JUNIATA VALLEY FINANCIAL CORP (Form: 10-K, Received: 03/13/2009 12:35:51)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)


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

For the Fiscal Year ended December 31, 2008


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 No. 0-13232

Juniata Valley Financial Corp.

(Exact name of registrant as specified in its charter)


Pennsylvania		23-2235254

(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

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 o No þ

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 o No þ

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 þ No o

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. þ

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

Large accelerated filer o

Accelerated filer þ

Non-accelerated filer o
(Do not check if a smaller reporting company)

Smaller reporting company o

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

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 registrant’s most recently completed second fiscal quarter was $83,444,418. ⁽¹⁾

There were 4,341,055 shares of the registrant’s common stock outstanding as of March 4, 2009.

(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, 2008, the last business day of the registrant’s 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, 2008 are incorporated by reference in Parts I and II of this Report.

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, 2008 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 2009 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 was approved by the various regulatory agencies 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 1 of Notes to Consolidated Financial Statements contained in the Company’s 2008 Annual Report to Shareholders (“2008 Annual Report”); the 2008 Annual Report is incorporated by reference into Item 8 of this report.

Nature of Operations

Juniata operates primarily in central Pennsylvania with the purpose of delivering financial services within its local market. The Company provides retail and commercial banking services through 12 offices in the following locations: five community offices in Juniata County; five community offices in Mifflin County, as well as a financial services office; one community office in each of Perry and Huntingdon counties; and a loan production office in Centre County. The Company offers a full range of consumer and commercial banking services. Consumer banking services include: Internet banking; telephone banking; eight 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 and unsecured 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; ACH origination; payroll direct deposit; commercial lines of credit; commercial letters of credit; commercial term and demand loans. Comprehensive trust, asset management and estate services are provided, 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 it 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 Pennsylvania.

Juniata’s loan 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. Treasury or other 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, provides adequate collateral to pledge for public funds held and, as directed by the Asset Liability Committee, is managed to control interest rate risk. The investment policy provides limits on types of investments owned, credit quality of investments and 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 deposits. The majority of deposits have been made 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.

Competition

The Bank’s service area is characterized by a high level of competition for banking business among commercial banks, savings and loan associations and other 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 $6,420,000 as of December 31, 2008) 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 financings in excess of the limit.

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 customer base.

Other competitors, including credit unions, consumer finance companies, insurance companies and money market mutual funds, compete with certain lending and deposit gathering 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

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 Company is subject to supervision and examination by the Board of Governors of the Federal Reserve System and is required to file with the Federal Reserve Board quarterly reports and information regarding its business operations and those of the Bank.

The Federal Deposit Insurance Corporation (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 previously administered two separate insurance funds, the Bank Insurance Fund (BIF), which generally insured commercial bank and state savings bank deposits, and the Savings Association Insurance Fund (SAIF), which generally insured savings association deposits.

Under the Federal Deposit Insurance Reform Act of 2005 (The “Reform Act”), which was signed into law on February 15, 2006 (i) the BIF and the SAIF were merged into a new combined fund, called the Deposit Insurance Fund effective March 31, 2006, (ii) the current $100,000 deposit insurance coverage was indexed for inflation (with adjustments every five years, commencing January 1, 2011); and (iii) deposit insurance coverage for retirement accounts was increased to $250,000 per participant subject to adjustment for inflation. 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 Deposit Insurance Fund annually at between 1.15% and 1.5% of estimated insured deposits. Insured depository institutions that were in existence on December 31, 1996 and paid assessments prior to that date (or their successors) are entitled to a one-time credit against future assessments based on their past contributions to the BIF or SAIF. The Bank was able to offset the majority of its deposit insurance

premium for 2008 with the special assessment credit, and expects to use the remainder of the credit in the first quarter of 2009.

Recent bank failures significantly increased the Deposit Insurance Fund’s losses. As a result of a decline in the reserve ratio of the Deposit Insurance Fund, the FDIC Board adopted a restoration plan and also raised assessment rates. Other changes included are primarily to ensure that riskier institutions will bear a greater share of the proposed increase in assessments. The FDIC’s final rule raises the current assessment rates uniformly by 7 basis points for the first quarter 2009 assessment period, and ranges from 12 to 50 basis points. Institutions in the lowest risk category — Risk Category I — will pay between 12 and 14 basis points. Effective April 1, 2009, the rule widens the range of rates overall and within Risk Category I. Initial base assessment rates would 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 would be 20, 30 and 45 basis points, respectively. For institutions in any risk category, assessment rates will rise above initial rates for institutions relying significantly on secured liabilities. Assessment rates will increase 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.

On February 27, 2009, the FDIC also adopted an interim rule that would impose a 20 basis point special emergency assessment, payable on September 30, 2009. The interim rule also permits the Board to impose an emergency special assessment after June 30, 2009, of up to 10 basis points, if necessary to maintain public confidence in federal deposit insurance.

In addition, all insured institutions of the FDIC 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 .0154 of insured deposits, will continue until the Financing Corporation bonds mature in 2017.

As a bank chartered under the laws of Pennsylvania, the Bank is subject to the regulations and supervision of the FDIC and the Pennsylvania Department of Banking. 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.

Under the Bank Holding Company Act, the Company is required to file periodic reports and other information regarding its operations with, and is subject to examination by, the Federal Reserve Board. In addition, under the Pennsylvania Banking Code of 1965, the Pennsylvania Department of Banking 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 Federal Reserve Board approval before: acquiring more than five percent ownership interest in any class of the voting securities of any bank; acquiring all or substantially all of the assets of a bank; or merging or consolidating with another bank holding company. In addition, the Act prohibits a bank holding company from acquiring the assets, or more than five percent of the voting securities, of a bank located in another state, unless such acquisition is specifically authorized by the statutes of the state in which the bank is located.

The Company is generally prohibited under the 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 Federal Reserve Board, 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 Federal Reserve Board 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, 2008, 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 charters, branches and other deposit facilities, relocations, mergers, consolidations and acquisitions. Less than satisfactory performance may be the basis for denying an application.

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.

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.

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.

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. See Note 15 of Notes to Consolidated Financial Statements, contained in the 2008 Annual Report, which is included in Exhibit 13 to this report and incorporated by reference in this Item 1.

The Company and the Bank are also subject to the following rules and regulations:

Capital Regulation . The Company and the Bank are subject to risk-based and leverage capital standards by which all bank holding companies and banks are evaluated in terms of capital adequacy. The risk-based capital standards relate a banking company’s capital to the risk profile of its assets and require that bank holding companies and banks must have Tier 1 capital of at least 4% of its total risk-adjusted assets, and total capital, including Tier 1 capital, equal to at least 8% of its 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 100 to 200 basis points above such minimum, depending on 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.

Under Federal Reserve Board policy, the Company is expected to act as a source of financial strength to the Bank and the First National Bank of Liverpool (“FNBL”), of which the Company owns 39.16%, and to commit resources to support the Bank and The First National Bank of Liverpool, in circumstances where they might not be in a financial position to support themselves. Consistent with the “source of strength” policy for subsidiary banks, the Federal Reserve Board 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 shareholders 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.

See Note 15 of Notes to Consolidated Financial Statements, contained in the 2008 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,” “under capitalized”, “significantly undercapitalized,” or “critically undercapitalized.” As of December 31, 2008, 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.

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.

Gramm-Leach-Bliley Act . On November 12, 1999, the Gramm-Leach-Bliley Act was signed into law. Gramm-Leach-Bliley 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 merchant banking provisions allow a bank holding company to make a controlling investment in any kind of company, financial or commercial. These new powers allow 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 have a satisfactory or better Community Reinvestment Act rating. Gramm-Leach-Bliley 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, Gramm-Leach-Bliley 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) new requirements for audit committees, including independence, expertise, and responsibilities; (ii) additional responsibilities regarding financial statements for the Chief Executive Officer and Chief Financial Officer of the reporting company; (iii) new 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 the reporting company 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 new and increased 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.

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 Federal Reserve and the FDIC. An important function of the Federal Reserve 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 Federal Reserve 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.

Employees

As of December 31, 2008, the Company had a total of 124 full-time employees and 26 part-time employees.

Additional Information

The Company files annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission.

You may read and copy any reports, statements and other information we file at the SEC’s Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operations of the Public Reference Room. Our SEC filings are also available on the SEC’s Internet site (http://www.sec.gov).

The Company’s common stock is quoted under the symbol “JUVF” on the OTC 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, 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.

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.

ITEM 1A. RISK FACTORS

In analyzing whether to make or to continue an investment in the Company, investors should consider, among other factors, the following:

Changes in interest rates may have an adverse effect on the Company’s profitability. 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 Federal Reserve Board (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. See the section entitled “Market / Interest Rate Risk” and Table 5 — “Maturity Distribution” in Management’s Discussion and Analysis of Financial Condition in the 2008 Annual Report, incorporated by reference in this Item 1A for a discussion of the effects on net interest income over a twelve month period beginning on December 31, 2008 of simulated interest rate changes. Like all financial institutions, the Company’s balance sheet 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 US 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” and “Item 7A: Quantitative and Qualitative Disclosure about Market Risk”.

Changes in economic conditions and the composition of the Company’s loan portfolio could lead to an increase in the allowance for loan losses, which could decrease earnings. The Company has established an allowance for loan losses which 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. 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, which could reduce earnings. Furthermore, an increase in unemployment could cause an increase in loan charge-offs.

Declines in value may adversely impact the investment portfolio.

We reported non-cash, other-than-temporary impairment charges totaling $554,000 for the year ended December 31, 2008, representing reductions in fair value below original cost of investments in common stocks of eight financial institutions. We may be required to record future impairment charges on our investment securities if they suffer further declines in value that are considered other-than-temporary. 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.

Recent negative developments in the financial services industry and U.S. and global credit markets may adversely impact our results of operations and our stock price.

The recent national and global economic downturn has resulted in unprecedented levels of financial market volatility which may depress the market value of financial institutions, limit access to capital or have a material adverse effect on the financial condition or results of operations of banking companies. In addition, the possible duration and severity of the adverse economic cycle is unknown and may exacerbate our exposure to credit risk. The United States Treasury and the Federal Deposit Insurance Corporation (FDIC) have initiated programs to address economic stabilization, yet the effectiveness of these programs in stabilizing the economy and the banking system at large are uncertain.

Negative developments in the latter half of 2007 and 2008 in the subprime mortgage market and the securitization markets for such loans have resulted in uncertainty in the financial markets in general with the expectation of the

general economic downturn continuing through 2009. As a result of this “credit crunch,” commercial as well as consumer loan portfolio performances have deteriorated at many institutions and the competition for deposits and quality loans has increased significantly, due to liquidity concerns at many financial institutions. In addition, the values of real estate collateral supporting many commercial loans and home mortgages have declined and may continue to decline. Stock prices of bank holding companies, like ours, have been negatively affected by the current condition of the financial markets, as has our ability, if needed, to raise capital or borrow in the debt markets compared to recent years. As a result, financial institution regulatory agencies are expected to be very aggressive in responding to concerns and trends regarding lending and funding practices and liquidity standards identified in examinations, including issuing many formal enforcement actions. Negative developments in the financial services industry and the impact of potential new legislation and regulations in response to those developments could negatively impact our business by restricting our operations, including our ability to originate or sell loans or raise additional capital, and could adversely impact our financial performance and stock price.

Changes in economic conditions and related uncertainties may have an adverse affect on the Company’s profitability. Commercial banking is affected, directly and indirectly, by local, domestic, and international economic and political conditions, and by governmental monetary and fiscal policies. Conditions such as inflation, recession, unemployment, volatile interest rates, tight money supply, real estate values, international conflicts and other factors beyond the Company’s control may adversely affect the potential profitability of the Company. Any future rises in interest rates, while increasing the income yield on the Company’s earnings assets, may adversely affect loan demand and the cost of funds and, consequently, the profitability of the Company. Any future decreases in interest rates may adversely affect the Company’s profitability because such decreases may reduce the amounts that the Company may earn on its assets. A continued recessionary climate could result in the delinquency of outstanding loans. Management does not expect any one particular factor to have a material effect on the Company’s results of operations. However, downtrends in several areas, including real estate, construction and consumer spending, could have a material adverse impact on the Company’s profitability.

Our results of operations are significantly affected by the ability of our borrowers to repay their loans.

Lending money is an essential part of the banking business. However, borrowers do not always repay their loans. The risk of non-payment is affected by credit risks of a particular 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.

The supervision and regulation to which the Company is subject can be a competitive disadvantage. The operations of the Company and the Bank are heavily regulated and will be affected by present and future legislation and by the policies established from time to time by various federal and state regulatory authorities. In particular, the monetary policies of the Federal Reserve have had a significant effect on the operating results of banks in the past, and are expected to continue to do so in the future. Among the instruments of monetary policy used by the Federal Reserve to implement its objectives are changes in the discount rate charged on bank borrowings and changes in the reserve requirements on bank deposits. It is not possible to predict what changes, if any, will be made to the monetary polices of the Federal Reserve or to existing federal and state legislation or the effect that such changes may have on the future business and earnings prospects of the Company.

The Company is subject to changes in federal and state tax laws as well as changes in banking and credit regulations, accounting principles and governmental economic and monetary policies.

During the past several years, significant legislative attention has been focused on the regulation and deregulation of the financial services industry. Non-bank financial institutions, such as securities brokerage firms, insurance companies and money market funds, have been permitted to engage in activities that compete directly with traditional bank business.

The Competition the Company faces is increasing and may reduce our customer base and negatively impact the Company’s results of operations. 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 Corporation and, as a result, may have higher lending limits and may offer other services not offered by our Company. See “Item 1: Business — Competition.”

Our deposit insurance premium could be substantially higher in the future which would have an adverse effect on our future earnings.

The FDIC insures deposits at FDIC-insured financial institutions, including Juniata. The FDIC charges the insured financial institutions premiums to maintain the Deposit Insurance Fund at a certain level. Current economic conditions have increased bank failures and expectations for further failures, which may result in the FDIC making more payments from the Deposit Insurance Fund and, in connection therewith, raising deposit premiums. In February 2009, the FDIC finalized a rule that increases premiums paid by insured institutions and makes other changes to the assessment system. Additionally, the FDIC adopted an interim rule that imposes an emergency special assessment in the second quarter of 2009 and further gives the FDIC authority to impose additional emergency special assessments of up to 10 basis points in subsequent quarters. These significant final and proposed increases will adversely affect our net income.

Concern of customers over deposit insurance may cause a decrease in deposits at Juniata.

With the recent news about bank failures, customers are increasingly concerned about the extent to which their deposits are insured by the FDIC. Customers may withdraw deposits in an effort to ensure that the amount they have on deposit with us is fully insured. Decreases in deposits may adversely affect our funding costs and net income.

The actions of the U.S. Government for the purpose of stabilizing the financial markets, or market response to those actions, may not achieve the intended effect, and our results of operations could be adversely affected.

In response to the financial issues affecting the banking system and financial markets and going concern threats to investment banks and other financial institutions, the U.S. Congress recently enacted the Emergency Economic Stabilization Act of 2008 (“EESA”). The EESA provides the U.S. Secretary of the Treasury with the authority to establish a Troubled Asset Relief Program (“TARP”) to purchase from financial institutions up to $700 billion of residential or commercial mortgages and any securities, obligations or other instruments that are based on or related to such mortgages, that in each case was originated or issued on or before March 14, 2008, as well as any other financial instrument that the U.S. Secretary of the Treasury, after consultation with the Chairman of the Federal Reserve, determines the purchase of which is necessary to promote financial market stability. As of the date hereof, the Treasury Department has determined not to purchase troubled assets under the program.

As part of the EESA, the Treasury Department has developed a Capital Purchase Program to purchase up to $250 billion in senior preferred stock from qualifying financial institutions. The Capital Purchase Program was designed to strengthen the capital and liquidity positions of viable institutions and to encourage banks and thrifts to increase lending to creditworthy borrowers. The EESA also increases the insurance coverage of deposit accounts to $250,000 per depositor. In a related action, the FDIC established a Temporary Liquidity Guarantee Program under which the FDIC provides a guarantee for newly-issued senior unsecured debt and non-interest bearing transaction deposit accounts at eligible insured institutions. For non-interest bearing transaction deposit accounts, a 10 basis point annual rate surcharge will be applied to deposit amounts in excess of $250,000. We have elected not to participate in the Capital Purchase Program but have opted to participate in the Temporary Liquidity Guarantee Program for the additional coverage for non-interest bearing transaction deposit accounts, available until December 31, 2009. In February 2009, the American Recovery and Reinvestment Act of 2009 (“the Stimulus Bill”) was enacted, which is intended to stabilize the financial markets and slow or reverse the downturn in the U.S. economy, and which revised certain provisions of the EESA.

The U.S. Congress or federal banking regulatory agencies could adopt additional regulatory requirements or restrictions in response to the threats to the financial system and such changes may adversely affect our operations. There can be no assurance that the EESA and its implementing regulations, the Stimulus Bill, the FDIC programs, or any other governmental program will have a positive impact on the financial markets. The failure of the EESA, the Stimulus Bill, the FDIC programs, or any other actions of the U.S. government to stabilize the financial markets and a continuation or worsening of current financial market conditions could materially and adversely affect the Company’s business, financial condition, results of operations or the trading price of the Company’s common stock.

Fluctuations in the stock market could negatively affect the value of the Company’s common stock. The Company’s common stock is quoted under the symbol “JUVF” on the OTC Bulletin Board, an automated quotation service, made available through, and governed by, the NASDAQ system. There can be no assurance that a regular and active market for the Common Stock will develop in the foreseeable future. See “Item 5: Market for Registrant’s Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities.” Investors in the shares of common stock may, therefore, be required to assume the risk of their investment for an indefinite period of time. Current lack of investor confidence in large banks may keep investors away from the banking sector as a whole, causing unjustified deterioration in the trading prices of well-capitalized community banks such as the Company.

“Anti-takeover” provisions may keep shareholders from receiving a premium for their shares. The Articles of Incorporation of the Company presently contain certain provisions 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 corporation or person through a tender offer, merger, proxy contest or similar transaction or series of transactions. The overall effects of the “anti-takeover” provisions may be to discourage, make more costly 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 the 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 auditors 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) implement 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 auditors’ audit of internal control, and 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.

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 exclusively for banking purposes, the buildings located at:
Bridge and Main Streets, Mifflintown, Pennsylvania
218 Bridge Street, Mifflintown, Pennsylvania (its corporate headquarters)
Butcher Shop Road, Mifflintown, Pennsylvania (financial center)
301 Market Street, Port Royal, Pennsylvania (branch office)
R.D. #1 McAlisterville, Pennsylvania (branch office)
Four North Market Street, Millerstown, Pennsylvania (branch office)
Main Street, Blairs Mills, Pennsylvania (branch office)
Monument Square, Lewistown, Pennsylvania (branch office)
20 Prince Street, Reedsville, Pennsylvania (branch office)
100 West Water Street, Lewistown, Pennsylvania (branch office)
302 South Logan Boulevard, Burnham, Pennsylvania (branch office)
571 Main Street, Richfield, Pennsylvania (branch office)

The Bank leases four offices:
Branch Offices —
Juniata Valley Shopping Plaza, RR4, Mifflintown, Pennsylvania (lease expires December 31, 2012)
Wal-Mart Supercenter, Lewistown, Pennsylvania (lease expires October 2011)
Financial Services Office —
129 South Main Street, Lewistown, Pennsylvania (lease expires November 2014)
Loan Production Office —
1350 South Atherton Street, State College, Pennsylvania (lease renews monthly)

The Bank owns property at the corner of Main and School Streets in McAlisterville, Pennsylvania, that was a former branch office and which the Bank is actively attempting to sell.

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. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

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, 2008, in the section entitled “Common Stock Market Prices and Dividends,” and is incorporated by reference in this Item 5.

Holders:

As of March 10, 2009, there were approximately 1,826 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:

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)

October 1-31, 2008

—

218,536

November 1-30, 2008

—

218,536

December 1-31, 2008

—

218,536

Totals

—

218,536

Performance Graph:

The following graph shows the yearly percentage change in the Company’s cumulative total shareholder return on its common stock from December 31, 2003 to December 31, 2008 compared with the Russell 3000 Index and a peer group index (the “Juniata Valley Custom Peer Group”), consisting of seven bank holding companies that operate within our immediate market area. The bank holding companies are First Community Financial Corporation, F.N.B. Corporation, Kish Bancorp, Inc., Mifflinburg Bank & Trust Company, Mid Penn Bancorp, Inc., Northumberland Bancorp and Orrstown Financial Services, Inc. Our 2007 peer group index consisted of eight Pennsylvania bank holding companies, of which three were acquired by other institutions during 2008. The 2007 group, consisting of The ACNB Corporation, Citizens & Northern Corporation, Codorus Valley Bancorp, Inc., Fidelity D&D Bancorp, Inc. and Union National Financial Corp is included in the chart this year for comparative purposes. Management changed the members of the peer group index in 2008 to a group that more closely represents our immediate competitors within the same geographic region. The Company has selected the Russell 3000 Index for inclusion in

the graph because it contains a broader array of publicly traded companies and provides a more comprehensive market comparison than the S&P 500.


	*Period Ending*
*Index*	12/31/03		12/31/04		12/31/05		12/31/06		12/31/07		12/31/08

Juniata Valley Financial Corp.		100.00		128.53		153.92		139.03		141.81		136.24
Russell 3000		100.00		111.95		118.80		137.47		144.54		90.61
Juniata Valley Peer Group 2007*		100.00		103.78		100.26		97.57		81.85		74.60
Juniata Valley Custom Peer Group 2008**		100.00		116.60		106.13		115.72		101.56		94.63


*		Juniata Valley Peer Group 2007 consists of ACNB Corporation, Citizens & Northern Corporation, Codorus Valley Bancorp, Inc., Fidelity D&D Bancorp, Inc. and Union National Financial Corp.

**		Juniata Valley Custom Peer Group 2008 consists of First Community Financial Corporation, F.N.B. Corporation, Kish Bancorp, Inc., Mifflinburg Bank & Trust Company, Mid Penn Bancorp, Inc., Northumberland Bancorp, Orrstown Financial Services, Inc.

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, 2008 is incorporated by reference in this Item 6.

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, 2008 is incorporated by reference in this Item 7.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

The section entitled “Management’s Discussion and Analysis — Financial Condition — Market / Interest Rate Risk” in the Company’s Annual Report to Shareholders for the year ended December 31, 2008 is incorporated by reference in this Item 7A.

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, 2008 is 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, 2008, 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 effective in reaching a reasonable level of assurance that management is timely alerted to material events relating to the Company during the period when the Company’s periodic reports are being prepared.

Report on Management’s Assessment of Internal Control over Financial Reporting

The management of the Company is responsible for establishing and maintaining effective disclosure controls and procedures, as defined under Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934. As of December 31, 2008, an evaluation was performed under the supervision and with the participation of Management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on that evaluation, management concluded that disclosure controls and procedures as of December 31, 2008 were effective in ensuring material information required to be disclosed in this Annual Report on Form 10-K was recorded, processed, summarized and reported on a timely basis. Additionally, there were no changes in the Company’s internal control over financial reporting.

Management’s responsibilities related to establishing and maintaining effective disclosure controls and procedures include maintaining effective internal control over financial reporting that are designed to produce reliable financial statements in accordance with accounting principles generally accepted in the United States of America. As disclosed in the Report on Management’s Assessment of Internal Control Over Financial Reporting, Management assessed the Company’s system of internal control over financial reporting as of December 31, 2008, in relation to criteria for effective internal control over financial reporting as described in Internal Control — Integrated Framework , issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on this assessment, Management believes that, as of December 31, 2008, its system of internal control over financial reporting met those criteria and is effective.

The registered public accounting firm that audited the financial statements included in the annual report has issued an attestation report on the registrant’s internal control over financial reporting.



/s/ Francis J. Evanitsky
Francis J. Evanitsky,
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, 2008 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Report of Beard Miller Company LLP Regarding the Company’s Internal Control Over Financial Reporting

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders
Juniata Valley Financial Corp.
Mifflintown, Pennsylvania

We have audited Juniata Valley Financial Corp. and its wholly-owned subsidiary’s The Juniata Valley Bank, (the “Company”) internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). 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 Management’s Report on 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 conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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 of internal control over financial reporting 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 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

-2-

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.

In our opinion, the Company, maintained, in all material respects, effective internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated statements of financial condition of Juniata Valley Financial Corp. and its wholly-owned subsidiary, The Juniata Valley Bank as of December 31, 2008 and 2007 and the related consolidated statements of income, stockholders’ equity and cash flows for each of the years in the three-year period ended December 31, 2008, and our report dated March 13, 2009 expressed an unqualified opinion.



			/s/ Beard Miller Company LLP

Beard Miller Company LLP
Lancaster, Pennsylvania March 13, 2009

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 19, 2009 under the captions “Directors of the Company”, “Executive Officers of the Company”, “Meetings and Committees of the Board of Directors” 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 29, 2009.

ITEM 11. EXECUTIVE COMPENSATION

Incorporated by reference herein is the information contained in the Proxy Statement under the captions “Compensation Discussion and Analysis”, “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.

Number of

securities

remaining available

Number of

for future issuance

securities to be

under equity

issued upon

Weighted average

compensation plans

exercise of

exercise price of

(excluding

outstanding

securities

options, warrants

reflected in column

and rights

Plan Category

Equity compensation plans approved by security holders

85,985

18.73

544,387

Equity compensation plans not approved by security holders

—

Total

85,985

18.73

544,387

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 “Management and Corporate Governance”.

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”.

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)		Report of Independent Registered Public Accounting Firm

	(ii)		Consolidated Statements of Financial Condition as of December 31, 2008 and December 31, 2007

	(iii)		Consolidated Statements of Income for the fiscal years ended December 31, 2008, December 31, 2007 and December 31, 2006

	(iv)		Consolidated Statements of Cash Flows for the fiscal years ended December 31, 2008, December 31, 2007 and December 31, 2006

	(v)		Consolidated Statements of Stockholders’ Equity for the fiscal years ended December 31, 2008, December 31, 2007 and December 31, 2006

	(vi)		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 4.1 to the Company’s Form S-3 registration statement no. 333-129023 filed with the SEC on October 14, 2005)

3.2		Bylaws (incorporated by reference to Exhibit 3.2 to the Company’s report on Form 8-K filed with the SEC on December 21, 2007)

10.1		1982 Directors Deferred Compensation Agreement for A. Jerome Cook*

10.2		1986 Directors Deferred Compensation Agreement for A. Jerome Cook *

10.3		1988 Retirement Program for Directors*

10.4		1991 Directors Deferred Compensation Agreement for A. Jerome Cook *

10.5		1992 Directors Deferred Compensation Agreement for Ronald H. Witherite *

10.6		1993 Directors Deferred Compensation Agreement for Dale G. Nace *



10.7		1999 Directors Deferred Compensation Agreement*

10.8		Director Supplemental Life Insurance/ Split Dollar Plan*

10.9		2004 Executive Annual Incentive Plan (incorporated by reference to Exhibit 10.15 to the Company’s report on Form 10-K filed with the SEC on March 16, 2005)*

10.10		Employment Agreement with Francis Evanitsky (incorporated by reference to Exhibit 10 to the Company’s report on Form 8-K filed with the SEC on June 14, 2005)*

10.11		Amendment to Employment Agreement with Francis Evanitsky (incorporated by reference to the Company’s report on form 8-K filed with the SEC on December 31, 2008).*

10.12		Change of Control Severance Agreement with JoAnn N. McMinn (incorporated by reference to Exhibit 10 to the Company’s report on Form 10-Q filed with the SEC on November 8, 2005).*

10.13		Salary Continuation Agreement with Francis J. Evanitsky (incorporated by reference to Exhibit 10.18 to the Company’s report on Form 10-K filed with the SEC on March 16, 2006)*

10.14		Salary Continuation Agreement with JoAnn N. McMinn (incorporated by reference to Exhibit 10.17 to the Company’s report on Form 10-K filed with the SEC on March 14, 2008)*

10.15		Salary Continuation Agreement with Marcie A. Barber (incorporated by reference to Exhibit 10.17 to the Company’s report on Form 10-K filed with the SEC on March 14, 2008)*

10.16		Change of Control Severance Agreement with Marcie A. Barber (incorporated by reference to Exhibit 10.19 to the Company’s report on Form 8-K filed with the SEC on May 27, 2008).*

13.1		Excerpts from 2008 Annual Report to Shareholders

21.1		Subsidiaries of Juniata Valley Financial Corp.

23.1		Consent of Beard Miller Company LLP

31.1		Rule 13a-4(d) Certification of Francis J. Evanitsky, the Chief Executive Officer

31.2		Rule 13a-4(d) Certification of JoAnn N. McMinn, the Chief Financial Officer

32.1		Section 1350 Certification of Francis J. Evanitsky, the Chief Executive Officer

32.2		Section 1350 Certification of JoAnn N. McMinn, the Chief Financial Officer


*		Denotes a compensatory plan.

(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.

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: March 13, 2009
	/s/ Francis J. Evanitsky
	By: Francis J. Evanitsky
	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/ Martin L. Dreibelbis

Martin L. Dreibelbis Chairman		March 13, 2009

/s/ Ronald H. Witherite

Ronald H. Witherite Secretary		March 13, 2009

/s/ Philip E. Gingerich, Jr.

Philip E. Gingerich, Jr. Vice Chairman		March 13, 2009

/s/ Joe E. Benner

Joe E. Benner Director		March 13, 2009

/s/ A. Jerome Cook

A. Jerome Cook Director		March 13, 2009

/s/ Jan G. Snedeker

Jan G. Snedeker Director		March 13, 2009

/s/ Francis J. Evanitsky

Francis J. Evanitsky Director, President and Chief Executive Officer		March 13, 2009

/s/ Dale G. Nace

Dale G. Nace Director		March 13, 2009

/s/ Timothy I. Havice

Timothy I. Havice Director		March 13, 2009


/s/ Charles L. Hershberger

Charles L. Hershberger Director		March 13, 2009

/s/ Marshall L. Hartman

Marshall L. Hartman Director		March 13, 2009

/s/ Robert K. Metz, Jr.

Robert K. Metz, Jr. Director		March 13, 2009

/s/ Richard M. Scanlon

Richard M. Scanlon, DMD Director		March 13, 2009

/s/ JoAnn N. McMinn

JoAnn N. McMinn Chief Financial Officer Chief Accounting Officer		March 13, 2009

EXHIBIT 10.1

1982 DIRECTOR’S DEFERRED COMPENSATION AGREEMENT FOR A. JEROME COOK

DIRECTOR’S COMPENSATION AGREEMENT

This Agreement is entered into this first day of January 1982, between THE JUNIATA VALLEY BANK, P.O. Box 66, Mifflintown, Pennsylvania 17059 (herein referred to as the “Bank”) and A. JEROME COOK, RD. #1, Port Royal, Pennsylvania 17082 (herein referred to as the “Director”).

