10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One) 

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year ended December 31, 2018

or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________________ to __________________

Commission File No. 0-13232

Juniata Valley Financial Corp.

(Exact name of registrant as specified in its charter)

Pennsylvania	23-2235254
(State or other jurisdiction of	(IRS Employer Identification No.)
incorporation or organization)
Bridge and Main Streets, PO Box 66
Mifflintown, PA	17059-0066
(Address of 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

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ¨        No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes ¨        No x

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x        No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes 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 this Form 10-K or any amendment to this Form 10-K.     x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer     ¨	Accelerated filer     x	Non-accelerated filer    ¨
Smaller reporting company     x	Emerging growth company      ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act)

Yes ¨        No x

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrants most recently completed second fiscal quarter was $111,380,229. ⁽¹⁾

There were 5,098,748 shares of the registrant’s common stock outstanding as of April 2, 2019.

(1)          The aggregate dollar amount of the voting stock set forth equals the number of shares of the Company’s Common Stock outstanding, reduced by the amount of Common Stock held by officers, directors, shareholders owning in excess of 10% of the Company’s Common Stock and the Company’s employee benefit plans multiplied by the last reported sale price for the Company’s Common Stock on June 30, 2018, the last business day of the registrants most recently completed second fiscal quarter. The information provided shall not be construed as an admission that any officer, director or 10% shareholder of the Company, or any employee benefit plan, may be deemed an affiliate of the Company or that such person or entity is the beneficial owner of the shares reported as being held by such person or entity, and any such inference is hereby disclaimed.

DOCUMENTS INCORPORATED BY REFERENCE

(Specific sections incorporated are identified under applicable items herein)

Certain portions of the Company’s Annual Report to Shareholders for the year ended December 31, 2018 are incorporated by reference in Parts I and II of this Report. The Company’s Annual Report to Shareholders is attached to this Report as Exhibit 13.1.

With the exception of the information incorporated by reference in Parts I and II of this Report, the Company’s Annual Report to Shareholders for the year ended December 31, 2018 is not to be deemed "filed" with the Securities and Exchange Commission for any purpose.

Certain portions of the Company’s Proxy Statement to be filed in connection with its 2019 Annual Meeting of Shareholders are incorporated by reference in Part III of this Report; provided, however, that any information in such Proxy Statement that is not required to be included in this Annual Report on Form 10-K shall not be deemed to be incorporated herein or filed for the purposes of the Securities Act of 1933 or the Securities Exchange Act of 1934.

Other documents incorporated by reference are listed in the Exhibit Index.

PART I

ITEM 1. BUSINESS

Overview

Juniata Valley Financial Corp. (the “Company” or “Juniata”) is a Pennsylvania corporation that was formed in 1983 as a result of a plan of merger and reorganization of The Juniata Valley Bank (the “Bank”). The plan received regulatory approval on June 7, 1983, and Juniata, a one-bank holding company, registered under the Bank Holding Company Act of 1956. The Bank is the oldest independent commercial bank in Juniata and Mifflin Counties, having originated under a state bank charter in 1867. The Company has one reportable segment, consisting of the Bank, as described in Note 2 of Notes to Consolidated Financial Statements contained in the Company’s 2018 Annual Report to Shareholders (the “2018 Annual Report”).

Nature of Operations

Juniata operates primarily in central and northern Pennsylvania with the purpose of delivering financial services within its local markets. The Company provides retail and commercial banking services through 16 offices in the following locations: five community offices in Juniata County; five community offices in Mifflin County, as well as a financial services office; two community offices in McKean County; one community office in each of Potter, Perry and Huntingdon Counties; and a loan production office in Centre County. On April 30, 2018, Juniata, which previously owned 39.16%, or 1,214 of the 3,100 outstanding common shares of Liverpool Community Bank (“Liverpool” or “LCB”), completed the acquisition of the remainder of Liverpool’s outstanding common stock. Under the terms of a merger agreement between the parties, LCB merged with and into the Bank.

The Company offers a full range of consumer and commercial banking services. Consumer banking services include: Internet banking; mobile banking; telephone banking; twelve automated teller machines; personal checking accounts; club accounts; checking overdraft privileges; money market deposit accounts; savings accounts; debit cards; certificates of deposit; individual retirement accounts; secured lines of credit; construction and mortgage loans; and safe deposit boxes. Commercial banking services include: low and high-volume business checking accounts; Internet account management services; remote deposit capability; ACH origination; payroll direct deposit; commercial lines of credit; commercial letters of credit; mobile deposit for small business customers; and commercial term and demand loans.

The Bank also provides comprehensive trust, asset management and estate services, and the Company has a contractual arrangement with a broker-dealer to offer a full range of financial services, including annuities, mutual funds, stock and bond brokerage services and long-term care insurance to the Bank’s customers. Management believes the Bank has a relatively stable deposit base with no major seasonal depositor or group of depositors. Most of the Company’s commercial customers are small and mid-sized businesses in central and northern Pennsylvania.

Juniata’s loan underwriting policies are updated periodically and are presented for approval to the Board of Directors of the Bank. The purpose of the policies is to grant loans on a sound and collectible basis, to invest available funds in a safe, profitable manner, to serve the credit needs of the communities in Juniata’s primary market area and to ensure that all loan applicants receive fair and equal treatment in the lending process. It is the intent of the underwriting policies to seek to minimize loan losses by requiring careful investigation of the credit history of each applicant, verifying the source of repayment and the ability of the applicant to repay, securing those loans in which collateral is deemed to be required, exercising care in the documentation of the application, review, approval and origination process and administering a comprehensive loan collection program.

The major types of investments held by Juniata consist of obligations and securities issued by U.S. government agencies or corporations, obligations of state and local political subdivisions, mortgage-backed securities and common stock. Juniata’s investment policy directs that investments be managed in a way that provides necessary funding for the Company’s liquidity needs and adequate collateral to pledge for public funds held and, as directed by the Asset Liability Committee, manages interest rate risk. The investment policy specifies the types of permitted investments owned, addresses credit quality of investments and includes limitations by investment types and issuer.

The Company’s primary source of funds is deposits, consisting of transaction type accounts, such as demand deposits and savings accounts, and time deposits, such as certificates of deposit. The majority of deposits are held by customers residing or located in Juniata’s market area. No material portion of the deposits has been obtained from a single or small group of customers, and the Company believes that the loss of any customer’s deposits or a small group of customers’ deposits would not have a material adverse effect on the Company.

Other sources of funds used by the Company include retail repurchase agreements, borrowings from the Federal Home Loan Bank of Pittsburgh and lines of credit established with various correspondent banks for overnight funding.

2 

Competition

The Bank’s service area is characterized by a high level of competition for banking and financial services among commercial banks, varying in size from local community banks to regional and national banks, credit unions, savings and loan associations, and non-bank financial institutions located inside and outside the Bank’s market area. The Bank actively competes with dozens of such banks and institutions for local consumer and commercial deposit accounts, loans and other types of banking business. Many competitors have substantially greater financial resources and larger branch systems than those of the Bank.

In commercial transactions, the Company believes that the Bank’s legal lending limit to a single borrower (approximately $9,553,000 as of December 31, 2018) enables it to compete effectively for the business of small and mid-sized businesses. However, this legal lending limit is considerably lower than that of various competing institutions and thus may act as a constraint on the Bank’s effectiveness in competing for larger financings.

In consumer transactions, the Bank believes that it is able to compete on a substantially equal basis with larger financial institutions because it offers competitive interest rates on savings and time deposits and on loans.

In competing with other banks, savings and loan associations and financial institutions, the Bank seeks to provide personalized services through management’s knowledge and awareness of its service areas, customers and borrowers. In management’s opinion, larger institutions often do not provide sufficient attention to the retail depositors and the relatively small commercial borrowers that comprise the Bank’s primary customer base.

Other competitors, including credit unions, consumer finance companies, insurance companies and money market mutual funds, compete with many of the lending and deposit services offered by the Bank. The Bank also competes with insurance companies, investment counseling firms, mutual funds and other business firms and individuals in corporate and trust investment management services.

Supervision and Regulation

General

The Company operates in a highly regulated industry, and thus may be affected by changes in state and federal regulations and legislation. As a registered bank holding company under the Bank Holding Company Act of 1956, as amended (the “Bank Holding Company Act”), the Company is subject to supervision and examination by the Board of Governors of the Federal Reserve System (“FRB”) and is required to file periodic reports and information regarding its business operations and those of the Bank with the FRB. In addition, under the Pennsylvania Banking Code of 1965, the Pennsylvania Department of Banking and Securities has the authority to examine the books, records and affairs of the Company and to require any documentation deemed necessary to ensure compliance with the Pennsylvania Banking Code.

The Bank Holding Company Act requires the Company to obtain FRB approval before: acquiring more than a five percent ownership interest in any class of the voting securities of any bank; acquiring all or substantially all of the assets of a bank; or merging or consolidating with another bank holding company. In addition, the Bank Holding Company Act prohibits a bank holding company from acquiring the assets, or more than five percent of the voting securities, of a bank located in another state, unless such acquisition is specifically authorized by the statutes of the state in which the bank is located.

The Company is generally prohibited under the Bank Holding Company Act from engaging in, or acquiring direct or indirect ownership or control of more than five percent of the voting shares of any company engaged in, nonbanking activities unless the FRB, by order or regulation, has found such activities to be so closely related to banking or managing or controlling banks as to be a proper incident thereto. In making such determination, the FRB considers whether the performance of these activities by a bank holding company can reasonably be expected to produce benefits to the public that outweigh the possible adverse effects.

A satisfactory safety and soundness rating, particularly with regard to capital adequacy, and a satisfactory Community Reinvestment Act rating are generally prerequisites to obtaining federal regulatory approval to make acquisitions and open branch offices. As of December 31, 2018, the Bank was rated “satisfactory” under the Community Reinvestment Act and was a “well capitalized” bank. An institution’s Community Reinvestment Act rating is considered in determining whether to grant approvals relating to charters, branches and other deposit facilities, relocations, mergers, consolidations and acquisitions. Less than satisfactory performance may be the basis for denying an application.

There are various legal restrictions on the extent to which the Company and its non-bank subsidiaries can borrow or otherwise obtain credit from the Bank. In general, these restrictions require that any such extensions of credit must be secured by designated amounts of specified collateral and are limited, as to any one of the Company or such non-bank subsidiaries, to ten percent of the lending bank’s capital stock and surplus and, as to the Company and all such non-bank subsidiaries in the aggregate, to 20 percent of the Bank’s capital stock and surplus. Further, the Company and the Bank are prohibited from engaging in certain tie-in arrangements in connection with any extension of credit, lease or sale of property or furnishing of services.

3 

As a bank chartered under the laws of Pennsylvania, the Bank is subject to the regulations and supervision of the Federal Deposit Insurance Corporation (“FDIC”) and the Pennsylvania Department of Banking and Securities. These government agencies conduct regular safety and soundness and compliance reviews that have resulted in satisfactory evaluations to date. Some of the aspects of the lending and deposit business of the Bank that are regulated by these agencies include personal lending, mortgage lending and reserve requirements.

The operations of the Bank are also subject to numerous Federal, state and local laws and regulations which set forth specific restrictions and procedural requirements with respect to interest rates on loans, the extension of credit, credit practices, the disclosure of credit terms and discrimination in credit transactions. The Bank also is subject to certain limitations on the amount of cash dividends that it can pay to the Company. See Note 17 of Notes to Consolidated Financial Statements, contained in the 2018 Annual Report, which is included in Exhibit 13 to this report and incorporated by reference in this Item 1.

Under FRB policy, the Company is expected to act as a source of financial strength to the Bank, and to commit resources to support the Bank in circumstances where it might not be in a financial position to support itself. Consistent with the “source of strength” policy for subsidiary banks, the FRB has stated that, as a matter of prudent banking, a bank holding company generally should not maintain a rate of cash dividends unless its net income available to common stockholders has been sufficient to fully fund the dividends and the prospective rate of earnings retention appears to be consistent with the Company’s capital needs, asset quality and overall financial condition.

As a public company, the Company is subject to the Securities and Exchange Commission’s rules and regulations relating to periodic reporting, proxy solicitation and insider trading.

FDIC Insurance

The FDIC is an independent federal agency that insures the deposits, up to prescribed statutory limits, of federally insured banks and savings institutions and safeguards the safety and soundness of the banking and savings industries. The FDIC administers the Deposit Insurance Fund (“DIF”). The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”) permanently raised the standard maximum deposit insurance coverage amount to $250,000 and made the increase retroactive to January 1, 2008. The FDIC deposit insurance coverage limit applies per depositor, per insured depository institution for each account ownership category. The FDIC has been given greater latitude in setting the assessment rates for insured depository institutions which could be used to impose minimum assessments.

The FDIC is authorized to set the reserve ratios for the DIF annually at between 1.15% and 1.5% of estimated insured deposits. FDIC assessment rates currently range from 12 to 50 basis points. Institutions in the lowest risk category, Risk Category I, pay between 12 and 14 basis points. Initial base assessment rates range between 12 and 45 basis points (12 – 16 basis points for Category I). The initial base rates for risk categories II, III and IV were 20, 30 and 45 basis points, respectively. For institutions in any risk category, assessment rates rose above initial rates for institutions relying significantly on secured liabilities. Assessment rates increased for institutions with a ratio of secured liabilities (repurchase agreements, Federal Home Loan Bank advances, secured Federal Funds purchased and other secured borrowings) to domestic deposits of greater than 15%, with a maximum of 50% above the rate before such adjustment.

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd Frank Act”) revised the statutory authorities governing the FDIC’s management of the DIF. Key requirements from the Dodd-Frank Act have resulted in the FDIC’s adoption of amendments that: (1) redefined the assessment base used to calculate deposit insurance assessments to “average consolidated total assets minus average tangible equity”; (2) raised the DIF’s minimum reserve ratio to 1.35 percent and removed the upper limit on the reserve ratio; (3) revised adjustments to the assessment rates by eliminating one adjustment and adding another; and (4) revised the deposit insurance assessment rate schedules due to changes to the assessment base. Revised rate schedules and other revisions to the deposit insurance assessment rules became effective April 1, 2011. Though deposit insurance assessments maintain a risk-based approach, the FDIC’s changes effective April 1, 2011, impose a more extensive risk-based assessment system on large insured depository, institutions with at least $10 billion in total assets since they are more complex in nature and could pose greater risk. Due to the changes to the assessment base and assessment rates, as well as the DIF restoration time frame, the impact on the Company’s deposit insurance assessments resulted in lower premiums from 2011 through 2018 and will likely continue in future years.

4 

Under the Reform Act, the FDIC may terminate the insurance of an institution’s deposits upon finding that the institution has engaged in unsafe and unsound practices, is in an unsafe and unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC. The Company does not know of any practice, condition or violation that might lead to termination of its deposit insurance.

In addition, all FDIC-insured institutions are required to pay assessments to fund interest payments on bonds issued by the Financing Corporation, an agency of the Federal government established to finance resolutions of insolvent thrifts. These assessments, the current quarterly rate of which is approximately 0.00115% of the total assessment base, will continue until the Financing Corporation bonds fully mature in 2019.

Community Reinvestment Act

Under the Community Reinvestment Act, the Bank has a continuing and affirmative obligation, consistent with its safe and sound operation, to help meet the credit needs of its entire community, including low and moderate-income neighborhoods. However, the Community Reinvestment Act does not establish specific lending requirements or programs for financial institutions nor does it limit an institution’s discretion to develop the types of products and services that it believes are best suited to its particular community. The Community Reinvestment Act also requires:

· the applicable regulatory agency to assess an institution’s record of meeting the credit needs of its community;

· public disclosure of an institution’s CRA rating; and

· that the applicable regulatory agency provides a written evaluation of an institution’s CRA performance utilizing a four-tiered descriptive rating system.

Capital Regulation

All bank holding companies and banks, including the Company and its subsidiary, are subject to risk-based and leverage capital standards. The risk-based capital standards relate a banking organization’s capital to the risk profile of its assets and require that bank holding companies and banks have Tier 1 capital of at least 4% of total risk-adjusted assets, and total capital, including Tier 1 capital, equal to at least 8% of total risk-adjusted assets. Tier 1 capital includes common stockholders’ equity and qualifying perpetual preferred stock together with related surpluses and retained earnings. The remaining portion of this capital standard, known as Tier 2 capital, may be comprised of limited life preferred stock, qualifying subordinated debt instruments and the reserves for possible loan losses.

Additionally, banking organizations must maintain a minimum leverage ratio of 3%, measured as the ratio of Tier 1 capital to adjusted average assets. This 3% leverage ratio is a minimum for the most highly rated banking organizations without any supervisory, financial or operational weaknesses or deficiencies. Other banking organizations are expected to maintain leverage capital ratios that are 100 to 200 basis points above such minimum, depending upon their financial condition.

Under the Federal Deposit Insurance Corporation Improvement Act of 1991 (the "1991 Act"), a bank holding company is required to guarantee that any "undercapitalized" (as such term is defined in the statute) insured depository institution subsidiary will comply with the terms of any capital restoration plan filed by such subsidiary with its appropriate federal banking agency up to the lesser of (i) an amount equal to 5% of the institution's total assets at the time the institution became undercapitalized, or (ii) the amount which is necessary (or would have been necessary) to bring the institution into compliance with all capital standards as of the time the institution failed to comply with such capital restoration plan.

See Note 17 of Notes to Consolidated Financial Statements, contained in the 2018 Annual Report and incorporated by reference in this Item 1, for a table that provides the Company’s risk-based capital ratios and leverage ratio.

Federal banking agencies have broad powers to take corrective action to resolve problems of insured depository institutions. The extent of these powers depends upon whether the institutions in question are “well capitalized,” “adequately capitalized,” “undercapitalized”, “significantly undercapitalized,” or “critically undercapitalized.” As of December 31, 2018, the Bank was a “well-capitalized” bank, as defined by the FDIC.

The FDIC has issued a rule that sets the capital level for each of the five capital categories by which banks are evaluated. A bank is deemed to be “well capitalized” if the bank has a total risk-based capital ratio of 10% or greater, has a Tier 1 risk-based capital ratio of 6% or greater, has a leverage ratio of 5% or greater, and is not subject to any order or final capital directive by the FDIC to meet and maintain a specific capital level for any capital measure. A bank may be deemed to be in a capitalization category that is lower than is indicated by its actual capital position if it received an unsatisfactory safety and soundness examination rating.

5 

All of the bank regulatory agencies have issued rules that amend their capital guidelines for interest rate risk and require such agencies to consider in their evaluation of a bank’s capital adequacy the exposure of a bank’s capital and economic value to changes in interest rates. These rules do not establish an explicit supervisory threshold. The agencies intend, at a subsequent date, to incorporate explicit minimum requirements for interest rate risk into their risk-based capital standards and have proposed a supervisory model to be used together with bank internal models to gather data and hopefully propose at a later date, explicit minimum requirements.

The United States is a member of the Basel Committee on Banking Supervision (the “Basel Committee”) that provides a forum for regular international cooperation on banking supervisory matters. The Basel Committee develops guidelines and supervisory standards and is best known for its international standards on capital adequacy.

In December 2010, the Basel Committee released its final framework for strengthening international capital and liquidity regulation, officially identified by the Basel Committee as “Basel III”. In July 2013, the FRB published final rules to implement the Basel III capital framework and revise the framework for the risk-weighting of assets. The Basel III rules, among other things, narrow the definition of regulatory capital. As fully phased in on January 1, 2019, Basel III requires bank holding companies and their bank subsidiaries to maintain substantially more capital, with a greater emphasis on common equity. Basel III also provides for a “countercyclical capital buffer,” an additional capital requirement that generally is imposed when national regulators determine that excess aggregate credit growth has become associated with a buildup of systemic risk, in order to absorb losses during periods of economic stress. Banking institutions that maintain insufficient capital to comply with the capital conservation buffer face constraints on dividends, equity repurchases and compensation based on the amount of the shortfall.

Additionally, the Basel III framework requires banks and bank holding companies to measure their liquidity against specific liquidity tests, including a liquidity coverage ratio (LCR) designed to ensure that the banking entity maintains a level of unencumbered high-quality liquid assets greater than or equal to the entity’s expected net cash outflow for a 30-day time horizon under an acute liquidity stress scenario, and a net stable funding ratio (NSFR) designed to promote more medium and long-term funding based on the liquidity characteristics of the assets and activities of banking entities over a one-year time horizon. In September 2014, the federal regulatory agencies finalized rules implementing the LCR for U.S. financial institutions that are “internationally active banking organizations” and those generally with more than $250 billion in total consolidated assets. The FRB separately adopted a less stringent, modified LCR requirement for bank holding companies that have more than $50 billion in total consolidated assets. Because of the Company’s size, neither the LCR Rule nor any additional proposed rules under the Basel III liquidity framework are applicable to it.

The final rules revise federal regulatory agencies’ risk-based and leverage capital requirements and their method for calculating risk-weighted assets to make them consistent with the Basel III framework. The final rules apply to all depository institutions, top-tier bank holding companies with total consolidated assets of $500 million or more, and top-tier savings and loan holding companies (“banking organizations”). Among other things, the rules establish a new common equity tier 1 (CET1) minimum capital requirement (4.5% of risk-weighted assets) and a higher minimum tier 1 capital requirement (from 4.0% to 6.0% of risk-weighted assets), and assign higher risk weightings (150%) to exposures that are more than 90 days past due or are on nonaccrual status and certain commercial real estate facilities that finance the acquisition, development or construction of real property.

As fully phased in, Basel III requires financial institutions to maintain: (a) as a newly adopted international standard, a minimum ratio of CET1 to risk-weighted assets of at least 4.5%; (b) a minimum ratio of tier 1 capital to risk-weighted assets of at least 6.0%; (c) a minimum ratio of total (that is, tier 1 plus tier 2) capital to risk-weighted assets of at least 8.0%; and (d) as a newly adopted international standard, a minimum leverage ratio of 3.0%, calculated as the ratio of tier 1 capital balance sheet exposures plus certain off-balance sheet exposures (computed as the average for each quarter of the month-end ratios for the quarter). In addition, the final rules also limit a banking organization’s capital distributions and certain discretionary bonus payments if the banking organization does not hold a “capital conservation buffer” of 2.5% above each of the foregoing capital requirements stated in (a) – (c).

As a result of the new capital conservation buffer rules, if the Company’s bank subsidiary fails to maintain the required minimum capital conservation buffer, the Company may be unable to obtain capital distributions from it, which could negatively impact the Company’s ability to pay dividends, service debt obligations or repurchase common stock. In addition, such a failure could result in a restriction on the Company’s ability to pay certain cash bonuses to executive officers, negatively impacting the Company’s ability to retain key personnel.

As of December 31, 2018, the Company’s current capital levels meet the minimum capital requirements, including capital conservation buffer, as prescribed in the U.S. Basel III Capital Rules.

6 

Gramm-Leach-Bliley Act

On November 12, 1999, the Gramm-Leach-Bliley Act (“GLB”) became law. GLB permits commercial banks to affiliate with investment banks. It also permits bank holding companies which elect financial holding company status to engage in any type of financial activity, including securities, insurance, merchant banking/equity investment and other activities that are financial in nature. The Company has not elected financial holding company status. The merchant banking provisions allow a bank holding company to make a controlling investment in any kind of company, financial or commercial. GLB allows a bank to engage in virtually every type of activity currently recognized as financial or incidental or complementary to a financial activity. A commercial bank that wishes to engage in these activities is required to be well capitalized, well managed and to have a satisfactory or better Community Reinvestment Act rating. GLB also allows subsidiaries of banks to engage in a broad range of financial activities that are not permitted for banks themselves. Although the Company and the Bank have not commenced these types of activities to date, GLB enables them to evaluate new financial activities that would complement the products already offered to enhance non-interest income.

Sarbanes-Oxley Act of 2002

The Sarbanes-Oxley Act of 2002 implemented a broad range of corporate governance, accounting and reporting measures for companies, like Juniata, that have securities registered under the Securities Exchange Act of 1934. Specifically, the Sarbanes-Oxley Act and the various regulations promulgated under the Act, established, among other things: (i) requirements for audit committees, including independence, expertise, and responsibilities; (ii) additional responsibilities relating to financial statements for the Chief Executive Officer and Chief Financial Officer of reporting companies; (iii) standards for auditors and regulation of audits, including independence provisions that restrict non-audit services that accountants may provide to their audit clients; (iv) increased disclosure and reporting obligations for reporting companies and their directors and executive officers, including accelerated reporting of stock transactions and a prohibition on trading during pension blackout periods; and (v) a range of civil and criminal penalties for fraud and other violations of the securities laws. In addition, Sarbanes-Oxley required stock exchanges, such as NASDAQ, to institute additional requirements relating to corporate governance in their listing rules.

Section 404 of the Sarbanes-Oxley Act requires the Company to include in its Annual Report on Form 10-K a report by management and an attestation report by the Company’s independent registered public accounting firm on the adequacy of the Company’s internal control over financial reporting. Management’s internal control report must, among other things, set forth management’s assessment of the effectiveness of the Company’s internal control over financial reporting.

Financial Privacy

Federal banking regulators have adopted rules that limit the ability of banks and other financial institutions to disclose non-public information about consumers to nonaffiliated third parties. These limitations require disclosure of privacy policies to consumers and, in some circumstances, allow consumers to prevent disclosure of certain personal information to a nonaffiliated third party. The privacy provisions of the GLB Act affect the Company by limiting how consumer information is transmitted and conveyed to outside vendors.

Anti-Money Laundering Initiatives and the USA Patriot Act

A major focus of governmental policy on financial institutions in recent years has been aimed at combating money laundering and terrorist financing. The USA Patriot Act of 2001 (“USA Patriot Act”) imposes significant compliance and due diligence obligations, creates criminal and financial liability for non-compliance and expands the extra-territorial jurisdiction of the U.S. The United States Treasury has issued a number of regulations that apply various requirements of the USA Patriot Act to financial institutions. These regulations require financial institutions to maintain appropriate policies, procedures and controls to detect, prevent and report money laundering and terrorist financing and to verify the identity of their customers. Failure of a financial institution to maintain and implement adequate programs to combat money laundering and terrorist financing, or to comply with all of the relevant laws or regulations, could have serious legal and reputational consequences for the institution.

Office of Foreign Assets Control Regulation

The U.S. has instituted economic sanctions which restrict transactions with designated foreign countries, nationals and others. These are typically known as the “OFAC rules” because they are administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury (“OFAC”). The OFAC-administered sanctions target countries in various ways. Generally, however, they contain one or more of the following elements: (i) restrictions on trade with or investment in a sanctioned country, including prohibitions against direct or indirect imports from and exports to a sanctioned country, and prohibitions on “U.S. persons” engaging in financial transactions which relate to investments in, or providing investment-related advice or assistance to, a sanctioned country; and (ii) a blocking of assets in which the government or specially designated nationals of the sanctioned country have an interest, by prohibiting transfers of property subject to U.S. jurisdiction (including property in the possession or control of U.S. persons). Blocked assets (e.g., property and bank deposits) cannot be paid out, withdrawn, set off or transferred in any manner without a license from OFAC. Failure to comply with these sanctions could have serious legal and reputational consequences for the institution. As U.S. financial institutions, the Company and the Bank are required to comply with the OFAC rules.

7 

Consumer Protection Statutes and Regulations

The Company is subject to many federal consumer protection statutes and regulations, including the Truth in Lending Act, Truth in Savings Act, Equal Credit Opportunity Act, Fair Housing Act, Real Estate Settlement Procedures Act and Home Mortgage Disclosure Act. Among other things, these acts:

· require banks to disclose credit terms in meaningful and consistent ways;

· prohibit discrimination against an applicant in any consumer or business credit transaction;

· prohibit discrimination in housing-related lending activities;

· require banks to collect and report applicant and borrower data regarding loans for home purchases or improvement projects;

· require lenders to provide borrowers with information regarding the nature and cost of real estate settlements;

· prohibit certain lending practices and limit escrow account amounts with respect to real estate transactions; and

· prescribe possible penalties for violations of the requirements of consumer protection statutes and regulations.

On November 17, 2009, the FRB published a final rule amending Regulation E, which implements the Electronic Funds Transfer Act. The final rule limits the ability of a financial institution to assess an overdraft fee for paying automated teller machine transactions and one-time debit card transactions that overdraw a customer’s account, unless the customer affirmatively consents, or opts in, to the institution’s payment of overdrafts for these transactions.

Dodd-Frank Act

The Dodd-Frank Act resulted in significant financial regulatory reform. The Dodd-Frank Act also changed the responsibilities of the current federal banking regulators. Among other things, the Dodd-Frank Act created the Financial Oversight Council, with oversight authority for monitoring and regulating systemic risk, and the Consumer Financial Protection Bureau (“CFPB”), which has broad regulatory and enforcement powers over consumer financial products and services. Effective July 21, 2011, the CFPB became responsible for administering and enforcing numerous federal consumer financial laws enumerated in the Dodd-Frank Act. The Dodd Frank Act also provided that, for banks with total assets of more than $10 billion, the CFPB would have exclusive or primary authority to examine those banks for, and enforce compliance with, the federal consumer financial laws. Although not subject to examination by the CFPB, the Company remains subject to the review and supervision of other applicable regulatory authorities, and such authorities may enforce compliance with regulations issued by the CFPB.

The scope of the Dodd-Frank Act impacts many aspects of the financial services industry, and it requires the development and adoption of numerous regulations, some of which have not yet been issued. The effects of the Dodd-Frank Act on the financial services industry will depend, in large part, upon the extent to which regulators exercise the authority granted to them under the Dodd-Frank Act and the approaches taken in implementing those regulations. Additional uncertainty regarding the effects of the Dodd-Frank Act exists due to court decisions and the potential for additional legislative changes to the Dodd-Frank Act.

The Dodd-Frank Act's provisions that have received the most public attention have generally been those which apply only to larger institutions with total consolidated assets of $50 billion or more. However, the Dodd-Frank Act contains numerous other provisions that affect all bank holding companies, including the Company.

The following is a list of significant provisions of the Dodd-Frank Act, and, if applicable, the resulting regulatory rules adopted, that apply (or will apply), most directly to the Company and its subsidiary:

· Federal deposit insurance - On April 1, 2011, the FDIC's revised deposit insurance assessment base changed from total domestic deposits to average total assets, minus average tangible equity. In addition, the Dodd-Frank Act created a two scorecard system, one for large depository institutions that have more than $10 billion in assets and another for highly complex institutions that have over $50 billion in assets.

8 

· Debit card interchange fees - In June 2011, the FRB adopted regulations, which became effective on October 1, 2011, setting maximum permissible interchange fees issuers can receive or charge on electronic debit card transaction fees and network exclusivity arrangements (the "Current Rule").

· Interest on demand deposits - Beginning in July 2011, depository institutions were no longer prohibited from paying interest on business transaction and other accounts.

· Stress testing - In October 2012, the FRB issued final rules regarding company-run stress testing. In accordance with these rules, a company whose assets exceed $10 billion is required to conduct an annual stress test in the manner specified, and using assumptions for baseline, adverse and severely adverse scenarios announced by the FRB. The stress test is designed to assess the potential impact of various scenarios on a company’s earnings, capital levels and capital ratios over at least a nine-quarter time horizon. If applicable, the Company's board of directors and its senior management are required to consider the results of the stress test in the normal course of business, including as part of its capital planning process and the evaluation of the adequacy of its capital. While the Company believes that both the quality and magnitude of its capital base are sufficient to support its current operations given its risk profile, this requirement is not applicable to the Company because its assets are under $10 billion.

· Ability-to-pay rules and qualified mortgages - As required by the Dodd-Frank Act, the CFPB issued a series of final rules in January 2013 amending Regulation Z, implementing the Truth in Lending Act, by requiring mortgage lenders to make a reasonable and good faith determination, based on verified and documented information, that a consumer applying for a residential mortgage loan has a reasonable ability to repay the loan according to its terms. These final rules, most of which became effective January 10, 2014, prohibit creditors, such as the Company, from extending residential mortgage loans without regard for the consumer's ability to repay and add restrictions and requirements to residential mortgage origination and servicing practices. In addition, these rules restrict the imposition of prepayment penalties and compensation practices relating to residential mortgage loan origination. Mortgage lenders are required to determine consumers' ability to repay in one of two ways. The first alternative requires the mortgage lender to consider eight underwriting factors when making the credit decision. Alternatively, the mortgage lender can originate "qualified mortgages," which are entitled to a presumption that the creditor making the loan satisfied the ability-to-repay requirements. In general, a "qualified mortgage" is a residential mortgage loan that does not have certain high-risk features, such as negative amortization, interest-only payments, balloon payments, or a term exceeding 30 years. In addition, to be a qualified mortgage, the points and fees paid by a consumer cannot exceed 3% of the total loan amount, and the borrower's total debt-to-income ratio must be no higher than 43% (subject to certain limited exceptions for loans eligible for purchase, guarantee or insurance by a government sponsored entity or a federal agency).

Compliance with these rules has increased Juniata's overall regulatory compliance costs and required changes to the underwriting practices of the Company with respect to mortgage loans.

· Integrated disclosures under the Real Estate Settlement Procedures Act and the Truth in Lending Act - In December 2013, the CFPB issued final rules revising and integrating previously separate disclosures required under the Real Estate Settlement Procedures Act (RESPA) and the Truth in Lending Act (TILA) in connection with certain closed-end consumer mortgage loans. These final rules became effective August 1, 2015 and require lenders to provide a new Loan Estimate, combining content from the former Good Faith Estimate required under RESPA and the initial disclosures required under TILA not later than the third business day after submission of a loan application, and a new Closing Disclosure, combining content of the former HUD-1 Settlement Statement required under RESPA and the final disclosures required under TILA at least three days prior to the loan closing.

· Volcker Rule — As mandated by the Dodd-Frank Act, in December 2013, the OCC, FRB, FDIC, SEC and Commodity Futures Trading Commission issued a final rule (the "Final Rules") implementing certain prohibitions and restrictions on the ability of a banking entity and non-bank financial company supervised by the FRB to engage in proprietary trading and have certain ownership interests in, or relationships with, a "covered fund" (the so-called "Volcker Rule"). The Final Rules generally treat as a covered fund any entity that would be an investment company under the Investment Company Act of 1940 (the "1940 Act") but for the application of the exemptions from SEC registration set forth in Section 3(c)(1) (fewer than l00 beneficial owners) or Section 3(c)(7) (qualified purchasers) of the 1940 Act. The Final Rules also require regulated entities to establish an internal compliance program that is consistent with the extent to which it engages in activities covered by the Volcker Rule, which must include making regular reports about those activities to regulators. Although the Final Rules provide some tiering of compliance and reporting obligations based on size, the fundamental prohibitions of the Volcker Rule apply to banking entities of any size, including the Company.

9 

While the Company does not engage in proprietary trading or in any other activities prohibited by the Final Rules, the Company will continue to evaluate whether any of its investments fall within the definition of a "covered fund" and would need to be disposed of by the extended deadline. However, based on the Company's evaluation to date, it does not currently expect that the Final Rules will have a material effect on its business, financial condition or results of operations.

· Incentive compensation — As required by the Dodd-Frank Act, a joint interagency proposed regulation was issued in April 2011. The proposed rule would require the reporting of incentive-based compensation arrangements by a covered financial institution and prohibit incentive-based compensation arrangements at a covered financial institution that provides excessive compensation or that could expose the institution to inappropriate risks that could lead to material financial loss. The proposed rule, if adopted as currently proposed, could limit the manner in which the Company structures incentive compensation for its executives.

National Monetary Policy

In addition to being affected by general economic conditions, the earnings and growth of the Bank and, therefore, the earnings and growth of the Company, are affected by the policies of regulatory authorities, including the FRB and the FDIC. An important function of the FRB is to regulate the money supply and credit conditions. Among the instruments used to implement these objectives are open market operations in U.S. government securities, setting the discount rate and changes in financial institution reserve requirements. These instruments are used in varying combinations to influence overall growth and distribution of credit, bank loans, investments and deposits, and their use may also affect interest rates charged on loans or paid on deposits.

The monetary policies and regulations of the FRB have had a significant effect on the operating results of commercial banks in the past and are expected to continue to do so in the future. The effects of such policies upon the future businesses, earnings and growth of the Company cannot be predicted with certainty.

Tax Cuts and Jobs Act

On December 22, 2017, the Tax Cuts and Jobs Act (TCJA) was signed into law. Among other changes, the TCJA significantly changed corporate income tax law by reducing the corporate income tax rate from 35% to 21%, allowing for immediate capital expensing of certain qualified property and eliminating the deductibility of DIF assessments. The tax laws were generally effective for the 2018 tax year; however, the Company recognized certain effects of the changes in 2017, which was when the new legislation was enacted. Refer to Note 16 of Notes to Consolidated Financial Statements contained in the 2018 Annual Report for additional disclosures regarding the impact of the TCJA.

Employees

As of December 31, 2018, the Company had a total of 131 full-time and 47 part-time employees.

Additional Information

The Company files annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission. Our SEC filings are available on the SEC’s website (http://www.sec.gov).

The Company’s common stock is quoted under the symbol “JUVF” on the OTC-Pink Bulletin Board, an automated quotation service, made available through, and governed by, the NASDAQ system. You may also read reports, proxy statements and other information we file at the offices of the National Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington, DC 20006.

The Company’s Internet address is www.JVBonline.com. At that address, we make available, free of charge, the Company’s annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act (see “Investor Information” section of website), as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

In addition, we will provide, at no cost, paper or electronic copies of our reports and other filings made with the SEC (except for exhibits). Requests should be directed to JoAnn N. McMinn, Chief Financial Officer, Juniata Valley Financial Corp., PO Box 66, Mifflintown, PA 17059, 717-436-8211.

The information on the websites listed above is not and should not be considered to be part of this annual report on Form 10-K and is not incorporated by reference in this document.

10 

ITEM 1A. RISK FACTORS

An investment in the Company's common stock involves certain risks, including, among others, the risks described below. In addition to the other information contained in this report, you should carefully consider the following risk factors in analyzing whether to make or to continue an investment in the Company:

RISKS RELATED TO INTEREST RATES AND LIQUIDITY

Fluctuations in market interest rates, particularly in a continuing period of low market interest rates, and relative balances of rate-sensitive assets to rate-sensitive liabilities, can negatively impact net interest margin and net interest income.

The operations of financial institutions such as the Company are dependent to a large degree on net interest income, which is the difference between interest income from loans and investments and interest expense on deposits and borrowings.

An institution's net interest income is significantly affected by market rates of interest that in turn are affected by prevailing economic conditions, by the fiscal and monetary policies of the federal government and by the policies of various regulatory agencies. The FRB regulates the national money supply in order to manage recessionary and inflationary pressures. In doing so, the FRB may use techniques such as engaging in open market transactions of U.S. Government securities, changing the discount rate and changing reserve requirements against bank deposits. The use of these techniques may also affect interest rates charged on loans and paid on deposits. The interest rate environment, which includes both the level of interest rates and the shape of the U.S. Treasury yield curve, has a significant impact on net interest income.

Low market interest rates have pressured the net interest margin in recent years. Interest-earning assets, such as loans and investments, have been originated, acquired or repriced at lower rates, reducing the average rate earned on those assets. While the average rate paid on interest-bearing liabilities, such as deposits and borrowings, has also declined, the decline has not always occurred at the same pace as the decline in the average rate earned on interest-earning assets, resulting in a narrowing of the net interest margin.

Competition sometimes requires the Company to lower rates charged on loans more than the decline in market rates would otherwise indicate. Competition may also require the Company to pay higher rates on deposits than market rates would otherwise indicate. Thus, although loan demand has improved in recent years, intense competition among lenders has continued to place downward pressure on loan yields, also narrowing the net interest margin. Further, due to historically low market interest rates, rates paid on deposits have tended to reach a natural floor below which it is difficult to further reduce such rates.

Like all financial institutions, the Company's consolidated statement of financial condition is affected by fluctuations in interest rates. Volatility in interest rates can also result in disintermediation, which is the flow of deposits away from financial institutions into direct investments, such as U.S. Government and corporate securities and other investment vehicles, including mutual funds, which, because of the absence of federal insurance premiums and reserve requirements, generally pay higher rates of return than bank deposit products. See "Item 7: Management's Discussion of Financial Condition and Results of Operations”.

See the section entitled Interest Rate Risk and Table 5 – Maturity Distribution” in Management’s Discussion and Analysis of Financial Condition in the 2018 Annual Report, incorporated by reference in this Item 1A, for the maturity distribution and cumulative sensitivity ratio of the Company’s interest earning assets and interest bearing liabilities.

Capital and liquidity strategies, including the impact of the capital and liquidity requirements implemented by the Basel III standards, may require the Company to maintain higher levels of capital, which could restrict the amount of capital that the Company has available to deploy for income generating and other activities.

In July 2013, the FRB approved the final rules implementing the Basel III capital standards (the “Basel III Rules”) which substantially revise the risk-based capital requirements applicable to bank holding companies and depository institutions. See previous Capital Regulation discussion.

As of December 31, 2018, the Company believes its current capital levels meet the fully phased-in minimum capital requirements as prescribed in the U.S. Basel III Capital Rules. However, the new rules, which began January 1, 2015 and which were fully phased in on January 1, 2019, effectively require financial institutions to maintain higher capital levels than was previously required. As a result, Juniata may have to maintain capital in the form of assets that contribute less income to Juniata and that are not available for deployment as loans or other interest-income generating assets, funding of capital projects or other growth initiatives. 

11 

Competition, including competition on rates of deposit and for loan growth may negatively impact the Company’s net interest margin.

There is significant competition among banks in the market areas served by the Company. In addition, as a result of deregulation of the financial industry, the Bank also competes with other providers of financial services, such as savings and loan associations, credit unions, consumer finance companies, securities firms, insurance companies, the mutual funds industry, full service brokerage firms and discount brokerage firms, some of which are subject to less extensive regulations than the Company with respect to the products and services they provide. Some of the Company’s competitors have greater resources than the Company and, as a result, may have higher lending limits and may offer other services not offered by the Company. See "Item 1: Business - Competition." Competition may adversely affect the rates the Company pays on deposits and charges on loans, thereby potentially adversely affect the Company’s profitability. The Company’s profitability depends upon its continued ability to successfully compete in the markets it serves. Further, intense competition among lenders can contribute to downward pressure on loan yields.

Changes in interest rates or disruption in liquidity markets may adversely affect the Company’s sources of funding.

The Company must maintain sufficient sources of liquidity to meet the demands of its depositors and borrowers, support its operations and meet regulatory expectations. The Company’s liquidity practices emphasize core deposits and repayments and maturities of loans and investments as its primary sources of liquidity. These primary sources of liquidity can be supplemented by FHLB advances, borrowings from the Federal Reserve Bank and lines of credit from correspondent banks. Lower-cost, core deposits may be adversely affected by changes in interest rates, and secondary sources of liquidity can be costlier to the Company than funding provided by deposit account balances having similar maturities. In addition, adverse changes in the Company’s results of operations or financial condition, regulatory actions involving the Company, or changes in regulatory, industry or market conditions could lead to increases in the cost of these secondary sources of liquidity, the inability to refinance or replace these secondary funding sources as they mature, or the withdrawal of unused borrowing capacity under these secondary funding sources.

While the Company attempts to manage its liquidity through various techniques, the assumptions and estimates used do not always accurately forecast the impact of changes in customer behavior. For example, the Company may face limitations on its ability to fund loan growth if customers move funds out of the Bank’s deposit accounts in response to increases in interest rates. In the years following the 2008 financial crisis, even as the general level of market interest rates remained low by historical standards, depositors frequently avoided higher-yielding and higher-risk alternative investments, in favor of the safety and liquidity of non-maturing deposit accounts. These circumstances contributed to significant growth in non-maturing deposit account balances at the Company, and at depository financial institutions generally. As interest rates rise, customers may become more sensitive to interest rates when making deposit decisions and considering alternative opportunities. This increased sensitivity to interest rates could cause customers to move funds into higher-yielding deposit accounts offered by the Company’s bank subsidiary, require the Company’s bank subsidiary to offer higher interest rates on deposit accounts to retain customer deposits or cause customers to move funds into alternative investments or deposits of other banks or non-bank providers. Technology and other factors have also made it more convenient for customers to transfer low-cost deposits into higher-cost deposits or into alternative investments or deposits of other banks or non-bank providers. Movement of customer deposits into higher-yielding deposit accounts offered by the Company’s bank subsidiary, the need to offer higher interest rates on deposit accounts to retain customer deposits or the movement of customer deposits into alternative investments or deposits of other banks or non-bank providers could increase the Company’s funding costs, reduce its net interest margin and/or create liquidity challenges.

Market conditions have been negatively impacted by disruptions in the liquidity markets in the past, and such disruptions or an adverse change in the Company's results of operations or financial condition could, in the future, have a negative impact on secondary sources of liquidity. If the Company is not able to continue to rely primarily on customer deposits to meet its liquidity and funding needs, continue to access secondary, non-deposit funding sources on favorable terms or otherwise fails to manage its liquidity effectively, the Company’s ability to continue to grow may be constrained, and the Company’s liquidity, operating margins, results of operations and financial condition may be materially adversely affected.

Regulators are increasingly emphasizing liquidity planning at both the bank and Company levels.

Due to regulatory limitations on the Corporation’s ability to rely on short-term borrowings, any significant movements of deposits away from traditional depository accounts which negatively impacts the Corporation’s loan-to-deposit ratio could restrict its ability to achieve growth in loans or require the Corporation to pay higher interest rates on deposit products in order to retain deposits to fund loans.

12 

Liquidity must also be managed at the holding company level. Banking regulators carefully scrutinize liquidity at the holding company level, in addition to consolidated and bank liquidity levels. For safety and soundness reasons, banking regulations limit the amount of cash that can be transferred from subsidiary banks to the parent company in the form of loans and dividends. Generally, these limitations are based on a subsidiary bank’s regulatory capital levels and net income. These factors have affected some institutions' ability to pay dividends and have required some institutions to establish borrowing facilities at the holding company level.

COMPLIANCE AND REGULATORY RISKS

The increasing time and expense associated with regulatory compliance and risk management could negatively impact our results of operations.

The time, expense and internal and external resources associated with regulatory compliance continue to increase. Thus, balancing the need to address regulatory changes and effectively managing growth in non-interest expenses has become more challenging than it has been in the past.

The Company and the Bank are extensively regulated under federal and state banking laws and regulations that are intended primarily for the protection of depositors, federal deposit insurance funds and the banking system as a whole. In general, these laws and regulations establish: the eligible business activities for the Company; certain acquisition and merger restrictions; limitations on intercompany transactions such as loans and dividends; capital adequacy requirements; requirements for anti-money laundering programs; consumer lending and other compliance requirements. While these statutes and regulations are generally designed to minimize potential loss to depositors and the FDIC insurance funds, they do not eliminate risk, and compliance with such statutes and regulations increases the Company’s expense, requires management’s attention and can be a disadvantage from a competitive standpoint with respect to non-regulated competitors and larger bank competitors.

Compliance with banking statutes and regulations is important to the Company's ability to engage in new activities and to consummate additional acquisitions. Bank regulators are scrutinizing banks through longer and more extensive bank examinations in both the safety and soundness and compliance areas. The results of such examinations could result in a delay in receiving required regulatory approvals for potential new activities and transactional matters. In the event that the Company's compliance record would be determined to be unsatisfactory, such approvals may not be able to be obtained. Federal and state banking regulators also possess broad powers to take supervisory actions, as they deem appropriate. These supervisory actions may result in higher capital requirements, higher deposit insurance premiums and limitations on the Company's operations that could have a material adverse effect on its business and profitability.

In addition, the Company is subject to changes in federal and state tax laws as well as changes in banking and credit regulations, accounting principles, governmental economic and monetary policies and collection efforts by taxing authorities.

Financial reform legislation is likely to have a significant impact on the Company’s business and results of operations; however, until more implementing regulations are adopted, the extent to which the legislation will impact the Company is uncertain.

In July, 2010, the President of the United States signed into law the Dodd-Frank Act. Among other things, the Dodd-Frank Act created the Financial Stability Oversight Council, with oversight authority for monitoring and regulating systemic risk, and the CFPB, which has broad regulatory and enforcement powers over consumer financial products and services. The Dodd-Frank Act also changed the responsibilities of the current federal banking regulators, imposed additional corporate governance and disclosure requirements in areas such as executive compensation and proxy access, and restricted private equity activities of banks.

The scope of the Dodd-Frank Act impacted many aspects of the financial services industry. However, its implementation requires the development and adoption of many regulations, some of which have not yet been proposed, adopted or fully implemented. The ultimate effect of the Dodd-Frank Act on the financial services industry will depend, in large part, upon the extent to which regulators exercise the authority granted to them under the Dodd-Frank Act and the approaches taken in implementing regulations. Additional uncertainty regarding the effect of the Dodd-Frank Act exists due to court decisions and the potential for additional legislative changes to the Dodd-Frank Act. The delay in the implementation of many of the regulations mandated by the Dodd-Frank Act has resulted in a lack of clear regulatory guidance to banks. The resulting uncertainty has caused banks to take a cautious approach to business initiatives and planning. The Company has been impacted, and will likely continue to be in the future, by the so-called Durbin Amendment to the Dodd-Frank Act, which reduced debit card interchange revenue of banks and revised deposit insurance assessments. It also is likely to be impacted by the Dodd-Frank Act in the areas of corporate governance, capital requirements, risk management, stress testing and regulation under consumer protection laws.

13 

Pursuant to the Dodd-Frank Act, the CFPB was given rulemaking authority over most providers of consumer financial services in the U.S., examination and enforcement authority over the consumer operations of large banks, as well as interpretive authority with respect to numerous existing consumer financial services regulations. The CFPB began exercising these oversight authorities over the largest banks during 2011.

In January 2013, the CFPB issued a series of final rules related to mortgage loan origination and mortgage loan servicing, most provisions of which became effective January 10, 2014. These rules prohibit creditors, such as the Bank, from extending residential mortgage loans without regard for the consumer's ability to repay, provide certain safe harbor protections for the origination of loans that meet the requirements for a "qualified mortgage," add restrictions and requirements to residential mortgage origination and servicing practices and restrict the imposition of prepayment penalties and compensation practices relating to residential mortgage loan origination. Compliance with these rules has increased the Company’s overall regulatory compliance costs and required the Bank to change its underwriting practices. Moreover, these rules may adversely affect the volume of mortgage loans that the Bank originates and may subject it to increased potential liability related to its residential loan origination activities. In December 2013, the CFPB issued final rules revising and integrating previously separate disclosures required under the Truth in Lending Act and RESPA in connection with closed-end consumer mortgages. These final rules became effective August 1, 2015, and compliance with these rules required the Corporation to adapt its systems and procedures to accommodate the use of new disclosure forms to be provided to closed-end consumer mortgage borrowers at the time of application and at the time of closing for those loans within the timeframes required under these new rules.

RISKS RELATED TO OPERATIONS

Cyber security incidents could disrupt business operations, result in the loss of critical and confidential information, and adversely impact our reputation and results of operations.

The Company’s computer systems, software and networks are subject to ongoing cyber incidents, such as unauthorized access; mishandling or misuse of information; loss or destruction of data (including confidential customer information); account takeovers; unavailability of service; computer viruses or other malicious code; cyber-attacks designed to obtain confidential information, destroy data, disrupt or degrade service, sabotage systems or cause other damage; denial of service attacks; and other events. Cyber threats may arise from human error, fraud or malice on the part of employees or third parties, including third party vendors, or may result from accidental technological failure. In addition, the party’s intent on penetrating our systems may also attempt to fraudulently induce employees, customers, third parties or other users of our systems to disclose sensitive information in order to gain access to our data or that of the Company’s customers.

Cyber security incidents, depending on their nature and scope, could potentially result in the misappropriation, destruction, corruption or unavailability of critical data and confidential or proprietary information (the Company’s own or that of third parties) and the disruption of business operations. The potential consequences of a material cyber security incident include reputational damage, litigation with third parties, and increased cyber security protection and remediation costs, which in turn could adversely affect the Company’s competitiveness and results of operations. The Company carries insurance to partially offset the risk of loss; however, there can be no assurance that the policy limits or policy exclusions would adequately protect the Company from a related loss.

Potential disruption or failure of network and information processing systems and those of third-party vendors may negatively impact our operations.

The Company's business activities are dependent on its ability to accurately and timely process, record and monitor a large number of transactions. If any of its financial, accounting, network or other information processing systems fail or have other significant shortcomings, the Company could be materially adversely affected. The Company outsources some of it processing and other activities to third party vendors. Third parties with which the Company does business could be sources of operational risk to the Company, including the risk that the third parties' own network and information processing systems could fail. Any of these occurrences could materially diminish the Company's ability to operate one or more of the Company's businesses, or cause the Company to suffer financial loss, a disruption of its business, regulatory sanctions or damage to its reputation, any of which could materially adversely affect the Company.

14 

The Company may be subject to disruptions or failures of the Company's financial, accounting, network and information processing systems arising from events that are wholly or partially beyond the Company's control, which may include, for example, computer viruses or electrical or telecommunications outages, denial of service attacks or hacking targeting the Company's network or information processing systems or the Company's websites, natural disasters, disease pandemics or other damage to property or physical assets or terrorist acts. The Company has developed an emergency recovery program, which includes plans to maintain or resume operations in the event of an emergency, and has contingency plans in the event that operations or systems cannot be resumed or restored. The emergency recovery program is periodically reviewed and updated, and components of the emergency recovery program are periodically tested and validated. The Company also reviews and evaluates the emergency recovery programs of vendors which provide certain third-party systems that the Company considers critical. Nevertheless, there is no guarantee that these measures or any other measures can provide absolute security. In addition, because the methods used to cause cyber-attacks change frequently or, in some cases, are not recognized until launched, the Corporation may be unable to implement effective preventive measures or proactively address these methods. Resulting disruptions or failures affecting any of our systems may give rise to interruption in service to customers, damage to the Company's reputation and loss or liability to the Company.

Failure by the Company to keep up with technological advancements in deployment of services and efficiency of operations may make it more vulnerable to competition.

The financial services industry is continually undergoing rapid technological change, with frequent introductions of new technology-driven products and services. The effective use of technology increases efficiency and enables financial institutions to better serve customers and to reduce costs. The Company’s future success depends, in part, upon its ability to address the needs of its customers by using technology to provide products and services that will satisfy customer demands, as well as to create additional efficiencies in the Company’s operations. Many of the Company’s financial institution competitors have substantially greater resources to invest in technological improvements, and new payment services developed and offered by non-financial institution competitors pose an increasing threat to the traditional payment services offered by financial institutions. The Company may not be able to effectively implement new technology-driven products and services, be successful in marketing these products and services to its customers, or effectively deploy new technologies to improve the efficiency of its operations. Failure to successfully keep pace with technological change affecting the financial services industry could have a material adverse impact on the Company’s business, financial condition and results of operations.

Further, the costs of new technology, including personnel, can be high in both absolute and relative terms. There can be no assurance, given the fast pace of change and innovation, that the Company’s technology, either purchased or developed internally, will meet or continue to meet the needs of the Company and the needs of its customers.

ECONOMIC AND CREDIT RISKS

Difficult economic conditions and real estate markets, including protracted periods of low-growth and sluggish loan demand, can negatively impact the Company’s income, and result in higher charge-offs as borrowers’ ability to repay is negatively impacted by those conditions.

Lending money is an essential part of the banking business, and the revenues derived from lending activities are the most significant segment of the Company’s income statement. Extended periods of sluggish loan demand can materially affect the composition of the Company’s consolidated statement of financial condition, reducing the ratio of loans to deposits and the Company’s profitability. Adverse changes in the economy and real estate markets and the duration of economic downturns can negatively affect the solvency of businesses and consumers. Borrowers’ inability to repay loans causes increases in non-performing assets, which may result in elevated collection and carrying costs related to such non-performing assets and increases in loan charge-offs, significantly impacting the loan loss provision charged to earnings to fund the allowance for loan losses. The risk of non-payment is affected by credit risks of the borrower, changes in economic and industry conditions, the duration of the loan and, in the case of a collateralized loan, uncertainties as to the future value of the collateral supporting the loan. Historically, commercial loans have presented a greater risk of non-payment than consumer loans. The application of various federal and state laws, including bankruptcy and insolvency laws, may limit the amount that can be recovered on these loans.

The Company has established an allowance for loan losses that management believes to be adequate to offset probable losses on the Company’s existing loans. However, there is no precise method of estimating loan losses. The Company determines the appropriate level of the allowance for credit losses based on many quantitative and qualitative factors, including, but not limited to: the size and composition of the loan portfolio; changes in risk ratings; changes in collateral values; delinquency levels; historical losses; and economic conditions. In addition, as the Company’s loan portfolio grows, it will generally be necessary to increase the allowance for credit losses through additional provisions, which will impact the Company’s operating results.  If the Company’s assumptions and judgments regarding such matters prove to be inaccurate, its allowance for credit losses might not be sufficient, and additional provisions for credit losses might need to be made. Depending on the amount of such provisions for credit losses, the adverse impact on the Company’s earnings could be material. Also, there can be no assurance that any future declines in real estate market conditions, general economic conditions or changes in regulatory policies will not require the Company to increase its allowance for loan losses, through additional loan loss provisions, which could reduce earnings.

15 

Investment securities losses, including other-than-temporary declines in the value of available for sale securities, may result in charges to earnings that could negatively impact our results of operations.

Price fluctuations in securities markets, as well as other market events, could have an impact on the Company’s results of operations. As described below, the Company’s holding of certain securities and the revenues the Company earns from its trust and investment management services business are particularly sensitive to those events:

Equity investments:

As of December 31, 2018, the Company’s equity investments were comprised primarily of publicly traded financial institutions. The value of the securities in the Company’s equity portfolio may be affected by a number of factors. General economic conditions and uncertainty surrounding the financial institution sector as a whole, impacts the value of these securities. Upon the adoption of Accounting Standard Update (ASU) 2016-01, Measurement of Financial Asset Instruments, on January 1, 2018, equity investments are stated at fair value with realized and unrealized gains and losses reported in net income. Declines in bank stock values in general, as well as deterioration in the performance of specific banks are now reflected on the Consolidated Statements of Income in the 2018 Annual Report. Prior to the adoption of ASU 2016-01, unrealized gains and losses on equity investments were reported as a separate component of AOCI, net of tax, and deterioration of the value or performance of the stock could result in other-than-temporary impairment charges. Considerations used to determine other-than-temporary impairment status to individual holdings include the length of time the stock has remained in an unrealized loss position, and the percentage of unrealized loss compared to the carrying cost of the stock, dividend reduction or suspension, market analyst reviews and expectations, and other pertinent news that would affect expectations for recovery or further decline.

Municipal securities:

As of December 31, 2018, the Company had approximately $18.2 million of municipal securities issued by various municipalities in its investment portfolio. Uncertainty with respect to the financial viability of municipal insurers places greater emphasis on the underlying strength of issuers. Increasing pressure on local tax revenues of issuers due to adverse economic conditions could also have a negative impact on the underlying credit quality of issuers.

Investment management and trust services revenue:

The Company’s investment management and trust services revenue is also impacted by fluctuations in the securities markets. A portion of this revenue is based on the value of the underlying investment portfolios. If the values of those investment portfolios decrease, whether due to factors influencing U.S. securities markets, in general, or otherwise, the Company’s revenue could be negatively impacted. In addition, the Company’s ability to sell its brokerage services is dependent, in part, upon consumers’ level of confidence in securities markets.

RISKS RELATED TO INVESTMENT IN THE COMPANY’S STOCK

The Corporation is a holding company and relies on dividends from its subsidiaries for substantially all of its revenue and its ability to make dividends, distributions and other payments.

The Company is a separate and distinct legal entity from the Bank, and depends on the payment of dividends from the Bank for substantially all of its revenues. As a result, the Company's ability to make dividend payments on its common stock depends primarily on certain federal and state regulatory considerations and the receipt of dividends and other distributions from its subsidiaries. There are various regulatory and prudential supervisory restrictions, which may change from time to time, that impact the ability of the Bank to pay dividends or make other payments to the Company. There can be no assurance that the Bank will be able to pay dividends at past levels, or at all, in the future. If the Company does not receive sufficient cash dividends or is unable to borrow from the Bank, then the Company may not have sufficient funds to pay dividends to its shareholders, repurchase its common stock or service its debt obligations.

16 

"Anti-takeover" provisions may keep shareholders from receiving a premium for their shares.

The Articles of Incorporation of the Company presently contain certain provisions, such as staggered Board of Directors terms and super majority voting requirements for transactions not approved by the Company’s Board of Directors, which may be deemed to be "anti-takeover" in nature in that such provisions may deter, discourage or make more difficult the assumption of control of the Company by another Company or person through a tender offer, merger, proxy contest or similar transaction or series of transactions. In addition, provisions of Pennsylvania and applicable banking laws could similarly make it more difficult for a third party to acquire control of the Company. The overall effects of the "anti-takeover” provisions may be to discourage, make costlier or more difficult, or prevent a future takeover offer, thereby preventing shareholders from receiving a premium for their securities in a takeover offer. These provisions may also increase the possibility that a future bidder for control of the Company will be required to act through arms-length negotiation with the Company’s Board of Directors. Copies of the Articles of Incorporation of the Company are on file with the Securities and Exchange Commission and the Pennsylvania Secretary of State.

If the Company fails to maintain an effective system of internal controls, it may not be able to accurately report its financial results or prevent fraud. As a result, current and potential shareholders could lose confidence in the Company’s financial reporting, which could harm its business and the trading price of its common stock.

The Company has established a process to document and evaluate its internal controls over financial reporting in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 and related regulations, which require annual management assessments of the effectiveness of the Company’s internal controls over financial reporting and a report by the Company’s independent registered public accounting firm on the effectiveness of the Company’s internal control. In this regard, management has dedicated internal resources, engaged outside consultants and adopted a detailed work plan to (i) assess and document the adequacy of internal controls over financial reporting, (ii) take steps to improve control processes, where appropriate, (iii) validate through testing that controls are functioning as documented and (iv) maintain a continuous reporting and improvement process for internal control over financial reporting.

The Company’s efforts to comply with Section 404 of the Sarbanes-Oxley Act of 2002 and the related regulations regarding the Company’s assessment of its internal controls over financial reporting and the Company’s independent registered public accounting firm audit of internal control are likely to continue to result in increased expenses. The Company’s management and audit committee have given the Company’s compliance with Section 404 a high priority. The Company cannot be certain that these measures will ensure that the Company implements and maintains adequate controls over its financial processes and reporting in the future. Any failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm the Company’s operating results or cause the Company to fail to meet its reporting obligations. If the Company fails to correct any issues in the design or operating effectiveness of internal controls over financial reporting or fails to prevent fraud, current and potential shareholders could lose confidence in the Company’s financial reporting, which could harm its business and the trading price of its common stock. Please see Item 9A describing certain material weaknesses as to the Company’s disclosure controls and procedures, and internal control over financial reporting with respect to the company’s financial statements as of, and for the year ended, December 31, 2018.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

The physical properties of the Company are all owned or leased by the Bank.

The Bank owns and operates, for banking purposes, the buildings located at:

One South Main Street, Mifflintown, Pennsylvania

218 Bridge Street, Mifflintown, Pennsylvania (its corporate headquarters)

4068 William Penn Highway, Mifflintown, Pennsylvania (branch office)

1762 Butcher Shop Road, Mifflintown, Pennsylvania (operations center and Trust offices)

301 Market Street, Port Royal, Pennsylvania (branch office)

30580 Rt. 35, McAlisterville, Pennsylvania (branch office)

Four North Market Street, Millerstown, Pennsylvania (branch office)

17428 Tuscarora Creek Road, Blairs Mills, Pennsylvania (branch office)

One East Market Street, Lewistown, Pennsylvania (branch office)

20 Prince Street, Reedsville, Pennsylvania (branch office)

100 West Water Street, Lewistown, Pennsylvania (branch office)

320 South Logan Boulevard, Burnham, Pennsylvania (branch office)

571 Main Street, Richfield, Pennsylvania (branch office)

64 Main Street, Port Allegany, Pennsylvania (branch office)

118 East Second Street, Coudersport, Pennsylvania (branch office)

104 N Front Street, Liverpool, Pennsylvania (branch office)

17 

The Bank leases four offices:

Branch Offices

Wal-Mart Supercenter, Route 522 South, Lewistown, Pennsylvania (lease expires January 2022)

52 West Mill Street, Port Allegany, Pennsylvania (lease expires June 2028)

Financial Services Office

129 South Main Street, Suite 600, Lewistown, Pennsylvania (lease expires October 2029)

Loan Production Office

1366 South Atherton Street, State College, Pennsylvania (lease expires December 2020)

ITEM 3. LEGAL PROCEEDINGS

The nature of the Company’s and Bank’s business, at times, generates litigation involving matters arising in the ordinary course of business. However, in the opinion of management, there are no proceedings pending to which the Company or the Bank is a party or to which its property is subject, which, if adversely determined, would be material in relation to their financial condition. In addition, no material proceedings are pending or are known to be threatened or contemplated against the Company by government authorities or others.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information:

Information regarding the market for the Company’s stock, the market price of the stock and dividends that the Company has paid is included in the Company’s Annual Report to Shareholders for the year ended December 31, 2018, in the section entitled “Common Stock Market Prices and Dividends,” and is incorporated by reference in this Item 5.

Holders:

As of April 2, 2019, there were 1,777 registered holders of the Company’s outstanding common stock.

For information concerning the Company’s Equity Compensation Plans, see “Item 12: Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters”.

Recent Sales of Unregistered Securities:

None

Purchases of Equity Securities by the Issuer and Affiliated Purchasers:

The Company periodically repurchases shares of its common stock under the share repurchase program approved by the Board of Directors. The program will remain authorized until all approved shares are repurchased, unless terminated by the Board of Directors. There were 1,488 shares purchased with respect to the program during the fourth quarter of 2018, and 170,574 shares remain available to purchase under the program.

					Total Number of
					Shares Purchased as		Maximum Number of
	Total Number		Average		Part of Publicly		Shares that May Yet Be
	of Shares		Price Paid		Announced Plans or		Purchased Under the
Period	Purchased		per Share		Programs		Plans or Programs
October 1-31, 2018		-	$	-		-		172,062
November 1-30, 2018		1,488		20.36		1,488		170,574
December 1-31, 2018		-		-		-		170,574
Totals		1,488				1,488		170,574

ITEM 6. SELECTED FINANCIAL DATA

The section entitled “Five Year Financial Summary - Selected Financial Data” in the Company’s Annual Report to Shareholders for the year ended December 31, 2018 is incorporated by reference in this Item 6.

18 

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The section entitled “Management’s Discussion and Analysis of Financial Condition” and “Results of Operations” in the Company’s Annual Report to Shareholders for the year ended December 31, 2018 is incorporated by reference in this Item 7.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Company’s Consolidated Financial Statements and the Notes to Consolidated Financial Statements thereto included in the Company’s Annual Report to Shareholders for the year ended December 31, 2018 are incorporated by reference in this Item 8.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Attached as exhibits to this Form 10-K are certifications of the Company’s Chief Executive Officer (CEO) and Chief Financial Officer (CFO), which are required in accordance with Rule 13a-14 of the Securities Exchange Act of 1934, as amended (the Exchange Act). This “Controls and Procedures” section includes information concerning the controls and controls evaluation referred to in the certifications.

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

The Company’s management, with the participation of its CEO and CFO, conducted an evaluation, as of December 31, 2018, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)). Based on this evaluation, the Company’s CEO and CFO concluded that, as of the end of the period covered by this annual report, the Company’s disclosure controls and procedures were not effective because of the material weaknesses described below.

Conclusion Regarding Internal Control Over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a – 15(f) promulgated under the Exchange Act. The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our internal control over financial reporting based on the framework in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the evaluation under the framework in Internal Control-Integrated Framework (2013), the Company’s management concluded that internal control over financial reporting was not effective as of December 31, 2018.

19 

Management’s Report on Internal Control over Financial Reporting

Management is responsible for the preparation, integrity and fair presentation of the consolidated financial statements included in this Annual Report on Form 10-K. The consolidated financial statements and notes included in this annual report have been prepared in conformity with accounting principles generally accepted in the United States of America, and as such, include some amounts that are based on management’s best estimates and judgments.

The Company’s management is responsible for establishing and maintaining effective internal control over financial reporting. The system of internal control over financial reporting, as it relates to the financial statements, is evaluated for effectiveness by management and tested for reliability through a program of internal audits and management testing and review. Actions are taken to correct potential deficiencies as they are identified. Any system of internal control, no matter how well designed, has inherent limitations, including the possibility that a control can be circumvented or overridden and misstatements due to error or fraud may occur and not be detected. Also, because of changes in conditions, internal control effectiveness may vary over time. Accordingly, even an effective system of internal control will provide only a reasonable assurance with respect to financial statement preparation.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2018. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013).

Based on our assessment, management concluded that as of December 31, 2018, the Company’s internal control over financial reporting was not effective and did not meet the criteria of the Internal Control-Integrated Framework (2013). We concluded that material weaknesses in our internal control over financial reporting existed related to management not designing and maintaining controls over the annual review process for evaluating risk ratings on commercial loans and over the accounting for income taxes.

The independent registered public accounting firm that audited the consolidated financial statements included in the annual report has issued an adverse opinion in its report on the Company’s internal control over financial reporting. During the first quarter of 2019, Management has evaluated the causes of the material weaknesses and is taking steps to improve its internal controls over financial reporting, including formally documenting policies and procedures pertaining to the ongoing process for evaluating risk ratings on commercial loans and to the accounting for income taxes, as well as formally testing the key controls.

/s/ Marcie A. Barber

Marcie A. Barber, President and Chief Executive Officer

/s/ JoAnn N. McMinn

JoAnn N. McMinn, Chief Financial Officer

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

20 

Report of Independent Registered Public Accounting Firm on Effectiveness of Internal Control over Financial Reporting

Report of Independent Registered Public Accounting Firm

Board of Directors and Shareholders

Juniata Valley Financial Corp.

Mifflintown, Pennsylvania

Opinion on Internal Control over Financial Reporting

We have audited Juniata Valley Financial Corp., and its wholly-owned subsidiary, The Juniata Valley Bank’s (the “Company’s”) internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”). In our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting as of December 31, 2018, based on the COSO criteria. We do not express an opinion or any other form of assurance on management’s statements referring to any corrective actions taken by the Company after the date of management’s assessment.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated statement of financial condition of the Company as of December 31, 2018 and 2017, the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2018, and the related notes, and our report dated April 2, 2019 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying “Item 9A, Report on Management’s Assessment of Internal Control over Financial Reporting”. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit of internal control over financial reporting in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. Material weaknesses regarding management not designing and maintaining controls over the annual review process for evaluating risk ratings on commercial loans and over the accounting for income taxes have been described in management’s assessment. These material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2018 financial statements, and this report does not affect our report dated April 2, 2019 on those financial statements.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ BDO USA, LLP

Harrisburg, Pennsylvania

April 2, 2019

21 

ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Incorporated by reference herein is information appearing in the Proxy Statement for the Annual Meeting of Shareholders to be held on May 21, 2019 (the “Proxy Statement”) under the captions “Directors of the Company”, “Executive Officers of the Company”, “Corporate Governance and Board Matters” and “Section 16(a) Beneficial Ownership Reporting Compliance”. The Company has adopted a Code of Ethics that is applicable to the Company’s Chief Executive Officer, Chief Financial Officer and Principal Accounting Officer and other designated senior officers, which can be found in the Investor Information – Governance Documents section of the Company’s website at www.JVBonline.com. The Company will file its Proxy Statement on or before April 9, 2019.

ITEM 11. EXECUTIVE COMPENSATION

Incorporated by reference herein is the information contained in the Proxy Statement under the captions “Director’s Compensation” and “Compensation Committee Interlocks and Insider Participation”.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Incorporated by reference herein is the information contained in the Proxy Statement under the caption “Stock Ownership by Management and Beneficial Owners”. Additionally, the following table contains information regarding equity compensation plans approved by shareholders, which include a stock option plan for the Company’s employees and an employee stock purchase plan. The Company has no equity compensation plans that were not approved by shareholders.

Equity Compensation Plan Information
					Number of securities remaining
	Number of securities to be				available for future issuance
	issued upon exercise of		Weighted average exercise		under equity compensation
	outstanding options, warrants		price of outstanding options,		plans (excluding securities
Plan Category	and rights		warrants and rights		reflected in column a)
	a
Equity compensation plans approved by security holders		113,756	$	17.76		337,914
Equity compensation plans not approved by security holders		-		-
Total		113,756	$	17.76		337,914

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

Incorporated by reference herein is the information contained in the Proxy Statement under the caption “Related Party Transactions” and “Corporate Governance and Board Matters”.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Incorporated by reference herein is information contained in the Proxy Statement under the caption “Independent Registered Public Accounting Firm”.

22 

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)(1) The following consolidated financial statements of the Company are filed as part of this Form 10-K:

(i) Reports of Independent Registered Public Accounting Firm

(ii) Consolidated Statements of Financial Condition as of December 31, 2018 and December 31, 2017

(iii)	Consolidated Statements of Income for the fiscal years ended December 31, 2018, December 31, 2017 and December 31, 2016
(iv)	Consolidated Statements of Comprehensive Income for the fiscal years ended December 31, 2018, December 31, 2017 and December 31, 2016

(v) Consolidated Statements of Stockholders’ Equity for the fiscal years ended December 31, 2018, December 31, 2017 and December 31, 2016

(vi) Consolidated Statements of Cash Flows for the fiscal years ended December 31, 2018, December 31, 2017 and December 31, 2016

(vii) Notes to Consolidated Financial Statements

(a)(2) Financial Statements Schedules. All financial statement schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and have therefore been omitted.

(a)(3) Exhibits.

3.1	Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3(i) to the Company’s Form 8-K Current Report filed with the SEC on November 12, 2015)
3.2	Amended and Restated Bylaws – (incorporated by reference to Exhibit 3.4 to the Company’s Current Report on Form 8-K filed with the SEC on February 27, 2019)
10.1	Form of 1999 Directors Deferred Compensation Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Annual Report on Form 10-K filed with the SEC on March 13, 2009)*
10.2	Form of Amendments to the 1999 Directors Deferred Compensation Agreement (incorporated by reference to Exhibit 10.7 to the Company’s Annual Report on Form 10-K filed with the SEC on March 15, 2011)*
10.3	Form of Director Supplemental Life Insurance/ Split Dollar Plan (incorporated by reference to Exhibit 10.1 to the Company’s Annual Report on Form 10-K filed with the SEC on March 13, 2009)*
10.4	Employee Annual Incentive Plan, (filed herewith)*■
10.5	Change of Control Severance Agreement with JoAnn N. McMinn (incorporated by reference to Exhibit 10 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on November 8, 2005).*
10.6	Salary Continuation Agreement with JoAnn N. McMinn (incorporated by reference to Exhibit 10.17 to the Company’s Annual Report on Form 10-K filed with the SEC on March 14, 2008)*

23 

10.7	Salary Continuation Agreement with Marcie A. Barber (incorporated by reference to Exhibit 10.17 to the Company’s Annual Report on Form 10-K filed with the SEC on March 14, 2008)*
10.8	Change of Control Severance Agreement with Marcie A. Barber (incorporated by reference to Exhibit 10.19 to the Company’s Current Report on Form 8-K filed with the SEC on May 27, 2008)*
10.9	Long Term Incentive Plan of Juniata Valley Financial Corp.  (incorporated by reference to Exhibit 10.1 to the Company’s 2016 proxy statement filed with the SEC on April 8, 2016)*
10.10	Technology Outsourcing Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on January 22, 2010)
10.11	Agreement and Plan of Merger, dated December 29, 2017 by and between Juniata Valley Financial Corp., The Juniata Valley Bank and Liverpool Community Bank (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the SEC on January 5, 2018)
13.1	Annual Report to Shareholders
21.1	Subsidiaries of Juniata Valley Financial Corp.
23.1	Consent of BDO USA, LLP
31.1	Rule 13a-4(d) Certification of Marcie A. Barber
31.2	Rule 13a-4(d) Certification of JoAnn N. McMinn
32.1	Section 1350 Certification of Marcie A. Barber
32.2	Section 1350 Certification of JoAnn N. McMinn
101.LAB	XBRL Taxonomy Extension Label Linkbase
101.PRE	XBRL Taxonomy Extension Presentation Linkbase
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema
101.CAL	XBRL Taxonomy Extension Calculation Linkbase
101.DEF	XBRL Taxonomy Extension Definition Linkbase

*Denotes a compensatory plan.

n Denotes that portions of such Plan have been omitted pursuant to a request for confidential treatment and such confidential information has been filed separately with the Securities Exchange Commission.

(b) Exhibits. The exhibits required to be filed as part of this report are submitted as a separate section of this report.

(c) Financial Statements Schedules. None Required.

24 

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

JUNIATA VALLEY FINANCIAL CORP. (REGISTRANT)

Date: April 2, 2019

/s/ Marcie A. Barber

By: Marcie A. Barber

Director, President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

/s/ Timothy I. Havice
Timothy I. Havice	April 2, 2019
Chairman
/s/ Philip E. Gingerich, Jr.
Philip E. Gingerich, Jr.	April 2, 2019
Vice Chairman
/s/ Marcie A. Barber
Marcie A. Barber	April 2, 2019
Director and Chief Executive Officer (Principal Executive Officer)
/s/ Martin L. Dreibelbis
Martin L. Dreibelbis	April 2, 2019
Director
/s/ Gary E. Kelsey
Gary E. Kelsey	April 2, 2019
Director
/s/ Michael A. Buffington
Michael A. Buffington	April 2, 2019
Director
/s/ Richard M. Scanlon
Richard M. Scanlon, DMD	April 2, 2019
Director
/s/ Bradley J. Wagner
Bradley J. Wagner	April 2, 2019
Director
/s/ JoAnn N. McMinn
JoAnn N. McMinn	April 2, 2019
Chief Financial Officer (Principal Accounting and Financial Officer)

25 

EX-10.4

Exhibit 10.4

 

Employee Annual Incentive Plan

Plan Document

Plan Effective: January 1, 2004

Revised/Approved: February 8, 2019

1 

Employee Annual Incentive Plan

I. Introduction/Purpose

This Employee Annual Incentive Plan has been developed as a meaningful compensation tool for employees at all levels, who through high levels of performance, contribute to the success and profitability of Juniata Valley Financial Corp (Company). The Plan is designed to support organizational objectives, financial goals, and the best interests of the shareholders as defined in the Bank’s Strategic Plan, by making available additional, variable, and contingent at-risk compensation, in the form of cash awards.

The Employee Annual Incentive Plan is based upon the achievement of required financial targets and other defined objectives consistent with those contained in the Strategic Plan. The formulas and awards have been carefully constructed to integrate the interests of the shareholder as well as enable the Bank to attract, retain, and motivate high quality personnel and support the continued growth and profitability of the Company.

The Plan is not meant to be a substitute for salary increases, but supplemental to base salary and a reward for performance that contributes to outstanding levels of long-term achievement.

While risk is an inherent aspect of business, this compensation plan is designed to reward executives for certain levels of performance without encouraging undue risk taking which could materially threaten the safety and soundness of the organization or business unit.

II. Plan Year

The Plan year for this program will be the calendar year. The effective date of the Plan is January 1, 2004. The performance measures for this will be determined, calculated and approved annually.

III. Participation

In order to be eligible, an individual must meet the following criteria:

· Must have been employed prior to July 1 of the Plan year;

· Must be employed in a full-time or part-time position; and

· Must receive an overall rating of “Good” or better on his/her most recent individual performance evaluation prior to the Plan year award.

2 

A participant's eligibility ceases at termination of employment (other than retirement, death or disability), and the participant will not receive any awards under the Plan for the year of termination. Termination as a result of retirement (as defined in the company’s retirement plans), death, or disability will provide pro-rated awards in the Plan through the last working date for the year in which termination occurred. If the participant dies during the Plan year, his/her designated beneficiary shall receive a pro-rated share of any award for which he/she would have been eligible.

Due to the various levels of responsibility of the positions within the Bank, the Board of Directors has selected the following Tiers of participation for the Employee Annual Incentive Plan. These tiers will generally be based upon position responsibility and grade level.

Tier 1 – President and Chief Executive Officer

Tier 2 – Executive Vice President/Chief Financial Officer

Tier 3 – ■

Tier 4 – ■)

Tier 5 – ■

IV. Performance Factors

The annual portion of the Plan is based upon company financial performance factors which may change from year to year. In general, these factors may be measures such as return on assets, return on equity, net income, earnings per share or similar indicators. The factors and weighing of the factors are determined at the beginning of each Plan year. Each factor has quantifiable objectives consisting of threshold, target and optimum goals. The Company’s financial performance factors for the current year can be found in Exhibit A.

V. Award Calculation and Distribution

Awards under the Plan are calculated according to determination of the established performance factors at year end. Company performance between the threshold and target, and target and optimum is interpolated. Awards are determined by taking the determined award percentage times eligible compensation.

3 

With regard to discretionary changes to award amounts relative to individual performance, please reference the following:

· Tier 4 ■

· Tier 3 ■

· Tier 2 (Executive Vice President/Chief Financial Officer) – After the award is calculated according to the financial performance factors, the President and Chief Executive Officer may increase or decrease the award up to 10%* (of the calculated award amount) based on the participant’s individual performance for the year.

· Tier 1 (President and Chief Executive Officer) – After the award is calculated according to the financial performance factors, the Board may increase or decrease the award up to 10% (of the calculated award amount) based on the participant’s individual performance for the year.

*All discretionary adjustments within the 10% (of the calculated award amount) being made by the President and Chief Executive Officer will be reviewed and approved by the Board of Directors.

Bank performance below threshold will result in no awards being paid under the Plan. In the event this occurs, the President and Chief Executive Officer will have discretion to grant individual awards, with approval by the Board of Directors, for performance bonuses to those individuals who have achieved a high level of individual performance within their divisions.

Annual awards are paid in cash less normal payroll tax withholding. Awards will be paid within 75 days following the end of the plan year. Any participant terminating employment (except retirement, death, or disability) prior to the actual payment of the award will forfeit that award.

While every effort has been made to ensure that this incentive plan does not motivate or reward undue risk taking, any results deemed to have been the result of inappropriate risk will be backed out of incentive payments. The Board of Directors has the discretion to lever incentive payments down by as much as 100% if it is determined that excessive risk has been taken. This can be done on an individual or overall basis, as appropriate.

VI. Clawback

Awards will be recalculated if the relevant company performance measures upon which they are based are restated or otherwise adjusted within the 36-month period following the public release of the financial information. Any material overpayments or adjustments required by law will be owed back to the company.

VII. Administration

Eligible Compensation for purpose of this Plan is defined as a participant’s W-2 gross wages net of any option activity results, taxable retirement earnings, prior year commissions and bonuses and any other imputed income resulting from employee benefits.

The Board of Directors of the Bank may amend the Plan at any time.

4 

Once established, performance factors will remain in place for the year, unless the Board of Directors decides otherwise.

Participation, performance factors, thresholds, targets and any other participation features are established each Plan year and may change from year to year according to the strategic objectives of the bank.

At least annually, the Chief Financial Officer acting as the highest-ranking risk officer will review this Plan and provide a detailed report including a detailed assessment regarding any risk issues inherent in the Plan. This risk report and the plan document in full will be reviewed by the Personnel and Compensation Committee of the Board of Directors to ensure that the plan design is consistent with the compensation philosophy of Juniata Valley Bank and that the plan does not motivate undue risk taking. The annual review will also include the market competitiveness of the plan, the plan’s alignment with the Bank’s strategic plan, an assessment of how the plan meets the objectives in the Introduction of this document, plus the plan’s impact on the overall safety and soundness of the Bank. The Committee will then provide a report and recommendations to the full Board of Directors who are responsible to approve the Plan. The Board of Directors of the Bank may amend the Plan at any time.

The Plan does not constitute a contract of employment, and participation in the Plan does not give any employee the right to be retained by the Bank or any right or claim to an award under the Plan unless specifically accrued under the terms of this Plan.

