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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT 1934
For the quarterly period ended March 31, 1995
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 2-81699
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Juniata Valley Financial Corp.
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(Exact name of registrant as specified in its charter)
Pennsylvania 23-2235254
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(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)
Bridge and Main Streets, Mifflintown, Pennsylvania 17059
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(Address of principal executive offices) (Zip Code)
(717) 436-8211
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. [X] Yes [ ] No
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Class Outstanding as of April 26,1995
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Common Stock ($1.00 par value) 890,692 shares
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2.
JUNIATA VALLEY FINANCIAL CORP. AND SUBSIDIARY
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CONSOLIDATED BALANCE SHEETS
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March 31, December 31,
1995 1994
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(In thousands)
(Unaudited)
ASSETS:
Cash and due from banks $ 5,831 $ 5,978
Interest-bearing deposits with banks 20 7
Federal funds sold 4,500 -
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Total cash and cash equivalents 10,351 5,985
Securities available for sale 12,069 13,057
Securities held to maturity, fair value of
$43,671 and $42,728 respectively 44,363 44,157
Loans, receivable net of unearned discount
of $4,119 and $4,095 respectively 123,316 123,191
Less: Allowance for loan losses 1,560 1,523
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Net loans receivable 121,756 121,668
Bank premises and equipment, net 1,653 1,681
Accrued interest receivable and other assets 3,831 3,628
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TOTAL ASSETS $ 194,023 $ 190,176
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LIABILITIES AND STOCKHOLDERS' EQUITY:
Non-interest bearing deposits $ 19,173 $ 18,971
Interest bearing deposits 148,862 146,180
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Total deposits 168,035 165,151
Accrued interest and other liabilities 2,885 2,591
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Total liabilities 170,920 167,742
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Stockholders' Equity:
Preferred stock, no par value, authorized
500,000 shares, no shares issued or outstanding - -
Common stock, par value $1.00, per share;
authorized 2,000,000 shares; issued and
outstanding 890,692 shares 891 891
Capital surplus 14,956 14,956
Retained earnings 7,273 6,749
Net unrealized depreciation on securities
available for sale, net of taxes of
$9 and $84 (17) (162)
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Total stockholders' equity 23,103 22,434
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TOTAL LIABILITIES AND STOCKHOLDERS'EQUITY $ 194,023 $ 190,176
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3.
JUNIATA VALLEY FINANCIAL CORP. AND SUBSIDIARY
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CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
(Unaudited)
For the Quarter Ended
----------------------
March 31, March 31,
1995 1994
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(In thousands, except
per share amounts)
INTEREST INCOME:
Loans receivable $ 2,758 $ 2,546
Taxable securities 437 448
Tax-exempt securities 237 358
Other 26 54
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Total interest income 3,548 3,406
INTEREST EXPENSE ON DEPOSITS 1,527 1,418
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Net interest income 2,021 1,988
PROVISION FOR LOAN LOSSES 45 45
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Net interest income, after
provision for loan losses 1,976 1,943
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OTHER INCOME:
Trust department 35 30
Customer service fees 57 51
Other 44 30
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Total other income 136 111
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OTHER EXPENSES:
Salaries and wages 532 506
Employee benefits 155 143
Occupancy 73 89
Equipment 74 100
Federal deposit insurance premiums 112 93
Director compensation 110 107
Taxes, other than income 51 49
Other 287 224
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Total other expenses 1,394 1,311
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INCOME BEFORE INCOME TAXES 718 743
FEDERAL INCOME TAXES 194 152
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Net income $ 524 $ 591
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PER SHARE DATA:
Net income $ .59 $ .66
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Weighted average number of
shares outstanding 890,692 890,692
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4.
JUNIATA VALLEY FINANCIAL CORP. AND SUBSIDIARY
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CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
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FOR THE THREE MONTHS ENDED MARCH 31, 1995
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(Unaudited)
Net Unrealized
Appreciation
(Depreciation)
on Securities
Common Capital Retained Available
Stock Surplus Earnings For Sale Total
---------- ----------- ----------- ------------- -----------
(In thousands)
Balance,
December 31,
1994 $ 891 $ 14,956 $ 6,749 (162)$ 22,434
Net income for the
three months
ended March
31, 1995 - - 524 - 524
Net change in
unrealized
depreciation
on securities
available for
sale, net of
taxes - - - 145 145
---------- ----------- ----------- ------------- -----------
Balance March
31, 1995 $ 891 $ 14,956 $ 7,273 $ (17)$ 23,103
========== =========== =========== ============= ===========
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5.