WITNESSETH

WHEREAS, the Bank recognizes that the competent and faithful efforts of Director on behalf of the Bank have contributed significantly to the success and growth of the Bank; and

WHEREAS, the Bank values the efforts, abilities and accomplishments of the Director and recognizes that his services are vital to its continued growth and profits in the future; and

WHEREAS, the Bank desires to compensate the Director and retain his services for five years, if elected, to serve on the Board of Directors. Such compensation is set forth below; and

WHEREAS, the Director, in consideration of the foregoing, agrees to continue to serve as a Director, if elected,

NOW, THEREFORE, it is mutually agreed as follows:

1. Compensation. The Bank agrees to pay Director the total sum of $229,680 payable in monthly installments of $1,914 for 120 consecutive months, commencing on the first day of the month following Director’s 65th birthday. Payments to the Director will terminate when the 120 payments have been made or at the time of the Director’s death, whichever occurs first.

2. Death of Director Before Age 65. In the event Director should die before reaching age 65, the Bank agrees to pay to Director’s beneficiary designated in writing to the Bank, the sum of $1,914 per month for 120 consecutive months. Payments will begin on the first day of the month following Director’s death.

3. Death of Director After Age 65. If the Director dies after age 65 prior to receiving the full 120 monthly installments, the remaining monthly installments will be paid to the Director’s designated beneficiary (ies). The beneficiary (ies) shall receive all remaining monthly installments which the Director would have received until the total sum of $229,680 set forth in paragraph “1” is paid. If the Director fails to designate a beneficiary in writing to the Bank, the balance of monthly installments remaining at the time of his death shall be paid to the legal representative of the estate of the Director.

4. Termination of Service as A Director. If the Director, for any reason other than death, fails to serve five consecutive years as a Director, he will receive monthly compensation beginning at age 65 on the basis that the number of full months served bears to the required number of 60 months times the compensation stated in paragraph “1”. For example, if the Director serves only 36 months, he will be entitled to 36/60 or 60% of the compensation stated in paragraph “1”.

5. Suicide. No payments will be made to the Director’s beneficiary (ies) or to his estate in the event of death by suicide during the first three years of this agreement.

6. Status of Agreement. This agreement does not constitute a contract of employment between the parties, nor shall any provision of this agreement restrict the right of the Bank’s Shareholders to replace the Director or the right of the Director to terminate his service.

7. Binding Effect. This agreement shall be binding upon the parties hereto and upon the successors and assigns of the Bank, and upon the heirs and legal representatives of the Director.

of the main office of the Bank for a period of ten years, coinciding with the number of years that the Director shall receive such compensation.

9. Assignment of Rights. None of the rights to compensation under this Agreement are assignable by the Director or any beneficiary or designee of the Director and any attempt to anticipate, sell, transfer, assign, pledge, encumber or change Director’s right to receive compensation, shall be void.

10. Status of Director’s Rights. The rights granted to the Director or any designee or beneficiary under this Agreement shall be solely those of an unsecured creditor of the Bank.

11. Amendments. This Agreement may be amended only by a written Agreement signed by the parties.

12. If the Bank shall acquire an insurance policy or any other asset in connection with the liabilities assumed by it hereunder, it is expressly understood and agreed that neither Director nor any beneficiary of Director shall have any right with respect to, or claim against, such policy or other asset except as expressly provided by the terms of such policy or in the title to such other asset. Such policy or asset shall not be deemed to be held under any trust for the benefit of Director or his beneficiaries or to be held in any way as collateral security for the fulfilling of the obligations of the Bank under this Agreement except as may be expressly provided by the terms of such policy or other asset. It shall be, and remain, a general, unpledged, unrestricted asset of the Bank.

13. This agreement shall be construed under and governed by the laws of the State of Pennsylvania.

14. Interpretation. Wherever appropriate in this Agreement, words used in the singular shall include the plural and the masculine shall include the feminine gender.

EXHIBIT 10.2

1986 DIRECTOR’S DEFERRED COMPENSATION AGREEMENT FOR A. JEROME COOK

DIRECTOR’S COMPENSATION AGREEMENT

This Agreement is entered into this first day of January, 1986, between THE JUNIATA VALLEY BANK, P.O. Box 66, Mifflintown, Pennsylvania 17059 (herein referred to as the “Bank”) and A. JEROME COOK, 311 Orange St., Mifflintown, Pennsylvania 17059 (herein referred to as the “Director”).

WITNESSETH

WHEREAS, the Bank recognizes that the competent and faithful efforts of Director on behalf of the Bank have contributed significantly to the success and growth of the Bank; and

WHEREAS, the Bank values the efforts, abilities and accomplishments of the Director and recognizes that his services are vital to its continued growth and profits in the future; and

WHEREAS, the Bank desires to compensate the Director and retain his services for five years, if elected, to serve on the Board of Directors. Such compensation is set forth below; and

WHEREAS, the Director, in consideration of the foregoing, agrees to continue to serve as a Director, if elected,

NOW, THEREFORE, it is mutually agreed as follows:

1. Compensation. The Bank agrees to pay Director the total sum of $475,370 payable in monthly installments of $3,961.42 for 120 consecutive months commencing on the first day of the month following Director’s 65th birthday. Payments to the Director will terminate when the 120 payments have been made or at the time of the Director’s death, whichever occurs first.

2. Death of Director Before Age 65. In the event Director should die before reaching age 65, the Bank agrees to pay to Director’s beneficiary (ies) designated in writing to the Bank, the sum of $3,961.42 per month for 120 consecutive months. Payments will begin on the first day of the month following Director’s death.

3. Death of Director After Age 65. If the Director dies after age 65 prior to receiving the full 120 monthly installments, the remaining monthly installments will be paid to the Director’s designated beneficiary (ies). The beneficiary (ies) shall receive all remaining monthly installments which the Director would have received until the total sum of $475,370 set forth in paragraph “1” is paid. If the Director fails to designate a beneficiary in writing to the Bank, the balance of monthly installments at the time of his death shall be paid to the legal representative of the estate of the Director.

5. Suicide. No payments will be made to the Director’s beneficiary (ies) or to his estate in the event of death by suicide during the first three years of this agreement.

7. Binding Effect. This agreement shall be binding upon the parties hereto and upon the successors and assigns of the Bank, and upon the heirs and legal representatives of the Director.

8. Forfeiture of Compensation by Competition. The Director agrees that all rights to compensation following age 65 shall be forfeited by him if he engages in competition with the Bank, without the prior written consent of the Bank, within a radius of 5 miles of the main office of the Bank for a period of ten years, coinciding with the number of years that the Director shall receive such compensation.

10. Status of Director’s Rights. The rights granted to the Director or any designee or beneficiary under this Agreement shall be solely those of an unsecured creditor of the Bank.

11. Amendments. This Agreement may be amended only by a written Agreement signed by the parties.

12. If the Bank shall acquire an insurance policy or any other asset in connection with the liabilities assumed by it hereunder, it is expressly understood and agreed that neither Director nor any beneficiary of Director shall have any right with respect to, or claim against, such policy or in the title to such other asset. Such policy or asset shall not be deemed to be held under any trust for the benefit of Director or his beneficiaries or to be held in any way as collateral security for the fulfilling of the obligations of the Bank under this Agreement except as may be expressly provided by the terms of such policy or other asset. It shall be, and remain, a general, unpledged, unrestricted asset of the Bank.

13. This agreement shall be construed under and governed by the laws of the State of Pennsylvania.

14. Interpretation. Wherever appropriate in this Agreement, words used in the singular shall include the plural and the masculine shall include the feminine gender.

15. This Agreement shall be binding upon and inure to the benefit of any successor of the Bank and any such successor shall be deemed substituted for the Bank under the terms of this Agreement. As used herein, the term “successor” shall include any person, corporation or other business entity which at any time, whether by merger, purchase or otherwise, acquires all or substantially all of the stock, assets or business of the Bank.

16. If the Bank’s marginal income tax bracket is different from 46% at the time deferred income payments are made under this Agreement to the Director or his beneficiary (ies), the payments may be adjusted by the Board of Directors to reflect that change. The following formula could be used to calculate the change in benefits: Monthly Income (As Shown) X .54 divided by 1 — Tax Bracket

17. All compensation provided by this Agreement is in addition to that which is provided under the Director’s Compensation Agreement dated January 1, 1982.

EXHIBIT 10.3

1988 RETIREMENT PROGRAM FOR DIRECTORS

JUNIATA VALLEY BANK RETIREMENT PROGRAM FOR DIRECTORS

Juniata Valley Bank, a Pennsylvania chartered bank, hereby adopts the following Retirement Program for the members of its Board of Directors, effective January 1, 1988.

PURPOSE

The purpose of the Plan is to secure for the Bank the benefits of the continued service of certain of the Bank’s directors and to recognize the many years of their past service by making supplemental retirement arrangements for their benefit as herein provided.

ARTICLE 1
DEFINITIONS

The following terms when used in the Plan shall have the following designated meanings unless a different meaning is clearly required by the context:

1.1 “Accrued Retirement Benefit” means, as of any date before a Director’s Normal Retirement Age, that cumulative portion of a Director’s Retirement Benefit which he has earned in accordance with the schedule attached to his Signature Page. In order to accrue an additional benefit for any calendar year; the Director must serve on the Board for the entire calendar year.

1.2 “Actuarial Equivalent” means a benefit of equal value to a Director’s Accrued Retirement Benefit or Retirement Benefit when computed using an annual interest rate of 6%.

1.3 “Bank” means Juniata Valley Bank, a Pennsylvania chartered Bank.

1.4 “Board” means the board of directors of the Bank.

1.5 “Director” means each member of the Board who is eligible to participate in the Plan and has signed a Signature Page. A member of the Board shall be eligible to participate in the Plan on January 1 following his completion of six months of service, except that all members of the Board on January 1, 1988 shall be eligible to participate in the Plan as of that date.

1.6 “Normal Retirement Age” means the later of the date on which the Director attains age 65 or completes 10 years of Credited Service.

1.7 “Normal Retirement Date” means the first day of the next calendar month after a Director reaches his Normal Retirement Age.

1.8 “Plan” means the Juniata Valley Bank Retirement Program for Directors set forth herein, as the same may be amended from time to time.

1.9 “Retirement Benefit” means for each Director, the annual retirement benefit which is set forth on the schedule attached to his Signature Page and Payable pursuant to Article II hereof.

1.10 “Signature Page” means that document, with attached schedules, by which the Directors agrees to participate in the Plan and be bound by the terms thereof, and in which the specific amount of each benefit provided by the Plan is set forth. Together the Signature Page and this Plan Document shall set forth all of the terms of the Plan as to each Director.

1.11 “Years of Credited Service” means a Year of Service with respect to calendar years after 1987 and each 5 years of Service with respect to calendar years prior to 1988.

1.12 “Years of Service” means a calendar year during which the Director has served on the Board for a period of at least six months.

ARTICLE II
RETIREMENT PENSION

In the event of the retirement of a Director, on or after attaining his Normal Retirement Age, he shall be entitled to a retirement pension in an amount equal to his Retirement Benefit. Payment of the retirement pension shall commence on the Director’s Normal Retirement Date, and shall be payable monthly for one hundred twenty (120) months.

ARTICLE III
BENEFITS ON TERMINATION OF EMPLOYMENT

3.1 In the event the services of Director are terminated prior to his Normal Retirement Age for any reason (including death or disability), except if the termination is due to the Director’s fraud or dishonesty (whether or not directed toward the Bank), he shall be entitled to receive a pension in an amount equal to his Accrued Retirement Benefit as of the date of termination of his services on the Board. The pension shall be paid to the Director in equal monthly payments over a period of one hundred twenty (120) months, commencing on his Normal Retirement Date. (For the purpose of computing the Director’s Normal Retirement Date it shall be

assumed he continues to serve on the Board until he attains his Normal Retirement Age.) However, the Director may elect to commence receipt of the benefit provided by this article III at any time prior to his Normal retirement Date after satisfying the requirements of this Article III, but in such event, the benefit to which the Director is entitled shall be the Actuarial Equivalent of his Accrued retirement Benefit. The election shall be effective only if approved by the Board, except that Board approval shall not be required if a Director terminates his service on the Board at or after attaining age 72.

ARTICLE IV
DEATH BENEFIT

If the Director dies after his pension commences but prior to receiving one hundred twenty (120) monthly payments, the beneficiary named by the Director or, if the Director fails to name a beneficiary or if the named beneficiary predeceases the Director, his surviving spouse (or if the spouse predeceases the Director, his estate) shall receive monthly payments in an amount equal to the portion of the benefit not received by the Director during his life, for the remainder of the one hundred twenty (120) month period.

ARTICLE V
CLAIMS PROCEDURE

5.1 A Director or his beneficiary may submit a claim for benefits to the Board of Directors in writing in such form as is permitted by the Board of Directors. A Director or his beneficiary shall have no right to seek review of a denial of benefits, or to bring any action in any court to enforce a claim for benefits prior to his filing a claim for benefits and exhausting his rights to review under Sections 5.1, 5.2 and 5.3. When a claim for benefits has been filed properly, such claim for benefits shall be evaluated and the claimant shall be notified of the approval or the denial within ninety (90) days after the receipt of such claim unless special circumstances require an extension of time for processing the claim. If such an extension of time for processing is required, written notice of the extension shall be furnished to the claimant prior to the termination of the initial ninety (90) day period which shall specify the special circumstances requiring an extension and the date by which a final decision will be reached (which date shall not be later than one hundred and eighty (180) days after the date on which the claim was filed). A claimant shall be given a written notice in which the claimant shall be advised as to whether the claim is granted or denied, in whole or in part. If the claim is denied, in whole or in part, the claimant shall be given written notice which shall contain (a) the specific reasons for the denial, (b) references to pertinent Plan provisions upon which the denial is based, (c) a description of any additional material on information necessary to perfect the claim and an explanation of why such material or information is necessary, and (d) the claimant’s rights to seek review of the denial.

5.2 If a claim is denied, in whole or in part, the claimant shall have the right to request that the Board review the denial, provided that the claimant files a written request for review with the Board of Directors within sixty (60) days after the date on which the claimant received written notification of the denial. A claimant (or his duly authorized representative) may review pertinent documents and submit issues and comments in writing to the Board. Within sixty (60) days after the request for review is received, the review shall be made and the claimant shall be advised in writing of the decision on review, unless special circumstances require an extension of time for processing the review, in which case the claimant shall be given a written notification within such initial sixty (60) day period specifying the reasons for the extension and when such review shall be completed (provided that such review shall be completed within one hundred and twenty (120) days after the date on which the request for the review was filed). The decision on review shall be forwarded to the claimant in writing and shall include specific reasons for the decision and references to the Plan provisions upon which the decision is based. A decision on review shall be final and binding on all persons for all purposes.

5.3 If a claimant shall fail to file request for review in accordance with the procedures herein outlined, such claimant shall have no rights to review and shall have no rights to review and shall have no right to bring action in any court and the denial of the claim shall become final and binding on all persons for all purposes.

ARTICLE VI
NO PROHIBITION AGAINST OR RIGHT UPON FUNDING

Should the Bank elect to acquire any insurance or annuity contract or other investment or to establish reserves in connection with the liabilities assumed by it under the Plan, it is expressly understood and agreed that the Director shall not have any right with respect to, or claim against, such assets nor shall any such acquisition or reserve be construed to create a trust of any kind or a fiduciary relationship between the Bank and the Directors, their beneficiaries or any other person. Any such assets and reserves shall be and remain a part of the general, unpledged, unrestricted assets of the Bank, subject to the claims of its general creditors. Each Director and his beneficiaries shall be required to look solely to the provisions of the Plan and to Bank itself for enforcement of any and all benefits due under the Plan and to the extent any such person acquires a right to receive payment under Plan, such right shall be no greater than the right of any unsecured general creditor of the Bank. The Bank shall be designated owner and beneficiary of any insurance contract or investment acquired or reserve established in connection with its obligations under the Plan.

ARTICLE VII

GENERAL PROVISIONS

7.1 No benefit or payment under this Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assignment pledge, encumbrance or charge, whether voluntary or involuntary, and no attempt so to anticipate, alienate, sell, transfer, assign, pledge, encumber or charge the same shall be valid, nor shall any such benefit or payment be in any way liable for or subject to the debts, contracts, liabilities, engagements or torts of any person entitled to such benefit or payment, except to such extent as may be required by law. If any person entitled to a benefit or payment under the Plan becomes bankrupt or attempts to anticipate, alienate, sell, transfer, assign, pledge, encumber or charge any benefit or payment under the Plan, in whole or in part; or if any attempt is made to subject any such benefit or payment, in whole or in part, to the debts, contracts, liabilities, engagements or torts of the person entitled to any such benefit or payment, then such benefit or payment shall cease and terminate with respect to such person, and the Bank in such case shall hold or apply the same or any part thereof for the benefit of any dependent, relative or beneficiary of such person, in such manner and proportion as the Bank may deem proper.

7.2 The establishment of the Plan shall not be construed to confer upon any Director the legal right to be continue to service on the Board, or give a Director or any beneficiary, or any other person, any right to any payment whatsoever, except to the extent of the benefits provided for hereunder. Each Director shall remain subject to removal to the same extent as if the Plan had never been adopted.

7.3 If the Bank determines that any person to whom a benefit is payable under the Plan is incompetent by reason of age or physical or mental disability, the Bank shall have the power to cause the payments becoming due to such person to be made to another for his benefit without responsibility of the Bank to see to the application of such payments. Any payment made pursuant to such power shall, as to such payment, operate as a complete discharge of the Bank.

7.4 With the approval of the Board, the payment of any benefit under the Plan may be anticipated by the purchase of a paid up life annuity or insurance contract issued by a legal reserve life insurance company licensed to do business in Pennsylvania.

7.5 The benefits of each Director or any other person hereunder shall be in addition to any benefits paid or payable to or on account of the Director or such other person under any other pension, disability, equity, annuity, profit sharing or other retirement plan or policy whatsoever.

7.6 No liability shall attach to or be incurred by any officer or director of the Bank under or by reason of the terms, conditions and provisions contained in the Plan, or for the acts or decisions taken or made thereunder, or both, such liability, if any, is expressly waived and released by each Director and by any and all persons claiming under or through any director or any other person.

7.7 All questions of interpretation, construction, or application arising under the Plan shall be decided by the Board, whose decision shall be final and conclusive upon all persons. The Board shall also have the sole authority to modify, amend or terminate the Plan; provided, however, that no amendment or termination of the Plan shall reduce, alter or impair, without the consent of a Director, the right to any benefit to which a Director would be entitled to under the Plan immediately before the effective date of such modification or termination. Should this Plan be terminated or amended, each Director shall receive written notice of when such termination shall be effective.

7.8 The Plan shall be construed and administered under the laws of the Commonwealth of Pennsylvania, unless superseded by the laws of the United States of America.

7.9 If any provision of this Plan is held invalid or unenforceable, its invalidity or unenforceability shall not affect any other provisions of the Plan, and the Plan shall be construed and enforced as if such provision had not been included therein.

7.10 The Article headings contained herein are inserted only as a matter of convenience and for reference and do not enlarge or describe the scope, intent or construction of the Plan. Pronouns used herein shall be deemed to be masculine, feminine, singular or plural, as their context may require.

IN WITNESS WHEREOF, the Bank has caused this Plan to be executed this 23rd day of December 1988.


ATTEST: Juniata Valley Bank

By:
	Secretary President

EXHIBIT 10.4

1991 DIRECTOR’S DEFERRED COMPENSATION AGREEMENT FOR A. JEROME COOK

DIRECTOR’S COMPENSATION AGREEMENT

This Agreement is entered into this first day of January, 1991, between JUNIATA VALLEY BANK, P.O. Box 66, Mifflintown, Pennsylvania 17059 (herein referred to as the “Bank”) and A. JEROME COOK, 311 Orange St., Mifflintown, Pennsylvania 17059 (herein referred to as the “Director”).

WITNESSETH

WHEREAS, the Bank recognizes that the competent and faithful efforts of Director on behalf of the Bank have contributed significantly to the success and growth of the Bank; and

WHEREAS, the Bank values the efforts, abilities and accomplishments of the Director and recognizes that his services are vital to its continued growth and profits in the future; and

WHEREAS, the Bank desires to compensate the Director and retain his services for five years, if elected, to serve on the Board of Directors. Such compensation is set forth below; and

WHEREAS, the Director, in consideration of the foregoing, agrees to continue to serve as a Director, if elected,

NOW, THEREFORE, it is mutually agreed as follows:

1. Compensation. The Bank agrees to pay Director the total sum of $164,250 payable in monthly installments of $1,368.75 for 120 consecutive months, commencing on the first day of the month following Director’s 65 ^th birthday. Payments to the Director will terminate when the 120 payments have been made or at the time of the Director’s death, whichever occurs first.

2. Death of Director Before Age 65. In the event Director should die before reaching age 65, the Bank agrees to pay to Director’s beneficiary (ies) designated in writing to the Bank, the sum of $1,368.75 per month for 120 consecutive months. Payments will begin on the first day of the month following Director’s death.

3. Death of Director After Age 65. If the Director dies after age 65 prior to receiving the full 120 monthly installments, the remaining monthly installments will be paid to the Director’s designated beneficiary (ies). The beneficiary (ies) shall receive all remaining monthly installments which the Director would have received until the total sum of $164,250 set forth in paragraph “1” is paid. If the Director fails to designate a beneficiary in writing to the Bank, the balance of monthly installments at the time of his death shall be paid to the legal representative of the estate of the Director.

5. Suicide. No payments will be made to the Director’s beneficiary (ies) or to his estate in the event of death by suicide during the first three years of this agreement.

7. Binding Effect. This agreement shall be binding upon the parties hereto and upon the successors and assigns of the Bank, and upon the heirs and legal representatives of the Director.

the Bank for reasons of professional advancement, education, health or government service, or during military leave for any period if the Director is elected to serve on the board following such interruption.

9. Forfeiture of Compensation by Competition. The Director agrees that all rights to compensation following age 65 shall be forfeited by him if he engages in competition with the Bank, without the prior written consent of the Bank, within a radius of 50 miles of the main office of the Bank for a period of ten years, coinciding with the number of years that the Director shall receive such compensation.

10. Assignment of Rights. None of the rights to compensation under this Agreement are assignable by the director or any beneficiary or designee of the Director and any attempt to anticipate, sell, transfer, assign, pledge, encumber or change Director’s right to receive compensation, shall be void.

11. Status of Director’s Rights. The rights granted to the Director or any designee or beneficiary under this Agreement shall be solely those of an unsecured creditor of the Bank.

12. Amendments. This Agreement may be amended only by a written Agreement signed by the parties.

13. If the Bank shall acquire an insurance policy or any other asset in connection with the liabilities assumed by it hereunder, it is expressly understood and agreed that neither Director nor any beneficiary of Director shall have any right with respect to, or claim against, such policy or in the title to such other asset. Such policy or asset shall not be deemed to be held under any trust for the benefit of Director or his beneficiaries or to be held in any way as collateral security for the fulfilling of the obligations of the Bank under this Agreement except as may be expressly provided by the terms of such policy or other asset. It shall be, and remain, a general, unpledged, restricted asset of the Bank.

14. This agreement shall be construed under and governed by the laws of the State of Pennsylvania.

15. Interpretation. Wherever appropriate in this Agreement, words used in the singular shall include the plural and the masculine shall include the feminine gender.

16. This Agreement shall be binding upon and inure to the benefit of any successor of the Bank and any such successor shall be deemed substituted for the Bank under the terms of this Agreement. As used herein, the term “successor” shall include any person, corporation or other business entity which at any time, whether by merger, purchase or otherwise, acquires all or substantially all of the stock, assets or business of the Bank.

17. If the Bank’s marginal income tax bracket is different from 34% at the time deferred income payments are made under this Agreement to the Director or his beneficiary (ies), the payments may be adjusted by the Board of Directors to reflect that change. The following formula could be used to calculate the change in benefits: Monthly Income (As Shown) X .66 divided by 1 — Tax Bracket.

18. All compensation provided by this Agreement is in addition to that which is provided under the Director’s Compensation Agreements dated January 1, 1982 and January 1, 1986.

EXHIBIT 10.5

1992 DIRECTOR’S DEFERRED COMPENSATION AGREEMENT FOR RONALD WITHERITE

DIRECTOR’S COMPENSATION AGREEMENT

This Agreement is entered into this first day of January, 1992, between JUNIATA VALLEY BANK, P.O. Box 66, Mifflintown, Pennsylvania 17059 (herein referred to as the “Bank”) and RONALD WITHERITE, Box 161BB, Road #1, Reedsville, Pennsylvania 17084 (herein referred to as the “Director”).

WITNESSETH

WHEREAS, the Bank recognizes that the competent and faithful efforts of Director on behalf of the Bank have contributed significantly to the success and growth of the Bank; and

WHEREAS, the Bank values the efforts, abilities and accomplishments of the Director and recognizes that his services are vital to its continued growth and profits in the future; and

WHEREAS, the Bank desires to compensate the Director and retain his services for five years, if elected, to serve on the Board of Directors. Such compensation is set forth below; and

WHEREAS, the Director, in consideration of the foregoing, agrees to continue to serve as a Director, if elected,

NOW, THEREFORE, it is mutually agreed as follows:

1. Compensation. The Bank agrees to pay Director the total sum of $171,930 payable in monthly installments of $1,432.75 for 120 consecutive months, commencing on the first day of the month following Director’s 65 ^th birthday. Payments to the Director will terminate when the 120 payments have been made or at the time of the Director’s death, whichever occurs first.

2. Death of Director Before Age 65. In the event Director should die before reaching age 65, the Bank agrees to pay to Director’s beneficiary (ies) designated in writing to the Bank, the sum of $1,432.75 per month for 120 consecutive months. Payments will begin on the first day of the month following Director’s death.

Director fails to designate a beneficiary in writing to the Bank, the balance of monthly installments at the time of his death shall be paid to the legal representative of the estate of the Director.

4. Termination of Service as A Director. If the Director, for any reason other than death, fails to serve five consecutive years as a Director, he will receive monthly compensation beginning at age 65 on the basis that the number of full months served bears to the required number of 60 months times the compensation stated in paragraph “1”. For example, if the Director serves only 30 months, he will be entitled to 30/60 or 50% of the compensation stated in paragraph “1” and “2”.

5. Suicide. No payments will be made to the Director’s beneficiary (ies) or to his estate in the event of death by suicide during the first three years of this agreement.

7. Binding Effect. This agreement shall be binding upon the parties hereto and upon the successors and assigns of the Bank, and upon the heirs and legal representatives of the Director.

8. Interruption of Service. The service of the Director shall not be deemed to have been terminated or interrupted due to his absence from active service on account of illness, disability, during any authorized vacation or during temporary leaves of absence granted by the Bank for reasons of professional advancement, education, health or government service, or during military leave for any period if the Director is elected to serve on the board following such interruption.

11. Status of Director’s Rights. The rights granted to the Director or any designee or beneficiary under this Agreement shall be solely those of an unsecured creditor of the Bank.

12. Amendments. This Agreement may be amended only by a written Agreement signed by the parties.

13. If the Bank shall acquire an insurance policy or any other asset in connection with the liabilities assumed by it hereunder, it is expressly understood and agreed that neither Director nor any beneficiary of Director shall have any right with respect to, or claim against, such policy or other asset except as expressly provided by the terms of such policy or in the title to such other asset. Such policy or asset shall not be deemed to be held under any trust for the benefit of Director or his beneficiaries or to be held in any way as collateral security for the fulfilling of the obligations of the Bank under this Agreement except as may be expressly provided by the terms of such policy or other asset. It shall be, and remain, a general, unpledged, unrestricted asset of the Bank.

14. This agreement shall be construed under and governed by the laws of the State of Pennsylvania.

15. Interpretation. Wherever appropriate in this Agreement, words used in the singular shall include the plural and the masculine shall include the feminine gender.

16. This Agreement shall be binding upon and inure to the benefit of any successor of the Bank and any such successor shall be deemed substituted for the Bank under the terms of this Agreement. As used herein, the term “successor’ shall include any person, corporation or other business entity which at any time, whether by merger, purchase or otherwise, acquires all or substantially all of the stock, assets or business of the Bank.

EXHIBIT 10.6

1993 DIRECTOR’S DEFERRED COMPENSATION AGREEMENT FOR DALE NACE

DIRECTOR’S COMPENSATION AGREEMENT

This Agreement is entered into this first day of January, 1993, between JUNIATA VALLEY NATIONAL BANK, P.O. Box 66, Mifflintown, Pennsylvania 17059 (herein referred to as the “Bank”) and DALE NACE, R.D.#2, Box 453, Millerstown, Pennsylvania 17062 (herein referred to as the “Director”).

WITNESSETH

WHEREAS, the Bank recognizes that the competent and faithful efforts of Director on behalf of the Bank have contributed significantly to the success and growth of the Bank; and

WHEREAS, the Bank values the efforts, abilities and accomplishments of the Director and recognizes that his services are vital to its continued growth and profits in the future; and

WHEREAS, the Bank desires to compensate the Director and retain his services for five years, if elected, to serve on the Board of Directors. Such compensation is set forth below; and

WHEREAS, the Director, in consideration of the foregoing, agrees to continue to serve as a Director, if elected,

NOW, THEREFORE, it is mutually agreed as follows:

1. Compensation. The Bank agrees to pay Director the total sum of $109,340 payable in monthly installments of $911.17 for 120 consecutive months, commencing on the first day of the month following Director’s 65 ^th birthday. Payments to the Director will terminate when the 120 payments have been made or at the time of the Director’s death, whichever occurs first.

2. Death of Director Before Age 65. In the event Director should die before reaching age 65, the Bank agrees to pay to Director’s beneficiary (ies) designated in writing to the Bank, the sum of $911.17 per month for 120 consecutive months. Payments will begin on the first day of the month following Director’s death.

3. Death of Director After Age 65. If the Director dies after age 65 prior to receiving the full 120 monthly installments, the remaining monthly installments will be paid to the Director’s designated beneficiary (ies). The beneficiary (ies) shall receive all remaining monthly installments which the Director would have received until the total sum of $109,340 set forth in paragraph “1” is paid. If the Director fails to designate a beneficiary in writing to the Bank, the balance of monthly installments at the time of his death shall be paid to the legal representative of the estate of the Director.

4. Termination of Service as A Director. If the Director, for any reason other than death, fails to serve five consecutive years as a Director, he will receive monthly compensation beginning at age 65 on the basis that the number of full months served bears to the required number of 60 months times the compensation stated in paragraph “1”. For example, if the Director serves only 30 months, he will be entitled to 30/60 or 50% of the compensation stated in paragraph “1”, “2” and “3”.

