STAYING THE COURSE
It was a very good year…. It’s not often we can look back with such satisfaction but, in 2022, Juniata Valley Financial Corp.
posted record earnings and record loan growth while still maintaining strong credit quality.
Net income of $8.3 million was driven by significant loan growth while managing the cost of funding that growth and the
execution of several balance sheet strategies designed to maximize earnings.
Loan production and loans outstanding significantly surpassed both our expectations and the levels of recent years, with
total loan balances exceeding budget by $43.4 million and year-end 2021 by $66.2 million. We are especially proud of
these results as we attribute our success to person to person, individualized service, a business practice which is becoming
increasingly rare.
While many aspects of banking have changed over the past decade, our commitment to serving the financial needs of our
communities has not.
Banking at its best is still very much a “people” business, but the growing customer demand for a robust digital delivery is
undeniable. Embracing that preference and understanding that underlying the customer’s online experience is the bank’s
core operating system, we engaged in a focused analysis of our core system and will be making what we believe will be a
game-changing system conversion. The new system, slated for implementation in Q1 2024, will support the changing
FinTech needs of our varied customer base, as its open architecture will enable us to integrate cutting edge products and
services as technology continues to advance. The innovative system will also provide for streamlined customer service
within our community offices, which remain very crucial service ports.
While keeping pace with digital delivery systems, we continue to support a broad physical presence throughout our markets,
and we continue to refine it.
We enhanced the service and convenience of our branch delivery in McKean County through the comprehensive physical
remodel and a service hours expansion of our Lillibridge office. Lillibridge now provides full service to business and retail
clients. A major upgrade to our community branch footprint is scheduled for 2023. We are purchasing the facility and the
deposit footings of Orrstown Bank’s Fannett-Metal branch, located in Spring Run, Pennsylvania. We will consolidate our
Blairs Mills office with the former Orrstown branch and relocate our staff to the central site in Spring Run. The result will
enable us to serve a broader community with expanded retail services, stronger staffing, faster service delivery, and greater
efficiencies for the combined customer base. This new office, our PATH VALLEY office, is scheduled to open mid- May.
In “STAYING THE COURSE”, we acknowledge that our markets and our customers have diverse service needs. And as a
community bank, we are committed to meeting all of these needs, through strategic branching and people and systems which
support the highest level of digital convenience.
We look forward to another year of service to our customers and performance for our shareholders.
Marcie A. Barber, President and CEO
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year ended December 31, 2022
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________________ to __________________
Commission File No. 0-13232
Juniata Valley Financial Corp.
(Exact name of registrant as specified in its charter)
Pennsylvania
(State or other jurisdiction of incorporation or organization)
23-2235254
(IRS Employer Identification No.)
Bridge and Main Streets, PO Box 66
Mifflintown, PA
(Address of principal executive offices)
Registrant’s telephone number, including area code: (855) 582-5101
Securities registered pursuant to Section 12(b) of the Act:
17059-0066
(Zip Code)
Title of each class
N/A
Trading Symbol(s)
N/A
Name of each exchange on which registered
N/A
Securities registered pursuant to Section 12(g) of the Act:
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Common Stock, par value $1.00
(Title of Class)
Yes No
Yes No
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such
shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes No
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the
definition of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Smaller reporting company ☒
Accelerated filer
Emerging growth company ☐
Non-accelerated filer
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under
Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error
to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive‐based compensation received by any of the registrant’s executive
officers during the relevant recovery period pursuant to §240.10D‐1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act)
Yes ☐ No
The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid
and asked price of such common equity, as of the last business day of the registrants most recently completed second fiscal quarter was $72,445,245. (1)
There were 5,013,899 shares of the registrant’s common stock outstanding as of March 16, 2023.
(1) The aggregate dollar amount of the voting stock set forth equals the number of shares of the Company’s Common Stock outstanding, reduced by the amount of Common Stock held by
officers, directors, shareholders owning in excess of 10% of the Company’s Common Stock and the Company’s employee benefit plans multiplied by the last reported sale price for the
Company’s Common Stock on June 30, 2022, the last business day of the registrants most recently completed second fiscal quarter. The information provided shall not be construed as an
admission that any officer, director or 10% shareholder of the Company, or any employee benefit plan, may be deemed an affiliate of the Company or that such person or entity is the
beneficial owner of the shares reported as being held by such person or entity, and any such inference is hereby disclaimed.
DOCUMENTS INCORPORATED BY REFERENCE
(Specific sections incorporated are identified under applicable items herein)
Certain portions of the Company’s Proxy Statement to be filed in connection with its 2023 Annual Meeting of Shareholders are incorporated by reference in Part III of this Report; provided;
however, that any information in such Proxy Statement that is not required to be included in this Annual Report on Form 10-K shall not be deemed to be incorporated herein or filed for the
purposes of the Securities Act of 1933 or the Securities Exchange Act of 1934.
Other documents incorporated by reference are listed in the Exhibit Index.
PAGE
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TABLE OF CONTENTS
PART I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 1.
ITEM 1A. RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 1B. UNRESOLVED STAFF COMMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 2.
LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 3.
ITEM 4. MINE SAFETY DISCLOSURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES . . . . . . . . . . . . . . . . . . . .
SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 6.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
ITEM 8.
ITEM 9.
RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . . . . . . . . . . . . . . . . . . . . . .
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 9A. CONTROLS AND PROCEDURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 9B. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE . . . . . . . . . . . .
ITEM 11. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PRINCIPAL ACCOUNTANT FEES AND SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 14.
PART IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES . . . . . . . . . . . . . . . . . . . . . . . . . . .
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2
ITEM 1. BUSINESS
PART I
Overview
Juniata Valley Financial Corp. (the “Company” or “Juniata”) is a Pennsylvania corporation formed in 1983 as a result of
a plan of merger and reorganization of The Juniata Valley Bank (the “Bank”). The plan received regulatory approval on
June 7, 1983 and Juniata, a one-bank holding company, registered under the Bank Holding Company Act of 1956. The
Bank is the oldest independent commercial bank in Juniata and Mifflin Counties, and was organized as a state bank charter
in 1867. The Company has one reportable segment, consisting of the Bank, as described in Note 2 of The Notes to
Consolidated Financial Statements.
Nature of Operations
Juniata operates primarily in central and northern Pennsylvania with the purpose of delivering financial services within its
local markets. The Company 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 four offices for loan production, trust services and wealth management sales.
The Company offers a full range of consumer and commercial banking services. Consumer banking services include online
account opening; online banking; mobile banking; telephone banking; automated teller machines; personal checking
accounts; checking overdraft privileges; money market deposit accounts; savings accounts; debit cards; certificates of
deposit; individual retirement accounts; secured lines of credit; construction and mortgage loans; and safe deposit boxes.
Commercial banking services include low and high-volume business checking accounts; online account management
services; remote deposit capability; ACH origination; payroll direct deposit; commercial lines of credit; commercial letters
of credit; mobile deposit for small business customers; and commercial term and demand loans.
The Bank also provides comprehensive trust, asset management and estate services, and the Company has a contractual
arrangement with a broker-dealer to offer a full range of financial services, including annuities, mutual funds, stock and
bond brokerage services and long-term care insurance, to the Bank’s customers. Management believes the Bank 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 and northern Pennsylvania.
Juniata’s loan underwriting policies are updated periodically and are presented for approval to the Board of Directors of
the Bank. The purpose of the policies is to grant loans on a sound and collectible basis, to invest available funds in a safe,
profitable manner, to serve the credit needs of the communities in Juniata’s primary market area and to ensure that all loan
applicants receive fair and equal treatment in the lending process. It is the intent of the underwriting policies to seek to
minimize loan losses by requiring careful investigation of the credit history of each applicant, verifying the source of
repayment and the ability of the applicant to repay, securing those loans for which collateral is deemed to be required,
exercising care in the documentation of the application, review, approval and origination process and administering a
comprehensive loan collection program.
The major types of investments held by Juniata consist of obligations and securities issued by U.S. government agencies
or corporations, obligations of state and local political subdivisions, government sponsored entity mortgage-backed
securities, subordinated debt and common stock. Juniata’s investment policy directs that investments be managed in a way
that provides necessary funding for the Company’s liquidity needs and adequate collateral to pledge for public funds held,
and as directed by the Asset Liability Committee, manages interest rate risk. The investment policy specifies the types of
investments permitted to be owned, addresses credit quality of investments and includes limitations by investment types
and issuer.
The Company’s primary source of funds is deposits, consisting of transaction type accounts, such as demand deposits and
savings accounts, and time deposits, such as certificates of deposit. Most deposits are held by customers residing or located
in Juniata’s market area. No material portion of the deposits has been obtained from a single or small group of customers,
and the Company believes that the loss of any customer’s deposits or a small group of customers’ deposits would not have
a material adverse effect on the Company.
3
Other sources of funds used by the Company include brokered deposits, retail repurchase agreements, borrowings from
the Federal Home Loan Bank of Pittsburgh, and lines of credit established with various correspondent banks for overnight
funding.
Competition
The Bank’s service area is characterized by a high level of competition for banking and financial services among
commercial banks, varying in size from local community banks to regional and national banks, credit unions, savings and
loan associations, and non-bank financial institutions, including fintech-based loan and deposit providers, located inside
and outside the Bank’s market area. The Bank actively competes with such banks and institutions for local consumer and
commercial deposit accounts, loans and other types of banking business. Many competitors have substantially greater
financial resources and larger branch systems than those of the Bank.
In commercial transactions, the Company believes that the Bank’s legal lending limit to a single borrower (approximately
$10,902,000 as of December 31, 2022) enables it to compete effectively for the business of small and mid-sized businesses.
However, the Bank’s legal lending limit is considerably lower than that of various competing institutions and thus, may
act as a constraint on the Bank’s effectiveness in competing for larger financings.
In consumer transactions, the Bank believes it can compete on a substantially equal basis with larger financial institutions
because it offers competitive interest rates on deposit products and on loans.
In competing with other banks and financial institutions, the Bank seeks to provide personalized services through
management’s knowledge and awareness of its service areas, customers and borrowers. In management’s opinion, larger
institutions often do not provide comparable attention to the retail depositors and the relatively small commercial
borrowers that comprise the Bank’s primary customer base.
Other competitors, including credit unions, consumer finance companies, fintech-based loan and deposit providers,
insurance companies and money market mutual funds, compete with many of the lending and deposit services offered by
the Bank. The Bank also competes with insurance companies, investment counseling firms, mutual funds and other
business firms and individuals in corporate and trust investment management services.
Supervision and Regulation
General
The Company operates in a highly regulated industry and, thus, may be affected by changes in state and federal regulations
and legislation. As a registered bank holding company under the Bank Holding Company Act of 1956, as amended (the
“Bank Holding Company Act”), the Company is subject to supervision and examination by the Board of Governors of the
Federal Reserve System (“FRB”) and is required to file periodic reports and information regarding its business operations
and those of the Bank with the FRB. In addition, under the Pennsylvania Banking Code of 1965, the Pennsylvania
Department of Banking and Securities has the authority to examine the books, records and affairs of the Company and to
require any documentation deemed necessary to ensure compliance with the Pennsylvania Banking Code.
The Bank Holding Company Act requires the Company to obtain FRB approval before: acquiring more than a five percent
ownership interest in any class of the voting securities of any bank; acquiring all or substantially all the assets of a bank;
or merging or consolidating with another bank holding company. In addition, the Bank Holding Company Act prohibits a
bank holding company from acquiring the assets, or more than five percent of the voting securities, of a bank located in
another state, unless such acquisition is specifically authorized by the statutes of the state in which the bank is located.
The Company is generally prohibited under the Bank Holding Company Act from engaging in, or acquiring, direct or
indirect ownership or control of more than five percent of the voting shares of any company engaged in, nonbanking
activities unless the FRB, by order or regulation, has found such activities to be so closely related to banking or managing
or controlling banks as to be a proper incident thereto. In making such determination, the FRB considers whether the
performance of these activities by a bank holding company can reasonably be expected to produce benefits to the public
that outweigh the possible adverse effects.
4
A satisfactory safety and soundness rating, particularly regarding capital adequacy, and a satisfactory Community
Reinvestment Act rating are generally prerequisites to obtaining federal regulatory approval to make acquisitions and open
branch offices. As of December 31, 2022, the Bank was rated “satisfactory” under the Community Reinvestment Act and
was a “well-capitalized” bank. An institution’s Community Reinvestment Act rating is considered in determining whether
to grant approvals relating to charters, branches and other deposit facilities, relocations, mergers, consolidations and
acquisitions. Less than satisfactory performance may be the basis for denying an application.
There are various legal restrictions on the extent to which the Company and its non-bank subsidiaries can borrow or
otherwise obtain credit from the Bank. In general, these restrictions require that any such extensions of credit must be
secured by designated amounts of specified collateral and are limited, as to any one of the Company or such non-bank
subsidiaries, to ten percent of the lending bank’s capital stock and surplus and, as to the Company and all such non-bank
subsidiaries in the aggregate, to 20 percent of the Bank’s capital stock and surplus. Further, the Company and the Bank
are prohibited from engaging it’s then certain tie-in arrangements in connection with any extension of credit, lease or sale
of property or furnishing of services.
As a bank chartered under the laws of Pennsylvania, the Bank is subject to the regulations and supervision of the Federal
Deposit Insurance Corporation (“FDIC”) and the Pennsylvania Department of Banking and Securities. These government
agencies conduct regular safety and soundness and compliance reviews that have resulted in satisfactory evaluations to
date. Some of the aspects of the lending and deposit business of the Bank that are regulated by these agencies include
personal lending, mortgage lending and reserve requirements.
The operations of the Bank are also subject to numerous federal, state and local laws and regulations which set forth
specific restrictions and procedural requirements with respect to interest rates on loans, the extension of credit, credit
practices, the disclosure of credit terms and discrimination in credit transactions. The Bank also is subject to certain
limitations on the amount of cash dividends that it can pay to the Company. See Note 14 of The Notes to Consolidated
Financial Statements.
Under FRB policy, the Company is expected to act as a source of financial strength to the Bank, and to commit resources
to support the Bank in circumstances where it might not be in a financial position to support itself. Consistent with the
“source of strength” policy for subsidiary banks, the FRB has stated that, as a matter of prudent banking, a bank holding
company generally should not maintain a rate of cash dividends unless its net income available to common stockholders
has been sufficient to fully fund the dividends and the prospective rate of earnings retention appears to be consistent with
the Company’s capital needs, asset quality and overall financial condition.
As a public company, the Company is subject to the Securities and Exchange Commission’s (“SEC”) rules and regulations
relating to periodic reporting, proxy solicitation and insider trading.
On March 12, 2020, the SEC adopted amendments to the “accelerated filer” and “large accelerated filer” definitions
pursuant to Rule 12b-2 under the Securities Exchange Act of 1934 to resolve an overlap that existed between the definitions
related to accelerated filers and “smaller reporting companies,” with the focus to reduce disclosure and reporting
obligations for lower-revenue smaller reporting companies. The final amendments were effective on, and apply to an
annual report filing due on or after, April 27, 2020. The most notable impact of these amendments was that a smaller
reporting company with less than $100 million in revenue that previously met the definition of an accelerated filer or large
accelerated filer is not required to obtain an attestation of their internal control over financial reporting as required under
Section 404(b) of the Sarbanes-Oxley Act and is not required to comply with the shorter SEC filing deadlines that apply
to accelerated filers. Juniata qualifies as a smaller reporting company and is not required to obtain such an attestation and
may comply with the shorter SEC filing deadlines.
FDIC Insurance
The FDIC is an independent federal agency that insures the deposits, up to prescribed statutory limits, of federally insured
banks and savings institutions and safeguards the safety and soundness of the banking and savings industries. The FDIC
administers the Deposit Insurance Fund (“DIF”). The Dodd-Frank Wall Street Reform and Consumer Protection Act of
2010 (“Dodd-Frank Act”) permanently raised the standard maximum deposit insurance coverage amount to $250,000 and
5
made the increase retroactive to January 1, 2008. The FDIC deposit insurance coverage limit applies per depositor, per
insured depository institution for each account ownership category. The FDIC has been given greater latitude in setting
the assessment rates for insured depository institutions which could be used to impose minimum assessments.
The FDIC is authorized to set the reserve ratios for the DIF annually at between 1.15% and 1.5% of estimated insured
deposits. FDIC assessment rates currently range from 12 to 50 basis points. Institutions in the lowest risk category, Risk
Category I, pay between 12 and 14 basis points. Initial base assessment rates range between 12 and 45 basis points (12 –
16 basis points for Category I). The initial base rates for risk categories II, III and IV were 20, 30 and 45 basis points,
respectively. For institutions in any risk category, assessment rates rose above initial rates for institutions relying
significantly on secured liabilities (repurchase agreements, Federal Home Loan Bank advances, secured Federal Funds
purchased and other secured borrowings). Assessment rates increased for institutions with a ratio of secured liabilities to
domestic deposits of greater than 15%, with a maximum of 50% above the rate before such adjustment.
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd Frank Act”) revised the statutory
authorities governing the FDIC’s management of the DIF. Key requirements from the Dodd-Frank Act have resulted in
the FDIC’s adoption of amendments that: (1) redefined the assessment base used to calculate deposit insurance
assessments to “average consolidated total assets minus average tangible equity”; (2) raised the DIF’s minimum reserve
ratio to 1.35 percent and removed the upper limit on the reserve ratio; (3) revised adjustments to the assessment rates by
eliminating one adjustment and adding another; and (4) revised the deposit insurance assessment rate schedules due to
changes to the assessment base. Though deposit insurance assessments maintain a risk-based approach, the FDIC’s
changes imposed a more extensive risk-based assessment system on large insured depository, institutions with at least
$10 billion in total assets since they are more complex in nature and could pose greater risk.
Under the Dodd-Frank Act, the FDIC may terminate the insurance of an institution’s deposits upon finding that the
institution has engaged in unsafe and unsound practices, is in an unsafe and unsound condition to continue operations or
has violated any applicable law, regulation, rule, order or condition imposed by the FDIC. The Company does not know
of any practice, condition or violation that might lead to termination of the Bank’s deposit insurance.
Community Reinvestment Act
Under the Community Reinvestment Act, the Bank has a continuing and affirmative obligation, consistent with its safe
and sound operation, to help meet the credit needs of its entire community, including low and moderate-income
neighborhoods. However, the Community Reinvestment Act does not establish specific lending requirements or programs
for financial institutions, nor does it limit an institution’s discretion to develop the types of products and services that it
believes are best suited to its community. The Community Reinvestment Act also requires:
•
•
•
the applicable regulatory agency to assess an institution’s record of meeting the credit needs of its community;
public disclosure of an institution’s CRA rating; and
that the applicable regulatory agency provides a written evaluation of an institution’s CRA performance
utilizing a four-tiered descriptive rating system.
Capital Regulation
The Bank is subject to risk-based capital standards by which 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 consolidated financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative
measures of the Bank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting
practices. The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators.
Management believes, as of December 31, 2022, the Bank meets all capital adequacy requirements to which it is subject.
five classifications: well-capitalized, adequately capitalized,
Prompt corrective action
undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to
regulations provide
6
represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits.
If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are
required. At year-end 2022 and 2021, the Bank was well-capitalized under the regulatory framework for prompt corrective
action. There are no conditions or events since that notification that management believes have changed the Bank’s capital
category.
The United States is a member of the Basel Committee on Banking Supervision (the “Basel Committee”) that provides a
forum for regular international cooperation on banking supervisory matters. The Basel Committee develops guidelines
and supervisory standards and is best known for its international standards on capital adequacy. 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”, which set capital standards with which the Bank would be required to
comply.
The federal banking agencies issued a joint final rule in 2019 that provided an optional, simplified measure of capital
adequacy, the community bank leverage ratio framework (“CBLR framework”), for qualifying community banking
organizations, consistent with Section 201 of the Economic Growth, Regulatory Relief, and Consumer Protection Act (the
“Economic Growth Act”), which was effective on January 1, 2020. As of December 31, 2022, the Bank was a qualifying
community banking organization as defined by the federal banking agencies but elected to comply with the risk-weighting
framework under the Basel III capital requirements.
The Bank is subject to risk-based and leverage capital standards. The risk-based capital standards relate a banking
organization’s capital to the risk profile of its assets and require it to maintain Tier 1 capital of at least 4% of total risk-
adjusted assets, and total capital, including Tier 1 capital, equal to at least 8% of total risk-adjusted assets. Tier 1 capital
includes common stockholders’ equity and qualifying perpetual preferred stock together with related surpluses and
retained earnings. The remaining portion of this capital standard, known as Tier 2 capital, may be comprised of limited
life preferred stock, qualifying subordinated debt instruments and the reserves for possible loan losses.
Additionally, banking organizations must maintain a minimum leverage ratio of 3%, measured as the ratio of Tier 1 capital
to adjusted average assets. This 3% leverage ratio is a minimum for the most highly rated banking organizations without
any supervisory, financial or operational weaknesses or deficiencies. Other banking organizations are expected to maintain
leverage capital ratios that are 100 to 200 basis points above such minimum, depending upon their financial condition.
Under the Federal Deposit Insurance Corporation Improvement Act of 1991 (the "1991 Act"), a bank holding company is
required to guarantee that any "undercapitalized" (as such term is defined in the statute) insured depository institution
subsidiary will comply with the terms of any capital restoration plan filed by such subsidiary with its appropriate federal
banking agency up to the lesser of (i) an amount equal to 5% of the institution’s total assets at the time the institution
became undercapitalized, or (ii) the amount which is necessary (or would have been necessary) to bring the institution into
compliance with all capital standards as of the time the institution failed to comply with such capital restoration plan.
Federal banking agencies have broad powers to take corrective action to resolve problems of insured depository
institutions. The extent of these powers depends upon whether the institutions in question are “well-capitalized,”
“adequately capitalized,” “undercapitalized”, “significantly undercapitalized,” or “critically undercapitalized.” As of
December 31, 2022, the Bank was a “well-capitalized” bank, as defined by the FDIC.
The FDIC has issued a rule that sets the capital level for each of the five capital categories by which banks are evaluated.
A bank is deemed to be “well-capitalized” if the bank has a total risk-based capital ratio of 10% or greater, has a Tier 1
risk-based capital ratio of 6% or greater, has a leverage ratio of 5% or greater, and is not subject to any order or final
capital directive by the FDIC to meet and maintain a specific capital level for any capital measure. A bank may be deemed
to be in a capitalization category that is lower than is indicated by its actual capital position if it received an unsatisfactory
safety and soundness examination rating.
All the bank regulatory agencies have issued rules that amend their capital guidelines for interest rate risk and require such
agencies to consider in their evaluation of a bank’s capital adequacy the exposure of a bank’s capital and economic value
to changes in interest rates. These rules do not establish an explicit supervisory threshold. The agencies intend, at a
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subsequent date, to incorporate explicit minimum requirements for interest rate risk into their risk-based capital standards
and have proposed a supervisory model to be used together with bank internal models to gather data and hopefully propose
at a later date, explicit minimum requirements.
The Basel III rules, among other things, narrow the definition of regulatory capital. Basel III requires bank holding
companies and their bank subsidiaries to maintain substantially more capital, with a greater emphasis on common equity.
Specifically, Basel III requires financial institutions to maintain: (a) a minimum ratio of common equity tier 1 capital
(CET1) to risk-weighted assets of at least 4.5%; (b) a minimum ratio of tier 1 capital to risk-weighted assets of at least
6.0%; (c) a minimum ratio of total (that is, tier 1 plus tier 2) capital to risk-weighted assets of at least 8.0%; and (d) 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). In addition, the
rules also limit a banking organization’s capital distributions and certain discretionary bonus payments if the banking
organization does not hold a “capital conservation buffer” of 2.5% above each of the foregoing capital requirements stated
in (a) – (c). Basel III also provides for a “countercyclical capital buffer,” an additional capital requirement that generally
is imposed when national regulators determine that excess aggregate credit growth has become associated with a buildup
of systemic risk, to absorb losses during periods of economic stress. Banking institutions that maintain insufficient capital
to comply with the capital conservation buffer face constraints on dividends, equity repurchases and compensation based
on the amount of the shortfall.
Additionally, the Basel III framework requires banks and bank holding companies to measure their liquidity against
specific liquidity tests, including a liquidity coverage ratio (“LCR”) designed to ensure that the banking entity maintains
a level of unencumbered high-quality liquid assets greater than or equal to the entity’s expected net cash outflow for a
30-day time horizon under an acute liquidity stress scenario, and a net stable funding ratio (“NSFR”) designed to promote
more medium and long-term funding based on the liquidity characteristics of the assets and activities of banking entities
over a one-year time horizon. In September 2014, the federal regulatory agencies finalized rules implementing the LCR
for U.S. financial institutions that are “internationally active banking organizations” and those with more than $250 billion
in total consolidated assets. The FRB separately adopted a less stringent, modified LCR requirement for bank holding
companies that have more than $50 billion in total consolidated assets. Because of the Company’s size, neither the LCR
Rule nor any additional proposed rules under the Basel III liquidity framework are applicable to it.
Gramm-Leach-Bliley Act
On November 12, 1999, the Gramm-Leach-Bliley Act (“GLB”) became law. GLB permits commercial banks to affiliate
with investment banks. It also permits bank holding companies which elect financial holding company status to engage in
any type of financial activity, including securities, insurance, merchant banking/equity investment and other activities that
are financial in nature. The Company has not elected financial holding company status. The merchant banking provisions
of GLB allow a bank holding company to make a controlling investment in any kind of company, financial or commercial.
GLB allows a bank to engage in virtually every type of activity currently recognized as financial or incidental or
complementary to a financial activity. A commercial bank that wishes to engage in these activities is required to be well-
capitalized, well managed and to have a satisfactory or better Community Reinvestment Act rating. GLB also allows
subsidiaries of banks to engage in a broad range of financial activities that are not permitted for banks themselves. Although
the Company and the Bank have not commenced these types of activities to date, GLB enables them to evaluate new
financial activities that would complement the products already offered to enhance non-interest income.
Sarbanes-Oxley Act of 2002
The Sarbanes-Oxley Act of 2002 implemented a broad range of corporate governance, accounting and reporting measures
for companies, like Juniata, that have securities registered under the Securities Exchange Act of 1934. Specifically, the
Sarbanes-Oxley Act and the various regulations promulgated under the Act, established, among other things:
(i) requirements for audit committees,
independence, expertise, and responsibilities; (ii) additional
responsibilities relating to financial statements for the Chief Executive Officer and Chief Financial Officer of reporting
companies; (iii) standards for auditors and regulation of audits, including independence provisions that restrict non-audit
services that accountants may provide to their audit clients; (iv) increased disclosure and reporting obligations for reporting
companies and their directors and executive officers, including accelerated reporting of stock transactions and a prohibition
including
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on trading during pension blackout periods; and (v) a range of civil and criminal penalties for fraud and other violations
of the securities laws. In addition, Sarbanes-Oxley required stock exchanges institute additional requirements relating to
corporate governance in their listing rules.
Section 404(b) of the Sarbanes-Oxley Act requires the Company to include in its Annual Report on Form 10-K a report
by management on the adequacy of the Company’s internal control over financial reporting. Management’s internal control
report must, among other things, set forth management’s assessment of the effectiveness of the Company’s internal control
over financial reporting.
Due to the SEC’s recently adopted amendments to the “accelerated filer” and “large accelerated filer” definitions pursuant
to Rule 12b-2 under the Securities Exchange Act of 1934, smaller reporting companies, such as Juniata, with less than
$100 million in revenue that previously met the definition of an accelerated filer or large accelerated filer will not be
required to obtain an attestation of their internal control over financial reporting as required under Section 404(b) of the
Sarbanes-Oxley Act; thus, no such attestation is included in this Annual Report on Form 10-K.
Financial Privacy
Federal banking regulators have adopted rules that limit the ability of banks and other financial institutions to disclose
non-public information about consumers to nonaffiliated third parties. These limitations require disclosure of privacy
policies to consumers and, in some circumstances, allow consumers to prevent disclosure of certain personal information
to a nonaffiliated third party. The privacy provisions of the GLB Act affect the Company by limiting how consumer
information is transmitted and conveyed to outside vendors.
Anti-Money Laundering Initiatives and the USA Patriot Act
A major focus of governmental policy on financial institutions in recent years has been aimed at combating money
laundering and terrorist financing. U.S. federal laws and regulations, including the USA Patriot Act of 2001 (“USA Patriot
Act”), impose significant compliance and due diligence obligations, create criminal and financial liability for non-
compliance and expand the extra-territorial jurisdiction of the U.S. The United States Department of the Treasury has
issued several regulations that apply various requirements of the USA Patriot Act to financial institutions. These
regulations require financial institutions to maintain appropriate policies, procedures and controls to detect, prevent and
report money laundering and terrorist financing and to verify the identity of their customers. Failure of a financial
institution to maintain and implement adequate programs to combat money laundering and terrorist financing, or to comply
with all the relevant laws or regulations, could have serious legal and reputational consequences for the institution.
On January 1, 2021, the National Defense Authorization Act ("NDAA") was signed into law, which enacted significant
changes to existing U.S. anti-money laundering (“AML”) laws. The NDAA includes: (i) significant changes to the
collection of beneficial ownership and the establishment of a beneficial ownership registry, which requires certain
corporate entities to report beneficial ownership information to the U.S. Department of the Treasury’s Financial Crimes
Enforcement Network (“FinCEN”); (ii) enhanced whistleblower provisions, which provide that one or more
whistleblowers who voluntarily provide original information leading to the successful enforcement of violations of the
Bank Secrecy Act or other AML-related laws under certain circumstances will receive a percentage of the monetary
sanctions collected and will receive increased protections; (iii) increased penalties for violations of the BSA;
(iv) improvements to existing information sharing provisions that permit financial institutions to share information relating
to suspicious activity for the purpose of combating illicit finance risks; and (v) expanded duties and powers of FinCEN.
Many of the new provisions, including those with respect to beneficial ownership, require the Department of Treasury and
FinCEN to promulgate rules.
Office of Foreign Assets Control Regulation
The U.S. has instituted economic sanctions which restrict transactions with designated foreign countries, nationals and
others. These are typically known as the “OFAC rules” because they are administered by the Office of Foreign Assets
Control of the U.S. Department of the Treasury (“OFAC”). The OFAC-administered sanctions target countries in various
ways. Generally, however, they contain one or more of the following elements: (i) restrictions on trade with or investment
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in a sanctioned country, including prohibitions against direct or indirect imports from and exports to a sanctioned country,
and prohibitions on “U.S. persons” engaging in financial transactions which relate to investments in, or providing
investment-related advice or assistance to, a sanctioned country; and (ii) a blocking of assets in which the government or
specially designated nationals of the sanctioned country have an interest, by prohibiting transfers of property subject to
U.S. jurisdiction (including property in the possession or control of U.S. persons). Blocked assets (e.g., property and bank
deposits) cannot be paid out, withdrawn, set off or transferred in any manner without a license from OFAC. Failure to
comply with these sanctions could have serious legal and reputational consequences for the institution. As U.S. financial
institutions, the Company and the Bank are required to comply with the OFAC rules.
Consumer Protection Statutes and Regulations
The Company is subject to many federal consumer protection statutes and regulations, including the Truth in Lending Act,
Truth in Savings Act, Equal Credit Opportunity Act, Fair Housing Act, Real Estate Settlement Procedures Act and Home
Mortgage Disclosure Act. Among other things, these acts:
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require banks to disclose credit terms in meaningful and consistent ways;
prohibit discrimination against an applicant in any consumer or business credit transaction;
prohibit discrimination in housing-related lending activities;
require banks to collect and report applicant and borrower data regarding loans for home purchases or
improvement projects;
require lenders to provide borrowers with information regarding the nature and cost of real estate settlements;
prohibit certain lending practices and limit escrow account amounts with respect to real estate transactions; and
prescribe possible penalties for violations of the requirements of consumer protection statutes and regulations.
On November 17, 2009, the FRB published a final rule amending Regulation E, which implements the Electronic Funds
Transfer Act. The final rule limits the ability of a financial institution to assess an overdraft fee for paying automated teller
machine transactions and one-time debit card transactions that overdraw a customer’s account, unless the customer
affirmatively consents, or opts in, to the institution’s payment of overdrafts for these transactions.
Dodd-Frank Act
The Dodd-Frank Act resulted in significant financial regulatory reform. The Dodd-Frank Act also changed the
responsibilities of the current federal banking regulators. Among other things, the Dodd-Frank Act created the Financial
Oversight Council, with oversight authority for monitoring and regulating systemic risk, and the Consumer Financial
Protection Bureau (“CFPB”), which has broad regulatory and enforcement powers over consumer financial products and
services. Effective July 21, 2011, the CFPB became responsible for administering and enforcing numerous federal
consumer financial laws enumerated in the Dodd-Frank Act. The Dodd Frank Act also provided that, for banks with total
assets of more than $10 billion, the CFPB would have exclusive or primary authority to examine those banks for, and
enforce compliance with, the federal consumer financial laws. Although not subject to examination by the CFPB, the
Company remains subject to the review and supervision of other applicable regulatory authorities, and such authorities
may enforce compliance with regulations issued by the CFPB.
