JUNIATA VALLEY FINANCIAL CORP (Form: 10-Q, Received: 11/08/2005 15:02:54)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended September 30, 2005


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

For the transition period from to

Commission File Number 000-13232

Juniata Valley Financial Corp.

(Exact name of registrant as specified in its charter)


Pennsylvania		23-2235254

(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

Bridge and Main Streets, Mifflintown, Pennsylvania		17059

(Address of principal executive offices)		(Zip Code)

(717) 436-8211

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þ Yes o No

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). þ Yes o No

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes þ No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Class		Outstanding as of November 1, 2005

Common Stock ($1.00 par value)		4,519,544 shares


TABLE OF CONTENTS


PART I — FINANCIAL INFORMATION
Item 1. Financial Statements

Consolidated Statements of Financial Condition as of September 30, 2005 and December 31, 2004 (Unaudited)			2

Consolidated Statements of Income for the three and nine months ended September 30, 2005 and 2004 (Unaudited)			3

Consolidated Statement of Changes in Stockholders’ Equity For the nine months ended September 30, 2005 (Unaudited)			4

Consolidated Statements of Cash Flows for the nine months ended September 30, 2005 and 2004 (Unaudited)			5

Notes to Unaudited Consolidated Financial Statements			6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			11

Item 3. Quantitative and Qualitative Disclosures about Market Risk			17

Item 4. Controls and Procedures			17

PART II — OTHER INFORMATION

Item 1. Legal Proceedings			18

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			18

Item 3. Defaults Upon Senior Securities			18

Item 4. Submission of Matters to a Vote of Security Holders			18

Item 5. Other Information			18

Item 6. Exhibits			19

Signatures			19

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

Juniata Valley Financial Corporation and Subsidiary

Consolidated Statements of Financial Condition

(Dollar amounts in thousands)


	September 30,			December 31,
	2005			2004
Assets
Cash and due from banks	$	10,038		$	10,733
Interest bearing deposits with banks		296			167
Federal funds sold		5,000			3,900

Cash and cash equivalents		15,334			14,800
Interest bearing time deposits with banks		5,660			6,760
Securities available for sale		67,157			71,583
Securities held to maturity, fair value of $7,843 and $4,489 respectively		7,891			4,485
Federal Home Loan Bank (FHLB) stock		1,089			1,329

Total loans, net of unearned interest		295,731			279,748
Less: Allowance for loan losses		(2,950	)		(2,989	)

Total loans, net of allowance for loan losses		292,781			276,759

Premises and equipment, net		6,452			6,802
Bank owned life insurance		10,737			10,464
Accrued interest receivable and other assets		5,392			4,092

Total assets	$	412,493		$	397,074

Liabilities and Stockholders’ Equity
Liabilities:
Deposits:
Non-interest bearing	$	43,866		$	47,459
Interest bearing		302,219			285,183

Total deposits		346,085			332,642

Securities sold under agreements to repurchase		7,409			4,716
Long-term debt		5,000			5,000
Other interest bearing liabilities		791			722
Accrued interest payable and other liabilities		4,945			3,841

Total liabilities		364,230			346,921
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 —
4,745,826 shares at September 30, 2005;
2,372,913 shares at December 31, 2004
Outstanding —
4,549,544 shares at September 30, 2005;
2,280,629 shares at December 31, 2004		4,746			2,373
Surplus		18,110			20,386
Retained earnings		29,719			29,966
Accumulated other comprehensive (loss) income		(911	)		414
Cost of common stock in Treasury:
196,282 shares at September 30, 2005;
92,284 shares at December 31, 2004		(3,401	)		(2,986	)

Total stockholders’ equity		48,263			50,153

Total liabilities and stockholders’ equity	$	412,493		$	397,074

See accompanying notes to unaudited consolidated financial statements.

Juniata Valley Financial Corporation and Subsidiary

Consolidated Statements of Income

For the three and nine months ended September 30, 2005 and 2004 (Unaudited)

(Dollar amounts in thousands, except share data)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2005		2004		2005		2004
Interest income:
Loans receivable	$	4,989	$	4,744	$	14,710	$	13,896
Taxable securities		442		477		1,403		1,556
Tax-exempt securities		163		192		498		641
Other interest income		138		60		294		134

Total interest income		5,732		5,473		16,905		16,227

Interest expense:
Deposits		2,001		1,568		5,558		4,749
Borrowings		103		25		232		35

Total interest expense		2,104		1,593		5,790		4,784

Net interest income		3,628		3,880		11,115		11,443
Provision for loan losses		—		82		28		239

Net interest income after provision for loan losses		3,628		3,798		11,087		11,204

Noninterest income:
Trust department		86		101		276		337
Customer service fees		353		330		1,036		933
Earnings on bank-owned life insurance		95		106		273		317
Gain on sale of loans and other assets		9		3		15		11
Gain on sale of securities		52		—		151		268
Other noninterest income		243		204		698		609

Total noninterest income		838		744		2,449		2,475

Noninterest expense:
Salaries and wages		1,066		1,052		3,525		3,141
Employee benefits		348		333		1,108		1,038
Occupancy		214		196		631		606
Equipment		148		145		438		421
Data processing expense		307		304		917		850
Director compensation		114		128		363		386
Taxes, other than income		130		129		389		386
Other noninterest expense		632		367		1,461		1,064

Total noninterest expense		2,959		2,654		8,832		7,892

Income before income taxes		1,507		1,888		4,704		5,787
Provision for income taxes		416		572		1,307		1,541

Net income	$	1,091	$	1,316	$	3,397	$	4,246

Net income per share
Basic	$	0.24	$	0.29	$	0.74	$	0.93
Diluted	$	0.24	$	0.29	$	0.74	$	0.93
Cash dividends declared per share		—		—	$	0.80	$	0.78
Weighted average shares outstanding		4,568,060		4,558,076		4,562,132		4,560,234
Weighted average shares and share equivalents outstanding		4,586,328		4,572,000		4,579,816		4,572,088

See accompanying notes to unaudited consolidated financial statements.

Juniata Valley Financial Corporation and Subsidiary

Consolidated Statement of Changes in Stockholders’ Equity

For the nine months ended September 30, 2005 (Unaudited)

(Dollar amounts in thousands)


									Accumulated
									Other
									Comprehensive						Total
	Common					Retained			(Loss) Income			Treasury			Stockholders’
	Stock		Surplus			Earnings			Net of Tax			Stock			Equity
Balance at December 31, 2004	$	2,373	$	20,386		$	29,966		$	414		$	(2,986	)	$	50,153

Comprehensive Income:
Net income		—		—			3,397			—						3,397
Change in unrealized losses on securities available for sale, net of reclassification adjustment and tax effects		—		—			—			(694	)		—			(694	)
Minimum pension liability, net of tax effects		—		—			—			(631	)		—			(631	)

Total comprehensive income		—		—			3,397			(1,325	)		—			2,072
Cash dividends at $.80 per share		—		—			(3,644	)		—						(3,644	)
Purchase of treasury stock, at cost (32,800 shares)		—		—						—			(763	)		(763	)
Treasury stock issued for dividend reinvestment plan (14,158 shares)		—		95						—			233			328
Treasury stock issued for stock option and stock purchase plans (6,928 shares)		—		2						—			115			117
Stock issued pursuant to 2 for 1 stock split effective October 31, 2005 (2,372,913 shares)		2,373		(2,373	)											—


Balance at September 30, 2005	$	4,746	$	18,110		$	29,719		$	(911	)	$	(3,401	)	$	48,263

See accompanying notes to unaudited consolidated financial statements.

