<PAGE>
2.
JUNIATA VALLEY FINANCIAL CORP. AND SUBSIDIARY
---------------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
September 30, December 31,
1997 1996
------------ -----------
(In thousands)
(Unaudited)
ASSETS:
Cash and due from banks $ 6,275 $ 5,857
Interest-bearing deposits with banks 52 65
Federal funds sold 425 3,100
--------- ----------
Total cash and cash equivalents 6,752 9,022
Securities available for sale 26,664 30,215
Securities held to maturity, fair value of
$45,097 and $40,309, respectively 44,918 40,284
Loans, receivable net of unearned discount of
$4,671 and $4,279, respectively 135,424 128,146
Less: Allowance for loan losses 1,798 1,707
--------- ----------
Net Loans receivable 133,626 126,439
Bank premises and equipment, net 1,742 1,766
Accrued interest receivable and other assets 6,311 4,538
--------- ----------
TOTAL ASSETS $ 220,013 $ 212,264
========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Non-interest bearing deposits $ 22,838 $ 21,873
Interest bearing deposits 165,038 160,582
--------- ----------
Total deposits 187,876 182,455
Accrued interest and other liabilities 3,338 3,046
--------- ----------
Total liabilities 191,214 185,501
--------- ----------
Stockholders' Equity:
Preferred stock, no par value, authorized
500,000 shares, no shares issued or outstanding - -
Common stock, par value $1.00, per share;
authorized 5,000,000 shares; issued and
outstanding 1,400,389 and 1,117,088 shares
respectively 1,401 1,117
Capital surplus 14,709 14,879
Retained earnings 12,286 10,549
Net unrealized appreciation on securities
available for sale, net of taxes 403 218
--------- ----------
Total stockholders' equity 28,799 26,763
--------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS'EQUITY $ 220,013 $ 212,264
========= ==========
<PAGE>
3.
JUNIATA VALLEY FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
For the Quarter Ended For Nine Months Ended
---------------------- --------------------
Sept 30, Sept 30, Sept 30, Sept 30,
1997 1996 1997 1996
---------- --------- --------- ---------
(In thousands, except per share amount)
INTEREST INCOME:
Loans receivable $ 3,156 $ 2,900 $ 9,165 $ 8,611
Taxable securities 699 691 2,058 2,088
Tax-exempt securities 297 324 927 911
Other 37 48 117 170
---------- ---------- ---------- ---------
Total interest income 4,189 3,963 12,267 11,780
INTEREST EXPENSE ON DEPOSITS 1,968 1,922 5,799 5,661
---------- ---------- ---------- ---------
Net interest income 2,221 2,041 6,468 6,119
PROVISION FOR LOAN LOSSES 45 45 135 135
---------- ---------- ---------- ---------
Net interest income, after
provision for loan losses 2,176 1,996 6,333 5,984
---------- ---------- ---------- ---------
OTHER INCOME:
Trust department 45 58 130 161
Customer service fees 66 60 191 173
Net realized gains on
sales of securities - - 65 -
Other 54 39 218 100
---------- ---------- ---------- ---------
Total other income 165 157 604 434
---------- ---------- ---------- ---------
OTHER EXPENSES:
Salaries and wages 574 548 1,707 1,647
Employee benefits 141 153 442 468
Occupancy 90 76 237 236
Equipment 88 80 243 249
Federal deposit insurance 6 1 17 2
Director compensation 65 94 195 271
Taxes, other than income 64 61 190 177
Other 333 279 1,024 810
---------- ---------- ---------- ---------
Total other expenses 1,361 1,292 4,055 3,860
---------- ---------- ---------- ---------
INCOME BEFORE INCOME TAXES 980 861 2,882 2,558
FEDERAL INCOME TAXES 242 201 678 613
---------- ---------- ---------- ---------
Net income $ 738 $ 660 $ 2,204 $ 1,945
========== ========== ========== ==========
PER SHARE DATA:
Net income $ .53 $ .47 $ 1.58 $ 1.39
========== ========== ========== ==========
Weighted average number of
shares outstanding 1,400,389 1,395,242 1,398,201 1,395,242
========= ========= ========= =========
<PAGE>
4.
