. As the Company does not
intend to sell the securities, does not believe the Company will be required to sell the securities before recovery
and expects to recover the entire amortized cost basis, none of the debt securities are deemed to be other-than-
temporarily impaired.
71
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
Equity securities owned by the Company consist of common stock of various financial services providers
(“Bank Stocks”) and are evaluated quarterly for evidence of other-than-temporary impairment. There were five
equity securities that were in an unrealized loss position on December 31, 2015, and have carried unrealized
losses for 12 months or more. Individually, none of these five equity securities have significant unrealized losses.
Of the five equity securities that have sustained unrealized losses for more than 12 months, all have increased in
fair value during 2015, indicating the possibility of full recovery and therefore are deemed to be temporarily
impaired. Additionally, there are six equity securities in an unrealized loss position as of December 31, 2015 that
have been in that position for less than 12 months. The unrealized losses present in those securities are
insignificant. Management has identified no other-than-temporary impairment as of, or for the years ended,
December 31, 2015, 2014 and 2013 in the equity portfolio. Management continues to track the performance of
each stock owned to determine if it is prudent to deem any further other-than-temporary impairment charges.
The Company has the ability and intent to hold its equity securities until recovery of unrealized losses.
The following table shows gross unrealized losses and fair value, aggregated by category and length of time
that individual securities had been in a continuous unrealized loss position, at December 31, 2014
(in thousands):
Less than 12 Months
Unrealized
Fair
Losses
Value
Unrealized Losses at December 31, 2014
12 Months or More
Total
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Obligations of U.S. Government
agencies and corporations
Obligations of state and political
subdivisions
Mortgage-backed securities
Debt securities
Equity securities
Total temporarily
$
6,998
$
(26) $
32,515
$
(577)
$
39,513
$
(603)
5,592
13,550
26,140
31
(33)
(60)
(119)
(2)
2,426
95
35,036
179
(20)
(1)
(598)
(28)
8,018
13,645
61,176
210
(53)
(61)
(717)
(30)
impaired securities
$ 26,171
$
(121) $
35,215
$
(626)
$
61,386
$
(747)
7. LOANS AND RELATED ALLOWANCE FOR LOAN LOSSES
The following table presents the classes of the loan portfolio summarized by the aggregate pass rating and the
classified ratings of special mention, substandard and doubtful within the Company’s internal risk rating system
as of December 31, 2015 and December 31, 2014 (in thousands):
Pass
Special
Mention
Substandard
Doubtful
Total
As of December 31, 2015
Commercial, financial and agricultural
Real estate - commercial
Real estate - construction
Real estate - mortgage
Obligations of states and political subdivisions
Personal
Total
$
30,814
106,629
16,351
152,161
17,069
6,787
$ 329,811
$
$
1,853
16,067
7,024
6,595
455
56
32,050
$
$
1,504
3,274
3,297
4,656
-
3
12,734
$
$
-
1,243
-
1,205
-
-
2,448
$ 34,171
127,213
26,672
164,617
17,524
6,846
$ 377,043
72
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
Pass
Special
Mention
Substandard
Doubtful
Total
As of December 31, 2014
Commercial, financial and agricultural
Real estate - commercial
Real estate - construction
Real estate - mortgage
Obligations of states and political subdivisions
Personal
Total
$
17,904
70,369
12,934
128,898
15,708
3,987
$ 249,800
$
$
5,697
15,297
3,486
5,611
22
57
30,170
$
$
137
3,037
3,957
4,280
-
-
11,411
$
$
-
1,297
336
1,887
-
-
3,520
$
23,738
90,000
20,713
140,676
15,730
4,044
$ 294,901
The Company has certain loans in its portfolio that are considered to be impaired. It is the policy of the
Company to recognize income on impaired loans that have been transferred to nonaccrual status on a cash basis,
only to the extent that it exceeds principal balance recovery. A collateral analysis is performed on each impaired
loan at least quarterly and results are used to determine if a specific reserve is necessary to adjust the carrying
value of each individual loan down to the estimated fair value. Generally, specific reserves are carried against
impaired loans based upon estimated collateral value until a confirming loss event occurs or until termination of
the credit is scheduled through liquidation of the collateral or foreclosure. Consumer mortgage loans secured by
residential real estate properties for which formal foreclosure proceedings were in process at December 31, 2015
and December 31, 2014 totaled $382,000 and $384,000, respectively. Charge off will occur when a confirmed loss
is identified. Professional appraisals of collateral, discounted for expected selling costs, are used to determine the
charge-off amount. The following tables summarize information regarding impaired loans by portfolio class as of
December 31, 2015 and December 31, 2014 (in thousands):
As of December 31, 2015
Unpaid
Principal
Balance
Related
Allowance
Recorded
Investment
Impaired Loans
With no related allowance recorded:
Commercial, financial
and agricultural
Real estate - commercial
Acquired with credit
deterioration
Real estate - construction
Real estate - mortgage
Acquired with credit
deterioration
With an allowance recorded:
Real estate - mortgage
Total:
Commercial, financial
and agricultural
Real estate - commercial
Acquired with credit
deterioration
Real estate - construction
Real estate - mortgage
Acquired with credit
deterioration
$
475
1,851
$
475
2,024
$
834
-
2,636
630
893
-
4,127
642
-
$
-
$
475
1,851
834
-
2,636
$
475
2,024
$
893
-
4,127
$
$
630
6,426
$
642
8,161
$
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
73
As of December 31, 2014
Unpaid
Principal
Balance
Recorded
Investment
Related
Allowance
$
1
2,264
$
1
2,357
$
-
336
3,056
-
664
4,324
-
-
-
-
-
-
-
-
896
$
937
$
150
1
2,264
$
1
2,357
$
-
336
3,952
-
664
5,261
-
6,553
$
-
8,283
$
$
-
-
-
-
150
-
150
$
$
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
Year Ended December 31, 2015
Cash
Basis
Interest
Income
Interest
Income
Recognized
Average
Recorded
Investment
Year Ended December 31, 2014
Average
Recorded
Investment
Interest
Income
Recognized
Cash
Basis
Interest
Income
Year Ended December 31, 2013
Cash
Basis
Interest
Income
Interest
Income
Recognized
Average
Recorded
Investment
$
48
2,141
$
1
62
$
2
49
127
2,345
$
$
-
96
$
238
2,058
$
25 $
45
417
168
2,846
53
-
-
27
-
- $
27
-
-
36
-
-
420
3,205
-
-
-
76
-
-
-
71
-
-
1,254
1,920
-
$
$
-
-
-
448
- $
-
-
-
- $
-
-
-
-
119
739
631
$
-
$
-
$
119
$
-
-
-
5
838
1,253
238
2,058
25
45
-
27
48 $
1 $
2 $
2,260
62
417
-
-
-
-
49
-
127
2,464
$
$
-
96
-
-
-
2
64
-
-
-
-
-
$
-
24
-
6
24
-
-
-
-
7
-
24
-
Impaired loans
With no related allowance:
Commercial, financial
and agricultural
Real estate - commercial
Acquired with credit
deterioration
Real estate - construction
Real estate - mortgage
Acquired with credit
deterioration
With an allowance recorded:
Commercial, financial
and agricultural
Real estate - commercial
Real estate - construction
Real estate - mortgage
Total:
Commercial, financial
and agricultural
Real estate - commercial
Acquired with credit
deterioration
The following table presents nonaccrual loans by classes of the loan portfolio as of December 31, 2015 and
December 31, 2014 (in thousands):
Nonaccrual loans:
Real estate - commercial
Real estate - construction
Real estate - mortgage
Total
December 31, 2015 December 31, 2014
1,717
$
336
3,193
5,246
1,286
-
2,402
3,688
$
$
$
Interest income not recorded based on the original contractual terms of the loans for nonaccrual loans was
$239,000, $382,000 and $490,000 in 2015, 2014 and 2013, respectively. The aggregate amount of demand
deposits that have been reclassified as loan balances at December 31, 2015 and 2014 were $146,000 and
$36,000, respectively.
74
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
The performance and credit quality of the loan portfolio is also monitored by analyzing the age of the loans
receivable as determined by the length of time a recorded payment is past due. The following table presents the
classes of the loan portfolio summarized by the past due status as of December 31, 2015 and December 31, 2014
(in thousands):
Loans
Past Due
Greater
than 90
Days and
Accruing
$
-
-
443
-
-
119
-
2
564
Loans
Past Due
Greater
than 90
Days and
Accruing
-
-
-
400
-
-
400
$
$
$
As of December 31, 2015
Commercial, financial and agricultural
Real estate - commercial
Real estate - commercial
Acquired with credit deterioration
Real estate - construction
Real estate - mortgage
Real estate - mortgage
Acquired with credit deterioration
Obligations of states and political subdivisions
Personal
Total
As of December 31, 2014
Commercial, financial and agricultural
Real estate - commercial
Real estate - construction
Real estate - mortgage
Obligations of states and political subdivisions
Personal
Total
30-59 Days 60-89 Days
Past Due
Past Due
Greater
than 90
Days
Total
Past
Due
Current
$
92
-
-
$
92 $
34,079
$
Total
Loans
34,171
112
-
-
124
175
-
1,243
443
-
1,479
618
-
124,900
216
26,672
126,379
834
26,672
1,038
-
-
56
1,298 $
761
61
-
48
1,169 $
1,669
119
-
2
3,476 $
3,468
180
-
106
160,519
450
17,524
6,740
5,943 $ 371,100
163,987
630
17,524
6,846
$ 377,043
$
$
Total
Loans
23,738
90,000
20,713
140,676
15,730
4,044
$ 294,901
30-59 Days 60-89 Days
Past Due
Past Due
Greater
than 90
Days
Total
Past
Due
Current
14 $
23,724
87,834
20,273
135,884
15,730
4,027
7,429 $ 287,472
2,166
440
4,792
-
17
$
2 $
388
-
498
-
17
905 $
$
12 $
61
104
1,326
-
-
1,503 $
$
-
1,717
336
2,968
-
-
5,021 $
75
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
The following table summarizes information regarding troubled debt restructurings by loan portfolio class as
of and for the years ended December 31, 2015 and 2014, in thousands of dollars.
As of December 31, 2015
Accruing troubled debt restructurings:
Real estate - commercial
Real estate - mortgage
As of December 31, 2014
Accruing troubled debt restructurings:
Real estate - commercial
Real estate - mortgage
Non-accruing troubled debt restructurings:
Real estate - mortgage
Pre-Modification Post-Modification
Number of
Contracts
Outstanding
Recorded
Investment
Outstanding
Recorded
Investment
Recorded
Investment
1
6
7
1
6
1
8
$
$
$
$
148
254
402
148
254
364
766
$
$
$
$
148
282
430
148
282
371
801
$
$
$
$
142
234
376
145
256
366
767
The Company’s troubled debt restructurings are also impaired loans, which may result in a specific allocation
and subsequent charge-off if appropriate. As of December 31, 2015, there were no specific reserves and no
charge-offs relating to the troubled debt restructurings. The amended terms of the restructured loans vary,
whereby interest rates have been reduced, principal payments have been reduced or deferred for a period of time
and/or maturity dates have been extended.
As of December 31, 2014, one restructured loan with a balance of $366,000 was in default because it was
delinquent in excess of 90 days with respect to the terms of the restructuring and was placed in non-accrual. In
2015, the loan was foreclosed upon and the property was sold. There have been no defaults of troubled debt
restructurings that took place during 2015, 2014 or 2013 within 12 months of restructure.
