UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1995 Commission File Number 0-13232
JUNIATA VALLEY FINANCIAL CORP.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2235254
- ------------------------------- ---------------------
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification Number)
Bridge & Main Streets, PO Box 66, Mifflintown, PA 17059-0066
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(Address or principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (717)436-8211
-------------
SECURITIES REGISTERED PURSUANT TO SECTION 12 (b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12 (g) OF THE ACT:
Common Stock, Par Value $1.00 Per Share
---------------------------------------
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X 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 the Form 10-K or any amendment to this
Form 10-K. (X)
The Aggregate market value of the voting stock held by non-affiliates of the
Registrant as of January 31, 1996.
Common Stock, $1.00 Par Value - $38,955,035
-------------------------------------------
Indicate the number of shares outstanding of each issuer's classes of common
stock, as of January 31, 1996
Common Stock, $1.00 Par Value - 1,113,001
-----------------------------------------
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Annual Report to Shareholders for the year ended December 31,
1995 are incorporated by reference into Parts I, II and III.
Portions of the Proxy Statement for the Annual Meeting of Shareholders to be
held April 16, 1996 are incorporated by reference into Part III.
<PAGE>
PART I
Item 1. Business
Incorporated by reference are the data appearing on
pages 6 through 12 of the 1995 Annual Report.
Item 2. Properties
The physical properties of the Corporation are all owned
or leased by the Bank.
The Bank owns the buildings located at: Bridge and Main
Streets, Mifflintown, Pennsylvania (its corporate headquarters);
301 Market Street, Port Royal, Pennsylvania; corner of Main and
School Streets, McAlisterville, Pennsylvania; Four North Market
Street, Millerstown, Pennsylvania; Main Street, Blairs Mills,
Pennsylvania; East Market Street, Lewistown, Pennsylvania; Route
322, Reedsville, Pennsylvania. In addition thereto, the Bank
leases an office in the Shopping Plaza located on Legislative
Route 31, Mifflintown, Pennsylvania, which lease with extensions
expires in 2007. All of the buildings used by the Bank are
freestanding and are used exclusively for banking purposes.
Item 3. Legal Proceedings
The nature of the Bank's business, at times, generates
litigation involving matters arising in the ordinary course of
business. However, in the opinion of management of the Bank,
there are no proceedings pending to which the Bank is a party or
to which its property is subject, which, if determined adversely
to the Bank, would be material in relation to the Bank's
financial condition, nor are there any proceedings pending other
than ordinary routine litigation incident to the business of the
Bank. In addition, no material proceedings are pending or are
known to be threatened or contemplated against the Bank by
government authorities or others.
Item 4. Submission of Matters to a Vote of Security Holders
None.
<PAGE>
PART II
Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters
The Corporation's stock is not traded on a national
securities exchange and is only occasionally and sporadically
traded through local and regional brokerage houses or through the
facilities of the Bank. Sales of shares of which the management
of the Corporation has knowledge occurring during 1995 have
ranged from a low of $28.80 to a high of $35.00 per share.
In 1994 the market value ranged from a low of $26.24 to a
high of $28.80. Cash dividends in 1995 and 1994 are as follows:
Payable
Date 1995 1994
------- ---- ----
June 1 $.34 $.33
December 1 .36 .34
---- ----
Total $.70 $.67
---- ----
---- ----
Item 6. Selected Financial Data
Incorporated by reference are the data appearing on page
13 of the 1995 Annual Report.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Incorporated by reference are the data appearing on
pages 14 through 26 of the 1995 Annual Report.
Item 8. Financial Statements and Supplementary Data
Incorporated by reference are the financial statements
and notes on pages 27 through 43 of the 1995 Annual Report.
Item 9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure
None.
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
Incorporated by reference is the information appearing
under the captions "Election of Directors of JVF" on pages 3 through
5 and "Remuneration of Executive Officers" on page 12 in the Proxy
Statement to be filed.
Item 11. Executive Compensation
Incorporated by reference in the proxy statement to be
filed on page 12, under the caption "Remuneration of Executive
Officers".
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Incorporated by reference is the following information
contained in the Proxy Statement to be filed under the captions
"Election of Directors of JVF" on pages 3 through 5 and
"Management of JVF and the Bank" on page 9.
Item 13. Certain Relationships and Related Transactions
Incorporated by reference is the information pertaining
to transactions with directors and officers of the Bank within the
footnote "Transactions with Executive Officers and Directors"
on page 40 of the 1995 Annual Report.
PART IV
Item 14. Exhibits, Financial Statements Schedules, and Reports on
Form 8-K
(a) 1. Financial Statements
The Consolidated Financial Statements of
Juniata Valley Financial Corp., as reported in
the 1995 Annual Report to Shareholders, are
incorporated in this report by reference.
2. All schedules are omitted because they are not
applicable, the data is not significant, or the
required information is shown in the financial
statements or the notes thereto.
(b) Reports on Form 8-K
None.
<PAGE>
(c) Exhibits
(3) Articles of Incorporation and By-Laws -
Incorporated by reference is the information
appearing in Exhibit "A" of the proxy
statement dated March 14, 1996
(13) Annual Report To Security Holders
(21) Subsidiaries of the Registrant - As of the date
of this report Juniata Valley Bank is the only
subsidiary of the Registrant.
(23) i. Consent of Beard & Company, Inc.,
Independent Auditors
ii. Consent of Stockton Bates & Company,
Independent Auditors
(27) Financial data schedule
(99) Report of Independent Auditors, Stockton Bates &
Company, as to the Corporation's Consolidated
Financial Statements for year ending December
31, 1993.
<PAGE>
Signatures
Pursuant to the requirements of Section 13 or 15 (d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
JUNIATA VALLEY FINANCIAL CORP. (REGISTRANT)
DATE: MARCH 14, 1996
BY _____________________
A. JEROME COOK
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.
___________________ ___________________
Harry B. Fairman, Jr. Darwin C. Pomeroy
Chairman Vice Chairman
Date: March 14, 1996 Date: March 14, 1996
___________________ ___________________
Ronald H. Witherite A. Jerome Cook
Vice Chairman, Secretary President
Date: March 14, 1996 Date: March 14, 1996
___________________ ___________________
Edward R. Rhodes John E. Groninger
Director Director
Date: March 14, 1996 Date: March 14, 1996
___________________ ___________________
Karl E. Guss Don E. Haubert
Director Director
Date: March 14, 1996 Date: March 14, 1996
___________________ ___________________
Dale G. Nace John A. Renninger
Director Director
Date: March 14, 1996 Date: March 14, 1996
<PAGE>
Signatures (Continued)
___________________
Harold B. Shearer
Director
Date: March 14, 1996
___________________
Linda L. Engle
Chief Financial Officer
Chief Accounting Officer
Date: March 14, 1996
_
<PAGE>
JUNIATA VALLEY FINANCIAL CORP.
Bridge and Main Streets
Post Office Box 66
Mifflintown, PA 17O59
Telephone (717) 436-8211
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 16, 1996
TO OUR SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Shareholders of
Juniata Valley Financial Corp. ("JVF") will be held at 10:30 a.m. on April 16,
1996, at the Lewistown Branch Office of The Juniata Valley Bank (the "Bank"),
for the purpose of considering and voting upon the following matters:
1. Election of Directors. The election of three Class C Directors listed
---------------------
in Proxy Statement dated March 14, 1996, accompanying this Notice. These
Directors will serve until the 1999 Annual Meeting.
2. Amendment to Amended and Restated Articles of Incorporation. To act
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upon a proposal to increase the number of authorized shares of Common stock, par
value $1.00 per share, from 2,000,000 to 5,000,000 shares.
3. Juniata Valley Financial Corp. Employee Stock Purchase Plan. To act
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upon a proposal to adopt the Juniata Valley Financial Corp. Employee Stock
Purchase Plan, which will permit employees of the Bank to purchase shares of the
Common stock, par value $1.00 per share, of JVF.
4. Other Business. Such other business as may be properly brought before
--------------
the Annual Meeting of Shareholders or any adjournment or adjournments thereof.
Information regarding the matters to be acted upon at the meeting is
contained in the Proxy Statement accompanying this Notice.
IN ACCORDANCE with the statutes in such case made and PROVIDED only those
holders of record of Common stock of JVF at the close of business on March 13,
1996 (the "RECORD DATE"), are entitled to notice of and to vote at the Annual
Meeting of Shareholders and any adjournment or adjournments thereof. The Stock
Transfer Books of JVF will not be closed.
BY ORDER OF THE BOARD OF DIRECTORS,
RONALD H. WITHERITE
Secretary
Mifflintown, Pennsylvania
March 14, 1996
THE MANAGEMENT OF JVF REQUESTS THAT YOU SIGN AND DATE THE ENCLOSED PROXY
AND RETURN IT IN THE PREPAID ENVELOPE PROVIDED. THIS PROXY WILL NOT BE USED IF
YOU ARE PRESENT AND DESIRE TO VOTE IN PERSON.
<PAGE>
JUNIATA VALLEY FINANCIAL CORP.
PROXY STATEMENT
MARCH 14, 1996
GENERAL INFORMATION
This Proxy Statement (the "Proxy Statement") is being furnished in
connection with the solicitation by Management of Juniata Valley Financial Corp.
("JVF"), a corporation organized under the laws of the Commonwealth of
Pennsylvania, of proxies to be voted at the Annual Meeting of Shareholders of
JVF to be held on April 16, 1996 at 10:30 a.m. prevailing time, and at any and
all adjournments or postponements thereof. This Proxy Statement and the enclosed
Form of Proxy (the "Proxy") are first being sent to shareholders of JVF on or
about March 14, 1996.
The costs of preparing, printing and mailing the Proxy and all materials
used in the solicitation thereof will be borne by JVF. In addition to use of the
mails, proxies may be solicited by officers, directors and employees of JVF
personally, by telephone or by telegraph.
JVF's executive offices are located at Bridge and Main Streets,
Mifflintown, Pennsylvania 17059, and its telephone number is (717) 436-8211.
JVF's mailing address is P.O. Box 66, Mifflintown, Pennsylvania 17059.
Date by which Security Holder Proposals must be Received to be Presented at Next
Annual Meeting of Shareholders
Proposals of security holders of JVF intended to be presented at the next
annual meeting of shareholders of JVF must be received by JVF for inclusion in
JVF's Proxy Statement and Form of Proxy relating to that meeting by November 15,
1996.
If the date of the next Annual Meeting of Shareholders of JVF is advanced
or delayed by more than 30 days from April 15, 1997, security holders will be
timely informed of the change of the Annual Meeting of Shareholders and the date
by which proposals of security holders must be received.
PURPOSES OF THE MEETING
The Annual Meeting of Shareholders will be held for the purpose of (i)
electing three (3) Class C Directors to serve until the Annual Meeting of 1999;
(ii) to act upon a proposal to increase the number of authorized shares of JVF
common stock, par value $1.00 per share, from 2,000,000 to 5,000,000 shares;
(iii) to act upon a proposal to adopt the Juniata Valley Financial Corp.
Employee Stock Purchase Plan, which will permit employees of the Bank to
purchase shares of the common stock, par value $1.00 per share, of JVF; and (iv)
transacting such other business as may properly be brought before the meeting or
any adjournment thereof.
VOTING
Voting; Revocation of Proxies
Each Proxy may be revoked at any time before its exercise by, among other
methods, giving written notice to the Secretary of JVF. A subsequently dated
Proxy will, if presented to the Secretary
<PAGE>
of JVF, revoke a prior dated Proxy. Any shareholder of JVF may attend the
meeting and vote in person whether or not he has previously given a Proxy.
The enclosed Proxy confers discretionary authority to vote with respect to
any and all of the following matters that may come before the Annual Meeting of
Shareholders: (i) matters which the Board of Directors does not know, a
reasonable time before the proxy solicitation, are to be presented at the
meeting; (ii) approval of the minutes of a prior meeting of the shareholders, if
such approval does not amount to ratification of the action taken at that
meeting; and (iii) matters incident to the conduct of the meeting. In connection
with such matters, the persons named in the enclosed Proxy will vote in
accordance with their best judgment.
The Board of Directors of JVF is not presently aware of any matters (other
than procedural matters) which will be brought before the Annual Meeting of
Shareholders which are not referred to in the Notice of Annual Meeting of
Shareholders. If other business is properly brought before the Annual Meeting of
Shareholders, the persons named in the Proxies will act or vote in accordance
with their judgment.
Vote Required; Shares Entitled to Vote
The presence in person or by proxy of the holders of a majority of the
outstanding shares of JVF's common stock will constitute a quorum for the
transaction of business at the Annual Meeting of Shareholders. At the close of
business on the Record Date, there were 1,113,001 shares of JVF's common stock
outstanding. Each share of JVF's common stock outstanding on the Record Date is
entitled to one vote on all matters, including the election of directors, to
come before the Annual Meeting.
The Trust Department of The Juniata Valley Bank (the "Bank") as sole
trustee, holds 49,698 shares of stock which may not be voted in the election of
directors of JVF.
Management of JVF in the aggregate beneficially owned 4.74% of the common
stock of JVF and the Bank's Trust Department as corporate fiduciary owned 4.50%
of the outstanding common stock of JVF as of the Record Date. To the knowledge
of management of JVF, no shareholder beneficially owned 5% or more of the
outstanding common stock of JVF on the Record Date.
All matters which are expected to come before the shareholders, including
election of directors, will require the affirmative vote of the holders of a
majority of JVF's outstanding common stock represented at the meeting, if a
quorum is present.
At the Annual Meeting, the Judges of Election will manually tabulate all
votes which are cast in person or by proxy. Those shareholders wishing to vote
in person will be provided ballots with which to vote.
Voting is an important right of shareholders. If a shareholder abstains or
otherwise fails to cast a vote on any matter brought before the shareholders,
the Pennsylvania Business Corporation Law provides that notwithstanding any
intention to the contrary, the abstention or failure is not a vote and will not
be counted. This is true of broker nonvotes, as well as nonvotes by other
shareholders.
-2-
<PAGE>
ELECTION OF DIRECTORS OF JVF
The Bylaws of JVF provide that the Board of Directors may, from time to
time, fix the number of directors and their respective classifications. The
number of directors that shall constitute the whole Board of Directors shall be
not less than five nor more than 25. The Bylaws also provide that the Board of
Directors shall be classified into three classes as nearly equal in number as
possible, each class to be elected for a term of three years. Each class shall
be elected in a separate election. At each subsequent annual meeting of
Shareholders, successors to the class of directors whose term shall then expire
shall be elected to hold office for a term of three years, so that the term of
office of one class of directors shall expire in each year.
Nomination for elections to the Board of Directors may be made by the Board
of Directors or by any holder of the common stock of JVF entitled to vote at the
election of directors. Nominations, other than those made by or on behalf of the
existing management of JVF, shall be made in writing and shall be delivered or
mailed to the secretary of JVF not less than 45 days prior to the date of any
meeting of shareholders called for the election of directors. Such notification
shall contain the following information to the extent known by the notifying
shareholder: (a) the name and address of each proposed nominee; (b) the age of
each proposed nominee; (c) the principal occupation of each proposed nominee;
(d) the number of shares of JVF owned by each proposed nominee; (e) total number
of shares that, to the knowledge of the notifying shareholder, will be voted for
each proposed nominee; (f) the name and residence address of the notifying
shareholder; and (g) the number of shares of JVF owned by the notifying
shareholder. Any nomination for director not made in accordance with the above
procedure shall be disregarded by the Chairman of the meeting, and votes cast
for each such nominee shall be disregarded by the Judge of Election.
It is the intention of the persons named in the Proxy to vote for the
election of the three individuals listed as Class C Directors to the class to
which said directors have been designated, to serve until the 1999 Annual
Meeting of Shareholders.
In absence of instructions to the contrary, proxies will be voted in favor
of the election of the management's nominees. In the event any nominee should
become unavailable, it is intended that the proxies will be voted for such
substitute nominee as may be nominated by management. Management has no present
knowledge that any of the nominees will be unavailable to serve.
In February, 1996, pursuant to the Bylaws of JVF, the number of Directors
was decreased from 11 to 10. This decrease was in response to the resignation of
Darwin C. Pomeroy, whose term will expire at the Annual Meeting.
Each nominee for the position of Class C Director is currently a director
of JVF and its sole wholly-owned subsidiary, The Juniata Valley Bank. All Class
C Directors were elected directors of JVF at the 1993 Annual Meeting of
Shareholders of JVF.
The following table sets forth the name and age of each nominee to each
class of the Board of Directors of JVF, as well as the nominee's business
experience, including principal occupation for the past five years, the period
during which he has served as a director of JVF, the Bank, and the number and
percentage of outstanding shares of common stock of JVF beneficially owned by
said nominee as of the Record Date.
-3-
<PAGE>
<TABLE>
<CAPTION>
Business Experience
Including Principal Amount and Percentage
Occupation Nature of of
for the Director Beneficial Outstanding
Name and Age Past Five Years Since/1/ Ownership/2/ Stock Owned
------------ --------------- ----- --------- -----------
<S> <C> <C> <C> <C>
CLASS C Directors to be elected for a three-year term ending in 1999.
Dale G. Nace Owner, Glenn Nace 1992 805 .07%
Age 51 Plumbing & Heating;
GlenDale Storage,
Millerstown, PA
Edward R. Rhodes Senior Partner 1992 520 .05%
Age 67 E. R. Rhodes & Son
Lewistown, PA
Harold B. Shearer Self-Employed Farmer 1988 3,131 .28%
Age 60 East Waterford, PA
CLASS B Directors to continue in office to 1998.
Harry B. Fairman, Jr. President of Hilltop 1983 3,725 .33%
Age 68 Oil, Inc.
Mifflintown, PA
Don E. Haubert CEO/Chairman of 1975 8,997 .81%
Age 56 the Board, S & A
Custom Built Homes, Inc.
Contractor, Mifflintown, PA
John A. Renninger President of A.D. 1979 7,398 .66%
Age 59 Renninger Lumber Co.
Richfield, PA
Ronald H. Witherite Owner, Ron's IGA 1992 768 .07%
Age 58 Fruit Market, Inc.
Reedsville, PA
CLASS A Directors to continue in office to 1997.
A. Jerome Cook President and CEO 1976 3,651 .33%
Age 55 of The Juniata Valley
Bank and Juniata Valley
Financial Corp.
</TABLE>
-4-
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
John E. Groninger President of John E. 1971 12,653 1.13%
Age 70 Groninger, Inc., Con-
tractor, Mexico, PA,
Director of Consumers
Financial Corporation,
Camp Hill, PA, a life
insurance company
Karl E. Guss Funeral Director 1974 11,716 1.05%
Age 68 with Guss Funeral,
Home, Mifflintown, PA
</TABLE>
/1/ Includes period prior to the formation of JVF (1983) during which named
person served as director of the Bank. Each director of JVF also serves as
a director of the Bank.
/2/ The securities "beneficially owned" by an individual are determined in
accordance with the definition of "beneficial ownership" set forth in the
regulations of the Securities and Exchange Commission. Accordingly, they
may include securities owned by or for, among others, the wife and/or minor
children of the individual and any other relative who has the same home as
such individual, as well as other securities as to which the individual has
or shares voting or investment power or has the right to acquire under
outstanding stock options within 60 days after March 14, 1996. Beneficial
ownership may be disclaimed as to certain of the securities.
The following are all shares owned beneficially by all directors and
principal officers as a group:
<TABLE>
<CAPTION>
Amount and Nature of
Beneficial Ownership
--------------------
Title of Class Direct Indirect Percentage
-------------- ------ -------- ----------
<S> <C> <C> <C>
Common 46,715 6,649 4.79%
</TABLE>
PROPOSED AMENDMENT TO INCREASE NUMBER OF SHARES OF AUTHORIZED
COMMON STOCK
JVF is currently authorized to issue 2,500,000 shares of stock, which is
divided into two classes. Authorized stock consists of 2,000,000 shares of
common stock with a par value of $1.00 per share, and 500,000 of preferred stock
without a par value. A copy of JVF's currently effective Amended and Restated
Articles of Incorporation are attached to this Proxy Statement as Exhibit "A".
The Board of Directors of JVF has authority to fix the voting rights,
designations, preferences, qualifications, privileges and other features of
preferred stock. JVF has not issued any preferred stock, and there is no plan at
the present time to issue preferred stock.
As noted above, at the close of business on March 14, 1996, there were
issued and outstanding 1,113,001 shares of common stock.
-5-
<PAGE>
The additional shares of authorized JVF common stock for which shareholder
approval is sought would be part of the existing class of common stock. When and
if issued, this common stock would have the same rights and privileges as shares
of common stock presently issued and outstanding. The Board of Directors
currently has no plan, arrangement or understanding regarding the issuance of
additional shares of common stock, except in connection with dividend
reinvestments, employee stock purchase plans and stock dividends to existing
shareholders.
The Board of Directors believes that it is desirable to have additional
authorized shares of JVF common stock for use in raising additional capital, for
use in connection with stock dividends, stock splits, employee benefit plans,
and for other general corporate purposes. Having additional authorized common
stock available for issuance in the future would give JVF greater flexibility
and would allow additional shares to be issued without the expense and delay of
a special shareholder's meeting.
On January 16, 1996, the Board of Directors unanimously adopted a
resolution approving the increase in the number of shares of common stock, and
directed that the matter be presented at the Annual Meeting to the shareholders
of JVF for their approval.
Under certain circumstances, the issuance of additional shares of JVF
common stock could be used to create voting impediments or to frustrate persons
seeking to effect a takeover or otherwise gain control of JVF. Additional shares
of JVF common stock could be privately sold to purchasers who might side with
the Board of Directors in opposing a hostile takeover attempt. The issuance of
additional shares of JVF common stock could be used to dilute the stock
ownership of a takeover bidder. To the extent that potential takeovers are
discouraged, stockholders may not have opportunity to dispose of all or part of
their stock at a price that may be higher than that prevailing in the market.
However, it is also possible that making additional shares of authorized but
unissued common stock available to the Board of Directors to be issued for the
purposes described above may have the effect of increasing the price offered to
shareholders should a tender offer or exchange offer take place.
Because JVFC shareholders would not be entitled to preemptive rights to
purchase additional shares, their shareholder interests in JVFC are potentially
subject to dilution in the event JVFC issues additional shares of JVFC common
stock or preferred stock to other parties. Such dilution would occur if the
JVFC Board of Directors determines to offer additional shares of JVFC common
stock for sale to the general public in a non-preemptive rights offering.
If the shareholders approve the proposed Amendment, Article 5 of the
Amended and Restated Articles of Incorporation of JVF will provide as follows:
ARTICLE 5: The aggregate number of shares which the Corporation shall
have authority to issue is 5,500,000 shares divided into two (2) classes
consisting of 5,000,000 shares of common stock with a par value of $1.00
per share, and 500,000 shares of Preferred Stock without a par value. The
Board of Directors shall have the full authority permitted by law to fix by
resolution full, limited, multiple, or fractional, or no voting rights, and
such designations and preferences, priorities, qualifications, privileges,
limitations, restrictions, options, conversion rights, dividend features,
retirement features, liquidation features, redemption features, or other
special or relative rights that may be desired for the Preferred Stock and
any series thereof, and to issue such Preferred Stock from time to time in
one or more series. The designations, preferences, priorities,
qualifications, privileges, limitations, restrictions, options, conversion
rights, dividend
-6-
<PAGE>
features, retirement features, liquidation features, redemption features,
and any other special or relative rights of any series of Preferred Stock
may differ from those of any and all series at anytime outstanding.
The Board of Directors unanimously recommends that shareholders approve the
proposed Amendment to Article 5 of JVF's Articles of Incorporation.
ADOPTION OF THE JUNIATA VALLEY FINANCIAL CORP. EMPLOYEE STOCK
PURCHASE PLAN
General
JVF's Board of Directors has unanimously approved the Juniata Valley
Financial Corp. Employee Stock Purchase Plan (the "Plan"), subject to approval
by JVF shareholders. The Board believes that the ability to give employees the
opportunity to purchase stock of JVF is an important factor in attracting and
retaining exceptional individuals as employees and in rewarding existing
employees. The granting of supplemental compensation provides a valuable
incentive to employees in the performance of their duties. The important
features of the Plan are summarized below, but the summary is qualified in its
entirety by express reference to the Plan itself.
The purpose of the Plan is to provide a method for employees of the Bank to
acquire a proprietary interest in JVF. The Plan is intended to promote the best
interests of JVF by encouraging its employees to acquire stock ownership in JVF.