JUNIATA VALLEY FINANCIAL CORP. AND SUBSIDIARY
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CONSOLIDATED STATEMENTS OF CASH FLOWS
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(Unaudited)
Increase (Decrease) in Cash and Cash Equivalents
For the Three Months Ended
-------------------------
March 31, March 31,
1995 1994
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(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 524 $ 591
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 45 45
Provision for depreciation and amortization 43 47
Deferred directors' fees and supplemental
retirement plan expense 79 73
Payment of deferred compensation (31) (32)
Deferred income taxes (21) (22)
(Increase) decrease in accrued interest
receivable and other assets (258) (344)
Increase (decrease) in interest payable
and other liabilities 247 228
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Net cash provided by operating activities 628 586
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CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of available for sale securities (89) (998)
Proceeds from maturities of and principal
repayments on available for sale securities 1,296 308
Purchases of held to maturity securities (1,145) (7,148)
Proceeds from maturities of and principal
repayments on held to maturity securities 939 3,254
Net (increase) decrease in loans receivable (133) 438
Purchases of bank premises and equipment (14) (27)
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Net cash provided by (used in)
investing activities 854 (4,173)
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CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits 2,884 1,638
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Net cash provided by
financing activities 2,884 1,638
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Increase (decrease) in cash and cash
equivalents 4,366 (1,949)
CASH AND CASH EQUIVALENTS:
Beginning 5,985 10,429
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Ending $ 10,351 $ 8,480
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CASH PAYMENTS FOR:
Interest $ 1,483 $ 1,423
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6.
JUNIATA VALLEY FINANCIAL CORP. AND SUBSIDIARY
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NOTES TO THE INTERIM FINANCIAL STATEMENTS
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MARCH 31, 1995
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NOTE A - Basis of Presentation
The financial statements includes the accounts of the Juniata Valley Financial
Corp. and its wholly owned subsidiary, The Juniata Valley Bank. All
significant intercompany accounts and transactions have been eliminated.
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments considered
necessary for fair presentation have been included. Operating results for the
three-month period ended March 31, 1995, are not necessarily indicative of the
results that may be expected for the year ended December 31, 1995. For further
information, refer to the consolidated financial statements and footnotes
thereto included in Juniata Valley Financial Corp. annual report on Form 10-K
for the year ended December 31, 1994.
NOTE B - Significant Accounting Policies
Loans receivable and accounting change:
Loans receivable are stated at the amount of unpaid principal, adjusted for
unearned discounts, less an allowance for loan losses. Unearned discounts are
amortized by the interest method, generally over the remaining contractual term
of the related loans, and reported as an adjustment to interest income.
The allowance for loan losses is increased through a provision for loan losses
charged to income, and decreased by charge-offs, net of recoveries, when
management determines that collectability of all amounts when due is unlikely.
The allowance is based on management's estimate of the amount necessary to
absorb losses on existing loans. Management's estimate is based on a review of
specific loans and, for smaller balance homogeneous loans, on the Corporation's
past loan loss experience, known and inherent risks in the entire loan
portfolio, overall portfolio quality, estimated fair value of any underlying
collateral, and current economic conditions that may affect the borrower's
ability to repay. For those loans that are separately evaluated for
collectability, when management determines that it is probable that principal
and interest on those loans will not be collected according to their
contractual terms, the impairment of those loans is recognized in the allowance
account based on the present value of expected future cash flows discounted at
the loans' effective rate, except for those loans which are collateral
dependent or where foreclosure is probable, on which impairment is based on the
fair value of the collateral. Prior to 1995, the allowance for loan losses
related to these loans was based on undiscounted cash flows or the fair value
of the collateral for collateral dependent loans. Interest received on
impaired loans generally is either applied against principal or reported as
interest income, according to management's judgement as to the collectability
of principal.
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7.