Any right of a participant or his or her beneficiary to the payment of an award under this Plan may not be assigned, transferred, pledged or encumbered.

Any adjustments to the financial performance results utilized in this Plan because of extraordinary gains or losses or other items must be approved by the Board of Directors.

VIII. Plan Approval

This Plan has been amended and approved by the Board of Directors of Juniata Valley Financial Corp on ________________________________

By
	Board of Directors
	Juniata Valley Financial Corp

5 

Exhibit A: Bank Performance Factors and Award Schedule Plan Year 2019

2019 Goals

Performance Measures (Basic) Earnings Per Share (75%)
Threshold		Target		Optimum
$	1.13	$	1.19	$	1.31

Return on Average Equity (25%)
Threshold			Target			Optimum
	8.70	%		9.16	%		10.08	%

2019 Award Schedule

	President & CEO			EVP/CFO
	Tier 1*			Tier 2*			Tier 3*	Tier 4	Tier 5
Min		12.00	%		10.00	%	■	■	■
Target		20.00	%		16.00	%	■	■	■
Max		30.00	%		24.00	%	■	■	■

NOTE: Awards will be interpolated for performance levels between threshold and target and target and maximum.

*Please see additional notes for these Tiers:

Tier 4 ■

Tier 3 ■

Tier 2 (Executive Vice President/Chief Financial Officer) – After the award is calculated according to the financial performance factors, the President and Chief Executive Officer may increase or decrease the award up to 10%* (of the calculated award amount) based on the participant’s individual performance for the year.

Tier 1 (President and Chief Executive Officer) – After the award is calculated according to the financial performance factors, the Board may increase or decrease the award up to 10% (of the calculated award amount) based on the participant’s individual performance for the year.

*All discretionary adjustments within the 10% (of the calculated award amount) being made by the President and Chief Executive Officer will be reviewed and approved by the Board of Directors.

6 

EX-13.1

Exhibit 13.1

FIVE-YEAR FINANCIAL SUMMARY - SELECTED FINANCIAL DATA

(Dollars in thousands, except share and per share data)

	2018			2017			2016			2015			2014
BALANCE SHEET INFORMATION
at December 31
Assets	$	625,236		$	591,945		$	580,354		$	583,928		$	480,529
Deposits		521,722			477,668			455,822			457,126			380,884
Loans, net of allowance for loan losses		414,597			380,965			375,574			374,565			292,521
Investments		148,802			157,278			154,448			156,186			145,629
Goodwill		9,139			5,448			5,448			5,381			2,046
Short-term borrowings		11,600			12,000			32,196			35,057			20,544
Long-term debt		15,000			25,000			25,000			22,500			22,500
Stockholders' equity		67,378			59,387			59,090			59,962			49,856
Number of shares outstanding		5,092,048			4,767,656			4,755,630			4,798,086			4,187,441
Average for the year
Assets		614,632			593,923			577,341			489,323			470,660
Stockholders' equity		62,689			59,938			61,209			51,131			50,704
Weighted average shares outstanding		4,987,186			4,765,165			4,801,245			4,240,319			4,192,761
INCOME STATEMENT INFORMATION
Years Ended December 31
Total interest income	$	23,651		$	21,374		$	20,469		$	17,379		$	16,932
Total interest expense		3,635			2,855			2,268			2,042			2,598
Net interest income		20,016			18,519			18,201			15,337			14,334
Provision for loan losses		337			439			466			502			357
Other income		5,027			5,292			5,418			4,505			4,334
Other expenses		19,461			17,775			17,178			16,199			13,570
Income before income taxes		5,245			5,597			5,975			3,141			4,741
Federal income tax (benefit) expense		(659	)		1,060			819			83			525
Net income	$	5,904		$	4,537		$	5,156		$	3,058		$	4,216
PER SHARE DATA
Earnings per share - basic	$	1.18		$	0.95		$	1.07		$	0.72		$	1.01
Earnings per share - diluted		1.18			0.95			1.07			0.72			1.01
Cash dividends		0.88			0.88			0.88			0.88			0.88
Book value		13.23			12.46			12.43			12.50			11.91
FINANCIAL RATIOS
Return on average assets		0.96	%		0.76	%		0.89	%		0.62	%		0.90	%
Return on average equity		9.42			7.57			8.42			5.98			8.31
Dividend payout		74.71			92.44			81.96			120.57			87.52
Average equity to average assets		10.20			10.09			10.60			10.45			10.77
Loans to deposits (year-end)		79.47			79.76			82.39			81.94			76.80

MANAGEMENT'S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

The information contained in this Annual Report contains forward-looking statements (as such term is defined in the Securities Exchange Act of 1934 and the regulations thereunder) including statements which are not historical facts or that reflect trends or management's intentions, plans, beliefs, expectations or opinions. Such forward-looking statements are subject to risks and uncertainties and may be affected by various factors which may cause actual results to differ materially from those in the forward-looking statements including, without limitation:

· the impact of adverse changes in the economy and real estate markets, including protracted periods of low-growth and sluggish loan demand;

· the effect of market interest rates and uncertainties, and relative balances of rate-sensitive assets to rate-sensitive liabilities, on net interest margin and net interest income;

· the effect of competition on rates of deposit and loan growth and net interest margin;

· increases in non-performing assets, which may result in increases in the allowance for credit losses, loan charge-offs and elevated collection and carrying costs related to such non-performing assets;

· other income growth, including the impact of regulatory changes which have reduced debit card interchange revenue;

· investment securities gains and losses, including other than temporary declines in the value of securities which may result in charges to earnings;

· the effects of changes in the applicable federal income tax rate;

· the level of other expenses, including salaries and employee benefit expenses;

· the impact of increased regulatory scrutiny of the banking industry;

· the impact of governmental monetary and fiscal policies, as well as legislative and regulatory changes;

· the results of regulatory examination and supervision processes;

· the failure of assumptions underlying the establishment of reserves for loan and lease losses, and estimations of collateral values and various financial assets and liabilities;

· the increasing time and expense associated with regulatory compliance and risk management;

· the ability to implement business strategies, including business acquisition activities and organic branch, product, and service expansion strategies;

· capital and liquidity strategies, including the impact of the capital and liquidity requirements modified by the Basel III standards;

· the effects of changes in accounting policies, standards, and interpretations on the presentation in the Company’s consolidated balance sheets and consolidated statements of income;

· the Company’s failure to identify and to address cyber-security risks;

· the Company’s ability to keep pace with technological changes;

· the Company’s ability to attract and retain talented personnel;

· the Company’s reliance on its subsidiary for substantially all of its revenues and its ability to pay dividends;

· the effects of changes in relevant accounting principles and guidelines on the presentation in the Company’s financial condition;

· acts of war or terrorism; disruptions due to flooding, severe weather, or other natural disasters

· failure of third party service providers to perform their contractual obligations; and

· the impact on earnings of the Company’s strategy to terminate its defined benefit retirement plan.

Certain of these risks, uncertainties and other factors are discussed in this Annual Report or in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, a copy of which may be obtained from the Company upon request and without charge (except for the exhibits thereto).

OVERVIEW

This discussion concerns Juniata Valley Financial Corp. (“Company” or “Juniata”) and its wholly owned subsidiary, The Juniata Valley Bank (“Bank”). Juniata is a bank holding company that delivers financial services within its market, primarily central Pennsylvania. The Bank provides retail and commercial banking, trust, estate, and wealth management services through 16 offices in Juniata, Mifflin, Perry, Huntingdon, McKean, Potter and Centre counties. On April 30, 2018, Juniata, which previously owned 39.16%, or 1,214 of the 3,100 outstanding common shares of Liverpool Community Bank (“Liverpool” or “LCB”), completed the acquisition of the remainder of Liverpool’s outstanding common stock. Under the terms of a merger agreement between the parties, LCB merged with and into the Bank.

The overview is intended to provide a context for the following Management’s Discussion and Analysis of Financial Condition and Results of Operations. Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our consolidated financial statements, including the notes thereto, included in this annual report. We have attempted to identify the most important matters on which our management focuses in evaluating our financial condition and operating performance and the short-term and long-term opportunities, challenges and risks (including material trends and uncertainties) which we face. We also discuss the actions we are taking to address these opportunities, challenges and risks. The Overview is not intended as a summary of, or a substitute for review of, Management’s Discussion and Analysis of Financial Condition and Results of Operations.

ECONOMIC AND INDUSTRY-WIDE FACTORS RELEVANT TO JUNIATA

As a financial services organization, Juniata’s core business is most influenced by the level of, and movement of, interest rates. Lending and investing is done daily, using funding from deposits and borrowings, resulting in net interest income, the most significant portion of operating results. Through the use of asset/liability management tools, the Company continually evaluates the effects that possible changes in interest rates could have on operating results and balance sheet growth. Using this information, along with analysis of competitive factors, management designs and prices its products and services.

General economic conditions are relevant to Juniata’s business. In addition, economic factors impact customers’ needs for financing, thus affecting loan growth. Additionally, changes in the economy can directly impact the credit strength of existing and potential borrowers.

FOCUS OF MANAGEMENT

The management of Juniata believes that it is important to know who and what we are in order to be successful. We must be aligned in our efforts to achieve goals. We’ve identified the four characteristics that define the Company and the personnel that support it. We are Committed, Capable, Caring and Connected. Management seeks to be the preeminent financial institution in its market area and measures its success by the five key elements described below.

SHAREHOLDER SATISFACTION

Above all else, management is committed to maximizing the value of our shareholders’ investment, through both stock value appreciation and dividend returns. Remaining connected to our communities will allow us to identify the financial needs of our market and to deliver those products and services capably. In doing so, we will seek to profitably grow the balance sheet and enhance earnings, while maintaining capital and liquidity levels well exceeding all regulatory guidelines.

CUSTOMER RELATIONSHIPS

We are committed to maximizing customer satisfaction. We are sensitive to the expanding array of financial services and financial service providers available to our customers, both locally and globally. We are committed to fostering a complete customer relationship by helping clients identify their current and future financial needs and offering practical and affordable solutions to both. As our customers’ lifestyles change, the channels through which we deliver our services must change as well. One element of the Company’s strategic plan is to provide connection through every means available, wherever we are needed, whether through a stand-alone branch, in-store boutique, ATM or via online and mobile banking anywhere internet or cell phone signals can be received. In 2018, we continued to make advances in technological resources, placing data and information in the hands of our customers and employees, because we are committed to optimizing the customer experience.

BALANCE SHEET GROWTH

We are capable of profitable balance sheet growth. Rapid growth should not be a substitute for careful fiscal and strategic management. It is our goal to continue quality growth despite intense competition by paying careful attention to the needs of our customers. We will continue to maintain high credit standards, knowing that lending under the right circumstances is the proper way to maintain soundness and profitability. We believe we consistently pay fair market rates on all deposits, and have invested wisely and conservatively in compliance with self-imposed standards, minimizing risk of asset impairment. We aspire to increase our market share within the current communities that we serve, and to expand in contiguous areas through acquisition and investment. As part of our strategic plan for growth, we continue to actively seek opportunities for acquisitions of branches or stakes in other financial institutions, similar to those that have occurred in prior years, and most recently in April 2018 with the acquisition of LCB.

OPERATING RESULTS

We are capable of producing profitability ratios that exceed those of many of our peers. Recognizing that net interest margins have narrowed for banks in general and that they may not return to the ranges experienced in the past, we also focus on the importance of providing fee-generating services in which customers find value. Offering a broad array of services prevents us from becoming too reliant on one form of revenue. It has also been our philosophy to spend conservatively and to implement operating efficiencies where possible to keep non-interest expense from escalating in areas that can be controlled.

CONNECTION TO THE COMMUNITY

We are active corporate citizens of the communities we serve. Although the world of banking has transitioned to global availability through electronics, we believe that our community banking philosophy is not only still valid, but essential. Despite technological advances, banking is still a personal business, particularly in the rural areas we serve. We believe that our customers shop for services and value a relationship with an institution involved in the same community, with the same interests in its prosperity. We have a foundation and a history in each of the communities we serve. Management takes an active role in local business and industry development organizations to help attract and retain commerce in our market area. We provide businesses, large and small, with financial tools and financing needed to grow and prosper. We have always been committed to responsible lending practices. We invest locally by including local municipal bonds in our investment portfolio and participating in funding for such projects as low income and elderly housing. We support charitable programs that benefit the local communities, not only with monetary contributions, but also through the personal involvement of our caring employees.

JUNIATA'S OPPORTUNITIES

SOUNDNESS AND STABILITY

Our financial condition is strong. We enjoy strong capital and liquidity ratios that significantly exceed regulatory guidelines. Our business model includes a plan for growth without sacrificing profitability or integrity. We believe an opportunity exists for banks such as ours to offer the trusted, personal service of a locally managed institution that has roots in the community reaching back 150 years.

EXPANSION OF CUSTOMER BASE

Our strategic focus is based on leveraging our collective knowledge of the Company’s primary and contiguous markets to identify lending or fee-based opportunities consistent with our risk parameters and profitability targets. We continue to develop our sales team through mentoring and by making employee education paramount. We continually seek and implement back-room efficiencies. We recognize change is taking place in a world where convenience and mobility are priorities for consumers and businesses when choosing a financial institution with whom to do business. We offer full-featured secure mobile banking that includes remote check deposit for use on home computers and all mobile devices for consumers. For businesses, we provide options for cash management and remote deposit. We offer identity protection to the families of our customers, which we believe to be a true value-added service, with features that go far beyond traditional banking services, and sets us apart from other financial institutions in our market area. With the acquisition of First National Bank of Port Allegheny (“FNBPA”) in 2015, we expanded our market into the northern tier region of Pennsylvania and integrated the JVB brand there and have since expanded our footprint in Perry County, Pennsylvania, following the consummation of the acquisition of LCB in April 2018.

DELIVERY SYSTEM ENHANCEMENTS

We seek to continually enhance our customer delivery system, both through technology and physical facilities. We actively seek opportunities to expand our branch network through acquisitions. We believe that it is imperative that our customers have convenient and easy access to personal financial services that complement their particular lifestyle, whether it is through electronic or personal delivery. We achieved an early entry into the mobile banking arena in 2011 and have since expanded online delivery each year following, including consumer remote deposit and Touch ID. Our suite of online services includes the convenience of online loan applications for residential mortgages, home equity, vehicle and other personal loans. Online and mobile banking features include full bill-pay and monetary transfers between internal and external accounts. Our ATM network is equipped with all highly functional state-of-the art machines. Our Customer Care Center became operational in 2016, providing dedicated service to address all customer inquiries and provide outreach through our new social media sites. The rollout of a fully redesigned JVBonline.com website was completed in 2016 as well. In 2017, the construction was completed on a new branch facility featuring a highly interactive and complete customer experience. In 2019, Juniata plans to offer online deposit account opening capability.

JUNIATA’S CHALLENGES

NET INTEREST MARGIN COMPRESSION

While market interest rates are slowly rising, the low interest rate environment that has persisted in recent years has pressured the net interest margin for most banks, including Juniata. Loans have been originated, acquired or repriced at lower rates, reducing the average rate earned on those assets. While the average rate paid on interest-bearing liabilities, such as deposits and borrowings, has also declined, the decline has not always occurred at the same pace as the decline in the average rate earned on interest-earning assets, which can result in a narrowing of the net interest margin. We believe that increasing the net interest margin will continue to be a challenge until general market rates rise more significantly.

COMPETITION

Each year, competition becomes more intense and global in nature. To meet this challenge, we attempt to stay in close contact with our customers, monitoring their satisfaction with our services through surveys, personal visits and networking in the communities we serve. We strive to meet or exceed our customers’ expectations and deliver consistent high-quality service. We believe that our customers have become acutely aware of the value of local service, and we strive to maintain their confidence.

RATE ENVIRONMENT

We intend to continue making what we believe to be rational pricing decisions for loans, deposits and non-deposit products. This strategy can be difficult to maintain, as many of our peers appear to continue pricing for growth, rather than long-term profitability and stability. We believe that a strategy of “growth for the sake of growth” results in lower profitability, and such actions by large groups of banks have had an adverse impact on the entire financial services industry. We intend to maintain our core pricing principles, which we believe protect and preserve our future as a sound community financial services provider, proven by results.

REGULATIONS

The Company is subject to banking regulation, as well as regulation by the Securities and Exchange Commission (“SEC”) and, as such, must comply with many laws, including the USA Patriot Act, the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”) and the Dodd-Frank Wall Street Reform and Consumer Protection Act. Management has established a Disclosure Committee for Financial Reporting, an internal group at Juniata that seeks to ensure that current and potential investors in the Company receive full and complete information concerning our financial condition. Juniata has incurred direct and indirect costs associated with compliance with the SEC’s filing and reporting requirements imposed on public companies by the Sarbanes-Oxley Act, as well as adherence to new and existing banking regulations and stronger corporate governance requirements. Regulatory burdens continue to increase as evidenced by the provisions in the Dodd-Frank Act that impact the Company in the areas of corporate governance, capital requirements and restrictions on fees that may be charged to consumers.

APPLICATION OF CRITICAL ACCOUNTING POLICIES

The Company’s consolidated financial statements are prepared based upon the application of accounting principles generally accepted in the United States of America (“GAAP”), the most significant of which are described in Note 2 to our consolidated financial statements – Summary of Significant Accounting Policies. Certain of these policies, particularly with respect to allowance for loan losses and the investment portfolio, require numerous estimates and economic assumptions, based upon information available as of the date of the consolidated financial statements. As such, over time, they may prove inaccurate or vary and may significantly affect the Company’s reported results and financial position in future periods.

The accounting policy for establishing the allowance for loan losses relies to a greater extent on the use of estimates than other areas and, as such, has a greater possibility of producing results that could be different from those currently reported. Changes in underlying factors, assumptions or estimates in the allowance for loan losses could have a material impact on the Company’s future financial condition and results of operations. The allowance for loan losses is maintained at a level believed adequate by management to absorb probable losses in the loan portfolio. Management’s determination of the adequacy of the allowance for loan losses is based upon an evaluation of individual credits in the loan portfolio, historical loan loss experience, current economic conditions and other relevant factors. This determination is inherently subjective, as it requires material estimates, including the amounts and timing of future cash flows expected to be received on impaired loans that may be susceptible to significant change.

Considerations used by management to determine other-than-temporary impairment status of individual holdings within the investment securities portfolio are based partially upon estimations of fair value and potential for recovery. As market conditions and perception can unpredictably affect the value of individual investments in the future, these determinations could have a material impact on the Company’s future financial condition and results of operations.

Goodwill recorded in connection with acquisitions is tested annually for impairment. If certain events occur which indicate goodwill might be impaired between annual tests, goodwill must be tested when such events occur. In making this assessment, Juniata considers a number of factors including operation results, business plans, economic projections, anticipated future cash flows, current market data, stock price, etc. There are inherent uncertainties related to these factors and Juniata’s judgement in applying them to the analysis of goodwill impairment. Changes in economic and operating conditions could result in goodwill impairment in future periods.

Valuations of assets acquired and liabilities assumed in business combinations are measured at fair value as of the acquisition date. In many case, determining the fair value of the assets acquired and liabilities assumed requires Juniata to estimate the timing and amount of cash flows expected to result from these assets and liabilities and to discount these cash flows at appropriate rates of interest, which require the utilization of significant estimates and judgment in accounting for the acquisition.

RESULTS OF OPERATIONS

2018 FINANCIAL PERFORMANCE OVERVIEW

The comparability of the results of operations for the years ended December 31, 2018 and December 31, 2017 was impacted by the following events discussed in more detail below: (i) the acquisition of LCB, (ii) the “de-risking” of the Company’s defined benefit plan in 2018 and 2017, and (iii) the reduction in the corporate tax rate due to the enactment of the Tax Cuts and Jobs Act (“TCJA”) on December 22, 2017. Juniata’s management believes it is meaningful to present a performance comparison that segregates the financial impact of the afore-mentioned items, to allow a view of comparative results to 2017. The following discussion includes both GAAP, as well as non-GAAP financial measures that are reconciled to GAAP financial measures in the supplemental tables presented below. The non-GAAP measures are referred to as “adjusted” results.

Prior to Juniata’s acquisition of Liverpool on April 30, 2018, Juniata owned 39.16% of the outstanding common stock of Liverpool and recorded its share of Liverpool’s earnings as “income from unconsolidated subsidiary” using the equity method of accounting. In conjunction with the acquisition, Juniata incurred $884,000 and $13,000 in merger-related expenses during the years ended December 31, 2018 and 2017, respectively. Since Juniata accounted for its investment in Liverpool using the equity method, 39.16% of Liverpool’s merger-related expenses incurred in the year ended December 31, 2017 reduced Juniata’s non-interest income by $33,000. Additionally, an adjustment to the carrying value of Juniata’s previous 39.16% ownership of Liverpool at April 30, 2018 resulted in a recorded pre-tax net gain of $215,000 during the year ended December 31, 2018. Also, the reversal of a $406,000 deferred tax liability related to the previous investment in Liverpool, resulted in a corresponding reduction in income tax expense in 2018.

In 2017, Juniata initiated a strategy to reduce the liability associated with its defined benefit pension plan. The first step of the initiative consisted of the purchase of a single premium group annuity for a group of Juniata’s retirees, transferring the associated pension liability to the issuer of the annuity. This step reduced Juniata’s overall pension liability by approximately 12%, which resulted in a pre-tax charge to earnings of $377,000 in 2017. In 2018, Juniata completed the second step of the strategy to reduce the liability associated with its defined benefit pension plan by making a lump sum payment offer to a small group of terminated vested participants in Juniata’s defined benefit plan. This step further reduced Juniata’s remaining pension liability by approximately 9%, which resulted in a pre-tax charge to earnings of $210,000 in the twelve months ended December 31, 2018. The pre-tax charges represent a further acceleration of pension expenses that would otherwise have impacted Juniata’s future earnings. In 2019, Juniata plans to finalize the termination of its defined benefit plan.

The enactment of the TCJA at the end of 2017, while expected to provide tax savings to Juniata in future periods, resulted in write-downs of Juniata’s and Liverpool’s net deferred tax assets in 2017, which were previously valued based upon the projection of a 34% future tax benefit. As a result, a non-cash charge of $416,000 was included in the provision for income taxes at Juniata as was a similar non-cash charge at Liverpool, resulting in a $32,000 decline in Juniata’s non-interest income in the in the three and twelve months ended December 31, 2017 due to Juniata’s previous 39.16% ownership in Liverpool. In 2018, the value of the Juniata’s deferred tax asset was adjusted again, due primarily to a defined benefit contribution applied to the prior tax year. The adjustment resulted in a decrease in tax expense of $168,000.

Net income for Juniata in 2018 was $5,904,000, representing a 30.1% increase compared to net income for 2017. Earnings per share on a fully diluted basis increased from $0.95 in 2017 to $1.18 in 2018. When adjusted for the impact of the tax-effected events mentioned above, adjusted net income was $6,024,000 for the year ended December 31, 2018, an increase of 14.7% over adjusted net income for the year ended December 31, 2017. Adjusted earnings per share increased by 10.0% from $1.10 in 2017 to $1.21 in 2018. For 2018, return on average assets (“ROA”) and return on average equity (“ROE”) were 0.96% and 8.81%, respectively. On an adjusted basis, return on average assets was 0.98% in 2018 as compared to 0.88% in 2017, and return on average equity was 9.61% and 8.77% in 2018 and 2017, respectively.

The net interest margin, on a fully tax-equivalent basis, increased from 3.52% in 2017 to 3.60% in 2018. The yield on earning assets increased 26 basis points to 4.18%, while the cost of funds increased 17 basis points, to 0.85%, compared to 2017.

Five-year historical ratios are presented below.

(Dollars in thousands)
	2018			2017			2016			2015			2014
Return on average assets		0.96	%		0.76	%		0.89	%		0.62	%		0.90	%
Return on average equity		9.42			7.57			8.42			5.98			8.31
Yield on earning assets		4.18			3.92			3.87			3.88			3.94
Cost to fund earning assets		0.85			0.68			0.43			0.59			0.60
Non-interest income (excluding gains on sales or calls of securities and securities impairment charges) to average assets		0.82			0.89			0.90			0.92			0.92
Non-interest expense to average assets		3.17			2.99			2.98			3.31			2.88
Net non-interest expense to average assets		2.35			2.10			2.08			2.39			1.96

Below, and on the following page, are the comparative disclosures illustrating the reconciliation of the non-GAAP financial measures discussed on the previous page to GAAP financial measures for the most recent three years.

(Dollars in thousands)
	2018			2017			2016
Non-GAAP presentation of comparative net income
Net Income	$	5,904		$	4,537		$	5,156
Adjustments to reported net income to reconcile to non-GAAP measure
Defined benefit plan settlement cost included in employee benefits		210			377			-
Tax benefit of defined benefit plan settlement cost		(44	)		(128	)		-
Merger-related expense for JUVF		884			13			347
Merger-related expense included in income from unconsolidated subsidiary		-			33			-
Tax benefit of all merger-related expense		(186	)		(16	)		(118	)
Merger-related net gain on carrying value of 39.16% in LCB		(215	)		-			(113	)
Tax expense of merger-related gains		45			-			38
Merger-related gains on sale of loans		-			-			(113	)
Tax expense of merger-related gains on sale of loans		-			-			38
Gains from life insurance proceeds		-			-			(364	)
Tax expense of gains from life insurance proceeds (N/A)		-			-			-
Reduction in valuation of deferred tax assets included in income from unconsolidated subsidiary		-			32			-
Tax benefit for reduction in valuation of deferred tax assets included in income from unconsolidated subsidiary		-			(11	)		-
(Increase) reduction in valuation of deferred tax assets due to TCJA		(168	)		416			-
Reduction in deferred tax liability related to previous investment in unconsolidated subsidiary		(406	)		-			-
Total adjustments to reported net income to reconcile to non-GAAP measure		120			716			(210	)
Adjusted net income (non-GAAP)	$	6,024		$	5,253		$	4,946

(Dollars in thousands, except share and per share data)
Non-GAAP presentation of performance ratios
	2018			2017			2016
Adjusted Earnings Per Share (Diluted)
Earnings per share (diluted)	$	1.18		$	0.95		$	1.07
Adjustments to reported diluted earnings per share to reconcile to non-GAAP measure (tax effected)
Defined benefit settlement cost (tax effected)		0.03			0.05			-
Merger-related expenses (tax effected)		0.14			0.01			0.05
Merger-related gains (tax effected)		(0.03	)		-			(0.02	)
Gains from life insurance proceeds		-			-			(0.08	)
Reduction in valuation of deferred tax assets		(0.03	)		0.09			-
Reduction in valuation of deferred tax liability		(0.08	)		-			-
Total adjustments to reported diluted earnings per share to reconcile to non-GAAP measure		0.03			0.15			(0.05	)
Adjusted earnings per share (diluted) (non-GAAP)	$	1.21		$	1.10		$	1.02
Net Income	$	5,904		$	4,537		$	5,156
Average Assets		614,632			593,923			577,341
Average Equity		62,689			59,938			61,209
Weighted average diluted shares outstanding		5,009,484			4,775,505			4,802,175
Adjusted Return on Average Assets
Return on average assets		0.96	%		0.76	%		0.89	%
Total adjustments to reported net income to reconcile to non-GAAP measure		0.02			0.12			(0.04	)
Adjusted return on average assets		0.98	%		0.88	%		0.86	%
Adjusted Return on Average Equity
Return on average equity		9.42	%		7.57	%		8.42	%
Total adjustments to reported net income to reconcile to non-GAAP measure		0.19			1.20			(0.34	)
Adjusted return on average equity		9.61	%		8.77	%		8.08	%

Juniata strives to attain consistently satisfactory earnings levels each year by protecting the core (repeatable) earnings base through conservative growth strategies that minimize stockholder and balance-sheet risk, while serving its rural Pennsylvania customer base. This approach has helped achieve solid performances year after year. The Company considers the return on assets ratio to be a key indicator of its success and constantly scrutinizes the broad categories of the income statement that impact this profitability indicator.

Summarized below are the components of net income and the contribution of each to ROA for 2018 and 2017.

(Dollars in thousands)	2018						2017
	Net Income			% of Average			Net Income			% of Average
	Components			Assets			Components			Assets
Net interest income	$	20,016			3.26	%	$	18,519			3.12	%
Provision for loan losses		(337	)		(0.05	)		(439	)		(0.07	)
Customer service fees		1,779			0.29			1,747			0.29
Debit card fee income		1,280			0.21			1,120			0.19
BOLI		352			0.06			352			0.06
Trust fees		430			0.07			446			0.08
Commissions from sales of non-deposit products		259			0.04			173			0.03
Income from unconsolidated subsidiary		296			0.05			167			0.03
Security gains		(188	)		(0.03	)		512			0.09
Mortgage banking income		70			0.01			214			0.04
Other noninterest income		749			0.12			561			0.09
Total noninterest income		5,027			0.82			5,292			0.89
Employee expense		(10,280	)		(1.67	)		(9,996	)		(1.68	)
Occupancy and equipment		(2,035	)		(0.33	)		(1,884	)		(0.32	)
Data processing expense		(1,924	)		(0.31	)		(1,751	)		(0.29	)
Director compensation		(215	)		(0.03	)		(241	)		(0.04	)
Professional fees		(640	)		(0.10	)		(571	)		(0.10	)
Taxes, other than income		(498	)		(0.08	)		(463	)		(0.08	)
FDIC insurance premiums		(274	)		(0.04	)		(334	)		(0.06	)
Gain (loss) on sales of other real estate owned		60			0.01			8			0.00
Intangible amortization		(79	)		(0.01	)		(67	)		(0.01	)
Amortization of investment in partnership		(800	)		(0.13	)		(612	)		(0.10	)
Merger and acquisition expense		(884	)		(0.14	)		(13	)		(0.00	)
Other noninterest expense		(1,892	)		(0.31	)		(1,851	)		(0.31	)
Total noninterest expense		(19,461	)		(3.17	)		(17,775	)		(2.99	)
Income tax benefit (expense)		659			0.11			(1,060	)		(0.18	)
Net income	$	5,904			0.96	%	$	4,537			0.76	%
Average assets	$	614,632					$	593,923

NET INTEREST INCOME

Net interest income is the amount by which interest income on earning assets exceeds interest expense on interest bearing liabilities. Net interest income is the most significant component of revenue, comprising approximately 82% of total revenues (the total of net interest income and non-interest income, exclusive of security losses) for 2018. Interest spread measures the absolute difference between average rates earned and average rates paid. Because some interest earning assets are tax-exempt, an adjustment is made for analytical purposes to present all assets on a fully tax-equivalent basis. Net interest margin is the percentage of net return on average earning assets on a fully tax-equivalent basis and provides a measure of comparability of a financial institution’s performance.

Both net interest income and net interest margin are impacted by interest rate changes, changes in the relationships between various rates and changes in the composition of the average balance sheet. Additionally, product pricing, product mix and customer preferences dictate the composition of the balance sheet and the resulting net interest income. Table 1 shows average asset and liability balances, average interest rates and interest income and expense for the years 2018, 2017 and 2016. Table 2 further shows changes attributable to the volume and rate components of net interest income.

TABLE 1

AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS

	Years Ended December 31,
(Dollars in thousands)	2018								2017								2016
	Average					Yield/			Average					Yield/			Average					Yield/
	Balance(1)			Interest		Rate			Balance(1)			Interest		Rate			Balance(1)			Interest		Rate
ASSETS
Interest earning assets:
Loans:
Taxable (5)	$	379,696		$	19,092		5.03	%	$	355,033		$	17,090		4.81	%	$	348,914		$	16,653		4.77	%
Tax-exempt		29,666			968		3.26			30,378			915		3.01			30,263			906		2.99
Total loans (8)		409,362			20,060		4.90			385,411			18,005		4.67			379,177			17,559		4.63
Investment securities:
Taxable		131,420			3,040		2.31			134,607			2,888		2.15			124,611			2,475		1.99
Tax-exempt		19,988			393		1.97			24,797			451		1.82			23,807			418		1.76
Total investment  securities		151,408			3,433		2.27			159,404			3,339		2.09			148,418			2,893		1.95
Interest bearing deposits		3,246			132		4.07			580			30		5.17			770			13		1.69
Federal funds sold		1,267			26		2.05			-			-		0.00			675			4		0.52
Total interest earning assets		565,283			23,651		4.18			545,395			21,374		3.92			529,040			20,469		3.87
Non-interest earning assets:
Cash and due from banks		12,685								10,513								9,553
Allowance for loan losses		(3,016	)							(2,809	)							(2,572	)
Premises and equipment		8,757								6,823								7,017
Other assets (7)		30,923								34,001								34,303
Total assets	$	614,632							$	593,923							$	577,341
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest bearing liabilities:
Demand deposits (2)	$	141,483			978		0.69		$	123,520			404		0.33		$	121,479			253		0.21
Savings deposits		102,086			102		0.10			99,385			99		0.10			96,869			102		0.11
Time deposits		148,671			1,988		1.34			139,652			1,626		1.16			139,387			1,456		1.04
Other, including short and long-term borrowings, and other interest bearing liabilities		33,136			567		1.71			56,846			726		1.28			46,310			457		0.99
Total interest bearing liabilities		425,376			3,635		0.85			419,403			2,855		0.68			404,045			2,268		0.56
Non-interest bearing liabilities:
Demand deposits		120,521								108,141								105,536
Other		6,046								6,441								6,551
Stockholders' equity		62,689								59,938								61,209
Total liabilities  and stockholders' equity	$	614,632							$	593,923							$	577,341
Net interest income				$	20,016							$	18,519							$	18,201
Net margin on  interest earning assets (3)							3.54	%							3.40	%							3.44	%
Net interest income and margin - Tax equivalent basis (4)				$	20,378		3.60	%				$	19,223		3.52	%				$	18,884		3.57	%

Notes:

(1) Average balances were calculated using a daily average.

(2) Includes interest-bearing demand and money market accounts.

(3) Net margin on interest earning assets is net interest income divided by average interest earning assets.

(4) Interest on obligations of states and municipalities is not subject to federal income tax. In order to make the net yield comparable on a fully taxable basis, a tax equivalent adjustment is applied against the tax-exempt income utilizing a federal tax rate of 21% in 2018 and 34% in both 2017 and 2016.

TABLE 2

RATE/VOLUME ANALYSIS OF NET INTEREST INCOME

	2018 Compared to 2017									2017 Compared to 2016
(Dollars in thousands)	Increase (Decrease) Due To (6)									Increase (Decrease) Due To (6)
	Volume			Rate			Total			Volume			Rate			Total
ASSETS
Interest earning assets:
Loans:
Taxable (5)	$	1,219		$	783		$	2,002		$	294		$	143		$	437
Tax-exempt		(22	)		75			53			3			6			9
Total loans (8)		1,197			858			2,055			297			149			446
Investment securities:
Taxable		(70	)		222			152			207			206			413
Tax-exempt		(92	)		34			(58	)		18			15			33
Total investment  securities		(162	)		256			94			225			221			446
Interest bearing deposits		110			(8	)		102			(4	)		21			17
Federal funds sold		26			-			26			(4	)		-			(4	)
Total interest earning assets		1,171			1,106			2,277			514			391			905
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest bearing liabilities:
Demand deposits (2)	$	66		$	508		$	574		$	4		$	147		$	151
Savings deposits		3			-			3			3			(6	)		(3	)
Time deposits		110			252			362			3			167			170
Other, including short and long-term borrowings, and other interest bearing liabilities		(360	)		201			(159	)		117			152			269
Total interest bearing liabilities		(181	)		961			780			127			460			587
Net interest income	$	1,352		$	145		$	1,497		$	387		$	(69	)	$	318

Notes:

(5) Non-accruing loans are included in the above table until they are charged off.

(6) The change in interest due to rate and volume has been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amounts of the change in each.

(7) Includes net unrealized losses on securities available for sale: $4,687 in 2018, $1,065 in 2017, $1,302 in 2016.

(8) Interest income includes loan fees of $95, $89 and $78, in 2018, 2017 and 2016, respectively.

On average, total loans outstanding in 2018 increased from 2017 by 6.2%, to $409,362,000, primarily due to the addition of Liverpool’s loan portfolio, as well as organic growth. Average yields on loans increased by 23 basis points in 2018 when compared to 2017. As shown in the preceding Rate – Volume Analysis of Net Interest Income Table 2, the increase in yield raised interest income on loans by approximately $858,000, while the increase in volume increased interest income by $1,197,000, resulting in an aggregate increase in interest recorded on loans of $2,055,000 in 2018 compared to 2017. The prime rate increased by 25 basis points in March 2018, June 2018, September 2018, and mid-December 2018 to end the year at 5.50%. The increased yield on prime-related loans in 2018 assisted in the increase in the average yield on loans in 2018 compared to 2017.

During 2018, cash flows from maturities, sales and repayments of investment securities were primarily used to fund a portion of the loan growth and pay off maturing long-term debt and pay down short-term borrowings. Additional funds from deposit growth were likewise invested into the loan portfolio and used to pay down debt. As a result, average balances of investment securities decreased by $7,996,000, and this volume decline accounted for a $162,000 decrease in interest income compared to 2017. The improvement in the overall yield of the investment portfolio by 18 basis points between 2017 and 2018 increased net interest income by $256,000, resulting in an aggregate increase in interest recorded on investment securities of $94,000 in 2018 compared to 2017.

In total, yield on earning assets in 2018 was 4.18% compared to 3.92% in 2017, an increase of 26 basis points. On a fully tax equivalent basis, the yield on earning assets also increased 20 basis points from 4.05% in 2017 to 4.25% in 2018.

Average interest bearing liabilities increased by $5,973,000 in 2018, compared to 2017. Within the categories of interest bearing liabilities, deposits increased on average by $29,683,000, and borrowings declined by $23,710,000 on average. The addition of Liverpool’s deposits was the primary reason for the increase in average interest bearing deposits as Liverpool’s deposits allowed for a reduction in overnight borrowings, which declined by an average of approximately $16,217,000 in 2018 compared to 2017. In addition, the deposits were also used towards the repayment of two FHLB long-term debt advances, further contributing to a decline in average borrowings of $7,507,000. Changes in the volume of total interest-bearing liabilities decreased interest expense by $181,000 in 2018 compared to 2017, while changes in interest rates increased interest expense by $961,000. The percentage of average interest earning assets funded by average non-interest bearing demand deposits was approximately 23.1% in 2018 versus 19.8% in 2017. The total cost to fund earning assets (computed by dividing the total interest expense by the total average earning assets) in 2018 was 0.64%, compared to 0.52% in 2017. This increase was primarily caused by the 1.00% increase in the Prime rate during 2018, which led to increased deposit rate competition and higher overnight borrowing rates.

Net interest income was $20,016,000 for 2018, an increase of $1,497,000 when compared to 2017. Increases in both volume and rates contributed $1,352,000 and $145,000, respectively, toward the improved net interest income in 2018 compared to 2017.

PROVISION FOR LOAN LOSSES

Juniata’s provision for loan losses is determined as a result of an analysis of the adequacy level of the allowance for loan losses. In order to closely reflect the potential losses within the current loan portfolio based upon current information known, the Company carries no unallocated allowance. Using the process of analysis described in “Application of Critical Accounting Policies” earlier in this discussion, the Company determined that a provision of $337,000 was appropriate for 2018, a decrease of $102,000 when compared to 2017 when the total loan loss provision was $439,000. The lower provision in 2018 primarily resulted from continued strong asset quality with a reduction in the recorded investment in impaired loans. The discussion included in the Loans and Allowance for Loan Losses in the section below titled “Financial Condition” explains the information and analysis used to arrive at the provision for 2018.

NON-INTEREST INCOME

The Company remains committed to providing comprehensive services and products to meet the current and future financial needs of its customers. Juniata believes its responsiveness to customers’ needs surpasses that of its competitors, and measures its success by the customer acceptance of fee-based services. The Company continually explores avenues to enhance product offerings in areas beneficial to its customers, such as adding new features and services for its electronic banking clientele. Fraud protection services are made available to all consumer depositors. We offer a variety of options for financing to home-buyers that includes a mortgage referral program, providing significant fee income. Juniata also provides alternative investment opportunities through an arrangement with a broker dealer that integrates the delivery of non–traditional products with its Trust and Wealth Management Division. This arrangement enables Juniata to meet the investment needs of a varied customer base and to better identify its clients’ needs for traditional trust services.

Fee-generated non-interest revenues consist of customer service fees derived from deposit accounts, trust relationships and sales of non-deposit products. In 2018, revenues from these services totaled $2,468,000, representing an increase of $102,000, or 4.3%, from 2017 revenues, primarily due to an increase in wealth management commissions. Total fees from customer deposits increased by $32,000, or 1.8%. Fees from both estate settlements and non-estate fees declined by $4,000 and $12,000, respectively, in 2018 compared to 2017. Variance in fees from estate settlements occurs because estate settlements occur sporadically and are not necessarily consistent year to year. Non-estate fees are repeatable revenues that generally increase and decrease in relation to movements in interest rates as market values of trust assets under management increase or decrease and as new relationships are established. Commissions from sales of non-deposit products increased in 2018, in comparison to 2017, by $86,000, or 49.7%, as sales increased.

Fees generated by debit card activity increased by $160,000, or 14.3%, in 2018 compared to the prior year due to general increased debit card usage, as well as the addition of Liverpool’s debit card customers.

Fees and income derived from the origination, sale and servicing of residential mortgage loans (mortgage banking income) was $70,000 in 2018, a decline of $144,000, or 67.3%, compared to 2017. No loans were sold to the secondary market in 2018 as the focus of the Bank’s was shifted to a loan referral program. Other non-interest-related fees derived from loan activity increased by $149,000 when comparing 2018 to 2017, primarily due to revenues generated from title insurance fees and the loan referral program.

The Company previously owned 39.16% of the stock of LCB and accounted for its ownership through the equity method. As such, 39.16% of the income of LCB was recorded by Juniata as non-interest income. Upon the acquisition of Liverpool on April 30, 2018, an adjustment to the carrying value of Juniata’s previous 39.16% ownership resulted in a net gain of $215,000 (derived from Juniata’s share of $239,000 in LCB’s second quarter earnings net loss, $39,000 in dividend income received from LCB’s special merger-related dividend, as well as a $415,000 equity gain recorded from the acquisition) at April 30, 2018, which was offset by the discontinuance of income in this category after April 30, 2018. Due to the recording of the net gain in 2018, income/gain from unconsolidated subsidiary increased by $129,000 compared to the same 2017 period.

Losses realized from the sales and calls of investment securities during 2018 were $188,000 compared to a gain of $512,000 in 2017. A strategy was undertaken at the end of 2018 to replace lower yielding investments with higher yielding ones in order to position the portfolio for higher future returns. This strategy resulted in a loss in 2018, while Juniata benefited from the price appreciation of securities sold in 2017 for a gain.

As a percentage of average assets, non-interest income (excluding securities gains/losses on sales or calls of securities) was 0.85% and 0.89% in 2018 and 2017, respectively.

NON-INTEREST EXPENSE

Management strives to control non-interest expense where possible in order to achieve maximum operating results.

In 2018, total non-interest expense increased by $1,686,000, or 9.5%, when compared to 2017. Merger and acquisition expense increased $871,000 in 2018 compared to 2017 due to the acquisition of Liverpool. Employee compensation expense increased $663,000, or 9.3%, in 2018 compared to 2017, predominantly due to the addition of the Liverpool staff and higher levels of accruals for the employee incentive bonus. However, a reduction in medical expenses of $165,000 and defined benefit expense of $242,000 contributed to a decline of $379,000, or 13.4%, in employee benefits expense in 2018 compared to 2017. Some of the decline was attributable to a reduction in settlement costs of $167,000, with the remainder attributable to a pre-tax charge to earnings of $377,000 recorded in 2017 from step one of the “de-risking” of the defined benefit plan compared to $210,000 recorded in 2018 for the completion of step two.

Also contributing to the year over year increase in non-interest expense was an increase of $188,000, or 30.7%, in the amortization of two tax credit investments in low-income housing partnerships. Amortization for the phase II project did not begin until the in the second half of 2017, while amortization was recorded for the entire year of 2018. Amortization expense associated with the Bank’s investment in low-income housing partnerships, which first became applicable during the second quarter of 2013, was more than offset by the recording of the benefit of the tax credit from the partnerships in both 2018 and 2017. Amortization is scheduled to continue through 2023 for phase I and through 2027 for phase II.

Data processing expense increased by $173,000, or 9.9%, in 2018 compared to 2017 with occupancy and equipment expense including, in aggregate, by $151,000, or 8.0%, due to the increased expense of adding Liverpool’s data processing, branch office, and equipment in 2018.

Offsetting the increase in total non-interest expense was a decline in FDIC insurance premiums of $60,000, or 18.0%, as well as an increase in the gain on sales of other real estate owned of $52,000, or 650.0%.

As a percentage of average assets, non-interest expense was 3.17% in 2018 as compared to 2.99% in 2017.

INCOME TAXES

Income tax for 2018 amounted to a benefit of $659,000 versus and expense of $1,060,000 in 2017. The effect of the TCJA passed in 2017 required an immediate write-down of JVB’s deferred tax assets as of December 31, 2017 resulting in an additional tax expense of $416,000, while the reduction in Juniata’s corporate tax rate from 34% in 2017 to 21% in 2018 resulted in an additional tax benefit of $168,000. Further impacting the income tax provision in 2018 was the removal of a $406,000 deferred tax liability related to the previous investment in unconsolidated subsidiary. Both periods included the effect of a tax credit amounting to $901,000 in 2018 and $722,000 in 2017. The tax credit was available to the Company as a result of an equity investment in two low-income housing projects. Juniata’s effective tax rate in 2018 was (12.6)% versus 18.9% in 2017. See Note 16 of Notes to Consolidated Financial Statements for further information on income taxes.

NET INCOME

For comparative purposes, the following table sets forth earnings and selected earnings ratios for the past three years.

(Dollars in thousands)

	2018			2017			2016
As Reported
Net income	$	5,904		$	4,537		$	5,156
Return on average assets		0.96	%		0.76	%		0.89	%
Return on average equity		9.42	%		7.57	%		8.42	%

2017 FINANCIAL PERFORMANCE OVERVIEW

The comparability of the results of operations for the years ended December 31, 2017 and December 31, 2016 was impacted by the following events discussed in more detail below: (i) the “de-risking” of a portion of the Company’s defined benefit plan in 2017, (ii) the pending merger between the Bank, and Juniata’s unconsolidated subsidiary, LCB, (iii) the reduction in the corporate tax rate due to the enactment of the TCJA on December 22, 2017, and (iv) the gains from life insurance proceeds recorded in 2016, with no such gains recorded in 2017. Juniata’s management believes it to be meaningful to present a performance comparison that segregates the financial impact of the afore-mentioned items, to allow a view of comparative results to 2016. The following discussion includes both GAAP, as well as non-GAAP financial measures that are reconciled to GAAP financial measures in the supplemental tables presented in the “2018 Financial Performance Overview”. The non-GAAP measures are referred to as “adjusted” results.

As noted above, Juniata initiated a strategy to reduce the liability associated with its defined benefit pension plan in the fourth quarter of 2017. The first step of the initiative consisted of the purchase of a single premium group annuity for a group of Juniata’s retirees, transferring the associated pension liability to the issuer of the annuity. This step reduced Juniata’s overall pension liability by approximately 12%, which resulted in a pre-tax charge to earnings of $377,000. This pre-tax charge represents an acceleration of pension expenses that would otherwise have impacted Juniata’s earnings in the future. During 2018, management continued to implement its strategy to further reduce the pension liability.

Also occurring in the fourth quarter of 2017 was the execution of a definitive merger agreement between Juniata and LCB. Merger-related expenses were incurred at both institutions in 2017. Since Juniata accounts for its investment in Liverpool using the equity method, 39.16% of LCB’s merger-related expenses reduced Juniata’s non-interest income by $33,000. Juniata’s own merger-related expenses increased non-interest expense by $13,000.

On December 22, 2017, the TCJA was enacted, lowering Juniata’s and LCB’s future maximum corporate tax rate from 34% to 21%. The effects of tax law and rate changes must be reflected as a component of tax expense from continuing operations. Though the reduced rate will provide tax savings to Juniata and LCB in future periods, the reduction resulted in write-downs of Juniata’s and LCB’s net deferred tax assets, which were previously valued based upon the projection of a 34% future tax rate. As a result, a non-cash charge of $416,000 was included in the 2017 income taxes expense. A similar non-cash charge at LCB, resulted in a $32,000 decline in Juniata’s non-interest income in the fourth quarter of 2017.

Net income for Juniata in 2017 was $4,537,000, representing a 12.0% decrease as compared to net income for 2016. Earnings per share on a fully diluted basis decreased from $1.07 in 2016 to $0.95 in 2017. When adjusted for the impact of the tax-effected events mentioned above, adjusted net income was $5,253,000 for the year ended December 31, 2017, an increase of 6.2% over adjusted net income for the year ended December 31, 2016. Adjusted earnings per share increased by 6.8% from $1.02 in 2016 to $1.10 in 2017. For 2017, return on average assets (“ROA”) and return on average equity (“ROE”) were 0.76% and 7.57%, respectively. On an adjusted basis, return on average assets was 0.88% in 2017 as compared to 0.85% in 2016, and return on average equity was 8.76% and 8.08% in 2017 and 2016, respectively.

Summarized below are the components of net income and the contribution of each to ROA for 2017 and 2016.

(Dollars in thousands)	2017						2016
	Net Income			% of Average			Net Income			% of Average
	Components			Assets			Components			Assets
Net interest income	$	18,519			3.12	%	$	18,201			3.15	%
Provision for loan losses		(439	)		(0.07	)		(466	)		(0.08	)
Customer service fees		1,747			0.29			1,736			0.30
Debit card fee income		1,120			0.19			1,044			0.18
BOLI		352			0.06			371			0.06
Trust fees		446			0.08			454			0.08
Commissions from sales of non-deposit products		173			0.03			223			0.04
Income from unconsolidated subsidiary		167			0.03			222			0.04
Insurance-related gains		-			0.00			364			0.06
Security gains		512			0.09			218			0.04
Mortgage banking income		214			0.04			158			0.03
Other noninterest income		561			0.09			628			0.11
Total noninterest income		5,292			0.89			5,418			0.94
Employee expense		(9,996	)		(1.68	)		(9,184	)		(1.59	)
Occupancy and equipment		(1,884	)		(0.32	)		(1,798	)		(0.31	)
Data processing expense		(1,751	)		(0.29	)		(1,807	)		(0.31	)
Director compensation		(241	)		(0.04	)		(238	)		(0.04	)
Professional fees		(571	)		(0.10	)		(539	)		(0.09	)
Taxes, other than income		(463	)		(0.08	)		(437	)		(0.08	)
FDIC insurance premiums		(334	)		(0.06	)		(375	)		(0.06	)
(Loss) gain on sales of other real estate owned		8			0.00			(150	)		(0.03	)
Intangible amortization		(67	)		(0.01	)		(105	)		(0.02	)
Merger and acquisition expense		(612	)		(0.10	)		(347	)		(0.06	)
Amortization of investment in partnership		(13	)		(0.00	)		(479	)		(0.08	)
Other noninterest expense		(1,851	)		(0.31	)		(1,719	)		(0.30	)
Total noninterest expense		(17,775	)		(2.99	)		(17,178	)		(2.98	)
Income tax expense		(1,060	)		(0.18	)		(819	)		(0.14	)
Net income	$	4,537			0.76	%	$	5,156			0.89	%
Average assets	$	593,923					$	577,341

NET INTEREST INCOME

On average, total loans outstanding in 2017 increased from 2016 by 1.6%, to $385,411,000. Average yields on loans increased by 4 basis points in 2017 when compared to 2016. As shown in the preceding Rate – Volume Analysis of Net Interest Income Table 2, the increase in yield raised interest income on loans by approximately $149,000, while the increase in volume increased interest income by $297,000, resulting in an aggregate increase in interest recorded on loans of $446,000 in 2017 compared to 2016. The prime rate increased by 25 basis points in March 2017, June 2017, and mid-December 2017 to end the year at 4.50%. The increased yield on prime-related loans in 2017 assisted in the increase in the average yield on loans in 2017 compared to 2016.

During 2017, cash flows from maturities, sales and repayments of investment securities were primarily used to fund a portion of the loan growth and to reinvest in the investment portfolio. Additional funds from deposit growth were likewise invested in the securities portfolio. As a result, average balances of investment securities increased by $10,986,000, and this volume increase accounted for a $225,000 increase in interest income as compared to 2016. The improvement in the overall yield of the investment portfolio by 14 basis points between 2016 and 2017 further increased net interest income by $221,000, resulting in an aggregate increase in interest recorded on investment securities of $446,000 in 2017 compared to 2016.

In total, yield on earning assets in 2017 was 3.92% compared to 3.87% in 2016, an increase of 5 basis points. On a fully tax equivalent basis, the yield on earning assets also increased 5 basis points, from 4.00% in 2016 to 4.05% in 2017.

Average interest bearing liabilities increased by $15,358,000 in 2017, compared to 2016. Within the categories of interest bearing liabilities, deposits increased on average by $4,822,000, and borrowings increased by $10,536,000 on average. The average increase in overnight borrowings of approximately $9,774,000 in 2017 compared to 2016 was the primary reason for the increase in average borrowings. Changes in the volume of total interest-bearing liabilities increased interest expense by $127,000 in 2017 as compared to 2016, while changes in interest rates further increased interest expense by $459,000. The percentage of interest earning assets funded by non-interest bearing liabilities was approximately 23.1% in 2017 versus 23.6% in 2016. The total cost to fund earning assets (computed by dividing the total interest expense by the total average earning assets) in 2017 was 0.52%, compared to 0.43% in 2016. This increase was primarily caused by the 0.75% increase in the Prime rate during 2017, combined with the increased volume in overnight borrowings.

Net interest income was $18,519,000 for 2017, an increase of $318,000 when compared to 2016. Increases in volumes contributed $387,000 toward the improved net interest income, partially offset by a $69,000 reduction of net interest income due to rate changes.

PROVISION FOR LOAN LOSSES

Juniata’s provision for loan losses is determined as a result of an analysis of the adequacy level of the allowance for loan losses. In order to closely reflect the potential losses within the current loan portfolio based upon current information known, the Company carries no unallocated allowance. Using the process of analysis described in “Application of Critical Accounting Policies” earlier in this discussion, the Company determined that a provision of $439,000 was appropriate for 2017, a decrease of $27,000 when compared to 2016 when the total loan loss provision was $466,000. The lower provision in 2017 primarily resulted from the relatively unchanged loan volumes and asset quality in 2017 versus 2016. The discussion included in the Loans and Allowance for Loan Losses in the section below titled “Financial Condition” explains the information and analysis used to arrive at the provision for 2017.

NON-INTEREST INCOME

The Company remains committed to providing comprehensive services and products to meet the current and future financial needs of our customers. We believe that our responsiveness to customers’ needs surpasses that of our competitors, and we measure our success by the customer acceptance of fee-based services. We continually explore avenues to enhance product offerings in areas beneficial to customers. We offer a variety of options for financing to home-buyers that includes a secondary market lending program, providing significant fee income. We continue to add new features and services for our electronic banking clientele. We make fraud protection services available to all consumer depositors. We provide alternative investment opportunities through an arrangement with a broker dealer and integrate the delivery of non–traditional products with our Trust and Wealth Management Division. This arrangement enables us to meet the investment needs of a varied customer base and to better identify our clients’ needs for traditional trust services.

Fee-generated non-interest revenues consist of customer service fees derived from deposit accounts, trust relationships and sales of non-deposit products. In 2017, revenues from these services totaled $2,366,000, representing a decline of $47,000, or 1.9%, from 2016 revenues, primarily due to a decrease in wealth management commissions. Total fees from customer deposits increased by $11,000, or 0.6%. Fees from estate settlements decreased by $39,000, or 34.2%, in 2017 as compared to 2016, while non-estate fees increased by $31,000, or 9.4%. Variance in fees from estate settlements occurs because estate settlements occur sporadically and are not necessarily consistent year to year. Non-estate fees are repeatable revenues that generally increase and decrease in relation to movements in interest rates as market values of trust assets under management increase or decrease and as new relationships are established. Commissions from sales of non-deposit products decreased in 2017, in comparison to 2016, by $50,000, or 22.4%, as sales declined.

Fees generated by debit card activity increased by $76,000, or 7.3%, in 2017 as compared to the prior year due to general increased debit card usage.

Fees and income derived from the origination, sale and servicing of residential mortgage loans (mortgage banking income) was $214,000 in 2017, an increase of $56,000, or 35.4%, compared to 2016, as activity increased. Other non-interest-related fees derived from loan activity increased by $35,000 when comparing 2017 to 2016, primarily due to revenues generated from title insurance fees and a loan referral program that commenced in the second half of 2017. Gains of $364,000 were recorded in 2016 as a result of life insurance claims, while no claims were recorded in 2017.

Prior to April 30, 2018, the Company owned 39.16% of the stock of LCB and accounted for its ownership through the equity method. As such, 39.16% of the income of LCB was recorded by Juniata as non-interest income. As a result of this investment, $167,000 was recorded as income in 2017, compared to $222,000 in 2016. The decline in income from LCB was the result of merger-related expenses and the write-down of its deferred tax asset due to the passing of the TCJA. Earnings on bank-owned life insurance and annuities decreased in 2017 by $19,000, or 5.1%, when compared to the previous year, because investment in BOLI was lower in 2017.

In 2016, student loans that were included in the FNBPA acquisition were sold, generating a gain of $113,000; no similar corresponding gain was recorded in the 2017 period. Gains realized from the sale and call of investment securities during 2017 were $512,000, compared to $218,000 during 2016.

As a percentage of average assets, non-interest income (excluding securities gains on sales or calls of securities) was 0.89% and 0.90% in 2017 and 2016, respectively.

NON-INTEREST EXPENSE

Management strives to control non-interest expense where possible in order to achieve maximum operating results.

In 2017, total non-interest expense increased by $597,000, or 3.5%, when compared to 2016. The $377,000 in settlement costs from the first step of the “de-risking” of the defined benefit plan contributed to the increase in employee benefits expense in 2017 of $536,000, or 23.3%, compared to 2016, as well as $238,000 in increased medical insurance claims. Compensation expense for 2017 increased by $276,000, or 4.0%, as compared to 2016 due to staffing enhancements and higher levels of accruals for the employee incentive bonus.

Also contributing to the year over year increase in non-interest expense was an increase of $133,000, or 27.8%, in the amortization of two tax credit investments in low-income housing partnerships due to the addition of the amortization for the phase II project, which began in the second half of 2017. Amortization expense associated with the Bank’s investment in low-income housing partnerships, which first became applicable during the second quarter of 2013, was more than offset by the recording of the benefit of the tax credit from the partnerships in both 2017 and 2016. Amortization is scheduled to continue through 2023 for phase I and through 2027 for phase II.

Occupancy and equipment expense increased in the aggregate by $86,000, or 4.8%, due to the completion and occupation of a relocated banking office. Other noninterest expense increased $132,000, or 7.7%, in 2017 to the same period in 2016 due to higher electronic banking losses and the addition of consultant expenses associated with the “de-risking” of the defined benefit plan.

Offsetting the increase in total non-interest expense was a decline in data processing expense of $56,000, or 3.1%, in 2017 as compared to 2016. Merger and acquisition expense decreased $334,000, or 96.3%, for the year 2017 compared to the same period in 2016 as the remaining merger expenses for the FNBPA acquisition were recorded in 2016. Additionally, the valuation of properties held in other real estate owned resulted in net gains of $8,000 in 2017 compared to net losses of $150,000 in 2016, resulting in a net decline in expense of $158,000, or 105.3%, in 2017.

As a percentage of average assets, non-interest expense was 2.99% in 2017 as compared to 2.98% in 2016.

INCOME TAXES

Income tax expense for 2017 amounted to $1,060,000 versus $819,000 in 2016. The effect of the Tax Cuts and Jobs Act passed in 2017 required an immediate write-down of JVB’s deferred tax assets as of December 31, 2017 resulting in an additional tax expense of $416,000. Both periods included the effect of a tax credit amounting to $722,000 in 2017 and $572,000 in 2016. The tax credit was available to the Company as a result of an equity investment in a low-income housing project. Juniata’s effective tax rate in 2017 was 18.9% versus 13.7% in 2016. See Note 16 of Notes to Consolidated Financial Statements for further information on income taxes.

FINANCIAL CONDITION

BALANCE SHEET SUMMARY

Juniata functions as a financial intermediary and, as such, its financial condition can be best analyzed in terms of changes in its uses and sources of funds, and can also be analyzed in terms of changes in daily average balances. The table below sets forth average daily balances for the last three years and the dollar change and percentage change for the past two years.

TABLE 3

CHANGES IN USES AND SOURCES OF FUNDS

(Dollars in thousands)	2018									2017									2016
	Average			Increase(Decrease)						Average			Increase(Decrease)						Average
Funding Uses:	Balance			Amount			%			Balance			Amount			%			Balance
Taxable loans	$	379,696		$	24,663			6.9	%	$	355,033		$	6,119			1.8	%	$	348,914
Tax-exempt loans		29,666			(712	)		(2.3	)		30,378			115			0.4			30,263
Taxable securities		131,420			(3,187	)		(2.4	)		134,607			9,996			8.0			124,611
Tax-exempt securities		19,988			(4,809	)		(19.4	)		24,797			990			4.2			23,807
Interest bearing deposits		3,246			2,666			459.7			580			(190	)		(24.7	)		770
Federal funds sold		1,267			1,267			-			-			(675	)		(100.0	)		675
Total interest earning assets		565,283			19,888			3.6			545,395			16,355			3.1			529,040
Investment in:
Unconsolidated subsidiary		1,573			(3,198	)		(67.0	)		4,771			157			3.4			4,614
Low income housing		4,965			(18	)		(0.4	)		4,983			1,564			45.7			3,419
BOLI and annuities		15,552			761			5.1			14,791			(97	)		(0.7	)		14,888
Goodwill and intangible assets		8,294			2,616			46.1			5,678			(76	)		(1.3	)		5,754
Other non-interest earning assets		26,668			4,489			20.2			22,179			(1,524	)		(6.4	)		23,703
Unrealized gains (losses) on securities		(4,687	)		(3,622	)		340.1			(1,065	)		440			(29.2	)		(1,505	)
Less: Allowance for loan losses		(3,016	)		(207	)		(7.4	)		(2,809	)		(237	)		(9.2	)		(2,572	)
Total uses	$	614,632		$	20,709			3.5	%	$	593,923		$	16,582			2.9	%	$	577,341
Funding Sources:
Interest bearing demand deposits	$	141,483		$	17,963			14.5	%	$	123,520		$	2,041			1.7	%	$	121,479
Savings deposits		102,086			2,701			2.7			99,385			2,516			2.6			96,869
Time deposits under $100,000		110,931			5,326			5.0			105,605			(3,449	)		(3.2	)		109,054
Time deposits over $100,000		37,740			3,693			10.8			34,047			3,714			12.2			30,333
Repurchase agreements		4,177			(646	)		(13.4	)		4,823			112			2.4			4,711
Short-term borrowings		9,906			(15,570	)		(61.1	)		25,476			9,763			62.1			15,713
Long-term debt		17,493			(7,507	)		(30.0	)		25,000			594			2.4			24,406
Other interest bearing liabilities		1,560			13			0.8			1,547			67			4.5			1,480
Total interest bearing liabilities		425,376			5,973			1.4			419,403			15,358			3.8			404,045
Demand deposits		120,521			12,380			11.4			108,141			2,605			2.5			105,536
Other liabilities		6,046			(395	)		(6.1	)		6,441			(110	)		(1.7	)		6,551
Stockholders' equity		62,689			2,751			4.6			59,938			(1,271	)		(2.1	)		61,209
Total sources	$	614,632		$	20,709			3.5	%	$	593,923		$	16,582			2.9	%	$	577,341

Overall, total average assets increased by $20,709,000, or 3.5%, for the year 2018 compared to 2017, following an increase of $16,582,000, or 2.9%, in 2017 over average assets in 2016. The increase in 2018 was primarily due to the acquisition of LCB on April 30, 2018. The ratio of average earning assets to total average assets was 92.0% in 2018, while it was 91.8% and 91.6% in 2017 and 2016, respectively. The ratio of average interest-bearing liabilities to total average assets decreased in 2018 to 69.2% from 70.6% in 2017, which was an increase from 70.0% in 2016. Although Juniata’s previous investment in its unconsolidated subsidiary, investment in low income elderly housing projects and its bank owned life insurance and annuities are not classified as interest-earning assets, income is derived directly from those assets. These instruments have represented 3.6% and 4.1% of total average assets in 2018 and 2017, respectively. A more detailed discussion of the Company’s earning assets and interest bearing liabilities will follow in the Sections titled “Loans”, “Investments”, “Deposits” and “Market/Interest Rate Risk”.

LOANS

Loans outstanding at the end of each year consisted of the following:

(Dollars in thousands)	Years Ended December 31,
	2018		2017		2016		2015		2014
Commercial, financial and agricultural	$	46,563	$	45,802	$	40,827	$	34,171	$	23,738
Real estate - commercial		141,295		140,369		123,711		127,213		90,000
Real estate - construction		36,688		28,403		35,206		26,672		20,713
Real estate - mortgage		163,548		146,888		154,905		164,617		140,676
Obligations of states and political subdivisions		19,129		13,044		13,616		17,524		15,730
Personal		10,408		9,398		10,032		6,846		4,044
Total	$	417,631	$	383,904	$	378,297	$	377,043	$	294,901

From year-end 2017 to year-end 2018, total loans outstanding increased by $33,727,000, primarily due to the addition of $31,331,000 at April 30, 2018 from Liverpool’s loan portfolio, following an increase of $5,607,000 in 2017 when compared to year-end 2016. The following table summarizes how the ending balances changed annually in each of the last three years.

(Dollars in thousands)
	2018			2017			2016
Beginning balance	$	383,904		$	378,297		$	377,043
Net new loans		2,931			6,239			1,750
Loans acquired through merger, net of fair value adjustments		31,331			-			-
Loans charged off		(285	)		(292	)		(279	)
Loans transferred to other real estate owned and other adjustments to carrying value		(250	)		(340	)		(217	)
Net change		33,727			5,607			1,254
Ending balance	$	417,631		$	383,904		$	378,297

The loan portfolio was comprised of approximately 41.7% consumer loans and 58.3% commercial loans (including construction) on December 31, 2018 as compared to 40.7% consumer loans and 59.3% commercial loans on December 31, 2017. Management believes that diversification in the loan portfolio is important and performs a loan concentration analysis on a quarterly basis. The highest loan concentration by activity type was commercial real estate loans secured by income-producing property, with debt service on this category of loans being reliant upon the cash flow generated by the property. In the aggregate, loans in this category had outstanding balances of $93,966,000 at December 31, 2018, or 142.57% of the Bank’s capital. Components of this concentration group with balances considered for general reserve purposes are as follows:

NAIC Definition	Outstanding Balance		% of Bank Capital
Lessors of non-residential buildings	$	36,459,183		55.32	%
Hotels and Motels		20,424,415		30.99	%
Continuing care retirement communities		18,684,249		28.35	%
Lessors of residential buildings and dwellings		18,398,129		27.91	%
Total	$	93,965,976		142.57	%

Given the reserves allocated to this sector over the past several years and the continuing softness in the market, management has assigned an additional concentration risk factor to this group of loans when analyzing the adequacy of the allowance for loan losses. See Note 7 of Notes to Consolidated Financial Statements.

There was growth in all loan categories in 2018, mainly due to the addition of Liverpool’s loan portfolio, as well as organic growth. During 2017, there was growth in commercial and commercial real estate mortgages, largely offset by a decrease in real estate construction and consumer mortgages. Juniata is willing, able and continues to lend to qualifying businesses and individuals. Our business model closely aligns lenders and community office managers’ efforts to effectively develop referrals and existing customer relationships. Continued emphasis is placed on responsiveness and personal attention given to customers, which we believe differentiates the Bank from its competition. Nearly all commercial loans are either variable or adjustable rate loans, while non-mortgage consumer loans generally have fixed rates for the duration of the loan.

Juniata strives to offer fair, competitive rates and to provide optimal service in order to attract loan growth. Emphasis will continue to be placed upon attracting the entire customer relationship of our borrowers.

The loan portfolio carries the potential risk of past due, non-performing or, ultimately, charged-off loans. The Bank attempts to manage this risk through credit approval standards and aggressive monitoring and collection efforts. Where prudent, the Bank secures commercial loans with collateral consisting of real and/or tangible personal property. The Company maintains a dedicated credit administration division, in response to the need for heightened credit review, both in the loan origination process and in the ongoing risk assessment process. With stringent credit standards in place, Juniata’s lending strategy stresses quality growth, diversified by product. A standardized credit policy is in place throughout the Company, and the credit committee of the Board of Directors reviews and approves all loan requests for amounts that exceed management’s approval levels. The Company makes credit judgments based on a customer’s existing debt obligations, collateral, ability to pay and general economic trends. See Note 3 of Notes to Consolidated Financial Statements.

The allowance for loan losses has been established in order to absorb probable losses on existing loans. A quarterly provision or credit is charged to earnings to maintain the allowance at adequate levels. Charge-offs and recoveries are recorded as adjustments to the allowance. The allowance for loan losses at December 31, 2018 was 0.73% of total loans, net of unearned interest, as compared to 0.77% of total loans, net of unearned interest, at the end of 2017. Loans that Juniata acquired through mergers and acquisitions, such as those acquired from Liverpool in 2018 and FNBPA in 2015 are recorded at fair value with no carryover of the related allowance for loan losses. Acquired loans subsequently deemed impaired are included in the allowance for loan losses as impaired loans. Through loan amortization and other scheduled payments, the excluded balances become a smaller percentage of total outstanding loans over time, contributing to the increase in the allowance as a percentage of total loans. The allowance increased $95,000 when compared to December 31, 2017, as a result of net charge-offs of $242,000 offset by the provision of $337,000. Net charge-offs for both 2018 and 2017 were 0.06% of average loans.

At December 31, 2018, non-performing loans (as defined in Table 4 below), as a percentage of the allowance for loan losses, were 68.4% as compared to 102.9% at December 31, 2017. Non-performing loans were 0.50% of loans as of December 31, 2018, and 0.79% of loans as of December 31, 2017. The decrease in nonperforming loans in 2018 compared to 2017 was predominantly due to successful workout efforts, which resulted in a significant reduction in non-performing loans as several of these loans were either brought current or liquidated. Of the $2,075,000 in non-performing loans at December 31, 2018, only one loan for $17,000 was not collateralized with real estate.

TABLE 4

NON-PERFORMING LOANS

	Years Ended December 31,
(Dollars in thousands)	2018		2017		2016		2015		2014
Nonaccrual loans	$	1,707	$	2,874	$	4,733	$	3,688	$	4,880
Accruing loans past due 90 days or more,  exclusive of loans acquired with credit deterioration		329		64		554		2		400
Restructured loans in default and non-accruing		39		87		25		-		366
Total non-performing loans	$	2,075	$	3,025	$	5,312	$	3,690	$	5,646

Loans on which the accrual of interest has been discontinued are designated as non-accrual loans. Accrual of interest on loans is generally discontinued when the contractual payment of principal or interest has become 90 days past due or reasonable doubt exists as to the full, timely collection of principal or interest. However, it is the Company’s policy to continue to accrue interest on loans over 90 days past due as long as (1) they are guaranteed or well secured and (2) there is an effective means of timely collection in process. When a loan is placed on non-accrual status, all unpaid interest credited to income in the current year is reversed against current period income, and unpaid interest accrued in prior years is charged against the allowance for loan losses. Interest received on nonaccrual loans generally is either applied against principal or reported as interest income, according to management’s judgment as to the collectability of principal. Generally, accruals are resumed on loans only when the obligation is brought fully current with respect to interest and principal, has performed in accordance with the contractual terms for a reasonable period of time and the ultimate collectability of the total contractual principal and interest is no longer in doubt. The Company’s nonaccrual and charge-off policies are the same, regardless of loan type. During 2018, gross interest income that would have been recorded if loans on nonaccrual status had been current was $311,000, of which $33,000 was collected and included in net income.

ALLOWANCE FOR LOAN LOSSES

The amount of allowance for loan losses is determined through a critical quantitative and qualitative analysis performed by management that includes significant assumptions and estimates. It is maintained at a level deemed sufficient to absorb probable estimated losses within the loan portfolio, and supported by detailed documentation. To assess potential credit weaknesses, it is critical to analyze observable trends that may be occurring.

Management systematically monitors the loan portfolio and the adequacy of the allowance for loan losses on a quarterly basis to provide for probable losses inherent in the portfolio. The Bank’s methodology for maintaining the allowance is highly structured and contains two components: 1) specific allowances allocated to loans evaluated for impairment under the Financial Accounting Standards Board's Accounting Standards Codification ("FASB ASC") Section 310-10-35; and 2) allowances calculated for pools of loans evaluated for impairment under FASB ASC Subtopic 450-20 (Contingencies).

Component for impaired loans:

A loan is considered to be impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loans and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan by loan basis by the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price or the fair value of the collateral if the loan is collateral dependent.

The estimated fair values of substantially all of the Company’s impaired loans are measured based on the estimated fair value of the loan’s collateral. For commercial loans secured with real estate, estimated fair values are determined primarily through third-party appraisals. When a real estate secured loan becomes impaired, a decision is made regarding whether an updated certified appraisal of the real estate is necessary. This decision is based on various considerations, including the age of the most recent appraisal, the loan-to-value ratio based on the current appraisal and the condition of the property. Appraised values may be discounted to arrive at the estimated selling price of the collateral, which is considered to be the estimated fair value. The discounts also include the estimated costs to sell the property. For commercial loans secured by non-real estate collateral, estimated fair values are determined based on the borrower’s financial statements, inventory reports, aging accounts receivable, equipment appraisals or invoices. Indications of value from these sources are generally discounted based on the age of the financial information or the quality of the assets. For such loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The Company generally does not separately identify individual consumer segment loans for impairment analysis, unless such loans are subject to a restructuring agreement.

Loans whose terms are modified are classified as troubled debt restructurings if the Company grants borrower’s concessions and it is deemed that those borrowers are experiencing financial difficulty. Concessions granted under a troubled debt restructuring generally involve a below-market interest rate based on the loan’s risk characteristics or an extension of a loan’s stated maturity date. Nonaccrual troubled debt restructurings are restored to accrual status if principal and interest payments, under the modified terms, are current for a sustained period of time after modification. Loans classified as troubled debt restructurings are designated as impaired.

As of December 31, 2018, 34 loans, with aggregate outstanding balances of $2,133,000, were evaluated for impairment. A collateral analysis was performed on each of these 34 loans in order to establish a portion of the reserve needed to carry impaired loans at no higher than fair value. As a result of this analysis, no loans were determined to have insufficient collateral, and therefore, no specific reserves were established. Loans acquired with credit impairment are considered to be impaired loans, but are not included with this component for consideration in the allowance, as they are carried at fair value of $1,515,000 as of December 31, 2018.

Component for pooled loan contingencies:

A contingency is an existing condition, or set of circumstances, involving uncertainty as to possible gain or loss to the Company that will ultimately be resolved when one or more future events occur or fail to occur. These conditions may be considered in relation to individual loans or in relation to groups of similar types of loans. If the conditions are met, a provision is made even though the particular loans that are uncollectible may not be identifiable.

In accordance with FASB ASC Subtopic 450-20, when measuring estimated credit losses, these loans are grouped into homogenous pools with similar characteristics and evaluated collectively considering both quantitative measures, such as historical loss, and qualitative measures, in the form of environmental adjustments.

These pools are established by general loan type, or "portfolio segments," as follows:

· Commercial, financial and agricultural

· Real estate – commercial

· Real estate - construction

· Real estate – mortgage

· Obligations of states and political subdivisions

· Personal

Some portfolio segments are further disaggregated and evaluated collectively for impairment based on "class segments," which are largely based on the type of collateral underlying each loan. For commercial, financial and agricultural loans, class segments include commercial loans secured by other-than real estate collateral. Real estate – commercial class segments include loans secured by farmland, multi-family properties, owner-occupied non-farm, non-residential properties and other nonfarm non-residential properties. Real estate – mortgage includes loans secured by first and junior liens on residential real estate. Construction loan class segments include loans secured by commercial real estate, loans to commercial borrowers secured by residential real estate and loans to individuals secured by residential real estate. Personal loan class segments include direct consumer installment loans, indirect automobile loans and other revolving and unsecured loans to individuals.

Quantitative factor determination:

An average annual loss rate is calculated for each pool through an analysis of historical losses over a five-year look-back period. Using data for each loan, a loss emergence period is determined within each segmented class pool. The loss emergence period reflects the approximate length of time from the point when a loss is incurred (the loss trigger event) to the point of loss confirmation (the date of eventual charge-off). The loss emergence period is applied to the average annual loss to produce the qualitative factor for each pooled class segment.

Qualitative factor determination:

Historical loss rates computed in the quantitative component reflects an estimate of the level of incurred losses in the portfolio based on historical experience. Management considers that the current conditions may deviate from those that prevailed over the historical look-back period. Thus, the quantitative rates are an imperfect estimate, necessitating an evaluation of qualitative considerations, i.e. environmental factors to incorporate these risks.

Management considered qualitative, environmental risk factors including:

· National, regional and local economic and business conditions, and developments that affect the collectability of the portfolio, including the condition of various market segments;

· Changes in the volume and severity of past due loans, the volume of nonaccrual loans, and the volume and severity of adversely classified loans;

· Changes in the nature and volume of the portfolio and terms of loans;

· Changes in the experience, ability and depth of lending and credit management and other relevant staff;

· Existence and effect of any concentrations of credit and changes in the level of such concentrations;

· Changes in the quality of the loan review system;

· Changes in lending policies and procedures including changes in underwriting standards and collection, charge-off and recovery practices;

· Changes in the value of underlying collateral for collateral-dependent loans; and

· Effect of external influences, including competition, legal and regulatory requirements.

Within each loan segment, an analysis was performed over a ten-year look-back period to discover peak historical losses, and with this data, management established ranges of risk from minimal to very high, for each risk factor, to produce a supportable anchor for risk assignment. Based on the framework for risk factor evaluation and range of adjustments established through the anchoring process, a risk assessment and corresponding adjustment was assigned for each portfolio segment as of December 31, 2018. Adjustments to the factors are supported through documentation of changes in conditions in a narrative accompanying the allowance for loan loss calculation.

The combination of quantitative and qualitative factors were applied to year-end balances in each pooled segment to establish the overall allowance.

A summary of activity in the allowance for loan loss for the last five years is shown below. The area most affected by charge-offs in each of the five years presented was real estate – mortgages, which balances accounted for approximately 39% of the total loan portfolio at December 31, 2018. In 2018, the Company recorded net charge-offs of $242,000. Based on the analysis described above, the provision for loan loss in 2018 was 23.2% lower than in 2017. With the provision exceeding net charge-offs, the loan loss allowance increased by 3.2% over the allowance level in December 31, 2017. Management’s analysis indicated that the loan loss allowance of $3,034,000 at December 31, 2018 was adequate.

(Dollars in thousands)	Years Ended December 31,
	2018			2017			2016			2015			2014
Balance of allowance - beginning of period	$	2,939		$	2,723		$	2,478		$	2,380		$	2,287
Loans charged off:
Commercial, financial and agricultural		-			46			4			11			20
Real estate - commercial		60			70			146			66			92
Real estate - construction		-			-			-			24			18
Real estate - mortgage		183			149			103			305			125
Personal		42			27			26			9			20
Total charge-offs		285			292			279			415			275
Recoveries of loans previously charged off:
Commercial, financial and agricultural		10			5			-			7			4
Real estate - commercial		5			2			24			-			5
Real estate - mortgage		12			45			15			1			-
Personal		16			17			19			3			2
Total recoveries		43			69			58			11			11
Net charge-offs		242			223			221			404			264
Provision for loan losses		337			439			466			502			357
Balance of allowance - end of period	$	3,034		$	2,939		$	2,723		$	2,478		$	2,380
Ratio of net charge-offs during period to average loans outstanding		0.06	%		0.06	%		0.06	%		0.13	%		0.09	%

The following tables show how the allowance for loan losses is allocated among the various types of outstanding loans and the percent of loans by type to total loans.

(Dollars in thousands)	Years Ended December 31,
	2018		2017		2016		2015		2014
Commercial, financial and agricultural	$	275	$	273	$	318	$	264	$	222
Real estate - commercial		1,074		1,022		948		836		665
Real estate - construction		558		288		231		191		155
Real estate - mortgage		1,035		1,285		1,143		1,140		1,300
Obligations of states and political subdivisions		20		-		-		-		-
Personal		72		71		83		47		38
	$	3,034	$	2,939	$	2,723	$	2,478	$	2,380

(Dollars in thousands)	Years Ended December 31,
	2018			2017			2016			2015			2014
Commercial, financial and agricultural		11.1	%		11.9	%		10.8	%		9.1	%		8.0	%
Real estate - commercial		33.8	%		36.6	%		32.7	%		33.7	%		30.5	%
Real estate - construction		8.8	%		7.4	%		9.3	%		7.1	%		7.0	%
Real estate - mortgage		39.2	%		38.3	%		40.9	%		43.7	%		47.8	%
Obligations of states and political subdivisions		4.6	%		3.4	%		3.6	%		4.6	%		5.3	%
Personal		2.5	%		2.4	%		2.7	%		1.8	%		1.4	%
		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

INVESTMENTS

Total investments, defined to include all interest earning assets except loans (i.e. investment securities available for sale (at fair value), equity securities, federal funds sold, interest bearing deposits, restricted investment in bank stock and other interest-earning assets), totaled $149,641,000 on December 31, 2018, representing a decrease of $7,695,000 when compared to year-end 2017. The following table summarizes how the ending balances changed annually in each of the last three years.

(Dollars in thousands)
	2018			2017			2016
Beginning balance	$	157,336		$	154,543		$	156,259
Purchases of investment securities		20,610			42,510			48,309
Sales, calls and maturities of investment securities		(29,794	)		(37,614	)		(47,974	)
Change in value of equity securities under ASU 2016-01		(1	)		-			-
Adjustment in market value of AFS securities		(1,028	)		(830	)		(1,434	)
Amortization/Accretion		(540	)		(650	)		(740	)
Restricted investment in bank stock, net change		(663	)		(586	)		101
Federal funds sold, net change		729			-			-
Interest bearing deposits with others, net change		52			(37	)		22
Interest bearing time deposits with banks acquired through merger		3,675			-			-
Maturities of interest bearing time deposits with banks		(735	)		-			-
Net change		(7,695	)		2,793			(1,716	)
Ending balance	$	149,641		$	157,336		$	154,543

On average, total investments declined by $4,063,000, or 2.5%, during 2018, following an increase of $10,121,000, or 6.8%, during 2017. The decline in 2018 was the result of a strategy to apply cash flows from the investment portfolio to reduce high cost borrowings, as opposed to reinvesting in additional investment securities. The increase in 2017 resulted from excess cash available from loan repayments.

The investment area is managed according to internally established guidelines and quality standards. Juniata segregates its investment securities portfolio into two classifications: those held to maturity and those available for sale. Juniata classifies all new marketable investment securities as available for sale, and currently holds no securities in the held to maturity or trading classifications. At December 31, 2018, the market value of the entire securities portfolio was less than amortized cost by $3,357,000 as compared to December 31, 2017, when the market value was less than amortized cost by $2,132,000. The weighted average life of the investment portfolio was 4.5 years on December 31, 2018 and 4.3 years on December 31, 2017. The weighted average maturity has remained short in order to achieve a desired level of liquidity. Table 5, “Maturity Distribution”, in this Management’s Discussion and Analysis of Financial Condition shows the remaining maturity or earliest possible repricing for investment securities.

The following table sets forth the maturities of securities and the weighted average yields of such securities by contractual maturities or call dates. Yields on obligations of states and public subdivisions are presented on a tax-equivalent basis.