5. Suicide. No payments will be made to the Director’s beneficiary (ies) or to his estate in the event of death by suicide during the first three years of this agreement.

7. Binding Effect. This agreement shall be binding upon the parties hereto and upon the successors and assigns of the Bank, and upon the heirs and legal representatives of the Director.

10. Assignment of Rights. None of the rights to compensation under this Agreement are assignable by the Director or any beneficiary or designee of the Director and any attempt to anticipate, sell, transfer, assign, pledge, encumber or change Director’s right to receive compensation, shall be void.

11. Status of Director’s Rights. The rights granted to the Director or any designee or beneficiary under this Agreement shall be solely those of an unsecured creditor of the Bank.

12. Amendments. This Agreement may be amended only by a written Agreement signed by the parties.

13. If the Bank shall acquire an insurance policy or any other asset in connection with the liabilities assumed by it hereunder, it is expressly understood and agreed that neither Director nor any beneficiary of Director shall have any right with respect to, or claim against, such policy or other asset except as expressly provided by the terms of such policy or in the title to such other asset. Such policy or asset shall not be deemed to be held under any trust for the benefit of Director or his beneficiaries or to be held in any way as collateral security for the fulfilling of the obligations of the Bank under this Agreement except as may be expressly provided by the terms of such policy or other asset. It shall be, and remain, a general, unpledged, unrestricted asset of the Bank.

14. This agreement shall be construed under and governed by the laws of the State of Pennsylvania.

15. Interpretation. Wherever appropriate in this Agreement, words used in the singular shall include the plural and the masculine shall include the feminine gender.

16. This Agreement shall be binding upon and inure to the benefit of any successor of the Bank and any such successor shall be deemed substituted for the Bank under the terms of this Agreement. As used herein, the term “successor’ shall include any person, corporation or other business entity which at any time, whether by merger, purchase or otherwise, acquires all or substantially all of the stock, assets or business of the Bank.

EXHIBIT 10.7

1999 DIRECTOR’S DEFERRED COMPENSATION PLAN

I. Name and Purpose.

The name of the plan is the Juniata Valley Bank and Juniata Valley Financial Corp. Directors Deferred Compensation Plan (the “Plan”). Its purpose is to provide its respective Directors with the opportunity to defer receipt of their compensation to a future date. Juniata Valley Bank and Juniata Valley Financial Corp. (the “Sponsors”) have adopted this program in recognition of the valuable services of its Directors and the desire to provide them with additional flexibility in their personal financial planning.

II. Effective Date.

The Plan shall be effective as of January 1, 1999.

III. Eligibility.

Each Director on the Sponsors’ Boards of Directors is eligible to participate in the Plan. Any eligible individual who elects to participate in the Plan is hereinafter referred to as a “Participant”.

IV. Administration of the Plan.

The Plan will be administered by the Board of Directors of Juniata Valley Financial Corp. The Board of Directors will have the right to interpret the provisions of the Plan. However, no Participant may partake in any decision which would specifically affect his or her own deferral account.

V. Definition of Compensation.

As used throughout this document, the term “Compensation” refers to the amount of Director’s fees a Participant receives. A maximum of one hundred percent (100%) of a Director’s compensation may be deferred under this Plan.

VI. Election to Participate.

(a) Any eligible individual may irrevocably elect, prior to the beginning of each calendar year, but no later than December 31 of the preceding calendar year, to participate in the Plan and defer receipt of all or part of the cash Compensation (as defined in Section V) that would otherwise have been payable to him or her, to a distribution date defined in Section VIII. A new Participant may make an election with respect to future cash Compensation, including cash Compensation earned in the first year of eligibility, within thirty (30) days after becoming eligible.

(b) The election will be made on a written form called a “Notice of Election” signed by the Participant and delivered to the Board of Directors. This election will continue in effect for future years in which the Participant is eligible to participate unless the Participant submits a written request revoking or revising his or her election on a Notice of Election form.

Any revocation or revised deferral election will be applicable only to compensation the Participant may earn for services performed in the future and will be effective as of January 1 of the year specified, provided that the signed Notice of Election form has been received by the Board of Directors by December 31 of the preceding calendar year.

(c) Nothing in this Section VI prevents a Participant from filing an election not to participate for a calendar year and thereafter filing another election to participate in the Plan for any subsequent calendar year.

VII. Deferral Accounts.

A deferred compensation account will be established for each Participant as a bookkeeping instrument. Credits will be made to a Participant’s account on the same dates compensation would have otherwise been paid to him or her currently. The deferred compensation will be credited with interest, credited and compounded quarterly, until distribution is made in full. The interest rate for purposes of this Plan will be the current interest rate of Juniata Valley Bank’s Floating IRA Savings Program (updated quarterly).

VIII. Method of Distribution of Deferred Compensation.

(a) If a Participant who has not reached age fifty-five (55) resigns as a Director of the Sponsors, he or she will be paid his or her account balance in one lump sum as soon as administratively convenient. If a

Participant, age 55 or older, resigns as Director of the Sponsors’ Trust, he or she will be paid his or her account balance in approximately equal semi-annual payments over ten (10) years commencing on the earlier of January 1 or July 1 coinciding with or next following the date of resignation.

(b) Cash amounts held pending distribution shall continue to accrue interest as provided in Section VII until the date of distribution. Any tax required by any governmental authority to be withheld shall be deducted from each distribution under the Plan.

(c) The semi-annual installments will be made on the business day coinciding with or next following January 1 and July 1.

IX. Change in Distribution Schedule.

(a) In the event of the death of a Participant before full payment of Participant’s account balance has been made, the Board of Directors shall pay the remaining balance of any deferred amount in one lump sum to the individual designated as Primary Beneficiary on the latest executed “Notice of Change of Beneficiary” form on file. If the Primary Beneficiary designated on the latest executed “Notice of Change of Beneficiary” form is no longer living, the Board of Directors shall pay the remaining balance of any deferred amount in one lump sum to the individual designed as Secondary Beneficiary on the latest executed “Notice of Change of Beneficiary” form on file. If the Secondary Beneficiary designated on the latest executed “Notice of Change of Beneficiary” form is no longer living, the Board of Directors shall pay the remaining balance of any deferred amount in one lump sum to the Participant’s estate.

If a Participant wishes to change the beneficiary he or she has previously designated, he or she may do so at any time by submitting a “Notice of Change of Beneficiary” form to the Plan Administrator.

(b) In the event of permanent disability (as defined below) before full payment of a Participant’s account balance has been made, the Board of Directors in its sole discretion shall be permitted to pay the balance of any deferred amount in one lump sum. Such payouts shall be made to the Participant or the legal representative of such Participant pursuant to paragraph (c) of Section XV.

Permanent Disability: The Participant will be considered permanently disabled for the purposes of this Plan if, based on medical evidence, the Board of Directors determines that the Participant (1) is totally disabled, mentally or physically, (2) will remain so for the rest of his or her life, and (3) is, therefore, unable to continue his or her services to the Sponsor.

(c) In the event of a Participant’s “unforeseeable emergency”, the Participant may submit a written petition to the Board of Directors for an early withdrawal from his or her remaining account balance. The Board of Directors has sole discretion in the determination of the merits of petitioner’s “Unforeseeable Emergency” petition. Any early withdrawal approved by the Board of Directors is limited to the amount necessary to meet the emergency. Unforeseeable Emergency: An Unforeseeable Emergency is severe financial hardship to the Participant resulting from (1) a sudden and unexpected illness or accident of the Participant or of a dependent (as defined in Internal Revenue Code ss.152(a) of the Participant, (2) loss of the Participant’s property due to casualty, (3) or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of Participant. The need to send a Participant’s child to college or the desire to purchase a home are not considered to be Unforeseeable Emergencies.

(d) If a Participant wishes to modify the payment schedule noted at Section VIII, he or she must submit a written petition to the Board of Directors for such change. The Board of Directors has sole discretion in whether to permit the requested change.

X. Rights of a Participant.

Establishment of the Plan shall not be construed as giving any Participant the right to be retained as a Director of the Sponsors or the right to receive any benefits not specifically provided by the Plan.

Income deferred under this Plan will not be segregated from the general funds of the Sponsors and no Participant will have any claim on any specific assets of the Sponsors. To the extent that any Participant acquires a right to receive benefits under this Plan, his or her right will be no greater than the right of any unsecured general creditor of the Sponsors and is not assignable or transferable except to his or her estate as defined in Section IX.

XI. Amendment and Termination.

(a) The Plan may be amended from time to time by resolution of the Board of Directors to comply with changes in the laws of the State and Federal Government having jurisdiction over the Sponsors. The amendment of any one or more provisions of the Plan shall not affect the remaining provisions of the Plan. No amendment shall reduce any benefits accrued by any Participant prior to the amendment.

(b) The Board of Directors has the right to alter the method of crediting interest to deferral accounts or to cease crediting future interest at any time.

(c) The Board of Directors has the right to terminate the Plan at any time. Any amount accumulated prior to the Plan’s termination will continue to be subject to the provisions of the Plan.

XII. Arbitration of Disputes.

Any disagreement, dispute, controversy or claim arising out of, or relating to, this Plan or interpretation or validity hereof shall be settled exclusively and finally by arbitration. The arbitration shall be conducted in accordance with the commercial arbitration rules of the American Arbitration Association.

XIII. Notices.

Notices and elections under this Plan must be in writing. A notice or election is deemed delivered if it is delivered personally or mailed by registered or certified mail to the person at his or her last known business address.

XIV.

(a) Controlling Law. Except to the extent superseded by federal law, the laws of the Commonwealth of Pennsylvania shall be controlling in all matters relating to the Plan, including construction and performance thereof.

(b) Captions. The captions of sections and paragraphs of this Plan are for the convenience of reference only and shall not control or affect the meaning or construction of any of its provisions.

(c) Facility of Payment. Any amounts payable hereunder to any Participant who is under legal disability or who, in the judgment of the Board of Directors, is unable to properly manage his or her financial affairs may be paid to the legal representative of such Participant or may be applied for the benefit of such Participant in any manner which the Board of Directors may select, and any such payment shall be deemed to be payment for such Participant’s account and shall be a complete discharge of all liability of Sponsors with respect to the amount so paid.

(d) Withholding of Payroll Taxes. To the extent required by the laws in effect at the time compensation or deferred compensation payments are made, Sponsors shall withhold from such compensation, or from deferred compensation payments made hereunder, any taxes required to be withheld for federal, state, or local government purposes.

(e) Administrative Expenses. All expenses of administering the Plan shall be borne by Sponsors. No part thereof shall be charged against any Participant’s account or any amounts distributable hereunder.

(f) Any Provision of this Plan prohibited by the law of any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition without invalidating the remaining provisions hereof.

(g) Except as otherwise expressly provided herein, no member of the Sponsors’ Boards of Directors, and no officer, employee, or agent of Sponsors shall have any liability to any person, firm, or corporation based on or arising out of the Plan, except in the case of gross negligence or fraud.

XV. Unfunded Status of Plan.

It is the intention of the parties that the arrangements herein described be unfounded for tax purposes and for purposes of Title I of ERISA. Plan Participants have the status of general unsecured creditors of the Sponsors. The Plan constitutes a mere promise by the Sponsors to make payments in the future. Any and all payments made to the Participant pursuant to the Plan, shall be made only from the general assets of the Sponsors. All accounts under the Plan shall be for bookkeeping purposes only and shall not represent a claim against specific assets of the Sponsors. Nothing contained in this Plan shall be deemed to create a trust of any kind or create any fiduciary relationship.

XVI. Rights to Benefits.

A Participant’s rights to benefit payments under the Plan are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors of the Participant or the Participant’s beneficiaries.

EXHIBIT 10.8

DIRECTORS SUPPLEMENT LIFE INSURANCE/SPLIT DOLLAR PLAN

THE JUNIATA VALLEY BANK
DIRECTOR SPLIT DOLLAR AGREEMENT

THIS AGREEMENT is made and entered into this day of , 2001, by and between THE JUNIATA VALLEY BANK, a state-chartered commercial bank located in Mifflintown, Pennsylvania (the “Bank”), and (the “Director”), intending to be legally bound hereby.

INTRODUCTION

To encourage the Director to continue to serve on the Board of Directors of the Bank, the Bank is willing to divide the death proceeds of a life insurance policy on the Director’s life. The Bank will pay life insurance premiums from its general assets.

ARTICLE 1
GENERAL DEFINITIONS

The following terms shall have the meanings specified:

1.1 “Change in Control” means any of the following:

(A) any person (as such term is used in Sections 13d and 14d-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), other than the Corporation, a subsidiary of the Corporation, an employee benefit plan (or related trust) of the Corporation or a direct or indirect subsidiary of the Corporation, or Affiliates of the Corporation (as defined in Rule 12b-2 under the Exchange Act), becomes the beneficial owner (as determined pursuant to Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation representing more than 50% of the combined voting power of the Corporation’s then outstanding securities (other than a person owning 10% or more of the voting power of stock on the date hereof); or

(B) the liquidation or dissolution of the Corporation or the occurrence of, or execution of an agreement providing for a sale of all or substantially all of the assets of the Corporation to an entity which is not a direct or indirect subsidiary of the Corporation; or

(C) the occurrence of, or execution of an agreement providing for a reorganization, merger, consolidation or other similar transaction or connected series of transactions of the Corporation as a result of which either (a) the Corporation does not survive or (b) pursuant to which shares of the Corporation common stock (“Common Stock”) would be converted into cash, securities or other property, unless, in case of either (a) or (b), the holders of the Corporation Common Stock immediately prior to such transaction will, following the consummation of the transaction, beneficially own, directly or indirectly, more than 50% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the corporation surviving, continuing or resulting from such transaction; or

(D) the occurrence of, or execution of an agreement providing for a reorganization, merger, consolidation or similar transaction of the Corporation, or before any connected series of such transactions, if upon consummation of such transaction or transactions, the persons who are members of the Board of Directors of the Corporation immediately before such transaction or transactions cease or, in the case of the execution of an agreement for such transaction or transactions, it is contemplated in such agreement that upon consummation such persons would cease to constitute a majority of the Board of Directors of the Corporation or, in the case where the Corporation does not survive in such transaction, of the corporation surviving, continuing or resulting from such transaction or transactions; or

(E) any other event which is at any time designated as a “Change in Control” for purposes of this Agreement by a resolution adopted by the Board of Directors of the Corporation with the affirmative vote of a majority of the non-employee directors in office at the time the resolution is adopted; in the event any such resolution is adopted, the Change in Control event specified thereby shall be deemed incorporated herein by reference and thereafter may not be amended, modified or revoked without the written agreement of the Director; or

(F) during any period of two consecutive years during the term of this Agreement, individuals who at the beginning of such period constitute the Board of Directors of the Bank or Corporation cease for any reason to constitute at least a majority thereof, unless the

election of each director who was not a director at the beginning of such period has been approved in advance by directors representing at least two-thirds of the directors then in office who were directors at the beginning of the period, provided however this provision shall not apply in the event two-thirds of the Board of Directors at the beginning of a period no longer are directors due to death, normal retirement, or other circumstances not related to a Change in Control.

Notwithstanding anything else to the contrary set forth in this Agreement, if (i) an agreement is executed by the Corporation providing for any of the transactions or events constituting a Change in Control as defined herein, and the agreement subsequently expires or is terminated without the transaction or event being consummated, and (ii) Director’s service did not terminate during the period after the agreement and prior to such expiration or termination, for purposes of this Agreement it shall be as though such agreement was never executed and no Change in Control event shall be deemed to have occurred as a result of the execution of such agreement.

1.2 “Corporation” means The Juniata Valley Financial Corp.

1.3 “Disability” means the Director suffering a sickness, accident or injury which, in the judgment of a physician satisfactory to the Bank, permanently prevents the Director from performing substantially all of the Director’s normal duties for the Bank. As a condition to any benefits, the Bank may require the Director to submit to such physical or mental evaluations and tests as the Bank’s Board of Directors deems appropriate.

1.4 “Insured” means the Director.

1.5 “Insurer” means Jefferson Pilot Life Insurance Company.

1.6 “Policy” means insurance policy # JP0053696 issued by the Insurer.

1.7 “Termination of Service” means the Director ceasing to be a member of the Board of Directors of the Bank or the Corporation for any reason other than death.

1.8 “Vested Insurance Benefit” means the Bank will provide the Director with continued insurance coverage from the date of vesting until death, subject to the forfeiture provisions detailed in Article 5. Article 3 explains how a Director achieves vested status.

1.9 “Years of Service” means the total number of continuous years of service as a director of the Bank or the Corporation, inclusive of any years of service as a director of Lewistown Trust Company and inclusive of any approved leaves of absences.

ARTICLE 2
POLICY OWNERSHIP/INTERESTS

2.1 Bank Ownership. The Bank is the sole owner of the Policy and shall be the direct beneficiary of the death proceeds of the Policy remaining after the Director’s interest is determined according to Section 2.2 below.

2.2 Director’s Interest. Subject to the forfeiture provisions of Section 3.2, the Director shall have the right to designate the beneficiary of $25,000 of death proceeds while serving on the Bank’s (or Corporation’s) Board, or if not serving on the Board, if the Director has a Vested Insurance Benefit pursuant to Section 3.1. The Director shall also have the right to elect and change settlement options that may be permitted.

2.3 Comparable Coverage. If the Director has a Vested Insurance Benefit that has not been forfeited, the Bank shall maintain the Policy in full force and effect and in no event shall the Bank amend, terminate or otherwise abrogate the Director’s interest in the Policy. However, the Bank may replace the Policy with a comparable insurance policy to cover the benefit provided under this Agreement. The Policy or any comparable policy shall be subject to the claims of the Bank’s creditors.

2.4 Offer to Purchase. The Bank shall not sell, surrender or transfer ownership of the Policy while this Agreement is in effect without first giving the Director or the Director’s transferee the option to purchase the Policy for a period of thirty (30) days from written notice of such intention. The purchase price shall be an amount equal to the cash surrender value of the Policy. This provision shall not apply if the Director terminated service without attaining a Vested Insurance Benefit or if a forfeiture of benefits occurred pursuant to Section 3.2, in either of which events Bank may sell, surrender or transfer ownership of the Policy without notice to Director or Director’s beneficiary.

ARTICLE 3
VESTING

3.1 Vested Insurance Benefit. The Director shall have a Vested Insurance Benefit equal to the Director’s interest as set forth in paragraph 2.2 herein at the earliest of the following events:

3.1.1 If death occurs while the Director is a member of the Board of Directors of the Bank or the Corporation;

3.1.2 Continuing to serve on the Board until the combination of the Director’s age and Years of Service equals or exceeds 72;

3.1.3 Termination of Service on or after age 65;

3.1.4 Termination of Service due to Disability;

3.1.5 The occurrence of a Change in Control while the Director is a member of the Board of Directors of the Bank or the Corporation, provided that the Director does not resign his position as a member of the Board of Directors prior to consummation of the transaction which constitutes the Change in Control; or

3.1.6 At the discretion of the Board of Directors if there are other circumstances not addressed in Sections 3.1.2, 3.1.3, 3.1.4 or 3.1.5 of this Agreement.

3.2 Forfeiture of Benefit. Notwithstanding the provisions of Section 3.1, the Director will forfeit his or her Vested Insurance Benefit: (1) if the Director violates any of the provisions detailed in Article 5 or, (2) if the payment of the benefit would violate any federal or state banking regulations.

ARTICLE 4
PREMIUMS

4.1 Premium Payment. The Bank shall pay any premiums due on the Policy.

4.2 Imputed Income. The Bank shall impute income to the Director in an amount equal to the current term rate for the Director’s age multiplied by the aggregate death benefit payable to the Director’s beneficiary. The “current term rate” is the minimum amount required to be imputed under Revenue Rulings 64-328 and 66-110, or any subsequent applicable authority.

ARTICLE 5
FORFEITURE OF BENEFIT

5.1 Excess Parachute or Golden Parachute Payment. Notwithstanding any provision of this Agreement to the contrary, the benefit provided under this Agreement shall be forfeited to the extent the benefit would be an excess parachute payment under Section 280G of the Code or would be a prohibited golden parachute payment pursuant to 12 C.F.R. Section 359.2 and for which the appropriate federal banking agency has not given written consent to pay pursuant to 12 C.F.R. Section 359.4.

5.2 Termination for Cause. Notwithstanding any provision of this Agreement to the contrary, the benefit provided under this Agreement shall be forfeited if the Bank terminates the Director’s service for:

(a) Gross negligence or gross neglect of duties;

(b) Commission of a felony or of a gross misdemeanor involving moral turpitude; or

(c) Fraud, disloyalty, dishonesty or willful violation of any law or significant Bank policy resulting in an adverse effect on the Bank.

5.3 Removal. Notwithstanding any provision of this Agreement to the contrary, the benefit provided under this Agreement shall be forfeited if the Director is subject to a final removal or prohibition order issued by an appropriate federal banking agency pursuant to Section 8(e) of the Federal Deposit Insurance Act.

5.4 Competition. No benefits shall be payable if the Director, without the prior written consent of the Bank, violates the following described restrictive covenants.

5.4.1 Non-compete Provision. The Director shall not, for the term of this Agreement and until all benefits have been distributed, directly or indirectly, either as an individual or as a proprietor, stockholder, partner, officer, director, employee, agent, consultant or

independent contractor of any individual, partnership, corporation or other entity (excluding an ownership interest of one percent (1%) or less in the stock of a publicly traded company):

(i) become employed by, participate in, or be connected in any manner with the ownership, management, operation or control of any bank, savings and loan or any financial institution, as that term is defined in the Gramm-Leach-Bliley Act of 1999, Pub. L. 106-102, that has its main office, a branch office, or conducts any business within a forty (40) mile radius of Mifflintown, Pennsylvania; or

(ii) participate in any way in hiring or otherwise engaging, or assisting any other person or entity in hiring or otherwise engaging, on a temporary, part-time or permanent basis, any individual who was employed by the Corporation or any of its subsidiaries during the three (3) year period immediately prior to the termination of the Director’s service; or

(iii) assist, advise, or serve in any capacity, representative or otherwise, any third party in any action against the Corporation or any of its subsidiaries or transaction involving the Corporation or any of its subsidiaries; or

(iv) sell, offer to sell, provide banking or other financial services, assist any other person in selling or providing banking or other financial services, or solicit or otherwise compete for, either directly or indirectly, any orders, contract, or accounts for services of a kind or nature like or substantially similar to the services performed or products sold by the Corporation or any of its subsidiaries (the preceding hereinafter referred to as “Services”), to or from any person or entity from whom the Director or the Corporation or any of its subsidiaries provided banking or other financial services, sold, offered to sell or solicited orders, contracts or accounts for Services during the three (3) year period immediately prior to the termination of the Director’s service; or

(v) divulge, disclose, or communicate to others in any manner whatsoever, any confidential information of the Corporation or any of its subsidiaries, including, but not limited to, the names and addresses of customers of the Corporation or any of its subsidiaries, as they may have existed from time to time or of any of the Corporation’s or any of its subsidiaries’ prospective customers, work performed or services rendered for any customer, any method and/or procedures relating to projects or other work developed for the Corporation or any of its subsidiaries, earnings or other information concerning the Corporation or any of its subsidiaries. The restrictions contained in this subparagraph (v) apply to all information regarding the Corporation or any of its subsidiaries until it becomes known to the general public from sources other than the Director.

5.4.2 Judicial Remedies. In the event of a breach or threatened breach by the Director of any provision of these restrictions, the Director recognizes the substantial and immediate harm that a breach or threatened breach will impose upon the Corporation or any of its subsidiaries, and further recognizes that in such event monetary damages may be inadequate to fully protect the Corporation or any of its subsidiaries. Accordingly, in the event of a breach or threatened breach of this Agreement, the Director consents to the Corporation’s or any of its subsidiaries’ entitlement to such ex parte, preliminary, interlocutory, temporary or permanent injunctive, or any other equitable relief, protecting and fully enforcing the Corporation’s or any of its subsidiaries’ rights hereunder and preventing the Director from further breaching any of his obligations set forth herein. The Director expressly waives any requirement, based on any statute, rule of procedure, or other source, that the Corporation or any of its subsidiaries post a bond as a condition of obtaining any of the above-described remedies. Nothing herein shall be construed as prohibiting the Corporation or any of its subsidiaries from pursuing any other remedies available to the Corporation or any of its subsidiaries at law or in equity for such breach or threatened breach, including the recovery of damages from the Director. The Director expressly acknowledges and agrees that: (i) the restrictions set forth in Section 5.4.1 are reasonable, in terms of scope, duration, geographic area, and otherwise, (ii) the protections afforded the Corporation or any of its subsidiaries in Section 5.4.1 are necessary to protect its legitimate business interest, (iii) the restrictions set forth in Section 5.4.1 will not be materially adverse to the Director’s service with the Bank, and (iv) his agreement to observe such restrictions forms a material part of the consideration for this Agreement.

5.4.3 Overbreadth of Restrictive Covenant. It is the intention of the parties that if any restrictive covenant in this Agreement is determined by a court of competent jurisdiction to be overly broad, then the court should enforce such restrictive covenant to the maximum extent permitted under the law as to area, breadth and duration.

5.4.4 The non-compete provision detailed in Section 5.4.1 shall not be enforceable following a Change in Control.

5.5 Suicide or Misstatement. No benefits shall be payable if the Director commits suicide within two years after the date of this Agreement, or if the insurance company denies coverage for material misstatements of fact made by the Director on any application for life insurance purchased by the Bank, or any other reason; provided, however that the Bank shall evaluate the reason for the

denial, and upon advice of legal counsel and in its sole discretion, consider judicially challenging any denial. The Bank shall have no liability to the Director for any denial of coverage by the insurance company.

ARTICLE 6
ASSIGNMENT

The Director may assign without consideration all interests in the Policy and in this Agreement to any person, entity or trust. In the event the Director transfers all of the Director’s interest in the Policy, then all of the Director’s interest in the Policy and in the Agreement shall be vested in the Director’s transferee, who shall be substituted as a party hereunder and the Director shall have no further interest in the Policy or in this Agreement.

ARTICLE 7
INSURER

The Insurer shall be bound only by the terms of the Policy. Any payments the Insurer makes or actions it takes in accordance with the Policy shall fully discharge it from all claims, suits and demands of all entities or persons. The Insurer shall not be bound by or be deemed to have notice of the provisions of this Agreement.

ARTICLE 8
CLAIMS PROCEDURE

Any dispute, controversy or claim arising out of or under this agreement or its performance shall first be negotiated by the parties, and if an acceptable resolution does not result, shall be submitted to arbitration which shall be exclusive, final, binding and conducted in accordance with the Commercial Arbitration Rules of the American Arbitration Association (“AAA”). Each party shall bear the fees and expenses of its counsel and witnesses, and the cost of the arbitration shall be borne as set forth in the award, or in the absence of an award or a specific determination by the arbitrator or agreement of the parties, shall be borne equally by the parties. At any time before the arbitrator has served upon the parties a written award, the parties may resolve the dispute by settlement, whereupon they shall direct the arbitrator to cease his or her deliberations and render a final accounting of fees and expenses to be paid by the parties in accordance with the foregoing. Any decision of the arbitrator may be entered as a judgment in any court of competent jurisdiction and may be enforced as such in accordance with the provisions of the award. This agreement to arbitrate shall be specifically enforceable by the parties, and they confirm that they intend that all disputes, controversies or claims of any kind shall be arbitrated. Arbitration proceedings shall be held in Mifflintown, Pennsylvania, or in such other locale on which the parties may mutually agree.

ARTICLE 9
AMENDMENT OR TERMINATION

This Agreement may be amended or terminated only by a written agreement signed by the Bank and the Director, except for the automatic termination provisions provided in Article 5.

ARTICLE 10
MISCELLANEOUS

10.1 Binding Effect. This Agreement shall bind the Director and the Bank, their successors, beneficiaries, survivors, executors, administrators and transferees, and any Policy beneficiary.

10.2 No Guarantee of Service. This Agreement is not a contract for services. It does not give the Director the right to remain a Director of the Bank, nor does it interfere with the shareholders’ rights to replace the Director. It also does not require the Director to remain a Director nor interfere with the Director’s right to terminate services at any time.

10.3 Applicable Law. The Agreement and all rights hereunder shall be governed by and construed according to the laws of the Commonwealth of Pennsylvania, except to the extent preempted by the laws of the United States of America.

10.4 Reorganization. The Bank shall not merge or consolidate into or with another company, or reorganize, or sell substantially all of its assets to another company, firm or person unless such succeeding or continuing company, firm or person agrees to assume and discharge the obligations of the Bank.

10.5 Notice. Any notice, consent or demand required or permitted to be given under the provisions of this Split Dollar Agreement by one party to another shall be in writing, shall be signed by the party giving or making the same, and may be given either by delivering the same to such other party personally, or by mailing the same, by United States certified mail, postage prepaid, to such party, addressed to his or her last known address as shown on the records of the Bank. The date of such mailing shall be deemed the date of such mailed notice, consent or demand.

10.6 Entire Agreement. This Agreement constitutes the entire agreement between the Bank and the Director as to the subject matter hereof. No rights are granted to the Director by virtue of this Agreement other than those specifically set forth herein.

10.7 Administration. The Bank shall have powers which are necessary to administer this Agreement, including, but not limited to:

10.7.1 Interpreting the provisions of the Agreement;

10.7.2 Establishing and revising the method of accounting for the Agreement;

10.7.3 Maintaining a record of benefit payments; and

10.7.4 Establishing rules and prescribing any forms necessary or desirable to administer the Agreement.

10.8 Named Fiduciary. The Bank shall be the named fiduciary and plan administrator under this Agreement. It may delegate to others certain aspects of the management and operational responsibilities including the service of advisors and the delegation of ministerial duties to qualified individuals.

10.9 Recovery of Estate Taxes. If the Director’s gross estate for federal estate tax purposes includes any amount determined by reference to and on account of this Agreement, and if the beneficiary is other than the Director’s estate, then the Director’s estate shall be entitled to recover from the beneficiary receiving such benefit under the terms of the Agreement, an amount by which the total estate tax due by the Director’s estate, exceeds the total estate tax which would have been payable if the value of such benefit had not been included in the Director’s gross estate. If there is more than one person receiving such benefit, the right of recovery shall be against each such person. In the event the beneficiary has a liability hereunder, the beneficiary may petition the Bank for a lump sum payment in an amount not to exceed the beneficiary’s liability hereunder.

IN WITNESS WHEREOF, the parties have executed this Agreement the day and year first above written.

DIRECTOR: BANK:
THE JUNIATA VALLEY BANK

Title

By execution hereof, The Juniata Valley Financial Corp. consents to and agrees to be bound by the terms and condition of this Agreement.