JUNIATA VALLEY FINANCIAL CORP. AND SUBSIDIARY
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NOTES TO THE INTERIM FINANCIAL STATEMENTS
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MARCH 31, 1995
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NOTE B - Significant Accounting Policies
Loans receivable and accounting change - Continued:
On January 1, 1995, the Corporation adopted FASB Statement No. 114, Accounting
by Creditors for Impairment of Loans. Statement No. 114 has been amended by
FASB Statement No. 118, Accounting By Creditors for Impairment of a Loan -
Income Recognition and Disclosures. Statement 114, as amended, requires that
the impairment of loans that have been separately identified for evaluation is
to be measured based on the present value of expected future cash flows, or
alternatively, the observable market price of the loans or the fair value of
the collateral. However, for those loans that are collateral dependent (that
is, if repayment of those loans is expected to be provided solely by the
underlying collateral) and for which management has determined foreclosure is
probable, the measure of impairment of those loans is to be based on the fair
value of the collateral. Statement 114, as amended also requires certain
disclosures about investments in impaired loans and the allowance for loan
losses and interest income recognized on those loans. There was no effect on
the allowance for loan losses and the related provision for loan losses upon
the adoption of Statement 114.
Recently issued FASB statements:
The Financial Accounting Standards Board has issued Statement No. 121,
Accounting for Impairment of Long-Lived Assets and For Long-Lived Assets to be
Disposed Of. For long-lived assets and certain intangibles that are to be held
and used, the Statement requires that an impairment loss be recognized when the
expected future gross cash flows are less that the carrying amount of the
asset. These assets should be carried at their fair value. Long-lived assets
and certain intangible assets that are to be disposed of should be carried at
the lower of the carrying amount of their fair value less cost to dispose.
Statement No. 121 is effective for financial statements for fiscal years
beginning after December 15, 1995, although earlier application is permitted.
The effect of adopting the provisions of this Statement is not expected to have
a material impact on the Corporation's financial position or results of
operations.
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8.
JUNIATA VALLEY FINANCIAL CORP. AND SUBSIDUARY
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NOTES TO THE INTERIM FINANCIAL STATEMENTS
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MARCH 31, 1995
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NOTE C - Allowance for Loan Losses
An analysis of the activity in the allowance for loan losses during the
quarters ended March 31, 1995 and 1994 is as follows (in 000s):
1995 1994
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Balance, January 1 $ 1,523 $ 1,458
Provision for loan losses 45 45
Recoveries 0 11
Loans charged off (8) (24)
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Balance March 31 $ 1,560 $ 1,490
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Information about impaired loans as of and for the quarter ended March 31, 1995
is as follows (in 000s)
1995
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Loans recievalbe for which there is a
related allowance for loan losses $ 0
Loans receivable for which there is no
related allowance for loan losses 649
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Total impaired loans $ 649
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Related allowance for loan losses $ 0
Average balance (based on month-end
balances) $ 649
Interest income recognized on impaired
loans $ 0
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9.
Item 2. Management's Discussion and Analysis
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Financial Condition:
Total assets of Juniata Valley Financial Corp. reached $194,023,000 as of March
31, 1995, an increase of $3,843,000 or 2.02% from December 31, 1994. An
increase in cash and cash equivalents of $4,366,000 from December 31, 1994, to
March 31, 1995 was the primary reason for the growth in assets. The cash
provided by operating activities of $628,000 for the period ended March 31,
1995, was more than adequate to fund net loan demand of $132,000 as well as
cover the increase in bank premise and equipment of $14,000. Repayments and
maturities of securities were in excess of purchases for the first quarter by
$1,001,000. The cash provided by financing activities was $2,884,000 from an
increase in deposits.
There are no material loans classified for regulatory purposes as loss,
doubtful, substandard or special mention which management expects to impact
future operating results, liquidity or capital resources. Additionally,
management is not aware of any information which would give serious doubt as to
the ability of its borrowers to substantially comply with their loan repayment
terms. The Corporation's problem loans (i.e., 90 days past due and
restructured loans) were not material for all periods presented.
Management is not aware of any current recommendations of the regulatory
authorities which, if implemented, would have a material effect on the
Corporation's liquidity, capital resources or operations.