The scope of the Dodd-Frank Act impacts many aspects of the financial services industry, and it requires the development
and adoption of numerous regulations, some of which have not yet been issued. The effects of the Dodd-Frank Act on the
financial services industry will depend, in large part, upon the extent to which regulators exercise the authority granted to
them under the Dodd-Frank Act and the approaches taken in implementing those regulations. Additional uncertainty
regarding the effects of the Dodd-Frank Act exists due to court decisions and the potential for additional legislative changes
to the Dodd-Frank Act.
The Dodd-Frank Act’s provisions that have received the most public attention have generally been those which apply only
to larger institutions with total consolidated assets of $50 billion or more. However, the Dodd-Frank Act contains numerous
other provisions that affect all bank holding companies, including the Company.
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The following is a list of significant provisions of the Dodd-Frank Act, and, if applicable, the resulting regulations adopted,
that apply (or will apply), most directly to the Company and its subsidiary:
• Federal deposit insurance - On April 1, 2011, the FDIC’s revised deposit insurance assessment base changed
from total domestic deposits to average total assets, minus average tangible equity.
• Debit card interchange fees - In June 2011, the FRB adopted regulations, which became effective on October 1,
2011, setting maximum permissible interchange fees issuers can receive or charge on electronic debit card
transaction fees and network exclusivity arrangements.
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Interest on demand deposits - Beginning in July 2011, depository institutions were no longer prohibited from
paying interest on business transaction and other accounts.
• Stress testing - In October 2012, the FRB issued final rules regarding company-run stress testing, which were
amended by the Economic Growth Act. In accordance with these rules, a company whose assets exceed
$10 billion is required to conduct an annual stress test. The Economic Growth Act raised the asset threshold for
the stress testing requirement to apply to companies with assets above $100 billion. While the Company believes
that both the quality and magnitude of its capital base are sufficient to support its current operations given its risk
profile, this requirement is not applicable to the Company because its assets are under $100 billion.
• Ability-to-pay rules and qualified mortgages - As required by the Dodd-Frank Act, the CFPB issued a series of
final rules in January 2013 amending Regulation Z, implementing the Truth in Lending Act, by requiring
mortgage lenders to make a reasonable and good faith determination, based on verified and documented
information, that a consumer applying for a residential mortgage loan has a reasonable ability to repay the loan
according to its terms. These final rules, most of which became effective January 10, 2014, prohibit creditors,
such as the Company, from extending residential mortgage loans without regard for the consumer’s ability to
repay and add restrictions and requirements to residential mortgage origination and servicing practices. In
addition, these rules restrict the imposition of prepayment penalties and compensation practices relating to
residential mortgage loan origination. Mortgage lenders are required to determine consumers’ ability to repay in
one of two ways. The first alternative requires the mortgage lender to consider eight underwriting factors when
making the credit decision. Alternatively, the mortgage lender can originate "qualified mortgages," which are
entitled to a presumption that the creditor making the loan satisfied the ability-to-repay requirements. In general,
a "qualified mortgage" is a residential mortgage loan that does not have certain high-risk features, such as negative
amortization, interest-only payments, balloon payments, or a term exceeding 30 years. In addition, to be a
qualified mortgage, the points and fees paid by a consumer cannot exceed 3% of the total loan amount, and the
borrower’s total debt-to-income ratio must be no higher than 43% (subject to certain limited exceptions for loans
eligible for purchase, guarantee or insurance by a government sponsored entity or a federal agency).
Compliance with these rules has increased Juniata’s overall regulatory compliance costs and required changes to
the underwriting practices of the Company with respect to mortgage loans.
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Integrated disclosures under the Real Estate Settlement Procedures Act and the Truth in Lending Act - require
lenders to provide a new Loan Estimate, combining content from the former Good Faith Estimate required under
RESPA and the initial disclosures required under TILA not later than the third business day after submission of
a loan application, and a new Closing Disclosure, combining content of the former HUD-1 Settlement Statement
required under RESPA and the final disclosures required under TILA at least three days prior to the loan closing.
• Volcker Rule — As mandated by the Dodd-Frank Act, in December 2013, the OCC, FRB, FDIC, SEC and
Commodity Futures Trading Commission issued a final rule (the "Final Rules") implementing certain
prohibitions and restrictions on the ability of a banking entity and non-bank financial company supervised by the
FRB to engage in proprietary trading and have certain ownership interests in, or relationships with, a "covered
fund". Generally, any entity that would be an investment company under the Investment Company Act of 1940
(the "1940 Act") is treated as a covered fund, but for the application of the exemptions from SEC registration set
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forth in Section 3(c)(1) (fewer than l00 beneficial owners) or Section 3(c)(7) (qualified purchasers) of the 1940
Act. Also requires regulated entities to establish an internal compliance program consistent with the extent to
which it engages in activities covered by the Volcker Rule, which must include making regular reports about
those activities to regulators. Although there is some tiering of compliance and reporting obligations based on
size, the fundamental prohibitions of the Volcker Rule apply to banking entities of any size, including the
Company.
While the Company does not engage in proprietary trading or in any other activities prohibited by the Final Rules,
the Company will continue to evaluate whether any of its investments fall within the definition of a "covered
fund" and would need to be disposed of by the extended deadline. However, based on the Company’s evaluation
to date, it does not currently expect that the Final Rules will have a material effect on its business, financial
condition or results of operations.
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Incentive compensation — As required by the Dodd-Frank Act, a joint interagency proposed regulation was
issued in April 2011. The proposed rule would require the reporting of incentive-based compensation
arrangements by a covered financial institution and prohibit incentive-based compensation arrangements at a
covered financial institution that provides excessive compensation or that could expose the institution to
inappropriate risks that could lead to material financial loss. The proposed rule, if adopted as currently proposed,
could limit the way the Company structures incentive compensation for its executives.
National Monetary Policy
In addition to being affected by general economic conditions, the earnings and growth of the Bank and, therefore, the
earnings and growth of the Company, are affected by the policies of regulatory authorities, including the FRB and the
FDIC. An important function of the FRB is to regulate the money supply and credit conditions. Among the instruments
used to implement these objectives are open market operations in U.S. government securities, setting the discount rate and
changes in financial institution reserve requirements. These instruments are used in varying combinations to influence
overall growth and distribution of credit, bank loans, investments and deposits, and their use may also affect interest rates
charged on loans or paid on deposits.
The monetary policies and regulations of the FRB have had a significant effect on the operating results of commercial
banks in the past and are expected to continue to do so in the future. The effects of such policies upon the future businesses,
earnings and growth of the Company cannot be predicted with certainty.
Tax Cuts and Jobs Act
On December 22, 2017, the Tax Cuts and Jobs Act (“TCJA”) was signed into law. Among other changes, the TCJA
significantly changed corporate income tax law by reducing the corporate income tax rate from 35% to 21%, allowing for
immediate capital expensing of certain qualified property and eliminating the deductibility of DIF assessments. The tax
laws were effective for the 2018 tax year; however, the Company recognized certain effects of the changes in 2017, which
was when the new legislation was enacted.
Coronavirus Aid, Relief, and Economic Security Act
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law,
temporarily suspending certain requirements under U.S. GAAP. The CARES Act permitted the suspension of ASC 310-40
for loan modifications made by financial institutions in response to the COVID-19 pandemic if the borrower met certain
criteria. A loan modification accounted for in accordance with the CARES Act was not treated as a TDR for accounting
or disclosure purposes. In response to the COVID-19 pandemic, the Company established a COVID-19 Modification
Program on March 20, 2020 to offer payment relief to certain borrowers. Through this program, the Company approved
interest and/or principal payment deferrals on loans for individuals and businesses affected by the economic impacts of
the COVID-19 pandemic.
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As part of the CARES Act, and in recognition of the challenging circumstances faced by small businesses, Congress
created the Paycheck Protection Program (“PPP”), in which the Company was a participating lender. PPP covered loans
are fully guaranteed as to principal and accrued interest by the SBA and, therefore, require a zero percent risk weight for
risk-based capital requirements. The SBA reimburses PPP lenders for any amount of a PPP covered loan that is forgiven.
PPP lenders are not held liable for any representations made by PPP borrowers in connection with a borrower's request for
PPP covered loan forgiveness. Juniata funded a total of 870 PPP loans totaling $51.0 million. As of December 31, 2022,
Juniata had one PPP loan remaining with an outstanding balance of $4,000.
To provide liquidity to small business lenders and the broader credit markets, and to help stabilize the financial system, on
April 7, 2020, the Federal Reserve Banks extended credit to financial institutions under the Paycheck Protection Program
Liquidity Facility (“PPPLF”). Under the PPPLF, each Federal Reserve Bank can extend non-recourse loans to institutions
eligible to make PPP covered loans. Under the PPPLF, only PPP covered loans guaranteed by the SBA under the Paycheck
Protection Program with respect to both principal and interest and that are originated by an eligible institution may be
pledged as collateral to the Federal Reserve Banks. The Company received $31.3 million in PPPLF advances with a two
year term in June 2020. The Company repaid all remaining PPPLF advances in 2021.
Employees
As of December 31, 2022, the Company had a total of 124 full-time and 34 part-time employees.
Additional Information
The Company files annual, quarterly and current reports, proxy statements and other information with the SEC. Our SEC
filings are available on the SEC’s website (http://www.sec.gov).
The Company’s common stock is quoted under the symbol “JUVF” on the OTCQX Best Market, an electronic inter-dealer
quotation and trading system developed by OTC Markets Group.
The Company’s website is www.JVBonline.com. At that address, we make available, free of charge, the Company’s
Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and
amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act (see “Investor
Relations” section of website), as soon as reasonably practicable after we electronically file such material with the SEC.
In addition, we will provide, at no cost, paper or electronic copies of our reports and other filings made with the SEC
(except for exhibits). Requests should be directed to Michael W. Wolf, Chief Financial Officer, Juniata Valley Financial
Corp., P.O. Box 66, Mifflintown, PA 17059, (855) 582-5101.
The information on the websites listed above is not, and should not be deemed to be, part of this Annual Report on
Form 10-K and is not incorporated by reference in this document.
ITEM 1A. RISK FACTORS
An investment in the Company's common stock involves certain risks, including, among others, the risks described below.
In addition to the other information contained in this report, you should carefully consider the following risk factors in
analyzing whether to make or to continue an investment in the Company:
RISKS RELATED TO INTEREST RATES AND LIQUIDITY
Fluctuations in market interest rates and relative balances of rate-sensitive assets to rate-sensitive liabilities can
negatively impact net interest margin and net interest income.
The operations of financial institutions such as the Company are dependent to a large degree on net interest income, which
is the difference between interest income from loans and investments and interest expense on deposits and borrowings.
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An institution's net interest income is significantly affected by market rates of interest that, in turn, are affected by
prevailing economic conditions, by the fiscal and monetary policies of the federal government and by the policies of
various regulatory agencies. The FRB regulates the national money supply to manage recessionary and inflationary
pressures. In doing so, the FRB may use techniques such as engaging in open market transactions of U.S. Government
securities, changing the discount rate and changing reserve requirements against bank deposits. The use of these techniques
may also affect interest rates charged on loans and paid on deposits. The interest rate environment, which includes both
the level of interest rates and the shape of the U.S. Treasury yield curve, has a significant impact on net interest income.
Higher market interest rates improved the net interest margin in 2022 in comparison to 2021. Interest-earning assets, such
as loans and investments, have been originated, acquired or repriced at higher rates, increasing the average rate earned on
those assets. While the average rate paid on interest bearing liabilities, such as deposits and borrowings, has also increased,
the increase has not always occurred at the same pace as the increase in the average rate earned on interest-earning assets,
resulting in an improvement of the net interest margin. However, during the fourth quarter of 2022, the cost of interest
bearing liabilities accelerated at a faster pace than the increase in interest earning assets impacting the net interest margin.
This trend may continue to adversely impact the net interest margin.
Like all financial institutions, the Company's consolidated statement of financial condition is affected by fluctuations in
interest rates. Volatility in interest rates can also result in disintermediation, which is the flow of deposits away from
financial institutions into direct investments, such as U.S. Government and corporate securities and other investment
vehicles, including mutual funds, which, because of the absence of federal insurance premiums and reserve requirements,
generally pay higher rates of return than bank deposit products. See "Item 7: Management's Discussion of Financial
Condition and Results of Operations”.
See the section entitled “Interest Rate Risk” in Management’s Discussion and Analysis of Financial Condition, for more
information regarding the Company’s interest rate sensitivity.
Capital and liquidity strategies, including the impact of the capital and liquidity requirements implemented by the
Basel III standards, may require the Company to maintain higher levels of capital, which could restrict the amount
of capital that the Company has available to deploy for income generating and other activities.
In July 2013, the FRB approved the final rules implementing the Basel III capital standards (the “Basel III Rules”) which
substantially revised the risk-based capital requirements applicable to bank holding companies and depository
institutions. See previous Capital Regulation discussion.
As of December 31, 2022, the Company believes it meets all capital adequacy requirements to which it is
subject. However, the new rules, which were fully phased in on January 1, 2019, effectively require financial institutions
to maintain higher capital levels than previously required. As a result, Juniata may have to maintain capital in the form of
assets that contribute less income to Juniata and that are not available for deployment as loans or other interest-income
generating assets, funding of capital projects or other growth initiatives.
Competition, including competition on rates of deposit and for loan growth, may negatively impact the Company’s
net interest margin.
There is significant competition among banks in the market areas served by the Company. In addition, as a result of
deregulation of the financial industry, the Bank also competes with other providers of financial services, such as savings
and loan associations, credit unions, consumer finance companies, securities firms, insurance companies, the mutual funds
industry, fintech-based loan and deposit providers, full service brokerage firms and discount brokerage firms, some of
which are subject to less extensive regulations than the Company with respect to the products and services they provide.
Some of the Company’s competitors have greater resources than the Company and, as a result, may have higher lending
limits and may offer other products or services not offered by the Company.
Competition may adversely affect the rates the Company pays on deposits and charges on loans, thereby potentially
adversely affecting the Company’s profitability. Competition sometimes requires the Company to lower rates charged on
loans more than the decline in market rates would otherwise indicate. Competition may also require the Company to pay
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higher rates on deposits than market rates would otherwise indicate. Thus, although loan demand is improving, intense
competition among lenders has continued to place downward pressure on loan yields, also narrowing the net interest
margin.
Changes in interest rates or disruption in liquidity markets may adversely affect the Company’s sources of funding.
The Company must maintain enough sources of liquidity to meet the demands of its depositors and borrowers, support its
operations and meet regulatory expectations. The Company’s liquidity practices emphasize core deposits and repayments
and maturities of loans and investments as its primary sources of liquidity. These primary sources of liquidity can be
supplemented by Federal Home Loan Bank (“FHLB”) advances, borrowings from the Federal Reserve Bank and lines of
credit from correspondent banks. Lower-cost, core deposits may be adversely affected by changes in interest rates, and
secondary sources of liquidity can be costlier to the Company than funding provided by deposit account balances having
similar maturities. In addition, adverse changes in the Company’s results of operations or financial condition, regulatory
actions involving the Company, or changes in regulatory, industry or market conditions could lead to increases in the cost
of these secondary sources of liquidity, the inability to refinance or replace these secondary funding sources as they mature,
or the withdrawal of unused borrowing capacity under these secondary funding sources.
While the Company attempts to manage its liquidity through various techniques, the assumptions and estimates used do
not always accurately forecast the impact of changes in customer behavior. For example, the Company may face limitations
on its ability to fund loan growth if customers move funds out of the Bank’s deposit accounts in response to increases in
interest rates. In the years following the 2008 financial crisis, even as the general level of market interest rates remained
low by historical standards, depositors frequently avoided higher-yielding and higher-risk alternative investments, in favor
of the safety and liquidity of non-maturing deposit accounts. These circumstances contributed to significant growth in non-
maturing deposit account balances at the Company, and at depository financial institutions generally. In a rising rate
environment, customers may become more sensitive to interest rates when making deposit decisions and considering
alternative opportunities. This increased sensitivity to interest rates could cause customers to move funds into higher-
yielding deposit accounts offered by the Company’s bank subsidiary, require the Company’s bank subsidiary to offer
higher interest rates on deposit accounts to retain customer deposits or cause customers to move funds into alternative
investments or deposits of other banks or non-bank providers. Technology and other factors have also made it more
convenient for customers to transfer low-cost deposits into higher-cost deposits or into alternative investments or deposits
of other banks or non-bank providers. Such movement of customer deposits could increase the Company’s funding costs,
reduce its net interest margin and/or create liquidity challenges.
Market conditions have been negatively impacted by disruptions in the liquidity markets in the past, and such disruptions
or an adverse change in the Company's results of operations or financial condition could, in the future, have a negative
impact on secondary sources of liquidity. If the Company is not able to continue to rely primarily on customer deposits to
meet its liquidity and funding needs, continue to access secondary, non-deposit funding sources on favorable terms or
otherwise fails to manage its liquidity effectively, the Company’s ability to continue to grow may be constrained, and the
Company’s liquidity, operating margins, results of operations and financial condition may be materially adversely affected.
Regulators emphasize liquidity planning at both the Bank and Company levels.
Due to regulatory limitations on the Corporation’s ability to rely on short-term borrowings, any significant movements of
deposits away from traditional depository accounts which negatively impacts the Corporation’s loan-to-deposit ratio could
restrict its ability to achieve growth in loans or require the Corporation to pay higher interest rates on deposit products to
retain deposits to fund loans.
Liquidity must also be managed at the holding company level. Banking regulators scrutinize liquidity at the holding
company level, in addition to consolidated and bank liquidity levels. For safety and soundness reasons, banking regulations
limit the amount of cash that can be transferred from subsidiary banks to the parent company in the form of loans and
dividends. Generally, these limitations are based on a subsidiary bank’s regulatory capital levels and net income. These
factors have affected some institutions' ability to pay dividends and have required some institutions to establish borrowing
facilities at the holding company level.
15
Unrealized losses in the Bank’s investment portfolio could affect liquidity.
As market interest rates increased during 2022, the unrealized losses on the Bank’s investment portfolio also increased.
The increase in unrealized losses is reflected in Accumulated Other Comprehensive Income (“AOCI”) on the balance sheet
and reduces book capital, and therefore, the tangible common equity ratio. Unrealized losses do not affect regulatory
capital ratios.
The Bank’s access to liquidity sources could be affected by unrealized losses if investments must be sold at a loss, tangible
capital ratios continue to decline from an increase in unrealized losses or realized credit losses, the FHLB or other sources
reduce capacity or bank regulators impose restrictions on the Bank such as a limit on interest rates it may pay on deposits
or its ability to access brokered deposits.
COMPLIANCE AND REGULATORY RISKS
The increasing time and expense associated with regulatory compliance and risk management could negatively
impact our results of operations.
The time, expense and internal and external resources associated with regulatory compliance continue to increase. Thus,
balancing the need to address regulatory changes and effectively manage growth in non-interest expenses has become
more challenging than it has been in the past.
The Company and the Bank are extensively regulated under federal and state banking laws and regulations that are intended
primarily for the protection of depositors, federal deposit insurance funds and the banking system. In general, these laws
and regulations establish: the eligible business activities for the Company; certain acquisition and merger restrictions;
limitations on intercompany transactions such as loans and dividends; capital adequacy requirements; requirements for
anti-money laundering programs; and consumer lending and other compliance requirements. While these statutes and
regulations are generally designed to minimize potential loss to depositors and the FDIC insurance funds, they do not
eliminate risk, and compliance with such statutes and regulations increases the Company’s expense, requires
management’s attention and can be a disadvantage from a competitive standpoint with respect to non-regulated competitors
and larger bank competitors.
Compliance with banking statutes and regulations is important to the Company's ability to engage in new activities and to
consummate additional acquisitions. Bank regulators are scrutinizing banks through longer and more extensive bank
examinations in both the safety and soundness and compliance areas. The results of such examinations could result in a
delay in receiving required regulatory approvals for potential new activities and transactional matters. If the Company's
compliance record would be determined to be unsatisfactory, such approvals may not be able to be obtained. Federal and
state banking regulators also possess broad powers to take supervisory actions, as they deem appropriate. These
supervisory actions may result in higher capital requirements, higher deposit insurance premiums and limitations on the
Company's operations that could have a material adverse effect on its business and profitability.
In addition, the Company is subject to changes in federal and state tax laws as well as changes in banking and credit
regulations, accounting principles, governmental economic and monetary policies and collection efforts by taxing
authorities.
RISKS RELATED TO OPERATIONS
Cyber security incidents could disrupt business operations, result in the loss of critical and confidential information,
and adversely impact our reputation and results of operations.
The Company’s computer systems, software and networks are regularly subject to cyber-attacks, which may result in
unauthorized access; mishandling or misuse of information; loss or destruction of data (including confidential customer
information); account takeovers; unavailability of service; computer viruses or other malicious code; disruption or
degradation of service; denial of service; and other events. Cyber threats may arise from human error, fraud or malice on
the part of employees or third parties, including third party vendors, or may result from accidental technological failure.
16
In addition, the parties intent on penetrating our systems may also attempt to fraudulently induce employees, customers,
third parties or other users of our systems to disclose sensitive information to gain access to the Company’s data or that of
the Company’s customers.
Cyber security incidents, depending on their nature and scope, could potentially result in the misappropriation, destruction,
corruption or unavailability of critical data and confidential or proprietary information (the Company’s own or that of third
parties) and the disruption of business operations. The potential consequences of a material cyber security incident include
reputational damage, litigation with third parties, and increased cyber security protection and remediation costs, which in
turn could adversely affect the Company’s competitiveness and results of operations. The Company carries insurance to
partially offset the risk of loss; however, there can be no assurance that the policy limits or policy exclusions would
adequately protect the Company from a related loss.
Potential disruption or failure of network and information processing systems and those of third-party vendors
may negatively impact our operations.
The Company's business activities are dependent on its ability to accurately and timely process, record and monitor many
transactions. If any of its financial, accounting, network or other information processing systems fail or have other
significant shortcomings, the Company could be materially adversely affected. The Company outsources some of it
processing and other activities to third party vendors. Third parties with which the Company does business could be
sources of operational risk to the Company, including the risk that the third parties' own network and information
processing systems could fail. Any of these occurrences could materially diminish the Company's ability to operate one or
more of the Company's businesses, or cause the Company to suffer financial loss, a disruption of its business, regulatory
sanctions or damage to its reputation, any of which could materially adversely affect the Company.
The Company may be subject to disruptions or failures of the Company's financial, accounting, network and information
processing systems arising from events that are wholly or partially beyond the Company's control, which may include, for
example, computer viruses or electrical or telecommunications outages, denial of service attacks or hacking targeting the
Company's or its vendors’ networks or information processing systems or websites, natural disasters, other damage to
property or physical assets or terrorist acts. The Company has developed an emergency recovery program, which includes
plans to maintain or resume operations in the event of an emergency and has contingency plans if operations or systems
cannot be resumed or restored. The emergency recovery program is periodically reviewed and updated, and components
of the emergency recovery program are periodically tested and validated. The Company also reviews and evaluates the
emergency recovery programs of vendors which provide certain third-party systems that the Company considers critical.
Nevertheless, there is no guarantee that these measures or any other measures can provide absolute security. In addition,
because the methods used to cause cyber-attacks change frequently or, in some cases, are not recognized until launched,
the Corporation may be unable to implement effective preventive measures or proactively address these attacks. Resulting
disruptions or failures affecting any of the Company’s systems may give rise to interruption in service to customers,
damage to the Company's reputation and loss or liability to the Company.
Failure by the Company to keep up with technological advancements in deployment of services and efficiency of
operations may make it more vulnerable to competition.
The financial services industry is continually undergoing rapid technological change, with frequent introductions of new
technology-driven products and services. The effective use of technology increases efficiency and enables financial
institutions to better serve customers and to reduce costs. The Company’s future success depends, in part, upon its ability
to address the needs of its customers by using technology to provide products and services that will satisfy customer
demands, as well as to create additional efficiencies in the Company’s operations. Many of the Company’s financial
institution competitors have substantially greater resources to invest in technological improvements, and new payment
services developed and offered by non-financial institution competitors pose an increasing threat to the traditional payment
services offered by financial institutions. The Company may not be able to effectively implement new technology-driven
products and services, be successful in marketing these products and services to its customers, or effectively deploy new
technologies to improve the efficiency of its operations. Failure to successfully keep pace with technological change
affecting the financial services industry could have a material adverse impact on the Company’s business, financial
condition and results of operations.
17
Further, the costs of new technology, including personnel, can be high in both absolute and relative terms. There can be
no assurance, given the fast pace of change and innovation, that the Company’s technology, either purchased or developed
internally, will meet or continue to meet the needs of the Company and the needs of its customers.
The Company may not be able to attract and retain skilled people.
The Company’s success depends, in large part, on its ability to attract and retain skilled people. The unexpected loss of
services of one or more of the Company’s key personnel could have a material adverse impact on the Company's business
because of their skills, knowledge of the Company's operations and markets, industry experience, and the difficulty of
promptly finding qualified replacement personnel. Our ability to attract and retain skilled personnel cost effectively is
subject to a variety of external factors, including the limited availability of qualified personnel in the workforce in the local
markets in which we operate, unemployment levels within those markets, prevailing wage rates, which have increased
significantly, and health and other insurance costs. Furthermore, the complexities introduced into the labor market because
of the transition to increased work-from-home arrangements have impacted the competitive landscape in our labor market.
Based on current conditions in the labor market, we have experienced some difficulty in retaining and attracting personnel,
and there is no assurance we will be able to continue to successfully do so.
ECONOMIC AND CREDIT RISKS
General economic conditions may harm our industry, business and results of operations.
Various aspects of our business could be impacted by general macroeconomic conditions including, among others,
inflation, interest rates, supply chain complications and economic uncertainty. Inflation rates in the United States have
increased to levels not experienced in several years. These economic uncertainties may be compounded by the Russia –
Ukraine conflict. Inflation, interest rates and related economic volatility, as well as supply chain complications, could
adversely affect our business, financial condition, results of operations and liquidity. These unfavorable economic
conditions could, among other things, impact the value of our securities portfolio, impact our net interest margin, adversely
impact our customer’s ability to make payments on floating rate loans, if interest rates rise, and increase the risk of default
by our customers experiencing financial difficulties and business disruptions.
Difficult economic conditions and real estate markets, including protracted periods of low-growth and sluggish loan
demand, can negatively impact the Company’s income, and result in higher charge-offs as borrowers’ ability to
repay is negatively impacted by those conditions.
Lending money is an essential part of the banking business, and the revenues derived from lending activities are the most
significant segment of the Company’s income statement. Extended periods of sluggish loan demand can materially affect
the composition of the Company’s consolidated statement of financial condition, reducing the ratio of loans to deposits
and the Company’s profitability. Adverse changes in the economy and real estate markets and the duration of economic
downturns can negatively affect the solvency of businesses and consumers. Borrowers’ inability to repay loans causes
increases in non-performing assets, which may result in elevated collection and carrying costs related to such non-
performing assets and increases in loan charge-offs, significantly impacting the loan loss provision charged to earnings to
fund the allowance for loan losses. The risk of non-payment is affected by credit risks of the borrower, changes in economic
and industry conditions, the duration of the loan and, in the case of a collateralized loan, uncertainties as to the future value
of the collateral supporting the loan. Historically, commercial loans have presented a greater risk of non-payment than
consumer loans. The application of various federal and state laws, including bankruptcy and insolvency laws, may limit
the amount that can be recovered on these loans.
The Company has established an allowance for loan losses that management believes to be adequate to offset probable
losses on the Company’s existing loans. However, there is no precise method of estimating loan losses. The Company
determines the appropriate level of the allowance for credit losses based on many quantitative and qualitative factors,
including, but not limited to the size and composition of the loan portfolio; changes in risk ratings; changes in collateral
values; delinquency levels; historical losses; and economic conditions. In addition, as the Company’s loan portfolio grows,
it will generally be necessary to increase the allowance for credit losses through additional provisions, which will impact
the Company’s operating results. If the Company’s assumptions and judgments regarding such matters prove to be
18
inaccurate, its allowance for credit losses might not be sufficient, and additional provisions for credit losses might need to
be made. Depending on the amount of such provisions for credit losses, the adverse impact on the Company’s earnings
could be material. Also, there can be no assurance that any future declines in real estate market conditions, general
economic conditions or changes in regulatory policies will not require the Company to increase its allowance for loan
losses, through additional loan loss provisions, which could reduce earnings.
Investment securities losses, including other-than-temporary declines in the value of available for sale securities,
may result in charges to earnings that could negatively impact our results of operations.
Price fluctuations in securities markets, as well as other market events, could have an impact on the Company’s results of
operations. As described below, the Company’s holding of certain securities and the revenues the Company earns from its
trust and investment management services business are particularly sensitive to those events:
• Equity investments:
As of December 31, 2022, the Company’s equity investments were comprised primarily of publicly traded
financial institutions. The value of the securities in the Company’s equity portfolio may be affected by several
factors. General economic conditions and uncertainty surrounding the financial institution sector impacts the
value of these securities. Equity investments are stated at fair value with realized and unrealized gains and losses
reported in net income. General declines in bank stock values, as well as deterioration in the performance of
specific banks, are reflected on the Consolidated Statements of Income.
• Municipal securities:
As of December 31, 2022, the Company had approximately $7,679,000 of municipal securities issued by various
municipalities in its investment portfolio. Uncertainty with respect to the financial viability of municipal insurers
places greater emphasis on the underlying strength of issuers. Increasing pressure on local tax revenues of issuers
due to adverse economic conditions could also have a negative impact on the underlying credit quality of issuers.
•
Investment management and trust services revenue:
The Company’s investment management and trust services revenue is also impacted by fluctuations in the
securities markets. A portion of this revenue is based on the value of the underlying investment portfolios. If the
values of those investment portfolios decrease, whether due to factors influencing U.S. securities markets in
general or otherwise, the Company’s revenue could be negatively impacted. In addition, the Company’s ability
to sell its brokerage services is dependent, in part, upon consumers’ level of confidence in securities markets.
RISKS RELATED TO INVESTMENT IN THE COMPANY’S STOCK
The Corporation is a holding company and relies on dividends from its subsidiaries for substantially all its revenue
and its ability to make dividends, distributions and other payments.
The Company is a separate and distinct legal entity from the Bank and depends on the payment of dividends from the
Bank for substantially all of its revenues. As a result, the Company's ability to make dividend payments on its common
stock depends primarily on certain federal and state regulatory considerations and the receipt of dividends and other
distributions from its subsidiaries. There are various regulatory and prudential supervisory restrictions, which may change
from time to time, that impact the ability of the Bank to pay dividends or make other payments to the Company. There can
be no assurance that the Bank will be able to pay dividends at past levels, or at all, in the future. If the Company does not
receive enough cash dividends or is unable to borrow from the Bank, then the Company may not have enough funds to
pay dividends to its shareholders, repurchase its common stock or service its debt obligations.
19
"Anti-takeover" provisions may keep shareholders from receiving a premium for their shares.
The Articles of Incorporation of the Company presently contain certain provisions, such as staggered Board of Directors
terms and super majority voting requirements for transactions not approved by the Company’s Board of Directors, which
may be deemed to be "anti-takeover" in nature in that such provisions may deter, discourage or make more difficult the
assumption of control of the Company by another company or person through a tender offer, merger, proxy contest or
similar transaction or series of transactions. In addition, provisions of Pennsylvania and applicable federal banking laws
could similarly make it more difficult for a third party to acquire control of the Company. The overall effects of the "anti-
takeover” provisions may be to discourage, make costlier or more difficult, or prevent a future takeover offer, even if
shareholders may desire the Company to pursue the takeover offer. These provisions may also increase the possibility that
a future bidder for control of the Company will be required to act through arms-length negotiation with the Company’s
Board of Directors.
If the Company fails to maintain an effective system of internal controls, it may not be able to accurately report its
financial results or prevent fraud. As a result, current and potential shareholders could lose confidence in the
Company’s financial reporting, which could harm its business and the trading price of its common stock.
The Company has established a process to document and evaluate its internal controls over financial reporting to satisfy
the requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002 and related regulations, which require annual
management assessments of the effectiveness of the Company’s internal controls over financial reporting. In this regard,
management has dedicated internal resources, engaged outside consultants and adopted a detailed work plan to (i) assess
and document the adequacy of internal controls over financial reporting, (ii) take steps to improve control processes, where
appropriate, (iii) validate through testing that controls are functioning as documented and (iv) maintain a continuous
reporting and improvement process for internal control over financial reporting.
