UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-K
                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

 For the Fiscal Year Ended December 31, 2001     Commission File Number 0-13232

                         JUNIATA VALLEY FINANCIAL CORP.
                         ------------------------------
             (Exact name of registrant as specified in its charter)

           Pennsylvania                               23-2235254
           ------------                               ----------
  (State or other jurisdiction of                  (I.R.S. Employer
    incorporation or organization)               Identification Number)

    Bridge & Main Streets, PO Box 66, Mifflintown, PA        17059-0066
    --------------------------------------------------------------------
         (Address or 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 Per Share
                     ---------------------------------------

                                (Title of Class)

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

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. ( )

The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of January 31, 2002.

                   Common Stock, $1.00 Par Value - $66,241,800
                   -------------------------------------------

Indicate the number of shares outstanding of each issuer's classes of common
stock, as of January 31, 2002.

                     Common Stock, $1.00 Par Value 2,349,000
                     ---------------------------------------

DOCUMENTS INCORPORATED BY REFERENCE:

Portions of the Annual Report to Shareholders for the year ended December 31,
2001, are incorporated by reference into Parts I, II and III.

Portions of the Proxy Statement for the Annual Meeting of Shareholders to be
held April 16, 2002, are incorporated by reference into Part III.


<PAGE>




PART I

ITEM 1.    BUSINESS

           Incorporated by reference are the data appearing on Pages 7 through
14 of the 2001 Annual Report.

ITEM 2.    PROPERTIES

           The physical properties of the Corporation are all owned or leased
by the Bank.

           The Bank owns the buildings located at: Bridge and Main Streets,
Mifflintown, Pennsylvania (its corporate headquarters); Butcher Shop Road,
Mifflintown, Pennsylvania (financial center); 301 Market Street, Port Royal,
Pennsylvania; corner of Main and School Streets, McAlisterville, Pennsylvania;
Four North Market Street, Millerstown, Pennsylvania; Main Street, Blairs Mills,
Pennsylvania; Monument Square, Lewistown, Pennsylvania; Route 322 Reedsville,
Pennsylvania; 100 East Market Street, Lewistown, Pennsylvania; 100 West Water
Street, Lewistown, Pennsylvania; 302 South Logan Boulevard, Burnham,
Pennsylvania. In addition thereto, the Bank leases three offices. One, in the
Shopping Plaza located on Legislative Route 31, Mifflintown, Pennsylvania, which
lease with extension expires in 2007. One is located in the Wal-Mart
Supercenter, Lewistown, Pennsylvania, which expires in October 2006, and one is
a loan production office located at 1525 Science Street, State College,
Pennsylvania, which renews month to month. All of the buildings used by the Bank
are freestanding and are used exclusively for banking purposes.

ITEM 3.    LEGAL PROCEEDINGS

           The nature of the Corporation's and Bank's business, at times,
generates litigation involving matters arising in the ordinary course of
business. However, in the opinion of management of the Corporation, there are no
proceedings pending to which the Bank is a party or to which its property is
subject, which, if determined adversely to the Bank, would be material in
relation to the Bank's financial condition, nor are there any proceedings
pending other than ordinary routine litigation incident to the business of the
Bank. In addition, no material proceedings are pending or are known to be
threatened or contemplated against the Bank by government authorities or others.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

           None


PART II

ITEM 5.    MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
           MATTERS

           Incorporated by reference are the data appearing on page 2 of the
2001 Annual Report.

ITEM 6.           SELECTED FINANCIAL DATA

           Incorporated by reference are the data appearing on Page 16 of the
2001 Annual Report.


<PAGE>


ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
           RESULTS OF OPERATIONS

           Incorporated by reference are the data appearing on Pages 17 through
32 of the 2001 Annual Report.

ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

           Incorporated by reference are the data under the caption "Market
Rate Risk" appearing on Pages 27 through 30 of the 2001 Annual Report.

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

           Incorporated by reference are the financial statements and notes on
Pages 33 through 55 of the 2001 Annual Report and the Quarterly Results of
Operations on Page 15 of the 2001 Annual Report.

ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
           FINANCIAL DISCLOSURE

           None


PART III

ITEM 10.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

           Incorporated by reference is information appearing under the captions
"Election of Directors of JVF" and "Management of JVF and the Bank" in the Proxy
Statement.

ITEM 11.   EXECUTIVE COMPENSATION

           Incorporated by reference in the proxy statement under the caption
"Remuneration of Executive Officers".

ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

           Incorporated by reference is the following information contained in
the Proxy Statement filed under the captions "Election of Directors of JVF" and
"Management of JVF and the Bank".

ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

           Incorporated by reference is the information pertaining to
transactions with directors and officers of the Bank within the footnote
"Transactions with Executive Officers and Directors: on Page 50 of the 2001
Annual Report.


<PAGE>


PART IV

ITEM 14.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K


           (a) 1.   Financial Statements

                    The Consolidated Financial Statements of Juniata Valley
                    Financial Corp., as included in the 2001 Annual Report to
                    Shareholders, are incorporated in this report by reference.

               2.   All schedules are omitted because they are not applicable,
                    the data is not significant, or the required information is
                    shown in the financial statements or the notes thereto.

           (b) Reports on Form 8-K

               None.

           (c) Exhibits

               (13) Annual Report to Shareholders

               (21) Subsidiaries of the Registrant - As of the date of this
                    report Juniata Valley Bank is the only subsidiary of the
                    Registrant.

               (23) Consent of Beard Miller Company L.L.P., Independent Auditors


<PAGE>


                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                   JUNIATA VALLEY FINANCIAL CORP. (REGISTRANT)
                              Date: March 19, 2002


                        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.


     -------------------------                   -------------------------
     Ronald H. Witherite                         Joe E. Benner
     Vice Chairman, Secretary                    Director
     Date:  March 19, 2002                       Date:  March 19, 2002



     -------------------------                   -------------------------
     Jan G. Snedeker                             A. Jerome Cook
     Director                                    Director
     Date:  March 19, 2002                       Date:  March 19, 2002



     -------------------------                   -------------------------
     Don E. Haubert                              Martin L. Dreibelbis
     Director                                    Chairman
     Date:  March 19, 2002                       Date:  March 19, 2002



     -------------------------                   -------------------------
     John A. Renninger                           Dale G. Nace
     Director                                    Director
     Date:  March 19, 2002                       Date:  March 19, 2002


     -------------------------                   -------------------------
     Francis J. Evanitsky                        Harold B. Shearer
     President & CEO                             Director
     Date:  March 19, 2002                       Date:  March 19, 2002


<PAGE>


     -------------------------                   -------------------------
     Philip E. Gingrich Jr.                      Charles L. Hershberger
     Director                                    Director
     Date:  March 19, 2002                       Date:  March 19, 2002



     -------------------------                   -------------------------
     Marshall L. Hartman                         Robert K. Metz, Jr.
     Director                                    Director
     Date:  March 19, 2002                       Date:  March 19, 2002



     -------------------------                   -------------------------
     Timothy I. Havice                           Richard M. Scanlon, DMD
     Director                                    Director
     Date:  March 19, 2002                       Date:  March 19, 2002



     -------------------------
     Linda L. Engle
     Chief Financial Officer
     Chief Accounting Officer
     Date:  March 19, 2002



<PAGE>



         JUNIATA VALLEY FINANCIAL CORP. AND ITS WHOLLY-OWNED SUBSIDIARY,
                             THE JUNIATA VALLEY BANK
                                DECEMBER 31, 2001




                                MISSION STATEMENT


The Juniata Valley Bank, as an independent community bank, will endeavor to
identify customers' financial needs and exceed their expectations in delivering
quality products and services at a fair price to assure shareholders an above
average return and employees competitive salaries and benefits. The business of
the bank will be conducted with integrity and responsiveness to the communities
served.

<TABLE>
<CAPTION>

                                    CONTENTS


                                                                                                 Page
<S>                                                                                          <C>
Stock, Dividend and Broker Information------------------------------------------------------------ 2
Letter to Shareholders---------------------------------------------------------------------------- 3
Corporation Officers and Directors---------------------------------------------------------------- 4
Advisory Board Members---------------------------------------------------------------------------- 5
Bank Officers------------------------------------------------------------------------------------- 6
Business--------------------------------------------------------------------------------------7 - 15
Financial Highlights------------------------------------------------------------------------------16
Management's Discussion and Analysis of Financial Condition and Results of Operations--------17 - 32
Report of Independent Auditors--------------------------------------------------------------------33
Financial Statements:
   Consolidated Balance Sheets--------------------------------------------------------------------34
   Consolidated Statements of Income--------------------------------------------------------------35
   Consolidated Statements of Stockholders' Equity------------------------------------------------36
   Consolidated Statements of Cash Flows----------------------------------------------------------37
   Notes to Consolidated Financial Statements------------------------------------------------38 - 55

</TABLE>

<PAGE>

STOCK, DIVIDEND AND BROKER INFORMATION

Common stock issued by Juniata Valley Financial Corp. is quoted under the symbol
"JUVF" on the over-the-counter ("OTC") Electronic Bulletin Board, an automated
quotation service, made available through, and governed by, the NASDAQ system.

Prices presented in the table below are bid prices between broker-dealers which
do not include retail mark-ups or mark-downs or any commission to the
broker-dealer. The published bid prices do not necessarily reflect prices in
actual transactions. Cash dividends paid for 2001 and 2000 are provided in the
table below. 2001 Dividends Quarter High Low per share

                 2001                                     2000
                 ----                                     ----
                             Dividends                                Dividends
Quarter    High       Low    per share    Quarter    High      Low    per share
-------    ----       ---    ---------    -------    ----      ---    ---------
First     $23.17    $22.72                First     $30.00   $28.12     $.45
Second     26.75     23.17     $.39       Second     28.12    24.75      .37
Third      28.90     26.75                Third      24.75    23.40
Fourth     29.00     28.10      .41       Fourth     23.40    22.50      .39


     For further information, we refer you to:

Ferris Baker Watts, Inc.
100 Light Street
Baltimore, MD  21202
(800) 638-7411

F.J. Morrissey & Co., Inc.
1700 Market St., Suite 1420
Philadelphia, PA  19103-3913
(800) 842-8928

Ryan, Beck & Co.
150 Monument Road, Suite 106
Bala Cynwyd, PA  19004
(800) 223-8969

Janney, Montgomery, Scott, Inc.
48 E. Market St., P.O. Box 2246
York, PA  17405-2246
(717) 845-5611



DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN

Information regarding the Corporation's Dividend Reinvestment and Stock Purchase
Plan may be obtained by calling (717) 436-8211 or by writing to:

                               Ms. Linda L. Engle
                         Juniata Valley Financial Corp.
                                   P.O. Box 66
                              Mifflintown, PA 17059


DIVIDEND DIRECT DEPOSIT PROGRAM

Juniata Valley Financial Corp. now offers a dividend direct deposit program
whereby shareholders with registered stock in their own names may choose to have
their dividends deposited directly into the bank account of their choice on
dividend payment date. Information concerning this optional program is available
by calling (717) 436-8211 or writing to:

                               Ms. Linda L. Engle
                         Juniata Valley Financial Corp.
                                   P.O. Box 66
                              Mifflintown, PA 17059

-2-

<PAGE>


                   [JUNIATA VALLEY LETTERHEAD GRAPHIC OMITTED]



To Our Shareholders,

     An uncertain economy, a volatile stock market, eleven short term interest
rate reductions, and the horrific events of September 11 were just some of the
challenges faced by our industry in the year 2001. In addition to these
challenges, the year also provided your Bank with the opportunity to continue to
develop our goal of becoming a one stop provider of financial services.

     The development of a new deposit product, enhancements to existing
products, and the overwhelming success of our alternative investment program are
just a few examples of our improvement in our quest to become a one stop
provider of financial services.

     In September we installed our seventh ATM. This ATM is a drive-up ATM
located at our Mt. View Office. This machine provides our customers access to
cash at a very convenient location. Initial usage results at this machine during
the 4th quarter of 2001 were very encouraging.
     In November we opened a Loan Production Office in State College. We have an
opportunity to grow our loan portfolio as well as increase our non-interest
income by generating good quality loans that correspond to the lending policies
and practices of the Bank. Again, the initial results of this venture are very
encouraging.
     The year 2001 marked improved performance over 2000 for the Juniata Valley
Financial Corp. As a result of improvement in other income, net income increased
5.8% to $4,642,000 from $4,387,000. Increases in other income were realized by
increased income from the Trust Division, service fees, bank-owned life
insurance, and in certain non-recurring items included in the other income
category.
     Total assets increased 6.5% to $356,757,000 from $334,914,000, an increase
of $21,843,000. Fueled in part by the uncertain economy, and the volatile stock
market, deposits increased 6.4% to $305,468,000 from $287,220,000.
     Although 2001 was a turbulent year, the Bank showed a modest loan growth of
3.7%. This increase brought loan outstandings to a record level of $227,998,000
from $219,819,000.
     As a result of the growth in loans, deposits, and continued improvement in
our other income categories, earnings per share increased 8.3% from $1.81 in
2000 to $1.96 in 2001. Additionally, return on average assets (ROAA) improved
from 1.31% in 2000 to 1.33% in 2001, and return on average equity (ROAE)
improved from 10.42% in 2000 to 10.47% in 2001.
     We would like to take this opportunity to thank John M. "Jack" Wilson for
his years of dedicated service to the Bank. Mr. Wilson retired as a director in
October 2001. His loyalty and commitment will be missed.
     As always, we would like to thank you, our shareholders, for your continued
loyalty and support. Further, we want to assure you that the officers, directors
and employees will continue to work diligently to ensure that the Juniata Valley
Financial Corp. continues to be a quality financial institution.

                                           Sincerely,



                                           /s/ Francis J. Evanitsky
                                           ------------------------------------
                                           Francis J. Evanitsky
                                           President and CEO

                                                                             -3-

<PAGE>

                    JUNIATA VALLEY FINANCIAL CORP. OFFICERS


MARTIN L. DREIBELBIS                                         RONALD H. WITHERITE
Chairman                                                Vice Chairman, Secretary

FRANCIS J. EVANITSKY                                              LINDA L. ENGLE
President                                                              Treasurer

<TABLE>
<CAPTION>

                                            DIRECTORS

<S>                                                      <C>
JOE E. BENNER                                                                    ROBERT K. METZ, JR.
Owner, Benner Automotive                                 Retired President, Metz Poultry Farms, Inc.

A. JEROME COOK                                                                          DALE G. NACE
Retired President, The Juniata Valley Bank                     Owner, Glenn Nace Plumbing & Heating;
                                                                                    GlenDale Storage
MARTIN L. DREIBELBIS
Chairman, Self-Employed, Petroleum Consultant                                      JOHN A. RENNINGER
                                                                          President, A. D. Renninger
FRANCIS J. EVANITSKY                                                                  Lumber Company
President & CEO, The Juniata Valley Bank
                                                                             RICHARD M. SCANLON, DMD
PHILIP E. GINGERICH, JR.                                                      Self-Employed, Dentist
President, Central Insurers Group, Inc.
                                                                                   HAROLD B. SHEARER
MARSHALL L. HARTMAN                                                   Retired, Self-employed, Farmer
Owner, Traditions, Ltd.
                                                                                     JAN G. SNEDEKER
DON E. HAUBERT                                                     President, Snedeker Oil Co., Inc.
President, Haubert Homes, Inc.
                                                                                 RONALD H. WITHERITE
TIMOTHY I. HAVICE                                                    Owner, Ron's Fruit Market, Inc.
Owner, T.I. Havice, Developer

CHARLES L. HERSHBERGER
President, Hoenstine Funeral Homes, Inc.



      NOTE: Above Directors also comprise the Board of Directors for The Juniata Valley Bank

</TABLE>

-4-

<PAGE>


ADVISORY BOARD MEMBERS

MILLERSTOWN OFFICE                        MONUMENT SQUARE /WAL-MART OFFICES
R. Franklin Campbell                      William H. Bradford
Lowell R. Frantz, C.L.U.                  William R. Carter
Gregory J. Gordon                         Lee Ellen Foose
Gerald M. Lyter                           Sharon Havice
James A. Witmer                           Harry F. Stimely
Gary G. Wright                            Frank A. Zampelli


PORT ROYAL OFFICE                         GARDENVIEW OFFICE
Kim Bomberger                             David B. Esh
Larry B. Cottrill, Jr.                    M. Randall French
Richard J. Junk                           H. Ross Harshbarger
N. Jeffrey Leonard                        Donald R. Hartzler
Dennis A. Long                            Jerry L. Wagner


MCALISTERVILLE OFFICE                     MARKET STREET/WATER STREET OFFICES
Mark Apple                                George W. Anderson
M. Richard Dimm                           Catherine J. Laub
Clair Ehrenzeller                         Susan M. McCartney
Samuel E. Knouse                          J. Neal Shawver
Joseph D. Ritzman                         Steve R. Watson
Richard J. Sankey


BLAIRS MILLS OFFICE                       BURNHAM OFFICE
Robert G. Allison                         Mark S. Elsesser
Wayde H. Cisney                           Daniel B. Firth
William R. Goshorn                        Leann M. Fisher
C. Roger Searer                           David E. Walker
Clair L. Yohn



                                                                             -5-


<PAGE>

<TABLE>
<CAPTION>


                        THE JUNIATA VALLEY BANK OFFICERS

           A Wholly-Owned Subsidiary of Juniata Valley Financial Corp.