ATTEST: CORPORATION: THE JUNIATA VALLEY FINANCIAL CORP.
By
	Title

Exhibit 13.1
Excerpts from Annual Report to Shareholders
Five-Year Financial Summary — Selected Financial Data


	2008			2007			2006			2005			2004
				(In thousands of dollars, except share and per share data)
BALANCE SHEET INFORMATION
at December 31
Assets	$	428,084		$	420,146		$	415,931		$	410,802		$	397,074
Deposits		357,031			359,457			355,169			343,466			332,642
Loans, net of allowance for loan losses		312,522			295,678			303,246			295,300			276,759
Investments		71,843			73,676			65,619			77,208			84,157
Intangible assets		344			389			434			—			—
Goodwill		2,046			2,046			2,046			—			—
Short-term borrowings		10,579			5,431			6,112			9,801			4,716
Long-term debt		5,000			—			—			5,000			5,000
Stockholders’ equity		48,485			48,572			47,786			47,119			50,153
Number of shares outstanding *		4,341,055			4,409,445			4,457,934			4,503,392			4,561,258

Average for the year
Assets		428,744			424,847			414,048			406,706			393,554
Stockholders’ equity		48,674			47,635			47,503			48,403			48,776
Weighted average shares outstanding *		4,376,077			4,434,859			4,480,245			4,550,483			4,559,168

INCOME STATEMENT INFORMATION
Years Ended December 31
Total interest income	$	25,230		$	26,723		$	24,663		$	22,707		$	21,717
Total interest expense		9,057			11,060			10,111			8,015			6,438


Net interest income		16,173			15,663			14,552			14,692			15,279
Provision for loan losses		421			120			54			28			326
Other income		4,037			4,199			3,830			3,323			3,445
Other expenses		12,008			12,209			11,245			11,680			10,600

Income before income taxes		7,781			7,533			7,083			6,307			7,798
Federal income tax expense		2,057			2,099			2,081			1,741			1,969


Net income	$	5,724		$	5,434		$	5,002		$	4,566		$	5,829


PER SHARE DATA *
Earnings per share — basic	$	1.31		$	1.23		$	1.12		$	1.00		$	1.28
Earnings per share — diluted		1.31			1.22			1.11			1.00			1.27
Cash dividends		0.74			0.95			0.66			1.11			1.07
Book value		11.17			11.02			10.72			10.46			11.00

FINANCIAL RATIOS
Return on average assets		1.34	%		1.28	%		1.21	%		1.12	%		1.48	%
Return on average equity		11.76			11.41			10.53			9.43			11.95
Dividend payout		56.62			77.48			59.12			110.71			83.70
Average equity to average assets		11.35			11.21			11.47			11.90			12.39
Loans to deposits (year end)		87.53			82.26			85.38			85.98			83.20


*		All share and per-share data have been restated for effect of the 2 for 1 stock split on October 31, 2005.

MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

This discussion concerns Juniata Valley Financial Corp. (“Company” or “Juniata”) and its wholly owned subsidiary, The Juniata Valley Bank (“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. For comparative purposes, certain amounts have been reclassified to conform to the current-year presentation. The reclassifications had no impact on net income.

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, without limitation, statements as to future loan and deposit volumes, the allowance and provision for possible loan losses, future interest rates and their effect on the Company’s financial condition or results of operations, the classification of the Company’s investment portfolio and other statements which are not historical facts or as to 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 effect of economic conditions and related uncertainties, the effect of interest rates on the Company, federal and state government regulation and competition. 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, 2008, a copy of which may be obtained from the Company upon request and without charge (except for the exhibits thereto).

Nature of Operations

Juniata is a bank holding company that delivers financial services within its market, primarily central Pennsylvania. The Company owns one bank, the Bank, which provides retail and commercial banking services through 12 offices in Juniata, Mifflin, Perry, Huntingdon and Centre counties. Additionally, Juniata owns 39.16% of The First National Bank of Liverpool, carried as an unconsolidated subsidiary and accounted for under the equity method of accounting.

The Bank provides a full range of consumer and commercial services. Consumer services include Internet and telephone banking, an automated teller machine network, personal checking accounts, interest checking accounts, savings accounts, insured money market accounts, debit cards, fixed and variable rate certificates of deposit, club accounts, secured and unsecured installment loans, construction and mortgage loans, safe deposit facilities, credit lines with overdraft checking protection, individual retirement accounts, health savings accounts and student loans. Commercial banking services include small and high-volume business checking accounts, on-line account management services, ACH origination, payroll direct deposit, commercial lines and letters of credit, commercial term and demand loans and repurchase agreements. The Bank also provides a variety of trust, asset management and estate services. The Bank offers annuities, mutual funds, stock and bond brokerage services and long-term care insurance products through an arrangement with a broker-dealer and insurance brokers. Management believes the Company 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 Pennsylvania.

Economic and Industry-Wide Factors Relevant to Juniata

As a financial services organization, Juniata’s core business is most influenced by the 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’ need 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

Management is committed to being the preeminent financial institution in its market area and measures its success by five key elements.

Customer Relationships

Juniata strives to maximize customer satisfaction. We are sensitive to the broad array of financial alternatives available to our customers from both local and global competition. We are committed to fostering a complete customer relationship and we strive to continue to provide financial products that meet the needs of both current and future customers. One element of the Company’s strategic plan is to increase the number of Bank-provided services per household.

Shareholder Satisfaction

Management believes our investors are entitled to a good return on their investment through both stock value appreciation and dividend returns. We intend to continue to seek to maximize the value of their investment through profitable balance sheet growth and core earnings results that surpass that of our peers.

Balance Sheet Growth

We are committed to profitable balance sheet growth. It is our goal to continue quality growth in spite of intense competition by paying careful attention to the needs of our customers. We will continue to maintain the high credit standards that have resulted in favorable comparisons to our peer group in terms of loan charge-offs and levels of non-performing loans. 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. In 2008, we completed construction of and relocated our McAlisterville branch office, intended to enhance the customer experience for the nearly 2,000 customers that currently bank with us in the McAlisterville area. This re-location allowed us to offer state-of-the-art technology and provide drive-through service as well as secure ATM access. 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 recent years.

Operating Results

We strive to produce profitability ratios that exceed those of our peers. Recognizing that net interest margins have narrowed for banks in general and that they may never 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. We successfully improved earnings in 2008, including a 5.3% increase in net income and a 7.4% increase in diluted earnings per share over 2007 results. We believe that we have positioned our balance sheet to perform well in 2009 in a challenging recessionary climate.

Commitment to the Community

We are active corporate citizens of the communities we serve. Although the world of banking is ever-changing and in some cases does not even require a physical building, we believe that our community banking philosophy is still valid. 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 support charitable programs that benefit the local communities, not only with monetary contributions, but also with personal involvement by our volunteering employees.

Juniata’s Opportunities

Soundness and stability

We believe that our balance sheet itself is a strength. We have very strong capital and liquidity ratios. We did not seek capital infusions from the US Treasury through its Troubled Assets Relief Program (TARP) and consider ourselves to have an advantage over banks that applied for and accepted those funds. Because we do not need the aid offered by our government, we will not have the cost and burden of compliance with the guidelines associated with acceptance as will be the case with some of our counterparts. There will be no political intervention in the management of our business. 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 140 years.

Expansion of customer base

Through market analysis, we believe that there are opportunities to enhance our sales effort in order to increase deposit market share in rural central Pennsylvania. Our strategic focus during 2009 and beyond is to focus on the team effort it takes to nourish existing relationships and expand our customer base. We plan to further develop our sales team by making employee education paramount and to capitalize upon back-room efficiencies created through new processes that have been recently implemented.

Delivery system improvements

We seek to continually enhance our customer delivery system, both through technology and physical facilities. During 2008, we relocated our McAlisterville, Pennsylvania community office to improve access and customer convenience. We actively seek other opportunities to expand our branch network through acquisitions. We continually examine opportunities to upgrade technology both to cater to our customers’ needs and to increase operational efficiency. We believe that it is imperative that our customers have convenient and easy access to personal financial services that match their particular lifestyle, whether it is through electronic or personal delivery.

Juniata’s Challenges

Economic recession

We are experiencing a serious recession, the duration of which is unknown. Unemployment has risen, home values have declined, retirement funds have lost value and government actions to intervene in the markets will result in a large increase in the national debt. All these factors are affecting the behavior of consumers and businesses and the way in which money is spent, saved and invested.

Public perception

We believe that all banks have suffered reputation loss in the recent economic downturn, without regard to individual performance. National news reports have generally applied blame to the banking industry in the aggregate, rather than to specific banks that participated in large-scale risky investments and lending practices. As a result, consumers appear to be wary of all banks. Our challenge is to demonstrate the value of sound community banking to rebuild the confidence of the public. Through consistently solid performance results, we are proving to our customers and shareholders our stability and soundness. We have an unwavering commitment to our community, supporting our neighbors and providing trusted financial services to businesses and individuals in our

home area. How our market area ultimately responds to current events and the recession, as it related to their financial needs, depends upon us and how we meet their needs.

Competition

Each year, competition becomes more fierce 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 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 be pricing for growth, rather than long-term profitability and stability. We believe that the result of a strategy of “growth for the sake of growth” is evident in the recent widespread sub-prime lending problems, which 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.

Regulated Company

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 and the Sarbanes-Oxley Act of 2002. 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 Sarbanes-Oxley, as well as adherence to new and existing banking regulations and stronger corporate governance requirements. Regulatory burdens will only increase, and management expects that more internal resources will be dedicated to meet future compliance standards.

APPLICATION OF CRITICAL ACCOUNTING POLICIES

The Company’s consolidated financial statements are prepared based upon the application of U.S. generally accepted accounting principles, the most significant of which are described in Note 1 to our consolidated financial statements — Summary of Significant Accounting Policies. Certain of these policies require numerous estimates and economic assumptions, based upon information available as of the date of the 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 than originally 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 section of this Annual Report to Shareholders entitled “Allowance for Loan Losses” provides management’s analysis of the Company’s allowance for loan losses and related provision expense. 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.

RESULTS OF OPERATIONS

2008
Financial Performance Overview

Net income for Juniata in 2008 was $5,724,000, representing a 5.3% increase as compared to net income for 2007. Earnings per share on a fully diluted basis increased from $1.22 in 2007 to $1.31 in 2008. The net interest margin, on a fully tax-equivalent basis, increased by 17 basis points. The ratio of noninterest income to average assets increased by 7 basis points and the ratio of noninterest expense to average assets decreased by 7 basis points. Five-year historical ratios are presented below.


	2008			2007			2006			2005			2004


Return on average assets		1.34	%		1.28	%		1.21	%		1.12	%		1.48	%
Return on average equity		11.76			11.41			10.53			9.43			11.95
Yield on earning assets		6.48			6.88			6.43			6.00			5.98
Cost to fund earning assets		2.33			2.85			2.63			2.12			1.77
Net interest margin (fully tax equivalent)		4.34			4.17			3.91			4.00			4.34
Noninterest income (excluding gains on sales of securities and security impairment charges) to average assets		1.06			0.99			0.88			0.77			0.78
Noninterest expense to average assets		2.80			2.87			2.72			2.87			2.69
Net noninterest expense to average assets		1.74			1.88			1.84			2.10			1.91

Key factors that defined the 2008 results were as follows:

	•		Interest rate environment — an increase in net interest margin during swiftly changing rate environment

	•		Allowance for loan loss adequacy

	•		Loan growth

	•		Changes in depositor preferences

	•		Other-than-temporary impairment charges

	•		Staffing turnover

	•		Noninterest income improvement

Details follow in the appropriate sections of this discussion.

Return on Assets (ROA) increased in 2008 to 1.34% from 1.28% in 2007, and management believes that Juniata’s performance was favorable in comparison to the performance of many of its peers and competitors. Juniata strives to attain consistently high earnings levels each year by protecting the core (repeatable) earnings base with 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 ROA 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 (in thousands of dollars) and the contribution of each to ROA for 2008 and 2007.


	2008						2007
				% of Average						% of Average
				Assets						Assets

Net interest income	$	16,173			3.77	%	$	15,663			3.69	%
Provision for loan losses		(421	)		(0.10	)		(120	)		(0.03	)

Trust fees		389			0.09			444			0.10
Deposit service fees		1,660			0.39			1,656			0.39
BOLI		486			0.11			440			0.10
Commissions from sales of non-deposit products		704			0.16			711			0.17
Income from unconsolidated subsidiary		207			0.05			192			0.05
Other fees		875			0.20			774			0.18
Gain from life insurance proceeds		179			0.04			—			0.00
Security gains (losses) and impairment charges		(521	)		(0.12	)		(19	)		(0.00	)
Gains on sale of other assets		58			0.01			1			0.00

Total noninterest income		4,037			0.94			4,199			0.99

Employee expense		(6,451	)		(1.50	)		(6,592	)		(1.55	)
Occupancy and equipment		(1,638	)		(0.38	)		(1,580	)		(0.37	)
Data processing expense		(1,375	)		(0.32	)		(1,332	)		(0.31	)
Director compensation		(417	)		(0.10	)		(455	)		(0.11	)
Professional fees		(379	)		(0.09	)		(437	)		(0.10	)
Taxes, other than income		(500	)		(0.12	)		(546	)		(0.13	)
Intangible amortization		(45	)		(0.01	)		(45	)		(0.01	)
Other noninterest expense		(1,203	)		(0.28	)		(1,222	)		(0.29	)

Total noninterest expense		(12,008	)		(2.80	)		(12,209	)		(2.87	)

Income tax expense		(2,057	)		(0.48	)		(2,099	)		(0.49	)

Net income	$	5,724			1.34	%	$	5,434			1.28	%


Average assets	$	428,744					$	424,847

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 80% of total revenues (the total of net interest income and noninterest income) for 2008. 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 place 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 exhibits average asset and liability balances, average interest rates and interest income and expense for the years 2008, 2007 and 2006. 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
(Dollars in thousands)


	Years Ended December 31,
		2008								2007								2006
		Average					Yield/			Average					Yield/			Average					Yield/
		Balance (1)			Interest		Rate			Balance (1)			Interest		Rate			Balance (1)			Interest		Rate
ASSETS
Interest earning assets:
Taxable loans (5)		$	298,947		$	21,774		7.28	%	$	294,938		$	22,638		7.68	%	$	299,488		$	21,622		7.22	%
Tax-exempt loans			8,659			326		3.76			5,669			213		3.76			4,500			146		3.24

Total loans			307,606			22,100		7.18			300,607			22,851		7.60			303,988			21,768		7.16

Taxable investment securities			38,646			1,666		4.31			51,746			2,438		4.71			54,198			1,975		3.64
Tax-exempt investment securities			31,999			1,082		3.38			24,040			857		3.56			19,027			659		3.46

Total investment securities			70,645			2,748		3.89			75,786			3,295		4.35			73,225			2,634		3.60
Interest bearing deposits			6,389			258		4.04			5,876			254		4.32			5,730			244		4.26
Federal funds sold			4,846			124		2.56			6,358			323		5.08			324			17		5.25

Total interest earning assets			389,486			25,230		6.48			388,627			26,723		6.88			383,267			24,663		6.43

Non-interest earning assets:
Cash and due from banks			10,167								9,384								9,764
Allowance for loan losses			(2,391	)							(2,460	)							(2,761	)
Premises and equipment			5,968								6,366								6,147
Other assets (7)			25,514								22,930								17,631

Total assets		$	428,744							$	424,847							$	414,048


LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest bearing liabilities:
Interest bearing demand deposits (2)		$	72,051			541		0.75		$	82,877			1,751		2.11		$	77,570			1,675		2.16
Savings deposits			37,248			362		0.97			35,247			556		1.58			40,031			629		1.57
Time deposits			204,809			7,992		3.90			199,239			8,437		4.23			187,283			7,168		3.83
Other, including short-term borrowings, long-term debt and other interest bearing liabilities			10,253			162		1.58			7,804			316		4.05			14,822			639		4.31

Total interest bearing liabilities			324,361			9,057		2.79			325,167			11,060		3.40			319,706			10,111		3.16


Non-interest bearing liabilities:
Demand deposits			49,137								45,433								41,587
Other			6,572								6,612								5,252
Stockholders’ equity			48,674								47,635								47,503

Total liabilities and stockholders’ equity		$	428,744							$	424,847							$	414,048


Net interest income					$	16,173							$	15,663							$	14,552

Net margin on interest earning assets (3)								4.15	%							4.03	%							3.80	%

Net interest income and margin — Tax equivalent basis (4)					$	16,898		4.34	%				$	16,214		4.17	%				$	14,967		3.91	%


Notes:

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

(2)		Includes Super Now 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 34%.

Table 2
RATE — VOLUME ANALYSIS OF NET INTEREST INCOME
(Dollars in thousands)


	2008 Compared to 2007									2007 Compared to 2006
	Increase (Decrease) Due To (6)									Increase (Decrease) Due To (6)
	Volume			Rate			Total			Volume			Rate			Total
ASSETS
Interest earning assets:
Taxable loans (5)	$	310		$	(1,174	)	$	(864	)	$	(335	)	$	1,351		$	1,016
Tax-exempt loans		113			—			113			42			25			67

Total loans		423			(1,174	)		(751	)		(293	)		1,376			1,083
Taxable investment securities		(578	)		(194	)		(772	)		(93	)		556			463
Tax-exempt investment securities		270			(45	)		225			178			20			198

Total investment securities		(308	)		(239	)		(547	)		85			576			661
Interest bearing deposits		21			(17	)		4			7			3			10
Federal funds sold		(65	)		(134	)		(199	)		307			(1	)		306

Total interest earning assets		71			(1,564	)		(1,493	)		106			1,954			2,060

LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest bearing liabilities:
Interest bearing demand deposits (2)		(204	)		(1,006	)		(1,210	)		115			(39	)		76
Savings deposits		31			(225	)		(194	)		(77	)		4			(73	)
Time deposits		230			(675	)		(445	)		482			787			1,269
Other, including short-term borrowings, long-term debt and other interest bearing liabilities		79			(233	)		(154	)		(286	)		(37	)		(323	)

Total interest bearing liabilities		136			(2,139	)		(2,003	)		234			715			949


Net interest income	$	(65	)	$	575		$	510		$	(128	)	$	1,239		$	1,111


(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 gross unrealized gains (losses) on securities available for sale: $436 in 2008, $(127) in 2007 and $(495) in 2006.

On average, total loans outstanding in 2008 increased from 2007 by 2.3%, to $307,606,000. Average yields on loans decreased by 42 basis points in 2008 when compared to 2007. As shown in the preceding Rate — Volume Analysis of Net Interest Income Table 2, the decrease in yield reduced interest income by approximately $1,174,000, and the increase in volume added $423,000, resulting in an aggregate decrease in interest recorded on loans of $751,000. The yield decrease was largely due to the difference in market rates between the two years. The prime rate decreased from January 1, 2008 to December 31, 2008 by 400 basis points, from 7.25% to 3.25%. On average, the prime rate was 8.08% during 2007 and 5.21% during 2008.

During 2008, 58% of the investment portfolio, or $38,987,999, matured or was prepaid. Of the proceeds from these events, $36,063,000 was reinvested in the investment portfolio in the lower rate environment, which explains the decrease in overall yield of the investment securities by 46 basis points. Yields on the investment securities portfolio decreased to 3.89% in 2008, as compared to 4.35% in 2007. Yield declines accounted for a $239,000 decrease in interest income when compared to 2007. Average balances of investment securities decreased by $5,141,000, as proceeds from maturities and calls were needed to supplement deposit increases for funding loan growth, and this volume reduction accounted for a $308,000 decrease in interest income as compared to 2007.

In total, yield on earning assets in 2008 was 6.48% as compared to 6.88% in 2007, a decrease of 40 basis points. On a fully tax equivalent basis, yield decreased from 7.02% in 2007 to 6.67% in 2008.

Average interest bearing liabilities decreased by $806,000 in 2008 as compared to 2007. Within the categories of interest bearing liabilities, deposits decreased on average by $3,255,000, and borrowings increased by $2,449,000 on average. Changes in these balances resulted in $136,000 in additional interest expense in 2008 as compared to 2007, while decreases in interest rates accounted for $2,139,000 in reduced interest expense. Noninterest bearing liabilities used to fund earning assets included demand deposits, which increased $3,704,000 on average. The percentage of interest earning assets funded by noninterest bearing liabilities was approximately 16.7% in 2008 versus 16.3% in 2007. The total cost to fund earning assets (computed by dividing the total interest expense by the total average earning assets) in 2008 was 2.33%, as compared to 2.85% in 2007.

Net interest income was $16,173,000 for 2008, an increase of $510,000 when compared to 2007. The overall increase in net interest income was the net result of an increase due to rate changes of $575,000, offset by the reduction due to volume changes of $65,000.

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 unsupported allowance. An analysis was performed following the process described in “Application of Critical Accounting Policies” earlier in this discussion, and it was determined that a provision of $421,000 was appropriate for 2008, an increase of $301,000 when compared to 2007 when the total loan loss provision was $120,000. In 2008, the provision exceeded net charge-offs by $288,000. Although net charge-offs were significantly lower in 2008 than in the two immediately preceding years and the lowest in the current five-year period, the increases in outstanding loans and in non-performing loans were the primary reason for the need for a higher provision in 2008. See the discussion on Loans and Allowance for Loan Losses in the section below titled “Financial Condition”.

Noninterest Income

The Company remains committed to providing excellent customer service and products that fill the financial needs of our communities. We believe that our responsiveness to customers’ needs surpasses that of our competitors and measure our success by the customer acceptance of fee-based services. In 2008, we added to our menu of services by making available “Remote Deposit Capture”, a convenient and secure method for our business clients to make deposits from their own offices. Our Company’s web site ( www.JVBonline.com ) has allowed us to provide our customers with the convenience of Internet banking. Continual technology advances have also helped us to better protect our customers against Internet hackers that attempt to defraud both the Bank and our customers. We provide alternative investment opportunities through an arrangement with a broker dealer, and have representatives on staff

devoted entirely to this service. This investment alternative is in addition to the trust services that have traditionally been offered by the Bank.

Customer service fees derived from deposit accounts and from sales of non-deposit products were similar to those in 2007, varying by only $4,000 in the aggregate, and accounting for approximately 55% of all fee-generated noninterest revenues. Total fees for trust services decreased by $55,000, or 12.4%, as fees from estate settlements decreased by $42,000 in 2008 as compared to 2007, and non-estate fees decreased by $13,000. 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 and as new relationships are established.

The Company owns 39.16% of the stock of The First National Bank of Liverpool. The investment is accounted for through the equity method and, as such, 39.16% of the income of the banking institution is recorded by Juniata as noninterest income. As a result of this investment, $207,000 was recorded as income in 2008, compared to $192,000 in 2007. Earnings on bank-owned life insurance and annuities increased in 2008 by $46,000, or 10.5%, when compared to the previous year, as a result of new BOLI purchases in late 2007. Other noninterest income increased by $101,000, or 13.0%, primarily as a result of fees for increased electronic card activity.

In 2008, the Company received proceeds from a claim on a life insurance policy in excess of the cash surrender value recorded, resulting in a gain of $179,000. Additionally, gains from the sale of property owned by the Company yielded a gain of $58,000 during 2008.

As a percentage of average assets, non-interest income (excluding securities gains and impairment charges) was 1.06% in 2008 as compared to 0.99% in 2007.

In 2008, net gains from the sale of investment securities were $33,000, an increase of $19,000 in comparison to 2007. Management considers multiple factors when selling investment securities; therefore, income from this activity can fluctuate from year to year, and may not be consistent in the future. Juniata generally sells only equity securities that have appreciated in value since their purchase or when an equity security is in danger of impairment or is considered to be other-than-temporarily impaired. Equity securities are considered for sale primarily when there is market appreciation available or when there is no longer a business reason to hold the stock. A loss is recognized on debt and equity securities if permanent or other-than-temporary impairment is deemed to have occurred. In 2008, there was an impairment charge of $554,000 recorded relating to investments in the common stock of eight financial services companies. The impairment charge of $33,000 recorded in 2007 was nearly all recovered as part of the $33,000 net gain on the sale of investment securities in 2008.

Noninterest Expense

Management strives to control noninterest expense where possible in order to achieve maximum operating results. In 2008, total non-interest expense decreased by $201,000, or 1.6%, when compared to 2007.

Employee compensation decreased by $59,000, or 1.1%, in 2008 as compared to 2007, primarily due to an increase in deferred compensation expense related to loan originations. Employee benefit expense was reduced in 2008, primarily as a result of the forfeiture of certain unvested benefits in non-qualified post retirement plans by former employees. This reduction, combined with the increase in deferral of benefit costs related to loan originations, were partially offset by the addition of expense associated with post-retirement benefits in the form of split-dollar insurance and a safe-harbor employer contribution to the defined contribution plan.

Expenses relating to occupancy and equipment increased 4.0% and 3.2%, respectively, in 2008 as compared to 2007 due primarily to the completion and occupancy of a new branch building. Data processing costs increased by 3.2% as a result of costs associated with the enhancement of our web site and increased electronic banking activity. Professional fees declined in 2008 by 13.3%, due to the reduction of the use of consultants during the year. Other noninterest expense decreased by 3.6% in 2008 over 2007, due primarily to reductions in Pennsylvania Shares Tax expense and loan origination cost deferrals.

As a percentage of average assets, noninterest expense was 2.80% in 2008 as compared to 2.87% in 2007.

Income Taxes

Income tax expense for 2008 amounted to $2,057,000 compared to $2,099,000 in 2007. The effective tax rate was 26.4% in 2008 versus 27.9% in 2007, due to Juniata’s tax favored income being higher in 2008 as compared to 2007. Average tax-exempt investments and loans as a percentage of average assets were 9.5%, 7.0% and 5.7% in 2008, 2007 and 2006, respectively. Tax-exempt income as a percentage of income before tax was 18.1%, 14.2% and 11.3% in 2008, 2007 and 2006, respectively. See Note 14 of Notes to Consolidated Financial Statements for further information on income taxes.

Net Income

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


	2008			2007			2006

Net income	$	5,724		$	5,434		$	5,002
Return on average assets		1.34	%		1.28	%		1.21	%
Return on average equity		11.76	%		11.41	%		10.53	%

Outlook for 2009

There are a number of significant events that will occur in 2009 and others that may occur, that are outside our control, but will have an adverse impact on our income statement. While these events will not affect the soundness of our operation, they will materially affect our level of earnings. Of primary focus is the cost of FDIC insurance. At the writing of this discussion, the FDIC has announced final rules to significantly raise deposit insurance premiums and an interim rule that imposes at least one special assessment during 2009.

Although we believe that the premium increases will pose a severe burden on every bank, regardless of their participation in the high-risk practices that led to the current economic crisis, we are happy to pay our share of insurance premiums in order to solidify the confidence of our depositors while recognizing that our earnings will suffer from it.

We also expect the market will continue to look upon the financial services sector with disfavor well into 2009, and may result in further declines in the fair value of our equities portfolio, that could lead to further other-than-temporary impairment charges in 2009. The recession may cause a number of our borrowers to develop financial problems that could result in a number of loan defaults.

It is during economic conditions like those we now face that our long-standing philosophies have the greatest impact:

	•		There is a higher value in a strong net interest margin than in high growth levels.

	•		Solid, repeatable non-interest revenues result from service-focused strategies.

	•		Centralized cost controls are imperative.

As a result of adherence to these philosophies, we believe that we have built a solid balance sheet and developed a strong capital position, putting us in the position to overcome the obstacles that we will face in the coming year.

In 2009, our focus continues to be directed to areas that we can control — our business development plan. To offset what may be a relatively slow growth year, we are in the process of developing new internal efficiencies that will enable us to reduce non-interest expense without sacrificing service. In spite of the dire condition of the economy, we will strive to maintain a level of profitability that will reinforce and retain the confidence of our shareholders and the trust of our community.

2007
Financial Performance Overview

Net income for Juniata in 2007 was $5,434,000, representing an 8.6% increase as compared to net income for 2006. Earnings per share on a fully diluted basis increased from $1.11 in 2006 to $1.22 in 2007. The net interest margin, on a fully tax-equivalent basis, increased by 26 basis points. The ratio of noninterest income to average assets increased by 11 basis points, and the ratio of noninterest expense to average assets increased by 15 basis points.

Key factors that defined the 2007 results were as follows:

	•		Interest rate environment — an increase in net interest margin despite a sustained flat/inverted yield curve

	•		Full-year effect of acquisitions made in 2006

	•		Restructured investment portfolio

	•		Noninterest income improvement

Details follow in the appropriate sections of this discussion.

Return on Assets (ROA) increased in 2007 to 1.28% from 1.21% in 2006, and management believes that Juniata’s performance was favorable in comparison to the performance of many of its peers and competitors. Summarized below are the components of net income (in thousands of dollars) and the contribution of each to ROA for 2007 and 2006.


	2007						2006
				% of Average						% of Average
				Assets						Assets

Net interest income	$	15,663			3.69	%	$	14,552			3.51	%
Provision for loan losses		(120	)		(0.03	)		(54	)		(0.01	)

Trust fees		444			0.10			435			0.11
Deposit service fees		1,656			0.39			1,497			0.36
BOLI		440			0.10			433			0.10
Commissions from sales of non-deposit products		711			0.17			513			0.12
Income from unconsolidated subsidiary		192			0.05			80			0.02
Other fees		774			0.18			681			0.16
Security gains (losses)		(19	)		(0.00	)		181			0.04
Gains on sale of other assets		1			0.00			10			0.00

Total noninterest income		4,199			0.99			3,830			0.93

Employee expense		(6,592	)		(1.55	)		(6,064	)		(1.46	)
Occupancy and equipment		(1,580	)		(0.37	)		(1,424	)		(0.34	)
Data processing expense		(1,332	)		(0.31	)		(1,204	)		(0.29	)
Director compensation		(455	)		(0.11	)		(465	)		(0.11	)
Professional fees		(437	)		(0.10	)		(378	)		(0.09	)
Taxes, other than income		(546	)		(0.13	)		(505	)		(0.12	)
Intangible amortization		(45	)		(0.01	)		(15	)		(0.00	)
Other noninterest expense		(1,222	)		(0.29	)		(1,190	)		(0.29	)

Total noninterest expense		(12,209	)		(2.87	)		(11,245	)		(2.72	)

Income tax expense		(2,099	)		(0.49	)		(2,081	)		(0.50	)

Net income	$	5,434			1.28	%	$	5,002			1.21	%


Average assets	$	424,847					$	414,048

Net Interest Income

On average, total loans outstanding in 2007 decreased from 2006 by 1.1%, to $300,607,000. Average yields on loans increased by 44 basis points in 2007 when compared to 2006. As shown in the preceding Rate — Volume Analysis of Net Interest Income Table 2, the decrease in volume reduced interest income by approximately $293,000, and the increase in yield added $1,376,000, resulting in an aggregate increase in interest recorded on loans of $1,083,000. The yield increase was largely due to the difference in market rates at the times variable rate loans re-priced during 2007 as compared to original booking and last re-priced rates.