The Company’s efforts to comply with Section 404(b) of the Sarbanes-Oxley Act of 2002 and the related regulations
regarding the Company’s assessment of its internal controls over financial reporting are likely to continue to result in
increased expenses. The Company’s management and audit committee have given the Company’s compliance with Section
404(b) a high priority. The Company cannot be certain that these measures will ensure that the Company implements and
maintains adequate controls over its financial processes and reporting in the future. Any failure to implement required new
or improved controls, or difficulties encountered in their implementation, could harm the Company’s operating results or
cause the Company to fail to meet its reporting obligations. If the Company fails to correct any issues in the design or
operating effectiveness of internal controls over financial reporting or fails to prevent fraud, current and potential
shareholders could lose confidence in the Company’s financial reporting, which could harm its business and the trading
price of its common stock.
20
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
The physical properties of the Company are all owned or leased by the Bank.
The Bank owns and operates, for banking purposes, the buildings located at:
One South Main Street, Mifflintown, Pennsylvania (branch office)
218 Bridge Street, Mifflintown, Pennsylvania (corporate headquarters)
4068 William Penn Highway, Mifflintown, Pennsylvania (branch office)
1762 Butcher Shop Road, Mifflintown, Pennsylvania (operations center and Trust offices)
301 Market Street, Port Royal, Pennsylvania (branch office)
30580 Rt. 35, McAlisterville, Pennsylvania (branch office)
Four North Market Street, Millerstown, Pennsylvania (branch office)
17428 Tuscarora Creek Road, Blairs Mills, Pennsylvania (branch office)
One East Market Street, Lewistown, Pennsylvania (branch office)
20 Prince Street, Reedsville, Pennsylvania (branch office)
100 West Water Street, Lewistown, Pennsylvania (branch office)
320 South Logan Boulevard, Burnham, Pennsylvania (branch office)
571 Main Street, Richfield, Pennsylvania (branch office)
118 East Second Street, Coudersport, Pennsylvania (branch office)
104 N Front Street, Liverpool, Pennsylvania (branch office)
The Bank leases four offices:
Branch Offices
Wal-Mart Supercenter, Route 522 South, Lewistown, Pennsylvania (lease expires January 2026)
52 West Mill Street, Port Allegany, Pennsylvania (lease expires June 2028)
Financial Services Office
129 South Main Street, Suite 600, Lewistown, Pennsylvania (lease expires October 2029)
Loan Production Office
1366 South Atherton Street, State College, Pennsylvania (lease expires December 2023)
ITEM 3. LEGAL PROCEEDINGS
At times, the nature of the Company’s and the Bank’s business generates litigation involving matters arising in the ordinary
course of business. However, in the opinion of management, there are no proceedings pending to which the Company or
the Bank is a party or to which its property is subject, which, if adversely determined, would be material in relation to their
financial condition. In addition, no material proceedings are pending or are known to be threatened or contemplated against
the Company by government authorities or others.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
21
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information:
The common stock of Juniata Valley Financial Corp. is quoted under the symbol “JUVF” on the OTCQX Best Market; a
regulated stock market operated by the OTC Market’s Group.
Transfer Agent:
Computershare Investor Services, P.O. Box 43006, Providence, RI 02940-3006. Phone: (800) 368-5948. Website:
www.computershare.com/investor.
Holders:
As of February 17, 2023, there were 1,674 registered holders of the Company’s outstanding common stock.
For information concerning the Company’s Equity Compensation Plans, see “Item 12: Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder Matters”.
Dividends:
Cash dividends of $0.88 per share were declared in each of 2023 and 2022. As stated in Note 14 – Stockholders’ Equity
and Regulatory Matters, in The Notes to Consolidated Financial Statements, the Company is subject to 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 the Company’s financial condition, earnings, capital and regulatory requirements, prospects, business conditions and
other factors deemed relevant by the Board of Directors.
Annual Meeting:
The Annual Meeting of Shareholders of Juniata Valley Financial Corp. will be held at 10:30 a.m., on Tuesday, May 16,
2023, virtually via the internet at meetnow.global/MMLYV4Z.
Recent Sales of Unregistered Securities:
None.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers:
The Company periodically repurchases shares of its common stock under a share repurchase program approved by the
Board of Directors. In November of 2021, the Board of Directors authorized the repurchase of an additional 200,000 shares
of its common stock through the Company’s share repurchase program for a total of 209,307 shares authorized to be
repurchased at that time. The program will remain authorized until all approved shares are repurchased, unless terminated
by the Board of Directors. There were no shares purchased under the program during the fourth quarter of 2022. As of
December 31, 2022, 208,312 shares remained available to purchase under the program.
Total Number of
Total Number
of Shares
Purchased or Restricted
Shares Forfeited
Average
Price Paid
per Share
—
—
Part of Publicly
Announced Plans or
Programs
Shares Purchased as Maximum Number of
Shares that May Yet Be
Purchased Under the
Plans or Programs (1)
208,312
208,312
208,312
—
—
—
—
208,312
Period
October 1-31, 2022 . . . . . . . . . . . . . . . . .
November 1-30, 2022 . . . . . . . . . . . . . . .
December 1-31, 2022 . . . . . . . . . . . . . . .
Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 6. SELECTED FINANCIAL DATA
Not applicable.
— $
—
—
—
22
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THREE-YEAR FINANCIAL SUMMARY
(Dollars in thousands, except share and per share data)
2022
2021
2020
BALANCE SHEET INFORMATION at December 31
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans, net of allowance for loan losses . . . . . . . . . . . . . . . . . . . .
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term borrowings and repurchase agreements . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Number of shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average for the year
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average shares outstanding for the year - basic . . . . .
Weighted average shares outstanding for the year - diluted . . .
INCOME STATEMENT INFORMATION
Years Ended December 31
Total interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Federal income tax (benefit) expense . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PER SHARE DATA
Earnings per share - basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings per share - diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Book value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
FINANCIAL RATIOS
Return on average assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Return on average equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividend payout . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average equity to average assets . . . . . . . . . . . . . . . . . . . . . . . . .
Loans to deposits (year-end) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Yield on earning assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost to fund earning assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-interest income [excluding gains (losses) on sales or
calls of securities] to average assets . . . . . . . . . . . . . . . . . . . . . .
Non-interest expense to average assets . . . . . . . . . . . . . . . . . . . .
Net non-interest expense to average assets . . . . . . . . . . . . . . . . .
23
$
$
$
$
$
$
$
$
830,875
711,512
480,485
287,966
9,047
55,710
20,000
36,949
5,003,059
819,153
50,151
4,999,980
5,008,512
27,555
3,422
24,133
455
5,225
19,941
8,962
642
8,320
1.66
1.66
0.88
7.39
1.02 %
16.59
52.90
6.12
67.53
3.50
0.60
0.82
2.43
1.62
810,518
708,447
414,795
339,997
9,047
4,227
20,000
71,290
4,988,542
$
793,718
622,866
418,567
321,417
9,047
24,750
35,000
76,597
5,029,841
816,989
73,638
5,004,051
5,013,460
740,111
76,056
5,073,840
5,080,455
$
$
$
24,553
3,218
21,335
(769)
5,154
20,370
6,888
284
6,604
1.32
1.32
0.88
14.29
0.81 %
8.97
66.66
9.01
58.55
3.21
0.58
0.63
2.49
1.87
24,283
4,037
20,246
721
5,320
19,293
5,552
(50)
5,602
1.10
1.10
0.88
15.23
0.76 %
7.37
79.71
10.28
67.20
3.55
0.80
0.60
2.61
2.00
FORWARD-LOOKING STATEMENTS
The information contained in this Annual Report on Form 10-K contains forward looking statements (as such term is
defined in the Securities Exchange Act of 1934 and the regulations thereunder). These forward-looking statements may
include projections of, or guidance on, the Corporation’s future financial performance, expected levels of future expenses,
including future credit losses, anticipated growth strategies, descriptions of new business initiatives and anticipated trends
in the Corporation’s business or financial results. When words such as "may”, "should”, "will”, "could”, "estimates”,
"predicts”, "potential”, "continue”, "anticipates”, "believes”, "plans”, "expects”, "future”, "intends”, “projects”, the
negative of these terms and other comparable terminology are used in this document, Juniata is making forward-looking
statements. Any forward-looking statement made by the Company in this document is based only on Juniata’s current
expectations, estimates and projections about future events and financial trends affecting the financial condition of its
business based on information currently available to the Company and speaks only as of the date when made. Juniata
undertakes no obligation to publicly update or revise forward-looking information, whether as a result of new or updated
information, future events, or otherwise. Forward-looking statements are not historical facts or guarantees of future
performance. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and
changes in circumstances that are difficult to predict and many of which are outside of the Company’s control, and actual
results may differ materially from this forward-looking information and therefore, should not be unduly relied upon. Many
factors could cause our actual results and financial condition to differ materially from those indicated in the forward-
looking statements, including, without limitation:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
changes in general economic, business and political conditions, including inflation, a recession or intensified
international hostilities;
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 and uncertainties, 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 effects of changes in the applicable federal income tax rate;
the level of other expenses, including salaries and employee benefit expenses;
the impact of increased regulatory scrutiny of the banking industry;
the impact of governmental monetary and fiscal policies, as well as legislative and regulatory changes;
the results of regulatory examination and supervision processes;
the failure of assumptions underlying the establishment of reserves for loan and lease losses, and estimations of
collateral values and various financial assets and liabilities;
the increasing time and expense associated with regulatory compliance and risk management;
the ability to implement business strategies, including business acquisition activities and organic branch, product,
and service expansion strategies;
capital and liquidity strategies, including the impact of the capital and liquidity requirements modified by the
Basel III standards;
the effects of changes in accounting policies, standards, and interpretations on the presentation in the Company’s
consolidated balance sheets and consolidated statements of income;
the Company’s failure to identify and to address cyber-security risks;
the Company’s ability to keep pace with technological changes;
the Company’s ability to attract and retain talented personnel;
the Company’s reliance on its subsidiary for substantially all its revenues and its ability to pay dividends;
acts of war or terrorism;
disruptions due to flooding, climate change, severe weather, or other natural disasters;
24
•
•
failure of third-party service providers to perform their contractual obligations; and
the impact of increase unrealized losses on debt securities on stockholders’ equity.
OVERVIEW
This discussion relates to Juniata Valley Financial Corp. (the “Company” or “Juniata”) and its wholly owned subsidiary,
The Juniata Valley Bank (the “Bank”). Juniata is a bank holding company that delivers financial services through the Bank
within its market, primarily central and northern Pennsylvania. The Bank provides retail and commercial banking, trust,
estate, and wealth management services through offices located in Juniata, Mifflin, Perry, Huntingdon, McKean, Potter
and Centre Counties.
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 consolidated financial statements, including the notes thereto, included
in this Annual Report on Form 10-K. 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) that 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.
ECONOMIC AND INDUSTRY-WIDE FACTORS RELEVANT TO JUNIATA
As a financial services organization, Juniata’s core business is most influenced by the level of, and movement of, interest
rates. Lending and investing are done daily, using funding from deposits and borrowings, resulting in net interest income,
the most significant portion of operating results. Using 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.
FOCUS OF MANAGEMENT
The management of Juniata believes that it is important to know who and what we are to be successful. We must be aligned
in our efforts to achieve goals. We have identified the four characteristics that define the Company and the personnel that
support it. We are Committed, Capable, Caring and Connected. Management seeks to be the preeminent financial
institution in its market area and measures its success in achieving our goals by the five key elements described below.
SHAREHOLDER SATISFACTION
Above all else, management is committed to maximizing the value of our shareholders’ investment, through both stock
value appreciation and dividend returns. Remaining connected to our communities will allow us to identify the financial
needs of our market and to deliver those products and services capably. In doing so, we will seek to profitably grow the
balance sheet and enhance earnings, while maintaining capital and liquidity levels that exceed all regulatory guidelines.
CUSTOMER RELATIONSHIPS
We are committed to maximizing customer satisfaction. We are sensitive to the expanding array of financial 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 which we deliver our services must
change as well. One element of the Company’s strategic plan is to provide connection through every means available,
wherever we are needed, whether through a stand-alone branch, in-store boutique, ATM or via online and mobile banking
anywhere internet or cell phone signals can be received. In 2022, we continued to make advances in technological
resources, offering a mobile wallet to consumers because we are committed to optimizing the customer experience.
25
BALANCE SHEET GROWTH
We are capable of profitable balance sheet growth. Rapid growth should not be a substitute for careful fiscal 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, and most recently in April 2018 with the acquisition of the remaining shares of the Liverpool Community
Bank (“LCB”).
OPERATING RESULTS
We are capable 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 these margins 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.
CONNECTION TO THE COMMUNITY
We are active corporate citizens, connected to 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. And though these tools are electronically driven, they are custom-designed by relationship managers who
take time to understand the need. 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. We were privileged to support our local
business clients with Paycheck Protection Loans, when they needed it most, and maintained a physical presence at service
locations throughout the pandemic.
JUNIATA’S OPPORTUNITIES
SOUNDNESS AND STABILITY
Our financial condition is strong. We enjoy strong capital and liquidity ratios that 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 over 150 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. With the acquisition of First
26
National Bank of Port Allegheny (“FNBPA”) in 2015, we expanded our market into the northern tier region of
Pennsylvania and integrated the JVB brand there and have since expanded our footprint in Perry County, Pennsylvania,
through the consummation of the acquisition of remaining shares of LCB in April 2018.
DELIVERY SYSTEM ENHANCEMENTS
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 lifestyle, whether it is through
electronic or personal delivery. We achieved an early entry into the mobile banking arena and have since expanded online
delivery, offering consumer remote deposit and Touch ID, and most recently online consumer loan and deposit accounting
opening. Through the www.JVBonline.com website, we offer a suite of online services including the convenience of online
loan applications for residential mortgages, home equity, vehicle and other personal loans. Online and mobile banking
features include full bill-pay and monetary transfers between internal and external accounts. Our ATM network is equipped
with state-of-the art machines. Our Customer Care Center provides a dedicated service to address all customer inquiries,
including expanded service times and on-line chat, and provides outreach through our social media sites. Our updated
branch facilities feature a highly interactive and complete customer experience.
JUNIATA’S CHALLENGES
NET INTEREST MARGIN COMPRESSION
The increasing interest rate environment in 2022 improved the net interest margin for most banks, including Juniata. Loans
have been originated, acquired or repriced at higher rates, increasing the average rate earned on those assets. While the
average rate paid on interest bearing liabilities, such as deposits and borrowings, has also increased, the increase has not
always occurred at the same pace as the increase in the average rate earned on interest-earning assets until late in the fourth
quarter of 2022. We believe the increased cost of funding will impact the net interest margin and that increasing the net
interest margin will continue to be a challenge as general market rates, particularly funding costs, rise.
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.
REGULATIONS
The Company is subject to banking regulation, as well as regulation by the 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.
27
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 of
The Notes to 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, these assumptions may prove to be 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 allowance for loan losses is maintained at a level
believed to be 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.
28
RESULTS OF OPERATIONS
2022 AND 2021 FINANCIAL PERFORMANCE OVERVIEW
Net income for Juniata in 2022 was $8.3 million, an increase of 26.0%, compared to net income of $6.6 million for 2021.
Earnings per share on a fully diluted basis increased 25.8%, to $1.66 in 2022, compared to $1.32 in 2021. Return on
average assets (“ROA”) for the years ended December 31, 2022 and 2021 was 1.02% and 0.81%, respectively, while the
return on average equity (“ROE”) for 2022 was 16.59% compared to 8.97% in 2021.
The net interest margin, on a fully tax-equivalent basis, increased from 2.83% in 2021 to 3.10% in 2022. The yield on
earning assets increased 29 basis points, to 3.50%, while the cost of funds increased two basis points, to 0.60%, in 2022
compared to 2021.
In 2022, Juniata executed a balance sheet and regulatory capital management strategy by selling $24.7 million, par value,
of sub debt of unconsolidated financial institutions, classified as corporate debt securities, at a loss of $1.5 million, which
was partially offset by the termination of two forward starting interest rate swaps, resulting in a gain of $1.2 million.
Management’s intent with respect to these securities changed in 2022 due to the adverse regulatory impact of substantial
(relative to capital) holdings of subordinated debt. In 2021, Juniata executed a balance sheet strategy funding the
prepayment of $15.0 million in higher-cost long-term debt with proceeds from the sale of investment securities and the
use of brokered deposits.
Juniata strives to attain consistently satisfactory earnings levels each year by protecting the core (repeatable) earnings base
through conservative growth strategies that seek to minimize shareholder 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 ratio to be a key indicator of its success and constantly scrutinizes the broad categories of
the income statement that impact this profitability indicator.
29
Summarized below are the components of net income and the contribution of each to ROA for 2022 and 2021.
(Dollars in thousands)
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer service fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debit card fee income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BOLI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trust fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commissions from sales of non-deposit products. . . . . . . . . . .
Fees derived from loan activity . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage banking income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Security gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in value of equity securities . . . . . . . . . . . . . . . . . . . . .
Gain from life insurance proceeds . . . . . . . . . . . . . . . . . . . . . . .
Other noninterest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total noninterest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employee expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Occupancy and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Data processing expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Professional fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Taxes, other than income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
FDIC insurance premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sales of other real estate owned . . . . . . . . . . . . . . . . . .
Intangible amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of investment in partnership . . . . . . . . . . . . . . . .
Long-term debt prepayment penalty . . . . . . . . . . . . . . . . . . . . .
Other noninterest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total noninterest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022
Net Income % of Average
2021
Net Income % of Average
Components
$ 24,133
(455)
Assets
Components Assets
2.95 % $ 21,335
769
(0.06)
2.61 %
0.09
1,472
1,703
219
472
384
540
34
(1,453)
(68)
380
1,542
5,225
(10,815)
(2,018)
(2,582)
(800)
(503)
(405)
28
(54)
(799)
—
(1,993)
(19,941)
0.18
0.21
0.03
0.06
0.05
0.07
0.00
(0.18)
(0.01)
0.05
0.19
0.64
(1.32)
(0.25)
(0.32)
(0.1)
(0.06)
(0.05)
0.00
(0.01)
(0.10)
(0.24)
(2.43)
1,355
1,755
246
445
368
441
41
21
151
151
331
5,154
(10,700)
(2,002)
(2,693)
(841)
(574)
(310)
64
(66)
(799)
(691)
(1,758)
(20,370)
—
0.17
0.21
0.03
0.05
0.05
0.05
0.01
0.00
0.02
0.02
0.04
0.63
(1.31)
(0.25)
(0.33)
(0.1)
(0.07)
(0.04)
0.01
(0.01)
(0.10)
(0.08)
(0.22)
(2.49)
Income tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(642)
8,320
$
(0.08)
1.02 % $
(284)
6,604
(0.03)
0.81 %
Average assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 819,153
$ 816,989
NET INTEREST INCOME
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 78% of total
revenues (the total of net interest income and non-interest income, exclusive of gains on sales and calls of securities) for
2022. 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 present 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 2022, 2021 and
2020. Table 2 further shows changes attributable to the volume and rate components of net interest income.
30
TABLE 1
AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS
(Dollars in thousands)
ASSETS
Interest earning assets:
Loans:
Year Ended
December 31, 2022
Year Ended
December 31, 2021
Year Ended
December 31, 2020
Yield/
Average
Balance(1) Interest Rate
Average
Yield/
Average
Yield/
Balance(1) Interest Rate Balance(1) Interest Rate
Taxable loans (5) . . . . . . . . . . . . . . $ 414,208 $ 20,429
Tax-exempt loans . . . . . . . . . . . . .
798
21,227
Total loans . . . . . . . . . . . . . . . . .
27,762
441,970
4.93 % $ 393,679
29,606
2.88
423,285
4.80
$ 18,579
883
19,462
4.72 % $ 385,425 $ 18,364
885
27,826
2.98
19,249
413,251
4.60
4.76 %
3.18
4.66
Investment securities:
Taxable investment securities . . . .
Tax-exempt investment securities . .
Total investment securities . . . . .
332,777
7,214
339,991
6,077
155
6,232
Interest bearing deposits . . . . . . . . . .
Federal funds sold . . . . . . . . . . . . . .
Total interest earning assets . . . . . . . . .
5,423
—
787,384
96
—
27,555
1.83
2.15
1.83
1.78
—
3.50
322,956
6,550
329,506
7,226
4,248
764,265
4,912
154
5,066
24
1
24,553
1.52
2.35
1.54
0.33
0.01
3.21
251,095
5,979
257,074
4,813
142
4,955
9,831
3,082
683,238
66
13
24,283
1.92
2.37
1.93
0.67
0.43
3.55
Non-interest earning assets:
Cash and due from banks . . . . . . . . .
Allowance for loan losses . . . . . . . . .
Premises and equipment . . . . . . . . . .
Other assets (7) . . . . . . . . . . . . . . . .
12,968
(3,713)
8,257
14,257
Total assets . . . . . . . . . . . . . . . . . . $ 819,153
LIABILITIES AND
STOCKHOLDERS’ EQUITY
Interest bearing liabilities:
Interest bearing demand
deposits (2) . . . . . . . . . . . . . . . . . . . $ 236,438
149,909
Savings deposits . . . . . . . . . . . . . . . .
Time deposits . . . . . . . . . . . . . . . . . .
136,472
Short-term and long-term
borrowings and other
interest bearing liabilities . . . . . . . . .
Total interest bearing liabilities . . . . . .
45,326
568,145
Non-interest bearing liabilities:
Demand deposits . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . .
Stockholders’ equity . . . . . . . . . . . . . .
195,301
5,556
50,151
Total liabilities and
stockholders’ equity . . . . . . . . . . . . $ 819,153
13,687
(3,972)
8,513
34,496
$ 816,989
13,137
(3,513)
9,011
38,238
$ 740,111
1,030
75
1,472
845
3,422
0.44
0.05
1.08
1.86
0.60
$ 220,082
137,899
149,405
299
70
1,903
0.14
0.05
1.27
$ 166,627
108,535
152,632
403
69
2,474
0.24
0.06
1.62
51,596
558,982
946
3,218
1.83
0.58
75,737
503,531
1,091
4,037
1.44
0.80
179,202
5,167
73,638
$ 816,989
155,090
5,434
76,056
$ 740,111
Net interest income and net
interest rate spread . . . . . . . . . . . . . . .
Net interest margin on interest
earning assets (3) . . . . . . . . . . . . . . . .
Net interest income and net interest
margin - Tax equivalent basis (4) . . . . .
$ 24,133
2.90 %
$ 21,335
2.63 %
$ 20,246
2.75 %
3.06 %
2.79 %
2.96 %
$ 24,386
3.10 %
$ 21,610
2.83 %
$ 20,519
3.00 %
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 using a
federal tax rate of 21%.
31
TABLE 2
RATE/VOLUME ANALYSIS OF NET INTEREST INCOME
(Dollars in thousands)
ASSETS
Interest earning assets:
Loans:
2022 Compared to 2021
Increase (Decrease) Due To (6)
Total
Rate
Volume
2021 Compared to 2020
Increase (Decrease) Due To (6)
Volume Rate
Total
Taxable (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax-exempt . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total loans (8) . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
969
(55)
914
881
(30)
851
$ 1,850
(85)
1,765
$
395 $
57
452
(180) $
(59)
(239)
149
16
165
(6)
(1)
1,072
1,016
(15)
1,001
78
—
1,930
1,165
1
1,166
72
(1)
3,002
1,377
14
1,391
(18)
6
1,831
(1,278)
(2)
(1,280)
(24)
(18)
(1,561)
215
(2)
213
99
12
111
(42)
(12)
270
Investment securities:
Taxable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax-exempt . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total investment securities . . . . . . . . . . . . . . .
Interest bearing deposits . . . . . . . . . . . . . . . . . . . .
Federal funds sold . . . . . . . . . . . . . . . . . . . . . . . . .
Total interest earning assets . . . . . . . . . . . . . . . . . .
LIABILITIES AND STOCKHOLDERS’
EQUITY
Interest bearing liabilities:
Demand deposits (2) . . . . . . . . . . . . . . . . . . . . .
Savings deposits . . . . . . . . . . . . . . . . . . . . . . . . .
Time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, including short and long-term
borrowings, and other interest bearing
liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total interest bearing liabilities . . . . . . . . . . . . . . .
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
22
6
(165)
709
(1)
(266)
$
$
731
5
(431)
129 $
19
(52)
(233) $
(18)
(519)
(104)
1
(571)
(115)
(252)
$ 1,324
14
456
$ 1,474
(101)
204
$ 2,798
(419)
(323)
(145)
(819)
$ 2,154 $ (1,065) $ 1,089
274
(496)
Notes:
(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 debt securities: ($26.0 million) in 2022, $137,000 in 2021 and $4.3 million
in 2020.
(8) Interest income includes loan fees of $596,000, $1.1 million and $463,000 in 2022, 2021 and 2020, respectively.
Net interest income was $24.1 million for the year ended December 31, 2022. An increase in volume and rate contributed
$1.3 million and $1.5 million, respectively, to net interest income in 2022, resulting in an overall increase of $2.8 million,
or 13.1%, when compared to net interest income of $21.3 million for the comparable 2021 period, which increased by
$1.1 million, or 5.4%, over the 2020 period. Average earning assets increased $23.1 million, or 3.0%, to $787.4 million,
during the year ended December 31, 2022, compared to the same period in 2021, which increased $81.0 million, or 11.9%
compared to the year ended December 31, 2020.
32
On average, total loans outstanding increased $18.7 million, or 4.4%, in 2022 compared to 2021. Average loans in 2022
included average PPP loan balances of $2.7 million compared to $23.8 million in 2021. Average total loans outstanding
increased $10.0 million, or 2.4%, in 2021 compared to 2020. Average yields on loans increased by 20 basis points in 2022
compared to 2021, which was 6 basis points less than 2020. As shown in Table 2, Rate – Volume Analysis of Net Interest
Income, the increase in yield in 2022 increased interest income on loans by approximately $851,000, while the increase in
volume raised interest income by $914,000 compared to 2021, resulting in a net increase in interest recorded on loans of
$1.8 million. The 425 basis point increase in the prime rate, to 7.50% in 2022, impacted the yield on loans. During 2021,
the decrease in yield lowered interest income on loans by approximately $239,000, while the increase in volume increased
interest income by $452,000 compared to 2020, resulting in a net increase in interest recorded on loans of $213,000. The
150 basis point decline in the prime rate in 2020, ending at 3.25%, impacted the yield on loans.
Average investment securities increased by $10.5 million, or 3.2%, during 2022. The increase in volume on investment
securities in 2022 accounted for a $165,000 increase in interest income, while the increase in yield on investment securities
of $1.1 million resulted in an aggregate increase in interest recorded on investment securities of $1.2 million in 2022
compared to 2021. During 2021 and 2020, cash flows from maturities, sales and repayments of investment securities were
reinvested into the securities portfolio, as were the additional funds from the growth in interest bearing liabilities and non-
interest bearing demand deposits. As a result, average balances of investment securities increased by $72.4 million, or
28.2%, during 2021 compared to 2020. The increases in volume accounted for a $1.4 million increase in interest income
in 2021 compared to 2020, while the decline in yield on investment securities decreased net interest income by
$1.3 million, resulting in an aggregate increase in interest recorded on investment securities of $111,000 in 2021 compared
to 2020. Average yields on investment securities increased by 29 basis points in 2022 compared to 2021, which was
39 basis points less than 2020. Investment yields in 2022 were impacted by the 425 basis point increase in the federal
funds rate during the year.
In total, yield on earning assets in 2022 was 3.50% compared to 3.21% in 2021 and 3.55% in 2020. On a fully tax equivalent
basis, the yield on earning assets increased 28 basis points to 3.53% in 2022, from 3.25% in 2021, which decreased
34 basis points from 3.59% in 2020.
Average interest bearing liabilities increased by $9.2 million, or 1.6%, in 2022 compared to 2021, which increased
$55.5 million compared to 2020. Within the categories of interest bearing liabilities, average interest bearing demand and
savings deposits increased by $28.4 million in 2022 compared to 2021, while average overnight borrowings and short-
term debt increased by $11.9 million. These increases were partially offset by decreases in average time deposits of
$12.9 million, as well as FHLB long-term debt and FRB advances, which decreased in total by $19.1 million.
During 2021, average deposits increased by $79.6 million compared to 2020, primarily due to government stimulus
payments and the addition of brokered demand deposits that averaged $14.2 million in 2021. The repayment of short-term
borrowings and long-term debt led to a decline in average borrowings of $24.1 million in 2021 compared to 2020. Changes
in the volume and rate of total interest bearing liabilities, in the aggregate, increased interest expense by $204,000 in 2022
compared to 2021, while the aggregate changes in volume and rate in 2021 decreased interest expense by $819,000
compared to 2020. The percentage of average interest earning assets funded by average non-interest bearing demand
deposits was approximately 24.8% in 2022, compared to 23.4% in 2021 and 22.7% in 2020. The total cost to fund earning
assets (computed by dividing the total interest expense by the total average earning assets) in 2022 was 0.43%, compared
to 0.42% in 2021 and 0.59% in 2020.
33
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 loan loss provision expense of $455,000
was appropriate for 2022, compared to a provision credit of $769,000 recorded in 2021. Loan growth of 15.8% as of
December 31, 2022 compared to December 31, 2021 was a factor in the increase in the loan loss provision for the year
ended December 31, 2022. Additionally, while Juniata continued to experience favorable asset quality trends and net
recoveries during the year ended December 31, 2022, elevated qualitative risk factors were considered in the allowance
for loan loss analysis for certain loan segments due to the continued uncertainty in the economy and the potential for a
recession as inflation remains elevated. The discussion included in the Loans and Allowance for Loan Losses section
below titled “Financial Condition” explains the information and analysis used to derive the loan loss provision for 2022.
NON-INTEREST INCOME
The Company remains committed to providing comprehensive services and products to meet the current and future
financial needs of its customers. Juniata believes its responsiveness to customers’ needs surpasses that of many of its
competitors and measures its success by the customer acceptance of fee-based services. The Company continually explores
avenues to enhance product offerings in areas beneficial to its customers, such as adding new features and services for its
electronic banking clientele. Fraud protection services are made available to all consumer depositors. Juniata offers a
variety of options for financing to home-buyers that includes a mortgage referral program, providing significant fee
income. Juniata also provides alternative investment opportunities through an arrangement with a broker-dealer that
integrates the delivery of non–traditional products with Juniata’s Trust and Wealth Management Division. This
arrangement enables Juniata to meet the investment needs of a varied customer base and to better identify its clients’ needs
for traditional trust services.
Non-interest income was $5.2 million in 2022, which was $71,000 higher than in 2021. Most significantly impacting the
comparative year end periods was a $1.5 million loss on sales and calls of securities in the 2022 period due to the execution
of a balance sheet and regulatory capital management strategy, which was partially offset by $1.2 million in gains from
the termination of two derivatives contracts, recorded in other non-interest income, as well as $380,000 in life insurance
proceeds recorded in the 2022 period.
Fee-generated non-interest income consists of customer service fees derived from deposit accounts, trust relationships and
sales of non-deposit products. In 2022, revenues from these services totaled $2.3 million, representing an increase of
$160,000, or 7.4%, from 2021 revenues. Customer service fees increased by $117,000, or 8.6%, due to an increase in
overdraft fee income. Fees from estate settlements increased by $30,000, while non-estate trust fees decreased by $3,000
in 2022 versus 2021. Variances in fees from estate settlements arise 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 increased in 2022, in comparison to 2021,
by $16,000, or 4.3%, as sales increased.
Fees generated by debit card activity decreased by $52,000, or 3.0%, in 2022 compared to the prior year due to decreased
debit card usage, while earnings on bank-owned life insurance and annuities declined by $27,000, or 11.0%, in 2022
compared to 2021 caused by a decline in earnings resulting from the lower rate environment.
Other non-interest-related fees derived from loan activity increased by $99,000, or 22.4%, when comparing 2022 to 2021,
primarily due to recording a $104,000 purchased credit risk adjustment in 2022 for a participated loan relationship with a
back-to-back swap arrangement. Additionally, the change in value of equity securities decreased $219,000, or 145.0%, in
2022 compared to 2021 resulting from a decline in bank stock market values.
As a percentage of average assets, non-interest income (excluding securities gains/losses on sales or calls of securities,
change in value of equity securities and gain from life insurance proceeds) was 0.78% and 0.61%, respectively in 2022
and 2021.
34
NON-INTEREST EXPENSE
Management strives to control non-interest expense where possible in order to improve operating results. Non-interest
expense was $19.9 million in 2022 compared to $20.4 million in 2021, a decrease of 2.1%. Most significantly impacting
non-interest expense in the comparative year end periods was a decline of $691,000 in long-term debt prepayment penalty
as $15.0 million in higher-cost FHLB long-term debt was repaid in 2021.
Data processing expense decreased by $111,000, or 4.1%, during the year ended December 31, 2022, compared to the year
ended December 31, 2022 due to a cost-saving contract negotiation.