<S>                          <C>
MIFFLINTOWN OFFICE
    Francis J. Evanitsky-----------------------------------------President & C.E.O.
    Linda L. Engle---------------------------------Executive Vice President, C.F.O.
    Betty D. Ryan--------------------------Vice President, Community Office Manager
    Lou Ann Wilson-------------------------------Vice President, Compliance Officer
    Paul M. Lipka-----------------------Assistant Vice President, Marketing Officer
    Judy R. Robinson--------------------------------------------Executive Secretary
  ADMINISTRATION
    Donald L. Musser---------Sr. Vice President, Community Banking Division Manager
    Pamela S. Eberman--------------------Sr. Vice President, Human Resource Manager
  CONTROLLER
    Kristi J. Burdge-----------------------------------------------------Controller
    Anna Mae Peoples---------------------------Vice President, Assistant Controller
  LOANS
    Edward L. Kauffman--------------------Sr. Vice President, Loan Division Manager
    Robert G. Dillon------------Vice President, Sr. Loan Officer/Collection Manager
    Scott E. Nace-----------------------Vice President, Loan Administration Manager
    David A. Pecht-----------------------Vice President, Secondary Mortgage Manager
    Kurt L. McKinney, Jr.-----------Vice President, Sr. Loan Officer Market Manager
    R. Jack Morgan-----------------------------------------------------Loan Officer
    John B. Zavacky-------------------------------------Loan Administration Officer
  OPERATIONS
    Judy R. Aumiller----------------Sr. Vice President, Operations Division Manager
    Kathy D. Hutchinson-------------Vice President, Data/Deposit Operations Manager
    Deborah A. Sheaffer--------------------------Vice President, Operations Officer
    Sherise Pelizzari------------------Assistant Vice President, Operations Manager
    S. Marlene Hubler-----------------------------------Computer Operations Manager
  TRUST
    James C. Dillman---------------------Sr. Vice President, Trust Division Manager
    Cynthia L. Williams------------------------------ Vice President, Trust Officer
BLAIRS MILLS OFFICE
    C. Roger Searer------------------------Vice President, Community Office Manager
    Wanda K. Rowles----------------------------------------Customer Service Officer
BURNHAM OFFICE
    Leann M. Fisher------------------------Vice President, Community Office Manager
GARDENVIEW OFFICE
    M. Randall French----------------------Vice President, Community Office Manager
    Christine L. Searer------------------------------------Customer Service Officer
MARKET STREET OFFICE
    J. Neal Shawver------------------------Vice President, Community Office Manager
    Susan C. Mayer-----------------------------------------Customer Service Officer
    Winston L. Libby-------------------------------------Financial Services Officer
MCALISTERVILLE OFFICE
    Joseph D. Ritzman----------------------Vice President, Community Office Manager
    Leslie A. Miller---------------------------------------Customer Service Officer
MILLERSTOWN OFFICE
    James A. Witmer------------------------Vice President, Community Office Manager
    Barbara I. Seaman--------------------------------------Customer Service Officer
MONUMENT SQUARE OFFICE
    Lee Ellen Foose------------------------Vice President, Community Office Manager
    Suzanne Booher-----------------------------------------Customer Service Officer
MOUNTAIN VIEW OFFICE
    Brenda A. Brubaker-------------------------------------Community Office Manager
PORT ROYAL OFFICE
    Larry B. Cottrill, Jr.-----------------Vice President, Community Office Manager
    Lona Rae Hawthorne-------------------------------------Customer Service Officer
WAL-MART SUPERCENTER OFFICE
    Christine L. Weyer-------------------------------------Community Office Manager
    Tammy L. Miller----------------------------------------Customer Service Officer
WATER STREET OFFICE
    Catherine J. Laub----------------------Vice President, Community Office Manager

</TABLE>

-6-

<PAGE>


         JUNIATA VALLEY FINANCIAL CORP. AND ITS WHOLLY-OWNED SUBSIDIARY,
                             THE JUNIATA VALLEY BANK
                                    BUSINESS

DESCRIPTION OF BUSINESS

On April 19,1983, the shareholders of The Juniata Valley Bank (The Bank)
approved a plan of merger and reorganization. The plan was approved by the
various regulatory agencies on June 7, 1983 and the Juniata Valley Financial
Corp., a one bank holding company, registered under the Bank Holding Company Act
of 1956, as amended, was organized. The Bank is the oldest independent
commercial bank in Juniata and Mifflin County having originated under a state
bank charter in 1867.

The Juniata Valley Bank operates twelve branch banking offices, two trust
service offices, and one loan production office. At December 31, 2001, the Bank
had 135 full-time equivalent employees. The Bank is engaged in commercial
banking and trust business as authorized by the Pennsylvania Banking Code of
1965. This includes accepting time and demand deposits, making secured and
unsecured commercial and consumer loans, financing commercial transactions,
making construction and mortgage loans, and administering corporate, pension and
personal trust services. The Bank provides its services to individuals,
corporations, partnerships, associations, municipalities and other governmental
bodies. As of December 31, 2001, the Bank had four offices in Juniata County,
one office in Perry County, six offices in Mifflin County, one office in
Huntingdon County, and a loan production office in Centre County.

COMPETITION

The Bank's principal market area includes all of Mifflin and Juniata Counties,
and portions of Perry, Huntingdon, Centre, Franklin and Snyder Counties. There
are 15 commercial banks which are headquartered or have branch offices located
within the Bank's market area which the Bank considers its primary competitors.
Of the 15 commercial banks with operations in the Bank's market area, the Bank
ranked third in assets as of December 31, 2001.

Additionally, the Bank has been subjected to competition from non-bank firms,
such as credit unions, brokerage firms, insurance companies, mutual fund
companies, consumer finance and credit card firms, retail and manufacturing
conglomerates, and other firms providing financial services and credit to
customers. Although many non-bank industries now offer services traditionally
provided only by banks, banks are constrained by costly regulations and
time-worn laws to compete effectively against non-bank providers of financial
services. However, the Bank strives to remain competitive with respect to
interest rates, service fees and service quality in order to achieve continued
growth and success in its market. The Bank also continues to develop and
strengthen its strong ties to the communities it serves, relying on the unique
and strong relationship that a community bank has with its customers and
community by providing excellent, personal customer service.

The deposit base of The Juniata Valley Bank is such that the loss of one
depositor or a related group of depositors would not have a dramatically adverse
effect on the Bank's business. In addition, the loan portfolio is very well
diversified, so that one industry or group or related industries does not
comprise a material portion of total loans outstanding. The Bank's business is
not seasonal, nor does it have any risks attendant to foreign sources.

SUPERVISION AND REGULATION

Juniata Valley Financial Corp. 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 Act), the Corporation 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 its subsidiary.

The Act requires the Corporation to obtain Federal Reserve 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.

New banking legislation passed in November of 1999, modifies the 43-year old
Bank Holding Company Act of 1956 to permit a Bank Holding Company that owns a
commercial bank to engage in any type of financial activity. The commercial bank
has to be well-capitalized, well-managed and CRA-rated satisfactory or better.
Financial activities include securities, insurance, merchant banking/equity
investment, financial in nature, and complimentary activities.

                                                                             -7-

<PAGE>


         JUNIATA VALLEY FINANCIAL CORP. AND ITS WHOLLY-OWNED SUBSIDIARY,
                             THE JUNIATA VALLEY BANK
                                    BUSINESS

SUPERVISION AND REGULATION (CONTINUED)

The deposits of The Juniata Valley Bank are insured by the Bank Insurance Fund
of the Federal Deposit Insurance Corporation (FDIC). Consequently, the Bank is
subject to regulations and reviews under the provisions of the Federal Deposit
Insurance Act, but the primary regulatory body is the Pennsylvania Department of
Banking. The Pennsylvania Department of Banking conducts regular reviews which
have resulted in satisfactory evaluations to date.

In 1991, the Federal Deposit Insurance Corporation Act (FDICIA) was signed into
law. FDICIA established five different levels of capitalization of financial
institutions, with prompt corrective actions and significant operational
restrictions imposed on institutions that are capital deficient. The five
categories are: well capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized and critically undercapitalized.

To be considered well capitalized, an institution must have a total risk-based
capital ratio of at least 10%, a Tier I risk based capital ratio of at least 6%,
a leverage capital ratio of 5% and must not be subject to any order or directive
requiring the institution to improve its capital level. An institution falls
within the adequately capitalized category if it has a total risk-based capital
ratio of at least 8%, a Tier I risk-based capital ratio of at least 4%, and a
leverage capital ratio of at least 4%. Institutions with lower capital levels
are deemed to be undercapitalized, significantly undercapitalized, or critically
undercapitalized, depending on their actual capital levels.

The following table sets forth the computation of the Bank's regulatory capital
ratios. The Bank exceeded the minimum capital levels of the well capitalized
category. The Corporation's ratios were not materially different from those of
the Bank.

                                                          December 31,
                                                          ------------
                                                 2001        2000         1999
                                                 ----        ----         ----
Risk-weighted assets ratio:
   Tier I                                       18.46%      18.46%       19.59%
   Total                                        19.56%      19.59%       20.76%

Total assets leverage ratio:
   Tier I                                       11.98%      12.30%       12.33%


SECURITIES PORTFOLIO

The following table sets forth the carrying amount of securities at the dates
indicated:

<TABLE>
<CAPTION>

                                                                            December 31,
                                                                            ------------
                                                                   2001          2000          1999
                                                                   ----          ----          ----
                                                                           (In Thousands)

<S>                                                              <C>           <C>           <C>
Available for sale securities (at fair value):

   U.S. Treasury and other U.S. government obligations           $30,960       $ 6,035       $  6,441
   States and political subdivisions                              15,691        15,341         23,448
   Other corporate                                                 3,116         5,042          5,992
   Mortgage-backed                                                 3,951         5,823          7,244
   Equity                                                            945           905            800
                                                                 -------       -------       --------

                                                                  54,663        33,146         43,925
                                                                 -------       -------       --------
Held to maturity securities (at amortized cost):

   U.S. Treasury and other U.S. government obligations             3,461        13,071         14,448
   States and political subdivisions                              26,742        27,201         30,223
   Other corporate                                                 8,409        10,968         14,879
                                                                 -------       -------       --------

                                                                  38,612        51,240         59,550
                                                                 -------       -------       --------

      Total securities                                           $93,275       $84,386       $103,475
                                                                 =======       =======       ========
</TABLE>

-8-

<PAGE>


         JUNIATA VALLEY FINANCIAL CORP. AND ITS WHOLLY-OWNED SUBSIDIARY,
                             THE JUNIATA VALLEY BANK
                                    BUSINESS

SECURITIES PORTFOLIO (CONTINUED)

The following table sets forth the maturities of securities at December 31, 2001
and the weighted average yields of such securities by contractual maturities or
call dates. Yields on obligations of state and political subdivisions are not
presented on a tax equivalent basis. Mortgage-backed securities with contractual
maturities after ten years from December 31, 2001, feature regular repayments of
principal and average lives of three to five years.

<TABLE>
<CAPTION>

                                                                         Maturing
                                                                         --------
                                                               After One             After Five
                                                               But Within            But Within              After
                                       Within One Year         Five Years             Ten Years            Ten Years
                                       Amount    Yield       Amount    Yield       Amount    Yield      Amount    Yield
                                       ------    -----       ------    -----       ------    -----      ------    -----
                                                                      (In Thousands)
<S>                                   <C>         <C>       <C>         <C>        <C>        <C>       <C>        <C>
Available for sale:

   U.S. Treasury and other U.S.
      government agencies             $   614     6.39%     $27,307     5.09%      $3,013     5.76%     $   26     4.69%
   State and political
      subdivisions                      5,864     4.81        6,026     4.40        3,551     3.66         250     6.50
   Other corporate                      1,041     6.77        2,075     6.13           --       --          --       --
   Mortgage-backed                         --       --           12     8.80           96     7.74       3,843     7.03
                                      -------               -------                ------               ------
                                        7,519                35,420                 6,660                4,119
                                      -------               -------                ------               ------

Held to maturity:

   U.S. Treasury and other U.S.
      government agencies                  --       --        3,461     5.40           --       --          --       --
   State and political
      subdivisions                      5,794     4.13       20,681     3.99           --       --         267     4.25
   Other corporate                      2,557     6.11        5,352     5.91           --       --         500     5.90
                                      -------               -------                ------               ------

                                        8,351                29,494                    --                  767
                                      -------               -------                ------               ------

        Total                         $15,870               $64,914                $6,660               $4,886
                                      =======               =======                ======               ======

</TABLE>

Securities classified as available for sale are those debt securities that the
Bank intends to hold for an indefinite period of time, but not necessarily to
maturity. Securities available for sale are carried at fair value. Unrealized
gains or losses are reported in other comprehensive income, net of the related
deferred tax effect. Securities classified as held to maturity are those debt
securities the Bank has both the intent and ability to hold to maturity. These
securities are carried at cost adjusted for amortization of premium and
accretion of discount.

                                                                             -9-

<PAGE>



         JUNIATA VALLEY FINANCIAL CORP. AND ITS WHOLLY-OWNED SUBSIDIARY,
                             THE JUNIATA VALLEY BANK
                                    BUSINESS

LOAN PORTFOLIO

The highest loan concentration by activity type continues to be the trucking
industry. The percentage of these loans to total loans was approximately four
percent at the latest review. This industry services many other industries and
no potential significant risk is evident.

As with any lending activity, potential risk exists. Loans in the commercial,
financial and industrial category have remained relatively constant as a
percentage of total loans. The Bank prudently evaluates loans in this category
and generally secures such lending with collateral consisting of real and/or
tangible personal property.

All lending is granted on a variable rate basis except consumer loans which are
fixed rate. Consumer loans, consisting of approximately twenty-three percent of
total loans, average a three to four year repayment period and are fixed at such
a rate that rate sensitivity is considered to be limited.

The following table shows the Bank's loan distribution at the end of each of the
last five years:

<TABLE>
<CAPTION>


                                                                          December 31,
                                                 2001           2000           1999            1998           1997
                                                 ----           ----           ----            ----           ----
                                                                         (In Thousands)
<S>                                            <C>            <C>            <C>             <C>            <C>
   Commercial, financial and agricultural      $ 24,548       $ 23,327       $ 18,784        $ 15,047       $ 16,110
   Real estate mortgage                         151,369        142,897        139,163         133,047        142,216
   Consumer (less unearned discount)             51,733         52,991         46,419          41,049         32,428
   All other                                      2,874          3,101          2,456           2,819          2,945
                                               --------       --------       --------        --------       --------

      Total loans                              $230,524       $222,316       $206,822        $191,962       $193,699
                                               ========       ========       ========        ========       ========

</TABLE>

This table shows the maturity of loans (excluding residential mortgages of 1-4
family residences and consumer loans) outstanding as of December 31, 2001.

<TABLE>

                                               Maturing     Maturing      Maturing
                                                During      From 2003       After
                                                 2002       Thru 2006       2005        Total
                                                 ----       ---------       ----        -----
                                                               (In Thousands)

<S>                                            <C>          <C>          <C>          <C>
   Commercial, agricultural and financial      $ 24,548     $     --     $     --     $ 24,548
   All other                                      2,874           --           --        2,874
                                               --------     --------     --------     --------

      Total loans                              $ 27,422     $     --     $     --     $ 27,422
                                               ========     ========     ========     ========

</TABLE>

-10-

<PAGE>


         JUNIATA VALLEY FINANCIAL CORP. AND ITS WHOLLY-OWNED SUBSIDIARY,
                             THE JUNIATA VALLEY BANK
                                    BUSINESS

NONACCRUAL, PAST DUE AND RESTRUCTURED LOANS

The following table summarizes the Bank's nonaccrual, past due and restructured
loans:

<TABLE>
<CAPTION>
                                                                      December 31,
                                                                      ------------
                                                2001         2000         1999         1998         1997
                                                ----         ----         ----         ----         ----
                                                                     (In Thousands)

<S>                                           <C>          <C>          <C>          <C>          <C>
   Average loans outstanding                  $223,487     $212,270     $193,305     $189,778     $186,510
                                              ========     ========     ========     ========     ========
   Nonaccrual loans                           $    934     $    364     $    164     $     --     $    239
   Accruing loans past due
      90 days or more                              811          440          262          386          395
   Restructured loans                               --           --           --           --          173
                                              --------     --------     --------     --------     --------

      Total                                   $  1,745     $    804     $    426     $    386     $    807
                                              ========     ========     ========     ========     ========
   Ratio of non-performing loans
      to average loans outstanding                 .78%         .39%         .22%         .20%         .43%

Information with respect to nonaccrual and restructured loans at December 31,

                                                2001         2000         1999         1998         1997
                                                ----         ----         ----         ----         ----
                                                                     (In Thousands)

   Nonaccrual loans                           $    934     $    364     $    164     $     --     $    239
   Restructured loans                               --           --           --           --          173
   Interest income that would have been
       recorded under original terms                84           38           16           --           20
   Interest income recorded
       during the period                            --           --           --           --           24
   Commitments to lend additional funds             --           --           --           --           --

</TABLE>


A loan is generally considered impaired when it is probable the Bank will be
unable to collect all contractual principal and interest payments due in
accordance with the terms of the loan agreement. The accrual of interest is
discontinued when the contractual payment of principal and interest has become
90 days past due or management has serious doubts about further collectibility
of principal or interest, even though the loan is currently performing. A loan
may remain on accrual status if it is in process of collection and is either
guaranteed or well secured. When a loan is placed on nonaccrual status, unpaid
interest credited to income in the current year is reversed 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 judgement as
to the collectibility of principal. Generally, loans are restored to accrual
status when the obligation is brought current, has performed in accordance with
the contractual terms for a reasonable period of time and the ultimate
collectibility of the total contractual principal and interest is no longer in
doubt.