There were no loans whose terms have been modified resulting in troubled debt restructurings during 2015.
The following table summarizes loans whose terms have been modified, resulting in troubled debt restructurings
during 2014, in thousands of dollars.
As of December 31, 2014
Accruing troubled debt restructurings:
Real estate - mortgage
Pre-Modification Post-Modification
Number of
Contracts
Outstanding
Recorded
Investment
Outstanding
Recorded
Investment
Recorded
Investment
3
3
$
$
92
92
$
$
92
92
$
$
87
87
76
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
The following tables summarize loans and the activity in the allowance for loan losses by loan class, segregated
into the amount required for loans individually evaluated for impairment and the amount required for loans
collectively evaluated for impairment as of and for the years ended December 31, 2015, 2014 and 2013
(in thousands):
Allowance for loan losses
Beginning Balance, January 1, 2015
Charge-offs
Recoveries
Provisions
Ending balance
As of December 31, 2015
Allowance for loan losses:
Ending balance
evaluated for impairment
individually
collectively
Loans:
Ending balance
evaluated for impairment
individually
collectively
acquired with credit deterioration
Allowance for loan losses
Beginning Balance, January 1, 2014
Charge-offs
Recoveries
Provisions
Ending balance
As of December 31, 2014
Allowance for loan losses:
Ending balance
evaluated for impairment
individually
collectively
Loans:
Ending balance
evaluated for impairment
individually
collectively
Commercial,
financial
and
agricultural commercial
Real estate- Real estate- Real estate-
construction mortgage
Obligations
of states and
political
subdivisions
$
$
222 $
(11)
7
46
264 $
665 $
(66)
-
237
836 $
155 $
(24)
-
60
191 $
1,300 $
(305)
1
144
1,140 $
-
-
-
-
-
Commercial,
financial
and
agricultural commercial
Real estate- Real estate- Real estate-
construction mortgage
Obligations
of states and
political
subdivisions
$
264 $
836 $
191 $
1,140 $
$
$
- $
264 $
-
$
836 $
-
$
191 $
-
$
1,140 $
-
-
-
Personal
38
(9)
3
15
47
Personal
47
-
47
$
$
$
$
$
Total
2,380
(415)
11
502
2,478
Total
2,478
-
2,478
$
$
$
$
$
$ 34,171 $ 127,213 $
26,672 $
164,617 $
17,524
$
6,846
$ 377,043
$
475 $
$ 33,696 $ 124,551
834
- $
$
1,828 $
$
$
-
$
26,672 $
$
-
2,532 $
$
$
161,455
630
-
17,524
-
Commercial,
financial
and
agricultural commercial
Real estate- Real estate- Real estate-
construction mortgage
Obligations
of states and
political
subdivisions
$
$
253 $
(20)
4
(15)
222 $
534 $
(92)
5
218
665 $
212 $
(18)
-
(39)
155 $
1,246 $
(125)
-
179
1,300 $
-
-
-
-
-
Commercial,
financial
and
agricultural commercial
Real estate- Real estate- Real estate-
construction mortgage
Obligations
of states and
political
subdivisions
$
222 $
665 $
155 $
1,300 $
$
$
- $
222 $
-
$
665 $
-
$
155 $
150 $
1,150 $
-
-
-
$
$
$
$
$
$
$
$
-
6,846
-
$
4,835
$ 370,744
1,464
$
Personal
42
(20)
2
14
38
Personal
38
-
38
Total
2,287
(275)
11
357
2,380
Total
2,380
150
2,230
$
$
$
$
$
$ 23,738 $
90,000 $
20,713 $
140,676 $
15,730
$
4,044
$ 294,901
$
1 $
$ 23,737 $
2,264 $
87,736 $
336 $
20,377 $
3,952 $
136,724 $
-
15,730
$
$
-
4,044
$
6,553
$ 288,348
77
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
Allowance for loan losses
Beginning Balance, January 1, 2013
Charge-offs
Recoveries
Provisions
Ending balance
As of December 31, 2013
Allowance for loan losses:
Ending balance
evaluated for impairment
individually
collectively
Loans:
Ending balance
evaluated for impairment
individually
collectively
Commercial,
financial
and
agricultural commercial
Real estate- Real estate- Real estate-
construction mortgage
Obligations
of states and
political
subdivisions
$
$
179 $
(4)
13
65
253 $
463 $
-
-
71
534 $
202 $
(117)
-
127
212 $
2,387 $
(1,281)
-
140
1,246 $
-
-
-
-
-
Personal
50
(29)
9
12
42
$
$
Total
3,281
(1,431)
22
415
2,287
$
$
Commercial,
financial
and
agricultural commercial
Real estate- Real estate- Real estate-
construction mortgage
Obligations
of states and
political
subdivisions
Personal
Total
$
253 $
534 $
212
$
1,246 $
$
$
- $
253 $
26 $
508 $
93 $
119 $
45 $
1,201 $
-
-
-
$
$
$
42
$
2,287
-
42
$
$
164
2,123
$ 26,281 $
74,471 $
19,681 $
140,459 $
12,702
$
4,204
$ 277,798
$
94 $
$ 26,187 $
2,255 $
72,216 $
1,982 $
17,699 $
3,718 $
136,741 $
-
12,702
$
$
-
4,204
$
8,049
$ 269,749
78
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
8. pLEDGED ASSETS
The Bank must maintain sufficient qualifying collateral with the Federal Home Loan Bank (FHLB) in order to
secure borrowings. Therefore, a Master Collateral Agreement has been entered into which pledges all mortgage
related assets as collateral for future borrowings. Mortgage related assets could include loans or investment
securities. As of December 31, 2015, the amount of loans included in qualifying collateral was $184,153,000, for
a collateral value of $133,309,000. No investment securities are included in qualifying collateral as of
December 31, 2015.
9. BANK OWNED LIFE INSuRANCE AND ANNuITIES
The Company holds bank-owned life insurance (BOLI), deferred annuities and payout annuities with a
combined cash value of $14,905,000 and $14,807,000 at December 31, 2015 and 2014, respectively. As
annuitants retire, the deferred annuities may be converted to payout annuities to create payment streams that
match certain post-retirement liabilities. The cash surrender value on the BOLI and annuities increased by
$97,000, $411,000 and $446,000 in 2015, 2014 and 2013, respectively, from earnings recorded as non-interest
income and from premium payments, net of cash payments received. The contracts are owned by the Bank in
various insurance companies. The crediting rate on the policies varies annually based on the insurance
companies’ investment portfolio returns in their general fund and market conditions. Changes in cash value of
BOLI and annuities in 2015 and 2014 are shown below (in thousands):
Life
Insurance
14,462
$
Deferred
Annuities
381
$
Payout
Annuities
5
$
Total
$ 14,848
Balance as of January 1, 2014
Earnings
Premiums on existing policies
Annuity payments received
Net proceeds from life insurance claim
Balance as of December 31, 2014
Earnings
Premiums on existing policies
Annuity payments received
Net proceeds from life insurance claim
Balance as of December 31, 2015
10. pREMISES AND EquIpMENT
339
46
-
(450)
14,397
321
41
-
(259)
14,500
$
$
15
14
-
-
410
16
13
(34)
-
405
Premises and equipment consist of the following (in thousands):
Land
Buildings and improvements
Furniture, computer software and equipment
Less: accumulated depreciation
-
-
(5)
-
-
-
-
-
-
-
354
60
(5)
(450)
14,807
337
54
(34)
(259)
14,905
$
$
December 31,
2015
1,126
9,226
4,901
15,253
(8,344)
6,909
2014
1,066
8,828
4,690
14,584
(8,051)
6,533
$
$
$
$
Depreciation expense on premises and equipment charged to operations was $506,000 in 2015, $494,000 in
2014 and $497,000 in 2013.
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JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
11. GOODWILL AND OThER INTANGIBLE ASSETS
Branch Acquisition
On September 8, 2006, the Company acquired a branch office in Richfield, PA. Goodwill at December 31, 2015
and 2014 was $2,046,000. Core deposit intangible was $29,000 net of amortization of $402,000 at December 31,
2015 and $74,000 net of amortization of $375,000 at December 31, 2014. The core deposit intangible is being
amortized over a ten-year period on a straight line basis. Goodwill is not amortized, but is measured annually for
impairment. Core deposit intangible amortization expense of $45,000 was recorded in each of the years 2015,
2014 and 2013. Intangible amortization expense projected for the remaining year in 2016 is estimated to
be $29,000.
FNBPA Acquisition
On November 30, 2015, the Company completed its acquisition of FNBPA and, as a result, recorded goodwill of
$3,335,000. Core deposit intangible in the amount of $303,000 was recorded and will be amortized over
a ten-year period using a sum of the year’s digits basis. Core deposit intangible amortization expense recorded in
2015 was $4,000 and for the succeeding five years beginning 2016 is estimated to be $55,000, $49,000, $44,000,
$38,000 and $33,000 per year, respectively, and $80,000 in total for years after 2020. Other intangible assets
were identified and recorded as of November 30, 2015,in the amount of $40,000 and will be amortized on a
straight line basis over two years, through November 30, 2017. Expense recognized in 2015 was $2,000, and is
projected to be $20,000 and $18,000 for 2016 and 2017, respectively. Core deposit and other intangible assets,
net of amortization, was $337,000 as of December 31, 2015.
12. INVESTMENT IN uNCONSOLIDATED SuBSIDIARy
On September 1, 2006, the Company invested in Liverpool Community Bank (formerly known as The First
National Bank of Liverpool) (“LCB”), Liverpool, Pennsylvania, by purchasing 39.16% of its outstanding common
stock. This investment is accounted for under the equity method of accounting. The investment was carried at
$4,553,000 and $4,369,000 as of December 31, 2015 and 2014, respectively. The Company increases its
investment in LCB for its share of earnings and decreases its investment by any dividends received from LCB. The
investment is evaluated quarterly for impairment. A loss in value of the investment which is determined to be
other than a temporary decline would be recognized as a loss in the period in which such determination is made.
Evidence of a loss in value might include, but would not necessarily be limited to, absence of an ability to recover
the carrying amount of the investment or inability of LCB to sustain an earnings capacity which would justify the
current carrying value of the investment.