JUNIATA VALLEY FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(Unaudited)
Net unrealized
Appreciation
(Depreciation)
on Securities
Common Capital Retained Available
Stock Surplus Earnings For Sale Total
---------- ----------- ----------- ------------ -----------
(In thousands)
BALANCE,
DECEMBER 31,
1996 $ 1,117 $ 14,879 $ 10,549 $ 218 $ 26,763
Net income for
the nine
months ended
Sept 30, 1997 - - 2,204 - 2,204
Cash dividend,
$.32 per share - - (447) - (447)
Stock issued,
Employee stock
purchase plan 4 110 - - 114
5-for-4 stock split
in the form of a
25% stock dividend 280 (280) (20) - (20)
Net unrealized
depreciation on
securities available
for sale, net of
taxes - - - 185 185
-------- -------- -------- --------- --------
Balance September
30, 1997 $ 1,401 $ 14,709 $ 12,286 $ 403 $ 28,799
======== ======== ======== ========= ========
<PAGE>
5.
JUNIATA VALLEY FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Increase (Decrease) in Cash and Cash Equivalents
For the Nine Months Ended
-------------------------
Sept 30, Sept 30,
1997 1996
-------------------------
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 2,204 $ 1,945
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 135 135
Provision for depreciation 139 145
Net amortization on premiums of securities 113 182
Deferred directors' fees and supplemental
retirement plan expense 120 169
Payment of deferred compensation (108) (110)
Net realized gain on sale of securities (65) -
Deferred income taxes (47) (62)
Increase in accrued interest
receivable and other assets (1,661) (851)
Increase in interest payable
and other liabilities 189 108
------------ -----------
Net cash provided by operating activities 1,019 1,661
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of available for sale securities (1,258) (8,275)
Proceeds from sales of available for sale securities 93 -
Proceeds from maturities of and principal
repayments on available for sale securities 5,042 3,592
Purchases of held to maturity securities (13,356) (7,532)
Proceeds from maturities of and principal
repayments on held to maturity securities 8,628 6,856
Net increase in loans receivable (7,391) (3,008)
Purchases of bank premises and equipment (115) (171)
------------ -----------
Net cash used in investing activities (8,357) (8,538)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits 5,421 4,249
Cash dividends (467) (412)
Dividend reinvestment plan - 91
Employee stock purchase plan 114 -
------------ -----------
Net cash provided by financing activies 5,068 3,928
------------ -----------
Increase (decrease) in cash and
cash equivalents (2,270) (2,949)
CASH AND CASH EQUIVALENTS
Beginning 9,022 11,673
------------ -----------
Ending $ 6,752 $ 8,724
============= ===========
CASH PAYMENTS FOR
Interest $ 5,784 $ 5,631
============ ===========
Income Taxes $ 695 $ 693
============ ===========
<PAGE>
6.
NOTE A - Basis of Presentation
The financial information includes the accounts of the Juniata Valley Financial
Corp. and its wholly owned subsidiary, The Juniata Valley Bank. All
significant intercompany accounts and transactions have been eliminated.
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments considered
necessary for fair presentation have been included. Operating results for the
nine-month period ended September 30, 1997, are not necessarily indicative of
the results that may be expected for the year ended December 31, 1997. For
further information, refer to the consolidated financial statements and
footnotes thereto included in Juniata Valley Financial Corp. annual report on
Form 10-K for the year ended December 31, 1996.
NOTE B - Summary of Significant Accounting Policies
Stock repurchase program:
On October 21, 1997, the Board of Directors of the Corporation authorized the
repurchase of up to 140,000 shares of the Corporation's outstanding common
stock. Pursuant to the authorization, appropriate senior officers of the
Corporation may direct the repurchases at times and in amounts determined by
them to be prudent.
Repurchases will be made from time to time on the open market or in privately
negotiated transactions. The shares purchased are to be held as treasury stock
for various corporate programs, including the funding of existing employee
benefit plans and such other benefit plans as may be herein after adopted by
the Corporation.
Per share data:
Net income and dividends per share are based on the weighted average number of
shares outstanding adjusted for stock dividends. The net income per share data
and weighted average number of shares outstanding have been adjusted to reflect
a 5-for-4 stock split declared on July 15, 1997.
<PAGE>
7.