(Dollars in thousands)	December 31, 2018					December 31, 2017					December 31, 2016
			Weighted					Weighted					Weighted
	Fair		Average			Fair		Average			Fair		Average
Security type and maturity	Value		Yield			Value		Yield			Value		Yield
Obligations of U.S. Government  agencies and corporations
Within one year	$	-		0.00	%	$	5,969		1.11	%	$	-		0.00	%
After one year but within five years		20,355		1.96	%		14,689		1.84	%		19,331		1.38	%
After five years but within ten years		2,911		2.29	%		13,556		1.99	%		16,468		1.87	%
		23,266		2.00	%		34,214		1.78	%		35,799		1.61	%
Obligations of state and political subdivisions
Within one year		826		3.37	%		2,516		1.84	%		2,820		2.04	%
After one year but within five years		14,686		3.82	%		13,955		2.75	%		13,240		2.50	%
After five years but within ten years		2,669		3.74	%		8,510		3.02	%		10,599		3.00	%
		18,181		3.79	%		24,981		2.75	%		26,659		2.65	%
Mortgage-backed securities
After one year but within five years		-		0.00	%		-		0.00	%		104		1.37	%
After five years but within ten years		5,664		2.19	%		5,249		2.21	%		7,701		2.22	%
After ten years		94,842		2.52	%		88,261		2.27	%		77,897		2.13	%
		100,506		2.51	%		93,510		2.26	%		85,702		2.13	%
Available for sale equity securities		-					1,119					2,328
	$	141,953				$	153,824				$	150,488

BANK OWNED LIFE INSURANCE AND ANNUITIES

The Company periodically insures the lives of certain bank officers in order to provide split-dollar life insurance benefits to some key officers and to offset the cost of providing post-retirement benefits through non-qualified plans. Some annuities are also owned to provide cash streams that match certain post-retirement liabilities. See Note 9 of Notes to Consolidated Financial Statements. The following table summarizes how the cash surrender values of these instruments changed annually in each of the last three years.

(Dollars in thousands)
	2018		2017		2016
Beginning balance	$	14,972	$	14,631	$	14,905
BOLI net increase in cash surrender value		303		311		349
BOLI policy acquired through merger		632		-		-
BOLI receipt of death benefit		-		-		(651	)
Annuities net increase in cash surrender value		31		30		28
Net change		966		341		(274	)
Ending balance	$	15,938	$	14,972	$	14,631

INVESTMENT IN UNCONSOLIDATED SUBSIDIARY

The Company no longer has an investment in an unconsolidated subsidiary following its acquisition of the remainder of the outstanding common stock of Liverpool on April 30, 2018. Prior to the acquisition, the Company owned 39.16% of the outstanding common stock of Liverpool, and the investment was carried at $4,812,000 as of December 31, 2017. The investment was accounted for under the equity method of accounting. The Company increased its investment in LCB for its share of earnings and decreased its investment by any dividends received from LCB. The investment was evaluated quarterly for impairment. A loss in value of the investment which is determined to be other than a temporary decline would have been recognized as a loss in the period in which such determination was made. Evidence of a loss in value might include, but would not necessarily be limited to, absence of an ability to recover the carrying amount of the investment or inability of LCB to sustain an earnings capacity that would justify the current carrying value of the investment. There was no impairment of the investment relating to LCB prior to the acquisition on April 30, 2018. In connection with this investment, two representatives of Juniata served on the Board of Directors of LCB.

GOODWILL AND INTANGIBLE ASSETS

Branch Acquisition

On September 8, 2006, the Company acquired a branch office in Richfield, PA. Goodwill at December 31, 2018 and 2017 was $2,046,000. The core deposit intangible of $431,000 was fully amortized as of December 31, 2018 and 2017. Core deposit intangible amortization expense of $29,000 was recorded in 2016, while no such expense was recorded during the years 2018 and 2017. The core deposit intangible was amortized over a ten-year period on a straight-line basis. Goodwill is not amortized, but is measured annually for impairment.

FNBPA Acquisition

On November 30, 2015, the Company completed its acquisition of FNBPA and, as a result, recorded goodwill of $3,335,000, which was subsequently adjusted in 2016 to $3,402,000. As of December 31, 2018, goodwill related to the FNBPA acquisition remained at $3,402,000. In addition, a core deposit intangible in the amount of $303,000 was recorded and is being amortized over a ten-year period using a sum of the year’s digits basis. Core deposit intangible amortization expense recorded in 2018 was $44,000 and, for the succeeding five years beginning 2019, is estimated to be $38,000, $33,000, $27,000, $22,000, and $16,000 per year, respectively, and $15,000 in total for years after 2023. Other intangible assets were identified and recorded as of November 30, 2015, in the amount of $40,000 and were amortized on a straight-line basis over two years, through November 30, 2017. Expense recognized in 2017 was $18,000, while no such expense was recognized in 2018. Core deposit and other intangible assets, net of amortization, was $151,000 as of December 31, 2018.

LCB Acquisition

On April 30, 2018, Juniata completed the acquisition of LCB and, as a result, recorded goodwill of $3,691,000. In addition, a core deposit intangible of $289,000 was recorded and will be amortized over a ten-year period using a sum of the years’ digits basis. Core deposit intangible expense recorded in 2018 was $35,000, and for the succeeding five years beginning 2019, is estimated to be $49,000, $44,000, $39,000, $33,000, and $28,000 per year, respectively, and $68,000 in total for years after 2023. Core deposit intangible, net of amortization, was $254,000 as of December 31, 2018.

Mortgage Servicing Rights

Due to a strategic shift in focus to a new mortgage product, which is increasing fees derived from loan activity, the Company did not originate and sell residential mortgage loans to the secondary market in 2018; however, the Company retains the servicing on loans originated and sold in prior years. The mortgage servicing rights are valued based on the present value of estimated future cash flows on pools of mortgages stratified by rate and maturity date. The computed value is carried as an intangible asset. As of December 31, 2018 and December 31, 2017, the fair value of mortgage servicing rights was $200,000 and $225,000, respectively.

DEFERRED TAXES

The Company accounts for income taxes under the asset/liability method. Deferred tax assets and liabilities are recognized for the future consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, as well as operating loss and tax credit carry-forwards, if applicable. A valuation allowance is established against deferred tax assets when, in the judgment of management, it is more likely than not that such deferred tax assets will not become realizable. Management has determined that there was no need for a valuation allowance for deferred taxes as of December 31, 2018 or 2017. As of December 31, 2018 and 2017, the Company recorded a net deferred tax asset of $1,000,000 and $652,000, respectively, which was carried as a non-interest earning asset.

The Tax Cuts and Jobs Act, lowered Juniata’s future maximum corporate tax rate from 34% to 21% on January 1, 2018. While the reduced rate provides tax savings to Juniata now and in future periods, the reduction resulted in write-downs of Juniata’s net deferred tax asset as of year-end 2017, which was previously valued based upon the projection of a 34% future tax rate. Overall, the TCJA resulted in a reduction in net deferred taxes of $416,000, or 69.7%, of the total reduction of $597,000 at December 31, 2017. In 2018, the value of the Juniata’s deferred tax asset was adjusted again, due primarily to a defined benefit contribution applied to the prior tax year, along with the removal of a deferred tax liability no longer applicable. The net adjustment resulted in a decrease in tax expense in 2018 of $168,000.

The remainder of the difference was due to the various other changes in gross temporary tax differences. See Note 16 of Notes to Consolidated Financial Statements.

OTHER NON-INTEREST EARNING ASSETS

The following table summarizes the components of the non-interest earning asset category, and how the ending balances changed annually in each of the last three years.

(Dollars in thousands)
	2018			2017			2016
Beginning balance	$	27,992		$	24,988		$	25,886
Cash and cash equivalents		5,778			375			(921	)
Premises and equipment, net		(143	)		2,030			(52	)
Other real estate owned		389			(283	)		21
Investment in low income housing		(700	)		1,433			444
Other receivables and prepaid expenses, including deferred tax assets		2,000			(551	)		(390	)
Net change		7,324			3,004			(898	)
Ending balance	$	35,316		$	27,992		$	24,988

DEPOSITS

At December 31, 2018, total deposits were $521,722,000, an increase of $44,054,000 as compared to the previous year end. At December 31, 2017, total deposits were $477,668,000, an increase of $21,846,000 from total deposits on December 31, 2016. Deposits assumed from the LCB acquisition accounted for an increase of $36,052,000 in 2018. The following table summarizes how the ending balances changed annually in each of the last three years.

(Dollars in thousands)
	2018		2017		2016
Beginning balance	$	477,668	$	455,822	$	457,126
Demand deposits		10,146		11,905		(2,661	)
Interest bearing demand deposits		25,006		3,977		4,023
Savings deposits		270		3,517		526
Time deposits		8,632		2,447		(3,192	)
Net change		44,054		21,846		(1,304	)
Ending balance	$	521,722	$	477,668	$	455,822

The following table shows the comparison of average core deposits and average time deposits as a percentage of total deposits for each of the last three years.

	Changes in Deposits
(Dollars in thousands)	2018							2017								2016
	Average		Increase (Decrease)					Average		Increase (Decrease)						Average
	Balance		Amount		%			Balance		Amount			%			Balance
Core transaction deposits:
Money market	$	48,210	$	1,544		3.3	%	$	46,666	$	2,770			6.3	%	$	43,896
Interest bearing demand		93,273		16,419		21.4			76,854		(729	)		(0.9	)		77,583
Savings		102,086		2,701		2.7			99,385		2,516			2.6			96,869
Demand		120,521		12,380		11.4			108,141		2,605			2.5			105,536
Total core transaction deposits		364,090		33,044		10.0			331,046		7,162			2.2			323,884
Time deposits:
$100,000 and greater		37,740		3,693		10.8			34,047		3,714			12.2			30,333
Other		110,931		5,326		5.0			105,605		(3,449	)		(3.2	)		109,054
Total time deposits		148,671		9,019		6.5			139,652		265			0.2			139,387
Total deposits	$	512,761	$	42,063		8.9	%	$	470,698	$	7,427			1.6	%	$	463,271

Average deposits increased $42,063,000, or 8.9%, to $512,761,000 in 2018 following an increase in 2017 of $7,427,000, or 1.6%, to $470,698,000. Core transaction accounts increased by 10.0% and 2.2%, respectively, in 2018 and 2017. The large increase in 2018 was largely due to the acquisition of LCB in the second quarter of 2018. Since market rates increased during the period, many customers sought higher rates, in both time deposits, as well as interest-bearing demand deposits, particularly money market deposits. In addition to our deposit products, we continue to provide alternatives to our customers through the sale of our wealth management (non-deposit) products.

The consumer continues to have a need for transaction accounts, and the Bank is continuing to focus on that need in order to build deposit relationships. Our products are geared toward low-cost convenience and ease for the customer. The Company’s strategy is to aggressively seek to grow customer relationships by staying in touch with customers’ changing needs and new methods of connectivity, in an effort to increase deposit (and loan) market share. The Bank offers identity protection services as an option for all consumer demand depositors. We believe this product to be a valuable and essential tool necessary to combat the upsurge in fraud and identity theft. This product is a unique benefit to our customers as there are no other banks in our immediate market that offer a similar service.

The Bank competes in the marketplace with many sources that offer products that directly compete with traditional banking products. In keeping with our desire to provide our customers with a full array of financial services, we supplement the services traditionally offered by our Trust Department by staffing our community offices with wealth management consultants that are licensed and trained to sell variable and fixed rate annuities, mutual funds, stock brokerage services and long-term care insurance. Although the sale of these products can reduce the Bank’s deposit levels, these products offer solutions for our customers that traditional bank products cannot and allow us to more completely service our customer base. Fee income from the sale of non-deposit products (primarily annuities and mutual funds) was $259,000 and $173,000 in 2018 and 2017, respectively, representing approximately 5.2% and 3.3%, respectively, of total non-interest income.

OTHER INTEREST BEARING LIABILITIES

Juniata funds its needs primarily with local deposits and when necessary, relies on external funding sources for additional funding. External funding sources include credit facilities at correspondent banks and the Federal Home Loan Bank of Pittsburgh. Juniata’s average balances for all borrowings declined by $23,710,000 in 2018 compared to 2017, and increased by $10,536,000 in 2017 compared to 2016.

	Changes in Borrowings
(Dollars in thousands)	2018								2017							2016
	Average		Increase (Decrease)						Average		Increase (Decrease)					Average
	Balance		Amount			%			Balance		Amount		%			Balance
Repurchase agreements	$	4,177	$	(646	)		(13.4	)%	$	4,823	$	112		2.4	%	$	4,711
Short-term borrowings		9,906		(15,570	)		(61.1	)		25,476		9,763		62.1			15,713
Long-term debt		17,493		(7,507	)		(30.0	)		25,000		594		2.4			24,406
Other interest bearing liabilities		1,560		13			0.8			1,547		67		4.5			1,480
Total borrowings	$	33,136	$	(23,710	)		(41.7	)%	$	56,846	$	10,536		22.8	%	$	46,310

PENSION PLAN

The Company sponsors a noncontributory pension plan, the JVB Plan. The JVB Plan has unfunded liabilities that totaled $373,000 as of December 31, 2018. Through the JVB Plan, the Company provides pension benefits to substantially all employees that were employed as of December 31, 2007. Benefits are provided based upon an employee’s years of service and compensation through December 31, 2012. Effective December 31, 2012, the JVB Plan was amended to cease future service accruals after that date (i.e., it was frozen). The JVB Plan was amended in 2016 to provide pension benefits to all former FNBPA employees that were previously participants in the former FNB Plan at the same level of benefit provided in the FNB Plan. ASC Topic 715 gives guidance on the allowable pension expense that is recognized in any given year. In determining the appropriate amount of pension expense to recognize, management must make subjective assumptions relating to amounts and rates that are inherently uncertain.

In 2017, Juniata initiated a strategy to reduce the liability associated with its defined benefit pension plan. The first step of the initiative consisted of the purchase of a single premium group annuity for a group of Juniata’s retirees, transferring the associated pension liability to the issuer of the annuity. This step reduced Juniata’s overall pension liability by approximately 12%, which resulted in a pre-tax charge to earnings of $377,000. In 2018, Juniata completed the second step of the strategy to reduce the liability associated with its defined benefit pension plan by making a lump sum payment offer to a small group of terminated vested participants in Juniata’s defined benefit plan. This step further reduced Juniata’s remaining pension liability by approximately 9%, which resulted in a pre-tax charge to earnings of $210,000 in 2018. The pre-tax charges represent a further acceleration of pension expenses that would otherwise have impacted Juniata’s future earnings.

Management plans to terminate the JVB Plan in 2019. Please refer to Note 22 of Notes to Consolidated Financial Statements.

STOCKHOLDERS’ EQUITY

Total stockholders’ equity increased by $7,991,000, or 13.5%, in 2018. The Company is well-capitalized and had the capacity to maintain the traditional dividend level in 2018. The Company’s net income exceeded dividends paid by $1,493,000. Common stock issued to LCB shareholders increased total stockholders’ equity by $6,463,000. The adjustment to accumulated other comprehensive loss (“AOCI”) to record the change in net unrealized gains from the previous unconsolidated subsidiary, the reclassification adjustment for losses on sales of debt securities, as well as the unrecognized net gains and amortization of the costs associated with the Company’s defined benefit retirement plan decreased the Company’s equity by $109,000. Stock based compensation expense recorded pursuant to the Company’s Stock Option Plan added $82,000 to stockholders’ equity in 2018, while payments for exercised stock options increased shareholders’ equity by $90,000 and employee stock plans added $42,000. Treasury stock purchases during the year ended December 31, 2018 decreased stockholders’ equity by $70,000.

The following table summarizes how the components of equity changed annually in each of the last three years.

(Dollars in thousands)
	2018			2017			2016
Beginning balance	$	59,387		$	59,090		$	59,962
Net income		5,904			4,537			5,156
Dividends		(4,411	)		(4,194	)		(4,226	)
Common stock issued for acquisition		6,463			-			-
Common stock issued for stock plans		42			34			64
Treasury stock issued for stock plans		90			172			-
Stock-based compensation		82			71			67
Repurchase of stock, net of re-issuance		(70	)		(86	)		(927	)
Net change in unrealized security gains		(807	)		(817	)		(963	)
Defined benefit retirement plan adjustments, net of tax		698			(8	)		(43	)
AOCI deferred tax adjustment due to tax reform		-			588			-
Net change		7,991			297			(872	)
Ending balance	$	67,378		$	59,387		$	59,090

Average stockholders' equity in 2018 was $62,689,000, an increase of 4.6% from $59,938,000 in 2017, and was $61,209,000 in 2016. At December 31, 2018, Juniata held 42,201 shares of stock in treasury versus 43,955 at December 31, 2017. Return on average equity increased to 9.42% in 2018 from 7.57% in 2017. Return on average equity increased in 2018 due to a 30.1% increase in net income mainly from the enactment of the TCJA, as well as the removal of the deferred tax liability related to the Company’s previous ownership of Liverpool, which resulted in a net tax benefit of $659,000 in 2018 compared to a net tax expense of $1,060,000 in 2017. See the discussion in the 2018 Financial Overview section.

The Company periodically repurchases shares of its common stock under the share repurchase program approved by the Board of Directors. In December of 2016, the Board of Directors authorized the repurchase of an additional 200,000 shares of its common stock through its share repurchase program. The program will remain authorized until all approved shares are repurchased, unless terminated by the Board of Directors. Repurchases have typically been accomplished through open market transactions and have complied with all regulatory restrictions on the timing and amount of such repurchases. Shares repurchased have been added to treasury stock and accounted for at cost. These shares may be reissued for stock option exercises, employee stock purchase plan purchases, restricted stock awards, to fulfill dividend reinvestment program needs and to supply shares needed as consideration in an acquisition. During 2018, 2017 and 2016, 3,416, 4,289 and 49,370 shares, respectively, were repurchased in conjunction with this program. Treasury shares of 5,170 and 9,704 were also redeemed for stock option exercises in 2018 and 2017, respectively. Shares remaining authorized for repurchase in the program were 170,574 as of December 31, 2018

In each of the years 2018, 2017 and 2016, Juniata declared dividends of $0.88 per common share (See Note 17 of Notes to Consolidated Financial Statements regarding restrictions on dividends from the Bank to the Company). The dividend payout ratio was 74.71% and 92.4% in 2018 and 2017, respectively. The dividend payout ratio in 2017 was greater than 2018 due to the impact of recording less net income in 2017 compared to 2018 resulting from increased expenses including the “de-risking” of the defined benefit plan and the TCJA tax reform adjustments recorded in 2017. In January 2019, the Board of Directors declared a dividend of $0.22 per share to stockholders of record on February 18, 2019, payable on March 1, 2019.

Juniata’s book value per share at December 31, 2018 was $13.23 as compared to $12.46 and $12.43 at December 31, 2017 and 2016, respectively. Juniata’s average equity to assets ratio for 2018, 2017 and 2016 was 10.20%, 10.09% and 10.60%, respectively. Refer also to the Capital Risk section in the Asset / Liability management discussion that follows.

ASSET / LIABILITY MANAGEMENT OBJECTIVES

Management believes that optimal performance is achieved by maintaining overall risks at a low level. Therefore, the objective of asset/liability management is to control risk and produce consistent, high quality earnings independent of changing interest rates. The Company has identified five major risk areas discussed below:

· Liquidity Risk

· Capital Risk

· Interest Rate Risk

· Investment Portfolio Risk

· Economic Risk

Liquidity Risk

Through liquidity risk management, we seek to maintain our ability to readily meet commitments to fund loans, purchase assets and other securities and repay deposits and other liabilities. Liquidity management also includes the ability to manage unplanned changes in funding sources and recognize and address changes in market conditions that affect the quality of liquid assets. Juniata has developed a methodology for assessing its liquidity risk through an analysis of its primary and total liquidity sources. Juniata relies on three main types of liquidity sources: (1) asset liquidity, (2) liability liquidity and (3) off-balance sheet liquidity.

Asset liquidity refers to assets that we are quickly able to convert into cash, consisting of cash, federal funds sold and securities. Short-term liquid assets generally consist of federal funds sold and securities maturing over the next twelve months. The quality of our short-term liquidity is very good; as federal funds are unimpaired by market risk and as bonds approach maturity, their value moves closer to par value. Liquid assets tend to reduce earnings when there is not an immediate use for such funds, since normally these assets generate income at a lower rate than loans or other longer-term investments.

Liability liquidity refers to funding obtained through deposits. The largest challenge associated with liability liquidity is cost. Juniata’s ability to attract deposits depends primarily on several factors, including sales effort, competitive interest rates and other conditions that help maintain consumer confidence in the stability of the financial institution. Large certificates of deposit, public funds and brokered deposits are all acceptable means of generating and providing funding. If the cost is favorable or fits the overall cost structure of the Bank, then these sources have many benefits. They are readily available, come in large block size, have investor-defined maturities and are generally low maintenance.

Off-balance sheet liquidity is closely tied to liability liquidity. Sources of off-balance sheet liquidity include Federal Home Loan Bank borrowings, repurchase agreements and federal funds lines with correspondent banks. These sources provide immediate liquidity to the Bank. They are available to be deployed when a need arises. These instruments also come in large block sizes, have investor-defined maturities and generally require low maintenance.

“Available liquidity” encompasses all three sources of liquidity when determining liquidity adequacy. It results from the Bank’s access to short-term funding sources for immediate needs and long-term funding sources when the need is determined to be permanent. Management uses both on-balance sheet liquidity and off-balance sheet liquidity to manage its liquidity position. The Company’s liquidity strategy seeks to maintain an adequate volume of high quality liquid instruments to facilitate customer liquidity demands. Management also maintains sufficient capital, which provides access to the liability and off-balance sheet sides of the balance sheet for funding. An active knowledge of debt funding sources is important to liquidity adequacy.

Contingency funding management involves maintaining contingent sources of immediate liquidity. Management believes that it must consider an array of available sources in terms of volume, maturity, cash flows and pricing. To meet demands in the normal course of business or for contingency, secondary sources of funding such as public funds deposits, collateralized loans, sales of investment securities or sales of loan receivables are considered.

It is the Company’s policy to maintain both a primary liquidity ratio and a total liquidity ratio greater than 10% of total assets. The primary liquidity ratio equals liquid assets divided by total assets, where liquid assets equal the sum of cash and due from banks, federal funds sold, interest-bearing deposits with other banks and available for sale securities. Total liquidity is comprised of all components noted in primary liquidity plus securities classified as held-to-maturity, if any. If either of these liquidity ratios falls below 10%, it is the Company’s policy to increase liquidity in a timely manner to achieve the required ratio.

It is the Company’s policy to maintain available liquidity greater than 10% of total assets and contingency liquidity greater than 7.5% of total assets.

Juniata is a member of the Federal Home Loan Bank (“FHLB”) of Pittsburgh, which provides short-term liquidity and a source for long-term borrowings. The Bank uses this vehicle to satisfy temporary funding needs throughout the year. The Company had short-term borrowings of $11,600,000 on December 31, 2018 and $12,000,000 on December 31, 2017.

The Bank’s maximum borrowing capacity with the FHLB was $187,818,000 at December 31, 2018. In order to borrow additional amounts, the FHLB would require the Bank to purchase additional FHLB Stock. The FHLB is a source of both short-term and long-term funding. The Bank must maintain sufficient qualifying collateral to secure all outstanding advances.

Juniata needs to have liquid resources available to fulfill contractual obligations that require future cash payments.

Capital Risk

The Company maintains sufficient core capital to protect depositors and stockholders and to take advantage of business opportunities while ensuring that it has resources to absorb the risks inherent in the business. Federal banking regulators have established capital adequacy requirements for banks and bank holding companies based on risk factors, which require more capital backing for assets with higher potential credit risk than assets with lower credit risk.

In December 2010, the Basel Committee released its final framework for strengthening international capital and liquidity regulation, officially identified by the Basel Committee as “Basel III”. In July 2013, the FRB approved final rules to implement the Basel III capital framework which revises the risk-based capital requirements applicable to bank holding companies and depository institutions. The new minimum regulatory capital requirements established by the U.S. Basel III Capital Rules became effective for the Company on January 1, 2015 and were fully phased in on January 1, 2019.

As fully phased in, Basel III requires financial institutions to maintain: (a)  Common Equity Tier 1 (CET1) to risk-weighted assets ratio of at least 4.5%; (b) a minimum ratio of tier 1 capital to risk-weighted assets of at least 6.0%; (c) a minimum ratio of total (that is, tier 1 plus tier 2) capital to risk-weighted assets of at least 8.0%; and (d) as a newly adopted international standard, a minimum leverage ratio of 3.0%, calculated as the ratio of tier 1 capital balance sheet exposures plus certain off-balance sheet exposures (computed as the average for each quarter of the month-end ratios for the quarter). However, unless the Company maintains an additional 2.5% “capital conservation buffer” above the percentages stated above in (a) – (c), the Company may be unable to obtain capital distributions from it, which could negatively impact the Company’s ability to pay dividends, service debt obligations or repurchase common stock. In addition, such a failure could result in a restriction on the Company’s ability to pay certain cash bonuses to executive officers, negatively impacting the Company’s ability to retain key personnel.

As of December 31, 2018, the Company’s current capital levels met the fully phased-in minimum capital requirements, including capital conservation buffer, as prescribed in the U.S. Basel III Capital Rules. See Note 17 of Notes to the Consolidated Financial Statements.

Interest Risk

Table 5, presented below, illustrates the maturity distribution of the Company’s interest-sensitive assets and liabilities as of December 31, 2018. Earliest re-pricing opportunities for variable and adjustable rate products and scheduled maturities for fixed rate products have been placed in the appropriate column to compute the cumulative sensitivity ratio (ratio of interest-earning assets to interest-bearing liabilities). Securities with call features are treated as though the call date is the maturity date. Through one year, the cumulative sensitivity ratio is 0.44, indicating a liability-sensitive balance sheet, when measured on a static basis.

TABLE 5

MATURITY DISTRIBUTION

As of December 31, 2018
Remaining Maturity / Earliest Possible Repricing
				Over One
	Within			Year But			Over
(Dollars in thousands)	One			Within Five			Five
	Year			Years			Years		Total
Interest Earning Assets
Interest bearing deposits	$	945		$	2,455		$	-	$	3,400
Federal funds sold		729			-			-		729
Investment securities:
Debt securities - taxable		-			20,355			2,911		23,266
Debt securities - tax-exempt		826			14,686			2,669		18,181
Mortgage-backed securities		-			-			100,506		100,506
Stocks		-			-			-		-
Loans:
Commercial, financial, and agricultural		24,857			14,557			7,149		46,563
Real estate - construction		18,376			16,056			2,256		36,688
Other loans		99,315			141,908			93,157		334,380
Total Interest Earning Assets		145,048			210,017			208,648		563,713
Interest Bearing Liabilities
Demand deposits		147,413			-			-		147,413
Savings deposits		99,236			-			-		99,236
Certificates of deposit over $100,000		11,678			20,223			6,259		38,160
Time deposits		40,916			60,696			9,244		110,856
Securities sold under agreements to repurchase		2,911			-			-		2,911
Short-term borrowings		11,600			-			-		11,600
Long-term debt		15,000			-			-		15,000
Other interest bearing liabilities		1,596			-			-		1,596
Total Interest Bearing Liabilities		330,350			80,919			15,503		426,772
Gap	$	(185,302	)	$	129,098		$	193,145	$	136,941
Cumulative Gap	$	(185,302	)	$	(56,204	)	$	136,941
Cumulative sensitivity ratio		0.44			0.86			1.32
Commercial, financial and agricultural loans maturing after one year with:
Fixed interest rates				$	12,375		$	7,301	$	19,676
Variable interest rates					19,104			3,264		22,368
Total				$	31,479		$	10,565	$	42,044
Certificates of Deposit of $100,000 or more
Maturing within 3 months									$	3,047
Maturing within 3 to 6 months										3,530
Maturing within 6 to 12 months										5,101
Maturing 1-5 years										20,223
Maturing after 5 years										6,259
									$	38,160

Investment Portfolio Risk

Management considers its investment portfolio risk as the amount of appreciation or depreciation the investment portfolio will sustain when interest rates change. The securities portfolio will decline in value when interest rates rise and increase in value when interest rates decline. Securities with long maturities, excessive optionality (as a result of call features) and unusual indexes tend to produce the most market risk during interest rate movements. Rate shocks of minus 100 and plus 100, 200, 300 and 400 basis points were applied to the securities portfolio to determine how Tier 1 capital would be affected if the securities portfolio had to be liquidated and all gains and losses were recognized. The test revealed that, as of December 31, 2018, the risk-based capital ratio would remain adequate under these scenarios.

Economic Risk

Economic risk is the risk that the long-term or underlying value of the Company will change if interest rates change. Economic value of equity (“EVE”) represents the change in the value of the balance sheet without regard to business continuity. Rate shocks are applied to all financial assets and liabilities, using parallel and non-parallel rate shifts of 100 to 400 basis points to estimate the change in EVE under the various hypothetical scenarios. As of December 31, 2018, in a rising rate environment, the modeling results indicate that the Company’s liabilities would increase in value slightly more than assets would lose value. A non-parallel 200 basis point increase shock in rates produced an estimated 2.4% increase in EVE, indicating a stable value well within Juniata’s policy guidelines.

OFF-BALANCE SHEET ARRANGEMENTS

The Company has numerous off-balance sheet loan obligations that exist in order to meet the financing needs of its customers. These financial instruments include commitments to extend credit, unused lines of credit and letters of credit. Because many commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. These instruments involve, to varying degrees, elements of credit and interest rate risk that are not recognized in the consolidated financial statements. The Company does not expect that these commitments will have an adverse effect on its liquidity position.

Exposure to credit loss in the event of non-performance by the other party to the financial instrument for commitments to extend credit and financial guarantees written is represented by the contractual notional amount of those instruments. The Company uses the same credit policies in making these commitments as it does for on-balance sheet instruments.

The Company had outstanding loan origination commitments aggregating $72,755,000 and $77,023,000 at December 31, 2018 and 2017, respectively. In addition, the Company had $14,468,000 and $3,150,000 outstanding in unused lines of credit commitments extended to its customers at December 31, 2018 and 2017, respectively. The increase was mainly due to the acquisition of Liverpool’s consumer lines of credit.

Letters of credit are instruments issued by the Company that guarantee payment by the Bank to the beneficiary in the event of default by the Company's customer in the non-performance of an obligation or service. Most letters of credit are extended for a one-year period. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Company holds collateral supporting those commitments for which collateral is deemed necessary. The amount of the liability as of December 31, 2018 and 2017 for guarantees under letters of credit issued is not material.

The maximum undiscounted exposure related to these guarantees at December 31, 2018 was $2,749,000, and the approximate value of underlying collateral upon liquidation that would be expected to cover this maximum potential exposure was $22,963,000.

In 2017, the Company executed renewal agreements for technology outsourcing services through two outside service bureaus. Both agreements provide for termination fees if the Company cancels the services prior to the end of the 7-year commitment period that runs through May 31, 2024. At December 31, 2018, termination fees are estimated to be approximately $1,672,000 and $1,542,000 on the two contracts. The termination fees would decrease by approximately 15% in each succeeding year through 2024. Since the Company does not expect to terminate these services with either vendor prior to the end of the commitment periods, no liability has been recorded as of December 31, 2018.

EFFECTS OF INFLATION

The performance of a bank is affected more by changes in interest rates than by inflation; therefore, the effect of inflation is normally not as significant to the Company as it is to other businesses and industries. During periods of high inflation, the money supply usually increases and banks normally experience above average growth in assets, loans and deposits. A bank’s operating expenses may increase during inflationary times as the price of goods and services increase.

A bank’s performance is also affected during recessionary periods. In times of recession, a bank usually experiences a tightening on its earning assets and on its profits. A recession is usually an indicator of higher unemployment rates, which could mean an increase in the number of nonperforming loans because of continued layoffs and other deterioration of consumers’ financial condition.

REPORT ON MANAGEMENT’S ASSESSMENT OF INTERNAL
CONTROL OVER FINANCIAL REPORTING

Management is responsible for the preparation, integrity and fair presentation of the consolidated financial statements included in this Annual Report on Form 10-K. The consolidated financial statements and notes included in this annual report have been prepared in conformity with accounting principles generally accepted in the United States of America, and as such, include some amounts that are based on management’s best estimates and judgments.

The Company’s management is responsible for establishing and maintaining effective internal control over financial reporting. The system of internal control over financial reporting, as it relates to the financial statements, is evaluated for effectiveness by management and tested for reliability through a program of internal audits and management testing and review. Actions are taken to correct potential deficiencies as they are identified. Any system of internal control, no matter how well designed, has inherent limitations, including the possibility that a control can be circumvented or overridden and misstatements due to error or fraud may occur and not be detected. Also, because of changes in conditions, internal control effectiveness may vary over time. Accordingly, even an effective system of internal control will provide only a reasonable assurance with respect to financial statement preparation.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2018. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013).

Based on our assessment, management concluded that as of December 31, 2018, the Company’s internal control over financial reporting was not effective and did not meet the criteria of the Internal Control-Integrated Framework (2013). We concluded that material weaknesses in our internal control over financial reporting existed related to management not designing and maintaining controls over the annual review process for evaluating risk ratings on commercial loans and over the accounting for income taxes.

The independent registered public accounting firm that audited the consolidated financial statements included in the annual report has issued an attestation report on the Company’s internal control over financial reporting, which contains an adverse opinion. During the first quarter of 2019, Management has evaluated the causes of the material weaknesses and is taking steps to improve its internal controls over financial reporting, including formally documenting policies and procedures pertaining to the ongoing process for evaluating risk ratings on commercial loans and to the accounting for income taxes, as well as formally testing the key controls.

Marcie A. Barber	JoAnn N. McMinn
President and Chief Executive Officer	Chief Financial Officer

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON EFFECIVENESS
OF INTERNAL CONTROL OVER FINANCIAL REPORTING

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders

Juniata Valley Financial Corp.

Mifflintown, Pennsylvania

Opinion on Internal Control over Financial Reporting

We have audited Juniata Valley Financial Corp., and its wholly-owned subsidiary, The Juniata Valley Bank’s (the “Company’s”) internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”). In our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting as of December 31, 2018, based on the COSO criteria. We do not express an opinion or any other form of assurance on management’s statements referring to any corrective actions taken by the Company after the date of management’s assessment.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated statement of financial condition of the Company as of December 31, 2018 and 2017, the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2018, and the related notes, and our report dated April 2, 2019 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying “Item 9A, Report on Management’s Assessment of Internal Control over Financial Reporting”. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit of internal control over financial reporting in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. Material weaknesses regarding management not designing and maintaining controls over the annual review process for evaluating risk ratings on commercial loans and over the accounting for income taxes have been described in management’s assessment. These material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2018 financial statements, and this report does not affect our report dated April 2, 2019 on those financial statements.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ BDO USA, LLP

Harrisburg, Pennsylvania

April 2, 2019

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON CONSOLIDATED FINANCIAL STATEMENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders

Juniata Valley Financial Corp.

Mifflintown, Pennsylvania

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated statements of financial condition of Juniata Valley Financial Corp., and its wholly-owned subsidiary, The Juniata Valley Bank, (the “Company”) as of December 31, 2018 and 2017, the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2018, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company and subsidiaries at December 31, 2018 and 2017, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated April 2, 2019 expressed an adverse opinion thereon.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

We have served as the Company's auditor since 2013.

/s/ BDO USA, LLP

Harrisburg, Pennsylvania

April 2, 2019

JUNIATA VALLEY FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Dollars in thousands, except share data)	December 31,
	2018			2017
ASSETS
Cash and due from banks	$	15,617		$	9,839
Interest bearing deposits with banks		110			58
Federal funds sold		729			-
Cash and cash equivalents		16,456			9,897
Interest bearing time deposits with banks		3,290			350
Equity securities		1,118			-
Securities available for sale		141,953			153,824
Restricted investment in bank stock		2,441			3,104
Investment in unconsolidated subsidiary		-			4,812
Total loans		417,631			383,904
Less: Allowance for loan losses		(3,034	)		(2,939	)
Total loans, net of allowance for loan losses		414,597			380,965
Premises and equipment, net		8,744			8,887
Other real estate owned		744			355
Bank owned life insurance and annuities		15,938			14,972
Investment in low income housing partnerships		4,545			5,245
Core deposit and other intangible		405			195
Goodwill		9,139			5,448
Mortgage servicing rights		200			225
Accrued interest receivable and other assets		5,666			3,666
Total assets	$	625,236		$	591,945
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Non-interest bearing	$	126,057		$	115,911
Interest bearing		395,665			361,757
Total deposits		521,722			477,668
Securities sold under agreements to repurchase		2,911			9,769
Short-term borrowings		11,600			12,000
Long-term debt		15,000			25,000
Other interest bearing liabilities		1,596			1,593
Accrued interest payable and other liabilities		5,029			6,528
Total liabilities		557,858			532,558
Stockholders' Equity:
Preferred stock, no par value: Authorized - 500,000 shares, none issued		-			-
Common stock, par value $1.00 per share: Authorized 20,000,000 shares
Issued -
5,134,249 shares at December 31, 2018;
4,811,611 shares at December 31, 2017;
Outstanding -
5,092,048 shares at December 31, 2018;
4,767,656 shares at December 31, 2017;		5,134			4,811
Surplus		24,821			18,565
Retained earnings		42,525			40,876
Accumulated other comprehensive loss		(4,299	)		(4,034	)
Cost of common stock in Treasury:
42,201 shares at December 31, 2018;
43,955 shares at December 31, 2017;		(803	)		(831	)
Total stockholders' equity		67,378			59,387
Total liabilities and stockholders' equity	$	625,236		$	591,945

See Notes to Consolidated Financial Statements

JUNIATA FINANCIAL CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands, except share and per share data)	Years Ended December 31,
	2018			2017			2016
Interest income:
Loans, including fees	$	20,060		$	18,005		$	17,559
Taxable securities		3,040			2,888			2,475
Tax-exempt securities		393			451			418
Other interest income		158			30			17
Total interest income		23,651			21,374			20,469
Interest expense:
Deposits		3,068			2,129			1,811
Securities sold under agreements to repurchase		62			31			5
Short-term borrowings		190			295			94
Long-term debt		276			369			328
Other interest bearing liabilities		39			31			30
Total interest expense		3,635			2,855			2,268
Net interest income		20,016			18,519			18,201
Provision for loan losses		337			439			466
Net interest income after provision for loan losses		19,679			18,080			17,735
Non-interest income:
Customer service fees		1,779			1,747			1,736
Debit card fee income		1,280			1,120			1,044
Earnings on bank owned life insurance and annuities		352			352			371
Trust fees		430			446			454
Commissions from sales of non-deposit products		259			173			223
Income/gain from unconsolidated subsidiary		296			167			222
Fees derived from loan activity		416			267			232
Mortgage banking income		70			214			158
(Loss) gain on sales and calls of securities		(188	)		512			218
Change in value of equity securities		(1	)		-			-
Gain on sales of loans		-			-			113
Gain from life insurance proceeds		-			-			364
Other non-interest income		334			294			283
Total non-interest income		5,027			5,292			5,418
Non-interest expense:
Employee compensation expense		7,822			7,159			6,883
Employee benefits		2,458			2,837			2,301
Occupancy		1,217			1,173			1,137
Equipment		818			711			661
Data processing expense		1,924			1,751			1,807
Director compensation		215			241			238
Professional fees		640			571			539
Taxes, other than income		498			463			437
FDIC Insurance premiums		274			334			375
(Gain) loss on sales of other real estate owned		(60	)		(8	)		150
Amortization of intangibles		79			67			105
Amortization of investment in low-income housing partnerships		800			612			479
Merger and acquisition expense		884			13			347
Other non-interest expense		1,892			1,851			1,719
Total non-interest expense		19,461			17,775			17,178
Income before income taxes		5,245			5,597			5,975
Income tax (benefit) provision		(659	)		1,060			819
Net income	$	5,904		$	4,537		$	5,156
Earnings per share
Basic	$	1.18		$	0.95		$	1.07
Diluted	$	1.18		$	0.95		$	1.07
Cash dividends declared per share	$	0.88		$	0.88		$	0.88
Weighted average basic shares outstanding		4,987,186			4,765,165			4,801,245
Weighted average diluted shares outstanding		5,009,484			4,775,505			4,802,175

See Notes to Consolidated Financial Statements

JUNIATA VALLEY FINANCIAL CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in thousands)	Year ended December 31, 2018
	Pre-Tax			Tax			Net-of-Tax
	Amount			Effect			Amount
Net income	$	5,245		$	659		$	5,904
Other comprehensive income (loss):
Available for sale securities :
Unrealized holding loss arising during the period		(1,216	)		255			(961	)
Unrealized holding gain from unconsolidated subsidiary		5			-			5
Less reclassification adjustment for gains included in net income (1) (3)		188			(39	)		149
Unrecognized pension net gain (2) (3)		(55	)		11			(44	)
Unrecognized pension gain due to change in assumptions (2) (3)		601			(126	)		475
Amortization of pension net actuarial loss (2) (3)		338			(71	)		267
Other comprehensive (loss) income		(139	)		30			(109	)
Total comprehensive income	$	5,106		$	689		$	5,795

	Year ended December 31, 2017
	Pre-Tax			Tax			Net-of-Tax
	Amount			Effect			Amount
Net income	$	5,597		$	(1,060	)	$	4,537
Other comprehensive income (loss):
Available for sale securities :
Unrealized holding loss arising during the period		(318	)		108			(210	)
Unrealized holding loss from unconsolidated subsidiary		3			-			3
Less reclassification adjustment for gains included in net income (1) (3)		(512	)		174			(338	)
Unrecognized pension net loss (2) (3)		1,024			(348	)		676
Unrecognized pension loss due to change in assumptions (2) (3)		(1,141	)		388			(753	)
Amortization of pension net actuarial loss (2) (3)		584			(199	)		385
Other comprehensive (loss) income		(360	)		123			(237	)
Total comprehensive income	$	5,237		$	(937	)	$	4,300

	Year ended December 31, 2016
	Pre-Tax			Tax			Net-of-Tax
	Amount			Effect			Amount
Net income	$	5,975		$	(819	)	$	5,156
Other comprehensive income (loss):
Available for sale securities :
Unrealized holding loss arising during the period		(1,215	)		413			(802	)
Unrealized holding gains from unconsolidated subsidiary		(17	)		-			(17	)
Less reclassification adjustment for gains included in net income (1) (3)		(218	)		74			(144	)
Unrecognized pension net loss (2) (3)		(9	)		3			(6	)
Unrecognized pension gain due to change in assumptions (2) (3)		(305	)		104			(201	)
Amortization of pension net actuarial loss (2) (3)		248			(84	)		164
Other comprehensive (loss) income		(1,516	)		510			(1,006	)
Total comprehensive income	$	4,459		$	(309	)	$	4,150

(1) Amounts are included in (loss) gain on calls of securities on the Consolidated Statements of Income as a separate element within total non-interest income.

(2) Amounts are included in the computation of net periodic benefit cost and are included in employee benefits expense on the Consolidated Statements of Income as a separate element within total non-interest expense.

(3) Income tax amounts are included in the provision for income taxes on the Consolidated Statements of Income.

See Notes to Consolidated Financial Statements

JUNIATA VALLEY FINANCIAL CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

	Years Ended December 31, 2018, 2017 and 2016
	(Dollars in thousands, except share and per share data)
												Accumulated
	Number											Other						Total
	of Shares			Common					Retained			Comprehensive			Treasury			Stockholders'
	Outstanding			Stock		Surplus			Earnings			Loss			Stock			Equity
Balance at January 1, 2016		4,798,086		$	4,798	$	18,352		$	39,015		$	(2,203	)	$	-		$	59,962
Net income										5,156									5,156
Other comprehensive loss													(1,006	)					(1,006	)
Cash dividends at $0.88 per share										(4,226	)								(4,226	)
Stock-based compensation activity							67												67
Purchase of treasury stock		(49,370	)													(927	)		(927	)
Common stock issued to		6,914			7		57												64
Balance at December 31, 2016		4,755,630			4,805		18,476			39,945			(3,209	)		(927	)		59,090
Net income										4,537									4,537
Other comprehensive loss													(237	)					(237	)
Reclassification due to tax reform										588			(588	)					-
Cash dividends at $0.88 per share										(4,194	)								(4,194	)
Stock-based compensation activity							71												71
Purchase of treasury stock		(4,289	)													(86	)		(86	)
Treasury stock issued for stock plans		9,704					(10	)								182			172
Common stock issued for stock plans		6,611			6		28												34
Balance at December 31, 2017		4,767,656			4,811		18,565			40,876			(4,034	)		(831	)		59,387
Net income										5,904									5,904
Other comprehensive loss													(109	)					(109	)
Reclassification for ASU 2016-01										156			(156	)					-
Cash dividends at $0.88 per share										(4,411	)								(4,411	)
Stock-based compensation activity							82												82
Purchase of treasury stock		(3,416	)													(70	)		(70	)
Treasury stock issued for stock plans		5,170					(8	)								98			90
Common stock issued for stock plans		7,354			8		34												42
Common stock issued for acquisition		315,284			315		6,148												6,463
Balance at December 31, 2018		5,092,048		$	5,134	$	24,821		$	42,525		$	(4,299	)	$	(803	)	$	67,378

See Notes to Consolidated Financial Statements

JUNIATA VALLEY FINANCIAL CORP. AND SUBSIDIARY

CONSOLIDATED STATEMETNS OF CASH FLOWS

(Dollars in thousands)	Years Ended December 31,
	2018			2017			2016
Operating activities:
Net income	$	5,904		$	4,537		$	5,156
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		337			439			466
Depreciation		815			672			595
Net amortization of securities premiums		540			650			740
Net amortization of loan origination costs		43			75			63
Deferred net loan origination costs		(348	)		(410	)		(124	)
Amortization of core deposit intangible		79			67			105
Amortization of investment in low income housing partnership		800			612			479
Net (amortization) accretion of purchase fair value adjustments		(102	)		17			(9	)
Net realized loss (gain) on sales and calls of securities		188			(512	)		(218	)
Change in value of equity securities		1			-			-
Net (gain) loss on sales of other real estate owned		(60	)		(8	)		148
Earnings on bank owned life insurance and annuities		(352	)		(352	)		(371	)
Deferred income tax (benefit) expense		(96	)		681			320
Equity loss (gain) in unconsolidated subsidiary, net of dividends of $75, $61 and $55		194			(106	)		(167	)
Equity gain from acquisition of unconsolidated subsidiary		(415	)		-			-
Stock-based compensation expense		82			71			67
Mortgage loans originated for sale		-			(4,170	)		(1,582	)
Proceeds from loans sold to others		95			4,257			1,822
Mortgage banking income		(70	)		(107	)		(228	)
Gain from life insurance proceeds		-			-			(364	)
(Increase) decrease in accrued interest receivable and other assets		(1,493	)		(6	)		461
(Decrease) increase in accrued interest payable and other liabilities		(821	)		393			(1,056	)
Net cash provided by operating activities		5,321			6,800			6,303
Investing activities:
Purchases of:
Securities available for sale		(20,610	)		(42,510	)		(48,195	)
FHLB stock		-			-			(111	)
Premises and equipment		(548	)		(2,703	)		(542	)
Bank owned life insurance and annuities		(39	)		(40	)		(53	)
Proceeds from:
Sales of securities available for sale		10,461			21,799			4,304
Maturities of and principal repayments on securities available for sale		19,145			16,322			43,835
Redemption of FHLB stock		787			586			-
Sale of student loans		-			-			1,796
Life insurance claims		-			-			1,016
Sale of other real estate owned		352			1,007			144
Sale of other assets		22			25			20
Net cash received from acquisition		7,561			-			-
Investment in low income housing partnerships		(100	)		(2,045	)		(923	)
Net decrease in interest bearing time deposits with banks		735			-			-
Net increase in loans		(2,931	)		(6,239	)		(1,750	)
Net cash provided by (used in) investing activities		14,835			(13,798	)		(459	)
Financing activities:
Net increase (decrease) in deposits		8,010			21,837			(1,293	)
Net decrease in short-term borrowings and securities sold under agreements to repurchase		(7,258	)		(10,427	)		(2,861	)
Issuance of long-term debt		-			-			10,000
Repayment of long-term debt		(10,000	)		-			(7,500	)
Cash dividends		(4,411	)		(4,194	)		(4,226	)
Purchase of treasury stock		(70	)		(86	)		(927	)
Treasury stock issued for employee stock plans		90			-			-
Common stock issued for employee stock plans		42			206			64
Net cash (used in) provided by financing activities		(13,597	)		7,336			(6,743	)
Net increase (decrease) in cash and cash equivalents		6,559			338			(899	)
Cash and cash equivalents at beginning of year		9,897			9,559			10,458
Cash and cash equivalents at end of year	$	16,456		$	9,897		$	9,559

(Dollars in thousands)	Years Ended December 31,
	2018			2017		2016
Supplemental information:
Interest paid	$	3,646		$	2,823	$	2,237
Income tax (refund) paid		(663	)		735		200
Supplemental schedule of noncash investing and financing activities:
Transfer of loans to other real estate owned	$	681		$	716	$	313
Transfer of loans to other assets		12			21		20
Securities sold settling after year-end		-			-		104
Supplemental schedule of assets and liabilities in connection with merger:
Assets acquired:
Investment in time deposits with banks	$	3,675
Loans		31,331
Premises and equipment		125
Accrued interest receivable		123
Core deposit and other intangible assets		289
Bank owned life insurance		632
FHLB stock		124
Other assets		267
	$	36,566
Liabilities assumed:
Deposits		36,052
Accrued interest payable and other liabilities		266
	$	36,318

See Notes to Consolidated Financial Statements

JUNIATA VALLEY FINANCIAL CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2018, 2017 AND 2016

1. Nature Of Operations

Juniata Valley Financial Corp. (“Juniata” or the “Company”) is a bank holding company operating in central Pennsylvania for the purpose of delivering financial services within its local market. Through its wholly-owned banking subsidiary, The Juniata Valley Bank (the “Bank”), Juniata provides retail and commercial banking and other financial services through 16 branch locations located in Juniata, Mifflin, Perry, McKean, Potter and Huntingdon Counties. Additionally, in Mifflin, Juniata and Centre Counties, the Company maintains three offices for loan production, trust services and wealth management sales. Each of the Company’s lines of business are part of the same reporting segment, whose operating results are regularly reviewed and managed by a centralized executive management group. As a result, the Company has only one reportable segment for financial reporting purposes. The Bank provides a full range of banking services, including online and mobile banking, an automatic teller machine network, checking accounts, identity protection products for consumers, savings accounts, money market accounts, fixed rate certificates of deposit, club accounts, secured and unsecured commercial and consumer loans, construction and mortgage loans, safe deposit facilities and credit loans with overdraft checking protection. The Bank also provides a variety of trust services. The Company has a contractual arrangement with a broker-dealer to allow the offering of annuities, mutual funds, stock and bond brokerage services and long-term care insurance to its local market. Most of the Company’s commercial customers are small and mid-sized businesses operating in the Bank’s local service area. The Bank operates under a state bank charter and is subject to regulation by the Pennsylvania Department of Banking and the Federal Deposit Insurance Corporation. Juniata is subject to regulation by the Board of Governors of the Federal Reserve Bank and the Pennsylvania Department of Banking and Securities.

2. Summary of Significant Accounting Policies

The accounting policies of Juniata Valley Financial Corp. and its wholly owned subsidiary conform to accounting principles generally accepted in the United States of America (“GAAP”) and to general financial services industry practices. A summary of the more significant accounting policies applied in the preparation of the accompanying consolidated financial statements follows.

Principles of consolidation

The consolidated financial statements include the accounts of Juniata Valley Financial Corp. and its wholly owned subsidiary, The Juniata Valley Bank. All significant intercompany transactions and balances have been eliminated.

Use of estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, the determination of other-than-temporary impairment on securities, impairment of goodwill and the value of assets acquired and liabilities assumed in business combinations.

Significant group concentrations of credit risk

Most of the Company’s activities are with customers located within the Juniata Valley and the JVB Northern Tier regions. Note 6 discusses the types of securities in which the Company invests. Note 7 discusses the types of lending in which the Company engages.

As of December 31, 2018, credit exposure to lessors of non-residential buildings and dwellings represented 55.3% of capital, credit exposure to hotels and motels represented 40.0% of capital, credit exposure to continuing care retirement communities represented 28.4% of capital, and credit exposure to residential buildings and dwellings represented 27.9% of capital. Otherwise, there were no concentrations of credit to any particular industry equaling more than 25% of total capital. The Bank’s business activities are geographically concentrated in the counties of Juniata, Mifflin, Perry, Huntingdon, Centre, Franklin, McKean, Potter and Snyder, Pennsylvania. The Bank has a diversified loan portfolio; however, a substantial portion of its debtors’ ability to honor their obligations is dependent upon the economy in central Pennsylvania.

Revenue Recognition

The Company generally acts in a principal capacity, on its own behalf, in most contracts with customers. In such transactions, revenue and related costs to provide these services are recognized on a gross basis in the financial statements. In some cases, the Company acts in an agent capacity, deriving revenue through assisting other entities in transactions with its customers. In such transactions, revenue and the related costs to provide the services are recognized on a net basis in the financial statements. These transactions primarily relate to non-deposit product commissions and fees derived from customer’s use of various interchange and ATM/debit card networks.

All of the Company’s revenue from contracts with customers in the scope of ASC Topic 606, Revenue from Contracts with Customers, are recognized within non-interest income on the consolidated statements of income. Revenue streams not within the scope of ASC 606 included in non-interest income on the consolidated statements of income include earnings on bank-owned life insurance and annuities, income from unconsolidated subsidiary, fees derived from loan activity, mortgage banking income, gain/loss on sales and calls of securities, and the change in value of equity securities. Refer to Note 21 for a description of the Company’s sources of revenue accounted for under ASC 606.

Cash and cash equivalents

For purposes of reporting cash flows, cash and cash equivalents include cash on hand, amounts due from banks, interest bearing demand deposits with banks and federal funds sold. Generally, federal funds are sold for one-day periods.

Interest bearing time deposits with banks

Interest-bearing time deposits with banks consist of certificates of deposits in other banks with maturities within five years.

Securities

Securities classified as available for sale, which include marketable investment securities, are stated at fair value, with the unrealized gains and losses, net of tax, reported as a component of other comprehensive income (loss). Securities classified as available for sale are those securities that the Company intends to hold for an indefinite period of time but not necessarily to maturity. Any decision to sell a security classified as available for sale would be based on various factors, including significant movement in interest rates, changes in maturity mix of the Company’s assets and liabilities, liquidity needs, regulatory capital considerations and other similar factors. Interest and dividends are recognized as income when earned. Premiums and discounts are recognized in interest income using the interest method over the terms of the securities. Gains or losses on the disposition of securities available for sale are based on the net proceeds and the adjusted carrying amount of the securities sold, determined on a specific identification basis. The Company had no securities classified as held to maturity at December 31, 2018 and 2017.

Prior to January 1, 2018, both debt and equity securities were accounted for under ASC 320, Investments – Debt and Equity Securities. ASC 320 clarified the interaction of the factors that should be considered when determining whether a debt security is other-than-temporarily impaired. For debt securities, management had to assess whether (a) it had the intent to sell the security and (b) it was more likely than not that it would be required to sell the security prior to its anticipated recovery. These steps were taken before an assessment was made as to whether the entity would recover the cost basis of the investment. If either of these circumstances was present, the securities would be written down to fair value through an impairment charge recorded on the income statement.

In instances when a determination is made that an other-than-temporary impairment exists and the entity does not intend to sell the debt security and it is not more likely than not that it will be required to sell the debt security prior to its anticipated recovery, the other-than-temporary impairment is separated into the amount of the total other-than-temporary impairment related to a decrease in cash flows expected to be collected from the debt security (the credit loss) and the amount of the total other-than-temporary impairment related to all other factors. The amount of the total other-than-temporary impairment related to the credit loss is recognized in earnings. The amount of the total other-than-temporary impairment related to all other factors is recognized in other comprehensive (loss) income. Management determines the appropriate classification of debt securities at the time of purchase and re-evaluates such designation as of each balance sheet date.

For equity securities under ASC 320, consideration was given to management’s intention and ability to hold the securities until recovery of unrealized losses in assessing potential other-than-temporary impairment. More specifically, factors considered to determine other-than-temporary impairment status for individual equity holdings included the length of time the stock remained in an unrealized loss position, the percentage of unrealized loss compared to the carrying cost of the stock, dividend reduction or suspension, market analyst reviews and expectations, and other pertinent factors that would affect expectations for recovery or further decline.

As of January 1, 2018, upon the adoption of ASU 2016-01, all of the Company’ equity securities are within the scope of ASC 321, Investments – Equity Securities, while debt securities remain under ASC 320, Investments – Debt Securities. ASC 321 requires all equity securities within its scope to be measured at fair value with changes in fair value recognized in net income.

Restricted Investment in Bank Stock

The Bank owns restricted stock investments in the Federal Home Loan Bank and the Atlantic Community Bankers Bank (“ACBB”). Federal law requires a member institution of the Federal Home Loan Bank to hold stock according to a predetermined formula. Both the FHLB and ACBB stock is carried at cost.

Management evaluates the restricted stock for impairment on an annual basis. Management’s determination of whether these investments are impaired is based on management’s assessment of the ultimate recoverability of the cost of these investments rather than by recognizing temporary declines in value. The recoverability of the cost of the FHLB investments is influenced by criteria such as (1) the significance of the decline in net assets of the FHLB as compared to the capital stock amount for the FHLB and the length of time this situation has persisted, (2) commitments by the FHLB to make payments required by law or regulation and the level of such payments in relation to the operating performance of the FHLB, and (3) the impact of legislative and regulatory changes on institutions and, accordingly, on the customer base of the FHLB.

Management believes no impairment charge was necessary related to the FHLB or ACBB restricted stock during 2018, 2017 or 2016.

Loans

Loans that the Company has the intent and ability to hold for the foreseeable future or until maturity are stated at the outstanding unpaid principal balances, net of any deferred fees or costs and the allowance for loan losses. Interest income on all loans, other than nonaccrual loans, is accrued over the term of the loans based on the amount of principal outstanding. Unearned income is amortized to income over the life of the loans, using the interest method.

The loan portfolio is segmented into commercial and consumer loans. Commercial loans are comprised of the following classes of loans: (1) commercial, financial and agricultural, (2) commercial real estate, (3) real estate construction, (4) mortgage loans and (5) obligations of states and political subdivisions. Consumer loans are comprised of (4) mortgage loans and (6) personal loans.

Loans on which the accrual of interest has been discontinued are designated as non-accrual loans. Accrual of interest on loans is generally discontinued when the contractual payment of principal or interest has become 90 days past due or reasonable doubt exists as to the full, timely collection of principal or interest. However, it is the Company’s policy to continue to accrue interest on loans over 90 days past due as long as (1) they are guaranteed or well secured and (2) there is an effective means of collection in process. When a loan is placed on non-accrual status, all unpaid interest credited to income in the current year is reversed against current period income and unpaid interest accrued in prior years is charged against the allowance for loan losses. Interest received on nonaccrual loans generally is either applied against principal or reported as interest income, according to management’s judgment as to the collectability of principal. Generally, accruals are resumed on loans only when the obligation is brought fully current with respect to interest and principal, has performed in accordance with the contractual terms for a reasonable period of time and the ultimate collectability of the total contractual principal and interest is no longer in doubt.

The Company originates loans in the portfolio with the intent to hold them until maturity. At the time the Company no longer intends to hold loans to maturity based on asset/liability management practices, the Company transfers loans from its portfolio to held for sale at fair value. Any write-down recorded upon transfer is charged against the allowance for loan losses. Any write-downs recorded after the initial transfers are recorded as a charge to other non-interest expense. Gains or losses recognized upon sale are included in other non-interest income.

Loan origination fees and costs

Loan origination fees and related direct origination costs for a given loan are deferred and amortized over the life of the loan on a level-yield basis as an adjustment to interest income over the contractual life of the loan. As of December 31, 2018 and 2017, the amount of net unamortized origination fees carried as an adjustment to outstanding loan balances was $11,000 and $52,000, respectively.

Allowance for credit losses

The allowance for credit losses consists of the allowance for loan losses and the reserve for unfunded lending commitments. The allowance for loan losses (“allowance”) represents management’s estimate of losses inherent in the loan portfolio as of the consolidated statement of financial condition date and is recorded as a reduction to loans. The reserve for unfunded lending commitments represents management’s estimate of losses inherent in its unfunded lending commitments and is recorded in other liabilities on the consolidated statement of financial condition, when necessary. The amount of the reserve for unfunded lending commitments is not material to the consolidated financial statements. The allowance for loan losses is increased by the provision for loan losses, and decreased by charge-offs, net of recoveries. Loans deemed to be uncollectible are charged against the allowance for loan losses, and subsequent recoveries, if any, are credited to the allowance.

For financial reporting purposes, the provision for loan losses charged to current operating income is based on management's estimates, and actual losses may vary from estimates. These estimates are reviewed and adjusted at least quarterly and are reported in earnings in the periods in which they become known.

Loans included in any class are considered for charge-off when:

· principal or interest has been in default for 120 days or more and for which no payment has been received during the previous four months;

· all collateral securing the loan has been liquidated and a deficiency balance remains;

· a bankruptcy notice is received for an unsecured loan;

· a confirming loss event has occurred; or

· the loan is deemed to be uncollectible for any other reason.

The allowance for loan losses is maintained at a level considered adequate to offset probable losses on the Company’s existing loans. The analysis of the allowance for loan losses relies heavily on changes in observable trends that may indicate potential credit weaknesses. Management’s periodic evaluation of the adequacy of the allowance is based on the Bank’s past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, composition of the loan portfolio, current economic conditions and other relevant factors. This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant revision as more information becomes available. Based on management’s comprehensive analysis of the loan portfolio, management believes the level of the allowance for loan losses as of December 31, 2018 was adequate.

There are two components of the allowance: 1) specific allowances allocated to loans evaluated for impairment under ASC Section 310-10-35; and 2) allowances calculated for pools of loans evaluated collectively for impairment under ASC Subtopic 450-20 (Contingencies).

A loan is considered to be impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loans and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan by loan basis by the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price or the fair value of the collateral if the loan is collateral dependent.

The estimated fair values of substantially all of the Company’s impaired loans are measured based on the estimated fair value of the loan’s collateral. For commercial loans secured with real estate, estimated fair values are determined primarily through third-party appraisals. When a real estate secured loan becomes impaired, a decision is made regarding whether an updated certified appraisal of the real estate is necessary. This decision is based on various considerations, including the age of the most recent appraisal, the loan-to-value ratio based on the current appraisal and the condition of the property. Appraised values may be discounted to arrive at the estimated selling price of the collateral, which is considered to be the estimated fair value. The discounts also include the estimated costs to sell the property. For commercial loans secured by non-real estate collateral, estimated fair values are determined based on the borrower’s financial statements, inventory reports, aging accounts receivable, equipment appraisals or invoices. Indications of value from these sources are generally discounted based on the age of the financial information or the quality of the assets. For such loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The Company generally does not separately identify individual consumer segment loans for impairment analysis, unless such loans are subject to a restructuring agreement.

Loans whose terms are modified are classified as troubled debt restructurings if the Company grants borrowers concessions and it is deemed that those borrowers are experiencing financial difficulty. Concessions granted under a troubled debt restructuring generally involve a below-market interest rate based on the loan’s risk characteristics, an extension of a loan’s stated maturity date or a significant delay in payment. Nonaccrual troubled debt restructurings are restored to accrual status if principal and interest payments, under the modified terms, are current for a sustained period of time after modification. Loans classified as troubled debt restructurings are designated as impaired.

The component of the allowance for pooled loan contingencies relates to other loans that have been segmented into risk rated categories. In accordance with ASC Subtopic 450-20, when measuring estimated credit losses, these loans are grouped into homogenous pools with similar characteristics and evaluated collectively considering both quantitative measures, such as historical loss, and qualitative measures, in the form of environmental adjustments.

Some portfolio segments are further disaggregated and evaluated collectively for impairment based on "class segments," which are largely based on the type of collateral underlying each loan. For commercial, financial and agricultural loans, class segments include commercial loans secured by other-than real estate collateral. Real estate – commercial class segments include loans secured by farmland, multi-family properties, owner-occupied non-farm, non-residential properties and other nonfarm non-residential properties. Real estate – mortgage includes loans secured by first and junior liens on residential real estate. Construction loan class segments include loans secured by commercial real estate, loans to commercial borrowers secured by residential real estate and loans to individuals secured by residential real estate. Personal loan class segments include direct consumer installment loans, indirect automobile loans and other revolving and unsecured loans to individuals.

Quantitative factor determination:

An average annual loss rate is calculated for each pool through an analysis of historical losses over a five-year look-back period. Using data for each loan, a loss emergence period is determined within each segmented class pool. The loss emergence period reflects the approximate length of time from the point when a loss is incurred (the loss trigger event) to the point of loss confirmation (the date of eventual charge-off). The loss emergence period is applied to the average annual loss to produce the qualitative factor for each pooled class segment.

Qualitative factor determination:

Historical loss rates computed in the quantitative component reflects an estimate of the level of incurred losses in the portfolio based on historical experience. Management considers that the current conditions may deviate from those that prevailed over the historical look-back period. Thus, the quantitative rates are an imperfect estimate, necessitating an evaluation of qualitative considerations, i.e. environmental factors to incorporate these risks.

Management considered qualitative, environmental risk factors including:

· National, regional and local economic and business conditions, and developments that affect the collectability of the portfolio, including the condition of various market segments;

· Changes in the volume and severity of past due loans, the volume of nonaccrual loans, and the volume and severity of adversely classified loans;

· Changes in the nature and volume of the portfolio and terms of loans;

· Changes in the experience, ability and depth of lending and credit management and other relevant staff;

· Existence and effect of any concentrations of credit and changes in the level of such concentrations;

· Changes in the quality of the loan review system;

· Changes in lending policies and procedures including changes in underwriting standards and collection, charge-off and recovery practices;

· Changes in the value of underlying collateral for collateral-dependent loans; and

· Effect of external influences, including competition, legal and regulatory requirements.

Within each loan segment, an analysis was performed over a ten-year look-back period to discover peak historical losses, and with this data, management established ranges of risk from minimal to very high, for each risk factor, to produce a supportable anchor for risk assignment. Based on the framework for risk factor evaluation and range of adjustments established through the anchoring process, a risk assessment and corresponding adjustment was assigned for each portfolio segment as of December 31, 2018. Adjustments to the factors are supported through documentation of changes in conditions in a narrative accompanying the allowance for loan loss calculation.

The combination of quantitative and qualitative factors were applied to year-end balances in each pooled segment to establish the overall allowance.

Acquired Loans

Loans that Juniata acquires through business combinations are recorded at fair value with no carryover of the related allowance for loan losses. Fair value of the loans involves estimating the amount and timing of principal and interest cash flows expected to be collected on the loans and discounting those cash flows at a market rate of interest.

The excess of cash flows expected at acquisition over the estimated fair value is referred to as the accretable discount and is recognized into interest income over the remaining life of the loan. The difference between contractually required payments at acquisition and the cash flows expected to be collected at acquisition is referred to as the nonaccretable discount. The nonaccretable discount includes estimated future credit losses expected to be incurred over the life of the loan. Subsequent decreases to the expected cash flows will require Juniata to evaluate the need for an additional allowance for credit losses. Subsequent improvement in expected cash flows will result in the reversal of a corresponding amount of the nonaccretable discount which Juniata will then reclassify as accretable discount that will be recognized into interest income over the remaining life of the loan.

Acquired loans that met the criteria for impaired or nonaccrual of interest prior to the acquisition may be considered performing upon acquisition, regardless of whether the customer is contractually delinquent, if Juniata expects to fully collect the new carrying value (i.e. fair value) of the loans. As such, Juniata may no longer consider the loan to be nonaccrual or nonperforming and may accrue interest on these loans, including the impact of any accretable discount. In addition, charge-offs on such loans would be first applied to the nonaccretable difference portion of the fair value adjustment.

Loans acquired through business combinations that do not meet the specific criteria of ASC 310-30, but for which a discount is attributable at least in part to credit quality, are also accounted for in accordance with this guidance. As a result, related discounts are recognized subsequently through accretion based on the contractual cash flows of the acquired loans.

Loans Held for Sale

The Company has originated residential mortgage loans with the intent to sell. These individual loans are normally funded by the buyer immediately. The Company maintains servicing rights on these loans. Mortgage servicing rights are recognized as an asset upon the sale of a mortgage loan. A portion of the cost of the loan is allocated to the servicing right based upon relative fair value. Servicing rights are intangible assets and are carried at estimated fair value. Adjustments to fair value are recorded as non-interest income and included in mortgage banking income in the consolidated statements of income.

In a business combination, the Company may acquire loans which it intends to sell. These loans are assigned a fair value by obtaining actual bids on the loans and adjusting for contingencies in the bids. These loans are carried at lower of cost or market value until sold, adjusted periodically if conditions change before the subsequent sale. Adjustments to fair value and gains or losses recognized upon sale are included in gains on sales of loans which is a component of non-interest income.

Commercial, Financial and Agricultural Lending

The Company originates commercial, financial and agricultural loans primarily to businesses located in its primary market area and surrounding areas. These loans are used for various business purposes, which include short-term loans and lines of credit to finance machinery and equipment purchases, inventory and accounts receivable. Generally, the maximum term for loans extended on machinery and equipment is shorter and does not exceed the projected useful life of such machinery and equipment. Most business lines of credit are written with a five year maturity, subject to an annual review.

Commercial loans are generally secured with short-term assets; however, in many cases, additional collateral, such as real estate, is provided as additional security for the loan. Loan-to-value maximum values have been established by the Company and are specific to the type of collateral. Collateral values may be determined using invoices, inventory reports, accounts receivable aging reports, collateral appraisals, etc.

In underwriting commercial loans, an analysis of the borrower’s character, capacity to repay the loan, the adequacy of the borrower’s capital and collateral, as well as an evaluation of conditions affecting the borrower, is performed. Analysis of the borrower’s past, present and future cash flows is also an important aspect of the Company’s analysis.

Concentration analysis assists in identifying industry specific risk inherent in commercial, financial and agricultural lending. Mitigants include the identification of secondary and tertiary sources of repayment and appropriate increases in oversight.

Commercial, financial and agricultural loans generally present a higher level of risk than certain other types of loans, particularly during slow economic conditions.

Commercial Real Estate Lending

The Company engages in commercial real estate lending in its primary market area and surrounding areas. The Company’s commercial real estate portfolio is secured primarily by residential housing, commercial buildings, raw land and hotels. Generally, commercial real estate loans have terms that do not exceed 20 years, have loan-to-value ratios of up to 80% of the appraised value of the property and are typically secured by personal guarantees of the borrowers.

As economic conditions deteriorate, the Company reduces its exposure in real estate loans with higher risk characteristics. In underwriting these loans, the Company performs a thorough analysis of the financial condition of the borrower, the borrower’s credit history, and the reliability and predictability of the cash flow generated by the property securing the loan. Appraisals on properties securing commercial real estate loans originated by the Company are performed by independent appraisers.

Commercial real estate loans generally present a higher level of risk than certain other types of loans, particularly during slow economic conditions.

Real Estate Construction Lending

The Company engages in real estate construction lending in its primary market area and surrounding areas. The Company’s real estate construction lending consists of commercial and residential site development loans, as well as commercial building construction and residential housing construction loans.

The Company’s commercial real estate construction loans are generally secured with the subject property, and advances are made in conformity with a pre-determined draw schedule supported by independent inspections. Terms of construction loans depend on the specifics of the project, such as estimated absorption rates, estimated time to complete, etc.

In underwriting commercial real estate construction loans, the Company performs a thorough analysis of the financial condition of the borrower, the borrower’s credit history, the reliability and predictability of the cash flow generated by the project using feasibility studies, market data, etc. Appraisals on properties securing commercial real estate loans originated by the Company are performed by independent appraisers.

Real estate construction loans generally present a higher level of risk than certain other types of loans, particularly during slow economic conditions. The difficulty of estimating total construction costs adds to the risk as well.

Mortgage Lending

The Company’s real estate mortgage portfolio is comprised of consumer residential mortgages and business loans secured by one-to-four family properties. One-to-four family residential mortgage loan originations, including home equity installment and home equity lines of credit loans, are generated by the Company’s marketing efforts, its present customers, walk-in customers and referrals. These loans originate primarily within the Company’s market area or with customers primarily from the market area.

The Company offers fixed-rate and adjustable rate mortgage loans with terms up to a maximum of 25 years for both permanent structures and those under construction. The Company’s one-to-four family residential mortgage originations are secured primarily by properties located in its primary market area and surrounding areas. The majority of the Company’s residential mortgage loans originate with a loan-to-value of 80% or less. Home equity installment loans are secured by the borrower’s primary residence with a maximum loan-to-value of 80% and a maximum term of 15 years. Home equity lines of credit are secured by the borrower’s primary residence with a maximum loan-to-value of 90% and a maximum term of 20 years.

In underwriting one-to-four family residential real estate loans, the Company evaluates the borrower’s ability to make monthly payments, the borrower’s repayment history and the value of the property securing the loan. The ability to repay is determined by the borrower’s employment history, current financial conditions, and credit background. The analysis is based primarily on the customer’s ability to repay and secondarily on the collateral or security. Most properties securing real estate loans made by the Company are appraised by independent fee appraisers. The Company generally requires mortgage loan borrowers to obtain an attorney’s title opinion or title insurance, and fire and property insurance (including flood insurance, if necessary) in an amount not less than the amount of the loan. The Company does not engage in sub-prime residential mortgage originations.

Residential mortgage loans and home equity loans generally present a lower level of risk than certain other types of consumer loans because they are secured by the borrower’s primary residence. Risk is increased when the Company is in a subordinate position for the loan collateral.

Obligations of States and Political Subdivisions

The Company lends to local municipalities and other tax-exempt organizations. These loans are primarily tax-anticipation notes and, as such, carry little risk. Historically, the Company has never had a loss on any loan of this type.

Personal Lending

The Company offers a variety of secured and unsecured personal loans, including vehicle loans, mobile home loans and loans secured by savings deposits as well as other types of personal loans.

Personal loan terms vary according to the type and value of collateral and creditworthiness of the borrower. In underwriting personal loans, a thorough analysis of the borrower’s willingness and financial ability to repay the loan as agreed is performed. The ability to repay is determined by the borrower’s employment history, current financial conditions and credit background.

Personal loans may entail greater credit risk than do residential mortgage loans, particularly in the case of personal loans which are unsecured or are secured by rapidly depreciable assets, such as automobiles or recreational equipment. In such cases, any repossessed collateral for a defaulted personal loan may not provide an adequate source of repayment of the outstanding loan balance as a result of the greater likelihood of damage, loss or depreciation. In addition, personal loan collections are dependent on the borrower’s continuing financial stability and, thus are more likely to be affected by adverse personal circumstances. Furthermore, the application of various federal and state laws, including bankruptcy and insolvency laws, may limit the amount which can be recovered on such loans.

Other real estate owned

Assets acquired in settlement of mortgage loan indebtedness are recorded as other real estate owned (“OREO”) at fair value less estimated costs to sell, establishing a new cost basis. Costs to maintain the assets and subsequent gains and losses attributable to their disposal are included in other expense as realized. No depreciation or amortization expense is recognized. At December 31, 2018 and 2017, the carrying value of other real estate owned was $744,000 and $355,000, respectively.

Goodwill and intangibles

The Company accounts for its business combinations using the purchase accounting method. Purchase accounting requires the total purchase price to be allocated to the estimated fair values of assets acquired and liabilities assumed, including certain intangible assets that must be recognized. Typically, this allocation results in the purchase price exceeding the fair value of net assets acquired, which is recorded as goodwill. Core deposit intangibles are a measure of the value of checking, money market and savings deposits acquired in business combinations accounted for under the purchase method. Core deposit intangibles and other identified intangibles with finite useful lives are amortized over their estimated useful lives.

Goodwill and other intangible assets are tested for impairment annually or when circumstances arise indicating impairment may have occurred. In determining whether impairment has occurred, management considers a number of factors including, but not limited to, the market value of the Company’s stock, operating results, business plans, economic projections, anticipated future cash flows and current market data. There are inherent uncertainties related to these factors and management’s judgment in applying them to the analysis of impairment. Changes in economic and operating conditions, as well as other factors, could result in impairment in future periods. Any impairment losses arising from such testing would be reported in the Consolidated Statements of Income as a separate line item within operations. There were no impairment losses recognized as a result of periodic impairment testing in each of the three years ended December 31, 2018.

Mortgage servicing rights

The Company originates residential mortgage loans with the intent to sell. These individual loans are normally funded by the buyer immediately. The Company maintains servicing rights on these loans.

Mortgage servicing rights are recognized as an asset upon the sale of a mortgage loan. A portion of the cost of the loan is allocated to the servicing right based upon relative fair value. Servicing rights are intangible assets and are carried at estimated fair value. The carrying amount of mortgage servicing rights was $200,000 and $225,000 at December 31, 2018 and 2017, respectively. Adjustments to fair value are recorded as non-interest income and included in gain on sales of loans in the consolidated statements of income.

The Company retains the servicing rights on mortgage loans sold to the FHLB and receives mortgage banking fee income based upon the principal balance outstanding. Total loans serviced for the FHLB were $23,563,000 and $23,647,000 at December 31, 2018 and 2017, respectively. The mortgage loans sold to the FHLB and serviced by the Company are not reflected in the consolidated statements of financial condition.

Premises and equipment and depreciation

Premises and equipment are stated at cost less accumulated depreciation. Depreciation is computed principally using the straight-line method over the estimated useful lives of the related assets, which range from 3 to 10 years for furniture and equipment and 25 to 50 years for buildings. Expenditures for maintenance and repairs are charged against income as incurred. Costs of major additions and improvements are capitalized. Amortization of leasehold improvements is computed on a straight-line basis over the shorter of the assets’ useful life or the related lease term.

Trust assets and revenues

Assets held in a fiduciary capacity are not assets of the Bank or the Bank’s Trust Department and are, therefore, not included in the consolidated financial statements. Trust revenues are recorded on the accrual basis.

Bank owned life insurance, annuities and split-dollar arrangements

The cash surrender value of bank owned life insurance and annuities is carried as an asset, and changes in cash surrender value are recorded as non-interest income.

GAAP requires split-dollar life insurance arrangements to have a liability recognized related to the postretirement benefits covered by an endorsement split-dollar life insurance arrangement. The accrued benefit liability was $1,081,000 and $1,014,000 as of December 31, 2018 and 2017, respectively. Related expenses for 2018, 2017 and 2016 were $38,000, $95,000 and $61,000, respectively.

Investments in low-income housing partnerships

Juniata has invested as a limited partner in two partnerships that provide low-income housing in Lewistown, Pennsylvania. The carrying value of the investment in the limited partnerships was $4,545,000 at December 31, 2018 and $5,245,000 at December 31, 2017. The decline in carrying value in 2018 was the result of amortization exceeding the draws taken for the completion of the phase II low-income housing project. Federal credits are available for ten years for each of the two projects. Tax credits associated with phase I will continue through 2023 annually at $572,000. Phase II credits were initiated in 2017 and will run through 2027 at an annual amount of $333,000. The tax credits are included in the tax expense line item on the Consolidated Statements of Income. Amortization of the investment using the cost method is scheduled to occur over the same period as tax credits are earned. Juniata’s maximum exposure to loss is limited to the carrying value of the investment at year-end.

Income taxes

The Company accounts for income taxes in accordance with income tax accounting guidance ASC Topic 740, Income Taxes.

Current income tax accounting guidance results in two components of income tax expense: current and deferred. Current income tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues. The Company determines deferred income taxes using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax bases of assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur.

Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred tax assets are reduced by a valuation allowance if, based on the weight of the evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized.

The Company accounts for uncertain tax positions if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination. The term “more likely than not” means a likelihood of more than 50 percent; the terms “examined” and “upon examination” also include resolution of the related appeals or litigation processes, if any. A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met the more-likely-than-not recognition threshold considers the facts, circumstances and information available at the reporting date and is subject to management’s judgment.

The Company recognizes interest and penalties on income taxes, if any, as a component of income tax expense.

Advertising

The Company follows the policy of charging costs of advertising to expense as incurred. Advertising expenses were $294,000, $272,000 and $243,000 in 2018, 2017 and 2016, respectively.

Off-balance sheet financial instruments

In the ordinary course of business, the Bank has entered into off-balance sheet financial instruments consisting of commitments to extend credit and letters of credit. Such financial instruments are recorded on the consolidated statement of financial condition when they are funded.

Transfer of financial assets

Transfers of financial assets are accounted for as sales when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

Comprehensive Income

Comprehensive income consists of net income and other comprehensive income (loss). Other comprehensive income (loss) includes changes in unrealized gains and losses on securities available for sale arising during the period and reclassification adjustments for realized gains and losses on securities available for sale included in net income. The Company has a defined benefit retirement plan which utilizes assumptions and methods to calculate the fair value of Plan assets and recognizing the funded status of the Plans on its consolidated balance sheet. Gains and losses on the Plan are recognized in other comprehensive income (loss), net of tax, until they are amortized, or immediately upon curtailment.

Stock-based compensation

The Company sponsors a stock compensation plan for certain key officers which allows, among other stock-based compensation methods, for stock options and restricted stock awards. Prior to 2016, stock options were used exclusively for long-term compensation, but beginning in 2016, restricted shares awards were used. Compensation expense for stock options granted and restricted stock awarded is measured using the fair value of the award on the grant date and is recognized over the vesting period. The stock-based compensation expense amounts for stock options were derived based on the fair value of options using the Black-Scholes option-pricing model.

Segment reporting

Management does not separately allocate expenses, including the cost of funding loan demand, between the commercial, retail and trust operations of the Company. As such, discrete financial information is not available, and segment reporting would not be meaningful.

Subsequent events

The Company has evaluated events and transactions occurring subsequent to the consolidated statement of financial condition date of December 31, 2018, for items that should potentially be recognized or disclosed in the consolidated financial statements. The evaluation was conducted through the date these consolidated financial statements were issued.

3. RECENT ACCOUNTING STANDARDS UPDATE (“asu”)

New Accounting Standards Adopted in 2018

ASU 2014-09, Revenue from Contracts with Customers (Topic 606)

Issued: May 2014

Summary: The amendments in this Update establish a comprehensive revenue recognition standard for virtually all industries under U.S. GAAP, including those that previously followed industry-specific guidance. The revenue standard’s core principle requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To accomplish this objective, the standard requires five basic steps: (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation.

In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date. ASU 2015-14 deferred the effective date of the new revenue recognition standard by one year. As a result, the standard was effective for public entities in fiscal years beginning after December 15, 2017.

The Company adopted the ASU 2014-09 on January 1, 2018 and elected the modified retrospective transition method. Because the amended guidance does not apply to revenue associated with financial instruments accounted for under other U.S. GAAP, the Company assessed the effect the guidance had on the recognition processes of certain recurring revenue streams related to non-interest income. The Company did not identify any significant changes in the timing of revenue recognition when considering the amended accounting guidance. Additional disclosures related to revenue recognition appear in Note 21.

ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.

Issued: February 2018

Summary: The Update allows entities to reclassify from accumulated other comprehensive income (“AOCI”) to retained earnings the 'stranded' tax effects of accounting for income tax rate changes on items accounted for in AOCI that were impacted by tax reform enacted in December 2017. Because the impact of tax rate changes is recorded in income, items accounted for in AOCI could be left with a stranded tax effect appearing as though those items do not reflect the appropriate tax rate. The FASB's changes were intended to improve the usefulness of information reported to financial statement users.