13. DEpOSITS
Deposits consist of the following (in thousands):
Demand, non-interest bearing
Interest-bearing demand and money market
Savings
Time deposits, $250,000 or more
Other time deposits
80
$
December 31,
2015
$ 106,667
114,406
94,923
5,222
135,908
$ 457,126
2014
77,697
95,675
67,430
4,501
135,581
$ 380,884
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
Aggregate amount of scheduled maturities of time deposits as of December 31, 2015 include the following
(in thousands):
Maturing in:
2016
2017
2018
2019
2020
Later
$250,000 or more
$
962
252
626
1,683
503
1,309
5,335
Other
57,599
21,262
12,600
16,987
17,634
9,713
135,795
$
$
$
Total Time Deposits
58,561
21,514
13,226
18,670
18,137
11,022
141,130
$
14. BORROWINGS
$
Borrowings consist of the following (dollars in thousands):
Securities sold under agreements to repurchase
$
4,996
0.10%
$
4,594
0.10%
$
4,716
0.10%
December 31, 2015
December 31, 2014
For the year 2015
Outstanding
Balance
Rate
Outstanding
Balance
Rate
Average
Balance
Weighted
Average
Rate
Short-term borrowings with Federal Home Loan Bank
Overnight advances
30,061
0.44%
9,700
0.27%
Mid-term repo maturing August 2015
Long-term debt with Federal Home Loan Bank
Mid-term repo maturing April 2016
Mid-term repo maturing March 2017
Fixed rate loan maturing April 2018
Fixed rate loan maturing April 2019
7,500
6,250
5,000
3,750
$ 57,557
0.63%
1.10%
1.60%
2.00%
0.71%
6,250
0.39%
7,500
0.63%
6,250
1.10%
5,000
1.60%
3,750
2.00%
10,693
5,616
0.38%
0.39%
7,500
6,250
5,000
3,750
0.63%
1.10%
1.60%
2.00%
0.78%
$
43,044
0.76%
$
43,525
The maximum balance of short-term borrowings at any month-end during 2015 was $ 35,234,000.
The Bank has repurchase agreements with several of its depositors, under which customers’ funds are invested
daily into an interest bearing account. These funds are carried by the Company as short-term debt. It is the
Company’s policy to have repurchase agreements collateralized 100% by U.S. Government securities. As of
December 31, 2015, the securities that serve as collateral for securities sold under agreements to repurchase had
a fair value of $7,964,000. The interest rate paid on these funds is variable and subject to change daily.
The Bank’s maximum borrowing capacity with the Federal Home Loan Bank of Pittsburgh (“FHLB”) is
$133,309,000, with a balance of $52,561,000 outstanding as of December 31, 2015. In order to borrow additional
amounts, the FHLB would require the Bank to purchase additional FHLB Stock. The FHLB is a source of both
short-term and long-term funding. The Bank must maintain sufficient qualifying collateral to secure all
outstanding advances. Qualifying collateral is defined by the FHLB and includes outstanding balances of the
Company’s real estate loans, excluding loans with certain risk mitigants, including delinquencies and loans made
to insiders, borrowers with low credit scores or loans with high loan-to-value ratios.
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JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
15. OpERATING LEASE OBLIGATIONS
The Company has entered into a number of arrangements that are classified as operating leases. The operating
leases are for several branch and office locations. The majority of the branch and office location leases are
renewable at the Company’s option. Future minimum lease commitments are based on current rental payments.
Rental expense charged to operations, including license fees for branch offices, was $127,000, $124,000 and
$122,000 in 2015, 2014 and 2013, respectively.
The following is a summary of future minimum rental payments for the next five years required under
operating leases that have initial or remaining noncancellable lease terms in excess of one year as of December
31, 2015 (in thousands):
Years ending December 31,
2016
2017
2018
2019
2020
2021 and beyond
Total minimum payments required
$
$
138
132
84
78
60
63
555
16. INCOME TAxES
The components of income tax expense for the three years ended December 31 were (in thousands):
Current tax (benefit) expense
Deferred tax expense (benefit)
Total tax expense
2015
149
(66)
83
$
$
2014
331
194
525
$
$
2013
(157)
662
505
$
$
A reconciliation of the statutory income tax expense computed at 34% to the income tax expense included in
the consolidated statements of income follows (dollars in thousands):
Income before income taxes
Statutory tax rate
Federal tax at statutory rate
Tax-exempt interest
Net earnings on BOLI
Gain from life insurance proceeds
Dividend from unconsolidated subsidiary
Stock-based compensation
Federal tax credits
Merger and acquisition expenses
Other permanent differences
Total tax expense
Effective tax rate
82
Years Ended December 31,
2015
3,141
2014
4,741
2013
4,506
$
$
$
34.0%
34.0%
34.0%
1,068
(391)
(99)
(34)
(15)
20
(570)
115
(11)
83
2.6%
$
1,612
(358)
(93)
(56)
(13)
16
(575)
-
(8)
525
11.1%
$
1,532
(354)
(108)
-
(13)
10
(556)
-
(6)
505
11.2%
$
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
Deductible temporary differences and taxable temporary differences gave rise to a net deferred tax asset for
the Company as of December 31, 2015 and 2014. The components giving rise to the net deferred tax asset are
detailed below (in thousands):
Deferred Tax Assets
Allowance for loan losses
Deferred directors’ compensation
Employee and director benefits
Qualified pension liability
Unrealized loss from securities impairment
Investment in low income housing project
Fair value adjustments to acquired assets and liabilities
Tax credit carryforward
Other
Total deferred tax assets
Deferred Tax Liabilities
Depreciation
Equity income from unconsolidated subsidiary
Loan origination costs
Prepaid expense
Unrealized gains on securities available for sale
Annuity earnings
Fair value of mortgage servicing rights
Intangible assets
Goodwill
Total deferred tax liabilities
Net deferred tax asset included in other assets
December 31,
2015
2014
489
511
534
785
236
96
493
80
104
3,328
$
675
519
553
457
239
52
-
-
57
2,552
(288)
(589)
(412)
(284)
(58)
(73)
(70)
(67)
(433)
(2,274)
1,054
(199)
(526)
(348)
(138)
(148)
(68)
(66)
-
(387)
(1,880)
672
$
$
$
The Company has concluded that the deferred tax assets are realizable (on a more likely than not basis)
through the combination of future reversals of existing taxable temporary differences, certain tax planning
strategies and expected future taxable income.
It is the Company’s policy to recognize interest and penalties on unrecognized tax benefits in income tax
expense in the Consolidated Statements of Income. No significant income tax uncertainties were identified as a
result of the Company’s evaluation of its income tax position. Therefore, the Company recognized no adjustment
for unrecognized income tax benefits for the years ended December 31, 2015, 2014 and 2013. The Company is no
longer subject to examination by taxing authorities for years before 2012. Tax years 2012 through the present,
with limited exception, remain open to examination.
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JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
17. STOCKhOLDERS’ EquITy AND REGuLATORy MATTERS
The Company is authorized to issue 500,000 shares of preferred stock with no par value. The Board has the
ability to fix the voting, dividend, redemption and other rights of the preferred stock, which can be issued in one
or more series. No shares of preferred stock have been issued.
The Company has a dividend reinvestment and stock purchase plan. Under this plan, additional shares of
Juniata Valley Financial Corp. stock may be purchased at the prevailing market prices with reinvested dividends
and voluntary cash payments, within limits. To the extent that shares are not available in the open market, the
Company has reserved common stock to be issued under the plan. Any adjustment in capitalization of the
Company will result in a proportionate adjustment to the reserved shares for this plan. At December 31, 2015,
141,887 shares were available for issuance under the Dividend Reinvestment Plan.
The Company periodically repurchases shares of its common stock under a share repurchase program
approved by the Board of Directors. Repurchases have typically been through open market transactions and have
complied with all regulatory restrictions on the timing and amount of such repurchases. Shares repurchased have
been added to treasury stock and accounted for at cost. These shares may be reissued for stock option exercises,
employee stock purchase plan purchases, to fulfill dividend reinvestment program needs and to supply shares
needed for exchange in an acquisition. During 2015, 2014 and 2013, 3,504, 12,322 and 24,918 shares,
respectively, were repurchased in conjunction with this program. Remaining shares authorized in the program
were 27,649 as of December 31, 2015. On November 30, 2015, 555,555 treasury shares were reissued to former
FNBPA shareholders in conjunction with the acquisition of FNBPA.
The Company and the Bank are subject to risk-based capital standards by which bank holding companies and
banks are evaluated in terms of capital adequacy. These regulatory capital requirements are administered by the
federal banking agencies. Failure to meet minimum capital requirements can result in certain mandatory and
possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on
the Company’s consolidated financial statements. Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that
involve quantitative measures of the Company’s and the Bank’s assets, liabilities, and certain off-balance sheet
items as calculated under regulatory accounting practices. The Company’s and Bank’s capital amounts and
classification are also subject to qualitative judgments by the regulators about components, risk weightings, and
other factors.
Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank
to each maintain minimum amounts and ratios. The requirements were revised and became effective on a
phased-in basis beginning January 1, 2015 and include the establishment of a new Common Equity Tier I level.
Juniata’s and the Bank’s Total, Tier I and Common Equity Tier I capital (as defined in the regulations) to risk-
weighted assets (as defined in the regulations), and Tier I capital (as defined in the regulations) to average assets
(as defined in the regulations) are set forth in the table below. The new risk-based capital rules require that
banks and holding companies maintain a “capital conservation buffer” of 250 basis points in excess of the
“minimum capital ratio”. The minimum capital ratio is equal to the prompt corrective action adequately
capitalized threshold ratio. The capital conservation buffer will be phased in over four years beginning on
January 1, 2016, with a maximum buffer of 0.625% of risk weighted assets for 2016, 1.25% for 2017, 1.875% for
2018 and 2.5% for 2019 and thereafter. Failure to maintain the required capital conservation buffer will result in
limitations on capital distributions and on discretionary bonuses to executive officers. Management believes, as
of December 31, 2015 and 2014, that the Company and the Bank met all capital adequacy requirements to which
they were subject.
84
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
As of December 31, 2015, the most recent notification from the regulatory banking agencies categorized the
Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as “well
capitalized”, the Bank must maintain minimum Total risk-based, Tier I risk-based, Common Equity Tier I risk-
based and Tier I leverage ratios as set forth in the table. To the knowledge of management, there are no
conditions or events since these notifications that have changed the Bank’s category.
The table below provides a comparison of the Company’s and the Bank’s risk-based capital ratios and leverage
ratios to the minimum regulatory requirements as of the dates indicated (dollars in thousands).
Juniata Valley Financial Corp. (Consolidated)
As of December 31, 2015:
Total Capital
(to Risk Weighted Assets)
Tier 1 Capital
(to Risk Weighted Assets)
Common Equity Tier 1 Capital
(to Risk Weighted Assets)
Tier 1 Capital
(to Average Assets) Leverage
As of December 31, 2014:
Total Capital
(to Risk Weighted Assets)
Tier 1 Capital
(to Risk Weighted Assets)
Tier 1 Capital
(to Average Assets) Leverage
The Juniata Valley Bank
As of December 31, 2015:
Total Capital
(to Risk Weighted Assets)
Tier 1 Capital
(to Risk Weighted Assets)
Common Equity Tier 1 Capital
(to Risk Weighted Assets)
Tier 1 Capital
(to Average Assets) Leverage
As of December 31, 2014:
Total Capital
(to Risk Weighted Assets)
Tier 1 Capital
(to Risk Weighted Assets)
Tier 1 Capital
(to Average Assets) Leverage
Actual
Amount
Ratio
Minimum Requirement
for Capital
Adequacy Purposes
Ratio
Amount
$
57,098
15.03%
$
30,385
8.00%
54,338
14.31%
22,789
6.00%
54,338
14.31%
17,092
4.50%
54,338
11.23%
19,352
4.00%
$
52,492
17.12%
$
24,531
8.00%
49,912
16.28%
12,265
4.00%
49,912
10.65%
18,741
4.00%
Actual
Amount
Ratio
Minimum Requirement
For Capital
Adequacy Purposes
Amount
Ratio
Minimum
Regulatory
Requirements
to be "Well
Capitalized"
under Prompt
Corrective Action
Provisions
Amount
Ratio
$
51,491
14.11%
$
29,186
8.00%
$
36,482
10.00%
48,861
13.39%
14,593
4.00%
29,186
8.00%
48,861
13.39%
16,417
4.50%
23,713
6.50%
48,861
10.21%
19,146
4.00%
23,932
5.00%
$
47,145
15.59%
$
24,186
8.00%
$
30,233
10.00%
44,688
14.78%
12,093
4.00%
18,140
6.00%
44,688
9.42%
18,969
4.00%
23,711
5.00%
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JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
Certain regulatory restrictions exist regarding the ability of the Bank to transfer funds to the Company in the
form of cash dividends, loans or advances. At December 31, 2015, $33,862,000 of undistributed earnings of the
Bank, included in the consolidated stockholders’ equity, was available for distribution to the Company as
dividends without prior regulatory approval, subject to the regulatory capital requirements above.