Juniata Valley Financial Corporation and Subsidiary

Consolidated Statements of Cash Flows

For the nine months ended September 30, 2005 and 2004 (Unaudited)

(Dollar amounts in thousands)


	Nine months ended
	September 30,
	2005			2004
Operating activities:
Net income	$	3,397		$	4,246
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		28			239
Provision for depreciation		453			415
Net amortization of security premiums		170			223
Net realized gains on sales of securities		(151	)		(268	)
Earnings on investment in life insurance		(273	)		(317	)
Other		(401	)		(344	)

Net cash provided by operating activities		3,223			4,194

Investing activities:
Net decrease (increase) in interest bearing time deposits		1,100			(3,270	)
Purchases of:
Securities available for sale		(8,084	)		(12,136	)
FHLB stock		—			(636	)
Held to maturity securities		(4,400	)		(1,295	)
Bank premises and equipment		(103	)		(547	)
Proceeds from:
Sales of available for sale securities		336			3,279
Maturities of and principal repayments on available for sale securities		11,098			17,726
Redemption of FHLB stock		240			348
Maturities of and principal repayments on held to maturity securities		1,000			7,394
Net increase in loans receivable		(16,050	)		(25,934	)

Net cash used in investing activities		(14,863	)		(15,071	)

Financing activities:
Net increase in deposits		13,443			2,912
Net increase in short-term borrowings		2,693			4,706
Long term debt advances		—			5,000
Cash dividends		(3,644	)		(3,560	)
Purchase of treasury stock		(763	)		(779	)
Treasury stock issued for dividend reinvestment and employee stock purchase plan		445			434

Net cash provided by financing activities		12,174			8,713

Net increase (decrease) in cash and cash equivalents		534			(2,164	)
Cash and cash equivalents at beginning of period		14,800			13,627

Cash and cash equivalents at end of period	$	15,334		$	11,463


Supplemental information:

Interest paid	$	5,675		$	4,801
Income taxes paid	$	1,651		$	1,721

See accompanying notes to unaudited consolidated financial statements.

Juniata Valley Financial Corporation and Subsidiary

Notes to Unaudited Consolidated Financial Statements

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE A – Basis of Presentation

The financial information includes the accounts of Juniata Valley Financial Corp. (the “Corporation”) and its wholly owned subsidiary, The Juniata Valley Bank (the “Bank”). All significant intercompany accounts and transactions have been eliminated.

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for fair presentation have been included. Operating results for the nine-month period ended September 30, 2005, are not necessarily indicative of the results for the year ended December 31, 2005. For further information, refer to the consolidated financial statements and footnotes thereto included in Juniata Valley Financial Corp. annual report on Form 10-K for the year ended December 31, 2004.

All share and per-share data presented for September 30, 2005 and 2004 has been stated to reflect the effect of a two for one stock split which was effective on October 31, 2005.

Certain prior year amounts have been reclassified to conform with the current year presentation. Such reclassifications had no effect on net income or stockholders’ equity.

NOTE B – Recent Accounting Pronouncements

In April 2005, the Securities and Exchange Commission adopted a new rule that amends the compliance dates for Financial Accounting Standards Board’s (“FASB”) Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment (FAS No. 123R). The Statement requires that compensation cost relating to share-based payment transactions be recognized in financial statements and that this cost be measured based on the fair value of the equity or liability instruments issued. FAS No. 123 (Revised 2004) covers a wide range of share-based compensation arrangements including share options, restricted share plans, performance-based awards, share appreciation rights, and employee share purchase plans. The Company will adopt FAS No. 123 (Revised 2004) on January 1, 2006 and is currently evaluating the impact the adoption of the standard will have on the Company’s results of operations.

In March 2005, the Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin No. 107 (“SAB No. 107”), “Share-Based Payment,” providing guidance on option valuation methods, the accounting for income tax effects of share-based payment arrangements upon adoption of FAS No. 123R, and the disclosures in MD&A subsequent to the adoption. The Company will provide SAB No. 107 required disclosures upon adoption of SFAS No. 123R on January 1, 2006, and is currently evaluating the impact the adoption of the standard will have on the Company’s financial condition, results of operations, and cash flows.

In May 2005, the FASB issued FAS No. 154, “Accounting Changes and Errors Corrections, a replacement of APB Opinion No. 20 and FAS No. 3.” The Statement applies to all voluntary changes in accounting principle, and changes the requirements for accounting for and reporting of a change in accounting principle. FAS No. 154 requires retrospective application to prior periods’ financial statements of a voluntary change in accounting principle unless it is impractical. APB Opinion No. 20 previously required that most voluntary changes in accounting principle be recognized by including in net income of the period of the change the cumulative effect of changing to the new accounting principle. FAS No. 154 improves the financial reporting because its requirements enhance the consistency of financial reporting between periods. The provisions of FAS No. 154 are effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. Management believes that adoption of the provisions of FAS No. 154 will not have a material impact on the Corporation’s condensed consolidated financial statements.

NOTE C – Comprehensive Income

Accounting principles generally require that recognized revenue, expenses, gains, and losses be included in net income. Although certain changes in assets and liabilities, such as unrealized gains and losses on available for sale securities, are reported as a separate component of the equity section of the balance sheet, such items, along with net income, are components of comprehensive income (loss).

The components of comprehensive income and related tax affects are as follows (in thousands):


	Three Months September 30, 2005									Three Months September 30, 2004
	Before			Tax Expense						Before		Tax Expense
	Tax			or			Net-of-Tax			Tax		or		Net-of-Tax
	Amount			(Benefit)			Amount			Amount		(Benefit)		Amount
Net income	$	1,507		$	416		$	1,091		$	1,888	$	572	$	1,316
Other comprehensive income (loss):

Unrealized gains on available for sale securities :
Unrealized holding (gains) losses arising during the period		(339	)		(115	)		(224	)		584		199		385
Less reclassification adjustment for gains included in net income		(52	)		(18	)		(34	)		—		—		—
Minimum pension liability		—			—			—			—		—		—

Other comprehensive income (loss)		(391	)		(133	)		(258	)		584		199		385

Total comprehensive income	$	1,116		$	283		$	833		$	2,472	$	771	$	1,701


	Nine Months September 30, 2005									Nine Months September 30, 2004
	Before			Tax Expense						Before			Tax Expense
	Tax			or			Net-of-Tax			Tax			or			Net-of-Tax
	Amount			(Benefit)			Amount			Amount			(Benefit)			Amount
Net income	$	4,704		$	1,307		$	3,397		$	5,787		$	1,541		$	4,246
Other comprehensive income (loss):

Unrealized gains on available for sale securities :
Unrealized holding losses arising during the period		(900	)		(306	)		(594	)		(872	)		(295	)		(577	)
Less reclassification adjustment for gains included in net income		(151	)		(51	)		(100	)		(268	)		(91	)		(177	)
Minimum pension liability		(956	)		(325	)		(631	)		—			—			—

Other comprehensive income (loss)		(2,007	)		(682	)		(1,325	)		(1,140	)		(387	)		(753	)

Total comprehensive income	$	2,697		$	625		$	2,072		$	4,647		$	1,154		$	3,493

NOTE D – Stock Option Plan

The Corporation accounts for the stock option plan under the recognition and measurement principles of APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations. No stock-based employee compensation cost is reflected in net income, as all options granted under those plans had an exercise price equal to the market value of the underlying common stock on the date of grant. The following table illustrates the effect on net income and earnings per share if the Corporation had applied the fair value recognition provisions of FASB Statement No. 123, “Accounting for Stock-Based Compensation,” to stock-based compensation for three and nine months ended September 30, 2005 and 2004:


	Three Months Ended
	September 30,
(Dollar amounts in thousands, except share data)	2005			2004

Net income, as reported	$	1,091		$	1,316
Compensation expense, under FAS 123, net of tax		(5	)		(6	)

Pro forma net income	$	1,086		$	1,310

Basic net income per share, as reported	$	0.24		$	0.29
Pro forma basic net income per share	$	0.24		$	0.29

Diluted net income per share, as reported	$	0.24		$	0.29
Pro forma diluted net income per share	$	0.24		$	0.29


	Nine Months Ended
	September 30,
(Dollar amounts in thousands, except share data)	2005			2004

Net income, as reported	$	3,397		$	4,246
Compensation expense, under FAS 123, net of tax		(15	)		(17	)

Pro forma net income	$	3,382		$	4,229

Basic net income per share, as reported	$	0.74		$	0.93
Pro forma basic net income per share	$	0.73		$	0.92

Diluted net income per share, as reported	$	0.74		$	0.93
Pro forma diluted net income per share	$	0.73		$	0.92

NOTE E – Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share:

(Amounts, except earnings per share, in thousands)


	Three Months		Three Months
	Ended		Ended
	September 30, 2005		September 30, 2004
Net income	$	1,091	$	1,316
Weighted-average common shares outstanding		4,568		4,558

Basic earnings per share	$	0.24	$	0.29

Weighted-average common shares outstanding		4,568		4,558
Common stock equivalents due to effect of stock options		18		14

Total weighted-average common shares and equivalents		4,586		4,572

Diluted earnings per share	$	0.24	$	0.29


	Nine Months		Nine Months
	Ended		Ended
	September 30, 2005		September 30, 2004
Net income	$	3,397	$	4,246
Weighted-average common shares outstanding		4,562		4,560

Basic earnings per share	$	0.74	$	0.93

Weighted-average common shares outstanding		4,562		4,560
Common stock equivalents due to effect of stock options		18		12

Total weighted-average common shares and equivalents		4,580		4,572

Diluted earnings per share	$	0.74	$	0.93

NOTE F – Commitments, Contingent Liabilities and Guarantees

In the ordinary course of business, the Corporation makes commitments to extend credit to its customers through letters of credit, loan commitments and lines of credit. At September 30, 2005, the Bank had $46,925,000 outstanding in loan commitments and other unused lines of credit extended to its customers.

The Corporation does not issue any guarantees that would require liability recognition or disclosure, other than its letters of credit. Letters of credit written are conditional commitments issued by the Corporation to guarantee the performance of a customer to a third party. Generally, all letters of credit, when issued have expiration dates within one year. The credit risk involved in issuing letters of credit is essentially the same as those that are involved in extending loan facilities to customers. The Corporation, generally, holds collateral and/or personal guarantees supporting these commitments. The Corporation had $753,000 of letters of credit as of September 30, 2005. Management believes that the proceeds obtained through a liquidation of collateral and the enforcement of guarantees would be sufficient to cover the potential amount of future payment required under the corresponding guarantees. The current amount of the liability as of September 30, 2005, for guarantees under letters of credit issued is not material.

NOTE G – Defined Benefit Retirement Plan

The Corporation has a defined benefit retirement plan covering substantially all of its employees. The benefits are based on years of service and the employees’ compensation. The Corporation’s funding policy is to contribute annually the maximum amount that can be deducted for federal income taxes purposes. Contributions are intended to provide not only for benefits attributed to service to date but also for those expected to be earned in the future.

Pension expense included the following components for the three- and nine-month periods ended September 30, 2005 and 2004:

(Dollar amounts in thousands)


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2005			2004			2005			2004

Components of net periodic pension cost
Service cost	$	74		$	55		$	214		$	211
Interest cost		87			80			260			240
Expected return on plan assets		(85	)		(80	)		(251	)		(240	)
Additional recognized amounts		26			—			63			—

Net periodic pension cost	$	102		$	55		$	286		$	211

NOTE H – Subsequent Events

On September 20, 2005, the Board of Directors of the Corporation declared a 2 for 1 stock split to shareholders of record October 17, 2005 to be distributed on October 31, 2005. As of November 1, the total number of shares issued and outstanding is 4,745,826 and 4,519,544, respectively.

On October 11, 2005, the Corporation appointed Registrar and Transfer Company as transfer agent for the Corporation’s common stock. The Juniata Valley Bank formerly acted as the Corporation’s transfer agent.

On October 14, 2005, the Corporation registered an additional 100,000 shares, on a pre-split basis, for issuance under the Corporation’s Dividend Reinvestment Plan. Additionally, the Plan was amended and restated and filed as an exhibit to the Corporation’s registration statement on Form S-3.

On October 18, 2005, the Board of Directors declared a cash dividend of $0.31 to shareholders of record November 1, 2005, payable on December 1, 2005. The dividend was declared on a post-split basis and will not be further affected by the stock split.

On October 18, 2005, the Board of Directors authorized the repurchase of an additional 200,000 shares of stock in conjunction with the Corporation’s existing Treasury Stock Buyback program. The number of shares authorized is also on a post-split basis.

On November 7, 2005, the Corporation and JoAnn N. McMinn, Chief Financial Officer, entered into a Change of Control Severance Agreement. The Agreement provides certain severance benefits upon termination of employment following a change in control (as defined in the Agreement) of the Corporation. The severance benefits will be equal to 295% of the employee’s average annualized taxable compensation from the Corporation for the five years prior to the year in which a change of control occurs, provided, however that the benefits are limited so as not to constitute “excess parachute payments” within the meaning of Section 280G of the Internal Revenue Code. The severance benefit shall be in the form of a lump sum payment and shall be made no later than thirty days following the effective date of the termination.

Item 2 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward Looking Statements:

The Private Securities Litigation Reform Act of 1995 contains safe harbor provisions regarding forward-looking statements. When used in this discussion, the words “believes,” “anticipates,” “contemplates,” “expects,” and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties which could cause actual results, performance or achievements expressed or implied by such forward-looking statements to differ materially from those projected. Those risks and uncertainties include changes in interest rates and their impact on the level of deposits, loan demand and value of loan collateral, increased competition from other financial institutions, governmental monetary policy, legislation and changes in banking regulations, risks associated with the effect of opening a new branch, the ability to control costs and expenses, and general economic conditions. The Corporation undertakes no obligation to publicly release the results of any revisions to those forward-looking statements which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Critical Accounting Policies:

Disclosure of the Corporation’s significant accounting policies is included in the notes to the financial statements of the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2004. Some of these policies are particularly sensitive, requiring significant judgments, estimates, and assumptions to be made by management, most particularly in connection with determining the provision for loan losses and the appropriate level of the allowance for loan losses. There have been no significant changes in the Corporation’s application of critical accounting policies since December 31, 2004. as more fully discussed under Note B to the interim condensed consolidated financial statements, “Recent Accounting Pronouncements”, the FASB issued a new accounting standard, FAS No. 123 (Revised 2004) which will be effective for the Corporation on January 1, 2006. The new accounting standard eliminates the ability of the Corporation to account for stock-based compensation under the recognition and measurement principles of APB Opinion 25; the new standard will require the Corporation to recognize in the income statement compensation cost relating to share-based payment transactions based on the fair value of the equity or liability instruments issued.

General

The following discusses the financial condition of the Corporation as of September 30, 2005, as compared to December 31, 2004, and the results of operations for the three and nine months ended September 30, 2005, compared to the same period in 2004. This discussion should be read in conjunction with the interim condensed consolidated financial statements and related footnotes included herein.