Effective Date: The changes are effective for years beginning after December 31, 2018, with early adoption permitted. The Company elected to adopt the changes in the first quarter of 2018, as of December 31, 2017. The amount transferred from AOCI to retained earnings totaled $588,000 and represented the impact of the Company’s corporate tax rate change from 34% to 21% at the date of enactment of the tax reform for the unrealized gains and losses on securities and the defined benefit plan accounted for in AOCI.

ASU 2016-01, Measurement of Financial Instruments

Issued: January 2016

Summary: The amendments in this Update require all equity investments to be measured at fair value with changes in the fair value recognized through net income (other than those changes accounted for under the equity method of accounting or those that result in consolidation of the investee). The amendments in this Update also require an entity to present separately in AOCI the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. In addition, the Update emphasizes the existing requirement to use exit prices to measure fair value for disclosure purposes and clarifies that entities should not make use of a practicability exception in determining the fair value of loans. Accordingly, we refined the calculations used to determine the disclosed fair value of our loans as part of adopting this standard. The redefined calculation did not have a significant impact on our fair value disclosures.

Effective Date: For public entities, the amendments in the Update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company currently holds a small portfolio of equity investments for which the fair value fluctuates with market activity. The Company adopted ASU 2016-01 on January 1, 2018. As of this date, the Company had $197,000 in unrealized gains on equity securities (see Note 6). The adoption of this Update resulted in a reclassification of $156,000 from other comprehensive loss to retained earnings. The Company recorded a decline of $1,000 during the year ended December 31, 2018 for the change in fair value of equity securities on the consolidated statements of income.

ASU 2018-03, Technical Corrections and Improvements to Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities

Issued: February 2018

Summary: The FASB issued this Update to clarify certain aspects of the guidance on recognizing and measuring financial assets and liabilities in ASU 2016-01:

· Clarification regarding the ability to discontinue application of the measurement alternative for equity securities without a readily determinable fair value;

· Clarification of the measurement date for fair value adjustments to the carrying amount of equity securities without a readily determinable fair value for which the measurement alternative is elected;

· Clarification of the unit of account for fair value adjustments to forward contracts and purchased options on equity securities without a readily determinable fair value for which the measurement alternative is expected to be elected;

· Presentation requirements for certain hybrid financial liabilities for which the fair value option is elected;

· Measurement of financial liabilities denominated in a foreign currency for which the fair value option is elected; and

· Transition guidance for equity securities without a readily determinable fair value.

The amendments in ASU 2018-03 are effective for public business entities for fiscal years beginning after December 15, 2017 and for interim periods within those fiscal years beginning after June 15, 2018. For all other entities, the effective date is the same as the effective date for ASU 2016-01. All entities may early adopt the amendments, including adoption in an interim period, provided they have already adopted ASU 2016-01. The Company adopted this Update in conjunction with the adoption of ASU 2016-01 on January 1, 2018. The adoption had no material impact to the Company’s consolidated financial position or results of operations.

ASU 2017-09, Scope of Modification Accounting

Issued: May 2017

Summary: ASU 2017-09 clarifies Topic 718 such that an entity must apply modification accounting to changes in the terms or conditions of a share-based payment award unless all of the following criteria are met:

1. The fair value of the modified award is the same as the fair value of the original award immediately before the modification. The standard indicates that if the modification does not affect any of the inputs to the valuation technique used to value the award, the entity is not required to estimate the value immediately before and after the modification.

2. The vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the modification.

3. The classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the modification.

Effective Date: The amendments were effective for all entities for fiscal years beginning after December 15, 2017, including interim periods within those years. The Company adopted ASU 2017-09 on January 1, 2018 and it had no material impact on the Company’s consolidated financial position or results of operations.

ASU 2017-08, Premium Amortization on Purchased Callable Debt Securities

Issued: March 2017

Summary: ASU 2017-08 shortens the amortization period for premiums on purchased callable debt securities to the earliest call date, rather than amortizing over the full contractual term. The ASU does not change the accounting for securities held at a discount.

Effective Date: The amendments are effective for public business entities for fiscal years beginning after December 15, 2018. Early adoption is permitted. The Company chose to early adopt this standard, and the financial statements as of, and for the year ended, December 31, 2017 reflected the impact of premium amortization on callable debt securities to the earliest call date. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.

ASU 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost

Issued: March 2017

Summary: ASU 2017-07 requires that an employer disaggregate the service cost component from the other components of net benefit cost. The amendments also provide explicit guidance on how to present the service cost component and the other components of net benefit cost in the income statement and allows only the service cost component of net benefit cost to be eligible for capitalization.

Effective Date: The amendments were effective for public business entities for fiscal years beginning after December 15, 2017. The Company adopted this Update on January 1, 2018, and it had no impact on the Company’s consolidated financial position and results of operations because the Company’s defined benefit plan is frozen; therefore, there is no service cost component to consider. The cost for other components related to the defined benefit plan are recorded in employee benefits expense on the consolidated statements of income.

ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments

Issued: August 2016

Summary: ASU 2016-15 clarifies how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments are intended to reduce diversity in practice.

Effective Date: The amendments were effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. The Company adopted this Update on January 1, 2018 and it did not have a material impact on the Company’s consolidated financial position or results of operations.

Pending Accounting Standards

ASU 2016-02, Leases

Issued: February 2016

Summary: The new standard establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement.

In July 2018, the FASB issued ASU-2018-10, Codification Improvements to Topic 842, Leases. ASU 2018-10 clarifies the intended application of certain narrow aspects of the guidance in ASU 2016-02. The amendments are similar in nature to those in the FASB’s ongoing project to make improvements to clarify the Codification or correct unintended application of the guidance. Key amendments in this ASU include:

· Updating the definition of Rate Implicit in the Lease to clarify that the rate cannot be less than zero;

· Clarifying application of guidance for lessors when determining impairment of net investment in the lease;

· Clarifying whether lessors and lessees should recognize certain transition adjustments to earnings rather than through equity;

· Clarifying certain transition guidance for amounts previously recognized in business combinations.

In July 2018, the FASB also issued ASU 2018-11, Leases (Topic 842): Targeted Improvements. ASU 2018-11 provides entities with an additional (and optional) transition method to adopt the new leases standard. Under this new transition method, an entity initially applies the new leases standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption.

ASU 2018-11 also provides lessors with a practical expedient, by class of underlying asset, to elect not to separate nonlease components from the associated lease component and, instead, to account for those components as a single component if the nonlease components otherwise would be accounted for under the new revenue guidance (Topic 606) and both the timing and pattern of transfer of the nonlease component(s) and associated lease component are the same, and the lease component, if accounted for separately, would be classified as an operating lease. If the nonlease component or components associated with the lease component are the predominant component of the combined component, an entity is required to account for the combined component in accordance with Topic 606. Otherwise, the entity must account for the combined component as an operating lease in accordance with Topic 842.

Effective Date: ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The effective date and transition requirements of ASU 2018-10 and ASU 2018-11 are the same as the effective date and transition requirements in Topic 842.

The Company adopted ASU 2016-02 on January 1, 2019 using the optional transition method. The Company also elected the following practical expedients: the package of practical expedients, combining lease and nonlease components by class of underlying asset, and using hindsight in determining the lease terms. The adoption of this standard resulted in the recording of a ROU asset of $519,000 and a lease liability of $510,000 as of January 1, 2019 for the Company’s four operating lease obligations. The adoption of this standard is not expected to have a material impact on the Company’s operations, cash flows or capital ratios, nor should it cause the Company to no longer be well capitalized.

ASU 2018-14, Compensation—Retirement Benefits—Defined Benefit Plans—General (Topic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans

Issued: August 2018

Summary: ASU 2018-14 modifies the disclosure requirements under ASC 715-20 for employers that sponsor defined benefit pension or other postretirement plans. Those modifications include the removal and addition of disclosure requirements as well as clarifying specific disclosure requirements.

Effective Date: The amendments are effective for public business entities for fiscal years ending after December 15, 2020. For all other entities, the amendments are effective for annual reporting periods ending after December 15, 2021. Early adoption is permitted. This Update will have no impact on the Company’s consolidated financial position and results of operations because in August 2018, Juniata’s Board of Directors resolved to terminate the Company’s defined benefit retirement plan, The Juniata Valley Bank Retirement Plan, effective November 30, 2018. All participants have been properly notified and settlement of all obligations is expected to occur in mid-2019. See Note 22 for additional information.

ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement

Issued: August 2018

Summary: ASU 2018-13 modifies the disclosure requirements for fair value measurements required under ASC 820. Those modifications include the removal and addition of disclosure requirements as well as clarifying specific disclosure requirements.

Effective Date: The amendments become effective for all entities for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted upon issuance of this ASU. An entity is permitted to early adopt all disclosure requirements in the ASU or early adopt only the removed and modified disclosures and delay adoption of the additional disclosures until their effective date. This Update is not expected to have an impact on the Company’s consolidated financial position or results of operations.

ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities

Issued: August 2017

Summary: ASU 2017-12 improves Topic 815 by simplifying and expanding the eligible hedging strategies for financial and nonfinancial risks by more closely aligning hedge accounting with a company’s risk management activities, and also simplifies its application through targeted improvements in key practice areas. This includes expanding the list of items eligible to be hedged and amending the methods used to measure the effectiveness of hedging relationships. In addition, the ASU prescribes how hedging results should be presented and requires incremental disclosures. These changes are intended to allow preparers more flexibility and to enhance the transparency of how hedging results are presented and disclosed. Further, the new standard provides partial relief on the timing of certain aspects of hedge documentation and eliminates the requirement to recognize hedge ineffectiveness separately in earnings in the current period.

Effective Date: The amendments are effective for public business entities, for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early application is permitted in any interim period after issuance of the amendments for existing hedging relationships on the date of adoption. This Update will have no impact on the Company’s consolidated financial position and results of operations.

ASU 2017-04, Simplifying the Test for Goodwill Impairment

Issued: January 2017

Summary: ASU 2017-04 eliminates the requirement of Step 2 in the current guidance to calculate the implied fair value of goodwill to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value in Step 1 of the current guidance.

Effective Date: The amendments are effective for public business entities for fiscal years beginning after December 15, 2019. The adoption of this Update is not expected to have an impact on the Company’s consolidated financial position and results of operations.

ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments

Issued: June 2016

Summary: ASU 2016-13 requires credit losses on most financial assets to be measured at amortized cost and certain other instruments to be measured using an expected credit loss model (referred to as the current expected credit loss (“CECL”) model). Under this model, entities will estimate credit losses over the entire contractual term of the instrument (considering estimated prepayments, but not expected extensions or modifications unless reasonable expectation of a troubled debt restructuring exists) from the date of initial recognition of that instrument.

The ASU also replaces the current accounting model for purchased credit impaired loans and debt securities. The allowance for credit losses for purchased financial assets with a more-than insignificant amount of credit deterioration since origination (“PCD assets”), should be determined in a similar manner to other financial assets measured on an amortized cost basis. However, upon initial recognition, the allowance for credit losses is added to the purchase price (“gross up approach”) to determine the initial amortized cost basis. The subsequent accounting for PCD financial assets is the same expected loss model described above.

Further, the ASU made certain targeted amendments to the existing impairment model for available for sale (AFS) debt securities. For an AFS debt security for which there is neither the intent nor a more-likely-than-not requirement to sell, an entity will record credit losses as an allowance rather than a write-down of the amortized cost basis.

Effective Date: The new standard is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. While the Company’s senior management is currently in the process of evaluating the impact of the amended guidance on its consolidated financial statements and disclosures, it currently expects the ALLL to increase upon adoption given that the allowance will be required to cover the full remaining expected life of the portfolio, rather than the incurred loss under current U.S. GAAP. The extent of this increase is still being evaluated and will depend on economic conditions and the composition of the Company’s loan portfolio at the time of adoption. In preparation, the Company has taken steps to prepare for the implementation when it becomes effective by forming an internal taskforce, gathering pertinent data, participating in training courses, and partnering with a software provider that specializes in ALLL analysis, as well as assessing the sufficiency of data currently available through its core database.

4. MERGER

On April 30, 2018, the Company completed the acquisition of Liverpool Community Bank, a Pennsylvania state-chartered bank with one branch location in Liverpool, Perry County. Liverpool was merged with and into The Juniata Valley Bank. As of the merger date, Liverpool had assets of $45,360,000, loans of $32,091,000, and equity of $9,246,000.

Prior to the acquisition, Juniata owned 1,214, or 39.16%, of the 3,100 outstanding common shares of Liverpool. The merger was accounted for using the acquisition method of accounting, in accordance with the provisions of ASC 805, Business Combinations. Juniata obtained control over Liverpool in a step acquisition by acquiring the previously unowned interest in Liverpool. As such, Juniata was required to remeasure its previously held equity interest in Liverpool at its acquisition date fair value and recognize the resulting gain in earnings. The purchase price for the step acquisition was calculated as the aggregate of the consideration transferred for the newly acquired interest (Step Two 60.84% interest) and the fair value of Juniata’s previously held equity interest (Step One 39.16% interest) in Liverpool.

On April 30, 2018, Juniata’s Step One adjusted basis in Liverpool was $5,037,000, which included a $415,000 equity gain from the acquisition, in addition to Juniata’s basis in Liverpool of $4,622,000 prior to the recording of the equity gain.

Liverpool shareholders (other than Juniata, whose Liverpool common stock owned of record or beneficially was cancelled) received either: (i) 202.6286 shares of common stock of Juniata or (ii) $4,050.00 in cash in exchange for each share of Liverpool common stock subject to the limitation that cash would be paid for no more than 20% and no less than 15% of Liverpool’s outstanding common stock. As a result, Juniata issued 315,284 shares of common stock with an acquisition date fair value of approximately $6,463,000, based on Juniata’s closing stock price of $20.50 on April 30, 2018, and cash of $1,362,000, including cash in lieu of fractional shares for a total Step Two purchase price consideration of $7,825,000. The total purchase price of the merger, including both the Step One adjusted basis and Step Two purchase price consideration, was $12,862,000.

The assets and liabilities of Liverpool were recorded on the consolidated balance sheet at their estimated fair value as of April 30, 2018, and its results of operations have been included in the consolidated income statement since such date.

The purchase price included goodwill and a core deposit intangible of $3,691,000 and $289,000, respectively. The core deposit intangible will be amortized over a ten-year period using a sum of the year’s digits basis. The goodwill will not be amortized but will be tested annually for impairment, or more frequently if circumstances require.

The allocation of the purchase price is as follows:

(Dollars in thousands)
Step One Purchase Price Consideration
April 30, 2018 JUVF basis in LCB (before gain)	$	4,622
Increase in Step One basis from equity gain in acquisition		415
Total Step One adjusted basis		5,037
Step Two Purchase Price Consideration
Purchase price assigned to LCB common shares exchanged for 315,284 JUVF common shares	$	6,463
Purchase price assigned to LCB common shares exchanged for cash including cash in lieu of fractional shares		1,362
Total Step Two purchase price consideration		7,825
Total purchase price		12,862
LCB net assets acquired:
Tangible common equity		9,246
Adjustments to reflect assets acquired and liabilities assumed at fair value:
Total fair value adjustments		(95	)
Associated deferred income taxes		20
Fair value adjustment to net assets acquired, net of tax		(75	)
Total LCB net assets acquired		9,171
Goodwill resulting from the merger	$	3,691

The following table summarizes the estimated fair value of the assets acquired and liabilities assumed.

(Dollars in thousands)
Total purchase price	$	12,862
Net assets acquired:
Cash and cash equivalents		8,923
Investments in time deposits with banks		3,675
Loans		31,331
Premises and equipment		125
Accrued interest receivable		123
Core deposit and other intangibles		289
Bank owned life insurance		632
FHLB stock		124
Other assets		267
Deposits		(36,052	)
Accrued interest payable		(17	)
Other liabilities		(249	)
		9,171
Goodwill	$	3,691

As of April 30, 2018, the merger date, goodwill was recorded at $3,691,000. ASC 805 allows for adjustments to the estimated fair value of assets and liabilities, and the resulting goodwill for a period of up to one year after the merger date for new information that becomes available that reflects circumstances at the merger date.

The fair value of the financial assets acquired included loans receivable with a gross amortized cost basis of $32,091,000. The table below illustrates the fair value adjustments made to the amortized cost basis in order to present a fair value of the loans acquired.

(Dollars in thousands)
Gross amortized cost basis at April 30, 2018	$	32,091
Market rate adjustment		272
Credit fair value adjustment on pools of homogeneous loans		(496	)
Credit fair value adjustment on purchased credit impaired loans		(622	)
Reversal of existing deferred fees and premiums		86
Fair value of purchased loans at April 30, 2018	$	31,331

The market rate adjustment represents the movement in market interest rates, irrespective of credit adjustments, compared to the stated rates of the acquired loans. The credit adjustment made on pools of homogeneous loans represents the changes in credit quality of the underlying borrowers from the loan inception to the acquisition date. The credit adjustment on impaired loans is derived in accordance with ASC 310-30 and represents the portion of the loan balances that has been deemed uncollectible based on the Company’s expectations of future cash flows for each respective loan.

Summarized below is the acquired Liverpool purchased credit impaired loan portfolio as of April 30, 2018.

(Dollars in thousands)
Contractually required principal and interest at acquisition	$	2,022
Contractual cash flows not expected to be collected (nonaccretable discount)		(1,273	)
Expected cash flows at acquisition		749
Interest component of expected cash flows (accretable discount)		(177	)
Fair value of acquired loans	$	572

The following table presents unaudited pro forma information as if the merger between Juniata and Liverpool had been completed on January 1, 2017. The pro forma information does not necessarily reflect the results of operations that would have occurred had Juniata merged with Liverpool at the beginning of 2017. Due to Juniata’s former 39.16% ownership in Liverpool, the income previously recorded in 2018 and 2017 that was attributable to the partial ownership of Liverpool has been excluded, in addition to merger-related costs incurred in 2018 and the resulting tax impacts. Supplemental pro forma earnings for the year ended December 31, 2018 were adjusted to exclude $296,000 from the income/gain from unconsolidated subsidiary, $884,000 in merger-related expenses, and the resulting tax benefit of $123,000. The results for the comparable 2017 period were adjusted to include the aforementioned merger-related expenses; however, those results exclude the income from unconsolidated subsidiary and merger-related expenses previously recorded in the year ended December 31, 2017 of $167,000 and $13,000, respectively. The resulting tax benefit included in the year ended December 31, 2017 was $218,000. A 21% tax rate was assumed in both the 2018 and 2017 periods. The pro forma financial information does not include the impact of possible business model changes, nor does it consider any potential impacts of current market conditions or revenues, expense efficiencies or other factors.

(Dollars in thousands; except share data)	Years ended December 31,
	2018		2017
Net interest income after loan loss provision	$	20,629	$	19,943
Noninterest income		4,816		5,347
Noninterest expense		18,818		19,098
Net income available to common shareholders		6,996		5,184
Net income per common share		1.37		1.02

5. Restrictions on Cash and Due From Banks

The Bank is required to maintain cash reserve balances with the Federal Reserve Bank if vault cash is insufficient to cover the reserve requirement. As of December 31, 2018 and 2017, respectively, no reserves were required to be held at the Federal Reserve Bank.

6. Securities

On January 1, 2018, the Company adopted ASU 2016-01, Measurement of Financial Assets Instruments. Upon adoption, equity securities with readily determinable fair values are stated at fair value with realized and unrealized gains and losses reported in net income. For periods prior to January 1, 2018, equity securities were classified as available for sale and stated at fair value with unrealized gains and losses reported as a separate component of AOCI, net of tax. At December 31, 2017, the fair value of equity securities classified as available for sale was $1,119,000. The adoption of ASU 2016-01 resulted in a reclassification of $156,000 in net unrealized gains from AOCI to retained earnings. As of December 31, 2018, the Company had $1,118,000 in equity investments recorded at fair value.

The Company’s investment portfolio includes primarily mortgage-backed securities issued by U.S. Government sponsored agencies and backed by residential mortgages (approximately 71%), bonds issued by U.S. Government sponsored agencies (approximately 16%) and municipalities (approximately 13%) as of December 31, 2018. Most of the municipal bonds are general obligation bonds with maturities or pre-refunding dates within 5 years.

The amortized cost and fair value of securities available for sale as of December 31, 2018 and 2017, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because the securities may be called or prepaid with or without prepayment penalties.

(Dollars in thousands)	December 31, 2018
					Gross		Gross
	Amortized		Fair		Unrealized		Unrealized
Securities Available for Sale	Cost		Value		Gains		Losses
Type and maturity
Obligations of U.S. Government agencies and corporations
After one year but within five years	$	20,998	$	20,355	$	-	$	(643	)
After five years but within ten years		2,999		2,911		-		(88	)
		23,997		23,266		-		(731	)
Obligations of state and political subdivisions
Within one year		826		826		-		-
After one year but within five years		14,751		14,686		13		(78	)
After five years but within ten years		2,779		2,669		-		(110	)
		18,356		18,181		13		(188	)
Mortgage-backed securities		102,957		100,506		172		(2,623	)
Total	$	145,310	$	141,953	$	185	$	(3,542	)

(Dollars in thousands)	December 31, 2017
					Gross		Gross
	Amortized		Fair		Unrealized		Unrealized
Securities Available for Sale	Cost		Value		Gains		Losses
Type and maturity
Obligations of U.S. Government agencies and corporations
Within one year	$	6,000	$	5,969	$	-	$	(31	)
After one year but within five years		15,000		14,689		-		(311	)
After five years but within ten years		13,998		13,556		-		(442	)
		34,998		34,214		-		(784	)
Obligations of state and political subdivisions
Within one year		2,521		2,516		-		(5	)
After one year but within five years		13,959		13,955		50		(54	)
After five years but within ten years		8,611		8,510		18		(119	)
		25,091		24,981		68		(178	)
Mortgage-backed securities		94,945		93,510		38		(1,473	)
Equity securities		922		1,119		197		-
Total	$	155,956	$	153,824	$	303	$	(2,435	)

Certain obligations of the U.S. Government and state and political subdivisions are pledged to secure public deposits, securities sold under agreements to repurchase and for other purposes as required or permitted by law. The carrying value of the pledged assets was $50,157,000 and $47,825,000 at December 31, 2018 and 2017, respectively.

In addition to cash received from the scheduled maturities of securities, some investment securities available for sale are sold at current market values during the course of normal operations. Following is a summary of proceeds received from all investment securities transactions and the resulting realized gains and losses:

(Dollars in thousands)	Years Ended December 31,
	2018			2017			2016
Gross proceeds from sales of securities	$	10,461		$	21,799		$	4,304
Securities available for sale:
Gross realized gains from sold and called securities	$	-		$	539		$	139
Gross realized losses from sold and called securities		(188	)		(32	)		(21	)
Gross gains from business combinations		-			5			100

Equity securities owned by the Company consist of common stock of various financial services providers (“Bank Stocks”). As of January 1, 2018, upon the adoption of ASU 2016-01, all of the Company’ equity securities are within the scope of ASC Topic 321, Investments – Equity Securities. ASC 321 requires all equity investments within its scope to be measured at fair value with changes in fair value recognized in net income. The Company recorded a decline of $1,000 during the year ended December 31, 2018 for the change in fair value of equity securities on the consolidated statements of income.

The following table shows gross unrealized losses and fair values of securities available for sale, aggregated by category and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2018:

	Unrealized Losses at December 31, 2018
	Less Than 12 Months							12 Months or More							Total
	Number							Number							Number
	of		Fair		Unrealized			of		Fair		Unrealized			of		Fair		Unrealized
(Dollars in thousands)	Securities		Value		Losses			Securities		Value		Losses			Securities		Value		Losses
Obligations of U.S. Government agencies and corporations		-	$	-	$	-			14	$	23,267	$	(731	)		14	$	23,267	$	(731	)
Obligations of state and political subdivisions		8		5,055		(10	)		13		8,242		(178	)		21		13,297		(188	)
Mortgage-backed securities		3		6,726		(32	)		43		77,170		(2,591	)		46		83,896		(2,623	)
Total debt securities		11		11,781		(42	)		70		108,679		(3,500	)		81		120,460		(3,542	)
Total temporarily impaired securities		11	$	11,781	$	(42	)		70	$	108,679	$	(3,500	)		81	$	120,460	$	(3,542	)

At December 31, 2018, 14 U.S. Government and agency securities had unrealized losses that, in the aggregate, did not exceed 1% of amortized cost. All of these securities have been in a continuous loss position for 12 months or more.

At December 31, 2018, 21 obligations of state and political subdivision bonds had unrealized losses that, in the aggregate, did not exceed 1% of amortized cost. Thirteen of these securities have been in a continuous loss position for 12 months or more.

At December 31, 2018, 46 mortgage-backed securities had an unrealized loss that did not exceed 2% of amortized cost. Forty-three of these securities have been in a continuous loss position for 12 months or more.

The mortgage-backed securities in the Company’s portfolio are government sponsored enterprise (“GSE”) pass-through instruments issued by the Federal National Mortgage Association (“FNMA”), which guarantees the timely payment of principal on these investments.

The unrealized losses noted above are considered to be temporary impairments. The decline in the values of the debt securities is due only to interest rate fluctuations, rather than erosion of issuer credit quality. As a result, the payment of contractual cash flows, including principal repayment, is not at risk. As the Company does not intend to sell the securities, does not believe the Company will be required to sell the securities before recovery and expects to recover the entire amortized cost basis, none of the debt securities are deemed to be other-than-temporarily impaired.

There were two available for sale equity securities in an unrealized loss position on December 31, 2017, with one in an unrealized loss position for 12 months or more. The total unrealized loss on available for sale equity securities at December 31, 2017 was less than $1,000. Management identified no other-than-temporary impairment as of, or for the years ended, December 31, 2017 and 2016.

The following table shows gross unrealized losses and fair values of securities available for sale, aggregated by category and length of time that individual securities had been in a continuous unrealized loss position, at December 31, 2017:

	Unrealized Losses at December 31, 2017
	Less Than 12 Months							12 Months or More							Total
	Number							Number							Number
	of		Fair		Unrealized			of		Fair		Unrealized			of		Fair		Unrealized
(Dollars in thousands)	Securities		Value		Losses			Securities		Value		Losses			Securities		Value		Losses
Obligations of U.S. Government agencies and corporations		5	$	10,845	$	(157	)		15	$	23,369	$	(627	)		20	$	34,214	$	(784	)
Obligations of state and political subdivisions		23		10,491		(70	)		6		3,862		(108	)		29		14,353		(178	)
Mortgage-backed securities		23		51,050		(518	)		20		38,740		(955	)		43		89,790		(1,473	)
Total debt securities		51		72,386		(745	)		41		65,971		(1,690	)		92		138,357		(2,435	)
Equity securities		1		9		-			1		4		-			2		13		-
Total temporarily impaired securities		52	$	72,395	$	(745	)		42	$	65,975	$	(1,690	)		94	$	138,370	$	(2,435	)

7. Loans and Related Allowance for Loan Losses

The following table presents the classes of the loan portfolio summarized by the aggregate pass rating and the classified ratings of special mention, substandard and doubtful within the Company’s internal risk rating system as of December 31, 2018 and December 31, 2017. Due to the expansion of the Company’s internal credit quality risk ratings in the second quarter of 2018, the amount reclassified from the special mention rating to the pass/watch rating, which is included within the pass rating classification below, was $32,603,000 at June 30, 2018. Previously, both special mention and watch rated loans were reported under the special mention rating classification.

(Dollars in thousands)
			Special
As of December 31, 2018	Pass		Mention		Substandard		Doubtful		Total
Commercial, financial and agricultural	$	42,757	$	2,992	$	814	$	-	$	46,563
Real estate - commercial		125,352		8,590		6,459		894		141,295
Real estate - construction		34,131		-		2,528		29		36,688
Real estate - mortgage		160,774		24		2,569		181		163,548
Obligations of states and political subdivisions		19,129		-		-		-		19,129
Personal		10,389		-		19		-		10,408
Total	$	392,532	$	11,606	$	12,389	$	1,104	$	417,631

(Dollars in thousands)
			Special
As of December 31, 2017	Pass		Mention		Substandard		Doubtful		Total
Commercial, financial and agricultural	$	34,826	$	8,692	$	2,280	$	4	$	45,802
Real estate - commercial		114,299		17,928		7,189		953		140,369
Real estate - construction		22,470		3,297		2,636		-		28,403
Real estate - mortgage		139,861		3,551		2,859		617		146,888
Obligations of states and political subdivisions		12,088		956		-		-		13,044
Personal		9,360		32		6		-		9,398
Total	$	332,904	$	34,456	$	14,970	$	1,574	$	383,904

The Company has certain loans in its portfolio that are considered to be impaired. It is the policy of the Company to recognize income on impaired loans that have been transferred to nonaccrual status on a cash basis, only to the extent that it exceeds principal balance recovery. A collateral analysis is performed on each impaired loan at least quarterly, and results are used to determine if a specific reserve is necessary to adjust the carrying value of each individual loan down to the estimated fair value of the collateral, less costs to sell. Generally, specific reserves are carried against impaired loans based upon estimated collateral value until a confirming loss event occurs or until termination of the credit is scheduled through liquidation of the collateral or foreclosure. Consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process at December 31, 2018 and December 31, 2017 totaled $94,000 and $1,285,000, respectively. Charge-offs will occur when a confirmed loss is identified. Professional appraisals of collateral, discounted for expected selling costs, are used to determine the charge-off amount.

The following tables summarize information regarding impaired loans by portfolio class as of December 31, 2018 and December 31, 2017:

(Dollars in thousands)	As of December 31, 2018						As of December 31, 2017
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
Impaired Loans
With no related allowance recorded:
Commercial, financial and agricultural	$	-	$	-	$	-	$	468	$	477	$	-
Real estate - commercial		909		1,303		-		5,031		5,957		-
Acquired with credit  deterioration		544		592		-		191		247		-
Real estate - construction		27		1,123		-		-		-		-
Real estate - mortgage		1,180		1,912		-		2,232		3,738		-
Acquired with credit  deterioration		971		1,061		-		337		384		-
Personal		17		17		-		-		-		-
Total:
Commercial, financial and agricultural	$	-	$	-	$	-	$	468	$	477	$	-
Real estate - commercial		909		1,303		-		5,031		5,957		-
Acquired with credit  deterioration		544		592		-		191		247		-
Real estate - construction		27		1,123		-		-		-		-
Real estate - mortgage		1,180		1,912		-		2,232		3,738		-
Acquired with credit  deterioration		971		1,061		-		337		384		-
Personal		17		17		-		-		-		-
	$	3,648	$	6,008	$	-	$	8,259	$	10,803	$	-

(Dollars in thousands)	Year Ended December 31, 2018						Year Ended December 31, 2017						Year Ended December 31, 2016
	Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Income		Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Income		Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Income
Impaired Loans
With no related allowance recorded:
Commercial, financial and agricultural	$	234	$	-	$	-	$	452	$	25	$	-	$	456	$	29	$	-
Real estate - commercial		2,970		-		-		5,265		313		-		3,675		331		-
Acquired with credit deterioration		368		-		-		416		-		-		738		-		-
Real estate - construction		14		-		-		1,228		34		-		1,228		136		-
Real estate - mortgage		1,706		19		33		2,789		21		20		2,991		28		37
Acquired with credit  deterioration		654		-		-		376		-		-		523		-		-
Personal		9		-		-		-						-
With an allowance recorded:
Real estate - mortgage	$	-	$	-	$	-	$	356	$	-	$	-	$	356	$	-	$	-
Total:
Commercial, financial and agricultural		234		-		-		452		25		-		456		29		-
Real estate - commercial		2,970		-		-		5,265		313		-		3,675		331		-
Acquired with credit  deterioration		368		-		-		416		-		-		738		-		-
Real estate - construction		14		-		-		1,228		34		-		1,228		136		-
Real estate - mortgage		1,706		19		33		3,145		21		20		3,347		28		37
Acquired with credit  deterioration		654		-		-		376		-		-		523		-		-
Personal		9		-		-		-		-		-		-		-		-
	$	5,955	$	19	$	33	$	10,882	$	393	$	20	$	9,967	$	524	$	37

The following table presents nonaccrual loans by classes of the loan portfolio as of December 31, 2018 and December 31, 2017:

(Dollars in thousands)
	December 31, 2018		December 31, 2017
Nonaccrual loans:
Commercial, financial and agricultural	$	-	$	4
Real estate - commercial		908		953
Real estate - construction		29		-
Real estate - mortgage		753		1,917
Personal		17		-
Total	$	1,707	$	2,874

Interest income not recorded based on the original contractual terms of the loans for nonaccrual loans was $311,000, $300,000 and $281,000 in 2018, 2017 and 2016, respectively.

The performance and credit quality of the loan portfolio is also monitored by analyzing the age of the loans receivable as determined by the length of time a recorded payment is past due. The following table presents the classes of the loan portfolio summarized by the past due status as of December 31, 2018 and December 31, 2017:

													Loans
													Past Due
													Greater
(Dollars in thousands)					Greater								than 90
	30-59 Days		60-89 Days		than 90		Total Past						Days an
As of December 31, 2018	Past Due		Past Due		Days		Due		Current		Total Loans		Accruing(1)
Commercial, financial and agricultural	$	6	$	-	$	-	$	6	$	46,557	$	46,563	$	-
Real estate - commercial
Real estate - commercial		-		-		1,214		1,214		139,890		141,104		306
Acquired with credit deterioration		140		-		-		140		51		191		-
Real estate - construction		32		-		29		61		36,627		36,688		-
Real estate - mortgage
Real estate - mortgage		824		561		175		1,560		161,651		163,211		23
Acquired with credit deterioration		259		-		7		266		71		337		7
Obligations of states and political  subdivisions		-		-		-		-		19,129		19,129		-
Personal		24		15		17		56		10,352		10,408		-
Total	$	1,285	$	576	$	1,442	$	3,303	$	414,328	$	417,631	$	336

													Loans
													Past Due
													Greater
(Dollars in thousands)					Greater								than 90
	30-59 Days		60-89 Days		than 90		Total Past						Days an
As of December 31, 2017	Past Due		Past Due		Days		Due		Current		Total Loans		Accruing(1)
Commercial, financial and agricultural	$	-	$	-	$	-	$	-	$	45,802	$	45,802	$	-
Real estate - commercial
Real estate - commercial		16		23		-		39		140,139		140,178		-
Acquired with credit deterioration		-		-		28		28		163		191		28
Real estate - construction		-		-		-		-		28,403		28,403		-
Real estate - mortgage
Real estate - mortgage		694		80		64		838		145,713		146,551		64
Acquired with credit deterioration		-		-		123		123		214		337		123
Obligations of states and political  subdivisions		-		-		-		-		13,044		13,044		-
Personal		66		6		-		72		9,326		9,398		-
Total	$	776	$	109	$	215	$	1,100	$	382,804	$	383,904	$	215

(1) These loans are guaranteed, or well secured, and there is an effective means of collection in process.

The following table summarizes information regarding troubled debt restructurings by loan portfolio class as of and for the years ended December 31, 2018 and 2017.

(Dollars in thousands)			Pre-Modification		Post-Modification
	Number of		Outstanding		Outstanding
	Contracts		Recorded Investment		Recorded Investment		Recorded Investment
As of December 31, 2018
Accruing troubled debt restructurings:
Real estate - mortgage		8	$	522	$	550	$	428
Non-accruing troubled debt  restructurings:
Real estate - mortgage		1		25		25		17
		9	$	547	$	575	$	445

(Dollars in thousands)			Pre-Modification		Post-Modification
	Number of		Outstanding		Outstanding
	Contracts		Recorded Investment		Recorded Investment		Recorded Investment
As of December 31, 2017
Accruing troubled debt restructurings:
Real estate - commercial
Real estate - mortgage		7	$	369	$	397	$	315
Non-accruing troubled debt  restructurings:
Commercial, financial, agricultural		1		19		20		4
Real estate - mortgage		1		25		25		20
		9	$	413	$	442	$	339

The Company’s troubled debt restructurings are also impaired loans, which may result in a specific allocation and subsequent charge-off if appropriate. As of December 31, 2018, there were no specific reserves relating to the troubled debt restructurings, nor were there any charge-offs on troubled debt restructured loans recorded in 2018. The amended terms of the restructured loans vary, whereby interest rates have been reduced, principal payments have been reduced or deferred for a period of time and/or maturity dates have been extended.

As of December 31, 2018, one restructured loan for $39,000 was in default because it was delinquent in excess of 30 days with respect to the terms of the restructuring. There were no defaults of troubled debt restructurings within 12 months of restructure during 2018, 2017 or 2016.

The following tables summarize loans whose terms were modified, resulting in troubled debt restructurings during 2018 and 2017.

(Dollars in thousands)			Pre-Modification		Post-Modification
	Number of		Outstanding		Outstanding
	Contracts		Recorded Investment		Recorded Investment		Recorded Investment
Year ended December 31, 2018
Non-accruing troubled debt  restructurings:
Real estate - mortgage		1	$	153	$	153	$	147
		1	$	153	$	153	$	147

(Dollars in thousands)			Pre-Modification		Post-Modification
	Number of		Outstanding		Outstanding
	Contracts		Recorded Investment		Recorded Investment		Recorded Investment
Year ended December 31, 2017
Non-accruing troubled debt  restructurings:
Commercial, financial, agricultural		1	$	19	$	20	$	4
		1	$	19	$	20	$	4

The following tables summarize loans and the activity in the allowance for loan losses by loan class, segregated into the amount required for loans individually evaluated for impairment and the amount required for loans collectively evaluated for impairment as of and for the years ended December 31, 2018, 2017 and 2016:

(Dollars in thousands)												Obligations
	Commercial,											of states
	financial and			Real estate-			Real estate-		Real estate-			and political
Allowance for loan losses:	agricultural			commercial			construction		mortgage			subdivisions		Personal			Total
Beginning Balance, January 1, 2018	$	273		$	1,022		$	288	$	1,285		$	-	$	71		$	2,939
Charge-offs		-			(60	)		-		(183	)		-		(42	)		(285	)
Recoveries		10			5			-		12			-		16			43
Provisions		(8	)		107			270		(79	)		20		27			337
Ending balance, December 31, 2018	$	275		$	1,074		$	558	$	1,035		$	20	$	72		$	3,034
collectively evaluated for impairment	$	275		$	1,074		$	558	$	1,035		$	20	$	72		$	3,034
Loans receivable:
Ending balance	$	46,563		$	141,295		$	36,688	$	163,548		$	19,129	$	10,408		$	417,631
individually evaluated for impairment		-			909			27		1,180			-		17			2,133
acquired with credit deterioration		-			544			-		971			-		-			1,515
collectively evaluated for impairment	$	46,563		$	139,842		$	36,661	$	161,397		$	19,129	$	10,391		$	413,983

(Dollars in thousands)												Obligations
	Commercial,											of states
	financial and			Real estate-			Real estate-		Real estate-			and political
Allowance for loan losses:	agricultural			commercial			construction		mortgage			subdivisions		Personal			Total
Beginning Balance, January 1, 2017	$	318		$	948		$	231	$	1,143		$	-	$	83		$	2,723
Charge-offs		(46	)		(70	)		-		(149	)		-		(27	)		(292	)
Recoveries		5			2			-		45			-		17			69
Provisions		(4	)		142			57		246			-		(2	)		439
Ending balance, December 31, 2017	$	273		$	1,022		$	288	$	1,285		$	-	$	71		$	2,939
collectively evaluated for impairment	$	273		$	1,022		$	288	$	1,285		$	-	$	71		$	2,939
Loans receivable:
Ending balance	$	45,802		$	140,369		$	28,403	$	146,888		$	13,044	$	9,398		$	383,904
individually evaluated for impairment		468			5,031			-		2,232			-		-			7,731
acquired with credit deterioration		-			191			-		337			-		-			528
collectively evaluated for impairment	$	45,334		$	135,147		$	28,403	$	144,319		$	13,044	$	9,398		$	375,645

(Dollars in thousands)												Obligations
	Commercial,											of states
	financial and			Real estate-			Real estate-		Real estate-			and political
Allowance for loan losses:	agricultural			commercial			construction		mortgage			subdivisions		Personal			Total
Beginning Balance, January 1, 2016	$	264		$	836		$	191	$	1,140		$	-	$	47		$	2,478
Charge-offs		(4	)		(146	)		-		(103	)		-		(26	)		(279	)
Recoveries		-			24			-		15			-		19			58
Provisions		58			234			40		91			-		43			466
Ending balance, December 31, 2016	$	318		$	948		$	231	$	1,143		$	-	$	83		$	2,723
individually evaluated for impairment		-			-			-		56			-		-			56
collectively evaluated for impairment	$	318		$	948		$	231	$	1,087		$	-	$	83		$	2,667
Loans receivable:
Ending balance	$	40,827		$	123,711		$	35,206	$	154,905		$	13,616	$	10,032		$	378,297
individually evaluated for impairment		436			5,499			2,455		4,057			-		-			12,447
acquired with credit deterioration		-			641			-		415			-		-			1,056
collectively evaluated for impairment	$	40,391		$	117,571		$	32,751	$	150,433		$	13,616	$	10,032		$	364,794

8. Pledged Assets

The Bank must maintain sufficient qualifying collateral with the FHLB in order to secure borrowings. Therefore, a Master Collateral Agreement has been entered into which pledges all mortgage related assets as collateral for future borrowings. Mortgage related assets could include loans or investment securities. As of December 31, 2018, the amount of loans included in qualifying collateral was $261,442,000, for a lending value of $187,818,000. As of December 31, 2017, the amount of loans included in qualifying collateral was $224,561,000, for a lending value of $163,181,000. No investment securities are included in qualifying collateral as of December 31, 2018 or 2017.

9. Bank Owned Life Insurance and Annuities

The Company holds bank-owned life insurance (“BOLI”) and deferred annuities with a combined cash value of $15,938,000 and $14,972,000 at December 31, 2018 and 2017, respectively. As annuitants retire, the deferred annuities may be converted to payout annuities to create payment streams that match certain post-retirement liabilities. The net increase in cash surrender value on the BOLI and annuities was $966,000 and $341,000 in 2018 and 2017, respectively, while the cash surrender value decreased in 2016 by $274,000; the net change resulting from the addition of BOLI acquired through acquisition, proceeds from life insurance claim payments, premium payments and earnings recorded as non-interest income. The contracts are owned by the Bank in various insurance companies. The crediting rate on the policies varies annually based on the insurance companies’ investment portfolio returns in their general fund and market conditions. Changes in cash value of BOLI and annuities in 2018 and 2017 are shown below:

(Dollars in thousands)	Life		Deferred
	Insurance		Annuities		Total
Balance as of January 1, 2017	$	14,198		433	$	14,631
Earnings		285		16		301
Premiums on existing policies		27		13		40
Balance as of December 31, 2017		14,510		462		14,972
Earnings		277		18		295
Premiums on existing policies		25		13		38
Annuity payments received		1		-		1
BOLI acquired through acquisition		632		-		632
Balance as of December 31, 2018	$	15,445	$	493	$	15,938

10. Premises And Equipment

Premises and equipment consist of the following:

(Dollars in thousands)	December 31,
	2018			2017
Land	$	1,158		$	1,126
Buildings and improvements		11,645			11,358
Furniture, computer software and equipment		6,217			5,898
		19,020			18,382
Less: accumulated depreciation		(10,276	)		(9,495	)
	$	8,744		$	8,887

Depreciation expense on premises and equipment charged to operations was $815,000 in 2018, $672,000 in 2017 and $595,000 in 2016.

11. Goodwill and other intangible assets

Branch Acquisition

On September 8, 2006, the Company acquired a branch office in Richfield, PA. Goodwill at December 31, 2018 and 2017 was $2,046,000. The core deposit intangible of $431,000 was fully amortized as of December 31, 2018 and 2017. The core deposit intangible was being amortized over a ten-year period on a straight-line basis. Goodwill is not amortized, but is measured annually for impairment.

FNBPA Acquisition

On November 30, 2015, the Company completed its acquisition of FNBPA and, as a result, recorded goodwill of $3,335,000. In 2016, an adjustment was made to increase goodwill to $3,402,000, which is where the balance remained as of December 31, 2018 and 2017. Core deposit intangible in the amount of $303,000 was recorded and is being amortized over a ten-year period using a sum of the year’s digits basis. Other intangible assets were identified and recorded as of November 30, 2015, in the amount of $40,000 and were amortized on a straight-line basis over two years, through November 30, 2017.

LCB Acquisition

On April 30, 2018, Juniata completed the acquisition of LCB and, as a result, recorded goodwill of $3,691,000, which was also the balance at December 31, 2018. In addition, a core deposit intangible of $289,000 was recorded and will be amortized over a ten-year period using a sum of the years’ digits basis.

The following table shows the amortization schedule for each of the intangible assets recorded.

(Dollars in thousands)	LCB		FNBPA		FNBPA		Branch
	Acquisition		Acquisition		Acquisition		Acquisition
	Core		Core		Other		Core
	Deposit		Deposit		Intangible		Deposit
	Intangible		Intangible		Assets		Intangible
Beginning Balance at Acquisition Date	$	289	$	303	$	40	$	431
Amortization expense recorded prior to December 31, 2015		-		4		2		402
Amortization expense recorded in Years ended:
December 31, 2016		-		55		20		29
December 31, 2017		-		49		18		-
December 31, 2018		35		44		-		-
Unamortized balance as of December 31, 2018		254		151		-		-
Scheduled Amortization expense for years ended:
December 31, 2019		49		38		-		-
December 31, 2020		44		33		-		-
December 31, 2021		39		27		-		-
December 31, 2022		33		22		-		-
December 31, 2023		28		16		-		-
After December 31, 2023		61		15		-		-

12. Investment in Unconsolidated Subsidiary

The Company no longer has an investment in an unconsolidated subsidiary following its acquisition of the remainder of the outstanding common stock of Liverpool on April 30, 2018. Prior to the acquisition, the Company owned 39.16% of the outstanding common stock of Liverpool. The investment was accounted for under the equity method of accounting and was carried at $4,812,000 as of December 31, 2017. The Company increased its investment in LCB for its share of earnings and decreased its investment by any dividends received from LCB. The investment was evaluated quarterly for impairment. A loss in value of the investment which is determined to be other than a temporary decline would have been recognized as a loss in the period in which such determination was made. Evidence of a loss in value might include, but would not necessarily be limited to, absence of an ability to recover the carrying amount of the investment or inability of LCB to sustain an earnings capacity that would justify the current carrying value of the investment. There was no impairment of the investment relating to LCB prior to the acquisition on April 30, 2018. A deferred tax liability of $406,000 related to the previous 39.16% ownership in LCB, was removed as of April 30, 2018, resulting in a corresponding reduction in income tax expense.

The following table illustrates the components of the income/gain from the unconsolidated subsidiary investment recorded for the years ended December 31, 2018, 2017, and 2016.

(Dollars in thousands)

	Years Ended December 31,
Income from unconsolidated subsidiary (excluding merger-related adjustments)	2018			2017		2016
Dividend income	$	36		$	61	$	55
Equity income		45			106		167
Total income (excluding merger-related adjustments)		81			167		222
Merger-related adjustments for investment in unconsolidated subsidiary
Adjustment to LCB book value at April 30, 2018		(239	)		-		-
Special merger-related dividend		39			-		-
Fair value gain		415			-		-
Total merger-related adjustments		215			-		-
Total income/gain from unconsolidated subsidiary	$	296		$	167	$	222

13. Deposits

The aggregate amount of demand deposit overdrafts that were reclassified as loans were $75,000 at December 31, 2018, compared to $33,000 at December 31, 2017.

Deposits consist of the following:

(Dollars in thousands)	December 31,
	2018		2017
Demand, non-interest bearing	$	126,057	$	115,911
Interest-bearing demand and money market		147,413		122,407
Savings		99,236		98,966
Time deposits, $250,000 or more		8,368		8,456
Other time deposits		140,648		131,928
	$	521,722	$	477,668

Deposits and other funds from related parties held by Juniata amounted to $1,215,000 and $1,116,000 at December 31, 2018 and 2017, respectively.

Aggregate amount of scheduled maturities of time deposits as of December 31, 2018 include the following:

(Dollars in thousands)
	Time Deposits
Maturing in:	$250,000 or more		Other		Total Time Deposits
2019	$	3,538	$	49,056	$	52,594
2020		2,715		34,817		37,532
2021		513		21,694		22,207
2022		-		9,503		9,503
2023		607		11,070		11,677
Later		995		14,508		15,503
	$	8,368	$	140,648	$	149,016

14. Borrowings

Short term borrowings as of December 31, 2018, 2017 and 2016, and the related maximum amounts outstanding at the end of any month in each of the three years ended, are presented below.

(Dollars in thousands)	December 31,						Maximum Outstanding at Any Month End
	2018		2017		2016		2018		2017		2016
Securities sold under agreements to repurchase	$	2,911	$	9,769	$	4,496	$	4,620	$	9,769	$	6,018
Short-term borrowings  with FHLB:
Overnight advances		11,600		12,000		27,700		29,238		30,721		32,300
	$	14,511	$	21,769	$	32,196	$	33,858	$	40,490	$	38,318

The following table presents supplemental information related to short-term borrowings.

	Securities sold under agreements									Short-term borrowings with
(Dollars in thousands)	to repurchase									Federal Home Loan Bank
	2018			2017			2016			2018			2017			2016
Amount outstanding as of December 31	$	2,911		$	9,769		$	4,496		$	11,600		$	12,000		$	27,700
Weighted average interest rate as of December 31		2.13	%		0.32	%		0.18	%		2.62	%		1.54	%		0.74	%
Average amount out- standing during the year		4,177			4,823			4,712			9,906			25,476			15,696
Weighted average interest rate during the year		1.49	%		0.64	%		0.11	%		1.92	%		1.16	%		0.60	%

Long-term debt is comprised only of FHLB advances with an original maturity of one year or more. Outstanding balances were $15,000,000 as of December 31, 2018 and $25,000,000 as of December 31, 2017.

The following table summarizes the scheduled maturities of long-term debt as of December 31, 2018.

(Dollars in thousands)
	Scheduled		Weighted Average
Year	Maturities		Interest Rate
2019		15,000		1.59	%
2020		-		-
2021		-		-
2022		-		-
2023		-		-
Thereafter		-		-
	$	15,000		1.59	%

The Bank has repurchase agreements with several of its depositors, under which customers’ funds are invested daily into an interest bearing account. These funds are carried by the Company as short-term debt. It is the Company’s policy to completely collateralize repurchase agreements with U.S. Government securities. As of December 31, 2018, the securities that serve as collateral for securities sold under agreements to repurchase had a fair value of $8,666,000. The interest rate paid on these funds is variable and subject to change daily.

The Bank’s maximum borrowing capacity with the FHLB is $187,818,000, with a balance of $26,600,000 outstanding as of December 31, 2018. In order to borrow additional amounts, the FHLB would require the Bank to purchase additional FHLB Stock. The FHLB is a source of both short-term and long-term funding. The Bank must maintain sufficient qualifying collateral to secure all outstanding advances. Qualifying collateral is defined by the FHLB and includes outstanding balances of the Company’s real estate loans, excluding loans with certain risk mitigants, including delinquencies and loans made to insiders, borrowers with low credit scores or loans with high loan-to-value ratios.

15. Operating Lease Obligations

The Company has entered into four operating lease arrangements. The operating leases are for two branch and two office locations. The majority of the leases are renewable at the Company’s option. One of the office location lease agreements is with a related party. The original term of this lease was for ten years followed by fifteen annual renewal options. The Company is currently in the fifth annual renewal period.

Future minimum lease commitments are based on current rental payments. Rental expense charged to operations, including license fees for branch offices, was $109,000, $147,000 and $142,000 in 2018, 2017 and 2016, respectively. The primary reason for the decline in rental expense in 2018 was because a previously leased branch office was relocated to a newly constructed branch facility owned by Juniata at the end of 2017.

The following is a summary of future minimum rental payments for the next five years required under operating leases that have initial or remaining noncancelable lease terms in excess of one year as of December 31, 2018:

(Dollars in thousands)
Years ending December 31,	Lease Obligation
2019	$	111
2020		93
2021		83
2022		26
2023		21
2024 and beyond		95
Total minimum payments required	$	429

16. Income Taxes

ASC 740 requires the effects of tax law and rate changes be reflected as a component of tax expense from continuing operations. Due to the enactment of the Tax Cuts and Jobs Act on December 22, 2017, Juniata’s future maximum corporate tax rate was lowered from 34% to 21%, thereby decreasing the future tax benefit of its net deferred tax asset by 13%. Though the reduced rate will provide tax savings to Juniata in future periods, the reduction resulted in a write-downs of Juniata’s net deferred tax assets, which was previously valued based upon the projection of a 34% future tax rate. As a result, a non-cash charge of $416,000 was included in the 2017 expense for income taxes. In 2018, the value of Juniata’s net deferred tax asset was adjusted again, primarily due to a defined benefit contribution applied to the 2017 tax year that resulted in a decline in tax expense of $168,000 in 2018. Offsetting the tax expense was the effect of tax credits for Juniata’s investment in two low-income housing partnerships amounting to $901,000 in 2018, $722,000 in 2017 and $572,000 in 2016. Tax credits associated with phase I will continue through 2023. Phase II credits were initiated in the second half of 2017 and will run through 2027. The tax credits are included in the tax expense line item on the Consolidated Statements of Income. In addition, a $406,000 deferred tax liability related to the previous 39.16% ownership in Liverpool, was removed as of April 30, 2018, resulting in a corresponding reduction in income tax expense.

The components of income tax (benefit) expense for the three years ended December 31 were:

(Dollars in thousands)	Years Ended December 31,
	2018			2017		2016
Current tax (benefit) expense	$	(563	)	$	379	$	499
Deferred tax expense		(96	)		681		320
Total tax (benefit) expense	$	(659	)	$	1,060	$	819

A reconciliation of the statutory income tax (benefit) expense computed at 21% in 2018 and 34% in both 2017 and 2016 to the income tax expense included in the consolidated statements of income follows:

(Dollars in thousands)	Years Ended December 31,
	2018			2017			2016
Income before income taxes	$	5,245		$	5,597		$	5,975
Statutory tax rate		21.0	%		34.0	%		34.0	%
Federal tax at statutory rate		1,101			1,903			2,032
Tax-exempt interest		(271	)		(443	)		(427	)
Net earnings on BOLI		(50	)		(75	)		(84	)
Gain from life insurance proceeds		-			-			(124	)
Dividend from unconsolidated subsidiary		(10	)		(17	)		(15	)
Stock-based compensation		19			24			23
Federal tax credits		(901	)		(722	)		(572	)
Merger and acquisition expenses		33			-			-
Tax reform adjustment		-			416			-
Defined benefit prior year contribution, net of other PTR adjustments		(198	)		-			-
Basis difference related to LCB investment  prior to acquisition		(406	)		-			-
Other permanent differences		24			(26	)		(14	)
Total tax (benefit) expense	$	(659	)	$	1,060		$	819
Effective tax rate		(12.6	)%		18.9	%		13.7	%

Deductible temporary differences and taxable temporary differences gave rise to a net deferred tax asset for the Company as of December 31, 2018 and 2017. The components giving rise to the net deferred tax asset are detailed below:

(Dollars in thousands)	Years Ended December 31,
	2018			2017
Deferred Tax Assets:
Allowance for loan losses	$	494		$	369
Deferred directors' compensation		345			338
Employee and director benefits		309			320
Qualified pension liability		78			512
Unrealized losses on securities available for sale		655			439
Unrealized loss from securities impairment		34			37
Investment in low income housing project		142			141
Fair value adjustments to acquired assets and liabilities		293			168
Tax credit carryforward		225			75
Valuation reserves on other real estate owned		1			1
Other		1			-
Total deferred tax assets		2,577			2,400
Deferred Tax Liabilities:
Depreciation		(445	)		(345	)
Equity income from unconsolidated subsidiary		-			(368	)
Loan origination costs		(384	)		(340	)
Prepaid expense		(229	)		(230	)
Annuity earnings		(56	)		(52	)
Fair value of mortgage servicing rights		(42	)		(47	)
Intangible assets		(68	)		(18	)
Goodwill		(353	)		(324	)
Other		-			(24	)
Total deferred tax liabilities		(1,577	)		(1,748	)
Net deferred tax asset included in other assets	$	1,000		$	652

The Company has concluded that the deferred tax assets are realizable (on a more likely than not basis) through the combination of future reversals of existing taxable temporary differences, certain tax planning strategies and expected future taxable income.

It is the Company’s policy to recognize interest and penalties on unrecognized tax benefits in income tax expense in the Consolidated Statements of Income. No significant income tax uncertainties were identified as a result of the Company’s evaluation of its income tax position. Therefore, the Company recognized no adjustment for unrecognized income tax benefits for the years ended December 31, 2018, 2017 and 2016. The Company is no longer subject to examination by taxing authorities for years before 2015.  Tax years 2015 through the present, with limited exception, remain open to examination.

17. Stockholders’ Equity and Regulatory Matters

The Company is authorized to issue 500,000 shares of preferred stock with no par value. The Board has the ability to fix the voting, dividend, redemption and other rights of the preferred stock, which can be issued in one or more series. No shares of preferred stock have been issued.

The Company has a dividend reinvestment and stock purchase plan. Under this plan, additional shares of Juniata Valley Financial Corp. stock may be purchased at the prevailing market prices through reinvested dividends and voluntary cash payments, within limits. To the extent that shares are not available in the open market, the Company has reserved common stock to be issued under the plan. Any adjustment in capitalization of the Company will result in a proportionate adjustment to the reserved shares for this plan. At December 31, 2018, 141,887 shares were available for issuance under the Dividend Reinvestment Plan.

The Company periodically repurchases shares of its common stock under a share repurchase program approved by the Board of Directors. Repurchases have typically been through open market transactions and have complied with all regulatory restrictions on the timing and amount of such repurchases. Shares repurchased have been added to treasury stock and accounted for at cost. These shares may be reissued for stock option exercises, stock awards, employee stock purchase plan purchases, to fulfill dividend reinvestment program needs and to supply shares needed for exchange in an acquisition. During 2018, 2017 and 2016, 3,416, 4,289 and 49,370 shares, respectively, were repurchased in conjunction with this program. Remaining shares authorized in the program were 170,574 as of December 31, 2018.

The Company and the Bank are subject to risk-based capital standards by which bank holding companies and banks are evaluated in terms of capital adequacy. These regulatory capital requirements are administered by the federal banking agencies. Failure to meet minimum capital requirements can result in certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the Company’s and the Bank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Company’s and Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to each maintain minimum amounts and ratios. The requirements were revised and became effective on a phased-in basis beginning January 1, 2015 and included the establishment of a Common Equity Tier I level. Juniata’s and the Bank’s Total, Tier I and Common Equity Tier I capital (as defined in the regulations) to risk-weighted assets (as defined in the regulations), and Tier I capital (as defined in the regulations) to average assets (as defined in the regulations) are set forth in the table below. These risk-based capital rules require that banks and holding companies maintain a “capital conservation buffer” of 250 basis points in excess of the “minimum capital ratio”. The minimum capital ratio is equal to the prompt corrective action adequately capitalized threshold ratio. The capital conservation buffer was fully phased in as of January 1, 2019. The maximum buffer for 2018 was 1.875% and is 2.5% for 2019 and thereafter. Failure to maintain the required capital conservation buffer will result in limitations on capital distributions and on discretionary bonuses to executive officers. Management believes, as of December 31, 2018 and 2017, that the Company and the Bank met all capital adequacy requirements to which they were subject.

As of December 31, 2018, the most recent notification from the regulatory banking agencies categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as “well capitalized”, the Bank must maintain minimum Total risk-based, Tier I risk-based, Common Equity Tier I risk-based and Tier I leverage ratios as set forth in the table. To the knowledge of management, there are no conditions or events since these notifications that have changed the Bank’s category.

The table below provides a comparison of the Company’s and the Bank’s risk-based capital ratios and leverage ratios to the minimum regulatory requirements as of the dates indicated.

Juniata Valley Financial Corp. (Consolidated)						Minimum Requirement
						for Capital
(Dollars in thousands)	Actual					Adequacy Purposes
	Amount		Ratio			Amount		Ratio
As of December 31, 2018:
Total Capital (to Risk Weighted Assets)	$	63,883		15.86	%	$	32,214		8.00	%
Tier 1 Capital (to Risk Weighted Assets)		60,849		15.11	%		24,160		6.00	%
Common Equity Tier 1 Capital (to Risk Weighted Assets)		60,849		15.11	%		18,120		4.50	%
Tier 1 Capital (to Average Assets) Leverage		60,849		10.01	%		24,318		4.00	%
As of December 31, 2017:
Total Capital (to Risk Weighted Assets)	$	59,667		15.01	%	$	31,809		8.00	%
Tier 1 Capital (to Risk Weighted Assets)		55,808		14.04	%		23,857		6.00	%
Common Equity Tier 1 Capital (to Risk Weighted Assets)		55,808		14.04	%		17,892		4.50	%
Tier 1 Capital (to Average Assets) Leverage		55,808		9.43	%		23,666		4.00	%

																Minimum
																Regulatory
																Requirements
											Minimum					to be "Well
											Capital					Capitalized"
The Juniata Valley Bank						Minimum Requirement					Adequacy					under Prompt
						for Capital					with Capital					Corrective Action
(Dollars in thousands)	Actual					Adequacy Purposes					Buffer					Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio
As of December 31, 2018:
Total Capital	$	62,422		15.50	%	$	32,222		8.00	%	$	39,774		9.875	%	$	40,278		10.00	%
(to Risk Weighted Assets)
Tier 1 Capital		59,388		14.74	%		24,167		6.00	%		31,719		7.875	%		32,222		8.00	%
(to Risk Weighted Assets)
Common Equity Tier 1 Capital		59,388		14.74	%		18,125		4.50	%		25,677		6.375	%		26,181		6.50	%
(to Risk Weighted Assets)
Tier 1 Capital		59,388		9.77	%		24,317		4.00	%		24,317		4.000	%		30,397		5.00	%
(to Average Assets) Leverage
As of December 31, 2017:
Total Capital	$	52,009		13.24	%	$	31,435		8.00	%	$	36,346		9.250	%	$	39,293		10.00	%
(to Risk Weighted Assets)
Tier 1 Capital		49,026		12.48	%		23,576		6.00	%		28,488		7.250	%		31,435		8.00	%
(to Risk Weighted Assets)
Common Equity Tier 1 Capital		49,026		12.48	%		17,682		4.50	%		22,594		5.750	%		25,541		6.50	%
(to Risk Weighted Assets)
Tier 1 Capital		49,026		8.36	%		23,460		4.00	%		23,460		4.000	%		29,325		5.00	%
(to Average Assets) Leverage

Certain regulatory restrictions exist regarding the ability of the Bank to transfer funds to the Company in the form of cash dividends, loans or advances. At December 31, 2018, $42,119,000 of undistributed earnings of the Bank, included in the consolidated stockholders’ equity, was available for distribution to the Company as dividends without prior regulatory approval, subject to the regulatory capital requirements above.

18. Calculation Of Earnings Per Share

Basic earnings per share (“EPS”) is computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company. Potential common shares that may be issued by the Company relate solely to outstanding stock options and are determined using the treasury stock method. Restricted stock is participating, and therefore, is included in the EPS calculation. The following table sets forth the computation of basic and diluted earnings per share:

(Dollars in thousands, except earnings per share)	Years Ended December 31,
	2018		2017		2016
Net income	$	5,904	$	4,537	$	5,156
Weighted-average common shares outstanding		4,987		4,765		4,801
Basic earnings per share	$	1.18	$	0.95	$	1.07
Weighted-average common shares outstanding		4,987		4,765		4,801
Common stock equivalents due to effect of stock options		22		10		1
Total weighted-average common shares and equivalents	$	5,009	$	4,775	$	4,802
Diluted earnings per share	$	1.18	$	0.95	$	1.07
Anti-dilutive stock options outstanding		-		6		401

19. Accumulated other Comprehensive loss

Components of accumulated other comprehensive loss, net of tax as of December 31 of each of the last three years consist of the following:

(Dollars in thousands)	As of December 31,
	2018			2017			2016
Unrealized losses on available for sale securities	$	(2,647	)	$	(1,683	)	$	(866	)
Unrecognized expense for defined benefit pension		(1,652	)		(2,351	)		(2,343	)
Accumulated other comprehensive loss	$	(4,299	)	$	(4,034	)	$	(3,209	)

20. Fair Value Measurement

Fair value measurement and disclosure guidance defines fair value as the price that would be received to sell an asset or transfer a liability in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. Additional guidance is provided on determining when the volume and level of activity for the asset or liability has significantly decreased. The guidance also includes guidance on identifying circumstances when a transaction may not be considered orderly.

Fair value measurement and disclosure guidance provides a list of factors that a reporting entity should evaluate to determine whether there has been a significant decrease in the volume and level of activity for the asset or liability in relation to normal market activity for the asset or liability. When the reporting entity concludes there has been a significant decrease in the volume and level of activity for the asset or liability, further analysis of the information from that market is needed, and significant adjustments to the related prices may be necessary to estimate fair value in accordance with fair value measurement and disclosure guidance.

This guidance clarifies that, when there has been a significant decrease in the volume and level of activity for the asset or liability, some transactions may not be orderly. In those situations, the entity must evaluate the weight of the evidence to determine whether the transaction is orderly. The guidance provides a list of circumstances that may indicate that a transaction is not orderly. A transaction price that is not associated with an orderly transaction is given little, if any, weight when estimating fair value.

Fair value measurement and disclosure guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. The price in the principal (or most advantageous) market used to measure the fair value of the asset or liability is not adjusted for transaction costs. An orderly transaction is a transaction that assumes exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets and liabilities; it is not a forced transaction. Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact and (iv) willing to transact.

Fair value measurement and disclosure guidance requires the use of valuation techniques that are consistent with the market approach, the income approach and/or the cost approach. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets and liabilities. The income approach uses valuation techniques to convert future amounts, such as cash flows or earnings, to a single present amount on a discounted basis. The cost approach is based on the amount that currently would be required to replace the service capacity of an asset (replacement cost). Valuation techniques should be consistently applied. Inputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability. Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources, or unobservable, meaning those that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. In that regard, the guidance establishes a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:

Level 1 Inputs – Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

Level 2 Inputs – Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market data by correlation or other means.

Level 3 Inputs – Unobservable inputs for determining the fair values of assets or liabilities that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.

An asset’s or liability’s placement in the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below.

In general, fair value is based upon quoted market prices, where available. If such quoted market prices are not available, fair value is based upon internally developed models that primarily use, as inputs, observable market-based parameters. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. These adjustments may include amounts to reflect counterparty credit quality, the Company’s creditworthiness, among other things, as well as unobservable parameters. Any such valuation adjustments are applied consistently over time. The Company’s valuation methodologies may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. While management believes the Company’s valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.

Equities Securities

The fair value of equity securities is based upon quoted prices in active markets and is reported using Level 1 inputs.

Securities Available for Sale

Debt securities classified as available for sale are reported at fair value utilizing Level 2 inputs. For these securities, the Company obtains fair value measurement from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the debt securities’ terms and conditions, among other things. Equity securities classified as available for sale are reported at fair value using Level 1 inputs.

Impaired Loans

Certain impaired loans are reported on a non-recurring basis at the fair value of the underlying collateral since repayment is expected solely from the collateral. Fair value is generally determined based upon independent third-party appraisals of the properties, or discounted cash flows based upon the expected proceeds. These assets are included as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements.

Other Real Estate Owned

Certain assets included in other real estate owned are carried at fair value as a result of impairment and accordingly are presented measured on a non-recurring basis as they are carried at the lower of cost or fair value. Values are estimated using Level 3 inputs, based on appraisals that consider the sales prices of property in the proximate vicinity less estimated costs to sell.

Mortgage Servicing Rights

The fair value of servicing assets is based on the present value of estimated future cash flows on pools of mortgages stratified by rate and maturity date and are considered Level 3 inputs.

The following table summarizes financial assets and financial liabilities measured at fair value as of December 31, 2018 and December 31, 2017, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value. There were no transfers of assets between fair value Level 1 and Level 2 during the years ended December 31, 2018 or 2017.

			(Level 1)		(Level 2)		(Level 3)
			Quoted Prices in		Significant		Significant
			Active Markets		Other		Other
	December 31,		for Identical		Observable		Unobservable
(Dollars in thousands)	2018		Assets		Inputs		Inputs
Measured at fair value on a recurring basis:
Debt securities available-for-sale:
Obligations of U.S. Government agencies  and corporations	$	23,266	$	-	$	23,266	$	-
Obligations of state and political  subdivisions		18,181		-		18,181		-
Mortgage-backed securities		100,506		-		100,506		-
Measured at fair value on a non-recurring basis:
Impaired loans		1,104		-		-		1,104
Other real estate owned		149		-		-		149
Mortgage servicing rights		200		-		-		200

			(Level 1)		(Level 2)		(Level 3)
			Quoted Prices in		Significant		Significant
			Active Markets		Other		Other
	December 31,		for Identical		Observable		Unobservable
(Dollars in thousands)	2017		Assets		Inputs		Inputs
Measured at fair value on a recurring basis:
Debt securities available-for-sale:
Obligations of U.S. Government agencies  and corporations	$	34,214	$	-	$	34,214	$	-
Obligations of state and political  subdivisions		24,981		-		24,981		-
Mortgage-backed securities		93,510		-		93,510		-
Equity securities available-for-sale		1,119		1,119		-		-
Measured at fair value on a non-recurring basis:
Impaired loans		1,574		-		-		1,574
Other real estate owned		27		-		-		27
Mortgage servicing rights		225		-		-		225

The following table presents additional quantitative information about assets measured at fair value on a nonrecurring basis and for which Level 3 inputs have been used to determine fair value:

(Dollars in thousands)
	Fair Value						Weighted
December 31, 2018	Estimate		Valuation Technique	Unobservable Input	Range		Average
Impaired loans	$	1,104	Appraisal of collateral (1)	Appraisal and liquidation adjustments (2)		0% - 15%		14	%
Other real estate owned		149	Appraisal of collateral (1)	Appraisal and liquidation adjustments (2)		2%		2	%
Mortgage servicing rights		200	Multiple of annual servicing fee	Estimated pre-payment speed, based on rate and term		300% - 400%		369	%

(Dollars in thousands)
	Fair Value						Weighted
December 31, 2017	Estimate		Valuation Technique	Unobservable Input	Range		Average
Impaired loans	$	1,574	Appraisal of collateral (1)	Appraisal and liquidation adjustments (2)		0% - 13%		8	%
Other real estate owned		27	Appraisal of collateral (1)	Appraisal and liquidation adjustments (2)		22%		22	%
Mortgage servicing rights		225	Multiple of annual servicing fee	Estimated pre-payment speed, based on rate and term		300% - 400%		371	%

(1) Fair value is generally determined through independent appraisals of the underlying collateral that generally include various level 3 inputs which are not identifiable.

(2) Appraisals may be adjusted downward by management for qualitative factors such as economic conditions and estimated liquidation expenses. The range of liquidation expenses and other appraisal adjustments are presented as a percent of the appraisal.

Fair Value of Financial Instruments

Management uses its best judgment in estimating the fair value of the Company’s financial instruments; however, there are inherent weaknesses in any estimation technique. Therefore, the fair value estimates herein are not necessarily indicative of the amounts the Company could have realized in sales transactions on the dates indicated. The estimated fair value amounts have been measured as of their respective year ends and have not been re-evaluated or updated for purposes of these consolidated financial statements subsequent to those respective dates. As such, the estimated fair values of these financial instruments subsequent to the respective reporting dates may be different from the amounts reported at each year end.

The information presented below should not be interpreted as an estimate of the fair value of the entire Company since a fair value calculation is provided only for a limited portion of the Company’s assets and liabilities. Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Company’s disclosures and those of other companies may not be meaningful.

The following describes the estimated fair value of the Company’s financial instruments as well as the significant methods and assumptions not previously disclosed used to determine these estimated fair values.

Carrying values approximate fair value for cash and due from banks, interest-bearing demand deposits with banks, federal funds sold, restricted stock in the Federal Home Loan Bank, interest receivable, mortgage servicing rights, non-interest bearing deposits, securities sold under agreements to repurchase, short-term borrowings and interest payable. Other than cash and due from banks, which are considered Level 1 inputs, and mortgage servicing rights, which are Level 3 inputs, these instruments are Level 2 inputs.

The estimated fair values of the Company’s financial instruments are as follows:

	Financial Instruments
(Dollars in thousands)	December 31, 2018				December 31, 2017
	Carrying		Fair		Carrying		Fair
Financial assets:	Value		Value		Value		Value
Cash and due from banks	$	15,617	$	15,617	$	9,839	$	9,839
Interest bearing deposits with banks		110		110		58		58
Federal funds sold		729		729		-		-
Interest bearing time deposits with banks		3,290		3,290		350		350
Securities		141,953		141,953		153,824		153,824
Restricted investment in FHLB stock		2,441		2,441		3,104		3,104
Loans, net of allowance for loan losses		414,597		415,195		380,965		372,906
Mortgage servicing rights		200		200		225		225
Accrued interest receivable		1,681		1,681		1,582		1,582
Financial liabilities:
Non-interest bearing deposits		126,057		126,057		115,911		115,911
Interest bearing deposits		395,665		395,226		361,757		361,468
Securities sold under agreements to repurchase		2,911		2,911		9,769		9,769
Short-term borrowings		11,600		11,600		12,000		12,000
Long-term debt		15,000		14,958		25,000		24,885
Other interest bearing liabilities		1,596		1,597		1,593		1,595
Accrued interest payable		289		289		300		300
Off-balance sheet financial instruments:
Commitments to extend credit		-		-		-		-
Letters of credit		-		-		-		-

The following presents the carrying amount, fair value and placement in the fair value hierarchy of the Company’s financial instruments not previously disclosed as of December 31, 2018 and December 31, 2017. This table excludes financial instruments for which the carrying amount approximates fair value.

					(Level 1)		(Level 2)		(Level 3)
					Quoted Prices in		Significant		Significant
(Dollars in thousands)					Active Markets		Other		Other
	Carrying				for Identical		Observable		Unobservable
December 31, 2018	Amount		Fair Value		Assets or Liabilities		Inputs		Inputs
Financial instruments - Assets
Interest bearing time deposits with  banks	$	3,290	$	3,290	$	-	$	3,290	$	-
Loans, net of allowance for loan  losses		414,597		415,195		-		-		415,195
Financial instruments - Liabilities
Interest bearing deposits	$	395,665	$	395,226	$	-	$	395,226	$	-
Long-term debt		15,000		14,958		-		14,958		-
Other interest bearing liabilities		1,596		1,597		-		1,597		-

					(Level 1)		(Level 2)		(Level 3)
					Quoted Prices in		Significant		Significant
(Dollars in thousands)					Active Markets		Other		Other
	Carrying				for Identical		Observable		Unobservable
December 31, 2017	Amount		Fair Value		Assets or Liabilities		Inputs		Inputs
Financial instruments - Assets
Interest bearing time deposits with  banks	$	350	$	350	$	-	$	350	$	-
Loans, net of allowance for loan  losses		380,965		372,906		-		-		372,906
Financial instruments - Liabilities
Interest bearing deposits	$	361,757	$	361,468	$	-	$	361,468	$	-
Long-term debt		25,000		24,885		-		24,885		-
Other interest bearing liabilities		1,593		1,595		-		1,595		-

21. Revenue Recognition

As disclosed in Note 3, as of January 1, 2018, the Company adopted ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)”, as well as subsequent ASU’s that modified ASC 606. The Company elected to apply the ASU and all related ASU’s using the modified retrospective approach applied to all contracts initiated on or after the effective date, and for contracts which have remaining obligations as of the effective date, while prior period results continue to be reported under legacy U.S. GAAP. Based on this assessment, the Company concluded that ASC 606 did not materially change the method by which the Company currently recognizes revenue for these revenue streams, which is by recognizing revenues as they are earned based upon contractual terms, as transactions occur, or as services are provided and collectability is reasonably assured.

The Company generally acts in a principal capacity, on its own behalf, in most contracts with customers. In such transactions, revenue and related costs to provide these services are recognized on a gross basis in the financial statements. In some cases, the Company acts in an agent capacity, deriving revenue through assisting other entities in transactions with its customers. In such transactions, revenue and the related costs to provide the services are recognized on a net basis in the financial statements. These transactions primarily relate to non-deposit product commissions and fees derived from customer’s use of various interchange and ATM/debit card networks.

All of the Company’s revenue from contracts with customers in the scope of ASC 606 are recognized within non-interest income on the consolidated statements of income. Revenue streams not within the scope of ASC 606 included in non-interest income on the consolidated statements of income include earnings on bank-owned life insurance and annuities, income from unconsolidated subsidiary, fees derived from loan activity, mortgage banking income, gain/loss on sales and calls of securities, and the change in value of equity securities.

A description of the Company’s sources of revenue accounted for under ASC 606 are as follows:

Customer Service Fees – fees mainly represent fees from deposit customers for transaction based, account maintenance, and overdraft services. Transaction based fees include, but are not limited to, stop payment and overdraft fees. These fees are recognized at the time of the transaction when the performance obligation has been fulfilled. Account maintenance fees and account analysis fees are earned over the course of a month, representing the period of the performance obligation, and are recognized monthly.

Debit Card Fee Income – consists of interchange fees from cardholder transactions conducted through the card payment network. Cardholders use debit cards to conduct point-of-sale transactions that produce interchange fees. The Company acts in an agent capacity to offer processing services for debit cards to its customers. Fees are recognized with the processing of the transactions and netted against the related fees from such transactions.

Trust Fees – include asset management and estate fees. Asset management fees are generally based on a fee schedule, based upon the market value of the assets under management, and recognized monthly when the service obligation is completed. Trust fees recognized in 2018 and 2017 were $367,000 and $371,000, respectively. Fees for estate management services are based on a specified fee schedule and generally recognized as the following performance obligations are fulfilled: (i) 25% of total estate fee recognized when all estate assets are collected and debts paid, (ii) 50% of the total fee is recognized when the inheritance tax return is filed, and (iii) remaining 25% is recognized when the first and final account is confirmed, settling the estate. Estate fees recognized during 2018 and 2017 were $63,000 and $75,000, respectively.

Commissions From Sales Of Non-Deposit Products – include, but are not limited to, brokerage services, employer-based retirement solutions, individual retirement planning, insurance solutions, and fee-based investment advisory services. The Company acts in an agent capacity to offer these services to customers. Revenue is recognized, net of related fees, in the month in which the contract is fulfilled.

Other Non-Interest Income – includes certain revenue streams within the scope of ASC 606 comprised primarily of ATM surcharges, commissions on check orders, and wire transfer fees. ATM surcharges are the result of customers conducting ATM transactions that generate fee income. All of these fees, as well as wire transfer fees, are transaction based and are recognized at the time of the transaction. In addition, the Company acts in an agent capacity to offer checks to its customers and recognizes commissions, net of related fees, when the contract is fulfilled.

Gains/Losses On Sales Of Other Real Estate Owned – are recognized when control of the property transfers to the buyer, which generally occurs when the deed is executed.

Contract Balances

A contract asset balance occurs when an entity performs a service for a customer before the customer pays consideration (resulting in a contract receivable) or before payment is due (resulting in a contract asset). A contract liability balance is an entity’s obligation to transfer a service to a customer for which the entity has already received payment (or payment is due from the customer). The company’s non-interest revenue streams are largely based on transactional activity, or standard month-end revenue accruals such as asset management fees based on month-end market values. Consideration is often received immediately or shortly after the Company satisfies its performance obligation and revenue is recognized. The Company does not typically enter into longer-term revenue contracts with customer, and therefore, does not experience significant contract balances.

Contract Acquisition Costs

The Company expenses all contract acquisition costs as costs are incurred.

22. Employee Benefit Plans

Long-Term Incentive Plan

The Company maintains the 2016 Long-Term Incentive Plan (the “Plan”), that amended and restated the former 2011 Stock Option Plan (the “2011 Plan”). The Plan continues in effect for any outstanding awards under the 2011 Plan in accordance with the terms and conditions governing such awards immediately prior to the effective date of the Plan but expanded the types of awards authorized to include, among others, restricted stock. Under the provisions of the Plan, while active, awards may consist of grants of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock and performance shares to officers and key employees of the Company, as well as Directors.

Compensation expense for stock options granted and restricted stock awarded is measured using the fair value of the award on the grant date and is recognized over the vesting period. The Company recognized $82,000, $71,000 and $67,000 of expense for the years ended December 31, 2018, 2017 and 2016, respectively, for stock-based compensation.

The Plan is administered by a committee of the Board of Directors. The Committee determines, among other things, which officers and key employees receive stock compensation, the number of shares to be subject to each award, the option price, the duration of the option and the restricted period, as appropriate. A recipient of the restricted shares will forfeit those shares in their entirety if employment is terminated prior to the vesting date for reasons other than retirement, death or disability. The maximum number of shares of common stock that may be issued under the Plan is 300,000 shares, and 164,955 shares were available for grant as of December 31, 2018. Shares of common stock issued under the Plan may be treasury shares or authorized but unissued shares.

During 2018 and 2017, certain officers and key employees were issued restricted stock awards of 5,220 and 4,650 shares, respectively. Each of the awards carry a three-year restriction, with no interim vesting.

The following table presents compensation expense and related tax benefits for restricted stock awards recognized on the consolidated statement of income.

(Dollars in thousands)
	2018			2017			2016
Compensation expense	$	77		$	43		$	16
Tax benefit		(16	)		(15	)		(5	)
Net income effect	$	61		$	28		$	11

At December 31, 2018, there was $109,000 of unrecognized compensation cost related to all non-vested restricted stock awards. This cost is expected to be recognized through February 2021.

The following table presents a summary of non-vested restricted shares activity for 2018.

			Weighted
			Average
			Grant Date
	Shares		Fair Value
Non-vested at January 1, 2018		7,800	$	18.10
Vested		-
Cancelled		-
Granted		5,220		19.80
Non-vested at December 31, 2018		13,020		18.78

No stock options were awarded in 2018. Options granted prior to 2018 vest over three to five years and are exercisable at the grant price, which is at least the fair market value of the stock on the grant date. The Plan provides that the option price per share is not to be less than the fair market value of the stock on the day the option was granted, but in no event less than the par value of such stock. Options granted under the Plan are exercisable no earlier than one year after the date of grant and expire ten years after the date of the grant. All options previously granted under the Plans are scheduled to expire through February 17, 2025.

Total options outstanding at December 31, 2018 have exercise prices between $17.22 and $18.00, with a weighted average exercise price of $17.91 and a weighted average remaining contractual life of 5.1 years.

As of December 31, 2018, there was $111,000 of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the Plan. That cost is expected to be recognized through 2021.

Cash received from option exercises under the Plans for the year ended December 31, 2018 was $90,000 and $172,000 for the year ended December 31, 2017. No options were exercised in 2016.

A summary of the status of the outstanding stock options as of December 31, 2018, 2017 and 2016, and changes during the years ending on those dates is presented below:

	2018					2017					2016
				Weighted					Weighted					Weighted
				Average					Average					Average
				Exercise					Exercise					Exercise
	Shares			Price		Shares			Price		Shares			Price
Outstanding at beginning of year		125,026		$	17.91		139,155		$	17.97		142,524		$	18.07
Granted		-			-		-			-		-			-
Exercised		(5,170	)		17.47		(9,704	)		17.74		-			-
Forfeited		(6,100	)		21.10		(4,425	)		20.05		(3,369	)		22.36
Outstanding at end of year		113,756		$	17.76		125,026		$	17.91		139,155		$	17.97
Options exercisable at year-end		110,911					110,282					97,584
Weighted-average fair value of of options granted during the year				$	-				$	-				$	-
Intrinsic value of options exercised during the year				$	15,240				$	10,807				$	-
Intrinsic value of options outstanding and exercisable at December 31, 2018				$	387,318

The following table summarizes characteristics of stock options as of December 31, 2018:

			Outstanding				Exercisable
Grant Date	Exercise Price		Shares		Contractual Average Life (Years)		Shares
10/20/2009	$	17.22		3,909		0.80		3,909
9/20/2011	$	17.75		13,200		2.72		13,200
3/20/2012	$	18.00		15,800		3.22		15,800
2/19/2013	$	17.65		16,622		4.14		16,622
2/18/2014	$	17.72		31,025		5.13		30,180
2/17/2015	$	17.80		33,200		6.13		31,200
				113,756				110,911

Defined Benefit Retirement Plans

The Company sponsors a defined benefit retirement plan [The Juniata Valley Bank Retirement Plan (“JVB Plan”)] which covers substantially all of its employees employed prior to December 31, 2007. As of January 1, 2008, the JVB Plan was amended to close the plan to new entrants. All active participants as of December 31, 2007 became 100% vested in their accrued benefit and, as long as they remained eligible, continued to accrue benefits until December 31, 2012. The benefits are based on years of service and the employee’s compensation. Effective December 31, 2012, the JVB Plan was amended to cease future service accruals after that date (i.e., it was frozen).