                                                                            -11-

<PAGE>


         JUNIATA VALLEY FINANCIAL CORP. AND ITS WHOLLY-OWNED SUBSIDIARY,
                             THE JUNIATA VALLEY BANK
                                    BUSINESS

SUMMARY OF LOAN LOSS EXPERIENCE

The following table summarizes the Bank's loan loss experience for each of the
five years ended December 31,

<TABLE>
<CAPTION>
                                                2001           2000           1999            1998           1997
                                                ----           ----           ----            ----           ----
                                                                         (In Thousands)


   <S>                                        <C>            <C>            <C>             <C>            <C>
   Average loans outstanding                  $223,487       $212,270       $193,305        $189,778       $186,510
                                              ========       ========       ========        ========       ========

   Allowance for loan loss at January 1       $  2,497       $  2,486       $  2,477        $  2,390       $  2,350

   Losses charged to allowance
      Commercial                                    58            155              2              37             60
      Real estate                                   51             --             27              13             12
      Consumer                                     128             89            100              93            161
                                              --------       --------       --------        --------       --------

                                                   237            244            129             143            233
                                              --------       --------       --------        --------       --------
   Recoveries credited to allowance
      Commercial                                     2             13             --               1             17
      Real estate                                   19             --             --              --             --
      Consumer                                       5             12             18              19             36
                                              --------       --------       --------        --------       --------

                                                    26             25             18              20             53
                                              --------       --------       --------        --------       --------

   Net charge-offs                                 211            219            111             123            180

   Provision for possible loan losses              240            230            120             210            220
                                              --------       --------       --------        --------       --------

   Allowance for loan losses at December 31   $  2,526       $  2,497       $  2,486        $  2,477       $  2,390
                                              ========       ========       ========        ========       ========

   Ratio of net charge-offs to
      average loans outstanding                    .09%           .10%           .06%            .06%           .10%

</TABLE>

The amount charged to operations and the related balance in the allowance for
loan losses is based upon periodic evaluations of the loan portfolio by
management. These evaluations consider several factors including, but not
limited to, general economic conditions, loan portfolio composition, prior loan
loss experience and management's estimate of future potential losses.

Management maintains an allowance for loan losses that it considers adequate
based on the evaluation process that it performs on a quarterly basis. As part
of this process, management considers it appropriate to maintain a portion of
the allowance that is based on credit quality trends, loan volume, current
economic trends and other uncertainties. This portion of the allowance for loan
losses is reflected as the unallocated portion in the table below that indicates
the distribution of the allowance as of the end of each of the last five years.

<TABLE>
<CAPTION>
                            2001                2000                1999              1998               1997
                            ----                ----                ----              ----               ----
                                                               (In Thousands)

                                 % OF                % of               % of               % of                % of
                      AMOUNT     LOAN     Amount     Loan     Amount    Loan    Amount     Loan    Amount      Loan
                      ------     ----     ------     ----     ------    ----    ------     ----    ------      ----
<S>                   <C>        <C>      <C>        <C>      <C>       <C>     <C>         <C>    <C>          <C>
   Commercial         $  970     11.9%    $  670     12.4%    $  577    10.3%   $  537      9.3%   $  482       9.9%
   Real estate           747     65.7        472     64.3        468    67.3       483     69.3       483      73.4
   Consumer              656     22.4        770     23.3        750    22.4       741     21.4       694      16.7
   Unallocated           153       --        585       --        691      --       716       --       731        --
                      ------     ----     ------     ----     ------    ----    ------     ----    ------      ----
      Total           $2,526      100%    $2,497      100%    $2,486     100%   $2,477      100%   $2,390       100%
                      ======     ====     ======     ====     ======    ====    ======     ====    ======      ====

</TABLE>


-12-

<PAGE>

         JUNIATA VALLEY FINANCIAL CORP. AND ITS WHOLLY-OWNED SUBSIDIARY,
                             THE JUNIATA VALLEY BANK
                                    BUSINESS

SUMMARY OF LOAN LOSS EXPERIENCE (CONTINUED)

While loans secured by real estate mortgages comprise greater than 65% of the
total loan portfolio, historically these accounts have resulted in marginal
loss. Therefore management's evaluation of the loan portfolio indicates a
relatively low allocation of the allowance for this category of loans.

In addition to management's regular reviews, the results of normal examination
of the loan portfolio by representatives of regulatory agencies are also
considered in determining the level at which the allowance should be maintained.
There are no material loans classified for regulatory purposes as loss,
doubtful, substandard or special mention which management expects to impact
future operating results, liquidity or capital resources. Additionally,
management is not aware of any information that would give serious doubt as to
the ability of its borrowers to substantially comply with loan repayment terms.

Highly leveraged transactions (HLTS) generally include loans and commitments
made in connection with recapitalizations, acquisitions and leveraged buyouts,
and result in the borrowers debt-to-total assets ratio exceeding 75%. The Bank
has no loans at December 31, 2001, that qualified as HLTS.


                                                                            -13-

<PAGE>


         JUNIATA VALLEY FINANCIAL CORP. AND ITS WHOLLY-OWNED SUBSIDIARY,
                             THE JUNIATA VALLEY BANK
                                    BUSINESS

DEPOSITS

The average daily amount of deposits and rates paid on such deposits is
summarized for December 31, in the following table:

<TABLE>
<CAPTION>

                                                 2001                       2000                        1999
                                                 ----                       ----                        ----
                                         AMOUNT         RATE        Amount         Rate         Amount         Rate
                                         ------         ----        ------         ----         ------         ----
                                                                     (In Thousands)

<S>                                     <C>                        <C>                         <C>
   Non-interest bearing demand          $ 36,623                   $ 34,827                    $ 34,728
   Interest bearing demand                50,056        2.36%        46,221        2.95%         46,212        2.67%
   Savings deposits                       31,204        2.44         31,033        2.67          33,494        2.72
   Time deposits                         181,085        5.51        175,535        5.52         175,455        5.24
                                         -------                    -------                     -------

      Total                             $298,968                   $287,616                    $289,889
                                        ========                   ========                    ========
</TABLE>

As of December 31, 2001, certificates of deposit outstanding in an individual
amount of $100,000 or more totalled $31,271,000.

The maturity of these certificates of deposits is as follows:

                             Over 3          Over 6
         3 months          through 6       through 12       Over 12
          or less            months          months          months
          -------            ------          ------          ------
                                     (In Thousands)

          $10,504            $3,617          $4,299         $12,851
          =======            ======          ======         =======


-14-

<PAGE>

         JUNIATA VALLEY FINANCIAL CORP. AND ITS WHOLLY-OWNED SUBSIDIARY,
                             THE JUNIATA VALLEY BANK
                                    BUSINESS

QUARTERLY RESULTS OF OPERATIONS

<TABLE>
<CAPTION>

                                                                 Three Months Ended
                                                   March 31     June 30     Sept. 30     Dec. 31
                                                   --------     -------     --------     -------
                                                      (In Thousands, except per share data)
<S>                                                 <C>          <C>         <C>         <C>
FOR THE YEAR 2001
   Interest income                                  $6,311       $6,172      $6,192      $5,966
   Interest expense                                 (3,073)      (3,073)     (3,029)     (2,754)
                                                    ------       ------      ------      ------
   Net interest income                               3,238        3,099       3,163       3,212
   Provision for loan losses                           (60)         (60)        (60)        (60)
   Other income                                        366          563         509         756
   Other expenses                                   (2,160)      (2,145)     (2,138)     (2,153)
                                                    ------       ------      ------      ------
   Income before income taxes                        1,384        1,457       1,474       1,755
   Income taxes                                       (294)        (297)       (352)       (485)
                                                    ------       ------      ------      ------
   Net income                                       $1,090       $1,160      $1,122      $1,270
                                                    ======       ======      ======      ======
   Per-share data:
      Basic and diluted earnings                    $  .46       $  .49      $  .47      $  .54
      Cash dividends                                    --          .39          --         .41

</TABLE>

<TABLE>
<CAPTION>


                                                                Three Months Ended
                                                   March 31     June 30     Sept. 30     Dec. 31
                                                   --------     -------     --------     -------
                                                      (In Thousands, except per share data)
<S>                                                 <C>          <C>         <C>         <C>
FOR THE YEAR 2000
     Interest income                               $ 5,946      $ 6,094     $ 6,288     $ 6,351
     Interest expense                               (2,785)      (2,880)     (3,064)     (3,151)
                                                    ------       ------      ------      ------
     Net interest income                             3,161        3,214       3,224       3,200
     Provision for loan losses                         (45)         (45)        (45)        (95)
     Other income                                      330          339         304         404
     Other expenses                                 (2,058)      (2,023)     (2,025)     (2,078)
                                                    ------       ------      ------      ------
     Income before income taxes                      1,388        1,485       1,458       1,431
     Income taxes                                     (360)        (376)       (336)       (303)
                                                    ------       ------      ------      ------
     Net income                                    $ 1,028      $ 1,109     $ 1,122     $ 1,128
                                                   =======      =======     =======     =======
     Per-share data:
         Basic and diluted earnings                $   .42      $   .46     $   .47     $   .46
         Cash dividends                                .45          .37          --         .39

</TABLE>

                                                                            -15-

<PAGE>

<TABLE>
<CAPTION>

         JUNIATA VALLEY FINANCIAL CORP. AND ITS WHOLLY-OWNED SUBSIDIARY
                             THE JUNIATA VALLEY BANK
            FIVE YEAR FINANCIAL HIGHLIGHTS O SELECTED FINANCIAL DATA


                                         2001             2000              1999            1998              1997
                                         ----             ----              ----            ----              ----
<S>                                    <C>              <C>               <C>             <C>               <C>
BALANCE SHEET DATA (In Thousands)
   Assets                              $356,757         $334,914          $336,119        $343,857          $332,440
   Deposits                             305,468          287,221           283,350         293,890           285,138
   Loans receivable, net                227,998          219,819           204,336         189,485           191,309
   Securities                            98,073           85,571           104,650         123,505           113,757
   Stockholders' equity                  45,326           43,082            43,255          45,980            42,695
   Average equity                        44,348           42,106            44,526          44,448            41,449
   Average assets                       348,331          334,685           339,364         338,295           327,068

EARNINGS DATA (In Thousands)
   Interest income                     $ 24,641         $ 24,679          $ 23,858        $ 24,864          $ 24,317
   Interest expense                      11,929           11,880            11,354          12,136            11,862
                                       --------         --------          --------        --------          --------
   Net interest income                   12,712           12,799            12,504          12,728            12,455
   Provision for loan losses                240              230               120             210               220
                                       --------         --------          --------        --------          --------
   Net interest income after
      provision for loan losses          12,472           12,569            12,384          12,518            12,235
   Other income                           2,194            1,377             1,286           1,182             1,273
   Other expenses                         8,596            8,184             8,032           7,986             7,531
                                       --------         --------          --------        --------          --------
   Income before income taxes             6,070            5,762             5,638           5,714             5,977
   Federal income taxes                   1,428            1,375             1,360           1,313             1,405
                                       --------         --------          --------        --------          --------
   Net income                          $  4,642         $  4,387          $  4,278        $  4,401          $  4,572
                                       ========         ========          ========        ========          ========

RATIOS
   Return on average assets                1.33%            1.31%             1.26%           1.30%             1.40%
   Return on average equity               10.47            10.42              9.61            9.90             11.03
   Equity to assets (year end)            12.71            12.86             12.87           13.37             12.84
   Loans to deposits (year end)           74.64            76.53             72.11           64.47             67.09
   Dividend payout (percentage
      of income)                          40.78            66.90             68.61           37.99             32.68

PER SHARE DATA
   Basic and diluted earnings              1.96             1.81              1.70            1.72              1.79
   Cash dividends                           .80             1.21              1.16             .67               .60
   Book value                             19.28            19.90             19.35           19.73             18.43
   Average shares outstanding         2,368,923        2,420,966         2,519,801       2,553,913         2,560,911
   Approximate number
      of stockholders                     1,719            1,725             1,696           1,607             1,603

</TABLE>


-16-

<PAGE>


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

--------------------------------------------------------------------------------
                              FINANCIAL CONDITION
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>

SOURCES AND USES OF FUNDS TRENDS
                                           2001                               2000                               1999
                                         AVERAGE   Increase  (Decrease)     Average   Increase   (Decrease)    Average
                                         BALANCE    Amount        %         Balance    Amount         %        Balance
                                         -------    ------       ---        -------    ------        ---       -------
                                                                         (Thousands of Dollars)
<S>                                     <C>         <C>          <C>       <C>        <C>           <C>       <C>
Funding uses:
   Interest earning assets:
      Loans:
         Commercial                     $ 66,587    $ 1,843      2.85%     $ 64,744   $  6,058      10.32%    $ 58,686
         Mortgage                        106,611      6,818      6.83        99,793      7,841       8.53       91,952
         Consumer                         50,289      2,556      5.35        47,733      5,066      11.87       42,667
                                        --------    -------                --------   --------                --------

                                         223,487     11,217      5.28       212,270     18,965       9.81      193,305
         Less: Allowance for loan losses  (2,518)         1       .04        (2,519)       (27)      1.08       (2,492)
                                        --------    -------                --------   --------                --------

                                         220,969     11,218      5.35       209,751     18,938       9.92      190,813
      Interest bearing deposits
         with banks                        1,114        442     65.77           672          5        .75          667
      Securities                          86,520    (12,276)   (12.43)       98,796    (22,581)    (18.60)     121,377
      Funds sold                          10,240      6,670    186.83         3,570     (1,985)    (35.73)       5,555
                                        --------    -------                --------   --------                --------

                                          97,874     (5,164)    (5.01)      103,038    (24,561)    (19.25)     127,599
      Total interest earning
         assets                          318,843      6,054      1.94       312,789     (5,623)      1.77      318,412
      Other assets                        29,488      7,592     34.67        21,896        944       4.51       20,952
                                        --------    -------                --------   --------                --------

            Total uses                  $348,331    $13,646      4.08      $334,685   $ (4,679)      1.38     $339,364
                                        ========    =======                ========   ========                ========

Funding sources:
      Deposits:
         Demand                         $ 36,623    $ 1,796      5.16      $ 34,827   $     99        .29     $ 34,728
         Interest bearing demand          50,056      3,835      8.30        46,221          9        .02       46,212
         Savings                          31,204        171       .55        31,033     (2,461)      7.35       33,494
         Time under $100,000             149,814       (612)     (.41)      150,426        (49)      (.03)     150,475
                                        --------    -------                --------   --------                --------

         Total core deposits             267,697      5,190      1.98       262,507     (2,402)      (.91)     264,909
         Time over $100,000               31,271      6,162     24.54        25,109        129        .52       24,980
                                        --------    -------                --------   --------                --------

         Total deposits                  298,968     11,352      3.95       287,616     (2,273)      (.78)     289,889
      Other liabilities                    4,994         31       .62         4,963        301       6.46        4,662
      Short-term borrowings                   21         21    100.00            --       (287)   (100.00)         287
      Stockholders' equity                44,348      2,242      5.32        42,106     (2,420)     (5.44)      44,526
                                        --------    -------                --------   --------                --------

            Total sources               $348,331    $13,646      4.08      $334,685   $ (4,679)     (1.38)    $339,364
                                        ========    =======                ========   ========                ========
</TABLE>


This discussion concerns Juniata Valley Financial Corp. (Corporation) and its
wholly owned subsidiary The Juniata Valley Bank (Bank). The purpose is to focus
on information concerning the Corporation financial condition and results of
operations which is not readily apparent from the consolidated financial
statements. In order to obtain a clear understanding of this discussion, the
reader should reference the consolidated financial statements, the notes to the
statements, and other financial information presented in this Annual Report.

                                                                            -17-

<PAGE>


                      MANAGEMENT'S DISCUSSION AND ANALYSIS
          OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

--------------------------------------------------------------------------------
                        FINANCIAL CONDITION (CONTINUED)
--------------------------------------------------------------------------------

FORWARD-LOOKING STATEMENTS

The information contained in this Annual Report contains forward-looking
statements (as defined in the Securities Exchange Act of 1934), including
without limitation, statements as to the future loan and deposit volumes, the
allowance and provision for possible loan losses, future interest rates and
their effect on the Corporation's financial condition or results of operations,
the classification of the 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 these forward-looking statements
including without limitation, the effect of economic conditions and related
uncertainties, the effect of interest rates on the Corporation, federal and
state government regulation and competition. Certain of these risks,
uncertainties and other factors are discussed in this Annual Report or on Form
10-K for the year ended December 31, 2001, a copy of which may be obtained from
the Corporation upon request without charge.