Introduction

Juniata Valley Financial Corp. is a Pennsylvania corporation organized to become the holding company of The Juniata Valley Bank (“Bank”). The Bank is a state-chartered bank headquartered in Mifflintown, Pennsylvania. Juniata Valley Financial Corp. and its subsidiary bank derive substantially all of their income from banking and bank-related services, including interest earnings on residential real estate, commercial mortgage, commercial, and consumer financings, as well as interest earnings on investment securities and deposit services to its customers through 11 locations in central Pennsylvania.

Financial Condition:

As of September 30, 2005, total assets increased by $15,419,000, or 3.9% as compared to December 31, 2004. The increase was primarily due to a $13,443,000 increase in deposits, which helped fund the additional $15,983,000 in loans.

Total securities available for sale at September 30, 2005 decreased $4,426,000 or 6.2% from December 31, 2004, with net unrealized holding losses arising during the period accounting for $900,000 of the decrease. Total purchases for the period were $8,084,000, while calls, maturities, and principal repayments totaled $11,098,000. Total securities held to maturity at September 30, 2005 increased $3,406,000 or 75.9% when compared to December 31, 2004. Total purchases for the period were $4,400,000, while calls, maturities, and principal repayments totaled $1,000,000. A majority of the calls, maturities, and principal repayments in the available for sale portfolio were reinvested in the held to maturity portfolio in order to invest in tax anticipation securities.

Loans to commercial borrowers increased $4,357,000 or 5.0%, installment loans increased $6,921,000 or 11.3%, and mortgages increased $4,705,000 or 3.6%. Management attributes the increases in lending balances to continued customer referrals, the economic climate within the market area, and competitive rates. The growth in loans was primarily funded by deposit growth.

As of September 30, 2005, the Corporation has one large loan relationship that is considered to be impaired. There is a specific allocation of loan loss reserve for this loan that management believes is adequate to cover potential future losses. Otherwise, there are no material loans classified for regulatory purposes as loss, doubtful, substandard, or special mention which management expects to significantly impact future operating results, liquidity or capital resources. Following is a summary of the Bank’s non-performing loans on September 30, 2005 as compared to December 31, 2004.

(Dollar amounts in thousands)


	September 30, 2005			December 31, 2004

Non-performing loans
Nonaccrual loans	$	96		$	—
Accruing loans past due 90 days or more		489			365
Restructured loans		—			—

Total	$	585		$	365

Average loans outstanding	$	288,051		$	263,773

Ratio of non-performing loans to average loans outstanding		0.20	%		0.14	%

Total deposits increased $13,443,000 or 4.0% during the first nine months of 2005. Interest bearing deposits grew by $17,036,000, or 6.0%, while non-interest bearing deposits declined by $3,593,000, or 7.6%. Management has continued to offer attractive interest rates on deposit accounts resulting in both new customers and additional deposits from existing customers.

Securities sold under agreements to repurchase increased $2,693,000 or 57.1% during the period, as a result of additional relationships.

Stockholders’ equity decreased $1,890,000 or 3.8% from December 31, 2004 to September 30, 2005. Net income of $3,397,000 was offset by dividends of $3,644,000. Securities available for sale declined in market value, representing a decrease to equity of $694,000 during the period. During the second quarter, a minimum pension liability adjustment was recorded in the amount of $956,000, resulting in a pension liability balance of $674,000, and a decrease in other comprehensive income of $631,000, net of tax. This adjustment was due to a change in the discount rate used by the Corporation in the pension calculation that caused a significant increase in the accumulated benefit obligation. The Corporation is repurchasing stock into Treasury, pursuant to its Treasury Repurchase Program, and during the first nine months of 2005, purchased 16,400 shares at a cost of $763,000. Treasury stock is used for reissuance of shares in the Corporation’s Dividend Reinvestment Plan as well as its employee stock plans.

Subsequent to September 30, 2005, the following events took place:

On October 14, 2005, the Corporation registered an additional 100,000 shares, on a pre-split basis, for issuance through the Corporation’s Dividend Reinvestment Plan. Additionally, the Plan was amended and filed as an exhibit to the Corporation’s registration statement on Form S-3.

On October 18, 2005, the Board of Directors authorized the repurchase of an additional 200,000 shares of stock in conjunction with their existing Treasury Stock Buyback program. The number of shares authorized is also on a post-split basis.

Management is not aware of any current recommendations of the regulatory authorities which, if implemented, would have a material effect on the Corporation’s liquidity, capital resources, or operations.

Comparison of the three months ended September 30, 2005 and 2004

Operations Overview:

The third quarter’s income before taxes decreased by $381,000, or 20.2%, when compared to the same period in 2004. Net interest income after provision for loan losses decreased by $170,000 or 4.5%. Non-interest income increased $94,000 or 12.6% while non-interest expense increased by $305,000 or 11.5%. Provision for income tax was reduced by $156,000 when comparing the two quarters, resulting in an overall decrease to net income of $225,000 or 17.1%. Presented below are selected key ratios for the two periods:


	Three months ended
	September 30
	2005			2004

Return on average assets (annualized)		1.07	%		1.61	%
Return on average equity (annualized)		8.96	%		12.64	%
Average equity to average assets		11.89	%		12.77	%

The discussion that follows further explains changes in the components of net income when comparing the third quarter of 2005 with the third quarter of 2004.

Net Interest Income:

Interest on loans increased $245,000 or 5.2% in the third quarter of 2005 as compared to the same period in 2004. Volume increases in the loan portfolio were responsible for greater income over the period with the average balance of the portfolio increasing $27,418,000 or 6.9% while the average weighted interest rate earned on the portfolio decreased 12 basis points from 6.90% to 6.78% over the period. The substantial growth in the loan portfolio over the past year continued during the third quarter of 2005. Management attributes the increases in lending balances to continued customer referrals and consumer loan demands, the economic climate within the market area, and competitive rates. The growth in loans was primarily funded by deposit growth.

Interest earned on investment securities decreased $64,000 or 9.6% in the third quarter of 2005 as compared to 2004 as average balances decreased by $3,228,000 or 4.1% and the average weighted rate of the portfolio dropped by 19 basis points. Maturities and calls of investments which were purchased while interest rates were higher than current rates were not able to be reinvested at similar rates without increasing the duration of the bonds. Management believes that economic indicators show that we are in a rising interest rate period.

Interest expense on deposits increased $431,000 or 27.5% in the third quarter of 2005 as compared to 2004, reflecting growth in deposits and gradually rising interest rates. The average balance of interest-bearing deposits increased $7,958,000 or 2.8% while the average interest rate paid increased to 2.68% in 2005 from 2.16% in 2004.

Total average earning assets during the third quarter of 2005 were $380,094,000, compared to $362,190,000 during the third quarter of 2004, yielding 6.00% in 2005 versus 6.01% in 2004. Funding costs for the earning assets were 2.20% and 1.74%, for the third quarters of 2005 and 2004, respectively. Net interest spread for the third quarter of 2005 was 3.81% and net interest margin on a fully tax-equivalent basis was 3.91%. For the same period in 2004, net interest spread and fully-tax equivalent net interest margin were 4.27% and 4.40%, respectively.

Provision for Loan Losses:

In the third quarter of 2005, there was no provision made for loan losses, Management regularly reviews the adequacy of the loan loss reserve and makes assessments as to specific loan impairment, historical charge-off expectations, general economic conditions in the Bank’s market area, specific loan quality and other factors. In the third quarter of 2004, a loan loss provision of $82,000 was recorded.