The affirmative vote of holders of a majority of the issued and outstanding
common stock of JVF entitled to vote at the meeting is required to approve the
Plan. The full text of the Plan is set forth in Exhibit "B" to this Proxy
Statement. All proxies will be voted "FOR" approval of the Plan except for that
of any shareholder who specifies the contrary on his or her proxy card.
Administration of the Plan
The Plan is administered by a Committee to be appointed by the Board of
Directors of JVF. No member of the Committee may be eligible for awards under
the Plan. The Committee will consist of no fewer than three (3) members of the
Board of Directors. The Committee shall have plenary authority in its discretion
to interpret and construe any and all provisions of the Plan, to adopt rules and
regulations for administering the Plan, and to make all of the determinations
necessary or advisable for administering the Plan.
The maximum number of shares which employees may purchase under this Plan
is 100,000. As of March 1, 1996, the closing sale price quotation for shares of
JVF common stock in the over-the-counter market was $35.00 per share.
Eligibility
An employee of the Bank will be eligible to participate in the Plan if: (i)
he or she has completed ninety (90) days employment; and (ii) he or she is
employed by the Bank on the date the employee's participation in the Plan
becomes effective. Participation will be limited to the extent necessary to
prevent an employee from owning stock, and/or hold outstanding options to
purchase stock, possessing
-7-
<PAGE>
five (5%) percent or more of the total combined voting power or value of all
classes of stock of JVF. In addition, participation is prohibited or limited
if participation permits the participant's right to purchase stock under all
employee stock purchase plans of JVF to accrue at a rate which exceeds
Twenty-five Thousand ($25,000.00) Dollars for each calendar year (determined
by the fair market value of the stock at the time the option is granted).
Options
On the Commencement Date of each offering (July 1 of each year), a
participant will be granted an option to purchase as many full shares of stock
as he or she will be able to purchase with the aggregate sum of the payroll
deductions deposited into his or her account during that offering. The option
price of stock purchased during each annual offering for a participant shall be
a percentage between eighty-five (85%) percent and one hundred (100%) percent of
the fair market value of the stock on the Commencement Date or the nearest prior
business day to the Commencement Date. The percentage used shall be in the sole
and exclusive discretion of the Board of Directors.
During a participant's lifetime, options held by the participant shall be
exercised only by that participant.
If, prior to the expiration of an option exercise term, the participant
ceases to be employed by the Bank (other than by reason of death or disability)
the participant's participation in the Plan will automatically terminate, and
the participant will not be entitled to purchase any shares at the end of the
offering. Any payroll deductions credited to the participant's account will be
returned to the participant. Should the termination of an employee occur because
of the employee's death, the participant's beneficiary may elect either to
withdraw all of the payroll deductions credited to the participant's account
under the Plan or to exercise the participant's option for the purchase of stock
on the next Termination Date (May 15 of each year).
Tax Consequences - Generally
The Plan is intended to be an "Employee Stock Purchase Plan" as defined in
Section 423 of the Code. There are several tax advantages of an employee stock
purchase plan. First, when an option is granted to an employee, he or she will
not realize taxable income. Second, the employee will not recognize taxable
income on the exercise of the option.
In order to be eligible for this favorable tax treatment, an employee must
be employed by JVB during the offering period. Additionally, the employee may
not dispose of his or her shares within one (1) year after the date of the
transfer of the stock to him or her or within two (2) years after the date the
option is offered. Under these circumstances, there will be no tax effect upon
JVB (it will not be entitled to tax deduction by reason of the employee's
subscription or purchase, nor will it recognize gain or loss upon the transfer
of the shares to the employee).
There are tax consequences when an employee disposes of the shares. The tax
treatment of the subsequent disposition of (S) 423 Plan stock depends on whether
the stock was disposed of within the statutory holding period for (S) 423 Plan
stock. The statutory holding period for (S) 423 Plan stock, as discussed above,
is the later of two years after the grant of an option or one year from the date
of transfer of the stock pursuant to the option.
-8-
<PAGE>
If the employee disposes of stock purchased pursuant to the Plan before the
expiration of the statutory holding period, the employee must recognize as
ordinary income the difference between the stock's fair market value and the
option's exercise price. If the sale or other taxable disposition of stock
occurs after the statutory holding period has expired, the employee's capital
gain on the sale is an amount equal to the excess of the proceeds of the sale
over the employee's basis in the stock.
There is a difference in treatment of an option with an exercise price of
more than 85% and less than 100% of the fair market value of the stock. In this
case, the employee must include in taxable income at time of sale or other
taxable disposition of the stock, or upon the employee's death while still
holding the stock, the lesser of 1) the amount, if any, by which the fair market
value of the stock when the option was granted exceeds the option price; or 2)
the amount, if any, by which the stock's fair market value at the time of the
disposition or death exceeds the exercise price paid.
JVB may not deduct the difference between the fair market value of the
option stock and the option exercise price if the option is one issued pursuant
to a (S) 423 Plan. However, if there is a disqualifying disposition (i.e.,
disposing of the stock in violation of the statutory holding period), the
employer will be entitled to the compensation deduction to which it would be
entitled if the option had been a non-qualified option.
Amendment of the Plan
The Board of Directors shall have complete power and authority to terminate
or amend the Plan. No termination, modification, or amendment of the Plan may
adversely affect the rights under outstanding options.
MANAGEMENT OF JVF AND THE BANK
Board of Directors
The Board of Directors of JVF and the Bank are identical. The Board of
Directors of JVF has not appointed any committees as of this date. JVF has
utilized the Bank's committees.
Executive Officers
The following table sets forth the executive officers of JVF, their ages,
their positions with JVF and the beneficial ownership (as determined in
accordance with the rules and regulations of the Securities and Exchange
Commission) of common stock of JVF by each of such persons. Share information is
stated as of March 14, 1996.
<TABLE>
<CAPTION>
Amount and Percentage
Nature of of
Beneficial Outstanding
Name and Age Title Ownership Stock
- ------------ ----- --------- -----
<S> <C> <C> <C>
A. Jerome Cook Chairman and CEO 3,651 .33%
Age 55 of JVF and the Bank
</TABLE>
- ----------
-9-
<PAGE>
Board Personnel Committee Report on Executive Compensation
JVF does not have a Compensation Committee. The Board of Directors has
delegated to the Personnel Committee initial review and recommendations for
executive compensation. Recommendations of the Personnel Committee are
reviewed and ratified by the full Board of Directors.
Executive compensation is designed to provide a level of salary competitive
with that offered by other similar regional bank holding companies and banks. To
that end, the Personnel Committee reviews the results of several salary and
compensation surveys. At the present time, there is no relationship between
executive compensation and JVF's corporate performance. Rather, the process of
determining executive compensation is primarily subjective and not based on
quantifiable data.
Executive officers of JVF participate in the same two bonus programs in
which all employees of JVF participate. These programs pay modest bonuses; one
is paid at year end and the other after JVF's return on assets is calculated.
Mr. Cook, as President and Chief Executive Officer of JVF, receives a
salary determined by the Personnel Committee in the manner described above. In
addition, he participates in the same bonus programs which are applicable to all
employees. Mr. Cook's total compensation is disclosed in the Summary
Compensation Table set forth below on Page 12.
JVF offers no special incentive programs for its executive officers.
Members of the Personnel Committee are Harry Fairman, John Renninger,
Edward Rhodes, and Ronald Witherite. None of these committee members have been
officers or employees of JVF or the Bank at any time, and none had any
relationship with JVF or the Bank requiring specific disclosure under applicable
Securities and Exchange Commission regulations.
This report is given over the signatures of the Personnel Committee,
consisting of Harry Fairman, John Renninger, Edward Rhodes, and Ronald
Witherite.
Stock Performance Graph
The following graph sets forth the yearly percentage change in JVF's
cumulative total shareholder return on its common stock from December 31, 1990
to December 31, 1995. This percentage change is measured by dividing (i) the sum
of (A) the cumulative amount of dividends for the period measured, assuming
dividend reinvestment and (B) the difference between JVF's share price at
December 31, 1995 and December 31, 1990 by (ii) the share price of December 31,
1990. This result, on the following performance graph, is compared with the
NASDAQ Market Index and the MG Industry Group 042-Middle Atlantic Banks:
- 10 -
<PAGE>
[GRAPH APPEARS HERE]
ASSUMES $100 INVESTED ON JAN. 1, 1991
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DEC. 31, 1995
COMPARISON OF CUMULATIVE TOTAL RETURN
OF COMPANY, INDUSTRY INDEX AND BROAD MARKET
<TABLE>
<CAPTION>
- ------------------------- FISCAL YEAR ENDING -----------------------------
COMPANY 1990 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C>
JUNIATA VALLEY FINANCIAL CP 100 102.75 123.33 161.50 190.94 239.48
INDUSTRY INDEX 100 133.08 166.65 207.03 196.56 298.47
BROAD MARKET 100 128.38 129.64 155.50 163.26 211.77
</TABLE>
THE INDUSTRY INDEX CHOSEN WAS:
MG INDUSTRY GROUP 042 - Middle Atlantic Banks
THE BROAD MARKET INDEX CHOSEN WAS:
NASDAQ MARKET INDEX
THE CURRENT COMPOSITION OF THE INDUSTRY INDEX IS AS FOLLOWS:
ALLEGIANCE BANC CP
AMBANC HLDG CO INC
ANNAPOLIS BANCSHARES INC
ARGENTARIA CP BANC
ARROW BANK CP
AUBURN NATL BANC INC
BANCO BILBOA VIZ S A
BANCO DE SANTANDER
BANK OF NEW YORK CO
BANKERS TRUST NEW YORK
BARCLAYS PLC ADR
BCB FIN SVCS
BFS BANKORP INC NY
BMJ FIN CP
BROAD NATL BANCORP
BRYN MAWR BANK CP
BSB BANCORP INC
BT FIN CP
CARNEGIE BANCORP
CARROLLTON BANCORP
CHASE MANHATTAN CP
CHEMICAL BANKING CP
CITI-BANCSHARES INC
CITICORP
CITIZENS BANCORP
CNB FIN CP NY
COLLECTIVE BANCORP INC
COLUMBIA BANCORP
COMMERCE BANCORP INC NJ
COMMERCE BK HARRISBURG
COMMERCIAL BANK OF NY
COMMUNITY BANK SYSTS INC
COMMUNITY BANKS MLRBG PA
COMMUNITY FIN HLDG
CONESTOGA BANCORP INC
CORESTATES FIN CP
DAUPHIN DEPOSIT CP
ELMIRA SVGS BK FSB NY
ESPIRITO SANTO FIN HLDG
EVERGREEN BANCORP INC
EXECUFIRST BANCORP INC
F&M BANCORP
FCNB CP
FINANCIAL BANCORP INC NY
FINANCIAL TRUST CP
FIRST BANK OF PHILA
FIRST BELL BANCORP INC
FIRST COMMONWEALTH FIN
FIRST EMPIRE STATE CP
FIRST FIDELITY BANCORP
FIRST KEYSTONE FIN
FIRST LEESPORT BANCORP
FIRST OF LONG ISLAND CP
FIRST SAV BK NJ
FIRST SHENANGO BANCORP
FIRST UNITED CP
FIRST WESTERN BANCORP
FLEMINGTON NATL BK & TR
FLUSHING FINANCIAL CP
FNB CORP INC (PA)
FNB ROCHESTER CP
FRANKLIN BANCORP
FULTON FIN CP
GARDEN STATE BANCSHARES
GATEWAY BANCORP INC
GROWTH FIN CP
HARBOR FED BANCORP
HARLEYSYILLE NATL CP
HERITAGE BANCORP INC
HOME FED CP MARYLAND
HUBCO INC
HUDSON CHARTERED BANCORP
IBS FIN CP
INDEPENDENCE BANCORP
INDEPENDENCE FED SAV BK
INTEGRA FIN CP
INTERCHANGE FIN SVGS
JEFFBANKS INC
KEYSTONE FIN INC
KEYSTONE HERITAGE GR
LAKE ARIEL BANCORP INC
LAKEVIEW FIN CP
LETCHWORTH IND BANCSHARE
MADISON BANCSHRS GR
MASON-DIXON BANCSHRS
MBNA CP
MELLON BANK CP
MERCANTILE BANKSHRS CP
MERCHANTS N Y BANCORP
MERIDIAN BANCORP INC
MIDLANTIC CP
MLF BANCORP INC
MORGAN, J.P. & CO INC
MOXHAM BANK CP
NATIONAL PENN BANCSHRS
NATIONAL WESTMINSTER BK
NBT BANCORP INC
NEWBERRY BANCORP
NORTH FORK BANCORP NY
NORTH SIDE SAV BANK NY
NSD BANCORP INC
OMEGA FIN CP
ONBANCORP INC
PEEKSKILL FIN CP
PENNFED FIN SVCS
PNC BANK CP
POUGHKEEPSIE SAV BANK
PRESTIGE FIN CP
PRIME BANCORP INC
PROGRESS FIN CP
PROGRESSIVE BANK INC
QUEENS COUNTY BANCORP
RAMAPO FIN CP
RARITAN BANCORP INC
REGENT BANCSHARES CP
REPUBLIC NY CP
RIGGS NATL CP
ROYAL BANCSHARES OF PA
S&T BANCORP INC
SFS BANCORP INC
SKYLANDS COMMUNITY BANK
SOUTHWEST NATL CP
STATE BANCORP INC
STATEWIDE FIN GR
STERLING BANCORP
SUFFOLK BANCORP
SUMMIT BANCORP
SUN BANCORP INC
SUSQUEHANNA BANCSHARES
TAPPAN ZEE FIN INC
TROY HILL BANCORP INC
TRUST CO OF NJ
TRUSTCO BANK CP NY
U.S. TRUST CP
UJB FIN CP
UNITED COUNTIES BANCORP
UNITED NATL BANCORP NJ
USBANCORP INC PA
VALLEY NATL BANCORP
VISTA BANCORP INC
WEST JERSEY BANCSHARES
WILMINGTON TRUST CP
WSFS FIN CP
WVS FIN CP
YARDVILLE NATL BCP
SOURCE: MEDIA GENERAL FINANCIAL SERVICES
P.O. BOX 85333
RICHMOND, VA 23293
PHONE: l-(800) 446-7922
FAX: 1-(804) 649-6097
-11-
<PAGE>
Remuneration of Executive Officers
The following Summary Compensation Table sets forth the remuneration of the
executive officer of JVF (as defined in applicable securities regulations), and
the annual salary and other compensation of that officer for the preceding three
years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Lone Term Compensation
--------------------------------------
Annual Compensation Awards Payouts
------------------------------------ ------------------------ ----------
Other Securities
Name Annual Restricted Underlying All Other
and Compen- Stock Options/ LTIP Compen
Principal sation/1/ Awards/2/ SARs/3/ Payouts/4/ sation/5/
Position Year Salary ($) Bonus ($) ($) ($) (#) ($) ($)
- -------- ---- ---------- --------- --------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
A. Jerome Cook 1995 116,423 1,175 - - - - 21,795
Chairman & CEO 1994 111,746 1,165 - - - - 21.155
1993 110,000 1,165 - - - - 20,408
</TABLE>
/1/ The aggregate of personal benefits provided by JVF and the Bank for any
executive officer, individually or all executive officers as a group did
not exceed the lesser of (i) $50,000 or (ii) 10% of the salary and bonus of
the officer for any of the years referenced. This does not include benefits
that are available to all salaried officers, directors and employees on a
non-discriminatory basis.
/2/ JVF has not issued any Restricted Stock Awards to any executive officer.
/3/ JVF has not issued any options or SARs to any Executive Officer.
/4/ JVF does not maintain any Long-Term Incentive Plan as defined in the
applicable Securities and Exchange Commission Regulations, and consequently
has made no payouts pursuant to any such plan.
/5/ Mr. Cook received $7,500 in 1995, $7,500 in 1994, and $7,200 in 1993 as
compensation for serving as a director of JVF and the Bank. Mr. Cook has
elected to defer a portion of this compensation in the manner described
below under "Director's Compensation." Mr. Cook also participated in the
Officer's Supplemental Retirement Plan, also described below. Accruals to
Mr. Cook's account under this Plan were $13,000 in 1995, $11,940 in 1994,
and $11,600 in 1993. Finally, Mr. Cook participated in the Director's
Retirement Plan described below. Accruals to Mr. Cook's account under this
plan were $947 in 1995, $907 in 1994 and $886 in 1993. Mr. Cook is provided
with the use of an automobile; the compensation element of this automobile
aggregated $348 in 1995, $808 in 1994, and $722 in 1993.
- 12 -
<PAGE>
Employment Agreement
In 1995, JVF and the Bank entered into a deferred compensation agreement
with A. Jerome Cook. The agreement provides that JVF and the Bank shall, if Mr.
Cook's employment is terminated without cause, or, if Mr. Cook's employment with
JVF and the Bank is terminated by either Mr. Cook, JVF or the Bank within a
period commencing six months before or nine months after a change in control of
JVF and the Bank, pay Mr. Cook severance compensation equal to 2.95 times Mr.
Cook's average annual compensation over the five taxable years immediately
preceding the termination of Mr. Cook's employment with JVF and the Bank. The
agreement shall expire when Mr. Cook retires.
Stock Option Grants
Applicable Securities Exchange Commission regulations require disclosure of
Stock Option grants to executive employees. JVF maintains no stock option plans
and the following table indicates that no such options have been granted:
INCENTIVE STOCK OPTION GRANTS
IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential
Realizable Value at Assumed
Annual Alternative
Rates of Stock Price
Appreciation
Individual Grants for Option Term
---------------------------------------------------------------------- ------------------
Number of % of Total
Securities Options/
Underlying SARs
Options/ Granted to Exercise
SARs Employees or Base Expira-
Granted in Fiscal Price tion
Name (#) Year ($/Sh) Date 5% ($) 10% ($)
---- ---------- ---------- -------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
A. Jerome Cook 0 0% $0 0 $0 $0
</TABLE>
Pension Plan
JVF and the Bank maintain a pension plan for employees of JVF and the Bank.
The aggregate amount set aside or accrued as of December 31, 1995, for all
pension or retirement benefits to be paid under existing plan for all plan
participants was $107,000, an amount equal to 5.34% of the total covered
compensation of all plan participants. All employees with 12 months' continuous
service who have attained the age of 21 years (except those paid hourly who work
less than 1,000 hours per year) are eligible to participate. The cost of the
pension, which is actuarially determined, is paid by JVF and the Bank. The
amount of the contribution or accrual with respect to a specified pension is not
and cannot readily be separated or individually calculated by the regular
actuaries for the Plan. The formula used to determine an employee's monthly
pension income is 1% of the employee's average monthly compensation for the Plan
year multiplied by his or her years of Benefit Formula Service, not to exceed 99
years. Early retirement is possible with reduced benefits provided the employee
has attained the age of 55 years and has completed 20 years of service. Average
monthly earnings are calculated from the
- 13 -
<PAGE>
employee's highest five consecutive years of earnings and exclude directors'
fees, whether paid in cash or deferred.
The amount shown on the following table assumes the retirement of an
employee who chose a straight life annuity, who is presently 50 years old and
who will retire at the age of 65 years.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
Years of Service
-----------------------------------------------
Remuneration 15 20 25 30 35
- ------------ -- -- -- -- --
<S> <C> <C> <C> <C> <C>
75,000 $13,594 $18,125 $22,656 $27,187 $31,718
95,000 $18,674 $24,900 $31,125 $37,349 $43,574
115,000 $23,794 $31,725 $39,656 $47,587 $55,518
135,000 $28,894 $38,525 $48,156 $57,787 $67,418
145,000 $31,444 $41,925 $52,406 $62,887 $73,368
155,000 $32,700 $43,600 $54,500 $65,400 $76,300
</TABLE>
As of December 31, 1995, A. Jerome Cook had 30 years of credit service under the
Pension Plan.
Officer's Supplemental Retirement Plan
In December, 1988, the Bank established a supplemental retirement plan for
certain key executive employees (the "Officer's Plan"). The Officer's Plan
provides for a target annual retirement benefit, payable over 10 years beginning
at age 65, in an amount equal to 40% of the employee's 1988 compensation. The
retirement benefit will accrue to the account of each participating employee,
commencing in 1989, over his working years with the Bank until he attains the
age of 65. The Plan is dependent on annual funding which is subject to approval
by the Board of Directors. If the Board terminates the Plan or declines to make
a contribution in any year, participants will receive only such benefits as have
accrued, even if less than the targeted benefits.
A lesser retirement benefit, equal to the employee's accrued benefit to
date of retirement, is payable if the employee retires on or after attainment of
the age of 62, provided that he has completed 15 years of service. Payment is
deferred until the employee attains the age of 65. If the Board of Directors
approves, receipt of benefits on early retirement may commence, but the benefit
will be the then actuarial equivalent of the accrued retirement benefit.
The plan also provides for a disability pension in an amount equal to the
employee's accrued retirement benefit on the date of disability. This pension is
payable over a 10-year period, commencing when the employee attains the age of
65. However, payment may be accelerated with approval of the Board; in such
event, the actuarial equivalent of the benefit will be paid.
If a participant in the plan dies while employed by the Bank, a death
benefit is payable. The amount of the benefit depends on whether the Bank has
purchased insurance on the life of the participant. The death benefit is equal
to the proceeds of the policy if the Bank has purchased insurance, and the
equivalent of the participant's accrued retirement benefit if life insurance has
not been purchased.
- 14 -
<PAGE>
Directors' Compensation
Subject to the right of a director to defer the payment of directors' fees
in accordance with the directors' compensation plan set forth below, each
director is paid an annual fee of $7,500 for attendance at 12 regular meetings
of the Board of Directors of the Bank. Each director who is not an executive
officer also receives $60 for attendance of each committee meeting of the Bank
and special meeting of the Board of Directors of the Bank. JVF directors receive
no fees in addition to those received from the Bank.
Director's Deferred Compensation Plans.
In 1982, JVF established a director's deferred compensation plan. This plan
permitted participating directors to defer $3,700 in director's fees each year
for a five year period commencing with the election to participate in the plan
in return for an undertaking by JVF to pay each participating director a
specified amount in 120 equal payments beginning at the last to occur of the
attainment of the age of 65 or the expiration of five years from the date of the
director's election to participate in the plan, or if the director were to die
prior to such time, upon the death of the director. JVF applied the deferred
director's compensation to the purchase of life insurance policies which will
fund JVF's obligations under the plan. JVF is the owner and the beneficiary of
these life insurance policies.
In 1987, when the first director's deferred compensation plan was fully
funded, JVF offered directors a second deferred compensation plan whereby each
director could elect to defer $4,900 in directors fees each year for five years
in exchange for an additional benefit similar to that offered under the 1982
plan. In 1991, when the second plan was funded, JVF offered a third deferred
compensation plan to directors whereby they may elect to defer $6,000 in
director's fees each year for five years in order to receive an additional
benefit similar to that offered under the 1982 and 1987 plans. All three plans
operate in substantially the same manner and all are funded by insurance
policies as described above. JVF has no plans to offer any additional deferred
compensation plans to its directors. The above-referenced plans will continue in
effect.
Director's Retirement Plan
In December, 1988, the Bank established a retirement program for directors
(the "Director's Plan"). All persons who were directors of the Bank on January
1, 1988, are eligible for benefits under the Plan. All directors whose service
commenced after January 1, 1988, are eligible following the completion of six
months of service on the Board. The Director's Plan provides for a target
retirement benefit of $7,800 per year for 10 years commencing at age 65, or, if
later, at such time as the director has completed 10 years of credited service
(as defined in the Director's Plan) with the Board. The retirement benefit for
each director will accrue over his remaining projected period of service until
he reaches age 65 or completes 10 years of credited service. The Plan is
dependent on annual funding which is subject to approval by the Board of
Directors. If the Board terminates the Plan or declines to make a contribution
in any year, directors will receive only such benefits as have accrued, even if
less than the targeted benefits. Lesser benefits are payable in the event of the
director's death, disability, or other termination (except terminations caused
by the director's fraud or dishonesty).
- 15 -
<PAGE>
Transactions with Officers and Directors
During 1995, the Bank had and expects to have in the future banking
transactions in the ordinary course of its business with directors, officers,
principal shareholders and their associates of JVF and the Bank, on the same
terms, including interest rates and collateral on loans as those prevailing at
the same time for comparable transactions with others. Such loans present, in
the opinion of management, no more than the normal risk of collectibility or
present other unfavorable features. During 1995, the highest aggregate amount of
extensions of credit to directors, officers and their associates either directly
or indirectly, did not exceed 20% of equity capital. Also during 1995, extension
of credit to any one director, officer, or principal shareholder did not exceed
10% of equity capital.