Partially offsetting these decreases was an increase in FDIC insurance premiums of $95,000, or 30.6%, during 2022
compared to 2021, predominantly due to a prior period assessment adjustment. Additionally, employee benefits expense
increased by $84,000, or 3.7%, during the year ended December 31, 2022 compared to year end December 31, 2022 as
medical claims expense increased.
As a percentage of average assets, non-interest expense was 2.43% in 2022 as compared to 2.49% in 2021. Excluding the
prepayment penalty on long-term debt, non-interest expense as a percentage of average assets was 2.41% in 2021.
INCOME TAXES
Income tax expense for 2022 was $642,000 versus $284,000 in 2021. Both periods included the effect of a tax credit of
$902,000. The tax credit was available to the Company as a result of an equity investment in two low-income housing
projects.
Exclusive of the tax credit, the Company recorded income tax expense of $1.5 million in 2022, compared to $1.2 million
in 2021. Juniata’s effective tax rate in 2022 was 7.2% versus 4.1% in 2021. See Note 13 of The Notes to Consolidated
Financial Statements for further information on income taxes.
35
FINANCIAL CONDITION
BALANCE SHEET SUMMARY
Juniata functions as a financial intermediary and, as such, its financial condition can be best analyzed in terms of changes
in its uses and sources of funds and can also be analyzed in terms of changes in daily average balances. The table below
sets forth average daily balances for the last two years and the dollar change and percentage change for the past year.
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:
Low income housing . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BOLI and annuities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill and intangible assets . . . . . . . . . . . . . . . . . . . . . .
Unrealized gains (losses) on securities . . . . . . . . . . . . . . .
Other non-interest earning assets . . . . . . . . . . . . . . . . . . . .
Less: Allowance for loan losses . . . . . . . . . . . . . . . . . . . . .
Total uses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Funding Sources:
Interest bearing demand deposits . . . . . . . . . . . . . . . . . . . .
Savings deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Time deposits under $100,000 . . . . . . . . . . . . . . . . . . . . . .
Time deposits over $100,000 . . . . . . . . . . . . . . . . . . . . . . .
Repurchase agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . .
FRB advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other interest bearing liabilities . . . . . . . . . . . . . . . . . . . . .
Total interest bearing liabilities . . . . . . . . . . . . . . . . . . . .
Demand deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total sources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022
Average
Balance
Increase (Decrease)
%
Amount
2021
Average
Balance
$
$
$
$
414,208
27,762
332,777
7,214
5,423
—
787,384
1,935
16,209
9,197
(25,735)
33,876
(3,713)
819,153
236,438
149,909
93,514
42,958
5,532
18,635
—
20,000
1,159
568,145
195,301
5,556
50,151
819,153
$
$
$
$
20,529
(1,844)
9,821
664
(1,803)
(4,248)
23,119
(798)
(492)
(26)
(25,927)
6,029
259
2,164
16,356
12,010
(2,436)
(10,497)
1,283
11,894
(4,948)
(14,110)
(389)
9,163
16,099
389
(23,487)
2,164
5.2 % $
(6.2)
3.0
10.1
(25.0)
(100.0)
3.0
(29.2)
(2.9)
(0.3)
(13,503.6)
21.7
(6.5)
0.3 % $
7.4 % $
8.7
(2.5)
(19.6)
30.2
176.4
(100.0)
(41.4)
(25.1)
1.6
9.0
7.5
(31.9)
0.3 % $
393,679
29,606
322,956
6,550
7,226
4,248
764,265
2,733
16,701
9,223
192
27,847
(3,972)
816,989
220,082
137,899
95,950
53,455
4,249
6,741
4,948
34,110
1,548
558,982
179,202
5,167
73,638
816,989
36
Overall, total average assets increased by $2.2 million, or 0.3%, for the year 2022 compared to 2021. The increase in 2022
was partially due to an increase in taxable loans and investment securities, which were funding by increases in interest
bearing and noninterest bearing demand deposits, as well as short-term borrowings. The ratio of average earning assets to
total average assets increased from 93.5% in 2021 to 96.1% in 2022. The ratio of average interest bearing liabilities to
total average assets increased in 2022 to 69.4% from 68.4% in 2021. Although Juniata’s investment in low income elderly
housing projects and its bank owned life insurance and annuities are not classified as interest-earning assets, income is
derived directly from those assets. These instruments represented 2.2% and 2.4% of total average assets in 2022 and 2021,
respectively. A more detailed discussion of the Company’s earning assets and interest bearing liabilities will follow in the
Sections titled “Loans”, “Investments” and “Deposits”.
Total average stockholders’ equity declined $23.5 million as of December 31, 2022 compared to December 31, 2021
primarily due to a $26.6 million increase in unrealized losses on debt securities recorded in AOCI, which was partially
offset by a $2.9 million, or 6.3%, increase in retained earnings. Juniata transferred $212.3 million in debt securities from
the available for sale to the held to maturity classification in the fourth quarter of 2022 reflecting Juniata’s intent and ability
to hold such debt securities for the foreseeable future or until maturity.
LOANS
Loans outstanding at the end of each year consisted of the following:
(Dollars in thousands)
Commercial, financial and agricultural . . . . . . . . . . . . . . .
Real estate - commercial . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate - construction . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate - mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Obligations of states and political subdivisions . . . . . . . .
Personal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022
$ 61,458
199,206
50,748
150,290
18,770
4,040
$ 484,512
Years Ended December 31,
2020
2019
2021
$ 62,639
159,806
43,281
131,754
16,323
4,500
$ 418,303
$ 73,057 $ 51,785
126,613
46,459
150,538
16,377
8,818
$ 422,661 $ 400,590
122,698
61,051
141,438
18,550
5,867
2018
$ 46,563
141,295
36,688
163,548
19,129
10,408
$ 417,631
From year-end 2021 to year-end 2022, total loans outstanding increased by $66.3 million. PPP loans are included in the
commercial, financial and agricultural class and totaled $10.1 million at December 31, 2021 compared to $4,000 at
December 31, 2022. Excluding PPP loan forgiveness and repayments, total loans outstanding increased by $76.4 million
at December 31, 2022 compared to the prior year end. The following table summarizes how the ending balances changed
in each of the last two years.
(Dollars in thousands)
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net (paid off) new loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans charged off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans transferred to other real estate owned. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans transferred to repossessions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other adjustments to carrying value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022
418,233
65,821
(36)
(30)
—
524
66,279
484,512
$
$
$
$
2021
422,661
(4,404)
(18)
(148)
(1)
143
(4,428)
418,233
37
The following table presents the maturity distribution and amount of loans with fixed and variable interest rates as of
December 31, 2022.
(Dollars in thousands)
Loans with Fixed Interest Rates
Commercial, financial, and agricultural . . . . . .
Real estate - commercial . . . . . . . . . . . . . . . . . .
Real estate - construction . . . . . . . . . . . . . . . . . .
Real estate - mortgage . . . . . . . . . . . . . . . . . . . .
Other loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans with Variable Interest Rates
Commercial, financial, and agricultural . . . . . .
Real estate - commercial . . . . . . . . . . . . . . . . . .
Real estate - construction . . . . . . . . . . . . . . . . . .
Real estate - mortgage . . . . . . . . . . . . . . . . . . . .
Other loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Within
1 Year
After 1 Year
But Within
5 Years
After 5 Years
But Within
15 Years
After
15 Years
Total
$
$
401
141
627
1,491
243
2,903
$
2,248
1,479
15,696
484
—
$ 19,907
$ 22,810
$ 15,463
9,042
3,932
7,929
4,208
$ 40,574
$ 26,672
9,447
15,146
2,559
456
$ 54,280
$ 94,854
$
$
214
5,937 $
5,001
15,450
5,598
2,135
31,982
42,687
11,404
13
77,613 $ 42,808
$
7,841 $
88,670
1,427
31,846
2,421
2,682
69,976
6,187
31,312
4,065
$ 132,205 $ 114,222
$ 209,818 $ 157,030
$ 22,015
29,634
12,292
84,089
15,868
$ 163,898
$ 39,443
169,572
38,456
66,201
6,942
$ 320,614
$ 484,512
The loan portfolio was comprised of approximately 31.9% consumer loans (real estate – mortgage and personal loans) and
68.1% commercial loans (commercial, financial and agricultural, real estate – commercial and construction, and
obligations of states and political subdivisions) on December 31, 2022 compared to 32.6% consumer loans and
67.4% commercial loans on December 31, 2021. 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
in 2022 was real estate - commercial 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 $157.8 million at December 31, 2022, or 145.93% of the Bank’s capital. Components of this concentration
group with balances considered for general reserve purposes are as follows:
(Dollars in thousands)
NAIC Definition
Lessors of residential buildings and dwellings . . . . . . . . . . . . . . . . .
Lessors of non-residential buildings . . . . . . . . . . . . . . . . . . . . . . . . .
Hotels and motels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
New housing for-sale builders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Continuing care retirement communities . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
Outstanding Balance
% of Bank Capital
51,054
40,880
26,583
23,978
15,293
157,788
69.80 %
55.89
36.34
32.78
20.91
145.93 %
Given the reserves allocated to this sector over the years and the continued economic and market uncertainty, management
continues to assess a concentration risk factor to this group of loans when analyzing the adequacy of the allowance for
loan losses. See Note 6 of The Notes to Consolidated Financial Statements.
During 2022, all real estate loan categories, as well as obligations of states and political subdivision loans increased, offset
by declines in commercial, financial and agricultural, as well as personal loans. The decrease in commercial, financial and
agricultural loans in 2022 was due to SBA loan forgiveness and repayments of PPP loans, which accounted for
$10.1 million of the decline between periods. In 2021, real estate – commercial loans increased, but were offset by declines
in all other loan categories. The decrease in commercial, financial and agricultural loans in 2021 was due to PPP loan
forgiveness of $18.6 million, whereas the decline in real estate – construction class was mainly due to the transfer of two
large relationships to the real estate – commercial loan class for permanent financing during 2021. Juniata’s 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
38
management believes 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 to attract loan growth and will continue to
place emphasis on 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. 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. Juniata’s lending strategy and credit standards
stress 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 2 of The Notes to Consolidated Financial Statements.
The allowance for loan losses is set at an amount calculated to provide for probable losses on existing loans. A quarterly
provision or credit is charged or credited 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 on December 31, 2022 was 0.83%
of total loans, net of unearned interest, compared to 0.84% of total loans, net of unearned interest, at the end of 2021.
Loans that Juniata acquired through mergers and acquisitions, such as those acquired from Liverpool in 2018 and from
FNBPA in 2015, are recorded at fair value with no carryover of the related allowance for loan losses. Acquired loans
subsequently deemed to be impaired are included in the allowance for loan losses as impaired loans. Through loan
amortization and other scheduled payments, the excluded balances become a smaller percentage of total outstanding loans
over time, contributing to the increase in the allowance as a percentage of total loans.
Juniata recorded a loan loss provision expense of $455,000 in 2022 compared to a provision credit of $769,000 in 2021.
Loan growth of 15.8% as of December 31, 2022 compared to December 31, 2021 was a factor in the increase in the loan
loss provision for the year ended December 31, 2022. Additionally, while Juniata continued to experience favorable asset
quality trends and net recoveries during the year ended December 31, 2022, elevated qualitative risk factors were
considered in the allowance for loan loss analysis for certain loan segments due to the continued uncertainty in the economy
and the potential for a recession as inflation remains prevalent. Net recoveries for 2022 were 0.01% of average loans
outstanding compared to net recoveries of 0.04% in 2021.
At December 31, 2022, non-performing loans (as defined in Table 4 below), as a percentage of the allowance for loan
losses, were 4.4%, compared to 6.4% at December 31, 2021. Non-performing loans were 0.04% of loans outstanding as
of December 31, 2022 and 0.05% of loans outstanding as of December 31, 2021. All non-performing loans were
collateralized with real estate at December 31, 2022.
39
TABLE 4
NON-PERFORMING LOANS
(Dollar amounts in thousands)
Non-performing loans
Non-accrual loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accruing loans past due 90 days or more . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31, 2022
December 31, 2021
$
$
$
139
39
178
$
$
141
85
226
484,512
$
418,303
Ratio of non-performing loans to loans outstanding. . . . . . . . . . . . . . . . . .
Ratio of non-accrual loans to loans outstanding . . . . . . . . . . . . . . . . . . . . .
Allowance for loan losses to non-accrual loans . . . . . . . . . . . . . . . . . . . . .
0.04 %
0.03 %
2,897.12 %
0.05 %
0.03 %
2,487.94 %
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 if (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 non-accrual 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 and the ultimate collectability of the total
contractual principal and interest is no longer in doubt. The Company’s non-accrual and charge-off policies are the same,
regardless of loan type. During 2022, gross interest income that would have been recorded if loans on non-accrual status
had been current was $49,000, of which $39,000 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 adequate to absorb
probable estimated losses within the loan portfolio and supported by detailed documentation. To assess potential credit
weaknesses, it is important 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: 1) specific allowances allocated to loans evaluated for impairment under
the Financial Accounting Standards Board’s Accounting Standards Codification ("FASB ASC") Section 310-10-35; and
2) allowances calculated for pools of loans evaluated for impairment under FASB ASC Subtopic 450-20 (Contingencies).
Component for impaired loans:
A loan is considered 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 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.
40
The estimated fair values of substantially all 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 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. Non-accrual troubled debt restructurings are restored to accrual status if principal and interest
payments, under the modified terms, are current for a sustained period after modification. Loans classified as troubled debt
restructurings are designated as impaired.
As of December 31, 2022, 14 loans, with aggregate outstanding balances of $2.4 million, were evaluated for impairment.
A collateral analysis was performed on each of these loans 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,
therefore, no specific reserve was established. Loans acquired with credit impairment are considered impaired loans but
are not included with this component for consideration in the allowance, and they were carried at fair value of $753,000
as of December 31, 2022.
Component for pooled loan 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 loans that are uncollectible may not be identifiable.
In accordance with FASB ASC Subtopic 450-20, when measuring estimated credit losses, these loans are grouped into
homogenous pools with similar characteristics and evaluated collectively considering both quantitative measures, such as
historical loss, and qualitative measures, in the form of environmental adjustments.
These pools are established by general loan type, or "class" as follows:
• Commercial, financial and agricultural
• Real estate – commercial
• Real estate – construction
• Real estate – mortgage
• Obligations of states and political subdivisions
• Personal
Some portfolio segments are further disaggregated and evaluated collectively for impairment based on "class segments,"
which are largely based on the type of collateral underlying each loan. For commercial, financial and agricultural loans,
class segments include commercial loans secured by other-than real estate collateral. Real estate – commercial class
segments include loans secured by farmland, multi-family properties, owner-occupied non-farm, non-residential properties
and other nonfarm non-residential properties. Real estate - construction loan class segments include loans secured by
commercial real estate, loans to commercial borrowers secured by residential real estate and loans to individuals secured
by residential real estate. Real estate – mortgage includes loans secured by first and junior liens on residential real estate.
41
Obligations of states and political subdivision loan class segment primarily includes tax-anticipation notes to local
municipalities and other tax-exempt organizations. Personal loan class segments include direct consumer installment loans,
indirect automobile loans and other revolving and unsecured loans to individuals.
Quantitative factor determination:
An average annual loss rate is calculated for each pool through an analysis of historical losses over a five-year look-back
period. Using data for each loan, a loss emergence period is determined within each segmented class pool. The loss
emergence period reflects the approximate length of time from the point when a loss is incurred (the loss trigger event) to
the point of loss confirmation (the date of eventual charge-off). The loss emergence period is applied to the average annual
loss to produce the quantitative factor for each pooled class segment.
Qualitative factor determination:
Historical loss rates computed in the quantitative component reflects an estimate of the level of incurred losses in the
portfolio based on historical experience. Management considers that the current conditions may deviate from those that
prevailed over the historical look-back period. Thus, the quantitative rates are an imperfect estimate, necessitating an
evaluation of qualitative considerations to incorporate these risks.
Management considered qualitative risk factors including:
• National, regional and local economic and business conditions, and developments that affect the collectability of
the portfolio, including the condition of various market segments;
• Changes in the volume and severity of past due loans, the volume of non-accrual loans, and the volume and
severity of adversely classified loans;
• Changes in the nature and volume of the portfolio and terms of loans;
• Changes in the experience, ability and depth of lending and credit management and other relevant staff;
• Existence and effect of any concentrations of credit and changes in the level of such concentrations;
• Changes in the quality of the loan review system;
• Changes in lending policies and procedures, including changes in underwriting standards and collection, charge-
off and recovery practices;
• Changes in the value of underlying collateral for collateral-dependent loans; and
• Effect of external influences, including competition, legal and regulatory requirements.
Within each loan segment, an analysis was performed over a ten-year look-back period to discover peak historical losses,
and with this data, management established ranges of risk from minimal to very high, for each risk factor, to produce a
supportable anchor for risk assignment. Based on the framework for risk factor evaluation and range of adjustments
established through the anchoring process, a risk assessment and corresponding adjustment was assigned for each portfolio
segment as of December 31, 2022. Adjustments to the factors are supported through documentation of changes in
conditions in a narrative accompanying the allowance for loan loss calculation.
The combination of quantitative and qualitative factors was applied to year-end balances in each pooled segment to
establish the overall allowance.
42
A summary of activity in the allowance for loan losses for the last five years is shown below. The Company recorded net
recoveries of $64,000 in 2022. With a provision expense greater than net recoveries and loan growth of 15.8%, the
allowance for loan losses at December 31, 2022 increased by 14.8% over the allowance at December 31, 2021.
Management’s analysis indicated that the allowance for loan losses of $4.0 million at December 31, 2022 was adequate.
(Dollars in thousands)
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 - construction . . . . . . . . . . . . . . . . . . . . .
Real estate - mortgage . . . . . . . . . . . . . . . . . . . . . . .
Personal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total recoveries . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022
3,508
$
—
—
—
23
13
36
2
—
—
94
4
100
Years Ended December 31,
2020
$ 2,961
2019
$ 3,034
2021
$ 4,094
—
—
—
—
17
17
7
36
86
61
10
200
7
—
—
7
42
56
1
2
426
30
9
468
2
15
—
66
54
137
3
314
295
7
18
637
2018
$ 2,939
—
60
—
183
42
285
10
5
—
12
16
43
Net (recoveries) charge-offs . . . . . . . . . . . . . . . . . . . .
Provision for loan losses . . . . . . . . . . . . . . . . . . . . . . .
Balance of allowance - end of period . . . . . . . . . . . . .
(64)
455
4,027
(183)
(769)
$ 3,508
(412)
721
$ 4,094
(500)
(573)
$ 2,961
242
337
$ 3,034
$
Ratio of net (recoveries) charge-offs during
period to average loans outstanding . . . . . . . . . . . . . .
(0.01)%
(0.04)%
(0.10)%
(0.12)%
0.06 %
Because of the Company’s low rate of charge-offs, disaggregated ratios of net charge-offs to average loans outstanding
are not provided.
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.
Years Ended December 31,
2020
2021
2019
$
$
251
1,020
884
1,269
45
39
3,508
$
$
302 $
908
1,586
1,200
28
70
4,094 $
321
754
718
1,081
17
70
2,961
2018
275
1,074
558
1,035
20
72
3,034
$
$
(Dollars in thousands)
Commercial, financial and agricultural . . . . . . . . . . . . .
Real estate - commercial . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate - construction . . . . . . . . . . . . . . . . . . . . . . . .
Real estate - mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . .
Obligations of states and political subdivisions . . . . . .
Personal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022
297
1,110
1,146
1,385
54
35
4,027
$
$
43
(Dollars in thousands)
Commercial, financial and agricultural . . . . . . . . . . . . . . .
Real estate - commercial . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate - construction . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate - mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Obligations of states and political subdivisions . . . . . . . .
Personal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022
12.7 %
41.1 %
10.5 %
31.0 %
3.9 %
0.8 %
100 %
Years Ended December 31,
2020
2021
15.0 %
38.2 %
10.3 %
31.5 %
3.9 %
1.1 %
100 %
17.3 %
29.0 %
14.4 %
33.5 %
4.4 %
1.4 %
100 %
2019
12.9 %
31.6 %
11.6 %
37.6 %
4.1 %
2.2 %
100 %
2018
11.1 %
33.8 %
8.8 %
39.2 %
4.6 %
2.5 %
100 %
The Company is adopting ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit
Losses on Financial Instruments (“CECL”) effective January 1, 2023. The main objective of this amendment is to provide
financial statement users with more useful information about the expected credit losses on financial instruments and other
commitments to extend credit held by the Company. The CECL standard requires the measurement of all expected credit
losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and
supportable forecasts. The Company will now use forward-looking information to enhance its credit loss estimates. The
Company’s CECL implementation efforts are continuing to focus on completion of model validation, developing new
disclosures, establishing formal policies and procedures and other governance and control documentation. Based on the
Company’s portfolio balances, and forecasted economic conditions as of December 31, 2022, management believes the
adoption of the CECL standard will result in an increase to its total current reserves of between $1.0 million to $1.2 million.
An increase to the Company's reserve levels will include nonaccretable credit marks on PCI loans, which will be transferred
into current reserves at adoption. The impact of adoption on the allowance for credit losses on off-balance sheet
commitments and for credit losses on securities held to maturity is not expected to be material.
INVESTMENTS
Total investments, defined to include all interest earning assets except loans (i.e. debt securities available for sale at fair
value and held to maturity at amortized cost, equity securities, federal funds sold, interest bearing deposits, restricted
investment in bank stock and other interest-earning assets), totaled $288.0 million on December 31, 2022, a decrease of
$52.0 million, or 15.3%, compared to year-end 2021. The decrease in 2022 was primarily the result of the adjustment in
market value of debt securities.
The following table summarizes how the ending balances changed annually in each of the last two years.
(Dollars in thousands)
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of securities available for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Redemption of equity securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sales, calls and maturities of debt securities available for sale. . . . . . .
Proceeds from calls and maturities of debt securities held to maturity. . . . . . . . . . . . .
Change in value of equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustment in market value of debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization/Accretion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted investment in bank stock, net change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Federal funds sold, net change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest bearing deposits with others, net change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maturities of interest bearing time deposits with banks. . . . . . . . . . . . . . . . . . . . . . . . .
Net change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022
339,997
53,295
—
(52,642)
(4,116)
(68)
(48,452)
(408)
1,550
—
(455)
(735)
(52,031)
287,966
$
$
2021
321,417
181,122
(118)
(121,584)
—
151
(9,309)
(1,220)
(1,307)
(10,000)
(19,155)
—
18,580
339,997
$
$
The investment area is managed according to internally established guidelines and quality standards. Juniata separates its
investment securities portfolio into two classifications: those held to maturity and those available for sale. Juniata holds
no securities in the trading classification.
44
Juniata reassessed classification of certain investments, and effective October 1, 2022, transferred $28.4 million of
obligations of U.S. Government sponsored enterprises and $183.9 million in mortgage-backed securities from the available
for sale to held to maturity security classification. The transfer occurred at fair value. The combined related unrealized loss
of $46.8 million, included in other comprehensive income, remained in other comprehensive income to be amortized out
of other comprehensive income with an offsetting entry to interest income as a yield adjustment through earnings over the
remaining term of the securities. No gain or loss was recorded at the time of transfer.
The Bank sold $24.7 million, par value, of subordinated debt of unconsolidated financial institutions, classified as
corporate debt securities, at a loss of $1.5 million in 2022. Management’s intent with respect to these securities changed
in 2022 due to the adverse regulatory impact of substantial (relative to capital) holdings of subordinated debt
At December 31, 2022, the market value of the investment securities portfolio was less than amortized cost by $7.5 million,
compared to December 31, 2021, when the market value of the investment securities portfolio was less than amortized
cost by $4.5 million. The weighted average life of the investment portfolio was 8.1 years on December 31, 2022 and
6.7 years on December 31, 2021. The weighted average maturity has remained short to achieve a desired level of liquidity.
The following table sets forth the maturities of securities and the weighted average yields of such securities by scheduled
maturity or call dates. Yields on obligations of states and public subdivisions are presented on a tax-equivalent basis.
Within One year
Amount Yield Amount
After One Year
But Within Five Years
Yield
After Five Years
But Within Ten Years
Yield
Amount
After Ten Years
Total
Amount Yield Amount
Yield
(Dollars in thousands)
December 31, 2022
Debt securities
available for sale, at
fair value:
Obligations of U.S.
Government
agencies and
corporations . . . . . . . $
Obligations of
state and political
subdivisions . . . . . . .
Corporate Debt
Securities . . . . . . . . .
Mortgage-backed
securities . . . . . . . . .
—
— % $
13,705
1.27 % $
—
— % $
—
— % $ 13,705
1.27 %
1,228
2.73 %
2,696
2.98 %
3,755
1.99 %
—
— %
7,679
2.40 %
—
— %
4,190
2.75 %
11,151
3.95 %
—
— %
15,341
3.63 %
404
$ 1,632
2.33 %
— % $
10,314
30,905
2.64 %
2.08 % $
24,913
39,819
3.62 %
1,180
3.56 % $ 1,180
2.56 %
36,811
2.56 % $ 73,536
3.30 %
2.90 %
Debt securities held to
maturity, at amortized
cost:
Obligations of
U.S. Government
agencies and
corporations . . . . . . . $
Mortgage-backed
securities . . . . . . . . .
$
—
— % $
13,039
4.30 % $
15,561
4.34 % $
—
— % $ 28,600
4.32 %
—
—
— %
— % $
6,711
19,750
5.22 %
4.61 % $
126,675
142,236
4.71 % 47,579
4.67 % $ 47,579
2.93 % 180,965
2.93 % $ 209,565
4.26 %
4.27 %
BANK OWNED LIFE INSURANCE AND ANNUITIES
The Company periodically ensures the lives of certain bank officers 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. The $1.7 million decline in cash surrender
45
value of the Company’s bank owned life insurance and annuities was due to the death of two former directors and one
current director in 2022. See Note 7 of The Notes to Consolidated Financial Statements.
The following table summarizes how the cash surrender values of these instruments changed annually in each of the last
two years.
(Dollars in thousands)
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BOLI net increase in cash surrender value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BOLI receipt of death benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Annuities net increase in cash surrender value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Annuity receipt of death benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022
16,852
216
(1,847)
33
(57)
(1,655)
15,197
$
$
$
$
2021
16,568
251
—
33
—
284
16,852
GOODWILL AND INTANGIBLE ASSETS
Branch Acquisition
On September 8, 2006, the Company acquired a branch office in Richfield, PA. Goodwill recorded on that acquisition was
$2.0 million and is measured annually for impairment.
FNBPA Acquisition
On November 30, 2015, the Company completed its acquisition of FNBPA. Goodwill recorded on the acquisition was
$3.4 million as of December 31, 2022 and 2021. In addition, a core deposit intangible in the amount of $303,000 was
recorded and is being amortized over a ten-year period using a sum of the year’s digits basis. Core deposit intangible
amortization expense recorded in 2022 was $21,000 and, for the succeeding three years beginning 2023, is estimated to
be $16,000, $11,000 and $5,000 per year, respectively. The core deposit intangible will be fully amortized in 2025. Core
deposit and other intangible assets, net of amortization, was $32,000 as of December 31, 2022 and $53,000 as of
December 31, 2021.
LCB Acquisition
On April 30, 2018, Juniata completed the acquisition of LCB and, as a result, recorded goodwill of $3.6 million as of
December 31, 2022 and 2021. In addition, a core deposit intangible of $289,000 was recorded and will be amortized over
a ten-year period using a sum of the years’ digits basis. Core deposit intangible expense recorded in 2022 was $33,000,
and for the succeeding five years beginning 2023, is estimated to be $28,000, $23,000, $17,000 and $12,000, $7,000
per year, respectively, and $2,000 in total for years after 2027. Core deposit intangible, net of amortization, was $89,000
as of December 31, 2022 and $122,000 as of December 31, 2021.
Mortgage Servicing Rights
Due to a strategic shift in focus to a different mortgage product, which is recorded in fees derived from loan activity, the
Company did not originate and sell residential mortgage loans to the secondary market in 2022 or 2021; however, the
Company retained the servicing rights on loans originated and sold in prior years. 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, 2022 and December 31, 2021, the fair value of
mortgage servicing rights was $92,000 and $120,000, respectively.
DERIVATIVES
The Company entered into rate swap agreements as part of its asset liability management strategy to help manage interest
rate risk. The notional amount of the interest rate swaps does not represent amounts exchanged by the parties. The amount
exchanged is determined by reference to the notional amount and the other terms of the individual interest rate swap
agreements. The notional amount of the Company’s interest rate swaps as of December 31, 2022 and 2021, were
$20.0 million and $40.0 million, respectively. The Company terminated two forward-starting swaps with a notional
amount of $20.0 million in 2022 as part of a capital restructure plan. The interest rate swaps were determined to be fully
effective during both year-end periods. As such, no amount of ineffectiveness has been included in net income. The aggregate fair
46
value of the swaps is recorded in either other assets or other liabilities on the Consolidated Statements of Condition with
changes in fair value recorded in other comprehensive income. The Company expects the remaining hedge to remain fully
effective during the remaining term of the swap. See Note 22 of The Notes to Consolidated Financial Statements.
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 carryforwards, 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. The Company recorded net deferred tax assets of $11.8 million
and $1.7 million, at December 31, 2022 and December 31, 2021, respectively. The net deferred tax assets were carried as
a non-interest earning asset. The increase in net deferred tax assets between periods was primarily due to the increase in
unrealized losses on debt securities. See Note 13 of The 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
changed over the last two years.
(Dollars in thousands)
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Premises and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other real estate owned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment in low income housing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other receivables and prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022
29,532
(2,072)
(181)
(87)
(799)
10,244
1,330
8,435
37,967
$
$
$
$
2021
27,720
1,060
(437)
87
(799)
1,594
307
1,812
29,532
DEPOSITS
As of December 31, 2022, total deposits were $711.5 million, an increase of $3.1 million compared to the previous year
end. The decline in interest bearing demand deposits was due to the repayment of $30.0 million in brokered demand
deposits. Juniata had $127.3 million and $105.0 million in uninsured deposits as of December 31, 2022 and 2021,
respectively.
The following table summarizes how the ending balances changed over the last two years.
(Dollars in thousands)
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Demand deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest bearing demand deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Savings deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022
708,447
17,109
(13,946)
895
(993)
3,065
711,512
$
$
$
$
2021
622,866
13,907
64,505
18,615
(11,446)
85,581
708,447
47
The following table shows the comparison of average transaction deposits and average time deposits as a percentage of
total deposits for the last two years.
(Dollars in thousands)
Transaction deposits:
Money market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest bearing demand . . . . . . . . . . . . . . . . . . . . . . . . . .
Savings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total transaction deposits . . . . . . . . . . . . . . . . . . . . . . .
Time deposits:
$100,000 and greater . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022
Average
Balance
72,383
164,055
149,909
195,301
581,648
42,958
93,514
136,472
718,120
$
$
Changes in Deposits
Increase (Decrease)
%
Amount
2021
Average
Balance
$
$
5,922
10,434
12,010
16,099
44,465
(10,497)
(2,436)
(12,933)
31,532
8.9 % $
6.8
8.7
9.0
8.3
66,461
153,621
137,899
179,202
537,183
(19.6)
(2.5)
(8.7)
4.6 % $
53,455
95,950
149,405
686,588
Average deposits increased $31.5 million, or 4.6%, to $718.1 million in 2022. Transaction accounts increased by 8.3% in
2022, while time deposits decreased by 8.7%. The largest dollar and percentage increase in 2022 compared to the previous
year was in demand accounts, which increased by $16.1 million, or 9.0%.
Maturities of time deposits of $250,000 or more outstanding at December 31, 2022 are summarized as follows:
(Dollars in thousands)
Certificates of deposit of $250,000 or more
Maturing within 3 months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maturing within 3 to 6 months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maturing within 6 to 12 months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maturing 1‑5 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maturing after 5 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022
1,138
1,970
1,258
8,604
268
13,238
$
$
The consumer continues to have a need for transaction accounts, and the Bank is continuing to focus on that need to build
deposit relationships. 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 provides a unique benefit to our customers as
there are no other banks in our immediate market that offer a similar service.
In addition to deposit products, Juniata provides alternatives to customers through the sale of wealth management (non-
deposit) products. 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 who 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 service our customer
base more completely. Fee income from the sale of non-deposit products (primarily annuities and mutual funds) was
$384,000 and $368,000 in 2022 and 2021, respectively, representing approximately 7.3% and 7.1%, respectively, of total
non-interest income.