Noninterest income:

Noninterest income increased $94,000 or 12.6% in the third quarter of 2005 as compared to the same period in 2004. The Corporation recognized gains on sales of securities of $52,000 in the third quarter of 2005 which were not present in 2004, accounting for the majority of the increase, however, income from customer service fees on deposit accounts in the third quarter of 2005 was favorable to the same period in 2004 by 7.0%, and fee income from the Bank’s Alternative Investment program increased by 12.3%. Income from trust services and bank owned life insurance decreased in the third quarter of 2005 compared to the third quarter of 2004 as a result of generally lower interest rates.

As a percentage of average assets, annualized noninterest income, exclusive of net gains on the sale of securities, was 0.77% in the third quarter of 2005 as compared to 0.76% in the same period of 2004.

Noninterest expense:

Total noninterest expense increased $305,000 or 11.5% in the third quarter of 2005 as compared to 2004. Salaries and wages and employee benefit expense increased $29,000, or 2.1% in the third quarter of 2005 as compared to 2004. Costs relating to occupancy, equipment, data processing, director compensation and state taxes were not materially different in the third quarter of 2005 than in the third quarter of 2004, however, other noninterest expense rose by $265,000, or 72.2%. The increase in other noninterest expense between the two periods is primarily due to additional costs related to the initial compliance with Section 404 of the Sarbanes-Oxley Act. These additional costs include professional, legal and consulting fees, that, as a group exceeded the same period in 2004 by 251,000, or 470.0%. An advertising campaign to promote a new Bank product added approximately $57,000 in costs that were not experienced in the prior year’s third quarter as well.

As a percentage of average assets, annualized noninterest expense, was 2.89% as compared to 2.72% in the same period of 2004.

Comparison of the nine months ended September 30, 2005 and 2004

Operations Overview:

As of September 30, 2005, income before taxes decreased by $1,083,000, or 18.7%, when compared to the same period in 2004. Net interest income after provision for loan losses decreased by $117,000 or 1.0%. Non-interest income decreased $26,000 or 1.1% and non-interest expense increased by $940,000 or 11.9%. Provision for income tax was reduced by $234,000 when comparing the two periods, resulting in an overall decrease to net income of $849,000 or 20.0%. Presented below are selected key ratios for the two periods:


	Nine months ended
	September 30
	2005			2004
Return on average assets (annualized)		1.12	%		1.45	%
Return on average equity (annualized)		9.23	%		11.41	%
Average equity to average assets		12.11	%		12.69	%

The discussion that follows further explains changes in the components of net income when comparing year-to-date results in 2005 with the same period in 2004.

Net Interest Income:

Interest on loans increased $814,000 or 5.8% in the first nine months of 2005 as compared to the same period in 2004. Volume increases in the loan portfolio were responsible for greater income over the period with the average balance of the portfolio increasing $23,400,000 or 8.8% while the average weighted interest rate earned on the portfolio decreased 19 basis points from 7.50% to 7.31% over the period. Management attributes the increases in lending balances to continued customer referrals and consumer loan demand, the economic climate within the market area, and competitive rates. The growth in loans was primarily funded by increased deposits.

Interest earned on investment securities decreased $296,000 or 13.5% in the first nine months of 2005 as compared to 2004 as average balances decreased by $9,149,000 or 10.6% and the average weighted rate of the portfolio dropped by 10 basis points. Most of the funds received from sales, maturities and calls of investments during the period were used to fund loan demand. Reinvestments within the investment portfolio were made at generally lower rates than the portfolio average, as management’s policy was to conservatively invest in relatively shorter term, lower-yielding maturities in anticipation of a rising interest rate period in the near term.

Interest expense on deposits increased $809,000 or 17.0% in the first nine months of 2005 as compared to 2004. The average balance of interest-bearing deposits increased $311,000 or 0.1% while the average interest rate paid increased to 2.88% in 2005 from 2.47% in 2004.

Total average earning assets during the first nine months of 2005 were $375,051,000, compared to $360,051,000 during the first nine months of 2004, yielding 6.47% in 2005 versus 6.45% in 2004. Funding costs for the earning assets were 2.33% and 2.00%, for the first nine months of 2005 and 2004, respectively. Net interest spread in 2005 was 4.15% and net interest margin on a fully tax-equivalent basis was 4.26%. For the same period in 2004, net interest spread and fully-tax equivalent net interest margin were 4.26% and 4.60%, respectively.

Provision for Loan Losses:

For the nine months ending on September 30, 2005, a provision of $28,000 was made for loan losses, as compared to $239,000 for the same period in 2004. This is based upon management’s review of the adequacy of the loan loss reserve, where an assessment is made as to specific loan impairment, historical charge-off expectations, general economic conditions in the Bank’s market area, specific loan quality and other factors.

Noninterest income:

Noninterest income decreased $26,000 or 1.1% in the first nine months of 2005 as compared to the same period in 2004. The Corporation recognized gains on sales of securities of $151,000 in 2005 as compared to $268,000 in 2004, a reduction of $117,000, or 43.7%. Trust fee income and earnings on bank-owned life insurance were less in 2005 than in 2004 due to fewer trust estate settlements in 2005 than in 2004 and generally lower rates. Income from customer service fees on deposit accounts in 2005 was favorable to the same period in 2004 by $103,000, or 11.0%, and fee income from the Bank’s Alternative Investment program increased by $39,000, or 13.9%.

As a percentage of average assets, annualized noninterest income, exclusive of net gains on the sale of securities, was 0.76% for the first nine months in 2005 as compared to 0.75% in the same period of 2004.

Noninterest expense:

Total noninterest expense increased $940,000 or 11.9% in the nine months ending September 30, 2005 as compared to the same period in 2004. Salaries and wages and employee benefit expense increased $454,000, or 10.9% through nine months in 2005 as compared to 2004. The majority of this increase is due to severance that was recorded related to an executive who left the company during the second quarter of 2005. Costs relating to occupancy, equipment, director compensation and state taxes were not materially different in 2005 than in 2004. Data processing expense increased for the nine-month period in 2005 by $67,000, or 7.9% over the same period in 2004, due to the advancement of technology within the Corporation. Other noninterest expense rose by $397,000, or 37.3%. The increase in other noninterest expense between the two periods is primarily due to additional costs related to the initial compliance with Section 404 of the Sarbanes-Oxley Act. These additional costs include professional, legal and consulting fees, which, as a group exceeded costs in the same period in 2004 by 485,000, or 353%. An advertising campaign to promote a new Bank product added approximately $57,000 in costs that were not experienced in the prior year’s results as well.

As a percentage of average assets, annualized noninterest expense, was 2.91% as compared to 2.69% in the same period of 2004.

Liquidity:

The objective of liquidity management is to ensure that sufficient funding is available, at a reasonable cost, to meet the ongoing operational cash needs of the Corporation and to take advantage of income producing opportunities as they arise. While the desired level of liquidity will vary depending upon a variety of factors, it is the primary goal of the Corporation to maintain a high level of liquidity in all economic environments. Principal sources of asset liquidity are provided by securities maturing in one year or less, other short-term investments such as federal funds sold and cash and due from banks. Liability liquidity, which is more difficult to measure, can be met by attracting deposits and maintaining the core deposit base. The Corporation is a member of the Federal Home Loan Bank of Pittsburgh for the purpose of providing short-term liquidity when other sources are unable to fill these needs.

The Corporation borrowed $5,000,000 from Federal Home Loan Bank in August of 2004, for a two-year term with a fixed interest rate of 2.86 percent which was used for investment purposes.

Funding derived from securities sold under agreements to repurchase began in September of 2004 through new corporate cash management accounts for business customers. This allows the bank an ability to pay interest on corporate checking accounts.