Results of operations:
Interest income increased $142,000 or 4.17% for the first three months of 1995
compared to 1994, while interest expense increased $109,000 or 7.69%. These
increases in interest income and expense for the first three months of 1995
versus 1994 are reflective of the overall higher rates offered and paid in 1995
versus 1994; however repricing of the assets is lagging behind the repricing of
the liabilities. Net interest income increased $33,000 or 1.66% for the first
three months of 1995 compared to 1994. This net increase was due primarily to
an increase in net interest earning assets.
Other income has increased $25,000 or 22.52% from 1994 to 1995. This was due
to an increase in the other category which can all be attributed to an increase
in loan fees. Expenses increased $83,000 or 6.33% from 1994 to 1995. The
increase in salaries can be attributed to the annual merit increases and
promotions of employees. The increase in the other category is due to a
$15,000 consulting fee; $10,000 increase in examination fees by the
Pennsylvania Department of Banking; a $10,000 increase in errors and omissions;
a $6,500 increase in repossession and delinquent loans expense. The decrease
in occupancy expense is a direct result of a decrease in repairs and
maintenance. The decrease in equipment costs can be attributed to expiration
of a lease and less costly replacement lease. Federal income taxes have also
increased $41,000 or 26.80% from 1994 to 1995, due to a reduction in tax free
securities through maturities and repayments. All of these factors combined
have contributed to a decline in net income of $67,000 or 11.34% from 1995
versus 1994.
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10.
Item 2. Management's Discussion and Analysis - Continued
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Liquidity:
The objective of liquidity management is to ensure that sufficient funding is
available at a reasonable cost to meet the ongoing operational cash needs of
the Corporation and to take advantage of income producing opportunities as they
arise. While the desired level of liquidity will vary depending upon a variety
of factors, it is the primary goal of the Corporation to maintain a high level
of liquidity in all economic environments.
Principal sources of asset liquidity are provided by securities maturing in one
year or less, other short-term investments such as Federal Funds sold and cash
and due from banks. Liability liquidity, which is more difficult to measure,
can be met by attracting deposits and maintaining the core deposit base. The
Corporation joined the Federal Home Loan Bank of Pittsburgh in August of 1993
for the purpose of providing short term liquidity when other sources are unable
to fill these needs.
In view of the primary and secondary sources previously mentioned, Management
believes that the Corporation's liquidity is capable of providing the funds
needed to meet loan demand.
Interest rate sensitivity:
Interest rate sensitivity management is the responsibility of the
Asset/Liability Management Committee. This process involves the development
and implementation of strategies to maximize net interest margin, while
minimizing the earnings risk associated with changing interest rates. The
traditional gap analysis identified the maturity and repricing terms of all
assets and liabilities.
As of March 31, 1995, the Corporation's had a six-month negative gap of
$4,553,000. Generally a liability sensitive position indicates that more
liabilities than assets are expected to reprice within the time period and that
falling interest rates could positively affect net interest income while rising
interest rates could negatively affect net interest income. However, the
traditional analysis does not accurately reflect the Bank's interest rate
sensitivity since the rates on core deposits generally do not change as quickly
as market rates. Historically net interest income has, in fact, not been
subject to the degree of sensitivity indicated by the traditional analysis at
The Juniata Valley Bank.
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11.
Item 2. Management's Discussion and Analysis - Continued
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Capital Adequacy:
The Bank's regulatory capital ratios for the periods presented are as
follows:
Risk Weighted Assets Ratio:
Actual Required
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March 31, December 31, March 31, December 31,
1995 1994 1995 1994
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TIER I 17.80% 17.16% 8.0% 8.0%
TIER I & II 19.00% 18.34% 8.0% 8.0%
Total Assets Leveraged Ratio:
TIER I 12.15% 11.47% 3.0% 3.0%
At March 31, 1995, the Corporation exceeds the regulatory requirements
to be considered a "well capitalized" financial institution.
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12.
Part II. Other Information
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
None
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Juniata Valley Financial Corp.
(Registrant)
Date_______________________________ By_______________________________
A. Jerome Cook, President
Date_______________________________ By_______________________________
Linda L. Engle, Treasurer
