MIFFLINTOWN - Marcie A. Barber, president and chief executive officer of Juniata Valley Financial Corp., announced net income and earnings per share for the quarter ended June 30 were $1,163,000 and 28 cents, respectively, compared to $1,009,000 and 24 cents respectively for the quarter ended June 30, 2013. These results represented a 15.3 percent increase in net income and an earnings per share increase of 16.7 percent. As compared to the immediately preceding quarter ended March 31, the second quarter of 2014 reflected a net income increase of 28.8 percent and an earnings per share increase of 27.3 percent. For the year-to-date, net income and earnings per share increased in 2014 as compared to 2013 by 2.5 percent and 2.1 percent respectively.
Comparative earnings and key performance ratios were:
Net income - $1.16 million, compared to $1 million in the previous quarter and $903,000 in the quarter ended March 31.
Return on average assets - .97 percent, compared to .89 percent in the previous quarter and .81 percent in the quarter ended March 31.
Return on average equity - 9.23 percent, compared to 8.03 percent in the previous quarter and 7.17 percent in the quarter ended March 31.
Earnings per share - 28 cents, compared to 24 cents in the previous quarter and 22 cents in the quarter ended March 31.
During the second quarter of 2014, average earning assets increased by $27.65 million, or 6.8 percent, as compared to the second quarter of 2013, primarily as a result of the purchase of investment securities funded by the issuance of longterm debt. As a result, the investment portfolio was higher on average by $23.75 million, or 18.1 percent, during the second quarter of 2014 compared to the second quarter of 2013 and borrowings averaged $23.10 million higher in the second quarter of 2014 compared to the second quarter of 2013. Loan balances during the second quarter of 2014, on average, exceeded average loan balances in the second quarter of 2013 by $4.6 million, or 1.7 percent. This increase was partially funded by increases of average deposits of $3.8 million. Successful resolution of an impaired loan resulted in the collection of previously unaccrued interest of $137,000 in June. This combination of factors resulted in an increase in net interest income of $210,000 in the second quarter of 2014 as compared to the second quarter of 2013 despite a decrease in the net interest margin, which is net interest income expressed as a percentage of average interest-earning assets, from 3.5 percent to 3.47 percent.
Comparing net interest income and net interest margin for the second quarter of 2014 to the immediately preceding first quarter of 2014, the changes were similar to the changes from the second quarter of 2013. Comparing results for the first six months of 2014 to the results for the same period in 2013, net interest income was higher by 3.5 percent in 2014 and the net interest margin on a fully tax-equivalent basis, one basis point lower, at 3.49 percent in the 2014 period.
Credit quality continued to improve in the second quarter of 2014, as non-performing and risk rated loans were addressed through liquidation of loans or exits from relationships. As of June 30, nonperforming loans as a percentage of average outstanding loans was 2.04 percent, improving from 2.23 percent on Dec. 31, 2013 and from 2.88 percent on June 30, 2013. The decrease in nonperforming loans has had a positive effect on the adequacy of the allowance for loan losses carried by Juniata, but was offset by specific reserves assigned to two of the impaired loans due to aging collateral appraisals. It is the Company's policy to discount appraisals on collateral securing impaired loans, based on the age of the valuation. For the quarter ended June 30, the loan loss provision was $117,000, versus $86,000 for the second quarter of 2013 and $20,000 in the first quarter of 2014.
Noninterest income was $1.2 million in the second quarter of 2014 reflecting an increase over the $1.1 million earned in the second quarter of 2013, and an increase over the $920,000 earned in the first quarter of 2014. Most significantly impacting noninterest income in the second quarter of 2014 was a gain of $165,000 from death benefits related to bank-owned life insurance. There were no such occurrences in either of the two comparative periods. Also unique to the second quarter of 2014 was a lump-sum fee of $40,000 collected on a terminated trust relationship that elevated trust fees.
For the first six months of 2014, noninterest income was $2.1 million, 2 percent less than for the first six months of 2013. The positive impacts of the aforementioned death benefits and trust fees helped to partially offset the continued reduction in fees and gains related to loans sold in the secondary market and reductions in customer service fees on deposit accounts.
Noninterest expense in the second quarter of 2014 was $3.4 million, exceeding noninterest expense in the second quarter of 2013 and the first quarter of 2014 by $71,000 and $65,000 respectively. The increase in noninterest expense as compared to both previous periods related primarily to increased compensation expense. Full-time equivalent employment has increased slightly in the second quarter of 2014 as compared to both previous comparative quarters, and company-wide annual salary adjustments occurred early in the second quarter.
For the first six months of 2014, noninterest expense increased by $372,000, or 5.8 percent, as compared to the first six months of 2013. Amortization expense associated with the bank's investment in a low-income housing project was offset by the recording of the benefit of the tax credit from the project, and first became applicable during the second quarter of 2013. Excluding the effect of this amortization expense, noninterest expense increased in the first half of 2014 by $278,000, or 4.5 percent, when compared to the same period one year ago. The increase was primarily due to increases in costs associated with foreclosure activity, facilities maintenance, utilities and employee compensation.
The tax provisions for each period discussed reflected the application of the aforementioned low income housing tax credit. For the second quarter of 2014 the tax credit lowered the effective tax rate from 21.2 percent to 10.1 percent. In the second quarter of 2013, when earnings from tax exempt sources were lower, the effective tax rate was lowered from 23.1 percent to 5.8 percent. When comparing the second quarter of 2014 with the immediate preceding quarter ending March 31, 2014, the tax credit lowered the effective tax rate from 22 percent to 7.2 percent. For the first six months of 2014, the tax credit lowered the effective tax rate from 21.6 percent to 8.9 percent as compared to the same period in 2013, in which the tax credit lowered the effective tax rate from 24.2 percent to 16.5 percent.
Total assets of $478.1 million on June 30 represented an increase of 6.5 percent from Dec. 31, 2013 and a 6.3 percent increase as compared to June 30, 2013.
On July 15, Juniata Valley Financial Corp.'s Board of Directors declared a cash dividend of 22 cents per share, payable on Sept. 2 to shareholders of record on Aug. 15.
The Juniata Valley Bank, the principal subsidiary of Juniata Valley Financial Corp., is headquartered in Mifflintown with 12 community offices located in Juniata, Mifflin, Perry and Huntingdon counties. More information regarding Juniata Valley Financial Corp. and The Juniata Valley Bank can be found online at www.JVBonline.com. Juniata Valley Financial Corp. trades over the counter under the symbol JUVF.