18. CALCuLATION OF EARNINGS pER ShARE
Basic earnings per share (EPS) is computed by dividing net income by the weighted average number of
common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted into common stock or resulted
in the issuance of common stock that then shared in the earnings of the Company. Potential common shares that
may be issued by the Company relate solely to outstanding stock options and are determined using the treasury
stock method. The following table sets forth the computation of basic and diluted earnings per share:
Years Ended December 31,
Net income
Weighted-average common shares outstanding
Basic earnings per share
Weighted-average common shares outstanding
Common stock equivalents due to effect of stock options
Total weighted-average common shares and equivalents
Diluted earnings per share
Anti-dilutive stock options outstanding
19. ACCuMuLATED OThER COMpREhENSIVE LOSS
$
$
$
$
2015
$
$
2013
2014
(Amounts, except earnings
per share, in thousands)
4,216
4,193
1.01
4,193
-
4,193
1.01
100
4,001
4,210
0.95
4,210
1
4,211
0.95
78
$
$
$
$
$
$
3,058
4,240
0.72
4,240
1
4,241
0.72
103
Components of accumulated other comprehensive loss, net of tax as of December 31 of each of the last three
years consist of the following (in thousands):
Unrealized gains (losses) on available for sale securities
Unrecognized expense for defined benefit pension
Accumulated other comprehensive loss
20. FAIR VALuE MEASuREMENT
12/31/2015
96
$
(2,299)
(2,203)
$
12/31/2014
296
$
(2,493)
(2,197)
$
12/31/2013
(751)
$
(908)
(1,659)
$
Fair value measurement and disclosure guidance defines fair value as the price that would be received to sell
an asset or transfer a liability in an orderly transaction (that is, not a forced liquidation or distressed sale)
between market participants at the measurement date under current market conditions. Additional guidance is
provided on determining when the volume and level of activity for the asset or liability has significantly
decreased. The guidance also includes guidance on identifying circumstances when a transaction may not be
considered orderly.
Fair value measurement and disclosure guidance provides a list of factors that a reporting entity should
evaluate to determine whether there has been a significant decrease in the volume and level of activity for the
asset or liability in relation to normal market activity for the asset or liability. When the reporting entity
concludes there has been a significant decrease in the volume and level of activity for the asset or liability, further
analysis of the information from that market is needed, and significant adjustments to the related prices may be
necessary to estimate fair value in accordance with fair value measurement and disclosure guidance.
86
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
This guidance clarifies that, when there has been a significant decrease in the volume and level of activity for
the asset or liability, some transactions may not be orderly. In those situations, the entity must evaluate the
weight of the evidence to determine whether the transaction is orderly. The guidance provides a list of
circumstances that may indicate that a transaction is not orderly. A transaction price that is not associated with
an orderly transaction is given little, if any, weight when estimating fair value.
Fair value measurement and disclosure guidance defines fair value as the price that would be received to sell
an asset or paid to transfer a liability in an orderly transaction between market participants. A fair value
measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market
for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or
liability. The price in the principal (or most advantageous) market used to measure the fair value of the asset or
liability is not adjusted for transaction costs. An orderly transaction is a transaction that assumes exposure to the
market for a period prior to the measurement date to allow for marketing activities that are usual and customary
for transactions involving such assets and liabilities; it is not a forced transaction. Market participants are buyers
and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact and (iv)
willing to transact.
Fair value measurement and disclosure guidance requires the use of valuation techniques that are consistent
with the market approach, the income approach and/or the cost approach. The market approach uses prices and
other relevant information generated by market transactions involving identical or comparable assets and
liabilities. The income approach uses valuation techniques to convert future amounts, such as cash flows or
earnings, to a single present amount on a discounted basis. The cost approach is based on the amount that
currently would be required to replace the service capacity of an asset (replacement cost). Valuation techniques
should be consistently applied. Inputs to valuation techniques refer to the assumptions that market participants
would use in pricing the asset or liability. Inputs may be observable, meaning those that reflect the assumptions
market participants would use in pricing the asset or liability developed based on market data obtained from
independent sources, or unobservable, meaning those that reflect the reporting entity’s own assumptions about
the assumptions market participants would use in pricing the asset or liability developed based on the best
information available in the circumstances. In that regard, the guidance establishes a fair value hierarchy for
valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities
and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:
Level 1 Inputs
– Unadjusted quoted prices in active markets for identical assets or liabilities that the
Level 2 Inputs
reporting entity has the ability to access at the measurement date.
– Inputs other than quoted prices included in Level 1 that are observable for the asset or
liability, either directly or indirectly. These might include quoted prices for similar assets or
liabilities in active markets, quoted prices for identical or similar assets or liabilities in
markets that are not active, inputs other than quoted prices that are observable for the asset
or liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.) or inputs
that are derived principally from or corroborated by market data by correlation or
other means.
Level 3 Inputs
– Unobservable inputs for determining the fair values of assets or liabilities that reflect an
entity’s own assumptions about the assumptions that market participants would use in pricing
the assets or liabilities.
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JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
An asset’s or liability’s placement in the fair value hierarchy is based on the lowest level of input that is
significant to the fair value measurement.
A description of the valuation methodologies used for instruments measured at fair value, as well as the
general classification of such instruments pursuant to the valuation hierarchy, is set forth below.
In general, fair value is based upon quoted market prices, where available. If such quoted market prices are not
available, fair value is based upon internally developed models that primarily use, as inputs, observable market-
based parameters. Valuation adjustments may be made to ensure that financial instruments are recorded at fair
value. These adjustments may include amounts to reflect counterparty credit quality, the Company’s
creditworthiness, among other things, as well as unobservable parameters. Any such valuation adjustments are
applied consistently over time. The Company’s valuation methodologies may produce a fair value calculation that
may not be indicative of net realizable value or reflective of future fair values. While management believes the
Company’s valuation methodologies are appropriate and consistent with other market participants, the use of
different methodologies or assumptions to determine the fair value of certain financial instruments could result
in a different estimate of fair value at the reporting date.
Securities Available for Sale
Debt securities classified as available for sale are reported at fair value utilizing Level 2 inputs. For these
securities, the Company obtains fair value measurement from an independent pricing service. The fair value
measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S.
Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit
information and the debt securities’ terms and conditions, among other things. Equity securities classified as
available for sale are reported at fair value using Level 1 inputs.
Impaired Loans
Certain impaired loans are reported on a non-recurring basis at the fair value of the underlying collateral since
repayment is expected solely from the collateral. Fair value is generally determined based upon independent
third-party appraisals of the properties, or discounted cash flows based upon the expected proceeds. These
assets are included as Level 3 fair values, based upon the lowest level of input that is significant to the fair value
measurements.
Other Real Estate Owned
Certain assets included in other real estate owned are carried at fair value as a result of impairment and
accordingly are presented as measured on a non-recurring basis. Values are estimated using Level 3 inputs, based
on appraisals that consider the sales prices of property in the proximate vicinity.
Mortgage Servicing Rights
The fair value of servicing assets is based on the present value of estimated future cash flows on pools of
mortgages stratified by rate and maturity date and are considered Level 3 inputs.
88
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
The following table summarizes financial assets and financial liabilities measured at fair value as of December
31, 2015 and December 31, 2014, segregated by the level of the valuation inputs within the fair value hierarchy
utilized to measure fair value (in thousands). There were no transfers of assets between fair value Level 1 and
Level 2 during the years ended December 31, 2015 or 2014.
(Level 1)
(Level 2)
Quoted Prices in Significant
Active Markets
for Identical
Assets
Inputs
Other
(Level 3)
Significant
Other
Inputs
Observable Unobservable
December 31,
2015
Measured at fair value on a recurring basis:
Debt securities available-for-sale:
Obligations of U.S. Government agencies and corporations
Obligations of state and political subdivisions
Mortgage-backed securities
Equity securities available-for-sale
$
32,732
29,535
87,741
2,319
$
$
-
-
-
2,319
$
32,732
29,535
87,741
-
-
-
-
-
Measured at fair value on a non-recurring basis:
Impaired loans
Other real estate owned
Mortgage servicing rights
2,232
150
205
-
-
-
-
-
-
2,232
150
205
(Level 1)
(Level 2)
Quoted Prices in Significant
Active Markets
for Identical
Assets
Inputs
Other
(Level 3)
Significant
Other
Inputs
Observable Unobservable
December 31,
2014
Measured at fair value on a recurring basis:
Debt securities available-for-sale:
Obligations of U.S. Government agencies and corporations
Obligations of state and political subdivisions
Mortgage-backed securities
Equity securities available-for-sale
$
50,101
35,873
55,429
1,500
$
$
-
-
-
1,500
$
50,101
35,873
55,429
-
-
-
-
-
Measured at fair value on a non-recurring basis:
Impaired loans
Mortgage servicing rights
3,370
193
-
-
-
-
3,370
193
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JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
The following table presents additional quantitative information about assets measured at fair value on a
nonrecurring basis and for which Level 3 inputs have been used to determine fair value:
December 31, 2015
Impaired loans
Fair Value Estimate
2,232
$
Valuation Technique
Appraisal of collateral (1)
Other real estate owned
150
Appraisal of collateral (1)
Mortgage servicing rights
205 Multiple of annual
servicing fee
December 31, 2014
Impaired loans
Fair Value Estimate
3,370
$
Valuation Technique
Appraisal of collateral (1)
Mortgage servicing rights
193 Multiple of annual
servicing fee
Unobservable Input
Appraisal and
liquidation
adjustments (2)
Appraisal and
liquidation
adjustments (2)
Estimated
pre-payment
speed, based
on rate and term
Unobservable Input
Appraisal and
liquidation
adjustments (2)
Estimated
pre-payment speed,
based on rate
and term
Range
Average
7% - 37%
16.1%
32%
32%
300% - 400%
364%
Range
Average
7% - 15%
11.2%
300% - 400%
360%
(1) Fair value is generally determined through independent appraisals of the underlying collateral that generally include
various level 3 inputs which are not identifiable.
(2) Appraisals may be adjusted downward by management for qualitative factors such as economic conditions and estimated
liquidation expenses. The range of liquidation expenses and other appraisal adjustments are presented as a percent of
the appraisal.
Fair Value of Financial Instruments
Management uses its best judgment in estimating the fair value of the Company’s financial instruments;
however, there are inherent weaknesses in any estimation technique. Therefore, the fair value estimates herein
are not necessarily indicative of the amounts the Company could have realized in sales transactions on the dates
indicated. The estimated fair value amounts have been measured as of their respective year ends and have not
been re-evaluated or updated for purposes of these consolidated financial statements subsequent to those
respective dates. As such, the estimated fair values of these financial instruments subsequent to the respective
reporting dates may be different from the amounts reported at each year end.