OVERVIEW

The Corporation functions as a financial intermediary and therefore its
financial condition is analyzed in terms of changes in its sources and uses of
funds. Table 1 presents daily average balances, the dollar change, and
percentage change for the past two years. This table is referenced for the
discussion in this section.

The Corporation's average assets experienced an increase during 2001, reaching
the level of $348,331,000 an increase of $13,646,000 or 4.08% compared to 2000.
From 1999 to 2000 the Corporation experienced a decline in assets of $4,679,000.
The Corporation experienced an increase in average balances of loans of
$11,218,000 or 5.28% from 2000 to 2001. This increase was not as large as the
increase in 2000 over 1999 when loans grew by $18,938,000 or 9.81%. The decline
in the average balance of securities of $12,276,000 or 12.43% was used to fund
these loans. This occurred because normal funding sources in the way of average
balances of core deposits increased by $5,190,000 or 1.98% from 2000 to 2001 but
it was not enough to keep pace with loan demand. Securities declined from 1999
to 2000 by $22,581,000 or 18.60%. In 2001 as securities matured or were called,
money was placed in overnight Federal Funds until loans closed or an appropriate
investment security could be purchased. That is why Funds sold increased
$6,670,000 or 186.83%. Other assets increased because of a $5,000,000 bank-owned
life insurance purchase in the first quarter of 2001. The cash surrender value
of this instrument is included in other assets and revenues generated are
included in other income.

The Corporation's funding sources have increased from 2000 to 2001 by
$11,352,000 or 3.95%. Whereas, there was a decline from 1999 to 2000 of
$2,273,000 or .78%. Core deposits grew by $5,190,000 in 2001 over 2000 with the
largest growth coming in the interest-bearing demand deposits. Core deposits
declined in 2000 over 1999 by $2,402,000. The largest decline came from savings
deposits. Time deposits over $100,000 grew by $6,162,000 in 2001. In 2000 these
time deposits grew by $129,000.

The intense competition from banks and nonbanks in the market area was apparent
in 2001 which lead to a decline in market share.

--------------------------------------------------------------------------------
                             RESULTS OF OPERATIONS
--------------------------------------------------------------------------------

[NET INCOME GRAPHIC OMITTED]

Juniata Valley Financial Corp. reported net income for 2001 of $4,642,000 which
was $255,000 or 5.81% more than the $4,387,000 reported in 2000 and $364,000 or
8.51% more than the $4,278,000 reported in 1999. Basic and diluted earnings per
share were $1.96 in 2001. This is an increase of $.15 from 2000 and an increase
of $.26 over 1999. This increase in earnings per share is a result of both
increased income but also a decline in weighted shares outstanding due to the
stock repurchase program.

-18-

<PAGE>


                      MANAGEMENT'S DISCUSSION AND ANALYSIS
          OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

--------------------------------------------------------------------------------
                       RESULTS OF OPERATIONS (CONTINUED)
--------------------------------------------------------------------------------

The two most widely recognized performance ratios within the financial services
industry are the return on average equity and return on average assets. The
return on average equity ratio presents the net income to average equity
maintained throughout the year. The return on average equity was 10.47% in 2001,
compared to 10.42% in 2000 and 9.61% in 1999.

                                      [RETURN ON AVERAGE EQUITY GRAPHIC OMITTED]


[REETURN ON AVERAGE ASSETS GRAPHIC OMITTED]

Return on average assets presents the income for the year compared to the
average assets maintained throughout the year. The return on average assets was
1.33% in 2001 compared to 1.31% in 2000 and 1.26% in 1999.


In the spring of 2001 the Board of Directors declared a 10% stock dividend. Per
share data has been adjusted in prior years to reflect this event. On a per
share basis $.80 was paid in 2001 down 33.88% from the $1.21 paid in 2000 and
down 31.03% from the $1.16 paid in 1999. The increase of cash dividends in 2000
and 1999 was to help increase the return on equity ratio by returning cash value
to stockholders. The Board of Directors declared a $.45 special dividend to be
paid in the spring of 1999 and 2000.

                                      [CASH DIVIDENDS PER SHARE GRAPHIC OMITTED]


[ASSETS GRAPHIC OMITTED]

The Corporation had an increase in total assets of $21,843,000 or 6.52% at
December 31, 2001. Assets for the year ended December 31, 2001, were
$356,757,000 compared to assets of $334,914,000 at December 31, 2000.

                                                                            -19-

<PAGE>

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
          OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

--------------------------------------------------------------------------------
                       RESULTS OF OPERATIONS (CONTINUED)
--------------------------------------------------------------------------------

The Juniata Valley Bank's allowance for loan losses was $2,526,000 in 2001,
$2,497,000 in 2000 and $2,486,000 in 1999. The provision provided in each of
those years was $240,000 in 2001, $230,000 in 2000 and $120,000 in 1999. The
provision for loan losses exceeded net charge-offs by 13.74%, 5.02%, and 8.11%
in 2001, 2000 and 1999, respectively. In 2001 net charge-offs were .09% of
average loans outstanding. In 2000 and 1999 net charge-offs were .10% and .06%,
respectively of average loans outstanding each year.

Other income increased $817,000 or 59.33% from 2000 to 2001. From 1999 to 2000
the increase was $91,000 or 7.08%. The trust department income increased $48,000
in 2001 over 2000 and $12,000 in 2000 over 1999. This was a result of increased
estate settlements both in number and size. Customer service fees increased
$76,000 for 2001 compared to 2000 and $57,000 for 2000 compared to 1999. The
increases in customer service fees can be attributed to an increase in volume
and not as a result of increased fees. Because there were no realized gains on
the sale of securities in 2001, this created a decrease of $5,000 in 2001 over
2000 and a decrease of $39,000 occurred in net realized gains on sales of
securities in 2000 over 1999. The securities were sold in the fourth quarter of
1999 and were reflective of the higher interest rate environment during this
time period. Income on life insurance increased by $287,000 in 2001 over 2000.
The income on life insurance for 2000 and 1999 was the same. The increase in
income on life insurance is from a new bank-owned life insurance plan put into
place in 2001 that covers Directors retirement and key employees that are not
covered by another plan. The plan also offers life insurance for Director's and
key employees. The other income increased in 2001 over 2000 by $411,000. This
increase can be attributed to $266,000 in a settlement of a long-standing
litigation process in which the Bank was the plaintiff. The Bank also
experienced an increase of $107,000 in alternative investment commissions. The
increase in 2000 over 1999 was $61,000. This increase can be attributed to a
$30,000 transfer agent fee and $20,000 interchange fee on debit cards. Both
increases in 2000 can be attributed to increased usage as opposed to increased
fees. The management of The Juniata Valley Bank seeks product and service
improvements that both strengthen existing customer relationships and help
attract new ones. During 1997, sales of mutual funds were introduced through a
joint marketing arrangement with T.H.E. Financial for those customers desiring
this type of alternative investment. Fee income derived from the sale of this
product in 2001 was $187,000.

Other expenses increased $412,000 or 5.03% over 2000, compared to an increase of
$152,000 from 1999 to 2000. Salaries and wages decreased $72,000 from 2000 to
2001. This compares to a decrease of $19,000 from 1999 to 2000. An early
retirement option was given and six employees took advantage of it in September
2000. Employee benefits decreased $67,000 from 2001 to 2000. From 1999 to 2000
the Bank experienced an increase of $116,000. This was due to price changes of
benefits provided as opposed to changed benefits. Occupancy expense increased by
$77,000 and can be attributed in the Bank's new operations' center in 2001 over
2000. Occupancy expense was virtually unchanged between 1999 and 2000. Equipment
expense increased $229,000 in 2001. The increase was $42,000 in 2000 over 1999.
The increases in equipment expenses are a direct result of increased technology
being offered and additional equipment needed to offer the technology.
Directors' compensation increased by $90,000 which was a result of the new
retirement plan put in place in 2001. Directors' expense declined $50,000 in
2000 over 1999 because of deferred compensation arrangements reaching maturity.
Taxes, other than income is an increase in the Pennsylvania shares tax of
$20,000 in 2001 over 2000 and $27,000 from 1999 to 2000. The $135,000 increase
in 2001 over 2000 in other expenses can be attributed to $68,000 paid for
outsourcing the internal audit, compliance, and loan review function, $42,000
increase in postage, and $25,000 for redesigning the wage and salary
administration. The $37,000 increase in other expenses for the year 2000 can be
attributed to an increase in postage.

On November 12, 1999, The Gramm-Leach-Bliley Act was signed into law. The Act
permits commercial banks to affiliate with investment banks. It permits bank
holding companies to engage in any type of financial activity which includes,
securities, insurance, merchant banking/equity investment, financial in nature,
and complimentary activities. The merchant banking provisions will 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. The commercial bank has to be
well-capitalized, well-managed and CRA-rated satisfactory or better. The Act
also allows subsidiaries of banks to engage in a broad range of financial
activities that are not permitted for banks themselves. In light of this new
legislation, The Corporation and The Juniata Valley Bank will evaluate new
financial activities that would complement the products already offered to
enhance non-interest income.

-20-

<PAGE>


                      MANAGEMENT'S DISCUSSION AND ANALYSIS
          OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

--------------------------------------------------------------------------------
                              NET INTEREST INCOME
--------------------------------------------------------------------------------

Net interest income is the most significant contributor to the Corporation's net
income. During 2001, net interest income decreased .68% to $12,712,000 compared
to an increase of 2.36% from 1999 to 2000. Table 3 shows the interest income,
interest expense and net interest income with the percentage change between the
years.

Table 2 presents average balances, interest income and expense and yields earned
or paid. This table summarizes the components of the net interest income growth.
Interest earning assets increased $6,053,000 or 1.92% in 2001. In 2000 over 1999
there was a decrease of $5,596,000. The largest contributor to interest income
is loans. The yield on loans has declined from 2000 to 2001 by .16%. From 1999
to 2000 the rate increased .20%. The yield on taxable securities decreased .26%
in 2001 and the yield on tax free securities decreased .12%. In 2000 the yield
on taxable securities increased .05% and tax free securities decreased .10%.
Federal funds sold had a decrease of 4.24% in 2001 over 2000 while the
Corporation had an increase of 2.43% from 1999 to 2000. The overall yield on
these interest earning assets for 2001 was a decrease of .16%. This followed an
increase of .40% from 1999 to 2000.

Interest bearing liabilities increased $9,577,000 or 3.79% for 2001. There was a
decrease of $2,659,000 from 1999 to 2000. Time deposits increased by $5,550,000
from 2000 to 2001 and demand deposits bearing interest increased $3,835,000.
Rates paid decreased by .15% in 2001. There was an increase in rates paid from
1999 to 2000 of .26%.

The Corporation's net spread was 3.12% in 2001 down slightly from the 3.13% in
2000 but more than the 2.99% in 1999. Interest spread measures the absolute
difference between average rates earned and average rates paid while net
interest margin reflects the relationship of interest income to earning assets
versus interest expense to earning assets. The Corporation's net interest margin
was 3.96% for 2001 compared to 4.06% in 2000 and 3.89% in 1999.

From Table 4 it can be seen that the decreases in net interest income of $87,000
during 2001 were affected by increases in volume of $303,000 however, and not
surprisingly decreases in rates which declined by $390,000. Volume increased
while rates decreased on interest income which is the same scenario with
interest expense in 2001. Loans added $1,005,000 in volume but had a $340,000
decrease in rates. Securities had both a decrease in volume and rate. Interest
expense experienced a small increase in volume in all categories and a small
decline in rates in all categories also. In 2000 an increase in net interest
income was also due to an increase in volume and a decrease in rates. Interest
income had both an increase in volume and rate while interest expense
experienced a decrease in volume and an increase in rates.

                                                                            -21-

<PAGE>

--------------------------------------------------------------------------------
                    TABLE 2 - ANALYSIS OF NET INTEREST INCOME
--------------------------------------------------------------------------------

Table 2 presents average balances, interest income and expense and the yields
earned or paid on these assets and liabilities. Yields on tax exempt securities
are not presented on a tax equivalent basis. Nonaccrual loans and unrealized
gains on securities are included in "Other assets" under "Noninterest earning
assets".


<TABLE>
<CAPTION>



                                                                       2001
                                                                     INTEREST
                                                        AVERAGE        INCOME        AVERAGE
                                                        BALANCES     (EXPENSE)     YIELD/RATE
                                                        --------     ---------     ----------

                                                                  (IN THOUSANDS)

<S>                                                     <C>          <C>              <C>
INTEREST EARNING ASSETS
   Interest bearing deposits in other banks             $  1,114     $      53        4.76%
   Securities (taxable)                                   44,691         2,692        6.02
   Securities (tax exempt)                                41,829         1,555        3.72
   Federal funds sold                                     10,240           412        4.02
   Loans                                                 223,487        19,929        8.92
                                                        --------     ---------

         Total interest earning assets                   321,361        24,641        7.67
                                                                                      ----
NON-INTEREST EARNING ASSETS
   Cash and due from banks                                 9,596
   Other assets                                           19,892
   Less: allowance for loan losses                        (2,518)
                                                        --------

         Total assets                                   $348,331
                                                        ========
INTEREST BEARING LIABILITIES
   Demand deposits bearing interest                     $ 50,056        (1,183)       2.36%
   Savings deposits                                       31,204          (760)       2.44
   Time deposits                                         181,085        (9,985)       5.51
   Short-term borrowings                                      21            (1)       4.76
                                                        --------     ---------

         Total interest bearing liabilities              262,366       (11,929)       4.55
                                                                     ---------        ----

NON-INTEREST BEARING LIABILITIES
   Demand deposits                                        36,623
   Other liabilities                                       4,994
STOCKHOLDERS' EQUITY                                      44,348
                                                        --------

         Total liabilities and stockholders' equity     $348,331
                                                        ========

NET INTEREST INCOME/SPREAD                                           $ 12,712         3.12%
                                                                     ========         ====

MARGIN ANALYSIS
   Interest income/ earning assets                                                    7.67%
   Interest expense/earning assets                                                    3.71
                                                                                      ----

         Net interest margin                                                          3.96%
                                                                                      ====

</TABLE>

-22-

<PAGE>


<TABLE>
<CAPTION>

--------------------------------------------------------------------------------
                               TABLE 2 (CONTINUED)
--------------------------------------------------------------------------------


                 2000                                      1999
               Interest                                  Interest
 Average        Income       Average       Average        Income        Average
 Balances     (Expense)     Yield/Rate     Balances     (Expense)     Yield/Rate
 --------     ---------     ----------     --------     ---------     ----------

            (In Thousands)                            (In Thousands)
<S>            <C>             <C>          <C>          <C>            <C>
 $    672      $     48        7.14%        $    667     $     44       6.60%
   52,339         3,287        6.28           66,942        4,171       6.23
   46,457         1,785        3.84           54,435        2,147       3.94
    3,570           295        8.26            5,555          324       5.83
  212,270        19,264        9.08          193,305       17,172       8.88
 --------      --------                     --------     --------

  315,308        24,679        7.83          320,904       23,858       7.43
                               ----                                     ----

    9,243                                      9,209
   12,653                                     11,743
   (2,519)                                    (2,492)
 --------                                   --------

 $334,685                                   $339,364
 ========                                   ========


 $ 46,221        (1,363)       2.95%        $ 46,212       (1,233)      2.67%
   31,033          (828)       2.67           33,494         (912)      2.72
  175,535        (9,689)       5.52          175,455       (9,194)      5.24
       --            --          --              287          (15)      5.23
 --------      --------                     --------     --------

  252,789       (11,880)       4.70          255,448      (11,354)      4.44
               --------        ----                       --------      ----



   34,827                                    34,728
    4,963                                     4,662
   42,106                                    44,526
   ------                                    ------

 $334,685                                   $339,364
 ========                                   ========

               $ 12,799        3.13%                     $ 12,504       2.99%
               ========        ====                      ========       ====


                               7.83%                                    7.43%
                               3.77                                     3.54
                               ----                                     ----

                               4.06%                                    3.89%
                               ====                                     ====

</TABLE>

                                                                            -23-

<PAGE>

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
          OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

--------------------------------------------------------------------------------
                         TABLE 3 --- NET INTEREST INCOME
--------------------------------------------------------------------------------

Net interest income, defined as interest income less interest expense, is shown
in the following table:

                             2001     % Change     2000    % Change     1999
                             ----     --------     ----    --------     ----
                                              (In Thousands)

Interest income            $24,641     (.15)%    $24,679     3.44%    $23,858
Interest expense            11,929      .41       11,880     4.63      11,354
                           -------               -------              -------
Net interest income        $12,712     (.68)     $12,799     2.36     $12,504
                           =======               =======              =======


--------------------------------------------------------------------------------
             TABLE 4 - RATE-VOLUME ANALYSIS OF NET INTEREST INCOME
--------------------------------------------------------------------------------

Table 4 attributes increases and decreases in components of net interest income
either to changes in average volume or to changes in average rates for interest
earning assets and interest bearing liabilities. Numerous and simultaneous
balance and rate changes occur during the year. The acmount of change that is
not due solely to volume or tate is allocated roportionally to both.