MANAGEMENT'S DISCUSSION AND ANALYSIS
Financial Condition:
Total assets of Juniata Valley Financial Corp. reached $220,013,000 as of
September 30, an increase of $7,749,000 or 3.65% from December 31, 1996. The
cash provided by financing activities of $5,068,000 was a result of the net
increase in deposits of $5,421,000. In addition, the cash provided by
operating activities of $1,019,000 and the decrease in cash and cash
equivalents of $2,270,000 for the period ended September 30, 1997, were used
for loan growth of $7,391,000. The remaining cash was used to purchase
securities which exceeded proceeds by $851,000 and to purchase bank premise and
equipment of $115,000.
There are no material loans classified for regulatory purposes as loss,
doubtful, substandard or special mention which management expects to
significantly impact future operating results, liquidity or capital resources.
Additionally, management is not aware of any information which would give
serious doubt as to the ability of its borrowers to substantially comply with
their loan repayment terms. The Corporation's problem loans (i.e., 90 days
past due and restructured loans) were not material for all periods presented.
Management is not aware of any current recommendations of the regulatory
authorities which, if implemented, would have a material effect on the
Corporation's liquidity, capital resources or operations.
A dividend reinvestment plan for stockholders was instituted on January 1,
1996. The Corporation pays dividends semi-annually on June 1 and December 1 of
every year. Under the plan additional shares of Juniata Valley Financial Corp
may be purchased at market value with reinvested dividends and voluntary cash
payments. The Corporation has reserved 100,000 shares of common stock for this
plan. In 1996, 4,087 shares were issued and 95,913 remain unissued. For the
June 1, 1997 dividend pay date all shares to satisfy the dividend reinvestment
plan were purchased on the open market.
An employee stock purchase plan was approved by stockholders on April 16, 1996.
The first plan year began on July 1, 1996, and ended June 30, 1997. There were
58 out of 87 eligible employees that participated in the first plan year. On
June 15, 1997, 3,600 shares were issued. The corporation has reserved 100,000
shares of common stock for this plan. After the issuance on June 15, 1997,
there are 96,400 shares remaining to be issued.
Results of operations:
Interest income increased $487,000 or 4.13% for the first nine months of 1997
compared to 1996 and $226,000 or 5.70% for the quarter. Interest expense
increased $138,000 or 2.44% for the first nine months of 1997 and $46,000 or
2.39% for the quarter comparing 1997 to 1996. These increases in interest
income and expense for the first nine months ended September 30, 1997, versus
1996, are reflective of an increase of both interest earning assets and
interest bearing liabilities and overall higher rates offered and paid in 1997
versus 1996. This resulted in an increase in net interest income of $349,000
or 5.70% for the nine months ended September 30, 1997 and $180,000 or 8.82% for
the quarter ended.
Other income has increased $170,000 or 39.71% for the first nine months of 1997
and $8,000 for 5.10% for the quarter. This was due to the gains on sales of
securities for $65,000. There was also an increase of $118,000 in the other
<PAGE>
8.
Results of operations continued:
category for the first nine months. $51,000 was received in life insurance
proceeds due to the death of a former director; a fixed asset owned by the Bank
was sold which resulted in a $14,000 gain and a $42,000 increase in insurance
fees earned on consumer loans compared to the same period last year. There was
an increase of $18,000 in customer service fees. This was as a result of an
increase in the volume in accounts as opposed to an increase in fees. The
decrease of $31,000 in trust department fees was due to the settlement of three
estates in 1996 over 1997.
Other expenses for the first nine months increased $195,000 or 5.05% and
$69,000 or 5.34% for the quarter comparing 1997 to 1996. The $60,000 increase
in salary and wages for the nine months ended September 30, 1997, compared to
1996, can be attributed to annual merit increases and promotions of employees.
The $26,000 decrease in employee benefits is a result of lower benefit costs as
opposed to less benefits being provided. The $15,000 increase in federal
deposit insurance reflects the increased FICO debt service assessments. The
$76,000 decrease in directors compensation is due to fully funded retirement
plans. The $214,000 increase in the other category is due to $15,000 increase
in the Pennsylvania Bank Shares tax; $11,000 increase in branch advisory board
fees and $157,000 increase in repossession and loan collection expenses.