Compliance with Section 16(a) of Securities Exchange Act
In 1995, to the knowledge of JVF, no directors or officers failed to file
on a timely basis any reports with the Securities Exchange Commission.
Committees of the Board of Directors of the Bank
The Board of Directors of JVF has not established its own committees but
rather utilizes the committees of the Bank.
The total number of Board of Directors' meetings during 1995 was 12 and no
director attended fewer than 75% of the aggregate total number of meetings of
the Board of Directors and the total number of meetings held by all committees
of the Board on which he served.
Audit Committee
Members of the Audit Committee were Karl E. Guss, Dale Nace and Edward
Rhodes. This Committee met three times during 1995. The Audit Committee causes
to be made by certified public accountants a complete audit of the books and
financial statements of JVF. Upon receipt and review of the internal auditor's
report and certified public audit report, the Committee brings to the Board of
Directors the Committee's recommendations concerning the audit. The Committee
also reviews any examination reports by the Department of Banking, Federal
Deposit Insurance Corporation and The Federal Reserve Bank of Philadelphia.
Trust Committee
Members of the Trust Committee were John Groninger, Harold Shearer, and
Ronald Witherite. This Committee met 11 times during 1995. The Trust Committee
determines the policy and investments of the Trust Department, the acceptance of
all fiduciary relationships and relinquishment of all fiduciary relationships.
The Trust Committee keeps minutes of their meetings which are reviewed by the
Board of Directors monthly.
Personnel Committee
Members of the Personnel Committee were John Renninger, Edward Rhodes, and
Ronald Witherite. This Committee met once during 1995. The Personnel Committee
reviews all personnel policies, including compensation of all employees.
- 16 -
<PAGE>
Other Committees of the Bank
There is no nominating committee but there are other standing committees
which are appointed from time to time by the Chairman of the Board of Directors
subject to the approval of the Board. Examples of some of the committees are
Policy, Consumer, Marketing, Buildings and Grounds, Pension and Finance.
OTHER BUSINESS
To transact any other matters connected with and incidental to the election
of directors that may properly come before the Annual Meeting of Shareholders.
Management, at present, knows of no other business except those items
explained herein that may require the vote of the shareholders to be presented
by or on behalf of JVF or its management at the meeting.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors of JVF has engaged Beard & Company, Inc., Reading,
Pennsylvania, as principal accountant for JVF and the Bank to audit its
financial statements for the year 1995. This firm has no material relationship
with JVF or the Bank and is considered to be well qualified. A representative of
the firm is expected to be at the Annual Meeting of Shareholders.
FORM 10-K ANNUAL REPORT
Securities and Exchange Commission Form 10-K Annual Report is available
free of charge. If you desire a copy of this report, forward your request to:
Ms. Linda L. Engle
Sr. Vice President/CFO
The Juniata Valley Bank
P.O. Box 66
Mifflintown, PA 17059
RETURN OF PROXY
You are urged to sign, date and return the accompanying Proxy as promptly
as possible, whether or not you plan to attend the meeting in person. If you do
attend the meeting, you may then withdraw your Proxy.
BY ORDER OF THE BOARD OF DIRECTORS
RONALD H. WITHERITE
Secretary
Mifflintown, Pennsylvania
March 14, 1996
<PAGE>
PROXY
JUNIATA VALLEY FINANCIAL CORP.
P.O. Box 66
Mifflintown, PA 17059
Telephone: (717) 436-8211
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS OF JUNIATA VALLEY FINANCIAL CORP.
The undersigned hereby appoints Madelon Book, Margaret Fleck and Dennis Long as
Proxies, each with the power to appoint his substitute, and authorizes them to
represent and vote, as designated below, all the shares of common stock of
Juniata Valley Financial Corp. held of record by the undersigned on March 14,
1996 at the Annual Meeting of Shareholders to be held on April 16, 1996.
1. ELECTION OF DIRECTORS:
For all Nominees Listed Below _____ Withhold Authority _____
(except as indicated below)
CLASS C
-------
Dale G. Nace
Edward R. Rhodes
Harold B. Shearer
INSTRUCTION: To withhold authority to vote for any individual nominee(s),
write that nominee's name(s) in the space immediately below.
2. INCREASE IN NUMBER OF AUTHORIZED SHARES OF COMMON STOCK, PAR VALUE $1.00,
FROM 2,000,000 TO 5,000,000:
FOR ___ AGAINST ___ ABSTAIN ___
3. APPROVAL OF THE JUNIATA VALLEY FINANCIAL CORP. EMPLOYEE STOCK PURCHASE
PLAN:
FOR ___ AGAINST ___ ABSTAIN ___
4. OTHER BUSINESS: Take action on other business which may properly come before
the meeting.
FOR ___ AGAINST ___ ABSTAIN ___
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS SPECIFIED. IF NO
SPECIFICATION OR DIRECTION IS MADE, THEY WILL BE VOTED FOR THE ELECTION OF THE
THREE CLASS C DIRECTORS, AND FOR ANY OTHER BUSINESS IN ACCORDANCE WITH THE
RECOMMENDATIONS OF MANAGEMENT. THIS PROXY MAY BE REVOKED PRIOR TO ITS
EXERCISE.
Dated this day of , 1996. (SEAL)
--------------------------------------
Signature
(SEAL)
--------------------------------------
Signature
Please sign exactly as your name appears
hereon. When signing as an Attorney,
Executor, Administrator, Trustee or
Guardian, please give full title. If more
than one Trustee, all must sign. All
joint owners must sign.
<PAGE>
EXHIBIT "A"
COMMONWEALTH OF PENNSYLVANIA
DEPARTMENT OF STATE
CORPORATION BUREAU
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
JUNIATA VALLEY FINANCIAL CORP.
1. The name of the Corporation is Juniata Valley Financial Corp.
2. The location and post office address of its registered office in the
Commonwealth of Pennsylvania is Bridge and Main Streets, Mifflintown,
Pennsylvania.
3. The Corporation is incorporated under the Business Corporation Law of
the Commonwealth of Pennsylvania for the following purpose or purposes:
To have unlimited power to engage in and to do any lawful act concerning
any or all lawful business for which Corporations may be incorporated under
the provisions of the Business Corporation Law of the Commonwealth of
Pennsylvania. The Corporation is incorporated under the provisions of the
Business Corporation Law of the Commonwealth of Pennsylvania (Act of May 5,
1933, P. L. 364, as amended).
4. The term for which the Corporation is to exist is perpetual.
5. The aggregate number of shares which the Corporation shall have
authority to issue is 2,500,000 shares, divided into two classes consisting of
2,000,000 shares of Common Stock with a par value of $1.00 per share and 500,000
shares of Preferred Stock without a par value. The Board of Directors shall have
the full authority permitted by law to fix by resolution full, limited, multiple
or fractional, or no voting rights, and such designations and preferences,
priorities, qualifications, privileges, limitations, restrictions, options,
conversion rights, dividend features, retirement features, liquidation features,
redemption features or other special or relative rights that may be desired for
the Preferred Stock and any series thereof, and to issue such Preferred Stock
from time to time in one or more series. The designations, preferences,
priorities, qualifications, privileges, limitations, restrictions, options,
conversion rights, dividend features, retirement features, liquidation features,
redemption features and any other special or relative rights of any series of
Preferred Stock may differ from those of any and all series at any time
outstanding.
6. The name and post office address of each incorporator and the number
and class of shares subscribed by each incorporator is:
Name Address No and Class of Shares
---- ------- ----------------------
James A. Ulsh 1801 N. Front St. One share of common stock
P.O. Box 729
Harrisburg, PA 17108
<PAGE>
7. No cumulative voting for the election of directors shall be permitted.
8. No holder of any class of capital stock of the Corporation shall have
pre-emptive rights, and the Corporation may issue shares, option rights or
securities having conversion or option rights with respect to shares and any
other securities of any class without first offering them to shareholders of any
class or classes.
9. To the full extent permitted by law, the Board of Directors is expressly
vested with the authority to make, alter, amend and repeal such Bylaws as it may
deem necessary or desirable for the Corporation, subject to the statutory power
of the shareholders to change such action but only upon the affirmative vote of
the holders of the outstanding capital stock of the Corporation entitled to cast
at least seventy-five percent (75%) of the votes which all shareholders are
entitled to cast on the matter at a regular or special meeting of the
shareholders duly convened after notice to the shareholders of that purpose.
10. A. The Board of Directors of the Corporation may, in its sole
discretion, if it deems it advisable, oppose any offer, proposal, or attempt by
any Corporation or other business entity, person or group to (a) make any tender
or other offer to acquire any of the Corporation's securities; (b) merge or
consolidate the Corporation with or into another entity; (c) purchase or
otherwise acquire all or substantially all of the assets of the Corporation; or
(d) make any transaction similar in purpose or effect to any of the above. In
considering whether to oppose, recommend or remain neutral with respect to any
of the aforesaid offers, proposals or plans, the Board of Directors shall
evaluate what is in the best interests of the Corporation and may, but is not
legally obligated to, consider any pertinent factors which may include but are
not limited to any of the following:
(1) Whether the offering price, whether in cash or in securities, is
adequate and acceptable based upon both the current market price of the
Corporation's securities and the historical and present operating results or
financial condition of the Corporation.
(2) Whether a price more favorable to the shareholders may be obtained now
or in the future from other offerors and whether the Corporation's continued
existence as an independent Corporation will affect the future value of the
Corporation.
(3) What the impact of the offer would have on the employees, depositors,
clients and the customers of the Corporation or its subsidiaries and the
communities which they serve.
(4) The present and historical financial position of the offeror, its
reputation in the communities which it serves and the effect which the
reputation and practices of offeror or its management and affiliates would
have upon the employees, depositors and customers of the Corporation and the
community which the Corporation serves.
(5) An analysis of the value of the securities (if any) offered in exchange
for the Corporation's securities.
(6) Any anti-trust or other legal or regulatory issues raised by the
offeror.
B. If the Board of Directors determines that an offer shall be rejected, it
may take any lawful action to accomplish its purpose, including, but not limited
to, any or all of the following: advising
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shareholders not to accept the offer; litigation against the offeror; filing
complaint with all government and regulatory authorities having jurisdiction
over the offer; acquiring the Corporation's securities; selling or otherwise
issuing authorized but unissued securities or treasury stock and granting
options with respect thereto; acquiring a company to create an anti-trust or
other regulatory problem for the offeror; and obtaining a more favorable offer
from another individual or entity.
11. A. For purposes of this Article 11 the term "Business Combination"
shall mean any one or more of the following transactions:
(1) Any merger or consolidation of the Corporation or any Subsidiary (as
hereinafter defined) with or into (i) any ten percent (10%) Shareholder (as
hereinafter defined) or (ii) any other Corporation (whether or not itself is
a ten percent (10%) Shareholder) which is, or after such merger or
consolidation would be, an affiliate (as hereinafter defined) of a ten
percent (10%) Shareholder or;
(2) Any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or in a series of related transactions) to
or with any ten percent (10%) Shareholder of assets whether of the
Corporation or any Subsidiary or Subsidiaries of the Corporation, or any
combination thereof, the aggregate value of which is equal to or greater
than ten percent (10%) of the Corporation's consolidated stockholders
equity; or
(3) The issuance or transfer by the Corporation or by any Subsidiary (in one
transaction or in a series of related transactions) of any securities of the
Corporation or any Subsidiary to any ten percent (10%) Shareholder or
Affiliate of a ten percent (10%) Shareholder in exchange for cash,
securities or other property or any combination thereof, having an aggregate
fair market value equal to or greater than ten percent (10%) of the
Corporation's consolidated stockholders equity; or
(4) Any reclassification of securities (including any reverse stock split),
recapitalization, reorganization, merger or consolidation of the Corporation
with any of its Subsidiaries or any similar transaction (whether or not
with, into or otherwise involving a ten percent (10%) Shareholder) which has
the effect, directly or indirectly, of increasing the proportionate share of
the outstanding shares of any class of equity or convertible securities of
the Corporation or any Subsidiary, which is directly or indirectly owned by
any ten percent (10%) Shareholder or any Affiliate of a ten percent (10%)
Shareholder;
Provided however, no transaction described in Clauses 1. through 4. of this
subparagraph A of Article 11 shall constitute a Business Combination if the
Board of Directors has by resolution authorized or ratified the execution
and delivery of a written agreement in principle, memorandum of
understanding or letter of intent respecting such transaction prior to the
time the ten percent (10%) Shareholder involved in such transaction
acquired, directly or indirectly, more than five percent (5%) of the
outstanding Common Stock of the Corporation which would be entitled to vote
on such transaction. In such an event the provisions of subparagraph D of
this Article 11 shall apply.
B. Notwithstanding the fact that by law or by agreement with a national
securities exchange or otherwise no vote, or a lesser vote, of shareholders may
be specified or permitted, and except as otherwise expressly provided in
subparagraph C. of this Article 11 the affirmative vote of the holders of at
least
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eighty-five percent (85%) of the votes which all Shareholders are entitled to
cast on the matter shall be required to approve any Business Combination.
C. Notwithstanding the provisions of subparagraph B. of this Article 11, a
Business Combination shall require the affirmative vote of the holders of at
least sixty-six and two-thirds percent (66 2/3%) of the votes which all
Shareholders are entitled to cast on the matter, if and only if all of the
following conditions shall have been satisfied:
(1) The ratio of (a) the aggregate amount of cash and fair market value of
all other consideration to be received in such Business Combination by the
Corporation, a Subsidiary, or the holders of Common Stock, as the case may
be, divided by the number of shares of Common Stock issued and outstanding
immediately prior to the first public announcement relating to such Business
Combination, to (b) the market price of the Common Stock per share
immediately prior to the first public announcement relating to such Business
Combination, is at least as great as the ratio of (c) the highest per-share
price (including brokerage commissions, transfer taxes and soliciting
dealers' fees) which such ten percent (10%) Shareholder has paid for any
shares of Common Stock acquired by it within the three-year period prior to
the record date for determining shareholders entitled to vote on such
Business Combination to (d) the market price of the Common Stock immediately
prior to the initial acquisition by such ten percent (10%) Shareholder of
any Common Stock.
(2) The aggregate amount of the cash and fair market value of other
consideration to be received in such Business Combination by the
Corporation, a Subsidiary or the holders of Common Stock, as the case may
be, divided by the number of shares of Common Stock issued and outstanding
immediately prior to the first public announcement relating to such Business
Combination, is not less than the highest per-share price (including
brokerage commissions, transfer taxes and soliciting dealers' fees) paid by
such ten percent (10%) Shareholder for any block of Common Stock owned by
it; and in addition is not less than the market price per share of Common
Stock immediately prior to the first public announcement relating to such
Business Combination.
(3) The form of consideration to be received by holders of Common Stock in
such Business Combination shall not be less favorable than the consideration
paid by the ten percent (10%) Shareholder in acquiring the largest block of
Common Stock already owned by it;
(4) After such ten percent (10%) Shareholder has acquired ownership of not
less than ten percent (10%) of the then outstanding Common Stock (a "10%
Interest") and prior to the consummation of such Business Combination:
(a) the ten percent (10%) Shareholder shall have taken all action
necessary to ensure that the Corporation's Board of Directors included
at all times representation by Continuing Director(s) (as hereinafter
defined) proportionate to the ratio that the Voting Shares owned by
persons who are not ten percent (10%) Shareholders ("Public Holders")
bears to all Voting Shares outstanding at such respective times (with a
Continuing Director to occupy any resulting fractional Board position);
(b) such ten percent (10%) Shareholder shall not have acquired any
newly issued shares of stock, directly or indirectly, from the
Corporation (except upon conversion
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<PAGE>
of convertible securities acquired by it prior to obtaining a 10%
Interest or as a result of a pro rata stock dividend or stock split);
and
(c) such ten percent (10%) Shareholder shall not have acquired
any additional shares of the Corporation's outstanding Voting Shares
except as a part of the transaction which resulted in such ten percent
(10%) Shareholder acquiring its 10% Interest;
(5) Prior to the consummation of such Business Combination, such ten
percent (10%) Shareholder shall not have (a) received the benefit, directly
or indirectly (except proportionately as a shareholder), of any loans,
advances, guarantees, pledges or other financial assistance or tax credits
provided by the Corporation, or (b) made any major change in the
Corporation's business or equity capital structure without the unanimous
approval of the whole Board of Directors; and
(6) A proxy statement meeting the requirements of the Securities Exchange
Act of 1934 shall have been mailed to all holders of Voting Shares for the
purpose of soliciting shareholder approval of such Business Combination.
Such proxy statement shall contain at the front thereof, in a prominent
place, any recommendations as to the advisability (or inadvisability) of
the Business Combination which the continuing Directors, or any of them,
may have furnished in writing and an opinion of a reputable investment
banking firm as to the fairness (or lack of fairness) of the terms of such
Business Combination, from the point of view of the holders of Voting
Shares other than any ten percent (10%) Shareholder (such investment
banking firm to be selected by a majority of the Continuing Directors, to
be furnished with all information it reasonably requests and to be paid a
reasonable fee by the Corporation for its services upon receipt by the
Corporation of such opinion).
D. Any of the following which are not a Business Combination subject to the
provisions of subparagraph B or subparagraph C of this Article 11 shall require
the affirmative vote of the holders of at least seventy-five percent (75%) of
the votes which all Shareholders are entitled to cast on the matter:
(1) Any merger or consolidation of the Corporation with or into another
Corporation; or
(2) Any merger or consolidation of a Subsidiary with or into another
Corporation if (i) the resulting, surviving or continuing Corporation, as
the case may be, would not be a Subsidiary or (ii) the total number of
shares of the Corporation issued or delivered in connection with such
transaction, plus those initially issuable upon conversion of any other
shares, securities or obligation to be issued in connection with such
transaction, exceed fifteen percent (15%) of the shares of Common Stock of
the Corporation outstanding immediately prior to the date on which such
transaction is consummated; or
(3) Any sale, lease, exchange, mortgage, pledge, transfer or other
disposition of all or substantially all of the assets of the Corporation;
or
(4) Any sale, lease, exchange, mortgage, pledge, transfer or other
disposition of all or substantially all the assets of a Subsidiary whose
total assets exceed twenty percent (20%) of the total assets of the
Corporation as reflected on the most recent consolidated balance sheet of
the Corporation; or
5
<PAGE>
(5) Any sale of all or substantially all of the stock in a subsidiary whose
total assets exceed twenty percent (20%) of the total assets of the
Corporation as reflected on the most recent consolidated balance sheet of
the Corporation.
Provided, however, that the transaction described in Clauses 1 through 5,
of this subparagraph D of Article 11 shall require the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66 2/3%) and not seventy-
five percent (75%) of the votes which all Shareholders are entitled to cast on
the matter if the Board of Directors has by resolution authorized or ratified
the execution and delivery of a written agreement in principle, memorandum of
understanding or letter of intent respecting such transaction prior to the time
that any party has presented such transaction to the shareholders of the
Corporation for their consideration or approval.
Transactions involving the Corporation or a Subsidiary which are not
Business Combinations or which are not described in (1) through (5) of this
subparagraph D of Article 11, shall require only such shareholder approval, if
any, as may be required pursuant to the Business Corporation Law of Pennsylvania
as in effect from time to time.
E. Any plan or proposal for the liquidation or dissolution of the
Corporation which would require or permit a distribution of any surplus
remaining after paying off all debts and liabilities of the Corporation to the
shareholders in accordance with their respective rights and preferences shall
require the affirmative vote of the holders of at least sixty-six and two-thirds
percent (66 2/3%) of the votes which all Shareholders are entitled to cast on
the matter; provided, the affirmative vote of the holders of at least eighty-
five percent (85%) of the votes which all Shareholders are entitled to cast on
the matter shall be required for any such plan or proposal which would permit
such distribution to shareholders to be made other than in cash.
F. For the purposes of this Article 11 and Article 12:
(1) A "person" shall mean any individual group, firm, Corporation or other
entity.
(2) "10% Shareholder" shall mean, in respect of any Business Combination,
any person (other than the Corporation or any Subsidiary) who or which, as of
the record date for the determination of shareholders entitled to notice of
and to vote on such Business Combination, or immediately prior to the
consummating of any such transaction:
(a) is the beneficial owner, directly or indirectly, of not less than
ten percent (10%) of the outstanding Common Stock of the Corporation,
or
(b) is an Affiliate of the Corporation and at any time within two
years prior thereto was the beneficiary owner, directly or indirectly,
of not less than ten percent (10%) of the outstanding Common Stock of
this Corporation, or
(c) is an assignee of or has otherwise succeeded to any Common Stock
which was at any time within two years prior thereto beneficially owned
by any ten percent (10%) Shareholder, and such assignment or succession
shall have occurred in the course of a transaction or series of
transactions not involving a public offering within the meaning of the
Securities Act of 1933.
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(3) A person shall be the "beneficial owner" of any Common Stock:
(a) which such person or any of its Affiliates or Associates (as
hereinafter defined) beneficially own, directly or indirectly, or
(b) which such person or any of its Affiliates or Associates has (i)
the right to acquire (whether such right is exercisable immediately or
only after the passage of time), pursuant to any agreement, arrangement
or understanding or upon the exercise of conversion rights, exchange
rights, warrants or options, or otherwise, or (ii) the right to vote,
pursuant to any agreement, arrangement or understanding, or
(c) which are beneficially owned, directly or indirectly, by any
other person with which such first-mentioned person or any of its
Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of any shares of Common Stock.
(4) The outstanding Common Stock shall include shares deemed owned through
application of Section 3 above but shall not include any other shares of
Common Stock which may be issuable pursuant to any agreement, or upon
exercise of conversion rights, warrants or options, or otherwise.
(5) "Continuing Director" shall mean a person who was a member of the Board
of Directors of the Corporation elected by the Holders of Common Stock
prior to the date as of which any ten percent (10%) Shareholder acquired in
excess of five percent (5%) of the then outstanding shares of Common Stock,
or a person designated (before his initial election as a Director) as a
Continuing Director by a majority of the then Continuing Directors.
(6) "Affiliate" and "Associate" shall have the respective meanings given
those terms in the General Rules and Regulations under the Securities
Exchange Act of 1934.
(7) "Subsidiary" means any corporation or entity of which a majority of any
class of equity security (as defined in the General Rules and Regulations
under the Securities Exchange Act of 1934) is owned, directly or
indirectly, by the Corporation; provided, however, that for the purposes of
the definition of ten percent (10%) Shareholder set forth in Section 2 of
this subparagraph F, the term "Subsidiary" shall mean only a corporation of
which a majority of each class of equity security is owned, directly or
indirectly, by the Corporation.
(8) "Voting Shares" shall mean any shares of the capital stock of the
Corporation entitled to vote (irrespective of the number of votes which
each such share is entitled to cast) generally in the election of
Directors.
G. A majority of the Continuing Directors shall have the power and duty to
determine for the purposes of this Article 11, on the basis of information known
to them, (1) the number of shares of Common Stock beneficially owned by any
person, (2) whether a person is an Affiliate or Associate of another, (3)
whether a person has an agreement, arrangement or understanding with another as
to the matters referred to in Section 3 of subparagraph F., (4) the fair market
value of consideration other than cash to be received in any Business
Combination, (5) whether the form of consideration to be received by holder of
Common Stock in a Business Combination is not less favorable than the
consideration paid by a ten percent (10%) Shareholder in acquiring the largest
block of Common Stock owned by it, and (6)
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whether a ten percent (10%) Shareholder has taken all action necessary to
ensure proportionate representation by Continuing Directors on the Board of
Directors for purposes of clause 4(a) of subparagraph C of this Article 11.
H. Nothing contained in this Article 11 shall be construed to relieve any
ten percent (10%) Shareholder from any fiduciary obligation imposed by law.
12. Articles 7, 8, 9, 10 and 11 of these Articles of Incorporation, and
this Article 12, may not be amended, altered, changed or repealed without the
affirmative vote of holders of at least eighty-five percent (85%) of the votes
which all shareholders are entitled to cast on the matter. Provided, however,
that if the amendment, alteration, change or repeal of any of the aforesaid
Articles is recommended to the shareholders by sixty-six and two-thirds percent
(66 2/3%) of the whole Board of Directors, consisting entirely of Continuing
Directors, then the affirmative vote of the holders of at least sixty-six and
two-thirds percent (66 2/3%) of the votes which all Shareholders are entitled to
cast on the matter shall be required. Article 5 of these Articles of
Incorporation may not be amended, altered, changed or repealed without the
affirmative vote of the holders of at least sixty-six and two-thirds percent
(66 2/3%) of the votes which all shareholders are entitled to cast on the
matter.