<TABLE>
<CAPTION>

                                           2001/2000 Increase (Decrease)            2000/1999 Increase (Decrease)
                                                  Due to Change in                         Due to Change in

                                         Volume        Rate           Net         Volume        Rate          Net
                                         ------        ----           ---         ------        ----          ---

<S>                                      <C>           <C>          <C>           <C>           <C>         <C>
Interest bearing deposits
   in other banks                        $   25        $ (20)       $    5        $   --        $   4       $    4
Securities (taxable)                       (465)        (130)         (595)         (931)          47         (884)
Securities (tax free)                      (173)         (57)         (230)         (487)         125         (362)
Federal funds sold                          329         (212)          117           (63)          34          (29)
Loans                                     1,005         (340)          665         2,188          (96)       2,092
                                         ------        -----        ------        ------        -----       ------
      Interest income                       721         (759)          (38)          707          114          821
                                         ------        -----        ------        ------        -----       ------

Demand deposits
   bearing interest                         107         (287)         (180)           --          130          130
Savings deposits                              4          (72)          (68)          (67)         (17)         (84)
Time deposits                               306          (10)          296             4          491          495
Short-term borrowings                         1           --             1           (15)          --          (15)
                                         ------        -----        ------        ------        -----       ------
      Interest expense                      418         (369)           49           (78)         604          526
                                         ------        -----        ------        ------        -----       ------

Increase (decrease)
   in net interest income                $  303        $(390)       $ (87)        $  785        $(490)      $  295
                                         ======        =====        =====         ======        =====       ======


</TABLE>

--------------------------------------------------------------------------------
                                 LOAN PORTFOLIO
--------------------------------------------------------------------------------


[NET LOANS GRAPHIC OMITTED]


At December 31, 2001, net loans increased $8,179,000 or 3.72% over 2000. This
follows an increase in 2000 over 1999 in net loans of $15,483,000 or 7.58%. The
loan to deposit ratio fluctuated throughout 2001; monthly averages were at a low
in December of 72.2% and a high in January of 76.8%. Residential mortgages
increased by $5,242,000 or 4.59% from 2000 to 2001. Residential mortgages
increased by $3,619,000 from 1999 to 2000. Real estate loans still remain a very
attractive option due to the tax deductibility of mortgage interest. Commercial
real estate loans grew by $3,230,000 or 11.27% in 2001 over 2000. Commercial
real estate loans increased by $115,000 from 1999 to 2000. Consumer loans
decreased $1,517,000 or 2.41% in 2001 over 2000. This follows a year with an
increase of $8,581,000 from 1999 to 2000.

-24-

<PAGE>


                      MANAGEMENT'S DISCUSSION AND ANALYSIS
          OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

--------------------------------------------------------------------------------
                           LOAN PORTFOLIO (CONTINUED)
--------------------------------------------------------------------------------

In spite of the slow economy and increasing credit problems nationwide, the
Corporation continued its excellent charge-off record (charge-offs, net of
recoveries) during 2001. For the year, the net charge-offs were $211,000 or .09%
of average loans outstanding. The increase in 2000 was due to a growing loan
portfolio and not as a result of relaxation of underwriting standards. This
compares with $219,000 or .10% for 2000 and $111,000 or .06% for 1999.

The allowance for loan losses is based upon quarterly loan portfolio reviews by
management and a committee of the Board. The purpose of the review is to assess
loan quality, identify impaired loans, analyze delinquencies, ascertain loan
growth, evaluate potential charge-offs and recoveries and assess general
economic conditions in the market served.

Commercial and real estate loans are rated periodically by loan review
personnel. Consumer and residential real estate loans are generally reviewed in
the aggregate as they are of relative small dollar size and homogeneous in
nature.

In addition to economic conditions, loan portfolio diversification, delinquency,
and historic loss experience, consideration is also given to examinations
performed by the regulatory authorities.

To determine the allowance and corresponding provision, the amount required for
specific allocation is first determined. For all types of commercial and
construction loans, this amount is based upon specific borrower data determined
by reviewing non-performing, delinquent, or potentially troubled credits. In
addition, a general allocation is also determined using the same criteria
applied to the total commercial portfolio excluding the specific allocation.
Consumer and residential real estate allowances, which may include specific
allocations, generally are based upon recent charge-off and delinquency history,
other known trends, and expected losses over the remaining lives of these loans,
as well as the condition of local, regional, and national economies.

The unallocated portion of the allowance is the amount which, when added to
these allocated amounts, brings the total to the amount deemed adequate by
management at that time. This unallocated portion is available to absorb losses
sustained anywhere within the portfolio.

Determining the level of the allowance for possible loan losses at any given
period is difficult, particularly during deteriorating or uncertain economic
periods. Management must make estimates using assumptions and information which
is often subjective and changing rapidly. The review of the loan portfolio is a
continuing event in light of a changing economy and the dynamics of the banking
and regulatory environment. It is Management's opinion that the allowance for
loan losses for 2001 of $2,526,000 or 1.11% of outstanding loans is adequate to
meet any foreseeable loan loss contingency. This is lower than the 1.14% for
2000 and the 1.22% for 1999.

At December 31, 2001 and 2000, total non-performing loans were $1,745,000 and
$804,000, respectively; non-performing loans as a percentage of the allowance
for loan losses were 69.08% and 32.20%, respectively. The increase in 2001 was
due mainly from a single credit which the Corporation anticipates no loss to
occur.

In addition, regulatory authorities, as an integral part of their examinations,
periodically review the allowance for possible loan losses. They may require
additions to allowances based upon their judgements about information available
to them at the time of their examination.

It is the policy of the Corporation not to renegotiate the terms of a loan
simply because of a delinquency status. Rather a loan is transferred to
non-accrual status if it is not well secured and in process of collection and is
delinquent in payment of either principal or interest beyond 90 days. Interest
income received on non-accruing loans in 2001 and 2000 was $0.

Real estate acquired through foreclosure is carried at the lower of the recorded
amount of the loan for which the foreclosed property served as collateral or the
fair market value of the property as determined by a current appraisal less
estimated costs to sell (fair value). Prior to foreclosure, the recorded amount
of the loan is reduced, if necessary, to fair value by charging the allowance
for loan losses. Subsequent to foreclosure, gains or losses on the sale of real
estate acquired through foreclosure are recorded in operating income and any
losses determined as a result of periodic valuations are charged to other
operating expense.

Loans with principal and/or interest delinquent 90 days or more which are still
accruing interest were $811,000 at December 31, 2001 up from the $440,000 at
December 31, 2000. Although the economy has stabilized since September 11, 2001,
there is still uncertainty locally for large employers. This may adversely
affect certain borrowers and may cause additional loans to become past due
beyond 89 days or to be placed on non-accrual status because of uncertainty of
receiving full payments of either principal or interest on these loans.

Potential problem loans consist of loans which are performing but for which
credit problems have caused the Corporation to place them on its internally
monitored loan list. At December 31, 2001, such loans amounted to $680,000.
Depending upon the state of the economy and the impact thereon to these
borrowers, as well as future events such as regulatory examination assessment,
these losses and others not currently so identified could be classified as
non-performing assets in the future.

                                                                            -25-

<PAGE>


                      MANAGEMENT'S DISCUSSION AND ANALYSIS
          OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

--------------------------------------------------------------------------------
                  LIQUIDITY AND INTEREST RATE RISK MANAGEMENT
--------------------------------------------------------------------------------

The goals of the Corporation's asset/liability management function, are to
ensure adequate liquidity and to maintain an appropriate balance between the
relative rate sensitivity of interest earning assets and interest bearing
liabilities. Liquidity management encompasses the ability to meet ongoing cash
flow requirements of customers, who, as depositors, may want to withdraw funds
or who, as borrowers, need credit availability. Interest rate sensitivity
management attempts to prove stable net interest margins through changing
interest rate environments and thereby achieve consistent growth in net interest
income.

Liquidity management is influenced by several key elements, including asset
quality and the maturity structure of assets and liabilities. The single most
important source of liquidity for the Corporation is a strong, stable core
deposit base. This funding source has exhibited steady growth over the years and
consists of deposits from customers with long-standing relationships. In 2001
the Corporation funded approximately 77% of its assets with core deposits
acquired in local communities. This core deposit base, combined with
stockholders' equity, funded almost 90% of average assets in 2001 and provides a
substantial and highly stable source of liquidity.

Principal sources of asset liquidity are provided by held to maturity securities
maturing in one year or less, available for sale securities, and other short
term investments such as federal funds sold and cash and due from banks. At
December 31, 2001, these liquid assets amounted to $76,472,000 compared to
liquid assets at December 31, 2000, of $55,014,000. Liquidity is also provided
by scheduled and unscheduled principal repayments of loans.

The Corporation joined the Federal Home Loan Bank (FHLB) of Pittsburgh in August
of 1993 for the purpose of providing short term liquidity when other sources are
unable to fill these needs. The Corporation has a short term line of credit of
$10,000,000. Outstanding balances under this agreement were $1,275,000 at
December 31, 2001. At December 31, 2000, the amount borrowed was $0. The Bank
has a maximum borrowing capacity of $124,238,000 with the FHLB which is
collateralized by qualifying assets of the Bank.

Liability liquidity, which is more difficult to measure, can be met by
attracting deposits and maintaining the core deposit base. The Corporation's
ability to attract deposits depends primarily on several factors including sales
efforts, competitive interest rates, and other conditions which help maintain
consumer confidence in the stability of the financial institution. This
confidence is evaluated by such factors as profitability, capitalization and
overall financial condition.

The Corporation's primary funding requirement is loan demand. From the statement
of cash flows in 2001 loan demand increased by $8,419,000. This was easily
funded by the deposit growth of $18,248,000.


--------------------------------------------------------------------------------
                               REGULATORY MATTERS
--------------------------------------------------------------------------------

The Juniata Valley Bank is subject to periodic examinations by one or more of
the various regulatory agencies. During 2001 an examination was conducted by the
Commonwealth of Pennsylvania, Department of Banking. This examination included
but was not limited to, procedures designed to review lending practices, credit
quality, liquidity, operations and capital adequacy. No comments were received
from this regulatory body which would have a material effect on the
Corporation's liquidity, capital resources or operations.

In July of 2001, the Financial Accounting Standards Board issued Statement No.
141, "Business Combinations" and Statement No. 142, "Goodwill and Other
Intangible Assets".

Statement No. 141 requires all business combinations to be accounted for using
the purchase method of accounting as use of the pooling-of-interests method is
prohibited. In addition, this statement requires that negative goodwill that
exists after the basis of certain acquired assets is reduced to zero should be
recognized as an extraordinary gain. The provisions of this Statement apply to
all business combinations initiated after June 30, 2001.

-26-

<PAGE>

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
          OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

--------------------------------------------------------------------------------
                         REGULATORY MATTERS (CONTINUED)
--------------------------------------------------------------------------------

Statement No. 142 prescribes that goodwill associated with a business
combination and intangible assets with an indefinite useful life should not be
amortized but should be tested for impairment at least annually. The Statement
requires intangibles that are separable from goodwill and that have a
determinable useful life to be amortized over the determinable useful life. The
provisions of this Statement became effective for the Bank in January of 2002
and require that goodwill and other intangible assets arising from acquisitions
completed before July 1, 2001 should be accounted for in accordance with the
provisions of this Statement.

In June of 2001, the Financial Accounting Standards Board issued Statement 143,
"Accounting for Asset Retirement Obligations", which addresses the financial
accounting and reporting for obligations associated with the retirement of
tangible long-lived assets and the associated asset retirement costs. This
Statement requires that the fair value of a liability for an asset retirement
obligation be recognized in the period in which it is incurred if a reasonable
estimate of fair value can be made. The associated asset retirement costs are
capitalized as part of the carrying amount of the long-lived asset. This
Statement will become effective for the Bank on January 1, 2003.

The Financial Accounting Standards Board issued Statement No. 144, "Accounting
for the Impairment of Disposal of Long-Lived Assets", in August 2001. This
Statement supersedes Statement No. 121 of the same name and the accounting and
reporting provisions of APB Opinion No. 30, "Reporting the Results of
Operations-Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions for
the disposal of a segment of a business". This Statement also amends ARB 51,
"Consolidated Financial Statements". The provisions of this Statement became
effective for the Bank on January 1, 2002.

Adoption of these Statements is not expected to have a material impact on the
Bank's financial condition or results of operations.


--------------------------------------------------------------------------------
                                MARKET RATE RISK
--------------------------------------------------------------------------------

The operations of the Corporation are subject to risk resulting from interest
rate fluctuations to the extent that there is a difference between the amount of
the Corporation's interest earning assets and the amount of interest bearing
liabilities that are prepaid/withdrawn, mature or re-price in specified periods.
The principal objective of the Corporation's asset/liability management
activities is to provide consistently higher levels of net interest income while
maintaining acceptable levels of interest rate and liquidity risk and
facilitating the funding needs of the Corporation. The Corporation utilizes an
interest rate sensitivity model as the primary quantitative tool in measuring
the amount of interest rate risk that is present.

The operations of the Corporation do not subject it to foreign currency exchange
or commodity price risk. Also the Corporation does not utilize interest rate
swaps, caps or other hedging transactions.

The Corporation uses several tools to measure and evaluate interest rate risk.
Table 5 provides information about the Corporation's financial instruments that
are sensitive to changes in interest rates. For securities, loans and deposits,
the table presents principal cash flows and related weighted average interest
rates by maturity dates. The Corporation has no market risk sensitive
instruments entered into for trading purposes.

Another tool for analyzing interest rate risk is financial simulation modeling
which captures the impact of not only changing interest rates but also other
sources of cash flow variability including loan and securities prepayments, loan
repricing, and deposit pricing. Financial simulation modeling forecasts both net
interest income and the economic value of liabilities. The Corporation regularly
measures the effects of an up or down 200-basis point "rate shock" which is
deemed to represent the outside limits of any reasonably probable movement in
market interest rates during a one-year time frame. As indicated in Table 6, the
financial simulation analysis revealed that projected net interest income over a
one-year time period is positively affected by higher market interest rates,
while the economic value of equity is adversely affected by higher interest
rates. In a lower interest rate environment the opposite is presented projected
net interest income is adversely affected by and economic value of equity is
favorably affected.

Computations of the projected effects of hypothetical interest rate changes are
based on many assumptions, including relative levels of market interest rates
and loan prepayments. Certain shortcomings are inherent in the computation of
discounted present value and, if key relationships do not unfold as assumed,
actual values may differ from those presented. Further, the computations do not
contemplate certain actions management could undertake in response to changes in
market interest rates.