In view of the primary and secondary sources previously mentioned, Management believes that the Corporation’s liquidity is capable of providing the funds needed to meet loan demand.

Off-Balance Sheet Arrangements:

The Corporation’s financial statements do not reflect various off-balance sheet arrangements that are made in the normal course of business, which may involve some liquidity risk, credit risk, and interest rate risk. These commitments consist mainly of loans approved but not yet funded, unused lines of credit, and letters of credit made under the same standards as on-balance sheet instruments. 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. Letters of credit are conditional commitments issued to guarantee the financial performance obligation of a customer to a third party. Unused commitments at September 30, 2005, were $46,925,000. Because these instruments have fixed maturity dates, and because many of them will expire without being drawn upon, they do not generally present any significant liquidity risk to the Corporation. Management believes that any amounts actually drawn upon can be funded in the normal course of operations.

The Corporation has no investment in or financial relationship with any unconsolidated entities that are reasonably likely to have a material effect on liquidity or the availability of capital resources.

Interest Rate Sensitivity:

Interest rate sensitivity management is the responsibility of the Asset/Liability Management Committee. This process involves the development and implementation of strategies to maximize net interest margin, while minimizing the earnings risk associated with changing interest rates. The traditional gap analysis identifies the maturity and re-pricing terms of all assets and liabilities.

Generally a liability sensitive position indicates that more liabilities than assets are expected to re-price within the time period and that falling interest rates could positively affect net interest income while rising interest rates could negatively affect net interest income. However, the traditional analysis does not accurately reflect the Corporation’s interest rate sensitivity since the rates on core deposits generally do not change as quickly as market rates. Historically net interest income has, in fact, not been subject to the degree of sensitivity indicated by the traditional analysis at The Juniata Valley Bank.

Capital Adequacy:

Bank regulatory authorities in the United States issue risk-based capital standards. These capital standards relate a banking company’s capital to the risk profile of its assets and provide the basis by which all banking companies and banks are evaluated in terms of capital adequacy. The risk-based capital standards require all banks to have Tier 1 capital of at least 4% and total capital, including Tier 1 capital, of at least 8% of risk-adjusted assets. Tier 1 capital includes common stockholders’ equity and qualifying perpetual preferred stock together with related surpluses and retained earnings. Total capital is comprised of Tier 1 capital, limited life preferred stock, qualifying debt instruments, and the reserves for possible loan losses. Banking regulators have also issued leverage ratio requirements. The leverage ratio requirement is measured as the ratio of Tier 1 capital to adjusted average assets.

At September 30, 2005, both the Corporation and the Bank exceeded the regulatory requirements to be considered a “well capitalized” financial institution, i.e., a leverage ratio exceeding 5%, Tier 1 capital exceeding 6% and total capital exceeding 10%.

ITEM 3

Quantitative and Qualitative Disclosures About Market Risk:

Currently, the Corporation has approximately 32.4% of its deposits in NOW, money market, and savings accounts, which it considers core deposits. These types of interest bearing deposit accounts carry lower rates relative to other types of deposits. Because of this, these accounts have contributed significantly to the net interest margin. The Corporation anticipates future federal fund rates increases; therefore, future rate increases on the core deposit accounts which may result in further compression on net interest margin. The added risk in this interest rate environment is that as the rates on the core deposits are so low, investors could migrate to other types of accounts paying higher rates. The last financial simulation performed by the Bank as of June 30, 2005, showed a possible decline in net interest income of $186,000 in a -100 basis point rate shock over a one-year period. If rates continue to increase, in a +100 basis point shock over a one-year period, the simulation performed shows a possible $38,000 increase to net interest income. The net interest income at risk position remains within the guidelines established by the Bank’s asset/liability policy. The Bank continues to monitor and manage its rate sensitivity.

No material change has been noted in the Bank’s equity value at risk. Please refer to the Annual Report on Form 10-K as of December 31, 2004 for further discussion of this matter.

Item 4 – CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Corporation’s management, with the participation of the Corporation’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Corporation’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (Exchange Act)) as of the end of the period covered by this report. Based on such evaluation, the Corporation’s Chief Executive Officer and Chief Financial Officer concluded that, as of the end of such period, the Corporation’s disclosure controls and procedures are effective in recording, processing, summarizing, and reporting, on a timely basis, information required to be disclosed by the Corporation in the reports that it files or submits under the Exchange Act.

Changes in Internal Control Over Financial Reporting

During the third quarter, the Corporation’s management continued to make improvements in its in internal control over financial reporting. The Corporation previously reported that it lacked sufficient personnel in the Finance Department to review information and to assure that the information is calculated correctly and properly disclosed in the financial statements and related footnotes. The Corporation recognized a need for greater expertise in certain complex areas of financial reporting, including the calculation of income taxes, stock options and employee benefit plans. During the second quarter, management retained the services of an independent accounting firm for assistance in these areas. In the third quarter, the Corporation hired a new chief financial officer who has extensive experience in financial transactions, regulatory reporting, accounting and compliance.

Part II. OTHER INFORMATION


		Item 1		LEGAL PROCEEDINGS

				In the opinion of management of the Corporation, there are no legal proceedings pending to which the Corporation or its subsidiary is a party or to which their property is subject, which, if determined adversely to the Corporation or its subsidiary, would be material in relation to the Corporation’s or its subsidiary financial condition. There are no proceedings pending other than ordinary routine litigation incident to the business of the Corporation or its subsidiary. In addition, no material proceedings are pending or are known to be threatened or contemplated against the Corporation or its subsidiary by government authorities.

Item 2 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table provides information on repurchases by the Corporation of its common stock in each month of the quarter ended September 30, 2005:


					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 (1)

July 1-31, 2005		—	$	—		—		83,048
August 1-31, 2005		—		—		—		83,048
September 1-30, 2005		20,800		23.69		20,800		62,248


Totals		20,800	$	23.69		20,800		62,248


(1)		On March 23, 2001, Juniata Valley Financial Corp. announced plans to buy back 100,000 (200,000 on a post-split basis) shares of their stock. There is no expiration date to this buyback plan, but subsequent to the initial plan, 400,000 additional shares were authorized by the Board of Directors. As of November 1, 2005, the number of shares that may yet be purchased under the Program is 232,248. No Juniata Valley Financial Corp. repurchase plan or program expired during the period covered by the table. The Corporation has no stock repurchase plan or program that it has determined to terminate prior to expiration or under which it does not intend to make further purchases.


		Item 3 DEFAULTS UPON SENIOR SECURITIES

Not applicable


		Item 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDER

None


		Item 5 OTHER INFORMATION

None

Item 6 EXHIBITS

Exhibit 10 Change of Control Severance Agreement dated November 7, 2005 between Juniata Valley Financial Corp. and The Juniata Valley Bank and JoAnn N. McMinn.

Exhibit 31.1 Rule 13a – 14(a)/15d – 14(a) Certification of President and Chief Executive Officer

Exhibit 31.2 Rule 13a – 14(a)/15d – 14(a) Certification of Chief Financial Officer

Exhibit 32.1 Section 1350 Certification of President and Chief Executive Officer (furnished, not filed)

Exhibit 32.2 Section 1350 Certification of Chief Financial Officer (furnished, not filed)

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		Juniata Valley Financial Corp.
			(Registrant)

Date	11-08-2005	By	/s/ Francis J. Evanitsky

			Francis J. Evanitsky, President and
			Chief Executive Officer

Date	11-08-2005	By	/s/ JoAnn N. McMinn

			JoAnn N. McMinn, Chief Financial
			Officer

Exhibit 10 — Change of Control Severance Agreement dated November 7, 2005 between Juniata Valley Financial
Corp. and The Juniata Valley Bank and JoAnn N. McMinn.