The information presented below should not be interpreted as an estimate of the fair value of the entire
Company since a fair value calculation is provided only for a limited portion of the Company’s assets and liabilities.
Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates,
comparisons between the Company’s disclosures and those of other companies may not be meaningful.
The following describes the estimated fair value of the Company’s financial instruments as well as the
significant methods and assumptions not previously disclosed used to determine these estimated fair values.
Carrying values approximate fair value for cash and due from banks, interest-bearing demand deposits with
banks, restricted stock in the Federal Home Loan Bank, loans held for sale, interest receivable, mortgage servicing
rights, non-interest bearing deposits, securities sold under agreements to repurchase, short-term borrowings and
90
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
interest payable. Other than cash and due from banks, which are considered Level 1 inputs, and mortgage
servicing rights, which are Level 3 inputs, these instruments are Level 2 inputs.
Interest bearing time deposits with banks - The estimated fair value is determined by discounting the
contractual future cash flows, using the rates currently offered for deposits of similar remaining maturities.
Loans – For variable-rate loans that reprice frequently and which entail no significant changes in credit risk,
carrying values approximated fair value. Substantially all commercial loans and real estate mortgages are variable
rate loans. The fair value of other loans (i.e. consumer loans and fixed-rate real estate mortgages) are estimated
by calculating the present value of the cash flow difference between the current rate and the market rate, for the
average maturity, discounted quarterly at the market rate.
Fixed rate time deposits - The estimated fair value is determined by discounting the contractual future cash
flows, using the rates currently offered for deposits of similar remaining maturities.
Long-term debt and other interest bearing liabilities – The fair values are estimated using discounted cash flow
analysis, based on incremental borrowing rates for similar types of arrangements.
Commitments to extend credit and letters of credit – The fair value of commitments to extend credit is
estimated using the fees currently charged to enter into similar agreements, taking into account market interest
rates, the remaining terms and present credit-worthiness of the counterparties. The fair value of guarantees and
letters of credit is based on fees currently charged for similar agreements.
The estimated fair values of the Company’s financial instruments are as follows (in thousands):
FINANCIAL INSTRuMENTS
(in thousands)
Financial assets:
Cash and due from banks
Interest bearing deposits with banks
Interest bearing time deposits with banks
Securities
Restricted investment in FHLB stock
Loans held for sale
Loans, net of allowance for loan losses
Mortgage servicing rights
Accrued interest receivable
Financial liabilities:
Non-interest bearing deposits
Interest bearing deposits
Securities sold under agreements to repurchase
Short-term borrowings
Long-term debt
Other interest bearing liabilities
Accrued interest payable
Off-balance sheet financial instruments:
Commitments to extend credit
Letters of credit
December 31, 2015
Carrying
Value
Fair
Value
December 31, 2014
Fair
Carrying
Value
Value
$
10,385
73
350
152,327
3,509
1,808
374,565
205
1,806
106,667
350,459
4,996
30,061
22,500
1,471
238
$
10,385
73
350
152,327
3,509
1,808
373,078
205
1,806
106,667
352,859
4,996
30,061
22,482
1,476
238
$
6,757
10
-
142,903
2,726
-
292,521
193
1,491
77,697
303,187
4,594
15,950
22,500
1,412
301
$
6,757
10
-
142,903
2,726
-
294,083
193
1,491
77,697
305,635
4,594
15,950
22,464
1,416
301
-
-
-
-
-
-
-
-
91
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
The following presents the carrying amount, fair value and placement in the fair value hierarchy of the
Company’s financial instruments not previously disclosed as of December 31, 2015 and December 31, 2014. This
table excludes financial instruments for which the carrying amount approximates fair value.
December 31, 2015
Financial Instruments - Assets
Interest bearing time deposits with banks $
Loans held for sale
Loans, net of allowance for loan losses
Financial instruments - Liabilities
Interest bearing deposits
Long-term debt
Other interest bearing liabilities
December 31, 2014
Financial instruments - Assets
(Level 1)
Quoted Prices in
Active Markets
for Identical
(Level 2)
Significant
Other
(Level 3)
Significant
Other
Observable Unobservable
Fair Value Assets or Liabilities
Inputs
Inputs
Carrying
Amount
350
1,808
374,565
$
350
1,808
373,078
$
350,459
22,500
1,471
352,859
22,482
1,476
-
-
-
-
-
-
$
350
1,808
-
$
-
-
373,078
352,859
22,482
1,476
-
-
-
(Level 1)
Quoted Prices in
Active Markets
for Identical
(Level 2)
Significant
Other
(Level 3)
Significant
Other
Observable Unobservable
Fair Value Assets or Liabilities
Inputs
Inputs
Carrying
Amount
Interest bearing time deposits with banks $ 292,521 $ 294,083
Loans, net of allowance for loan losses
Financial instruments - Liabilities
Interest bearing deposits
Other interest bearing liabilities
21. EMpLOyEE BENEFIT pLANS
Stock Option Plan
303,187
22,500
1,412
305,635
22,464
1,416
-
-
-
-
$
-
$ 294,083
305,635
22,464
1,416
-
-
-
The 2000 Incentive Stock Option Plan expired in May 2010 and was replaced with the 2011 Stock Option Plan
in May 2011 (collectively, the “Plans”). The 2011 Stock Option Plan has essentially the same structure as the 2000
plan. Under the provisions of the Plans, while active, options can be granted to officers and key employees of the
Company. The Plans provide that the option price per share is not to be less than the fair market value of the
stock on the day the option was granted, but in no event less than the par value of such stock. Options granted
under the Plans are exercisable no earlier than one year after the date of grant and expire ten years after the date
of the grant.
The Plans are administered by a committee of the Board of Directors, whose members are not eligible to receive
options under the Plans. The Committee determines, among other things, which officers and key employees
receive options, the number of shares to be subject to each option, the option price and the duration of the option.
Options vest over three to five years and are exercisable at the grant price, which is at least the fair market value of
the stock on the grant date. All options previously granted under the Plans are scheduled to expire through
February 17, 2025. The aggregate number of shares that may be issued upon the exercise of options under the
2011 Stock Option Plan is 300,000 shares, and 177,975 shares were available for grant as of December 31, 2015.
Total options outstanding at December 31, 2015 have exercise prices between $17.22 and $24.00, with a weighted
average exercise price of $18.07 and a weighted average remaining contractual life of 7.0 years.
92
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
As of December 31, 2015, there was $86,000 of total unrecognized compensation cost related to nonvested
share-based compensation arrangements granted under the Plans. That cost is expected to be recognized
through 2020.
Cash received from option exercises under the Plans for the year ended December 31, 2015 was $53,000. No
options were exercised in 2014 or 2013.
A summary of the status of the Plans as of December 31, 2015, 2014 and 2013, and changes during the years
ending on those dates is presented below:
2015
2014
2013
Shares
109,816
35,800
(3,092)
-
142,524
70,920
Outstanding at beginning of year
Granted
Exercised
Forfeited
Outstanding at end of year
Options exercisable at year-end
Weighted-average fair value of
options granted during the year
Intrinsic value of options exercised during the year
Intrinsic value of options outstanding and
exercisable at December 31, 2015
Shares
83,930
33,525
-
(7,639)
109,816
51,396
Weighted
Average
Exercise
Price
18.50
17.72
-
20.44
18.13
1.96
-
$
$
$
$
Shares
97,792
21,800
-
(35,662)
83,930
43,079
Weighted
Average
Exercise
Price
$
$
$
$
19.04
17.65
.0-
19.45
18.50
1.75
.0 -
Weighted
Average
Exercise
Price
18.13
17.80
17.22
-
18.07
1.90
866
2,840
$
$
$
$
$
The following table summarizes characteristics of stock options as of December 31, 2015:
Outstanding
Grant Date
10/18/2005
10/17/2006
10/16/2007
10/21/2008
10/20/2009
9/20/2011
3/20/2012
2/19/2013
2/18/2014
2/17/2015
Exercise Price
24.00
21.00
20.05
21.10
17.22
17.75
18.00
17.65
17.72
17.80
Contractual Average Life (Years)
0.00
0.80
1.80
2.81
3.81
5.72
6.22
7.14
8.14
9.14
Shares
1,531
1,838
4,425
6,100
6,605
13,850
17,050
21,800
33,525
35,800
142,524
93
Exercisable
Shares
1,531
1,838
4,425
6,100
6,605
12,850
14,850
12,106
10,615
-
70,920
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
Defined Benefit Retirement Plan
s
The Company sponsors a defined benefit retirement plan (The Juniata Valley Bank Retirement Plan (“JVB
Plan”)) which covers substantially all of its employees employed prior to December 31, 2007. As of January 1,
2008, the JVB Plan was amended to close the plan to new entrants. All active participants as of December 31,
2007 became 100% vested in their accrued benefit and, as long as they remained eligible, continued to accrue
benefits until December 31, 2012. The benefits are based on years of service and the employee’s compensation.
Effective December 31, 2012, the JVB Plan was amended to cease future service accruals after that date (frozen).
The Company’s funding policy is to contribute annually no more than the maximum amount that can be deducted
for federal income tax purposes. Contributions are intended to provide for benefits attributed to service through
December 31, 2012. The Company does not expect to contribute to the JVB Plan in 2016.
Management expects to record a $122,000 net periodic expense in 2016 for the JVB Plan, which includes
expected amortization out of accumulated other comprehensive loss. The following table sets forth by level,
within the fair value hierarchy, debt and equity instruments included in the JVB Plan’s assets at fair value as of
December 31, 2015 and December 31, 2014 (in thousands). Assets included in the JVB Plan that are not valued in
the hierarchy table consist of cash and cash equivalents, totaling $250,000 and $527,000, at December 31, 2015
and 2014, respectively.
(Level 1)
(Level 2)
Quoted Prices in Significant
Active Markets
Other
(Level 3)
Significant
Other
Measured at fair value on a recurring basis:
U.S. Government and agency securities
Corporate bonds and notes
Mutual funds
Value funds
Blend funds
Growth funds
Money market funds
Measured at fair value on a recurring basis:
U.S. Government and agency securities
Corporate bonds and notes
Mutual funds
Value funds
Blend funds
Growth funds
Money market funds
December 31, for Identical
Observable Unobservable
2015
Assets
Inputs
Inputs
$
324
4,156
$
-
-
$
$
324
4,156
1,878
1,433
1,500
172
9,463
$
1,878
1,433
1,500
172
4,983
$
-
-
-
-
4,480
$
$
-
-
-
-
-
-
-
(Level 1)
(Level 2)
Quoted Prices in Significant
Active Markets
Other
(Level 3)
Significant
Other
December 31, for Identical
Observable Unobservable
2014
Assets
Inputs
Inputs
$
1,113
3,147
$
-
-
$
$
1,113
3,147
1,977
1,696
1,585
85
9,603
$
1,977
1,696
1,585
85
5,343
$
-
-
-
-
4,260
$
$
-
-
-
-
-
-
-
94
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
The measurement date for the JVB Plan is December 31. Information pertaining to the activity in the defined
benefit plan is as follows (in thousands):
Change in projected benefit obligation (PBO)
PBO at beginning of year
Interest cost
Change in assumptions
Actuarial loss
Benefits paid
PBO at end of year
Change in plan assets
Fair value of plan assets at beginning of year
Actual return on plan assets, net of expenses
Benefits paid
Fair value of plan assets at end of year
Years Ended
December 31,
2015
2014
$
$
$
$
11,473
450
(623)
37
(474)
10,863
10,130
57
(474)
9,713
$
$
$
$
9,108
426
2,297
110
(468)
11,473
10,114
484
(468)
10,130
Funded status, included in other (liabilities) assets
$
(1,150) $
(1,343)
Amounts recognized in accumulated comprehensive loss
before income taxes consist of:
Unrecognized actual loss
Accumulated benefit obligation
$
(3,483) $
(3,777)
$
10,863
$
11,473
For the year ended December 31, 2014, the mortality assumptions were derived using the RP-2014 White
Collar Mortality Table, with rates that were projected generationally using Scale MP-2014. The impact on the
benefit obligation for the mortality assumption change in 2014 was an increase in the projected benefit
obligation of $1,079,000. For the year ended December 31, 2015, the mortality assumptions were derived using
the Adjusted RP-2014 White Collar Mortality Table. Incorporated into the most recent table are rates projected
generationally using Scale MP-2015 to reflect mortality improvement. The impact on the benefit obligation for
the mortality assumption change in 2015 was a decrease in the projected benefit obligation of $623,000.