During 2007, most of the investment portfolio was restructured, as a total of $55,371,000 matured, was sold or was called. Proceeds from these events as well as other excess funds available were reinvested into a re-structured portfolio with improved yields and laddered maturities. Yields on the investment securities portfolio increased by 75 basis points, to 4.35% in 2007, as compared to 3.60% in 2006. Yield improvements added $576,000 to interest income. Average balances of investment securities increased by $2,561,000, as deposit growth outpaced loan growth, which added $85,000 to interest income.

In total, yield on earning assets in 2007 was 6.88% as compared to 6.43% in 2006, an increase of 45 basis points. On a fully tax equivalent basis, yield increased from 6.54% in 2006 to 7.02% in 2007.

The elimination of short-term borrowings and long-term debt had a material impact on the cost of interest bearing liabilities. In 2007, interest-bearing liabilities consisted entirely of internally-priced deposit products, as compared to 2006, when nearly 5% of interest-bearing liabilities consisted of externally borrowed funds. If the same level of external funding had been used in 2007 as in 2006, the total cost of interest-bearing liabilities would have been in the range of 3.47%, and would have decreased the net interest margin by 7 basis points.

Total growth on average of interest bearing liabilities was $5,461,000. Within the categories of interest bearing liabilities, deposits increased on average by $12,479,000, and borrowings decreased by $7,018,000 on average. Changes in these balances resulted in $234,000 in additional interest expense in 2007 as compared to 2006, while increases in interest rates accounted for $715,000 in added interest expense. Noninterest bearing liabilities used to fund earning assets included demand deposits, which increased $3,846,000 on average. The percentage of interest earning assets funded by noninterest bearing liabilities was approximately 16% in 2007 and 2006. The total cost to fund earning assets (computed by dividing the total interest expense by the total average earning assets) in 2007 was 2.85%, as compared to 2.63% in 2006.

Net interest income was $15,663,000 for 2007, an increase of $1,111,000 when compared to 2006. The overall increase in net interest income was the net result of an increase due to rate changes of $1,239,000 offset by the reduction due to volume changes of $128,000.

Provision for Loan Losses

An analysis was performed following the process described in “Application of Critical Accounting Policies” earlier in this discussion and it was determined that a provision of $120,000 was appropriate for 2007, an increase of $66,000 when compared to 2006 when the total loan loss provision was $54,000. In 2007, net charge-offs exceeded the provision by $250,000. The Bank recorded charge-offs of $122,000 in 2007 and $150,000 in each of the years 2006 and 2005 related to one commercial loan that was subject to bankruptcy liquidation. This loan was fully charged-off as of December 31 2007. In 2007, we charged off $180,000 of the remaining loan balances related to two relationships.

Noninterest Income

Customer service fees on deposits increased 10.6% in 2007 as compared to 2006, primarily a result of our popular Platinum Overdraft product. The increase in commissions from sales of non-deposit products of $198,000, or 38.6%, in 2007 over 2006 demonstrates the ongoing success of our alternative investment division. Total fees for trust services increased by 2.0%, as fees from estate settlements increased from 2006 by $17,000, and non-estate fees decreased by $8,000. Some of the 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 as market values of trust assets under management increase and as new relationships are established.

In the third quarter of 2006, the Company purchased 39.16% of the stock of The First National Bank of Liverpool. The investment is accounted for through the equity method and, as such, 39.16% of the income of the banking institution is recorded by Juniata as noninterest income. As a result of this investment, $192,000 was recorded as income in 2007, compared to $80,000 in 2006. Earnings on bank-owned life insurance and annuities increased in 2007 by $7,000, or 1.6%, as cash values of the contracts increased. Other noninterest income, which increased by $93,000, or 13.7%, was assisted by increases in fees collected for various services.

As a percentage of average assets, non-interest income (excluding securities gains and impairment charges) was 0.99% in 2007 as compared to 0.88% in 2006.

In 2007, net gains from the sale of investment securities were $14,000, a decrease of $167,000 in comparison to 2006. During 2007, there was an impairment charge of $33,000 recorded relating to an investment in the common stock of one financial services company. This company was subsequently acquired by a larger bank holding company. The acquisition was completed in the first half of 2008, and at that time, we recovered nearly the full amount of the impairment charge taken in 2007.

Noninterest Expense

In 2007, total non-interest expense increased by $964,000, or 8.6%. Of the increase, $127,000 was attributable to the increase in expense associated with the full year of staffing and operation of a branch acquired in September of 2006. Excluding the effect of the newest branch, the increase in noninterest expense would have been 7.4%.

Employee compensation expense increased by $544,000, or 11.8%, in 2007 as compared to 2006, primarily due to the expense related to incentive bonus plans (approximately $148,000), the full-year costs of staffing the newest branch (approximately $140,000) and increased payments to commission-based employees ($88,000). Employee benefit expense was reduced in 2007 as a result of a reduction in the net periodic expense for the Company’s pension plan.

Expenses relating to occupancy and equipment increased 10.9% and 11.0%, respectively, in 2007 as compared to 2006. Excluding expenses in the occupancy and equipment categories for the branch acquired late in 2006, the increases would have been 7.2% and 8.7%, respectively. The increased costs related to higher heating and rental expense, as well as depreciation for purchased equipment. Data processing costs increased by 10.6% as a result of increased electronic banking activity. Professional fees were higher in 2007 by 15.6%, due to the use of consultants during the year. Other noninterest expense increased by 2.7% in 2007 over 2006, due to increases in charitable contributions and the amortization of new core deposit intangible.

As a percentage of average assets, noninterest expense was 2.87% in 2007 as compared to 2.72% in 2006.

Income Taxes

Income tax expense for 2007 amounted to $2,099,000 compared to $2,081,000 in 2006. The effective tax rate was 27.9% in 2007 versus 29.4% in 2006, due to Juniata’s tax favored income being higher in 2007 as compared to 2006. Average tax-exempt investments and loans as a percentage of average assets were 7.0%, 5.7% and 6.0% in 2007, 2006 and 2005, respectively. Tax-exempt income as a percentage of income before tax was 14.2%, 11.3% and 12.9% in 2007, 2006 and 2005, respectively. See Note 14 of Notes to Consolidated Financial Statements for further information on income taxes.

Net Income

For comparative purposes, the following table sets forth earnings, in thousands of dollars, and selected earnings ratios for the three years ending December 31, 2005, 2006 and 2007.


	2007			2006			2005

Net income	$	5,434		$	5,002		$	4,566
Return on average assets		1.28	%		1.21	%		1.12	%
Return on average equity		11.41	%		10.53	%		9.43	%

FINANCIAL CONDITION

Balance Sheet Summary

Juniata functions as a financial intermediary and, as such, its financial condition is best analyzed in terms of changes in its uses and sources of funds, and is most meaningful when 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)


	2008									2007									2006
	Average			Increase(Decrease)						Average			Increase(Decrease)						Average
	Balance			Amount			%			Balance			Amount			%			Balance
Funding Uses:
Loans:
Commercial	$	81,291		$	(2,248	)		(2.7	%)	$	83,539		$	(3,704	)		(4.2	%)	$	87,243
Tax-exempt loans		8,659			2,990			52.7			5,669			1,169			26.0			4,500
Mortgage		144,028			8,054			5.9			135,974			(2,449	)		(1.8	)		138,423
Consumer, including Home Equity		73,628			(1,797	)		(2.4	)		75,425			1,603			2.2			73,822
Securities		38,646			(13,100	)		(25.3	)		51,746			(2,452	)		(4.5	)		54,198
Tax-exempt securities		31,999			7,959			33.1			24,040			5,013			26.3			19,027
Interest bearing deposits		6,389			513			8.7			5,876			146			2.5			5,730
Federal funds sold		4,846			(1,512	)		(23.8	)		6,358			6,034			1,862.3			324

Total interest earning assets		389,486			859			0.2			388,627			5,360			1.4			383,267
Investment in unconsolidated subsidiary		3,077			172			5.9			2,905			2,025			230.1			880
Bank-owned life insurance and annuities		12,442			998			8.7			11,444			675			6.3			10,769
Goodwill and intangible assets		2,414			(45	)		(1.8	)		2,459			1,679			215.3			780
Other non-interest earning assets		23,280			1,281			5.8			21,999			391			1.8			21,608
Unrealized gains (losses) on securities		436			563			443.3			(127	)		368			74.3			(495	)
Less: Allowance for loan losses		(2,391	)		69			2.8			(2,460	)		301			10.9			(2,761	)


Total uses	$	428,744		$	3,897			0.9	%	$	424,847		$	10,799			2.6	%	$	414,048


Funding Sources:
Interest bearing demand deposits	$	72,051		$	(10,826	)		(13.1	%)	$	82,877		$	5,307			6.8	%	$	77,570
Savings deposits		37,248			2,001			5.7			35,247			(4,784	)		(12.0	)		40,031
Time deposits under $100,000		166,279			2,491			1.5			163,788			9,481			6.1			154,307
Time deposits over $100,000		38,530			3,079			8.7			35,451			2,475			7.5			32,976
Repurchase agreements		5,368			(1,454	)		(21.3	)		6,822			1,294			23.4			5,528
Short-term borrowings		2,379			2,364			15,760.0			15			(5,389	)		(99.7	)		5,404
Long-term debt		1,448			1,448			—			—			(3,014	)		(100.0	)		3,014
Other interest bearing liabilities		1,058			91			9.4			967			91			10.4			876

Total interest bearing liabilities		324,361			(806	)		(0.2	)		325,167			5,461			1.7			319,706
Demand deposits		49,137			3,704			8.2			45,433			3,846			9.2			41,587
Other liabilities		6,572			(40	)		(0.6	)		6,612			1,360			25.9			5,252
Shareholders’ equity		48,674			1,039			2.2			47,635			132			0.3			47,503


Total sources	$	428,744		$	3,897			0.9	%	$	424,847		$	10,799			2.6	%	$	414,048

Overall, total assets increased by $3,897,000, or 0.9% on average, for the year 2008 compared to 2007, following an increase of $10,799,000, or 2.6%, in 2007 over average assets in 2006. The ratio of average earning assets to total assets was 91% in each of the last two years, while the ratio of average interest-bearing liabilities to total assets was 76% and 77% in 2008 and 2007, respectively. Although Juniata’s investment in its unconsolidated subsidiary and its bank owned life insurance and annuities are not classified as interest-earning assets, income is derived directly from

those assets. As a percentage of assets, these instruments have represented 3.6% and 3.4% of total average assets in 2008 and 2007, respectively. More detailed discussion of Juniata’s earning assets and interest bearing liabilities will follow in sections titled “Loans”, “Investments”, “Deposits” and “Market/Interest Rate Risk”.

Loans

Loans outstanding at the end of each year consisted of the following (in thousands):


	December 31,
	2008			2007			2006			2005			2004
Commercial, financial and agricultural	$	38,755		$	28,842		$	23,341		$	21,661		$	23,301
Real estate — commercial		32,171			29,021			29,492			27,588			25,068
Real estate — construction		22,144			27,223			29,489			28,323			24,968
Real estate — mortgage		140,016			127,324			132,572			135,992			132,243
Home equity		61,094			63,960			67,842			62,288			54,249
Obligations of states and political subdivisions		7,177			6,593			5,129			4,827			4,294
Personal		13,920			15,319			18,545			18,498			17,735
Unearned interest		(145	)		(282	)		(592	)		(1,114	)		(2,110	)

Total	$	315,132		$	298,000		$	305,818		$	298,063		$	279,748

From year-end 2007 to year-end 2008, total loans outstanding, net of unearned interest, increased by $17,132,000, following a decrease of $7,818,000 in 2007 when compared to year-end 2006. The following table summarizes how the ending balances (in thousands) changed annually in each of the last three years.


	2008			2007			2006

Beginning balance	$	298,000		$	305,818		$	298,063

New loans, net of repayments		17,595			(7,051	)		4,916
Loans acquired in branch purchase		—			—			3,810
Loans charged off		(156	)		(418	)		(307	)
Loans transferred to other real estate owned and other adjustments to carrying value		(307	)		(349	)		(664	)

Net change		17,132			(7,818	)		7,755


Ending balance	$	315,132		$	298,000		$	305,818

The loan portfolio was comprised of approximately 68% consumer loans and 32% commercial loans (including construction) on December 31, 2008 as compared to 69% consumer loans and 31% commercial loans on December 31, 2007. The highest loan concentration by activity type was property development, followed by car dealerships and the trucking industry, each accounting for less than 2.5% of the portfolio. Management believes that these small concentrations pose no significant risk. See Note 5 of Notes to Consolidated Financial Statements.

As can be seen in Table 3, the primary source of growth of the loan portfolio came from mortgage loans, which increased on average by 5.9% in 2008 as compared to 2007. Commercial loans decreased on average as construction loans declined. Although Juniata is willing and able to lend to qualifying businesses and individuals, management believes that the recessionary climate in 2009 will likely hinder growth, as unemployment escalates. We believe that, as a long-standing community bank, we must stand ready to help our communities through challenging times. With stringent credit standards in place, our business model closely aligns lenders and community office managers’ efforts to effectively develop referrals and existing customer relationships. Continued emphasis will be placed on responsiveness and personal attention given to customers, which we believe differentiates the Bank from its competition. Nearly all commercial loans and most residential mortgage loans are either variable or adjustable rate loans, while other consumer loans generally have fixed rates for the duration of the loan. 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, ability to pay and general economic trends.

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 allowance for loan losses has been established in order to absorb probable losses on existing loans. An annual 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, 2008 was 0.83% of total loans, net of unearned interest, as compared to 0.78% of total loans, net of unearned interest, at the end of 2007. The allowance increased $288,000 when compared to December 31, 2007. Net charge-offs for 2008 and 2007 were 0.04% and 0.12% of average loans, respectively.

At December 31, 2008, non-performing loans (as defined in Table 4), as a percentage of the allowance for loan losses, were 73.5% as compared to 36.0% at December 31, 2007. Of the $1,919,000 of non-performing loans at December 31, 2008, $1,868,000 was collateralized with real estate, $50,000 with other assets and $1,000 was unsecured.

Non-performing loans were 0.61% of loans as of December 31, 2008, and 0.28% of loans as of December 31, 2007. The increase in nonperforming loans in 2008 was primarily due to the identification of several deteriorating loan relationships.

Table 4
Non-Performing Loans


	December 31,
	2008		2007		2006		2005		2004
			(In thousands)
Nonaccrual loans	$	1,255	$	—	$	1,240	$	1,515	$	—
Accruing loans past due 90 days or more		664		837		214		724		365
Restructured loans		—		—		—		—		—

Total non-performing loans	$	1,919	$	837	$	1,454	$	2,239	$	365

Loans on which the accrual of interest has been discontinued are designated as non-accrual loans. Accrual of interest on loans is 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. It is the Company’s policy to continue to accrue interest on loans over 90 days past due as long as they are (1) guaranteed or well secured and (2) there is an effective means of collection. 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.

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.

Critical to this analysis is any change in observable trends that may be occurring, to assess potential credit weaknesses.

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 consists of several key elements:

	•		Historical trends: Historical net charge-offs are computed as a percentage of average loans, by loan type. This percentage is applied to the ending period balance of the loan type to determine the amount to be included in the allowance to cover charge-off probability;

	•		Individual loan performance: Management identifies a list of loans which are individually assigned a risk rating grade because the loan has not performed according to payment terms and there is reason to believe that repayment of the loan principal, in whole or part, is unlikely. The specific portion of the allowance for these loans is the total amount of potential losses for these individual loans which has not previously been charged off;

	•		General economic environment: Current economic factors and business trends relative to specific types of loans are assessed. Juniata’s lending is concentrated within central Pennsylvania and, accordingly, the loan portfolio quality is dependent upon localized economic factors such as: unemployment rates, commercial real estate vacancy rates, consumer delinquency trends and residential housing appreciation rates. Generally, the local unemployment rate consistently slightly exceeds the national and state statistics. Additionally, some of the larger employers in the local market area are experiencing some financial stress that has resulted in loss of jobs in the last two years. Fuel cost escalation has put profit pressure on trucking firms, and increased cost of employer-provided medical insurance has added to the profit pressures of employers in general; and

	•		Other relevant factors: Certain specific risks inherent in the loan portfolio are identified and examined to determine if an additional allowance is warranted and, if so, management assigns a percentage to the loan category. Such factors consist of:

	•		Credit concentration: Juniata’s loans are classified in pre-defined groups. Any group’s total that exceeds 25% of the Bank’s total capital is considered to be a credit concentration and as such, is determined to have an additional level of associated risk;

	•		Changes in loan volumes;

	•		Changes in experience, ability and depth of management; and

	•		External factors, such as legal and regulatory requirements.

Individual credits are selected throughout the year for detailed loan reviews, which are utilized by management to assess the risk in the portfolio and the adequacy of the allowance. Due to the nature of commercial lending, evaluation of the adequacy of the allowance as it relates to these loan types is often based more upon specific credit review, with consideration given to the potential impairment of certain credits and historical charge-off percentages, adjusted for general economic conditions and other inherent risk factors. The allowance not specifically allocated to individual credits is generally determined by analyzing potential exposure and other qualitative factors that could negatively impact the adequacy of the allowance. Loans not individually evaluated for impairment are grouped by pools with similar risk characteristics and the related historical charge-off percentages are adjusted to reflect current inherent risk factors, such as unemployment, overall economic conditions, concentrations of credit, loan growth, classified and impaired loan trends, staffing adherence to lending policies and loss trends.

Conversely, due to the homogeneous nature of the real estate and installment portfolios, the portions of the allowance allocated to those portfolios are primarily based on prior charge-off history of each portfolio, adjusted for general economic conditions and other inherent risk factors.

Determination of the allowance for loan losses is subjective in nature and requires management to periodically reassess the validity of its assumptions. Differences between net charge-offs and estimated losses are assessed such that management can modify its evaluation model on a timely basis to ensure that adequate provision has been made for risk in the total loan portfolio.

A summary of the transactions in the allowance for loan losses for the last five years (in thousands) is shown below. At $133,000, the level of net charge-offs in 2008 was the lowest in the five year period presented, reflecting 36% of the level of 2007’s net charge-offs and 48% of net charge-offs in 2006. However, the increase in both loans outstanding and non-performing loans indicated the need for a provision for loan losses in 2008 at a level of $421,000, or 351% of the provision deemed necessary in 2007.


	Years Ended December 31,
	2008			2007			2006			2005			2004
Balance of allowance — beginning of period	$	2,322		$	2,572		$	2,763		$	2,989		$	2,820
Loans charged off:
Commercial, financial and agricultural		43			291			159			171			43
Real estate — commercial		36			—			—			—			—
Real estate — construction		—			—			—			30			—
Real estate — mortgage		15			66			19			3			10
Personal		62			61			129			75			122

Total charge-offs		156			418			307			279			175

Recoveries of loans previously charged off:
Commercial, financial and agricultural		5			8			5			6			1
Real estate — commercial		—			—			—			—			—
Real estate — construction		—			—			—			5			—
Real estate — mortgage		5			8			—			—			2
Personal		13			32			25			14			15

Total recoveries		23			48			30			25			18


Net charge-offs		133			370			277			254			157
Provision for loan losses		421			120			54			28			326
Branch acquisition loan loss reserve								32			—			—

Balance of allowance — end of period	$	2,610		$	2,322		$	2,572		$	2,763		$	2,989


Ratio of net charge-offs during period to
average loans outstanding		0.04	%		0.12	%		0.09	%		0.09	%		0.06	%

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.


	Allocation of the Allowance for Loan Losses (in thousands)
	2008		2007		2006		2005		2004
Commercial	$	707	$	660	$	864	$	956	$	1,087
Real estate		1,202		933		1,011		1,112		602
Consumer		701		729		697		695		1,002
Unallocated		—		—		—		—		298

Total allowance for loan losses	$	2,610	$	2,322	$	2,572	$	2,763	$	2,989


	Percent of Loan Type to Total Loans
	2008			2007			2006			2005			2004
Commercial (non-real estate)		14.6	%		11.9	%		9.3	%		8.9	%		9.9	%
Real estate		81.0	%		83.0	%		84.6	%		84.9	%		83.8	%
Consumer		4.4	%		5.1	%		6.1	%		6.2	%		6.3	%

		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 market value), federal funds sold, interest bearing deposits, Federal Home Loan Bank stock and other interest-earning assets) totaled $72,036,000 on December 31, 2008, representing a decrease of $9,910,000 when compared to year-end 2007. The following table summarizes how the ending balances (in thousands) changed annually in each of the last three years.


	2008			2007			2006

Beginning balance	$	81,946		$	66,921		$	77,274
Purchases of investment securities		36,063			63,295			19,281
Sales and maturities of investment securities		(38,996	)		(55,357	)		(30,871	)
Impairment charge		(554	)		(33	)		—
Adjustment in market value of AFS securities		878			372			414
Amortization/Accretion		(126	)		(104	)		(133	)
Federal Home Loan Bank stock, net change		1,102			19			(280	)
Federal funds sold, net change		(7,500	)		6,300			1,200
Interest bearing deposits with others, net change		(777	)		533			36

Net change		(9,910	)		15,025			(10,353	)

Ending balance	$	72,036		$	81,946		$	66,921

On average, investments decreased by $6,140,000, or 7.0%, during 2008, after increasing by $8,741,000, or 11.0%, during 2007. The decrease in 2008 was directly related to the need to use cash proceeds from the maturities and sales of investments to fund loans, since deposit growth did not keep pace with the loan demand. The increase in 2007 was due to the growth in average deposits exceeding the loan growth on average, by $19,706,000.

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 classification. At December 31, 2008, the market value of the entire securities portfolio was greater than amortized cost by $1,042,000 as compared to December 31, 2007, when market value was greater than amortized cost by $196,000. The weighted average maturity of the investment portfolio was 2 years and 10 months as of December 31, 2008 as compared to 3 years and 3 months at the end of 2007. 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 (in thousands) at December 31, 2008 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.


	December 31, 2008
			Weighted
Securities	Carrying		Average
Type and maturity	Value		Yield
U.S. Treasury securities and obligations of U.S. Government agencies and corporations
Within one year	$	21,851		3.92	%
After one year but within five years		3,117		4.68	%
After five years but within ten years		—
After ten years		—

		24,968		4.01	%
Obligations of state and political subdivisions
Within one year		9,727		4.98	%
After one year but within five years		24,735		4.72	%
After five years but within ten years		1,053		5.23	%
After ten years		—

		35,515		4.81	%
Corporate Notes and Other
Within one year
After one year but within five years		957		4.00	%
After five years but within ten years
After ten years		—

		957		4.00	%
Mortgage-backed securities Within one year		210		4.58	%
After one year but within five years		—
After five years but within ten years		1,657		5.48	%
After ten years		—

		1,867		5.38	%

Equity securities		1,014

	$	64,321

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. During 2008, a claim was submitted on one of the life insurance policies that resulted in the receipt of $437,000, of which $258,000 represented recorded cash surrender value. During 2007, three new life insurance policies were purchased. See Note 7 of Notes to Consolidated Financial Statements. The following table summarizes how the ending balances (in thousands) changed annually in each of the last three years.


	2008			2007			2006

Beginning balance	$	12,344		$	11,017		$	10,647
Bank-owned life insurance		282			1,365			446
Annuities		(44	)		(38	)		(76	)

Net change		238			1,327			370


Ending balance	$	12,582		$	12,344		$	11,017

Investment in Unconsolidated Subsidiary

The Company owns 39.16% of the outstanding common stock of The First National Bank of Liverpool (FNBL), Liverpool, PA. This investment is accounted for under the equity method of accounting, and was carried at $3,176,000 as of December 31, 2008, of which $2,167,000 represents the underlying equity in net assets of FNBL. The difference between the investment carrying amount and the amount of the underlying equity, $1,009,000, is considered to be goodwill and is evaluated quarterly for impairment. Any loss in value of the investment that is other than a temporary decline would be recognized. 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 FNBL to sustain an earnings capacity that would justify the carrying amount of the investment. The carrying amount at December 31, 2008 represented an increase of $204,000 when compared to December 31, 2007. In connection with this investment, two representatives of Juniata serve on the Board of Directors of FNBL.

Goodwill and Intangible Assets

In 2006, the Company acquired a branch office in Richfield, PA. Completing this purchase was in line with a strategic goal of the Company to expand its base into contiguous market areas within rural Pennsylvania. Included in the purchase price of the branch was goodwill of $2,046,000. Additionally, core deposit intangible was acquired and had carrying values of $344,000 and $389,000, as of December 31, 2008 and December 31, 2007, respectively. The core deposit intangible is being amortized over a ten-year period on a straight-line basis. Goodwill is not being amortized, but is measured annually for impairment.

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, 2008 and 2007. As of December 31, 2008 and 2007, the Company recorded a net deferred tax asset of $1,685,000 and $1,935,000, respectively, which was carried as a non-interest earning asset. The decrease of $250,000 was primarily the result of the increase in deferred tax liability associated with the market value of investment securities available for sale of $292,000. The remainder of the difference was due to the various other changes in gross temporary tax differences. See Note 14 of Notes to Consolidated Financial Statements.

Other Non-Interest Earning Assets

Other non-interest earning assets on average increased $1,281,000, or 5.8%, in 2008, after an increase of $391,000, or 1.8%, in 2007. The following table summarizes the components of the non-interest earning asset category, and how the ending balances (in thousands) changed annually in each of the last three years.


	2008			2007			2006

Beginning balance	$	24,771		$	29,375		$	27,581
Cash and due from banks		10			(4,222	)		103
Premises and equipment, net		102			730			331
Other real estate owned		(6	)		154			133
Other receivables and prepaid expenses		501			(1,266	)		1,227

Net change		607			(4,604	)		1,794

Ending balance	$	25,378		$	24,771		$	29,375

Deposits

For the year 2008, total deposits decreased $2,426,000. From year-end 2006 to year-end 2007, total deposits increased by $4,288,000. The following table summarizes how the ending balances (in thousands) changed annually in each of the last three years.


	2008			2007			2006
Beginning balance	$	359,457		$	355,169		$343,467

										Acquired in
							Other			branch
							changes			purchase
Demand deposits		5,445			5,926			(4,457	)		1,245
Interest bearing demand deposits		(12,722	)		(365	)		3,469			3,195
Savings deposits		3,237			(2,340	)		(8,855	)		1,369
Time deposits, $100,000 and greater		2,751			(1,724	)		(3,975	)		2,376
Time deposits, other		(1,137	)		2,791			5,430			11,905

Net change		(2,426	)		4,288			(8,388	)		20,090

Ending balance	$	357,031		$	359,457		$355,169

The following table shows (in thousands of dollars) 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)


	2008								2007								2006
	Average		Increase(Decrease)						Average		Increase(Decrease)						Average
	Balance		Amount			%			Balance		Amount			%			Balance
Interest bearing demand deposits	$	72,051	$	(10,826	)		(13.1	)%	$	82,877	$	5,307			6.8	%	$	77,570
Savings deposits		37,248		2,001			5.7			35,247		(4,784	)		(12.0	)		40,031
Demand deposits		49,137		3,704			8.2			45,433		3,846			9.2			41,587

Total core (transaction) accounts		158,436		(5,121	)		(3.1	)		163,557		4,369			2.7			159,188

Time deposits, $100,000 and greater		38,530		3,079			8.7			35,451		2,475			7.5			32,976
Time deposits, other		166,279		2,491			1.5			163,788		9,481			6.1			154,307

Total time deposits		204,809		5,570			2.8			199,239		11,956			6.4			187,283


Total deposits	$	363,245	$	449			0.1	%	$	362,796	$	16,325			4.7	%	$	346,471

Average deposits increased $449,000, or 0.1%, to $363,245,000 in 2008 as compared to an increase in 2007 of $16,325,000, or 4.7%, to $362,796,000. The reduction in interest bearing demand deposits nearly offset the

increases in each of the other categories of deposits in 2008. The reduction in interest bearing demand deposits was primarily in the indexed money market deposit product that had grown during 2007 when the inverted yield curve created pricing in this product that was attractive to higher-balance customers seeking liquid transaction accounts. As the yield curve normalized late in 2007, the rates on this product decreased considerably. Management believes that these depositors shifted balances to instruments through which a higher rate could be earned. Additionally, in the latter part of 2008, consumer confidence in banks in general declined, as concerns about the deepening recession and bank failures heightened. Although our Company’s lending practices, deposit-gathering strategies and business models for growth bear little resemblance to those banks that failed or sought help from the government, we believe that the media’s negative portrayal of all banks created some fear that deposits were not safe in any bank. In response to this concern, FDIC insurance protection was increased for all banks temporarily, and Juniata opted to purchase the higher level of protection for our customers for as long as it is available. In order to fund loan growth in excess of deposit growth, Federal Home Loan Bank advances were used in 2008.

It is obvious that customers continue to value the safety of insured deposits and, we believe, the local familiarity that the Bank continues to offer; these factors appear to be primary considerations for the majority of our customers. In 2007, the Federal Funds target rate remained at 5.25%, where it had been since July 2006, until October. During the fourth quarter, that rate dropped by 100 basis points, to 4.25%, by the end of the year. Our depositors responded to the rate environment by keeping their maturities relatively short, appearing to believe that rates would have increased by the time their contracts matured. Of the $202,004,000 in time deposits at December 31, 2007, 67% were scheduled to mature within one year. In 2008, as the Federal Funds target rate decreased further to between zero and 0.25% by the end of the year, customers continued to opt for shorter-term certificates of deposit contracts. As of December 31, 2008, 53% of the $203,618,000 of time deposits were scheduled to mature within one year.

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 increasing the number of services per household, resulting in attracting more of the deposit (and loan) market share. Additionally, in 2009 we plan to market some recently enhanced services, such as remote deposit capture for commercial customers, as well as enhanced internet banking services for all types of customers, in order to grow those types of relationships as well.

In the past several years, the banking industry in general has experienced limited deposit growth because of competition in the marketplace from many sources, including competitors using the Internet to obtain funding, as well as mutual funds and other investment options that directly compete with traditional banking products. In keeping with our desire to provide our customers a full array of financial services “within our own walls,” we supplement the services traditionally offered by our Trust Department by staffing our community offices with alternative investment 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 can result in satisfied customers and increases in non-interest fee income. Fee income from the sale of alternative investments (primarily annuities and mutual funds) was $704,000 and $711,000 in 2008 and 2007, respectively, representing approximately 9% of total pre-tax income in each year.