                                                                            -27-

<PAGE>

<TABLE>
<CAPTION>

--------------------------------------------------------------------------------
                       TABLE 5 - INTEREST RATE SENSITIVITY
           PRINCIPAL AMOUNT BY EXPECTED MATURITY/AVERAGE INTEREST RATE
--------------------------------------------------------------------------------



                                                   2002                   2003                   2004
                                                   ----                   ----                   ----
DECEMBER 31, 2001                                              (Dollars in Thousands)
                                            Amount       Rate      Amount      Rate       Amount       Rate
                                            ------       ----      ------      ----       ------       ----
<S>                                        <C>           <C>       <C>         <C>        <C>          <C>
ASSETS

   Interest bearing and time deposits      $  2,217      2.96%     $ 1,400     3.66%      $    60      4.41%
   Federal funds sold                            --        --           --       --            --        --
   Available for sale securities              7,519      5.21       10,284     5.92         9,112      5.18
   Held to maturity securities                8,351      4.74       10,624     5.12        17,409      4.53

   Loans
      Commercial                             24,548      8.56           --       --            --        --
      Consumer                               11,799      8.72        9,435     9.33         7,387      9.03
      Real estate mortgage                  135,815      7.87          876     7.79           922      7.78


LIABILITIES

   Interest bearing demand deposits          51,769      2.36           --       --            --        --
   Savings deposits                          32,281      2.44           --       --            --        --
   Certificates of deposit                  112,800      4.73       47,917     5.18        11,163      4.83

</TABLE>

--------------------------------------------------------------------------------

<TABLE>
<CAPTION>

                                                   2001                   2002                   2003
                                                   ----                   ----                   ----
DECEMBER 31, 2000                                              (Dollars in Thousands)
                                            Amount       Rate      Amount      Rate       Amount       Rate
                                            ------       ----      ------      ----       ------       ----
<S>                                        <C>           <C>       <C>         <C>        <C>          <C>
ASSETS
     Interest bearing deposits             $    676      5.65%          --       --            --        --
     Federal funds sold                       4,400      6.44           --       --            --        --
     Available for sale securities           10,171      5.59      $ 7,487     5.74%      $ 3,750      5.68%
     Held to maturity securities              4,986      5.63        4,582     5.79         9,207      4.95

     Loans
         Commercial                          23,327      9.36           --       --            --        --
         Consumer                            12,287      9.37        8,557     9.22         7,105      9.55
         Real estate mortgage               129,819      8.11          930     8.13           961      8.13


LIABILITIES

     Interest bearing demand deposits        47,220      2.95           --       --            --        --
     Savings deposits                        29,191      2.67           --       --            --        --
     Certificates of deposit                108,609      5.71       38,396     6.12        21,480      6.00

</TABLE>

-28-

<PAGE>

--------------------------------------------------------------------------------
                               TABLE 5 (CONTINUED)
--------------------------------------------------------------------------------

                                                                      Fair Value
        2005               2006             Thereafter       Total    December
        ----               ----             ----------       -----    31, 2001
                             (Dollars in Thousands)                   ---------
  Amount     Rate    Amount     Rate     Amount     Rate
  ------     ----    ------     ----     ------     ----

      --       --        --       --         --       --   $  3,677   $  3,677
      --       --        --       --         --       --         --         --
   8,476     5.67     6,932     6.01     11,315     5.39     53,638     54,663
     500     6.00       961     3.50        767     5.33     38,612     39,435

      --       --        --       --         --       --     24,548   $ 24,548
 $ 4,949     8.79%  $ 3,271     8.78%   $15,240     8.89%    52,081     52,283
     983     7.77     1,045     7.76     11,728     7.59    151,369    151,620



      --       --        --       --         --       --     51,769     51,769
      --       --        --       --         --       --     32,281     32,281
   5,050     5.82     6,399     5.14         --       --    183,329    186,842


--------------------------------------------------------------------------------


                                                                      Fair Value
        2004               2005             Thereafter       Total    December
        ----               ----             ----------       -----    31, 2000
                             (Dollars in Thousands)                   ---------
  Amount     Rate    Amount     Rate     Amount     Rate
  ------     ----    ------     ----     ------     ----

      --       --        --       --         --       --   $    676   $    676
      --       --        --       --         --       --      4,400      4,400
 $ 2,372     6.12%  $ 1,763     6.15%   $ 8,233     6.31%    32,591     33,146
  18,031     4.42    13,659     4.37        775     5.31     51,240     50,967


      --       --        --       --         --       --     23,327     23,327
   5,156     9.45     3,138     9.45     17,352     9.48     53,595     53,535
     962     8.11     1,952     8.06      8,273     8.15    142,897    141,833


      --       --        --       --         --       --     47,220     47,220
      --       --        --       --         --       --     29,191     29,191
   5,415     5.37     3,016     6.13         --       --    176,916    177,656


                                                                            -29-

<PAGE>

<TABLE>
<CAPTION>

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
          OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)


--------------------------------------------------------------------------------
            TABLE 6 - SENSITIVITY TO CHANGE IN MARKET INTEREST RATES
--------------------------------------------------------------------------------


                                                                Interest Rate Scenarios
                                                                -----------------------
                                                 -200 bps       -100 bps        +100 bps       +200 bps
                                                 --------       --------        --------       --------
DECEMBER 31, 2001                                                    (In Thousands)

<S>                                              <C>            <C>             <C>            <C>
Prospective one-year net interest income:
   Projected                                     $12,390        $12,551         $12,804        $12,896
   Percent change                                  (2.53)%        (1.27)%           .72%          1.45%

Economic value of portfolio equity:
   Projected                                      47,820         46,573          43,544         41,763
   Percent change                                   5.50%          2.75%          (3.93)%        (7.86)%

</TABLE>

<TABLE>
<CAPTION>


                                                                Interest Rate Scenarios
                                                                -----------------------
                                                 -200 bps       -100 bps        +100 bps       +200 bps
                                                 --------       --------        --------       --------
DECEMBER 31, 2000                                                    (In Thousands)

<S>                                              <C>            <C>             <C>            <C>
Prospective one-year net interest income:
   Projected                                     $12,205        $12,527         $13,049        $13,299
   Percent change                                  (4.64)%        (2.13)%          1.95%          3.91%

Economic value of portfolio equity:
   Projected                                      43,582         43,332          42,810         42,488
   Percent change                                   1.16%           .58%           (.63)%        (1.38)%

</TABLE>

Key assumptions:

1. Residential mortgage loans and mortgage-backed securities prepay at
   rate-sensitive speeds consistent with observed historical prepayment speeds
   for pools of residential mortgages.
2. Variable rate loans and variable rate liabilities reprice in accordance
   with their contractual terms, if any. Rate changes for adjustable rate
   mortgages are constrained by their contractual caps and floors.
3. Interest-bearing nonmaturity deposits reprice in response to different
   interest rate scenarios consistent with the Corporation's historical rate
   relationships to market interest rates.
4. Interest rate scenarios assume a three month ramp in the term structure of
   interest rates.


-30-

<PAGE>

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
          OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

--------------------------------------------------------------------------------
                                    CAPITAL
--------------------------------------------------------------------------------

On March 20, 2001, the Board of Directors of the Juniata Valley Financial Corp.
declared a 10% stock dividend to shareholders payable on April 27, 2001. 182,210
shares were issued from treasury stock and 32,320 shares were issued from
authorized and unissued. At this same meeting the Board of Directors authorized
the repurchase of 100,000 shares outstanding of common stock. As of December 1,
2001, 8,929 shares were repurchased with 91,071 shares remaining. Shares are
also reissued for the dividend reinvestment plan as well as the employee stock
purchase plan. At December 31, 2001 and 2000 treasury stock was 21,934 and
167,110 shares, respectively at a cost of $623,000 and $5,132,000.

The Corporation maintains a strong capital base to take advantage of business
opportunities while ensuring that it has resources to absorb the risks inherent
in the business. The federal banking regulators have established capital
adequacy requirements for banks and bank holding companies by using risk-based
capital framework and by monitoring compliance with minimum leverage guidelines.
These guidelines are based on "risk adjusted" factors, which means assets with
potentially higher credit risk will require more capital backing than assets
with lower credit risk.

The FDIC classified capital into two tiers, referred to as Tier I and Tier II.
Tier I capital consists of common stockholders' equity (excluding the net
unrealized appreciation on securities available for sale), noncumulative and
cumulative (bank holding companies only) perpetual stock, and minority interests
less goodwill. Tier II capital consists of allowance for loan and lease losses,
perpetual preferred stock (not included in Tier I), hybrid capital instruments,
term subordinated debt, and intermediate-term preferred stock. Since December
31, 1992, all banks have been required to meet a minimum ratio of 8.00% and
qualifying total capital to risk adjusted total assets with at least 4% Tier I
capital and 8% of risk-adjusted assets in total capital. As indicated on the
schedule following this discussion, the Tier I risk-based capital ratio was
18.46% and Tier II risk-based capital ratio was 19.56% at December 31, 2001. The
Bank's capital ratios are well above the current minimum ratio requirement set
forth by federal banking regulators.

In addition to risk-based requirements, the Federal Reserve Board has
established minimum leverage guidelines for bank holding companies. For most
banks, the minimum leverage rate is 3% plus an additional cushion of 100 to 200
basis points depending on risk profiles and other factors. As of December 31,
2001, the leverage ratio was 11.98%.


[STOCKHOLDERS' EQUITY GRAPHIC OMITTED]

<TABLE>
<CAPTION>


CAPITAL ANALYSIS                                                                     December 31,
                                                                                     ------------
                                                                        2001             2000            1999
                                                                        ----             ----            ----
                                                                                (Thousands of Dollars)
<S>                                                                   <C>              <C>             <C>
Tier I
   Common stockholders' equity (excluding unrealized
      gains/losses on securities)                                     $ 42,515         $ 40,999        $ 41,833

Tier II
   Allowable portion of allowance for loan losses                        2,526            2,497           2,486
                                                                      --------         --------        --------

   Risk-based capital                                                 $ 45,041         $ 43,496        $ 44,319
                                                                      ========         ========        ========

Risk adjusted assets (including off-balance-sheet exposures)          $230,325         $222,052        $213,490
                                                                      ========         ========        ========

Tier I risk-based capital ratio                                          18.46%           18.46%          19.59%
Total risk-based capital ratio                                           19.56%           19.59%          20.76%
Leverage ratio                                                           11.98%           12.30%          12.33%

</TABLE>


                                                                            -31-

<PAGE>


                      MANAGEMENT'S DISCUSSION AND ANALYSIS
          OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

--------------------------------------------------------------------------------
                              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 will usually
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 conditions.

It is difficult to predict what will happen in 2002 because of many
uncertainties surrounding the economy. However, the Corporation's management and
Board of Directors are looking forward to meeting the challenges a changing
economy can present. The Corporation's commitment to providing quality banking
services for the communities it serves will continue through 2002. This
community-based strategy gives management the opportunity to recognize steady
growth in our consumer, mortgage and commercial loans as well as in our core
deposit base. The Corporation's strong capital and earnings potential provide
the solid foundation needed to excel in the ever-changing banking industry.
Management feels it is positioned to handle changes in the economic environment
in 2002 through effective asset/liability management. Juniata Valley Financial
Corp. is committed to providing stockholders with an attractive return on their
investment.


--------------------------------------------------------------------------------
                              FEDERAL INCOME TAXES
--------------------------------------------------------------------------------

The provision for income taxes for 2001 was $1,428,000 compared to $1,375,000 in
2000 and $1,360,000 in 1999. The effective tax rate, which is the ratio of
income tax expense to income before income taxes, was 23.53% in 2001, a decrease
from the 23.86% in 2000 and 24.12% in 1999. The tax rate for all periods was
less than the statutory rate of 34% due to tax exempt securities and loan income
and tax free earnings on the bank-owned life insurance. Please refer to the
Notes to the Consolidated Financial Statements "Income Taxes" for further
analysis of federal income tax expense.

-32-

<PAGE>

{LETTERHEAD GRAPHIC OMITTED]


                          INDEPENDENT AUDITOR'S REPORT



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


     We have audited the accompanying consolidated balance sheets of Juniata
Valley Financial Corp. and its wholly-owned subsidiary, The Juniata Valley Bank,
as of December 31, 2001 and 2000, and the related consolidated statements of
income, stockholders' equity and cash flows for each of the three years in the
period ended December 31, 2001. These financial statements are the
responsibility of the Corporation's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

     We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. 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, 2001 and 2000, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 2001 in
conformity with accounting principles generally accepted in the United States of
America.




                                           /s/ Beard Miller Company LLP

Harrisburg, Pennsylvania
January 18, 2002

                                                                            -33-

<PAGE>

<TABLE>
<CAPTION>

         JUNIATA VALLEY FINANCIAL CORP. AND ITS WHOLLY-OWNED SUBSIDIARY,
                             THE JUNIATA VALLEY BANK
                          CONSOLIDATED BALANCE SHEETS

                                     ASSETS
                                     ------
                                                                                                   December 31,
                                                                                                   ------------
                                                                                                2001          2000
                                                                                                ----          ----
                                                                                         (In Thousands, Except Share Data)

<S>                                                                                           <C>           <C>
Assets:
   Cash and due from banks                                                                    $ 11,571      $ 10,621
   Interest bearing deposits with banks                                                             87           676
   Federal funds sold                                                                               --         4,400
                                                                                              --------      --------

            Cash and cash equivalents                                                           11,658        15,697
   Interest bearing time deposits with banks                                                     3,590            --
   Securities available for sale                                                                54,663        33,146
   Securities held to maturity, fair value 2001 $39,435; 2000 $50,967                           38,612        51,240
   Federal Home Loan Bank stock                                                                  1,208         1,185
   Loans receivable, net of allowance for loan losses 2001 $2,526; 2000 $2,497                 227,998       219,819
   Bank premises and equipment, net                                                              6,068         5,992
   Accrued interest receivable and other assets                                                 12,960         7,835
                                                                                              --------      --------

        Total assets                                                                          $356,757      $334,914
                                                                                              ========      ========


                      LIABILITIES AND STOCKHOLDERS' EQUITY
                      ------------------------------------

Liabilities:
   Deposits:
      Non-interest bearing                                                                    $ 38,089     $  33,893
      Interest bearing                                                                         267,379       253,327
                                                                                              --------      --------

        Total deposits                                                                         305,468       287,220

   Short-term borrowings                                                                         1,275
   Accrued interest payable and other liabilities                                                4,688         4,612
                                                                                              --------      --------

        Total liabilities                                                                      311,431       291,832
                                                                                              --------      --------

Stockholders' equity:
   Preferred stock, no par value; 500,000 shares authorized; no shares                              --            --
       issued or outstanding
   Common stock, par value $1.00 per share; authorized 20,000,000 shares;
       issued 2001 2,372,934 shares; 2000 2,332,058 shares                                       2,373         2,332
   Surplus                                                                                      20,221        20,398
   Retained earnings                                                                            22,679        25,117
   Accumulated other comprehensive income                                                          676           367
   Treasury stock, at cost 2001 21,934 shares; 2000 167,110 shares                                (623)       (5,132)
                                                                                              --------      --------

        Total stockholders' equity                                                              45,326        43,082
                                                                                              --------      --------

        Total liabilities and stockholders' equity                                            $356,757      $334,914
                                                                                              ========      ========
</TABLE>

                SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

-34-

<PAGE>

<TABLE>
<CAPTION>

         JUNIATA VALLEY FINANCIAL CORP. AND ITS WHOLLY-OWNED SUBSIDIARY,
                             THE JUNIATA VALLEY BANK
                       CONSOLIDATED STATEMENTS OF INCOME


                                                                                     Years Ended December 31,
                                                                                     ------------------------
                                                                             2001             2000             1999
                                                                             ----             ----             ----
                                                                             (In Thousands, Except Per Share Data)
<S>                                                                        <C>              <C>              <C>
Interest income:
   Loans receivable, including fees                                        $19,929          $19,264          $17,172
   Taxable securities                                                        2,692            3,287            4,171
   Tax-exempt securities                                                     1,555            1,785            2,147
   Other                                                                       465              343              368
                                                                           -------          -------          -------

      Total interest income                                                 24,641           24,679           23,858
                                                                           -------          -------          -------

Interest expense:
   Deposits                                                                 11,928           11,880           11,339
   Short-term borrowings                                                         1               --               15
                                                                           -------          -------          -------

      Total interest expense                                                11,929           11,880           11,354
                                                                           -------          -------          -------

      Net interest income                                                   12,712           12,799           12,504

Provision for loan losses                                                      240              230              120
                                                                           -------          -------          -------

      Net interest income after provision for loan losses                   12,472           12,569           12,384
                                                                           -------          -------          -------

Other income:
   Trust department                                                            435              387              375
   Customer service fees                                                       627              551              494
   Net realized gains on sales of securities                                    --                5               44
   Income on life insurance                                                    362               75               75
   Other                                                                       770              359              298
                                                                           -------          -------          -------

      Total other income                                                     2,194            1,377            1,286
                                                                           -------          -------          -------

Other expenses:
   Salaries and wages                                                        3,496            3,568            3,587
   Employee benefits                                                         1,109            1,176            1,060
   Occupancy                                                                   575              498              499
   Equipment                                                                 1,204              975              933
   Director compensation                                                       361              271              321
   Taxes, other than income                                                    485              465              438
   Other                                                                     1,366            1,231            1,194
                                                                           -------          -------          -------

      Total other expenses                                                   8,596            8,184            8,032
                                                                           -------          -------          -------

      Income before income taxes                                             6,070            5,762            5,638

Federal income taxes                                                         1,428            1,375            1,360
                                                                           -------          -------          -------

      Net income                                                           $ 4,642          $ 4,387          $ 4,278
                                                                           =======          =======          =======

Per share data:
   Basic and diluted earnings                                              $  1.96          $  1.81          $  1.70
                                                                           =======          =======          =======

   Cash dividends                                                          $  0.80          $  1.21          $  1.16
                                                                           =======          =======          =======

</TABLE>

                SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                                                            -35-

<PAGE>

<TABLE>
<CAPTION>

         JUNIATA VALLEY FINANCIAL CORP. AND ITS WHOLLY-OWNED SUBSIDIARY,
                             THE JUNIATA VALLEY BANK
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                                                             Years Ended December 31, 2001, 2000 and 1999
                                                             --------------------------------------------
                                                                                    Accumulated
                                                                                       Other
                                               Common                  Retained    Comprehensive  Treasury
                                               Stock       Surplus     Earnings        Income       Stock        Total
                                               -----       -------     --------        ------       -----        -----
                                                                            (In Thousands)

<S>                                            <C>         <C>          <C>             <C>        <C>          <C>
Balance, December 31, 1998                     $2,332      $20,580      $22,322         $ 816      $   (70)     $45,980
                                                                                                                -------
Comprehensive income:
   Net income                                      --           --        4,278            --           --        4,278
   Change in unrealized gains (losses)
      on securities available for sale,
      net of reclassification adjustment
      and tax effects                              --           --           --          (714)          --         (714)
                                                                                                                -------
   Total comprehensive income                                                                                     3,564
                                                                                                                -------