As a result of the FNBPA acquisition, the Company assumed sponsorship of a second defined benefit retirement plan [Retirement Plan for the First National Bank of Port Allegany (“FNB Plan”)] as of November 30, 2015, which covers substantially all former FNBPA employees that were employed prior to September 30, 2008. The FNBPA Plan was amended as of December 31, 2015 to cease future service accruals to previously unfrozen participants and is now considered to be “frozen”. Effective December 31, 2016, the FNB Plan was merged into the JVB Plan, which was amended to provide the same benefits to the class of participants previously included in the FNB Plan.

The Company’s funding policy is to contribute annually no more than the maximum amount that can be deducted for federal income tax purposes. Contributions are intended to provide for benefits attributed to service through December 31, 2012.

In 2017, Juniata initiated a strategy to reduce the liability associated with its defined benefit pension plan. The first step of the initiative consisted of the purchase of a single premium group annuity for a group of Juniata’s retirees, transferring the associated pension liability to the issuer of the annuity. This step reduced Juniata’s overall pension liability by approximately 12%, which resulted in a pre-tax charge to earnings of $377,000.

In 2018, Juniata completed the second step of the strategy to reduce the liability associated with its defined benefit pension plan by making a lump sum payment offer to a small group of terminated vested participants in Juniata’s defined benefit plan. This step further reduced Juniata’s remaining pension liability by approximately 9%, which resulted in a pre-tax charge to earnings of $210,000 in the twelve months ended December 31, 2018. The pre-tax charges for both the 2018 and 2017 strategies executed to reduce the pension liability, represent a further acceleration of pension expenses that would otherwise have impacted Juniata’s future earnings. In 2019, Juniata plans to finalize the termination of its defined benefit plan.

Management expects to record a $117,000 net periodic expense in 2019 for the JVB Plan, which includes expected amortization out of accumulated other comprehensive loss. The following table sets forth by level, within the fair value hierarchy, debt and equity instruments included in the JVB Plan’s assets at fair value as of December 31, 2018 and December 31, 2017. Assets included in the JVB Plan that are not valued in the hierarchy table consist of cash and cash equivalents, totaling $50,000 and $46,000, at December 31, 2018 and 2017, respectively.

			(Level 1)		(Level 2)		(Level 3)
			Quoted Prices in		Significant Other		Significant Other
(Dollars in thousands)	December 31,		Active Markets for		Observable		Unobservable
	2018		Identical Assets		Inputs		Inputs
Measured at fair value on a recurring basis:
Mutual funds	$	11,891	$	11,891	$	-	$	-
Money market funds		241		241		-		-
	$	12,132	$	12,132	$	-	$	-

			(Level 1)		(Level 2)		(Level 3)
			Quoted Prices in		Significant Other		Significant Other
(Dollars in thousands)	December 31,		Active Markets for		Observable		Unobservable
	2017		Identical Assets		Inputs		Inputs
Measured at fair value on a recurring basis:
Mutual funds	$	12,857	$	12,857	$	-	$	-
Money market funds		213		213		-		-
	$	13,070	$	13,070	$	-	$	-

The measurement date for the JVB Plan is December 31. Information pertaining to the activity in the defined benefit plan is as follows:

(Dollars in thousands)	Years ended December 31,
	2018			2017
Change in projected benefit obligation (PBO)
PBO at beginning of year	$	15,554		$	16,332
Interest cost		521			621
Change in assumptions		(1,208	)		1,141
Actuarial loss		(244	)		136
Group annuity purchase		-			(1,974	)
Settlement payments		(1,485	)		-
Benefits paid		(583	)		(702	)
PBO at end of year	$	12,555		$	15,554
Change in plan assets
Fair value of plan assets at beginning of year	$	13,117		$	13,840
Actual return on plan assets, net of expenses		(217	)		1,953
Employer contribution		1,350			-
Group annuity purchase		-			(1,974	)
Settlement payments		(1,485	)		-
Benefits paid		(583	)		(702	)
Fair value of plan assets at end of year	$	12,182		$	13,117
Funded status, included in other (liabilities) assets	$	(373	)	$	(2,437	)
Amounts recognized in accumulated comprehensive loss  before income taxes consist of:
Unrecognized actual loss	$	(884	)	$	(3,081	)
Accumulated benefit obligation	$	12,555		$	15,554

For the year ended December 31, 2018, the mortality assumptions were derived using the Adjusted RP-2014 White Collar Mortality Table. Incorporated into the most recent table are rates projected generationally using Scale MP-2018 to reflect mortality improvement. For the year ended December 31, 2017, the mortality assumptions were derived using the Adjusted RP-2014 White Collar Mortality Table. Incorporated into the table are rates projected generationally using Scale MP-2017 to reflect mortality improvement.

Pension expense for the JVB Plan included the following components for the years ended December 31:

(Dollars in thousands)
	2018			2017			2016
Interest cost on projected benefit obligation	$	521		$	621		$	666
Expected return on plan assets		(690	)		(793	)		(795	)
Settlement loss		210			377			-
Recognized net actuarial loss		129			207			248
Net periodic benefit cost		170			412			119
Net loss (gain)		(449	)		117			173
Amortization of net loss		(435	)		(584	)		(248	)
Total recognized in other comprehensive loss (income)	$	(884	)	$	(467	)	$	(75	)
Total recognized in net periodic benefit cost and other
comprehensive loss (income)	$	(714	)	$	(55	)	$	44

Assumptions used to determine benefit obligations were:

	2018			2017			2016
Discount rate		4.10	%		3.50	%		4.00	%
Rate of compensation increase		N/A			N/A			N/A

Assumptions used to determine the net periodic benefit cost were:

	2018			2017			2016
Discount rate		3.50	%		4.00	%		4.25	%
Expected long-term return on plan assets		4.20			6.00			6.00
Rate of compensation increase		N/A			N/A			N/A

As previously stated, the Company has terminated the Defined Benefit Plan as of November 30, 2018, with final distribution targeted for the second or third quarter of 2019. Accordingly, a liability-driven investment strategy has been established, which includes an asset allocation glide path that gradually increases the fixed income allocation from 40% (as of December 31, 2017) to 100% and decrease the equity allocation from 60% to zero by mid-2019. At December 31, 2018, the asset allocation was 10% equities and 90% fixed income in the JVB Plan.

Future expected benefit payments:

(Dollars in thousands)
	2019		2020		2021		2022		2023		2024-2028
Estimated future benefit payments	$	626	$	630	$	620	$	621	$	631	$	3,406

Defined Contribution Plan

The Company has a Defined Contribution Plan under which employees, through payroll deductions, are able to defer portions of their compensation. The Company makes an annual non-elective fully vested contribution equal to 3% of compensation to each eligible participant. As of December 31, 2018, a liability of $238,000 was recorded to satisfy this obligation and was credited to employees’ accounts by January 31, 2019. This liability at December 31, 2017 totaled $224,000 and was credited to employee accounts during 2017. Expense incurred under this plan was $234,000, $222,000 and $211,000 in 2018, 2017 and 2016, respectively. The Defined Contribution Plan also includes an employer matching contribution for employees that elect to defer compensation into this program. The matching contribution in 2018, 2017 and 2016 was $199,000, $189,000 and $179,000, respectively.

Employee Stock Purchase Plan

The Company has an Employee Stock Purchase Plan under which employees, through payroll deductions, are able to purchase shares of Company stock annually. The option price of the stock purchases is between 95% and 100% of the fair market value of the stock on the offering termination date as determined annually by the Board of Directors. The maximum number of shares which employees may purchase under the Plan is 250,000; however, the annual issuance of shares may not exceed 5,000 shares plus any unissued shares from prior offerings. There were 2,134 shares issued in 2018, 1,961 shares issued in 2017 and 3,764 shares issued in 2016 under this plan. At December 31, 2018, there were 172,959 shares reserved for issuance under the Employee Stock Purchase Plan.

Supplemental Retirement Plans

The Company has non-qualified supplemental retirement plans for directors and key employees. At December 31, 2018 and 2017, the present value of the future liability associated with these plans was $215,000 and $261,000, respectively. For the years ended December 31, 2018, 2017 and 2016, $20,000, $25,000 and $30,000, respectively, was charged to expense in connection with these plans. The Company offsets the cost of these plans through the purchase of bank-owned life insurance and annuities. See Note 9.

Deferred Compensation Plans

The Company has entered into deferred compensation agreements with certain directors to provide each director an additional retirement benefit, or to provide their beneficiary a benefit, in the event of pre-retirement death. At December 31, 2018 and 2017, the present value of the future liability was $1,602,000 and $1,609,000, respectively. For the years ended December 31, 2018, 2017 and 2016, $40,000, $33,000 and $32,000, respectively, was charged to expense in connection with these plans. The Company offsets the cost of these plans through the purchase of bank-owned life insurance. See Note 9.

Salary Continuation Plans

The Company has non-qualified salary continuation plans for key employees. At December 31, 2018 and 2017, the present value of the future liability was $1,256,000 and $1,264,000, respectively. For the years ended December 31, 2018, 2017 and 2016 $103,000, $127,000 and $185,000, respectively, was charged to expense in connection with these plans. The Company offsets the cost of these plans through the purchase of bank-owned life insurance. See Note 9.

23. Financial Instruments With Off-Balance Sheet Risk

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments may include commitments to extend credit and letters of credit. Because many commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. These instruments involve, to varying degrees, elements of credit risk that are not recognized in the consolidated financial statements.

Exposure to credit loss in the event of non-performance by the other party to the financial instrument for commitments to extend credit and letters of credit is represented by the contractual amount of those instruments. The Bank uses the same credit policies in making these commitments and conditional obligations as it does for on-balance sheet instruments. The Company controls the credit risk of its financial instruments through credit approvals, limits and monitoring procedures; however, it does not generally require collateral for such financial instruments since there is no principal credit risk.

A summary of the Company’s financial instrument commitments is as follows:

(Dollars in thousands)	December 31,
	2018		2017
Commitments to grant loans	$	72,755	$	77,023
Unfunded commitments under lines of credit		14,468		3,150
Outstanding letters of credit		2,749		2,541

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since portions of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer's creditworthiness on a case-by-case basis. The amount of collateral obtained by the Bank upon extension of credit is based on management's credit evaluation of the counter-party. Collateral held varies but may include personal or commercial real estate, accounts receivable, inventory and equipment.

Outstanding letters of credit are instruments issued by the Bank that guarantee the beneficiary payment by the Bank in the event of default by the Bank’s customer in the non-performance of an obligation or service. Most letters of credit are extended for one year periods. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Bank holds collateral supporting those commitments for which collateral is deemed necessary. The amount of the liability as of December 31, 2018 and 2017 for guarantees under letters of credit issued is not material.

The maximum undiscounted exposure related to these guarantees at December 31, 2018 was $2,749,000, and the approximate value of underlying collateral upon liquidation that would be expected to cover this maximum potential exposure was $22,963,000.

24. Related-Party Transactions

The Bank has granted loans to certain of its executive officers, directors and their related interests. The aggregate dollar amount of these loans was $7,780,000 and $7,939,000 at December 31, 2018 and 2017, respectively. During 2018, $10,714,000 of new loans were made and repayments totaled $10,873,000. None of these loans were past due, in non-accrual status or restructured at December 31, 2018 or 2017.

25. Commitments And Contingent Liabilities

In 2017, the Company executed renewal agreements for technology outsourcing services through two outside service bureaus. Both agreements provide for termination fees if the Company cancels the services prior to the end of the 7-year commitment period that runs through May 31, 2024. At December 31, 2018, potential termination fees were estimated to be approximately $1,672,000 and $1,542,000 on the two contracts. The potential termination fees decrease by approximately 15% in each succeeding year through 2024. Since the Company does not expect to terminate these services with either vendor prior to the end of the commitment periods, no liability has been recorded as of December 31, 2018.

The Company, from time to time, may be a defendant in legal proceedings relating to the conduct of its banking business. Most of such legal proceedings are a normal part of the banking business and, in management's opinion, the consolidated financial condition and results of operations of the Company would not be materially affected by the outcome of such legal proceedings.

Additionally, the Company has sold qualifying residential mortgage loans to the FHLB as part of its Mortgage Partnership Finance Program (“Program”). Under the terms of the Program, there is limited recourse back to the Company for loans that do not perform in accordance with the terms of the loan agreement. Each loan sold under the Program is “credit enhanced” such that the individual loan’s rating is raised to “BBB”, as determined by the FHLB. The Program can be terminated by either the FHLB or the Company, without cause, by giving notice to the other party. The FHLB has no obligation to commit to purchase any mortgage through, or from, the Company.

26. Subsequent Event

In January 2019, the Board of Directors declared a dividend of $0.22 per share to shareholders of record on February 18, 2019, payable on March 1, 2019.

27. Juniata Valley Financial Corp. (Parent Company Only)

Financial information:

CONDENSED BALANCE SHEETS
(Dollars in thousands)
	December 31,
	2018		2017
ASSETS
Cash and cash equivalents	$	48	$	1,082
Investment in bank subsidiary		65,909		52,522
Investment in unconsolidated subsidiary		-		4,812
Investment securities available for sale		1,193		1,169
Other assets		641		224
TOTAL ASSETS	$	67,791	$	59,809
LIABILITIES
Accounts payable and other liabilities	$	413	$	422
STOCKHOLDERS' EQUITY		67,378		59,387
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	67,791	$	59,809

CONDENSED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Dollars in thousands)
	Years Ended December 31,
	2018			2017			2016
INCOME
Interest and dividends on investment securities available for sale	$	44		$	44		$	59
Dividends from bank subsidiary		4,923			4,194			5,624
Income from unconsolidated subsidiary		296			167			222
Gain on sale of securities		-			314			166
Change in value of equity securities		26			-			-
TOTAL INCOME		5,289			4,719			6,071
EXPENSE
Merger-related expenses		134			13			66
Other non-interest expense		155			146			157
TOTAL EXPENSE		289			159			223
INCOME BEFORE INCOME TAXES AND EQUITY IN UNDISTRIBUTED NET INCOME OF SUBSIDIARY		5,000			4,560			5,848
Income tax (benefit) expense		(347	)		(127	)		47
		5,347			4,687			5,801
Undistributed net gain (loss) of subsidiary		557			(150	)		(645	)
NET INCOME	$	5,904		$	4,537		$	5,156
COMPREHENSIVE INCOME	$	5,795		$	4,300		$	4,150

CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
	Years Ended December 31,
	2018			2017			2016
Cash flows from operating activities:
Net income	$	5,904		$	4,537		$	5,156
Adjustments to reconcile net income to net cash provided by operating activities:
Undistributed net (gain) loss of subsidiary		(556	)		150			645
Realized gains on sales of investment securities		-			(314	)		(166	)
Change in value of equity securities		(26	)		-			-
Equity in earnings of unconsolidated subsidiary, net of dividends of $75, $61 and $55		194			(106	)		(167	)
Equity gain from acquisition of unconsolidated subsidiary		(415	)		-			-
Stock-based compensation expense		82			71			67
(Increase) decrease in other assets		(93	)		513			(413	)
(Decrease) increase in taxes payable		(402	)		(271	)		191
(Decrease) increase in accounts payable and other liabilities		(12	)		(254	)		1
Net cash provided by operating activities		4,676			4,326			5,314
Cash flows from investing activities:
Purchases of available for sale securities		-			-			(470	)
Proceeds from the sale of available for sale securities		-			734			252
Proceeds from the maturity of available for sale investment securities		-			-			-
Net cash received from acquisition		(1,361	)		-			-
Net cash provided by (used in) investing activities		(1,361	)		734			(218	)
Cash flows from financing activities:
Cash dividends		(4,411	)		(4,194	)		(4,226	)
Purchase of treasury stock		(70	)		(86	)		(927	)
Treasury stock issued for stock plans		90			-			-
Common stock issued for stock plans		42			206			64
Net cash used in financing activities		(4,349	)		(4,074	)		(5,089	)
Net (decrease) increase in cash and cash equivalents		(1,034	)		986			7
Cash and cash equivalents at beginning of year		1,082			96			89
Cash and cash equivalents at end of year	$	48		$	1,082		$	96

28. Quarterly Results Of Operations (Unaudited)

The unaudited quarterly results of operations for the years ended December 31, 2018 and 2017 follow:

(Dollars in thousands, except per share data)
	2018 Quarter ended
	March 31			June 30 as Revised*			September 30			December 31
Total interest income	$	5,439		$	5,944		$	6,129		$	6,139
Total interest expense		794			890			950			1,001
Net interest income		4,645			5,054			5,179			5,138
Provision for loan losses		158			41			32			106
AFS securities losses		(15	)		-			-			(173	)
Change in equity security value		(6	)		52			(4	)		(43	)
Other income		1,195			1,444			1,245			1,332
Merger and acquisition expense		64			376			185			259
Other expense		4,341			4,530			4,847			4,859
Income before income taxes		1,256			1,603			1,356			1,030
Income tax (benefit) expense		(71	)		(372	)		(29	)		(187	)
Net income	$	1,327		$	1,975		$	1,385		$	1,217
Per-share data:
Basic earnings	$	0.28		$	0.39		$	0.27		$	0.24
Diluted earnings	$	0.28		$	0.39		$	0.27		$	0.24
Cash dividends	$	0.22		$	0.22		$	0.22		$	0.22

	2017 Quarter ended
	March 31		June 30		September 30		December 31
Total interest income	$	5,174	$	5,348	$	5,457	$	5,395
Total interest expense		627		702		752		774
Net interest income		4,547		4,646		4,705		4,621
Provision for loan losses		105		135		149		50
Securities gains		504		4		2		2
Other income		1,112		1,252		1,217		1,199
Merger and acquisition expense		-		-		-		13
Other expense		4,269		4,229		4,442		4,822
Income before income taxes		1,789		1,538		1,333		937
Income tax expense		330		244		127		359
Net income	$	1,459	$	1,294	$	1,206	$	578
Per-share data:
Basic earnings	$	0.31	$	0.27	$	0.25	$	0.12
Diluted earnings	$	0.31	$	0.27	$	0.25	$	0.12
Cash dividends	$	0.22	$	0.22	$	0.22	$	0.22

* The income tax benefit and net income for the quarter ended June 30, 2018 set forth on this table have been restated by $406,000 from the amounts of income tax expense of $34,000 and net income of $1,569,000 originally reported. In addition, the basic and diluted earnings per share set forth on this table have been restated from the $0.31 per share originally reported. The $406,000 relates primarily to the reversal of a deferred tax liability on the previous investment in LCB prior to the acquisition on April 30, 2018. The Form 10-Qs for the quarters ending June 30, 2019 and September 30, 2019 will reflect these changes as a correction of a prior year immaterial error.

Common Stock Market Prices and Dividends

The common stock of Juniata Valley Financial Corp. is quoted under the symbol “JUVF” on the over-the-counter (“OTC-Pink”) Electronic Bulletin Board, a regulated electronic quotation service made available through, and governed by, the NASDAQ system. As of December 31, 2018, the Company had 1,777 stockholders of record.

As stated in “Note 17 – Stockholders’ Equity and Regulatory Matters” in the Notes to Consolidated Financial Statements, the Company is subject to various regulatory capital requirements that limit the amount of capital available for dividends. While the Company expects to continue its policy of regular dividend payments, no assurance of future dividend payments can be given. Future dividend payments will depend upon the Company’s financial condition, future earnings, capital and regulatory requirements, future prospects, business conditions and other factors deemed relevant by the Board of Directors.

For further information on stock quotes, please contact any licensed broker-dealer, some of which make a market in Juniata Valley Financial Corp. stock.

Corporate Information

Corporate Headquarters

Juniata Valley Financial Corp.

128 Bridge Street

P.O. Box 66

Mifflintown, PA 17059

(855) 582-5101

JVBonline.com

Investor Information

JoAnn N. McMinn,

Executive Vice President and Chief Financial Officer

P.O. Box 66

Mifflintown, PA 17059

JoAnn.McMinn@JVBonline.com

Information Availability

Information about the Company’s financial performance may be found at www.JVBonline.com, following the “Investor Information” link.

All reports filed electronically by Juniata Valley Financial Corp. with the United States Securities and Exchange Commission (SEC), including the Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, as well as any amendments to those reports, are also accessible at no cost on the SEC’s web site at www.SEC.gov.

Additionally, a copy of the Company’s Annual Report to the SEC on Form 10-K for the year ended December 31, 2018 will be supplied without charge (except for exhibits) upon written request. Please direct all inquiries to Ms. JoAnn McMinn, as detailed above.

Pursuant to Part 350 of FDIC’s Annual Disclosure Regulation, Juniata Valley Financial Corp. will make available to you upon request, financial information about The Juniata Valley Bank. Please contact:

Ms. Danyelle Pannebaker

The Juniata Valley Bank

P.O. Box 66

Mifflintown, PA 17059

Investment Considerations

In analyzing whether to make, or to continue, an investment in Juniata Valley Financial Corp., investors should consider, among other factors, the information contained in this Annual Report and certain investment considerations and other information more fully described in our Annual Report on Form 10-K for the year ended December 31, 2018, a copy of which can be obtained as described above.

Registrar and Transfer Agent

By regular mail:

Computershare

P.O. Box 30170

College Station, TX 77842-3170

United States

By overnight delivery

Computershare

211 Quality Circle, Suite 210

College Station, TX 77845

Telephone: (800) 368-5948

Website: www.Computershare.com/investor

Shareholders of record may access their accounts via the Internet to review account holdings and transaction history through Computershare’s website: www.Computershare.com/investor.

Information regarding the Company’s Dividend Reinvestment and Stock Purchase Plan, including a Prospectus, may be obtained by contacting Computershare, through the means listed above.

The Company offers a dividend direct deposit option whereby shareholders of record may have their dividends deposited directly into the bank account of their choice on the dividend payment date. Please contact Computershare for further information and to register for this service.

Annual Meeting of Shareholders

The Annual Meeting of Shareholders of Juniata Valley Financial Corp. will be held at 10:30 a.m., on Tuesday, May 21, 2019 at the Juniata Valley Bank Financial Center, 1762 Butcher Shop Road, Mifflintown, Pennsylvania.

EX-21.1

Exhibit 21.1

SUBSIDIARIES OF JUNIATA VALLEY FINANCIAL CORP.

Name of Subsidiary	State or Jurisdiction of Incorporation	Trade Name (If any)
The Juniata Valley Bank	Pennsylvania	None
Bridge and Main Streets
Mifflintown, PA  17059

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S-3D (No. 033-64369 and 333-129023) and Form S-8 (No. 333-02007, 333-36610, and 333-174667) of Juniata Valley Financial Corp. of our reports dated April 2, 2019, relating to the consolidated financial statements and the effectiveness of Juniata Valley Financial Corp.’s internal control over financial reporting, which appear in the Annual Report to Shareholders, which is incorporated by reference in this Annual Report on Form 10-K. Our report on the effectiveness of internal control over financial reporting expresses an adverse opinion on the effectiveness of Juniata Valley Financial Corp.’s internal control over financial reporting as of December 31, 2018.

/s/ BDO USA, LLP

Harrisburg, Pennsylvania

April 2, 2019

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Marcie A. Barber, Chief Executive Officer, certify that:

1. I have reviewed this annual report on Form 10-K of Juniata Valley Financial Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  April 2, 2019	/s/ Marcie A. Barber
	Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, JoAnn N. McMinn, Chief Financial Officer certify that:

1. I have reviewed this annual report on Form 10-K of Juniata Valley Financial Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  April 2, 2019	/s/ JoAnn N. McMinn
	Chief Financial Officer

EX-32.1

Exhibit 32.1

SECTION 1350 CERTIFICATION

I, Marcie A. Barber, of Juniata Valley Financial Corp., certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

1. The Annual Report on Form 10-K of the Company for the annual period ended December 31, 2018 (“the Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separate disclosure document.

/s/ Marcie A. Barber
Chief Executive Officer	Date:  April 2, 2019

EX-32.2

Exhibit 32.2

SECTION 1350 CERTIFICATION

I, JoAnn N. McMinn, of Juniata Valley Financial Corp., certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

1. The Annual Report on Form 10-K of the Company for the annual period ended December 31, 2018 (“the Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separate disclosure document.

/s/ JoAnn N. McMinn
Chief Financial Officer	Date:  April 2, 2019

XML

Document and Entity Information - USD ($)	12 Months Ended
	Dec. 31, 2018	Apr. 02, 2019	Jun. 30, 2018
Document and Entity Information [Abstract]
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2018
Document Fiscal Period Focus	FY
Document Fiscal Year Focus	2018
Entity Registrant Name	JUNIATA VALLEY FINANCIAL CORP
Entity Central Index Key	0000714712
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Well-known Seasoned Issuer	No
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Public Float			$ 111,380,229
Entity Common Stock, Shares Outstanding		5,098,748

XML

Consolidated Statements of Financial Condition - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Assets:
Cash and due from banks	$ 15,617	$ 9,839
Interest bearing deposits with banks	110	58
Federal funds sold	729
Cash and cash equivalents	16,456	9,897
Interest bearing time deposits with banks	3,290	350
Equity securities	1,118
Securities available for sale	141,953	153,824
Restricted investment in bank stock	2,441	3,104
Investment in unconsolidated subsidiary		4,812
Total loans	417,631	383,904
Less: Allowance for loan losses	(3,034)	(2,939)
Total loans, net of allowance for loan losses	414,597	380,965
Premises and equipment, net	8,744	8,887
Other real estate owned	744	355
Bank owned life insurance and annuities	15,938	14,972
Investment in low income housing partnership	4,545	5,245
Core deposit and other intangible	405	195
Goodwill	9,139	5,448
Mortgage servicing rights	200	225
Accrued interest receivable and other assets	5,666	3,666
Total assets	625,236	591,945
Liabilities:
Non-interest bearing deposits	126,057	115,911
Interest bearing deposits	395,665	361,757
Total deposits	521,722	477,668
Securities sold under agreements to repurchase	2,911	9,769
Short-term borrowings	11,600	12,000
Long-term debt	15,000	25,000
Other interest bearing liabilities	1,596	1,593
Accrued interest payable and other liabilities	5,029	6,528
Total liabilities	557,858	532,558
Stockholders' Equity:
Preferred stock, no par value: Authorized - 500,000 shares, none issued
Common stock, par value $1.00 per share: Authorized 20,000,000 shares Issued - 5,134,249 shares at December 31, 2018; 4,811,611 shares at December 31, 2017; Outstanding - 5,092,048 shares at December 31, 2018; 4,767,656 shares at December 31, 2017;	5,134	4,811
Surplus	24,821	18,565
Retained earnings	42,525	40,876
Accumulated other comprehensive loss	(4,299)	(4,034)
Cost of common stock in Treasury: 42,201 shares at December 31, 2018; 43,955 shares at December 31, 2017	(803)	(831)
Total stockholders' equity	67,378	59,387
Total liabilities and stockholders' equity	$ 625,236	$ 591,945

XML

Consolidated Statements of Financial Condition (Parenthetical) - $ / shares	Dec. 31, 2018	Dec. 31, 2017
Consolidated Statements of Financial Condition [Abstract]
Preferred Stock, Par or Stated Value Per Share	$ 0	$ 0
Preferred Stock, Authorized	500,000	500,000
Preferred Stock, Shares Issued	0	0
Common Stock, Par or Stated Value Per Share	$ 1.00	$ 1.00
Common Stock, Shares Authorized	20,000,000	20,000,000
Common Stock, Shares Issued	5,134,249	4,811,611
Common Stock, Shares, Outstanding	5,092,048	4,767,656
Treasury Stock, Shares	42,201	43,955

XML

Consolidated Statements of Income - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Interest income:
Loans, including fees	$ 20,060	$ 18,005	$ 17,559
Taxable securities	3,040	2,888	2,475
Tax-exempt securities	393	451	418
Other interest income	158	30	17
Total interest income	23,651	21,374	20,469
Interest expense:
Deposits	3,068	2,129	1,811
Securities sold under agreements to repurchase	62	31	5
Short-term borrowings	190	295	94
Long-term debt	276	369	328
Other interest bearing liabilities	39	31	30
Total interest expense	3,635	2,855	2,268
Net interest income	20,016	18,519	18,201
Provision for loan losses	337	439	466
Net interest income after provision for loan losses	19,679	18,080	17,735
Non-interest income:
Earnings on bank-owned life insurance and annuities	352	352	371
Income/gain from unconsolidated subsidiary	296	167	222
(Loss) gain on sales and calls of securities	(188)	512	218
Change in value of equity securities	(1)
Gain on sales of loans			113
Gain from life insurance proceeds			364
Other non-interest income	334	294	283
Total non-interest income	5,027	5,292	5,418
Non-interest expense:
Employee compensation expense	7,822	7,159	6,883
Employee benefits	2,458	2,837	2,301
Occupancy	1,217	1,173	1,137
Equipment	818	711	661
Data processing expense	1,924	1,751	1,807
Director compensation	215	241	238
Professional fees	640	571	539
Taxes, other than income	498	463	437
FDIC Insurance premiums	274	334	375
(Gain) loss on sales of other real estate owned	(60)	(8)	150
Amortization of intangibles	79	67	105
Amortization of investment in low-income housing partnership	800	612	479
Merger and acquisition expense	884	13	347
Other non-interest expense	1,892	1,851	1,719
Total non-interest expense	19,461	17,775	17,178
Income before income taxes	5,245	5,597	5,975
Income tax (benefit) provision	(659)	1,060	819
Net income	$ 5,904	$ 4,537	$ 5,156
Earnings per share
Basic	$ 1.18	$ 0.95	$ 1.07
Diluted	1.18	0.95	1.07
Cash dividends declared per share	$ 0.88	$ 0.88	$ 0.88
Weighted average basic shares outstanding	4,987,186	4,765,165	4,801,245
Weighted average diluted shares outstanding	5,009,484	4,775,505	4,802,175
Customer Service Fees [Member]
Non-interest income:
Non-interest income	$ 1,779	$ 1,747	$ 1,736
Debit Card fee Income [Member]
Non-interest income:
Non-interest income	1,280	1,120	1,044
Trust Fees [Member]
Non-interest income:
Non-interest income	430	446	454
Commissions from Sales of Non-Deposit Products [Member]
Non-interest income:
Non-interest income	259	173	223
Fees Derived From Loan Activity [Member]
Non-interest income:
Non-interest income	416	267	232
Mortgage Banking Income [Member]
Non-interest income:
Non-interest income	$ 70	$ 214	$ 158

XML

Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands		12 Months Ended
		Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Statement of Comprehensive Income [Abstract]
Net income: Pre-Tax Amount		$ 5,245	$ 5,597	$ 5,975
Net Income: Tax Effect		659	(1,060)	(819)
Net income: Net-of-Tax Amount		5,904	4,537	5,156
Other comprehensive income (loss):
Unrealized holding losses arising during the period: Pre-Tax Amount		(1,216)	(318)	(1,215)
Unrealized holding losses arising during the period: Tax Effect		255	108	413
Unrealized holding losses arising during the period: Net-of-Tax Amount		(961)	(210)	(802)
Unrealized holding gain (loss) from unconsolidated subsidiary: Pre-Tax Amount		5	3	(17)
Unrealized holding gain (loss) from unconsolidated subsidiary: Net-of-Tax Amount		5	3	(17)
Less reclassification adjustment for gains included in net income: Pre-Tax Amount	[1],[2]	188	(512)	(218)
Less reclassification adjustment for: gains included in net income: Tax Effect	[1],[2]	(39)	174	74
Less reclassification adjustment for: gains included in net income: Net-of-Tax Amount	[1],[2]	149	(338)	(144)
Unrecognized pension net gain (loss): Pre-Tax Amount	[2],[3]	(55)	1,024	(9)
Unrecognized pension net gain (loss): Tax Effect	[2],[3]	11	(348)	3
Unrecognized pension net gain (loss): Net-of-Tax Amount	[2],[3]	(44)	676	(6)
Unrecognized pension cost due to change in assumptions: Pre-Tax Amount	[2],[3]	601	(1,141)	(305)
Unrecognized pension cost due to change in assumptions: Tax Effect	[2],[3]	(126)	388	104
Unrecognized pension cost due to change in assumptions: Net-of-Tax Amount	[2],[3]	475	(753)	(201)
Amortization of pension net actuarial cost: Pre-Tax Amount	[2],[3]	338	584	248
Amortization of net pension actuarial loss: Tax Expense	[2],[3]	(71)	(199)	(84)
Amortization of net pension actuarial cost: Net-of-Tax Amount	[2],[3]	267	385	164
Other comprehensive loss: Pre-Tax Amount		(139)	(360)	(1,516)
Other comprehensive loss: Tax Effect		30	123	510
Other comprehensive loss: Net-of-Tax Amount		(109)	(237)	(1,006)
Total comprehensive income: Pre-Tax Amount		5,106	5,237	4,459
Total comprehensive income: Tax Expense		689	(937)	(309)
Total comprehensive income: Net-of-Tax Amount		$ 5,795	$ 4,300	$ 4,150

[1] Amounts are included in (loss) gain on calls of securities on the Consolidated Statements of Income as a separate element within total non-interest income.

[2] Income tax amounts are included in the provision for income taxes on the Consolidated Statements of Income.

[3] Amounts are included in the computation of net periodic benefit cost and are included in employee benefits expense on the Consolidated Statements of Income as a separate element within total non-interest expense.

XML

Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands	Common Stock [Member]	Surplus [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Loss [Member]	Treasury Stock [Member]	Total
Beginning balance at Dec. 31, 2015	$ 4,798	$ 18,352	$ 39,015	$ (2,203)		$ 59,962
Beginning balance, shares at Dec. 31, 2015	4,798,086
Net income			5,156			5,156
Other comprehensive income (loss)				(1,006)		(1,006)
Cash dividends			(4,226)			(4,226)
Stock-based compensation activity		67				67
Purchase of treasury stock, at cost					$ (927)	$ (927)
Purchase of treasury stock, shares					(49,370)
Stock issued for stock option and stock plans, shares						3,764
Common stock issued to LCB stockholders	$ 7	57				$ 64
Common stock issued to LCB stockholders, shares	6,914
Ending balance at Dec. 31, 2016	$ 4,805	18,476	39,945	(3,209)	$ (927)	59,090
Ending balance, shares at Dec. 31, 2016	4,755,630
Net income			4,537			4,537
Other comprehensive income (loss)				(237)		(237)
Reclassification due to tax reform			588	(588)
Cash dividends			(4,194)			(4,194)
Stock-based compensation activity		71				71
Purchase of treasury stock, at cost					$ (86)	(86)
Purchase of treasury stock, shares					(4,289)
Treasury stock issued for stock plans		(10)			$ 182	172
Treasury stock issued for stock plans, shares	9,704
Stock issued for stock option and stock plans	$ 6	28				$ 34
Stock issued for stock option and stock plans, shares	6,611					1,961
Ending balance at Dec. 31, 2017	$ 4,811	18,565	40,876	(4,034)	(831)	$ 59,387
Ending balance, shares at Dec. 31, 2017	4,767,656					4,767,656
Net income			5,904			$ 5,904
Other comprehensive income (loss)				(109)		(109)
Reclassification for ASU 2016-01			156	(156)
Cash dividends			(4,411)			(4,411)
Stock-based compensation activity		82				82
Purchase of treasury stock, at cost					$ (70)	(70)
Purchase of treasury stock, shares					(3,416)
Treasury stock issued for stock plans		(8)			$ 98	90
Treasury stock issued for stock plans, shares					5,170
Stock issued for stock option and stock plans	$ 8	34				$ 42
Stock issued for stock option and stock plans, shares	7,354					2,134
Common stock issued to LCB stockholders	$ 315	6,148				$ 6,463
Common stock issued to LCB stockholders, shares	315,284
Ending balance at Dec. 31, 2018	$ 5,134	$ 24,821	$ 42,525	$ (4,299)	$ (803)	$ 67,378
Ending balance, shares at Dec. 31, 2018	5,092,048					5,092,048

XML

Consolidated Statement of Changes in Stockholders' Equity(Parenthetical) - $ / shares	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Consolidated Statements of in Stockholders' Equity [Abstract]
Cash Dividends at per share	$ 0.88	$ 0.88	$ 0.88

XML

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Operating activities:
Net income	$ 5,904	$ 4,537	$ 5,156
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses	337	439	466
Depreciation	815	672	595
Net amortization of securities premiums	540	650	740
Net amortization of loan origination costs	43	75	63
Deferred net loan origination costs	(348)	(410)	(124)
Amortization of core deposit intangible	79	67	105
Amortization of investment in low income housing partnership	800	612	479
Net (amortization) accretion of purchase fair value adjustments	(102)	17	(9)
Net realized loss (gain) on sales and calls of securities	188	(512)	(218)
Change in fair value of equity securities	1
Net (gain) loss on sales of other real estate owned	(60)	(8)	148
Earnings on bank owned life insurance and annuities	(352)	(352)	(371)
Deferred income tax (benefit) expense	(96)	681	320
Equity loss (gain) in unconsolidated subsidiary, net of dividends of $75, $61 and $55	194	(106)	(167)
Equity gain from acquisition of unconsolidated subsidiary	(415)
Stock-based compensation expense	82	71	67
Mortgage loans originated for sale		(4,170)	(1,582)
Proceeds from loans sold to others	95	4,257	1,822
Mortgage banking income	(70)	(107)	(228)
Gain from life insurance proceeds			(364)
(Increase) decrease in accrued interest receivable and other assets	(1,493)	(6)	461
(Decrease) increase in accrued interest payable and other liabilities	(821)	393	(1,056)
Net cash provided by operating activities	5,321	6,800	6,303
Investing activities:
Purchases of: Securities available for sale	(20,610)	(42,510)	(48,195)
Purchases of: FHLB stock			(111)
Purchases of: Premises and equipment	(548)	(2,703)	(542)
Purchases of: Bank owned life insurance and annuities	(39)	(40)	(53)
Proceeds from: Sales of securities available for sale	10,461	21,799	4,304
Proceeds from: Maturities of and principal repayments on securities available for sale	19,145	16,322	43,835
Redemption of FHLB stock	787	586
Proceeds from: Sale of student loans			1,796
Proceeds from: Proceeds from life insurance claims			1,016
Proceeds from: Sale of other real estate owned	352	1,007	144
Proceeds from: Sale of other assets	22	25	20
Net cash received from acquisition	7,561
Investment in low income housing partnerships	(100)	(2,045)	(923)
Net decrease in interest bearing time deposits with banks	735
Net increase in loans	(2,931)	(6,239)	(1,750)
Net cash provided by (used in) investing activities	14,835	(13,798)	(459)
Financing activities:
Net increase (decrease) in deposits	8,010	21,837	(1,293)
Net decrease in short-term borrowings and securities sold under agreements to repurchase	(7,258)	(10,427)	(2,861)
Issuance of long-term debt			10,000
Repayment of long-term debt	(10,000)		(7,500)
Cash dividends	(4,411)	(4,194)	(4,226)
Purchase of treasury stock	(70)	(86)	(927)
Common stock issued for stock plans	90
Treasury stock issued for employee stock plans	42	206	64
Net cash (used in) provided by financing activities	(13,597)	7,336	(6,743)
Net increase (decrease) in cash and cash equivalents	6,559	338	(899)
Cash and cash equivalents at beginning of year	9,897	9,559	10,458
Cash and cash equivalents at end of year	16,456	9,897	9,559
Supplemental information:
Interest paid	3,646	2,823	2,237
Income tax (refund) paid	(663)	735	200
Supplemental schedule of noncash investing and financing activities:
Transfer of loans to other real estate owned	681	716	313
Transfer of loans to other assets	12	$ 21	20
Securities sold settling after year-end			$ 104
Assets acquired:
Investment in time deposits with banks	3,675
Loans	31,331
Premises and equipment	125
Accrued interest receivable	123
Core deposit and other intangible assets	289
Bank owned life insurance	632
FHLB stock	124
Other assets	267
Assets acquired, total	36,566
Liabilities assumed:
Deposits	36,052
Pension liability	266
Liabilities assumed, total	$ 36,318

XML

Consolidated Statements of Cash Flows (Parenthetical) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Consolidated Statements of Cash Flows(Parenthetical) [Abstract]
Equity method investment, dividends	$ 75	$ 61	$ 55

XML

Nature of Operations

12 Months Ended

Dec. 31, 2018

Nature of Operations [Abstract]

Nature of Operations

1. Nature Of Operations

Juniata Valley Financial Corp. (“Juniata” or the “Company”) is a bank holding company operating in central Pennsylvania for the purpose of delivering financial services within its local market. Through its wholly-owned banking subsidiary, The Juniata Valley Bank (the “Bank”), Juniata provides retail and commercial banking and other financial services through 16 branch locations located in Juniata, Mifflin, Perry, McKean, Potter and Huntingdon Counties. Additionally, in Mifflin, Juniata and Centre Counties, the Company maintains three offices for loan production, trust services and wealth management sales. Each of the Company’s lines of business are part of the same reporting segment, whose operating results are regularly reviewed and managed by a centralized executive management group. As a result, the Company has only one reportable segment for financial reporting purposes. The Bank provides a full range of banking services, including online and mobile banking, an automatic teller machine network, checking accounts, identity protection products for consumers, savings accounts, money market accounts, fixed rate certificates of deposit, club accounts, secured and unsecured commercial and consumer loans, construction and mortgage loans, safe deposit facilities and credit loans with overdraft checking protection. The Bank also provides a variety of trust services. The Company has a contractual arrangement with a broker-dealer to allow the offering of annuities, mutual funds, stock and bond brokerage services and long-term care insurance to its local market. Most of the Company’s commercial customers are small and mid-sized businesses operating in the Bank’s local service area. The Bank operates under a state bank charter and is subject to regulation by the Pennsylvania Department of Banking and the Federal Deposit Insurance Corporation. Juniata is subject to regulation by the Board of Governors of the Federal Reserve Bank and the Pennsylvania Department of Banking and Securities.

XML

Recent Accounting Standards Update (ASU)

12 Months Ended

Dec. 31, 2018

Recent Accounting Standards Update (ASU) [Abstract]

Recent Accounting Standards Update (ASU)

3.  RECENT ACCOUNTING STANDARDS UPDATE (“asu”)

New Accounting Standards Adopted in 2018

ASU 2014-09, Revenue from Contracts with Customers (Topic 606)

Issued: May 2014

Summary: The amendments in this Update establish a comprehensive revenue recognition standard for virtually all industries under U.S. GAAP, including those that previously followed industry-specific guidance. The revenue standard’s core principle requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To accomplish this objective, the standard requires five basic steps: (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation.

In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date. ASU 2015-14 deferred the effective date of the new revenue recognition standard by one year. As a result, the standard was effective for public entities in fiscal years beginning after December 15, 2017.

The Company adopted the ASU 2014-09 on January 1, 2018 and elected the modified retrospective transition method. Because the amended guidance does not apply to revenue associated with financial instruments accounted for under other U.S. GAAP, the Company assessed the effect the guidance had on the recognition processes of certain recurring revenue streams related to non-interest income. The Company did not identify any significant changes in the timing of revenue recognition when considering the amended accounting guidance. Additional disclosures related to revenue recognition appear in Note 21.

ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.  

Issued: February 2018

Summary:The Update allows entities to reclassify from accumulated other comprehensive income (“AOCI”) to retained earnings the 'stranded' tax effects ofaccounting for income tax rate changes on items accounted for in AOCI that were impacted by tax reform enacted in December 2017. Because the impact of tax rate changes is recorded in income, items accounted for in AOCI could be left with a stranded tax effect appearing as though those items do not reflect the appropriate tax rate. The FASB's changes were intended to improve the usefulness of information reported to financial statement users.

Effective Date:  The changes are effective for years beginning after December 31, 2018, with early adoption permitted. The Company elected to adopt the changes in the first quarter of 2018, as of December 31, 2017. The amount transferred from AOCI to retained earnings totaled $588,000 and represented the impact of the Company’s corporate tax rate change from 34% to 21% at the date of enactment of the tax reform for the unrealized gains and losses on securities and the defined benefit plan accounted for in AOCI.

ASU 2016-01, Measurement of Financial Instruments

Issued: January 2016

Summary: The amendments in this Update require all equity investments to be measured at fair value with changes in the fair value recognized through net income (other than those changes accounted for under the equity method of accounting or those that result in consolidation of the investee). The amendments in this Update also require an entity to present separately in AOCI the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. In addition, the Update emphasizes the existing requirement to use exit prices to measure fair value for disclosure purposes and clarifies that entities should not make use of a practicability exception in determining the fair value of loans.  Accordingly, we refined the calculations used to determine the disclosed fair value of our loans as part of adopting this standard. The redefined calculation did not have a significant impact on our fair value disclosures.

Effective Date: For public entities, the amendments in the Update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company currently holds a small portfolio of equity investments for which the fair value fluctuates with market activity. The Company adopted ASU 2016-01 on January 1, 2018. As of this date, the Company had $197,000 in unrealized gains on equity securities (see Note 6). The adoption of this Update resulted in a reclassification of $156,000 from other comprehensive loss to retained earnings. The Company recorded a decline of $1,000 during the year ended December 31, 2018 for the change in fair value of equity securities on the consolidated statements of income.

ASU 2018-03, Technical Corrections and Improvements to Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities

Issued: February 2018

Summary: The FASB issued this Update to clarify certain aspects of the guidance on recognizing and measuring financial assets and liabilities in ASU 2016-01:

· Clarification regarding the ability to discontinue application of the measurement alternative for equity securities without a readily determinable fair value;

· Clarification of the measurement date for fair value adjustments to the carrying amount of equity securities without a readily determinable fair value for which the measurement alternative is elected;

· Clarification of the unit of account for fair value adjustments to forward contracts and purchased options on equity securities without a readily determinable fair value for which the measurement alternative is expected to be elected;

· Presentation requirements for certain hybrid financial liabilities for which the fair value option is elected;

· Measurement of financial liabilities denominated in a foreign currency for which the fair value option is elected; and

· Transition guidance for equity securities without a readily determinable fair value.

The amendments in ASU 2018-03 are effective for public business entities for fiscal years beginning after December 15, 2017 and for interim periods within those fiscal years beginning after June 15, 2018. For all other entities, the effective date is the same as the effective date for ASU 2016-01. All entities may early adopt the amendments, including adoption in an interim period, provided they have already adopted ASU 2016-01. The Company adopted this Update in conjunction with the adoption of ASU 2016-01 on January 1, 2018. The adoption had no material impact to the Company’s consolidated financial position or results of operations.

ASU 2017-09, Scope of Modification Accounting

Issued: May 2017

Summary: ASU 2017-09 clarifies Topic 718 such that an entity must apply modification accounting to changes in the terms or conditions of a share-based payment award unless all of the following criteria are met:

1. The fair value of the modified award is the same as the fair value of the original award immediately before the modification.  The standard indicates that if the modification does not affect any of the inputs to the valuation technique used to value the award, the entity is not required to estimate the value immediately before and after the modification.

2. The vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the modification.

3. The classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the modification.

Effective Date: The amendments were effective for all entities for fiscal years beginning after December 15, 2017, including interim periods within those years. The Company adopted ASU 2017-09 on January 1, 2018 and it had no material impact on the Company’s consolidated financial position or results of operations.

ASU 2017-08, Premium Amortization on Purchased Callable Debt Securities

Issued: March 2017

Summary: ASU 2017-08 shortens the amortization period for premiums on purchased callable debt securities to the earliest call date, rather than amortizing over the full contractual term. The ASU does not change the accounting for securities held at a discount.

Effective Date: The amendments are effective for public business entities for fiscal years beginning after December 15, 2018. Early adoption is permitted. The Company chose to early adopt this standard, and the financial statements as of, and for the year ended, December 31, 2017 reflected the impact of premium amortization on callable debt securities to the earliest call date. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.

ASU 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost

Issued: March 2017

Summary: ASU 2017-07 requires that an employer disaggregate the service cost component from the other components of net benefit cost.The amendments also provide explicit guidance on how to present the service cost component and the other components of net benefit cost in the income statement and allows only the service cost component of net benefit cost to be eligible for capitalization.

Effective Date: The amendments were effective for public business entities for fiscal years beginning after December 15, 2017. The Company adopted this Update on January 1, 2018, and it had no impact on the Company’s consolidated financial position and results of operations because the Company’s defined benefit plan is frozen; therefore, there is no service cost component to consider. The cost for other components related to the defined benefit plan are recorded in employee benefits expense on the consolidated statements of income.

ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments

Issued: August 2016

Summary: ASU 2016-15 clarifies how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments are intended to reduce diversity in practice.

Effective Date: The amendments were effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. The Company adopted this Update on January 1, 2018 and it did not have a material impact on the Company’s consolidated financial position or results of operations.

Pending Accounting Standards

ASU 2016-02, Leases

Issued: February 2016

Summary: The new standard establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement.

In July 2018, the FASB issued ASU-2018-10, Codification Improvements to Topic 842, Leases. ASU 2018-10 clarifies the intended application of certain narrow aspects of the guidance in ASU 2016-02. The amendments are similar in nature to those in the FASB’s ongoing project to make improvements to clarify the Codification or correct unintended application of the guidance. Key amendments in this ASU include:

· Updating the definition of Rate Implicit in the Lease to clarify that the rate cannot be less than zero;

· Clarifying application of guidance for lessors when determining impairment of net investment in the lease;

· Clarifying whether lessors and lessees should recognize certain transition adjustments to earnings rather than through equity;

· Clarifying certain transition guidance for amounts previously recognized in business combinations.

In July 2018, the FASB also issued ASU 2018-11, Leases (Topic 842): Targeted Improvements. ASU 2018-11 provides entities with an additional (and optional) transition method to adopt the new leases standard. Under this new transition method, an entity initially applies the new leases standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption.

ASU 2018-11 also provides lessors with a practical expedient, by class of underlying asset, to elect not to separate nonlease components from the associated lease component and, instead, to account for those components as a single component if the nonlease components otherwise would be accounted for under the new revenue guidance (Topic 606) and both the timing and pattern of transfer of the nonlease component(s) and associated lease component are the same, and the lease component, if accounted for separately, would be classified as an operating lease. If the nonlease component or components associated with the lease component are the predominant component of the combined component, an entity is required to account for the combined component in accordance with Topic 606. Otherwise, the entity must account for the combined component as an operating lease in accordance with Topic 842.

Effective Date:ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The effective date and transition requirements of ASU 2018-10 and ASU 2018-11 are the same as the effective date and transition requirements in Topic 842.

The Company adopted ASU 2016-02 on January 1, 2019 using the optional transition method. The Company also elected the following practical expedients: the package of practical expedients, combining lease and nonlease components by class of underlying asset, and using hindsight in determining the lease terms. The adoption of this standard resulted in the recording of a ROU asset of $519,000 and a lease liability of $510,000 as of January 1, 2019 for the Company’s four operating lease obligations. The adoption of this standard is not expected to have a material impact on the Company’s operations, cash flows or capital ratios, nor should it cause the Company to no longer be well capitalized.

ASU 2018-14, Compensation—Retirement Benefits—Defined Benefit Plans—General (Topic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans

Issued: August 2018

Summary: ASU 2018-14 modifies the disclosure requirements under ASC 715-20 for employers that sponsor defined benefit pension or other postretirement plans. Those modifications include the removal and addition of disclosure requirements as well as clarifying specific disclosure requirements.

Effective Date: The amendments are effective for public business entities for fiscal years ending after December 15, 2020. For all other entities, the amendments are effective for annual reporting periods ending after December 15, 2021. Early adoption is permitted. This Update will have no impact on the Company’s consolidated financial position and results of operations because in August 2018, Juniata’s Board of Directors resolved to terminate the Company’s defined benefit retirement plan, The Juniata Valley Bank Retirement Plan, effective November 30, 2018. All participants have been properly notified and settlement of all obligations is expected to occur in mid-2019. See Note 22 for additional information.

ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement

Issued: August 2018

Summary: ASU 2018-13 modifies the disclosure requirements for fair value measurements required under ASC 820. Those modifications include the removal and addition of disclosure requirements as well as clarifying specific disclosure requirements.

Effective Date: The amendments become effective for all entities for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted upon issuance of this ASU. An entity is permitted to early adopt all disclosure requirements in the ASU or early adopt only the removed and modified disclosures and delay adoption of the additional disclosures until their effective date. This Update is not expected to have an impact on the Company’s consolidated financial position or results of operations.

ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities

Issued: August 2017

Summary: ASU 2017-12 improves Topic 815by simplifying and expanding the eligible hedging strategies for financial and nonfinancial risks by more closely aligning hedge accounting with a company’s risk management activities, and also simplifies its application through targeted improvements in key practice areas. This includes expanding the list of items eligible to be hedged and amending the methods used to measure the effectiveness of hedging relationships. In addition, the ASU prescribes how hedging results should be presented and requires incremental disclosures. These changes are intended to allow preparers more flexibility and to enhance the transparency of how hedging results are presented and disclosed. Further, the new standard provides partial relief on the timing of certain aspects of hedge documentation and eliminates the requirement to recognize hedge ineffectiveness separately in earnings in the current period.

Effective Date: The amendments are effective for public business entities, for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early application is permitted in any interim period after issuance of the amendments for existing hedging relationships on the date of adoption.This Update will have no impact on the Company’s consolidated financial position and results of operations.

ASU 2017-04, Simplifying the Test for Goodwill Impairment

Issued: January 2017

Summary: ASU 2017-04 eliminates the requirement of Step 2 in the current guidance to calculate the implied fair value of goodwill to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value in Step 1 of the current guidance.

Effective Date: The amendments are effective for public business entities for fiscal years beginning after December 15, 2019. The adoption of this Update is not expected to have an impact on the Company’s consolidated financial position and results of operations.

ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments

Issued: June 2016

Summary: ASU 2016-13 requires credit losses on most financial assets to be measured at amortized cost and certain other instruments to be measured using an expected credit loss model (referred to as the current expected credit loss (“CECL”) model). Under this model, entities will estimate credit losses over the entire contractual term of the instrument (considering estimated prepayments, but not expected extensions or modifications unless reasonable expectation of a troubled debt restructuring exists) from the date of initial recognition of that instrument.

The ASU also replaces the current accounting model for purchased credit impaired loans and debt securities. The allowance for credit losses for purchased financial assets with a more-than insignificant amount of credit deterioration since origination (“PCD assets”), should be determined in a similar manner to other financial assets measured on an amortized cost basis. However, upon initial recognition, the allowance for credit losses is added to the purchase price (“gross up approach”) to determine the initial amortized cost basis. The subsequent accounting for PCD financial assets is the same expected loss model described above.

Further, the ASU made certain targeted amendments to the existing impairment model for available for sale (AFS) debt securities. For an AFS debt security for which there is neither the intent nor a more-likely-than-not requirement to sell, an entity will record credit losses as an allowance rather than a write-down of the amortized cost basis.

Effective Date:The new standard is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. While the Company’s senior management is currently in the process of evaluating the impact of the amended guidance on its consolidated financial statements and disclosures, it currently expects the ALLL to increase upon adoption given that the allowance will be required to cover the full remaining expected life of the portfolio, rather than the incurred loss under current U.S. GAAP. The extent of this increase is still being evaluated and will depend on economic conditions and the composition of the Company’s loan portfolio at the time of adoption. In preparation, the Company has taken steps to prepare for the implementation when it becomes effective by forming an internal taskforce, gathering pertinent data, participating in training courses, and partnering with a software provider that specializes in ALLL analysis, as well as assessing the sufficiency of data currently available through its core database.

XML

Merger

12 Months Ended

Dec. 31, 2018

Merger [Abstract]

Merger

4.  MERGER

On April 30, 2018, the Company completed the acquisition of Liverpool Community Bank, a Pennsylvania state-chartered bank with one branch location in Liverpool, Perry County. Liverpool was merged with and into The Juniata Valley Bank. As of the merger date, Liverpool had assets of $45,360,000, loans of $32,091,000, and equity of $9,246,000.

Prior to the acquisition, Juniata owned 1,214, or 39.16%, of the 3,100 outstanding common shares of Liverpool. The merger was accounted for using the acquisition method of accounting, in accordance with the provisions of ASC 805, Business Combinations. Juniata obtained control over Liverpool in a step acquisition by acquiring the previously unowned interest in Liverpool. As such, Juniata was required to remeasure its previously held equity interest in Liverpool at its acquisition date fair value and recognize the resulting gain in earnings. The purchase price for the step acquisition was calculated as the aggregate of the consideration transferred for the newly acquired interest (Step Two 60.84% interest) and the fair value of Juniata’s previously held equity interest (Step One 39.16% interest) in Liverpool.

On April 30, 2018, Juniata’s Step One adjusted basis in Liverpool was $5,037,000, which included a $415,000 equity gain from the acquisition, in addition to Juniata’s basis in Liverpool of $4,622,000 prior to the recording of the equity gain.

Liverpool shareholders (other than Juniata, whose Liverpool common stock owned of record or beneficially was cancelled) received either: (i) 202.6286 shares of common stock of Juniata or (ii) $4,050.00 in cash in exchange for each share of Liverpool common stock subject to the limitation that cash would be paid for no more than 20% and no less than 15% of Liverpool’s outstanding common stock. As a result, Juniata issued 315,284 shares of common stock with an acquisition date fair value of approximately $6,463,000, based on Juniata’s closing stock price of $20.50 on April 30, 2018, and cash of $1,362,000, including cash in lieu of fractional shares for a total Step Two purchase price consideration of $7,825,000. The total purchase price of the merger, including both the Step One adjusted basis and Step Two purchase price consideration, was $12,862,000.  

The assets and liabilities of Liverpool were recorded on the consolidated balance sheet at their estimated fair value as of April 30, 2018, and its results of operations have been included in the consolidated income statement since such date.

The purchase price included goodwill and a core deposit intangible of $3,691,000 and $289,000, respectively. The core deposit intangible will be amortized over a ten-year period using a sum of the year’s digits basis. The goodwill will not be amortized but will be tested annually for impairment, or more frequently if circumstances require.

The allocation of the purchase price is as follows:

(Dollars in thousands)
Step One Purchase Price Consideration
April 30, 2018 JUVF basis in LCB (before gain)	$	4,622
Increase in Step One basis from equity gain in acquisition		415
Total Step One adjusted basis		5,037
Step Two Purchase Price Consideration
Purchase price assigned to LCB common shares exchanged for 315,284 JUVF common shares	$	6,463
Purchase price assigned to LCB common shares exchanged for cash including cash in lieu of
fractional shares		1,362
Total Step Two purchase price consideration		7,825
Total purchase price		12,862
LCB net assets acquired:
Tangible common equity		9,246
Adjustments to reflect assets acquired and liabilities assumed at fair value:
Total fair value adjustments		(95)
Associated deferred income taxes		20
Fair value adjustment to net assets acquired, net of tax		(75)
Total LCB net assets acquired		9,171
Goodwill resulting from the merger	$	3,691

The following table summarizes the estimated fair value of the assets acquired and liabilities assumed.

(Dollars in thousands)
Total purchase price	$	12,862
Net assets acquired:
Cash and cash equivalents		8,923
Investments in time deposits with banks		3,675
Loans		31,331
Premises and equipment		125
Accrued interest receivable		123
Core deposit and other intangibles		289
Bank owned life insurance		632
FHLB stock		124
Other assets		267
Deposits		(36,052)
Accrued interest payable		(17)
Other liabilities		(249)
		9,171
Goodwill	$	3,691

As of April 30, 2018, the merger date, goodwill was recorded at $3,691,000. ASC 805 allows for adjustments to the estimated fair value of assets and liabilities, and the resulting goodwill for a period of up to one year after the merger date for new information that becomes available that reflects circumstances at the merger date.

The fair value of the financial assets acquired included loans receivable with a gross amortized cost basis of $32,091,000.  The table below illustrates the fair value adjustments made to the amortized cost basis in order to present a fair value of the loans acquired.

(Dollars in thousands)
Gross amortized cost basis at April 30, 2018	$	32,091
Market rate adjustment		272
Credit fair value adjustment on pools of homogeneous loans		(496)
Credit fair value adjustment on purchased credit impaired loans		(622)
Reversal of existing deferred fees and premiums		86
Fair value of purchased loans at April 30, 2018	$	31,331

The market rate adjustment represents the movement in market interest rates, irrespective of credit adjustments, compared to the stated rates of the acquired loans. The credit adjustment made on pools of homogeneous loans represents the changes in credit quality of the underlying borrowers from the loan inception to the acquisition date. The credit adjustment on impaired loans is derived in accordance with ASC 310-30 and represents the portion of the loan balances that has been deemed uncollectible based on the Company’s expectations of future cash flows for each respective loan.

Summarized below is the acquired Liverpool purchased credit impaired loan portfolio as of April 30, 2018.

(Dollars in thousands)
Contractually required principal and interest at acquisition	$	2,022
Contractual cash flows not expected to be collected (nonaccretable discount)		(1,273)
Expected cash flows at acquisition		749
Interest component of expected cash flows (accretable discount)		(177)
Fair value of acquired loans	$	572

The following table presents unaudited pro forma information as if the merger between Juniata and Liverpool had been completed on January 1, 2017. The pro forma information does not necessarily reflect the results of operations that would have occurred had Juniata merged with Liverpool at the beginning of 2017. Due to Juniata’s former 39.16% ownership in Liverpool, the income previously recorded in 2018 and 2017 that was attributable to the partial ownership of Liverpool has been excluded, in addition to merger-related costs incurred in 2018 and the resulting tax impacts. Supplemental pro forma earnings for the year ended December 31, 2018 were adjusted to exclude $296,000 from the income/gain from unconsolidated subsidiary, $884,000 in merger-related expenses, and the resulting tax benefit of $123,000. The results for the comparable 2017 period were adjusted to include the aforementioned merger-related expenses; however, those results exclude the income from unconsolidated subsidiary and merger-related expenses previously recorded in the year ended December 31, 2017 of $167,000 and $13,000, respectively. The resulting tax benefit included in the year ended December 31, 2017 was $218,000. A 21% tax rate was assumed in both the 2018 and 2017 periods. The pro forma financial information does not include the impact of possible business model changes, nor does it consider any potential impacts of current market conditions or revenues, expense efficiencies or other factors.

(Dollars in thousands; except share data)	Years ended December 31,
	2018		2017
Net interest income after loan loss provision	$	20,629	$	19,943
Noninterest income		4,816		5,347
Noninterest expense		18,818		19,098
Net income available to common shareholders		6,996		5,184
Net income per common share		1.37		1.02

XML

Restrictions on Cash and Due from Banks

12 Months Ended

Dec. 31, 2018

Restrictions on Cash and Due from Banks [Abstract]

Restrictions on Cash and Due from Banks

5.    Restrictions on Cash and Due From Banks

The Bank is required to maintain cash reserve balances with the Federal Reserve Bank if vault cash is insufficient to cover the reserve requirement. As of December 31, 2018 and 2017, respectively, no reserves were required to be held at the Federal Reserve Bank.

XML

Securities

12 Months Ended

Dec. 31, 2018

Securities [Abstract]

Securities

6.Securities

On January 1, 2018, the Company adopted ASU 2016-01, Measurement of Financial Assets Instruments. Upon adoption, equity securities with readily determinable fair values are stated at fair value with realized and unrealized gains and losses reported in net income. For periods prior to January 1, 2018, equity securities were classified as available for sale and stated at fair value with unrealized gains and losses reported as a separate component of AOCI, net of tax. At December 31, 2017, the fair value of equity securities classified as available for sale was $1,119,000. The adoption of ASU 2016-01 resulted in a reclassification of $156,000 in net unrealized gains from AOCI to retained earnings. As of December 31, 2018, the Company had $1,118,000 in equity investments recorded at fair value.

The Company’s investment portfolio includes primarily mortgage-backed securities issued by U.S. Government sponsored agencies and backed by residential mortgages (approximately 71%), bonds issued by U.S. Government sponsored agencies (approximately 16%) and municipalities (approximately 13%) as of December 31, 2018. Most of the municipal bonds are general obligation bonds with maturities or pre-refunding dates within 5 years.

The amortized cost and fair value of securities available for sale as of December 31, 2018 and 2017, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because the securities may be called or prepaid with or without prepayment penalties.

(Dollars in thousands)	December 31, 2018
						Gross		Gross
Securities Available for Sale		Amortized		Fair		Unrealized		Unrealized
Type and maturity		Cost		Value		Gains		Losses
Obligations of U.S. Government agencies and corporations
After one year but within five years	$	20,998	$	20,355	$	-	$	(643)
After five years but within ten years		2,999		2,911		-		(88)
		23,997		23,266		-		(731)
Obligations of state and political subdivisions
Within one year		826		826		-		-
After one year but within five years		14,751		14,686		13		(78)
After five years but within ten years		2,779		2,669		-		(110)
		18,356		18,181		13		(188)
Mortgage-backed securities		102,957		100,506		172		(2,623)
Total	$	145,310	$	141,953	$	185	$	(3,542)

(Dollars in thousands)	December 31, 2017
						Gross		Gross
Securities Available for Sale		Amortized		Fair		Unrealized		Unrealized
Type and maturity		Cost		Value		Gains		Losses
Obligations of U.S. Government agencies and corporations
Within one year	$	6,000	$	5,969	$	-	$	(31)
After one year but within five years		15,000		14,689		-		(311)
After five years but within ten years		13,998		13,556		-		(442)
		34,998		34,214		-		(784)
Obligations of state and political subdivisions
Within one year		2,521		2,516		-		(5)
After one year but within five years		13,959		13,955		50		(54)
After five years but within ten years		8,611		8,510		18		(119)
		25,091		24,981		68		(178)
Mortgage-backed securities		94,945		93,510		38		(1,473)
Equity securities		922		1,119		197		-
Total	$	155,956	$	153,824	$	303	$	(2,435)

Certain obligations of the U.S. Government and state and political subdivisions are pledged to secure public deposits, securities sold under agreements to repurchase and for other purposes as required or permitted by law. The carrying value of the pledged assets was $50,157,000 and $47,825,000at December 31, 2018 and 2017, respectively.

In addition to cash received from the scheduled maturities of securities, some investment securities available for sale are sold at current market values during the course of normal operations. Following is a summary of proceeds received from all investment securities transactions and the resulting realized gains and losses:

(Dollars in thousands)	Years Ended December 31,
		2018		2017		2016
Gross proceeds from sales of securities	$	10,461	$	21,799	$	4,304
Securities available for sale:
Gross realized gains from sold and called securities	$	-	$	539	$	139
Gross realized losses from sold and called securities		(188)		(32)		(21)
Gross gains from business combinations		-		5		100

Equity securities owned by the Company consist of common stock of various financial services providers (“Bank Stocks”). As of January 1, 2018, upon the adoption of ASU 2016-01, all of the Company’ equity securities are within the scope of ASC Topic 321, Investments – Equity Securities. ASC 321 requires all equity investments within its scope to be measured at fair value with changes in fair value recognized in net income. The Company recorded a decline of $1,000 during the year ended December 31, 2018 for the change in fair value of equity securities on the consolidated statements of income.

The following table shows gross unrealized losses and fair values of securities available for sale, aggregated by category and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2018:

	Unrealized Losses at December 31, 2018
	Less Than 12 Months					12 Months or More					Total
	Number					Number					Number
(Dollars in thousands)	of	Fair		Unrealized		of	Fair		Unrealized		of	Fair		Unrealized
	Securities	Value		Losses		Securities	Value		Losses		Securities	Value		Losses
Obligations of U.S.
Government agencies
and corporations	-	$	-	$	-	14	$	23,267	$	(731)	14	$	23,267	$	(731)
Obligations of state and
political subdivisions	8		5,055		(10)	13		8,242		(178)	21		13,297		(188)
Mortgage-backed
securities	3		6,726		(32)	43		77,170		(2,591)	46		83,896		(2,623)
Total debt securities	11		11,781		(42)	70		108,679		(3,500)	81		120,460		(3,542)
Total temporarily
impaired
securities	11	$	11,781	$	(42)	70	$	108,679	$	(3,500)	81	$	120,460	$	(3,542)

At December 31, 2018, 14 U.S. Government and agency securities had unrealized losses that, in the aggregate, did not exceed 1% of amortized cost. All of these securities have been in a continuous loss position for 12 months or more.

At December 31, 2018, 21 obligations of state and political subdivision bonds had unrealized losses that, in the aggregate, did not exceed 1% of amortized cost. Thirteen of these securities have been in a continuous loss position for 12 months or more.

At December 31, 2018, 46 mortgage-backed securities had an unrealized loss that did not exceed 2% of amortized cost. Forty-three of these securities have been in a continuous loss position for 12 months or more.

The mortgage-backed securities in the Company’s portfolio are government sponsored enterprise (“GSE”) pass-through instruments issued by the Federal National Mortgage Association (“FNMA”), which guarantees the timely payment of principal on these investments.

The unrealized losses noted above are considered to be temporary impairments. The decline in the values of the debt securities is due only to interest rate fluctuations, rather than erosion of issuer credit quality. As a result, the payment of contractual cash flows, including principal repayment, is not at risk. As the Company does not intend to sell the securities, does not believe the Company will be required to sell the securities before recovery and expects to recover the entire amortized cost basis, none of the debt securities are deemed to be other-than-temporarily impaired.

There were two available for sale equity securities in an unrealized loss position on December 31, 2017, with one in an unrealized loss position for 12 months or more. The total unrealized loss on available for sale equity securities at December 31, 2017 was less than $1,000. Management identified no other-than-temporary impairment as of, or for the years ended, December 31, 2017 and 2016.

The following table shows gross unrealized losses and fair values of securities available for sale, aggregated by category and length of time that individual securities had been in a continuous unrealized loss position, at December 31, 2017:

	Unrealized Losses at December 31, 2017
	Less Than 12 Months						12 Months or More						Total
	Number						Number						Number
(Dollars in thousands)	of	Fair		Unrealized			of	Fair		Unrealized			of	Fair		Unrealized
	Securities	Value			Losses		Securities	Value			Losses		Securities	Value			Losses
Obligations of U.S.
Government agencies
and corporations	5	$	10,845		$	(157)	15	$	23,369		$	(627)	20	$	34,214		$	(784)
Obligations of state and
political subdivisions	23		10,491			(70)	6		3,862			(108)	29		14,353			(178)
Mortgage-backed
securities	23		51,050			(518)	20		38,740			(955)	43		89,790			(1,473)
Total debt securities	51		72,386			(745)	41		65,971			(1,690)	92		138,357			(2,435)
Equity securities	1		9			-	1		4			-	2		13			-
Total temporarily
impaired
securities	52	$	72,395		$	(745)	42	$	65,975		$	(1,690)	94	$	138,370		$	(2,435)

XML

Loans and Related Allowance for Loan Losses

12 Months Ended

Dec. 31, 2018

Loans and Related Allowance for Loan Losses [Abstract]

Loans and Related Allowance for Loan Losses

7.  Loans and Related Allowance for Loan Losses

The following table presents the classes of the loan portfolio summarized by the aggregate pass rating and the classified ratings of special mention, substandard and doubtful within the Company’s internal risk rating system as of December 31, 2018 and December 31, 2017. Due to the expansion of the Company’s internal credit quality risk ratings in the second quarter of 2018, the amount reclassified from the special mention rating to the pass/watch rating, which is included within the pass rating classification below, was $32,603,000 at June 30, 2018. Previously, both special mention and watch rated loans were reported under the special mention rating classification.

(Dollars in thousands)
			Special
As of December 31, 2018	Pass		Mention		Substandard		Doubtful		Total
Commercial, financial and agricultural	$	42,757	$	2,992	$	814	$	-	$	46,563
Real estate - commercial		125,352		8,590		6,459		894		141,295
Real estate - construction		34,131		-		2,528		29		36,688
Real estate - mortgage		160,774		24		2,569		181		163,548
Obligations of states and political subdivisions		19,129		-		-		-		19,129
Personal		10,389		-		19		-		10,408
Total	$	392,532	$	11,606	$	12,389	$	1,104	$	417,631

(Dollars in thousands)
			Special
As of December 31, 2017	Pass		Mention		Substandard		Doubtful		Total
Commercial, financial and agricultural	$	34,826	$	8,692	$	2,280	$	4	$	45,802
Real estate - commercial		114,299		17,928		7,189		953		140,369
Real estate - construction		22,470		3,297		2,636		-		28,403
Real estate - mortgage		139,861		3,551		2,859		617		146,888
Obligations of states and political subdivisions		12,088		956		-		-		13,044
Personal		9,360		32		6		-		9,398
Total	$	332,904	$	34,456	$	14,970	$	1,574	$	383,904

The Company has certain loans in its portfolio that are considered to be impaired. It is the policy of the Company to recognize income on impaired loans that have been transferred to nonaccrual status on a cash basis, only to the extent that it exceeds principal balance recovery. A collateral analysis is performed on each impaired loan at least quarterly, and results are used to determine if a specific reserve is necessary to adjust the carrying value of each individual loan down to the estimated fair value of the collateral, less costs to sell. Generally, specific reserves are carried against impaired loans based upon estimated collateral value until a confirming loss event occurs or until termination of the credit is scheduled through liquidation of the collateral or foreclosure. Consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process at December 31, 2018 and December 31, 2017 totaled $94,000 and $1,285,000, respectively. Charge-offs will occur when a confirmed loss is identified. Professional appraisals of collateral, discounted for expected selling costs, are used to determine the charge-off amount.

The following tables summarize information regarding impaired loans by portfolio class as of December 31, 2018 and December 31, 2017:

(Dollars in thousands)	As of December 31, 2018						As of December 31, 2017
Impaired Loans	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance recorded:
Commercial, financial
and agricultural	$	-	$	-	$	-	$	468	$	477	$	-
Real estate - commercial		909		1,303		-		5,031		5,957		-
Acquired with credit
deterioration		544		592		-		191		247		-
Real estate - construction		27		1,123		-		-		-		-
Real estate - mortgage		1,180		1,912		-		2,232		3,738		-
Acquired with credit
deterioration		971		1,061		-		337		384		-
Personal		17		17		-		-		-		-
Total:
Commercial, financial
and agricultural	$	-	$	-	$	-	$	468	$	477	$	-
Real estate - commercial		909		1,303		-		5,031		5,957		-
Acquired with credit
deterioration		544		592		-		191		247		-
Real estate - construction		27		1,123		-		-		-		-
Real estate - mortgage		1,180		1,912		-		2,232		3,738		-
Acquired with credit
deterioration		971		1,061		-		337		384		-
Personal		17		17		-		-		-		-
	$	3,648	$	6,008	$	-	$	8,259	$	10,803	$	-

(Dollars in thousands)	Year Ended December 31, 2018						Year Ended December 31, 2017						Year Ended December 31,  2016
Impaired Loans	Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Income		Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Income		Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Income
With no related allowance
recorded:
Commercial, financial
and agricultural	$	234	$	-	$	-	$	452	$	25	$	-	$	456	$	29	$	-
Real estate - commercial		2,970		-		-		5,265		313		-		3,675		331		-
Acquired with credit
deterioration		368		-		-		416		-		-		738		-		-
Real estate - construction		14		-		-		1,228		34		-		1,228		136		-
Real estate - mortgage		1,706		19		33		2,789		21		20		2,991		28		37
Acquired with credit
deterioration		654		-		-		376		-		-		523		-		-
Personal		9		-		-		-						-
With an allowance
recorded:
Real estate - mortgage	$	-	$	-	$	-	$	356	$	-	$	-	$	356	$	-	$	-
Total:
Commercial, financial
and agricultural		234		-		-		452		25		-		456		29		-
Real estate - commercial		2,970		-		-		5,265		313		-		3,675		331		-
Acquired with credit
deterioration		368		-		-		416		-		-		738		-		-
Real estate - construction		14		-		-		1,228		34		-		1,228		136		-
Real estate - mortgage		1,706		19		33		3,145		21		20		3,347		28		37
Acquired with credit
deterioration		654		-		-		376		-		-		523		-		-
Personal		9		-		-		-		-		-		-		-		-
	$	5,955	$	19	$	33	$	10,882	$	393	$	20	$	9,967	$	524	$	37

The following table presents nonaccrual loans by classes of the loan portfolio as of December 31, 2018 and December 31, 2017:

(Dollars in thousands)
Nonaccrual loans:	December 31, 2018		December 31, 2017
Commercial, financial and agricultural	$	-	$	4
Real estate - commercial		908		953
Real estate - construction		29		-
Real estate - mortgage		753		1,917
Personal		17		-
Total	$	1,707	$	2,874

Interest income not recorded based on the original contractual terms of the loans for nonaccrual loans was $311,000, $300,000 and $281,000 in 2018, 2017 and 2016, respectively.

The performance and credit quality of the loan portfolio is also monitored by analyzing the age of the loans receivable as determined by the length of time a recorded payment is past due. The following table presents the classes of the loan portfolio summarized by the past due status as of December 31, 2018 and December 31, 2017:

													Loans
													Past Due
													Greater
(Dollars in thousands)					Greater								than 90
	30-59 Days		60-89 Days		than 90		Total Past						Days an
As of  December 31, 2018	Past Due		Past Due		Days		Due		Current		Total Loans		Accruing(1)
Commercial, financial and agricultural	$	6	$	-	$	-	$	6	$	46,557	$	46,563	$	-
Real estate - commercial
Real estate - commercial		-		-		1,214		1,214		139,890		141,104		306
Acquired with credit deterioration		140		-		-		140		51		191		-
Real estate - construction		32		-		29		61		36,627		36,688		-
Real estate - mortgage
Real estate - mortgage		824		561		175		1,560		161,651		163,211		23
Acquired with credit deterioration		259		-		7		266		71		337		7
Obligations of states and political
subdivisions		-		-		-		-		19,129		19,129		-
Personal		24		15		17		56		10,352		10,408		-
Total	$	1,285	$	576	$	1,442	$	3,303	$	414,328	$	417,631	$	336

													Loans
													Past Due
													Greater
(Dollars in thousands)					Greater								than 90
	30-59 Days		60-89 Days		than 90		Total Past						Days an
As of  December 31, 2017	Past Due		Past Due		Days		Due		Current		Total Loans		Accruing(1)
Commercial, financial and agricultural	$	-	$	-	$	-	$	-	$	45,802	$	45,802	$	-
Real estate - commercial
Real estate - commercial		16		23		-		39		140,139		140,178		-
Acquired with credit deterioration		-		-		28		28		163		191		28
Real estate - construction		-		-		-		-		28,403		28,403		-
Real estate - mortgage
Real estate - mortgage		694		80		64		838		145,713		146,551		64
Acquired with credit deterioration		-		-		123		123		214		337		123
Obligations of states and political
subdivisions		-		-		-		-		13,044		13,044		-
Personal		66		6		-		72		9,326		9,398		-
Total	$	776	$	109	$	215	$	1,100	$	382,804	$	383,904	$	215

(1) These loans are guaranteed, or well secured, and there is an effective means of collection in process.

The following table summarizes information regarding troubled debt restructurings by loan portfolio class as of and for the years ended December 31, 2018 and 2017.

(Dollars in thousands)		Pre-Modification		Post-Modification
	Number of	Outstanding		Outstanding
	Contracts	Recorded Investment		Recorded Investment		Recorded Investment
As of December 31, 2018
Accruing troubled debt restructurings:
Real estate - mortgage	8	$	522	$	550	$	428
Non-accruing troubled debt
restructurings:
Real estate - mortgage	1		25		25		17
	9	$	547	$	575	$	445

(Dollars in thousands)		Pre-Modification		Post-Modification
	Number of	Outstanding		Outstanding
	Contracts	Recorded Investment		Recorded Investment		Recorded Investment
As of December 31, 2017
Accruing troubled debt restructurings:
Real estate - commercial
Real estate - mortgage	7	$	369	$	397	$	315
Non-accruing troubled debt
restructurings:
Commercial, financial, agricultural	1		19		20		4
Real estate - mortgage	1		25		25		20
	9	$	413	$	442	$	339

The Company’s troubled debt restructurings are also impaired loans, which may result in a specific allocation and subsequent charge-off if appropriate. As of December 31, 2018, there were no specific reserves relating to the troubled debt restructurings, nor were there any charge-offs on troubled debt restructured loans recorded in 2018. The amended terms of the restructured loans vary, whereby interest rates have been reduced, principal payments have been reduced or deferred for a period of time and/or maturity dates have been extended.

As of December 31, 2018, one restructured loan for $39,000 was in default because it was delinquent in excess of 30 days with respect to the terms of the restructuring. There were no defaults of troubled debt restructurings within 12 months of restructure during 2018, 2017 or 2016.

The following tables summarize loans whose terms were modified, resulting in troubled debt restructurings during 2018 and 2017.

(Dollars in thousands)		Pre-Modification		Post-Modification
	Number of	Outstanding		Outstanding
	Contracts	Recorded Investment		Recorded Investment		Recorded Investment
Year ended December 31, 2018
Non-accruing troubled debt
restructurings:
Real estate - mortgage	1	$	153	$	153	$	147
	1	$	153	$	153	$	147

(Dollars in thousands)		Pre-Modification		Post-Modification
	Number of	Outstanding		Outstanding
	Contracts	Recorded Investment		Recorded Investment		Recorded Investment
Year ended December 31, 2017
Non-accruing troubled debt
restructurings:
Commercial, financial, agricultural	1	$	19	$	20	$	4
	1	$	19	$	20	$	4

The following tables summarize loans and the activity in the allowance for loan losses by loan class, segregated into the amount required for loans individually evaluated for impairment and the amount required for loans collectively evaluated for impairment as of and for the years ended December 31, 2018, 2017 and 2016:

(Dollars in thousands)									Obligations
	Commercial,								of states
	financial and		Real estate-		Real estate-		Real estate-		and political
Allowance for loan losses:	agricultural		commercial		construction		mortgage		subdivisions		Personal		Total
Beginning Balance, January 1, 2018	$	273	$	1,022	$	288	$	1,285	$	-	$	71	$	2,939
Charge-offs		-		(60)		-		(183)		-		(42)		(285)
Recoveries		10		5		-		12		-		16		43
Provisions		(8)		107		270		(79)		20		27		337
Ending balance, December 31, 2018	$	275	$	1,074	$	558	$	1,035	$	20	$	72	$	3,034
collectively evaluated for impairment	$	275	$	1,074	$	558	$	1,035	$	20	$	72	$	3,034
Loans receivable:
Ending balance	$	46,563	$	141,295	$	36,688	$	163,548	$	19,129	$	10,408	$	417,631
individually evaluated for impairment		-		909		27		1,180		-		17		2,133
acquired with credit deterioration		-		544		-		971		-		-		1,515
collectively evaluated for impairment	$	46,563	$	139,842	$	36,661	$	161,397	$	19,129	$	10,391	$	413,983

(Dollars in thousands)									Obligations
	Commercial,								of states
	financial and		Real estate-		Real estate-		Real estate-		and political
Allowance for loan losses:	agricultural		commercial		construction		mortgage		subdivisions		Personal		Total
Beginning Balance, January 1, 2017	$	318	$	948	$	231	$	1,143	$	-	$	83	$	2,723
Charge-offs		(46)		(70)		-		(149)		-		(27)		(292)
Recoveries		5		2		-		45		-		17		69
Provisions		(4)		142		57		246		-		(2)		439
Ending balance, December 31, 2017	$	273	$	1,022	$	288	$	1,285	$	-	$	71	$	2,939
collectively evaluated for impairment	$	273	$	1,022	$	288	$	1,285	$	-	$	71	$	2,939
Loans receivable:
Ending balance	$	45,802	$	140,369	$	28,403	$	146,888	$	13,044	$	9,398	$	383,904
individually evaluated for impairment		468		5,031		-		2,232		-		-		7,731
acquired with credit deterioration		-		191		-		337		-		-		528
collectively evaluated for impairment	$	45,334	$	135,147	$	28,403	$	144,319	$	13,044	$	9,398	$	375,645

(Dollars in thousands)									Obligations
	Commercial,								of states
	financial and		Real estate-		Real estate-		Real estate-		and political
Allowance for loan losses:	agricultural		commercial		construction		mortgage		subdivisions		Personal		Total
Beginning Balance, January 1, 2016	$	264	$	836	$	191	$	1,140	$	-	$	47	$	2,478
Charge-offs		(4)		(146)		-		(103)		-		(26)		(279)
Recoveries		-		24		-		15		-		19		58
Provisions		58		234		40		91		-		43		466
Ending balance, December 31, 2016	$	318	$	948	$	231	$	1,143	$	-	$	83	$	2,723
individually evaluated for impairment		-		-		-		56		-		-		56
collectively evaluated for impairment	$	318	$	948	$	231	$	1,087	$	-	$	83	$	2,667
Loans receivable:
Ending balance	$	40,827	$	123,711	$	35,206	$	154,905	$	13,616	$	10,032	$	378,297
individually evaluated for impairment		436		5,499		2,455		4,057		-		-		12,447
acquired with credit deterioration		-		641		-		415		-		-		1,056
collectively evaluated for impairment	$	40,391	$	117,571	$	32,751	$	150,433	$	13,616	$	10,032	$	364,794

XML

Pledged Assets

12 Months Ended

Dec. 31, 2018

Pledged Assets [Abstract]

Pledged Assets

8.  Pledged Assets

The Bank must maintain sufficient qualifying collateral with the FHLB in order to secure borrowings. Therefore, a Master Collateral Agreement has been entered into which pledges all mortgage related assets as collateral for future borrowings. Mortgage related assets could include loans or investment securities. As of December 31, 2018, the amount of loans included in qualifying collateral was $261,442,000, for a lending value of $187,818,000. As of December 31, 2017, the amount of loans included in qualifying collateral was $224,561,000, for a lending value of $163,181,000.  No investment securities are included in qualifying collateral as of December 31, 2018 or 2017.