13. The Corporation shall, to the fullest extent permitted by applicable
law, indemnify any and all persons whom it shall have the power to indemnify
from and against any and all expenses, liabilities or other matter for which
indemnification is permitted by applicable law, and the indemnification provided
for herein shall not be deemed exclusive of any other rights to which those
indemnified may be entitled under any by-law, agreement, vote of shareholders or
disinterested directors or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office, and
shall continue as to a person who has ceased to be a director, officer, employee
or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
14. Each article of these Articles of Incorporation shall be considered
separable and if for any reason any Article is determined to be invalid and
contrary to any then existing law, such invalidity shall not impair the
operation of or affect those Articles which are valid.
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EXHIBIT "B"
JUNIATA VALLEY FINANCIAL CORP.
EMPLOYEE STOCK PURCHASE PLAN
ARTICLE I-PURPOSE
1.01. Purpose
The Juniata Valley Financial Corporation Employee Stock Purchase Plan will
provide a method for employees of The Juniata Valley Bank to acquire a
proprietary interest in Juniata Valley Financial Corporation. Under the Employee
Stock Purchase Plan, participating employees may purchase shares of the Common
Stock of Juniata Valley Financial Corporation. Juniata Valley Financial
Corporation intends to have the Employee Stock Purchase Plan qualify as an
"employee stock purchase plan" under (S)423 of the Internal Revenue Code of
1986, as amended. The Employee Stock Purchase Plan shall be construed to comply
with the requirements of that section of the Internal Revenue Code.
ARTICLE II-DEFINITIONS
2.01. Base Pay
"Base Pay" means the regular straight-time earnings of an employee,
excluding payments for overtime, shift premium, bonuses and other special
payments, commissions and other marketing incentive payments.
2.02. Board of Directors
"Board of Directors" means the Board of Directors of Juniata Valley
Financial Corporation.
2.03. Code
"Code" means the Internal Revenue Code of 1986, as amended.
2.04. Committee
"Committee" means the committee administering the Employee Stock Purchase
Plan, which is more fully described in Article XI.
2.05. Employee
"Employee" means any person who is customarily employed on a fill-time or
part-time basis by Juniata Valley Bank and is regularly scheduled to work more
than 20 hours per week.
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2.06. JVB
"JVB" means The Juniata Valley Bank.
2.07. JVFC
"JVFC" means Juniata Valley Financial Corporation.
2.08. Offerings
"Offerings" means the annual offerings of JVFC's common stock. Each
Offering will begin on July 1 and end on May 15 of the following year.
2.09. Offering Commencement Date
"Offering Commencement Date" means July 1 of each year.
2.10. Offering Termination Date
"Offering Termination Date" means May 15 of the year following the Offering
Commencement Date.
2.11. Participant
"Participant" means any eligible employee of JVB that has completed an
authorization for payroll deduction on the form provided by JVB and filed the
form with the Treasurer of JVFC..
2.12. Plan
"Plan" means the JVFC Employee Stock Purchase Plan.
2.13. Stock
"Stock" means the common stock of JVFC.
ARTICLE III-ELIGIBILITY AND PARTICIPATION
3.01. Initial Eligibility
An employee is eligible to participate in the Plan if: (i) he or she has
completed ninety (90) days' employment; and (ii) he or she is employed by JVB on
the date the employee's participation in the Plan becomes effective. Eligible
employees may participate in offerings
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under the Plan which commence on or after the employee meets the eligibility
requirements set forth in this section.
3.02. Leave of Absence
For purposes of the Plan, a person on leave of absence will be considered
an employee for the first 90 days of the leave of absence. The person's
employment shall be considered terminated at the close of business on the 90th
day of the leave of absence. Termination by JVB of any employee's leave of
absence, other than termination of the leave of absence on return to full time
or part time employment, will terminate the employee's participation in the Plan
and the employee's right to exercise any option outstanding under the Plan.
3.03. Restrictions on Participation
Any provision of the Plan to the contrary notwithstanding, an employee's
participation in the Plan will be limited or prohibited:
(a) if, because of participation the employee would own stock, and/or
hold outstanding options to purchase stock, possessing 5% or more of the total
combined voting power or value of all classes of stock of JVFC (for purposes of
this paragraph, the rules of (S)424(d) of the Code shall apply in determining
stock ownership of any employee); or
(b) if the Participant's rights to purchase stock under all employee stock
purchase plans of JVFC would accrue at a rate which exceeds $25,000 for each
calendar year determined by the fair market value of the stock at the time the
option is granted.
3.04. Commencement of Participation
An eligible employee may become a Participant by completing an
authorization for a payroll deduction on the form provided by JVB and filing it
with the Treasurer of JVFC. With respect to each Offering, the payroll deduction
authorization must be received by JVFC on or before a date established by the
Committee. For each Offering, payroll deductions for a Participant will commence
on the applicable Offering Commencement Date, and will end on the Offering
Termination Date, unless sooner terminated by the Participant as provided in
Article VIII.
ARTICLE IV-OFFERINGS
4.01. Annual Offerings
The Plan will be implemented by annual Offerings of JVFC's Common Stock
beginning on the 1st day of July in each year. Each Offering will terminate on
May 15th of the following year.
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ARTICLE V-PAYROLL DEDUCTIONS
5.01. Amount of Deduction
At the time a Participant files the authorization for payroll deduction, he
or she shall elect to have deductions made from his or her pay. The deductions
shall be made on each payday during the time the employee is a Participant in an
Offering. The rate of each deductions shall be at the rate of 2, 3, 4, 5, 6, 7,
8, 9 or 10% of the Participant's base pay in effect at the Offering Commencement
Date. If the Participant is a part-time hourly employee, that employee's base
pay during an Offering will be determined by multiplying the employee's hourly
rate of pay in effect on the Offering Commencement Date by the number of
regularly scheduled hours of work for the employee during the Offering.
5.02. Participant's Account
All payroll deductions made for a Participant shall be credited to the
Participant's account under the Plan. A Participant may make separate cash
payments only as permitted by the Committee and permitted by (S) 5.04.
5.03. Changes in Payroll Deductions
A Participant may discontinue participation in the Plan as provided in
Article VIII. No other change can be made during an Offering. Specifically, a
Participant may not alter the amount of his or her payroll deductions for that
Offering.
5.04 Leave of Absence
If a Participant goes on a leave of absence, that Participant will have the
right to elect:
(a) to withdraw the balance in his or her account pursuant to (S)7.02;
(b) to discontinue contributions to the Plan but remain a Participant in
the Plan; or
(c) to remain a Participant in the Plan during the leave of absence,
authorizing deductions to be made from payments by JVB to the Participant during
the leave of absence and undertaking to make cash payments to the Plan at the
end of each payroll period to the extent that amounts payable by JVB to the
Participant are insufficient to meet the Participant's authorized Plan
deductions.
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ARTICLE VI-GRANTING OF OPTION
6.01. Number of Option Shares
On the Commencement Date of each Offering, a Participant will be granted an
option to purchase as many full shares of the Stock as he or she will be able to
purchase with the aggregate sum of the payroll deduction deposited in his or her
account during that Offering.
6.02. Option Price
The option price of Stock purchased during each annual Offering for a
Participant shall be a percentage between eighty-five (85%) percent and one
hundred (100%) percent of the fair market value of the Stock on the Offering
Commencement Date or the nearest prior business day to the Offering Commencement
Date. The percentage used shall be in the sole and exclusive discretion of the
Board of Directors.
ARTICLE VII-EXERCISE OF OPTION
7.01. Automatic Exercise
Unless a Participant gives written notice to the Treasurer of JVFC as
provided in Section 7.02, the Participant's option for the purchase of Stock
with payroll deductions made during any offering will be exercised automatically
on the Offering Termination Date, for the purchase of the number of full shares
of Stock which the balance in his or her account at that time will purchase at
the applicable option price (but not in excess of the number of shares for which
options have been granted to the employee pursuant to (S)6.01). Any excess in
the account at that time will be returned to the Participant.
7.02. Withdrawal of Account
By written notice to the Treasurer of JVFC, at any time prior to the
Offering Termination Date applicable to any Offering, a Participant may elect to
withdraw all the money in the Participant's account.
7.03. Fractional Shares
Fractional shares will not be issued under the Plan. Any accumulated
payroll deductions which would have been used to purchase fractional shares will
be returned to any Participant promptly following the termination of an
Offering.
-5-
<PAGE>
7.04. Transferability of Option
During a Participant's lifetime, options held by the Participant shall be
exercisable only by that Participant.
7.05. Delivery of Stock
Within forty-five (45) days after the Offering Termination Date of each
Offering, or as soon as practicable thereafter, JVFC will deliver to each
Participant, as appropriate, the Stock purchased upon exercise of his or her
option.
ARTICLE VIII-WITHDRAWAL
8.01. In General
A Participant may withdraw payroll deductions credited to his or her
account under the Plan at any time (subject to Article 7.02) by giving written
notice to the Treasurer of JVFC. All of the Participant's payroll deductions
credited to his or her account will be paid to the Participant promptly after
receipt of notice of withdrawal. No further payroll deductions will be made from
the Participant's pay during such Offering.
8.02. Effect on Subsequent Participation
A Participant's withdrawal from any Offering will not have any effect upon
his or her eligibility to participate in any succeeding Offering or in any
similar plan which may hereafter be adopted by JVFC.
8.03. Termination of Employment
Upon termination of the Participant's employment for any reason, including
retirement (but excluding death or continuation of a leave of absence for a
period beyond 90 days), the Participant's participation in the Plan shall
automatically terminate, the Participant shall not be entitled to purchase any
shares at the end of the Offering, and the payroll deductions credited to the
Participant's account will be returned to the Participant.
8.04. Termination of Employment Due to Death
Upon termination of the Participant's employment because of death, the
Participant's beneficiary (as defined in (S)12.01) shall have the right to
elect, by written notice given to the Treasurer of JVFC prior to the earlier of
the Offering Termination Date or the expiration of a period of sixty (60) days
commencing with the date of death of the Participant, either:
-6-
<PAGE>
(a) to withdraw all of the payroll deductions credited to the Participant's
account under the Plan; or
(b) to exercise the Participant's option for the purchase of Stock on the
Offering Termination Date following the date of the Participant's death under
the terms described in Article 7.01.
In the event that no written notice of election is received by the
Treasurer of JVFC, the beneficiary shall automatically be deemed to have elected
pursuant to paragraph (b), to exercise the Participant's option.
8.05. Leave of Absence
A Participant on leave of absence shall, subject to the election made by
the Participant pursuant to (S)5.04, continue to be a Participant in the Plan so
long as the Participant is on continuous leave of absence. A Participant who has
been on leave of absence for more than 90 days will not be entitled to
participate in any offering commencing after the 90th day of such leave of
absence. Notwithstanding any other provisions of the Plan, unless a Participant
on leave of absence returns to regular full time or part time employment with
the JVB at the earlier of: (a) the termination of such leave of absence or (b)
three months from the 90th day of the leave of absence, the Participant's
participation in the Plan shall terminate on whichever of such dates first
occurs.
ARTICLE IX-INTEREST
9.01 Payment of Interest
A Participant's account will be credited with simple interest computed at
the regular statement savings account rate in effect at JVB during the
applicable offering period
ARTICLE X-STOCK
10.01 Maximum Shares
The maximum number of shares which will be issued under the Plan, subject
to adjustment upon changes in capitalization of JVFC as provided in (S)12.04
shall be 5000 shares in each annual Offering plus in each Offering all unissued
shares from prior Offerings, whether offered or not, not to exceed 100,000
shares for all Offerings. If the total number of shares for which options are
exercised on any Offering Termination Date in accordance with Article VI exceeds
the maximum number of shares for the applicable Offering, JVFC shall make a pro
rata allocation of the shares remaining available in as nearly a uniform manner
as shall be practicable and as it shall determine to be equitable. In such
event, the balance of payroll deductions credited
-7-
<PAGE>
to the account of each Participant under the Plan shall be returned to the
Participant as promptly as possible.
10.02. Participant's Interest in Option Stock
The Participant will have no interest in Stock covered by his or her option
until the option has been exercised.
10.03. Registration of Stock
Stock to be delivered to a Participant under the Plan will be registered in
the name of the Participant, or, if the Participant directs by written notice to
the Treasurer of JVFC prior to the Offering Termination Date, in the names of
the Participant and one such other person as may be designate by the
Participant, as joint tenants with rights of survivorship or as tenants by the
entireties, to the extent permitted by applicable law.
ARTICLE XI-ADMINISTRATION
11.01. Appointment of Committee
The Board of Directors shall appoint a committee (the "Committee") to
administer the Plan. The Committee which shall consist of no fewer than three
members of the Board of Directors. No member of the Committee shall be eligible
to purchase stock under the Plan.
11.02. Authority of Committee
The Committee shall have plenary authority in its discretion to interpret
and construe any and all provisions of the Plan, to adopt rules and regulations
for administering the Plan, and to make all other determinations necessary or
advisable for administering the Plan. The Committee's determination shall be
conclusive.
11.03. Rules Governing the Administration of the Committee
The Board of Directors may from time to time appoint members of the
Committee in substitution for or in addition to members previously appointed and
may fill vacancies, however caused, in the Committee. The Committee may select
one of its members as its Chairman and shall hold its meetings at such times and
places as it shall deem advisable. Meetings by telephone are permissible. A
majority of its members shall constitute a quorum. All decisions of the
Committee shall be made by a majority of its members. The Committee may correct
any defect or omission or reconcile any inconsistency in the Plan, in the manner
and to the extent it shall deem desirable. Any decision or determination reduced
to writing and signed by a majority of the members of the Committee will be as
fully effective as if it had been made by a majority
-8-
<PAGE>
vote at a meeting duly called and held. The Committee may appoint a secretary
and shall make such rules and regulations for the conduct of its business as it
shall deem advisable.
ARTICLE XII-MISCELLANEOUS
12.01. Designation of Beneficiary
A Participant may file a written designation of a beneficiary who is to
receive any stock and/or cash in the event the Participant dies. A Participant
may change the designated beneficiary at any time by written notice to the
Treasurer of JVFC. In the event of the Participant's death prior to the delivery
of Stock purchased pursuant to an Offering, JVFC will deliver the Stock, or any
cash to which the Participant is entitled, to the joint tenant, if the
Participant has designated a joint tenant as provided in Article 10.03. If there
is no joint tenant, JVFC shall deliver the stock and/or cash to the designated
beneficiary upon receipt by JVFC of proof of the identity and existence at the
Participant's death of a beneficiary validly designated under the Plan. If a
Participant dies and no living beneficiary has been validly designated under the
Plan, JVFC shall deliver the stock and/or cash to the executor or administrator
of the estate of the Participant. If there is no executor or administrator
appointed (to the knowledge of JVFC), JVFC, in its discretion, may deliver the
stock and/or cash to the spouse or to any one or more dependents of the
Participant as JVFC may designate. No beneficiary shall, prior to death of the
Participant by whom he has been designated, acquire any interest in the stock or
cash credited to the Participant under the Plan. JVFC shall not be liable to any
person for the delivery of stock and/or cash pursuant to the provisions of this
Section 12.01.
12.02. Transferability
In no event may any rights with regard to the exercise of an option or to
receive stock under the Plan be assigned, transferred, pledged, or otherwise
disposed of in any way by the Participant other than by will or the laws of
descent and distribution. Any such attempted assignment, transfer, pledge or
other disposition shall be without effect, except that JVFC may treat such act
as an election to withdraw funds in accordance with (S)7.02.
12.03. Use of Funds
All payroll deductions received or held by JVFC under this Plan may be used
by JVFC in the same manner as funds held in ordinary savings accounts at JVB are
used. JVFC shall not be obligated to segregate payroll deductions.
12.04. Adjustment Upon Changes in Capitalization
(a) If, while any options are outstanding, the outstanding shares of Common
Stock of JVFC have increased, decreased, changed into, or been exchanged for a
different number or kind
-9-
<PAGE>
of shares or securities of JVFC through reorganization, stock split, reverse
stock split or similar transaction, appropriate and proportionate adjustments
may be made by the Committee. In addition, the number and/or kind of shares
which may be offered in the Offerings described in Article IV hereof shall also
be proportionately adjusted. No adjustments shall be made for stock dividends.
For the purposes of this Paragraph, any distribution of shares to shareholders
in an amount aggregating 20% or more of the outstanding shares shall be deemed a
stock split and any distributions of shares aggregating less than 20% of the
outstanding shares shall be deemed a stock dividend.
(b) Upon the (i) dissolution or liquidation of JVFC; (ii) reorganization,
merger or consolidation of JVFC with one or more corporations as a result of
which JVFC is not the surviving corporation; or (iii) upon a sale of
substantially all of the property or stock of JVFC to another corporation, the
holder of each option then outstanding under the Plan will thereafter be
entitled to receive at the next Offering Termination Date upon the exercise of
such option for each share as to which such option shall be exercised, as nearly
as reasonably may be determined, the cash, securities and/or property which a
holder of one share of the Common stock was entitled to receive upon and at the
time of such transaction. The Board of Directors shall take such steps in
connection with such transactions as the Board shall deem necessary to assure
that the provisions of this (S)12.04 shall thereafter be applicable, as nearly
as reasonably may be determined, in relation to the said cash, securities and/or
property as to which such holder of such option might thereafter be entitled to
receive.
12.05. Amendment and Termination
The Board of Directors shall have complete power and authority to terminate
or amend the Plan. The Board of Directors shall not, without the approval of the
stockholders of the Corporation (i) increase the maximum number of shares which
may be issued under any Offering (except pursuant to (S)12.04); (ii) amend the
requirements as to the class of employees eligible to purchase stock under the
Plan or permit the members of the Committee to purchase stock under the Plan. No
termination, modification, or amendment of the Plan may, without the consent of
an employee then having an option under the Plan to purchase stock, adversely
affect the rights of such employee under such option.
12.06. Effective Date
The Plan shall become effective as of July 1, 1996, subject to approval by
the holders of the majority of the Stock present and represented at the 1996
annual meeting of the shareholders. If the Plan is not approved, the Plan shall
not become effective.
- 10 -
<PAGE>
12.07. No Employment Rights
The Plan does not, directly or indirectly, create any right for the benefit
of any employee or class of employees to purchase any shares under the Plan, or
create in any employee or class of employees any right with respect to
continuation of employment by JVB. The Plan shall not be deemed to interfere in
any way with JVB's right to terminate, or otherwise modify, an employee's
employment at any time.
12.08. Effect of Plan
The provisions of the Plan will be binding upon all successors of each
employee participating in the Plan, including, without limitation, the
employee's estate and the executors, administrators or trustees thereof, heirs
and legatees, and any receiver, trustee in bankruptcy or representative of
creditors of the employee.
12.09. Governing Law
The law of the State of Pennsylvania will govern all matters relating to
this Plan except to the extent it is superseded by the laws of the United
States.
- 11 -
<PAGE>
<PAGE>
[LOGO OF JUNIATA VALLEY FINANCIAL CORP. APPEARS HERE]
Mifflintown, Pennsylvania 17059
1995
Annual
Report
<PAGE>
JUNIATA VALLEY FINANCIAL CORP. AND ITS WHOLLY-OWNED SUBSIDIARY,
THE JUNIATA VALLEY BANK
DECEMBER 31, 1995
CONTENTS
<TABLE>
Page
<S> <C>
Letter to Shareholders............................................................................. 3
Corporation Officers and Directors................................................................. 4
Bank Officers & Advisory Board Members............................................................. 5
Business...................................................................................... 6 - 12
Financial Highlights.............................................................................. 13
Management's Discussion and Analysis of Financial Condition and Results of Operations........ 14 - 26
Report of Independent Auditors.................................................................... 27
Financial Statements:
Consolidated Balance Sheets................................................................... 28
Consolidated Statements of Income............................................................. 29
Consolidated Statements of Stockholders' Equity............................................... 30
Consolidated Statements of Cash Flows......................................................... 31
Notes to Consolidated Financial Statements............................................... 32 - 43
</TABLE>
<PAGE>
[LOGO OF JUNIATA VALLEY FINANCIAL CORP. APPEARS HERE]
-------------------------------
MIFFLINTOWN, PENNSYLVANIA 17059
-------------------------------
POST OFFICE BOX 66
TELEPHONE (717) 436-8211
March 14, 1996
Dear Shareholder,
We are proud to present this Annual Report for 1995. Once again Juniata Valley
Financial Corp. had record profits.
Darwin C. Pomeroy has decided to not seek re-election for Director. Mr.
Pomeroy has served as a Director since 1966. He will be missed for his insight
and unselfish dedication to this organization.
As always, I would like you to know that this excellent report would not be
possible without dedicated officers and employees. Many of us have worked
together for over twenty years.
Our wish is that all of you continue to recommend your organization to your
friends. Without your support, we could not prosper.
Sincerely;
/s/ A. Jerome Cook
A. Jerome Cook
President
AJC:rhn
-3-
<PAGE>
Juniata Valley Financial Corp. Officers
Harry B. Fairman, Jr. Ronald H. Witherite
Chairman Vice Chairman, Secretary
A. Jerome Cook Linda L. Engle
President Treasurer
Directors
A. Jerome Cook Dale G. Nace
President, The Juniata Valley Bank Owner, Glenn Nace Plumbing & Heating;
GlenDale Storage
Harry B. Fairman, Jr.
President, Hilltop Oil, Inc. Darwin C. Pomeroy
Retired Sales Engineer
John E. Groninger Bethlehem Steel Co.
President, John E. Groninger, Inc.
Contractor, Director of John A. Renninger
Consumers Financial Corp. President, A. D. Renninger
Lumber Company
Karl E. Guss
Funeral Director Edward R. Rhodes
Guss Funeral Home Senior Partner, E. R. Rhodes & Son
Don E. Haubert Harold B. Shearer
CEO and Chairman of the Board Self-employed Farmer
S & A Custom Built Homes, Inc.
Contractor, Mifflintown, PA Ronald H. Witherite
Owner, Ron's IGA Fruit Market, Inc.
NOTE: Above Directors also comprise the Board of Directors for The Juniata
Valley Bank
- -4-
<PAGE>
THE JUNIATA VALLEY BANK OFFICERS
A Wholly-Owned Subsidiary of Juniata Valley Financial Corp
MIFFLINTOWN OFFICE
A. Jerome Cook....................................................President
Helen L. Sieber..................Vice President & Community Officer Manager
Jeffrey A. Pottorff............................Auditor & Compliance Officer
Paul M. Lipka.............................................Marketing Officer
Ruth H. Nace............................................Executive Secretary
ADMINISTRATION
Donald L. Musser.........................Sr. Vice President, Administration
CONTROLLER
Linda L. Engle..................Sr. Vice President, Chief Financial Officer
Anna Mae Peoples.......................Vice President, Assistant Controller
LOANS
Edward L. Kauffman..................Sr. Vice President, Loan Administration
Scott E. Nace..................................Vice President, Loan Officer
David A. Pecht.............................................Sr. Loan Officer
Loretta A. Saylor..............................................Loan Officer
OPERATIONS
Judy R. Aumiller.............................Sr. Vice President, Operations
Deborah A. Sheaffer......................................Operations Officer
Kathy D. Hutchinson....................Assistant Vice President, Operations
TRUST
Terry S. Love.............................Sr. Vice President, Trust Officer
Cynthia L. Williams...........................................Trust Officer
BLAIRS MILLS OFFICE
C. Roger Searer..................Vice President & Community Officer Manager
Wanda K. Rowles....................................Customer Service Officer
GARDENVIEW OFFICE
M. Randall French.................Vice President & Community Office Manager
LEWISTOWN OFFICE
R. Jack Morgan....................Vice President & Community Office Manager
Lee Ellen Foose....................................Customer Service Officer
McALISTERVILLE OFFICE
Joseph D. Ritzman.................Vice President & Community Office Manager
Leslie A. Miller...................................Customer Service Officer
MILLERSTOWN OFFICE
James A. Witmer...................Vice President & Community Office Manager
Barbara I. Seaman..................................Customer Service Officer
MOUNTAIN VIEW OFFICE
Connie C. Benner..................Vice President & Community Office Manager
PORT ROYAL OFFICE
Betty D. Ryan......................................Community Office Manager
Larry B. Cottrill, Jr..............................Customer Service Officer
ADVISORY BOARD MEMBERS
BLAIRS MILLS OFFICE PORT ROYAL OFFICE McALISTERVILLE OFFICE
Wayde H. Cisney Clinton F. Bashore Clair Ehrenzeller
William R. Goshorn Norman D. Clark Clair S. Graybill
Hays I. Lauthers Martin L. Dreibelbis Samuel E. Knouse
George Love Richard J. Junk Ralph E. Rickenbaugh
C. Roger Searer Dennis A. Long Joseph D. Ritzman
Freeburn Love Richard J. Sankey
Earl J. Wagner
LEWISTOWN OFFICE MILLERSTOWN OFFICE GARDENVIEW OFFICE
William H.Bradford R. Franklin Campbell David B. Esh
William R. Carter Lowell R. Frantz, C.L.U. M. Randall French
Sharon D. Havice Gerald M. Lyter H. Ross Harshbarger
R. Jack Morgan James A. Witmer Donald R. Hartzler
Harry F. Stimely Gary G. Wright Jerry L. Wagner
Frank A. Zampelli
-5-
<PAGE>
JUNIATA VALLEY FINANCIAL CORP. AND ITS WHOLLY-OWNED SUBSIDIARY,
THE JUNIATA VALLEY BANK
BUSINESS
DESCRIPTION OF BUSINESS
On April 19, 1983, the shareholders of The Juniata Valley Bank (The Bank)
approved a plan of merger and reorganization. The plan was approved by the
various regulatory agencies on June 7, 1983 and the Juniata Valley Financial
Corp., a one bank holding company, registered under the Bank Holding Company Act
of 1956, as amended, was organized. The Bank is the oldest independent
commercial bank in Juniata and Mifflin County having originated under a state
bank charter in 1867.