All of these factors combined have contributed to an increase in net income of
$259,000 or 13.32% for the nine months and $78,000 or 11.82% for the quarter
ended September 30, 1997.
Liquidity:
The objective of liquidity management is to ensure that sufficient funding is
available, at a reasonable cost, to meet the ongoing operational cash needs of
the Corporation and to take advantage of income producing opportunities as they
arise. While the desired level of liquidity will vary depending upon a variety
of factors, it is the primary goal of the Corporation to maintain a high level
of liquidity in all economic environments.
Principal sources of asset liquidity are provided by securities maturing in one
year or less, other short-term investments such as Federal Funds sold and cash
and due from banks. Liability liquidity, which is more difficult to measure,
can be met by attracting deposits and maintaining the core deposit base. The
Corporation joined the Federal Home Loan Bank of Pittsburgh in August of 1993
for the purpose of providing short term liquidity when other sources are unable
to fill these needs.
In view of the primary and secondary sources previously mentioned, Management
believes that the Corporation's liquidity is capable of providing the funds
needed to meet loan demand.
Interest rate sensitivity:
Interest rate sensitivity management is the responsibility of the
Asset/Liability Management Committee. This process involves the development
and implementation of strategies to maximize net interest margin, while
minimizing the earnings risk associated with changing interest rates. The
traditional gap analysis identifies the maturity and repricing terms of all
assets and liabilities.
<PAGE>
9.
As of September 30, 1997, the Corporation had a six-month negative gap of
$12,863,000. 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 interest rates could negatively affect net interest income. However,
the traditional analysis does not accurately reflect the Bank's interest rate
sensitivity since the rates on core deposits generally do not change as quickly
as market rates. Historically net interest income has, in fact, not been
subject to the degree of sensitivity indicated by the traditional analysis at
The Juniata Valley Bank.
Capital Adequacy:
The Bank's regulatory capital ratios for the periods presented are as follows:
Risk Weighted Assets Ratio:
Actual Required
------ --------
September 30, December 31, September 30, December 31,
1997 1996 1997 1996
------------- ------------ ------------- ------------
TIER I 18.90% 18.73% 4.0% 4.0%
TIER I & II 20.10% 19.94% 8.0% 8.0%
Total Assets Leverage Ratio:
TIER I 13.13% 12.66% 4.0% 4.0%
At September 30, 1997, the Corporation exceeds the regulatory requirements to
be considered a "well capitalized" financial institution.
<PAGE>
10.
Part II. Other Information
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(27) Financial Data Schedule
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Juniata Valley Financial Corp.
(Registrant)
Date_______________________________ By_______________________________
A. Jerome Cook, President
Date_______________________________ By_______________________________
Linda L. Engle, Treasurer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 6,275
<INT-BEARING-DEPOSITS> 52
<FED-FUNDS-SOLD> 425
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 26,664
<INVESTMENTS-CARRYING> 44,918
<INVESTMENTS-MARKET> 45,097
<LOANS> 135,424
<ALLOWANCE> 1,798
<TOTAL-ASSETS> 220,013
<DEPOSITS> 187,876
<SHORT-TERM> 0
<LIABILITIES-OTHER> 3,338
<LONG-TERM> 0
0
0
<COMMON> 1,401
<OTHER-SE> 27,398
<TOTAL-LIABILITIES-AND-EQUITY> 218,708
<INTEREST-LOAN> 9,165
<INTEREST-INVEST> 2,985
<INTEREST-OTHER> 117
<INTEREST-TOTAL> 12,267
<INTEREST-DEPOSIT> 5,799
<INTEREST-EXPENSE> 5,799
<INTEREST-INCOME-NET> 6,468
<LOAN-LOSSES> 135
<SECURITIES-GAINS> 65
<EXPENSE-OTHER> 4,055
<INCOME-PRETAX> 2,882
<INCOME-PRE-EXTRAORDINARY> 2,882
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,204
<EPS-PRIMARY> 1.58
<EPS-DILUTED> 1.58
<YIELD-ACTUAL> 7.97
<LOANS-NON> 116
<LOANS-PAST> 158
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 753
<ALLOWANCE-OPEN> 1,707
<CHARGE-OFFS> 80
<RECOVERIES> 36
<ALLOWANCE-CLOSE> 1,798
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
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