XML

Bank Owned Life Insurance and Annuities

12 Months Ended

Dec. 31, 2018

Bank Owned Life Insurance and Annuities [Abstract]

Bank Owned Life Insurance and Annuities

9.  Bank Owned Life Insurance and Annuities

The Company holds bank-owned life insurance (“BOLI”) and deferred annuities with a combined cash value of $15,938,000 and $14,972,000 at December 31, 2018 and 2017, respectively. As annuitants retire, the deferred annuities may be converted to payout annuities to create payment streams that match certain post-retirement liabilities. The net increase in cash surrender value on the BOLI and annuities was $966,000 and $341,000 in 2018 and 2017, respectively, while the cash surrender value decreased in 2016 by $274,000; the net change resulting from the addition of BOLI acquired through acquisition, proceeds from life insurance claim payments, premium payments and earnings recorded as non-interest income. The contracts are owned by the Bank in various insurance companies. The crediting rate on the policies varies annually based on the insurance companies’ investment portfolio returns in their general fund and market conditions. Changes in cash value of BOLI and annuities in 2018 and 2017 are shown below:

(Dollars in thousands)	Life		Deferred
	Insurance		Annuities		Total
Balance as of January 1, 2017	$	14,198		433	$	14,631
Earnings		285		16		301
Premiums on existing policies		27		13		40
Balance as of December 31, 2017		14,510		462		14,972
Earnings		277		18		295
Premiums on existing policies		25		13		38
Annuity payments received		1		-		1
BOLI acquired through acquisition		632		-		632
Balance as of December 31, 2018	$	15,445	$	493	$	15,938

XML

Premises and Equipment

12 Months Ended

Dec. 31, 2018

Premises and Equipment [Abstract]

Premises and Equipment

10.  Premises And Equipment

Premises and equipment consist of the following:

(Dollars in thousands)	December 31,
	2018		2017
Land	$	1,158	$	1,126
Buildings and improvements		11,645		11,358
Furniture, computer software and equipment		6,217		5,898
		19,020		18,382
Less: accumulated depreciation		(10,276)		(9,495)
	$	8,744	$	8,887

Depreciation expense on premises and equipment charged to operations was $815,000 in 2018, $672,000 in 2017 and $595,000 in 2016.

XML

Goodwill and Other Intangible Assets

12 Months Ended

Dec. 31, 2018

Goodwill and Other Intangible Assets [Abstract]

Goodwill and Other Intangible Assets

11. Goodwill and other intangible assets

Branch Acquisition

On September 8, 2006, the Company acquired a branch office in Richfield, PA. Goodwill at December 31, 2018 and 2017 was $2,046,000. The core deposit intangible of $431,000 was fully amortized as of December 31, 2018 and 2017. The core deposit intangible was being amortized over a ten-year period on a straight-line basis. Goodwill is not amortized, but is measured annually for impairment.

FNBPA Acquisition

On November 30, 2015, the Company completed its acquisition of FNBPA and, as a result, recorded goodwill of $3,335,000. In 2016, an adjustment was made to increase goodwill to $3,402,000, which is where the balance remained as of December 31, 2018 and 2017. Core deposit intangible in the amount of $303,000 was recorded and is being amortized over a ten-year period using a sum of the year’s digits basis. Other intangible assets were identified and recorded as of November 30, 2015, in the amount of $40,000 and were amortized on a straight-line basis over two years, through November 30, 2017.

LCB Acquisition

On April 30, 2018, Juniata completed the acquisition of LCB and, as a result, recorded goodwill of $3,691,000, which was also the balance at December 31, 2018. In addition, a core deposit intangible of $289,000 was recorded and will be amortized over a ten-year period using a sum of the years’ digits basis.

The following table shows the amortization schedule for each of the intangible assets recorded.

(Dollars in thousands)	LCB		FNBPA		FNBPA		Branch
	Acquisition		Acquisition		Acquisition		Acquisition
	Core		Core		Other		Core
	Deposit		Deposit		Intangible		Deposit
	Intangible		Intangible		Assets		Intangible
Beginning Balance at Acquisition Date	$	289	$	303	$	40	$	431
Amortization expense recorded prior to December 31, 2015		-		4		2		402
Amortization expense recorded in Years ended:
December 31, 2016		-		55		20		29
December 31, 2017		-		49		18		-
December 31, 2018		35		44		-		-
Unamortized balance as of December 31, 2018		254		151		-		-
Scheduled Amortization expense for years ended:
December 31, 2019		49		38		-		-
December 31, 2020		44		33		-		-
December 31, 2021		39		27		-		-
December 31, 2022		33		22		-		-
December 31, 2023		28		16		-		-
After December 31, 2023		61		15		-		-

XML

Investment in Unconsolidated Subsidiary

12 Months Ended

Dec. 31, 2018

Investment in Unconsolidated Subsidiary [Abstract]

Investment in Unconsolidated Subsidiary

12.  Investment in Unconsolidated Subsidiary

The Company no longer has an investment in an unconsolidated subsidiary following its acquisition of the remainder of the outstanding common stock of Liverpool on April 30, 2018. Prior to the acquisition, the Company owned 39.16% of the outstanding common stock of Liverpool. The investment was accounted for under the equity method of accounting and was carried at $4,812,000 as of December 31, 2017. The Company increased its investment in LCB for its share of earnings and decreased its investment by any dividends received from LCB. The investment was evaluated quarterly for impairment. A loss in value of the investment which is determined to be other than a temporary decline would have been recognized as a loss in the period in which such determination was made. Evidence of a loss in value might include, but would not necessarily be limited to, absence of an ability to recover the carrying amount of the investment or inability of LCB to sustain an earnings capacity that would justify the current carrying value of the investment. There was no impairment of the investment relating to LCB prior to the acquisition on April 30, 2018. A deferred tax liability of $406,000 related to the previous 39.16% ownership in LCB, was removed as of April 30, 2018, resulting in a corresponding reduction in income tax expense.

The following table illustrates the components of the income/gain from the unconsolidated subsidiary investment recorded for the years ended December 31, 2018, 2017, and 2016.

(Dollars in thousands)

	Years Ended December 31,
Income from unconsolidated subsidiary (excluding merger-	2018		2017		2016
related adjustments)
Dividend income	$	36	$	61	$	55
Equity income		45		106		167
Total income (excluding merger-related adjustments)		81		167		222
Merger-related adjustments for investment in unconsolidated
subsidiary
Adjustment to LCB book value at April 30, 2018		(239)		-		-
Special merger-related dividend		39		-		-
Fair value gain		415		-		-
Total merger-related adjustments		215		-		-
Total income/gain from unconsolidated subsidiary	$	296	$	167	$	222

XML

Deposits

12 Months Ended

Dec. 31, 2018

Deposits [Abstract]

Deposits

13. Deposits

The aggregate amount of demand deposit overdrafts that were reclassified as loans were $75,000 at December 31, 2018, compared to $33,000 at December 31, 2017.

Deposits consist of the following:

(Dollars in thousands)	December 31,
	2018		2017
Demand, non-interest bearing	$	126,057	$	115,911
Interest-bearing demand and money market		147,413		122,407
Savings		99,236		98,966
Time deposits, $250,000 or more		8,368		8,456
Other time deposits		140,648		131,928
	$	521,722	$	477,668

Deposits and other funds from related parties held by Juniata amounted to $1,215,000 and $1,116,000 at December 31, 2018 and 2017, respectively.

Aggregate amount of scheduled maturities of time deposits as of December 31, 2018 include the following:

(Dollars in thousands)
	Time Deposits
Maturing in:	$250,000 or more		Other		Total Time Deposits
2019	$	3,538	$	49,056	$	52,594
2020		2,715		34,817		37,532
2021		513		21,694		22,207
2022		-		9,503		9,503
2023		607		11,070		11,677
Later		995		14,508		15,503
	$	8,368	$	140,648	$	149,016

XML

Borrowings

12 Months Ended

Dec. 31, 2018

Borrowings [Abstract]

Borrowings

14. Borrowings

Short term borrowings as of December 31, 2018, 2017 and 2016, and the related maximum amounts outstanding at the end of any month in each of the three years ended, are presented below.

(Dollars in thousands)	December 31,						Maximum Outstanding at Any Month End
	2018		2017		2016		2018		2017		2016
Securities sold under
agreements to
repurchase	$	2,911	$	9,769	$	4,496	$	4,620	$	9,769	$	6,018
Short-term borrowings
with FHLB:
Overnight advances		11,600		12,000		27,700		29,238		30,721		32,300
	$	14,511	$	21,769	$	32,196	$	33,858	$	40,490	$	38,318

The following table presents supplemental information related to short-term borrowings.

	Securities sold under agreements									Short-term borrowings with
(Dollars in thousands)	to repurchase									Federal Home Loan Bank
	2018			2017			2016			2018			2017			2016
Amount outstanding
as of December 31	$	2,911		$	9,769		$	4,496		$	11,600		$	12,000		$	27,700
Weighted average interest
rate as of December 31		2.13	%		0.32	%		0.18	%		2.62	%		1.54	%		0.74	%
Average amount out-
standing during the year		4,177			4,823			4,712			9,906			25,476			15,696
Weighted average interest
rate during the year		1.49	%		0.64	%		0.11	%		1.92	%		1.16	%		0.60	%

Long-term debt is comprised only of FHLB advances with an original maturity of one year or more. Outstanding balances were $15,000,000 as of December 31, 2018 and $25,000,000 as of December 31, 2017.

The following table summarizes the scheduled maturities of long-term debt as of December 31, 2018.

(Dollars in thousands)
	Scheduled		Weighted Average
Year	Maturities		Interest Rate
2019		15,000	1.59	%
2020		-	-
2021		-	-
2022		-	-
2023		-	-
Thereafter		-	-
	$	15,000	1.59	%

The Bank has repurchase agreements with several of its depositors, under which customers’ funds are invested daily into an interest bearing account. These funds are carried by the Company as short-term debt. It is the Company’s policy to completely collateralize repurchase agreements with U.S. Government securities. As of December 31, 2018, the securities that serve as collateral for securities sold under agreements to repurchase had a fair value of $8,666,000. The interest rate paid on these funds is variable and subject to change daily.

The Bank’s maximum borrowing capacity with the FHLB is $187,818,000, with a  balance of $26,600,000 outstanding as of December 31, 2018. In order to borrow additional amounts, the FHLB would require the Bank to purchase additional FHLB Stock. The FHLB is a source of both short-term and long-term funding. The Bank must maintain sufficient qualifying collateral to secure all outstanding advances. Qualifying collateral is defined by the FHLB and includes outstanding balances of the Company’s real estate loans, excluding loans with certain risk mitigants, including delinquencies and loans made to insiders, borrowers with low credit scores or loans with high loan-to-value ratios.

XML

Operating Lease Obligations

12 Months Ended

Dec. 31, 2018

Operating Lease Obligations [Abstract]

Operating Lease Obligations

15.  Operating Lease Obligations

The Company has entered into four operating lease arrangements. The operating leases are for two branch and two office locations. The majority of the leases are renewable at the Company’s option. One of the office location lease agreements is with a related party. The original term of this lease was for ten years followed by fifteen annual renewal options. The Company is currently in the fifth annual renewal period.

Future minimum lease commitments are based on current rental payments. Rental expense charged to operations, including license fees for branch offices, was $109,000, $147,000 and $142,000 in 2018, 2017 and 2016, respectively. The primary reason for the decline in rental expense in 2018 was because a previously leased branch office was relocated to a newly constructed branch facility owned by Juniata at the end of 2017.

The following is a summary of future minimum rental payments for the next five years required under operating leases that have initial or remaining noncancelable lease terms in excess of one year as of December 31, 2018:

(Dollars in thousands)
Years ending December 31,		Lease Obligation
2019	$	111
2020		93
2021		83
2022		26
2023		21
2024 and beyond		95
Total minimum payments required	$	429

XML

Income Taxes

12 Months Ended

Dec. 31, 2018

Income Taxes [Abstract]

Income Taxes

16.  Income Taxes

ASC 740 requires the effects of tax law and rate changes be reflected as a component of tax expense from continuing operations. Due to the enactment of the Tax Cuts and Jobs Act on December 22, 2017, Juniata’s future maximum corporate tax rate was lowered from 34% to 21%, thereby decreasing the future tax benefit of its net deferred tax asset by 13%. Though the reduced rate will provide tax savings to Juniata in future periods, the reduction resulted in a write-downs of Juniata’s net deferred tax assets, which was previously valued based upon the projection of a 34% future tax rate. As a result, a non-cash charge of $416,000 was included in the 2017 expense for income taxes. In 2018, the value of Juniata’s net deferred tax asset was adjusted again, primarily due to a defined benefit contribution applied to the 2017 tax year that resulted in a decline in tax expense of $168,000 in 2018. Offsetting the tax expense was the effect of tax credits for Juniata’s investment in two low-income housing partnerships amounting to $901,000 in 2018, $722,000 in 2017 and $572,000 in 2016. Tax credits associated with phase I will continue through 2023.  Phase II credits were initiated in the second half of 2017 and will run through 2027. The tax credits are included in the tax expense line item on the Consolidated Statements of Income. In addition, a $406,000 deferred tax liability related to the previous 39.16% ownership in Liverpool, was removed as of April 30, 2018, resulting in a corresponding reduction in income tax expense.

The components of income tax (benefit) expense for the three years ended December 31 were:

(Dollars in thousands)	Years Ended December 31,
	2018		2017		2016
Current tax (benefit) expense	$	(563)	$	379	$	499
Deferred tax expense		(96)		681		320
Total tax (benefit) expense	$	(659)	$	1,060	$	819

A reconciliation of the statutory income tax (benefit) expense computed at 21% in 2018 and 34% in both 2017 and 2016 to the income tax expense included in the consolidated statements of income follows:

(Dollars in thousands)	Years Ended December 31,
	2018			2017			2016
Income before income taxes	$	5,245		$	5,597		$	5,975
Statutory tax rate		21.0	%		34.0	%		34.0%
Federal tax at statutory rate		1,101			1,903			2,032
Tax-exempt interest		(271)			(443)			(427)
Net earnings on BOLI		(50)			(75)			(84)
Gain from life insurance proceeds		-			-			(124)
Dividend from unconsolidated subsidiary		(10)			(17)			(15)
Stock-based compensation		19			24			23
Federal tax credits		(901)			(722)			(572)
Merger and acquisition expenses		33			-			-
Tax reform adjustment		-			416			-
Defined benefit prior year contribution, net of
other PTR adjustments		(198)			-			-
Basis difference related to LCB investment
prior to acquisition		(406)			-			-
Other permanent differences		24			(26)			(14)
Total tax (benefit) expense	$	(659)		$	1,060		$	819
Effective tax rate		(12.6)	%		18.9	%		13.7%

Deductible temporary differences and taxable temporary differences gave rise to a net deferred tax asset for the Company as of December 31, 2018 and 2017.  The components giving rise to the net deferred tax asset are detailed below:

(Dollars in thousands)	Years Ended December 31,
	2018		2017
Deferred Tax Assets:
Allowance for loan losses	$	494	$	369
Deferred directors' compensation		345		338
Employee and director benefits		309		320
Qualified pension liability		78		512
Unrealized losses on securities available for sale		655		439
Unrealized loss from securities impairment		34		37
Investment in low income housing project		142		141
Fair value adjustments to acquired assets and liabilities		293		168
Tax credit carryforward		225		75
Valuation reserves on other real estate owned		1		1
Other		1		-
Total deferred tax assets		2,577		2,400
Deferred Tax Liabilities:
Depreciation		(445)		(345)
Equity income from unconsolidated subsidiary		-		(368)
Loan origination costs		(384)		(340)
Prepaid expense		(229)		(230)
Annuity earnings		(56)		(52)
Fair value of mortgage servicing rights		(42)		(47)
Intangible assets		(68)		(18)
Goodwill		(353)		(324)
Other		-		(24)
Total deferred tax liabilities		(1,577)		(1,748)
Net deferred tax asset included in other assets	$	1,000	$	652

The Company has concluded that the deferred tax assets are realizable (on a more likely than not basis) through the combination of future reversals of existing taxable temporary differences, certain tax planning strategies and expected future taxable income.

It is the Company’s policy to recognize interest and penalties on unrecognized tax benefits in income tax expense in the Consolidated Statements of Income. No significant income tax uncertainties were identified as a result of the Company’s evaluation of its income tax position. Therefore, the Company recognized no adjustment for unrecognized income tax benefits for the years ended December 31, 2018, 2017 and 2016. The Company is no longer subject to examination by taxing authorities for years before 2015.  Tax years 2015 through the present, with limited exception, remain open to examination.

XML

Stockholders' Equity and Regulatory Matters

12 Months Ended

Dec. 31, 2018

Stockholders' Equity and Regulatory Matters [Abstract]

Stockholders' Equity and Regulatory Matters

17.  Stockholders’ Equity and Regulatory Matters

The Company is authorized to issue 500,000 shares of preferred stock with no par value. The Board has the ability to fix the voting, dividend, redemption and other rights of the preferred stock, which can be issued in one or more series. No shares of preferred stock have been issued.

The Company has a dividend reinvestment and stock purchase plan. Under this plan, additional shares of Juniata Valley Financial Corp. stock may be purchased at the prevailing market prices through reinvested dividends and voluntary cash payments, within limits. To the extent that shares are not available in the open market, the Company has reserved common stock to be issued under the plan. Any adjustment in capitalization of the Company will result in a proportionate adjustment to the reserved shares for this plan. At December 31, 2018, 141,887shares were available for issuance under the Dividend Reinvestment Plan.

The Company periodically repurchases shares of its common stock under a share repurchase program approved by the Board of Directors. Repurchases have typically been through open market transactions and have complied with all regulatory restrictions on the timing and amount of such repurchases. Shares repurchased have been added to treasury stock and accounted for at cost. These shares may be reissued for stock option exercises, stock awards, employee stock purchase plan purchases, to fulfill dividend reinvestment program needs and to supply shares needed for exchange in an acquisition. During 2018, 2017 and 2016, 3,416,  4,289 and 49,370 shares, respectively, were repurchased in conjunction with this program. Remaining shares authorized in the program were 170,574 as of December 31, 2018.

The Company and the Bank are subject to risk-based capital standards by which bank holding companies and banks are evaluated in terms of capital adequacy. These regulatory capital requirements are administered by the federal banking agencies. Failure to meet minimum capital requirements can result in certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the Company’s and the Bank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Company’s and Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to each maintain minimum amounts and ratios. The requirements were revised and became effective on a phased-in basis beginning January 1, 2015 and included the establishment of a Common Equity Tier I level.  Juniata’s and the Bank’s Total, Tier I and Common Equity Tier I capital (as defined in the regulations) to risk-weighted assets (as defined in the regulations), and Tier I capital (as defined in the regulations) to average assets (as defined in the regulations) are set forth in the table below. These risk-based capital rules require that banks and holding companies maintain a “capital conservation buffer” of 250 basis points in excess of the “minimum capital ratio”. The minimum capital ratio is equal to the prompt corrective action adequately capitalized threshold ratio. The capital conservation buffer was fully phased in as of January 1, 2019. The maximum buffer for 2018 was 1.875% and is 2.5% for 2019 and thereafter. Failure to maintain the required capital conservation buffer will result in limitations on capital distributions and on discretionary bonuses to executive officers. Management believes, as of December 31, 2018 and 2017, that the Company and the Bank met all capital adequacy requirements to which they were subject.

As of December 31, 2018, the most recent notification from the regulatory banking agencies categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as “well capitalized”, the Bank must maintain minimum Total risk-based, Tier I risk-based, Common Equity Tier I risk-based and Tier I leverage ratios as set forth in the table. To the knowledge of management, there are no conditions or events since these notifications that have changed the Bank’s category.

The table below provides a comparison of the Company’s and the Bank’s risk-based capital ratios and leverage ratios to the minimum regulatory requirements as of the dates indicated.

Juniata Valley Financial Corp. (Consolidated)				Minimum Requirement
				for Capital
(Dollars in thousands)	Actual			Adequacy Purposes
	Amount		Ratio	Amount		Ratio
As of December 31, 2018:
Total Capital (to Risk Weighted Assets)	$	63,883	15.86%	$	32,214	8.00%
Tier 1 Capital (to Risk Weighted Assets)		60,849	15.11%		24,160	6.00%
Common Equity Tier 1 Capital (to Risk Weighted Assets)		60,849	15.11%		18,120	4.50%
Tier 1 Capital (to Average Assets) Leverage		60,849	10.01%		24,318	4.00%
As of December 31, 2017:
Total Capital (to Risk Weighted Assets)	$	59,667	15.01%	$	31,809	8.00%
Tier 1 Capital (to Risk Weighted Assets)		55,808	14.04%		23,857	6.00%
Common Equity Tier 1 Capital (to Risk Weighted Assets)		55,808	14.04%		17,892	4.50%
Tier 1 Capital (to Average Assets) Leverage		55,808	9.43%		23,666	4.00%

										Minimum
										Regulatory
										Requirements
							Minimum			to be "Well
							Capital			Capitalized"
The Juniata Valley Bank				Minimum Requirement			Adequacy			under Prompt
				for Capital			with Capital			Corrective Action
(Dollars in thousands)	Actual			Adequacy Purposes			Buffer			Provisions
	Amount		Ratio	Amount		Ratio	Amount		Ratio	Amount		Ratio
As of December 31, 2018:
Total Capital	$	62,422	15.50%	$	32,222	8.00%	$	39,774	9.875%	$	40,278	10.00%
(to Risk Weighted Assets)
Tier 1 Capital		59,388	14.74%		24,167	6.00%		31,719	7.875%		32,222	8.00%
(to Risk Weighted Assets)
Common Equity Tier 1 Capital		59,388	14.74%		18,125	4.50%		25,677	6.375%		26,181	6.50%
(to Risk Weighted Assets)
Tier 1 Capital		59,388	9.77%		24,317	4.00%		24,317	4.000%		30,397	5.00%
(to Average Assets) Leverage
As of December 31, 2017:
Total Capital	$	52,009	13.24%	$	31,435	8.00%	$	36,346	9.250%	$	39,293	10.00%
(to Risk Weighted Assets)
Tier 1 Capital		49,026	12.48%		23,576	6.00%		28,488	7.250%		31,435	8.00%
(to Risk Weighted Assets)
Common Equity Tier 1 Capital		49,026	12.48%		17,682	4.50%		22,594	5.750%		25,541	6.50%
(to Risk Weighted Assets)
Tier 1 Capital		49,026	8.36%		23,460	4.00%		23,460	4.000%		29,325	5.00%
(to Average Assets) Leverage

Certain regulatory restrictions exist regarding the ability of the Bank to transfer funds to the Company in the form of cash dividends, loans or advances. At December 31, 2018, $42,119,000 of undistributed earnings of the Bank, included in the consolidated stockholders’ equity, was available for distribution to the Company as dividends without prior regulatory approval, subject to the regulatory capital requirements above.

XML

Calculation of Earnings Per Share

12 Months Ended

Dec. 31, 2018

Calculation of Earnings Per Share [Abstract]

Calculation of Earnings Per Share

18.  Calculation Of Earnings Per Share

Basic earnings per share (“EPS”) is computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company. Potential common shares that may be issued by the Company relate solely to outstanding stock options and are determined using the treasury stock method. Restricted stock is participating, and therefore, is included in the EPS calculation. The following table sets forth the computation of basic and diluted earnings per share:

(Dollars in thousands, except earnings per share)	Years Ended December 31,
	2018		2017		2016
Net income	$	5,904	$	4,537	$	5,156
Weighted-average common shares outstanding		4,987		4,765		4,801
Basic earnings per share	$	1.18	$	0.95	$	1.07
Weighted-average common shares outstanding		4,987		4,765		4,801
Common stock equivalents due to effect of stock options		22		10		1
Total weighted-average common shares and equivalents	$	5,009	$	4,775	$	4,802
Diluted earnings per share	$	1.18	$	0.95	$	1.07
Anti-dilutive stock options outstanding		-		6		401

XML

Accumulated Other Comprehensive Loss

12 Months Ended

Dec. 31, 2018

Accumulated Other Comprehensive Loss [Abstract]

Accumulated Other Comprehensive Loss

19.  Accumulated other Comprehensive loss

Components of accumulated other comprehensive loss, net of tax as of December 31 of each of the last three years consist of the following:

(Dollars in thousands)	As of December 31,
	2018		2017		2016
Unrealized losses on available for sale securities	$	(2,647)	$	(1,683)	$	(866)
Unrecognized expense for defined benefit pension		(1,652)		(2,351)		(2,343)
Accumulated other comprehensive loss	$	(4,299)	$	(4,034)	$	(3,209)

XML

Fair Value Measurement

12 Months Ended

Dec. 31, 2018

Fair Value Measurement [Abstract]

Fair Value Measurement

20. Fair Value Measurement

Fair value measurement and disclosure guidance defines fair value as the price that would be received to sell an asset or transfer a liability in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. Additional guidance is provided on determining when the volume and level of activity for the asset or liability has significantly decreased. The guidance also includes guidance on identifying circumstances when a transaction may not be considered orderly.

Fair value measurement and disclosure guidance provides a list of factors that a reporting entity should evaluate to determine whether there has been a significant decrease in the volume and level of activity for the asset or liability in relation to normal market activity for the asset or liability. When the reporting entity concludes there has been a significant decrease in the volume and level of activity for the asset or liability, further analysis of the information from that market is needed, and significant adjustments to the related prices may be necessary to estimate fair value in accordance with fair value measurement and disclosure guidance.

This guidance clarifies that, when there has been a significant decrease in the volume and level of activity for the asset or liability, some transactions may not be orderly. In those situations, the entity must evaluate the weight of the evidence to determine whether the transaction is orderly. The guidance provides a list of circumstances that may indicate that a transaction is not orderly. A transaction price that is not associated with an orderly transaction is given little, if any, weight when estimating fair value.

Fair value measurement and disclosure guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. The price in the principal (or most advantageous) market used to measure the fair value of the asset or liability is not adjusted for transaction costs. An orderly transaction is a transaction that assumes exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets and liabilities; it is not a forced transaction. Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact and (iv) willing to transact.

Fair value measurement and disclosure guidance requires the use of valuation techniques that are consistent with the market approach, the income approach and/or the cost approach. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets and liabilities. The income approach uses valuation techniques to convert future amounts, such as cash flows or earnings, to a single present amount on a discounted basis. The cost approach is based on the amount that currently would be required to replace the service capacity of an asset (replacement cost). Valuation techniques should be consistently applied. Inputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability. Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources, or unobservable, meaning those that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. In that regard, the guidance establishes a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:

Level 1 Inputs – Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

Level 2 Inputs – Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market data by correlation or other means.

Level 3 Inputs – Unobservable inputs for determining the fair values of assets or liabilities that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.

An asset’s or liability’s placement in the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below.

In general, fair value is based upon quoted market prices, where available. If such quoted market prices are not available, fair value is based upon internally developed models that primarily use, as inputs, observable market-based parameters. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. These adjustments may include amounts to reflect counterparty credit quality, the Company’s creditworthiness, among other things, as well as unobservable parameters. Any such valuation adjustments are applied consistently over time. The Company’s valuation methodologies may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. While management believes the Company’s valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.

Equities Securities

The fair value of equity securities is based upon quoted prices in active markets and is reported using Level 1 inputs.

Securities Available for Sale

Debt securities classified as available for sale are reported at fair value utilizing Level 2 inputs. For these securities, the Company obtains fair value measurement from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the debt securities’ terms and conditions, among other things. Equity securities classified as available for sale are reported at fair value using Level 1 inputs.

Impaired Loans

Certain impaired loans are reported on a non-recurring basis at the fair value of the underlying collateral since repayment is expected solely from the collateral. Fair value is generally determined based upon independent third-party appraisals of the properties, or discounted cash flows based upon the expected proceeds. These assets are included as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements.

Other Real Estate Owned

Certain assets included in other real estate owned are carried at fair value as a result of impairment and accordingly are presented measured on a non-recurring basis as they are carried at the lower of cost or fair value. Values are estimated using Level 3 inputs, based on appraisals that consider the sales prices of property in the proximate vicinity less estimated costs to sell.

Mortgage Servicing Rights

The fair value of servicing assets is based on the present value of estimated future cash flows on pools of mortgages stratified by rate and maturity date and are considered Level 3 inputs.

The following table summarizes financial assets and financial liabilities measured at fair value as of December 31, 2018 and December 31, 2017, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value. There were no transfers of assets between fair value Level 1 and Level 2 during the years ended December 31, 2018 or 2017.

			(Level 1)		(Level 2)		(Level 3)
			Quoted Prices in		Significant		Significant
			Active Markets		Other		Other
(Dollars in thousands)	December 31,		for Identical		Observable		Unobservable
	2018		Assets		Inputs		Inputs
Measured at fair value on a recurring basis:
Debt securities available-for-sale:
Obligations of U.S. Government agencies
and corporations	$	23,266	$	-	$	23,266	$	-
Obligations of state and political
subdivisions		18,181		-		18,181		-
Mortgage-backed securities		100,506		-		100,506		-
Measured at fair value on a non-recurring basis:
Impaired loans		1,104		-		-		1,104
Other real estate owned		149		-		-		149
Mortgage servicing rights		200		-		-		200

			(Level 1)		(Level 2)		(Level 3)
			Quoted Prices in		Significant		Significant
			Active Markets		Other		Other
(Dollars in thousands)	December 31,		for Identical		Observable		Unobservable
	2017		Assets		Inputs		Inputs
Measured at fair value on a recurring basis:
Debt securities available-for-sale:
Obligations of U.S. Government agencies
and corporations	$	34,214	$	-	$	34,214	$	-
Obligations of state and political
subdivisions		24,981		-		24,981		-
Mortgage-backed securities		93,510		-		93,510		-
Equity securities available-for-sale		1,119		1,119		-		-
Measured at fair value on a non-recurring basis:
Impaired loans		1,574		-		-		1,574
Other real estate owned		27		-		-		27
Mortgage servicing rights		225		-		-		225

The following table presents additional quantitative information about assets measured at fair value on a nonrecurring basis and for which Level 3 inputs have been used to determine fair value:

(Dollars in thousands)
	Fair Value					Weighted
December 31, 2018	Estimate		Valuation Technique	Unobservable Input	Range	Average
Impaired loans	$	1,104	Appraisal of collateral (1)	Appraisal and	0% - 15%	14%
				liquidation
				adjustments (2)
Other real estate owned		149	Appraisal of collateral (1)	Appraisal and	2%	2%
				liquidation
				adjustments (2)
Mortgage servicing rights		200	Multiple of annual	Estimated	300% - 400%	369%
			servicing fee	pre-payment
				speed, based
				on rate and term
		+
(Dollars in thousands)
	Fair Value					Weighted
December 31, 2017	Estimate		Valuation Technique	Unobservable Input	Range	Average
Impaired loans	$	1,574	Appraisal of collateral (1)	Appraisal and	0% - 13%	8%
				liquidation
				adjustments (2)
Other real estate owned		27	Appraisal of collateral (1)	Appraisal and	22%	22%
				liquidation
				adjustments (2)
Mortgage servicing rights		225	Multiple of annual	Estimated	300% - 400%	371%
			servicing fee	pre-payment
				speed, based
				on rate and term

(1) Fair value is generally determined through independent appraisals of the underlying collateral that generally include various level 3 inputs which are not identifiable.

(2) Appraisals may be adjusted downward by management for qualitative factors such as economic conditions and estimated liquidation expenses. The range of liquidation expenses and other appraisal adjustments are presented as a percent of the appraisal.

Fair Value of Financial Instruments

Management uses its best judgment in estimating the fair value of the Company’s financial instruments; however, there are inherent weaknesses in any estimation technique. Therefore, the fair value estimates herein are not necessarily indicative of the amounts the Company could have realized in sales transactions on the dates indicated. The estimated fair value amounts have been measured as of their respective year ends and have not been re-evaluated or updated for purposes of these consolidated financial statements subsequent to those respective dates. As such, the estimated fair values of these financial instruments subsequent to the respective reporting dates may be different from the amounts reported at each year end.

The information presented below should not be interpreted as an estimate of the fair value of the entire Company since a fair value calculation is provided only for a limited portion of the Company’s assets and liabilities. Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Company’s disclosures and those of other companies may not be meaningful.

The following describes the estimated fair value of the Company’s financial instruments as well as the significant methods and assumptions not previously disclosed used to determine these estimated fair values.

Carrying values approximate fair value for cash and due from banks, interest-bearing demand deposits with banks, federal funds sold, restricted stock in the Federal Home Loan Bank, interest receivable, mortgage servicing rights, non-interest bearing deposits, securities sold under agreements to repurchase, short-term borrowings and interest payable. Other than cash and due from banks, which are considered Level 1 inputs, and mortgage servicing rights, which are Level 3 inputs, these instruments are Level 2 inputs.

The estimated fair values of the Company’s financial instruments are as follows:

	Financial Instruments
(Dollars in thousands)	December 31, 2018				December 31, 2017
	Carrying		Fair		Carrying		Fair
Financial assets:	Value		Value		Value		Value
Cash and due from banks	$	15,617	$	15,617	$	9,839	$	9,839
Interest bearing deposits with banks		110		110		58		58
Federal funds sold		729		729		-		-
Interest bearing time deposits with banks		3,290		3,290		350		350
Securities		141,953		141,953		153,824		153,824
Restricted investment in FHLB stock		2,441		2,441		3,104		3,104
Loans, net of allowance for loan losses		414,597		415,195		380,965		372,906
Mortgage servicing rights		200		200		225		225
Accrued interest receivable		1,681		1,681		1,582		1,582
Financial liabilities:
Non-interest bearing deposits		126,057		126,057		115,911		115,911
Interest bearing deposits		395,665		395,226		361,757		361,468
Securities sold under agreements to repurchase		2,911		2,911		9,769		9,769
Short-term borrowings		11,600		11,600		12,000		12,000
Long-term debt		15,000		14,958		25,000		24,885
Other interest bearing liabilities		1,596		1,597		1,593		1,595
Accrued interest payable		289		289		300		300
Off-balance sheet financial instruments:
Commitments to extend credit		-		-		-		-
Letters of credit		-		-		-		-

The following presents the carrying amount, fair value and placement in the fair value hierarchy of the Company’s financial instruments not previously disclosed as of December 31, 2018 and December 31, 2017. This table excludes financial instruments for which the carrying amount approximates fair value.

					(Level 1)		(Level 2)		(Level 3)
					Quoted Prices in		Significant		Significant
(Dollars in thousands)					Active Markets		Other		Other
	Carrying				for Identical		Observable		Unobservable
December 31, 2018	Amount		Fair Value		Assets or Liabilities		Inputs		Inputs
Financial instruments - Assets
Interest bearing time deposits with
banks	$	3,290	$	3,290	$	-	$	3,290	$	-
Loans, net of allowance for loan
losses		414,597		415,195		-		-		415,195
Financial instruments - Liabilities
Interest bearing deposits	$	395,665	$	395,226	$	-	$	395,226	$	-
Long-term debt		15,000		14,958		-		14,958		-
Other interest bearing liabilities		1,596		1,597		-		1,597		-

					(Level 1)		(Level 2)		(Level 3)
					Quoted Prices in		Significant		Significant
(Dollars in thousands)					Active Markets		Other		Other
	Carrying				for Identical		Observable		Unobservable
December 31, 2017	Amount		Fair Value		Assets or Liabilities		Inputs		Inputs
Financial instruments - Assets
Interest bearing time deposits with
banks	$	350	$	350	$	-	$	350	$	-
Loans, net of allowance for loan
losses		380,965		372,906		-		-		372,906
Financial instruments - Liabilities
Interest bearing deposits	$	361,757	$	361,468	$	-	$	361,468	$	-
Long-term debt		25,000		24,885		-		24,885		-
Other interest bearing liabilities		1,593		1,595		-		1,595		-

XML

Revenue Recognition

12 Months Ended

Dec. 31, 2018

Revenue Recognition [Abstract]

Revenue Recognition

21. Revenue Recognition

As disclosed in Note 3, as of January 1, 2018, the Company adopted ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)”, as well as subsequent ASU’s that modified ASC 606. The Company elected to apply the ASU and all related ASU’s using the modified retrospective approach applied to all contracts initiated on or after the effective date, and for contracts which have remaining obligations as of the effective date, while prior period results continue to be reported under legacy U.S. GAAP. Based on this assessment, the Company concluded that ASC 606 did not materially change the method by which the Company currently recognizes revenue for these revenue streams, which is by recognizing revenues as they are earned based upon contractual terms, as transactions occur, or as services are provided and collectability is reasonably assured.

The Company generally acts in a principal capacity, on its own behalf, in most contracts with customers. In such transactions, revenue and related costs to provide these services are recognized on a gross basis in the financial statements. In some cases, the Company acts in an agent capacity, deriving revenue through assisting other entities in transactions with its customers. In such transactions, revenue and the related costs to provide the services are recognized on a net basis in the financial statements. These transactions primarily relate to non-deposit product commissions and fees derived from customer’s use of various interchange and ATM/debit card networks.

All of the Company’s revenue from contracts with customers in the scope of ASC 606 are recognized within non-interest income on the consolidated statements of income. Revenue streams not within the scope of ASC 606 included in non-interest income on the consolidated statements of income include earnings on bank-owned life insurance and annuities, income from unconsolidated subsidiary, fees derived from loan activity, mortgage banking income, gain/loss on sales and calls of securities, and the change in value of equity securities.

A description of the Company’s sources of revenue accounted for under ASC 606 are as follows:

Customer Service Fees – fees mainly represent fees from deposit customers for transaction based, account maintenance, and overdraft services. Transaction based fees include, but are not limited to, stop payment and overdraft fees. These fees are recognized at the time of the transaction when the performance obligation has been fulfilled. Account maintenance fees and account analysis fees are earned over the course of a month, representing the period of the performance obligation, and are recognized monthly. 

Debit Card Fee Income – consists of interchange fees from cardholder transactions conducted through the card payment network. Cardholders use debit cards to conduct point-of-sale transactions that produce interchange fees. The Company acts in an agent capacity to offer processing services for debit cards to its customers. Fees are recognized with the processing of the transactions and netted against the related fees from such transactions.

Trust Fees – include asset management and estate fees. Asset management fees are generally based on a fee schedule, based upon the market value of the assets under management, and recognized monthly when the service obligation is completed. Trust fees recognized in 2018 and 2017 were $367,000 and $371,000, respectively. Fees for estate management services are based on a specified fee schedule and generally recognized as the following performance obligations are fulfilled: (i) 25% of total estate fee recognized when all estate assets are collected and debts paid, (ii) 50% of the total fee is recognized when the inheritance tax return is filed, and (iii) remaining 25% is recognized when the first and final account is confirmed, settling the estate. Estate fees recognized during 2018 and 2017 were $63,000 and $75,000, respectively.

Commissions From Sales Of Non-Deposit Products – include, but are not limited to, brokerage services, employer-based retirement solutions, individual retirement planning, insurance solutions, and fee-based investment advisory services. The Company acts in an agent capacity to offer these services to customers. Revenue is recognized, net of related fees, in the month in which the contract is fulfilled.

Other Non-Interest Income – includes certain revenue streams within the scope of ASC 606 comprised primarily of ATM surcharges, commissions on check orders, and wire transfer fees. ATM surcharges are the result of customers conducting ATM transactions that generate fee income. All of these fees, as well as wire transfer fees, are transaction based and are recognized at the time of the transaction. In addition, the Company acts in an agent capacity to offer checks to its customers and recognizes commissions, net of related fees, when the contract is fulfilled.

Gains/Losses On Sales Of Other Real Estate Owned – are recognized when control of the property transfers to the buyer, which generally occurs when the deed is executed.

Contract Balances

A contract asset balance occurs when an entity performs a service for a customer before the customer pays consideration (resulting in a contract receivable) or before payment is due (resulting in a contract asset). A contract liability balance is an entity’s obligation to transfer a service to a customer for which the entity has already received payment (or payment is due from the customer). The company’s non-interest revenue streams are largely based on transactional activity, or standard month-end revenue accruals such as asset management fees based on month-end market values. Consideration is often received immediately or shortly after the Company satisfies its performance obligation and revenue is recognized. The Company does not typically enter into longer-term revenue contracts with customer, and therefore, does not experience significant contract balances.

Contract Acquisition Costs

The Company expenses all contract acquisition costs as costs are incurred.

XML

Employee Benefit Plans

12 Months Ended

Dec. 31, 2018

Employee Benefit Plans [Abstract]

Employee Benefit Plans

22.  Employee Benefit Plans

Long-Term Incentive Plan

The Company maintains the 2016 Long-Term Incentive Plan (the “Plan”), that amended and restated the former 2011 Stock Option Plan (the “2011 Plan”). The Plan continues in effect for any outstanding awards under the 2011 Plan in accordance with the terms and conditions governing such awards immediately prior to the effective date of the Plan but expanded the types of awards authorized to include, among others, restricted stock. Under the provisions of the Plan, while active, awards may consist of grants of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock and performance shares to officers and key employees of the Company, as well as Directors.

Compensation expense for stock options granted and restricted stock awarded is measured using the fair value of the award on the grant date and is recognized over the vesting period. The Company recognized $82,000, $71,000 and $67,000 of expense for the years ended December 31, 2018, 2017 and 2016, respectively, for stock-based compensation.

The Plan is administered by a committee of the Board of Directors. The Committee determines, among other things, which officers and key employees receive stock compensation, the number of shares to be subject to each award, the option price, the duration of the option and the restricted period, as appropriate. A recipient of the restricted shares will forfeit those shares in their entirety if employment is terminated prior to the vesting date for reasons other than retirement, death or disability. The maximum number of shares of common stock that may be issued under the Plan is 300,000 shares, and 164,955 shares were available for grant as of December 31, 2018. Shares of common stock issued under the Plan may be treasury shares or authorized but unissued shares.

During 2018 and 2017, certain officers and key employees were issued restricted stock awards of 5,220 and 4,650 shares, respectively. Each of the awards carry a three-year restriction, with no interim vesting.

The following table presents compensation expense and related tax benefits for restricted stock awards recognized on the consolidated statement of income.

(Dollars in thousands)
	2018		2017		2016
Compensation expense	$	77	$	43	$	16
Tax benefit		(16)		(15)		(5)
Net income effect	$	61	$	28	$	11

At December 31, 2018, there was $109,000 of unrecognized compensation cost related to all non-vested restricted stock awards. This cost is expected to be recognized through February 2021.

The following table presents a summary of non-vested restricted shares activity for 2018.

			Weighted
			Average
			Grant Date
	Shares		Fair Value
Non-vested at January 1, 2018		7,800	$	18.10
Vested		-
Cancelled		-
Granted		5,220		19.80
Non-vested at December 31, 2018		13,020		18.78

No stock options were awarded in 2018. Options granted prior to 2018 vest over three to five years and are exercisable at the grant price, which is at least the fair market value of the stock on the grant date. The Plan provides that the option price per share is not to be less than the fair market value of the stock on the day the option was granted, but in no event less than the par value of such stock. Options granted under the Plan are exercisable no earlier than one year after the date of grant and expire ten years after the date of the grant. All options previously granted under the Plans are scheduled to expire through February 17, 2025.

Total options outstanding at December 31, 2018 have exercise prices between $17.22 and $18.00, with a weighted average exercise price of $17.91 and a weighted average remaining contractual life of 5.1 years.

As of December 31, 2018, there was $111,000 of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the Plan. That cost is expected to be recognized through 2021.

Cash received from option exercises under the Plans for the year ended December 31, 2018 was $90,000 and $172,000 for the year ended December 31, 2017. No options were exercised in 2016.

A summary of the status of the outstanding stock options as of December 31, 2018, 2017 and 2016, and changes during the years ending on those dates is presented below:

	2018			2017			2016
		Weighted			Weighted			Weighted
		Average			Average			Average
		Exercise			Exercise			Exercise
	Shares	Price		Shares	Price		Shares	Price
Outstanding at beginning of year	125,026	$	17.91	139,155	$	17.97	142,524	$	18.07
Granted	-		-	-		-	-		-
Exercised	(5,170)		17.47	(9,704)		17.74	-		-
Forfeited	(6,100)		21.10	(4,425)		20.05	(3,369)		22.36
Outstanding at end of year	113,756	$	17.76	125,026	$	17.91	139,155	$	17.97
Options exercisable at year-end	110,911			110,282			97,584
Weighted-average fair value of
of options granted
during the year		$	-		$	-		$	-
Intrinsic value of options
exercised during the year		$	15,240		$	10,807		$	-
Intrinsic value of options
outstanding and exercisable at
December 31, 2018		$	387,318

The following table summarizes characteristics of stock options as of December 31, 2018:

			Outstanding		Exercisable
Grant Date	Exercise Price		Shares	Contractual Average Life (Years)	Shares
10/20/2009	$	17.22	3,909	0.80	3,909
9/20/2011	$	17.75	13,200	2.72	13,200
3/20/2012	$	18.00	15,800	3.22	15,800
2/19/2013	$	17.65	16,622	4.14	16,622
2/18/2014	$	17.72	31,025	5.13	30,180
2/17/2015	$	17.80	33,200	6.13	31,200
			113,756		110,911

Defined Benefit Retirement Plans

The Company sponsors a defined benefit retirement plan [The Juniata Valley Bank Retirement Plan (“JVB Plan”)] which covers substantially all of its employees employed prior to December 31, 2007. As of January 1, 2008, the JVB Plan was amended to close the plan to new entrants. All active participants as of December 31, 2007 became 100% vested in their accrued benefit and, as long as they remained eligible, continued to accrue benefits until December 31, 2012. The benefits are based on years of service and the employee’s compensation. Effective December 31, 2012, the JVB Plan was amended to cease future service accruals after that date (i.e., it was frozen).

As a result of the FNBPA acquisition, the Company assumed sponsorship of a second defined benefit retirement plan [Retirement Plan for the First National Bank of Port Allegany (“FNB Plan”)] as of November 30, 2015, which covers substantially all former FNBPA employees that were employed prior to September 30, 2008. The FNBPA Plan was amended as of December 31, 2015 to cease future service accruals to previously unfrozen participants and is now considered to be “frozen”. Effective December 31, 2016, the FNB Plan was merged into the JVB Plan, which was amended to provide the same benefits to the class of participants previously included in the FNB Plan.

The Company’s funding policy is to contribute annually no more than the maximum amount that can be deducted for federal income tax purposes. Contributions are intended to provide for benefits attributed to service through December 31, 2012.

In 2017, Juniata initiated a strategy to reduce the liability associated with its defined benefit pension plan.  The first step of the initiative consisted of the purchase of a single premium group annuity for a group of Juniata’s retirees, transferring the associated pension liability to the issuer of the annuity.  This step reduced Juniata’s overall pension liability by approximately 12%, which resulted in a pre-tax charge to earnings of $377,000. 

In 2018, Juniata completed the second step of the strategy to reduce the liability associated with its defined benefit pension plan by making a lump sum payment offer to a small group of terminated vested participants in Juniata’s defined benefit plan. This step further reduced Juniata’s remaining pension liability by approximately 9%, which resulted in a pre-tax charge to earnings of $210,000 in the twelve months ended December 31, 2018. The pre-tax charges for both the 2018 and 2017 strategies executed to reduce the pension liability, represent a further acceleration of pension expenses that would otherwise have impacted Juniata’s future earnings. In 2019, Juniata plans to finalize the termination of its defined benefit plan.

Management expects to record a $117,000 net periodic expense in 2019 for the JVB Plan, which includes expected amortization out of accumulated other comprehensive loss. The following table sets forth by level, within the fair value hierarchy, debt and equity instruments included in the JVB Plan’s assets at fair value as of December 31, 2018 and December 31, 2017. Assets included in the JVB Plan that are not valued in the hierarchy table consist of cash and cash equivalents, totaling $50,000 and $46,000, at December 31, 2018 and 2017, respectively.

			(Level 1)		(Level 2)		(Level 3)
			Quoted Prices in		Significant Other		Significant Other
(Dollars in thousands)	December 31,		Active Markets for		Observable		Unobservable
	2018		Identical Assets		Inputs		Inputs
Measured at fair value on a recurring basis:
Mutual funds	$	11,891	$	11,891	$	-	$	-
Money market funds		241		241		-		-
	$	12,132	$	12,132	$	-	$	-

			(Level 1)		(Level 2)		(Level 3)
			Quoted Prices in		Significant Other		Significant Other
(Dollars in thousands)	December 31,		Active Markets for		Observable		Unobservable
	2017		Identical Assets		Inputs		Inputs
Measured at fair value on a recurring basis:
Mutual funds	$	12,857	$	12,857	$	-	$	-
Money market funds		213		213		-		-
	$	13,070	$	13,070	$	-	$	-

The measurement date for the JVB Plan is December 31. Information pertaining to the activity in the defined benefit plan is as follows:

(Dollars in thousands)	Years ended December 31,
	2018		2017
Change in projected benefit obligation (PBO)
PBO at beginning of year	$	15,554	$	16,332
Interest cost		521		621
Change in assumptions		(1,208)		1,141
Actuarial loss		(244)		136
Group annuity purchase		-		(1,974)
Settlement payments		(1,485)		-
Benefits paid		(583)		(702)
PBO at end of year	$	12,555	$	15,554
Change in plan assets
Fair value of plan assets at beginning of year	$	13,117	$	13,840
Actual return on plan assets, net of expenses		(217)		1,953
Employer contribution		1,350		-
Group annuity purchase		-		(1,974)
Settlement payments		(1,485)		-
Benefits paid		(583)		(702)
Fair value of plan assets at end of year	$	12,182	$	13,117
Funded status, included in other (liabilities) assets	$	(373)	$	(2,437)
Amounts recognized in accumulated comprehensive loss
before income taxes consist of:
Unrecognized actual loss	$	(884)	$	(3,081)
Accumulated benefit obligation	$	12,555	$	15,554

For the year ended December 31, 2018, the mortality assumptions were derived using the Adjusted RP-2014 White Collar Mortality Table. Incorporated into the most recent table are rates projected generationally using Scale MP-2018 to reflect mortality improvement. For the year ended December 31, 2017, the mortality assumptions were derived using the Adjusted RP-2014 White Collar Mortality Table. Incorporated into the table are rates projected generationally using Scale MP-2017 to reflect mortality improvement.

Pension expense for the JVB Plan included the following components for the years ended December 31:

(Dollars in thousands)
	2018		2017		2016
Interest cost on projected benefit obligation	$	521	$	621	$	666
Expected return on plan assets		(690)		(793)		(795)
Settlement loss		210		377		-
Recognized net actuarial loss		129		207		248
Net periodic benefit cost		170		412		119

Net loss (gain)		(449)		117		173
Amortization of net loss		(435)		(584)		(248)
Total recognized in other comprehensive loss (income)	$	(884)	$	(467)	$	(75)
Total recognized in net periodic benefit cost and other
comprehensive loss (income)	$	(714)	$	(55)	$	44

Assumptions used to determine benefit obligations were:

	2018		2017		2016
Discount rate	4.10	%	3.50	%	4.00	%
Rate of compensation increase	N/A		N/A		N/A

Assumptions used to determine the net periodic benefit cost were:

	2018		2017		2016
Discount rate	3.50	%	4.00	%	4.25	%
Expected long-term return on plan assets	4.20		6.00		6.00
Rate of compensation increase	N/A		N/A		N/A

As previously stated, the Company has terminated the Defined Benefit Plan as of November 30, 2018, with final distribution targeted for the second or third quarter of 2019. Accordingly, a liability-driven investment strategy has been established, which includes an asset allocation glide path that gradually increases the fixed income allocation from 40% (as of December 31, 2017) to 100% and decrease the equity allocation from 60% to zero by mid-2019. At December 31, 2018, the asset allocation was 10% equities and 90% fixed income in the JVB Plan.

Future expected benefit payments:

(Dollars in thousands)
	2019		2020		2021		2022		2023		2024-2028
Estimated future benefit payments	$	626	$	630	$	620	$	621	$	631	$	3,406

Defined Contribution Plan

The Company has a Defined Contribution Plan under which employees, through payroll deductions, are able to defer portions of their compensation. The Company makes an annual non-elective fully vested contribution equal to 3% of compensation to each eligible participant. As of December 31, 2018, a liability of $238,000 was recorded to satisfy this obligation and was credited to employees’ accounts by January 31, 2019. This liability at December 31, 2017 totaled $224,000 and was credited to employee accounts during 2017. Expense incurred under this plan was $234,000, $222,000 and $211,000 in 2018, 2017 and 2016, respectively. The Defined Contribution Plan also includes an employer matching contribution for employees that elect to defer compensation into this program. The matching contribution in 2018, 2017 and 2016 was $199,000,  $189,000 and $179,000, respectively.

Employee Stock Purchase Plan

The Company has an Employee Stock Purchase Plan under which employees, through payroll deductions, are able to purchase shares of Company stock annually. The option price of the stock purchases is between 95% and 100% of the fair market value of the stock on the offering termination date as determined annually by the Board of Directors. The maximum number of shares which employees may purchase under the Plan is 250,000; however, the annual issuance of shares may not exceed 5,000 shares plus any unissued shares from prior offerings. There were 2,134 shares issued in 2018, 1,961 shares issued in 2017 and 3,764 shares issued in 2016 under this plan. At December 31, 2018, there were 172,959 shares reserved for issuance under the Employee Stock Purchase Plan.

Supplemental Retirement Plans

The Company has non-qualified supplemental retirement plans for directors and key employees. At December 31, 2018 and 2017, the present value of the future liability associated with these plans was $215,000 and $261,000, respectively. For the years ended December 31, 2018, 2017 and 2016, $20,000, $25,000 and $30,000, respectively, was charged to expense in connection with these plans. The Company offsets the cost of these plans through the purchase of bank-owned life insurance and annuities. See Note 9.

Deferred Compensation Plans

The Company has entered into deferred compensation agreements with certain directors to provide each director an additional retirement benefit, or to provide their beneficiary a benefit, in the event of pre-retirement death. At December 31, 2018 and 2017, the present value of the future liability was $1,602,000 and $1,609,000, respectively. For the years ended December 31, 2018, 2017 and 2016, $40,000, $33,000 and $32,000, respectively, was charged to expense in connection with these plans. The Company offsets the cost of these plans through the purchase of bank-owned life insurance. See Note 9.

Salary Continuation Plans

The Company has non-qualified salary continuation plans for key employees. At December 31, 2018 and 2017, the present value of the future liability was $1,256,000 and $1,264,000, respectively. For the years ended December 31, 2018, 2017 and 2016 $103,000, $127,000 and $185,000, respectively, was charged to expense in connection with these plans. The Company offsets the cost of these plans through the purchase of bank-owned life insurance. See Note 9.

XML

Financial Instruments with Off-Balance Sheet Risk

12 Months Ended

Dec. 31, 2018

Financial Instruments with off-Balance Sheet Risk [Abstract]

Financial Instruments with Off-Balance Sheet Risk

23.  Financial Instruments With Off-Balance Sheet Risk

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments may include commitments to extend credit and letters of credit. Because many commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. These instruments involve, to varying degrees, elements of credit risk that are not recognized in the consolidated financial statements.

Exposure to credit loss in the event of non-performance by the other party to the financial instrument for commitments to extend credit and letters of credit is represented by the contractual amount of those instruments. The Bank uses the same credit policies in making these commitments and conditional obligations as it does for on-balance sheet instruments. The Company controls the credit risk of its financial instruments through credit approvals, limits and monitoring procedures; however, it does not generally require collateral for such financial instruments since there is no principal credit risk.

A summary of the Company’s financial instrument commitments is as follows:

(Dollars in thousands)	December 31,
	2018		2017
Commitments to grant loans	$	72,755	$	77,023
Unfunded commitments under lines of credit		14,468		3,150
Outstanding letters of credit		2,749		2,541

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since portions of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer's creditworthiness on a case-by-case basis. The amount of collateral obtained by the Bank upon extension of credit is based on management's credit evaluation of the counter-party. Collateral held varies but may include personal or commercial real estate, accounts receivable, inventory and equipment.

Outstanding letters of credit are instruments issued by the Bank that guarantee the beneficiary payment by the Bank in the event of default by the Bank’s customer in the non-performance of an obligation or service. Most letters of credit are extended for one year periods. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Bank holds collateral supporting those commitments for which collateral is deemed necessary. The amount of the liability as of December 31, 2018 and 2017 for guarantees under letters of credit issued is not material.

The maximum undiscounted exposure related to these guarantees at December 31, 2018 was $2,749,000, and the approximate value of underlying collateral upon liquidation that would be expected to cover this maximum potential exposure was $22,963,000.

XML

Related-Party Transactions

12 Months Ended

Dec. 31, 2018

Related-Party Transactions [Abstract]

Related-Party Transactions

24.  Related-Party Transactions

The Bank has granted loans to certain of its executive officers, directors and their related interests.The aggregate dollar amount of these loans was $7,780,000 and $7,939,000 at December 31, 2018 and 2017, respectively. During 2018, $10,714,000 of new loans were made and repayments totaled $10,873,000. None of these loans were past due, in non-accrual status or restructured at December 31, 2018 or 2017.

XML

Commitments and Contingent Liabilities

12 Months Ended

Dec. 31, 2018

Commitments and Contingent Liabilities [Abstract]

Commitments and Contingent Liabilities

25.  Commitments And Contingent Liabilities

In 2017, the Company executed renewal agreements for technology outsourcing services through two outside service bureaus. Both agreements provide for termination fees if the Company cancels the services prior to the end of the 7-year commitment period that runs through May 31, 2024. At December 31, 2018, potential termination fees were estimated to be approximately $1,672,000 and $1,542,000 on the two contracts. The potential termination fees decrease by approximately 15% in each succeeding year through 2024. Since the Company does not expect to terminate these services with either vendor prior to the end of the commitment periods, no liability has been recorded as of December 31, 2018.

The Company, from time to time, may be a defendant in legal proceedings relating to the conduct of its banking business. Most of such legal proceedings are a normal part of the banking business and, in management's opinion, the consolidated financial condition and results of operations of the Company would not be materially affected by the outcome of such legal proceedings.

Additionally, the Company has sold qualifying residential mortgage loans to the FHLB as part of its Mortgage Partnership Finance Program (“Program”). Under the terms of the Program, there is limited recourse back to the Company for loans that do not perform in accordance with the terms of the loan agreement. Each loan sold under the Program is “credit enhanced” such that the individual loan’s rating is raised to “BBB”, as determined by the FHLB. The Program can be terminated by either the FHLB or the Company, without cause, by giving notice to the other party. The FHLB has no obligation to commit to purchase any mortgage through, or from, the Company.

XML

Subsequent Event

12 Months Ended

Dec. 31, 2018

Subsequent Event [Abstract]

Subsequent Event

26.  Subsequent Event

In January 2019, the Board of Directors declared a dividend of $0.22 per share to shareholders of record on February 18, 2019, payable on March 1, 2019.  

XML

Juniata Valley Financial Corp. (Parent Company Only)

12 Months Ended

Dec. 31, 2018

Juniata Valley Financial Corp. (Parent Company Only) [Abstract]

Juniata Valley Financial Corp. (Parent Company Only)

27.  Juniata Valley Financial Corp. (Parent Company Only)

Financial information:

CONDENSED BALANCE SHEETS
(Dollars in thousands)
	December 31,
		2018		2017
ASSETS
Cash and cash equivalents	$	48	$	1,082
Investment in bank subsidiary		65,909		52,522
Investment in unconsolidated subsidiary		-		4,812
Investment securities available for sale		1,193		1,169
Other assets		641		224
TOTAL ASSETS	$	67,791	$	59,809
LIABILITIES
Accounts payable and other liabilities	$	413	$	422
STOCKHOLDERS' EQUITY		67,378		59,387
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	67,791	$	59,809

CONDENSED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Dollars in thousands)
		Years Ended December 31,
		2018		2017		2016
INCOME
Interest and dividends on investment securities available for sale	$	44	$	44	$	59
Dividends from bank subsidiary		4,923		4,194		5,624
Income from unconsolidated subsidiary		296		167		222
Gain on sale of securities		-		314		166
Change in value of equity securities		26		-		-
TOTAL INCOME		5,289		4,719		6,071
EXPENSE
Merger-related expenses		134		13		66
Other non-interest expense		155		146		157
TOTAL EXPENSE		289		159		223
INCOME BEFORE INCOME TAXES AND EQUITY
IN UNDISTRIBUTED NET INCOME OF SUBSIDIARY		5,000		4,560		5,848
Income tax (benefit) expense		(347)		(127)		47
		5,347		4,687		5,801
Undistributed net gain (loss) of subsidiary		557		(150)		(645)
NET INCOME	$	5,904	$	4,537	$	5,156
COMPREHENSIVE INCOME	$	5,795	$	4,300	$	4,150

CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
	Years Ended December 31,
		2018		2017		2016
Cash flows from operating activities:
Net income	$	5,904	$	4,537	$	5,156
Adjustments to reconcile net income to net cash
provided by operating activities:
Undistributed net (gain) loss of subsidiary		(556)		150		645
Realized gains on sales of investment securities		-		(314)		(166)
Change in value of equity securities		(26)		-		-
Equity in earnings of unconsolidated subsidiary,
net of dividends of $75,  $61 and $55		194		(106)		(167)
Equity gain from acquisition of unconsolidated subsidiary		(415)		-		-
Stock-based compensation expense		82		71		67
(Increase) decrease in other assets		(93)		513		(413)
(Decrease) increase in taxes payable		(402)		(271)		191
(Decrease) increase in accounts payable and other liabilities		(12)		(254)		1
Net cash provided by operating activities		4,676		4,326		5,314
Cash flows from investing activities:
Purchases of available for sale securities		-		-		(470)
Proceeds from the sale of available for sale securities		-		734		252
Proceeds from the maturity of available for sale investment securities		-		-		-
Net cash received from acquisition		(1,361)		-		-
Net cash provided by (used in) investing activities		(1,361)		734		(218)
Cash flows from financing activities:
Cash dividends		(4,411)		(4,194)		(4,226)
Purchase of treasury stock		(70)		(86)		(927)
Treasury stock issued for stock plans		90		-		-
Common stock issued for stock plans		42		206		64
Net cash used in financing activities		(4,349)		(4,074)		(5,089)
Net (decrease) increase in cash and cash equivalents		(1,034)		986		7
Cash and cash equivalents at beginning of year		1,082		96		89
Cash and cash equivalents at end of year	$	48	$	1,082	$	96

XML

Quarterly Results of Operations (Unaudited)

12 Months Ended

Dec. 31, 2018

Quarterly Results of Operations (Unaudited) [Abstract]

Quarterly Results of Operations (Unaudited)

28.  Quarterly Results Of Operations (Unaudited)

The unaudited quarterly results of operations for the years ended December 31, 2018 and 2017 follow:

(Dollars in thousands, except per
share data)	2018 Quarter ended
	March 31		June 30 as Revised*		September 30		December 31
Total interest income	$	5,439	$	5,944	$	6,129	$	6,139
Total interest expense		794		890		950		1,001
Net interest income		4,645		5,054		5,179		5,138
Provision for loan losses		158		41		32		106
AFS securities losses		(15)		-		-		(173)
Change in equity security value		(6)		52		(4)		(43)
Other income		1,195		1,444		1,245		1,332
Merger and acquisition expense		64		376		185		259
Other expense		4,341		4,530		4,847		4,859
Income before income taxes		1,256		1,603		1,356		1,030
Income tax (benefit) expense		(71)		(372)		(29)		(187)
Net income	$	1,327	$	1,975	$	1,385	$	1,217
Per-share data:
Basic earnings	$	0.28	$	0.39	$	0.27	$	0.24
Diluted earnings	$	0.28	$	0.39	$	0.27	$	0.24
Cash dividends	$	0.22	$	0.22	$	0.22	$	0.22
	2017 Quarter ended
	March 31		June 30		September 30		December 31
Total interest income	$	5,174	$	5,348	$	5,457	$	5,395
Total interest expense		627		702		752		774
Net interest income		4,547		4,646		4,705		4,621
Provision for loan losses		105		135		149		50
Securities gains		504		4		2		2
Other income		1,112		1,252		1,217		1,199
Merger and acquisition expense		-		-		-		13
Other expense		4,269		4,229		4,442		4,822
Income before income taxes		1,789		1,538		1,333		937
Income tax expense		330		244		127		359
Net income	$	1,459	$	1,294	$	1,206	$	578
Per-share data:
Basic earnings	$	0.31	$	0.27	$	0.25	$	0.12
Diluted earnings	$	0.31	$	0.27	$	0.25	$	0.12
Cash dividends	$	0.22	$	0.22	$	0.22	$	0.22

* The income tax benefit and net income for the quarter ended June 30, 2018 set forth on this table have been restated by $406,000 from the amounts of income tax expense of $34,000 and net income of $1,569,000 originally reported. In addition, the basic and diluted earnings per share set forth on this table have been restated from the $0.31 per share originally reported. The $406,000 relates primarily to the reversal of a deferred tax liability on the previous investment in LCB prior to the acquisition on April 30, 2018. The Form 10-Qs for the quarters ending June 30, 2019 and September 30, 2019 will reflect these changes as a correction of a prior year immaterial error.

XML

Summary of Significant Accounting Policies (Policy)

12 Months Ended

Dec. 31, 2018

Principles of Consolidation

Principles of consolidation

The consolidated financial statements include the accounts of Juniata Valley Financial Corp. and its wholly owned subsidiary, The Juniata Valley Bank. All significant intercompany transactions and balances have been eliminated.

Use of Estimates

Use of estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, the determination of other-than-temporary impairment on securities, impairment of goodwill and the value of assets acquired and liabilities assumed in business combinations.

Significant Group Concentrations of Credit Risk

Significant group concentrations of credit risk

Most of the Company’s activities are with customers located within the Juniata Valley and the JVB Northern Tier regions. Note 6 discusses the types of securities in which the Company invests. Note 7 discusses the types of lending in which the Company engages.

As of December 31, 2018, credit exposure to lessors of non-residential buildings and dwellings represented 55.3% of capital, credit exposure to hotels and motels represented 40.0% of capital, credit exposure to continuing care retirement communities represented 28.4% of capital, and credit exposure to residential buildings and dwellings represented 27.9% of capital. Otherwise, there were no concentrations of credit to any particular industry equaling more than 25% of total capital. The Bank’s business activities are geographically concentrated in the counties of Juniata, Mifflin, Perry, Huntingdon, Centre, Franklin, McKean, Potter and Snyder, Pennsylvania. The Bank has a diversified loan portfolio; however, a substantial portion of its debtors’ ability to honor their obligations is dependent upon the economy in central Pennsylvania.

Revenue Recognition

Revenue Recognition

The Company generally acts in a principal capacity, on its own behalf, in most contracts with customers. In such transactions, revenue and related costs to provide these services are recognized on a gross basis in the financial statements. In some cases, the Company acts in an agent capacity, deriving revenue through assisting other entities in transactions with its customers. In such transactions, revenue and the related costs to provide the services are recognized on a net basis in the financial statements. These transactions primarily relate to non-deposit product commissions and fees derived from customer’s use of various interchange and ATM/debit card networks.

All of the Company’s revenue from contracts with customers in the scope of ASC Topic 606, Revenue from Contracts with Customers, are recognized within non-interest income on the consolidated statements of income. Revenue streams not within the scope of ASC 606 included in non-interest income on the consolidated statements of income include earnings on bank-owned life insurance and annuities, income from unconsolidated subsidiary, fees derived from loan activity, mortgage banking income, gain/loss on sales and calls of securities, and the change in value of equity securities. Refer to Note 21 for a description of the Company’s sources of revenue accounted for under ASC 606.

Cash and Cash Equivalents

Cash and cash equivalents

For purposes of reporting cash flows, cash and cash equivalents include cash on hand, amounts due from banks, interest bearing demand deposits with banks and federal funds sold. Generally, federal funds are sold for one-day periods.

Interest Bearing Time Deposits with Banks

Interest bearing time deposits with banks

Interest-bearing time deposits with banks consist of certificates of deposits in other banks with maturities within five years.

Securities

Securities

Securities classified as available for sale, which include marketable investment securities, are stated at fair value, with the unrealized gains and losses, net of tax, reported as a component of other comprehensive income (loss). Securities classified as available for sale are those securities that the Company intends to hold for an indefinite period of time but not necessarily to maturity. Any decision to sell a security classified as available for sale would be based on various factors, including significant movement in interest rates, changes in maturity mix of the Company’s assets and liabilities, liquidity needs, regulatory capital considerations and other similar factors. Interest and dividends are recognized as income when earned. Premiums and discounts are recognized in interest income using the interest method over the terms of the securities. Gains or losses on the disposition of securities available for sale are based on the net proceeds and the adjusted carrying amount of the securities sold, determined on a specific identification basis. The Company had no securities classified as held to maturity at December 31, 2018 and 2017.

Prior to January 1, 2018, both debt and equity securities were accounted for under ASC 320, Investments – Debt and Equity Securities. ASC 320 clarified the interaction of the factors that should be considered when determining whether a debt security is other-than-temporarily impaired. For debt securities, management had to assess whether (a) it had the intent to sell the security and (b) it was more likely than not that it would be required to sell the security prior to its anticipated recovery. These steps were taken before an assessment was made as to whether the entity would recover the cost basis of the investment. If either of these circumstances was present, the securities would be written down to fair value through an impairment charge recorded on the income statement.

In instances when a determination is made that an other-than-temporary impairment exists and the entity does not intend to sell the debt security and it is not more likely than not that it will be required to sell the debt security prior to its anticipated recovery, the other-than-temporary impairment is separated into the amount of the total other-than-temporary impairment related to a decrease in cash flows expected to be collected from the debt security (the credit loss) and the amount of the total other-than-temporary impairment related to all other factors.  The amount of the total other-than-temporary impairment related to the credit loss is recognized in earnings. The amount of the total other-than-temporary impairment related to all other factors is recognized in other comprehensive (loss) income. Management determines the appropriate classification of debt securities at the time of purchase and re-evaluates such designation as of each balance sheet date.

For equity securities under ASC 320, consideration was given to management’s intention and ability to hold the securities until recovery of unrealized losses in assessing potential other-than-temporary impairment. More specifically, factors considered to determine other-than-temporary impairment status for individual equity holdings included the length of time the stock remained in an unrealized loss position, the percentage of unrealized loss compared to the carrying cost of the stock, dividend reduction or suspension, market analyst reviews and expectations, and other pertinent factors that would affect expectations for recovery or further decline.

As of January 1, 2018, upon the adoption of ASU 2016-01, all of the Company’ equity securities are within the scope of ASC 321, Investments – Equity Securities, while debt securities remain under ASC 320, Investments – Debt Securities. ASC 321 requires all equity securities within its scope to be measured at fair value with changes in fair value recognized in net income.

Restricted Investment in FHLB Stock

Restricted Investment in Bank Stock

The Bank owns restricted stock investments in the Federal Home Loan Bank and the Atlantic Community Bankers Bank (“ACBB”). Federal law requires a member institution of the Federal Home Loan Bank to hold stock according to a predetermined formula. Both the FHLB and ACBB stock is carried at cost.

Management evaluates the restricted stock for impairment on an annual basis. Management’s determination of whether these investments are impaired is based on management’s assessment of the ultimate recoverability of the cost of these investments rather than by recognizing temporary declines in value. The recoverability of the cost of the FHLB investments is influenced by criteria such as (1) the significance of the decline in net assets of the FHLB as compared to the capital stock amount for the FHLB and the length of time this situation has persisted, (2) commitments by the FHLB to make payments required by law or regulation and the level of such payments in relation to the operating performance of the FHLB, and (3) the impact of legislative and regulatory changes on institutions and, accordingly, on the customer base of the FHLB.

Management believes no impairment charge was necessary related to the FHLB or ACBB restricted stock during 2018, 2017 or 2016.

Loans

Loans

Loans that the Company has the intent and ability to hold for the foreseeable future or until maturity are stated at the outstanding unpaid principal balances, net of any deferred fees or costs and the allowance for loan losses. Interest income on all loans, other than nonaccrual loans, is accrued over the term of the loans based on the amount of principal outstanding. Unearned income is amortized to income over the life of the loans, using the interest method.

The loan portfolio is segmented into commercial and consumer loans. Commercial loans are comprised of the following classes of loans: (1) commercial, financial and agricultural, (2) commercial real estate, (3) real estate construction, (4) mortgage loans and (5) obligations of states and political subdivisions. Consumer loans are comprised of (4) mortgage loans and (6) personal loans. 

Loans on which the accrual of interest has been discontinued are designated as non-accrual loans.  Accrual of interest on loans is generally discontinued when the contractual payment of principal or interest has become 90 days past due or reasonable doubt exists as to the full, timely collection of principal or interest. However, it is the Company’s policy to continue to accrue interest on loans over 90 days past due as long as (1) they are guaranteed or well secured and (2) there is an effective means of collection in process. When a loan is placed on non-accrual status, all unpaid interest credited to income in the current year is reversed against current period income and unpaid interest accrued in prior years is charged against the allowance for loan losses. Interest received on nonaccrual loans generally is either applied against principal or reported as interest income, according to management’s judgment as to the collectability of principal. Generally, accruals are resumed on loans only when the obligation is brought fully current with respect to interest and principal, has performed in accordance with the contractual terms for a reasonable period of time and the ultimate collectability of the total contractual principal and interest is no longer in doubt.

The Company originates loans in the portfolio with the intent to hold them until maturity. At the time the Company no longer intends to hold loans to maturity based on asset/liability management practices, the Company transfers loans from its portfolio to held for sale at fair value. Any write-down recorded upon transfer is charged against the allowance for loan losses. Any write-downs recorded after the initial transfers are recorded as a charge to other non-interest expense. Gains or losses recognized upon sale are included in other non-interest income.

Loan Origination Fees and Costs

Loan origination fees and costs

Loan origination fees and related direct origination costs for a given loan are deferred and amortized over the life of the loan on a level-yield basis as an adjustment to interest income over the contractual life of the loan. As of December 31, 2018 and 2017, the amount of net unamortized origination fees carried as an adjustment to outstanding loan balances was $11,000 and $52,000, respectively.

Allowance for Credit Losses

Allowance for credit losses

The allowance for credit losses consists of the allowance for loan losses and the reserve for unfunded lending commitments. The allowance for loan losses (“allowance”) represents management’s estimate of losses inherent in the loan portfolio as of the consolidated statement of financial condition date and is recorded as a reduction to loans. The reserve for unfunded lending commitments represents management’s estimate of losses inherent in its unfunded lending commitments and is recorded in other liabilities on the consolidated statement of financial condition, when necessary. The amount of the reserve for unfunded lending commitments is not material to the consolidated financial statements. The allowance for loan losses is increased by the provision for loan losses, and decreased by charge-offs, net of recoveries. Loans deemed to be uncollectible are charged against the allowance for loan losses, and subsequent recoveries, if any, are credited to the allowance.

For financial reporting purposes, the provision for loan losses charged to current operating income is based on management's estimates, and actual losses may vary from estimates. These estimates are reviewed and adjusted at least quarterly and are reported in earnings in the periods in which they become known.

Loans included in any class are considered for charge-off when:

· principal or interest has been in default for 120 days or more and for which no payment has been received during the previous four months;

· all collateral securing the loan has been liquidated and a deficiency balance remains;

· a bankruptcy notice is received for an unsecured loan;

· a confirming loss event has occurred; or

· the loan is deemed to be uncollectible for any other reason.

The allowance for loan losses is maintained at a level considered adequate to offset probable losses on the Company’s existing loans. The analysis of the allowance for loan losses relies heavily on changes in observable trends that may indicate potential credit weaknesses. Management’s periodic evaluation of the adequacy of the allowance is based on the Bank’s past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, composition of the loan portfolio, current economic conditions and other relevant factors. This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant revision as more information becomes available. Based on management’s comprehensive analysis of the loan portfolio, management believes the level of the allowance for loan losses as of December 31, 2018 was adequate.

There are two components of the allowance: 1) specific allowances allocated to loans evaluated for impairment under ASC Section 310-10-35; and 2) allowances calculated for pools of loans evaluated collectively for impairment under ASC Subtopic 450-20 (Contingencies).

A loan is considered to be impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loans and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan by loan basis by the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price or the fair value of the collateral if the loan is collateral dependent. 

The estimated fair values of substantially all of the Company’s impaired loans are measured based on the estimated fair value of the loan’s collateral. For commercial loans secured with real estate, estimated fair values are determined primarily through third-party appraisals. When a real estate secured loan becomes impaired, a decision is made regarding whether an updated certified appraisal of the real estate is necessary. This decision is based on various considerations, including the age of the most recent appraisal, the loan-to-value ratio based on the current appraisal and the condition of the property. Appraised values may be discounted to arrive at the estimated selling price of the collateral, which is considered to be the estimated fair value. The discounts also include the estimated costs to sell the property. For commercial loans secured by non-real estate collateral, estimated fair values are determined based on the borrower’s financial statements, inventory reports, aging accounts receivable, equipment appraisals or invoices. Indications of value from these sources are generally discounted based on the age of the financial information or the quality of the assets. For such loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The Company generally does not separately identify individual consumer segment loans for impairment analysis, unless such loans are subject to a restructuring agreement.

Loans whose terms are modified are classified as troubled debt restructurings if the Company grants borrowers concessions and it is deemed that those borrowers are experiencing financial difficulty. Concessions granted under a troubled debt restructuring generally involve a below-market interest rate based on the loan’s risk characteristics, an extension of a loan’s stated maturity date or a significant delay in payment. Nonaccrual troubled debt restructurings are restored to accrual status if principal and interest payments, under the modified terms, are current for a sustained period of time after modification. Loans classified as troubled debt restructurings are designated as impaired.

The component of the allowance for pooled loan contingencies relates to other loans that have been segmented into risk rated categories. In accordance with ASC Subtopic 450-20, when measuring estimated credit losses, these loans are grouped into homogenous pools with similar characteristics and evaluated collectively considering both quantitative measures, such as historical loss, and qualitative measures, in the form of environmental adjustments.

Some portfolio segments are further disaggregated and evaluated collectively for impairment based on "class segments," which are largely based on the type of collateral underlying each loan. For commercial, financial and agricultural loans, class segments include commercial loans secured by other-than real estate collateral. Real estate – commercial class segments include loans secured by farmland, multi-family properties, owner-occupied non-farm, non-residential properties and other nonfarm non-residential properties. Real estate – mortgage includes loans secured by first and junior liens on residential real estate. Construction loan class segments include loans secured by commercial real estate, loans to commercial borrowers secured by residential real estate and loans to individuals secured by residential real estate. Personal loan class segments include direct consumer installment loans, indirect automobile loans and other revolving and unsecured loans to individuals.

Quantitative factor determination:

An average annual loss rate is calculated for each pool through an analysis of historical losses over a five-year look-back period.  Using data for each loan, a loss emergence period is determined within each segmented class pool. The loss emergence period reflects the approximate length of time from the point when a loss is incurred (the loss trigger event) to the point of loss confirmation (the date of eventual charge-off). The loss emergence period is applied to the average annual loss to produce the qualitative factor for each pooled class segment.

Qualitative factor determination:

Historical loss rates computed in the quantitative component reflects an estimate of the level of incurred losses in the portfolio based on historical experience. Management considers that the current conditions may deviate from those that prevailed over the historical look-back period. Thus, the quantitative rates are an imperfect estimate, necessitating an evaluation of qualitative considerations, i.e. environmental factors to incorporate these risks.

Management considered qualitative, environmental risk factors including:

· National, regional and local economic and business conditions, and developments that affect the collectability of the portfolio, including the condition of various market segments;

· Changes in the volume and severity of past due loans, the volume of nonaccrual loans, and the volume and severity of adversely classified loans;

· Changes in the nature and volume of the portfolio and terms of loans;

· Changes in the experience, ability and depth of lending and credit management and other relevant staff;

· Existence and effect of any concentrations of credit and changes in the level of such concentrations;

· Changes in the quality of the loan review system;

· Changes in lending policies and procedures including changes in underwriting standards and collection, charge-off and recovery practices;

· Changes in the value of underlying collateral for collateral-dependent loans; and

· Effect of external influences, including competition, legal and regulatory requirements.

Within each loan segment, an analysis was performed over a ten-year look-back period to discover peak historical losses, and with this data, management established ranges of risk from minimal to very high, for each risk factor, to produce a supportable anchor for risk assignment. Based on the framework for risk factor evaluation and range of adjustments established through the anchoring process, a risk assessment and corresponding adjustment was assigned for each portfolio segment as of December 31, 2018. Adjustments to the factors are supported through documentation of changes in conditions in a narrative accompanying the allowance for loan loss calculation.

The combination of quantitative and qualitative factors were applied to year-end balances in each pooled segment to establish the overall allowance.

Acquired Loans

Acquired Loans

Loans that Juniata acquires through business combinations are recorded at fair value with no carryover of the related allowance for loan losses. Fair value of the loans involves estimating the amount and timing of principal and interest cash flows expected to be collected on the loans and discounting those cash flows at a market rate of interest.

The excess of cash flows expected at acquisition over the estimated fair value is referred to as the accretable discount and is recognized into interest income over the remaining life of the loan. The difference between contractually required payments at acquisition and the cash flows expected to be collected at acquisition is referred to as the nonaccretable discount. The nonaccretable discount includes estimated future credit losses expected to be incurred over the life of the loan. Subsequent decreases to the expected cash flows will require Juniata to evaluate the need for an additional allowance for credit losses. Subsequent improvement in expected cash flows will result in the reversal of a corresponding amount of the nonaccretable discount which Juniata will then reclassify as accretable discount that will be recognized into interest income over the remaining life of the loan.

