STOCKHOLDERS' EQUITY AND REGULATORY MATTERS

12 Months Ended

Dec. 31, 2022

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, 2022, 141,887 shares were available for issuance under the Dividend Reinvestment Plan. No shares were issued under this plan in 2022 or 2021.

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 2022 and 2021, 170 and 50,482 shares, respectively, were repurchased in conjunction with this program. In 2022 and 2021, 825 and 200 issued shares, respectively, were transferred to treasury due to forfeitures of restricted stock awards. Remaining shares authorized to be repurchased in the program were 208,312 as of December 31, 2022.

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, 2022, 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 2022 and 2021, 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. As of December 31, 2022, the Bank was a qualifying community banking organization as defined by the federal banking agencies but elected to use the risk-weighting framework under the Basel III capital requirements at year-end 2022 and 2021.

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, 2022 was 2.50% and is included in the capital adequacy ratios in the tables 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, 2022 and December 31, 2021, are presented below.

									Minimum
									Regulatory
									Requirements
									to be Well
									Capitalized
					Minimum Requirement				under Prompt
(Dollars in thousands)					for Capital				Corrective Action
	Actual				Adequacy Purposes				Provisions
The Juniata Valley Bank	Amount		Ratio		Amount		Ratio		Amount		Ratio
As of December 31, 2022:
Total Capital (to Risk Weighted Assets)	$	73,143	13.01	%	$	59,040	10.50	%	$	56,229	10.00	%
Tier 1 Capital (to Risk Weighted Assets)		69,116	12.29	%		47,794	8.50	%		44,983	8.00	%
Common Equity Tier 1 Capital (to Risk Weighted Assets)		69,116	12.29	%		39,360	7.00	%		36,549	6.50	%
Tier 1 Capital (to Average Assets) Leverage		69,116	8.48	%		32,605	4.00	%		40,756	5.00	%
As of December 31, 2021:
Total Capital (to Risk Weighted Assets)	$	56,153	11.06	%	$	54,580	10.50	%	$	51,981	10.00	%
Tier 1 Capital (to Risk Weighted Assets)		56,153	11.06	%		44,184	8.50	%		41,585	8.00	%
Common Equity Tier 1 Capital (to Risk Weighted Assets)		56,153	11.06	%		36,387	7.00	%		33,788	6.50	%
Tier 1 Capital (to Average Assets) Leverage		56,153	6.99	%		32,502	4.00	%		40,627	5.00	%

The actual regulatory capital amounts and ratios reported in Juniata’s December 31, 2021 Form 10-K were total capital of $68.4 million; tier 1 capital and common equity tier 1 capital of $64.9 million; total capital ratio – 13.16%; tier 1 capital and common equity tier 1 capital ratios – 12.48%; and leverage ratio – 7.98%. The change was the result of refiling the Bank’s December 31, 2021 call report, subsequent to filing the December 31, 2021 Form 10-K, due to the treatment of subordinated debt of unconsolidated financial institutions.

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, 2022, $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.