Other Interest Bearing Liabilities

As mentioned in the discussion concerning deposits, the need to supplement deposits to provide cash to meet loan demand was important during 2008. Juniata’s average balances for all borrowings increased by 31% in 2008 over 2007, after having decreased by 47.3% in 2007 as compared to 2006.

Changes in Borrowings
(Dollars in thousands)


	2008								2007								2006
	Average		Increase(Decrease)						Average		Increase(Decrease)						Average
	Balance		Amount			%			Balance		Amount			%			Balance
Repurchase agreements	$	5,368	$	(1,454	)		(21.3	)%	$	6,822	$	1,294			23.4	%	$	5,528
Short-term borrowings		2,379		2,364			15,760.0			15		(5,389	)		(99.7	)		5,404
Long-term debt		1,448		1,448			—			—		(3,014	)		(100.0	)		3,014
Other interest bearing liabilities		1,058		91			9.4			967		91			10.4			876

	$	10,253	$	2,449			31.4	%	$	7,804	$	(7,018	)		(47.3	)%	$	14,822

Pension Plans

Through its noncontributory pension plan, the Company provides pension benefits to substantially all of its employees that were employed as of December 31, 2007. To participate in the plan, an employee must be 21 years of age and work 1,000 hours per year. Benefits are provided based upon an employee’s years of service and compensation. FAS No. 87 gives guidance on the allowable pension expense that is recognized in any given year. Management must make subjective assumptions relating to amounts and rates that are inherently uncertain. Please refer to Note 18 of Notes to Consolidated Financial Statements.

Stockholders’ Equity

Total stockholders’ equity decreased by $87,000 in 2008, or 0.2%, while net income increased by 5.3%. The slight decrease in stockholders’ equity in comparison to net income resulted from stock repurchases, the net change in the minimum pension liability and the effect of the implementation of EITF 06-4 (“Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements”) on January 1, 2008. Management’s goal was to increase return on average equity, through a systematic Board-approved stock repurchase program. In addition to the success in repurchasing over 72,000 shares during the year, the dividend payout ratio was 57%. Return on average equity increased by 3.1%, to 11.76%, in 2008 from 11.41% in 2007. The following table summarizes how the components of equity (in thousands) changed annually in each of the last three years.


	2008			2007			2006

Beginning balance	$	48,572		$	47,786		$	47,119
Net income		5,724			5,434			5,002
Dividends		(3,241	)		(4,210	)		(2,957	)
Stock-based compensation		40			43			39
Repurchase of stock, net of re-issuance		(1,440	)		(1,022	)		(1,013	)
Net change in unrealized security gains (losses)		563			260			274
Cumulative effect of change in accounting for pension and post-retirement benefits, net of tax		—			—			(763	)
Net change in minimum pension liability, net of tax		—			—			85
Defined benefit retirement plan adjustments net of tax		(1,253	)		281			—
Effect of implementation of EITF 06-4		(480	)		—			—

Net change		(87	)		786			667

Ending balance	$	48,485		$	48,572		$	47,786

On average, stockholders’ equity in 2008 was $48,674,000, as compared to $47,635,000 in 2007. At December 31, 2008, Juniata held 404,771 shares of stock in treasury at a cost of $8,096,000 as compared to 336,381 in 2007 at a cost of $6,669,000. These increases are a result of the stock repurchase program in effect during 2007 and 2008 (see Note 15 of Notes to Consolidated Financial Statements).

The Company periodically repurchases shares of its common stock under the share repurchase program approved by the Board of Directors. In September of 2008, 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 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 periodically reissued for stock option exercises, employee stock purchase plan purchases and to fulfill dividend reinvestment program needs. During 2008, 72,955 shares were repurchased in conjunction with the current program. Remaining shares authorized for repurchase were 218,536 as of December 31, 2008.

In 2008, Juniata increased its regular dividend by 5.7%, to $0.74 per common share. Per share common regular dividends in prior years were $0.70 and $0.66 in 2007 and 2006, respectively. Additionally, a special dividend of $0.25 was paid to shareholders in 2007. No special dividend was paid in 2008 or in 2006. (See Note 15 of Notes to Consolidated Financial Statements regarding restrictions on dividends from the Bank to the Company.) In January 2009, the Board of Directors declared a dividend of $0.19 per share for the first quarter of 2009 to stockholders of record on February 15, 2009, payable on March 2, 2009.

Juniata’s book value per share at December 31, 2008 was $11.17, as compared to $11.02 and $10.72 at December 31, 2007 and 2006, respectively. Juniata’s average equity to assets ratio for 2008, 2007 and 2006 was 11.35%, 11.21% and 11.47%, 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

	•		Market / 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. This area 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. Three types of liquidity sources are (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, they get 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 is to maintain an adequate volume of high quality liquidity 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 of at least 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 at a minimum of 15% of total assets and contingency liquidity at a minimum of 20% of total assets.

Juniata is a member of the Federal Home Loan Bank (FHLB) of Pittsburgh, which provides short-term liquidity. The Bank uses this vehicle to satisfy temporary funding needs throughout the year. On December 31, 2008, the Company had overnight advances of $8,635,000, but had no overnight advances under this arrangement as of December 31, 2007.

The Bank’s maximum borrowing capacity with the Federal Home Loan Bank of Pittsburgh (“FHLB”) is $189,329,000, with an outstanding balance of $13,635,000 as of December 31, 2008. In order to borrow an amount in excess of $30,305,000, 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, as defined, to secure all outstanding advances.

The Bank has entered into an agreement with the FHLB for long-term debt through their Convertible Select Loan product. The principal amount of the loan is $5,000,000 and has a two-year term, maturing on September 17, 2010. The interest rate of 2.75% is fixed for one year. The loan, at the option of the FHLB, may be converted to an adjustable-rate loan or a fixed rate loan, beginning on September 17, 2009 and quarterly thereafter. If the loan is converted to an adjustable rate loan, the Bank may repay the loan on the conversion date without a prepayment fee. Otherwise, the loan will be converted to a rate equal to the 3-month LIBOR + 31 basis points and will be subject to conversion on the next and subsequent quarterly conversion dates. Prepayment of the loan at any time other than when the loan is being converted to an adjustable-rate loan would require a prepayment fee. The debt is being used by the Bank to match-fund a specific commercial loan with similar balance and term. It is not anticipated at this time that new long-term funding will be needed during 2009, however, given similar circumstances, the same type of matched-loan funding arrangement would likely occur.

Juniata needs liquid resources available to fulfill contractual obligations that require future cash payments. The table below summarizes significant obligations to third parties, by type, that are fixed and determined at December 31, 2008.

Presented below are the significant contractual obligations of the Company as of December 31, 2008 (in thousands of dollars). Further discussion of the nature of each obligation is included in the referenced note to the consolidated financial statements.

Contractual Obligations


					Payments Due by Period
							One to		Three to		More than
	Note				One Year		Three		Five		Five
	Reference		Total		or Less		Years		Years		Years

Certificates of deposits		11	$	203,618	$	108,592	$	76,509	$	18,517	$	—
Federal Funds borrowed and security repurchase agreements		12		10,579		10,579		—		—		—
Long-term debt		12		5,000		—		5,000		—		—
Operating lease obligations		13		402		102		200		78		22
Other long-term liabilities
3rd party data processor contract		22		306		204		102		—		—
Supplemental retirement and deferred compensation		18		4,407		457		948		738		2,264

			$	224,312	$	119,934	$	82,759	$	19,333	$	2,286

The schedule of contractual obligations (above) excludes expected defined benefit retirement payments that will be paid from the plan assets, as referenced in Note 18.

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. All banks and bank holding companies are required to have a minimum of 4% of risk adjusted assets in Tier I capital and 8% of risk adjusted assets in Total capital (Tier I and Tier II capital). As of December 31, 2008 and 2007, Juniata’s Tier I capital ratio was 17.31% and 17.53%, respectively, and its Total capital ratio was 18.26% and 18.41%, respectively. Additionally, banking organizations must maintain a minimum Tier I capital to total average asset (leverage) ratio of 3%. This 3% leverage ratio is a minimum for the top-rated banking organizations without any supervisory, financial or operational weaknesses or deficiencies. Other banking organizations are required to maintain leverage capital ratios 100 to 200 basis points above the minimum depending on their financial condition. At December 31, 2008 and 2007, Juniata’s leverage ratio was 11.11% and 11.06%, respectively, with a required leverage ratio of 4% (see Note 15 of Notes to the Consolidated Financial Statements).

Market / Interest Rate Risk

Market risk is the risk of loss arising from changes in the fair value of financial instruments due to changes in interest rates, currency exchange rates, commodity prices or equity prices. The Company’s market risk is composed primarily of interest rate risk. The process by which financial institutions manage their interest rate risk is called asset/liability management. The primary objective of Juniata’s asset/liability management process is to maximize current and future net interest income within acceptable levels of interest rate risk while satisfying liquidity and capital requirements. Management recognizes that a certain amount of interest rate risk is inherent, appropriate and necessary to ensure profitability. Thus the goal of interest rate risk management is to maintain a balance between risk and reward such that net interest income is maximized while risk is maintained at a tolerable level.

Management endeavors to control the exposure to changes in interest rates by understanding, reviewing and making decisions based on its risk position. The asset/liability management committee is responsible for these decisions. The Company primarily uses the securities portfolio and FHLB advances to manage its interest rate risk position. Additionally, pricing, promotion and product development activities are directed in an effort to emphasize the loan and deposit term or repricing characteristics that best meet current interest rate risk objectives. Hedging instruments are not used.

The committee operates under management policies defining guidelines and limits on the level of risk. These policies are monitored and approved by the Board of Directors. A simulation analysis is used to assess earnings and capital at risk from movements in interest rates. The model considers three major factors of (1) volume differences, (2) repricing differences, and (3) timing in its income simulation. As of December 31, 2008, the model disseminated data into appropriate repricing buckets, based upon the static position at that time. The interest-earning assets and interest-bearing liabilities were assigned a multiplier to simulate how much that particular balance sheet item would re-price when interest rates change. Finally, the estimated timing effect of rate changes is applied, and the net interest income effect is determined on a static basis (as if no other factors were present). As the table below indicates, based upon rate shock simulations on a static basis, the Company’s balance sheet is slightly asset sensitive. Over a one-year period, the effect of a 100, 200 and 300 basis point rate increase would decrease net interest income by $83,000, $167,000 and $250,000, respectively. No rate shock modeling was done for a declining rate environment, as the federal funds target rate currently is between zero and 0.25%. The modeling process is continued by further estimating the impact that imbedded options and probable internal strategies may have in the changing-rate environment. Examples of imbedded options are floor and ceiling features in adjustable rate mortgages and call features on securities in the investment portfolio. Applying the likely results of all known imbedded options and likely internal pricing strategies to the simulation produces quite different results from the static position assumptions. Over a one-year period, the effect a 100, 200 and 300 basis point rate increase would add about $27,000, $115,000 and $237,000, respectively, to net interest income. As the table below indicates, the net effect of interest rate risk on net interest income is minimal in a rising rate environment. Juniata’s rate risk policies provide for maximum limits on net interest income that can be at risk for 100 through 300 basis point changes in interest rates.

Effect of Interest Rate Risk on Net Interest Income
(Dollars in thousands)


		Change in Net
Change in		Interest Income Due			Change in Net		Total Change in
Interest Rates		to Interest Rate			Interest Income Due		Net Interest
(Basis Points)		Risk (Static)			to Imbedded Options		Income

	300	$	(250	)	$	237	$	(13	)
	200		(167	)		115		(52	)
	100		(83	)		27		(56	)
	0		—			—		—

Table 5, presented below, illustrates the maturity distribution of the Company’s interest-sensitive assets and liabilities as of December 31, 2008. 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, and adjustable rate mortgage loans that are currently at their floor rate are treated as fixed rate instruments. Through one year, the cumulative sensitivity ratio is 0.82, indicating a well-matched balance sheet, with a minor amount of risk when measured on a static basis.

Table 5
MATURITY DISTRIBUTION
AS OF DECEMBER 31, 2008
(In thousands)
Remaining Maturity / Earliest Possible Repricing


			Over Three			Over Six			Over One
	Three		Months But			Months But			Year But			Over
	Months		Within Six			Within One			Within Five			Five
	or Less		Months			Year			Years			Years		Total
Interest Earning Assets
Interest bearing deposits	$	193	$	—		$	5,250		$	75		$	—	$	5,518
Federal funds sold		—		—			—			—			—		—
Investment securities:
U.S. Treasury securities and obligations of U.S. Government agencies and corporations		7,098		11,675			3,079			3,117			—		24,969
Obligations of state and political subdivisions		3,070		1,412			5,245			24,734			1,053		35,514
Corporate notes		—		—			—			957			—		957
Mortgage-backed securities		9		—			200			—			1,658		1,867
Stocks		—		—			—			—			1,014		1,014
Loans:
Commercial, financial, and agricultural		25,872		245			2,505			7,076			3,057		38,755
Real estate — commercial		19,455		—			—			3,921			8,795		32,171
Real estate — construction		22,144		—			—			—			—		22,144
Real estate — mortgage		329		3,501			5,602			23,074			107,510		140,016
Home equity (net of unearned discount)		10,474		50			179			9,729			40,517		60,949
Personal		383		95			422			5,958			7,062		13,920
Obligations of state and political subdivisions		—		798			2			817			5,560		7,177

Total Interest Earning Assets		89,027		17,776			22,484			79,458			176,226		384,971

Interest Bearing Liabilities
Demand deposits		20,852		621			2,484			8,694			29,448		62,099
Savings deposits		7,423		371			1,485			5,196			22,639		37,114
Certificates of deposit over $100,000		5,671		5,724			6,299			21,365			—		39,059
Time deposits		30,987		28,375			31,536			73,661			—		164,559
Securities sold under agreements to repurchase		1,944		—			—			—			—		1,944
Short-term borrowings		8,635		—			—			—			—		8,635
Long-term debt		—		—			5,000			—			—		5,000
Other interest bearing liabilities		1,096		—			—			—			—		1,096

Total Interest Bearing Liabilities		76,608		35,091			46,804			108,916			52,087		319,506

Gap	$	12,419	$	(17,315	)	$	(24,320	)	$	(29,458	)	$	124,139	$	65,465

Cumulative Gap	$	12,419	$	(4,896	)	$	(29,216	)	$	(58,674	)	$	65,465

Cumulative sensitivity ratio		1.16		0.96			0.82			0.78			1.20
Commercial, financial and agricultural loans maturing after one year with:
Fixed interest rates									$	7,076		$	3,057	$	10,133
Variable interest rates										—			—		—

Total									$	7,076		$	3,057	$	10,133

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 plus 100, 200 and 300 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, 2008, 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 present value of the balance sheet without regard to business continuity. Economic value of equity methodology requires us to calculate the present value of all interest bearing instruments. Generally banks are exposed to rising interest rates on an economic value of equity basis because of the inherent mismatch between longer duration assets compared to shorter duration liabilities. A plus 200 basis point shock was applied, resulting in a minimal change to EVE, indicating a stable value.

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 $32,590,000 and $35,827,000 at December 31, 2008 and 2007, respectively. In addition, the Company had $15,148,000 and $15,544,000 outstanding in unused lines of credit commitments extended to its customers at December 31, 2008 and 2007, respectively.

Letters of credit are instruments issued by the Company that guarantee the beneficiary payment by the Bank 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 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 Company holds collateral supporting those commitments for which collateral is deemed necessary. The amount of the liability as of December 31, 2008 and 2007 for guarantees under letters of credit issued is not material.

The maximum undiscounted exposure related to these commitments at December 31, 2008 was $639,000, and the approximate value of underlying collateral upon liquidation that would be expected to cover this maximum potential exposure was $4,366,000.

The Company 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.

Effects of Inflation

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

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

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

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

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders
Juniata Valley Financial Corp.
Mifflintown, Pennsylvania

We have audited Juniata Valley Financial Corp. and its wholly-owned subsidiary’s The Juniata Valley Bank, (the “Company”) internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). 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 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.

- 2 -

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.

Beard Miller Company LLP
Lancaster, Pennsylvania
March 13, 2009

Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders
Juniata Valley Financial Corp.
Mifflintown, Pennsylvania

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, 2008 and 2007, and the related consolidated statements of income, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2008. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Juniata Valley Financial Corp. and its wholly-owned subsidiary, The Juniata Valley Bank, as of December 31, 2008 and 2007 and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2008 in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 18 to the consolidated financial statements, the Company changed its method of accounting for Defined Benefit, Pension, and other post retirement plans in 2006.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated March 13, 2009 expressed an unqualified opinion.

Beard Miller Company LLP
Lancaster, Pennsylvania

March 13, 2009

Juniata Valley Financial Corp. and Subsidiary
Consolidated Statements of Financial Condition
(in thousands, except share data)


	December 31,			December 31,
	2008			2007
ASSETS
Cash and due from banks	$	12,264		$	12,254
Interest bearing deposits with banks		193			770
Federal funds sold		—			7,500

Cash and cash equivalents		12,457			20,524
Interest bearing time deposits with banks		5,325			5,525
Securities available for sale		64,321			67,056
Restricted investment in Federal Home Loan Bank (FHLB) stock		2,197			1,095
Investment in unconsolidated subsidiary		3,176			2,972

Total loans, net of unearned interest		315,132			298,000
Less: Allowance for loan losses		(2,610	)		(2,322	)

Total loans, net of allowance for loan losses		312,522			295,678
Premises and equipment, net		7,374			7,272
Bank owned life insurance and annuities		12,582			12,344
Core deposit intangible		344			389
Goodwill		2,046			2,046
Accrued interest receivable and other assets		5,740			5,245

Total assets	$	428,084		$	420,146

LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Deposits:
Non-interest bearing	$	54,200		$	48,755
Interest bearing		302,831			310,702

Total deposits		357,031			359,457
Securities sold under agreements to repurchase		1,944			5,431
Short-term borrowings		8,635			—
Long-term debt		5,000			—
Other interest bearing liabilities		1,096			1,037
Accrued interest payable and other liabilities		5,893			5,649

Total liabilities		379,599			371,574
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
Outstanding -
4,341,055 shares at December 31, 2008;
4,409,445 shares at December 31, 2007		4,746			4,746
Surplus		18,324			18,297
Retained earnings		34,758			32,755
Accumulated other comprehensive loss		(1,247	)		(557	)
Cost of common stock in Treasury:
404,771 shares at December 31, 2008;
336,381 shares at December 31, 2007		(8,096	)		(6,669	)

Total stockholders’ equity		48,485			48,572

Total liabilities and stockholders’ equity	$	428,084		$	420,146

See Notes to Consolidated Financial Statements

Juniata Valley Financial Corp. and Subsidiary
Consolidated Statements of Income
(in thousands, except share data)


	Years Ended December 31,
	2008			2007			2006
Interest income:
Loans, including fees	$	22,100		$	22,851		$	21,768
Taxable securities		1,666			2,438			1,975
Tax-exempt securities		1,082			857			659
Other interest income		382			577			261

Total interest income		25,230			26,723			24,663

Interest expense:
Deposits		8,895			10,744			9,472
Securities sold under agreements to repurchase		69			276			246
Short-term borrowings		21			1			275
Long-term debt		41			—			88
Other interest bearing liabilities		31			39			30

Total interest expense		9,057			11,060			10,111

Net interest income		16,173			15,663			14,552
Provision for loan losses		421			120			54

Net interest income after provision for loan losses		15,752			15,543			14,498

Noninterest income:
Trust fees		389			444			435
Customer service fees		1,660			1,656			1,497
Earnings on bank owned life insurance and annuities		486			440			433
Commissions from sales of non-deposit products		704			711			513
Income from unconsolidated subsidiary		207			192			80
Securities impairment charge		(554	)		(33	)		—
Gain on sales of securities		33			14			181
Gain on sales of other assets		58			1			10
Gain on life insurance proceeds		179			—			—
Other noninterest income		875			774			681

Total noninterest income		4,037			4,199			3,830

Noninterest expense:
Employee compensation expense		5,078			5,137			4,593
Employee benefits		1,373			1,455			1,471
Occupancy		928			892			804
Equipment		710			688			620
Data processing expense		1,375			1,332			1,204
Director compensation		417			455			465
Professional fees		379			437			378
Taxes, other than income		500			546			505
Intangible amortization		45			45			15
Other noninterest expense		1,203			1,222			1,190

Total noninterest expense		12,008			12,209			11,245

Income before income taxes		7,781			7,533			7,083
Provision for income taxes		2,057			2,099			2,081

Net income	$	5,724		$	5,434		$	5,002

Earnings per share
Basic	$	1.31		$	1.23		$	1.12
Diluted	$	1.31		$	1.22		$	1.11
Cash dividends declared per share	$	0.74		$	0.95		$	0.66
Weighted average basic shares outstanding		4,376,077			4,434,859			4,480,245
Weighted average diluted shares outstanding		4,385,612			4,444,466			4,492,552

See Notes to Consolidated Financial Statements

Juniata Valley Financial Corp. and Subsidiary
Consolidated Statements of Stockholders’ Equity
(in thousands, except share data)


	Years Ended December 31, 2008, 2007 and 2006
	Number											Accumulated
	of											Other						Total
	Shares			Common					Retained			Comprehensive			Treasury			Stockholders’
	Outstanding			Stock		Surplus			Earnings			Loss			Stock			Equity

Balance at December 31, 2005		4,503,392		$	4,746	$	18,177		$	29,486		$	(694	)	$	(4,596	)	$	47,119
Comprehensive income:
Net income										5,002									5,002
Change in unrealized losses on securities available for sale, net of reclassification adjustment and tax effects													274						274
Minimum pension liability, net of tax effects													85						85

Total comprehensive income																			5,361
Cumulative effect of change in accounting for pension and other post-retirement benefits, net of tax of $393													(763	)					(763	)
Cash dividends at $0.66 per share										(2,957	)								(2,957	)
Stock-based compensation expense							39												39
Purchase of treasury stock, at cost		(58,082	)													(1,302	)		(1,302	)
Treasury stock issued for dividend reinvestment plan		8,147					37									159			196
Treasury stock issued for stock option and stock purchase plans		4,477					6									87			93

Balance at December 31, 2006		4,457,934			4,746		18,259			31,531			(1,098	)		(5,652	)		47,786
Comprehensive income:
Net income										5,434									5,434
Change in unrealized losses on securities available for sale, net of reclassification adjustment and tax effects													260						260
Defined benefit retirement plan adjustments, net of tax effects													281						281

Total comprehensive income																			5,975
Cash dividends at $0.95 per share										(4,210	)								(4,210	)
Stock-based compensation expense							43												43
Purchase of treasury stock, at cost		(51,175	)													(1,069	)		(1,069	)
Treasury stock issued for stock option and stock purchase plans		2,686					(5	)								52			47

Balance at December 31, 2007		4,409,445			4,746		18,297			32,755			(557	)		(6,669	)		48,572
Comprehensive income:
Net income										5,724									5,724
Change in unrealized losses on securities available for sale, net of reclassification adjustment and tax effects													563						563
Defined benefit retirement plan adjustments, net of tax effects													(1,253	)					(1,253	)

Total comprehensive income																			5,034
Implementation of EITF 06-4, “Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements”										(480	)								(480	)
Cash dividends at $0.74 per share										(3,241	)								(3,241	)
Stock-based compensation expense							40												40
Purchase of treasury stock, at cost		(72,955	)													(1,518	)		(1,518	)
Treasury stock issued for stock option and stock purchase plans		4,565					(13	)								91			78

Balance at December 31, 2008		4,341,055		$	4,746	$	18,324		$	34,758		$	(1,247	)	$	(8,096	)	$	48,485

See Notes to Consolidated Financial Statements

Juniata Valley Financial Corp. and Subsidiary
Consolidated Statements of Cash Flows
( in thousands)


	Years Ended December 31,
	2008			2007			2006
Operating activities:
Net income	$	5,724		$	5,434		$	5,002
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		421			120			54
Provision for depreciation		691			653			594
Net amortization of securities premiums		126			104			133
Net amortization of loan origination costs		25			—			—
Amortization of core deposit intangible		45			45			15
Security impairment charge		554			33			—
Net realized gains on sales of securities		(33	)		(14	)		(181	)
Net gains on sales of other assets		(58	)		(1	)		(10	)
Earnings on bank owned life insurance and annuities		(486	)		(440	)		(433	)
Bank owned life insurance proceeds in excess of cash surrender value		(179	)		—			—
Deferred income tax expense		609			94			40
Equity in earnings of unconsolidated subsidiary, net of dividends of $0, $126 and $0		(207	)		(66	)		(80	)
Stock-based compensation expense		40			43			39
Decrease (increase) in accrued interest receivable and other assets		(962	)		901			(80	)
Increase (decrease) in accrued interest payable and other liabilities		(2,066	)		248			258

Net cash provided by operating activities		4,244			7,154			5,351
Investing activities:
Purchases of:
Securities available for sale		(36,063	)		(59,340	)		(14,181	)
Securities held to maturity		—			(3,955	)		(5,100	)
FHLB stock		(1,419	)		(197	)		(827	)
Premises and equipment		(838	)		(1,383	)		(786	)
Bank owned life insurance and annuities		(94	)		(963	)		(106	)
Investment in unconsolidated subsidiary		—			—			(2,812	)
Proceeds from:
Sales of securities available for sale		9			585			364
Maturities of and principal repayments on:
Securities available for sale		38,987			48,331			24,588
Securities held to maturity		—			6,455			5,100
Redemption of FHLB stock		317			178			1,107
Bank owned life insurance and annuities		511			76			169
Sale of other real estate owned		311			244			634
Sale of property owned for investment		322			—			—
Net decrease in interest bearing time deposits		200			135			—
Net cash received from branch acquisition		—			—			13,801
Net (increase) decrease in loans receivable		(17,595	)		7,051			(4,916	)

Net cash (used in) provided by investing activities		(15,352	)		(2,783	)		17,035
Financing activities:
Net increase (decrease) in deposits		(2,426	)		4,288			(8,388	)
Net (decrease) increase in short-term borrowings and securities sold under agreements to repurchase		5,148			(681	)		(3,689	)
Issuance (repayment) of long-term debt		5,000			—			(5,000	)
Cash dividends		(3,241	)		(4,210	)		(2,957	)
Purchase of treasury stock		(1,518	)		(1,069	)		(1,302	)
Treasury stock issued for dividend reinvestment and employee stock purchase plans		78			47			289

Net cash provided by (used in) financing activities		3,041			(1,625	)		(21,047	)

Net (decrease) increase in cash and cash equivalents		(8,067	)		2,746			1,339
Cash and cash equivalents at beginning of year		20,524			17,778			16,439

Cash and cash equivalents at end of year	$	12,457		$	20,524		$	17,778

Supplemental information:
Interest paid	$	9,255		$	11,060		$	9,858
Income taxes paid		2,100			1,885			1,930
Supplemental schedule of noncash investing and financing activities:
Transfer of loans to other real estate owned	$	305		$	397		$	757
Transfer of fixed asset to other assets		45			—			—

See Notes to Consolidated Financial Statements

JUNIATA VALLEY FINANCIAL CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

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 12 branch locations located in Juniata, Mifflin, Perry and Huntingdon counties. Additionally, in Mifflin and Centre counties, the Company maintains two offices for loan production and alternative investment 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. The Bank provides a full range of banking services including on-line banking, an automatic teller machine network, checking accounts, NOW accounts, 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, credit loans with overdraft checking protection and student loans. 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. The bank holding company (parent company) is subject to regulation of the Federal Reserve Bank of Philadelphia.

1. Summary of Significant Accounting Policies

The accounting policies of Juniata Valley Financial Corp. and its wholly owned subsidiary conform to U.S. generally accepted accounting principles 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 valuation of deferred tax assets, core deposit intangible and goodwill valuation, determination of the pension liability position, determination of other-than-temporary impairment on securities and the potential impairment of restricted stock.

Basis of presentation

Certain amounts previously reported have been reclassified to conform to the financial statement presentation for 2008. The reclassification had no effect on net income.

Significant group concentrations of credit risk

Most of the Company’s activities are with customers located within the Juniata Valley region. Note 4 discusses the types of securities in which the Company invests. Note 5 discusses the types of lending in which the Company engages.

As of December 31, 2008, there were no concentrations of credit to any particular industry equaling 10% or more of total outstanding loans. The Bank’s business activities are geographically concentrated in the counties of Juniata, Mifflin, Perry, Huntingdon, Centre, Franklin 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.

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 one year to 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 comprehensive income, until realized. 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. Investment securities for which management has the positive intent and ability to hold the security to maturity regardless of changes in market conditions, liquidity needs or changes in general economic conditions are classified as held to maturity and are stated at cost, adjusted for amortization of premium and accretion of discount computed by the interest method over their contractual lives. Interest and dividends on investment securities available for sale and held to maturity 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’s policy requires quarterly reviews of impaired securities. This review includes analyzing the length of time and the extent to which the fair value has been less than cost; the financial condition and near-term prospects of the issuer, including any specific events which may influence the operations of the issuer and the intent and ability of the Company to hold its investment for a period of time sufficient to allow for any anticipated recovery in market value. Declines in fair value of impaired securities below their cost that are deemed to be other-than-temporary are reflected in earnings as realized losses.

Management determines the appropriate classification of debt securities at the time of purchase and re-evaluates such designation as of each balance sheet date.

Restricted Investment in Federal Home Loan Bank Stock

The Bank owns restricted stock investments in the Federal Home Loan Bank. Federal law requires a member institution of the Federal Home Loan Bank to hold stock according to a predetermined formula. The stock is carried at cost. In December 2008, the FHLB of Pittsburgh notified member banks that it was suspending dividend payments and the repurchase of capital stock.

Management evaluates the restricted stock for impairment in accordance with Statement of Position (SOP) 01-6, “Accounting by Certain Entities (Including Entities With Trade Receivables) That Lend

to or Finance the Activities of Others”. Management’s determination of whether these investments are impaired is based on their assessment of the ultimate recoverability of their cost rather than by recognizing temporary declines in value. The determination of whether a decline affects the ultimate recoverability of their cost 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 is necessary related to the FHLB restricted stock as of December 31, 2008.

Loans

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are stated at the principal amounts outstanding, net of unearned income 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 Company’s intent is to hold loans in the portfolio until maturity. At the time the Company’s intent is no longer to hold loans to maturity based on asset/liability management practices, the Company transfers loans from portfolio to held for sale at the lower of cost or market. Any write-down recorded upon transfer is charged against the allowance for loan losses. Any write-downs recorded after the initial transfer are recorded as a charge to Other Non-Interest Expense. Gains or losses recognized upon sale are recorded as Other Non-Interest Income/Expense.

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, 2008 the amount of net unamortized origination fees carried as an adjustment to outstanding loan balances is $23,000.