Acquired loans that met the criteria for impaired or nonaccrual of interest prior to the acquisition may be considered performing upon acquisition, regardless of whether the customer is contractually delinquent, if Juniata expects to fully collect the new carrying value (i.e. fair value) of the loans. As such, Juniata may no longer consider the loan to be nonaccrual or nonperforming and may accrue interest on these loans, including the impact of any accretable discount. In addition, charge-offs on such loans would be first applied to the nonaccretable difference portion of the fair value adjustment.

Loans acquired through business combinations that do not meet the specific criteria of ASC 310-30, but for which a discount is attributable at least in part to credit quality, are also accounted for in accordance with this guidance. As a result, related discounts are recognized subsequently through accretion based on the contractual cash flows of the acquired loans.

Loans Held for Sale

Loans Held for Sale

The Company has originated residential mortgage loans with the intent to sell. These individual loans are normally funded by the buyer immediately. The Company maintains servicing rights on these loans. Mortgage servicing rights are recognized as an asset upon the sale of a mortgage loan. A portion of the cost of the loan is allocated to the servicing right based upon relative fair value. Servicing rights are intangible assets and are carried at estimated fair value. Adjustments to fair value are recorded as non-interest income and included in mortgage banking income in the consolidated statements of income.

In a business combination, the Company may acquire loans which it intends to sell. These loans are assigned a fair value by obtaining actual bids on the loans and adjusting for contingencies in the bids. These loans are carried at lower of cost or market value until sold, adjusted periodically if conditions change before the subsequent sale. Adjustments to fair value and gains or losses recognized upon sale are included in gains on sales of loans which is a component of non-interest income.

Other Real Estate Owned

Other real estate owned

Assets acquired in settlement of mortgage loan indebtedness are recorded as other real estate owned (“OREO”) at fair value less estimated costs to sell, establishing a new cost basis. Costs to maintain the assets and subsequent gains and losses attributable to their disposal are included in other expense as realized. No depreciation or amortization expense is recognized. At December 31, 2018 and 2017, the carrying value of other real estate owned was $744,000 and $355,000, respectively.

Goodwill and Intangibles

Goodwill and intangibles

The Company accounts for its business combinations using the purchase accounting method. Purchase accounting requires the total purchase price to be allocated to the estimated fair values of assets acquired and liabilities assumed, including certain intangible assets that must be recognized. Typically, this allocation results in the purchase price exceeding the fair value of net assets acquired, which is recorded as goodwill. Core deposit intangibles are a measure of the value of checking, money market and savings deposits acquired in business combinations accounted for under the purchase method. Core deposit intangibles and other identified intangibles with finite useful lives are amortized over their estimated useful lives.

Goodwill and other intangible assets are tested for impairment annually or when circumstances arise indicating impairment may have occurred. In determining whether impairment has occurred, management considers a number of factors including, but not limited to, the market value of the Company’s stock, operating results, business plans, economic projections, anticipated future cash flows and current market data. There are inherent uncertainties related to these factors and management’s judgment in applying them to the analysis of impairment. Changes in economic and operating conditions, as well as other factors, could result in impairment in future periods. Any impairment losses arising from such testing would be reported in the Consolidated Statements of Income as a separate line item within operations. There were no impairment losses recognized as a result of periodic impairment testing in each of the three years ended December 31, 2018.

Mortgage Servicing Rights

Mortgage servicing rights

The Company originates residential mortgage loans with the intent to sell. These individual loans are normally funded by the buyer immediately. The Company maintains servicing rights on these loans.

Mortgage servicing rights are recognized as an asset upon the sale of a mortgage loan. A portion of the cost of the loan is allocated to the servicing right based upon relative fair value. Servicing rights are intangible assets and are carried at estimated fair value. The carrying amount of mortgage servicing rights was $200,000 and $225,000 at December 31, 2018 and 2017, respectively. Adjustments to fair value are recorded as non-interest income and included in gain on sales of loans in the consolidated statements of income.

The Company retains the servicing rights on mortgage loans sold to the FHLB and receives mortgage banking fee income based upon the principal balance outstanding. Total loans serviced for the FHLB were $23,563,000 and $23,647,000 at December 31, 2018 and 2017, respectively. The mortgage loans sold to the FHLB and serviced by the Company are not reflected in the consolidated statements of financial condition.

Premises, Equipment and Depreciation

Premises and equipment and depreciation

Premises and equipment are stated at cost less accumulated depreciation. Depreciation is computed principally using the straight-line method over the estimated useful lives of the related assets, which range from 3 to 10 years for furniture and equipment and 25 to 50 years for buildings. Expenditures for maintenance and repairs are charged against income as incurred. Costs of major additions and improvements are capitalized. Amortization of leasehold improvements is computed on a straight-line basis over the shorter of the assets’ useful life or the related lease term.

Trust Assets and Revenues

Trust assets and revenues

Assets held in a fiduciary capacity are not assets of the Bank or the Bank’s Trust Department and are, therefore, not included in the consolidated financial statements. Trust revenues are recorded on the accrual basis.

Bank Owned Life Insurance, Annuities and Split-dollar Arrangements

Bank owned life insurance, annuities and split-dollar arrangements

The cash surrender value of bank owned life insurance and annuities is carried as an asset, and changes in cash surrender value are recorded as non-interest income.

GAAP requires split-dollar life insurance arrangements to have a liability recognized related to the postretirement benefits covered by an endorsement split-dollar life insurance arrangement. The accrued benefit liability was $1,081,000 and $1,014,000 as of December 31, 2018 and 2017, respectively. Related expenses for 2018, 2017 and 2016 were $38,000, $95,000 and $61,000, respectively.

Investments in Low-income Housing Partnerships

Investments in low-income housing partnerships

Juniata has invested as a limited partner in two partnerships that provide low-income housing in Lewistown, Pennsylvania. The carrying value of the investment in the limited partnerships was $4,545,000 at December 31, 2018 and $5,245,000 at December 31, 2017. The decline in carrying value in 2018 was the result of amortization exceeding the draws taken for the completion of the phase II low-income housing project. Federal credits are available for ten years for each of the two projects. Tax credits associated with phase I will continue through 2023 annually at $572,000.  Phase II credits were initiated in 2017 and will run through 2027 at an annual amount of $333,000. The tax credits are included in the tax expense line item on the Consolidated Statements of Income. Amortization of the investment using the cost method is scheduled to occur over the same period as tax credits are earned. Juniata’s maximum exposure to loss is limited to the carrying value of the investment at year-end.

Income Taxes

Income taxes

The Company accounts for income taxes in accordance with income tax accounting guidance ASC Topic 740, Income Taxes.

Current income tax accounting guidance results in two components of income tax expense: current and deferred. Current income tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues. The Company determines deferred income taxes using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax bases of assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur.

Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred tax assets are reduced by a valuation allowance if, based on the weight of the evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized.

The Company accounts for uncertain tax positions if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination. The term “more likely than not” means a likelihood of more than 50 percent; the terms “examined” and “upon examination” also include resolution of the related appeals or litigation processes, if any. A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met the more-likely-than-not recognition threshold considers the facts, circumstances and information available at the reporting date and is subject to management’s judgment.

The Company recognizes interest and penalties on income taxes, if any, as a component of income tax expense.

Advertising

Advertising

The Company follows the policy of charging costs of advertising to expense as incurred. Advertising expenses were $294,000, $272,000 and $243,000 in 2018, 2017 and 2016, respectively.

Off-balance Sheet Financial Instruments

Off-balance sheet financial instruments

In the ordinary course of business, the Bank has entered into off-balance sheet financial instruments consisting of commitments to extend credit and letters of credit. Such financial instruments are recorded on the consolidated statement of financial condition when they are funded.

Transfer of Financial Assets

Transfer of financial assets

Transfers of financial assets are accounted for as sales when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

Comprehensive Income

Comprehensive Income

Comprehensive income consists of net income and other comprehensive income (loss). Other comprehensive income (loss) includes changes in unrealized gains and losses on securities available for sale arising during the period and reclassification adjustments for realized gains and losses on securities available for sale included in net income. The Company has a defined benefit retirement plan which utilizes assumptions and methods to calculate the fair value of Plan assets and recognizing the funded status of the Plans on its consolidated balance sheet. Gains and losses on the Plan are recognized in other comprehensive income (loss), net of tax, until they are amortized, or immediately upon curtailment.

Stock-based Compensation

Stock-based compensation

The Company sponsors a stock compensation plan for certain key officers which allows, among other stock-based compensation methods, for stock options and restricted stock awards. Prior to 2016, stock options were used exclusively for long-term compensation, but beginning in 2016, restricted shares awards were used. Compensation expense for stock options granted and restricted stock awarded is measured using the fair value of the award on the grant date and is recognized over the vesting period. The stock-based compensation expense amounts for stock options were derived based on the fair value of options using the Black-Scholes option-pricing model.

Segment Reporting

Segment reporting

Management does not separately allocate expenses, including the cost of funding loan demand, between the commercial, retail and trust operations of the Company. As such, discrete financial information is not available, and segment reporting would not be meaningful.

Subsequent Events

Subsequent events

The Company has evaluated events and transactions occurring subsequent to the consolidated statement of financial condition date of December 31, 2018, for items that should potentially be recognized or disclosed in the consolidated financial statements. The evaluation was conducted through the date these consolidated financial statements were issued.

Commercial, Financial and Agricultural [Member] | Commercial Portfolio Segment [Member]

Loans

Commercial, Financial and Agricultural Lending

The Company originates commercial, financial and agricultural loans primarily to businesses located in its primary market area and surrounding areas.  These loans are used for various business purposes, which include short-term loans and lines of credit to finance machinery and equipment purchases, inventory and accounts receivable. Generally, the maximum term for loans extended on machinery and equipment is shorter and does not exceed the projected useful life of such machinery and equipment. Most business lines of credit are written with a five year maturity, subject to an annual review.

Commercial loans are generally secured with short-term assets; however, in many cases, additional collateral, such as real estate, is provided as additional security for the loan.  Loan-to-value maximum values have been established by the Company and are specific to the type of collateral. Collateral values may be determined using invoices, inventory reports, accounts receivable aging reports, collateral appraisals, etc.

In underwriting commercial loans, an analysis of the borrower’s character, capacity to repay the loan, the adequacy of the borrower’s capital and collateral, as well as an evaluation of conditions affecting the borrower, is performed. Analysis of the borrower’s past, present and future cash flows is also an important aspect of the Company’s analysis.

Concentration analysis assists in identifying industry specific risk inherent in commercial, financial and agricultural lending. Mitigants include the identification of secondary and tertiary sources of repayment and appropriate increases in oversight.  

Commercial, financial and agricultural loans generally present a higher level of risk than certain other types of loans, particularly during slow economic conditions.

Commercial Loan [Member] | Real Estate Portfolio Segment [Member]

Loans

Commercial Real Estate Lending

The Company engages in commercial real estate lending in its primary market area and surrounding areas. The Company’s commercial real estate portfolio is secured primarily by residential housing, commercial buildings, raw land and hotels. Generally, commercial real estate loans have terms that do not exceed 20 years, have loan-to-value ratios of up to 80% of the appraised value of the property and are typically secured by personal guarantees of the borrowers.

As economic conditions deteriorate, the Company reduces its exposure in real estate loans with higher risk characteristics.  In underwriting these loans, the Company performs a thorough analysis of the financial condition of the borrower, the borrower’s credit history, and the reliability and predictability of the cash flow generated by the property securing the loan. Appraisals on properties securing commercial real estate loans originated by the Company are performed by independent appraisers.

Commercial real estate loans generally present a higher level of risk than certain other types of loans, particularly during slow economic conditions.

Construction Loan [Member] | Real Estate Portfolio Segment [Member]

Loans

Real Estate Construction Lending

The Company engages in real estate construction lending in its primary market area and surrounding areas. The Company’s real estate construction lending consists of commercial and residential site development loans, as well as commercial building construction and residential housing construction loans. 

The Company’s commercial real estate construction loans are generally secured with the subject property, and advances are made in conformity with a pre-determined draw schedule supported by independent inspections.  Terms of construction loans depend on the specifics of the project, such as estimated absorption rates, estimated time to complete, etc. 

In underwriting commercial real estate construction loans, the Company performs a thorough analysis of the financial condition of the borrower, the borrower’s credit history, the reliability and predictability of the cash flow generated by the project using feasibility studies, market data, etc. Appraisals on properties securing commercial real estate loans originated by the Company are performed by independent appraisers.

Real estate construction loans generally present a higher level of risk than certain other types of loans, particularly during slow economic conditions. The difficulty of estimating total construction costs adds to the risk as well.

Mortgage Loan [Member] | Real Estate Portfolio Segment [Member]

Loans

Mortgage Lending

The Company’s real estate mortgage portfolio is comprised of consumer residential mortgages and business loans secured by one-to-four family properties. One-to-four family residential mortgage loan originations, including home equity installment and home equity lines of credit loans, are generated by the Company’s marketing efforts, its present customers, walk-in customers and referrals. These loans originate primarily within the Company’s market area or with customers primarily from the market area.

The Company offers fixed-rate and adjustable rate mortgage loans with terms up to a maximum of 25years for both permanent structures and those under construction. The Company’s one-to-four family residential mortgage originations are secured primarily by properties located in its primary market area and surrounding areas. The majority of the Company’s residential mortgage loans originate with a loan-to-value of 80% or less. Home equity installment loans are secured by the borrower’s primary residence with a maximum loan-to-value of 80% and a maximum term of 15 years. Home equity lines of credit are secured by the borrower’s primary residence with a maximum loan-to-value of 90% and a maximum term of 20 years.

In underwriting one-to-four family residential real estate loans, the Company evaluates the borrower’s ability to make monthly payments, the borrower’s repayment history and the value of the property securing the loan. The ability to repay is determined by the borrower’s employment history, current financial conditions, and credit background. The analysis is based primarily on the customer’s ability to repay and secondarily on the collateral or security. Most properties securing real estate loans made by the Company are appraised by independent fee appraisers. The Company generally requires mortgage loan borrowers to obtain an attorney’s title opinion or title insurance, and fire and property insurance (including flood insurance, if necessary) in an amount not less than the amount of the loan. The Company does not engage in sub-prime residential mortgage originations.

Residential mortgage loans and home equity loans generally present a lower level of risk than certain other types of consumer loans because they are secured by the borrower’s primary residence. Risk is increased when the Company is in a subordinate position for the loan collateral.

Obligations of State and Political Subdivisions [Member] | Unallocated Financing Receivables [Member]

Loans

Obligations of States and Political Subdivisions

The Company lends to local municipalities and other tax-exempt organizations. These loans are primarily tax-anticipation notes and, as such, carry little risk. Historically, the Company has never had a loss on any loan of this type.

Personal Loan [Member] | Consumer Portfolio Segment [Member]

Loans

Personal Lending

The Company offers a variety of secured and unsecured personal loans, including vehicle loans, mobile home loans and loans secured by savings deposits as well as other types of personal loans.

Personal loan terms vary according to the type and value of collateral and creditworthiness of the borrower. In underwriting personal loans, a thorough analysis of the borrower’s willingness and financial ability to repay the loan as agreed is performed. The ability to repay is determined by the borrower’s employment history, current financial conditions and credit background.

Personal loans may entail greater credit risk than do residential mortgage loans, particularly in the case of personal loans which are unsecured or are secured by rapidly depreciable assets, such as automobiles or recreational equipment. In such cases, any repossessed collateral for a defaulted personal loan may not provide an adequate source of repayment of the outstanding loan balance as a result of the greater likelihood of damage, loss or depreciation. In addition, personal loan collections are dependent on the borrower’s continuing financial stability and, thus are more likely to be affected by adverse personal circumstances. Furthermore, the application of various federal and state laws, including bankruptcy and insolvency laws, may limit the amount which can be recovered on such loans.

XML

Borrowings (Policy)

12 Months Ended

Dec. 31, 2018

Borrowings [Abstract]

Repurchase Agreements, Policy

The Bank has repurchase agreements with several of its depositors, under which customers’ funds are invested daily into an interest bearing account. These funds are carried by the Company as short-term debt. It is the Company’s policy to completely collateralize repurchase agreements with U.S. Government securities.

XML

Merger (Tables)

12 Months Ended

Dec. 31, 2018

Merger [Abstract]

Schedule of Purchase Price Allocation

The allocation of the purchase price is as follows:

(Dollars in thousands)
Step One Purchase Price Consideration
April 30, 2018 JUVF basis in LCB (before gain)	$	4,622
Increase in Step One basis from equity gain in acquisition		415
Total Step One adjusted basis		5,037
Step Two Purchase Price Consideration
Purchase price assigned to LCB common shares exchanged for 315,284 JUVF common shares	$	6,463
Purchase price assigned to LCB common shares exchanged for cash including cash in lieu of
fractional shares		1,362
Total Step Two purchase price consideration		7,825
Total purchase price		12,862
LCB net assets acquired:
Tangible common equity		9,246
Adjustments to reflect assets acquired and liabilities assumed at fair value:
Total fair value adjustments		(95)
Associated deferred income taxes		20
Fair value adjustment to net assets acquired, net of tax		(75)
Total LCB net assets acquired		9,171
Goodwill resulting from the merger	$	3,691

Summary of the Estimated Fair Value of the Assets Acquired and Liabilities Assumed

The following table summarizes the estimated fair value of the assets acquired and liabilities assumed.

(Dollars in thousands)
Total purchase price	$	12,862
Net assets acquired:
Cash and cash equivalents		8,923
Investments in time deposits with banks		3,675
Loans		31,331
Premises and equipment		125
Accrued interest receivable		123
Core deposit and other intangibles		289
Bank owned life insurance		632
FHLB stock		124
Other assets		267
Deposits		(36,052)
Accrued interest payable		(17)
Other liabilities		(249)
		9,171
Goodwill	$	3,691

Schedule of Fair Value Adjustments for Acquired Loans

The table below illustrates the fair value adjustments made to the amortized cost basis in order to present a fair value of the loans acquired.

(Dollars in thousands)
Gross amortized cost basis at April 30, 2018	$	32,091
Market rate adjustment		272
Credit fair value adjustment on pools of homogeneous loans		(496)
Credit fair value adjustment on purchased credit impaired loans		(622)
Reversal of existing deferred fees and premiums		86
Fair value of purchased loans at April 30, 2018	$	31,331

Schedule of Acquired Impaired Loans

Summarized below is the acquired Liverpool purchased credit impaired loan portfolio as of April 30, 2018.

(Dollars in thousands)
Contractually required principal and interest at acquisition	$	2,022
Contractual cash flows not expected to be collected (nonaccretable discount)		(1,273)
Expected cash flows at acquisition		749
Interest component of expected cash flows (accretable discount)		(177)
Fair value of acquired loans	$	572

Merger, Pro Forma Information

The pro forma financial information does not include the impact of possible business model changes, nor does it consider any potential impacts of current market conditions or revenues, expense efficiencies or other factors.

(Dollars in thousands; except share data)	Years ended December 31,
	2018		2017
Net interest income after loan loss provision	$	20,629	$	19,943
Noninterest income		4,816		5,347
Noninterest expense		18,818		19,098
Net income available to common shareholders		6,996		5,184
Net income per common share		1.37		1.02

XML

Securities (Tables)

12 Months Ended

Dec. 31, 2018

Securities [Abstract]

Securities Available for Sale

The amortized cost and fair value of securities available for sale as of December 31, 2018 and 2017, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because the securities may be called or prepaid with or without prepayment penalties.

(Dollars in thousands)	December 31, 2018
						Gross		Gross
Securities Available for Sale		Amortized		Fair		Unrealized		Unrealized
Type and maturity		Cost		Value		Gains		Losses
Obligations of U.S. Government agencies and corporations
After one year but within five years	$	20,998	$	20,355	$	-	$	(643)
After five years but within ten years		2,999		2,911		-		(88)
		23,997		23,266		-		(731)
Obligations of state and political subdivisions
Within one year		826		826		-		-
After one year but within five years		14,751		14,686		13		(78)
After five years but within ten years		2,779		2,669		-		(110)
		18,356		18,181		13		(188)
Mortgage-backed securities		102,957		100,506		172		(2,623)
Total	$	145,310	$	141,953	$	185	$	(3,542)

(Dollars in thousands)	December 31, 2017
						Gross		Gross
Securities Available for Sale		Amortized		Fair		Unrealized		Unrealized
Type and maturity		Cost		Value		Gains		Losses
Obligations of U.S. Government agencies and corporations
Within one year	$	6,000	$	5,969	$	-	$	(31)
After one year but within five years		15,000		14,689		-		(311)
After five years but within ten years		13,998		13,556		-		(442)
		34,998		34,214		-		(784)
Obligations of state and political subdivisions
Within one year		2,521		2,516		-		(5)
After one year but within five years		13,959		13,955		50		(54)
After five years but within ten years		8,611		8,510		18		(119)
		25,091		24,981		68		(178)
Mortgage-backed securities		94,945		93,510		38		(1,473)
Equity securities		922		1,119		197		-
Total	$	155,956	$	153,824	$	303	$	(2,435)

Summary of Proceeds and Realized Gain/(Loss)

Following is a summary of proceeds received from all investment securities transactions and the resulting realized gains and losses:

(Dollars in thousands)	Years Ended December 31,
		2018		2017		2016
Gross proceeds from sales of securities	$	10,461	$	21,799	$	4,304
Securities available for sale:
Gross realized gains from sold and called securities	$	-	$	539	$	139
Gross realized losses from sold and called securities		(188)		(32)		(21)
Gross gains from business combinations		-		5		100

Schedule of Gross Unrealized Losses and Fair Value

The following table shows gross unrealized losses and fair values of securities available for sale, aggregated by category and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2018:

	Unrealized Losses at December 31, 2018
	Less Than 12 Months					12 Months or More					Total
	Number					Number					Number
(Dollars in thousands)	of	Fair		Unrealized		of	Fair		Unrealized		of	Fair		Unrealized
	Securities	Value		Losses		Securities	Value		Losses		Securities	Value		Losses
Obligations of U.S.
Government agencies
and corporations	-	$	-	$	-	14	$	23,267	$	(731)	14	$	23,267	$	(731)
Obligations of state and
political subdivisions	8		5,055		(10)	13		8,242		(178)	21		13,297		(188)
Mortgage-backed
securities	3		6,726		(32)	43		77,170		(2,591)	46		83,896		(2,623)
Total debt securities	11		11,781		(42)	70		108,679		(3,500)	81		120,460		(3,542)
Total temporarily
impaired
securities	11	$	11,781	$	(42)	70	$	108,679	$	(3,500)	81	$	120,460	$	(3,542)

The following table shows gross unrealized losses and fair value, aggregated by category and length of time that individual securities had been in a continuous unrealized loss position, at December 31, 2017:

	Unrealized Losses at December 31, 2017
	Less Than 12 Months						12 Months or More						Total
	Number						Number						Number
(Dollars in thousands)	of	Fair		Unrealized			of	Fair		Unrealized			of	Fair		Unrealized
	Securities	Value			Losses		Securities	Value			Losses		Securities	Value			Losses
Obligations of U.S.
Government agencies
and corporations	5	$	10,845		$	(157)	15	$	23,369		$	(627)	20	$	34,214		$	(784)
Obligations of state and
political subdivisions	23		10,491			(70)	6		3,862			(108)	29		14,353			(178)
Mortgage-backed
securities	23		51,050			(518)	20		38,740			(955)	43		89,790			(1,473)
Total debt securities	51		72,386			(745)	41		65,971			(1,690)	92		138,357			(2,435)
Equity securities	1		9			-	1		4			-	2		13			-
Total temporarily
impaired
securities	52	$	72,395		$	(745)	42	$	65,975		$	(1,690)	94	$	138,370		$	(2,435)

XML

Loans and Related Allowance for Loan Losses (Tables)

12 Months Ended

Dec. 31, 2018

Loans and Related Allowance for Loan Losses [Abstract]

Classes of the Loan Portfolio Summarized by the Aggregate Risk Rating

The following table presents the classes of the loan portfolio summarized by the aggregate pass rating and the classified ratings of special mention, substandard and doubtful within the Company’s internal risk rating system as of December 31, 2018 and December 31, 2017. Due to the expansion of the Company’s internal credit quality risk ratings in the second quarter of 2018, the amount reclassified from the special mention rating to the pass/watch rating, which is included within the pass rating classification below, was $32,603,000 at June 30, 2018. Previously, both special mention and watch rated loans were reported under the special mention rating classification.

(Dollars in thousands)
			Special
As of December 31, 2018	Pass		Mention		Substandard		Doubtful		Total
Commercial, financial and agricultural	$	42,757	$	2,992	$	814	$	-	$	46,563
Real estate - commercial		125,352		8,590		6,459		894		141,295
Real estate - construction		34,131		-		2,528		29		36,688
Real estate - mortgage		160,774		24		2,569		181		163,548
Obligations of states and political subdivisions		19,129		-		-		-		19,129
Personal		10,389		-		19		-		10,408
Total	$	392,532	$	11,606	$	12,389	$	1,104	$	417,631

(Dollars in thousands)
			Special
As of December 31, 2017	Pass		Mention		Substandard		Doubtful		Total
Commercial, financial and agricultural	$	34,826	$	8,692	$	2,280	$	4	$	45,802
Real estate - commercial		114,299		17,928		7,189		953		140,369
Real estate - construction		22,470		3,297		2,636		-		28,403
Real estate - mortgage		139,861		3,551		2,859		617		146,888
Obligations of states and political subdivisions		12,088		956		-		-		13,044
Personal		9,360		32		6		-		9,398
Total	$	332,904	$	34,456	$	14,970	$	1,574	$	383,904

Impaired Loans by Loan Portfolio Class

The following tables summarize information regarding impaired loans by portfolio class as of December 31, 2018 and December 31, 2017:

(Dollars in thousands)	As of December 31, 2018						As of December 31, 2017
Impaired Loans	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance recorded:
Commercial, financial
and agricultural	$	-	$	-	$	-	$	468	$	477	$	-
Real estate - commercial		909		1,303		-		5,031		5,957		-
Acquired with credit
deterioration		544		592		-		191		247		-
Real estate - construction		27		1,123		-		-		-		-
Real estate - mortgage		1,180		1,912		-		2,232		3,738		-
Acquired with credit
deterioration		971		1,061		-		337		384		-
Personal		17		17		-		-		-		-
Total:
Commercial, financial
and agricultural	$	-	$	-	$	-	$	468	$	477	$	-
Real estate - commercial		909		1,303		-		5,031		5,957		-
Acquired with credit
deterioration		544		592		-		191		247		-
Real estate - construction		27		1,123		-		-		-		-
Real estate - mortgage		1,180		1,912		-		2,232		3,738		-
Acquired with credit
deterioration		971		1,061		-		337		384		-
Personal		17		17		-		-		-		-
	$	3,648	$	6,008	$	-	$	8,259	$	10,803	$	-

(Dollars in thousands)	Year Ended December 31, 2018						Year Ended December 31, 2017						Year Ended December 31,  2016
Impaired Loans	Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Income		Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Income		Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Income
With no related allowance
recorded:
Commercial, financial
and agricultural	$	234	$	-	$	-	$	452	$	25	$	-	$	456	$	29	$	-
Real estate - commercial		2,970		-		-		5,265		313		-		3,675		331		-
Acquired with credit
deterioration		368		-		-		416		-		-		738		-		-
Real estate - construction		14		-		-		1,228		34		-		1,228		136		-
Real estate - mortgage		1,706		19		33		2,789		21		20		2,991		28		37
Acquired with credit
deterioration		654		-		-		376		-		-		523		-		-
Personal		9		-		-		-						-
With an allowance
recorded:
Real estate - mortgage	$	-	$	-	$	-	$	356	$	-	$	-	$	356	$	-	$	-
Total:
Commercial, financial
and agricultural		234		-		-		452		25		-		456		29		-
Real estate - commercial		2,970		-		-		5,265		313		-		3,675		331		-
Acquired with credit
deterioration		368		-		-		416		-		-		738		-		-
Real estate - construction		14		-		-		1,228		34		-		1,228		136		-
Real estate - mortgage		1,706		19		33		3,145		21		20		3,347		28		37
Acquired with credit
deterioration		654		-		-		376		-		-		523		-		-
Personal		9		-		-		-		-		-		-		-		-
	$	5,955	$	19	$	33	$	10,882	$	393	$	20	$	9,967	$	524	$	37

Nonaccrual Loans by Classes of the Loan Portfolio

The following table presents nonaccrual loans by classes of the loan portfolio as of December 31, 2018 and December 31, 2017:

(Dollars in thousands)
Nonaccrual loans:	December 31, 2018		December 31, 2017
Commercial, financial and agricultural	$	-	$	4
Real estate - commercial		908		953
Real estate - construction		29		-
Real estate - mortgage		753		1,917
Personal		17		-
Total	$	1,707	$	2,874

Loan Portfolio Summarized by the Past Due Status

The following table presents the classes of the loan portfolio summarized by the past due status as of December 31, 2018 and December 31, 2017:

													Loans
													Past Due
													Greater
(Dollars in thousands)					Greater								than 90
	30-59 Days		60-89 Days		than 90		Total Past						Days an
As of  December 31, 2018	Past Due		Past Due		Days		Due		Current		Total Loans		Accruing(1)
Commercial, financial and agricultural	$	6	$	-	$	-	$	6	$	46,557	$	46,563	$	-
Real estate - commercial
Real estate - commercial		-		-		1,214		1,214		139,890		141,104		306
Acquired with credit deterioration		140		-		-		140		51		191		-
Real estate - construction		32		-		29		61		36,627		36,688		-
Real estate - mortgage
Real estate - mortgage		824		561		175		1,560		161,651		163,211		23
Acquired with credit deterioration		259		-		7		266		71		337		7
Obligations of states and political
subdivisions		-		-		-		-		19,129		19,129		-
Personal		24		15		17		56		10,352		10,408		-
Total	$	1,285	$	576	$	1,442	$	3,303	$	414,328	$	417,631	$	336

													Loans
													Past Due
													Greater
(Dollars in thousands)					Greater								than 90
	30-59 Days		60-89 Days		than 90		Total Past						Days an
As of  December 31, 2017	Past Due		Past Due		Days		Due		Current		Total Loans		Accruing(1)
Commercial, financial and agricultural	$	-	$	-	$	-	$	-	$	45,802	$	45,802	$	-
Real estate - commercial
Real estate - commercial		16		23		-		39		140,139		140,178		-
Acquired with credit deterioration		-		-		28		28		163		191		28
Real estate - construction		-		-		-		-		28,403		28,403		-
Real estate - mortgage
Real estate - mortgage		694		80		64		838		145,713		146,551		64
Acquired with credit deterioration		-		-		123		123		214		337		123
Obligations of states and political
subdivisions		-		-		-		-		13,044		13,044		-
Personal		66		6		-		72		9,326		9,398		-
Total	$	776	$	109	$	215	$	1,100	$	382,804	$	383,904	$	215

(1) These loans are guaranteed, or well secured, and there is an effective means of collection in process.

Troubled Debt Restructurings on Financing Receivables

The following table summarizes information regarding troubled debt restructurings by loan portfolio class as of and for the years ended December 31, 2018 and 2017.

(Dollars in thousands)		Pre-Modification		Post-Modification
	Number of	Outstanding		Outstanding
	Contracts	Recorded Investment		Recorded Investment		Recorded Investment
As of December 31, 2018
Accruing troubled debt restructurings:
Real estate - mortgage	8	$	522	$	550	$	428
Non-accruing troubled debt
restructurings:
Real estate - mortgage	1		25		25		17
	9	$	547	$	575	$	445

(Dollars in thousands)		Pre-Modification		Post-Modification
	Number of	Outstanding		Outstanding
	Contracts	Recorded Investment		Recorded Investment		Recorded Investment
As of December 31, 2017
Accruing troubled debt restructurings:
Real estate - commercial
Real estate - mortgage	7	$	369	$	397	$	315
Non-accruing troubled debt
restructurings:
Commercial, financial, agricultural	1		19		20		4
Real estate - mortgage	1		25		25		20
	9	$	413	$	442	$	339

Summary of Loans whose Terms Have Been Modified

The following tables summarize loans whose terms were modified, resulting in troubled debt restructurings during 2018 and 2017.

(Dollars in thousands)		Pre-Modification		Post-Modification
	Number of	Outstanding		Outstanding
	Contracts	Recorded Investment		Recorded Investment		Recorded Investment
Year ended December 31, 2018
Non-accruing troubled debt
restructurings:
Real estate - mortgage	1	$	153	$	153	$	147
	1	$	153	$	153	$	147

(Dollars in thousands)		Pre-Modification		Post-Modification
	Number of	Outstanding		Outstanding
	Contracts	Recorded Investment		Recorded Investment		Recorded Investment
Year ended December 31, 2017
Non-accruing troubled debt
restructurings:
Commercial, financial, agricultural	1	$	19	$	20	$	4
	1	$	19	$	20	$	4

Allowance for Loan Losses and Recorded Investments in Loans Receivable

The following tables summarize loans and the activity in the allowance for loan losses by loan class, segregated into the amount required for loans individually evaluated for impairment and the amount required for loans collectively evaluated for impairment as of and for the years ended December 31, 2018, 2017 and 2016:

(Dollars in thousands)									Obligations
	Commercial,								of states
	financial and		Real estate-		Real estate-		Real estate-		and political
Allowance for loan losses:	agricultural		commercial		construction		mortgage		subdivisions		Personal		Total
Beginning Balance, January 1, 2018	$	273	$	1,022	$	288	$	1,285	$	-	$	71	$	2,939
Charge-offs		-		(60)		-		(183)		-		(42)		(285)
Recoveries		10		5		-		12		-		16		43
Provisions		(8)		107		270		(79)		20		27		337
Ending balance, December 31, 2018	$	275	$	1,074	$	558	$	1,035	$	20	$	72	$	3,034
collectively evaluated for impairment	$	275	$	1,074	$	558	$	1,035	$	20	$	72	$	3,034
Loans receivable:
Ending balance	$	46,563	$	141,295	$	36,688	$	163,548	$	19,129	$	10,408	$	417,631
individually evaluated for impairment		-		909		27		1,180		-		17		2,133
acquired with credit deterioration		-		544		-		971		-		-		1,515
collectively evaluated for impairment	$	46,563	$	139,842	$	36,661	$	161,397	$	19,129	$	10,391	$	413,983

(Dollars in thousands)									Obligations
	Commercial,								of states
	financial and		Real estate-		Real estate-		Real estate-		and political
Allowance for loan losses:	agricultural		commercial		construction		mortgage		subdivisions		Personal		Total
Beginning Balance, January 1, 2017	$	318	$	948	$	231	$	1,143	$	-	$	83	$	2,723
Charge-offs		(46)		(70)		-		(149)		-		(27)		(292)
Recoveries		5		2		-		45		-		17		69
Provisions		(4)		142		57		246		-		(2)		439
Ending balance, December 31, 2017	$	273	$	1,022	$	288	$	1,285	$	-	$	71	$	2,939
collectively evaluated for impairment	$	273	$	1,022	$	288	$	1,285	$	-	$	71	$	2,939
Loans receivable:
Ending balance	$	45,802	$	140,369	$	28,403	$	146,888	$	13,044	$	9,398	$	383,904
individually evaluated for impairment		468		5,031		-		2,232		-		-		7,731
acquired with credit deterioration		-		191		-		337		-		-		528
collectively evaluated for impairment	$	45,334	$	135,147	$	28,403	$	144,319	$	13,044	$	9,398	$	375,645

(Dollars in thousands)									Obligations
	Commercial,								of states
	financial and		Real estate-		Real estate-		Real estate-		and political
Allowance for loan losses:	agricultural		commercial		construction		mortgage		subdivisions		Personal		Total
Beginning Balance, January 1, 2016	$	264	$	836	$	191	$	1,140	$	-	$	47	$	2,478
Charge-offs		(4)		(146)		-		(103)		-		(26)		(279)
Recoveries		-		24		-		15		-		19		58
Provisions		58		234		40		91		-		43		466
Ending balance, December 31, 2016	$	318	$	948	$	231	$	1,143	$	-	$	83	$	2,723
individually evaluated for impairment		-		-		-		56		-		-		56
collectively evaluated for impairment	$	318	$	948	$	231	$	1,087	$	-	$	83	$	2,667
Loans receivable:
Ending balance	$	40,827	$	123,711	$	35,206	$	154,905	$	13,616	$	10,032	$	378,297
individually evaluated for impairment		436		5,499		2,455		4,057		-		-		12,447
acquired with credit deterioration		-		641		-		415		-		-		1,056
collectively evaluated for impairment	$	40,391	$	117,571	$	32,751	$	150,433	$	13,616	$	10,032	$	364,794

XML

Bank Owned Life Insurance and Annuities (Tables)

12 Months Ended

Dec. 31, 2018

Bank Owned Life Insurance and Annuities [Abstract]

Summary of Changes in Cash Value of BOLI and Annuities

Changes in cash value of BOLI and annuities in 2018 and 2017 are shown below:

(Dollars in thousands)	Life		Deferred
	Insurance		Annuities		Total
Balance as of January 1, 2017	$	14,198		433	$	14,631
Earnings		285		16		301
Premiums on existing policies		27		13		40
Balance as of December 31, 2017		14,510		462		14,972
Earnings		277		18		295
Premiums on existing policies		25		13		38
Annuity payments received		1		-		1
BOLI acquired through acquisition		632		-		632
Balance as of December 31, 2018	$	15,445	$	493	$	15,938

XML

Premises and Equipment (Tables)

12 Months Ended

Dec. 31, 2018

Premises and Equipment [Abstract]

Premises and Equipment

Premises and equipment consist of the following:

(Dollars in thousands)	December 31,
	2018		2017
Land	$	1,158	$	1,126
Buildings and improvements		11,645		11,358
Furniture, computer software and equipment		6,217		5,898
		19,020		18,382
Less: accumulated depreciation		(10,276)		(9,495)
	$	8,744	$	8,887

XML

Goodwill and Other Intangible Assets (Tables)

12 Months Ended

Dec. 31, 2018

Goodwill and Other Intangible Assets [Abstract]

Amortization Schedule for Intangible Assets

The following table shows the amortization schedule for each of the intangible assets recorded.

(Dollars in thousands)	LCB		FNBPA		FNBPA		Branch
	Acquisition		Acquisition		Acquisition		Acquisition
	Core		Core		Other		Core
	Deposit		Deposit		Intangible		Deposit
	Intangible		Intangible		Assets		Intangible
Beginning Balance at Acquisition Date	$	289	$	303	$	40	$	431
Amortization expense recorded prior to December 31, 2015		-		4		2		402
Amortization expense recorded in Years ended:
December 31, 2016		-		55		20		29
December 31, 2017		-		49		18		-
December 31, 2018		35		44		-		-
Unamortized balance as of December 31, 2018		254		151		-		-
Scheduled Amortization expense for years ended:
December 31, 2019		49		38		-		-
December 31, 2020		44		33		-		-
December 31, 2021		39		27		-		-
December 31, 2022		33		22		-		-
December 31, 2023		28		16		-		-
After December 31, 2023		61		15		-		-

XML

Investment in Unconsolidated Subsidiary (Tables)

12 Months Ended

Dec. 31, 2018

Investment in Unconsolidated Subsidiary [Abstract]

Components of the Income/Gain from the Unconsolidated Subsidiary Investment

The following table illustrates the components of the income/gain from the unconsolidated subsidiary investment recorded for the years ended December 31, 2018, 2017, and 2016.

(Dollars in thousands)

	Years Ended December 31,
Income from unconsolidated subsidiary (excluding merger-	2018		2017		2016
related adjustments)
Dividend income	$	36	$	61	$	55
Equity income		45		106		167
Total income (excluding merger-related adjustments)		81		167		222
Merger-related adjustments for investment in unconsolidated
subsidiary
Adjustment to LCB book value at April 30, 2018		(239)		-		-
Special merger-related dividend		39		-		-
Fair value gain		415		-		-
Total merger-related adjustments		215		-		-
Total income/gain from unconsolidated subsidiary	$	296	$	167	$	222

XML

Deposits (Tables)

12 Months Ended

Dec. 31, 2018

Deposits [Abstract]

Schedule of Deposits

Deposits consist of the following:

(Dollars in thousands)	December 31,
	2018		2017
Demand, non-interest bearing	$	126,057	$	115,911
Interest-bearing demand and money market		147,413		122,407
Savings		99,236		98,966
Time deposits, $250,000 or more		8,368		8,456
Other time deposits		140,648		131,928
	$	521,722	$	477,668

Schedule of Maturities of Time Deposits

Aggregate amount of scheduled maturities of time deposits as of December 31, 2018 include the following:

(Dollars in thousands)
	Time Deposits
Maturing in:	$250,000 or more		Other		Total Time Deposits
2019	$	3,538	$	49,056	$	52,594
2020		2,715		34,817		37,532
2021		513		21,694		22,207
2022		-		9,503		9,503
2023		607		11,070		11,677
Later		995		14,508		15,503
	$	8,368	$	140,648	$	149,016

XML

Borrowings (Tables)

12 Months Ended

Dec. 31, 2018

Borrowings [Abstract]

Short Term Borrowings

Short term borrowings as of December 31, 2018, 2017 and 2016, and the related maximum amounts outstanding at the end of any month in each of the three years ended, are presented below.

(Dollars in thousands)	December 31,						Maximum Outstanding at Any Month End
	2018		2017		2016		2018		2017		2016
Securities sold under
agreements to
repurchase	$	2,911	$	9,769	$	4,496	$	4,620	$	9,769	$	6,018
Short-term borrowings
with FHLB:
Overnight advances		11,600		12,000		27,700		29,238		30,721		32,300
	$	14,511	$	21,769	$	32,196	$	33,858	$	40,490	$	38,318

The following table presents supplemental information related to short-term borrowings.

	Securities sold under agreements									Short-term borrowings with
(Dollars in thousands)	to repurchase									Federal Home Loan Bank
	2018			2017			2016			2018			2017			2016
Amount outstanding
as of December 31	$	2,911		$	9,769		$	4,496		$	11,600		$	12,000		$	27,700
Weighted average interest
rate as of December 31		2.13	%		0.32	%		0.18	%		2.62	%		1.54	%		0.74	%
Average amount out-
standing during the year		4,177			4,823			4,712			9,906			25,476			15,696
Weighted average interest
rate during the year		1.49	%		0.64	%		0.11	%		1.92	%		1.16	%		0.60	%

Summary of the Scheduled Maturities of Long-Term Debt

The following table summarizes the scheduled maturities of long-term debt as of December 31, 2018.

(Dollars in thousands)
	Scheduled		Weighted Average
Year	Maturities		Interest Rate
2019		15,000	1.59	%
2020		-	-
2021		-	-
2022		-	-
2023		-	-
Thereafter		-	-
	$	15,000	1.59	%

XML

Operating Lease Obligations (Tables)

12 Months Ended

Dec. 31, 2018

Operating Lease Obligations [Abstract]

Schedule of Future Minimum Rental Payments

The following is a summary of future minimum rental payments for the next five years required under operating leases that have initial or remaining noncancelable lease terms in excess of one year as of December 31, 2018:

(Dollars in thousands)
Years ending December 31,		Lease Obligation
2019	$	111
2020		93
2021		83
2022		26
2023		21
2024 and beyond		95
Total minimum payments required	$	429

XML

Income Taxes (Tables)

12 Months Ended

Dec. 31, 2018

Income Taxes [Abstract]

Components of Income Tax Expense

The components of income tax (benefit) expense for the three years ended December 31 were:

(Dollars in thousands)	Years Ended December 31,
	2018		2017		2016
Current tax (benefit) expense	$	(563)	$	379	$	499
Deferred tax expense		(96)		681		320
Total tax (benefit) expense	$	(659)	$	1,060	$	819

Effective Income Tax Rate Reconciliation

A reconciliation of the statutory income tax (benefit) expense computed at 21% in 2018 and 34% in both 2017 and 2016 to the income tax expense included in the consolidated statements of income follows:

(Dollars in thousands)	Years Ended December 31,
	2018			2017			2016
Income before income taxes	$	5,245		$	5,597		$	5,975
Statutory tax rate		21.0	%		34.0	%		34.0%
Federal tax at statutory rate		1,101			1,903			2,032
Tax-exempt interest		(271)			(443)			(427)
Net earnings on BOLI		(50)			(75)			(84)
Gain from life insurance proceeds		-			-			(124)
Dividend from unconsolidated subsidiary		(10)			(17)			(15)
Stock-based compensation		19			24			23
Federal tax credits		(901)			(722)			(572)
Merger and acquisition expenses		33			-			-
Tax reform adjustment		-			416			-
Defined benefit prior year contribution, net of
other PTR adjustments		(198)			-			-
Basis difference related to LCB investment
prior to acquisition		(406)			-			-
Other permanent differences		24			(26)			(14)
Total tax (benefit) expense	$	(659)		$	1,060		$	819
Effective tax rate		(12.6)	%		18.9	%		13.7%

Schedule of Deferred Tax Assets and Liabilities

The components giving rise to the net deferred tax asset are detailed below:

(Dollars in thousands)	Years Ended December 31,
	2018		2017
Deferred Tax Assets:
Allowance for loan losses	$	494	$	369
Deferred directors' compensation		345		338
Employee and director benefits		309		320
Qualified pension liability		78		512
Unrealized losses on securities available for sale		655		439
Unrealized loss from securities impairment		34		37
Investment in low income housing project		142		141
Fair value adjustments to acquired assets and liabilities		293		168
Tax credit carryforward		225		75
Valuation reserves on other real estate owned		1		1
Other		1		-
Total deferred tax assets		2,577		2,400
Deferred Tax Liabilities:
Depreciation		(445)		(345)
Equity income from unconsolidated subsidiary		-		(368)
Loan origination costs		(384)		(340)
Prepaid expense		(229)		(230)
Annuity earnings		(56)		(52)
Fair value of mortgage servicing rights		(42)		(47)
Intangible assets		(68)		(18)
Goodwill		(353)		(324)
Other		-		(24)
Total deferred tax liabilities		(1,577)		(1,748)
Net deferred tax asset included in other assets	$	1,000	$	652

XML

Stockholders' Equity and Regulatory Matters (Tables)

12 Months Ended

Dec. 31, 2018

Stockholders' Equity and Regulatory Matters [Abstract]

Schedule of Compliance with Regulatory Capital Requirements

The table below provides a comparison of the Company’s and the Bank’s risk-based capital ratios and leverage ratios to the minimum regulatory requirements as of the dates indicated.

Juniata Valley Financial Corp. (Consolidated)				Minimum Requirement
				for Capital
(Dollars in thousands)	Actual			Adequacy Purposes
	Amount		Ratio	Amount		Ratio
As of December 31, 2018:
Total Capital (to Risk Weighted Assets)	$	63,883	15.86%	$	32,214	8.00%
Tier 1 Capital (to Risk Weighted Assets)		60,849	15.11%		24,160	6.00%
Common Equity Tier 1 Capital (to Risk Weighted Assets)		60,849	15.11%		18,120	4.50%
Tier 1 Capital (to Average Assets) Leverage		60,849	10.01%		24,318	4.00%
As of December 31, 2017:
Total Capital (to Risk Weighted Assets)	$	59,667	15.01%	$	31,809	8.00%
Tier 1 Capital (to Risk Weighted Assets)		55,808	14.04%		23,857	6.00%
Common Equity Tier 1 Capital (to Risk Weighted Assets)		55,808	14.04%		17,892	4.50%
Tier 1 Capital (to Average Assets) Leverage		55,808	9.43%		23,666	4.00%

										Minimum
										Regulatory
										Requirements
							Minimum			to be "Well
							Capital			Capitalized"
The Juniata Valley Bank				Minimum Requirement			Adequacy			under Prompt
				for Capital			with Capital			Corrective Action
(Dollars in thousands)	Actual			Adequacy Purposes			Buffer			Provisions
	Amount		Ratio	Amount		Ratio	Amount		Ratio	Amount		Ratio
As of December 31, 2018:
Total Capital	$	62,422	15.50%	$	32,222	8.00%	$	39,774	9.875%	$	40,278	10.00%
(to Risk Weighted Assets)
Tier 1 Capital		59,388	14.74%		24,167	6.00%		31,719	7.875%		32,222	8.00%
(to Risk Weighted Assets)
Common Equity Tier 1 Capital		59,388	14.74%		18,125	4.50%		25,677	6.375%		26,181	6.50%
(to Risk Weighted Assets)
Tier 1 Capital		59,388	9.77%		24,317	4.00%		24,317	4.000%		30,397	5.00%
(to Average Assets) Leverage
As of December 31, 2017:
Total Capital	$	52,009	13.24%	$	31,435	8.00%	$	36,346	9.250%	$	39,293	10.00%
(to Risk Weighted Assets)
Tier 1 Capital		49,026	12.48%		23,576	6.00%		28,488	7.250%		31,435	8.00%
(to Risk Weighted Assets)
Common Equity Tier 1 Capital		49,026	12.48%		17,682	4.50%		22,594	5.750%		25,541	6.50%
(to Risk Weighted Assets)
Tier 1 Capital		49,026	8.36%		23,460	4.00%		23,460	4.000%		29,325	5.00%
(to Average Assets) Leverage

XML

Calculation of Earnings Per Share (Tables)

12 Months Ended

Dec. 31, 2018

Calculation of Earnings Per Share [Abstract]

Computation of Basic and Diluted Earnings per Share

Restricted stock is participating, and therefore, is included in the EPS calculation. The following table sets forth the computation of basic and diluted earnings per share:

(Dollars in thousands, except earnings per share)	Years Ended December 31,
	2018		2017		2016
Net income	$	5,904	$	4,537	$	5,156
Weighted-average common shares outstanding		4,987		4,765		4,801
Basic earnings per share	$	1.18	$	0.95	$	1.07
Weighted-average common shares outstanding		4,987		4,765		4,801
Common stock equivalents due to effect of stock options		22		10		1
Total weighted-average common shares and equivalents	$	5,009	$	4,775	$	4,802
Diluted earnings per share	$	1.18	$	0.95	$	1.07
Anti-dilutive stock options outstanding		-		6		401

XML

Accumulated Other Comprehensive Loss (Tables)

12 Months Ended

Dec. 31, 2018

Accumulated Other Comprehensive Loss [Abstract]

Components of Accumulated Other Comprehensive Loss

Components of accumulated other comprehensive loss, net of tax as of December 31 of each of the last three years consist of the following:

(Dollars in thousands)	As of December 31,
	2018		2017		2016
Unrealized losses on available for sale securities	$	(2,647)	$	(1,683)	$	(866)
Unrecognized expense for defined benefit pension		(1,652)		(2,351)		(2,343)
Accumulated other comprehensive loss	$	(4,299)	$	(4,034)	$	(3,209)

XML

Fair Value Measurements (Tables)

12 Months Ended

Dec. 31, 2018

Fair Value Measurement [Abstract]

Fair Value Measurements by Level of Valuation Inputs

The following table summarizes financial assets and financial liabilities measured at fair value as of December 31, 2018 and December 31, 2017, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value. There were no transfers of assets between fair value Level 1 and Level 2 during the years ended December 31, 2018 or 2017.

			(Level 1)		(Level 2)		(Level 3)
			Quoted Prices in		Significant		Significant
			Active Markets		Other		Other
(Dollars in thousands)	December 31,		for Identical		Observable		Unobservable
	2018		Assets		Inputs		Inputs
Measured at fair value on a recurring basis:
Debt securities available-for-sale:
Obligations of U.S. Government agencies
and corporations	$	23,266	$	-	$	23,266	$	-
Obligations of state and political
subdivisions		18,181		-		18,181		-
Mortgage-backed securities		100,506		-		100,506		-
Measured at fair value on a non-recurring basis:
Impaired loans		1,104		-		-		1,104
Other real estate owned		149		-		-		149
Mortgage servicing rights		200		-		-		200

			(Level 1)		(Level 2)		(Level 3)
			Quoted Prices in		Significant		Significant
			Active Markets		Other		Other
(Dollars in thousands)	December 31,		for Identical		Observable		Unobservable
	2017		Assets		Inputs		Inputs
Measured at fair value on a recurring basis:
Debt securities available-for-sale:
Obligations of U.S. Government agencies
and corporations	$	34,214	$	-	$	34,214	$	-
Obligations of state and political
subdivisions		24,981		-		24,981		-
Mortgage-backed securities		93,510		-		93,510		-
Equity securities available-for-sale		1,119		1,119		-		-
Measured at fair value on a non-recurring basis:
Impaired loans		1,574		-		-		1,574
Other real estate owned		27		-		-		27
Mortgage servicing rights		225		-		-		225

Quantitative Information for Assets Measured at Fair Value

The following table presents additional quantitative information about assets measured at fair value on a nonrecurring basis and for which Level 3 inputs have been used to determine fair value:

(Dollars in thousands)
	Fair Value					Weighted
December 31, 2018	Estimate		Valuation Technique	Unobservable Input	Range	Average
Impaired loans	$	1,104	Appraisal of collateral (1)	Appraisal and	0% - 15%	14%
				liquidation
				adjustments (2)
Other real estate owned		149	Appraisal of collateral (1)	Appraisal and	2%	2%
				liquidation
				adjustments (2)
Mortgage servicing rights		200	Multiple of annual	Estimated	300% - 400%	369%
			servicing fee	pre-payment
				speed, based
				on rate and term
		+
(Dollars in thousands)
	Fair Value					Weighted
December 31, 2017	Estimate		Valuation Technique	Unobservable Input	Range	Average
Impaired loans	$	1,574	Appraisal of collateral (1)	Appraisal and	0% - 13%	8%
				liquidation
				adjustments (2)
Other real estate owned		27	Appraisal of collateral (1)	Appraisal and	22%	22%
				liquidation
				adjustments (2)
Mortgage servicing rights		225	Multiple of annual	Estimated	300% - 400%	371%
			servicing fee	pre-payment
				speed, based
				on rate and term

(1) Fair value is generally determined through independent appraisals of the underlying collateral that generally include various level 3 inputs which are not identifiable.

(2) Appraisals may be adjusted downward by management for qualitative factors such as economic conditions and estimated liquidation expenses. The range of liquidation expenses and other appraisal adjustments are presented as a percent of the appraisal.

Estimated Fair Values of Financial Instruments

The estimated fair values of the Company’s financial instruments are as follows:

	Financial Instruments
(Dollars in thousands)	December 31, 2018				December 31, 2017
	Carrying		Fair		Carrying		Fair
Financial assets:	Value		Value		Value		Value
Cash and due from banks	$	15,617	$	15,617	$	9,839	$	9,839
Interest bearing deposits with banks		110		110		58		58
Federal funds sold		729		729		-		-
Interest bearing time deposits with banks		3,290		3,290		350		350
Securities		141,953		141,953		153,824		153,824
Restricted investment in FHLB stock		2,441		2,441		3,104		3,104
Loans, net of allowance for loan losses		414,597		415,195		380,965		372,906
Mortgage servicing rights		200		200		225		225
Accrued interest receivable		1,681		1,681		1,582		1,582
Financial liabilities:
Non-interest bearing deposits		126,057		126,057		115,911		115,911
Interest bearing deposits		395,665		395,226		361,757		361,468
Securities sold under agreements to repurchase		2,911		2,911		9,769		9,769
Short-term borrowings		11,600		11,600		12,000		12,000
Long-term debt		15,000		14,958		25,000		24,885
Other interest bearing liabilities		1,596		1,597		1,593		1,595
Accrued interest payable		289		289		300		300
Off-balance sheet financial instruments:
Commitments to extend credit		-		-		-		-
Letters of credit		-		-		-		-

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis

The following presents the carrying amount, fair value and placement in the fair value hierarchy of the Company’s financial instruments not previously disclosed as of December 31, 2018 and December 31, 2017. This table excludes financial instruments for which the carrying amount approximates fair value.

					(Level 1)		(Level 2)		(Level 3)
					Quoted Prices in		Significant		Significant
(Dollars in thousands)					Active Markets		Other		Other
	Carrying				for Identical		Observable		Unobservable
December 31, 2018	Amount		Fair Value		Assets or Liabilities		Inputs		Inputs
Financial instruments - Assets
Interest bearing time deposits with
banks	$	3,290	$	3,290	$	-	$	3,290	$	-
Loans, net of allowance for loan
losses		414,597		415,195		-		-		415,195
Financial instruments - Liabilities
Interest bearing deposits	$	395,665	$	395,226	$	-	$	395,226	$	-
Long-term debt		15,000		14,958		-		14,958		-
Other interest bearing liabilities		1,596		1,597		-		1,597		-

					(Level 1)		(Level 2)		(Level 3)
					Quoted Prices in		Significant		Significant
(Dollars in thousands)					Active Markets		Other		Other
	Carrying				for Identical		Observable		Unobservable
December 31, 2017	Amount		Fair Value		Assets or Liabilities		Inputs		Inputs
Financial instruments - Assets
Interest bearing time deposits with
banks	$	350	$	350	$	-	$	350	$	-
Loans, net of allowance for loan
losses		380,965		372,906		-		-		372,906
Financial instruments - Liabilities
Interest bearing deposits	$	361,757	$	361,468	$	-	$	361,468	$	-
Long-term debt		25,000		24,885		-		24,885		-
Other interest bearing liabilities		1,593		1,595		-		1,595		-

XML

Employee Benefit Plans (Tables)

12 Months Ended

Dec. 31, 2018

Defined Benefit Plan Disclosure [Line Items]

Compensation Expense and Related Tax Benefits for Restricted Stock

The following table presents compensation expense and related tax benefits for restricted stock awards recognized on the consolidated statement of income.

(Dollars in thousands)
	2018		2017		2016
Compensation expense	$	77	$	43	$	16
Tax benefit		(16)		(15)		(5)
Net income effect	$	61	$	28	$	11

Summary of Non-Vested Restricted Shares Activity

The following table presents a summary of non-vested restricted shares activity for 2018.

			Weighted
			Average
			Grant Date
	Shares		Fair Value
Non-vested at January 1, 2018		7,800	$	18.10
Vested		-
Cancelled		-
Granted		5,220		19.80
Non-vested at December 31, 2018		13,020		18.78

Schedule of Stock Options Activity

A summary of the status of the outstanding stock options as of December 31, 2018, 2017 and 2016, and changes during the years ending on those dates is presented below:

	2018			2017			2016
		Weighted			Weighted			Weighted
		Average			Average			Average
		Exercise			Exercise			Exercise
	Shares	Price		Shares	Price		Shares	Price
Outstanding at beginning of year	125,026	$	17.91	139,155	$	17.97	142,524	$	18.07
Granted	-		-	-		-	-		-
Exercised	(5,170)		17.47	(9,704)		17.74	-		-
Forfeited	(6,100)		21.10	(4,425)		20.05	(3,369)		22.36
Outstanding at end of year	113,756	$	17.76	125,026	$	17.91	139,155	$	17.97
Options exercisable at year-end	110,911			110,282			97,584
Weighted-average fair value of
of options granted
during the year		$	-		$	-		$	-
Intrinsic value of options
exercised during the year		$	15,240		$	10,807		$	-
Intrinsic value of options
outstanding and exercisable at
December 31, 2018		$	387,318

Schedule of Stock Option Information by Grant Date

The following table summarizes characteristics of stock options as of December 31, 2018:

			Outstanding		Exercisable
Grant Date	Exercise Price		Shares	Contractual Average Life (Years)	Shares
10/20/2009	$	17.22	3,909	0.80	3,909
9/20/2011	$	17.75	13,200	2.72	13,200
3/20/2012	$	18.00	15,800	3.22	15,800
2/19/2013	$	17.65	16,622	4.14	16,622
2/18/2014	$	17.72	31,025	5.13	30,180
2/17/2015	$	17.80	33,200	6.13	31,200
			113,756		110,911

JVB Plan [Member]

Defined Benefit Plan Disclosure [Line Items]

Schedule of Allocation of Plan Assets

The following table sets forth by level, within the fair value hierarchy, debt and equity instruments included in the JVB Plan’s assets at fair value as of December 31, 2018 and December 31, 2017. Assets included in the JVB Plan that are not valued in the hierarchy table consist of cash and cash equivalents, totaling $50,000 and $46,000, at December 31, 2018 and 2017, respectively.

			(Level 1)		(Level 2)		(Level 3)
			Quoted Prices in		Significant Other		Significant Other
(Dollars in thousands)	December 31,		Active Markets for		Observable		Unobservable
	2018		Identical Assets		Inputs		Inputs
Measured at fair value on a recurring basis:
Mutual funds	$	11,891	$	11,891	$	-	$	-
Money market funds		241		241		-		-
	$	12,132	$	12,132	$	-	$	-

			(Level 1)		(Level 2)		(Level 3)
			Quoted Prices in		Significant Other		Significant Other
(Dollars in thousands)	December 31,		Active Markets for		Observable		Unobservable
	2017		Identical Assets		Inputs		Inputs
Measured at fair value on a recurring basis:
Mutual funds	$	12,857	$	12,857	$	-	$	-
Money market funds		213		213		-		-
	$	13,070	$	13,070	$	-	$	-

Schedule of Net Funded Status

The measurement date for the JVB Plan is December 31. Information pertaining to the activity in the defined benefit plan is as follows:

(Dollars in thousands)	Years ended December 31,
	2018		2017
Change in projected benefit obligation (PBO)
PBO at beginning of year	$	15,554	$	16,332
Interest cost		521		621
Change in assumptions		(1,208)		1,141
Actuarial loss		(244)		136
Group annuity purchase		-		(1,974)
Settlement payments		(1,485)		-
Benefits paid		(583)		(702)
PBO at end of year	$	12,555	$	15,554
Change in plan assets
Fair value of plan assets at beginning of year	$	13,117	$	13,840
Actual return on plan assets, net of expenses		(217)		1,953
Employer contribution		1,350		-
Group annuity purchase		-		(1,974)
Settlement payments		(1,485)		-
Benefits paid		(583)		(702)
Fair value of plan assets at end of year	$	12,182	$	13,117
Funded status, included in other (liabilities) assets	$	(373)	$	(2,437)
Amounts recognized in accumulated comprehensive loss
before income taxes consist of:
Unrecognized actual loss	$	(884)	$	(3,081)
Accumulated benefit obligation	$	12,555	$	15,554

Components of Net Periodic Pension Cost

Pension expense for the JVB Plan included the following components for the years ended December 31:

(Dollars in thousands)
	2018		2017		2016
Interest cost on projected benefit obligation	$	521	$	621	$	666
Expected return on plan assets		(690)		(793)		(795)
Settlement loss		210		377		-
Recognized net actuarial loss		129		207		248
Net periodic benefit cost		170		412		119

Net loss (gain)		(449)		117		173
Amortization of net loss		(435)		(584)		(248)
Total recognized in other comprehensive loss (income)	$	(884)	$	(467)	$	(75)
Total recognized in net periodic benefit cost and other
comprehensive loss (income)	$	(714)	$	(55)	$	44

Schedule of Assumptions Used

Assumptions used to determine benefit obligations were:

	2018		2017		2016
Discount rate	4.10	%	3.50	%	4.00	%
Rate of compensation increase	N/A		N/A		N/A

Assumptions used to determine the net periodic benefit cost were:

	2018		2017		2016
Discount rate	3.50	%	4.00	%	4.25	%
Expected long-term return on plan assets	4.20		6.00		6.00
Rate of compensation increase	N/A		N/A		N/A

Schedule of Expected Benefit Payments

Future expected benefit payments:

(Dollars in thousands)
	2019		2020		2021		2022		2023		2024-2028
Estimated future benefit payments	$	626	$	630	$	620	$	621	$	631	$	3,406

XML

Financial Instruments with Off-Balance Sheet Risk (Tables)

12 Months Ended

Dec. 31, 2018

Financial Instruments with off-Balance Sheet Risk [Abstract]

Summary of Financial Instrument Commitments

A summary of the Company’s financial instrument commitments is as follows:

(Dollars in thousands)	December 31,
	2018		2017
Commitments to grant loans	$	72,755	$	77,023
Unfunded commitments under lines of credit		14,468		3,150
Outstanding letters of credit		2,749		2,541

XML

Juniata Valley Financial Corp. (Parent Company Only) (Tables)

12 Months Ended

Dec. 31, 2018

Juniata Valley Financial Corp. (Parent Company Only) [Abstract]

Condensed Balance Sheet

CONDENSED BALANCE SHEETS
(Dollars in thousands)
	December 31,
		2018		2017
ASSETS
Cash and cash equivalents	$	48	$	1,082
Investment in bank subsidiary		65,909		52,522
Investment in unconsolidated subsidiary		-		4,812
Investment securities available for sale		1,193		1,169
Other assets		641		224
TOTAL ASSETS	$	67,791	$	59,809
LIABILITIES
Accounts payable and other liabilities	$	413	$	422
STOCKHOLDERS' EQUITY		67,378		59,387
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	67,791	$	59,809

Condensed Income Statement

CONDENSED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Dollars in thousands)
		Years Ended December 31,
		2018		2017		2016
INCOME
Interest and dividends on investment securities available for sale	$	44	$	44	$	59
Dividends from bank subsidiary		4,923		4,194		5,624
Income from unconsolidated subsidiary		296		167		222
Gain on sale of securities		-		314		166
Change in value of equity securities		26		-		-
TOTAL INCOME		5,289		4,719		6,071
EXPENSE
Merger-related expenses		134		13		66
Other non-interest expense		155		146		157
TOTAL EXPENSE		289		159		223
INCOME BEFORE INCOME TAXES AND EQUITY
IN UNDISTRIBUTED NET INCOME OF SUBSIDIARY		5,000		4,560		5,848
Income tax (benefit) expense		(347)		(127)		47
		5,347		4,687		5,801
Undistributed net gain (loss) of subsidiary		557		(150)		(645)
NET INCOME	$	5,904	$	4,537	$	5,156
COMPREHENSIVE INCOME	$	5,795	$	4,300	$	4,150

Condensed Cash Flow Statement

CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
	Years Ended December 31,
		2018		2017		2016
Cash flows from operating activities:
Net income	$	5,904	$	4,537	$	5,156
Adjustments to reconcile net income to net cash
provided by operating activities:
Undistributed net (gain) loss of subsidiary		(556)		150		645
Realized gains on sales of investment securities		-		(314)		(166)
Change in value of equity securities		(26)		-		-
Equity in earnings of unconsolidated subsidiary,
net of dividends of $75,  $61 and $55		194		(106)		(167)
Equity gain from acquisition of unconsolidated subsidiary		(415)		-		-
Stock-based compensation expense		82		71		67
(Increase) decrease in other assets		(93)		513		(413)
(Decrease) increase in taxes payable		(402)		(271)		191
(Decrease) increase in accounts payable and other liabilities		(12)		(254)		1
Net cash provided by operating activities		4,676		4,326		5,314
Cash flows from investing activities:
Purchases of available for sale securities		-		-		(470)
Proceeds from the sale of available for sale securities		-		734		252
Proceeds from the maturity of available for sale investment securities		-		-		-
Net cash received from acquisition		(1,361)		-		-
Net cash provided by (used in) investing activities		(1,361)		734		(218)
Cash flows from financing activities:
Cash dividends		(4,411)		(4,194)		(4,226)
Purchase of treasury stock		(70)		(86)		(927)
Treasury stock issued for stock plans		90		-		-
Common stock issued for stock plans		42		206		64
Net cash used in financing activities		(4,349)		(4,074)		(5,089)
Net (decrease) increase in cash and cash equivalents		(1,034)		986		7
Cash and cash equivalents at beginning of year		1,082		96		89
Cash and cash equivalents at end of year	$	48	$	1,082	$	96

XML

Quarterly Results of Operations (Unaudited) (Tables)

12 Months Ended

Dec. 31, 2018

Quarterly Results of Operations (Unaudited) [Abstract]

Schedule of Quarterly Financial Information

The unaudited quarterly results of operations for the years ended December 31, 2018 and 2017 follow:

(Dollars in thousands, except per
share data)	2018 Quarter ended
	March 31		June 30 as Revised*		September 30		December 31
Total interest income	$	5,439	$	5,944	$	6,129	$	6,139
Total interest expense		794		890		950		1,001
Net interest income		4,645		5,054		5,179		5,138
Provision for loan losses		158		41		32		106
AFS securities losses		(15)		-		-		(173)
Change in equity security value		(6)		52		(4)		(43)
Other income		1,195		1,444		1,245		1,332
Merger and acquisition expense		64		376		185		259
Other expense		4,341		4,530		4,847		4,859
Income before income taxes		1,256		1,603		1,356		1,030
Income tax (benefit) expense		(71)		(372)		(29)		(187)
Net income	$	1,327	$	1,975	$	1,385	$	1,217
Per-share data:
Basic earnings	$	0.28	$	0.39	$	0.27	$	0.24
Diluted earnings	$	0.28	$	0.39	$	0.27	$	0.24
Cash dividends	$	0.22	$	0.22	$	0.22	$	0.22
	2017 Quarter ended
	March 31		June 30		September 30		December 31
Total interest income	$	5,174	$	5,348	$	5,457	$	5,395
Total interest expense		627		702		752		774
Net interest income		4,547		4,646		4,705		4,621
Provision for loan losses		105		135		149		50
Securities gains		504		4		2		2
Other income		1,112		1,252		1,217		1,199
Merger and acquisition expense		-		-		-		13
Other expense		4,269		4,229		4,442		4,822
Income before income taxes		1,789		1,538		1,333		937
Income tax expense		330		244		127		359
Net income	$	1,459	$	1,294	$	1,206	$	578
Per-share data:
Basic earnings	$	0.31	$	0.27	$	0.25	$	0.12
Diluted earnings	$	0.31	$	0.27	$	0.25	$	0.12
Cash dividends	$	0.22	$	0.22	$	0.22	$	0.22

* The income tax benefit and net income for the quarter ended June 30, 2018 set forth on this table have been restated by $406,000 from the amounts of income tax expense of $34,000 and net income of $1,569,000 originally reported. In addition, the basic and diluted earnings per share set forth on this table have been restated from the $0.31 per share originally reported. The $406,000 relates primarily to the reversal of a deferred tax liability on the previous investment in LCB prior to the acquisition on April 30, 2018. The Form 10-Qs for the quarters ending June 30, 2019 and September 30, 2019 will reflect these changes as a correction of a prior year immaterial error.

XML

Nature of Operations (Narrative) (Details)	12 Months Ended
	Dec. 31, 2018 segment
Nature of Operations [Abstract]
Number of reportable segment	1

XML

Summary of Significant Accounting Policies (Narrative) (Details) - USD ($)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Summary of Significant Accounting Policies [Line Items]
Concentration of credit, benchmark description	Otherwise, there were no concentrations of credit to any particular industry equaling more than 25% of total capital.
Maturity of interest-bearing time deposits	5 years
Mortgage servicing rights	$ 200,000	$ 225,000
Held-to-maturity securities	0	0
Net unamortized origination fees	$ 11,000	52,000
Usual period of lines of credit for commercial, financial and agricultural lending	5 years
Other real estate owned	$ 744,000	355,000
Goodwill impairment loss	0	0	$ 0
Mortgage banking and servicing for FHLB	23,563,000	23,647,000
Investment in low-income housing limited partnership	$ 4,545,000	5,245,000
Income tax credits and adjustments period	10 years
Accrued benefit liability	$ 1,081,000	1,014,000
Other postretirement benefit	38,000	95,000	61,000
Advertising expense	294,000	272,000	243,000
Phase II Credits [Member]
Summary of Significant Accounting Policies [Line Items]
Annual income tax credits over ten years	333,000
Phase I Credits [Member]
Summary of Significant Accounting Policies [Line Items]
Annual income tax credits over ten years	$ 572,000
Leasehold Improvements [Member]
Summary of Significant Accounting Policies [Line Items]
Estimated useful life of property and equipment, description	shorter of the assets' useful life or the related lease term
Investment in Federal Home Loan Bank Stock [Member]
Summary of Significant Accounting Policies [Line Items]
Securities impairment charge	$ 0	$ 0	$ 0
Residential Portfolio Segment [Member] | Credit Exposure [Member]
Summary of Significant Accounting Policies [Line Items]
Percentage of capital representing credit exposure to lessors	27.90%
Residential Portfolio Segment [Member] | Mortgage Loan [Member]
Summary of Significant Accounting Policies [Line Items]
Loan period for lending, maximum	25 years
Maximum loan-to-value ratio	80.00%
Residential Portfolio Segment [Member] | Home Equity Lines of Credit [Member]
Summary of Significant Accounting Policies [Line Items]
Loan period for lending, maximum	20 years
Maximum loan-to-value ratio	90.00%
Residential Portfolio Segment [Member] | Home Equity Installments [Member]
Summary of Significant Accounting Policies [Line Items]
Loan period for lending, maximum	15 years
Maximum loan-to-value ratio	80.00%
Real Estate Portfolio Segment [Member] | Credit Exposure [Member]
Summary of Significant Accounting Policies [Line Items]
Percentage of capital representing credit exposure to lessors	28.40%
Real Estate Portfolio Segment [Member] | Mortgage Loan [Member]
Summary of Significant Accounting Policies [Line Items]
Loan period for lending, maximum	25 years
Real Estate Portfolio Segment [Member] | Commercial Loan [Member]
Summary of Significant Accounting Policies [Line Items]
Loan period for lending, maximum	20 years
Maximum loan-to-value ratio	80.00%
Commercial Portfolio Segment [Member] | Credit Exposure [Member]
Summary of Significant Accounting Policies [Line Items]
Percentage of capital representing credit exposure to lessors	40.00%
Non-Residential Portfolio [Member] | Credit Exposure [Member]
Summary of Significant Accounting Policies [Line Items]
Percentage of capital representing credit exposure to lessors	55.30%
Maximum [Member] | Furniture and Equipment [Member]
Summary of Significant Accounting Policies [Line Items]
Estimated useful life of property and equipment	10 years
Maximum [Member] | Building [Member]
Summary of Significant Accounting Policies [Line Items]
Estimated useful life of property and equipment	50 years
Minimum [Member] | Furniture and Equipment [Member]
Summary of Significant Accounting Policies [Line Items]
Estimated useful life of property and equipment	3 years
Minimum [Member] | Building [Member]
Summary of Significant Accounting Policies [Line Items]
Estimated useful life of property and equipment	25 years

XML

Recent Accounting Standards Update (ASU) (Narrative) (Details) - USD ($)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
New Accounting Pronouncement, Early Adoption [Line Items]
Federal statutory income tax rate	21.00%	34.00%	34.00%
Unrealized gains on equity securities	$ (1,000)
Operating leases, ROU assets	519,000
Operating lease liability	510,000
Equity Securities [Member]
New Accounting Pronouncement, Early Adoption [Line Items]
Unrealized gains on equity securities		$ 197,000
Retained Earnings [Member]
New Accounting Pronouncement, Early Adoption [Line Items]
AOCI deferred tax adjustment due to tax reform		588,000
Reclassification from other comprehensive loss to retained earnings	156,000
Accumulated Other Comprehensive Loss [Member]
New Accounting Pronouncement, Early Adoption [Line Items]
AOCI deferred tax adjustment due to tax reform		$ (588,000)
Reclassification from other comprehensive loss to retained earnings	$ (156,000)

XML

Merger (Narrative) (Details) - USD ($)		12 Months Ended
	Apr. 30, 2018	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016	Apr. 29, 2018
Business Acquisition [Line Items]
Acquiree's common shares outstanding		5,092,048	4,767,656
Fair value gain		$ 415,000
Goodwill		9,139,000	$ 5,448,000
Income/gain from unconsolidated subsidiary		296,000	167,000	$ 222,000
Gross amortized cost basis		$ 145,310,000	$ 155,956,000
Assumed tax rate		21.00%	34.00%	34.00%
Liverpool Community Bank [Member]
Business Acquisition [Line Items]
Acquisition date	Apr. 30, 2018
Business acquisition, name of acquired entity		Liverpool Community Bank
Total assets of acquiree	$ 45,360,000
Loans receivables of acquiree	32,091,000
Tangible common equity	$ 9,246,000
Number of acquiree's common shares owned					1,214
Percentage of equity interest in acquiree, before acquisition					39.16%
Acquiree's common shares outstanding					3,100
Percentage of equity interest acquired	60.84%
Juniata's basis in acquiree	$ 5,037,000
Fair value gain	415,000
Equity owned before acquisition	$ 4,622,000
Number of Juniata's share for each acquiree's share	202.6286
Per share price of acquiree's shares	$ 4,050.00
Number of shares issued upon the closing of acquisition	315,284
Fair value of shares issued for acquisition	$ 6,463,000
Closing stock price	$ 20.50
Cash paid for acquisition	$ 1,362,000
Step Two purchase price consideration	7,825,000
Juniata's Step One adjusted basis in acquiree	12,862,000
Goodwill	3,691,000
Core deposit intangible assets acquired	$ 289,000
Intangible assets amortization period	10 years
Income/gain from unconsolidated subsidiary		$ 296,000	$ 167,000
Gross amortized cost basis	$ 32,091,000
Merger related costs		884,000	13,000
Merger related tax expense (benefit)		$ (123,000)	$ (218,000)
Assumed tax rate		21.00%	21.00%
Maximum [Member] | Liverpool Community Bank [Member]
Business Acquisition [Line Items]
Percentage of outstanding common stock to be purchased for cash	20.00%
Minimum [Member] | Liverpool Community Bank [Member]
Business Acquisition [Line Items]
Percentage of outstanding common stock to be purchased for cash	15.00%

XML

Merger (Schedule of Purchase Price Allocation) (Details) - USD ($)		12 Months Ended
	Apr. 30, 2018	Dec. 31, 2018	Dec. 31, 2017
Business Acquisition [Line Items]
Increase in Step One basis from equity gain in acquisition		$ 415,000
Adjustments to reflect assets acquired and liabilities assumed at fair value:
Goodwill		$ 9,139,000	$ 5,448,000
Liverpool Community Bank [Member]
Business Acquisition [Line Items]
April 30, 2018 JUVF basis in LCB (before gain)	$ 4,622,000
Increase in Step One basis from equity gain in acquisition	415,000
Total Step One adjusted basis	5,037,000
Purchase price assigned to LCB common shares exchanged for 315,284 Juniata common shares	6,463,000
Purchase price assigned to LCB common shares exchanged for cash	1,362,000
Total Step Two purchase price consideration	7,825,000
Business Combination, Consideration Transferred, Including Equity Interest in Acquiree Held Prior to Combination, Total	12,862,000
Net assets acquired:
Tangible common equity	9,246,000
Adjustments to reflect assets acquired and liabilities assumed at fair value:
Total fair value adjustments	(95,000)
Associated deferred income taxes	20,000
Fair value adjustment to net assets acquired, net of tax	(75,000)
Total net assets acquired	9,171,000
Goodwill	$ 3,691,000
Number of shares issued upon the closing of acquisition	315,284

XML

Merger (Summary of the Estimated Fair Value of the Assets Acquired and Liabilities Assumed) (Details) - USD ($)	Apr. 30, 2018	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Net assets acquired:
Bank owned life insurance and annuities		$ 15,938,000	$ 14,972,000	$ 14,631,000
Goodwill		$ 9,139,000	$ 5,448,000
Liverpool Community Bank [Member]
Business Acquisition [Line Items]
Total purchase price	$ 12,862,000
Net assets acquired:
Cash and cash equivalents	8,923,000
Investments in time deposits with banks	3,675,000
Loans	31,331,000
Premises and equipment	125,000
Accrued interest receivable	123,000
Core deposit and other intangibles	289,000
Bank owned life insurance and annuities	632,000
FHLB Stock	124,000
Other assets	267,000
Deposits	(36,052,000)
Accrued interest payable	(17,000)
Other liabilities	(249,000)
Total net assets acquired	9,171,000
Goodwill	$ 3,691,000

XML

Merger (Schedule of Fair Value Adjustments for Acquired Loans) (Details) - Liverpool Community Bank [Member] $ in Thousands	Apr. 30, 2018 USD ($)
Business Acquisition [Line Items]
Gross amortized cost basis at April 30, 2018	$ 32,091
Market rate adjustment	272
Credit fair value adjustment on pools of homogeneous loans	(496)
Credit fair value adjustment on impaired loans	(622)
Reversal of existing deferred fees and premiums	86
Fair value of purchased loans at April 30, 2018	$ 31,331

XML

Merger (Schedule of Acquired Impaired Loans) (Details) - Liverpool Community Bank [Member] $ in Thousands	Apr. 30, 2018 USD ($)
Certain Loans Acquired in Transfer Not Accounted for as Debt Securities Acquired During Period [Line Items]
Contractually required principal and interest at acquisition	$ 2,022
Contractual cash flows not expected to be collected (nonaccretable discount)	(1,273)
Expected cash flows at acquisition	749
Interest component of expected cash flows (accretable discount)	(177)
Fair value of acquired loans	$ 572

XML

Merger (Merger, Pro Forma Information) (Details) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Merger [Abstract]
Consolidated net interest income after loan loss provision	$ 20,629	$ 19,943
Consolidated noninterest income	4,816	5,347
Consolidated noninterest expense	18,818	19,098
Consolidated net income	$ 6,996	$ 5,184
Consolidated net income per common share	$ 1.37	$ 1.02

XML

Securities (Narrative) (Details)	12 Months Ended
	Dec. 31, 2018 USD ($) security	Dec. 31, 2017 USD ($) security	Dec. 31, 2016 USD ($)
Schedule of Available-for-sale Securities [Line Items]
Equity securities | $	$ 1,118,000
Fair value of pledged assets | $	$ 50,157,000	$ 47,825,000
Number of securities | security	81	94
Unrealized loss on equity securities | $	$ 3,500,000	$ 1,690,000
Number of securities in unrealized loss positions for 12 Months or More | security	70	42
Equity Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Equity securities available for sale, fair value | $		$ 1,119,000
Number of securities | security		2
Other than temporary impairment | $		$ 0	$ 0
Unrealized loss on equity securities | $	$ 1,000	$ 1,000
Number of securities in unrealized loss positions for 12 Months or More | security		1
Obligations of U.S. Government Agencies and Corporations [Member]
Schedule of Available-for-sale Securities [Line Items]
Number of securities | security	14	20
Unrealized loss on equity securities | $	$ 731,000	$ 627,000
Number of securities in unrealized loss positions for 12 Months or More | security	14	15
Obligations of State and Political Subdivisions [Member]
Schedule of Available-for-sale Securities [Line Items]
Investment portfolio percentage	13.00%
Number of securities | security	21	29
Unrealized loss on equity securities | $	$ 178,000	$ 108,000
Number of securities in unrealized loss positions for 12 Months or More | security	13	6
U.S. Government Sponsored Agencies [Member]
Schedule of Available-for-sale Securities [Line Items]
Investment portfolio percentage	16.00%
Mortgage-Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Investment portfolio percentage	71.00%
Equity securities available for sale, fair value | $	$ 100,506,000	$ 93,510,000
Number of securities | security	46
Number of securities in unrealized loss positions for 12 Months or More | security	43
Municipal Bonds [Member]
Schedule of Available-for-sale Securities [Line Items]
Debt instrument term	5 years
Retained Earnings [Member]
Schedule of Available-for-sale Securities [Line Items]
Reclassification for ASU 2016-01 | $	$ 156,000
Maximum [Member] | Obligations of U.S. Government Agencies and Corporations [Member]
Schedule of Available-for-sale Securities [Line Items]
Percentage of securities depreciated from their amortized cost basis	1.00%
Maximum [Member] | Obligations of State and Political Subdivisions [Member]
Schedule of Available-for-sale Securities [Line Items]
Percentage of securities depreciated from their amortized cost basis	1.00%
Maximum [Member] | Mortgage-Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Percentage of securities depreciated from their amortized cost basis	2.00%