The Juniata Valley Bank operates eight branch banking offices and one trust
service office. At December 31, 1995, the Bank had 100 full-time equivalent
employees. The Bank is engaged in commercial banking and trust business as
authorized by the Pennsylvania Banking Code of 1965. This includes accepting
time and demand deposits, making secured and unsecured commercial and consumer
loans, financing commercial transactions, making construction and mortgage
loans, and administering corporate, pension and personal trust services. The
Bank provides its services to individuals, corporations, partnerships,
associations, municipalities and other governmental bodies. As of December 31,
1995, the Bank had four offices in Juniata County, one office in Perry County,
two offices in Mifflin County and one office in Huntingdon County.
COMPETITION
The Bank's principal market area includes all of Mifflin and Juniata Counties,
and portions of Perry, Huntingdon, Franklin and Snyder Counties. There are 15
commercial banks which are headquartered or have branch offices located within
the Bank's market area which the Bank considers its primary competitors. Of the
15 commercial banks with operations in the Bank's market area, the Bank ranked
sixth in assets as of December 31, 1995.
Additionally, the Bank has been subjected to competition from non-bank firms,
such as savings and loans, credit unions, brokerage firms, insurance companies,
mutual fund companies, consumer finance and credit card firms, retail and
manufacturing conglomerates, and other firms providing financial services and
credit to customers. Although many non-bank industries now offer services
traditionally provided only by banks, banks are constrained by costly
regulations and time-worn laws to compete effectively against non-bank providers
of financial services. However, the Bank strives to remain competitive with
respect to interest rates, service fees and service quality in order to achieve
continued growth and success in its market. The Bank also continues to develop
and strengthen its strong ties to the communities it serves, relying on the
unique and strong relationship that a community bank has with its customers and
community by providing excellent, personal customer service.
The deposit base of The Juniata Valley Bank is such that the loss of one
depositor or a related group of depositors would not have a dramatically adverse
effect on the Bank's business. In addition, the loan portfolio is very well
diversified, so that one industry or group or related industries does not
comprise a material portion of total loans outstanding. The Bank's business is
not seasonal, nor does it have any risks attendant to foreign sources.
SUPERVISION AND REGULATION
Juniata Valley Financial Corp. 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 Act), the Corporation is subject to supervision and examination by
the Board of Governors of the Federal Reserve System and is required to file
with the Federal Reserve Board quarterly reports and information regarding its
business operations and those of its subsidiary.
The Act requires the Corporation to obtain Federal Reserve approval before:
acquiring more than five percent ownership interest in any class of the voting
securities of any bank; acquiring all or substantially all of the assets of a
bank; or, merging or consolidating with another bank holding company. In
addition, the 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.
A bank holding company is normally not permitted to acquire direct or indirect
ownership of more than five percent of any class of voting securities of any
company that is not a bank or not engaged in activities determined by the
Federal Reserve Board regulations, activities deemed to be closely related to
banking including such ventures as consumer finance, equipment leasing, certain
data processing services, mortgage banking and investment advisory services. The
act does not place geographic restrictions on the activities of non-bank
subsidiaries of bank holding companies.
The deposits of The Juniata Valley Bank are insured by the Bank Insurance Fund
of the Federal Deposit Insurance Corporation (FDIC). Consequently, the Bank is
subject to regulations and reviews under the provisions of the Federal Deposit
Insurance Act, but the primary regulatory body is the Pennsylvania Department of
Banking. The Pennsylvania Department of Banking conducts regular reviews which
have resulted in satisfactory evaluations to date.
- -6-
<PAGE>
JUNIATA VALLEY FINANCIAL CORP. AND ITS WHOLLY-OWNED SUBSIDIARY,
THE JUNIATA VALLEY BANK
BUSINESS
SUPERVISION AND REGULATION (CONTINUED)
In 1991, the Federal Deposit Insurance Corporation Act (FDICIA) was signed into
law. FDICIA established five different levels of capitalization of financial
institutions, with prompt corrective actions and significant operational
restrictions imposed on institutions that are capital deficient. The five
categories are: well capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized and critically undercapitalized.
To be considered well capitalized, an institution must have a total risk-based
capital ratio of at least 10%, a Tier I risk based capital ratio of at least 6%,
a leverage capital ratio of 5% and must not be subject to any order or directive
requiring the institution to improve its capital level. An institution falls
within the adequately capitalized category if it has a total risk-based capital
ratio of at least 8%, a Tier I risk-based capital ratio of at least 4%, and a
leverage capital ratio of at least 4%. Institutions with lower capital levels
are deemed to be undercapitalized, significantly undercapitalized, or critically
undercapitalized, depending on their actual capital levels.
The following table sets forth the computation of the Bank's regulatory capital
ratios. The Bank exceeded the minimum capital levels of the well capitalized
category.
<TABLE>
<CAPTION>
December 31,
------------
1995 1994
------ ------
<S> <C> <C>
Risk-weighted assets ratio:
Tier I 18.24% 17.16%
Total 19.45% 18.34%
Total assets leverage ratio:
Tier I 12.41% 11.47%
</TABLE>
SECURITIES PORTFOLIO
The following table sets forth the dollar amount of securities at the dates
indicated:
<TABLE>
<CAPTION>
December 31,
------------
1995 1994 1993
------- ------- -------
(In Thousands)
<S> <C> <C> <C>
Available for sale securities:
U.S. Treasury and other U.S. government obligations $ 9,585 $ 486 $ -
States and political subdivisions 3,683 2,999 -
Other corporate 3,168 1,143 -
Mortgage-backed 6,971 7,514 -
Equity 1,098 915 -
------- ------- -------
24,505 13,057 -
Held to maturity securities:
U.S. Treasury and other U.S. government obligations 5,751 7,490 6,531
States and political subdivisions 20,448 22,265 27,822
Other corporate 16,472 14,402 14,268
Mortgage-backed - - 10,464
Equity - - 847
------- ------- -------
42,671 44,157 59,932
------- ------- -------
Total securities $67,176 $57,214 $59,932
======= ======= =======
</TABLE>
-7-
<PAGE>
JUNIATA VALLEY FINANCIAL CORP AND ITS WHOLLY-OWNED SUBSIDIARY,
THE JUNIATA VALLEY BANK
BUSINESS
SECURITIES PORTFOLIO (CONTINUED)
The following table sets forth the maturities of securities at December 31, 1995
and the weighted average yields of such securities by contractual maturities or
call dates. Mortgage-backed securities with contractual maturities after ten
years from December 31, 1995, feature regular repayments of principal and
average lives of three to five years.
<TABLE>
<CAPTION>
Maturing
--------
After One After Five
But Within But Within After
Within One Year Five Years Ten Years Ten Years
Amount Yield Amount Yield Amount Yield Amount Yield
------ ----- ------ ----- ------ ----- -------------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Available for sale:
U.S. Treasury and other U.S.
government agencies $ 3,521 6.57% $ 6,064 6.31% $ -- -- $ -- --
State and political
subdivisions 1,282 4.11 1,382 4.71 754 6.23% 265 6.50%
Other corporate -- -- 3,168 6.07 -- -- -- --
Mortgage-backed 209 5.54 2,862 6.16 174 5.63 3,726 6.46
------- ------- ------- -------
5,012 13,476 928 3,991
Held to maturity:
U.S. Treasury and other U.S.
government agencies 2,000 5.75 3,751 5.83 -- -- -- --
State and political
subdivisions 5,223 5.38 14,660 4.78 225 6.63 340 5.40
Other corporate 2,144 5.22 14,114 6.21 -- -- 214 6.67
------- ------- ------- -------
9,367 32,525 225 554
------- ------- ------- -------
Total $14,379 $46,001 $1,153 $4,545
======= ======= ====== ======
</TABLE>
Securities classified as available for sale are those debt securities that the
Bank intends to hold for an indefinite period of time, but not necessarily to
maturity. Securities available for sale are carried at fair value. Unrealized
gains or losses are reported as increases or decreases in stockholders' equity,
net of related deferred tax effect. Securities classified as held to maturity
are those debt securities the Bank has both the intent and ability to hold to
maturity. These securities are carried at cost adjusted for amortization of
premium and accretion of discount.
- -8-
<PAGE>
JUNIATA VALLEY FINANCIAL CORP AND ITS WHOLLY-OWNED SUBSIDIARY,
THE JUNIATA VALLEY BANK
BUSINESS
LOAN PORTFOLIO
The highest loan concentration by activity type continues to be the trucking
industry. The percentage of these loans to total loans was approximately four
percent at the latest review. This industry services many other industries and
no potential significant risk is evident.
As with any lending activity, potential risk exists. Loans in the commercial,
financial and industrial category have declined as a percentage of total loans
over the past three years. The Bank prudently evaluates loans in this category
and generally secures such lending with collateral consisting of real and/or
tangible personal property.
All lending is granted on a variable rate basis except consumer loans which are
fixed rate. Consumer loans, consisting of approximately seventeen percent of
total loans, average a three year repayment period and are fixed at such a rate
that rate sensitivity is considered to be limited.
The following table shows the Bank's loan distribution at the end of each of the
last five years:
<TABLE>
<CAPTION>
December 31
------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
(In Thousands)
<S> <C> <C> <C> <C> <C>
Commercial, financial and
agricultural $ 11,843 $ 14,472 $ 19,361 $ 24,156 $ 25,392
Real estate mortgage 88,593 86,316 75,613 71,152 63,691
Consumer (less unearned
discount) 21,019 20,917 18,792 17,508 18,393
All other 1,483 1,486 1,968 1,341 1,361
-------- -------- -------- -------- --------
Total loans $122,938 $123,191 $115,734 $114,157 $108,837
======== ======== ======== ======== ========
</TABLE>
This table shows the maturity of loans (excluding residential mortgages of 1-4
family residences and consumer loans) outstanding as of December 31, 1995.
<TABLE>
<CAPTION>
Maturing Maturing Maturing
During From 1997 After
1996 Thru 1998 1998 Total
-------- --------- -------- --------
(In Thousands)
<S> <C> <C> <C> <C>
Commercial, agricultural and
financial $11,843 $ -- $ -- $11,843
All other 1,483 -- -- 1,483
------- ------ ------ -------
Total loans $13,326 $ -- $ -- $13,326
======= ====== ====== =======
</TABLE>
-9-
<PAGE>
JUNIATA VALLEY FINANCIAL CORP AND ITS WHOLLY-OWNED SUBSIDIARY,
THE JUNIATA VALLEY BANK
BUSINESS
NONACCRUAL, PAST DUE AND RESTRUCTURED LOANS
The following table summarizes the Bank's nonaccrual, past due and restructured
loans:
<TABLE>
<CAPTION>
December 31,
------------
1995 1994 1993 1992 1991
--------- --------- ---------- --------- ---------
(In Thousands)
<S> <C> <C> <C> <C> <C>
Average loans outstanding $121,193 $116,805 $114,896 $111,741 $105,291
======== ======== ======== ======== ========
Nonaccrual loans $ 390 $ 433 $ 105 $ 92 $ 161
Accruing loans past due
90 days or more 462 166 177 796 640
Restructured loans -- -- -- -- --
-------- -------- -------- -------- --------
Total $ 852 $ 599 $ 282 $ 888 $ 801
======== ======== ======== ======== ========
Ratio of non-performing loans
to average loans outstanding .70% .51% .25% .79% .76%
Information with respect to nonaccrual and restructured loans at December 31,
<CAPTION>
1995 1994 1993 1992 1991
-------- -------- -------- -------- ---------
(In Thousands)
<S> <C> <C> <C> <C> <C>
Nonaccrual loans $ 390 $ 433 $ 105 $ 92 $ 161
Restructured loans -- -- -- -- --
Interest income that would have been
recorded under original terms 37 28 12 11 19
Interest income recorded
during the period 5 9 -- -- --
Commitments to lend additional funds -- -- -- -- --
</TABLE>
$390,000 of the nonaccrual loans at December 31, 1995, are secured by real
estate or otherwise guaranteed as to repayment. The majority of the nonaccrual
balance relates to one borrower.
- -10-
<PAGE>
JUNIATA VALLEY FINANCIAL CORP AND ITS WHOLLY-OWNED SUBSIDIARY,
THE JUNIATA VALLEY BANK
BUSINESS
SUMMARY OF LOAN LOSS EXPERIENCE
The following table summarizes the Bank's loan loss experience for each of the
five years ended December 31,
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
------------- ------------ ------------ ------------ ------------
(In Thousands)
<S> <C> <C> <C> <C> <C>
Average loans outstanding $121,193 $116,805 $114,896 $111,741 $105,291
======== ======== ======== ======== ========
Allowance for loan loss January 1 $ 1,523 $ 1,458 $ 1,363 $ 1,304 $ 1,294
Losses charged to allowance
Commercial 12 - 19 59 131
Real estate 28 92 66 14 18
Consumer 55 86 79 71 138
--------- ---------- ---------- ---------- ----------
95 178 164 144 287
Recoveries credited to allowance --------- ---------- ---------- ---------- ----------
Commercial 3 - 2 13 27
Real estate 42 2 10 2 3
Consumer 8 21 27 8 25
--------- ---------- ---------- ---------- ----------
53 23 39 23 55
--------- ---------- ---------- ---------- ----------
Net charge-offs 42 155 125 121 232
Provision for possible loan losses 135 220 220 180 242
--------- ---------- ---------- ---------- ----------
Allowance for loan losses December 31 $ 1,616 $ 1,523 $ 1,458 $ 1,363 $ 1,304
======== ========== ========== ========== ==========
Ratio of net charge-offs to
average loans outstanding .03% .13% .11% .11% .22%
</TABLE>
The amount charged to operations and the related balance in the allowance for
loan losses is based upon periodic evaluations of the loan portfolio by
management. These evaluations consider several factors including, but not
limited to, general economic conditions, loan portfolio composition, prior loan
loss experience and management's estimate of future potential losses.
This table shows an allocation of the allowance for loan losses as of the end
of each of the last five years.
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
--------- --------- --------- --------- ---------
(In Thousands)
% of % of % of % of % of
Amount Loan Amount Loan Amount Loan Amount Loan Amount Loan
-------- -------- --------- -------- --------- -------- --------- -------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial $ 321 9.6% $ 303 11.7% $ 385 4.3% $ 408 21.7% $ 380 22.5%
Real estate 322 72.1 298 70.1 243 77.1 164 62.6 160 56.6
Consumer 443 18.3 468 18.2 410 18.6 395 15.7 370 20.9
Unallocated 530 -- 454 -- 420 -- 396 -- 394 --
------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Total $1,616 100% $1,523 100% $1,458 100% $1,363 100% $1,304 100%
====== ===== ====== ===== ====== ===== ====== ===== ====== ======
</TABLE>
-11-
<PAGE>
JUNIATA VALLEY FINANCIAL CORP AND ITS WHOLLY-OWNED SUBSIDIARY,
THE JUNIATA VALLEY BANK
BUSINESS
SUMMARY OF LOAN LOSS EXPERIENCE (CONTINUED)
While loans secured by real estate mortgages comprise greater than 50% of the
total loan portfolio, historically these accounts have resulted in marginal
loss. Therefore management's evaluation of the loan portfolio indicates a
relatively low allocation of the allowance for this category of loans.
In addition to management's regular reviews, the results of normal examination
of the loan portfolio by representatives of regulatory agencies and the Bank's
independent accountants are also considered in determining the level at which
the allowance should be maintained. 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 that would
give serious doubt as to the ability of its borrowers to substantially comply
with loan repayment terms.
Highly leveraged transactions (HLTS) generally include loans and commitments
made in connection with recapitalizations, acquisitions and leveraged buyouts,
and result in the borrowers debt-to-total assets ratio exceeding 75%. The Bank
has no loans at December 31, 1995, that qualified as HLTS.
DEPOSITS
The average daily amount of deposits and rates paid on such deposits is
summarized for December 31, indicated in the following table:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
Amount Rate Amount Rate Amount Rate
------ ---- ------ ---- ------ ----
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Non-interest bearing demand $ 19,182 $ 18,562 $ 17,259
Interest bearing demand 25,505 2.45% 30,051 2.43% 29,610 2.64%
Savings deposits 22,183 2.86 24,794 2.85 23,186 3.09
Time deposits 103,793 5.50 95,043 4.60 95,464 4.79
-------- -------- --------
Total $170,663 $168,450 $165,519
======== ======== ========
</TABLE>
As of December 31, 1995, certificates of deposit outstanding in an individual
amount of $100,000 or more totalled $13,283,000.
The maturity of these certificates of deposits is as follows:
<TABLE>
<CAPTION>
Over 3 Over 6
3 months through 6 through 12 Over 12
or less months months months
------- ------ ------ ------
(In Thousands)
<S> <C> <C> <C>
$3,235 $1,890 $1,239 $6,919
====== ====== ====== ======
</TABLE>
- -12-
<PAGE>
JUNIATA VALLEY FINANCIAL CORP. AND ITS WHOLLY-OWNED SUBSIDIARY
THE JUNIATA VALLEY BANK
FIVE YEAR FINANCIAL HIGHLIGHTS . SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (In Thousands)
Assets $ 205,878 $ 190,176 $ 189,776 $ 185,958 $ 174,454
Deposits 178,153 165,151 166,542 165,698 155,702
Loans receivable 121,322 121,668 114,276 112,794 107,533
Securities 67,176 57,214 59,932 57,183 54,885
Stockholders' equity 24,723 22,434 20,803 18,578 16,987
Average equity 23,316 21,363 19,497 17,709 16,153
Average assets 197,168 192,759 187,603 181,390 170,202
EARNINGS DATA (In Thousands)
Interest income $ 15,070 $ 13,972 $ 14,090 $ 14,686 $ 15,805
Interest expense 6,970 5,813 6,073 7,337 8,920
---------- ---------- ---------- ---------- ----------
Net interest income 8,100 8,159 8,017 7,349 6,885
Provision for loan losses 135 220 220 180 242
---------- ---------- ---------- ---------- ----------
Net interest income after
provision for loan losses 7,965 7,939 7,797 7,169 6,643
Other operating income 581 551 518 468 467
Other operating expenses 5,106 5,146 5,237 4,897 4,535
---------- ---------- ---------- ---------- ----------
Income before income tax
provision 3,440 3,344 3,078 2,740 2,575
Income tax provision 780 791 697 518 448
---------- ---------- ---------- ---------- ----------
Income before cumulative effect
of change in accounting
principle 2,660 2,553 2,381 2,222 2,127
Net income $ 2,660 $ 2,553 $ 2,934 $ 2,222 $ 2,127
RATIOS
Return on average assets 1.35% 1.32% 1.27% (1) 1.22% 1.25%
Return on average equity 11.41 11.94 12.21 (1) 12.55 13.17
Equity to assets (year end) 12.01 11.80 10.27 9.99 9.26
Loans to deposits (year end) 68.10 73.67 68.62 68.07 69.06
Dividend payout (percentage
of income) 29.14 29.18 28.60 28.58 27.74
*PER SHARE DATA
Income before cumulative
effect of change in accounting
principle 2.39 2.29 2.14 2.00 1.91
Net Income 2.39 2.29 2.64 2.00 1.91
Cash dividends .70 .67 .62 .57 .53
Book value 22.21 20.16 18.69 16.69 15.26
Average shares outstanding 1,113,001 1,113,001 1,113,001 1,113,001 1,113,001
Approximate number
of stockholders 1,066 1,089 1,021 987 965
</TABLE>
*Outstanding and per-share information for all years presented has been restated
to give effect to the 5-for-4 stock split in the form of a 25% stock dividend
issued January 9, 1996, and on October 26, 1994, and three 10% stock dividends
issued on September 30, 1993, February 26, 1993 and September 15, 1992.
(1) Excluding the cumulative effect of change in accounting principle of
$553,000 or $.62 per share.
-13-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
The purpose of this discussion is to focus on information about the
Corporation's financial condition and results of operations which is not
otherwise apparent from the consolidated financial statements included in this
annual report. Reference should be made to those statements and the selected
financial data presented elsewhere in this report for an understanding of the
following discussion and analysis.
- --------------------------------------------------------------------------------
FINANCIAL CONDITION
- --------------------------------------------------------------------------------
SOURCES AND USES OF FUNDS TRENDS
<TABLE>
<CAPTION>
1995 Increase (Decrease) 1994 Increase (Decrease) 1993
Average -------- ---------- Average -------- ---------- Average
Balance Amount % Balance Amount % Balance
------- -------- --- ------- -------- --- -------
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C> <C> <C>
Funding uses:
Interest earning assets:
Loans:
Commercial $ 41,243 $ (98) (.24)% $ 41,341 $(3,827) (8.47)% $ 45,168
Mortgage 57,254 3,002 5.53 54,252 3,092 6.05 51,160
Consumer 22,696 1,484 7.00 21,212 2,644 14.24 18,568
-------- ------- -------- ------- --------
121,193 4,388 3.76 116,805 1,909 1.66 114,896
Less: Allowance for loan
losses (1,576) (70) 4.65 (1,506) (97) 6.97 (1,409)
-------- ------- -------- ------- --------
119,617 4,318 3.75 115,299 1,812 1.60 113,487
Securities 62,860 (1,652) (2.56) 64,512 4,514 7.52 59,998
Funds sold 3,993 1,361 51.71 2,632 (1,847) (41.24) 4,479
-------- ------- -------- ------- --------
66,853 (291) (.43) 67,144 2,667 4.14 64,477
Total interest earning
assets 186,470 4,027 2.21 182,443 4,479 2.52 177,964
Other assets 10,698 382 3.70 10,316 677 7.02 9,639
-------- ------- -------- ------- --------
Total uses $197,168 $ 4,409 2.29 $192,759 $5,156 2.75 $187,603
======== ======= ======== ======= ========
Funding sources:
Deposits:
Demand $ 19,182 $ 620 3.34 $ 18,562 $ 1,303 7.55 $ 17,259
Interest bearing demand 25,505 (4,546) (15.13) 30,051 441 1.49 29,610
Savings 22,183 (2,611) (10.53) 24,794 1,608 6.94 23,186
Time under $100,000 91,447 7,165 8.50 84,282 (466) (.55) 84,748
-------- ------- -------- ------- --------
Total core deposits 158,317 628 .40 157,689 2,886 1.86 154,803
Time over $100,000 12,346 1,585 14.73 10,761 45 .42 10,716
-------- ------- -------- ------- --------
Total deposits 170,663 2,213 1.31 168,450 2,931 1.77 165,519
Other liabilities 3,189 243 8.25 2,946 359 13.88 2,587
Stockholders' equity 23,316 1,953 9.14 21,363 1,866 9.57 19,497
-------- ------- -------- ------- --------
Total sources $197,168 $ 4,409 2.29 $192,759 $ 5,156 2.75 $187,603
======== ======= ======== ======= ========
</TABLE>
- -14-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
----------------------------------------------------------------
FINANCIAL CONDITION (Continued)
----------------------------------------------------------------
The Corporation functions as a financial intermediary and as such its financial
condition should be examined in terms of trends in its sources and uses of
funds. The following comparison of daily averages balances indicates how the
Corporation has managed its sources and uses of funds.