Pension expense for the JVB Plan included the following components for the years ended December 31
(in thousands):
Interest cost on projected benefit obligation
Expected return on plan assets
Net (amortization) accretion
Recognized net actuarial loss
Net periodic benefit cost
Net loss (gain)
Amortization of net loss
Net amortization (accretion)
Total recognized in other comprehensive loss (income)
Total recognized in net periodic benefit cost and other
comprehensive loss (income)
95
2015
450
(592)
-
242
100
2014
426
(518)
-
40
(52)
2013
395
(561)
(1)
203
36
(52)
(242)
-
(294)
$
2,441
(40)
-
2,401
(1,782)
(203)
1
(1,984)
$
(194)
$
2,349
$
(1,948)
$
$
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
Assumptions used to determine benefit obligations were:
Discount rate
Rate of compensation increase
Assumptions used to determine the net periodic benefit cost were:
Discount rate
Expected long-term return on plan assets
Rate of compensation increase
2015
4.25%
N/A
2015
4.00%
6.00
N/A
2014
4.00%
N/A
2014
4.75%
5.25
N/A
2013
4.75%
N/A
2013
4.00%
6.35
N/A
As a result of the FNBPA acquisition, the Company sponsors a second defined benefit retirement plan
(Retirement Plan for the First National Bank of Port Allegany (“FNB Plan”)) which covers substantially all former
FNBPA employees that were employed prior to September 30, 2008. The FNBPA Plan was amended as of
December 31, 2015 to cease future service accruals to previously unfrozen participants and is now considered to
be “frozen”. The Company’s funding policy is to contribute annually no more than the maximum amount that can
be deducted for federal income tax purposes. Contributions are intended to provide for benefits attributed to
service prior to the frozen date. The Company does not expect to contribute to the FNB Plan in 2016.
Management expects $17,000 expense to be recorded as net periodic expense in 2016 for the FNB Plan. The
following table sets forth by level, within the fair value hierarchy, debt and equity instruments included in the
FNB Plan’s assets at fair value as of December 31, 2015 (in thousands).
(Level 1)
(Level 2)
Quoted Prices in Significant
Active Markets
Other
(Level 3)
Significant
Other
Measured at fair value on a recurring basis:
Mutual funds
Aggressive growth funds
Growth funds
Growth and income funds
Income
December 31, for Identical
Observable Unobservable
2015
Assets
Inputs
Inputs
$
$
1,003
589
1,433
878
3,903
$
$
1,003
589
1,433
878
3,903
$
$
-
-
-
-
-
$
$
-
-
-
-
-
96
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
The measurement date for the FNB Plan is December 31. Information pertaining to the activity in the defined
benefit plan is as follows (in thousands):
Change in projected benefit obligation (PBO)
PBO at December 1, 2015
Service cost
Interest cost
Change in assumptions
Curtailment gain ($108) net of actuarial loss $2
Benefits paid
PBO at end of year
Change in plan assets
Fair value of plan assets at December 1, 2015
Actual return on plan assets, net of expenses
Benefits paid
Fair value of plan assets at end of year
Funded status, included in other (liabilities) assets
Accumulated benefit obligation
2015
5,249
3
18
(87)
(106)
(16)
5,061
4,001
(82)
(16)
3,903
$
$
$
$
$
(1,158)
$
5,061
For the year ended December 31, 2015, the mortality assumptions were derived using the Adjusted RP-2014
White Collar Mortality Table. Incorporated into the most recent table are rates projected generationally using
Scale MP-2015 to reflect mortality improvement.
Pension expense included the following components for the year ended December 31 (in thousands):
Service cost during the year
Interest cost on projected benefit obligation
Expected return on plan assets
Net periodic benefit gain
Total recognized in net periodic benefit cost and other comprehensive income
Assumptions used to determine benefit obligations were:
Discount rate
Rate of compensation increase
Assumptions used to determine the net periodic benefit cost were:
Discount rate
Expected long-term return on plan assets
Rate of compensation increase
97
2015
3
18
(23)
(2)
(2)
$
$
2015
4.25%
N/A
2015
4.00%
6.00
N/A
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
The investment strategy and investment policy for both the JVB Plan and the FNBPA Plan is to target the plan
assets to contain 50% equity and 50% fixed income securities. The asset allocation as of December 31, 2015 was
approximately 49% fixed income securities, 50% equities and 1% cash equivalents in the JVB Plan.
Future expected benefit payments (in thousands):
Estimated future benefit payments
JVB Plan
FNB Plan
Total
Defined Contribution Plan
2016
470
209
679
$
$
$
$
2017
475
205
$
2018
524
199
$
680
$
723
$
2019
528
295
823
$
$
2020
551
288
2021-2025
2,884
$
1,541
839
$
4,425
The Company has a Defined Contribution Plan under which employees, through payroll deductions, are able to
defer portions of their compensation. The Company makes an annual non-elective fully vested contribution equal
to 3% of compensation to each eligible participant. As of December 31, 2015 a liability of $157,000 was recorded
to satisfy this obligation, and was credited to employees’ accounts by January 31, 2016. This liability at December
31, 2014 totaled $191,000 and was credited to employee accounts during 2015. Expense incurred under this plan
was $192,000, $180,000 and $175,000 in 2015, 2014 and 2013, respectively. Effective January 1, 2013, the
Company amended the Defined Contribution Plan to include an employer matching contribution for employees
that elect to defer compensation into this program. The matching contribution in 2015, 2014 and 2013 was
$162,000, $147,000 and 123,000, respectively.
Employee Stock Purchase Plan
The Company has an Employee Stock Purchase Plan under which employees, through payroll deductions, are
able to purchase shares of Company stock annually. The option price of the stock purchases is between 95% and
100% of the fair market value of the stock on the offering termination date as determined annually by the Board
of Directors. The maximum number of shares which employees may purchase under the Plan is 250,000;
however, the annual issuance of shares may not exceed 5,000 shares plus any unissued shares from prior
offerings. There were 3,242 shares issued in 2015, 3,497 shares issued in 2014 and 2,823 shares issued in 2013
under this plan. At December 31, 2015, there were 180,818 shares reserved for issuance under the Employee
Stock Purchase Plan.
Supplemental Retirement Plans
The Company has non-qualified supplemental retirement plans for directors and key employees. At December
31, 2015 and 2014, the present value of the future liability associated with these plans was $392,000 and
$459,000, respectively. For the years ended December 31, 2015, 2014 and 2013, $34,000, $39,000 and $47,000,
respectively, was charged to expense in connection with these plans. The Company offsets the cost of these plans
through the purchase of bank-owned life insurance and annuities. See Note 9.
Deferred Compensation Plans
The Company has entered into deferred compensation agreements with certain directors to provide each
director an additional retirement benefit, or to provide their beneficiary a benefit, in the event of pre-retirement
death. At December 31, 2015 and 2014, the present value of the future liability was $1,504,000 and $1,528,000,
respectively. For the years ended December 31, 2015, 2014 and 2013, $30,000, $33,000 and $47,000,
respectively, was charged to expense in connection with these plans. The Company offsets the cost of these plans
through the purchase of bank-owned life insurance. See Note 9.
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JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
Salary Continuation Plans
The Company has non-qualified salary continuation plans for key employees. At December 31, 2015 and 2014,
the present value of the future liability was $1,178,000 and $1,167,000, respectively. For the years ended
December 31, 2015, 2014 and 2013, $119,000, $118,000 and $97,000, respectively, was charged to expense in
connection with these plans. The Company offsets the cost of these plans through the purchase of bank-owned
life insurance. See Note 9.
22. FINANCIAL INSTRuMENTS WITh OFF-BALANCE ShEET RISK
The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to
meet the financing needs of its customers. These financial instruments may include commitments to extend
credit and letters of credit. These instruments involve, to varying degrees, elements of credit risk that are not
recognized in the consolidated financial statements.
Exposure to credit loss in the event of non-performance by the other party to the financial instrument for
commitments to extend credit and letters of credit is represented by the contractual amount of those
instruments. The Bank uses the same credit policies in making these commitments and conditional obligations as
it does for on-balance sheet instruments. The Company controls the credit risk of its financial instruments
through credit approvals, limits and monitoring procedures; however, it does not generally require collateral for
such financial instruments since there is no principal credit risk.
A summary of the Company’s financial instrument commitments is as follows (in thousands):
December 31,
Commitments to grant loans
Unfunded commitments under lines of credit
Outstanding letters of credit
$
2015
42,619
4,661
2,586
2014
$ 38,776
6,245
1,703
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any
condition established in the contract. Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since portions of the commitments are expected to expire without
being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The
Bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained by
the Bank upon extension of credit is based on management’s credit evaluation of the counter-party. Collateral
held varies but may include personal or commercial real estate, accounts receivable, inventory and equipment.
Outstanding letters of credit are instruments issued by the Bank that guarantee the beneficiary payment by the
Bank in the event of default by the Bank’s customer in the non-performance of an obligation or service. Most
letters of credit are extended for one year periods. The credit risk involved in issuing letters of credit is
essentially the same as that involved in extending loan facilities to customers. The Bank holds collateral
supporting those commitments for which collateral is deemed necessary. The amount of the liability as of
December 31, 2015 and 2014 for guarantees under letters of credit issued is not material.
The maximum undiscounted exposure related to these guarantees at December 31, 2015 was $2,586,000, and
the approximate value of underlying collateral upon liquidation that would be expected to cover this maximum
potential exposure was $5,818,000.
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JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
23. RELATED-pARTy TRANSACTIONS
The Bank has granted loans to certain of its executive officers, directors and their related interests. These loans
were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with unrelated persons and, in the opinion of management, do not involve more than
normal risk of collection. The aggregate dollar amount of these loans was $4,749,000 and $1,764,000 at
December 31, 2015 and 2014, respectively. During 2015, $3,114,000 of new loans were made and repayments
totaled $451,000. None of these loans were past due, in non-accrual status or restructured at December 31, 2015
or 2014.