CHANGE OF CONTROL SEVERANCE AGREEMENT

THIS CHANGE OF CONTROL SEVERANCE AGREEMENT is entered into this 7th day of November 2005, between JUNIATA VALLEY FINANCIAL CORP., a Pennsylvania business corporation having its principal place of business in Mifflintown, Pennsylvania, and THE JUNIATA VALLEY BANK, a state-chartered bank located in Juniata, Pennsylvania (collectively, the “Bank”), and JOANN N. MCMINN, an individual residing at 1510 Green Lane, Reedsville, Pennsylvania 17084 (the “Employee”).

WHEREAS, the Employee has substantial knowledge, ability and experience which are beneficial to the successful operation of the Bank; and

WHEREAS, the Employee has recently accepted the position of Chief Financial Officer at Bank (“CFO”); and

WHEREAS, the Bank desires to secure for itself the benefit of the Employee’s knowledge, ability and experience and be assured of the Employee’s active participation in the business operations of the Bank; and

WHEREAS, Employee will acquire and use extensive knowledge and information about the Bank’s operations, much of which is confidential and proprietary in nature; and

WHEREAS, the Bank wishes to protect its confidential and proprietary information as well as its general business interests; and

WHEREAS, the Employee and the Bank wish to enter into this Agreement in order to protect the confidential and proprietary interests of the Bank and to induce the Employee to become actively involved in the business operations of the Bank by providing the Employee with the opportunity to receive benefits under this Agreement.

NOW, THEREFORE, in consideration of the mutual covenants contained herein and intending to be legally bound, the parties agree as follows:

1. SEVERANCE BENEFIT. In consideration for agreeing to be bound hereunder, the Employee will become eligible to receive the benefit provided in this Agreement. The benefit payable under this Agreement is triggered upon termination of Employee’s employment upon the occurrence of any of the events set forth in Section 2 hereof following a Change of Control as defined in section 6. (b) of this Agreement. The severance benefit will be equal to that amount which, when reduced to its present value (determined by using a discount rate equal to one hundred twenty(120%) percent of the applicable federal rate, as determined under Section 1274(d) of the Internal Revenue Code of 1986, as amended, compounded semiannually) equals 2.95 times Employee’s Average Annual Compensation. For purposes of this Section, Employee’s Average Annual Compensation, shall be the average of Employee’s annual compensation payable by the Bank and includible in Employee’s gross income for the five (5) most recent taxable years (or such shorter period as Employee has been employed by Bank, if less than five years) ending before the date on which Employee’s employment with the Bank was terminated.

The benefit shall be in the form of a lump sum payment and shall be made no later than thirty (30) days following the effective date of the termination.

In the event Employee should breach Employee’s obligations under this Agreement at any time, the Bank’s obligation under this Section shall terminate immediately.

2. TERMINATION OF EMPLOYMENT. If a Change of Control shall occur and if thereafter, at any time, there shall be:

(a) Any involuntary termination of Employee’s employment (other than for Cause);

(b) Any reduction in Employee’s title, responsibilities or authority, including such title, responsibilities or authority as such may be increased from time to time;

(c) Any reduction in Employee’s salary in effect immediately prior to a Change of Control, or any failure to provide Employee with benefits at least as favorable as those enjoyed by Employee under any of the

pension, life insurance, medical, health and accident, disability or other employee plans of the Bank in which Employee participated immediately prior to a Change of Control, or the taking of any action that would materially reduce any of such compensation or benefits in effect at the time of the Change of Control, unless such reduction relates to a reduction applicable to all employees generally;

(d) Any reassignment of Employee beyond a forty-five (45) minute commute by automobile from Mifflintown, Pennsylvania; or

(e) Any requirement that Employee travel in performance of her duties on behalf of the Bank for a greater period of time during any year than was required of Employee during the year preceding the year in which the Change of Control occurred;

then, at the option of Employee, exercisable by Employee within one hundred eighty (180) days of the occurrence of any of the foregoing events, the Employee may resign from employment (or, if involuntarily terminated, give notice of intention to collect the benefit hereunder) by delivering a notice in writing (the “Notice of Termination”) to the Bank.

3. DURATION OF AGREEMENT. This Agreement shall remain in effect only while the Employee is the CFO or in a higher ranking position (as determined by the Board of Directors) of the Bank.

4. UNAUTHORIZED DISCLOSURE. During the term of this Agreement or at any later time, the Employee shall not, without the written consent of the Bank, disclose to any person (including an employee of the Bank or a Subsidiary), other than a person to whom disclosure is reasonably necessary or appropriate or required in connection with the performance by the Employee of her duties as an Employee of the Bank, any material confidential information obtained by her while in the employ of the Bank or any Subsidiary with respect to any of the services, products, improvements, formulas, designs or styles, processes, customers, methods of distribution or business practices, the disclosure of which reasonably would be expected to materially damage the Bank; provided, however, that for purposes of this Agreement, confidential information shall not include any information known generally to the public (other than as a result of unauthorized disclosure by the Employee) or any information of a type not otherwise considered confidential by persons engaged in the same business or a business similar to that conducted by the Bank.

5. RESTRICTIVE COVENANTS. Except as otherwise provided below, upon termination of her employment with the Bank (or a Subsidiary), regardless of the circumstances or reasons for such termination, the Employee covenants and agrees as follows:

(a) NONCOMPETITION. Upon any termination of employment of Employee which results in the payment of the Severance Compensation referred to in Paragraph 1, Employee shall not directly or indirectly enter into or engage in the banking business, either as an individual, or as a partner or joint venturer, or as an employee, agent, officer, or director of another banking institution, for a period of two (2) years after such termination, which would involve the performance by Employee of active duties in the geographical area within a forty (40) mile radius of Mifflintown, Pennsylvania. The existence of any material claim or cause of action of the Employee against the Bank, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Bank of this covenant. The Employee acknowledges and agrees that enforcement of this covenant not to compete will not prevent her from earning a livelihood and that any breach of the restrictions set forth in this paragraph will result in irreparable injury to the Bank for which it shall have no adequate remedy at law, and that, therefore, the Bank shall be entitled to injunctive relief in order to enforce the provisions hereof. In the event that this paragraph shaft be determined by any court of competent jurisdiction to be unenforceable in part by reason of it being too great a period of time or covering too great a geographical area, it shall be in full force and effect as to that period of time or geographical area determined to be reasonable by the court.

(b) RETURN OF MATERIALS. Upon termination of employment with the Bank for any reason, including a termination of employment in conjunction with a Change of Control, the Employee shall immediately deliver to the Bank all correspondence, manuals, letters, notes, notebooks, reports and any other documents and tangible items containing or constituting confidential information about the Bank maintained at her office and shall promptly deliver all said materials held by her at other locations.

(c) NONSOLICITATION OF EMPLOYEES. The Employee shall not entice or solicit, directly or indirectly, any other Employees or key management personnel of the Bank to leave

the employ of the Bank or its Subsidiaries to work with the Employee or any entity with which the Employee has affiliated for a period of one year following the Employee’s termination of employment with the Bank for any reason, including a termination of employment in conjunction with a Change of Control.

(d) NONSOLICITATION OF CUSTOMERS. The Employee shall not entice or solicit, directly or indirectly, any client or customer of the Bank or any Subsidiary for a period of one year following the Employee’s termination of employment with the Bank for any reason, including a termination of employment in conjunction with a Change of Control.