XML

Securities (Securities Available for Sale) (Details) - USD ($)	Dec. 31, 2018	Dec. 31, 2017
Schedule of Available-for-sale Securities [Line Items]
Securities Available for Sale, Amortized Cost,Total	$ 145,310,000	$ 155,956,000
Fair Value of AFS Securities, Total	141,953,000	153,824,000
Gross Unrealized Gains on AFS Securities Without Single Maturity Date	(1,000)
Available-for-sale Securities, Accumulated Gross Unrealized Gain, before Tax, Total	185,000	303,000
AFS, Gross Unrealized Losses, Total	(3,542,000)	(2,435,000)
Obligations of U.S. Government Agencies and Corporations [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost of AFS Securities Maturing Within One Year		6,000,000
Amortized Cost of AFS Securities Maturing After One Year But Within Five Years	20,998,000	15,000,000
Amortized Cost of AFS Securities Maturing After Five Years But Within Ten Years	2,999,000	13,998,000
Amortized Cost of AFS Securities, Single Maturity Date, Total	23,997,000	34,998,000
Fair Value of AFS Securities Maturing Within One Year		5,969,000
Fair Value of AFS Securities Maturing After One Year But Within Five Years	20,355,000	14,689,000
Fair Value of AFS Securities Maturing After Five Years But Within Ten Years	2,911,000	13,556,000
Fair Value of AFS Securities, Single Maturity Date, Total	23,266,000	34,214,000
Gross Unrealized Losses on AFS Securities Maturing Within One Year		(31,000)
Gross Unrealized Losses on AFS Securities Maturing After One Year But Within Five Years	(643,000)	(311,000)
Gross Unrealized Losses on AFS Securities Maturing After Five Years But Within Ten Years	(88,000)	(442,000)
Gross Unrealized Losses on AFS Securities, Single Maturity Date, Total	(731,000)	(784,000)
Obligations of State and Political Subdivisions [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost of AFS Securities Maturing Within One Year	826,000	2,521,000
Amortized Cost of AFS Securities Maturing After One Year But Within Five Years	14,751,000	13,959,000
Amortized Cost of AFS Securities Maturing After Five Years But Within Ten Years	2,779,000	8,611,000
Amortized Cost of AFS Securities, Single Maturity Date, Total	18,356,000	25,091,000
Fair Value of AFS Securities Maturing Within One Year	826,000	2,516,000
Fair Value of AFS Securities Maturing After One Year But Within Five Years	14,686,000	13,955,000
Fair Value of AFS Securities Maturing After Five Years But Within Ten Years	2,669,000	8,510,000
Fair Value of AFS Securities, Single Maturity Date, Total	18,181,000	24,981,000
Gross Unrealized Gains on AFS Securities Maturing After One Year But Within Five Years	13,000	50,000
Gross Unrealized Gains on AFS Securities Maturing After Five Years But Within Ten Years		18,000
Gross Unrealized Gains on AFS Securities, Single Maturity Date, Total	13,000	68,000
Gross Unrealized Losses on AFS Securities Maturing Within One Year		(5,000)
Gross Unrealized Losses on AFS Securities Maturing After One Year But Within Five Years	(78,000)	(54,000)
Gross Unrealized Losses on AFS Securities Maturing After Five Years But Within Ten Years	(110,000)	(119,000)
Gross Unrealized Losses on AFS Securities, Single Maturity Date, Total	(188,000)	(178,000)
Mortgage-Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost of AFS Securities Without Single Maturity Date	102,957,000	94,945,000
Fair Value of AFS Securities Without Single Maturity Date	100,506,000	93,510,000
Gross Unrealized Gains on AFS Securities Without Single Maturity Date	172,000	38,000
Gross Unrealized Losses on AFS Securities Without Single Maturity Date	$ (2,623,000)	(1,473,000)
Equity Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost of AFS Securities Without Single Maturity Date		922,000
Fair Value of AFS Securities Without Single Maturity Date		1,119,000
Gross Unrealized Gains on AFS Securities Without Single Maturity Date		$ 197,000

XML

Securities (Summary of Proceeds and Realized Gain/(Loss)) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Securities [Abstract]
Proceeds from: Sales of securities available for sale	$ 10,461	$ 21,799	$ 4,304
Gross realized gains from sold and called securities		539	139
Gross realized losses from sold and called securities	$ (188)	(32)	(21)
Gross gains from business combinations		$ 5	$ 100

XML

Securities (Schedule of Unrealized Losses) (Details)	Dec. 31, 2018 USD ($) security	Dec. 31, 2017 USD ($) security
Schedule of Available-for-sale Securities [Line Items]
Number of Securities, Less Than 12 Months | security	11	52
Fair Value, Less Than 12 Months	$ 11,781,000	$ 72,395,000
Gross unrealized Losses, Less Than 12 Months	$ (42,000)	$ (745,000)
Number of Securities, 12 Months or More | security	70	42
Fair Value, 12 Months or More	$ 108,679,000	$ 65,975,000
Gross Unrealized Losses, 12 Months or More	$ (3,500,000)	$ (1,690,000)
Number of Securities, Total | security	81	94
Fair Value, Total	$ 120,460,000	$ 138,370,000
Unrealized Losses, Total	$ (3,542,000)	$ (2,435,000)
Obligations of U.S. Government Agencies and Corporations [Member]
Schedule of Available-for-sale Securities [Line Items]
Number of Securities, Less Than 12 Months | security		5
Fair Value, Less Than 12 Months		$ 10,845,000
Gross unrealized Losses, Less Than 12 Months		$ (157,000)
Number of Securities, 12 Months or More | security	14	15
Fair Value, 12 Months or More	$ 23,267,000	$ 23,369,000
Gross Unrealized Losses, 12 Months or More	$ (731,000)	$ (627,000)
Number of Securities, Total | security	14	20
Fair Value, Total	$ 23,267,000	$ 34,214,000
Unrealized Losses, Total	$ (731,000)	$ (784,000)
Obligations of State and Political Subdivisions [Member]
Schedule of Available-for-sale Securities [Line Items]
Number of Securities, Less Than 12 Months | security	8	23
Fair Value, Less Than 12 Months	$ 5,055,000	$ 10,491,000
Gross unrealized Losses, Less Than 12 Months	$ (10,000)	$ (70,000)
Number of Securities, 12 Months or More | security	13	6
Fair Value, 12 Months or More	$ 8,242,000	$ 3,862,000
Gross Unrealized Losses, 12 Months or More	$ (178,000)	$ (108,000)
Number of Securities, Total | security	21	29
Fair Value, Total	$ 13,297,000	$ 14,353,000
Unrealized Losses, Total	$ (188,000)	$ (178,000)
Mortgage Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Number of Securities, Less Than 12 Months | security	3	23
Fair Value, Less Than 12 Months	$ 6,726,000	$ 51,050,000
Gross unrealized Losses, Less Than 12 Months	$ (32,000)	$ (518,000)
Number of Securities, 12 Months or More | security	43	20
Fair Value, 12 Months or More	$ 77,170,000	$ 38,740,000
Gross Unrealized Losses, 12 Months or More	$ (2,591,000)	$ (955,000)
Number of Securities, Total | security	46	43
Fair Value, Total	$ 83,896,000	$ 89,790,000
Unrealized Losses, Total	$ (2,623,000)	$ (1,473,000)
Debt securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Number of Securities, Less Than 12 Months | security	11	51
Fair Value, Less Than 12 Months	$ 11,781,000	$ 72,386,000
Gross unrealized Losses, Less Than 12 Months	$ (42,000)	$ (745,000)
Number of Securities, 12 Months or More | security	70	41
Fair Value, 12 Months or More	$ 108,679,000	$ 65,971,000
Gross Unrealized Losses, 12 Months or More	$ (3,500,000)	$ (1,690,000)
Number of Securities, Total | security	81	92
Fair Value, Total	$ 120,460,000	$ 138,357,000
Unrealized Losses, Total	(3,542,000)	$ (2,435,000)
Equity Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Number of Securities, Less Than 12 Months | security		1
Fair Value, Less Than 12 Months		$ 9,000
Number of Securities, 12 Months or More | security		1
Fair Value, 12 Months or More		$ 4,000
Gross Unrealized Losses, 12 Months or More	$ (1,000)	$ (1,000)
Number of Securities, Total | security		2
Fair Value, Total		$ 13,000

XML

Loans and Related Allowance for Loan Losses (Narrative) (Details) - USD ($)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016	Jun. 30, 2018
Financing Receivable, Allowance for Credit Losses [Line Items]
Total loans	$ 417,631,000	$ 383,904,000	$ 378,297,000
Period for trouble debt restructuring loan to be considered in default	30 days
Interest income on nonaccrual loans	$ 311,000	300,000	281,000
Troubled debt restructured loan	445,000	339,000
Recorded charge-offs	285,000	292,000	279,000
Aggregate amount of demand deposits reclassified as loan balances	75,000	33,000
Real Estate Portfolio Segment [Member] | Commercial Loan [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Total loans	141,295,000	140,369,000	123,711,000
Recorded charge-offs	$ 60,000	70,000	146,000
Maximum loan-to-value ratio	80.00%
Real Estate Portfolio Segment [Member] | Mortgage Loan [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Total loans	$ 163,548,000	146,888,000	154,905,000
Restructured loan balance in default status	39,000
Recorded charge-offs	183,000	149,000	$ 103,000
Loan balance in the process of foreclosure	94,000	1,285,000
Non-Accruing Troubled Debt Restructurings [Member] | Real Estate Portfolio Segment [Member] | Mortgage Loan [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Troubled debt restructured loan	17,000	20,000
Pass [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Total loans	392,532,000	332,904,000		$ 32,603,000
Pass [Member] | Real Estate Portfolio Segment [Member] | Commercial Loan [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Total loans	125,352,000	114,299,000
Pass [Member] | Real Estate Portfolio Segment [Member] | Mortgage Loan [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Total loans	$ 160,774,000	$ 139,861,000

XML

Loans and Related Allowance for Loan Losses (Classes of the Loan Portfolio Summarized by the Aggregate Risk Rating) (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Jun. 30, 2018	Dec. 31, 2017	Dec. 31, 2016
Financing Receivable, Recorded Investment [Line Items]
Total loans	$ 417,631		$ 383,904	$ 378,297
Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	392,532	$ 32,603	332,904
Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	11,606		34,456
Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	12,389		14,970
Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	1,104		1,574
Commercial, Financial and Agricultural [Member] | Commercial Portfolio Segment [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	46,563		45,802	40,827
Commercial, Financial and Agricultural [Member] | Commercial Portfolio Segment [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	42,757		34,826
Commercial, Financial and Agricultural [Member] | Commercial Portfolio Segment [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	2,992		8,692
Commercial, Financial and Agricultural [Member] | Commercial Portfolio Segment [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	814		2,280
Commercial, Financial and Agricultural [Member] | Commercial Portfolio Segment [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans			4
Commercial Loan [Member] | Real Estate Portfolio Segment [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	141,295		140,369	123,711
Commercial Loan [Member] | Real Estate Portfolio Segment [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	125,352		114,299
Commercial Loan [Member] | Real Estate Portfolio Segment [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	8,590		17,928
Commercial Loan [Member] | Real Estate Portfolio Segment [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	6,459		7,189
Commercial Loan [Member] | Real Estate Portfolio Segment [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	894		953
Construction Loan [Member] | Real Estate Portfolio Segment [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	36,688		28,403	35,206
Construction Loan [Member] | Real Estate Portfolio Segment [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	34,131		22,470
Construction Loan [Member] | Real Estate Portfolio Segment [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans			3,297
Construction Loan [Member] | Real Estate Portfolio Segment [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	2,528		2,636
Construction Loan [Member] | Real Estate Portfolio Segment [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	29
Mortgage Loan [Member] | Real Estate Portfolio Segment [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	163,548		146,888	154,905
Mortgage Loan [Member] | Real Estate Portfolio Segment [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	160,774		139,861
Mortgage Loan [Member] | Real Estate Portfolio Segment [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	24		3,551
Mortgage Loan [Member] | Real Estate Portfolio Segment [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	2,569		2,859
Mortgage Loan [Member] | Real Estate Portfolio Segment [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	181		617
Personal Loan [Member] | Consumer Portfolio Segment [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	10,408		9,398	10,032
Personal Loan [Member] | Consumer Portfolio Segment [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	10,389		9,360
Personal Loan [Member] | Consumer Portfolio Segment [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans			32
Personal Loan [Member] | Consumer Portfolio Segment [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	19		6
Obligations of State and Political Subdivisions [Member] | Unallocated Financing Receivables [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	19,129		13,044	$ 13,616
Obligations of State and Political Subdivisions [Member] | Unallocated Financing Receivables [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	$ 19,129		12,088
Obligations of State and Political Subdivisions [Member] | Unallocated Financing Receivables [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans			$ 956

XML

Loans and Related Allowance for Loan Losses (Impaired Loans by Loan Portfolio Class) (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Financing Receivable, Impaired [Line Items]
Recorded Investment, Total	$ 3,648	$ 8,259
Unpaid Principal Balance, Total	6,008	10,803
Commercial, Financial and Agricultural [Member] | Commercial Portfolio Segment [Member]
Financing Receivable, Impaired [Line Items]
Impaired Loans with No Allowance: Recorded Investment		468
Impaired Loans with No Allowance: Unpaid Principal Balance		477
Recorded Investment, Total		468
Unpaid Principal Balance, Total		477
Commercial Loan [Member] | Real Estate Portfolio Segment [Member]
Financing Receivable, Impaired [Line Items]
Impaired Loans with No Allowance: Recorded Investment	909	5,031
Impaired Loans with No Allowance: Unpaid Principal Balance	1,303	5,957
Recorded Investment, Total	909	5,031
Unpaid Principal Balance, Total	1,303	5,957
Commercial Loan [Member] | Real Estate Portfolio Segment [Member] | Acquired with Credit Deterioration [Member]
Financing Receivable, Impaired [Line Items]
Impaired Loans with No Allowance: Recorded Investment	544	191
Impaired Loans with No Allowance: Unpaid Principal Balance	592	247
Recorded Investment, Total	544	191
Unpaid Principal Balance, Total	592	247
Construction Loan [Member] | Real Estate Portfolio Segment [Member]
Financing Receivable, Impaired [Line Items]
Impaired Loans with No Allowance: Recorded Investment	27
Impaired Loans with No Allowance: Unpaid Principal Balance	1,123
Recorded Investment, Total	27
Unpaid Principal Balance, Total	1,123
Mortgage Loan [Member] | Real Estate Portfolio Segment [Member]
Financing Receivable, Impaired [Line Items]
Impaired Loans with No Allowance: Recorded Investment	1,180	2,232
Impaired Loans with No Allowance: Unpaid Principal Balance	1,912	3,738
Recorded Investment, Total	1,180	2,232
Unpaid Principal Balance, Total	1,912	3,738
Mortgage Loan [Member] | Real Estate Portfolio Segment [Member] | Acquired with Credit Deterioration [Member]
Financing Receivable, Impaired [Line Items]
Impaired Loans with No Allowance: Recorded Investment	971	337
Impaired Loans with No Allowance: Unpaid Principal Balance	1,061	384
Recorded Investment, Total	971	337
Unpaid Principal Balance, Total	1,061	$ 384
Personal Loan [Member] | Consumer Portfolio Segment [Member]
Financing Receivable, Impaired [Line Items]
Impaired Loans with No Allowance: Recorded Investment	17
Impaired Loans with No Allowance: Unpaid Principal Balance	17
Recorded Investment, Total	17
Unpaid Principal Balance, Total	$ 17

XML

Loans and Related Allowance for Loan Losses (Impaired Loans and Related Interest Income by Loan Portfolio Class) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Financing Receivable, Impaired [Line Items]
Average Recorded Investment, Total	$ 5,955	$ 10,882	$ 9,967
Interest Income Recognized, Total	19	393	524
Cash Basis Interest Income, Total	33	20	37
Commercial, Financial and Agricultural [Member] | Commercial Portfolio Segment [Member]
Financing Receivable, Impaired [Line Items]
Impaired Loans with No Allowance: Average Recorded Investment	234	452	456
Impaired Loans with No Allowance: Interest Income Recognized		25	29
Average Recorded Investment, Total	234	452	456
Interest Income Recognized, Total		25	29
Commercial Loan [Member] | Real Estate Portfolio Segment [Member]
Financing Receivable, Impaired [Line Items]
Impaired Loans with No Allowance: Average Recorded Investment	2,970	5,265	3,675
Impaired Loans with No Allowance: Interest Income Recognized		313	331
Average Recorded Investment, Total	2,970	5,265	3,675
Interest Income Recognized, Total		313	331
Construction Loan [Member] | Real Estate Portfolio Segment [Member]
Financing Receivable, Impaired [Line Items]
Impaired Loans with No Allowance: Average Recorded Investment	14	1,228	1,228
Impaired Loans with No Allowance: Interest Income Recognized		34	136
Average Recorded Investment, Total	14	1,228	1,228
Interest Income Recognized, Total		34	136
Mortgage Loan [Member] | Real Estate Portfolio Segment [Member]
Financing Receivable, Impaired [Line Items]
Impaired Loans with No Allowance: Average Recorded Investment	1,706	2,789	2,991
Impaired Loans with No Allowance: Interest Income Recognized	19	21	28
Impaired Loans with No Allowance: Cash Basis Interest Income	33	20	37
Impaired Loans with Allowance: Average Recorded Investment		356	356
Average Recorded Investment, Total	1,706	3,145	3,347
Interest Income Recognized, Total	19	21	28
Cash Basis Interest Income, Total	33	20	37
Personal Loan [Member] | Consumer Portfolio Segment [Member]
Financing Receivable, Impaired [Line Items]
Impaired Loans with No Allowance: Average Recorded Investment	9
Average Recorded Investment, Total	9
Acquired with Credit Deterioration [Member] | Commercial Loan [Member] | Real Estate Portfolio Segment [Member]
Financing Receivable, Impaired [Line Items]
Average Recorded Investment, Total	368	416	738
Acquired with Credit Deterioration [Member] | Construction Loan [Member] | Real Estate Portfolio Segment [Member]
Financing Receivable, Impaired [Line Items]
Impaired Loans with No Allowance: Average Recorded Investment	368	416	738
Acquired with Credit Deterioration [Member] | Mortgage Loan [Member] | Real Estate Portfolio Segment [Member]
Financing Receivable, Impaired [Line Items]
Impaired Loans with No Allowance: Average Recorded Investment	654	376	523
Average Recorded Investment, Total	$ 654	$ 376	$ 523

XML

Loans and Related Allowance for Loan Losses (Nonaccrual Loans by Classes of the Loan Portfolio) (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Financing Receivable, Impaired [Line Items]
Financing receivable, recorded investment, nonaccrual status	$ 1,707	$ 2,874
Commercial, Financial and Agricultural [Member] | Commercial Portfolio Segment [Member]
Financing Receivable, Impaired [Line Items]
Financing receivable, recorded investment, nonaccrual status		4
Commercial Loan [Member] | Real Estate Portfolio Segment [Member]
Financing Receivable, Impaired [Line Items]
Financing receivable, recorded investment, nonaccrual status	908	953
Construction Loan [Member] | Real Estate Portfolio Segment [Member]
Financing Receivable, Impaired [Line Items]
Financing receivable, recorded investment, nonaccrual status	29
Mortgage Loan [Member] | Real Estate Portfolio Segment [Member]
Financing Receivable, Impaired [Line Items]
Financing receivable, recorded investment, nonaccrual status	753	$ 1,917
Personal Loan [Member] | Consumer Portfolio Segment [Member]
Financing Receivable, Impaired [Line Items]
Financing receivable, recorded investment, nonaccrual status	$ 17

XML

Loans and Related Allowance for Loan Losses (Loan Portfolio Summarized by the Past Due Status) (Details) - USD ($) $ in Thousands		Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		$ 3,303	$ 1,100
Current		414,328	382,804
Total loans		417,631	383,904	$ 378,297
Loans Past Due Greater than 90 Days and Accruing	[1]	336	215
30-59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		1,285	776
60-89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		576	109
Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		1,442	215
Commercial, Financial and Agricultural [Member] | Commercial Portfolio Segment [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		6
Current		46,557	45,802
Total loans		46,563	45,802	40,827
Commercial, Financial and Agricultural [Member] | Commercial Portfolio Segment [Member] | 30-59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		6
Commercial Loan [Member] | Real Estate Portfolio Segment [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total loans		141,295	140,369	123,711
Commercial Loan [Member] | Real Estate Portfolio Segment [Member] | Acquired with Credit Deterioration [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		140	28
Current		51	163
Total loans		191	191
Loans Past Due Greater than 90 Days and Accruing	[1]		28
Commercial Loan [Member] | Real Estate Portfolio Segment [Member] | Acquired Without Deteriorated Credit Quality [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		1,214	39
Current		139,890	140,139
Total loans		141,104	140,178
Loans Past Due Greater than 90 Days and Accruing	[1]	306
Commercial Loan [Member] | Real Estate Portfolio Segment [Member] | 30-59 Days Past Due [Member] | Acquired with Credit Deterioration [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		140
Commercial Loan [Member] | Real Estate Portfolio Segment [Member] | 30-59 Days Past Due [Member] | Acquired Without Deteriorated Credit Quality [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due			16
Commercial Loan [Member] | Real Estate Portfolio Segment [Member] | 60-89 Days Past Due [Member] | Acquired Without Deteriorated Credit Quality [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due			23
Commercial Loan [Member] | Real Estate Portfolio Segment [Member] | Greater than 90 Days Past Due [Member] | Acquired with Credit Deterioration [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due			28
Commercial Loan [Member] | Real Estate Portfolio Segment [Member] | Greater than 90 Days Past Due [Member] | Acquired Without Deteriorated Credit Quality [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		1,214
Construction Loan [Member] | Real Estate Portfolio Segment [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		61
Current		36,627	28,403
Total loans		36,688	28,403	35,206
Construction Loan [Member] | Real Estate Portfolio Segment [Member] | 30-59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		32
Construction Loan [Member] | Real Estate Portfolio Segment [Member] | Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		29
Mortgage Loan [Member] | Real Estate Portfolio Segment [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total loans		163,548	146,888	154,905
Mortgage Loan [Member] | Real Estate Portfolio Segment [Member] | Acquired with Credit Deterioration [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		266	123
Current		71	214
Total loans		337	337
Loans Past Due Greater than 90 Days and Accruing	[1]	7	123
Mortgage Loan [Member] | Real Estate Portfolio Segment [Member] | Acquired Without Deteriorated Credit Quality [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		1,560	838
Current		161,651	145,713
Total loans		163,211	146,551
Loans Past Due Greater than 90 Days and Accruing	[1]	23	64
Mortgage Loan [Member] | Real Estate Portfolio Segment [Member] | 30-59 Days Past Due [Member] | Acquired with Credit Deterioration [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		259
Mortgage Loan [Member] | Real Estate Portfolio Segment [Member] | 30-59 Days Past Due [Member] | Acquired Without Deteriorated Credit Quality [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		824	694
Mortgage Loan [Member] | Real Estate Portfolio Segment [Member] | 60-89 Days Past Due [Member] | Acquired Without Deteriorated Credit Quality [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		561	80
Mortgage Loan [Member] | Real Estate Portfolio Segment [Member] | Greater than 90 Days Past Due [Member] | Acquired with Credit Deterioration [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		7	123
Mortgage Loan [Member] | Real Estate Portfolio Segment [Member] | Greater than 90 Days Past Due [Member] | Acquired Without Deteriorated Credit Quality [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		175	64
Obligations of State and Political Subdivisions [Member] | Unallocated Financing Receivables [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current		19,129	13,044
Total loans		19,129	13,044	13,616
Personal Loan [Member] | Consumer Portfolio Segment [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		56	72
Current		10,352	9,326
Total loans		10,408	9,398	$ 10,032
Personal Loan [Member] | Consumer Portfolio Segment [Member] | 30-59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		24	66
Personal Loan [Member] | Consumer Portfolio Segment [Member] | 60-89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		15	$ 6
Personal Loan [Member] | Consumer Portfolio Segment [Member] | Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		$ 17

[1] These loans are guaranteed, or well secured, and there is an effective means of collection in process.

XML

Loans and Related Allowance for Loan Losses (Troubled Debt Restructurings on Financing Receivables) (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2018 USD ($) contract	Dec. 31, 2017 USD ($) contract
Financing Receivable, Modifications [Line Items]
Financing Receivable, Modifications, Number of Contracts | contract	9	9
Financing Receivable, Modifications, Pre-Modification Recorded Investment	$ 547	$ 413
Financing Receivable, Modifications, Post-Modification Recorded Investment	575	442
Financing Receivable, Modifications, Recorded Investment	$ 445	$ 339
Mortgage Loan [Member] | Real Estate Portfolio Segment [Member] | Accruing Troubled Debt Restructurings [Member]
Financing Receivable, Modifications [Line Items]
Financing Receivable, Modifications, Number of Contracts | contract	8	7
Financing Receivable, Modifications, Pre-Modification Recorded Investment	$ 522	$ 369
Financing Receivable, Modifications, Post-Modification Recorded Investment	550	397
Financing Receivable, Modifications, Recorded Investment	$ 428	$ 315
Mortgage Loan [Member] | Real Estate Portfolio Segment [Member] | Non-Accruing Troubled Debt Restructurings [Member]
Financing Receivable, Modifications [Line Items]
Financing Receivable, Modifications, Number of Contracts | contract	1	1
Financing Receivable, Modifications, Pre-Modification Recorded Investment	$ 25	$ 25
Financing Receivable, Modifications, Post-Modification Recorded Investment	25	25
Financing Receivable, Modifications, Recorded Investment	$ 17	$ 20
Commercial, Financial and Agricultural [Member] | Commercial Portfolio Segment [Member] | Non-Accruing Troubled Debt Restructurings [Member]
Financing Receivable, Modifications [Line Items]
Financing Receivable, Modifications, Number of Contracts | contract		1
Financing Receivable, Modifications, Pre-Modification Recorded Investment		$ 19
Financing Receivable, Modifications, Post-Modification Recorded Investment		20
Financing Receivable, Modifications, Recorded Investment		$ 4
Restructured Loan [Member] | Non-Accruing Troubled Debt Restructurings [Member]
Financing Receivable, Modifications [Line Items]
Financing Receivable, Modifications, Number of Contracts | contract	1	1
Financing Receivable, Modifications, Pre-Modification Recorded Investment	$ 153	$ 19
Financing Receivable, Modifications, Post-Modification Recorded Investment	153	20
Financing Receivable, Modifications, Recorded Investment	$ 147	$ 4
Restructured Loan [Member] | Mortgage Loan [Member] | Real Estate Portfolio Segment [Member] | Non-Accruing Troubled Debt Restructurings [Member]
Financing Receivable, Modifications [Line Items]
Financing Receivable, Modifications, Number of Contracts | contract	1
Financing Receivable, Modifications, Pre-Modification Recorded Investment	$ 153
Financing Receivable, Modifications, Post-Modification Recorded Investment	153
Financing Receivable, Modifications, Recorded Investment	$ 147
Restructured Loan [Member] | Commercial, Financial and Agricultural [Member] | Commercial Portfolio Segment [Member] | Non-Accruing Troubled Debt Restructurings [Member]
Financing Receivable, Modifications [Line Items]
Financing Receivable, Modifications, Number of Contracts | contract		1
Financing Receivable, Modifications, Pre-Modification Recorded Investment		$ 19
Financing Receivable, Modifications, Post-Modification Recorded Investment		20
Financing Receivable, Modifications, Recorded Investment		$ 4

XML

Loans and Related Allowance for Loan Losses (Allowance for Loan Losses and Related Investments in Loans Receivable) (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning Balance				$ 2,939				$ 2,723	$ 2,939	$ 2,723	$ 2,478
Charge-offs									(285)	(292)	(279)
Recoveries									43	69	58
Provision for loan losses	$ 106	$ 32	$ 41	158	$ 50	$ 149	$ 135	105	337	439	466
Allowance for loan losses: Ending balance	3,034				2,939				3,034	2,939	2,723
Ending balance: individually evaluated for impairment											56
Ending balance: collectively evaluated for impairment	3,034				2,939				3,034	2,939	2,667
Loans: Ending Balance	417,631				383,904				417,631	383,904	378,297
Ending balance: individually evaluated for impairment	2,133				7,731				2,133	7,731	12,447
Ending balance: collectively evaluated for impairment	413,983				375,645				413,983	375,645	364,794
Commercial, Financial and Agricultural [Member] | Commercial Portfolio Segment [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning Balance				273				318	273	318	264
Charge-offs										(46)	(4)
Recoveries									10	5
Provision for loan losses									(8)	(4)	58
Allowance for loan losses: Ending balance	275				273				275	273	318
Ending balance: collectively evaluated for impairment	275				273				275	273	318
Loans: Ending Balance	46,563				45,802				46,563	45,802	40,827
Ending balance: individually evaluated for impairment					468					468	436
Ending balance: collectively evaluated for impairment	46,563				45,334				46,563	45,334	40,391
Commercial Loan [Member] | Real Estate Portfolio Segment [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning Balance				1,022				948	1,022	948	836
Charge-offs									(60)	(70)	(146)
Recoveries									5	2	24
Provision for loan losses									107	142	234
Allowance for loan losses: Ending balance	1,074				1,022				1,074	1,022	948
Ending balance: collectively evaluated for impairment	1,074				1,022				1,074	1,022	948
Loans: Ending Balance	141,295				140,369				141,295	140,369	123,711
Ending balance: individually evaluated for impairment	909				5,031				909	5,031	5,499
Ending balance: collectively evaluated for impairment	139,842				135,147				139,842	135,147	117,571
Construction Loan [Member] | Real Estate Portfolio Segment [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning Balance				288				231	288	231	191
Provision for loan losses									270	57	40
Allowance for loan losses: Ending balance	558				288				558	288	231
Ending balance: collectively evaluated for impairment	558				288				558	288	231
Loans: Ending Balance	36,688				28,403				36,688	28,403	35,206
Ending balance: individually evaluated for impairment	27								27		2,455
Ending balance: collectively evaluated for impairment	36,661				28,403				36,661	28,403	32,751
Mortgage Loan [Member] | Real Estate Portfolio Segment [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning Balance				1,285				1,143	1,285	1,143	1,140
Charge-offs									(183)	(149)	(103)
Recoveries									12	45	15
Provision for loan losses									(79)	246	91
Allowance for loan losses: Ending balance	1,035				1,285				1,035	1,285	1,143
Ending balance: individually evaluated for impairment											56
Ending balance: collectively evaluated for impairment	1,035				1,285				1,035	1,285	1,087
Loans: Ending Balance	163,548				146,888				163,548	146,888	154,905
Ending balance: individually evaluated for impairment	1,180				2,232				1,180	2,232	4,057
Ending balance: collectively evaluated for impairment	161,397				144,319				161,397	144,319	150,433
Obligations of State and Political Subdivisions [Member] | Unallocated Financing Receivables [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Provision for loan losses									20
Allowance for loan losses: Ending balance	20								20
Ending balance: collectively evaluated for impairment	20								20
Loans: Ending Balance	19,129				13,044				19,129	13,044	13,616
Ending balance: collectively evaluated for impairment	19,129				13,044				19,129	13,044	13,616
Personal Loan [Member] | Consumer Portfolio Segment [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning Balance				$ 71				$ 83	71	83	47
Charge-offs									(42)	(27)	(26)
Recoveries									16	17	19
Provision for loan losses									27	(2)	43
Allowance for loan losses: Ending balance	72				71				72	71	83
Ending balance: collectively evaluated for impairment	72				71				72	71	83
Loans: Ending Balance	10,408				9,398				10,408	9,398	10,032
Ending balance: individually evaluated for impairment	17								17
Ending balance: collectively evaluated for impairment	10,391				9,398				10,391	9,398	10,032
Acquired with Credit Deterioration [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Ending balance: individually evaluated for impairment	1,515				528				1,515	528	1,056
Acquired with Credit Deterioration [Member] | Commercial Loan [Member] | Real Estate Portfolio Segment [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans: Ending Balance	191				191				191	191
Ending balance: individually evaluated for impairment	544				191				544	191	641
Acquired with Credit Deterioration [Member] | Mortgage Loan [Member] | Real Estate Portfolio Segment [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans: Ending Balance	337				337				337	337
Ending balance: individually evaluated for impairment	$ 971				$ 337				$ 971	$ 337	$ 415

XML

Pledged Assets (Narrative) (Details) - USD ($)	Dec. 31, 2018	Dec. 31, 2017
Pledged Assets [Abstract]
Loans pledged as collateral	$ 261,442,000	$ 224,561,000
Securities pledged as collateral	0	0
Maximum borrowing capacity with the Federal Home Loan Bank of Pittsburgh ("FHLB")	$ 187,818,000	$ 163,181,000

XML

Bank Owned Life Insurance and Annuities (Narrative) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Bank Owned Life Insurance and Annuities [Abstract]
Bank owned life insurance and annuities, cash value	$ 15,938	$ 14,972	$ 14,631
Increase in cash surrender value of bank-owned life insurance	$ 966	$ (274)	$ 341

XML

Bank Owned Life Insurance and Annuities (Summary of Changes in Cash Value of BOLI and Annuities) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Balance	$ 14,972	$ 14,631
Earnings	295	301
Premiums on existing policies	38	40
Annuity payments received	1
BOLI acquired through acquisition	632
Balance	15,938	14,972
Life Insurance [Member]
Balance	14,510	14,198
Earnings	277	285
Premiums on existing policies	25	27
Annuity payments received	1
BOLI acquired through acquisition	632
Balance	15,445	14,510
Deferred Annuities [Member]
Balance	462	433
Earnings	18	16
Premiums on existing policies	13	13
Balance	$ 493	$ 462

XML

Premises and Equipment (Narrative) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Premises and Equipment [Abstract]
Depreciation expense on premises and equipment	$ 815	$ 672	$ 595

XML

Premises and Equipment (Premises and Equipment) (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Property, Plant and Equipment [Line Items]
Premises and equipment, gross	$ 19,020	$ 18,382
Less: accumulated depreciation	(10,276)	(9,495)
Premises and equipment, net	8,744	8,887
Land [Member]
Property, Plant and Equipment [Line Items]
Premises and equipment, gross	1,158	1,126
Building and Improvements [Member]
Property, Plant and Equipment [Line Items]
Premises and equipment, gross	11,645	11,358
Furniture, Computer Software and Equipment [Member]
Property, Plant and Equipment [Line Items]
Premises and equipment, gross	$ 6,217	$ 5,898

XML

Goodwill and Other Intangible Assets (Narrative) (Details) - USD ($)				12 Months Ended
	Apr. 30, 2018	Nov. 30, 2015	Sep. 08, 2006	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Goodwill and Other Intangible Assets [Line Items]
Goodwill included in purchase price of the branch				$ 3,402,000	$ 3,402,000	$ 3,402,000
Other intangible assets				200,000	225,000
Branch Office in Richfield, PA [Member]
Goodwill and Other Intangible Assets [Line Items]
Acquisition date			Sep. 08, 2006
Goodwill included in purchase price of the branch				$ 2,046,000	$ 2,046,000
Intangible assets included in purchase price			$ 431,000
Intangible assets amortization period			10 years
FNBPA Bancorp, Inc [Member]
Goodwill and Other Intangible Assets [Line Items]
Acquisition date			Nov. 30, 2015
Goodwill included in purchase price of the branch		$ 3,335,000
Intangible assets included in purchase price		$ 303,000
Intangible assets amortization period		10 years
Other intangible assets		$ 40,000
Liverpool Community Bank [Member]
Goodwill and Other Intangible Assets [Line Items]
Acquisition date	Apr. 30, 2018
Intangible assets included in purchase price	$ 289,000
Intangible assets amortization period	10 years
Other Intangible Assets [Member] | FNBPA Bancorp, Inc [Member]
Goodwill and Other Intangible Assets [Line Items]
Intangible assets included in purchase price		$ 40,000
Intangible assets amortization period		2 years

XML

Goodwill and Other Intangible Assets (Amortization Schedule for Intangible Assets) (Details) - USD ($)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2013	Apr. 30, 2018	Nov. 30, 2015	Sep. 08, 2006
Finite-Lived Intangible Assets [Line Items]
Amortization of intangibles	$ 79,000	$ 67,000	$ 105,000
Liverpool Community Bank [Member]
Finite-Lived Intangible Assets [Line Items]
Beginning Balance at Acquisition Date					$ 289,000
Liverpool Community Bank [Member] | Core Deposits [Member]
Finite-Lived Intangible Assets [Line Items]
Beginning Balance at Acquisition Date					$ 289,000
Amortization of intangibles	35,000
Unamortized balance as of December 31, 2018	254,000
Scheduled Amortization expense for years ended:
December 31, 2019	49,000
December 31, 2020	44,000
December 31, 2021	39,000
December 31, 2022	33,000
December 31, 2023	28,000
After December 31, 2023	61,000
FNBPA Bancorp, Inc [Member]
Finite-Lived Intangible Assets [Line Items]
Beginning Balance at Acquisition Date						$ 303,000
FNBPA Bancorp, Inc [Member] | Core Deposits [Member]
Finite-Lived Intangible Assets [Line Items]
Beginning Balance at Acquisition Date						303,000
Amortization of intangibles	44,000	49,000	55,000	$ 4,000
Unamortized balance as of December 31, 2018	151,000
Scheduled Amortization expense for years ended:
December 31, 2019	38,000
December 31, 2020	33,000
December 31, 2021	27,000
December 31, 2022	22,000
December 31, 2023	16,000
After December 31, 2023	$ 15,000
FNBPA Bancorp, Inc [Member] | Other Intangible Assets [Member]
Finite-Lived Intangible Assets [Line Items]
Beginning Balance at Acquisition Date						$ 40,000
Amortization of intangibles		$ 18,000	20,000	2,000
Branch Office in Richfield, PA [Member]
Finite-Lived Intangible Assets [Line Items]
Beginning Balance at Acquisition Date							$ 431,000
Amortization of intangibles			$ 29,000	$ 402,000

XML

Investment in Unconsolidated Subsidiary (Narrative) (Details) - USD ($)	Apr. 29, 2018	Dec. 31, 2017
Schedule of Equity Method Investments [Line Items]
Investment in unconsolidated subsidiary		$ 4,812,000
Deferred tax liability related to previous 39.16% ownership in LCB		$ 368,000
Liverpool Community Bank [Member]
Schedule of Equity Method Investments [Line Items]
Percentage of equity interest in acquiree, before acquisition	39.16%
Deferred tax liability related to previous 39.16% ownership in LCB	$ 406,000

XML

Investment in Unconsolidated Subsidiary (Components of the Income/Gain from the Unconsolidated Subsidiary Investment) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Income from unconsolidated subsidiary (excluding merger-related adjustments)
Dividend income	$ 36	$ 61	$ 55
Equity income	45	106	167
Total income (excluding merger-related adjustments)	81	167	222
Merger Related Adjustments For Investment In Unconsolidated Subsidiary [Abstract]
Adjustment to LCB book value at April 30, 2018	(239)
Special merger-related dividend	39
Fair value gain	415
Total merger-related adjustments	215
Total income/gain from unconsolidated subsidiary	$ 296	$ 167	$ 222

XML

Deposits (Narrative) (Details) - USD ($)	Dec. 31, 2018	Dec. 31, 2017
Deposits [Abstract]
Aggregate amount of demand deposits reclassified as loan balances	$ 75,000	$ 33,000
Deposits and other funds from related parties	$ 1,215,000	$ 1,116,000

XML

Deposits (Schedule of Deposits) (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Deposits [Abstract]
Demand, non-interest bearing	$ 126,057	$ 115,911
Interest-bearing demand and money market	147,413	122,407
Savings	99,236	98,966
Time deposits, 250,000 or more	8,368	8,456
Other time deposits	140,648	131,928
Total deposits	$ 521,722	$ 477,668

XML

Deposits (Schedule of Maturities of Time Deposits) (Details) $ in Thousands	Dec. 31, 2018 USD ($)
Time Deposits 250000 or More [Member]
Maturities of Time Deposits
2019	$ 3,538
2020	2,715
2021	513
2023	607
Later	995
Total time deposits	8,368
Time Deposits Other [Member]
Maturities of Time Deposits
2019	49,056
2020	34,817
2021	21,694
2022	9,503
2023	11,070
Later	14,508
Total time deposits	140,648
Certificates of Deposit [Member]
Maturities of Time Deposits
2019	52,594
2020	37,532
2021	22,207
2022	9,503
2023	11,677
Later	15,503
Total time deposits	$ 149,016

XML

Borrowings (Narrative) (Details) - USD ($)	Dec. 31, 2018	Dec. 31, 2017
Short-term Debt [Line Items]
Fair value of pledged assets	$ 50,157,000	$ 47,825,000
Maximum borrowing capacity with the Federal Home Loan Bank of Pittsburgh ("FHLB")	187,818,000	163,181,000
Amount outstanding with Federal Home Loan Bank ("FHLB")	26,600,000
Long-term debt	15,000,000	$ 25,000,000
Securities Sold under Agreements to Repurchase [Member]
Short-term Debt [Line Items]
Fair value of pledged assets	$ 8,666,000

XML

Borrowings (Schedule of Borrowings) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Short-term borrowings with Federal Home Loan Bank	$ 14,511	$ 21,769	$ 32,196
Maximum outstanding at any month end	33,858	40,490	38,318
Securities Sold under Agreements to Repurchase [Member]
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Short-term borrowings with Federal Home Loan Bank	2,911	9,769	4,496
Maximum outstanding at any month end	$ 4,620	$ 9,769	$ 6,018
Weighted average interest rate as of December 31	2.13%	0.32%	0.18%
Average amount outstanding during the year	$ 4,177	$ 4,823	$ 4,712
Weighted average interest rate during the year	1.49%	0.64%	0.11%
Overnight Advances [Member]
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Short-term borrowings with Federal Home Loan Bank	$ 11,600	$ 12,000	$ 27,700
Maximum outstanding at any month end	29,238	30,721	32,300
Short-term borrowings with Federal Home Loan Bank [Member]
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Short-term borrowings with Federal Home Loan Bank	$ 11,600	$ 12,000	$ 27,700
Weighted average interest rate as of December 31	2.62%	1.54%	0.74%
Average amount outstanding during the year	$ 9,906	$ 25,476	$ 15,696
Weighted average interest rate during the year	1.92%	1.16%	0.60%

XML

Borrowings (Summary of the Scheduled Maturities of Long-Term Debt) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Year
2019	$ 15,000
2020
2021
2022
2023
Thereafter
Long-term debt, total	$ 15,000	$ 25,000
Weighted Average Interest Rate
2019	1.59%
2020
2021
2022
2023
Thereafter
Weighted average interest rate	1.59%

XML

Operating Lease Obligations (Narrative) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Operating Lease Obligations [Abstract]
Rental expense including license fees	$ 109	$ 147	$ 142

XML

Operating Lease Obligations (Schedule of Future Minimum Rental Payments) (Details) $ in Thousands	Dec. 31, 2018 USD ($)
Operating Lease Obligations [Abstract]
2019	$ 111
2020	93
2021	83
2022	26
2023	21
2024 and beyond	95
Total minimum payments required	$ 429

XML

Income Taxes (Narrative) (Details) - USD ($)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016	Apr. 29, 2018
Federal statutory income tax rate	21.00%	34.00%	34.00%
Decrease in federal statutory tax rate	13.00%
Deferred tax liability related to previous 39.16% ownership in LCB		$ 368,000
Increase (decrease) in income tax expense	$ (168,000)
Federal tax credits related to investment in low income housing	901,000	722,000	$ 572,000
Reclassification out of AOCI to income		416,000
Adjustments to unrecognized tax benefits	$ 0	$ 0	$ 0
Liverpool Community Bank [Member]
Percentage of equity interest in acquiree, before acquisition				39.16%
Deferred tax liability related to previous 39.16% ownership in LCB				$ 406,000

XML

Income Taxes (Components of Income Tax Expense) (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Income Taxes [Abstract]
Current tax (benefit) expense									$ (563)	$ 379	$ 499
Deferred income tax (benefit) expense									(96)	681	320
Total tax (benefit) expense	$ (187)	$ (29)	$ (372)	$ (71)	$ 359	$ 127	$ 244	$ 330	$ (659)	$ 1,060	$ 819

XML

Income Taxes (Effective Income Tax Rate Reconciliation) (Details) - USD ($)	3 Months Ended								12 Months Ended
	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Income Taxes [Abstract]
Income before income taxes	$ 1,030,000	$ 1,356,000	$ 1,603,000	$ 1,256,000	$ 937,000	$ 1,333,000	$ 1,538,000	$ 1,789,000	$ 5,245,000	$ 5,597,000	$ 5,975,000
Assumed tax rate									21.00%	34.00%	34.00%
Federal tax at statutory rate									$ 1,101,000	$ 1,903,000	$ 2,032,000
Tax-exempt interest									(271,000)	(443,000)	(427,000)
Net earnings on BOLI									(50,000)	(75,000)	(84,000)
Gain from life insurance proceeds											(124,000)
Dividend from unconsolidated subsidiary									(10,000)	(17,000)	(15,000)
Stock-based compensation									19,000	24,000	23,000
Federal tax credits									(901,000)	(722,000)	(572,000)
Merger and acquisition expenses									33,000
Tax reform adjustment										416,000
Defined benefit prior year contribution, net of other PTR adjustments									(198,000)
Basis difference related to LCB investments prior to acquisition									(406,000)
Other permanent differences									24,000	(26,000)	(14,000)
Total tax (benefit) expense	$ (187,000)	$ (29,000)	$ (372,000)	$ (71,000)	$ 359,000	$ 127,000	$ 244,000	$ 330,000	$ (659,000)	$ 1,060,000	$ 819,000
Effective tax rate									(12.60%)	18.90%	13.70%

XML

Income Taxes (Schedule of Deferred Tax Assets and Liabilities) (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Deferred Tax Assets
Allowance for loan losses	$ 494	$ 369
Deferred directors' compensation	345	338
Employee and director benefits	309	320
Qualified pension liability	78	512
Unrealized losses on securities available for sale	655	439
Unrealized loss from securities impairment	34	37
Investment in low income housing project	142	141
Fair value adjustments to acquired assets and liabilities	293	168
Tax credit carryforward	225	75
Valuation reserves on other real estate owned	1	1
Other	1
Total deferred tax assets	2,577	2,400
Deferred Tax Liabilities
Depreciation	(445)	(345)
Equity income from unconsolidated subsidiary		(368)
Loan origination costs	(384)	(340)
Prepaid expense	(229)	(230)
Annuity earnings	(56)	(52)
Fair value of mortgage servicing rights	(42)	(47)
Intangible assets	(68)	(18)
Goodwill	(353)	(324)
Other		(24)
Total deferred tax liabilities	(1,577)	(1,748)
Net deferred tax asset included in other assets	$ 1,000	$ 652

XML

Stockholders' Equity and Regulatory Matters (Narrative) (Details) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Preferred Stock, Authorized	500,000	500,000
Preferred Stock Par Value	$ 0	$ 0
Preferred Stock, Issued	0	0
Shares Available For Issuance Under Dividend Reinvestment Plan	141,887
Remaining Number of Shares Authorized Under Repurchase Program	170,574
Undistributed Earnings of Subsidiary, Available for Distribution	$ 42,119
Shares issued during period under employee stock purchase plans	2,134	1,961	3,764
Treasury Stock [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Common Shares Repurchased Under Repurchase Program	3,416	4,289	49,370

XML

Stockholders' Equity and Regulatory Matters (Schedule of Compliance with Regulatory Capital Requirements) (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Total Capital, Amount	$ 63,883	$ 59,667
Total Capital, Ratio	15.86%	15.01%
Total Capital, Minimum Requirement for Capital Adequacy Purposes, Amount	$ 32,214	$ 31,809
Total Capital, Minimum Requirement for Capital Adequacy Purposes, Ratio	8.00%	8.00%
Tier 1 Capital, Amount	$ 60,849	$ 55,808
Tier 1 Capital, Ratio	15.11%	14.04%
Tier 1 Capital, Minimum Requirement for Capital Adequacy Purposes, Amount	$ 24,160	$ 23,857
Tier 1 Capital, Minimum Requirement for Capital Adequacy Purposes, Ratio	6.00%	6.00%
Common Equity Tier 1 Capital, Amount	$ 60,849	$ 55,808
Common Equity Tier 1 Capital, Ratio	15.11%	14.04%
Common Equity Tier 1 Capital, Minimum Requirement for Capital Adequacy Purposes, Amount	$ 18,120	$ 17,892
Common Equity Tier 1 Capital, Minimum Requirement for Capital Adequacy Purposes, Ratio	4.50%	4.50%
Tier 1, Leverage Capital to Average Assets, Amount	$ 60,849	$ 55,808
Tier 1, Leverage Capital to Average Assets, Ratio	10.01%	9.43%
Tier 1, Leverage Capital to Average Assets, Minimum Requirement for Capital Adequacy Purposes, Amount	$ 24,318	$ 23,666
Tier 1, Leverage Capital to Average Assets, Minimum Requirement for Capital Adequacy Purposes, Ratio	4.00%	4.00%
The Juniata Valley Bank [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Total Capital, Amount	$ 62,422	$ 52,009
Total Capital, Ratio	15.50%	13.24%
Total Capital, Minimum Requirement for Capital Adequacy Purposes, Amount	$ 32,222	$ 31,435
Total Capital, Minimum Requirement for Capital Adequacy Purposes, Ratio	8.00%	8.00%
Total Capital, Minimum Capital Adequacy With Capital Buffer, Amount	$ 39,774	$ 36,346
Total Capital, Minimum Capital Adequacy With Capital Buffer, Ratio	9.875%	9.25%
Total Capital, Minimum Regulatory Requirements to be "Well Capitalized", Amount	$ 40,278	$ 39,293
Total Capital, Minimum Regulatory Requirements to be "Well Capitalized", Ratio	10.00%	10.00%
Tier 1 Capital, Amount	$ 59,388	$ 49,026
Tier 1 Capital, Ratio	14.74%	12.48%
Tier 1 Capital, Minimum Requirement for Capital Adequacy Purposes, Amount	$ 24,167	$ 23,576
Tier 1 Capital, Minimum Requirement for Capital Adequacy Purposes, Ratio	6.00%	6.00%
Tier One Risk Based Capital Minimum Capital Adequacy With Capital Buffer, Amount	$ 31,719	$ 28,488
Tier One Risk Based Capital Minimum Capital Adequacy With Capital Buffer, Ratio	7.875%	7.25%
Tier 1 Capital, Minimum Regulatory Requirements to be "Well Capitalized", Amount	$ 32,222	$ 31,435
Tier 1 Capital, Minimum Regulatory Requirements to be "Well Capitalized", Ratio	8.00%	8.00%
Common Equity Tier 1 Capital, Amount	$ 59,388	$ 49,026
Common Equity Tier 1 Capital, Ratio	14.74%	12.48%
Common Equity Tier 1 Capital, Minimum Requirement for Capital Adequacy Purposes, Amount	$ 18,125	$ 17,682
Common Equity Tier 1 Capital, Minimum Requirement for Capital Adequacy Purposes, Ratio	4.50%	4.50%
Common Equity Tier 1 Capital, Minimum Capital Adequacy With Capital Buffer, Amount	$ 25,677	$ 22,594
Common Equity Tier 1 Capital, Minimum Capital Adequacy With Capital Buffer, Ratio	6.375%	5.75%
Common Equity Tier 1 Capital, Minimum Regulatory Requirements to be "Well Capitalized", Amount	$ 26,181	$ 25,541
Common Equity Tier 1 Capital, Minimum Regulatory Requirements to be "Well Capitalized", Ratio	6.50%	6.50%
Tier 1, Leverage Capital to Average Assets, Amount	$ 59,388	$ 49,026
Tier 1, Leverage Capital to Average Assets, Ratio	9.77%	8.36%
Tier 1, Leverage Capital to Average Assets, Minimum Requirement for Capital Adequacy Purposes, Amount	$ 24,317	$ 23,460
Tier 1, Leverage Capital to Average Assets, Minimum Requirement for Capital Adequacy Purposes, Ratio	4.00%	4.00%
Tier One Risk Based Capital Minimum Capital Adequacy With Capital Buffer, Amount	$ 24,317	$ 23,460
Tier 1, Leverage Capital to Average Assets, Minimum Capital Adequacy With Capital Buffer, Ratio	4.00%	4.00%
Tier 1, Leverage Capital to Average Assets, Minimum Regulatory Requirements to be "Well Capitalized", Amount	$ 30,397	$ 29,325
Tier 1, Leverage Capital to Average Assets, Minimum Regulatory Requirements to be "Well Capitalized", Ratio	5.00%	5.00%

XML

Calculation of Earnings Per Share (Computation of Basic and Diluted Earnings per Share) (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Calculation of Earnings Per Share [Abstract]
Net income	$ 1,217	$ 1,385	$ 1,975	$ 1,327	$ 578	$ 1,206	$ 1,294	$ 1,459	$ 5,904	$ 4,537	$ 5,156
Weighted-average common shares outstanding									4,987,186	4,765,165	4,801,245
Basic earnings per share	$ 0.24	$ 0.27	$ 0.39	$ 0.28	$ 0.12	$ 0.25	$ 0.27	$ 0.31	$ 1.18	$ 0.95	$ 1.07
Common stock equivalents due to effect of stock options									22,000	10,000	1,000
Total weighted-average common shares and equivalents									5,009,484	4,775,505	4,802,175
Diluted earnings per share	$ 0.24	$ 0.27	$ 0.39	$ 0.28	$ 0.12	$ 0.25	$ 0.27	$ 0.31	$ 1.18	$ 0.95	$ 1.07
Anti-dilutive stock options outstanding										6,000	401,000

XML

Accumulated Other Comprehensive Loss (Accumulated Other Comprehensive Loss) (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Accumulated Other Comprehensive Loss [Abstract]
Unrealized (losses) gains on available for sale securities	$ (2,647)	$ (1,683)	$ (866)
Unrecognized expense for defined benefit pension	(1,652)	(2,351)	(2,343)
Accumulated other comprehensive loss	$ (4,299)	$ (4,034)	$ (3,209)

XML

Fair Value Measurements (Fair Value Measurements by Level of Valuation Inputs) (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available for sale	$ 141,953	$ 153,824
Impaired loans	3,648	8,259
Other real estate owned	744	355
Measured at Fair Value on a Recurring Basis [Member] | Obligations of U.S. Government Agencies and Corporations [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available for sale	23,266	34,214
Measured at Fair Value on a Recurring Basis [Member] | Obligations of State and Political Subdivisions [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available for sale	18,181	24,981
Measured at Fair Value on a Recurring Basis [Member] | Mortgage-Backed Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available for sale	100,506	93,510
Measured at Fair Value on a Recurring Basis [Member] | Equity Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available for sale		1,119
Measured at Fair Value on a Recurring Basis [Member] | (Level 1) Quoted Prices in Active Markets for Identical Assets [Member] | Equity Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available for sale		1,119
Measured at Fair Value on a Recurring Basis [Member] | (Level 2) Significant Other Observable Inputs [Member] | Obligations of U.S. Government Agencies and Corporations [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available for sale	23,266	34,214
Measured at Fair Value on a Recurring Basis [Member] | (Level 2) Significant Other Observable Inputs [Member] | Obligations of State and Political Subdivisions [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available for sale	18,181	24,981
Measured at Fair Value on a Recurring Basis [Member] | (Level 2) Significant Other Observable Inputs [Member] | Mortgage-Backed Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available for sale	100,506	93,510
Measured at Fair Value on a Non-Recurring Basis [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Impaired loans	1,104	1,574
Other real estate owned	149	27
Mortgage servicing rights	200	225
Measured at Fair Value on a Non-Recurring Basis [Member] | (Level 3) Significant Other Unobservable Inputs [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Impaired loans	1,104	1,574
Other real estate owned	149	27
Mortgage servicing rights	$ 200	$ 225

XML

Fair Value Measurements (Quantitative Information for Assets Measured at Fair Value) (Details)	12 Months Ended
	Dec. 31, 2018 USD ($)	Dec. 31, 2017 USD ($)
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Impaired loans	$ 3,648,000	$ 8,259,000
Other real estate owned	744,000	355,000
Impaired Loans [Member] | Appraisal and Liquidation Adjustments [Member] | Appraisal of Collateral [Member] | (Level 3) Significant Other Unobservable Inputs [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Impaired loans	1,104,000	1,574,000
Other Real Estate Owned [Member] | Appraisal and Liquidation Adjustments [Member] | Appraisal of Collateral [Member] | (Level 3) Significant Other Unobservable Inputs [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Other real estate owned	$ 149,000	$ 27,000
Other real estate owned, measurement input	0.02	0.22
Mortgage Servicing Rights [Member] | Estimated Pre-Payment Speed, Based on Rate and Term [Member] | Multiple of Annual Servicing Fee [Member] | (Level 3) Significant Other Unobservable Inputs [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Mortgage servicing rights	$ 200,000	$ 225,000
Maximum [Member] | Impaired Loans [Member] | Appraisal and Liquidation Adjustments [Member] | Appraisal of Collateral [Member] | (Level 3) Significant Other Unobservable Inputs [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Impaired Loans, measurement input	0.15	0.13
Maximum [Member] | Mortgage Servicing Rights [Member] | Estimated Pre-Payment Speed, Based on Rate and Term [Member] | Multiple of Annual Servicing Fee [Member] | (Level 3) Significant Other Unobservable Inputs [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Mortgage servicing rights, measurement input	4	4
Minimum [Member] | Impaired Loans [Member] | Appraisal and Liquidation Adjustments [Member] | Appraisal of Collateral [Member] | (Level 3) Significant Other Unobservable Inputs [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Impaired Loans, measurement input	0.00	0.00
Minimum [Member] | Mortgage Servicing Rights [Member] | Estimated Pre-Payment Speed, Based on Rate and Term [Member] | Multiple of Annual Servicing Fee [Member] | (Level 3) Significant Other Unobservable Inputs [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Mortgage servicing rights, measurement input	3	3
Weighted Average [Member] | Impaired Loans [Member] | Appraisal and Liquidation Adjustments [Member] | Appraisal of Collateral [Member] | (Level 3) Significant Other Unobservable Inputs [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Impaired Loans, measurement input	0.14	0.08
Weighted Average [Member] | Other Real Estate Owned [Member] | Appraisal and Liquidation Adjustments [Member] | Appraisal of Collateral [Member] | (Level 3) Significant Other Unobservable Inputs [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Other real estate owned, measurement input	0.02	0.22
Weighted Average [Member] | Mortgage Servicing Rights [Member] | Estimated Pre-Payment Speed, Based on Rate and Term [Member] | Multiple of Annual Servicing Fee [Member] | (Level 3) Significant Other Unobservable Inputs [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Mortgage servicing rights, measurement input	3.69	3.71

XML

Fair Value Measurements (Estimated Fair Values of Financial Instruments) (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Interest bearing deposits with banks	$ 110	$ 58
Federal funds sold	729
Interest bearing time deposits with banks	3,290	350
Investment securities available for sale	141,953	153,824
Restricted investment in bank stock	2,441	3,104
Non-interest bearing deposits	126,057	115,911
Interest bearing deposits	395,665	361,757
Short-term borrowings with Federal Home Loan Bank	14,511	21,769	$ 32,196
Long-term debt	15,000	25,000
Other interest bearing liabilities	1,596	1,593
Carrying Value [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and due from banks	15,617	9,839
Interest bearing deposits with banks	110	58
Federal funds sold	729
Interest bearing time deposits with banks	3,290	350
Investment securities available for sale	141,953	153,824
Restricted investment in bank stock	2,441	3,104
Loans, net of allowance for loan losses	414,597	380,965
Mortgage servicing rights	200	225
Accrued interest receivable	1,681	1,582
Non-interest bearing deposits	126,057	115,911
Interest bearing deposits	395,665	361,757
Securities sold under agreements to repurchase	2,911	9,769
Short-term borrowings with Federal Home Loan Bank	11,600	12,000
Long-term debt	15,000	25,000
Other interest bearing liabilities	1,596	1,593
Accrued interest payable	289	300
Commitments to extend credit
Letters of credit
Fair Value [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and due from banks	15,617	9,839
Interest bearing deposits with banks	110	58
Federal funds sold	729
Interest bearing time deposits with banks	3,290	350
Investment securities available for sale	141,953	153,824
Restricted investment in bank stock	2,441	3,104
Loans, net of allowance for loan losses	415,195	372,906
Mortgage servicing rights	200	225
Accrued interest receivable	1,681	1,582
Non-interest bearing deposits	126,057	115,911
Interest bearing deposits	395,226	361,468
Securities sold under agreements to repurchase	2,911	9,769
Short-term borrowings with Federal Home Loan Bank	11,600	12,000
Long-term debt	14,958	24,885
Other interest bearing liabilities	1,597	1,595
Accrued interest payable	289	300
Commitments to extend credit
Letters of credit

XML

Fair Value Measurements (Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis) (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Interest bearing time deposits with banks	$ 3,290	$ 350
Interest bearing deposits	395,665	361,757
Long-term debt	15,000	25,000
Other interest bearing liabilities	1,596	1,593
(Level 2) Significant Other Observable Inputs [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Interest bearing time deposits with banks	3,290	350
Interest bearing deposits	395,226	361,468
Long-term debt	14,958	24,885
Other interest bearing liabilities	1,597	1,595
(Level 3) Significant Other Unobservable Inputs [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans, net of allowance for loan losses	415,195	372,906
Carrying Value [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Interest bearing time deposits with banks	3,290	350
Loans, net of allowance for loan losses	414,597	380,965
Interest bearing deposits	395,665	361,757
Long-term debt	15,000	25,000
Other interest bearing liabilities	1,596	1,593
Fair Value [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Interest bearing time deposits with banks	3,290	350
Loans, net of allowance for loan losses	415,195	372,906
Interest bearing deposits	395,226	361,468
Long-term debt	14,958	24,885
Other interest bearing liabilities	$ 1,597	$ 1,595

XML

Revenue Recognition (Narrative) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Trust Fees [Member]
Disaggregation of Revenue [Line Items]
Fees income recognized	$ 430	$ 446	$ 454
Asset Management Fees [Member]
Disaggregation of Revenue [Line Items]
Fees income recognized	367	371
Estate Management Services [Member]
Disaggregation of Revenue [Line Items]
Fees income recognized	$ 63	$ 75
Percentage of total estate fee recognized when all estate assets are collected and debts paid	25.00%
Percentage of total estate fee recognized when the inheritance tax return is filed	50.00%
Percentage of total estate fee recognized when the first and final account is confirmed	25.00%

XML

Employee Benefit Plans (Narrative) (Details) - USD ($)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2007	Dec. 31, 2015	Dec. 31, 2014
Defined Benefit Plan Disclosure [Line Items]
Stock-based compensation expense	$ 82,000	$ 71,000	$ 67,000
Weighted average exercise price	$ 17.76	$ 17.91	$ 17.97		$ 18.07
Compensation costs not yet recognized	$ 111,000
Employer's matching contribution	$ 199,000	$ 189,000	$ 179,000
Compensation cost not yet recognized, period for recognition	3 years
Cash received from option exercises	$ 90,000	0	172,000
Debt and equity instruments included in the plan assets	$ 12,132,000	13,070,000
Employer's safe harbor contribution rate	3.00%
Employer's safe harbor contribution payable	$ 238,000
Prior year contribution payable credited in current year		224,000
Defined contribution plan, cost recognized	$ 234,000	$ 222,000	$ 211,000
Percentage of increase (decrease) in pension liability	9.00%	12.00%
Settlement loss	$ 210,000	$ 377,000
Shares issued during period under employee stock purchase plans	2,134	1,961	3,764
Deferred compensation liability	$ 1,602,000	$ 1,609,000
Deferred compensation, compensation expense	40,000	33,000	$ 32,000
Salary continuation liability	1,256,000	1,264,000
Salary continuation period expense	103,000	127,000	185,000
Supplemental Employee Retirement Plan [Member]
Defined Benefit Plan Disclosure [Line Items]
Present value of future plan liability	215,000	261,000
Supplemental retirement plans, cost recognized during period	$ 20,000	$ 25,000	30,000
Employee Stock Option [Member]
Defined Benefit Plan Disclosure [Line Items]
Award expiration period	10 years
Award expiration date	Feb. 17, 2025
Shares authorized under share-based payment awards	300,000
Shares available for grant	164,955
Exercise price, lower range limit	$ 17.22
Exercise price, upper range limit	18.00
Weighted average exercise price	$ 17.91
Weighted average remaining contractual life	5 years 1 month 6 days
Restricted Stock [Member]
Defined Benefit Plan Disclosure [Line Items]
Number of shares issued under long-term stock incentive plan	5,220	4,650
Award vesting period	3 years
Unrecognized compensation cost related to non-vested awards	$ 109,000
Employee Stock Purchase Plan [Member]
Defined Benefit Plan Disclosure [Line Items]
Shares authorized under share-based payment awards	250,000
Shares available for grant	172,959
Number of share per year in addition to prior unissued shares	5,000
JVB Plan [Member]
Defined Benefit Plan Disclosure [Line Items]
Estimated net period benefit cost to be recorded next year	$ 117,000
Debt and equity instruments included in the plan assets	12,182,000	$ 13,117,000	$ 13,117,000			$ 13,840,000
Settlement loss	$ 210,000	$ 377,000
Percentage of vested benefit				100.00%
JVB Plan [Member] | Equity Securities [Member]
Defined Benefit Plan Disclosure [Line Items]
Plan assets, target allocation	0.00%
Plan assets, actual allocation	10.00%	60.00%
JVB Plan [Member] | Fixed Income Securities [Member]
Defined Benefit Plan Disclosure [Line Items]
Plan assets, target allocation	100.00%
Plan assets, actual allocation	90.00%	40.00%
JVB Plan [Member] | Cash and Cash Equivalents [Member]
Defined Benefit Plan Disclosure [Line Items]
Debt and equity instruments included in the plan assets	$ 50,000	$ 46,000
Maximum [Member]
Defined Benefit Plan Disclosure [Line Items]
Option price as a percentage of fair value	100.00%
Maximum [Member] | Employee Stock Option [Member]
Defined Benefit Plan Disclosure [Line Items]
Award vesting period	5 years
Minimum [Member]
Defined Benefit Plan Disclosure [Line Items]
Option price as a percentage of fair value	95.00%
Minimum [Member] | Employee Stock Option [Member]
Defined Benefit Plan Disclosure [Line Items]
Award vesting period	3 years

XML

Employee Benefit Plans (Compensation Expense and Related Tax Benefits for Restricted Stock) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Net income effect	$ 82	$ 71	$ 67
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Compensation expense	77	43	16
Tax benefit	(16)	(15)	(5)
Net income effect	$ 61	$ 28	$ 11

XML

Employee Benefit Plans (Summary of Non-Vested Restricted Shares Activity) (Details) - Restricted Stock [Member] - $ / shares	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Number of shares
Non-vested at January 1, 2018	7,800
Vested
Cancelled
Granted	5,220	4,650
Non-vested at December 31, 2018	13,020	7,800
Weighted Average Grant Date Fair Value
Non-vested at January 1, 2018	$ 18.10
Vested
Cancelled
Granted	19.80
Non-vested at December 31, 2018	$ 18.78	$ 18.10

XML

Employee Benefit Plans (Schedule of Stock Option Activity) (Details) - USD ($)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Employee Benefit Plans [Abstract]
Outstanding at beginning of year, Shares	125,026	139,155	142,524
Exercised, Shares	(5,170)	(9,704)
Forfeited, Shares	(6,100)	(4,425)	(3,369)
Outstanding at end of year, Shares	113,756	125,026	139,155
Options exercisable at year-end, Shares	110,911	110,282	97,584
Outstanding at beginning of year, Weighted average exercise price	$ 17.91	$ 17.97	$ 18.07
Exercised, Weighted average exercise price	17.47	17.74
Forfeited, Weighted average exercise price	21.10	20.05	22.36
Outstanding at end of year, Weighted average exercise price	$ 17.76	$ 17.91	$ 17.97
Intrinsic value of options exercised during the year	$ 15,240	$ 10,807.00
Intrinsic value of options outstanding and exercisable at December 31, 2018	$ 387,318

XML

Employee Benefit Plans (Schedule of Stock Option Information by Grant Date) (Details) - $ / shares	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares outstanding	113,756	125,026	139,155	142,524
Shares Exercisable	110,911
Grant Date - 10/20/2009 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted, Weighted average exercise price	$ 17.22
Shares outstanding	3,909
Contractual average life (years)	9 months 18 days
Shares Exercisable	3,909
Grant Date - 9/20/2011 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted, Weighted average exercise price	$ 17.75
Shares outstanding	13,200
Contractual average life (years)	2 years 8 months 19 days
Shares Exercisable	13,200
Grant Date - 3/20/2012 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted, Weighted average exercise price	$ 18.00
Shares outstanding	15,800
Contractual average life (years)	3 years 2 months 19 days
Shares Exercisable	15,800
Grant Date - 2/19/2013 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted, Weighted average exercise price	$ 17.65
Shares outstanding	16,622
Contractual average life (years)	4 years 1 month 21 days
Shares Exercisable	16,622
Grant Date - 2/18/2014 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted, Weighted average exercise price	$ 17.72
Shares outstanding	31,025
Contractual average life (years)	5 years 1 month 17 days
Shares Exercisable	30,180
Grant Date - 2/17/2015 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted, Weighted average exercise price	$ 17.80
Shares outstanding	33,200
Contractual average life (years)	6 years 1 month 17 days
Shares Exercisable	31,200

XML

Employee Benefit Plans (Schedule of Allocation of Plan Assets) (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2014
Defined Benefit Plan Disclosure [Line Items]
Debt and equity instruments included in the plan assets	$ 12,132	$ 13,070
Mutual Funds [Member]
Defined Benefit Plan Disclosure [Line Items]
Debt and equity instruments included in the plan assets	11,891	12,857
Money Market Funds [Member]
Defined Benefit Plan Disclosure [Line Items]
Debt and equity instruments included in the plan assets	241	213
(Level 1) Quoted Prices in Active Markets for Identical Assets [Member]
Defined Benefit Plan Disclosure [Line Items]
Debt and equity instruments included in the plan assets	12,132	13,070
(Level 1) Quoted Prices in Active Markets for Identical Assets [Member] | Mutual Funds [Member]
Defined Benefit Plan Disclosure [Line Items]
Debt and equity instruments included in the plan assets	11,891	12,857
(Level 1) Quoted Prices in Active Markets for Identical Assets [Member] | Money Market Funds [Member]
Defined Benefit Plan Disclosure [Line Items]
Debt and equity instruments included in the plan assets	241	213
JVB Plan [Member]
Defined Benefit Plan Disclosure [Line Items]
Debt and equity instruments included in the plan assets	$ 12,182	$ 13,117	$ 13,117	$ 13,840

XML

Employee Benefit Plans (Schedule of Net Funded Status) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Change in plan assets
Fair value of plan assets at beginning of year	$ 13,070
Fair value of plan assets at end of year	12,132	$ 13,070
JVB Plan [Member]
Change in projected benefit obligation (PBO)
PBO at beginning of year	15,554	16,332
Interest cost	521	621	$ 666
Change in assumptions	(1,208)	1,141
Actuarial (gain) loss	(244)	136
Group annuity purchase		(1,974)
Settlement payments	(1,485)
Benefits paid	(583)	(702)
PBO at end of year	12,555	15,554	16,332
Change in plan assets
Fair value of plan assets at beginning of year	13,117	13,117
Actual return on plan assets, net of expenses	(217)	1,953
Employer contribution	1,350
Group annuity purchase		(1,974)
Benefits paid	(583)	(702)
Fair value of plan assets at end of year	12,182	13,117	$ 13,117
Funded status, included in other (liabilities) assets	(373)	(2,437)
Unrecognized actual loss	(884)	(3,081)
Accumulated benefit obligation	$ 12,555	$ 15,554

XML

Employee Benefit Plans (Components of Net Periodic Pension Cost) (Details) - USD ($)		12 Months Ended
		Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Defined Benefit Plan Disclosure [Line Items]
Settlement loss		$ 210,000	$ 377,000
Net loss (gain)	[1],[2]	55,000	(1,024,000)	$ 9,000
JVB Plan [Member]
Defined Benefit Plan Disclosure [Line Items]
Interest cost on projected benefit obligation		521,000	621,000	666,000
Expected return on plan assets		(690,000)	(793,000)	(795,000)
Settlement loss		210,000	377,000
Recognized net actuarial loss		129,000	207,000	248,000
Net periodic benefit cost		170,000	412,000	119,000
Net loss (gain)		(449,000)	117,000	173,000
Amortization of net loss		(435,000)	(584,000)	(248,000)
Total recognized in other comprehensive loss (income)		(884,000)	(467,000)	(75,000)
Total recognized in net periodic benefit cost and other comprehensive loss (income)		$ (714,000)	$ (55,000)	$ 44,000

[1] Amounts are included in the computation of net periodic benefit cost and are included in employee benefits expense on the Consolidated Statements of Income as a separate element within total non-interest expense.

[2] Income tax amounts are included in the provision for income taxes on the Consolidated Statements of Income.

XML

Employee Benefit Plans (Schedule of Assumptions Used) (Details) - JVB Plan [Member]	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Defined Benefit Plan Disclosure [Line Items]
Assumptions used calculating benefit obligation, discount rate	4.10%	3.50%	4.00%
Assumptions used calculating net periodic benefit cost, discount rate	3.50%	4.00%	4.25%
Assumptions used calculating net periodic benefit cost, expected long-term return on plan assets	4.20%	6.00%	6.00%

XML

Employee Benefit Plans (Schedule of Expected Benefit Payments) (Details) - JVB Plan [Member] $ in Thousands	Dec. 31, 2018 USD ($)
Defined Benefit Plan Disclosure [Line Items]
2019	$ 626
2020	630
2021	620
2022	621
2023	631
2024-2028	$ 3,406

XML

Financial Instruments with Off-Balance Sheet Risk (Narrative) (Details)	12 Months Ended
	Dec. 31, 2018 USD ($)
Financial Instruments with off-Balance Sheet Risk [Abstract]
Maximum undiscounted exposure	$ 2,749,000
Underlying collateral upon liquidation	$ 22,963,000

XML

Financial Instruments with Off-Balance Sheet Risk (Summary of Financial Instrument Commitments) (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Commitments to Grant Loans [Member]
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Outstanding letters of credit	$ 72,755	$ 77,023
Unfunded Commitments Under Lines of Credit [Member]
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Outstanding letters of credit	14,468	3,150
Outstanding Letters of Credit [Member]
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Outstanding letters of credit	$ 2,749	$ 2,541

XML

Related-Party Transactions (Narrative) (Details) - USD ($)	Dec. 31, 2018	Dec. 31, 2017
Related-Party Transactions [Abstract]
Due from related parties	$ 7,780,000	$ 7,939,000
Due from related parties, new loans in period	10,714,000
Due from related parties, repayments in period	$ 10,873,000

XML

Commitments and Contingent Liabilities (Narrative) (Details)	12 Months Ended
	Dec. 31, 2018 USD ($)
Loss Contingencies [Line Items]
Commitment period	7 years
Technology Outsourcing Services [Member]
Loss Contingencies [Line Items]
Percentage decrease in termination fees in each succeeding year, if terminated	15.00%
Service Bureau One [Member]
Loss Contingencies [Line Items]
Estimated contract termination fees	$ 1,672,000
Service Bureau Two [Member]
Loss Contingencies [Line Items]
Estimated contract termination fees	$ 1,542,000

XML

Subsequent Events (Narrative) (Details) - Subsequent Event [Member]	1 Months Ended
	Jan. 31, 2019 $ / shares
Subsequent Event [Line Items]
Dividends payable per share	$ 0.22
Dividends payable, date declared	Jan. 15, 2019
Dividends payable, date of record	Feb. 15, 2018
Dividends payable, date to be paid	Mar. 01, 2019

XML

Juniata Valley Financial Corp. (Parent Company Only) (Schedule of Condensed Balance Sheets) (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Cash and cash equivalents	$ 16,456	$ 9,897
Investment in unconsolidated subsidiary		4,812
Investment securities available for sale	141,953	153,824
Total assets	625,236	591,945
Stockholders' equity	67,378	59,387	$ 59,090	$ 59,962
Total liabilities and stockholders' equity	625,236	591,945
Parent Company [Member]
Cash and cash equivalents	48	1,082
Investment in bank subsidiary	65,909	52,522
Investment in unconsolidated subsidiary		4,812
Investment securities available for sale	1,193	1,169
Other assets	641	224
Total assets	67,791	59,809
Accounts payable and other liabilities	413	422
Stockholders' equity	67,378	59,387
Total liabilities and stockholders' equity	$ 67,791	$ 59,809

XML

Juniata Valley Financial Corp. (Parent Company Only) (Schedule of Condensed Statements of Income and Comprehensive Income) (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Income/gain from unconsolidated subsidiary									$ 296	$ 167	$ 222
Gain (loss) on the sale of securities	$ (173)			$ (15)	$ 2	$ 2	$ 4	$ 504	(188)	512	218
Change in equity security value	43	$ 4	$ (52)	6
Merger-related expenses	259	185	376	64	13				884	13	347
Other non-interest expense									19,461	17,775	17,178
Income tax (benefit) provision	(187)	(29)	(372)	(71)	359	127	244	330	(659)	1,060	819
Net income	$ 1,217	$ 1,385	$ 1,975	$ 1,327	$ 578	$ 1,206	$ 1,294	$ 1,459	5,904	4,537	5,156
Comprehensive income									5,795	4,300	4,150
Parent Company [Member]
Interest and dividends on investment securities available for sale									44	44	59
Dividends from bank subsidiary									4,923	4,194	5,624
Income/gain from unconsolidated subsidiary									296	167	222
Gain (loss) on the sale of securities										314	166
Change in equity security value									26
Total income									5,289	4,719	6,071
Merger-related expenses									134	13	66
Other non-interest expense									155	146	157
Total expense									289	159	223
Income before income taxes (benefit) and equity in undistributed net income of subsidiary									5,000	4,560	5,848
Income tax (benefit) provision									(347)	(127)	47
Net income, Including Portion attributable to subsidiary									5,347	4,687	5,801
Undistributed net gain (loss) of subsidiary									557	(150)	(645)
Net income									5,904	4,537	5,156
Comprehensive income									$ 5,795	$ 4,300	$ 4,150

XML

Juniata Valley Financial Corp. (Parent Company Only) (Schedule of Condensed Statements of Cash Flows) (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Net income	$ 1,217	$ 1,385	$ 1,975	$ 1,327	$ 578	$ 1,206	$ 1,294	$ 1,459	$ 5,904	$ 4,537	$ 5,156
Net realized loss (gain) on sales and calls of securities									188	(512)	(218)
Change in equity security value	(43)	$ (4)	$ 52	(6)
Equity loss (gain) in unconsolidated subsidiary, net of dividends of $75, $61 and $55									194	(106)	(167)
Equity gain from acquisition of unconsolidated subsidiary									(415)
Stock-based compensation expense									82	71	67
Net cash provided by operating activities									5,321	6,800	6,303
Purchases of: Securities available for sale									(20,610)	(42,510)	(48,195)
Proceeds from the maturity and principal repayments of available for sale investment securities									19,145	16,322	43,835
Net cash received from acquisition									7,561
Net cash provided by (used in) investing activities									14,835	(13,798)	(459)
Cash dividends									(4,411)	(4,194)	(4,226)
Purchase of treasury stock									(70)	(86)	(927)
Treasury stock issued for stock plans									42	206	64
Common stock issued for stock plans									90
Net cash (used in) provided by financing activities									(13,597)	7,336	(6,743)
Net increase (decrease) in cash and cash equivalents									6,559	338	(899)
Cash and cash equivalents at beginning of year				9,897				9,559	9,897	9,559	10,458
Cash and cash equivalents at end of year	16,456				9,897				16,456	9,897	9,559
Equity method investment, dividends									75	61	55
Parent Company [Member]
Net income									5,904	4,537	5,156
Undistributed net loss (income) of subsidiary									(556)	150	645
Net realized loss (gain) on sales and calls of securities										(314)	(166)
Change in equity security value									(26)
Equity loss (gain) in unconsolidated subsidiary, net of dividends of $75, $61 and $55									194	(106)	(167)
Equity gain from acquisition of unconsolidated subsidiary									(415)
Stock-based compensation expense									82	71	67
Decrease (increase) in other assets									(93)	513	(413)
(Decrease) increase in taxes payable									(402)	(271)	191
(Decrease) increase in accounts payable and other liabilities									(12)	(254)	1
Net cash provided by operating activities									4,676	4,326	5,314
Purchases of: Securities available for sale											(470)
Proceeds from the sale of available for sale securities										734	252
Net cash received from acquisition									(1,361)
Net cash provided by (used in) investing activities									(1,361)	734	(218)
Cash dividends									(4,411)	(4,194)	(4,226)
Purchase of treasury stock									(70)	(86)	(927)
Treasury stock issued for stock plans									90
Common stock issued for stock plans									42	206	64
Net cash (used in) provided by financing activities									(4,349)	(4,074)	(5,089)
Net increase (decrease) in cash and cash equivalents									(1,034)	986	7
Cash and cash equivalents at beginning of year				$ 1,082				$ 96	1,082	96	89
Cash and cash equivalents at end of year	$ 48				$ 1,082				48	1,082	96
Equity method investment, dividends									$ 75	$ 61	$ 55

XML

Quarterly Results of Operations (Unaudited) (Quarterly Results of Operations) (Details) - USD ($)	3 Months Ended								12 Months Ended
	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016	Apr. 29, 2018
Total interest income	$ 6,139,000	$ 6,129,000	$ 5,944,000	$ 5,439,000	$ 5,395,000	$ 5,457,000	$ 5,348,000	$ 5,174,000	$ 23,651,000	$ 21,374,000	$ 20,469,000
Total interest expense	1,001,000	950,000	890,000	794,000	774,000	752,000	702,000	627,000	3,635,000	2,855,000	2,268,000
Net interest income	5,138,000	5,179,000	5,054,000	4,645,000	4,621,000	4,705,000	4,646,000	4,547,000	20,016,000	18,519,000	18,201,000
Provision for loan losses	106,000	32,000	41,000	158,000	50,000	149,000	135,000	105,000	337,000	439,000	466,000
Change in equity security value	(43,000)	(4,000)	52,000	(6,000)
Gain (loss) on the sale of securities	(173,000)			(15,000)	2,000	2,000	4,000	504,000	(188,000)	512,000	218,000
Other income	1,332,000	1,245,000	1,444,000	1,195,000	1,199,000	1,217,000	1,252,000	1,112,000
Merger and acquisition expense	259,000	185,000	376,000	64,000	13,000				884,000	13,000	347,000
Other expense	4,859,000	4,847,000	4,530,000	4,341,000	4,822,000	4,442,000	4,229,000	4,269,000
Income before income taxes	1,030,000	1,356,000	1,603,000	1,256,000	937,000	1,333,000	1,538,000	1,789,000	5,245,000	5,597,000	5,975,000
Income tax (benefit) provision	(187,000)	(29,000)	(372,000)	(71,000)	359,000	127,000	244,000	330,000	(659,000)	1,060,000	819,000
Net income	$ 1,217,000	$ 1,385,000	$ 1,975,000	$ 1,327,000	$ 578,000	$ 1,206,000	$ 1,294,000	$ 1,459,000	$ 5,904,000	$ 4,537,000	$ 5,156,000
Basic earnings per share	$ 0.24	$ 0.27	$ 0.39	$ 0.28	$ 0.12	$ 0.25	$ 0.27	$ 0.31	$ 1.18	$ 0.95	$ 1.07
Diluted earnings per share	0.24	0.27	0.39	0.28	0.12	0.25	0.27	0.31	1.18	0.95	1.07
Per-share data: Cash dividends	$ 0.22	$ 0.22	$ 0.22	$ 0.22	$ 0.22	$ 0.22	$ 0.22	$ 0.22	$ 0.88	$ 0.88	$ 0.88
Deferred tax liability related to previous 39.16% ownership in LCB					$ 368,000					$ 368,000
Previously Reported [Member]
Income tax (benefit) provision			$ 34,000
Net income			$ 1,569,000
Basic earnings per share			$ 0.31
Diluted earnings per share			$ 0.31
Liverpool Community Bank [Member]
Deferred tax liability related to previous 39.16% ownership in LCB												$ 406,000