Juniata Valley Financial Corp.'s primary source of funds is core deposits. Over
the past several years, the composition of the Corporation's deposits has
changed significantly due to volatile interest rates. Growth in 1995 occurred in
two funding sources with the majority of this growth coming from time deposits
under $100,000; whereas growth in 1994 occurred in all funding sources except
time deposits under $100,000. Time deposits under $100,000 increased 8.50% from
1994 to 1995 and decreased .55% from 1993 to 1994. Demand deposits increased
3.34% from 1994 to 1995 and 7.55% from 1993 to 1994. A decrease was experienced
in interest bearing demand of 15.13% from 1994 to 1995 and an increase of 1.49%
was shown in 1994 over 1993. Savings decreased from 1994 to 1995 by 10.53% but
increased 6.94% from 1993 to 1994. On average during 1995, core deposits
experienced a slight increase of $628,000. The Corporation's ability to maintain
its core deposit base despite the volatile interest rates and nonbank
influences in the market area, reflects the Corporation's strong customer base.
The largest category of core deposits and the primary source of funds, continues
to be time deposits under $100,000. This category includes certificates of
deposit, which allow customers to invest their funds at selected maturities
ranging from 6 months to 5 years and individual retirement accounts. A
disintermediation between time deposits under $100,000 and savings deposits has
been experienced for several years; this trend was not as significant in 1994.
At the beginning of the year in 1995, interest rates being offered on
certificates of deposits increased. These higher rates being offered lured
customers to commit to reinvest their money market and saving accounts into
certificates of deposit.
The Corporation uses its funds primarily to support its lending activities.
Total net loans increased by $4,318,000 or 3.75% in 1995. This compares to a
$1,812,000 or 1.60% increase during the prior year. The largest increase in
both years was in consumer loans, $1,484,000 or 7.00% from 1994 to 1995 and
$2,644,000 or 14.24% from 1993 to 1994. Mortgage loans, the largest category,
increased $3,002,000 or 5.53% from 1994 to 1995 and $3,092,000 or 6.05% from
1993 to 1994. In both years a decrease was experienced in commercial loans .24%
or $98,000 in 1995 over 1994, and 8.47% or $3,827,000 in 1994 over 1993.
Consumer loans which consist primarily of loans made to individuals on an
installment basis grew because of favorable loan rates being offered especially
on new and used vehicles. The increase in mortgage loans is due to the
refinancing of existing mortgages as well as first time home buyers. Other
consumers took this opportunity to renovate their existing homes and consolidate
other debt into residential mortgages. Commercial loans are typically made to
small businesses in our market place. There has been very little growth in this
market with many small businesses preferring other loan products the Bank has to
offer.
The Corporation's securities portfolio experienced a decline during 1995 of
$1,652,000 compared to an increase of $4,514,000 in 1994. The Corporation's
securities portfolio is comprised of U.S. government and federal agencies, tax-
exempt issues of states and municipalities, other corporate bonds and mortgage-
backed securities.
---------------------------------------------------------------------
RESULTS OF OPERATIONS INCOME
---------------------------------------------------------------------
Juniata Valley Financial Corp. reported net income for 1995 of $2,660,000, an
increase of 4.19% from the $2,553,000 net income reported in 1994 and a decrease
of 9.34% compared to 1993 earnings of $2,934,000. 1993's net income was
positively impacted by $553,000 due to the cumulative effect of adopting a
change in the method of accounting for income taxes. Earnings per share was
$2.39 in 1995 an increase of $.10 from 1994 and a decrease of $.25 from 1993.
[BAR GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
INCOME
<S> <C>
1991 2127
1992 2222
1993 2381
1994 2553
1995 2660
</TABLE>
-15-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
-------------------------------------------------------------------
RESULTS OF OPERATIONS (Continued)
-------------------------------------------------------------------
The two most widely recognized performance ratios are the return on average
equity and return on average assets. The return on average equity ratio presents
the net income to average equity maintained throughout the year. The return on
average equity was 11.41% in 1995, compared to 11.94% in 1994 and 12.21% in 1993
(excluding the cumulative effect of a change in accounting principle).
[GRAPH OF RETURN ON AVERAGE EQUITY APPEARS HERE]
<TABLE>
<CAPTION>
RETURN ON AVERAGE EQUITY
<S> <C>
1991 13.17
1992 12.55
1993 12.21
1994 11.94
1995 11.41
</TABLE>
Return on average assets ratio presents the income for the year compared to the
average assets maintained throughout the year. The return on average assets was
1.35% in 1995, compared to 1.32% in 1994 and 1.27% in 1993 (excluding the
cumulative effect of a change in accounting principle).
[GRAPH OF RETURN ON AVERAGE ASSETS APPEARS HERE]
<TABLE>
<CAPTION>
RETURN ON AVERAGE ASSETS
<S> <C>
1991 1.25
1992 1.22
1993 1.27
1994 1.32
1995 1.35
</TABLE>
The Board of Directors continued to increase the cash dividends paid to
stockholders. On a per share basis $.70 was paid in 1995, up 4.48% from the $.67
paid in 1994 and up 12.90% over the $.62 paid in 1993. Along with increases in
cash dividends, two 5-for-4 stock splits in the form of 25% stock dividends were
issued on January 9, 1996, and October 26, 1994. This followed three 10% stock
dividends that were paid on February 26 and September 30, 1993, and September
15, 1992. After giving effect to these stock splits and stock dividends, the
market price per share increased from $28.80 at December 31, 1994, to $35.00 at
December 31, 1995.
[GRAPH OF CASH DIVIDENDS PER SHARE APPEARS HERE]
<TABLE>
<CAPTION>
CASH DIVIDENDS PER SHARE
<S> <C>
1991 0.53
1992 0.57
1993 0.62
1994 0.67
1995 0.70
</TABLE>
While increasing the dividends, the Corporation was able to increase
Stockholders' equity to assets (the capital ratio) to 12.01% at December 31,
1995, up from 11.80% in 1994 and 10.27% in 1993. This indicates the continued
strength of the Corporation to build Stockholder wealth.
[GRAPH OF EQUITY TO ASSETS APPEARS HERE]
<TABLE>
<CAPTION>
EQUITY TO ASSETS
<S> <C>
1991 9.26
1992 9.99
1993 10.27
1994 11.80
1995 12.01
</TABLE>
The Corporation has realized steady growth over the past two years. Assets at
December 31, 1995 were $205,878,000 an increase of $15,702,000 or 8.26% compared
to 1994 assets of $190,176,000. Assets for 1994 grew $400,000 or .21% compared
to 1993 assets of $189,776,000.
[GRAPH OF ASSETS APPEARS HERE]
<TABLE>
<CAPTION>
ASSETS
<S> <C>
1991 174454
1992 185958
1993 189776
1994 190176
1995 205878
</TABLE>
- -16-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
-----------------------------------------------------------------
RESULTS OF OPERATIONS (Continued)
-----------------------------------------------------------------
The Juniata Valley Bank's allowance for loan losses was $1616,000 in 1995,
$1,523,000 in 1994 and $1,458,000 in 1993. The provision provided in each of
those years was $135,000 in 1995 and $220,000 in both 1994 and 1993. The
provision for loan losses exceeded net charge-offs by 221.43%, 41.94%, and
76.00% in 1995, 1994 and 1993, respectively. In 1995 net charge-offs were .03%
of average loans outstanding. In 1994 and 1993 net charge-offs were .13% and
.11% of average loans outstanding, respectively.
Other income increased $30,000 or 5.44% over 1994. From 1993 to 1994 the
increase was $33,000 or 6.37%. The increase in 1995 was attributable to trust
department income increasing $12,000 due to the settlement of two large estates.
This contrasts a decline in trust department income from 1994 to 1993 of
$24,000. This was due to settling three large estates in 1993 over 1994. Other
service charges, commissions and fees increased $10,000 or 5.71% over 1994 which
increased $32,000 over 1993. The increase in 1995 can be attributed to an
increase in commissions earned as a result of increased volume. Customer service
fees increased $1,000 or .45% from 1994 to 1995. Customer service fees increased
$16,000 or 7.77% from 1993 to 1994.
In total, other expenses decreased $40,000 or .78% over 1994. This compares to a
decline of $91,000 from 1993 to 1994. The $69,000 increase in salaries and wages
can be attributed to annual merit increases and promotions of employees. This
compares to an increase of $59,000 in salaries and wages for 1994 over 1993. In
1995 employee benefits decreased $15,000 or 2.58%. This was due to a decrease in
the price of the benefits provided as opposed to decreased benefits. There was
an increase in employee benefits of $21,000 from 1993 to 1994. Equipment expense
decreased by $78,000 or 20.53% from 1994 to 1995. This can be attributed to the
expiration of a lease and a less costly replacement lease. There was no change
between 1993 and 1994. Federal deposit insurance premiums decreased $184,000 or
48.94% in 1995. As a result of an industry wide funding of the federal deposit
insurance reserves, a refund of deposit insurance premiums previously paid of
$105,000 was received and the Bank experienced a decrease in the assessment rate
from $.23 to $.04 per $100 of insured deposits effective September 30, 1995. The
effect of the decrease in the deposit insurance premium assessment rate will
continue to have a favorable impact to the bank in the future. The 1996 premium
for the Bank will be at the statutory minimum of $2,000 based on the Bank being
well-capitalized. After a decrease of $41,000 in 1994 in director compensation,
there was a slight increase in 1995 of $13,000 or 3.49%. The $133,000 increase
in the other category is attributable to a $15,000 consulting fee; $22,000
increase in examination fees by the Pennsylvania Department of Banking; a
$15,000 increase in errors and omissions insurance costs; and a $30,000 increase
in repossession and loan collection expense.
Management is not aware of any known trends, events or uncertainties that will
have or that are reasonably likely to have material adverse effects on
liquidity, capital resources or operations of the Corporation.
-17-
<PAGE>
- --------------------------------------------------------------------------------
TABLE 1 - ANALYSIS OF NET INTEREST INCOME
- --------------------------------------------------------------------------------
Table 1 presents average balances, interest income and expense and the yields
earned or paid on these assets and liabilities. Yields on tax exempt securities
are not presented on a tax equivalent basis. Nonaccrual loans are included in
"Other assets" under "Noninterest earning assets".
<TABLE>
<CAPTION>
1995
Interest
Average Income %
Balances (Expense) Rate
-------- -------- -----
(In Thousands)
<S> <C> <C> <C>
INTEREST EARNING ASSETS
Interest bearing deposits in other banks $ 153 $ 10 6.54%
Securities (taxable) 36,011 2,212 6.14
Securities (tax free) 26,696 1,195 4.48
Federal funds sold 3,993 236 5.91
Loans 121,193 11,417 9.42
-------- --------
Total interest earning assets 188,046 $ 15,070 8.01
----
NON-INTEREST EARNING ASSETS
Cash and due from banks 5,127
Other assets 5,571
Less: allowance for loan losses (1,576)
--------
Total assets $197,168
========
INTEREST BEARING LIABILITIES
Demand deposits bearing interest $ 25,505 (624) 2.45
Savings deposits 22,183 (635) 2.86
Other time deposits 103,793 (5,711) 5.50
-------- --------
Total interest bearing liabilities 151,481 ($6,970) 4.60
-------- ----
NON-INTEREST BEARING LIABILITIES
Demand deposits 19,182
Other liabilities 3,189
Stockholders' equity 23,316
--------
Total liabilities and stockholders' equity $197,168
========
NET INTEREST INCOME/SPREAD $ 8,100 3.41%
======== =====
MARGIN ANALYSIS
Interest income/ earning assets 8.01%
Interest expense/earning assets 3.71
-----
Net interest margin 4.31%
=====
</TABLE>
- -18-
<PAGE>
- --------------------------------------------------------------------------------
TABLE 1 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1994 1993
Interest Interest
Average Income % Average Income %
Balances (Expense) Rate Balances (Expense) Rate
-------- --------- ----- --------- --------- -----
(In Thousands) (In Thousands)
<S> <C> <C> <C> <C> <C>
$ 738 $ 31 4.20% $ 110 $ 3 2.73%
34,599 2,035 5.88 32,335 1,916 5.93
29,175 1,301 4.46 27,554 1,337 4.85
2,632 98 3.72 4,479 134 2.99
116,805 10,507 9.00 114,896 10,700 9.31
-------- -------- -------- --------
$183,949 $ 13,972 7.60 $179,374 $ 14,090 7.86
---- ----
5,413 5,021
4,903 4,616
(1,506) (1,408)
-------- --------
$192,759 $187,603
======== ========
$ 30,051 (731) 2.43 $ 29,610 (781) 2.64
24,794 (707) 2.85 23,186 (716) 3.09
95,043 (4,375) 4.60 95,464 (4,576) 4.79
-------- -------- -------- --------
$149,888 $ (5,813) 3.88 148,260 $ (6,073) 4.10
-------- ---- -------- ----
18,562 17,259
2,946 2,587
21,363 19,497
-------- --------
$192,759 $187,603
======== ========
$ 8,159 3.72% $ 8,017 3.76%
======= ==== ======= ====
7.60% 7.86%
3.16 3.39
---- ----
4.44% 4.47%
==== ====
</TABLE>
- 19 -
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
- --------------------------------------------------------------------------------
NET INTEREST INCOME
- --------------------------------------------------------------------------------
The primary source of income for the Corporation is net interest income, which
represents the difference between interest income on earning assets and interest
expense on deposits. Earning assets include securities, loans and deposits in
other banks. The amount of interest income is dependent upon many factors
including the volume of earning assets, the general level of interest rates and
the dynamics of the change in interest rates. The cost of funds varies with the
amount of funds necessary to support earning assets, the rates paid to attract
and hold deposits and the level of non-interest bearing demand deposits and
equity capital.
Table 1 presents average balances, interest income and expense and yields earned
or paid on these assets and liabilities. Interest earning assets increased
$4,097,000 or 2.22% from 1994 to 1995. An increase was also experienced from
1993 to 1994 of $4,575,000 or 2.52%. The overall yield on these interest earning
assets was an increase of 41 basis points in 1995; however there was a decline
of 26 basis points from 1993 to 1994.
The largest contributor to interest income was loans. The yield on loans
increased 42 basis points from 1994 to 1995. Interest earned on securities is
the second largest contributor for the Corporation. The yield on taxable
securities increased from 5.88% in 1994 to 6.14% in 1995. For tax free
securities the yield increased from 4.46% in 1994 to 4.48% in 1995.
Interest bearing liabilities increased $1,593,000 or 1.06% from 1994 to 1995.
The average cost of interest bearing demand and savings deposits remained
relatively unchanged from 1994 to 1995. In order for the bank to not only keep
the deposits they had, but to attract new deposits, higher rates offered and
paid resulted in the average cost of time deposits increasing from 4.60% in 1994
to 5.50% in 1995.
The Corporation's net spread was 3.41% in 1995 down from 3.72% in 1994 and 3.76%
in 1993. Interest spread measures the absolute difference between average rates
earned and average rates paid while net interest margin reflects the
relationship of interest income to earning assets versus interest expense to
earning assets. The Corporation's net interest margin was 4.31% for 1995
compared to 4.44% in 1994 and 4.47% in 1993.
Table 2 shows the interest income, interest expense and net interest income with
the percentage change between the years. Interest income was $15,070,000 in 1995
an increase of 7.86% over 1994's amount of $13,972,000 and $14,090,000 in 1993.
Interest expense also increased 19.90% to $6,970,000 for 1995 compared with
$5,813,000 in 1994 and $6,073,000 in 1993. The changing interest rate
environment resulted in higher interest income and interest expense growth in
1995. The expense growth was more then the income which yielded an overall
decline in net interest income of .72% from 1994 to 1995. Interest income and
expense declined from 1993 to 1994; however the decrease in interest expense was
greater than the decrease in interest income to that an overall increase to net
interest income was experienced of 1.77%.
Table 3 indicates the interest income increase of $1,098,000 from 1994 to 1995
was attributable to increases in both volume and rates principally for loans.
Asset growth contributed $393,000 to interest income while rate increases
contributed $705,000 to interest income.
The interest expense increase of $1,157,000 from 1994 to 1995 was also
attributable to increases in both volume and rate increases principally for time
deposits. Liability growth contributed $218,000 to interest expense while rate
increases contributed $939,000 to expense.
- --------------------------------------------------------------------------------
TABLE 2 -- NET INTEREST INCOME
- --------------------------------------------------------------------------------
Net interest income, defined as interest income less interest expense, is shown
in the following table:
<TABLE>
<CAPTION>
1995 % Change 1994 % Change 1993
------- -------- ------- -------- -------
(In Thousands)
<S> <C> <C> <C> <C> <C>
Interest income $15,070 7.86% $13,972 (.84)% $14,090
Interest expense 6,970 19.90 5,813 (4.28) 6,073
Net interest income $ 8,100 (.72) $ 8,159 1.77 $ 8,017
======= ======= =======
</TABLE>
- - 20 -
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
- --------------------------------------------------------------------------------
TABLE 3 - RATE-VOLUME ANALYSIS OF NET INTEREST INCOME
- --------------------------------------------------------------------------------
Table 3 attributes increases and decreases in components of net interest income
to changes in average volume and to changes in average rates for interest
earning assets and interest bearing liabilities.
<TABLE>
<CAPTION>
1995/1994 Increase 1994/1993 Increase
(Decrease) Due to (Decrease) Due to
Change in Change in
Volume Rate Net Volume Rate Net
------ ---- --- ------ ---- ---
<S> <C> <C> <C> <C> <C> <C>
Interest bearing deposits
in other banks $ (25) $ 4 $ (21) $ 17 $ 11 $ 28
Securities (taxable) 83 94 177 134 (15) 119
Securities (tax free) (111) 5 (106) 79 (115) (36)
Federal funds sold and other 51 87 138 (55) 19 (36)
Loans 395 515 910 178 (371) (193)
----- ----- ------ ---- ----- -----
Interest income 393 705 1,098 353 (471) (118)
----- ----- ------ ---- ----- -----
Demand deposits
bearing interest (111) 4 (107) 12 (62) (50)
Savings deposits (74) 2 (72) 49 (58) (9)
Time deposits 403 933 1,336 (20) (181) (201)
----- ----- ------ ---- ----- -----
Interest expense 218 939 1,157 42 (302) (260)
----- ----- ------ ---- ----- -----
Increase (decrease)
in net interest
income $ 175 $(234) $ (59) $311 $(169) $ 142
===== ===== ====== ==== ===== =====
</TABLE>
- --------------------------------------------------------------------------------
LOAN PORTFOLIO
- --------------------------------------------------------------------------------
At December 31, 1995 the net loan decline was $346,000
or a decrease of .28% over 1994. This follows a year of
record growth of $7,392,000 in 1994 over 1993. The loan
to deposit ratio decreased throughout 1995; monthly
averages were at a high in January of 74.29% to a low in
[BAR GRAPH APPEARS December of 68.61%. Mortgage loans increased $2,277,000
HERE] or 2.63% from 1994 to 1995. The growth for 1994 over
1993 was $10,703,000. Real estate loans still remain a
very attractive option due to the tax deductibility of
mortgage interest. Consumer loans increased $102,000 or
.49% in 1995 over 1994. The increase from 1993 to 1994
was $2,125,000. Commercial loans decreased $2,629,000 or
18.17% from 1994 to 1995. The decrease from 1993 to 1994
was $4,889,000. This trend is indicative of weaker
demand primarily due to the uncertain national and local
economy.
In spite of the slow economy and increasing credit
problems nationwide, the Corporation continued its excellent net charge-off
record (charge-offs, net of recoveries) during 1995. For the year, the net
charge-offs were $42,000 or .03% of average loans outstanding. This compares
with $155,000 or .13% for 1994 and $125,000 or .11% for 1993.
The allowance for loan losses is based upon quarterly loan portfolio reviews by
management. The purpose of the review is to assess loan quality, analyze
delinquencies, ascertain loan growth, evaluate potential charge-offs and
recoveries and assess general economic conditions in the market served. It is
Management's judgement that the allowance for 1995 of $1,616,000 or 1.33% of
outstanding loans is adequate to meet any foreseeable loan loss contingency.
This is higher than the 1.25% for 1994 and 1.28% for 1993. At December 31,1995
and 1994, total non-performing loans were $852,000 and $599,000, respectively;
non-performing loans as a percentage of the allowance for loan losses were
52.72% and 39.33%, respectively. Increased collection efforts have been made to
decrease this percentage for the future.
Bar/Line Chart Data
<TABLE>
<CAPTION>
NET LOANS
X Axis
Pt Name
<S> <C> <C>
1 1991 107533
2 1992 112794
3 1993 114276
4 1994 121668
5 1995 121322
</TABLE>
- 21 -
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
- --------------------------------------------------------------------------------
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 a primary goal of the Corporation to maintain a high level of
liquidity in all economic environments.
Liquidity management is influenced by several key elements, including asset
quality and the maturity structure of assets and liabilities. The single most
important source of liquidity for the Corporation is a strong, stable core
deposit base. This funding source has exhibited steady growth over the years and
consists of deposits from customers with long-standing relationships. In 1995
the Corporation funded approximately 80% of its assets with core deposits
acquired in local communities. This core deposit base, combined with
Stockholders' equity, funded 90% of average assets in 1995 and provides a
substantial and highly stable source of liquidity.
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. 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.
Liability liquidity, which is more difficult to measure, can be met by
attracting deposits and maintaining the core deposit base. The Corporation's
ability to attract deposits depends primarily on several factors including sales
effort, competitive interest rates, and other conditions which help maintain
consumer confidence in the stability of the financial institution. This
confidence is evaluated by such factors as profitability, capitalization and
overall financial condition.
The Corporation's primary funding requirement is loan demand. Loan demand is
primarily funded through deposit growth. With loans decreasing in 1995, deposits
were used to purchase securities.
For the year ended December 31,1995 the financing activities of the Bank,
provided net cash of $12,214,000 resulting principally from the increase in
deposits. Net cash used in investing activities was $9,341,000 as purchases of
securities exceeded maturities and principal repayments by $9,330,000. Net cash
provided by operating activities was $2,815,000.
- --------------------------------------------------------------------------------
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 identifies the maturity and repricing terms of all assets and
liabilities.
The analysis in Table 4 indicates the existence of a liability sensitive
position. Generally a liability sensitive position indicates that more
liabilities than assets are expected to re-price within the time period and that
falling interest rates could positively affect net interest income while rising
rates could negatively affect net interest income. However, this 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. In
certain cases in prior years, securities were identified and disposed of that
did not conform to Management's model. In those cases, these securities were
sold.
- - 22 -
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
- --------------------------------------------------------------------------------
Table 4 - MATURITY DISTRIBUTION
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
As of December 31, 1995
-----------------------
(In Thousands)
Remaining Maturity/Earliest Possible Repricing
Over One
Over Three Over Six Year But
Three Months But Months But Within Over
Months Within Six Within One Five Five
Assets or Less Months Year Years Years
------- ------ ---- ----- --------
<S> <C> <C> <C> <C> <C>
Interest bearing deposits $ 15 $ - $ - $ - $ -
Securities:
U.S. Treasuries 1,000 - - 2,250 -
U.S. Agencies 768 3,499 1,819 7,513 -
Municipals 1,201 1,142 4,959 15,961 815
Corporate and others 660 232 1,872 20,129 1,107
Mortgage-backed 210 210 420 2,236 3,872
Loans:
Commercial 37,377 - - - 3,631
Installment 1,508 1,474 2,770 11,397 5,501
Mortgage 12,144 12,214 24,287 4,273 4,957
All non-interest earning
assets - - - - 12,455
-------- ------- ------- ------- --------
Total assets 54,883 18,771 36,127 63,759 32,338
-------- ------- ------- ------- --------
Liabilities and
stockholders' equity
Interest bearing demand
deposits 24,491 - - - -
Savings deposits 21,861 - - - -
Certificates of deposit 19,803 17,330 18,119 54,252 -
All non-interest bearing
liabilities - - - - 25,299
Stockholders' equity - - - - 24,723
-------- ------- ------- ------- --------
Total liabilities and
stockholders' equity 66,155 17,330 18,119 54,252 50,022
-------- ------- ------- ------- --------
Gap $(11,272) $ 1,441 $18,008 $ 9,507 $(17,684)
======== ======= ======= ======= ========
Cumulative gap $(11,272) $(9,831) $ 8,177 $17,684 $ -
======== ======= ======= ======= ========
</TABLE>
- 23 -
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
- --------------------------------------------------------------------------------
REGULATORY MATTERS
- --------------------------------------------------------------------------------
The Juniata Valley Bank is subject to periodic examinations by one or more of
the various regulatory agencies. During 1995 an examination was conducted by the
Federal Deposit Insurance Corporation. Also, The Federal Reserve Board of
Philadelphia conducted an examination of the Juniata Valley Financial Corp.