Allowance for loan losses

The allowance for loan losses is established through provisions for loan losses charged against income. Loans deemed to be uncollectible are charged against the allowance for loan losses, and subsequent recoveries, if any, are credited to the allowance.

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. The loan loss provision for federal income tax purposes is based on current income tax regulations, which allow for deductions equal to net charge-offs.

Loans are considered for charge-off when:

	(1)		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,

	(2)		all collateral securing the loan has been liquidated and a deficiency balance remains,

	(3)		a bankruptcy notice is received for an unsecured loan, or

	(4)		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. 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.

The allowance consists of specific and general components. The specific component relates to loans that are classified as doubtful, substandard or special mention. For such loans that are also 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 general component covers non-classified loans and is based on historical loss experience adjusted for qualitative factors.

A loan is considered impaired when, based on current information and events, it is probable that the Bank 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 for commercial and construction loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price or the fair value of the collateral if the loan is collateral dependent.

Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, the Bank does not separately identify individual consumer and residential loans for impairment disclosures, unless such loans are subject to a restructuring agreement.

Other real estate owned

Assets acquired in settlement of mortgage loan indebtedness are recorded as other real estate owned (OREO) and are included in other assets at fair value less estimated costs to sell. Costs to maintain the assets and subsequent gains and losses attributable to their disposal are included in other income and other expenses as realized. No depreciation or amortization expense is recognized. At December 31, 2008 and 2007, the carrying value of other real estate owned was $305,000 and $311,000, respectively.

Business combinations

Business combinations are accounted for under the purchase method of accounting. Under the purchase method, assets and liabilities of the business acquired are recorded at their estimated fair values as of the date of the acquisition with any excess of the cost of the acquisition over the fair value of the net tangible and intangible assets acquired recorded as goodwill. Results of operations of the acquired business are included in the consolidated statement of income from the date of acquisition.

Goodwill and other intangible assets

Goodwill represents the excess of the cost of an acquisition over the fair value of the net assets acquired. Other intangible assets represent purchased assets that also lack physical substance but can be separately distinguished from goodwill because of contractual or other legal rights or because the asset is capable of being sold or exchanged either on its own or in combination with a related contract, asset or liability. It is the Company’s policy that goodwill be tested at least annually for impairment.

Intangible assets with finite lives include core deposits. Core deposit intangible assets are subject to impairment testing whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Core deposit intangibles are amortized over a period of time that represents their expected life using a method of amortization that reflects the pattern of economic benefit.

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. (See Note 8).

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 and annuities

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. (See Note 7).

On January 1, 2008, the Company adopted the provisions of Emerging Issues Task Force (EITF) No. 06-4, “Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements” (EITF 06-4). EITF 06-4 requires employers who have entered into a split-dollar life insurance arrangement with an employee that extends to post-retirement periods to recognize a liability and related compensation costs in accordance with FAS No. 106, Accounting for Post Retirement Benefit Obligations or Accounting Principles Board Opinion No. 12, “Omnibus Opinion.” EITF 06-4 was adopted through a cumulative effect adjustment to retained earnings on January 1, 2008. The Company recognized its liability and related compensation costs in accordance with APB Opinion No. 12. The cumulative effect reduction to retained earnings was $480,000. The impact to earnings for the full year in 2008 was a decrease of $74,000.

Income taxes

Juniata Valley Financial Corp. and its subsidiary file a consolidated federal income tax return. The provision for income taxes is based upon the results of operations, adjusted principally for tax-exempt income and earnings from bank owned life insurance. Certain items of income or expense are reported in different periods for financial reporting and tax return purposes. The tax effects of these temporary differences are recognized currently in the deferred income tax provision or benefit.

Deferred income tax assets and liabilities are determined using the liability (or balance sheet) method. Deferred tax assets or liabilities are computed based on the difference between the financial statement and income tax bases of assets and liabilities using the applicable enacted marginal tax rate. Deferred income tax expenses or benefits are based on the changes in the deferred tax asset or liability from period to period.

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted through the provision for income taxes for the effects of changes in tax laws and rates on the date of enactment.

Advertising

The Company follows the policy of charging costs of advertising to expense as incurred. Advertising expenses were $156,000, $152,000 and $198,000 in 2008, 2007 and 2006, 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 balance sheet 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.

Stock-based compensation

Effective January 1, 2006, the Company adopted the fair value recognition provisions of FASB Statement No. 123(R), “Share-Based Payment”, using the modified-prospective-transition method. Under that transition method, compensation cost recognized in 2006 includes: (a) compensation cost for all share-based payments granted prior to, but not yet vested as of January 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of Statement 123, and (b) compensation cost for all share-based payments granted subsequent to January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of Statement 123(R).

As a result of adopting Statement No. 123(R) on January 1, 2006, the Company recognized $40,000, $43,000 and $39,000 of expense for the years ended December 31, 2008, 2007 and 2006, respectively. The stock-based compensation expense amounts were derived using the Black-Scholes option-pricing model. The following weighted average assumptions were used to value options granted in current and prior periods presented.


	2008			2007			2006
Expected life of options	7 years			7 years			7 years
Risk-free interest rate		3.08	%		4.47	%		4.74	%
Expected volatility		19.47	%		19.98	%		20.50	%
Expected dividend yield		3.20	%		3.20	%		2.99	%

The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company’s employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options.

Segment reporting

The Company acts as an independent community financial services provider, and offers traditional banking and related financial services to individual, business and government customers. Through its branch and automated teller machine network, the Company offers a full array of commercial and retail financial services, including the taking of time, savings and demand deposits; the making of commercial, consumer and mortgage loans; trust services and the providing of other financial services.

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.

2. Recent Accounting Pronouncements

FASB Statement No. 141 (R) “Business Combinations” was issued in December of 2007. This Statement establishes principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree. The Statement also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. The guidance will become effective as of the beginning of a company’s fiscal year beginning after December 15, 2008. This new pronouncement will impact the Company’s accounting for business combinations beginning January 1, 2009.

FASB Statement No. 160 “Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51” was issued in December of 2007. This Statement establishes accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. The guidance will become effective as of the beginning of a company’s fiscal year beginning after December 15, 2008. The Company believes that this new pronouncement will not have a material impact on the Company’s consolidated financial statements in future periods.

In March 2008, the FASB issued Statement No. 161, “Disclosures about Derivative Instruments and Hedging Activities—an amendment of Statement No. 133” (Statement 161). Statement 161 requires entities that utilize derivative instruments to provide qualitative disclosures about their objectives and strategies for using such instruments, as well as any details of credit-risk-related contingent features contained within derivatives. Statement 161 also requires entities to disclose additional information about the amounts and location of derivatives located within the financial statements, how the provisions of SFAS 133 have been applied, and the impact that hedges have on an entity’s financial position, financial performance, and cash flows. Statement 161 is effective for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The Company is currently not using derivative instruments and does not engage in hedging activities, and the new pronouncement is not expected to impact its consolidated financial statements.

In February 2008, the FASB issued FASB Staff Position (FSP) FAS 140-3, “Accounting for Transfers of Financial Assets and Repurchase Financing Transactions.” This FSP addresses the issue of whether or not these transactions should be viewed as two separate transactions or as one “linked” transaction. The FSP includes a “rebuttable presumption” that presumes linkage of the two transactions unless the presumption can be overcome by meeting certain criteria. The FSP will be effective for fiscal years beginning after November 15, 2008 and will apply only to original transfers made after that date; early adoption will not be allowed. The Company does not believe that the new pronouncement will impact its consolidated financial statements.

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles.” This Statement identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements. This Statement is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411,

“The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles.” The Company does not believe that there will be an impact of the new pronouncement on its consolidated financial statements.

In April 2008, the FASB issued FASB Staff Position (“FSP”) FAS 142-3, “Determination of the Useful Life of Intangible Assets.” This FSP amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FASB Statement No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”). The intent of this FSP is to improve the consistency between the useful life of a recognized intangible asset under SFAS 142 and the period of expected cash flows used to measure the fair value of the asset under SFAS 141R, and other GAAP. This FSP is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. Early adoption is prohibited. The Company is currently evaluating the potential impact the new pronouncement will have on its consolidated financial statements.

In June 2008, the FASB ratified EITF Issue No. 07-5, “Determining Whether an Instrument (or an Embedded Feature) Is Indexed to an Entity’s Own Stock” (EITF 07-5). EITF 07-5 provides that an entity should use a two step approach to evaluate whether an equity-linked financial instrument (or embedded feature) is indexed to its own stock, including evaluating the instrument’s contingent exercise and settlement provisions. It also clarifies the impact of foreign currency denominated strike prices and market-based employee stock option valuation instruments on the evaluation. EITF 07-5 is effective for fiscal years beginning after December 15, 2008. The Company is currently evaluating the potential impact the new pronouncement will have on its consolidated financial statements.

In October 2008, the FASB issued FSP SFAS No. 157-3, " Determining the Fair Value of a Financial Asset When The Market for That Asset Is Not Active” (FSP 157-3), to clarify the application of the provisions of SFAS 157 in an inactive market and how an entity would determine fair value in an inactive market. FSP 157-3 is effective immediately. The application of the provisions of FSP 157-3 did not materially affect our results of operations or financial condition as of and for the period ended December 31, 2008.

In September 2008, the FASB issued FSP 133-1 and FIN 45-4, “Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45; and Clarification of the Effective Date of FASB Statement No. 161” (FSP 133-1 and FIN 45-4). FSP 133-1 and FIN 45-4 amends and enhances disclosure requirements for sellers of credit derivatives and financial guarantees. It also clarifies that the disclosure requirements of SFAS No. 161 are effective for quarterly periods beginning after November 15, 2008, and fiscal years that include those periods. FSP 133-1 and FIN 45-4 is effective for reporting periods (annual or interim) ending after November 15, 2008. The implementation of this standard did not have a material impact on our consolidated financial position and results of operations.

In September 2008, the FASB ratified EITF Issue No. 08-5, “Issuer’s Accounting for Liabilities Measured at Fair Value With a Third-Party Credit Enhancement” (EITF 08-5). EITF 08-5 provides guidance for measuring liabilities issued with an attached third-party credit enhancement (such as a guarantee). It clarifies that the issuer of a liability with a third-party credit enhancement should not include the effect of the credit enhancement in the fair value measurement of the liability. EITF 08-5 is effective for the first reporting period beginning after December 15, 2008. The Company is currently assessing the impact of EITF 08-5 on its consolidated financial position and results of operations.

In November 2008, the SEC released a proposed roadmap regarding the potential use by U.S. issuers of financial statements prepared in accordance with International Financial Reporting Standards (IFRS). IFRS is a comprehensive series of accounting standards published by the International Accounting Standards Board (“IASB”). Under the proposed roadmap, the Company may be required to prepare financial statements in accordance with IFRS as early as 2014. The SEC will make a determination in 2011 regarding the mandatory adoption of IFRS. The Company is currently assessing the impact that this potential change would have on its consolidated financial statements, and it will continue to monitor the development of the potential implementation of IFRS.

In December 2008, the FASB issued FSP FAS 132(R)-1, “Employers’ Disclosures about Postretirement Benefit Plan Assets”. This FSP amends SFAS 132(R), “Employers’ Disclosures about Pensions and Other Postretirement Benefits”, to provide guidance on an employer’s disclosures about plan assets of a defined benefit pension or other postretirement plan. The disclosures about plan assets required by this FSP shall be provided for fiscal years ending after December 15, 2009. The Company is currently reviewing the effect this new pronouncement will have on its consolidated financial statements.

In November 2008, the FASB ratified Emerging Issues Task Force (EITF) Issue No. 08-6, “Equity Method Investment Accounting Considerations”. EITF 08-6 clarifies the accounting for certain transactions and impairment considerations involving equity method investments. EITF 08-6 is effective for fiscal years beginning after December 15, 2008, with early adoption prohibited. The Company is currently reviewing the effect this new pronouncement will have on its consolidated financial statements.

In November 2008, the FASB ratified Emerging Issues Task Force Issue No. 08-7, “Accounting for Defensive Intangible Assets”. EITF 08-7 clarifies the accounting for certain separately identifiable intangible assets which an acquirer does not intend to actively use but intends to hold to prevent its competitors from obtaining access to them. EITF 08-7 requires an acquirer in a business combination to account for a defensive intangible asset as a separate unit of accounting which should be amortized to expense over the period the asset diminishes in value. EITF 08-7 is effective for fiscal years beginning after December 15, 2008, with early adoption prohibited. This new pronouncement will impact the Company’s accounting for any defensive intangible assets acquired in a business combination completed beginning January 1, 2009.

3. Restrictions on Cash and Due From Banks

The Company’s banking subsidiary is required to maintain cash reserve balances with the Federal Reserve Bank. The total required reserve balances were $1,074,000 and $1,091,000 as of December 31, 2008 and 2007, respectively.

4. Securities

The amortized cost and fair value of securities as of December 31, 2008 and 2007, by contractual maturity, are shown below (in thousands). Expected maturities may differ from contractual maturities because the securities may be called or prepaid with or without prepayment penalties.


	December 31, 2008
Securities Available for Sale					Gross		Gross
	Amortized		Fair		Unrealized		Unrealized
Type and maturity	Cost		Value		Gains		Losses
U.S. Treasury securities and obligations of U.S. Government agencies and corporations
Within one year	$	4,627	$	4,732	$	105	$	—
After one year but within five years		19,961		20,236		275		—

		24,588		24,968		380		—
Obligations of state and political subdivisions
Within one year		3,571		3,593		22		—
After one year but within five years		27,622		28,343		727		(6	)
After five years but within ten years		3,485		3,579		95		(1	)

		34,678		35,515		844		(7	)
Corporate notes
After one year but within five years		1,000		957		—		(43	)

		1,000		957		—		(43	)

Mortgage-backed securities		1,803		1,867		64		—
Equity securities		1,210		1,014		29		(225	)

Total	$	63,279	$	64,321	$	1,317	$	(275	)


	December 31, 2007
Securities Available for Sale					Gross		Gross
	Amortized		Fair		Unrealized		Unrealized
Type and maturity	Cost		Value		Gains		Losses
U.S. Treasury securities and obligations of U.S. Government agencies and corporations
Within one year	$	3,676	$	3,680	$	9	$	(5	)
After one year but within five years		16,960		17,115		158		(3	)
After five years but within ten years		6,000		6,021		22		(1	)

		26,636		26,816		189		(9	)
Obligations of state and political subdivisions
Within one year		11,620		11,616		1		(5	)
After one year but within five years		17,730		17,903		176		(3	)
After five years but within ten years		6,217		6,288		71

		35,567		35,807		248		(8	)

Mortgage-backed securities		2,918		2,931		33		(20	)
Equity securities		1,739		1,502		108		(345	)
Total	$	66,860	$	67,056	$	578	$	(382	)

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 fair value of the pledged assets amounted to $34,301,000, $31,348,000 and $38,760,000 at December 31, 2008, 2007 and 2006, 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 (in thousands):


	Years Ended December 31,
	2008			2007			2006
Gross proceeds from sales of securities	$	9		$	585		$	364
Securities available for sale:
Gross realized gains	$	—		$	—		$	172
Gross realized losses		(8	)		(9	)		—
Gross gains from business combinations		41			23			9

In accordance with the disclosure requirements of EITF 03-01, the following table shows gross unrealized losses and fair value, aggregated by category and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2008 (in thousands):


	Less Than 12 Months					12 Months or More					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
U.S. Treasury securities and obligations of U.S. Government agencies and corporations	$	—	$	—		$	—	$	—		$	—	$	—
Obligations of state and political subdivisions		1,016		(7	)		—		—			1,016		(7	)
Mortgage-backed securities		—		—			—		—			—		—
Corporate and other securities		957		(43	)		—		—			957		(43	)

Debt securities		1,973		(50	)		—		—			1,973		(50	)

Equity securities		743		(181	)		99		(44	)		842		(225	)

Total temporarily impaired securities	$	2,716	$	(231	)	$	99	$	(44	)	$	2,815	$	(275	)

The unrealized losses noted above are considered to be temporary impairments. Decline in the value of these debt securities is due only to interest rate fluctuations, rather than erosion of quality. As a result, the payment of contractual cash flows, including principal repayment, is not at risk. As management has the intent and ability to hold these investments until market recovery or maturity, none of the debt securities are deemed to be other-than-temporarily impaired.

Equity securities owned by the Corporation consist of common stock of various financial services providers (“Bank stocks”) that have traditionally been high-performing stocks. During 2008, market values of most of the Bank stocks materially declined. As part of the quarterly analysis performed to assess impairment of its investment portfolio, management has determined that some of the unrealized losses in the Bank stock portfolio are “other than temporary”. 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. In 2008, a total of $554,000 was recorded as an other-than-temporary impairment charge on eight of the 17 Bank stocks held.

We understand that stocks can be cyclical and will experience some down periods. Historically, bank stocks have sustained cyclical losses, followed by periods of substantial gains. When market values of the Bank stocks recover, accounting standards do not allow reversal of the other-than-temporary impairment charge until the security is sold, at which time any proceeds above the carrying value will be recognized as gains on the sale of investment securities.

There are four debt securities that had unrealized losses for less than 12 months. These securities have maturity dates ranging from October 2009 to October 2013. These securities represent approximately 2.4% of the total debt securities amortized cost as of December 31, 2008.

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, 2007 (in thousands):


	Less Than 12 Months					12 Months or More					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
U.S. Treasury securities and obligations of U.S. Government agencies and corporations	$	1,998	$	(2	)	$	1,568	$	(7	)	$	3,566	$	(9	)
Obligations of state and political subdivisions		1,114		(1	)		2,298		(7	)		3,412		(8	)
Mortgage-backed securities		—		—			1,144		(20	)		1,144		(20	)

Debt securities		3,112		(3	)		5,010		(34	)		8,122		(37	)
Equity securities		948		(345	)		—		—			948		(345	)

Total temporarily impaired securities	$	4,060	$	(348	)	$	5,010	$	(34	)	$	9,070	$	(382	)

5. LOANS

Loans outstanding at the end of each year consisted of the following (in thousands):


	December 31,
	2008			2007
Commercial, financial and agricultural	$	38,755		$	28,842
Real estate — commercial		32,171			29,021
Real estate — construction		22,144			27,223
Real estate — mortgage		140,016			127,324
Home equity		61,094			63,960
Obligations of states and political subdivisions		7,177			6,593
Personal		13,920			15,319
Unearned interest		(145	)		(282	)

Total	$	315,132		$	298,000

The recorded investment in non-performing loans as of each year end follows (in thousands):


	December 31,
	2008		2007
Nonaccrual loans	$	1,255	$	—
Accruing loans past due 90 days or more		664		837
Restructured loans		—		—

Total non-performing loans	$	1,919	$	837

Interest income not recorded on nonaccrual loans was $94,000, $67,000 and $44,000 in 2008, 2007 and 2006, respectively.

The aggregate amount of demand deposits that have been reclassified as loan balances at December 31, 2008 and 2007 are $47,000 and $54,000, respectively.

Pledged Loans

The Bank must maintain sufficient qualifying collateral with the Federal Home Loan Bank (FHLB), in order to secure all loans and credit products. 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 investments. As of December 31, 2008, the amount of loans included in qualifying collateral was $180,366,000, for a collateral value of $131,667,000.

6. Allowance For Loan Losses

To provide for the risk of loss inherent in the process of extending credit, the Bank maintains an allowance for loan losses and for lending-related commitments.

A summary of the transactions in the allowance for loan losses for the last three years (in thousands) is shown below. At $133,000, the level of net charge-offs in 2008 was significantly lower than in the previous two years, reflecting 36% of the level of 2007’s net charge-offs and 48% of net charge-offs in 2006. However, the increase in both loans outstanding and non-performing loans indicated the need for a provision for loan losses in 2008 at a level of $421,000, or 351% of the provision deemed necessary in 2007.


	Years Ended December 31,
	2008			2007			2006
Balance of allowance — beginning of period	$	2,322		$	2,572		$	2,763
Loans charged off:
Commercial, financial and agricultural		43			291			159
Real estate — commercial		36			—			—
Real estate — construction		—			—			—
Real estate — mortgage		15			66			19
Personal		62			61			129

Total charge-offs		156			418			307

Recoveries of loans previously charged off:
Commercial, financial and agricultural		5			8			5
Real estate — commercial		—			—			—
Real estate — construction		—			—			—
Real estate — mortgage		5			8			—
Personal		13			32			25

Total recoveries		23			48			30


Net charge-offs		133			370			277
Provision for loan losses		421			120			54
Branch acquisition loan loss reserve		—			—			32

Balance of allowance — end of period	$	2,610		$	2,322		$	2,572


Ratio of net charge-offs during period to average loans outstanding		0.04	%		0.12	%		0.09	%

The Bank has certain loans in its portfolio that are considered to be impaired in accordance with FAS No. 114, as amended by FAS No. 118. 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. Until an impaired loan is placed on nonaccrual status, income is recognized on the accrual basis. Following is a summary of impaired loan data as of the date of each balance sheet presented (in thousands).


	December 31,
	2008		2007
Impaired loans:
Recorded investment at period end	$	1,933	$	88
Impaired loan balance for which:
There is a related allowance		512		—
There is no related allowance		1,421		88
Related allowance on impaired loans		142		—


	Years Ended December 31,
	2008		2007		2006
Average recorded investment in impaired loans	$	1,640	$	846	$	1,628
Interest income recognized (on a cash basis)		82		19		45

7. Bank Owned Life Insurance and Annuities

The Company holds bank-owned life insurance (BOLI), deferred annuities and payout annuities with a combined cash value of $12,582,000 and $12,344,000 at December 31, 2008 and 2007, respectively. As annuitants retire, the deferred annuities may be converted to payout annuities to create payment streams that match certain post-retirement liabilities. The cash surrender value on the BOLI and annuities increased by $238,000, $1,327,000 and $370,000 in 2008, 2007 and 2006, respectively, from earnings recorded as non-interest income and from premium payments, net of cash payments received. 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 2008 and 2007 are shown below (in thousands):


	Life Insurance			Deferred Annuities		Payout Annuities			Total
Balance as of December 31, 2006	$	10,515		$	204	$	298		$	11,017
Earnings		416			11		13			440
Premiums on new policies		853			—		—			853
Premiums on existing policies		95			15		—			110
Annuity payments received		—			—		(76	)		(76	)

Balance as of December 31, 2007		11,879			230		235			12,344

Earnings		456			10		10			476
Premiums on new policies		—			—		—			—
Premiums on existing policies		84			10		—			94
Annuity payments received		—			—		(74	)		(74	)
Proceeds from surrendered policy		(258	)		—		—			(258	)

Balance as of December 31, 2008	$	12,161		$	250	$	171		$	12,582

On January 1, 2008, the Corporation adopted the provisions of Emerging Issues Task Force (EITF) No. 06-4, “Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements” (EITF 06-4). EITF 06-4 requires employers who have entered into a split-dollar life insurance arrangement with an employee that extends to post-retirement periods to recognize a liability and related compensation costs in accordance with FAS No. 106, Accounting for Post Retirement Benefit Obligations or Accounting Principles Board Opinion No. 12, “Omnibus Opinion.” EITF 06-4 was adopted through a cumulative effect adjustment to retained earnings on January 1, 2008. The Company recognized its liability and related compensation costs in accordance with APB Opinion No. 12. The cumulative effect reduction to retained earnings was $480,000. The impact to earnings for the full year in 2008 was a decrease of $74,000.

8. Premises And Equipment

Premises and equipment consist of the following (in thousands):


	December 31,
	2008			2007
Land	$	864		$	864
Buildings and improvements		8,425			8,234
Furniture, computer software and equipment		5,012			4,684

		14,301			13,782
Less: accumulated depreciation		(6,927	)		(6,510	)

	$	7,374		$	7,272

Depreciation expense on premises and equipment charged to operations was $691,000 in 2008, $653,000 in 2007 and $594,000 in 2006.

9. Acquisition

On September 8, 2006, the Company completed its acquisition of a branch office in Richfield, PA. The acquisition included real estate, deposits and loans. The assets and liabilities of the acquired branch office were recorded on the consolidated balance sheet at their estimated fair values as of September 8, 2006, and its results of operations have been included in the consolidated statements of income since such date.

Included in the purchase price of the branch was goodwill and core deposit intangible of $2,046,000 and $449,000, respectively. The core deposit intangible is being amortized over a ten-year period on a straight line basis. The goodwill is not amortized, but is measured annually for impairment. Core deposit intangible amortization expense of $45,000, $45,000 and $15,000 was recorded in 2008, 2007 and 2006, respectively. Intangible amortization expense projected for the succeeding five years beginning in 2009 is estimated to be $45,000 per year and $119,000 in total for years after 2014.

The following table summarizes the estimated fair value (in thousands) of the net liabilities assumed:


Assets:
Cash	$	261
Premises and equipment		139
Loans		3,810
Core deposit intangible		449
Goodwill		2,046
Other assets		9

Total assets		6,714
Liabilities:
Deposits		20,090
Other liabilities		164

Total liabilities		20,254

Net liabilities assumed	$	13,540

10. Investment in Unconsolidated Subsidiary

On September 1, 2006, the Company invested in The First National Bank of Liverpool (FNBL), Liverpool, PA, by purchasing 39.16% of its outstanding common stock. This investment is accounted for under the equity method of accounting, as defined in Accounting Principles Board Opinion No. 18. The investment is being carried at $3,176,000 as of December 31, 2008, of which $2,167,000 represents the underlying equity in net assets of FNBL. The difference between the investment carrying amount and the amount of the underlying equity, $1,009,000, is considered to be goodwill and is evaluated quarterly for impairment. A loss in value of the investment which is other than a temporary decline will be recognized. 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 FNBL to sustain an earnings capacity which would justify the carrying amount of the investment.

11. Deposits

Deposits consist of the following (in thousands):


	December 31,
	2008		2007
Demand, non-interest bearing	$	54,200	$	48,755
NOW and Money Market		62,099		74,821
Savings		37,114		33,877
Time deposits, $100,000 or more		39,059		36,308
Other time deposits		164,559		165,696

	$	357,031	$	359,457

Aggregate amount of scheduled maturities of time deposits as of December 31, 2008 include the following (in thousands):


	Time Deposits
	$100,000 or more		Other
Maturing in:
2009	$	17,694	$	90,898
2010		14,261		44,559
2011		3,683		14,006
2012		1,900		5,515
2013		1,521		9,581

	$	39,059	$	164,559

12. Borrowings

Borrowings consist of the following (dollars in thousands):


																For the year 2008
	December 31, 2008					December 31, 2007					December 31, 2006							Average
	Outstanding					Outstanding					Outstanding					Average		Weighted
	Balance		Rate			Balance		Rate			Balance		Rate			Balance		Rate
Securities sold under agreements to repurchase	$	1,944		0.10	%	$	5,431		3.01	%	$	6,112		4.54	%	$	5,368		1.29	%
Short-term borrowings — Federal Home Loan Bank overnight advances		8,635		0.59	%		—					—					2,379		0.90	%
Long-term debt — Note payable to Federal Home Loan Bank		5,000		2.75	%		—					—					1,448		2.75	%

	$	15,579		1.22	%	$	5,431		3.01	%	$	6,112		4.54	%	$	9,195		1.42	%

The maximum balance of short-term borrowings on any one day during 2008 was $14,435,000.

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 have repurchase agreements collateralized 100% by U.S. Government securities. As of December 31, 2008, the securities that serve as collateral for securities sold under agreements to repurchase had a fair value of $6,524,000. The interest rate paid on these funds is variable and subject to change daily.

The Bank has entered into an agreement under which it can borrow up to $20,000,000 from the FHLB in their Open RepoPlus product. There was $8,635,000 outstanding as of December 31, 2008. There were no borrowings under this agreement as of December 31, 2007 or December 31, 2006. There is no expiration date on the current agreement.

13. Operating Lease Obligations

The Company has entered into a number of arrangements that are classified as operating leases. The operating leases are for several branch and office locations. The majority of the branch and office location leases are renewable at the Company’s option. Future minimum lease commitments are based on current rental payments. Rental expense charged to operations, including license fees for branch offices, was $104,000, $103,000 and $94,000 in 2008, 2007 and 2006, respectively.

The following is a summary of future minimum rental payments for the next five years required under operating leases that have initial or remaining noncancellable lease terms in excess of one year as of December 31, 2008 (in thousands):


Years ending December 31,
2009		102
2010		103
2011		97
2012		58
2013		20
2014 and beyond		22

Total minimum payments required	$	402

14. Income Taxes

The components of income tax expense for the three years ended December 31, 2008 were (in thousands):


	2008		2007		2006
Current tax expense	$	1,448	$	2,005	$	2,041
Deferred tax expense		609		94		40

Total tax expense	$	2,057	$	2,099	$	2,081

Income tax expense related to realized securities gains was $11,000 in 2008, $5,000 in 2007 and $62,000 in 2006.

A reconciliation of the statutory income tax expense computed at 34% to the income tax expense included in the consolidated statements of income follows (dollars in thousands):


	Years Ended December 31,
	2008			2007			2006
Income before income taxes	$	7,781		$	7,533		$	7,083
Effective tax rate		34.0	%		34.0	%		34.0	%
Federal tax at statutory rate		2,646			2,561			2,408
Tax-exempt interest		(398	)		(298	)		(233	)
Net earnings on BOLI		(130	)		(141	)		(123	)
Life insurance proceeds		(61	)		—			—
Dividend from unconsolidated subsidiary		—			(34	)		—
Stock-based compensation		14			15			13
Other permanent differences		(14	)		(4	)		16

Total tax expense	$	2,057		$	2,099		$	2,081

Effective tax rate		26.4	%		27.9	%		29.4	%

Deductible temporary differences and taxable temporary differences gave rise to a net deferred tax asset for the Company as of December 31, 2008 and 2007. The components giving rise to the net deferred tax asset are detailed below (in thousands):


	December 31,
	2008			2007
Deferred Tax Assets
Allowance for loan losses	$	750		$	652
Deferred directors’ compensation		681			705
Employee and director benefits		672			720
Qualified pension liability		296			319
Unrealized loss from securities impairment		167			11
Other		68			63

Total deferred tax assets		2,634			2,470

Deferred Tax Liabilities
Depreciation		(168	)		(209	)
Equity income from unconsolidated subsidiary		(120	)		(50	)
Loan origination costs		(94	)		—
Prepaid expense		(46	)		(91	)
Unrealized gains on securities available for sale		(369	)		(77	)
Annuity earnings		(44	)		(46	)
Goodwill		(108	)		(62	)

Total deferred tax liabilities		(949	)		(535	)

Net deferred tax asset included in other assets	$	1,685		$	1,935

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.