48
OTHER INTEREST BEARING LIABILITIES
Juniata funds its needs primarily with local deposits and, when necessary, relies on external funding sources for additional
funding. External funding sources include credit facilities at correspondent banks and the FHLB of Pittsburgh. Juniata’s
average balances for all borrowings decreased by $6.3 million in 2022 compared to 2021. In 2021, Juniata repaid the
remaining FRB advances from Juniata’s participation in the PPPLF and prepaid $15.0 million in long-term debt.
Changes in Borrowings
(Dollars in thousands)
2022
Average
Balance
Repurchase agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . .
FRB advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other interest bearing liabilities . . . . . . . . . . . . . . . . . . . . .
Total borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
5,532 $
18,635
—
20,000
1,159
45,326
$
Amount
Increase (Decrease)
%
30.2 % $
1,283
11,894
(4,948)
(14,110)
(389)
(6,270)
176.4
(100.0)
(41.4)
(25.1)
(12.2)% $
2021
Average
Balance
4,249
6,741
4,948
34,110
1,548
51,596
STOCKHOLDERS’ EQUITY
Total stockholders’ equity decreased by $34.3 million, or 48.2%, in 2022 compared to 2021, primarily due to the
$38.5 million adjustment to accumulated other comprehensive income (“AOCI”) to record the change in fair value of debt
securities and cash flow hedges. The Company was well-capitalized and had the capacity to maintain its typical dividend
level in 2022. The Company’s net income exceeded dividends paid by $3.9 million. Stock based compensation expense
recorded pursuant to the Company’s Long-Term Incentive Plan added $176,000 to stockholders’ equity in 2022, while
treasury stock issued for stock plans increased shareholders’ equity by $69,000.
The following table summarizes how the components of equity changed in the last two years.
(Dollars in thousands)
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock issued for stock plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repurchase of stock, net of re-issuance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net change in unrealized security gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized gains (losses) on cash flow hedge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022
71,290
8,320
(4,401)
69
176
(3)
(38,286)
(216)
(34,341)
36,949
$
$
$
$
2021
76,597
6,604
(4,402)
77
158
(861)
(7,355)
472
(5,307)
71,290
Average stockholders’ equity in 2022 was $50.2 million, a decrease of 31.9% from $73.6 million in 2021, which was a
3.2% decrease from $76.1 million in 2020. At December 31, 2022, Juniata held 148,220 shares of stock in treasury versus
162,737 at December 31, 2021. Return on average equity increased to 16.59% in 2022 from 8.97% in 2021 partially due
to higher income in 2022 compared to 2021, as well as the decline in average equity resulting primarily from the decrease
in AOCI. See the discussion in the 2022 Financial Overview section.
The Company periodically repurchases shares of its common stock under the share repurchase program approved by the
Board of Directors. In November of 2021, 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 purchase plan purchases, restricted stock awards, to fulfill dividend reinvestment
49
program needs and to supply shares needed as consideration in an acquisition. During 2022 and 2021, 170 and
50,482 shares, respectively, were repurchased in conjunction with this program. There were also 825 and 200 restricted
share awards forfeited in 2022 and 2021, respectively. Treasury shares of 15,512 and 13,783 were also redeemed for stock
purchase plan purchases in 2022 and 2021, respectively. The treasury shares remaining authorized for repurchase in the
program were 208,312 as of December 31, 2022.
Juniata declared dividends of $0.88 per common share in each of 2022 and 2021 (See Note 14 of The Notes to Consolidated
Financial Statements regarding restrictions on dividends from the Bank to the Company). The dividend payout ratio was
52.90% and 66.66% in 2022 and 2021, respectively. The dividend payout ratio in 2022 was less than 2021 due to higher
net income in 2022 compared to 2021. In January 2023, the Board of Directors declared a dividend of $0.22 per share to
stockholders of record on February 14, 2023, payable on March 1, 2023.
Juniata’s book value per share at December 31, 2022 was $7.39 as compared to $14.29 at December 31, 2021. Juniata’s
average equity to assets ratio for 2022 and 2021 was 6.12% and 9.01%, 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
• Capital Risk
•
•
• Economic Risk
Interest Rate Risk
Investment Portfolio Risk
Liquidity 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 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.
50
“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 seeks 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 greater than 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 greater than 10% of total assets and contingency liquidity greater
than 7.5% of total assets.
Juniata is a member of the 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. In 2020, the Company executed a
three-year cash flow hedge on $20,000,000 in rolling three-month advances from the FHLB. In 2021, Juniata replaced the
$20,000,000 FHLB three-month advance with a brokered interest bearing demand deposit of the same amount. The
Company repaid the $20.0 million brokered interest bearing demand deposit in 2022 and reborrowed a $20.0 million three-
month FHLB advance. Juniata had $48.1 million in short-term borrowings on December 31, 2022 but no short-term
borrowings on December 31, 2021.
The Bank’s maximum borrowing capacity with the FHLB was $214.7 million at December 31, 2022. 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.
Capital Risk
The Company maintains sufficient core capital to protect depositors and shareholders 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.
The Bank is subject to risk-based capital standards by which 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 consolidated financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative
measures of the Bank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting
practices. The Bank’s capital and classification are also subject to qualitative judgments by the regulators. Management
believes that, as of December 31, 2022, the Bank met all capital adequacy requirements to which it is subject.
five classifications: well-capitalized, adequately capitalized,
Prompt corrective action
undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to
regulations provide
51
represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits.
If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are
required. At year-end 2022 and 2021, the most recent regulatory notifications categorized the Bank as well-capitalized
under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that
management believes have changed the institution’s category.
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 were fully phased in on January 1, 2019 and require financial institutions to maintain: (a) Common
Equity Tier 1 (CET1) to risk-weighted assets ratio of at least 4.5%; (b) a minimum ratio of tier 1 capital to risk-weighted
assets of at least 6.0%; (c) a minimum ratio of total (that is, tier 1 plus tier 2) capital to risk-weighted assets of at least
8.0%; and (d) 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).
However, unless the Bank maintains an additional 2.5% “capital conservation buffer” above the percentages stated above
in (a) – (c), the Company may be 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.
In 2019, the federal banking agencies jointly issued a final rule providing an optional, simplified measure of capital
adequacy, the community bank leverage ratio framework (“CBLR framework”), for qualifying community banking
organizations, consistent with Section 201 of the Economic Growth Act. The final rule became effective on January 1,
2020. The community bank leverage ratio removed the requirement for qualifying banking organizations to calculate and
report risk-based capital, but rather only requires compliance with a Tier 1 to average assets (“leverage”) ratio. Qualifying
banking organizations that elect to use the CBLR framework and maintain a leverage ratio of greater than required
minimums will be considered to have satisfied the generally applicable risk-based and leverage capital requirements in the
agencies’ capital rules (generally applicable rule) and, if applicable, will be considered to have met the well-capitalized
ratio requirements for purposes of Section 38 of the Federal Deposit Insurance Act. Under the interim final rules, the
community bank leverage ratio minimum requirement is 9.0% for calendar year 2022 and beyond. The interim rule allows
for a two-quarter grace period to correct a ratio that falls below the required amount, provided the Bank maintains a
leverage ratio of 8.0% for calendar year 2022 and beyond.
Under the final rule, an eligible banking organization can opt out of the CBLR framework and revert back to the risk-
weighting framework without restriction. As of December 31, 2022, the Bank was a qualifying community banking
organization as defined by the federal banking agencies but elected to remain with the risk-weighting framework under
the Basel III capital requirements at year-end 2022. See Note 14 of Notes to the Consolidated Financial Statements.
Interest Rate Risk
For most financial institutions, including Juniata, interest rate risk primarily reflects exposures to changes in interest rates.
Interest rate fluctuations affect earnings by changing net interest income and other interest-sensitive income and expense
levels. Interest rate changes also affect capital by changing the net present value of a bank’s future cash flows, and the
cash flows themselves, as rates change. Accepting this risk is a normal part of banking and can be an important source of
profitability and enhancing shareholder value. However, excessive interest rate risk can threaten a bank’s earnings, capital,
liquidity and solvency. The Company’s sensitivity to changes in interest rate movements is continually monitored by the
Asset Liability Management Committee (“ALCO”). At December 31, 2022, the Company’s cumulative repricing gap
analysis indicated a liability-sensitive balance sheet through one year when measured on a static basis.
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 (because of call features) and
unusual indexes tend to produce the most market risk during interest rate movements.
52
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. 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 hypothetical scenarios. As of December 31, 2022, in
a rising rate environment, the modeling results for all basis point rate increases indicated the Company’s liabilities would
increase in value less than assets would lose in value, but the Company remained within EVE policy guidelines for all rate
shock scenarios.
OFF-BALANCE SHEET ARRANGEMENTS
The Company has numerous off-balance sheet loan obligations that exist 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 $103.8 million and $94.3 million on
December 31, 2022 and 2021, respectively. The increase in 2022 compared to 2021 was primarily due to the addition of
three new substantial commercial relationships in 2022. Additionally, the Company had $12.2 million and $12.7 million
outstanding in unused lines of credit commitments extended to its customers on December 31, 2022 and 2021, 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, 2022 and 2021 for guarantees under letters of credit
issued was not material.
The maximum undiscounted exposure related to these guarantees on December 31, 2022 was $2.6 million, and the
approximate value of underlying collateral upon liquidation that would be expected to cover this maximum potential
exposure was $31.2 million.
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.
53
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following audited financial statements are set forth in this Annual Report on Form 10-K on the following pages:
REPORT ON MANAGEMENT’S ASSESSMENT OF INTERNAL CONTROL OVER FINANCIAL
REPORTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB ID 173) . . . . . . . . . . . .
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CONSOLIDATED STATEMENTS OF INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CONSOLIDATED STATEMENTS OF CASH FLOWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
55
56
58
59
60
61
62
63
54
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,
2022. 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).
Based on our assessment, management concluded that as of December 31, 2022, the Company’s internal control over
financial reporting was effective and met the criteria of the Internal Control-Integrated Framework (2013).
Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules
of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual
report.
Marcie A. Barber
President and Chief Executive Officer
Michael W. Wolf
Chief Financial Officer
55
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Shareholders and the Board of Directors of Juniata Valley Financial Corp.
Mifflintown, Pennsylvania
Opinion on the Financial Statements
We have audited the accompanying consolidated statements of financial condition of Juniata Valley Financial Corp. (the
"Company") as of December 31, 2022 and 2021, the related consolidated statements of income, comprehensive loss,
stockholders’ equity, and cash flows for each of the years then ended, and the related notes (collectively referred to as the
"financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position
of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows the years then
ended in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion
on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and
Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement,
whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal
control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's
internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether
due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a
test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating
the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements
that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or
disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex
judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial
statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate
opinion on the critical audit matter or on the accounts or disclosures to which it relates.
56
Allowance for Loan Losses – Qualitative Factors
As more fully described in Note 2 to the consolidated financial statements, the Company estimates and records an
allowance for loan losses for loans collectively evaluated for impairment by developing a loss rate based on quantitative
and qualitative factors. As of December 31, 2022, the allowance for loan losses for loans collectively evaluated for
impairment was $4,027,000. Quantitative factors are based on historical loss rates using historical data for each loan
pool. Management considers the use of quantitative historical loss rates by themselves to result in an imperfect estimate
and so incorporates an evaluation of qualitative factors into the allowance for loan losses estimate. The qualitative factors
considered include national, regional and local economic and business conditions, and developments that affect the
collectability of the portfolio, including the condition of various market segments, changes in the volume and severity of
past due loans, the volume of non-accrual loans, and the volume and severity of adversely classified loans , changes in the
nature and volume of portfolio, changes in lending and credit management teams, existence and effect of any
concentrations, changes in quality of the loan review system, changes in lending policies and procedures, changes in the
value of underlying collateral-dependent loans, and the effect of external influences including competition, legal, and
regulatory requirements.
The principal considerations for our determination that auditing the qualitative factors is a critical audit matter is the high
degree of judgment involved in the assessment of the risk of loss associated with each qualitative factor. Our audit
procedures included substantive testing related to the assessments of these qualitative factors. These procedures included:
• Evaluation of the completeness and accuracy of internal data used to formulate the qualitative factors
• Evaluation of the relevance and reliability of external data used as a basis for the factors
• Evaluation of the reasonableness of management’s judgments related to the translation of the data used in the
determination of the qualitative factors into risk level assignments and the resulting allocation to the allowance.
• Testing the mathematical accuracy of the allowance calculation, including the calculation of the qualitative factors.
The test of the calculation of the qualitative factors included testing the accuracy of the allocation of the underlying
factors.
/s/ Crowe LLP
We have served as the Company's auditor since 2019.
Cleveland, Ohio
March 16, 2023
57
JUNIATA VALLEY FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands, except share data)
December 31, 2022 December 31, 2021
ASSETS
Cash and due from banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest bearing deposits with banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest bearing time deposits with banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt securities available for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt securities held to maturity (fair value 2022 - $209,887, 2021 - $0) . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted investment in bank stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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 partnerships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Core deposit and other intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage servicing rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued interest receivable and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Deposits:
Non-interest bearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest bearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term borrowings and repurchase agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other interest bearing liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued interest payable and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commitments and contingent liabilities
Stockholders’ Equity:
$
$
$
10,856 $
143
10,999
—
1,056
73,536
209,565
3,666
484,512
(4,027)
480,485
8,190
—
15,197
1,507
121
9,047
92
11,838
5,576
830,875 $
199,131 $
512,381
711,512
55,710
20,000
1,011
5,693
793,926
12,928
598
13,526
735
1,124
335,424
—
2,116
418,303
(3,508)
414,795
8,371
87
16,852
2,306
175
9,047
120
1,594
4,246
810,518
182,022
526,425
708,447
4,227
20,000
1,568
4,986
739,228
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 - 5,151,279
shares at December 31, 2022 and December 31, 2021; Outstanding - 5,003,059 shares at
December 31, 2022 and 4,988,542 shares at December 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of common stock in Treasury: 148,220 shares at December 31, 2022; 162,737 shares at
December 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities and stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
5,151
24,986
51,217
(41,867)
(2,538)
36,949
$
830,875 $
5,151
25,008
47,298
(3,365)
(2,802)
71,290
810,518
See The Notes to Consolidated Financial Statements
58
JUNIATA FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except share data)
Interest and dividend income:
Year Ended
December 31,
2022
2021
Loans, including fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Taxable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax-exempt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Interest expense:
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term borrowings and repurchase agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
FRB advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other interest bearing liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net interest income after 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fees derived from loan activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage banking income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain (loss) on sales and calls of securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in value of equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain from life insurance proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other non-interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total non-interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-interest expense:
Employee compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Occupancy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Data processing expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Professional fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Taxes, other than income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
FDIC Insurance premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on other real estate owned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of investment in low-income housing partnerships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt prepayment penalty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other non-interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total non-interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings per share
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
$
21,227
6,077
155
96
27,555
2,577
362
—
471
12
3,422
24,133
455
23,678
1,472
1,703
219
472
384
540
34
(1,453)
(68)
380
1,542
5,225
8,445
2,370
1,284
734
2,582
800
503
405
(28)
54
799
—
1,993
19,941
8,962
642
8,320
1.66
1.66
$
$
$
$
19,462
4,912
154
25
24,553
2,272
90
18
832
6
3,218
21,335
(769)
22,104
1,355
1,755
246
445
368
441
41
21
151
—
331
5,154
8,414
2,286
1,259
743
2,693
841
574
310
(64)
66
799
691
1,758
20,370
6,888
284
6,604
1.32
1.32
See The Notes to Consolidated Financial Statements
59
JUNIATA VALLEY FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Dollars in thousands)
Year Ended December 31,
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive loss:
Securities
Available for sale securities
Unrealized holding loss arising during the
period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reclassification adjustment for (gains)
losses included in net income (1) (3) . . . . . . . .
Held to maturity securities
Amortization of unrealized holding losses on
held to maturity securities (3) (4) . . . . . . . . . . . .
Cash Flow Hedge
Pre-Tax
Amount
8,962
$
2022
Tax
Effect
$
(642) $
Net-of-Tax
Amount
8,320
Pre-Tax
2021
Tax
Amount Effect
Net-of-Tax
Amount
$ 6,888 $ (284) $ 6,604
(51,247)
10,762
(40,485)
(9,288)
1,950
(7,338)
1,453
(305)
1,148
(21)
4
(17)
1,342
(291)
1,051
—
—
Unrealized gain on cash flow hedge . . . . . . . . . .
1,220
(256)
964
538
(113)
Reclassification adjustment for (gains)
losses included in net income (2) (3) . . . . . . . .
Other comprehensive loss . . . . . . . . . . . . . . . . . . . .
Total comprehensive loss . . . . . . . . . . . . . . . . . . . . .
(1,493)
(48,725)
313
10,223
$ (39,763) $ 9,581
(1,180)
(38,502)
(13)
1,828
$ (30,182) $ (1,823) $ 1,544
60
(8,711)
—
425
47
(6,883)
(279)
$
(1) Amounts are included in gain (loss) on sales and calls of securities on the Consolidated Statements of Income as a separate element within total
non-interest income.
(2) Amounts are included in interest expense on short-term borrowings and repurchase agreements and in other non-interest income on the Consolidated
Statements of Income.
Income tax amounts are included in the income tax provision on the Consolidated Statements of Income.
(3)
(4) Amounts are included in interest income on the Consolidated Statements of Income.
See The Notes to Consolidated Financial Statements
60
JUNIATA VALLEY FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Dollars in thousands, except share data)
Number
of Shares
Common
Outstanding Stock
5,151
Surplus
25,008
Balance, January 1, 2022 . . . . . . . 4,988,542
Net income . . . . . . . . . . . . . . . . . . . .
Other comprehensive loss . . . . . . . .
Cash dividends at $0.88 per
share . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . .
Purchase of treasury stock . . . . . . .
Treasury stock issued for
stock plans . . . . . . . . . . . . . . . . . . . .
Balance, December 31, 2022 . . . . 5,003,059 $ 5,151 $ 24,986 $ 51,217 $
15,512
(4,401)
(995)
(198)
176
Year ended December 31, 2022
Accumulated
Other
Total
Retained Comprehensive Treasury Stockholders’
Earnings
47,298
8,320
(3,365) (2,802) $
Stock
Loss
Equity
71,290
8,320
(38,502)
(38,502)
(3)
267
(41,867) $ (2,538) $
(4,401)
176
(3)
69
36,949
Year ended December 31, 2021
Accumulated
Other
Total
Retained Comprehensive Treasury Stockholders’
Earnings
Income (Loss) Stock
3,518 $ (2,179) $
(6,883)
Equity
76,597
6,604
(6,883)
(861)
238
(3,365) $ (2,802) $
(4,402)
158
(861)
77
71,290
(Dollars in thousands, except share data)
Number
of Shares
Common
Outstanding Stock
Surplus
Balance, January 1, 2021 . . . . . . . 5,025,441 $ 5,151 $ 25,011 $ 45,096 $
Net income . . . . . . . . . . . . . . . . . . . .
Other comprehensive loss . . . . . . . .
Cash dividends at $0.88 per
share . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . .
Purchase of treasury stock . . . . . . .
Treasury stock issued for
stock plans . . . . . . . . . . . . . . . . . . . .
Balance, December 31, 2021 . . . . 4,988,542 $ 5,151 $ 25,008 $ 47,298 $
(50,682)
13,783
(4,402)
6,604
(161)
158
See The Notes to Consolidated Financial Statements
61
JUNIATA VALLEY FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Operating activities:
Year Ended December 31,
2021
2022
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income to net cash provided by operating activities:
$
8,320
$
Provision for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net amortization of securities premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net amortization of loan origination fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred net loan origination costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of investment in low income housing partnerships . . . . . . . . . . . . . . . . . . . . . . . . . .
Net amortization of purchase fair value adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net realized (gain) loss on sales and calls of available for sale securities . . . . . . . . . . . . . . . . . . . .
Change in value of equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net gain on other real estate owned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings on bank owned life insurance and annuities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from mortgage loans sold to others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage banking income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain from life insurance proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Increase) decrease in accrued interest receivable and other assets. . . . . . . . . . . . . . . . . . . . . . . . .
Increase in accrued interest payable and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investing activities:
Purchases of:
Securities available for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
FHLB stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Premises and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bank owned life insurance and annuities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from:
Redemption of equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales of debt securities available for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maturities of and principal repayments on securities available for sale . . . . . . . . . . . . . . . . . . . . .
Maturities of and principal repayments on securities held to maturity . . . . . . . . . . . . . . . . . . . . . .
Redemption of FHLB stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Life insurance claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sale of other real estate owned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sale of other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net decrease in interest bearing time deposits with banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net (increase) decrease in loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financing activities:
Net increase in deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase (decrease) in short-term borrowings and securities sold under agreements to repurchase . .
Repayment of FRB advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayment of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock issued for employee stock plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net decrease in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Supplemental information:
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Supplemental schedule of noncash investing and financing activities:
Transfer of securities from available for sale to held to maturity . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transfer of loans to other real estate owned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transfer of loans to repossessed vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
See The Notes to Consolidated Financial Statements
$
$
$
62
455
631
408
393
(636)
54
799
(112)
1,453
68
(28)
(219)
129
176
62
(34)
(380)
(1,753)
150
9,936
(53,295)
(1,550)
(449)
(31)
—
23,271
27,918
4,116
—
2,285
145
—
735
(65,821)
(62,676)
3,065
51,483
—
—
(4,401)
(3)
69
50,213
(2,527)
13,526
10,999
3,341
425
212,340
30
—
$
$
$
6,604
(769)
712
1,220
895
(693)
66
799
(211)
(21)
(151)
(64)
(246)
49
158
79
(41)
—
476
4
8,866
(181,122)
—
(274)
(38)
118
42,997
78,608
—
1,307
—
125
1
—
4,404
(53,874)
85,577
(20,523)
(27,955)
(15,000)
(4,402)
(861)
77
16,913
(28,095)
41,621
13,526
3,414
289
—
148
1
JUNIATA VALLEY FINANCIAL CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 and 2021
1. NATURE OF OPERATIONS
Juniata Valley Financial Corp. (“Juniata” or the “Company”) is a bank holding company operating in central and northern
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 four 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 online 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, online account opening, 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. 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 and Securities.
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.
Significant Group Concentrations of Credit Risk
Most of the Company’s activities are with customers located within Juniata’s footprint in central and northern
Pennsylvania. Note 5 discusses the types of securities in which the Company invests. Note 6 discusses the types of lending
in which the Company engages.
As a percentage of total risk based capital, credit exposure to residential buildings and dwellings represented 70%, credit
exposure to lessors of non-residential buildings and dwellings represented 56%, credit exposure to hotels and motels
represented 36%, credit exposure to builders of new housing for-sale represented 33% and credit exposure to continuing
care retirement communities represented 21% as of December 31, 2022. There were no other concentrations of credit to
any industry equaling more than 15% 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 and northern Pennsylvania.
63
Revenue Recognition
The Company generally acts in a principal capacity, on its own behalf, in most contracts with customers. In such
transactions, revenue and related costs to provide these services are recognized on a gross basis in the financial statements.
In some cases, the Company acts in an agent capacity, deriving revenue through assisting other entities in transactions
with its customers. In such transactions, revenue and the related costs to provide the services are recognized on a net basis
in the financial statements. These transactions primarily relate to non-deposit product commissions and fees derived from
customers’ use of various interchange and ATM/debit card networks.
All the Company’s revenue from contracts with customers in the scope of ASC Topic 606, Revenue from Contracts with
Customers, are recognized within non-interest income on the consolidated statements of income. Revenue streams not
within the scope of ASC 606 included in non-interest income on the consolidated statements of income include earnings
on bank-owned life insurance and annuities, income from unconsolidated subsidiary, fees derived from loan activity,
mortgage banking income, gain/loss on sales and calls of securities, and the change in value of equity securities. Refer to
Note 18 for a description of the Company’s sources of revenue accounted for under ASC 606.
Cash Flows
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 original maturities of greater
than 90 days. These time deposits all have maturities within five years.
Debt Securities
Debt securities are classified as held to maturity and carried at amortized cost when management has the positive intent
and ability to hold them to maturity. Debt securities classified as available for sale are those securities that the Company
intends to hold for an indefinite period but not necessarily to maturity. Securities available for sale are carried at fair value,
with the unrealized gains and losses, net of tax, reported as a component of other comprehensive income. Interest and
dividends are recognized as income when earned. Interest income includes amortization of purchase premium or discount.
Premiums and discounts on securities are amortized on the level-yield method without anticipating prepayments, except
for mortgage-backed securities where prepayments are anticipated. Gains and losses on sales are recorded on the trade
date and determined using the specific identification method.
Management evaluates debt securities for other-than-temporary impairment (“OTTI”) on a quarterly basis, and more
frequently when economic or market conditions warrant such an evaluation. For debt securities in an unrealized loss
position, management considers the extent and duration of the unrealized loss, and the financial condition and near-term
prospects of the issuer. Management also assesses whether it intends to sell, or it is more likely than not that it will be
required to sell, a debt security in an unrealized loss position before recovery of its amortized cost basis. If either of the
criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is
recognized as impairment through earnings. For debt securities that do not meet the aforementioned criteria, the amount
of impairment is split into two components as follows: (1) OTTI related to credit loss, which must be recognized in the
income statement and (2) OTTI related to other factors, which is recognized in other comprehensive income. The credit
loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized
cost basis.
Equity Securities
Equity securities are carried at fair value, with changes in fair value reported in net income. Equity securities without
readily determinable fair values are carried at cost, minus impairment, if any, plus or minus changes resulting from
observable price changes in orderly transactions for the identical or a similar investment.
64
Restricted Investment in Bank Stock
The Bank is a member of the FHLB system. Members are required to own a certain amount of stock based on the level of
borrowings and other factors and may invest in additional amounts. The Bank also owns restricted stock investments in
the Atlantic Community Bankers Bank (“ACBB”). Both the FHLB and ACBB stock is carried at cost, classified as a
restricted security, and periodically evaluated for impairment based on ultimate recovery of par value. Both cash and stock
dividends are reported as income. The Bank owned $3.6 million in restricted stock investments with the FHLB at
December 31, 2022 and $2.1 million at December 31, 2021. The Bank owned $80,000 in restricted stock investments with
the ACBB at December 31, 2022 and 2021.
Loans
Loans that the Company has the intent and ability to hold for the foreseeable future or until maturity 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 non-accrual loans, is accrued over the term of the loans based on the amount of principal
outstanding.
The loan portfolio includes the following classes: (1) commercial, financial and agricultural, (2) real estate - commercial,
(3) real estate - construction, (4) real estate – mortgage, (5) obligations of states and political subdivisions, and (6) personal
loans.
Interest income on consumer, mortgage and commercial loans is discontinued and loans are placed on non-accrual status
at the time the loan is 90 days delinquent unless the loan is well-secured and in process of collection. Loans are charged
off to the extent principal or interest is deemed uncollectible. Past due status is based on the contractual terms of the loan.
In all cases, loans are placed on non-accrual or charged off at an earlier date if collection of principal or interest is
considered doubtful. Non-accrual loans and loans past due 90 days still on accrual include both homogeneous loans that
are collectively evaluated for impairment and individually classified impaired loans.
Interest received on such loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to
accrual. Under the cost-recovery method, interest income is not recognized until the loan principal balance is reduced to
zero. Under the cash-basis method, interest income is recorded when the payment is received in cash. Loans are returned
to accrual status when all the principal and interest amounts contractually due are brought current, the loan has performed
in accordance with the contractual terms for a reasonable period and future payments are reasonably assured.
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,
2022, the amount of net unamortized origination fees carried as an adjustment to outstanding loan balances was $47,000.
As of December 31, 2021, the amount of net unamortized origination fees carried as an adjustment to outstanding loan
balances was $489,000.
Acquired Loans
Loans that Juniata acquires through business combinations are recorded at fair value with no carryover of the related
allowance for loan losses. Some of these loans have shown evidence of credit deterioration since origination. These
purchased credit impaired (“PCI”) loans are recorded at the amount paid, such that there is no carryover of the seller’s
allowance for loan losses.
Such purchased credit impaired loans are accounted for individually or aggregated into pools of loans based on common
risk characteristics, such as credit score, loan type, and date of origination. Juniata estimates the amount and timing of
expected cash flows for each loan or pool, and the expected cash flows in excess of the amount paid is recorded as interest
income over the remaining life of the loan or pool (accretable yield). The excess of the loan’s or pool’s contractual principal
and interest over expected cash flows is not recorded (nonaccretable difference).
Over the life of the loan or pool, expected cash flows continue to be estimated. If the present value of expected cash flows
is less than the carrying amount, a loss is recorded as a provision for loan losses. If the present value of expected cash
flows is greater than the carrying amount, it is recognized as part of future interest income.
65
PCI loans that met the criteria for impairment or non-accrual 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 non-
accrual 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.
Allowance for Loan Losses
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 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. The allowance for loan losses is a valuation allowance for probable incurred credit losses. Loan losses are
charged against the allowance when management believes the loan balance is uncollectible. Subsequent recoveries, if any,
are credited to the allowance. Management estimates the allowance balance required using past loan loss experience, the
nature and volume of the portfolio, information about specific borrower situations and estimated collateral values,
economic conditions, as well as other factors. Allocations of the allowance may be made for specific loans, but the entire
allowance is available for any loan that, in management’s judgement, should be charged off.
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.
There are two components of the allowance: (1) specific allowances allocated to loans evaluated for impairment under
ASC Section 310-10-35; and (2) allowances calculated for pools of loans evaluated collectively for impairment under ASC
Subtopic 450-20, Contingencies.
The allowance consists of specific and general components. The specific component relates to loans that are individually
classified as impaired when, based on current information and events, it is probable that the Company will be unable to
collect all amounts due according to the contractual terms of the loan agreement. Loans for which the terms have been
modified resulting in a concession, and for which the borrower is experiencing financial difficulties, are considered
troubled debt restructurings (“TDRs”) and classified as impaired.
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 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. If a loan is impaired, a portion of the allowance
66
is allocated so that the loan is reported, net, at the present value of estimated future cash flows using the loan’s existing
rate or at the fair value of collateral if repayment is expected solely from the collateral.
Impairment for substantially all the Company’s impaired loans is measured based on the estimated fair value of the loan’s
collateral. For real estate - commercial loans, 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 the estimated fair value. The discounts also
include the estimated costs to sell the property. For commercial, financial and agricultural, and obligations of states and
political subdivision loans, 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.
Troubled debt restructurings are individually evaluated for impairment and included in the separately identified
impairment disclosures. 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, an extension of a loan’s stated maturity date or a significant delay in payment. Non-accrual troubled debt
restructurings are restored to accrual status if principal and interest payments, under the modified terms, are current for a
sustained period after modification. For TDRs that subsequently default, the Company determines the amount of the
allowance on that loan in accordance with the accounting policy for the allowance for loan losses on loans individually
identified as impaired. The Company incorporates recent historical experience related to TDRs, including the performance
of TDRs that subsequently default, into the calculation of the allowance by loan portfolio class.
The general component of the allowance covers loans that are collectively evaluated for impairment. In accordance with
ASC Subtopic 450-20, when measuring estimated credit losses, these loans are grouped into homogenous pools with
similar characteristics and evaluated collectively considering both quantitative measures, such as historical loss, and
qualitative measures, in the form of environmental adjustments.
Quantitative factor determination:
An average annual loss rate is calculated for each pool through an analysis of historical losses over a five-year look-back
period. Using data for each loan, a loss emergence period is determined within each class pool. The loss emergence period
reflects the approximate length of time from the point when a loss is incurred (the loss trigger event) to the point of loss
confirmation (the date of eventual charge-off). The loss emergence period is applied to the average annual loss to produce
the quantitative factor for each pooled class.
Qualitative factor determination:
Historical loss rates computed in the quantitative component reflects an estimate of the level of incurred losses in the
portfolio based on historical experience. Management considers that the current conditions may deviate from those that
prevailed over the historical look-back period. Thus, the quantitative rates are an imperfect estimate, necessitating an
evaluation of qualitative considerations to incorporate these risks.
67
Management considered qualitative risk factors including:
• National, regional and local economic and business conditions, and developments that affect the collectability of
the portfolio, including the condition of various market segments;
• Changes in the volume and severity of past due loans, the volume of non-accrual loans, and the volume and
severity of adversely classified loans;
• Changes in the nature and volume of the portfolio and terms of loans;
• Changes in the experience, ability and depth of lending and credit management and other relevant staff;
• Existence and effect of any concentrations of credit and changes in the level of such concentrations;
• Changes in the quality of the loan review system;
• Changes in lending policies and procedures including changes in underwriting standards and collection, charge-
off and recovery practices;
• Changes in the value of underlying collateral for collateral-dependent loans; and
• Effect of external influences, including competition, legal and regulatory requirements.