These examinations included, but were not limited to, procedures designed to
review lending practices, credit quality, liquidity, operations and capital
adequacy. No comments were received from this regulatory body which would have a
material effect on the Corporation's liquidity, capital resources or operations.
The Financial Accounting Standards Board has issued Statement No. 114,
"Accounting by Creditors for Impairment of a Loan", as amended by Statement
No. 118, "Accounting by Creditors for Impairment of a Loan - Income Recognition
and Disclosures". Under the new standards, the 1995 allowance for loan losses
related to loans that are identified for evaluation in accordance with Statement
No. 114 is based on discounted cash flows using the loans initial effective
interest rate or their fair value of the collateral for certain collateral
dependent loans. Prior to 1995, the allowance for loan losses related to these
loans was based on undiscounted cash flows or fair value of the collateral for
collateral dependent loans.
In 1995, the Financial Accounting Standards Board (FASB) issued Statement
No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be disposed Of" which establishes accounting and measurement standards
for the impairment of long-lived assets such as property and equipment, certain
identifiable intangibles and goodwill related to those assets. The Bank is
required to adopt the Statement effective January 1, 1996 and the effect of its
implementation is not expected to have a material impact on the Bank's financial
position or results of operation.
- --------------------------------------------------------------------------------
CAPITAL
- --------------------------------------------------------------------------------
The Corporation maintains a strong capital base to take advantage of business
opportunities while ensuring that it has resources to absorb the risks inherent
in the business. The federal banking regulators have established capital
adequacy requirements for banks and bank holding companies by using a risk-based
capital framework and by monitoring compliance with minimum leverage guidelines.
These guidelines are based on "risk adjusted" factors, which means assets with
potentially higher risk will require more capital backing than assets with lower
risk.
The FDIC classified capital into two tiers, referred to as Tier I and Tier II.
Tier I capital consists of common stockholders' equity, noncumulative and
cumulative (bank holding companies only) perpetual preferred stock, and minority
interests less goodwill. Tier II capital consists of allowance for loan and
lease losses, perpetual preferred stock (not included in Tier I),
hybrid capital instruments, term subordinated debt, and
intermediate-term preferred stock. Since December 31,
1992, all banks have been required to meet a minimum
ratio of 8.00% of qualifying total capital to risk
[BAR GRAPH APPEARS adjusted total assets with at least 4% Tier I capital.
HERE] As indicated on the schedule below, the Tier I risk-
based capital ratio was 18.24% and Total risk-based
capital ratio was 19.45% at December 31, 1995. The
Bank's capital ratios are well above the current minimum
ratio requirements set forth by federal banking
regulators.
In addition to risk-based requirements, the Federal
Reserve Board has established minimum leverage
guidelines for bank holding companies. For most banks,
the minimum leverage rate is 3% plus an additional
cushion of 100 to 200 basis points depending on risk
profiles and other factors. As of December 31, 1995,
Juniata Valley Financial Corp.'s leverage ratio was
12.41%.
Bar/Line Chart Data
<TABLE>
<CAPTION>
STOCKHOLDERS' EQUITY
X Axis
Pt Name
<S> <C> <C>
1 1991 16987
2 1992 18578
3 1993 20803
4 1994 22434
5 1995 24723
</TABLE>
- - 24 -
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
- --------------------------------------------------------------------------------
CAPITAL (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITAL ANALYSIS
December 31,
------------
1995 1994 1993
--------- --------- ---------
(Thousands of Dollars)
<S> <C> <C> <C>
Tier I
Common stockholders' equity (excluding
unrealized appreciation/depreciation on
securities) $ 24,468 $ 22,596 $ 20,803
Tier II
Allowable portion of allowance for loan
losses 1,616 1,523 1,458
-------- -------- --------
Risk-based capital $ 26,084 $ 24,119 $ 22,261
======== ======== ========
Risk adjusted assets (including
off-balance-sheet exposures) $134,122 $131,640 $130,162
======== ======== ========
Tier I risk-based capital ratio 18.24% 17.16% 15.97%
Total risk-based capital ratio 19.45% 18.34% 17.12%
Leverage ratio 12.41% 11.47% 10.82%
</TABLE>
- --------------------------------------------------------------------------------
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 as
it is on 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 will usually
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 conditions.
It is difficult to predict what will happen in 1996 because of the many
uncertainties surrounding the economy. However, The Juniata Valley Bank's
management and Board of Directors are looking forward to meeting the challenges
a changing economy can present. The Juniata Valley Bank's commitment to
providing quality banking services for the communities it serves will continue
through 1996. This community-based strategy gives management the opportunity to
recognize steady growth in our consumer, mortgage and commercial loans as well
as in our core deposit base. The Bank's strong capital and earnings potential
provide the solid foundation needed to excel in the ever-changing banking
industry. Management feels it is positioned to handle changes in the economic
environment in 1996 through effective asset/liability management. Juniata Valley
Financial Corp. is committed to providing stockholders with an attractive return
on their investment.
- 25 -
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
- --------------------------------------------------------------------------------
The provision for income taxes for 1995 was $780,000 compared to $791,000 in
1994 and $697,000 in 1993. The effective tax rate, which is the ratio of income
tax expense to income-before-income-taxes, was 22.67% in 1995, a slight decrease
from the 23.65% in 1994 and an increase from the 22.64% in 1993. The tax rate
for all periods was less than the statutory rate of 34% due to tax exempt
securities and loan income. Please refer to the Notes to the Consolidated
Financial Statements "Income Taxes" for further analysis of federal income tax
expense.
- - 26 -
<PAGE>
[LETTERHEAD OF BEARD & COMPANY APPEARS HERE]
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
Juniata Valley Financial Corp.
Mifflintown, Pennsylvania
We have audited the accompanying consolidated balance sheets of
Juniata Valley Financial Corp. and its wholly-owned subsidiary, The Juniata
Valley Bank, as of December 31, 1995 and 1994, and the related consolidated
statements of income, stockholders' equity and cash flows for the years then
ended. These financial statements are the responsibility of the Corporation's
management. Our responsibility is to express an opinion on these financial
statements based on our audits. The consolidated financial statements of Juniata
Valley Financial Corp. for the year ended December 31, 1993, before they were
restated for the matter discussed in the note "Restatement", were audited by
other auditors whose report, dated January 31, 1994, expressed an unqualified
opinion on those statements.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the 1995 and 1994 consolidated financial statements
referred to above present fairly, in all material respects, the financial
position of Juniata Valley Financial Corp. and subsidiary as of December 31,
1995 and 1994, and the results of their operations and their cash flows for the
years then ended in conformity with generally accepted accounting principles.
We also have audited the adjustment described in the note
"Restatement" that was applied to restate the 1993 financial statements. In our
opinion, such adjustment is appropriate and has been properly applied.
As described in the notes to the consolidated financial statements,
the Corporation changed its method of accounting for investments in debt and
equity securities, effective January 1, 1994.
BEARD & COMPANY, INC.
Reading, Pennsylvania
January 25, 1996
- 27 -
<PAGE>
JUNIATA VALLEY FINANCIAL CORP. AND ITS WHOLLY-OWNED SUBSIDIARY,
THE JUNIATA VALLEY BANK
CONSOLIDATED BALANCE SHEETS
ASSETS
------
<TABLE>
<CAPTION>
December 31,
------------
1995 1994
-------- --------
(In Thousands)
<S> <C> <C>
Cash and due from banks $ 6,578 $ 5,978
Interest-bearing deposits with banks 15 7
Federal funds sold 5,080 -
-------- --------
Total cash and cash equivalents 11,673 5,985
Securities available for sale 24,505 13,057
Securities held to maturity, fair value 1995 $43,070;
1994 $42,728 42,671 44,157
Loans receivable, net of allowance for loan losses
1995 $1,616; 1994 $1,523 121,322 121,668
Bank premises and equipment, net 1,729 1,681
Accrued interest receivable and other assets 3,978 3,628
-------- --------
Total assets $205,878 $190,176
======== ========
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
Liabilities:
Deposits:
Non-interest bearing $ 22,297 $ 18,971
Interest bearing 155,856 146,180
-------- --------
Total deposits 178,153 165,151
Accrued interest payable and other liabilities 3,002 2,591
-------- --------
Total liabilities 181,155 167,742
-------- --------
Stockholders' equity:
Preferred stock, no par value; 500,000 shares
authorized; no shares issued or outstanding - -
Common stock, par value $1.00 per share; authorized
2,000,000 shares; issued and outstanding 1,113,001
and 890,692 shares respectively 1,113 891
Surplus 14,734 14,956
Retained earnings 8,621 6,749
Net unrealized appreciation (depreciation) on
securities available for sale, net of taxes 255 (162)
-------- --------
Total stockholders' equity 24,723 22,434
-------- --------
Total liabilities and stockholders' equity $205,878 $190,176
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
- - 28 -
<PAGE>
JUNIATA VALLEY FINANCIAL CORP. AND ITS WHOLLY-OWNED SUBSIDIARY,
THE JUNIATA VALLEY BANK
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1995 1994 1993
---- ---- ----
(In Thousands, Except Per Share Amounts)
<S> <C> <C> <C>
Interest income:
Loans receivable, including fees $ 11,417 $ 10,507 $ 10,700
Taxable securities 2,212 2,035 1,916
Tax-exempt securities 1,195 1,301 1,337
Other 246 129 137
---------- ---------- ----------
Total interest income 15,070 13,972 14,090
Interest expense on deposits 6,970 5,813 6,073
---------- ---------- ----------
Net interest income 8,100 8,159 8,017
Provision for loan losses 135 220 220
---------- ---------- ----------
Net interest income after
provision for loan losses 7,965 7,939 7,797
---------- ---------- ----------
Other income:
Trust department 173 161 185
Customer service fees 223 222 206
Net realized losses on sales of securities - (7) (16)
Other 185 175 143
---------- ---------- ----------
Total other income 581 551 518
---------- ---------- ----------
Other expenses:
Salaries and wages 2,113 2,044 1,985
Employee benefits 567 582 561
Occupancy 309 308 322
Equipment 302 380 380
Federal deposit insurance premiums 192 376 370
Director compensation 386 373 414
Taxes, other than income 215 194 179
Other 1,022 889 1,026
---------- ---------- ----------
Total other expenses 5,106 5,146 5,237
---------- ---------- ----------
Income before income taxes and
cumulative effect of change in
accounting principle 3,440 3,344 3,078
Federal income taxes 780 791 697
---------- ---------- ----------
Income before cumulative effect of
change in accounting principle 2,660 2,553 2,381
Cumulative effect of change in accounting
principle - - 553
---------- ---------- ----------
Net income $ 2,660 $ 2,553 $ 2,934
========== ========== ==========
Per share data:
Income before cumulative effect of
change in accounting principle $2.39 $2.29 $2.14
========== ========== ==========
Net income $2.39 $2.29 $2.64
========== ========== ==========
Weighted average number of shares
outstanding 1,113,001 1,113,001 1,113,001
========== ========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
- 29 -
<PAGE>
JUNIATA VALLEY FINANCIAL CORP. AND ITS WHOLLY-OWNED SUBSIDIARY,
THE JUNIATA VALLEY BANK
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Years Ended December 31, 1995, 1994 and 1993
--------------------------------------------
Net Unrealized
Appreciation
(Depreciation)
On Securities
Common Retained Available
Stock Surplus Earnings For Sale Total
------ -------- --------- -------------- --------
(In Thousands)
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1992 $ 590 $10,698 $ 7,290 $ - $18,578
Net income - - 2,934 - 2,934
Cash dividend, $.62 per share - - (681) - (681)
10% stock dividend 59 2,052 (2,123) - (12)
10% stock dividend 64 2,384 (2,464) - (16)
------ ------- ------- ------------- -------
Balance, December 31, 1993 713 15,134 4,956 - 20,803
Adjustment to beginning balance for change in
accounting method, net of taxes of $141 - - 274 274
Net income - - 2,553 - 2,553
Cash dividend, $.67 per share - - (745) - (745)
5-for-4 stock split in the form of a
25% stock dividend 178 (178) (15) - (15)
Net change in unrealized appreciation
(depreciation) on securities available
for sale, net of taxes of $224 - - - (436) (436)
------ ------- ------- ------------- -------
Balance, December 31, 1994 891 14,956 6.749 (162) 22,434
Net income - - 2,660 - 2,660
Cash dividend, $.70 per share - - (775) - (775)
5-for-4 stock split in the form of a
25% stock dividend 222 (222) (13) - (13)
Net change in unrealized appreciation
(depreciation) on securities available
for sale,net of taxes of$215 - - - 417 417
------ ------- ------- ------------- -------
Balance, December 31, 1995 $1,113 $14,734 $ 8,621 $ 255 $24,723
====== ======= ======= ============= =======
</TABLE>
See Notes to Consolidated Financial Statements.
- - 30 -
<PAGE>
JUNIATA VALLEY FINANCIAL CORP. AND ITS WHOLLY-OWNED SUBSIDIARY,
THE JUNIATA VALLEY BANK
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1995 1994 1993
---- ---- ----
(In Thousands)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 2,660 $ 2,553 $ 2,934
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 135 220 220
Provision for depreciation and amortization 174 181 120
Net realized losses on sales of securities - 7 16
Deferred directors' fees and supplemental retirement plan expense 303 312 297
Payment of deferred compensation (135) (126) (108)
Cumulative effect of change in accounting principle - - (553)
Deferred income taxes (74) (40) (102)
(Increase) decrease in accrued interest receivable and other assets (356) (134) 110
Increase (decrease) in interest payable and other liabilities 108 (50) 14
-------- -------- -------
Net cash provided by operating activities 2,815 2,923 2,948
-------- -------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of available for sale securities
Proceeds from sales of available for sale securities (13,935) (1,998) -
Proceeds from maturities of and principal repayments - 2,017 -
on available for sale securities 6,118 6,533 -
Purchases of held to maturity securities (8,753) (14,385) (27,087)
Proceeds from maturities of and principal repayments
on held to maturity securities 7,240 10,298 22,249
Proceeds from sales of held to
maturity securities - - 2,073
Net (increase) decrease in loans receivable 211 (7,612) (1,727)
Purchases of bank premises and equipment (222) (69) (222)
-------- -------- -------
Net cash used in investing activities (9,341) (5,216) (4,714)
-------- -------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits 13,002 (1,391) 844
Cash dividends and cash paid for fractional shares (788) (760) (709)
-------- -------- -------
Net cash provided by (used in financing activities 12,214 (2,151) 135
-------- -------- -------
Increase (decrease) in cash and cash equivalents 5,688 (4,444) (1,631)
Cash and cash equivalents:
Beginning 5,985 10,429 12,060
-------- -------- -------
Ending $ 11,673 $ 5,985 $10,429
======== ======== =======
Cash payments for:
Interest $ 6,798 $ 5,782 $ 6,162
-------- -------- -------
Income taxes $ 833 $ 812 $ 760
======== ======== =======
</TABLE>
See Notes to Consolidated Financial Statements.
- 31 -
<PAGE>
JUNIATA VALLEY FINANCIAL CORP. AND ITS WHOLLY-OWNED SUBSIDIARY,
THE JUNIATA VALLEY BANK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation:
The accompanying consolidated financial statements include the accounts of
Juniata Valley Financial Corp. (the Corporation), a bank holding company, and
its wholly-owned subsidiary, The Juniata Valley Bank (the Bank). All
significant intercompany accounts and transactions have been eliminated.
Nature of operations:
The Bank operates under a state bank charter and provides full banking
services, including trust services. As a state bank, the Bank is subject to
regulation of the Pennsylvania Department of Banking and the Federal Deposit
Insurance Corporation. The bank holding company (parent company) is subject to
regulation of the Federal Reserve Bank. The area served by the Bank is
principally the counties of Juniata, Mifflin, Perry, Huntingdon, Franklin and
Snyder, Pennsylvania.
Estimates:
The preparation of financial statements in conformity with 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.
Presentation of 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.
Securities:
The Financial Accounting Standards Board issued Statement No. 115, "Accounting
for Certain Investments in Debt and Equity Securities" in May 1993. The
Corporation adopted the provisions of the new standard for investments held as
of or acquired after January, 1, 1994. The January 1, 1994 stockholders'
equity was increased by $274,000, net of $141,000 in deferred income taxes, to
reflect the net unrealized appreciation on securities classified as available
for sale previously carried at amortized cost. Management determines the
appropriate classification of debt securities at the time of purchase and re-
evaluates such designation as of each balance sheet date.
Securities classified as available for sale are those debt securities that the
Bank intends to hold for an indefinite period of time, but not necessarily to
maturity. Any decision to sell a security classified as available for sale
would be based on various factors, including significant movements in interest
rates, changes in the maturity mix of the Bank's assets and liabilities,
liquidity needs, regulatory capital considerations, and other similar factors.
Securities available for sale are carried at fair value. Unrealized
appreciation and depreciation is reported as increases or decreases in
stockholders' equity, net of the related deferred tax effect. Realized gains
or losses, determined on the basis of the cost of specific securities sold,
are included in earnings.
Securities classified as held to maturity are those debt securities the Bank
has both the intent and ability to hold to maturity regardless of changes in
market conditions, liquidity needs or changes in general economic conditions.
These securities are carried at cost adjusted for amortization of premium and
accretion of discount, computed by the interest method over their contractual
lives.
Loans receivable:
Loans generally are stated at their outstanding unpaid principal balances, net
of unearned discount and an allowance for loan losses. Interest income is
accrued on the unpaid principal balance. Unearned discount on discounted loans
is amortized to income over the life of the loans, using the interest method.
A loan is generally considered impaired when it is probable the Bank will be
unable to collect all contractual principal and interest payments due in
accordance with the terms of the loan agreement. The accrual of interest is
discontinued when the contractual payment of principal or interest has become
90 days past due or management has serious doubts about further collectibility
of principal or interest, even though the loan is currently performing. A loan
may remain on accrual status if it is in the process of collection and is
either guaranteed or well secured. When a loan is placed on nonaccrual status,
unpaid interest credited to income in the current year is reversed and unpaid
interest accrued in prior years is charged against the allowance for loan
losses. Interest received on nonaccrual loans generally is either applied
against principal or reported as interest income, according to management's
judgment as to the collectibility of principal. Generally, loans are restored
to accrual status when the obligation is brought current, has performed in
accordance with the contractual terms for a reasonable period of time and the
ultimate collectibility of the total contractual principal and interest is no
longer in doubt.
- - 32 -
<PAGE>
JUNIATA VALLEY FINANCIAL CORP. AND ITS WHOLLY-OWNED SUBSIDIARY,
THE JUNIATA VALLEY BANK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Allowance for loan losses:
The allowance for loan losses is established through provisions for loan
losses charged against income. Loans deemed to be uncollectible are charged
against the allowance for loan losses, and subsequent recoveries, if any, are
credited to the allowance.
Beginning in 1995, the Corporation adopted Financial Accounting Standards
Board Statement No.114, "Accounting by Creditors for Impairment of a Loan", as
amended by Statement No. 118. Under the new standards, the 1995 allowance for
loan losses related to loans that are identified for evaluation in accordance
with Statement No. 114 is based on discounted cash flows using the loan's
initial effective interest rate or the fair value of the collateral for
certain collateral dependent loans. 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.
The allowance for loan losses is maintained at a level considered adequate to
provide for losses that can be reasonably anticipated. Management's periodic
evaluation of the adequacy of the allowance is based on the Bank's past loan
loss experience, known and inherent risks in the portfolio, adverse situations
that may affect the borrower's ability to repay, the estimated value of any
underlying collateral, composition of the loan portfolio, current economic
conditions, and other relevant factors. This evaluation is inherently
subjective as it requires material estimates that may be susceptible to
significant change.
Bank premises and equipment:
Bank premises and equipment are stated at cost less accumulated depreciation.
Depreciation is computed principally on the straight-line method over their
estimated useful lives of the related assets.
Income taxes:
Effective January 1, 1993, the Corporation changed its method of accounting
for income taxes from the deferred method to the liability method required by
FASB Statement No.109, "Accounting for Income Taxes". The cumulative effect of
this
change in accounting principle increased 1993 net income by $553,000.
Deferred taxes are provided on the liability method whereby deferred tax
assets are recognized for deductible temporary differences and deferred tax
liabilities are recognized for taxable temporary differences. Temporary
differences are the differences between the reported amounts of assets and
liabilities in the financial statements and their tax basis. Deferred tax
assets are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion or all of the
deferred tax assets will not be realized. Deferred tax assets and liabilities
are adjusted through the provision for income taxes for the effects of changes
in tax laws and rates on the date of enactment.
The Corporation and its subsidiary file a consolidated federal income tax
return.
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 in the balance
sheet when they are funded.
Per share data:
Earnings and dividends per share are based on the weighted average number of
shares of common stock outstanding, adjusted for stock dividends.
New accounting standards:
In 1995, the Financial Accounting Standards Board (FASB) issued Statement No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of" which establishes accounting and measurement
standards for the impairment of long-lived assets such as property and
equipment, certain identifiable intangibles and goodwill related to those
assets. The Bank is required to adopt the Statement effective January 1, 1996
and the effect of its implementation is not expected to have a material impact
on the Bank's financial position or results of operations.
- 33 -
<PAGE>
JUNIATA VALLEY FINANCIAL CORP. AND ITS WHOLLY-OWNED SUBSIDIARY,
THE JUNIATA VALLEY BANK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
RESTATEMENT
The cumulative effect of a change in accounting principle previously reported in
the 1993 statement of income has been adjusted to correct an error in the
initial adoption of FASB Statement No. 109, "Accounting for Income Taxes". The
difference between the financial statement and tax basis of the allowance for
loan losses was not properly reflected as a temporary difference and,
accordingly, a deferred tax asset was not established for this temporary
difference. The effect of this adjustment on 1993 net income, retained earnings
and per share amounts is summarized as follows:
<TABLE>
<CAPTION>
As Originally
Reported Adjustment Restated
------------- ---------- --------
(In Thousands, Except Per Share Amounts)
<S> <C> <C> <C>
Net income $ 2,439 $ 495 $ 2,934
======= ===== =======
Retained earnings $ 4,461 $ 495 $ 4,956
======= ===== =======
Net income per share $2.19 $0.45 $2.64
======= ===== =======
<CAPTION>
SECURITIES
The amortized cost and fair value of securities at December 31 were as follows:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Appreciation Depreciation Value
--------- ------------- ------------ -----
(In Thousands)
<S> <C> <C> <C> <C>
Available for sale
securities:
December 31, 1995:
U.S. Government and
agency obligations $ 9,507 $ 79 $ (1) $ 9,585
Obligations of states
and political
subdivisions 3,630 54 - 3,684
Corporate and other
debt securities 3,140 27 - 3,167
Mortgage-backed
securities 6,948 62 (39) 6,971
Equity securities 894 207 (3) 1,098
------- ----- ------- -------
$24,119 $ 429 $ (43) $24,505
======= ===== ======= =======
December 31,1994:
U.S. Government and
agency obligations $ 500 $ - $ (14) $ 486
Obligations of states
and political
subdivisions 2,988 18 (7) 2,999
Corporate and other
debt securities 1,167 - (24) 1,143
Mortgage-backed
securities 7,842 3 (331) 7,514
Equity securities 805 110 - 915
------- ----- ------- -------
$13,302 $ 131 $ (376) $13,057
======= ===== ======= =======
Held to maturity
securities:
December 31,1995:
U.S. Treasury
securities $ 3,250 $ 20 $ (3) $ 3,267
U.S. Government and
agency obligations 2,501 19 - 2,520
Obligations of states
and political
subdivisions 20,448 203 (34) 20,617
Corporate and other
debt securities 16,472 208 (14) 16,666
------- ----- ------- -------
$42,671 $ 450 $ (51) $43,070
======= ===== ======= =======
December 31, 1994:
U.S.Treasury
securities $ 3,241 $ - $ (101) $ 3,140
U.S. Government and
agency obligations 4,249 - (233) 4,016
Obligations of states
and political
subdivisions 22,265 99 (470) 21,894
Corporate and other
debt securities 14,402 20 (744) 13,678
======= ===== ======= =======
$44,157 $ 119 $(1,548) $42,728
======= ===== ======= =======
</TABLE>
In December 1995, the Bank reevaluated the appropriateness of all securities
held and transferred $2,969,000 of securities from securities held to maturity
to securities available for sale in accordance with the Guide to Implementation
of Statement No.115 issued by the FASB. The securities were transferred at
their fair value on the date of transfer which was $29,000 less than the
amortized cost of the securities. The transfer represented three municipal
securities and three agency securities.