24. COMMITMENTS AND CONTINGENT LIABILITIES
In 2009, the Company executed an agreement to obtain technology outsourcing services through an outside
service bureau, and those services began in June 2010. The agreement provides for termination fees if the
Company cancels the services prior to the end of the 8-year commitment period. The termination fee would be an
amount equal to one hundred percent of the estimated remaining value of the terminated services if terminated
in the first contract year, ninety percent of the estimated remaining value of the terminated services if terminated
in the second contract year, eighty percent and seventy percent of the remaining value of the terminated services
if terminated in the third and fourth contract years, respectively, and sixty percent of the remaining value of the
terminated services if terminated in contract years five through eight. Termination fees are estimated to be
approximately $729,000 at December 31, 2015. Since the Company does not expect to terminate these services
prior to the end of the commitment period, no liability has been recorded at December 31, 2015.
The Company, from time to time, may be a defendant in legal proceedings relating to the conduct of its banking
business. Most of such legal proceedings are a normal part of the banking business and, in management’s
opinion, the consolidated financial condition and results of operations of the Company would not be materially
affected by the outcome of such legal proceedings.
Additionally, the Company has committed to fund and sell qualifying residential mortgage loans to the Federal
Home Loan Bank of Pittsburgh in the total amount of $10,000,000. As of December 31, 2015, $8,736,000 remains
to be delivered on that commitment, of which none has been committed to borrowers.
25. SuBSEquENT EVENTS
In January 2016, the Board of Directors declared a dividend of $0.22 per share to shareholders of record on
February 16, payable on March 1, 2016.
100
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
26. JuNIATA VALLEy FINANCIAL CORp. (pARENT COMpANy ONLy)
FINANCIAL INFORMATION:
CONDENSED BALANCE SHEETS
(in thousands)
ASSETS
Cash and cash equivalents
Investment in bank subsidiary
Investment in unconsolidated subsidiary
Investment securities available for sale
Other assets
TOTAL ASSETS
LIABILITIES
Accounts payable and other liabilities
STOCKHOLDERS’ EQUITY
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
CONDENSED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(in thousands)
INCOME
Interest and dividends on investment securities available for sale
Dividends from bank subsidiary
Income from unconsolidated subsidiary
Gain on sale of securities
Other non-interest income
TOTAL INCOME
EXPENSE
Merger-related expenses
Other non-interest expense
TOTAL EXPENSE
INCOME BEFORE INCOME TAXES AND EQUITY
IN UNDISTRIBUTED NET INCOME OF SUBSIDIARY
Income tax expense
Undistributed net income (loss) of subsidiary
NET INCOME
COMPREHENSIVE INCOME
December 31,
2015
2014
$
$
89
54,279
4,553
1,399
143
60,463
$
$
132
44,437
4,369
1,225
96
50,259
$
501
$
403
59,962
49,856
$
60,463
$
50,259
Years Ended December 31,
2014
2013
2015
$
$
$
34
3,900
238
19
1
4,192
279
131
410
3,782
27
3,755
(697)
3,058
3,052
$
$
$
32
3,691
236
-
1
3,960
-
132
132
3,828
25
3,803
413
4,216
3,678
$
$
$
28
4,290
237
-
-
4,555
-
140
140
4,415
23
4,392
(391)
4,001
3,761
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JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash
provided by operating activities:
Undistributed net loss (income) of subsidiary
Realized gains on sales of investment securities
Equity in earnings of unconsolidated subsidiary,
net of dividends of $55, $48 and $47
Stock-based compensation expense
Increase in other assets
Increase in taxes payable
Increase (decrease) in accounts payable and other liabilities
Net cash provided by operating activities
Cash flows from investing activities:
Purchases of available for sale securities
Proceeds from the sale of available for sale securities
Proceeds from the maturity of available for sale investment securities
Net cash received from acquisition
Net cash provided by (used in) investing activities
Cash flows from financing activities:
Cash dividends
Purchase of treasury stock
Treasury stock issued for dividend reinvestment and employee
stock purchase plan
Net cash used in financing activities
Years Ended December 31,
2015
2014
2013
$
3,058
$
4,216
$
4,001
698
(19)
(183)
57
(112)
72
13
3,584
-
9
-
4
13
(413)
-
(188)
47
(87)
65
(20)
3,620
-
-
-
-
-
391
-
(190)
30
(72)
87
(7)
4,240
(252)
-
250
-
(2)
(3,687)
(63)
110
(3,640)
(3,690)
(222)
(3,707)
(445)
59
(3,853)
48
(4,104)
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
(43)
132
89
$
(233)
365
132
$
134
231
365
$
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JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
27. quARTERLy RESuLTS OF OpERATIONS (uNAuDITED)
The unaudited quarterly results of operations for the years ended December 31, 2015 and 2014 follow (in
thousands, except per-share data):
2015 Quarter ended
Total interest income
Total interest expense
Net interest income
Provision for loan losses
Mortgage banking income
Other income
Merger and acquisition expense
Other expense
Income before income taxes
Income tax expense (benefit)
Net income
Per-share data:
Basic earnings
Diluted earnings
Cash dividends
Total interest income
Total interest expense
Net interest income
Provision for loan losses
Mortgage banking income
Other income
Other expense
Income before income taxes
Income tax expense
Net income
Per-share data:
Basic earnings
Diluted earnings
Cash dividends
March 31
$ 4,226
565
3,661
50
54
946
10
3,594
1,007
83
924
$
June 30
$ 4,220
496
3,724
112
60
1,070
48
3,573
1,121
120
$ 1,001
$
September 30 December 31
$
4,651
502
4,149
200
46
1,136
1,595
3,677
(141)
(266)
125
4,282
479
3,803
140
30
1,163
153
3,549
1,154
146
1,008
$
$
$
$
.22
.22
.22
.24
.24
.22
$
$
.24
.24
.22
.02
.02
.22
2014 Quarter ended
March 31
$ 4,036
627
3,409
20
29
891
3,336
973
70
903
$
June 30
$ 4,325
683
3,642
117
56
1,114
3,401
1,294
131
$ 1,163
$
September 30 December 31
4,344
$
628
3,716
110
75
1,076
3,495
1,262
170
1,092
4,227
660
3,567
110
54
1,039
3,338
1,212
154
1,058
$
$
$
$
.22
.22
.22
.28
.28
.22
$
$
.25
.25
.22
.26
.26
.22
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JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
COMMON STOCK MARKET pRICES AND DIVIDENDS
The common stock of Juniata Valley Financial Corp. is quoted under the symbol “JUVF” on the over-the-counter
(“OTC-Pink”) Electronic Bulletin Board, a regulated electronic quotation service made available through, and
governed by, the NASDAQ system. As of December 31, 2015, the Company had 1,837 stockholders of record.
The following table presents the quarterly high and low prices of the Company’s common stock and per
common share cash dividends declared for each of the quarterly periods in 2015 and 2014.
Quarter Ended
March 31
June 30
September 30
December 31
Quarter Ended
March 31
June 30
September 30
December 31
High
$ 18.75
18.90
19.95
19.50
High
$ 19.00
18.50
19.00
19.00
$
$
2015
Low
17.80
17.55
17.28
17.50
2014
Low
17.30
17.36
17.45
17.70
$
$
Dividends Declared
0.22
0.22
0.22
0.22
Dividends Declared
0.22
0.22
0.22
0.22
As stated in “Note 17 – Stockholders’ Equity and Regulatory Matters” in the Notes to Consolidated Financial
Statements, the Company is subject to various regulatory capital requirements that limit the amount of capital
available for dividends. While the Company expects to continue its policy of regular dividend payments, no
assurance of future dividend payments can be given. Future dividend payments will depend upon maintenance of
a strong financial condition, future earnings, capital and regulatory requirements, future prospects, business
conditions and other factors deemed relevant by the Board of Directors.
For further information on stock quotes, please contact any licensed broker-dealer, some of which make a
market in Juniata Valley Financial Corp. stock.
CORpORATE INFORMATION
Corporate Headquarters
Juniata Valley Financial Corp.
128 Bridge Street
P.O. Box 66
Mifflintown, PA 17059
(855) 582-5101
JVBonline.com
INVESTOR INFORMATION
JoAnn N. McMinn,
Executive Vice President and Chief Financial Officer
P.O. Box 66
Mifflintown, PA 17059
JoAnn.McMinn@JVBonline.com
104
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
INFORMATION AVAILABILITy
Information about the Company’s financial performance may be found at www.JVBonline.com, following the
“Investor Information” link.
All reports filed electronically by Juniata Valley Financial Corp. with the United States Securities and Exchange
Commission (SEC), including the Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current
Reports on Form 8-K, as well as any amendments to those reports, are also accessible at no cost on the SEC’s web
site at www.SEC.gov.
Additionally, a copy of the Company’s Annual Report to the SEC on Form 10-K for the year ended December 31,
2015 will be supplied without charge (except for exhibits) upon written request. Please direct all inquiries to Ms.
JoAnn McMinn, as detailed above.
Pursuant to Part 350 of FDIC’s Annual Disclosure Regulation, Juniata Valley Financial Corp. will make available
to you upon request, financial information about The Juniata Valley Bank. Please contact:
INVESTMENT CONSIDERATIONS
Ms. Danyelle Pannebaker
The Juniata Valley Bank
P.O. Box 66
Mifflintown, PA 17059
In analyzing whether to make, or to continue, an investment in Juniata Valley Financial Corp., investors should
consider, among other factors, the information contained in this Annual Report and certain investment
considerations and other information more fully described in our Annual Report on Form 10-K for the year
ended December 31, 2015, a copy of which can be obtained as described above.
Registrar and Transfer Agent
By regular mail:
Computershare
P.O. Box 30170
College Station, TX 77842-3170
United States
By overnight delivery:
Computershare
211 Quality Circle, Suite 210
College Station, TX 77845
Telephone: (800) 368-5948
Website: www.Computershare.com/investor
Stockholders of record may access their accounts via the Internet to review account holdings and transaction
history through Computershare’s website: www.Computershare.com/investor.
Information regarding the Company’s Dividend Reinvestment and Stock Purchase Plan, including a Prospectus,
may be obtained by contacting Computershare, through the means listed above.
The Company offers a dividend direct deposit option whereby shareholders of record may have their dividends
deposited directly into the bank account of their choice on the dividend payment date. Please contact
Computershare for further information and to register for this service.
ANNuAL MEETING OF ShAREhOLDERS
The Annual Meeting of Shareholders of Juniata Valley Financial Corp. will be held at 10:30 a.m., on Tuesday,
May 17, 2016 at the Lewistown Country Club, 306 Country Club Road, Lewistown, Pennsylvania.
105
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
JuNIATA VALLEy FINANCIAL CORp.
CORpORATE OFFICERS
Timothy I. Havice --------------------------------------------------------------------------- Chairman
Philip E. Gingerich, Jr. --------------------------------------------------------------- Vice Chairman
Marcie A. Barber ----------------------------------------- President and Chief Executive Officer
JoAnn N. McMinn ------- Executive Vice President, Treasurer and Chief Financial Officer
Charles L. Hershberger ---------------------------------------------------------------------Secretary
JuNIATA VALLEy FINANCIAL CORp. AND ThE JuNIATA VALLEy BANK
BOARD OF DIRECTORS
Marcie A. Barber
President and Chief Executive Officer
Martin L. Dreibelbis
Self-Employed, Petroleum Consultant
Philip E. Gingerich, Jr., Vice Chairman
President, Central Insurers Group, Inc.