Within each loan class, an analysis was performed over a ten-year look-back period to discover peak historical losses, and
with this data, management established ranges of risk from minimal to very high, for each risk factor, to produce a
supportable anchor for risk assignment. Based on the framework for risk factor evaluation and range of adjustments
established through the anchoring process, a risk assessment and corresponding adjustment was assigned for each class as
of December 31, 2022. Adjustments to the factors are supported through documentation of changes in conditions in a
narrative accompanying the allowance for loan loss calculation.
The combination of quantitative and qualitative factors was applied to year-end balances in each class to establish the
overall allowance.
Reserve for Unfunded Lending Commitments
The reserve for unfunded lending commitments represents management’s estimate of probable incurred 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.
Loans Held for Sale and Mortgage Servicing Rights
The Company has originated residential mortgage loans with the intent to sell. These individual loans were normally sold
to the buyer immediately. The Company maintains servicing rights on these loans.
When mortgage loans are sold with servicing retained, servicing rights are initially recorded at fair value with the income
statement effect recorded in gains on sales of loans. Fair value is based on market prices for comparable mortgage servicing
contracts, when available, or alternatively, is based on a valuation model that calculates the present value of estimated
future net servicing income. Under the fair value measurement method, the Company measures servicing rights at fair
value at each reporting date and reports changes in fair value of servicing assets in earnings in the period in which the
changes occur, which are included with mortgage banking income on the income statement. The fair values of servicing
rights are subject to fluctuations because of changes in estimated and actual prepayment speeds and default rates and
losses. The carrying amount of mortgage servicing rights was $92,000 and $120,000 at December 31, 2022 and 2021,
respectively.
Servicing fee income, which is reported on the income statement as mortgage banking income, is recorded for fees earned
for servicing loans. The fees are based on a contractual percentage of the outstanding principal or a fixed amount per loan
and are recorded as income when earned. Servicing fees totaled $63,000 and $80,000 for the years ended December 31,
2022 and 2021, respectively. Late fees and ancillary fees related to loan servicing are not material.
68
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, financial and agricultural 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, financial and agricultural loans, an analysis of the borrower’s 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.
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.
Real Estate – Commercial Lending
The Company engages in real estate – commercial lending in its primary market area and surrounding areas. The
Company’s real estate – commercial portfolio is secured primarily by residential housing, commercial buildings, raw land
and hotels. Generally, real estate – commercial 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 real estate – commercial loans originated by the Company are performed by independent
appraisers.
Real estate – commercial 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 real estate – commercial loans
originated by the Company are performed by independent appraisers.
69
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.
Real Estate – Mortgage Lending
The Company’s real estate – mortgage portfolio is comprised of one-to-four family residential mortgages and commercial
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 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 real estate – 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. Most of the
Company’s residential real estate – 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 – mortgage 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 – mortgage loans made by the Company are appraised by independent fee appraisers. The Company
generally requires real estate – 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 real estate – mortgage originations.
Residential real estate – 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 because 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.
70
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. Physical possession of residential real estate property
collateralizing a consumer mortgage loan occurs when legal title is obtained upon completion of foreclosure or when the
borrower conveys all interest in the property to satisfy the loan through completion of a deed in lieu of foreclosure or
through a similar legal agreement. These assets are subsequently accounted for at lower of cost or fair value less estimated
costs to sell. If fair value declines after foreclosure, a valuation allowance is recorded through expense. Operating costs
after acquisition are expensed.
Goodwill and Other Intangibles
Goodwill arises from business combinations and is generally determined as the excess of the fair value of the consideration
transferred, plus the fair value of any noncontrolling interest in the acquiree, over the fair value of the net assets acquired
and liabilities assumed as of the acquisition date. Goodwill and intangible assets acquired in a purchase business
combination and determined to have an indefinite useful life are not amortized but tested for impairment at least annually
or more frequently if events and circumstances exists that indicate that a goodwill impairment test should be performed.
Juniata has selected December 31 as the date to perform the annual impairment test. Intangible assets with definite useful
lives are amortized over their estimated useful lives to their estimated residual values. Goodwill is the only intangible asset
with an indefinite life on our balance sheet.
Other intangible assets consist of core deposit intangible assets arising from whole bank acquisitions and are amortized on
an accelerated method over their estimated useful lives.
There were no impairment losses recognized because of periodic impairment testing in the years ended December 31,
2022 and 2021.
Derivatives
At the inception of a derivative contract, the Company designates the derivative as one of three types based on the
Company’s intentions and belief as to its likely effectiveness as a hedge. These three types are (1) a hedge of the fair value
of a recognized asset or liability or of an unrecognized firm commitment (“Fair value hedge”), (2) a hedge of a forecasted
transaction or the variability of cash flows to be received or paid related to a recognized asset or liability (“cash flow
hedge”), or (3) an instrument with no hedging designation (“Stand-alone derivative”). For a fair value hedge, the gain or
loss on the derivative, as well as the offsetting loss or gain on the hedged item attributable to the hedged risk, are recognized
in current earnings as fair values change. For a cash flow hedge, the gain or loss on the derivative is reported in other
comprehensive income and is reclassified into earnings in the same periods during which the hedged transaction affects
earnings. Change in the fair value of derivatives that do not qualify for hedge accounting are reported currently in earnings,
as non-interest income.
Net cash settlements on derivative that qualify for hedge accounting are recorded in interest income or interest expense,
based on the item being hedged. Net cash settlements on derivatives that do not qualify for hedge accounting are reported
in non-interest income. Cash flows on hedges are classified in the cash flow statement the same as the cash flows of the
items being hedged.
The Company formally documents the relationship between derivatives and hedged items, as well as the risk-management
objective and the strategy for undertaking hedge transactions at the inception of the hedging relationship. This
documentation includes linking fair value of cash flow hedges to specific assets and liabilities on the balance sheet or to
specific firm commitments or forecasted transactions. The Company also formally assesses, both at the hedge’s inception
and on an ongoing basis, whether the derivative instruments that are used are highly effective in offsetting changes in fair
values or cash flows of the hedged items. The Company will discontinue hedge accounting if it determines the derivative
is no longer effective in offsetting changes in the fair value or cash flows of the hedged item, the derivative is settled or
terminates, a hedged forecasted transaction is no longer probable, a hedged firm commitment is no longer firm, or treatment
of the derivative as a hedge is no longer appropriate or intended.
71
When hedge accounting is discontinued, subsequent changes in fair value of the derivative are recorded as non-interest
income. When a fair value hedge is discontinued, the hedged asset or liability is no longer adjusted for changes in fair
value, and the existing basis adjustment is amortized or accreted over the remaining life of the asset or liability. When a
cash flow hedge is discontinued but the hedged cash flows or forecasted transactions are still expected to occur, gains or
losses that were accumulated in other comprehensive income are amortized into earnings over the same periods which the
hedged transactions will affect earnings.
The Company is exposed to losses if a counterparty fails to make its payments under a contract in which the Company is
in the net receiving position. The Company anticipates that the counterparties will be able to fully satisfy their obligations
under the agreements. All the contracts to which the Company is a party settle monthly or quarterly. In addition, the
Company obtains collateral above certain thresholds of the fair value of its hedges for each counterparty based upon their
credit standing, and the Company has netting agreements with the dealers with which it does business.
Premises and Equipment
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 40 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.
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 as the related obligations
are satisfied.
Bank Owned Life Insurance, Annuities and Split-dollar Arrangements
The Company has purchased life insurance policies on certain key executives. Bank owned life insurance is recorded at
the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value
adjusted for other charges or other amounts due that are probable at settlement.
Juniata has committed to a continuation of life insurance coverage for certain persons post-retirement. The estimated
present value of future benefits to be paid was $1.1 million and $1.2 million as of December 31, 2022 and 2021,
respectively, and is included in other liabilities. The related net benefit for 2022 was $120,000, and the related expense for
2021 was $52,000.
Investments in Low-income Housing Partnerships
Juniata has invested as a limited partner in two partnerships that provide low-income housing in Lewistown, Pennsylvania.
The carrying value of the investment in the limited partnerships was $1.5 million at December 31, 2022 and $2.3 million
at December 31, 2021. The decline in carrying value in 2022 was the result of amortization since the final remaining draw
occurred in 2019.
Income Taxes
The Company accounts for income taxes in accordance with income tax accounting guidance ASC Topic 740, Income
Taxes.
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.
72
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,
or all, of a deferred tax asset will not be realized.
The Company recognizes a benefit 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
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.
Advertising
The Company follows a policy of charging costs of advertising to expense as incurred. Advertising expenses were
$260,000 and $228,000 in 2022 and 2021, respectively, and included in other non-interest expense.
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.
Earnings Per Common Share
Basic earnings per common share is net income divided by weighted average number of common shares outstanding during
the period. All outstanding unvested share-based payment awards that contain rights to nonforfeitable dividends are
considered participating securities for this calculation. Diluted earnings per common share includes the dilutive effect of
additional potential common shares issuable under stock options.
Comprehensive Income
Comprehensive income consists of net income and other comprehensive income. Other comprehensive income includes
changes in unrealized gains and losses on securities available for sale and unrealized gains and losses on cash flow hedges
arising during the period, as well as reclassification adjustments for realized gains and losses on securities available for
sale and cash flow hedges included in net income.
Loss Contingencies
Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities
when the likelihood of loss is probable, and an amount or range of loss can be reasonably estimated. Management believes
that there are no such matters that will have a material effect on the financial statements.
Dividend Restrictions
Banking regulations require maintaining certain capital levels and may limit the dividends paid by the Bank to the
Company or by the Company to shareholders.
Fair Value of Financial Instruments
Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully
disclosed in a separate footnote. Fair value estimates involve uncertainties and matters of significant judgment regarding
73
interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for particular items.
Changes in assumptions or in market conditions could significantly affect these estimates.
Stock-based Compensation
The Company sponsors a stock compensation plan for certain key officers which allows, among other stock-based
compensation methods, for stock options and restricted stock awards. Prior to 2016, stock options were used exclusively
for long-term compensation. Beginning in 2016, restricted shares awards have been used. Compensation expense for stock
options granted and restricted stock awarded is measured using the fair value of the award on the grant date and is
recognized over the vesting period. The stock-based compensation expense amounts for stock options were derived based
on the fair value of options using the Black-Scholes option-pricing model.
Segment Reporting
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.
Reclassifications
Some items in the prior year financial statements were reclassified to conform to the current presentation. Reclassifications
had no effect on prior year net income or shareholders’ equity.
3. RECENT ACCOUNTING STANDARDS UPDATE (“ASU”)
New Accounting Standards Adopted in 2022:
ASU 2020-04, Reference Rate Report (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial
Reporting
Issued: March 2020
Summary: ASU 2020-04 was issued to ease the potential burden in accounting for reference rate reform. The amendments
in ASU 2020-04 are elective and apply to all entities that have contracts, hedging relationships, and other transactions that
reference LIBOR or another reference rate expected to be discontinued due to reference rate reform.
The new guidance provides the following optional expedients that reduce costs and complexity of accounting for reference
rate reform:
• Simplify accounting analyses for contract modifications.
• Allow hedging relationships to continue without de-designation if there are qualifying change in the critical terms
of an existing hedging relationship due to reference rate reform.
• Allow a change in the systematic and rational method used to recognize in earnings the components excluded
from the assessment of hedge effectiveness.
• Allow a change in the designated benchmark interest rate to a different eligible benchmark interest rate in a fair
value hedging relationship.
• Allow the shortcut method for a fair value hedging relationship to continue for the remainder of the hedging
relationship.
• Simplify the assessment of hedge effectiveness and provide temporary optional expedients for cash flow hedging
relationships affected by reference rate reform.
• Allow a one-time election to sell or transfer debt securities classified as held to maturity that reference a rate
affected by reference rate reform and are classified as held to maturity before January 1, 2020.
In January 2021, the FASB issued ASU 2021-01 which clarified that all derivative instruments affected by the changes to
interest rates used for discounting, margining or contract price alignment, regardless of whether they reference LIBOR or
74
another rate expected to be discontinued as a result of reference rate reform, an entity may apply certain practical
expedients in Topic 848.
Effective Date: ASU 2020-04 is effective for all entities from the beginning of an interim period that includes the issuance
date of the ASU and the amendments may be applied prospectively through December 31, 2022. The adoption of this
standard did not have a material effect on the Company’s operating results or financial condition.
Pending Accounting Standards:
ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial
Instruments
Issued: June 2016
Summary: FASB issued Topic 326 to replace the incurred loss model for loans and other financial assets with an expected
loss model, which is referred to as the current expected credit loss (“CECL”) model. The CECL model is applicable to the
measurement of credit losses on financial assets measured at amortized cost, including loan receivables and held to
maturity debt securities. It also applies to off-balance sheet credit exposures not accounted for as insurance loan
commitments, standby letters of credit, financial guarantees and other similar instruments) and new investments in certain
leases recognized by a lessor. In addition, the amendments in Topic 326 require credit losses on available for sale securities
to be presented as a valuation allowance rather than a direct write-down.
Effective Date: The standard will be effective for all entities, including SEC filers identified as smaller reporting
companies, and nonpublic business entities for fiscal years beginning after December 15, 2022.
• For debt securities with other-than-temporary impairment (“OTTI”), the guidance will be applied prospectively ,
if applicable.
• Existing purchased credit impaired (“PCI”) assets will be grandfathered and classified as purchased credit
deteriorated (“PCD”) assets as the date of adoption. The asset will be grossed up for the allowance for expected
credit losses for all PCD assets at the date of adoption and will continue to recognize the noncredit discount in
interest income based on the yield of such assets as of the adoption date. Subsequent changes in expected credit
losses will be recorded through the allowance.
• For all other assets within the scope of CECL, a cumulative-effect adjustment will be recognized in retained
earnings as of the beginning of the first reporting period in which the guidance is effective.
The Company is adopting Topic 326, as of January 1, 2023. While the Company has not finalized the impact of
implementing CECL, the Company expects to recognize a one-time cumulative effect increase to the allowance for credit
losses on loans of between $1.0 million to $1.2 million upon adoption. The future impact of CECL on the Company’s
allowance for credit losses and provision expense subsequent to the initial adoption will depend on changes in the loan
portfolio, economic conditions and refinements to key assumptions including forecasting and qualitative factors. The
Company measured its allowance under its current incurred loan loss model as of December 31, 2022. The impact of
adoption on the allowance for credit losses on off-balance sheet commitments and for credit losses on securities held to
maturity is not expected to be material.
ASU 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage
Disclosures
Issued: March 2022
Summary: ASU 2022-02 eliminates the recognition and measurement guidance for troubled debt restructurings (“TDRs”)
by creditors in ASC 310-40. The Update also enhances disclosure requirements for certain loan restructurings by creditors
when a borrower is experiencing financial difficulty. Specifically, rather than applying the recognition and measurement
75
guidance for TDRs, an entity will apply the loan refinancing and restructuring guidance to determine whether a
modification or other form of restructuring results in a new loan or a continuation of an existing loan. Additionally, the
amendments in this ASU require a public business entity to disclose current-period gross write-offs by year of origination
for financing receivables and net investments in leases in the existing vintage disclosures.
Effective Date: The amendments in this Update are effective for entities that have adopted the amendments in Update
2016-13 for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. For
entities that have not yet adopted the amendments in Update 2016-13, the effective date for the amendments in this update
are the same as the effective dates in Update 2016-13. This update requires prospective transition for the disclosures related
to loan restructurings for borrowers experiencing financial difficulty and the presentation of gross write-offs in the vintage
disclosures. The guidance related to the recognition and measurement of TDRs may be adopted on a prospective or
modified retrospective transition method. The adoption of this standard is not expected to have a material effect on the
Company’s operating results or financial condition.
4. RESTRICTIONS ON CASH AND DUE FROM BANKS
The Bank is required to maintain cash reserve balances with the Federal Reserve Bank if vault cash is insufficient to cover
the reserve requirement. As of December 31, 2022 and 2021, respectively, no reserves were required to be held at the
Federal Reserve Bank.
5. SECURITIES
Equity Securities
Equity securities owned by the Company consist of common stock of various financial services providers (“Bank Stocks”).
The Company had $1.1 million in equity securities recorded at fair value on the consolidated statements of financial
condition as of December 31, 2022 and December 31, 2021.
During the years ended December 31, 2022 and 2021, the Company recorded a net loss of $68,000 and a net gain of
$151,000, respectively, on the consolidated statements of income because of the change in fair value of the Company’s
equity securities. The Company redeemed $118,000 in equity securities in 2021.
Debt Securities
The Company’s investment portfolio includes primarily mortgage-backed securities issued by U.S. Government sponsored
agencies backed by residential mortgages (approximately 77%), bonds issued by U.S. Government sponsored agencies
(approximately 15%), corporate debt securities (approximately 5%) and municipalities (approximately 3%) as of
December 31, 2022. Most of the municipal bonds are general obligation bonds with maturities or pre-refunding dates
within 5 years.
The Company reassessed classification of certain investments, and effective October 1, 2022, transferred $28.4 million of
obligations of U.S. Government sponsored enterprises and $183.9 million in mortgage-backed securities from the available
for sale to held to maturity security classification. The transfer occurred at fair value. The combined related unrealized loss
of $46.8 million, included in other comprehensive income, remained in other comprehensive income to be amortized out
of other comprehensive income with an offsetting entry to interest income as a yield adjustment through earnings over the
remaining term of the securities. No gain or loss was recorded at the time of transfer.
The Company had holding of securities from two issuers in excess of 10% of stockholders’ equity, other than the U.S.
Government and its agencies at December 31, 2022 and December 31, 2021. Holdings of Federal Farm Credit Bank and
Pennsylvania Housing Finance had fair values of $10.9 million and $6.1 million, respectively, as of December 31, 2022
and $12.4 million and $7.5 million, respectively, as of December 31, 2021.
76
The amortized cost and fair value of debt securities as of December 31, 2022 and 2021, by contractual maturity, are shown
below. Expected maturities may differ from contractual maturities because the securities may be called or prepaid with or
without prepayment penalties. Securities not due at a single maturity date are shown separately.
(Dollars in thousands)
December 31, 2022
Amortized
Cost
Fair
Value
Gross
Unrealized
Gains
Gross
Unrealized
Losses
15,500
15,500
$
13,705
13,705
$
— $
—
4,076
4,608
8,684
4,673
13,000
17,673
39,479
81,336
3,924
3,755
7,679
4,190
11,151
15,341
36,811
73,536
$
—
—
—
—
—
—
—
— $
(1,795)
(1,795)
(152)
(853)
(1,005)
(483)
(1,849)
(2,332)
(2,668)
(7,800)
$
$
$
December 31, 2022
Fair
Value
Gross
Unrecognized
Gains
Gross
Unrecognized
Losses
13,067
15,605
28,672
181,215
209,887
$
$
28 $
56
84
1,682
1,766 $
—
(12)
(12)
(1,432)
(1,444)
Debt Securities Available for Sale
Obligations of U.S. Government sponsored
enterprises
After one year but within five years . . . . . . . . . . . .
$
Obligations of state and political subdivisions
After one year but within five years . . . . . . . . . . . .
After five years but within ten years . . . . . . . . . . .
Corporate debt securities
After one year but within five years . . . . . . . . . . . .
After five years but within ten years . . . . . . . . . . .
Mortgage-backed securities . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
(Dollars in thousands)
Debt Securities Held to Maturity
Obligations of U.S. Government sponsored
enterprises
After one year but within five years . . . . . . . . . . . .
After five years but within ten years . . . . . . . . . . .
Mortgage-backed securities . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortized
Cost
$
$
13,039
15,561
28,600
180,965
209,565
77
(Dollars in thousands)
December 31, 2021
Amortized
Cost
Fair
Value
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Debt Securities Available for Sale
Obligations of U.S. Government sponsored
enterprises
After one year but within five years . . . . . . . . . . . .
After five years but within ten years . . . . . . . . . . .
$
Obligations of state and political subdivisions
After one year but within five years . . . . . . . . . . . .
After five years but within ten years . . . . . . . . . . .
After ten years . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate debt securities
After one year but within five years . . . . . . . . . . . .
After five years but within ten years . . . . . . . . . . .
Mortgage-backed securities . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
6,000
35,881
41,881
3,810
1,246
4,118
9,174
2,000
32,408
34,408
254,762
340,225
$
$
5,807
34,719
40,526
3,937
1,221
4,062
9,220
1,972
33,024
34,996
250,682
335,424
$
$
— $
—
—
(193)
(1,162)
(1,355)
129
—
—
129
—
805
805
812
1,746 $
(2)
(25)
(56)
(83)
(28)
(189)
(217)
(4,892)
(6,547)
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 $102.3 million and $82.7 million at December 31, 2022 and 2021, respectively.
In addition to cash received from the scheduled maturities of securities, some investment securities available for sale are
sold at current market values through normal operations. Following is a summary of proceeds received from all investment
securities transactions and the resulting realized gains and losses:
(Dollars in thousands)
Gross proceeds from sales and calls of securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross realized gains from sold and called securities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross realized losses from sold and called securities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net gains (losses) from sales and calls of securities . . . . . . . . . . . . . . . . . . . . . . . . . .
Year Ended
December 31,
2022
23,271
25
(1,478)
(1,453)
$
$
$
$
2021
43,115
175
(154)
21
The tax benefit (provision) related to these net realized gains and losses was $305,000 and ($4,000) in 2022 and 2021,
respectively.
The Bank sold $24.7 million, par value, of subordinated debt of unconsolidated financial institutions, classified as
corporate debt securities, at a loss of $1.5 million during 2022. Management’s intent with respect to these securities
changed in 2022 due to the adverse regulatory impact of substantial (relative to capital) holdings of subordinated debt.
78
The following table summarizes securities with unrealized and unrecognized losses at December 31, 2022 and
December 31, 2021, aggregated by category and length of time in a continuous unrealized or unrecognized loss position:
Less Than 12 Months
Unrealized Losses at December 31, 2022
12 Months or More
Total
(Dollars in thousands)
Number
of
Fair
Securities Value
Unrealized
Losses
Number
of
Securities
Fair
Value
Unrealized
Losses
Number
of
Fair
Securities Value
Unrealized
Losses
Securities available for sale
Obligations of U.S. Government
sponsored enterprises . . . . . . . . . . .
Obligations of state and political
subdivisions . . . . . . . . . . . . . . . . . .
Corporate debt securities . . . . . . . . .
Mortgage-backed
securities . . . . . . . . . . . . . . . . . . . .
Total temporarily impaired
securities available for sale . . . .
Securities held to maturity
Obligations of U.S. Government
sponsored enterprises . . . . . . . . . . .
Mortgage-backed
securities . . . . . . . . . . . . . . . . . . . .
Total temporarily
impaired securities held
to maturity . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . .
1 $ 2,456 $
(44)
4
5
2,781
9,831
(20)
(1,669)
33 36,493
(2,630)
2
7
4
1
$ 11,248 $
(1,751)
3 $ 13,704 $
(1,795)
4,898
5,510
319
(985)
(663)
11
9
7,679
15,341
(1,005)
(2,332)
(38)
34
36,812
(2,668)
43 $ 51,561 $
(4,363)
14
$ 21,975 $
(3,437)
57 $ 73,536 $
(7,800)
1 $ 3,463 $
(12)
— $
— $
—
1 $
3,463 $
(12)
9 21,643
(392)
12
48,788
(1,040)
21
70,431
(1,432)
10 $ 25,106 $
53 $ 76,667 $
(404)
(4,767)
12
26
$ 48,788 $
$ 70,763 $
(1,040)
(4,477)
22 $ 73,894 $
79 $ 147,430 $
(1,444)
(9,244)
(Dollars in thousands)
Less Than 12 Months
Unrealized Losses at December 31, 2021
12 Months or More
Total
Number
of
Fair
Securities Value
Unrealized
Losses
Number
of
Fair Unrealized
Securities Value
Losses
Number
of
Fair
Securities Value
Unrealized
Losses
Securities available for sale
Obligations of U.S. Government
sponsored enterprises . . . . . . . . . . .
Obligations of state and political
subdivisions . . . . . . . . . . . . . . . . . .
Corporate debt securities . . . . . . . . .
Mortgage-backed securities . . . . . .
Total temporarily impaired
securities available for sale . . . .
5 $ 22,130 $
(752)
3 $ 18,396 $
(603)
8 $ 40,526 $
(1,355)
7
6
5,781
10,144
36 182,328
(83)
(217)
(3,504)
—
—
5
—
—
26,443
—
—
(1,388)
7
6
5,781
10,144
41 208,771
(83)
(217)
(4,892)
54 $ 220,383 $
(4,556)
8 $ 44,839 $
(1,991)
62 $ 265,222 $
(6,547)
At December 31, 2022, four obligations of U.S. Government sponsored enterprises, 11 obligations of state and political
subdivisions, nine corporate debt securities and 55 mortgage-backed securities had unrealized losses. Twenty-six of these
securities were in a continuous loss position for 12 months or more, with the majority of the unrealized losses related to
the Company’s mortgage-backed securities portfolio. 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 temporary impairments. The decline in the values of the debt securities
is due only to interest rate fluctuations and other market conditions, rather than erosion of issuer credit quality, and as a
result, timely payment of contractual cash flows, including principal and interest, has continued and is not considered at
risk. None of the debt securities are deemed to be other-than-temporarily impaired because the Company does not intend
to sell the securities, does not believe it will be required to sell the securities before their anticipated recovery and expects
to recover the entire amortized cost basis.
79
6. LOANS AND RELATED ALLOWANCE FOR LOAN LOSSES
Loan Portfolio Classification
The following table presents the loan portfolio by class at December 31, 2022 and 2021.
(Dollars in thousands)
Commercial, financial and agricultural . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate - commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate - construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate - mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Obligations of states and political subdivisions . . . . . . . . . . . . . . . . . . . . . . . . .
Personal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31, 2022
61,458
$
199,206
50,748
150,290
18,770
4,040
484,512
$
December 31, 2021
62,639
$
159,806
43,281
131,754
16,323
4,500
418,303
$
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, 2022 and 2021:
(Dollars in thousands)
Commercial,
Obligations
of states
financial and Real estate-
commercial
agricultural
Real estate-
construction
and political Real estate-
mortgage
subdivisions
Personal
Total
Year Ended
December 31, 2022
Balance, beginning of
period . . . . . . . . . . . . . . . . . . . $
Provision for loan losses . . .
Charge-offs . . . . . . . . . . . . .
Recoveries . . . . . . . . . . . . . .
Balance, end of period . . . . . $
December 31, 2021
Balance, beginning of
period . . . . . . . . . . . . . . . . . . . $
Provision for loan losses . . .
Charge-offs . . . . . . . . . . . . .
Recoveries . . . . . . . . . . . . . .
Balance, end of period . . . . . $
251 $ 1,020
90
—
—
297 $ 1,110
44
—
2
302 $
(58)
—
7
908
76
—
36
251 $ 1,020
$
$
$
$
884
262
—
—
1,146
1,586
(788)
—
86
884
$
$
$
$
45
9
—
—
54
28
17
—
—
45
$ 1,269 $
45
(23)
94
$ 1,385 $
$ 1,200 $
8
—
61
$ 1,269 $
39
5
(13)
4
35
70
(24)
(17)
10
39
$ 3,508
455
(36)
100
$ 4,027
$ 4,094
(769)
(17)
200
$ 3,508
80
(Dollars in thousands)
Commercial,
Obligations
of states
financial and Real estate-
commercial
agricultural
Real estate-
construction
and political Real estate-
mortgage
subdivisions
Personal
Total
December 31, 2022
Loans allocated by:
Individually evaluated for
impairment . . . . . . . . . . . . . . . . . .
Acquired with credit
deterioration . . . . . . . . . . . . . . . . .
Collectively evaluated for
impairment . . . . . . . . . . . . . . . . . .
Allowance for loan losses
allocated by:
Individually evaluated for
impairment . . . . . . . . . . . . . . . . . .
Acquired with credit
deterioration . . . . . . . . . . . . . . . . .
Collectively evaluated for
impairment . . . . . . . . . . . . . . . . . .
December 31, 2021
Loans allocated by:
Individually evaluated for
impairment . . . . . . . . . . . . . . . . . .
Acquired with credit
deterioration . . . . . . . . . . . . . . . . .
Collectively evaluated for
impairment . . . . . . . . . . . . . . . . . .
Allowance for loan losses
allocated by:
Individually evaluated for
impairment . . . . . . . . . . . . . . . . . .
Acquired with credit
deterioration . . . . . . . . . . . . . . . . .
Collectively evaluated for
impairment . . . . . . . . . . . . . . . . . .
$
$
$
$
$
$
$
—
$
2,025
$
— $
— $
377
$
— $
2,402
—
334
—
—
419
—
753
61,458
61,458
196,847
$ 199,206
$
50,748
50,748
$
18,770
18,770
149,494
$ 150,290
$
4,040
4,040
481,357
$ 484,512
—
$
— $
— $
— $
—
$
— $
—
297
297
$
—
1,110
1,110
$
—
1,146
1,146
$
—
54
54
—
1,385
1,385
$
$
—
35
35
—
—
4,027
4,027
$
$
—
$
5,262
$
— $
— $
437
$
— $
5,699
—
357
—
—
481
—
838
62,639
62,639
154,187
$ 159,806
$
43,281
43,281
$
16,323
16,323
130,836
$ 131,754
$
4,500
4,500
411,766
$ 418,303
—
$
— $
— $
— $
2
$
— $
—
251
251
$
—
1,020
1,020
$
—
884
884
$
—
45
45
—
1,267
1,269
$
$
—
39
39
2
—
3,506
3,508
$
The following tables summarize information regarding impaired loans by portfolio class as of December 31, 2022 and
December 31, 2021:
(Dollars in thousands)
As of December 31, 2022
As of December 31, 2021
Recorded Unpaid Principal Related
Allowance
Investment
Balance
Recorded Unpaid Principal Related
Allowance
Investment
Balance
Impaired loans
With no related allowance recorded:
Real estate - commercial . . . . . . . . . . . . . . . . . . . $
Acquired with credit deterioration . . . . . . . . . .
Real estate – construction . . . . . . . . . . . . . . . . . .
Real estate - mortgage . . . . . . . . . . . . . . . . . . . .
Acquired with credit deterioration . . . . . . . . . .
2,025
334
—
377
419
$
$
2,471
344
—
993
634
— $
—
—
—
—
5,262 $
357
—
368
481
With an allowance recorded:
Real estate - mortgage . . . . . . . . . . . . . . . . . . . . $
— $
— $
— $
69 $
Total:
Real estate - commercial . . . . . . . . . . . . . . . . . . . $
Acquired with credit deterioration . . . . . . . . . .
Real estate - construction . . . . . . . . . . . . . . . . . .
Real estate – mortgage . . . . . . . . . . . . . . . . . . . .
Acquired with credit deterioration . . . . . . . . . .
$
2,025
334
—
377
419
3,155
$
$
2,471
344
—
993
634
4,442
$
$
— $
—
—
—
—
— $
5,262 $
357
—
437
481
6,537 $
5,720
366
649
1,054
660
68
5,720
366
649
1,122
660
8,517
$
$
$
$
—
—
—
—
—
2
—
—
—
2
—
2
81
(Dollars in thousands)
Year Ended December 31, 2022
Interest
Income
Recognized
Average
Recorded
Investment
Interest
Income
Year Ended December 31, 2021
Interest
Income
Recorded
Investment Recognized
Cash Basis
Interest
Income
Cash Basis Average
Impaired Loans
With no related allowance recorded:
Real estate - commercial . . . . . . . . . . . . . . . . . . . . .
Acquired with credit deterioration . . . . . . . . . . . .
Real estate - mortgage . . . . . . . . . . . . . . . . . . . . . .
Acquired with credit deterioration . . . . . . . . . . . .
Total:
Real estate - commercial . . . . . . . . . . . . . . . . . . . . .
Acquired with credit deterioration . . . . . . . . . . . .
Real estate - mortgage . . . . . . . . . . . . . . . . . . . . . .
Acquired with credit deterioration . . . . . . . . . . . .
$
$
$
3,650
344
400
447
3,650
344
400
447
4,841
$
$
$
190
—
10
—
190
—
10
—
200
$
$
$
— $
—
39
—
— $
—
39
—
39
$
4,346
345
579
602
4,346
345
579
602
5,872
$
$
$
166
—
10
—
166
—
10
—
176
$
$
$
—
—
30
—
—
—
30
—
30
The recorded investment in loans excludes accrued interest receivable and loan origination fees, net due to immateriality.
For purposes of this disclosure, the unpaid principal balance is not reduced for partial charge-offs.
The following table presents non-accrual loans by classes of the loan portfolio as of December 31, 2022 and December 31,
2021:
(Dollars in thousands)
Non-accrual loans:
December 31, 2022
December 31, 2021
Real estate - mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
139
139
$
$
141
141
Interest income not recorded based on the original contractual terms of the loans for non-accrual loans was $49,000 in
2022 and in 2021. Consumer mortgage loans secured by residential real estate properties for which formal foreclosure
proceedings were in process at December 31, 2022 and December 31, 2021 totaled $123,000 and $85,000, respectively.