Effective January 1, 2007, the Company adopted the provisions of FASB Interpretation No 48, “Accounting for Uncertainty in Income Taxes.” The Interpretation provides clarification on accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS No. 109, “Accounting for Income Taxes.” The Interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return, and also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. As a result of the Company’s evaluation of the implementation of FIN 48, no significant income tax uncertainties were identified. Therefore, the Company recognized no adjustment for unrecognized income tax benefits for the year ended December 31, 2008. Our policy is to recognize interest and penalties on unrecognized tax benefits in income taxes expense in the Consolidated Statements of Income.

Years that remain open for potential review by the Internal Revenue Service are 2005 through 2007.

15. 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.

In August 2000, the Board of Directors adopted a Shareholder Rights Plan and declared a dividend distribution of one right to purchase a share of the Company’s common stock at $11.93 for each share issued and outstanding, upon the occurrence of certain events, as defined in the plan. These rights are fully transferable and expire on August 31, 2010. The rights are not considered potential common shares for earnings per share purposes because there is no indication that any event will occur which would cause them to become exercisable.

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 with 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. As of October 2005, any adjustment in capitalization of the Company resulted in a proportionate adjustment to the reserve for this plan. At December 31, 2008, 141,887 shares were available for issuance under the Dividend Reinvestment Plan.

The Company periodically repurchases shares of its common stock under the share repurchase program approved by the Board of Directors. In the third quarter of 2008, the Board updated the share repurchase program, authorizing management to buy back up to an additional 200,000 shares of its common stock. 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, employee stock purchase plan purchases and to fulfill dividend reinvestment program needs. During 2008, 72,955 shares were repurchased in conjunction with this program. Remaining shares authorized in the program were 218,536 as of December 31, 2008.

The Company and the Bank are subject to risk-based capital standards by which all 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 initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s 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 (set forth in the table below) of Total and 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). Management believes, as of December 31, 2008 and 2007, that the Company and the Bank met all capital adequacy requirements to which they were subject.

As of December 31, 2008, 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 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 for the periods indicated (dollars in thousands).

Juniata Valley Financial Corp. (Consolidated)


						Minimum Requirement
						For Capital
	Actual					Adequacy Purposes
	Amount		Ratio			Amount		Ratio
As of December 31, 2008:
Total Capital (to Risk Weighted Assets)	$	49,959		18.26	%	$	21,888		8.00	%
Tier 1 Capital (to Risk Weighted Assets)		47,349		17.31	%		10,944		4.00	%
Tier 1 Capital (to Average Assets)		47,349		11.11	%		17,054		4.00	%

As of December 31, 2007:
Total Capital (to Risk Weighted Assets)	$	49,080		18.41	%	$	21,328		8.00	%
Tier 1 Capital (to Risk Weighted Assets)		46,721		17.53	%		10,664		4.00	%
Tier 1 Capital (to Average Assets)		46,721		11.06	%		16,896		4.00	%

The Juniata Valley Bank


											Minimum Regulatory
											Requirements to be
						Minimum Requirement					“Well Capitalized”
						For Capital					under Prompt
	Actual					Adequacy Purposes					Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of December 31, 2008:
Total Capital (to Risk Weighted Assets)	$	44,191		16.38	%	$	21,589		8.00	%	$	26,987		10.00	%
Tier 1 Capital (to Risk Weighted Assets)		41,581		15.41	%		10,795		4.00	%		16,192		6.00	%
Tier 1 Capital (to Average Assets)		41,581		9.78	%		17,006		4.00	%		21,258		5.00	%

As of December 31, 2007:
Total Capital (to Risk Weighted Assets)	$	41,032		15.62	%	$	21,015		8.00	%	$	26,269		10.00	%
Tier 1 Capital (to Risk Weighted Assets)		38,673		14.72	%		10,508		4.00	%		15,761		6.00	%
Tier 1 Capital (to Average Assets)		38,673		9.25	%		16,730		4.00	%		20,913		5.00	%

Certain 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, 2008, $31,922,000 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 regulatory capital requirements above.

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


	Years Ended December 31,
	2008		2007		2006
	(Amounts, except earnings per share, in thousands)

Net income	$	5,724	$	5,434	$	5,002
Weighted-average common shares outstanding		4,376		4,435		4,480

Basic earnings per share	$	1.31	$	1.23	$	1.12


Weighted-average common shares outstanding		4,376		4,435		4,480
Common stock equivalents due to effect of stock options		10		9		12

Total weighted-average common shares and equivalents		4,386		4,444		4,492

Diluted earnings per share	$	1.31	$	1.22	$	1.11


Anti-dilutive stock options outstanding		33		21		10

17. Comprehensive Income

Accounting principles generally accepted in the United States of America 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 consolidated balance sheet, such items, along with net income, are components of comprehensive income. Components of comprehensive income (loss) consist of the following (in thousands):


	Year ended December 31, 2008
	Before			Tax (Expense)
	Tax			or			Net-of-Tax
	Amount			Benefit			Amount
Net income	$	7,781		$	(2,057	)	$	5,724
Other comprehensive income (loss):
Unrealized gains on available for sale securities:
Unrealized holding gains arising during the period		324			(110	)		214
Unrealized holding gains from unconsolidated subsidiary		5			—			5
Less reclassification adjustment for:
gains included in net income		(33	)		11			(22	)
securities impairment charge		554			(188	)		366
Unrecognized pension net loss		(1,894	)		644			(1,250	)
Unrecognized pension cost due to change in assumptions		(42	)		14			(28	)
Amortization of pension prior service cost		(2	)		1			(1	)
Amortization of pension net actuarial loss		38			(12	)		26

Other comprehensive income (loss)		(1,050	)		360			(690	)

Total comprehensive income	$	6,731		$	(1,697	)	$	5,034


	Year ended December 31, 2007
	Before			Tax (Expense)
	Tax			or			Net-of-Tax
	Amount			Benefit			Amount
Net income	$	7,533		$	(2,099	)	$	5,434
Other comprehensive income (loss):
Unrealized gains on available for sale securities:
Unrealized holding gains arising during the period		353			(120	)		233
Unrealized holding gains from unconsolidated subsidiary		14			—			14
Less reclassification adjustment for:
gains included in net income		(14	)		5			(9	)
securities impairment charge		33			(11	)		22
Unrecognized pension net gain		374			(127	)		247
Amortization of pension prior service cost		(2	)		—			(2	)
Amortization of pension net actuarial loss		54			(18	)		36

Other comprehensive income		812			(271	)		541

Total comprehensive income	$	8,345		$	(2,370	)	$	5,975


	Year ended December 31, 2006
	Before			Tax (Expense)
	Tax			or			Net-of-Tax
	Amount			Benefit			Amount
Net income	$	7,083		$	(2,081	)	$	5,002
Other comprehensive income (loss):
Unrealized gains on available for sale securities:
Unrealized holding gains arising during the period		595			(202	)		393
Less reclassification adjustment for gains included in net income		(181	)		62			(119	)
Minimum pension liability		129			(44	)		85

Other comprehensive income		543			(184	)		359

Total comprehensive income	$	7,626		$	(2,265	)	$	5,361

Components of accumulated comprehensive loss as of December 31 of each of the last three years consist of the following (in thousands):


	12/31/2008			12/31/2007			12/31/2006

Unrealized gains on available for sale securities	$	707		$	144		$	(116	)
Unrecognized expense for defined benefit pension		(1,954	)		(701	)		(982	)

Accumulated other comprehensive loss	$	(1,247	)	$	(557	)	$	(1,098	)

18. Employee Benefit Plans

Stock Compensation Plan

Under the 2000 Incentive Stock Option Plan (“the Plan”), options may be granted to officers and key employees of the Company. The Plan provides that the option price per share shall not be less than the fair market value of the stock on the day the option is granted, but in no event less than the par value of such stock. Options granted are exercisable no earlier than one year after the grant and expire ten years after the date of the grant.

The Plan is administered by a committee of the Board of Directors, whose members are not eligible to receive options under the Plan. The Committee determines, among other things, which officers and key employees will receive options, the number of shares to be subject to each option, the option price and the duration of the option. Options 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. These options are scheduled to expire through October 21, 2018. The aggregate number of shares that may be issued upon the exercise of options under the Plan is 440,000 shares, with 344,313 shares available for grant as of December 31, 2008. The Plan’s options outstanding at December 31, 2008 have exercise prices between $14.10 and $24.00, with a weighted average exercise price of $18.73 and a weighted average remaining contractual life of 5.9 years.

As of December 31, 2008, there was $91,000 of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the Plan. That cost is expected to be recognized through 2013.

Cash received from option exercises under the Plan for the years ended December 31, 2008, 2007 and 2006 was $36,000, $28,000, and $11,000, respectively.

A summary of the status of the Plan as of December 31, 2008, 2007 and 2006, and changes during the years ending on those dates is presented below:


	2008					2007					2006
				Weighted Average					Weighted Average					Weighted Average
	Shares			Exercise Price		Shares			Exercise Price		Shares			Exercise Price
Outstanding at beginning of year		79,512		$	18.31		65,746		$	17.83		57,983		$	17.25
Granted		13,317			21.10		15,513			20.05		10,880			21.00
Exercised		(2,477	)		14.72		(1,747	)		15.77		(750	)		14.18
Forfeited		(4,367	)		20.59		—					(2,367	)		19.40

Outstanding at end of year		85,985		$	18.73		79,512		$	18.31		65,746		$	17.83


Options exercisable at year-end		58,187		$	17.69		49,035		$	16.79		40,735		$	15.90

Weighted-average fair value of of options granted during the year	$	3.37				$	3.92				$	4.50

Intrinsic value of options exercised during the year	$	15,598				$	9,058				$	5,159

The following table summarizes characteristics of stock options as of December 31, 2008:


			Outstanding						Exercisable
					Contractual		Average				Average
	Exercise				Average Life		Exercise				Exercise
Grant Date	Price		Shares		(Years)		Price		Shares		Price
11/20/2001	$	14.10		10,438		2.50	$	14.10		10,438	$	14.10
11/19/2002		14.25		10,864		3.45		14.25		10,864		14.25
11/18/2003		15.13		10,348		4.45		15.13		10,348		15.13
11/15/2004		20.25		7,832		4.64		20.25		7,485		20.25
10/18/2005		24.00		9,534		5.64		24.00		7,909		24.00
10/17/2006		21.00		9,716		6.68		21.00		6,096		21.00
10/16/2007		20.05		13,936		8.05		20.05		5,047		20.05
10/21/2008		21.10		13,317		9.81		21.10		—

Defined Benefit Retirement Plan

The Company sponsors a defined benefit retirement plan which covered substantially all of its employees through December 31, 2007. As of January 1, 2008, the 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 remain eligible will continue to accrue benefits until retirement. The benefits are based on years of service and the employees’ compensation. 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 not only for benefits attributed to service to date but also for those expected to be earned in the future. The Company does not expect to contribute to the defined benefit plan in 2009.

On December 31, 2006, the Company adopted FAS No. 158. FAS No. 158 required the Company to recognize the funded status (i.e. the difference between the fair value of plan assets and the projected benefit obligations) of its benefit plans in the December 31, 2006 Consolidated Balance Sheet, with a corresponding adjustment to accumulated other comprehensive income, net of tax. The net adjustment to accumulated other comprehensive income at adoption of $1,156,000 ($763,000, net of tax) represents the net unrecognized actuarial losses and unrecognized prior service costs. The effects of adopting the provisions of FAS No. 158 on the Company’s consolidated financial statement at December 31, 2006, are presented in the following table (in thousands).


	Increase
	(Decrease)
Accrued pension liability	$	1,156
Deferred tax asset		393
Accumulated other comprehensive loss		763

Management expects that approximately $360,000 will be recorded as net periodic expense for the defined benefit plan, which includes 2009’s service cost and expected amortization out of accumulated other comprehensive income in 2009.

The measurement date for the defined benefit plan is December 31. Information pertaining to the activity in the defined benefit plan is as follows (in thousands):


	Years ended December 31,
	2008			2007
Change in projected benefit obligation (PBO)
PBO at beginning of year	$	7,041		$	6,881
Service cost		179			281
Interest cost		441			387
Actuarial loss (gain)		221			(248	)
Benefits paid		(297	)		(260	)


PBO at end of year	$	7,585		$	7,041


Change in plan assets
Fair value of plan assets at beginning of year	$	6,102		$	5,543
Actual return on plan assets, net of expenses		(1,290	)		519
Employer contribution		2,200			300
Benefits paid		(297	)		(260	)


Fair value of plan assets at end of year	$	6,715		$	6,102


Reconciliation of funded status to net amount recognized
Funded status	$	(870	)	$	(939	)


Accumulated benefit obligation	$	6,606		$	5,793

Pension expense included the following components for the years ended December 31 (in thousands):


	2008			2007			2006

Service cost during the year	$	179		$	281		$	296
Interest cost on projected benefit obligation		441			387			366
Expected return on plan assets		(425	)		(392	)		(359	)
Net amortization		(2	)		(2	)		(2	)
Recognized net actuarial loss		39			54			75


Net periodic benefit cost	$	232		$	328		$	376

Assumptions used to determine benefit obligations were:


	2008			2007			2006
Discount rate		6.00	%		6.25	%		5.75	%
Rate of compensation increase		4.00			4.25			3.75

Assumptions used to determine the net periodic benefit cost were:


	2008			2007			2006
Discount rate		6.00	%		5.75	%		5.75	%
Expected long-term return on plan assets		7.00			7.00			7.00
Rate of compensation increase		4.00			3.75			3.75

The investment strategy and investment policy for the retirement plan is 50% equity and 50% fixed income. The asset allocation as of December 31, 2008 is approximately 20% equities and 80% fixed income investments, primarily as a result of the reduction in market values of the equities as of December 31, 2008.

Future expected benefit payments (in thousands):


	2009		2010		2011		2012		2013		2014-2018

Estimated future benefit payments	$	357	$	367	$	389	$	401	$	405	$	2,466

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 plan was established in 1994 and, until 2008, the Company had made no contribution to the plan in any form. During 2007, the plan was amended so that, effective January 1, 2008, the Company will make an annual non-elective fully vested contribution equal to 3% of compensation to each eligible participant. In 2008, a liability of $154,000 was recorded to satisfy this obligation, and will be credited to employees’ accounts by March 31, 2009.

Employee Stock Purchase Plan

The Company has an Employee Stock Purchase Plan under which employees, through payroll deductions, are able to purchase shares of stock annually. The option price of the stock purchases shall be 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 shall not exceed 5,000 shares plus any unissued shares from prior offerings. There were 2,088 shares in 2008, 939 shares in 2007 and 3,727 shares in 2006 issued under this plan. At December 31, 2008, there were 200,074 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, 2008 and 2007, the present value of the future liability was $1,022,000 and $1,153,000, respectively. For the years ended December 31, 2008, 2007 and 2006, $64,000, $127,000 and $145,000, 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 7.

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, 2008 and 2007, the present value of the future liability was $2,004,000 and $2,075,000, respectively. For the years ended December 31, 2008, 2007 and 2006, $124,000, $152,000 and $151,000, 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 7.

Salary Continuation Plans

The Company has non-qualified salary continuation plans for key employees. At December 31, 2008 and 2007, the present value of the future liability was $953,000 and $966,000, respectively. For the years ended December 31, 2008, 2007 and 2006, $13,000, $131,000 and $140,000, 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 7.

19. Fair Value Measurements

Effective January 1, 2008, the Company adopted the provisions of SFAS No 157, “Fair Value Measurements” for financial assets and financial liabilities. In accordance with FASB Staff Position (FSP) No. 157-2, “Effective Date of FASB Statement No. 157”, the Company will delay application of SFAS 157 for non-financial assets and non-financial liabilities until January 1, 2009. SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements.

SFAS 157 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 to be 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.

SFAS 157 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, SFAS 157 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.

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. These valuation methodologies were applied to all of the Company’s financial assets and financial liabilities carried at fair value.

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.

Securities Available for Sale . 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 bond’s terms and conditions, among other things.

Impaired Loans . Certain impaired loans are reported at the fair value of the underlying collateral if repayment is expected solely from the collateral. Collateral values are estimated using Level 3 inputs based on customized discounting criteria. As of December 31, 2008, the Company had no impaired loans for which repayment is expected solely from the collateral.

The following table summarizes financial assets and financial liabilities measured at fair value on a recurring basis as of December 31, 2008, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value (in thousands).


	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
Securities available for sale		—	$	64,321		—	$	64,321

Certain financial assets and financial liabilities are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). Financial assets and liabilities measured at fair value on a non-recurring basis were not significant at December 31, 2008.

Certain non-financial assets and non-financial liabilities measured at fair value on a recurring basis include reporting units measured at fair value in the first step of a goodwill impairment test. Certain non-financial assets measured at fair value on a non-recurring basis include non-financial assets and non-financial liabilities measured at fair value in the second step of a goodwill impairment test, as well as intangible assets and other non-financial long-lived assets measured at fair value for impairment assessment. As stated above, SFAS 157 will be applicable to these fair value measurements beginning January 1, 2009.

Effective January 1, 2008, the Company adopted the provisions of SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities — Including an amendment of FASB Statement No. 115.” SFAS 159 permits the Company to choose to measure eligible items at fair value at specified election dates. Unrealized gains and losses on items for which the fair value measurement option has been elected are reported in earnings at each subsequent reporting date. The fair value option (i) may be applied, instrument by instrument, with certain exceptions, thus the Company may record identical financial assets and liabilities at fair value or by another measurement basis permitted under generally accepted accounting principles, (ii) is irrevocable (unless a new election date occurs) and (iii) is applied only to entire instruments and not to portions of instruments. Adoption of SFAS 159 on January 1, 2008 did not have a significant impact on the Company’s financial statements.

Fair Value of Financial Instruments

The estimated fair values of the Company’s financial instruments are as follows (in thousands):

Financial Instruments
(in thousands)


	December 31, 2008				December 31, 2007
	Carrying		Fair		Carrying		Fair
	Value		Value		Value		Value
Financial assets:
Cash and due from banks	$	12,264	$	12,264	$	12,254	$	12,254
Interest bearing deposits with banks		193		193		770		770
Federal funds sold		—		—		7,500		7,500
Interest bearing time deposits with banks		5,325		5,471		5,525		5,515
Securities		64,321		64,321		67,056		67,056
Restricted investment in FHLB stock		2,197		2,197		1,095		1,095
Total loans, net of unearned interest and allowance for loan loss reserve		312,522		323,289		295,678		299,835
Accrued interest receivable		2,315		2,315		2,247		2,247

Financial liabilities:
Non-interest bearing deposits		54,200		54,200		48,755		48,755
Interest bearing deposits		302,831		306,500		310,702		307,960
Securities sold under agreements to repurchase		1,944		1,944		5,431		5,431
Short-term borrowings		8,635		8,635		—		—
Long-term debt		5,000		5,021		—		—
Other interest bearing liabilities		1,096		1,096		1,037		1,037
Accrued interest payable		801		801		999		999

Off-balance sheet financial instruments:
Commitments to extend credit		—		—		—		—
Letters of credit		—		—		—		—

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 than the amounts reported at each year end.

The information presented above 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 used to determine these estimated fair values.

Carrying values approximate fair value for cash and due from banks, interest-bearing demand deposits with other banks, federal funds sold, restricted stock in the Federal Home Loan Bank, interest receivable, non-interest bearing demand deposits, securities sold under agreements to repurchase, other interest bearing liabilities and interest payable.

Interest bearing time deposits with banks — The estimated fair value is determined by discounting the contractual future cash flows, using the rates currently offered for deposits of similar remaining maturities.

Securities Available for Sale — 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 bond’s terms and conditions, among other things.

Loans — For variable-rate loans that reprice frequently and which entail no significant changes in credit risk, carrying values approximated fair value. Substantially all commercial loans and real estate mortgages are variable rate loans. The fair value of other loans (i.e. consumer loans and fixed-rate real estate mortgages) are estimated by calculating the present value of the cash flow difference between the current rate and the market rate, for the average maturity, discounted quarterly at the market rate.

Impaired Loans — Certain impaired loans are reported at the fair value of the underlying collateral if repayment is expected solely from the collateral. Collateral values are estimated using Level 3 inputs based on customized discounting criteria. As of December 31, 2008, the Corporation had no impaired loans for which repayment is expected solely from the collateral.

Fixed rate time deposits — The estimated fair value is determined by discounting the contractual future cash flows, using the rates currently offered for deposits of similar remaining maturities.

Commitments to extend credit and letters of credit — The fair value of commitments to extend credit is estimated using the fees currently charged to enter into similar agreements, taking into account market interest rates, the remaining terms and present credit worthiness of the counterparties. The fair value of guarantees and letters of credit is based on fees currently charged for similar agreements.

20. 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. 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 (in thousands):


	December 31,
	2008		2007
Commitments to grant loans	$	32,590	$	35,827
Unfunded commitments under lines of credit		15,148		15,544
Outstanding letters of credit		639		718

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, 2008 and 2007 for guarantees under letters of credit issued is not material.

The maximum undiscounted exposure related to these guarantees at December 31, 2008 was $639,000, and the approximate value of underlying collateral upon liquidation that would be expected to cover this maximum potential exposure was $4,366,000.

21. Related-Party Transactions

The Bank has granted loans to certain of its executive officers, directors and their related interests. These loans were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with unrelated persons, and in the opinion of management, do not involve more than normal risk of collection. The aggregate dollar amount of these loans was $2,045,000 and $2,125,000 at December 31, 2008 and 2007, respectively. During 2008, $1,975,000 of new loans were made and repayments totaled $1,911,000. Of the $2,125,000 balance at December 31, 2007, $144,000 represented balances of officers that are no longer related parties. None of these loans were past due, in non-accrual status or restructured at December 31, 2008.

22. Commitments And Contingent Liabilities

In 2005, the Company extended an agreement to obtain data processing services from an outside service bureau through June 2010. The agreement provides for termination penalties if the Company cancels it prior to the end of the commitment period. If the contract would have been canceled as of December 31, 2008, termination penalties of approximately $306,000 would have been assessed.

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.

23 . Subsequent Events

In January 2009, the Board of Directors declared a dividend of $0.19 per share for the first quarter of 2009 to shareholders of record on February 16, payable on March 2, 2009.

24. Juniata Valley Financial Corp. (Parent Company Only)

Financial information:

CONDENSED BALANCE SHEETS
(in thousands)


	December 31,
	2008		2007
ASSETS:
Cash and cash equivalents	$	194	$	235
Interest bearing deposits with banks		155		355
Investment in bank subsidiary		42,798		40,725
Investment in unconsolidated subsidiary		3,176		2,972
Investment securities available for sale		2,040		4,053
Other assets		151		275

TOTAL ASSETS	$	48,514	$	48,615


LIABILITIES:
Income tax payable	$	29	$	9
Accounts payable and other liabilities		—		34

STOCKHOLDERS’ EQUITY		48,485		48,572

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	48,514	$	48,615

CONDENSED STATEMENTS OF INCOME
(in thousands)


	Years Ended December 31,
	2008			2007		2006
INCOME:
Interest on deposits with banks	$	10		$	17	$	18
Interest and dividends on investment securities available for sale		103			168		152
Dividends from bank subsidiary		2,611			4,968		7,031
Income from unconsolidated subsidiary		207			192		80
Securities impairment charge		(554	)		—		—
Gain on the sale of investment securities		5			—		77

TOTAL INCOME		2,382			5,345		7,358
EXPENSE:
Non-interest expense		111			153		109

TOTAL EXPENSE		111			153		109

INCOME BEFORE INCOME TAXES AND EQUITY IN UNDISTRIBUTED NET INCOME OF SUBSIDIARY		2,271			5,192		7,249
Income tax expense (benefit)		(131	)		32		68

		2,402			5,160		7,181
Distributions in excess of (below) (undistributed) net income of subsidiary		3,322			274		(2,179	)

NET INCOME	$	5,724		$	5,434	$	5,002

CONDENSED
STATEMENTS OF CASH FLOWS
(in thousands)


	Years Ended December 31,
	2008			2007			2006
Cash flows from operating activities:
Net income	$	5,724		$	5,434		$	5,002
Adjustments to reconcile net income to net cash provided by operating activities:
Distributions in excess of (below) (undistributed) net income of subsidiary		(3,322	)		(274	)		2,179
Net amortization of securities premiums		3			—			—
Realized gains on sales of investment securities		(5	)		—			(77	)
Securities impairment charges		554			—			—
Income from unconsolidated subsidiary, net of dividends of $0, $126 and $0		(207	)		(66	)		(80	)
Decrease (increase) in interest and other assets		73			355			(180	)
(Decrease) increase in taxes payable		(9	)		(64	)		68
Increase (decrease) in accounts payable and other liabilities		(6	)		32			2

Net cash provided by operating activities		2,805			5,417			6,914

Cash flows from investing activities:
Purchases of available for sale securities		(720	)		(762	)		(134	)
Proceeds from the sale of available for sale securities		5			—			137
Proceeds from the maturity of available for sale investment securities		2,350			340			—
Proceeds from the maturity of interest bearing time deposits		200			135			—
Investment in unconsolidated subsidiary		—			—			(2,812	)

Net cash provided by (used in) investing activities		1,835			(287	)		(2,809	)

Cash flows from financing activities:
Cash dividends		(3,241	)		(4,210	)		(2,957	)
Purchase of treasury stock		(1,518	)		(1,069	)		(1,302	)
Treasury stock issued for dividend reinvestment and employee stock purchase plan		78			47			289

Net cash used in financing activities		(4,681	)		(5,232	)		(3,970	)

Net (decrease) increase in cash and cash equivalents		(41	)		(102	)		135
Cash and cash equivalents at beginning of year		235			337			202

Cash and cash equivalents at end of year	$	194		$	235		$	337

25. Quarterly Results Of Operations (Unaudited)

The unaudited quarterly results of operations for the years ended December 31, 2008 and 2007 follow (in thousands, except per-share data):


	2008 Quarter ended
	March 31		June 30			September 30			December 31
Total interest income	$	6,363	$	6,283		$	6,345		$	6,239
Total interest expense		2,481		2,320			2,223			2,033

Net interest income		3,882		3,963			4,122			4,206
Provision for loan losses		32		112			147			130
Gains (losses) from the sale of assets		7		87			(9	)		6
Securities impairment charge		—		(393	)		—			(161	)
Other income		1,125		1,228			1,112			1,035
Other expense		3,041		2,945			3,098			2,924

Income before income taxes		1,941		1,828			1,980			2,032
Income tax expense		539		431			529			558

Net income	$	1,402	$	1,397		$	1,451		$	1,474

Per-share data:
Basic earnings	$	.32	$	.32		$	.33		$	.34
Diluted earnings		.32		.32			.33			.34
Cash dividends		.18		.18			.19			.19


	2007 Quarter ended
	March 31		June 30			September 30		December 31
Total interest income	$	6,447	$	6,704		$	6,798	$	6,774
Total interest expense		2,668		2,776			2,860		2,756

Net interest income		3,779		3,928			3,938		4,018
Provision for loan losses		67		23			—		30
Securities impairment charge		—		(33	)		—		—
Gains from the sale of assets		12		9			45		9
Other income		1,026		1,005			1,065		1,061
Other expense		2,968		3,072			3,091		3,078

Income before income taxes		1,782		1,814			1,957		1,980
Income tax expense		503		500			538		558

Net income	$	1,279	$	1,314		$	1,419	$	1,422

Per-share data:
Basic earnings	$	.29	$	.30		$	.32	$	.32
Diluted earnings		.29		.30			.32		.32
Cash dividends		.17		.42			.18		.18

Common Stock Market Prices and Dividends

The common stock of Juniata Valley Financial Corp. is quoted under the symbol “JUVF.OB” on the over-the-counter (“OTC”) Electronic Bulletin Board, a regulated electronic quotation service made available through, and governed by, the NASDAQ system. As of December 31, 2008, the number of stockholders of record of the Company’s common stock was 1,812.

Prices presented below are bid prices between broker-dealers, which do not include retail mark-ups or markdowns or any commission to the broker-dealer. The published bid prices do not necessarily reflect prices in actual transactions.


	2008
					Dividends
Quarter Ended	High		Low		Declared

March 31	$	21.50	$	19.50	$	0.18
June 30		21.50		20.05		0.18
September 30		22.00		19.60		0.19
December 31		21.15		19.00		0.19


	2007
					Dividends
Quarter Ended	High		Low		Declared

March 31	$	21.50	$	20.85	$	0.17
June 30		23.00		20.00		0.42
September 30		23.75		20.05		0.18
December 31		21.25		20.00		0.18

As stated in “Note 15 – 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 maintenance of a strong 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.
Bridge and Main Streets
P.O. Box 66
Mifflintown, PA 17059
(717) 436-8211
JVBonline.com

Investor Information
JoAnn N. McMinn,
Senior 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 event 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, 2008 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 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, 2008, a copy of which can be obtained as described above.

Registrar and Transfer Agent

Registrar and Transfer Company
10 Commerce Drive
Cranford, New Jersey 07016-3572
Telephone: (800) 368-5948
Website: www.RTCo.com
Email: info@RTCo.com

Stockholders of record may access their accounts via the Internet to review account holdings and transaction history through Registrar and Transfer Company’s website: www.RTCo.com .

Information regarding the Company’s Dividend Reinvestment and Stock Purchase Plan may be obtained by contacting Registrar and Transfer Company, 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 Registrar and Transfer Company 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 19, 2009 at the Quality Inn Suites, 13015 Ferguson Valley Road, Burnham, Pennsylvania.

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 Bridge and Main Streets Mifflintown, PA 17059	Pennsylvania	None

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-8 (No. 333-02007) filed with the SEC on March 28, 1996, Form S-8 (No. 333-36610) filed with the SEC on May 9, 2000 and Form S-3D (No. 333-129023) filed with the SEC on October 14, 2005 of Juniata Valley Financial Corp. of our reports dated March 13, 2008, relating to the consolidated financial statements and Juniata Valley Financial Corp.’s internal control over financial reporting, which appears in this Annual Report on Form 10K for the year ended December 31, 2008.



	/s/ BEARD MILLER COMPANY LLP

Beard Miller Company LLP
Lancaster, Pennsylvania
March 13, 2009

Exhibit 31.1
CERTIFICATION

I, Francis J. Evanitsky, Chief Executive Officer of Juniata Valley Financial Corp., 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

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: 03/13/2009	/s/ Francis J. Evanitsky
	Chief Executive Officer

Exhibit 31.2
CERTIFICATION

I, JoAnn N. McMinn, Chief Financial Officer of Juniata Valley Financial Corp., 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

	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: 03/13/2009	/s/ JoAnn N. McMinn
	Chief Financial Officer

Exhibit 32.1

SECTION 1350 CERTIFICATION

I, Francis J. Evanitsky, 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, 2008 (“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/ Francis J. Evanitsky
Chief Executive Officer				Date: 03/13/2009

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, 2008 (“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: 03/13/2009