Timothy I. Havice, Chairman
Owner, T.I. Havice, Developer
The Rev. Charles L. Hershberger
Pastor, Port Royal Lutheran Church
and President, Stonewall Equity, Inc.
Gary E. Kelsey
Potter County, PA Register of Wills and Recorder
of Deeds and Co-Owner of Appalachian Basin
Land Resources, LLC.
Richard M. Scanlon,
DMD Retired Dentist
Jan G. Snedeker
Retired President, Snedeker Oil Co., Inc.
Bradley J. Wagner
Partner-Owner and General Manager of
Hoober Feeds
ThE JuNIATA VALLEy BANK
BuSINESS DEVELOpMENT BOARD MEMBERS
Mifflin County
Juniata/Perry/Huntingdon
McKean/Potter/Northern Tier
George W. Anderson
Mark S. Elsesser
Donald R. Hartzler
Sharon D. Havice
Jeffrey C. Moyer
Craig M. Rupert
William J. Rupp, Jr.
David E. Walker
Corey P. Wray
Kim E. Bomberger
R. Franklin Campbell
Steven R. Ehrenzeller
Gregory J. Gordon
Robert D. Hower
Carl F. Jaymes
N. Jeffrey Leonard
Dennis A. Long
Georgiana Snyder-Leitzel
R. Keith Fortner
Gary E. Kelsey
Dan F. Lane III
Martin L. Moses
Benjamin R. Olney
106
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015
ThIS pAGE INTENTIONALLy LEFT BLANK
107
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015 ThIS pAGE INTENTIONALLy LEFT BLANK
108
JuNIATA VAlley FINANcIAl corp - ANNuAl reporT 2015 JUNIATA VALLEy FINANCIAL CORP. | ANNUAL REPORT 2015
JUNIATA VALLEy FINANCIAL CORP. | ANNUAL REPORT 2015
JUVF UNdERSTANdS ThIS BUSINESS
The Juniata Valley Bank opened its doors in 1867, in
We added our Richfield branch through acquisition
mifflintown, PA, Juniata County. Nearly one hundred years
in 2006 and, on November 30th, 2015, we closed the
later, from 1962 through 1967, our bank grew through
acquisition of First National Bank of Port Allegany and
acquisition of The First National Bank of millerstown, Farmers
formally entered the Northern Tier with three new banking
National Bank of mcAlisterville, The Port Royal National Bank
locations in mcKean and Potter Counties.
and finally the Tuscarora State Bank of Blairs mills.
After all these years, we have proudly maintained high-
In 1998, The Juniata Valley Bank merged with the
touch personal service in all these varied communities.
Lewistown Trust Company, extending
its
footprint
throughout mifflin County with four additional branches.
ThIS BUSINESS IS ChANgINg
But
in every community,
regardless of size and
demographics...the need for innovative delivery systems
continues to grow. JVB is committed to providing robust
electronic services responsively designed to facilitate
electronic banking from any device. Our customers can
look forward to an enhanced internet banking website in
2016 with even greater access to loan and deposit services.
MaiN street | Port allegaNy, Pa
Photo Credit: Susan Carlson
JuNiata couNty, Pa| riverscaPe
Photo Credit: Nathaniel Thierwechter
“community banking has a special
meaning to our shareholders.
our belief in the value of community
banking and our ability to successfully
execute a community banking business
strategy throughout varied pennsylvania
regions is the essence of how we are
building shareholder value.”
and liabilities and managing risk, helping to assure the long-
term growth and health of your financial company.
We look forward to 2016 and the challenges and opportunities
the opportunities for the satisfaction of our customers, the
professional gratification of our dedicated employees, and the
enrichment of our shareholders.
COmmUNITy BANKINg
FOR OUR ShAREhOLdERS
“Community Banking has a special meaning to our shareholders.
Our belief in the value of Community Banking and our ability to
successfully execute a Community Banking business strategy
throughout varied Pennsylvania regions is the essence of how
we are building shareholder value.”
We will continue to adapt our banking model to the changing
needs and demands of our consumer and business clients;
however, acquisition remains a strategic focus. Through this
strategy, we can leverage our capital and overhead to deliver
stronger returns to our bottom line. Additionally, new markets
provide expanded opportunities to drive fee-based products
and services to a larger customer base.
dIRECTORy OF OFFICERS OF JVB
ExECUTIVE
Marcie A. Barber..................................................................President, Chief Executive Officer
BRANCh AdmINISTRATION
Patricia J. Yearick .............. Senior Vice President, Community Banking Division Manager
JoAnn N. McMinn ............................................................................... Executive Vice President,
Chief Financial Officer
Joseph W. Lashway....................... Senior Vice President, Northern Tier Division Manager
Cynthia L. Bosworth ....................... Northern Tier Branch Administrator and Loan Officer
Danyelle M. Pannebaker ............................................................................. Executive Assistant
AdmINISTRATION
Tina J. Smith........................................Senior Vice President, Director of Human Resources
Suzanne E. Booher ........................................................Vice President, Director of Marketing
and Facilities Management
Brent M. Miller ..................................................................Vice President, Compliance Officer
Kathy Hutchinson .........................................................Vice President, Compliance Specialist
and Security/BSA Officer
FINANCE
Kristi J. Burdge .............................................Assistant Vice President, Accounting Manager
Renee D. Williamson ..............................................................Financial Information Manager
LENdINg
Corbett J. Monica .................................. Senior Vice President, Lending Division Manager
William T. Campbell, Jr. ..............................................Vice President, Relationship Manager
Christine D. Coscia ....................................... Northern Tier Assistant Branch Administrator
and Loan Officer
Lora J. Rankin .............................................................................................Collections Manager
Jane A. Harrier ..............................................................................................Loan Administrator
blairs mills office
Wayne S. McCoy ............................................... Vice President, Community Office Manager
burnham office
Leann M. Fisher ................................................. Vice President, Community Office Manager
coudersport office
Kelly L. Bruno .................................................................................Community Office Manager
gardenview office
Larry B. Cottrill, Jr. ............................................ Vice President, Community Office Manager
Denise M. Rothrock .......................................................................... Assistant Office Manager
lillibridge office
Danielle H. Bennett ......................................................................Community Office Manager
it holds for JUVF. We intend to meet the challenges and leverage
Lisa K. Hobbs .......................................................................Northern Tier Compliance Officer
Thoughtful acquisition also provides an opportunity to
enhance both sides of our balance sheet by diversifying assets
marcie A. Barber | President and CEO
TOTAL ASSETS AT yEAR ENd (In Thousands)
$600,000
$580,000
$560,000
$540,000
$520,000
$500,000
$480,000
$460,000
$440,000
$420,000
$400,000
2009
2008
$442,109
$428,084
2010
$435,753
2006
$415,931
2007
$420,146
2014
$480,529
2011
$447,433
2012
2013
$448,869
$448,782
$583,928
2015
Jeffrey A. Herr ..............................................................Vice President, Relationship Manager
Scott E. Nace ................................................................Vice President, Relationship Manager
mcalisterville office
Leslie A. Miller ................................................... Vice President, Community Office Manager
H. Fred Wallace ............................................................Vice President, Relationship Manager
Kelly M. Neimond ............................................................................. Assistant Office Manager
Jon R. Yarger .....................................................Vice President, Consumer Lending Manager
Betty D. Ryan ................................ Vice President, Secondary Mortgage Market Manager
Pamela K. Parson ........................................................... Vice President, Collections Manager
Christine L. Burlew ............................................................. Vice President, Collections Officer
Lisa M. Snyder .............................................Vice President, Credit Administration Manager
mifflintown & mountain view offices
Annette M. Price ................................................ Vice President, Community Office Manager
millerstown office
Thomas P. O’Connell ........................................ Vice President, Community Office Manager
Matthew J. Waddell ...........................................................Vice President, Portfolio Manager
Lisa M. Freet ..................................................................................... Assistant Office Manager
OPERATIONS
Steven T. Kramm .......................................................................................Senior Vice President,
Operations/Technology Division Manager
S. Marlene Hubler .................................................................. Computer Operations Manager
Kelly L. Yetter ....................................................... Electronic and Business Banking Manager
Curtis M. Crouse ....................................................................................Network Administrator
Beverly M. McClellan ..............................................................................................Data Analyst
Tammy L Miller ........................................................................... Deposit Operations Manager
TRUST ANd INVESTmENT SERVICES
Donald E. Shawley ....................................................................................Senior Vice President,
Trust and Investment Services Division Manager
Cynthia L. Williams .......................................................................Vice President, Trust Officer
Paul M. Grego............................................................Vice President, Trust Investment Officer
Jonathan F. King ...................................................................Financial Services Representative
monument square office
Lee Ellen Foose ................................................ Vice President, Community Office Manager
Stacey K. McMurtrie ......................................................................... Assistant Office Manager
port allegany office
Shelly S. Morey ..............................................................................Community Office Manager
port royal office
Barbara I. Seaman ......................................... Vice President, Community Office Manager
richfield office
Brenda A. Brubaker .......................................... Vice President, Community Office Manager
wal-mart office
Kristi A. Dippery ................................................................................ Assistant Office Manager
water street office
Christine L. Searer ...........................Assistant Vice President, Community Office Manager
JuNiata couNty courthouse | MiffliNtowN, Pa
Photo Credit: Nathaniel Thierwechter
eMBassy theatre | lewistowN, Pa
Photo Credit: Nathaniel Thierwechter
acadeMia PoMeroy covered Bridge | Port royal, Pa
Photo Credit: Sandy Sieber
JUNIATA VALLEy FINANCIAL CORP.
ANNUAL REPORT 2015
BANKINg ON COmmUNIT y
A healthy economy is dependent upon a banking
system which provides access to basic financial
services. Access to fairly-priced loans, a safe and
sound repository for savings, and secure and robust payment
systems are basic financial services universally necessary for
consumer and businesses alike. That fact is understood.
Less understood is the fact that underlying the national
economy are thousands of diverse economic communities, often
with specific industries and cultural heritages which have unique
financial service needs or preferred service delivery systems.
Community Banks recognize that specific localities and
cultures have customized needs that are best met by community
bankers who understand those needs. Those bankers also
know that meeting their communities’ needs plays a critical
role in the regional, state-wide and national economy.
Community Bankers know their customers and their
customers know their bankers.
Community Bankers are your church choir director, your
son’s little league coach and your daughter’s dance class
assistant. They are Rotarians, Kiwanians, and library and
hospital volunteers. In short, they are a big part of the social
and economic fabric of their hometowns. And we need them.
charles cole MeMorial hosPital Pool| coudersPort, Pa
Photo Credit: Curt Weinhold
com·mu·ni·ty
noun
1. a social group of any size whose
members reside in a specific locality, share
government, and often have a common
cultural and historical heritage.
Potter couNty courthouse BeNches
coudersPort, Pa
Photo Credit: Curt Weinhold
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ANNUAL
REPORT
JUNIATA VALLEy FINANCIAL CORP.
218 Bridge Street | mifflintown, PA 17059 | www.jvbonline.com
002CSN60AB
Nickel Plate traiN at lewistowN statioN
Photo Credit: Nathaniel Thierwechter
MiffliN couNty field
Photo Credit: Nathaniel Thierwechter