Stockholders' Equity and Regulatory Matters

12 Months Ended

Dec. 31, 2021

STOCKHOLDERS' EQUITY AND REGULATORY MATTERS

Stockholders' Equity and Regulatory Matters

14. STOCKHOLDERS’ EQUITY AND REGULATORY MATTERS

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

The Company has a dividend reinvestment and stock purchase plan. Under this plan, additional shares of Juniata Valley Financial Corp. stock may be purchased by shareholders at the prevailing market prices through reinvested dividends and voluntary cash payments, within limits. To the extent that shares are not available in the open market, the Company has reserved common stock to be issued under the plan. Any adjustment in capitalization of the Company will result in a proportionate adjustment to the reserved shares for this plan. At December 31, 2021, 141,887 shares were available for issuance under the Dividend Reinvestment Plan. No shares were issued under this plan in 2021 or 2020.

The Company periodically repurchases shares of its common stock under a share repurchase program approved by the Board of Directors. In November of 2021, 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 reissued for stock option exercises, stock awards, employee stock purchase plan purchases, to fulfill dividend reinvestment program needs and to supply shares needed for exchange in an acquisition. During 2021 and 2020, 50,482 and 87,712 shares, respectively, were repurchased in conjunction with this program. In 2021 and 2020, 200 and 565 issued shares, respectively, were transferred to treasury due to forfeitures of restricted stock awards. Remaining shares authorized to be repurchased in the program were 209,307 as of December 31, 2021.

Regulatory Capital

The Bank is subject to risk-based capital standards by which banks are evaluated in terms of capital adequacy. These regulatory capital requirements are administered by the federal banking agencies. Failure to meet minimum capital requirements can result in certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Bank’s capital and classification are also subject to qualitative judgments by the regulators. Management believes that, as of December 31, 2021, the Bank meets all capital adequacy requirements to which it is subject.

Prompt corrective action regulations provide five classifications: well-capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. At year-end 2021 and 2020, the most recent regulatory notifications categorized the Bank as well-capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the institution’s category.

In 2019, the federal banking agencies jointly issued a final rule that provides for an optional, simplified measure of capital adequacy, the community bank leverage ratio framework (“CBLR framework”), for qualifying community banking organizations, consistent with Section 201 of the Economic Growth Act. The final rule became effective on January 1, 2020 and by the Bank elected to apply it in 2020. In April 2020, the federal banking agencies issued an interim final rule that makes temporary change to the CBLR framework, pursuant to Section 4012 of the CARES Act, and a second interim

final rule that provides a graduated increase in the community bank leverage ratio requirement after the expiration of the temporary changes implemented pursuant to Section 4012 of the CARES Act.

The community bank leverage ratio removes the requirement for qualifying banking organizations to calculate and report risk-based capital, and only requires a minimum Tier 1 to average assets (“leverage”) ratio. Qualifying banking organizations that elect to use the CBLR framework and that maintain a leverage ratio of greater than required minimums will be considered to have satisfied the generally applicable risk-based and leverage capital requirements in the agencies’ capital rules (generally applicable rule) and, if applicable, will be considered to have met the well-capitalized ratio requirements for purposes of section 38 of the Federal Deposit Insurance Act. Under the interim final rules, the community bank leverage ratio minimum requirement is 8.0% as of December 31, 2020, 8.5% for calendar year 2021, and 9.0% for calendar year 2022 and beyond. The interim rule allows for a two-quarter grace period to correct a ratio that falls below the required amount, provided the Bank maintains a leverage ratio of 7.0% as of December 31, 2020, 7.5% for calendar year 2021, and 8.0% for calendar year 2022 and beyond.

Under the final rule, an eligible banking organization can opt out of the CBLR framework and revert back to the risk-weighting framework without restriction. As of December 31, 2021, the Bank was a qualifying community banking organization as defined by the federal banking agencies but elected to revert back to the risk-weighting framework under the Basel III capital requirements at year-end 2021.

In addition, a capital conservation buffer of 2.50% is applicable to all capital ratios except for the Tier 1 Leverage ratio. The capital conservation buffer is equal to the lowest value of the three applicable capital ratios less the regulatory minimum (“adequately capitalized”) for each respective capital measurement. The Bank’s capital conservation buffer at December 31, 2021 was 2.50% and is included in the capital adequacy ratios in the table below. Compliance with the capital conservation buffer is required to avoid limitations on certain capital distributions, especially dividends.

Actual and required capital amounts and ratios as of December 31, 2021, are presented below.

									Minimum
									Regulatory
									Requirements
									to be Well
									Capitalized
					Minimum Requirement				under Prompt
					for Capital				Corrective Action
The Juniata Valley Bank	Actual				Adequacy Purposes				Provisions
(Dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
As of December 31, 2021:
Total Capital (to Risk Weighted Assets)	$	68,382	13.16	%	$	54,580	10.50	%	$	51,981	10.00	%
Tier 1 Capital (to Risk Weighted Assets)		64,874	12.48	%		44,184	8.50	%		41,585	8.00	%
Common Equity Tier 1 Capital (to Risk Weighted Assets)		64,874	12.48	%		36,387	7.00	%		33,788	6.50	%
Tier 1 Capital (to Average Assets) Leverage		64,874	7.98	%		32,502	4.00	%		40,627	5.00	%

Actual and required capital amounts and ratios under the CBLR Framework as of December 31, 2020, are presented below.

					To Be Well
					Capitalized Under
					Prompt Corrective
					Action Regulations
(Dollars in thousands)	Actual				(CBLR Framework)
The Juniata Valley Bank	Amount		Ratio		Amount		Ratio
As of December 31, 2020:
Tier 1 Capital to Average Total Assets	$	63,074	8.51	%	$	59,284	8.00	%

Certain regulatory restrictions exist regarding the ability of the Bank to transfer funds to the Company in the form of cash dividends, loans or advances. As of December 31, 2021, $37,324,000 of undistributed earnings of the Bank, included in the consolidated stockholders’ equity, was available for distribution to the Company as dividends without prior regulatory approval, subject to the regulatory capital requirements above.