- - 34 -
<PAGE>
JUNIATA VALLEY FINANCIAL CORP. AND ITS WHOLLY-OWNED SUBSIDIARY,
THE JUNIATA VALLEY BANK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SECURITIES (CONTINUED)
The amortized cost and fair value of securities as of December 31, 1995, by
contractual maturity or call date, are shown below. Expected maturities may
differ from contractual maturities or call dates because the securities may be
called or prepaid with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Available For Sale Held To Maturity
--------- ------- --------- --------
Amortized Fair Amortized Fair
Cost Value Cost Value
--------- ------- --------- --------
(In Thousands)
<S> <C> <C> <C> <C>
Due in one year or less $ 4,777 $ 4,803 $ 9,368 $ 9,422
Due after one year through five years 10,502 10,613 32,525 32,866
Due after five years through ten years 748 754 225 225
Due after ten years 250 266 553 557
Mortgage-backed securities 6,948 6,971 - -
Equity securities 894 1,098 - -
------- ------- ------- -------
$24,119 $24,505 $42,671 $43,070
======= ======= ======= =======
</TABLE>
Equity securities include Federal Home Loan Bank stock with an aggregate cost
and fair value of $689,000.
There were no sales of securities in 1995. Gross gains of $3,000 and gross
losses of $10,000 were realized on sales of securities available for sale in
1994. Gross gains of $3,000 and gross losses of $19,000 were realized on sales
of securities held to maturity in 1993.
Securities with an amortized cost of $6,369,000 and $6,307,000 at December
31, 1995 and 1994 respectively, were pledged to secure public deposits and for
other purposes as required or permitted by law.
LOANS RECEIVABLE AND ALLOWANCE FOR LOAN LOSSES
Loans are comprised of the following:
<TABLE>
<CAPTION>
December 31,
--------------
1995 1994
---- ----
(In Thousands)
<S> <C> <C>
Commercial, agricultural and financial $ 11,843 $ 14,472
Real estate mortgages 88,593 86,316
Consumer 25,332 25,012
Other 1,483 1,486
-------- --------
127,251 127,286
Unearned discount on loans 4,313 4,095
Allowance for loan losses 1,616 1,523
-------- --------
$121,322 $121,668
======== ========
</TABLE>
- 35 -
<PAGE>
JUNIATA VALLEY FINANCIAL CORP. AND ITS WHOLLY-OWNED SUBSIDIARY,
THE JUNIATA VALLEY BANK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
LOANS RECEIVABLE AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
The following table presents changes in the allowance for loan losses:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1995 1994 1993
---- ---- ----
(In Thousands)
<S> <C> <C> <C>
Balance, beginning $1,523 $1,458 $1,363
Provision for loan losses 135 220 220
Recoveries 53 23 39
Loans charged off (95) (178) (164)
------ ------ ------
Balance, ending $1,616 $1,523 $1,458
====== ====== ======
</TABLE>
Information with respect to impaired loans as of and for the year ended December
31,1995 is as follows (in thousands):
<TABLE>
<S> <C>
Loans receivable for which there is a related allowance for loan losses $390
Loans receivable for which there is no related allowance for loan losses -
----
Total impaired loans $390
====
Related allowance for loan losses $ 50
====
Average recorded balance of these impaired loans $408
====
Interest income recognized on these impaired loans $ 5
====
</TABLE>
At December 31,1994, the Bank had nonaccrual loans of $433,000, all of which
would be considered impaired under Statement No.114. The Bank recorded $9,000 of
interest income on these loans in 1994. Interest income that would have been
recorded under the original terms of the loan agreements amounted to $28,000 for
the year ended December 31,1994.
BANK PREMISES AND EQUIPMENT
The major components of bank premises and equipment
were as follows:
<TABLE>
<CAPTION>
December 31,
------------
1995 1994
---- ----
(In Thousands)
<S> <C> <C>
Land and land improvements $ 438 $ 438
Buildings and improvements 1,763 1,705
Furniture and equipment 1,594 1,449
-------- --------
3,795 3,592
Less accumulated depreciation 2,066 1,911
-------- --------
$ 1,729 $ 1,681
======== ========
</TABLE>
DEPOSITS
The composition of deposits is as follows:
<TABLE>
<CAPTION>
December 31,
------------
1995 1994
---- ----
(In Thousands)
<S> <C> <C>
Demand, non-interest bearing $ 22,297 $ 18,971
Now and Money Market 24,491 26,983
Savings 21,861 24,071
Time Certificates $100,000 or more 13,283 10,147
Other Time Certificates 96,221 84,979
-------- --------
$178,153 $165,151
======== ========
</TABLE>
- - 36 -
<PAGE>
JUNIATA VALLEY FINANCIAL CORP. AND ITS WHOLLY-OWNED SUBSIDIARY,
THE JUNIATA VALLEY BANK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BORROWINGS
The Bank has entered into an agreement whereby it can borrow up to approximately
10% of the Bank's assets from the Federal Home Loan Bank. There were no
outstanding balances under this agreement as of December 31, 1995 and 1994.
REGULATORY MATTERS AND STOCKHOLDERS' EQUITY
The Bank is required to maintain average cash reserve balances in vault cash or
with the Federal Reserve Bank. The average amount of these restricted cash
reserve balances as of December 31, 1995 was approximately $1,283,000.
The Bank is subject to various regulatory capital requirements administered by
the federal banking agencies. Failure to meet the minimum capital requirements
can initiate certain mandatory and possibly additional discretionary actions by
regulators that, if undertaken, could have a direct material effect on the
Bank's 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 about components, risk
weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth below) of
total and Tier 1 capital (as defined in the regulations) to risk-weighted
assets, and of Tier 1 capital to average assets. Management believes, as of
December 31, 1995, that the Bank meets all capital adequacy requirements to
which it is subject.
As of December 31, 1995, the most recent notification from the Federal Deposit
Insurance Corporation 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 Bank's
category.
The Bank's actual capital ratios at December 31, 1995 and the minimum ratios
required for capital adequacy purposes and to be well capitalized under the
prompt corrective action provisions are as follows:
<TABLE>
<CAPTION>
To Be Well
For Capital Capitalized Under
Adequacy Prompt Corrective
Actual Purposes Action Provisions
------ ----------- ------------------
<S> <C> <C> <C>
Total capital (to risk weighted
assets) 19.45% 8.00% 10.00%
Tier 1 capital (to risk weighted
assets) 18.24% 4.00% 6.00%
Tier 1 capital (to average
assets) 12.41% 3.00% - 5.00% 5.00%
</TABLE>
Certain restrictions exist regarding the ability of the Bank to transfer funds
to the Corporation in the form of cash dividends, loans or advances. At December
31, 1995, $19,268,000 of undistributed earnings of the Bank, included in the
consolidated stockholders' equity, was available for distribution to the
Corporation as dividends without prior regulatory approval.
In August 1990, the Board of Directors adopted a Shareholder Rights Plan and
declared a dividend distribution of one right to purchase a share of the
Corporation's common stock at $15.30 for each share issued and outstanding, upon
the occurrence of certain events, as defined in the Plan. These rights are fully
transferrable and expire on August 31, 2000. The rights are not considered
common stock equivalents because there is no indication that any event will
occur which would cause them to become exercisable. Their issuance, therefore,
has no effect on earnings per share.
In 1995, the Corporation established a dividend reinvestment and stock purchase
plan which goes into effect in 1996. Common stockholders may participate in the
Plan, which provides that additional shares of common stock may be purchased
with reinvested dividends at the prevailing market prices. To the extent that
shares are not available in the open market, the Corporation has reserved
100,000 shares of common stock to be issued under the dividend reinvestment
plan.
- 37 -
<PAGE>
JUNIATA VALLEY FINANCIAL CORP. AND ITS WHOLLY-OWNED SUBSIDIARY,
THE JUNIATA VALLEY BANK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
EMPLOYEE BENEFITS
Defined benefit retirement plan:
The Corporation has a defined benefit retirement plan covering substantially
all of its employees. The benefits are based on years of service and the
employees' compensation. The Corporation's funding policy is to contribute
annually the maximum amount that can be deducted for federal income tax
purposes. Contributions are intended to provide not only for benefits
attributed to service to date but also for those expected to be earned in the
future.
<TABLE>
<CAPTION>
The following table sets forth the Plan's funded status
and amounts recognized in the balance sheets at December 31:
1995 1994
---- ----
(In Thousands)
<S> <C> <C>
Actuarial present value of:
Accumulated benefit obligation, including
vested benefits of $1,550,000 and $1,395,000 $(1,563) $(1,410)
======= =======
Projected benefit obligation for service
rendered to date $(2,133) $(2,007)
Plan assets at fair value 2,020 1,758
------- -------
Plan assets less than projected benefit
obligation (113) (249)
Unrecognized net gain from experience different
from that assumed (147) (4)
Unrecognized net transition asset (31) (33)
------- -------
Accrued pension cost $ (291) $ (286)
======= =======
<CAPTION>
Pension expense included the following components
for the years ended December 31:
1995 1994 1993
---- ---- ----
(In Thousands)
<S> <C> <C> <C>
Service cost, benefits earned during the year $ 101 $ 98 $ 93
Interest cost on projected benefit obligation 143 134 124
Actual return on plan assets (204) 27 (125)
Net amortization 73 (161) (2)
------- ------- -----
$ 113 $ 98 $ 90
======= ======= =====
<CAPTION>
Assumptions used in the accounting were:
1995 1994 1993
---- ---- ----
(In Thousands)
<S> <C> <C> <C>
Discount rates 7.5% 7.5% 7.5%
Rates of increase in compensation levels 4.0 4.0 4.0
Expected long-term rate of return on assets 7.5 7.5 7.5
</TABLE>
Assets in the Plan consist primarily of U.S. Government securities, U.S.
Government security mutual funds and certificates of deposit.
Supplemental retirement plan:
The Corporation has a non-qualified supplemental retirement plan for directors
and key employees. At December 31, 1995 and 1994, the present value of the
future liability was $726,000 and $680,000 respectively. The Corporation has
funded these plans through the purchase of annuities and life insurance
policies, which have an aggregate cash surrender value of $763,000 and
$659,000 at December 31, 1995 and 1994 respectively. For the years ended
December 31, 1995, 1994 and 1993, $47,000, $78,000 and $98,000 was charged to
expense in connection with this plan.
Deferred compensation:
The Corporation has entered into deferred compensation agreements with certain
directors to provide each director an additional retirement benefit, or to
provide their beneficiary a benefit in the event of pre-retirement death. At
December 31, 1995 and 1994, the present value of the future liability was
$1,024,000 and $919,000 respectively. To fund the benefits under these
agreements, the Corporation is the owner and beneficiary of life insurance
policies on the lives of the directors. The policies had an aggregate cash
surrender value of $320,000 and $284,000 at December 31, 1995 and 1994,
respectively. For the years ended December 31, 1995, 1994 and 1993, $223,000,
$199,000 and $211,000 respectively, was charged to expense in connection with
this plan.
- - 38 -
<PAGE>
JUNIATA VALLEY FINANCIAL CORP. AND ITS WHOLLY-OWNED SUBSIDIARY,
THE JUNIATA VALLEY BANK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INCOME TAXES
The provision for federal income taxes consisted of the following:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1995 1994 1993
---- ---- ----
(In Thousands)
<S> <C> <C> <C>
Current $ 854 $ 831 $ 799
Deferred (74) (40) (102)
----- ----- -----
$ 780 $ 791 $ 697
===== ===== =====
</TABLE>
A reconciliation of the statutory income tax expense computed at 34% to the
income tax expense included in the statements of income is as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1995 1994 1993
---- ---- ----
(In Thousands)
<S> <C> <C> <C>
Federal income tax at statutory
rate $1,170 $1,137 $1,047
Tax-exempt interest (434) (469) (480)
Disallowance of interest expense 62 57 59
Other (18) 66 71
------ ------ ------
$ 780 $ 791 $ 697
====== ====== ======
</TABLE>
The income tax provision includes $-0- in 1995, $(2,000) in 1994 and $(5,000) in
1993 of income tax related to realized security losses.
The net deferred tax asset in the accompanying balance sheets includes the
following amounts of deferred tax assets and liabilities:
<TABLE>
<CAPTION>
December 31,
1995 1994
------- -------
<S> <C> <C>
(In Thousands)
Deferred tax assets:
Allowance for loan losses $ 555 $ 518
Deferred directors' fees 344 312
Pension liabilities 329 330
Unrealized depreciation on securities available for sale -- 84
Other 29 10
------ ------
1,257 1,254
Valuation allowance (53) (43)
------ ------
Total deferred tax assets, net of valuation allowance 1,204 1,211
------ ------
Deferred tax liabilities:
Bank premises and equipment (55) (52)
Unrealized appreciation on securities available for sale (131) -
------ ------
Total deferred tax liabilities (186) (52)
------ ------
Net deferred tax asset $1,018 $1,159
====== ======
</TABLE>
- 39 -
<PAGE>
JUNIATA VALLEY FINANCIAL CORP. AND ITS WHOLLY-OWNED SUBSIDIARY,
THE JUNIATA VALLEY BANK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
TRANSACTIONS WITH EXECUTIVE OFFICERS AND DIRECTORS
The Bank has had banking transactions in the ordinary course of business with
its executive officers, directors, and their related interests on the same
terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with others. At December 31, 1995 and 1994, these
persons were indebted to the Bank for loans totaling $1,376,000 and $1,884,000
respectively. During 1995, loans totaling $4,355,000 were disbursed and loan
repayments totaled $4,863,000.
COMMITMENTS
The Bank rents equipment under operating leases that expire through 2000.
Equipment and servicing fees were $368,000, $377,000 and $373,000 for the years
ended December 31, 1995, 1994 and 1993 respectively. Additionally the Bank
leases a branch office building for which rent expense was $26,000 in 1995 and
1994 and $25,000 in 1993.
Minimum future payments under all noncancellable lease agreements as of December
31, 1995 are (in thousands):
<TABLE>
<S> <C>
1996 $247
1997 195
1998 65
1999 39
2000 40
Thereafter 60
----
$646
====
</TABLE>
FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
The Bank 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 include commitments to extend credit and letters of
credit. Those instruments involve, to varying degrees, elements of credit risk
in excess of the amount recognized in the balance sheet.
The Bank's exposure to credit loss in the event of nonperformance 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 commitments and conditional
obligations as it does for on-balance sheet instruments.
A summary of the Bank's financial instrument commitments is as follows:
<TABLE>
<CAPTION>
December 31,
1995 1994
---- ----
(In Thousands)
<S> <C> <C>
Commitments to extend credit $14,822 $13,769
Outstanding letters of credit 334 984
</TABLE>
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. Since many
of the commitments are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash requirements.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. The Bank evaluates each customer's credit
worthiness on a case-by-case basis. The amount of collateral obtained, if deemed
necessary by the Bank upon extension of credit, is based on management's credit
evaluation. Collateral held varies but may include personal or commercial real
estate, accounts receivable, inventory and equipment.
Outstanding letters of credit written are conditional commitments issued by the
Bank to guarantee the performance of a customer to a third party. The credit
risk involved in issuing letters of credit is essentially the same as that
involved in extending loan facilities to customers.
- - 40 -
<PAGE>
JUNIATA VALLEY FINANCIAL CORP. AND ITS WHOLLY-OWNED SUBSIDIARY,
THE JUNIATA VALLEY BANK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONCENTRATION OF CREDIT RISK
The Bank grants commercial, residential and consumer loans to customers
primarily located in the counties of Juniata, Mifflin, Perry, Huntingdon,
Franklin and Snyder, Pennsylvania. The concentrations of credit by type of loan
are set forth in the note "Loans Receivable and Allowance for Loan Losses".
Although the Bank has a diversified loan portfolio, its debtors' ability to
honor their contracts is influenced by the region's economy.
DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments:
. For cash, cash equivalents and interest-bearing deposits in other banks, the
carrying amount is a reasonable estimate of fair value.
. For securities, fair values are based on quoted market prices, where
available. If quoted market prices are not available, fair values are based
on quoted market prices of comparable securities.
. For variable-rate loans that reprice frequently and which entail no
significant changes in credit risk, fair values are based on carrying values.
All commercial loans and substantially all real estate mortgages are variable
rate loans. The fair value of other loans (i.e., consumer loans and fixed-
rate real estate mortgages) are estimated using discounted cash flow
analyses, at interest rates currently offered for loans with similar terms to
borrowers of similar credit quality.
. Fair values for demand deposits, savings accounts and certain money market
deposits are, by definition, equal to the amount payable on demand at the
reopening date (i.e., their carrying amounts). Fair values of fixed-maturity
certificates of deposit are estimated using a discounted cash flow
calculation that applies interest rates currently being offered on
certificates to a schedule of aggregated expected monthly maturity of
deposits.
. Fair value of commitments to extend credit is estimated using the fees
currently charged to enter into similar agreements, taking into account
market interest rates, the remaining terms and present credit worthiness of
the counterparties. The fair value of guarantees and letters of credit is
based on fees currently charged for similar agreements.
The fair value estimates are dependent upon subjective assumptions and involve
significant uncertainties resulting in estimates that vary with changes in
assumptions. Any changes in assumptions or estimation methodologies may have a
material effect on the estimated fair values disclosed.
The estimated fair values of the Corporation's financial instruments were as
follows:
<TABLE>
<CAPTION>
December 31,
1995 1994
---- ----
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- ----- -------- -----
(In Thousands)
<S> <C> <C> <C> <C>
Financial assets:
Cash and due from banks $ 6,578 $ 6,578 $ 5,978 $ 5,978
Interest-bearing deposits in other
banks 15 15 7 7
Federal funds sold 5,080 5,080 - -
Securities 67,176 67,575 57,214 55,785
Loans receivable, net of allowance 121,322 120,855 121,668 120,822
Financial liabilities:
Deposits 178,153 179,049 165,151 164,496
Off-balance sheet financial instruments:
Commitments to extend credit - - - -
Standby letters of credit - - - -
</TABLE>
- 41 -
<PAGE>
JUNIATA VALLEY FINANCIAL CORP. AND ITS WHOLLY-OWNED SUBSIDIARY,
THE JUNIATA VALLEY BANK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PARENT COMPANY ONLY FINANCIAL INFORMATION
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
1995 1994
---- ----
(In Thousands)
<S> <C> <C>
ASSETS
Investment in Bank subsidiary $24,567 $22,284
Securities available for sale 157 140
Due from Bank subsidiary 33 25
------- -------
$24,757 $22,449
======= =======
LIABILITY AND STOCKHOLDERS' EQUITY
LIABILITY, other $ 34 $ 15
STOCKHOLDERS' EQUITY 24,723 22,434
------- -------
$24,757 $22,449
======= =======
</TABLE>
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Years Ended December 31,
1995 1994 1993
---- ---- ----
(In Thousands)
<S> <C> <C> <C>
Dividends from Bank subsidiary $ 807 $ 870 $ 723
Other dividend income 4 - -
Other expenses (21) (16) (17)
------- ------- ------
Income before equity in undistributed net
income of subsidiary and income taxes 790 854 706
Equity in undistributed net income of Bank
subsidiary 1,864 1,693 2,222
Income taxes (credits) (6) (6) (6)
------- ------- ------
Net income $ 2,660 $ 2,553 $2,934
======= ======= ======
</TABLE>
- - 42 -
<PAGE>
JUNIATA VALLEY FINANCIAL CORP. AND ITS WHOLLY-OWNED SUBSIDIARY,
THE JUNIATA VALLEY BANK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PARENT COMPANY ONLY FINANCIAL INFORMATION (CONTINUED)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
1995 1994 1993
------- ------- -------
(In Thousands)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 2,660 $ 2,553 $ 2,934
Adjustments to reconcile net income to net cash
provided by operating activities:
Undistributed net income of Bank subsidiary (1,864) (1,693) (2,222)
Non-cash dividends received from Bank subsidiary - (98) -
(Increase) in due from subsidiary (8) (2) (3)
------- ------- -------
Net cash provided by operating activities 788 760 709
------- ------- -------
<CAPTION>
CASH FLOWS FROM FINANCING ACTIVITIES
<S> <C> <C> <C>
Dividends paid and cash paid in lieu of fractional
shares (788) (760) (709)
------- ------- -------
Change in cash - - -
Cash:
Beginning - -
------- -------
Ending $ - $ -
======= =======
</TABLE>
- 43 -
<PAGE>
AVAILABILITY OF FORM 10-K
A copy of the Corporation's Annual Report on Form 10-K as filed with the
Securities and Exchange Commission will be available without charge upon written
request. This request should be addressed to:
Ms. Linda Engle
Juniata Valley Financial Corp.
P.O. Box 66
Mifflintown, PA 17059
Pursuant to Part 350 to FDIC's Annual Disclosure Regulation, Juniata Valley
Financial Corp. will make available to you upon request, financial information
about this Bank. The purpose of this regulation is to facilitate more informed
decision making by you, our shareholders, by providing statements containing
financial information for the last two years.
Please contact:
Ms. Ruth Nace
The Juniata Valley Bank
P.O. Box 66
Mifflintown, PA 17059
- - 44 -
<PAGE>
EXHIBIT 23.1
CONSENT OF BEARD & COMPANY, INC. INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statement (Form S-3) of Juniata Valley Financial Corp. of our
report dated January 25, 1996, with respect to the consolidated
financial statements of Juniata Valley Financial Corp.
incorporated by reference in this Annual Report (Form 10-K) for
the year ended December 31, 1995.
BEARD & COMPANY, INC.
Reading, Pennsylvania
March 22, 1996
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
--------------------------------------------------
We hereby consent to the use of our report included herein dated
January 31, 1994, relating to the consolidated financial
statements of Juniata Valley Financial Corp. and Subsidiary, to
the incorporation by reference of such report included in the
Company's 1995 annual report on Form 10-K.
STOCKTON BATES & COMPANY
Lancaster, Pennsylvania
March 1, 1996
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1996
<CASH> 6,578
<INT-BEARING-DEPOSITS> 15
<FED-FUNDS-SOLD> 5,080
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 24,505
<INVESTMENTS-CARRYING> 42,671
<INVESTMENTS-MARKET> 43,071
<LOANS> 122,938
<ALLOWANCE> 1,616
<TOTAL-ASSETS> 205,878
<DEPOSITS> 178,153
<SHORT-TERM> 0
<LIABILITIES-OTHER> 3,002
<LONG-TERM> 0
0
0
<COMMON> 1,113
<OTHER-SE> 23,610
<TOTAL-LIABILITIES-AND-EQUITY> 205,878
<INTEREST-LOAN> 11,417
<INTEREST-INVEST> 3,407
<INTEREST-OTHER> 246
<INTEREST-TOTAL> 15,070
<INTEREST-DEPOSIT> 6,970
<INTEREST-EXPENSE> 6,970
<INTEREST-INCOME-NET> 8,100
<LOAN-LOSSES> 135
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 5,100
<INCOME-PRETAX> 3,447
<INCOME-PRE-EXTRAORDINARY> 2,660
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,660
<EPS-PRIMARY> 2.39
<EPS-DILUTED> 2.39
<YIELD-ACTUAL> 7.71
<LOANS-NON> 390
<LOANS-PAST> 462
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 898
<ALLOWANCE-OPEN> 1,523
<CHARGE-OFFS> 95
<RECOVERIES> 53
<ALLOWANCE-CLOSE> 1,616
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
EHHIBIT 99
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors and Stockholders
Juniata Valley Financial Corp. and Subsidiary
Mifflintown, Pennsylvania
We have audited the accompanying consolidated statement of
income of Juniata Valley Financial Corp. and Subsidiary for the
year ended December 31, 1993, before it was restated, and the
related consolidated statements of stockholders' equity and cash
flows for the year ended December 31, 1993, before they were
restated. These financial statements are the responsibility of
the Corporation's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above,
prior to restatement, present fairly, in all material respects,
the consolidated results of operations, stockholders' equity and
cash flows of Juniata Valley Financial Corp. and Subsidiary for
the year ended December 31, 1993, in conformity with generally
accepted accounting principles.
STOCKTON BATES & COMPANY
Lancaster, Pennsylvania
January 31, 1994