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, 2022 and December 31, 2021:
(Dollars in thousands)
Current
30‑59 Days
Past Due(2)
60‑89 Days
Past Due
Loans
Past Due
Greater
than 89
Days and
Total Loans Accruing(1)
Total Past
Due
Greater
than 89
Days
As of December 31, 2022
Commercial, financial and
agricultural . . . . . . . . . . . . . . . . . . . . . $ 61,359
198,761
Real estate - commercial . . . . . . . . . .
50,748
Real estate - construction . . . . . . . . . .
Real estate - mortgage . . . . . . . . . . . .
149,488
Obligations of states and political
subdivisions . . . . . . . . . . . . . . . . . . . .
Personal . . . . . . . . . . . . . . . . . . . . . . .
Subtotal . . . . . . . . . . . . . . . . . . . .
18,770
4,008
483,134
Loans acquired with credit
deterioration
Real estate - commercial . . . . . . . . .
Real estate - mortgage . . . . . . . . . . .
Subtotal . . . . . . . . . . . . . . . . . . . .
334
419
753
$ 483,887
$
$
— $
104
—
36
—
1
141
—
—
—
141
$
24
7
—
142
—
4
177
—
—
—
177
$
$
99 $
111
—
383
61,458
198,872
50,748
149,871
—
32
625
18,770
4,040
483,759
334
—
419
—
—
753
625 $ 484,512
$
$
24
7
—
4
—
4
39
—
—
—
39
75
—
—
205
—
27
307
—
—
—
307
$
$
82
(Dollars in thousands)
Current
Past Due(2) Past Due
30‑59 Days
60‑89 Days
Loans
Past Due
Greater
than 89
Days and
Total Loans Accruing(1)
Total Past
Due
Greater
than 89
Days
As of December 31, 2021
Commercial, financial and
agricultural . . . . . . . . . . . . . . . . . . . . . $ 62,628
159,396
Real estate - commercial . . . . . . . . . .
43,281
Real estate - construction . . . . . . . . . .
130,242
Real estate - mortgage . . . . . . . . . . . .
Obligations of states and political
subdivisions . . . . . . . . . . . . . . . . . . . .
Personal . . . . . . . . . . . . . . . . . . . . . . .
Subtotal . . . . . . . . . . . . . . . . . . . .
16,323
4,492
416,362
Loans acquired with credit
deterioration
Real estate - commercial . . . . . . . . .
Real estate - mortgage . . . . . . . . . . .
Subtotal . . . . . . . . . . . . . . . . . . . .
357
481
838
$ 417,200
$
$
11
53
—
440
—
8
512
—
—
—
512
$
$
— $
—
—
488
— $
—
—
103
11 $
53
—
1,031
62,639
159,449
43,281
131,273
—
—
488
—
—
—
488
$
—
—
103
—
—
—
103
—
8
1,103
16,323
4,500
417,465
—
—
—
357
481
838
1,103 $ 418,303
$
$
$
—
—
—
85
—
—
85
—
—
—
85
(1) These loans are guaranteed, or well secured, and there is an effective means of collection in process.
(2) Loans are considered past due when the borrower is in arrears on two or more monthly payments.
Troubled Debt Restructurings
As of December 31, 2022 and 2021, the Company had a recorded investment in troubled debt restructurings of $2.3 million
and $5.6 million, respectively. The decline in troubled debt restructured loans between periods was primarily due to the
payoff of a $3.1 million troubled debt restructured loan in 2022. There were no specific reserves for the troubled debt
restructured loans, no restructured loans in default with respect to the restructured terms and no commitments to lend
additional amounts to these customers as of December 31, 2022 and 2021. There were also no defaults of troubled debt
restructurings within 12 months of restructure during 2022 or 2021.
There were no loans whose terms were modified, resulting in troubled debt restructurings during 2022. The modification
of the terms of the real estate - commercial loan that occurred during the year ended December 31, 2021 consisted of a
decline in the stated rate of interest below the current market rate.
The following table summarizes the loan whose term was modified, resulting in troubled debt restructurings during 2021.
(Dollars in thousands)
Year ended December 31, 2021
Accruing troubled debt restructurings:
Real estate - commercial . . . . . . . . . . . . .
Number of
Contracts
Pre-Modification
Post-Modification
Outstanding
Recorded Investment Recorded Investment Recorded Investment
Outstanding
1
1
$
$
2,254
2,254
$
$
2,254 $
2,254 $
1,854
1,854
The troubled debt restructurings described above had no specific allowance for loan losses and resulted in no charge-offs
during the year ending December 31, 2021.
83
Credit Quality Indicators
The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service
their debt such as: current financial information, historical payment experience, credit documentation, public information,
and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as
to credit risk. This analysis includes loans to commercial customers with an aggregate loan exposure greater than $500,000
and for lines of credit in excess of $50,000. This analysis is performed on a continuing basis with all such loans reviewed
annually. The Company uses the following definitions for risk ratings:
Special Mention. Loans classified as special mention have a potential weakness that deserves management’s close
attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan
or of the institution’s credit position at some future date. Loans in this category are reviewed no less than quarterly.
Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of
the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that
jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain
some loss if the deficiencies are not corrected. Loans in this category are reviewed no less than monthly.
Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added
characteristic that the weaknesses make collection or liquidation in full, based on currently existing facts, conditions, and
values, highly questionable and improbable. Loans in this category are reviewed no less than monthly.
Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered
pass-rated loans.
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,
2022 and December 31, 2021. The decline in special mention real estate – commercial loans as of December 31, 2022
compared to December 31, 2021 was largely due to a $2.9 million payoff of a special mention loan, as well as paydowns
and the upgrade of two loan relationships to pass ratings in 2022. The decline in substandard real estate – commercial as
of December 31, 2022 compared to December 31, 2021 was primarily due to the payoff of a $3.1 million substandard loan
relationship in 2022.
(Dollars in thousands)
As of December 31, 2022
Commercial, financial and agricultural . . . . . . .
Real estate - commercial . . . . . . . . . . . . . . . . . . .
Real estate - construction . . . . . . . . . . . . . . . . . .
Real estate - mortgage . . . . . . . . . . . . . . . . . . . . .
Obligations of states and political
subdivisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Personal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Dollars in thousands)
As of December 31, 2021
Commercial, financial and agricultural . . . . . . .
Real estate - commercial . . . . . . . . . . . . . . . . . . .
Real estate - construction . . . . . . . . . . . . . . . . . .
Real estate - mortgage . . . . . . . . . . . . . . . . . . . . .
Obligations of states and political
subdivisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Personal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,427
—
796
5,693
887
918
$
Pass
60,990
186,977
50,008
149,272
$
Special
Mention
468
9,802
740
222
Substandard Doubtful
— $
$
— $
—
—
—
Total
61,458
199,206
50,748
150,290
18,770
4,040
$ 470,057
$
—
—
11,232
$
—
—
3,223 $
18,770
—
—
4,040
— $ 484,512
$
Pass
61,372
137,684
42,394
130,584
$
Special
Mention
577
16,429
—
252
Substandard Doubtful
690 $
$
— $
—
—
—
Total
62,639
159,806
43,281
131,754
16,323
4,500
$ 392,857
$
—
—
17,258
$
—
—
8,188 $
16,323
—
—
4,500
— $ 418,303
84
7. BANK OWNED LIFE INSURANCE AND ANNUITIES
The Company holds bank-owned life insurance (“BOLI”) and deferred annuities with a combined cash value of
$15.2 million and $16.9 million at December 31, 2022 and 2021, 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 decreased by $1.7 million in 2022 with the net change resulting from proceeds
from death benefits received, premium payments and earnings recorded as non-interest income. The net increase in cash
surrender value on the BOLI and annuities was $284,000 in 2021. 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 2022 and
2021 are shown below:
(Dollars in thousands)
Life
Insurance
Deferred
Annuities
Balance as of January 1, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Premiums on existing policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance as of December 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Premiums on existing policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Annuity payments received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Death Benefits received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance as of December 31, 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
16,010
225
26
16,261
198
8
10
(1,847)
14,630
$
$
558
21
12
591
21
12
—
(57)
567
$
$
Total
16,568
246
38
16,852
219
20
10
(1,904)
15,197
8. PREMISES AND EQUIPMENT
Premises and equipment consist of the following:
(Dollars in thousands)
December 31,
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Furniture, computer software and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022
294
13,698
7,144
21,136
(12,946)
8,190
$
2021
294
13,486
6,940
20,720
(12,349)
8,371
$
$
Depreciation expense on premises and equipment charged to operations was $631,000 in 2022 and $712,000 in 2021.
The Company had no premises and equipment subject to lease agreements in which it acts as the lessor.
9. GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill
On September 8, 2006, the Company acquired a branch office in Richfield, PA. Goodwill associated with this transaction
is carried at $2.0 million. On November 30, 2015, the Company acquired FNBPA and carries goodwill of $3.4 million
relating to the acquisition. On April 30, 2018, Juniata completed the acquisition of the remaining stock of LCB and, as a
result, recorded goodwill of $3.6 million. Total goodwill at both December 31, 2022 and December 31, 2021 was
$9.0 million.
85
Intangible Assets
On November 30, 2015, a core deposit intangible in the amount of $303,000 associated with the FNBPA acquisition was
recorded. On April 30, 2018, a core deposit intangible of $289,000 associated with the LCB acquisition was recorded.
Both core deposit intangibles are being amortized over a ten-year period using a sum of the years’ digits basis.
The following table shows the amortization schedule for each of the intangible assets recorded.
(Dollars in thousands)
FNBPA
Acquisition
Core
Deposit
Intangible
LCB
Acquisition
Core
Deposit
Intangible
Beginning Balance at Acquisition Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization expense recorded prior to December 31, 2020 . . . . . . . . . . . .
Amortization expense recorded in Years ended:
December 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31, 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unamortized balance as of December 31, 2022 . . . . . . . . . . . . . . . . . . . . . . .
Scheduled Amortization expense for years ended:
December 31, 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31, 2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31, 2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31, 2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31, 2027 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
$
303 $
223
27
21
32 $
16 $
11
5
—
—
—
289
128
39
33
89
28
23
17
12
7
2
10. DEPOSITS
The aggregate amount of demand deposit overdrafts that were reclassified as loans was $46,000 at December 31, 2022,
compared to $31,000 at December 31, 2021.
Deposits consist of the following:
(Dollars in thousands)
December 31,
2022
2021
Demand, non-interest bearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 199,131 $ 182,022
240,974
Interest-bearing demand and money market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Savings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
142,187
13,547
Time deposits, $250,000 or more . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
129,717
Other time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 711,512 $ 708,447
227,028
143,082
13,238
129,033
Included in interest bearing demand and money markets as of December 31, 2021 was $30.0 million in brokered demand
deposits, while there were no brokered deposits as of December 31, 2022.
86
The aggregate amount of scheduled maturities of time deposits as of December 31, 2022 include the following:
(Dollars in thousands)
Maturing in:
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2027 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Later . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11. BORROWINGS
$250,000 or more
Other
Time Deposits
$
$
4,366
6,901
1,436
—
267
268
13,238
$
$
53,416 $
44,731
10,322
13,058
5,896
1,610
129,033 $
Total Time Deposits
57,782
51,632
11,758
13,058
6,163
1,878
142,271
Short term borrowings, and the related maximum amounts outstanding at the end of any month in the years ended
December 31, 2022 and 2021, are presented below.
(Dollars in thousands)
Repurchase agreements . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term borrowings with FHLB:
Overnight advances . . . . . . . . . . . . . . . . . . . . . . . . . . .
3-month advances . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Years Ended December 31,
2022
2021
Maximum Outstanding at
Any Month End
2022
2021
7,585
$
4,227
$
7,585
$
4,804
28,125
20,000
55,710
$
—
—
$
4,227
28,125
20,000
55,710
$
9,000
20,000
33,804
$
$
Short-term borrowings were at their maximum 2022 outstanding levels on December 31, 2022. Repurchase agreements
increased between the years ended December 31, 2022 and 2021 due to an additional customer relationship added in 2022.
Overnight borrowings increased as of December 31, 2022 compared to December 31, 2021 due to increased funding
needs, primarily from loan growth in 2022, while 3-month advances increased due to Juniata reverting to using
$20.0 million in FHLB short-term advances to supplement core deposits to satisfy its funding needs in lieu of brokered
demand deposits.
The following table presents supplemental information related to short-term borrowings.
(Dollars in thousands)
Amount outstanding as of December 31 . . . . . . . . . . .
Weighted average interest rate as of
December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average amount outstanding during the year . . . . . . .
Weighted average interest rate during the year . . . .
$
$
Securities sold under
agreements to repurchase
2022
2021
7,585
$
4,227
Short-term borrowings
2022
2021
$ 48,125
$
—
3.44 %
5,532
$
1.54 %
0.10 %
0.10 %
4,249
$ 18,635
4.55 %
$
3.05 %
— %
6,741
0.38 %
The Bank has repurchase agreements with some 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
completely collateralize repurchase agreements with U.S. Government securities. As of December 31, 2022, the securities
that serve as collateral for securities sold under agreements to repurchase had a fair value of $10.5 million. The interest
rate paid on these funds is variable and subject to change daily.
Long-term debt is comprised only of FHLB advances with an original maturity of one year or more. Outstanding balances
were $20,000,000 as of December 31, 2022 and December 31, 2021.
87
The following table summarizes the scheduled maturities of long-term debt as of December 31, 2022.
(Dollars in thousands)
Year
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2027 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Scheduled
Maturities
Weighted Average
Interest Rate
$
$
—
15,000
5,000
—
—
—
20,000
— %
2.29
2.41
—
—
—
2.32 %
The Bank must maintain sufficient qualifying collateral with the FHLB 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, 2022, the amount of loans
included in qualifying collateral was $306.3 million. As of December 31, 2021, the amount of loans included in qualifying
collateral was $253.8 million. No investment securities were included in qualifying collateral as of December 31, 2022 or
2021.
The Bank’s maximum borrowing capacity with the FHLB was $214.7 million, with a balance of $68.4 million outstanding
as of December 31, 2022. The Bank’s maximum borrowing capacity with the FHLB was $182.6 million, with a balance
of $20.7 million outstanding as of December 31, 2021. 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.
12. OPERATING LEASE OBLIGATIONS
The Company has four operating leases, of which one is with a related party. The leases are comprised of real estate
property for branch and office space with terms extending through 2029. As of December 31, 2022, the Company had
operating lease ROU assets totaling $395,000 included in other assets and operating lease liabilities totaling $403,000
included in other liabilities.
The calculated amount of the ROU assets and lease liabilities are impacted by the length of the lease term and the discount
rate used to calculate the present value of the minimum lease payments. The Company’s lease agreements often include
one or more options to renew at the Company’s discretion. If at lease inception, the Company considers the exercising of
a renewal option to be reasonably certain, the Company will include the extended term in the calculation of the ROU asset
and lease liability.
Topic 842 requires the use of the rate implicit in the lease as the discount rate if that rate is readily determinable. As this
rate is rarely determinable, the Company utilized its incremental borrowing rate at lease inception, which is the rate the
Company would have incurred to borrow on a collateralized basis over a similar term at an amount equal to the lease
payments in a similar economic environment.
As of December 31, 2022, the weighted-average remaining operating lease term was 5.1 years, and the weighted-average
discount rate was 4.97%.
The Company’s total operating lease cost for the years ended December 31, 2022 and 2021 was $110,000 and $119,000,
respectively. During the years ended December 31, 2022 and 2021, total operating lease payments made to a related party
totaled $24,000.
88
The future minimum payments for operating leases with initial or remaining terms of one year or more as of December 31,
2022 were as follows:
(Dollars in thousands)
Years ending December 31,
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2027 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2028 and beyond . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Future Minimum Lease Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amounts Representing Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Present Value of Net Future Minimum Lease Payments (Lease Liability) . . . . . . . . . . . . . . . . . . . . .
$
Lease Obligation
107
95
95
52
49
62
460
(57)
403
$
13. INCOME TAXES
The components of income tax expense for the two years ended December 31 were:
(Dollars in thousands)
Years Ended December 31,
2022
2021
Current tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
513
129
642
$
$
235
49
284
Federal credits are available for ten years for Juniata’s investment in two low income housing projects. Tax credits
associated with phase I of the projects will continue through January 2023, while phase II project credits will run through
2027. The tax credits are included in the tax expense line item on the Consolidated Statements of Income. Amortization
of the investments using the cost method is scheduled to occur over the same period as tax credits are earned. Juniata’s
maximum exposure to loss is limited to the carrying value of the investment at year-end.
The total tax provision during the year ended December 31, 2022 was $642,000 compared to $284,000 during the year
ended December 31, 2021. A reconciliation of the statutory income tax expense computed at 21% 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Federal tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other permanent differences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effective tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Years Ended December 31,
2022
8,962
$
2021
6,888
$
21 %
1,882
(189)
(67)
(80)
3
(902)
(5)
642
7.2 %
$
21 %
1,447
(208)
(36)
—
(2)
(902)
(15)
284
4.1 %
$
89
Deductible temporary differences and taxable temporary differences gave rise to a net deferred tax asset for the Company
as of December 31, 2022 and December 31, 2021. The components are detailed below:
(Dollars in thousands)
Years Ended December 31,
2022
2021
Deferred Tax Assets:
Allowance for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Deferred directors’ compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employee and director benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment in low income housing project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value adjustments to acquired assets and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax credit carryforward . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lease liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized loss on debt securities available for sale. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized loss on debt securities held to maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
847
212
252
51
494
146
—
85
1,638
9,536
13,261
Deferred Tax Liabilities:
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(124)
Right of use asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(83)
Loan origination fees and costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(559)
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(10)
Unrealized gains on debt securities available for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
Unrealized gain from securities impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(16)
Unrealized gain on derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(56)
Annuity earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(73)
Fair value of mortgage servicing rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(19)
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(26)
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(429)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(28)
(1,423)
Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net deferred tax asset included in other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,838
$
$
741
329
264
59
397
172
235
63
1,008
—
3,268
(165)
(62)
(505)
(20)
—
(58)
(114)
(68)
(25)
(37)
(429)
(42)
(1,525)
1,743
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 because 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, 2022 and 2021. The Company is no longer subject to examination by taxing
authorities for years before 2019. Tax years 2019 through the present, with limited exception, remain open to examination.
14. STOCKHOLDERS’ EQUITY AND REGULATORY MATTERS
The Company is authorized to issue 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 by shareholders at the prevailing market prices through 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
90
proportionate adjustment to the reserved shares for this plan. At December 31, 2022, 141,887 shares were available for
issuance under the Dividend Reinvestment Plan. No shares were issued under this plan in 2022 or 2021.
The Company periodically repurchases shares of its common stock under a share repurchase program approved by the
Board of Directors. In November of 2021, 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 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, stock awards, employee stock purchase plan purchases, to fulfill dividend reinvestment program needs and to
supply shares needed for exchange in an acquisition. During 2022 and 2021, 170 and 50,482 shares, respectively, were
repurchased in conjunction with this program. In 2022 and 2021, 825 and 200 issued shares, respectively, were transferred
to treasury due to forfeitures of restricted stock awards. Remaining shares authorized to be repurchased in the program
were 208,312 as of December 31, 2022.
Regulatory Capital
The Bank is subject to risk-based capital standards by which 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 consolidated financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative
measures of the Bank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting
practices. The Bank’s capital and classification are also subject to qualitative judgments by the regulators. Management
believes that, as of December 31, 2022, the Bank meets all capital adequacy requirements to which it is subject.
regulations provide
Prompt corrective action
five classifications: well-capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to
represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits.
If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are
required. At year-end 2022 and 2021, the most recent regulatory notifications categorized the Bank as well-capitalized
under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that
management believes have changed the institution’s category.
In 2019, the federal banking agencies jointly issued a final rule that provides for an optional, simplified measure of capital
adequacy, the community bank leverage ratio framework (“CBLR framework”), for qualifying community banking
organizations, consistent with Section 201 of the Economic Growth Act. As of December 31, 2022, the Bank was a
qualifying community banking organization as defined by the federal banking agencies but elected to use the risk-
weighting framework under the Basel III capital requirements at year-end 2022 and 2021.
A capital conservation buffer of 2.50% is applicable to all capital ratios except for the Tier 1 Leverage ratio. The capital
conservation buffer is equal to the lowest value of the three applicable capital ratios less the regulatory minimum
(“adequately capitalized”) for each respective capital measurement. The Bank’s capital conservation buffer at
December 31, 2022 was 2.50% and is included in the capital adequacy ratios in the tables below. Compliance with the
capital conservation buffer is required to avoid limitations on certain capital distributions, especially dividends.
91
Actual and required capital amounts and ratios as of December 31, 2022 and December 31, 2021, are presented below.
Minimum
Regulatory
Requirements
to be Well
Capitalized
under Prompt
Corrective Action
Provisions
(Dollars in thousands)
The Juniata Valley Bank
Actual
Amount
Ratio
Minimum Requirement
for Capital
Adequacy Purposes
Ratio
Amount
Amount
As of December 31, 2022:
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, 2021:
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 . . . . . . .
$
$
73,143
69,116
69,116
69,116
56,153
56,153
56,153
56,153
13.01 % $
12.29 %
59,040
47,794
10.50 % $
8.50 %
56,229
44,983
12.29 %
8.48 %
39,360
32,605
7.00 %
4.00 %
36,549
40,756
11.06 % $
11.06 %
54,580
44,184
10.50 % $
8.50 %
51,981
41,585
11.06 %
6.99 %
36,387
32,502
7.00 %
4.00 %
33,788
40,627
Ratio
10.00 %
8.00 %
6.50 %
5.00 %
10.00 %
8.00 %
6.50 %
5.00 %
The actual regulatory capital amounts and ratios reported in Juniata’s December 31, 2021 Form 10-K were total capital of
$68.4 million; tier 1 capital and common equity tier 1 capital of $64.9 million; total capital ratio – 13.16%; tier 1 capital
and common equity tier 1 capital ratios – 12.48%; and leverage ratio – 7.98%. The change was the result of refiling the
Bank’s December 31, 2021 call report, subsequent to filing the December 31, 2021 Form 10-K, due to the treatment of
subordinated debt of unconsolidated financial institutions.
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. As of December 31, 2022, $37,324,000 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.
15. 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. Restricted stock is participating, and
therefore, is included in the basic EPS calculation. The following table sets forth the computation of basic and diluted
earnings per share:
(Amounts in thousands, except earnings per share data)
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
$
$
Year ended December 31,
2021
2022
8,320 $
5,000
1.66
5,000 $
9
5,009 $
1.66 $
1
6,604
5,004
1.32
5,004
9
5,013
1.32
—
92
16. ACCUMULATED OTHER COMPREHENSIVE INCOME
The following tables show changes in accumulated other comprehensive income by component, net of tax, for the years
ending December 31, 2022 and 2021:
(Dollars in thousands)
December 31, 2022
Beginning balance, December 31, 2021 . . . . . . . . . . . . . . . . . . .
Current period other comprehensive income (loss):
Other comprehensive income (loss) before reclassification . .
Amounts reclassified from accumulated other
comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . .
Net current period other comprehensive loss. . . . . . . . . . . .
Ending balance, December 31, 2022 . . . . . . . . . . . . . . . . . . . . . .
$
$
Gains on Cash
Flow Hedges
Unrealized Losses
on Securities
Total
427
$
(3,792) $
(3,365)
964
(40,485)
(39,521)
(1,180)
(216)
211
$
2,199
(38,286)
(42,078) $
1,019
(38,502)
(41,867)
(Dollars in thousands)
December 31, 2021
Beginning balance, December 31, 2020 . . . . . . . . . . . . . . . . . . .
Current period other comprehensive income (loss):
Other comprehensive income (loss) before reclassification . .
Amounts reclassified from accumulated other
comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . .
Net current period other comprehensive income (loss). . . .
Ending balance, December 31, 2021 . . . . . . . . . . . . . . . . . . . . . .
Gains and (Losses)
on Cash Flow
Hedges
Unrealized Gains
and (Losses) on
Available for Sale
Securities
Total
$
$
(45) $
3,563 $
3,518
425
47
472
427
$
(7,338)
(17)
(7,355)
(3,792) $
(6,913)
30
(6,883)
(3,365)
The following table shows significant amounts reclassified out of each component of accumulated other comprehensive
income for the year ending December 31, 2022:
(Dollars in thousands)
Details About Accumulated Other Comprehensive Loss
Components
Unrealized gains and losses on securities
Realized losses on available for sale
securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of unrealized losses on
held to maturity securities . . . . . . . . . . . . . . . .
Total before tax . . . . . . . . . . . . . . . . . . . . . . .
Tax effect . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized gains and losses on cash flow
hedges
Realized gains on cash flow hedges . . . . . . . .
Realized gains on swap termination . . . . . . . .
Total before tax . . . . . . . . . . . . . . . . . . . . . . .
Tax effect . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amount
Reclassified From
Accumulated Other
Comprehensive
Loss
Affected Line Item in the Consolidated Statements of
Income
$
1,453
(Gain) loss on sales and calls of securities
1,342
2,795
(596)
2,199
Income tax provision (benefit)
Short-term borrowings and repurchase
agreements
(291)
(1,202) Other non-interest income
(1,493)
313
(1,180)
Income tax provision (benefit)
Total reclassifications for the period,
net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
1,019
93
The following table shows significant amounts reclassified out of each component of accumulated other comprehensive
loss for the year ending December 31, 2021:
(Dollars in thousands)
Details About Accumulated Other Comprehensive Loss
Components
Unrealized gains and losses on securities
Realized gains on available for sale securities . .
Total before tax . . . . . . . . . . . . . . . . . . . . . . .
Tax effect . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized gains and losses on cash flow
hedges
Realized losses on cash flow hedges . . . . . . . .
Total before tax . . . . . . . . . . . . . . . . . . . . . . .
Tax effect . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total reclassifications for the period, net of tax . .
17. FAIR VALUE MEASUREMENT
Amount
Reclassified From
Accumulated Other
Comprehensive
Loss
$
$
(21)
(21)
4
(17)
60
60
(13)
47
30
Affected Line Item in the Consolidated Statements of
Income
(Gain) loss on sales and calls of securities
Income tax provision (benefit)
Short-term borrowings and repurchase
agreements
Income tax provision (benefit)
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. 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. 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.
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.
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
94
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 reporting entity can
access at the measurement date.
Level 2 Inputs – Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or
liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by
observable market data.
Level 3 Inputs – Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that
market participants would use in pricing an asset or liability.
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.
Equities Securities
The fair value of equity securities is based upon quoted prices in active markets and is reported using Level 1 inputs.
Debt Securities
For debt securities where quoted prices are not available, fair values are calculated based on market prices of similar
securities and 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. For
debt securities where quoted prices or market prices of similar securities are not available, fair values are calculated using
other market indicators and are reported at fair value utilizing Level 3 inputs.
Derivatives
The fair values of derivatives are based on valuation models using observable market data as of the measurement date
utilizing Level 2 inputs. The Company’s derivatives are comprised of interest rate swaps traded in an over-the-counter
market where quoted market prices are not always available; therefore, the fair values are determined using quantitative
models that utilize multiple market inputs. The inputs will vary based on the type of curves, prepayment rates and volatility
factors used to value the position. Most market inputs are actively quoted and can be validated through external sources,
including brokers, market transactions and third-party pricing services.
95
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 in the Level 3 fair
value classification, 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 because of impairment and accordingly are
measured on a non-recurring basis as they are carried at the lower of cost or fair value. These assets are subsequently
accounted for at the lower of cost or fair value less estimated costs to sell. Values are estimated using Level 3 inputs, based
on appraisals that consider the sales prices of property in the proximate vicinity less estimated costs to sell.
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.
The following tables summarize financial assets and financial liabilities measured at fair value as of December 31, 2022
and December 31, 2021, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure
fair value.
(Dollars in thousands)
December 31, 2022
Assets measured at fair value on a recurring basis:
Debt securities available for sale:
(Level 1)
Quoted Prices in
Active Markets
for Identical
Assets
(Level 2)
Significant
Other
(Level 3)
Significant
Other
Observable Unobservable
Inputs
Inputs
Total
Obligations of U.S. Government agencies and
corporations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Obligations of state and political subdivisions. . . . . . . .
Corporate debt securities . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage-backed securities . . . . . . . . . . . . . . . . . . . . . . .
Total debt securities available for sale . . . . . . . . . . . . .
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage servicing rights . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest rate swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
$
$
$
— $
—
—
—
— $
$
— $
— $
1,056
13,705 $
7,679
8,196
36,811
66,391 $
— $
— $
268 $
— $
—
7,145
—
7,145 $
— $
92 $
— $
13,705
7,679
15,341
36,811
73,536
1,056
92
268
(Dollars in thousands)
December 31, 2021
Assets measured at fair value on a recurring basis:
Debt securities available for sale:
(Level 1)
Quoted Prices in
Active Markets
for Identical
Assets
(Level 2)
Significant
Other
(Level 3)
Significant
Other
Observable Unobservable
Inputs
Inputs
Total
Obligations of U.S. Government agencies and
corporations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Obligations of state and political subdivisions. . . . . . . .
Corporate debt securities . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage-backed securities . . . . . . . . . . . . . . . . . . . . . . .
Total debt securities available for sale . . . . . . . . . . . . .
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage servicing rights . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest rate swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
$
$
$
96
40,526 $
9,220
30,476
250,682
— $
—
—
—
— $ 330,904 $
— $
— $
541 $
$
— $
— $
1,124
— $
—
4,520
—
40,526
9,220
34,996
250,682
4,520 $ 335,424
1,124
120
541
— $
120 $
— $
The table below presents a reconciliation of the beginning and ending balances of investment securities measured at fair
value on a recurring basis using significant unobservable inputs (Level 3) for the years ended December 31, 2022 and
2021.
(Dollars in thousands)
Investment Securities:
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total gains (loss) included in OCI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Principal payments and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year Ended
December 31,
2022
2021
$
$
4,520
(1,375)
4,000
—
—
7,145
$
$
2,000
20
2,500
—
—
4,520
Mortgage servicing rights and assets measured at fair value on a nonrecurring basis for which Level 3 inputs have been
used to determine fair value are immaterial to the Company’s consolidated financial statements.
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 after those respective dates. As such, the estimated fair values of these financial
instruments after 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.
97
The carrying amounts and estimated fair values of the Company’s financial instruments are as follows:
Financial Instruments
(Dollars in thousands)
Financial assets:
Carrying
December 31, 2022
Fair
Value
Value
Carrying
December 31, 2021
Fair
Value
Value
Cash and due from banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest bearing deposits with banks . . . . . . . . . . . . . . . . . . . . . . .
Interest bearing time deposits with banks . . . . . . . . . . . . . . . . . . .
Debt securities available for sale . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt securities held to maturity . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted investment in bank stock . . . . . . . . . . . . . . . . . . . . . . .
Loans, net of allowance for loan losses . . . . . . . . . . . . . . . . . . . . .
Interest rate swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 10,856
143
—
73,536
209,565
3,666
480,485
268
2,124
$ 199,131
512,381
7,585
48,125
20,000
1,011
333
$ 10,856 $ 12,928
598
735
336,548
—
2,116
414,795
541
1,814
143
—
73,536
209,887
N/A
467,667
268
2,124
$ 12,928
598
735
336,548
—
N/A
414,984
541
1,814
$ 199,131 $ 182,022
526,425
4,227
—
20,000
1,568
252
508,753
N/A
48,122
19,156
1,009
333
$ 182,022
528,952
N/A
—
20,520
1,568
252
Off-balance sheet financial instruments:
Commitments to extend credit . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Letters of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
— $
—
— $
—
$
—
—
—
—
The following tables present 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, 2022 and December 31, 2021. These tables exclude
financial instruments for which the carrying amount approximates fair value.
(Dollars in thousands)
December 31, 2022
Financial instruments - Assets
Carrying
Amount
Fair Value
(Level 1)
Quoted Prices in
Active Markets
for Identical
Assets or Liabilities
(Level 2)
Significant
Other
(Level 3)
Significant
Other
Observable Unobservable
Inputs
Inputs
Debt securities held to maturity . . . . . . . . . . .
Loans, net of allowance for loan losses . . . . .
$ 209,565
480,485
$ 209,887
467,667
Financial instruments - Liabilities
Interest bearing deposits . . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . .
Other interest bearing liabilities . . . . . . . . . . .
$ 512,381
20,000
1,011
$ 508,753
19,156
1,009
$
$
— $ 209,887 $
—
—
—
467,667
— $ 508,753 $
—
—
19,156
1,009
—
—
—
98
(Dollars in thousands)
December 31, 2021
Financial instruments - Assets
Carrying
Amount
(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
Interest bearing time deposits with banks . . .
Loans, net of allowance for loan losses . . . . .