(e) REMEDY. The Employee acknowledges and agrees that any breach of the restrictions set forth in Sections 4 and 5 shall be deemed a material breach of this Agreement and will result in irreparable injury to the Bank for which it shall have no meaningful remedy in law and the Bank shall be entitled to injunctive relief in order to enforce provisions hereof. Upon obtaining such injunction, the Bank shall be entitled to pursue reimbursement from the Employee and/or the Employee’s employer of costs incurred in securing a qualified replacement for any employee enticed away from the Bank by the Employee. Further, the Bank shall be entitled to set off against or obtain reimbursement from the Employee of any payments owed or made to the Employee by the Bank hereunder.

6. DEFINITIONS.

(a ) SUBSIDIARY. For purposes of this Agreement, the term “Subsidiary” shall mean any bank, Bank or other entity of which the Bank owns, directly or indirectly through one or more Subsidiaries, a majority of each class of equity security having ordinary voting power in an election of directors.

(b) CHANGE OF CONTROL. For purposes of this Agreement, the term “Change of Control” shall mean:

	i)		An acquisition by any “person” or “group” (as those terms are defined or used in Section 13(d) of the Exchange Act) of “beneficial ownership” (within the meaning of Rule 13d-3 under the Exchange Act, specifically, including the signing of a definitive agreement to acquire securities of JUVF) of securities of Juniata Valley Financial Corp. (“JUVF”) representing 24.99% or more of the voting power of JUVF’s securities then outstanding;

	ii)		A merger, consolidation or other reorganization of Bank, except where the resulting entity is controlled, directly or indirectly, by JUVF;

	iii)		A merger, consolidation or other reorganization of JUVF, except where shareholders of JUVF immediately prior to consummation of any such transaction continue to hold at least a majority of the voting power of the outstanding voting securities of the legal entity resulting from or existing after any transaction and a majority of the members of the Board of Directors of the legal entity resulting from or existing after any such transaction are former members of JUVF’s Board of Directors;

	iv)		A sale, exchange, transfer or other disposition of substantially all of the assets of JUVF to another entity, or a corporate division involving JUVF; or

	v)		A contested proxy solicitation of the shareholders of JUVF that results in the contesting party obtaining the ability to cast 25% or more of the votes entitled to be cast in an election of directors of JUVF.

(c) TERMINATION FOR CAUSE . For purposes of this Agreement, Employee’s “Termination for Cause” shall mean that Employee is terminated for any of the following reasons:

	i)		Negligent or willful failure or the continuing inability to perform duties and functions reasonably assigned to Employee by the Board of Directors, which neglect or failure is not corrected within thirty (30) days following receipt of written notice of default;

	ii)		The commission or a criminal act against the Bank by Employee;

iii)

Default by the Employee in the performance of her obligations under this Agreement, which default is not corrected within thirty (30) days following receipt of written notice of default.

7. NOTICE. For the purposes of this Agreement, notices and all other communications shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States certified mail, return receipt requested, postage prepaid, addressed as follows:


If to the Employee:	JoAnn N. McMinn
		1510 Green Lane
		Reedsville, PA 17084

If to the Bank:	Juniata Valley Financial Corp. and
		The Juniata Valley Bank
		P.O. Box 66
		Mifflintown, PA 17059

or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon actual receipt.

8. BINDING EFFECT. This Agreement shall inure to the benefit of and be binding upon the Employee and her heirs and personal representatives, and the Bank and any successor to the Bank.

9. ENFORCEMENT OF SEPARATE PROVISIONS. Should any provision of this Agreement be ruled unenforceable for any reason, the remaining provisions of this Agreement shall be unaffected thereby and shall remain in full force and effect.

10 . AMENDMENT . Except as otherwise provided herein, this Agreement may be amended or canceled only by mutual agreement of the parties in writing without the consent of any other person. This Agreement may be amended to enhance the benefits available to the Employee hereunder at any time, provided the Employee consents in writing to any such amendment.

11. ARBITRATION . In the event that any disagreement or dispute shall arise between the parties concerning this Agreement, the issue(s) will be submitted to binding arbitration in the City of Harrisburg, PA pursuant to the rules of the American Arbitration Association. Any award entered shall be final and binding upon the parties hereto and judgment upon the award may be entered in any court having jurisdiction thereof. Attorneys’ fees and administrative court costs incurred in connection with such actions shall be paid by the Bank.

12. EMPLOYMENT . Nothing contained herein shall be construed as conferring upon the Employee the right to continue in the employ of the Bank.

13. PAYMENT OF MONEY DUE DECEASED EMPLOYEE . If the Employee dies prior the payment of any moneys that may be due her from the Bank under this Agreement as of the date of death, such moneys shall be paid to the executor, administrator, or other personal representative of the Employee’s estate.

14. LAW GOVERNING . This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania.

15. CAPTIONS; PRONOUNS . All captions are for convenience only and do not form a substantive part of this Agreement. All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural, as the identity of the person or persons may require.


Attest:	JUNIATA VALLEY FINANCIAL
		CORP.

/s/ Pamela S. Eberman	By:	/s/ Francis J. Evanitsky

Pamela S. Eberman		Francis J. Evanitsky

Attest:	THE JUNIATA VALLEY BANK

/s/ Pamela S. Eberman	By:	/s/ Francis J. Evanitsky

Pamela S. Eberman		Francis J. Evanitsky


Witness:		EMPLOYEE:

/s/ Judy Robinson		/s/ JoAnn N. McMinn

Judy Robinson		JoAnn N. McMinn

Exhibit 31.1 Rule 13a – 14(a)/15d – 14(a) Certification of President and Chief Executive Officer

I, Francis J. Evanitsky, certify that:

1.		I have reviewed this quarterly report on Form 10-Q of Juniata Valley Financial Corp.;

2.		Based on my knowledge, this report does not contain any untrue statements 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

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	11-08-2005	/s/ Francis J. Evanitsky

		Francis J. Evanitsky, President and Chief
		Executive Officer

Exhibit 31.2 Rule 13a – 14(a)/15d – 14(a) Certification of Chief Financial Officer

I, JoAnn N. McMinn, certify that:

1.		I have reviewed this quarterly report on Form 10-Q of Juniata Valley Financial Corp.;

2.		Based on my knowledge, this report does not contain any untrue statements 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

	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	11-08-2005	/s/ JoAnn N. McMinn

		JoAnn N. McMinn, Chief Financial Officer

EXHIBIT 32.1

SECTION 1350 CERTIFICATION of PRESIDENT AND CHIEF EXECUTIVE OFFICER

The undersigned herby certifies, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and in connection with this Quarterly Report on Form 10-Q, that:

•		the report fully complies with the requirements of Sections 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended, and

•		the information contained in the report fairly presents, in all material respects, the Company’s financial condition and results of operation.

The foregoing certification is being furnished solely pursuant to 18U.S.C. Section 1350 and is not being filed as part of the report or as a separate disclosure document.


/s/ Francis J. Evanitsky
Francis J. Evanitsky, President and Chief Executive Officer


Dated:		11-08-2005

EXHIBIT 32.2

SECTION 1350 CERTIFICATION of CHIEF FINANCIAL OFFICER

The undersigned herby certifies, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and in connection with this Quarterly Report on Form 10-Q, that:

•		the report fully complies with the requirements of Sections 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended, and

•		the information contained in the report fairly presents, in all material respects, the Company’s financial condition and results of operation.

The foregoing certification is being furnished solely pursuant to 18U.S.C. Section 1350 and is not being filed as part of the report or as a separate disclosure document.


/s/ JoAnn N. McMinn
JoAnn N. McMinn, Chief Financial Officer


Dated:		11-08-2005

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