   Cash dividends declared                         --           --       (2,935)           --           --       (2,935)
   Treasury stock issued under dividend
      reinvestment plan                            --          (21)          --            --          462          441
   Treasury stock issued under
      employee stock purchase plan                 --           --           --            --           28           28
   Treasury stock acquired                         --           --           --            --       (3,823)      (3,823)
                                               ------      -------      -------         -----      -------      -------
Balance, December 31, 1999                      2,332       20,559       23,665           102       (3,403)      43,255
                                                                                                                -------
Comprehensive income:
   Net income                                      --           --        4,387            --           --        4,387
   Change in unrealized gains (losses)
      on securities available for sale,
      net of reclassification adjustment
      and tax effects                              --           --           --           265           --          265
                                                                                                                -------

   Total comprehensive income                                                                                     4,652
                                                                                                                -------

   Cash dividends declared                         --           --       (2,935)           --           --       (2,935)
   Treasury stock issued under dividend
      reinvestment plan                            --         (161)          --            --          546          385
   Treasury stock issued under
      employee stock purchase plan                 --           --           --            --            1            1
   Treasury stock acquired                         --           --           --            --       (2,276)      (2,276)
                                               ------      -------      -------         -----      -------      -------
Balance, December 31, 2000                      2,332       20,398       25,117           367       (5,132)      43,082
                                                                                                                -------
Comprehensive income:
   Net income                                      --           --        4,642            --           --       4,642
   Change in unrealized gains (losses)
      on securities available for sale,
      net of reclassification adjustment
      and tax effects                              --           --           --           309           --          309
                                                                                                                -------

   Total comprehensive income                                                                                     4,951
                                                                                                                -------

   Stock issued under dividend
      reinvestment plan                             7          166           --            --           --          173
   Cash dividends declared                         --           --       (1,893)           --           --       (1,893)
   10% common stock dividend                       32         (373)      (5,187)           --        5,517          (11)
   Stock issued under employee stock
      purchase plan                                 2           30           --            --           --           32
   Treasury stock issued under dividend
      reinvestment plan                            --           --           --            --          181          181
Treasury stock acquired                            --           --           --            --       (1,189)      (1,189)
                                               ------      -------      -------         -----      -------      -------
BALANCE, DECEMBER 31, 2001                     $2,373      $20,221      $22,679         $ 676      $  (623)     $45,326
                                               ======      =======      =======         =====      =======      =======

</TABLE>


                SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

-36-

<PAGE>

<TABLE>
<CAPTION>

         JUNIATA VALLEY FINANCIAL CORP. AND ITS WHOLLY-OWNED SUBSIDIARY,
                             THE JUNIATA VALLEY BANK
                     CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                                                       Years Ended December 31,
                                                                                       ------------------------
                                                                               2001            2000             1999
                                                                               ----            ----             ----
                                                                                          (In Thousands)
<S>                                                                          <C>              <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES
   Net income                                                                $ 4,642          $ 4,387          $ 4,278
   Adjustments to reconcile net income to net cash
    provided by operating activities:
      Provision for loan losses                                                  240              230              120
      Provision for depreciation                                                 396              323              291
      Net amortization of securities' premiums                                   177              158               89
      Net realized gains on sales of securities                                   --               (5)             (44)
      Deferred compensation plans' expense                                       528              378              421
      Payment of deferred compensation                                          (252)            (199)            (174)
      Deferred income taxes                                                     (103)            (110)             (57)
      (Increase) decrease in accrued interest receivable and other assets        196              (11)              (7)
      Increase (decrease) in accrued interest payable and other liabilities     (199)             158              241
      Increase in investment life insurance                                     (377)            (119)             (96)
                                                                             -------          -------          -------

         Net cash provided by operating activities                             5,248            5,190            5,062
                                                                             -------          -------          -------

CASH FLOWS FROM INVESTING ACTIVITIES
   Net increase in interest bearing time deposits                             (3,590)              --               --
   Purchases of available for sale securities                                (40,760)          (1,141)            (470)
   Purchase of FHLB stock                                                        (23)             (10)            (415)
   Proceeds from sales of available for sale securities                           --               10            2,195
   Proceeds from maturities of and principal repayments
       on available for sale securities                                       19,629           12,274           18,066
   Purchases of held to maturity securities                                     (961)            (701)         (16,474)
   Proceeds from maturities of and principal repayments
       on held to maturity securities                                         13,494            8,895           14,684
   Net increase in loans receivable                                           (8,419)         (15,712)         (14,971)
   Purchase of investment in life insurance                                   (5,000)              --               --
   Net purchases of bank premises and equipment                                 (473)          (2,887)            (842)
                                                                             -------          -------          -------

         Net cash provided by (used in) investing activities                 (26,103)             728            1,773
                                                                             -------          -------          -------

CASH FLOWS FROM FINANCING ACTIVITIES
   Net increase (decrease) in deposits                                        18,248            3,870          (10,540)
   Net increase (decrease) in short-term borrowings                            1,275           (5,300)           5,300
   Cash dividends and cash paid for fractional shares                         (1,904)          (2,935)          (2,935)
   Purchase of treasury stock                                                 (1,189)          (2,276)          (3,823)
   Treasury stock issued                                                         181              386              469
   Stock issued for dividend reinvestment
      and employee stock purchase plan                                           205               --               --
                                                                             -------          -------          -------

         Net cash provided by (used in) financing activities                  16,816           (6,255)         (11,529)
                                                                             -------          -------          -------

         Decrease in cash and cash equivalents                                (4,039)            (337)          (4,694)

Cash and cash equivalents:
   Beginning                                                                  15,697           16,034           20,728
                                                                             -------          -------          -------

   Ending                                                                    $11,658          $15,697          $16,034
                                                                             =======          =======          =======

Supplementary cash flows information:
   Interest paid                                                             $11,967          $11,843          $11,397
                                                                             =======          =======          =======

   Income taxes paid                                                         $ 1,470          $ 1,520          $ 1,460
                                                                             =======          =======          =======
</TABLE>


                SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                                                            -37-

<PAGE>

         JUNIATA VALLEY FINANCIAL CORP. AND ITS WHOLLY-OWNED SUBSIDIARY,
                             THE JUNIATA VALLEY BANK
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of consolidation:
     The accompanying consolidated financial statements include the accounts of
     Juniata Valley Financial Corp. (the Corporation), a bank holding company,
     and its wholly-owned subsidiary, The Juniata Valley Bank (the Bank). All
     significant intercompany accounts and transactions have been eliminated.

Nature of operations:
     The Bank operates under a state bank charter and provides full banking
     services, including trust services. As a state bank, the Bank is subject to
     regulation of 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. The area served by the
     Bank is principally the counties of Juniata, Mifflin, Perry, Huntingdon,
     Centre, Franklin and Snyder, Pennsylvania.

Estimates:
     The preparation of financial statements in conformity with accounting
     principles generally accepted in the United States of America 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.

Presentation of cash flows:
     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.

Interest bearing time deposits with banks:
     Interest bearing deposits with banks consists of certificates of deposits
     in other banks with maturities within one year to three years.

Securities:
     Securities classified as available for sale are those debt securities that
     the Corporation 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
     movements in interest rates, changes in the maturity mix of the Bank's
     assets and liabilities, liquidity needs, regulatory capital considerations
     and other similar factors. Securities available for sale are carried at
     fair value. Unrealized gains and losses are reported in other comprehensive
     income, net of the related deferred tax effect. Realized gains or losses,
     determined on the basis of the cost of specific securities sold, are
     included in earnings. Premiums and discounts are recognized in interest
     income using the interest method over the period to maturity.

     Securities classified as held to maturity are those debt securities the
     Corporation has both the intent and ability to hold to maturity regardless
     of changes in market conditions, liquidity needs or changes in general
     economic conditions. These securities are carried at cost adjusted for
     amortization of premium and accretion of discount, computed by the interest
     method over the period to maturity.

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

     Federal law requires a member institution of the Federal Home Loan Bank
     system to hold stock of its district Federal Home Loan Bank according to a
     predetermined formula. The stock is carried at cost.

Loans receivable:
     Loans receivable that management has the intent and ability to hold for the
     foreseeable future or until maturity or payoff are stated at their
     outstanding unpaid principal balances, net of unearned discount and an
     allowance for loan losses. Interest income is accrued on the unpaid
     principal balance. Unearned discount on discounted loans is amortized to
     income over the life of the loans, using the interest method.

-38-

<PAGE>


         JUNIATA VALLEY FINANCIAL CORP. AND ITS WHOLLY-OWNED SUBSIDIARY,
                             THE JUNIATA VALLEY BANK
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Loans receivable (continued):
     The accrual of interest is generally discontinued when the contractual
     payment of principal or interest has become 90 days past due or management
     has serious doubts about further collectibility of principal or interest,
     even though the loan is currently performing. A loan may remain on accrual
     status if it is in the process of collection and is either guaranteed or
     well secured. When a loan is placed on nonaccrual status, unpaid interest
     credited to income in the current year is reversed 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 collectibility of principal. Generally, loans are
     restored to accrual status when the obligation is brought current, has
     performed in accordance with the contractual terms for a reasonable period
     of time and the ultimate collectibility of the total contractual principal
     and interest is no longer in doubt.

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.

     The allowance for loan losses is maintained at a level considered adequate
     to provide for losses that can be reasonably anticipated. 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 change, including the amounts and timing
     of future cash flows expected to be received on impaired loans.

     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
     loan 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.

Bank premises and equipment:
     Bank premises and equipment are stated at cost less accumulated
     depreciation. Depreciation is computed principally on the straight-line
     method over the estimated useful lives of the related assets.

Foreclosed real estate:
     Foreclosed assets, which are recorded in other assets, include properties
     acquired through foreclosure or in full or partial satisfaction of the
     related loan. Foreclosed assets are initially recorded at fair value, net
     of estimated selling costs, at the date of foreclosure. After foreclosure,
     valuations are periodically performed by management and the real estate is
     carried at the lower of carrying amount or fair value, less estimated costs
     to sell. Revenue and expenses from operations and changes in the valuation
     allowance are included in other expenses.


                                                                            -39-

<PAGE>

         JUNIATA VALLEY FINANCIAL CORP. AND ITS WHOLLY-OWNED SUBSIDIARY,
                             THE JUNIATA VALLEY BANK
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Income taxes:
     Deferred taxes are provided on the liability method whereby deferred tax
     assets are recognized for deductible temporary differences and deferred tax
     liabilities are recognized for taxable temporary differences. Temporary
     differences are the differences between the reported amounts of assets and
     liabilities in the financial statements and their tax basis. 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.

     The Corporation and its subsidiary file a consolidated federal income tax
     return.

Advertising:
     Advertising costs are expensed as incurred.

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 in the balance
     sheet when they are funded.

Earnings per common share:
     Basic earnings per share represents income available to common shareholders
     divided by the weighted average number of common shares outstanding during
     the period, as adjusted for the stock dividend. Diluted earnings per share
     reflects additional common shares that would have been outstanding if
     dilutive potential common shares had been issued, as well as any adjustment
     to income that would result from the assumed issuance. Potential common
     shares that may be issued by the Corporation relate solely to outstanding
     stock options and are determined using the treasury stock method. For the
     year ended December 31, 2001, outstanding options did not have a dilutive
     impact on earnings per share.

     The weighted average number of common shares outstanding was 2,368,923,
     2,420,966 and 2,519,801 in 2001, 2000 and 1999, respectively.

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

     The components of other comprehensive income (loss) and related tax effects
     are as follows:

<TABLE>
<CAPTION>
                                                                                       Years Ended December 31,
                                                                                       ------------------------
                                                                                2001             2000            1999
                                                                                ----             ----            ----
                                                                                            (In Thousands)
         <S>                                                                    <C>              <C>           <C>
         Unrealized holding gains (losses) on available for sale securities     $470             $405          $(1,008)
         Reclassification adjustment for gains realized in income                 --               (5)             (44)
                                                                                ----             ----          -------

         Net unrealized gains (losses)                                           470              400           (1,052)

         Tax effect                                                              161              135             (338)
                                                                                ----             ----          -------

            Net of tax amount                                                   $309             $265          $  (714)
                                                                                ====             ====          =======

</TABLE>

-40-

<PAGE>

         JUNIATA VALLEY FINANCIAL CORP. AND ITS WHOLLY-OWNED SUBSIDIARY,
                             THE JUNIATA VALLEY BANK
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Reclassifications:
     Certain amounts in the 2000 and 1999 financial statements have been
     reclassified to conform with the 2001 presentation format. Such
     reclassifications had no impact on the Corporations' net income.

Segment reporting:
     The Bank 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 Bank 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 Bank. As such, discrete financial information is not available and
     segment reporting would not be meaningful.

New accounting standards:
     In July of 2001, the Financial Accounting Standards Board issued Statement
     No. 141, "Business Combinations," and Statement No. 142, "Goodwill and
     Other Intangible Assets."

     Statement No. 141 requires all business combinations to be accounted for
     using the purchase method of accounting as use of the pooling-of-interests
     method is prohibited. In addition, this Statement requires that negative
     goodwill that exists after the basis of certain acquired assets is reduced
     to zero should be recognized as an extraordinary gain. The provisions of
     this Statement apply to all business combinations initiated after June 30,
     2001.

     Statement No. 142 prescribes that goodwill associated with a business
     combination and intangible assets with an indefinite useful life should not
     be amortized but should be tested for impairment at least annually. The
     Statement requires intangibles that are separable from goodwill and that
     have a determinable useful life to be amortized over the determinable
     useful life. The provisions of this Statement became effective for the Bank
     in January 2002 and require that goodwill and other intangible assets
     arising from acquisitions completed before July 1, 2001 be accounted for in
     accordance with the provisions of this Statement.

     In June of 2001, the Financial Accounting Standards Board issued Statement
     143, "Accounting for Asset Retirement Obligations," which addresses the
     financial accounting and reporting for obligations associated with the
     retirement of tangible long-lived assets and the associated asset
     retirement costs. This Statement requires that the fair value of a
     liability for an asset retirement obligation be recognized in the period in
     which it is incurred if a reasonable estimate of fair value can be made.
     The associated asset retirement costs are capitalized as part of the
     carrying amount of the long-lived asset. This Statement will become
     effective for the Bank on January 1, 2003.

     In August of 2001, the Financial Accounting Standards Board issued
     Statement 144, "Accounting for the Impairment of or Disposal of Long-Lived
     Assets." This Statement supersedes FASB Statement No. 121, "Accounting for
     the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
     Disposed Of," and the accounting and reporting provisions of APB Opinion
     No. 30, "Reporting the Results of Operations - Reporting the Effects of
     Disposal of a Segment of a Business, and Extraordinary, Unusual and
     Infrequently Occurring Events and Transactions for the Disposal of a
     Segment of a Business." This Statement also amends ARB No. 51,
     "Consolidated Financial Statements." The provisons of this Statement became
     effective for the Bank on January 1, 2002.

     Adoption of these Statements did not have or is not expected to have a
     material impact on the Corporation's financial condition or results of
     operations.

RESTRICTIONS ON CASH AND DUE FROM BANK BALANCES

The Bank is required to maintain reserve balances with the Federal Reserve Bank.
The average reserve balances for 2001 and 2000 approximated $3,468,000 and
$2,228,000, respectively.

                                                                            -41-

<PAGE>


<TABLE>
<CAPTION>

         JUNIATA VALLEY FINANCIAL CORP. AND ITS WHOLLY-OWNED SUBSIDIARY,
                             THE JUNIATA VALLEY BANK
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SECURITIES

     The amortized cost and fair value of securities at December 31 were as
follows:

                                                                                 Gross          Gross
                                                                 Amortized     Unrealized     Unrealized      Fair
                                                                   Cost           Gains         Losses       Value
                                                                   ----           -----         ------       -----
                                                                                    (In Thousands)
<S>                                                               <C>            <C>                        <C>
   AVAILABLE FOR SALE SECURITIES:
      DECEMBER 31, 2001:
           U.S. Treasury securities                               $ 1,508        $   37         $  --       $ 1,545
           U.S. Government and agency obligations                  29,153           353           (91)       29,415
           Obligations of states and political subdivisions        15,603           134           (46)       15,691
           Corporate and other debt securities                      2,992           124            --         3,116
           Mortgage-backed securities                               3,846           105            --         3,951
           Equity securities                                          536           409            --           945
                                                                  -------        ------         -----       -------

                                                                  $53,638        $1,162         $(137)      $54,663
                                                                  =======        ======         =====       =======

      DECEMBER 31, 2000:
           U.S. Treasury securities                               $   750        $    7         $  --       $   757
           U.S. Government and agency obligations                   5,287            10           (19)        5,278
           Obligations of states and political subdivisions        15,265            76            --        15,341
           Corporate and other debt securities                      5,030            20            (8)        5,042
           Mortgage-backed securities                               5,726           101            (4)        5,823
           Equity securities                                          533           403           (31)          905
                                                                  -------        ------         -----       -------

                                                                  $32,591        $  617         $ (62)      $33,146
                                                                  =======        ======         =====       =======

   HELD TO MATURITY SECURITIES:
       DECEMBER 31, 2001:
            U.S. Treasury securities                              $   961        $   --         $  (2)      $   959
            U.S. Government and agency obligations                  2,500            76            --         2,576
            Obligations of states and political subdivisions       26,742           500            (2)       27,240
            Corporate and other debt securities                     8,409           251            --         8,660
                                                                  -------        ------         -----       -------

                                                                  $38,612        $  827         $  (4)      $39,435
                                                                  =======        ======         =====       =======

       DECEMBER 31, 2000:
            U.S. Treasury securities                              $   999        $   --         $  (1)      $   998
            U.S. Government and agency obligations                 12,072             4           (51)       12,025
            Obligations of states and political subdivisions       27,201            16          (170)       27,047
            Corporate and other debt securities                    10,968             3           (74)       10,897
                                                                  -------        ------         -----       -------

                                                                  $51,240        $   23         $(296)      $50,967
                                                                  =======        ======         =====       =======
</TABLE>


-42-

<PAGE>


         JUNIATA VALLEY FINANCIAL CORP. AND ITS WHOLLY-OWNED SUBSIDIARY,
                             THE JUNIATA VALLEY BANK
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SECURITIES (CONTINUED)

The amortized cost and fair value of securities as of December 31, 2001, by
contractual maturity or call date, are shown below. Expected maturities may
differ from contractual maturities or call dates because the securities may be
called or prepaid with or without call or prepayment penalties.