$
735
414,795
$
735
414,984
Financial instruments - Liabilities
Interest bearing deposits . . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . .
Other interest bearing liabilities . . . . . . . . . . .
$ 526,425
20,000
1,568
$ 528,952
20,520
1,568
$
$
— $
—
735 $
—
—
414,984
— $ 528,952 $
—
—
20,520
1,568
—
—
—
18. REVENUE RECOGNITION
The Company adopted ASU 2014-09, Revenue from Contracts with Customers (Topic 606), as well as subsequent ASU’s
that modified ASC 606, on January 1, 2018. The Company elected to apply the ASU and all related ASU’s using the
modified retrospective approach applied to all contracts initiated on or after the effective date, and for contracts which
have remaining obligations as of the effective date, while prior period results continue to be reported under legacy U.S.
GAAP. Based on this assessment, the Company concluded that ASC 606 did not materially change the method by which
the Company currently recognizes revenue for these revenue streams, which is by recognizing revenues as they are earned
based upon contractual terms, as transactions occur, or as services are provided and collectability is reasonably assured.
The Company generally acts in a principal capacity, on its own behalf, in most contracts with customers. In such
transactions, revenue and related costs to provide these services are recognized on a gross basis in the financial statements.
In some cases, the Company acts in an agent capacity, deriving revenue through assisting other entities in transactions
with its customers. In such transactions, revenue and the related costs to provide the services are recognized on a net basis
in the financial statements. These transactions primarily relate to non-deposit product commissions and fees derived from
customer’s use of various interchange and ATM/debit card networks.
All the Company’s revenue from contracts with customers in the scope of ASC 606 are recognized within non-interest
income on the consolidated statements of income. Revenue streams not within the scope of ASC 606 included in non-
interest income on the consolidated statements of income include earnings on bank-owned life insurance and annuities,
fees derived from loan activity, mortgage banking income, gain/loss on sales and calls of securities, and the change in
value of equity securities.
A description of the Company’s sources of revenue accounted for under ASC 606 are as follows:
Customer Service Fees – fees mainly represent fees from deposit customers for transaction based, account maintenance,
and overdraft services. Transaction based fees include, but are not limited to, stop payment and overdraft fees. These fees
are recognized at the time of the transaction when the performance obligation has been fulfilled. Account maintenance
fees and account analysis fees are earned over the course of a month, representing the period of the performance obligation,
and are recognized monthly.
Debit Card Fee Income – consists of interchange fees from cardholder transactions conducted through the card payment
network. Cardholders use debit cards to conduct point-of-sale transactions that produce interchange fees. The Company
acts in an agent capacity to offer processing services for debit cards to its customers. Fees are recognized with the
processing of the transactions and netted against the related fees from such transactions.
99
Trust Fees – include asset management and estate fees. Asset management fees are generally based on a fee schedule,
based upon the market value of the assets under management, and recognized monthly when the service obligation is
completed. Trust fees recognized in 2022 and 2021 were $368,000 and $372,000, respectively. Fees for estate management
services are based on a specified fee schedule and generally recognized as the following performance obligations are
fulfilled: (i) 25% of total estate fee recognized when all estate assets are collected and debts paid, (ii) 50% of the total fee
is recognized when the inheritance tax return is filed, and (iii) remaining 25% is recognized when the first and final account
is confirmed, settling the estate. Estate fees recognized during 2022 and 2021 were $104,000 and $73,000, respectively.
Commissions From Sales Of Non-Deposit Products – include, but are not limited to, brokerage services, employer-based
retirement solutions, individual retirement planning, insurance solutions, and fee-based investment advisory services. The
Company acts in an agent capacity to offer these services to customers. Revenue is recognized, net of related fees, in
the month in which the contract is fulfilled.
Other Non-Interest Income – includes certain revenue streams within the scope of ASC 606 comprised primarily of ATM
surcharges, commissions on check orders, and wire transfer fees. ATM surcharges are the result of customers conducting
ATM transactions that generate fee income. All these fees, as well as wire transfer fees, are transaction based and are
recognized at the time of the transaction. In addition, the Company acts in an agent capacity to offer checks to its customers
and recognizes commissions, net of related fees, when the contract is fulfilled.
Gains/Losses On Sales Of Other Real Estate Owned – are recognized when control of the property transfers to the buyer,
which generally occurs when the deed is executed.
19. EMPLOYEE BENEFIT PLANS
Long-Term Incentive Plan
The Company maintains the 2016 Long-Term Incentive Plan (the “Plan”), that amended and restated the former 2011
Stock Option Plan (the “2011 Plan”). The Plan continues in effect for any outstanding awards under the 2011 Plan in
accordance with the terms and conditions governing such awards immediately prior to the effective date of the Plan but
expanded the types of awards authorized to include, among others, restricted stock. Under the provisions of the Plan, while
active, awards may consist of grants of incentive stock options, nonqualified stock options, stock appreciation rights,
restricted stock and performance shares to officers and key employees of the Company, as well as directors.
Compensation expense for stock options granted and restricted stock awarded is measured using the fair value of the award
on the grant date and is recognized over the vesting period. The Company recognized $176,000 and $158,000 of expense
for the years ended December 31, 2022 and 2021, respectively, for stock-based compensation.
The Plan is administered by a committee of the Board of Directors. The Committee determines, among other things, the
recipients of stock compensation, the number of shares to be subject to each award, the option price, the duration of the
option and the restricted period, as appropriate. A recipient of the restricted shares will forfeit those shares in their entirety
if employment is terminated prior to the vesting date for reasons other than retirement, death or disability. Forfeited awards
are returned to the pool of shares available for grant for future awards. The maximum number of shares of common stock
that may be issued under the Plan is 300,000 shares, and 163,990 shares were available for grant as of December 31, 2022.
Shares of common stock issued under the Plan may be treasury shares or authorized but unissued shares.
During 2022, a total of 10,486 restricted shares were awarded to certain officers and all directors. In 2021, a total of
8,839 shares of restricted stock were awarded to certain officers. Each award vests after three-years, with interim vesting
in the case of death, disability or retirement as approved by the board of directors.
100
The following table presents compensation expense and related tax benefits for restricted stock awards recognized on the
consolidated statement of income.
(Dollars in thousands)
Compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
176
(37)
139
$
$
158
(33)
125
2022
2021
At December 31, 2022, there was $138,000 of unrecognized compensation cost related to all non-vested restricted stock
awards. This cost is expected to be recognized through February 2025.
The following table presents a summary of non-vested restricted shares activity for 2022.
Non-vested at January 1, 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-vested at December 31, 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted
Average
Grant Date
Fair Value
18.48
18.72
17.32
15.90
17.10
Shares
22,789 $
(11,475)
(825)
10,486
20,975 $
No stock options were awarded in 2022. Outstanding options granted prior to 2022 have all vested and are exercisable at
the grant price, which is at least the fair market value of the stock on the grant date. The Plan provides 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 Plan are exercisable no earlier than one year after the date of
grant and expire ten years after the date of the grant. All options previously granted under the Plans are scheduled to expire
through February 17, 2025.
Total options outstanding as of December 31, 2022 have exercise prices between $17.65 and $18.00, with a weighted
average exercise price of $17.74 and a weighted average remaining contractual life of 1.40 years.
As of December 31, 2022, there was no unrecognized compensation cost related to options granted under the Plan.
No options were exercised under the Plans for the years ended December 31, 2022 and 2021.
101
A summary of the status of the outstanding stock options as of December 31, 2022 and 2021, and changes during the years
ending on those dates is presented below:
Outstanding at beginning of year . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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 cancelled during the year . . . . .
Intrinsic value of options outstanding and
exercisable at December 31, 2022 . . . . . . . . . . . . . . . . . .
Shares
71,947
—
—
(11,600)
60,347
60,347
2022
Weighted
Average
Exercise
Price
$
$
$
$
$
$
17.78
—
—
18.00
17.74
—
—
—
—
Shares
81,547
—
—
(9,600)
71,947
71,947
2021
Weighted
Average
Exercise
Price
$
$
$
$
17.78
—
—
17.75
17.78
—
—
Defined Contribution Plan (“401(k) Plan”)
The Company has a 401(k) 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. For the year ended December 31, 2022, the contribution amount totaled $258,000, which was credited
to employee’s accounts by January 31, 2022. This liability at December 31, 2021 totaled $252,000 and was credited to
employee accounts by January 31, 2021. Expense incurred under this plan was $259,000 and $250,000 in 2022 and 2021,
respectively. The 401(k) Plan also includes an employer matching contribution for employees that elect to defer
compensation into this program. The matching contribution in 2022 and 2021 was $226,000 and $222,000, 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 5,026 shares issued in 2022 and
4,944 shares issued in 2021 under this plan. As of December 31, 2022, there were 156,650 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, 2022
and 2021, the present value of the future liability associated with these plans was $100,000 and $112,000, respectively.
For the years ended December 31, 2022 and 2021, $15,000 and $11,000, respectively, was recorded as 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 7.
Deferred Compensation Plans
The Company has entered into deferred compensation agreements with certain directors to provide each director with an
additional retirement benefit, or to provide their beneficiary with a benefit, in the event of pre-retirement death. At
December 31, 2022 and 2021, the present value of the future liability was $1.0 million and $1.6 million, respectively. The
decline between periods was the result of the pre-retirement death of a current director in 2022. For the years ended
December 31, 2022 and 2021, $26,000 and $13,000, respectively, was recorded as expense in connection with these plans.
Separate accounts are maintained for each participating director with interest credited on a quarterly basis at the then
102
current rate offered on long-term certificates of deposit. The Company offsets the cost of these plans through the purchase
of bank-owned life insurance. See Note 7.
Salary Continuation Plans
The Company has non-qualified salary continuation plans for key employees. At December 31, 2022 and 2021, the present
value of the future liability was $1.1 million and $1.2 million, respectively. For the years ended December 31, 2022 and
2021, $89,000 and $85,000, respectively, was recorded as expense in connection with these plans. The Company offsets
the cost of these plans through the purchase of bank-owned life insurance. See Note 7.
20. 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. 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 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:
(Dollars in thousands)
December 31,
Commitments to grant loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unfunded commitments under lines of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding letters of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 103,848 $
12,203
2,609
2022
2021
94,349
12,714
5,724
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 counterparty. 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 payment to the beneficiary 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, 2022 and 2021 for guarantees under letters of credit
issued is not material.
The maximum undiscounted exposure related to these guarantees on December 31, 2022 was $2.6 million, and the
approximate value of underlying collateral upon liquidation that would be expected to cover this maximum potential
exposure was $31.2 million.
21. RELATED-PARTY TRANSACTIONS
The Bank has granted loans to certain of its executive officers, directors and their related interests. The aggregate dollar
amount of these loans was $4.9 million and $4.7 million at December 31, 2022 and 2021, respectively. During 2022, $1.0
103
million in new loans and advances were added, while repayments totaled $281,000. Additionally, loans totaling $492,000
were no longer considered related party loans as of December 31, 2022 due to the death of a current director in 2022. None
of these loans were past due, in non-accrual status or restructured on December 31, 2022 or 2021.
Deposits and other funds from related parties held by Juniata amounted to $1.3 million and $2.5 million at December 31,
2022 and 2021, respectively.
22. DERIVATIVES
The Company uses interest rate swap agreements as part of its asset liability management strategy to help manage its
interest rate risk position. The notional amount of the interest rate swaps does not represent amounts exchanged by the
parties. The amount exchanged is determined by reference to the notional amount and the other terms of the individual
interest rate swap agreements.
As of December 31, 2022, an interest rate swap with a notional amount of $20.0 million was designated as a cash flow
hedge of a short-term FHLB advance. As of December 31, 2021, interest rate swaps with a notional amount totaling
$40.0 million, were designated as cash flow hedges, of which $20.0 million were hedges of brokered deposits, and the
other $20.0 million were hedges of certain forecasted FHLB long-term advances. Based on updated funding need
projections, including the proceeds from the sale of investment securities and continued core deposit growth, Juniata
unwound two forward starting swaps at a gain of $1.2 million in June 2022. The amounts previously recognized in
accumulated other comprehensive income were reclassified to other non-interest income because it became probable that
the forecasted hedged transactions would not occur. Also in 2022, an interest rate swap with a notional amount totaling
$20.0 million was de-designated as a cash flow hedge on brokered deposits and designated instead, as a cash flow hedge
on a short-term FHLB advance.
The remaining interest rate swap was determined to be fully effective during the periods presented, and as such, no amount
of ineffectiveness has been included in net income. The aggregate fair value of the swaps is recorded in either other assets
or other liabilities on the Consolidated Statements of Condition, with changes in fair value recorded in other comprehensive
income. The Company expects the hedge to remain fully effective during the remaining terms of the swap.
The Company presents derivative positions gross on the balance sheet. The following table reflects the derivatives recorded
on the Consolidated Statements of Condition as of December 31, 2022 and 2021.
(Dollars in thousands)
Derivatives designated as hedges:
Interest rate swap - pay fixed / receive floating on 3-month
brokered deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest rate swap - pay fixed / receive floating on 3-month
FHLB advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest rate swaps - forward-starting on long-term FHLB
advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31, 2022
Fair
Value
Asset
(Liability)
Notional
Amount
December 31, 2021
Fair
Value
Asset
(Liability)
Notional
Amount
$
— $
— $ 20,000
$
20,000
268
—
—
—
20,000
52
—
489
104
The effect of cash flow hedge accounting, before income taxes, on accumulated other comprehensive income for the
period ended December 31, 2022 is as follows:
(Dollars in thousands)
Amount of Gain
(Loss) Recognized in
OCI on Derivatives
Interest rate contract . .
Swap termination
gain . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . .
$
$
18
1,202
1,220
December 31, 2022
Location of (Gain)
Loss Reclassified
from OCI into Income
Interest expense on short-term borrowings
and repurchase agreements
Other non-interest income
(Dollars in thousands)
Amount of Gain
(Loss) Recognized in
OCI on Derivatives
Interest rate contracts . .
Total . . . . . . . . . . . . . . . .
$
$
538
538
December 31, 2021
Location of (Gain)
Loss Reclassified
from OCI into Income
Interest expense on short-term borrowings
and repurchase agreements
Amount of (Gain)
Loss Reclassified
from OCI into Income
$
$
(291)
(1,202)
(1,493)
Amount of (Gain)
Loss Reclassified
from OCI into Income
$
$
60
60
The effect of cash flow hedge accounting on the Consolidated Statements of Income for the years ended December 31,
2022 and 2021 were as follows:
Location and Amount of Gain or Loss Recognized in Income on Fair Value and Cash Flow Hedging Relationships
(Dollars in thousands)
Effects of cash flow hedging:
Gain (loss) on cash flow hedging relationships:
Income (Expense)
Year Ended
December 31,
2022
2021
Amount reclassified from AOCI into income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amount reclassified from AOCI into income for swap termination . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
291
1,202
1,493
$
$
(60)
—
(60)
23. COMMITMENTS AND CONTINGENT LIABILITIES
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 sold qualifying residential mortgage loans to the FHLB as part of its Mortgage Partnership
Finance Program (“Program”). Under the terms of the Program, there is limited recourse back to the Company for loans
that do not perform in accordance with the terms of the loan agreement. Each loan sold under the Program is “credit
enhanced” such that the individual loan’s rating is raised to “BBB”, as determined by the FHLB. The Program can be
terminated by either the FHLB or the Company, without cause, by giving notice to the other party. The FHLB has no
obligation to commit to purchase any mortgage through, or from, the Company.
24. SUBSEQUENT EVENT
In January 2023, the Board of Directors declared a dividend of $0.22 per share to shareholders of record on February 14,
2023, payable on March 1, 2023.
105
25. JUNIATA VALLEY FINANCIAL CORP. (PARENT COMPANY ONLY) FINANCIAL INFORMATION
CONDENSED BALANCE SHEETS
(Dollars in thousands)
December 31,
2022
2021
ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment in bank subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
59 $
35,961
872
85
36,977 $
85
70,265
914
38
71,302
LIABILITIES
Accounts payable and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
28 $
12
STOCKHOLDERS’ EQUITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY . . . . . . . . . . . . . . . . . . . . . . . . .
36,949
36,977 $
$
71,290
71,302
CONDENSED STATEMENTS OF INCOME AND COMPREHENSIVE LOSS
(Dollars in thousands)
INCOME
Interest and dividends on investment securities available for sale . . . . . . . . . . . . . . . . . . . .
Dividends from bank subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in value of equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TOTAL INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EXPENSE
Other non-interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TOTAL EXPENSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
INCOME BEFORE INCOME TAXES AND EQUITY
IN UNDISTRIBUTED NET INCOME OF SUBSIDIARY . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Undistributed net income of subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
OTHER COMPREHENSIVE LOSS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TOTAL COMPREHENSIVE LOSS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Years Ended December 31,
2022
2021
$
43 $
4,401
(42)
4,402
138
138
4,264
(34)
4,298
4,022
8,320
(38,502)
$ (30,182) $
43
5,074
97
5,214
184
184
5,030
(25)
5,055
1,549
6,604
(6,883)
(279)
106
CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Years Ended December 31,
2022
2021
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
8,320 $
6,604
Adjustments to reconcile net income to net cash provided by operating activities:
Undistributed net income of subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in value of equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Increase) decrease in other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase in other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4,022)
42
(47)
16
4,309
(1,549)
(97)
39
11
5,008
Cash flows from investing activities:
Proceeds from the maturity of available for sale investment securities . . . . . . . . . . . . . . .
Net cash provided by investing activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
118
118
Cash flows from financing activities:
Cash dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock issued for stock plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net decrease in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4,401)
(3)
69
(4,335)
(26)
85
59 $
(4,402)
(861)
77
(5,186)
(60)
145
85
$
107
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Attached as exhibits to this Form 10-K are certifications of the Company’s Chief Executive Officer (CEO) and Chief
Financial Officer (CFO), which are required in accordance with Rule 13a-14 of the Securities Exchange Act of 1934, as
amended (the Exchange Act). This “Controls and Procedures” section includes information concerning the controls and
controls evaluation referred to in the certifications.
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
The Company’s management, with the participation of its CEO and CFO, conducted an evaluation, as of December 31,
2022, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act
Rule 13a-15(e)). Based on this evaluation, the Company’s CEO and CFO concluded that, as of the end of the period
covered by this annual report, the Company’s disclosure controls and procedures were effective in reaching a reasonable
level of assurance that management is timely alerted to material events relating to the company during the period when
the Company’s periodic reports are being prepared.
Conclusion Regarding Internal Control Over Financial Reporting
The Company’s management is responsible for establishing and maintaining adequate internal control over financial
reporting, as such term is defined in Rule 13a – 15(f) promulgated under the Exchange Act. The Company’s management,
with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the
effectiveness of our internal control over financial reporting based on the framework in Internal Control-Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the
evaluation under the framework in Internal Control-Integrated Framework (2013), the Company’s management
concluded that internal control over financial reporting was effective as of December 31, 2022.
108
Management’s Report on 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,
2022. 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).
Based on our assessment, management concluded that as of December 31, 2022, the Company’s internal control over
financial reporting was effective and met the criteria of the Internal Control-Integrated Framework (2013).
The independent registered public accounting firm that audited the consolidated financial statements included in the annual
report has not issued an attestation report on the Company’s internal control over financial reporting.
/s/ Marcie A. Barber
Marcie A. Barber, President and Chief Executive Officer
/s/ Michael W. Wolf
Michael W. Wolf, Chief Financial Officer
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the quarter ended December 31,
2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
None.
109
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Incorporated by reference herein is information appearing in the Proxy Statement for the Annual Meeting of Shareholders
to be held on May 16, 2023 (the “Proxy Statement”) under the captions “Management – Proposal 1 Election of Directors”,
“Management – Executive Officers of the Company”, “Corporate Governance and Board Matters – Audit Committee –
Members, Number of Meetings, Function, Charter and Audit Committee Financial Expert” and “Delinquent
Section 16(a) Reports”. The Company has adopted a Code of Ethics that is applicable to the Company’s Chief Executive
Officer, Chief Financial Officer and Principal Accounting Officer and other designated senior officers, which can be found
in the Investor Information – Governance Documents section of the Company’s website at www.JVBonline.com.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference herein is the information contained in the Proxy Statement under the captions “Director’s
Compensation”, “Corporate Governance And Board Matters – Personnel and Compensation Committee” and “Corporate
Governance And Board Matters – Personnel and Compensation Committee Interlocks and Insider Participation”.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
Incorporated by reference herein is the information contained in the Proxy Statement under the caption “Stock Ownership
by Management and Beneficial Owners”. Additionally, the following table contains information regarding equity
compensation plans approved by shareholders, which include a stock option plan for the Company’s employees and an
employee stock purchase plan. The Company has no equity compensation plans that were not approved by shareholders.
Plan Category
Equity compensation plans
approved by security holders . . . . . . .
Equity compensation plans not
approved by security holders . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity Compensation Plan Information
Number of securities to be
issued upon exercise of
outstanding options, warrants Weighted average exercise
price of outstanding options,
warrants and rights
and rights
(a)
Number of securities remaining
available for future issuance
under equity compensation
plans (excluding securities
reflected in column a)
60,347
$
—
60,347
$
17.74
—
17.74
163,990
163,990
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE
Incorporated by reference herein is the information contained in the Proxy Statement under the caption “Corporate
Governance And Board Matters – Related Party Transactions” and “Management – Directors of the Company – Director
Qualifications”.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Incorporated by reference herein is information contained in the Proxy Statement under the caption “Other Matters –
Independent Registered Public Accounting Firm”.
110
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
PART IV
(a)(1) The following consolidated financial statements of the Company are filed as part of this Form 10-K:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
Reports of Independent Registered Public Accounting Firm
Consolidated Statements of Financial Condition as of December 31, 2022 and December 31, 2021
Consolidated Statements of Income for the fiscal years ended December 31, 2022 and December 31,
2021
Consolidated Statements of Comprehensive Income for the fiscal years ended December 31, 2022 and
December 31, 2021
Consolidated Statements of Stockholders’ Equity for the fiscal years ended December 31, 2022 and
December 31, 2021
Consolidated Statements of Cash Flows for the fiscal years ended December 31, 2022 and
December 31, 2021
(vii)
Notes to Consolidated Financial Statements
(a)(2) Financial Statements Schedules. All financial statement schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are
inapplicable and have therefore been omitted.
(a)(3) Exhibits.
3.1
3.2
4.1
10.1
10.2
10.3
10.4
10.5
Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3(i) to the Company’s
Form 8-K Current Report filed with the SEC on November 12, 2015)
Amended and Restated Bylaws (incorporated by reference to Exhibit 3(ii) to the Company’s Current Report
on Form 8-K filed with the SEC on February 17, 2022)
Description of Registrant’s Securities (incorporated by reference to the Company’s Form 8-A filed with the
SEC on September 13, 2011)
Form of 1999 Directors Deferred Compensation Agreement (incorporated by reference to Exhibit 10.1 to the
Company’s Annual Report on Form 10-K filed with the SEC on March 13, 2009)*
Form of Amendments to the 1999 Directors Deferred Compensation Agreement (incorporated by reference
to Exhibit 10.7 to the Company’s Annual Report on Form 10-K filed with the SEC on March 15, 2011)*
Form of Director Supplemental Life Insurance/ Split Dollar Plan (incorporated by reference to Exhibit 10.1
to the Company’s Annual Report on Form 10-K filed with the SEC on March 13, 2009)*
Employee Annual Incentive Plan, (filed herewith)*■
Change of Control Severance Agreement with Michael W. Wolf (incorporated by reference to Exhibit 10.1 to
the Company’s Current Report on Form 8-K filed with the SEC on April 26, 2022).*
111
10.6
10.7
10.8
21.1
23.1
31.1
31.2
32.1
32.2
Salary Continuation Agreement with Marcie A. Barber (incorporated by reference to Exhibit 10.20 to the
Company’s Annual Report on Form 10-K filed with the SEC on March 14, 2008)*
Change of Control Severance Agreement with Marcie A. Barber (incorporated by reference to Exhibit 10.19
to the Company’s Current Report on Form 8-K filed with the SEC on May 27, 2008)*
Long Term Incentive Plan of Juniata Valley Financial Corp. (incorporated by reference to Exhibit 10.1 to the
Company’s 2016 proxy statement filed with the SEC on April 8, 2016)*
Subsidiaries of Juniata Valley Financial Corp.
Consent of Crowe LLP
Rule 13(a)-14 Certification of Marcie A. Barber
Rule 13(a)-14 Certification of Michael W. Wolf
Section 1350 Certification of Marcie A. Barber
Section 1350 Certification of Michael W. Wolf
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase
101.INS
Inline XBRL Instance Document
101.SCH
Inline XBRL Taxonomy Extension Schema
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase
104
Cover Page Interactive Data File (embedded within the Inline XBRL document).
* Denotes a compensatory plan.
■ Denotes that portions of such Plan have been omitted pursuant to a request for confidential treatment and such
confidential information has been filed separately with the Securities Exchange Commission.
(b) Exhibits. The exhibits required to be filed as part of this report are submitted as a separate section of this report.
(c) Financial Statements Schedules. None Required.
112
Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
JUNIATA VALLEY FINANCIAL CORP. (REGISTRANT)
Date: March 16, 2023
/s/ Marcie A. Barber
By: Marcie A. Barber
Director, President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated.
/s/ Timothy I. Havice
Timothy I. Havice
Chairman
/s/ Martin L. Dreibelbis
Martin L. Dreibelbis
Vice Chairman
/s/ Marcie A. Barber
Marcie A. Barber
Director and Chief Executive Officer (Principal Executive Officer)
/s/ Michael A. Buffington
Michael A. Buffington
Director
/s/ Gary E. Kelsey
Gary E. Kelsey
Director
/s/ Richard M. Scanlon
Richard M. Scanlon, DMD
Director
/s/ Joseph B. Scarnati, III
Joseph B. Scarnati, III
Director
/s/ Steven C. Sliver
Steven C. Sliver
Director
/s/ Bradley J. Wagner
Bradley J. Wagner
Director
/s/ Michael W. Wolf
Michael W. Wolf
Chief Financial Officer (Principal Accounting and Financial Officer)
113
March 16, 2023
March 16, 2023
March 16, 2023
March 16, 2023
March 16, 2023
March 16, 2023
March 16, 2023
March 16, 2023
March 16, 2023
March 16, 2023
JUNIATA VALLEY FINANCIAL CORP.
CORPORATE OFFICERS
Timothy I. Havice
Martin L. Dreibelbis
Marcie A. Barber
Michael W. Wolf
Chairman
Vice Chairman
President and Chief Executive Officer
Executive Vice President, Secretary, Treasurer and Chief Financial Officer
JUNIATA VALLEY FINANCIAL CORP. AND THE JUNIATA VALLEY BANK
BOARD OF DIRECTORS
Marcie A. Barber
Richard M. Scanlon, DMD
President and Chief Executive Officer
Retired, Dentist and Dental Consultant to Central
PA Institute of Science and Technology
Michael A. Buffington
Founder and President, Buffington Property
Joseph B. Scarnati, III
Management, LLC and One-Stop
Communications
Consultant, Allegheny Strategy Partners
Owner, The Dan Smith Candy Company
Martin L. Dreibelbis, Vice Chairman
Retired, Petroleum Consultant
Steven C. Sliver
Retired, President & CEO Mutual Benefit Group
Timothy I. Havice, Chairman
Owner, T.I. Havice, Developer
Gary E. Kelsey
Retired, Potter County, PA, Register of Wills
and Recorder of Deeds
Bradley J. Wagner
Chief Operating Officer and Senior Vice President
of Manufacturing, The Wenger Group, LLC
THE JUNIATA VALLEY BANK
BUSINESS DEVELOPMENT BOARD MEMBERS
Keith A. Altiery
Mark S. Elsesser
Jeffrey C. Moyer
Craig M. Rupert
Richard A. Smeltz
Corey P. Wray
114
DIRECTORY OF OFFICERS OF JVB
INFORMATION TECHNOLOGY, COMPUTER OPERATIONS & SECURITY
President, Chief Executive Officer Curtis M. Crouse . . . . . . .
Senior Vice President, IT Manager & Security Officer
Executive Vice President, Chief Financial Officer S. Marlene Hubler . . . . . . Assistant Vice President, Computer Operations & Facilities
Manager
Systems Administrator
Data Analyst
Brent J. Harpster . . . . . . .
Beverly M. McClellan . . .
Executive Assistant
Compliance Manager and BSA Officer
OPERATIONS
Kimberly A. Hart . . . . . . .
Senior Vice President, Customer Experience Officer Megan A. Lyons . . . . . . .
Customer Care Supervisor
Deposit Operations Supervisor
Electronic Banking Supervisor
Vice President, Controller
Assistant Vice President, Accounting Manager
Financial Information Manager
BRANCH ADMINISTRATION
Amy J. Pitts . . . . . . . . . . .
Catherine E. DeWyer . . . .
Vice President, Branch Administrator
Branch Operations Administrator
BLAIRS MILLS & PORT ROYAL OFFICES
Barbara I. Seaman . . . . . .
Vice President, Community Office Manager & Relationship
Manager
Assistant Office Manager, Blairs Mills Office
Senior Vice President, Director of Human Resources
Payroll Manager & Benefits Administrator
Lori A. Yocum . . . . . . . . .
BURNHAM OFFICE
Holly M. Laub . . . . . . . . .
Marketing Specialist
COUDERSPORT OFFICE
Kelly L. Bruno . . . . . . . . .
Senior Vice President, Lending Division Manager
Vice President, Northern Tier Senior Lender
Vice President, Relationship Manager
Vice President, Relationship Manager GARDENVIEW OFFICE
Vice President, Relationship Manager
Vice President, Relationship Manager
Vice President, Relationship Manager
Kelly L. Mayes . . . . . . . .
Diane S. Dynda . . . . . . . .
LILLIBRIDGE OFFICE
Denise R. Russell . . . . . . .
Community Office Manager
Community Office Manager & Northern Tier Electronic
Banking Coordinator
Assistant Office Manger
Community Office Manager
Community Office Manager
EXECUTIVE
Marcie A. Barber . . . . . . . . .
Michael W. Wolf . . . . . . . . .
Danyelle M. Pannebaker . . . .
COMPLIANCE
Camie L. Harr . . . . . . . . . . .
CUSTOMER EXPERIENCE
Brenda A. Brubaker . . . . . . .
Jessica M. Zimmerman . . . . .
FINANCE
Cortney E. Wilbert . . . . . . . .
Kristi J. Burdge . . . . . . . . . .
Renee D. Williamson . . . . . .
HUMAN RESOURCES
Tina J. Smith . . . . . . . . . . . .
Carol A. Noland . . . . . . . . . .
MARKETING
Kimberly N. Parker . . . . . . . .
BUSINESS LENDING
Jeremiah J. Trout . . . . . . . . .
Joseph W. Lashway . . . . . . .
William T. Campbell, Jr. . . . .
Jeffrey A. Herr . . . . . . . . . . .
Thomas P. O'Connell . . . . . .
Kelly A. Sherman . . . . . . . . .
H. Fred Wallace . . . . . . . . . .
CONSUMER LENDING
Larry B. Cottrill, Jr. . . . . . . .
Vice President, Mortgage & Consumer Lending
Manager
LIVERPOOL OFFICE
Diana S. Orwan . . . . . . . .
Community Office Manager
CREDIT ADMINISTRATION & LOAN OPERATIONS
Lisa M. Snyder . . . . . . . . . . .
Mathew J. Waddell . . . . . . . .
Cathleen L. Miller . . . . . . . .
Pamela K. Parson . . . . . . . . .
Jeremy S. Schwartz . . . . . . . .
Vice President, Portfolio Manager & Credit Officer
Loan Operations Supervisor
Vice President, Collections Manager
Senior Vice President, Credit Administration Manager McALISTERVILLE & RICHFIELD OFFICES
Leslie A. Miller . . . . . . . .
Amber N. Portzline . . . . .
Vice President, Community Office Manager
Assistant Office Manager, Richfield Office
Senior Credit Analyst MIFFLINTOWN & MOUNTAIN VIEW OFFICES
Jennifer L. Pennepacker . .
Vice President, Community Office Manager
TRUST & INVESTMENT SERVICES
Thomas D. Weldon . . . . . . . .
Cynthia L. Williams . . . . . . .
Adam E. Truitt . . . . . . . . . . .
Jonathan F. King . . . . . . . . .
Senior Vice President, Trust & Investment Services MILLERSTOWN OFFICE
Division Manager
Vice President, Trust Officer
Lisa M. Richardson . . . . .
Community Office Manager
Vice President, Financial Services Officer MONUMENT SQUARE & WALMART OFFICES
Financial Services Representative
Christine L. Searer . . . . . .
Vice President, Market Manager
WATER STREET OFFICE
Samantha M. Treaster . . . .
Assistant Office Manager
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