<TABLE>
<CAPTION>

                                                       AVAILABLE FOR SALE            HELD TO MATURITY
                                                       ------------------            ----------------
                                                      AMORTIZED     FAIR        AMORTIZED         FIAR
                                                        COST        VALUE          COST           VALUE
                                                        ----        -----          ----           -----
                                                                      (IN THOUSANDS)
   <S>                                                 <C>         <C>            <C>            <C>
   Due in one year or less                             $ 7,407     $ 7,519        $ 8,351        $ 8,475
   Due after one year through five years                34,975      35,408         29,494         30,178
   Due after five years through ten years                6,598       6,564             --             --
   Due after ten years                                     276         276            767            782
   Mortgage-backed securities                            3,846       3,951             --             --
   Equity securities                                       536         945             --             --
                                                       -------     -------        -------        -------

                                                       $56,638     $54,663        $38,612        $39,435
                                                       =======     =======        =======        =======

</TABLE>


Gross gains of $-0-, $5,000, and $44,000 were realized on sales of securities
available for sale in 2001, 2000 and 1999, respectively.

Securities with a fair value of $14,813,000 and $16,406,000 at December 31, 2001
and 2000, respectively, were pledged to secure public deposits and for other
purposes as required or permitted by law.

                                                                            -43-

<PAGE>


         JUNIATA VALLEY FINANCIAL CORP. AND ITS WHOLLY-OWNED SUBSIDIARY,
                             THE JUNIATA VALLEY BANK
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

LOANS RECEIVABLE AND ALLOWANCE FOR LOAN LOSSES

Loans are comprised of the following:

                                                             December 31,
                                                             ------------
                                                        2001            2000
                                                        ----            ----
                                                           (In Thousands)
   Commercial, agricultural and financial             $ 24,548       $  23,327
   Real estate mortgages:
      Residential                                      119,476         114,234
      Commercial                                        31,893          28,663
   Consumer                                             61,480          62,997
   Other                                                 2,874           3,101
                                                      --------       ---------

                                                       240,271         232,322
   Unearned discount on loans                           (9,747)        (10,006)
   Allowance for loan losses                            (2,526)         (2,497)
                                                      --------       ---------

                                                      $227,998        $219,819
                                                      ========        ========

The following table presents changes in the allowance for loan losses:


                                                   Years Ended December 31,
                                                   ------------------------
                                                2001         2000         1999
                                                ----         ----         ----
                                                       (In Thousands)
   Balance, beginning                          $2,497       $2,486    $2,477
      Provision for loan losses                   240          230       120
      Recoveries                                   26           25        18
      Loans charged off                          (237)        (244)     (129)
                                               ------       ------    ------

   Balance, ending                             $2,526       $2,497    $2,486
                                               ======       ======    ======

The recorded investment in impaired loans not requiring an allowance for loan
losses was $582,000 and $-0- at December 31, 2001 and 2000, respectively. There
were no impaired loans requiring an allowance for loan losses at December 31,
2001 and 2000. For the years ended December 31, 2001, 2000 and 1999, the average
recorded investment in these impaired loans was $582,000, $-0- and $-0-,
respectively, and no interest income was recognized on impaired loans in 2001,
2000 and 1999.

-44-

<PAGE>


         JUNIATA VALLEY FINANCIAL CORP. AND ITS WHOLLY-OWNED SUBSIDIARY,
                             THE JUNIATA VALLEY BANK
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

BANK PREMISES AND EQUIPMENT

The major components of bank premises and equipment are as follows:

                                                             December 31,
                                                             ------------
                                                          2001         2000
                                                          ----         ----
                                                            (In Thousands)
   Land and improvements                                $    686     $    686
   Buildings and improvements                              6,354        6,238
   Furniture and equipment                                 3,000        2,700
                                                        --------     --------
                                                          10,040        9,624
   Accumulated depreciation                               (3,972)      (3,632)
                                                        --------     --------

                                                        $  6,068     $  5,992
                                                        ========     ========


DEPOSITS

The composition of deposits is as follows:

                                                             December 31,
                                                             ------------
                                                          2001         2000
                                                          ----         ----
                                                            (In Thousands)

   Demand, non-interest bearing                         $ 38,089     $ 33,893
   NOW and Money Market                                   51,769       47,220
   Savings                                                32,281       29,191
   Time, $100,000 or more                                 31,271       25,102
   Other time                                            152,058      151,814
                                                        --------     --------

                                                        $305,468     $287,220
                                                        ========     ========




At December 31, 2001, the scheduled maturities of time deposits are as follows
(in thousands):

   2002                                                              $112,300
   2003                                                                47,917
   2004                                                                11,163
   2005                                                                 5,050
   2006                                                                 6,899
                                                                     --------

                                                                     $183,329
                                                                     ========


BORROWINGS

The Bank has entered into an agreement whereby it can borrow up to $10,000,000
from the Federal Home Loan Bank (FHLB). Outstanding balances under this
agreement were $1,275,000 and $-0- as of December 31, 2001 and 2000,
respectively. The agreement expires in March 2002 and the interest rate was
1.88% and 6.63% at December 31, 2001 and 2000, respectively.

The Bank has a maximum borrowing capacity of $124,238,000 with the FHLB which is
collateralized by qualifying assets of the Bank.

                                                                            -45-

<PAGE>


         JUNIATA VALLEY FINANCIAL CORP. AND ITS WHOLLY-OWNED SUBSIDIARY,
                             THE JUNIATA VALLEY BANK
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

REGULATORY MATTERS AND STOCKHOLDERS' EQUITY

The Corporation and the Bank are subject to various regulatory capital
requirements administered by the federal banking agencies. Failure to meet the
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 Corporation's financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective action,
the Corporation and the Bank must meet specific capital guidelines that involve
quantitative measures of their assets, liabilities and certain off-balance sheet
items as calculated under regulatory accounting practices. The 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 maintenance of minimum amounts and ratios (set forth below) of total
and Tier l capital (as defined in the regulations) to risk-weighted assets and
of Tier l capital to average assets. Management believes, as of December 31,
2001, that the Corporation and the Bank meet all capital adequacy requirements
to which they are subject.

As of December 31, 2001, the most recent notification from the Commonwealth of
Pennsylvania, Department of Banking 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 Bank's category.

The Bank's actual capital ratios and the minimum ratios required for capital
adequacy purposes and to be well capitalized under the prompt corrective action
provisions are presented below. The Corporation's ratios were not materially
different from those of the Bank.

<TABLE>
<CAPTION>


                                                                                                      To Be Well
                                                                             For Capital          Capitalized Under
                                                                               Adequacy           Prompt Corrective
                                                        Actual                 Purposes           Action Provisions
                                                        ------                 --------           -----------------
                                                  Amount      Ratio       Amount      Ratio       Amount       Ratio
                                                  ------      -----       ------      -----       ------       -----
                                                                 (Dollar Amounts in Thousands)
<S>                                               <C>         <C>         <C>          <C>        <C>          <C>
   AS OF DECEMBER 31, 2001:
      Total capital (to risk-weighted assets)     $45,041     19.56%     *$18,426     *8.00%     *$23,033     *10.00%
      Tier I capital (to risk-weighted assets)     42,515     18.46      *  9,213     *4.00      * 13,820     * 6.00
      Tier I capital (to average assets)           42,515     11.98      * 14,190     *4.00      * 17,738     * 5.00

   AS OF DECEMBER 31, 2000:
      Total capital (to risk-weighted assets)     $43,496     19.59%     *$17,764     *8.00%     *$22,205     *10.00%
      Tier l capital (to risk-weighted assets)     40,999     18.46      *  8,882     *4.00      * 13,323     * 6.00
      Tier l capital (to average assets)           40,999     12.30      * 13,332     *4.00      * 16,664     * 5.00

* = greater than or equal to

</TABLE>

Certain restrictions exist regarding the ability of the Bank to transfer funds
to the Corporation in the form of cash dividends, loans or advances. At December
31, 2001, $30,595,000 of undistributed earnings of the Bank, included in the
consolidated stockholders' equity, was available for distribution to the
Corporation as dividends without prior regulatory approval.

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
Corporation's common stock at $23.86 as adjusted for the stock dividend 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 Corporation has a dividend reinvestment and stock purchase plan. Under the
Plan, additional shares of Juniata Valley Financial Corp. may be purchased at
the prevailing market prices with reinvested dividends and voluntary cash
payments. To the extent that shares are not available in the open market, the
Corporation has reserved 100,000 shares of common stock to be issued under the
plan. At December 31, 2001, 88,846 shares were available for issuance under the
Dividend Reinvestment Plan.

-46-

<PAGE>


         JUNIATA VALLEY FINANCIAL CORP. AND ITS WHOLLY-OWNED SUBSIDIARY,
                             THE JUNIATA VALLEY BANK
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EMPLOYEE BENEFITS

Stock option plans:
     Under the 2000 Incentive Stock Option Plan, 220,000 shares of common stock,
     as adjusted for the stock dividend, were reserved for issuance upon the
     exercise of options granted or available for grant to officers and key
     employees of the Corporation. 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 six months after the
     grant and expire ten years after the date of the grant.

     Stock option transactions under the Plan were as follows:

                                                              2001
                                                              ----
                                                                   Weighted-
                                                                    Average
                                                      Options    Exercise Price
                                                      -------    --------------
         Outstanding at beginning of year                 --        $   --
            Granted                                    7,982         28.20
                                                       -----         -----

         Outstanding at end of year                    7,982        $28.20
                                                       =====        ======

         Exercisable at December 31, 2001                 --        $   --
                                                       =====        ======


     The weighted-average remaining contractual life of these options is
     approximately ten years.

     The Corporation applies Accounting Principles Board Opinion 25, "Accounting
     for Stock Issued to Employees" (APB 25), and related Interpretations in
     accounting for options granted under the Plan. Accordingly, no compensation
     expense has been recognized for the stock options granted. Had compensation
     expense for the Corporation's stock option plans been determined based on
     the fair value at the grant date for awards under the plan consistent with
     the method prescribed by FASB Statement No. 123, the Corporation's net
     income would have been adjusted to the pro forma amounts indicated below
     for the year ended December 31, 2001 (in thousands, except per share
     amount):

         Net income:
            As reported                               $4,642
            Pro forma                                  4,641

         Basic and diluted earnings per share:
            As reported                               $ 1.96
            Pro forma                                   1.96

     The fair value of each option grant is estimated on the date of grant using
     the Black-Scholes option-pricing model, with the following assumptions for
     2001: risk-free interest rate of 4.7%, volatility of .22, dividend yield of
     4.0% and an expected life of seven years. The fair value of options granted
     in 201 was $5.16.

                                                                            -47-

<PAGE>


         JUNIATA VALLEY FINANCIAL CORP. AND ITS WHOLLY-OWNED SUBSIDIARY,
                             THE JUNIATA VALLEY BANK
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EMPLOYEE BENEFITS (CONTINUED)

Defined benefit retirement plan:
     The Corporation has a defined benefit retirement plan covering
     substantially all of its employees. The benefits are based on years of
     service and the employees' compensation. The Corporation's funding policy
     is to contribute annually the maximum amount that can be deducted for
     federal income 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.

     Information pertaining to the activity in the Plan is as follows:

<TABLE>
<CAPTION>

                                                                 Years Ended December 31,
                                                                    2001          2000
                                                                    ----          ----
                                                                      (In Thousands)
        <S>                                                        <C>           <C>
        Change in benefit obligation:
            Benefit obligation at beginning of year                $3,561        $3,174
             Service cost                                             167           177
            Interest cost                                             253           242
            Actuarial (gain) loss                                    (192)           47
            Benefits paid                                            (132)          (79)
                                                                   ------        ------

               Benefit obligation at end of year                    3,657         3,561
                                                                   ------        ------

         Change in plan assets:
            Fair value of plan assets at beginning of year          3,189         2,932
            Actual return on plan assets                              176           107
            Employer contribution                                     204           229
            Benefits paid                                            (132)          (79)
                                                                   ------        ------

               Fair value of plan assets at end of year             3,437         3,189
                                                                   ------        ------

         Funded status                                               (220)         (372)

         Unrecognized net actuarial gain (loss)                       (49)           95
         Unrecognized net transition asset                            (21)          (22)
                                                                   ------        ------

               Accrued benefit cost                                $ (290)       $ (299)
                                                                   ======        ======

</TABLE>

     Pension expense included the following components for the years ended
     December 31:

<TABLE>
<CAPTION>

                                                                    2001          2000         1999
                                                                    ----          ----         ----
                                                                             (In Thousands)
         <S>                                                       <C>          <C>          <C>
         Service cost, benefits earned during the year             $  167       $  177       $  162
         Interest cost on projected benefit obligation                248          239          212
         Expected return on plan assets                              (239)        (219)        (202)
         Net amortization                                              (2)          (2)          (2)
                                                                   ------       ------       ------

                                                                   $  174       $  195       $  170
                                                                   ======       ======       ======

     Assumptions used in the accounting were:

                                                                    2001          2000         1999
                                                                    ----          ----         ----
         Discount rates                                               7.5%         7.5%         7.5%
         Rates of increase in compensation levels                     4.0          4.0          4.0
         Expected long-term rate of return on assets                  7.5          7.5          7.5

</TABLE>

-48-

<PAGE>

         JUNIATA VALLEY FINANCIAL CORP. AND ITS WHOLLY-OWNED SUBSIDIARY,
                             THE JUNIATA VALLEY BANK
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EMPLOYEE BENEFITS (CONTINUED)

Supplemental retirement plans:
     The Corporation has non-qualified supplemental retirement and split-dollar
     life insurance plans for directors and key employees. At December 31, 2001
     and 2000, the present value of the future liability was $1,123,000 and
     $1,065,000, respectively. The Corporation has funded these plans through
     the purchase of annuities and life insurance policies, which have an
     aggregate cash surrender value of $2,733,000 and $970,000 at December 31,
     2001 and 2000, respectively. For the years ended December 31, 2001, 2000
     and 1999, $188,000, $147,000 and $152,000, respectively, was charged to
     expense in connection with these plans.

Deferred compensation plan:
     The Corporation 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, 2001 and 2000, the present value of
     the future liability was $1,769,000 and $1,678,000, respectively. To fund
     the benefits under these agreements, the Corporation is the owner and
     beneficiary of life insurance policies on the lives of certain directors.
     The policies had an aggregate cash surrender value of $1,376,000 and
     $1,246,000 at December 31, 2001 and 2000, respectively. For the years ended
     December 31, 2001, 2000 and 1999, $213,000, $157,000 and $201,000,
     respectively, was charged to expense in connection with this plan.

Employee Stock Purchase Plan:
     The Corporation 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 85% and 100% of
     the fair market value of the stock on the commencement date as determined
     annually by the Board of Directors. The maximum number of shares which
     employees may purchase under the Plan is 100,000; however, the annual
     issuance of shares shall not exceed 5,000 shares plus any unissued shares
     from prior offerings. In 2001, 2000 and 1999, 1,500, 39 and 753 shares,
     respectively, were issued under the Plan. At December 31, 2001, 94,900
     shares were reserved for issuance under the Plan.

Salary continuation plans:
     The Corporation has a non-qualified Salary Continuation Plan for key
     employees. At December 31, 2001 and 2000, the present value of the future
     liability was $342,000 and $215,000, respectively. The Corporation has
     funded these plans through the purchase of life insurance policies which
     have an aggregate cash surrender value of $5,000,000 and $1,463,000 at
     December 31, 2001 and 2000, respectively. For the years ended December 31,
     2001, 2000 and 1999, $127,000, $74,000 and $68,000, respectively, was
     charged to expense in connection with these plans.


                                                                            -49-

<PAGE>

         JUNIATA VALLEY FINANCIAL CORP. AND ITS WHOLLY-OWNED SUBSIDIARY,
                             THE JUNIATA VALLEY BANK
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

INCOME TAXES

The provision for federal income taxes consists of the following:


                                                 Years Ended December 31,
                                                 ------------------------
                                              2001        2000        1999
                                              ----        ----        ----
                                                     (In Thousands)

   Current                                   $1,531      $1,485      $1,417
   Deferred                                    (103)       (110)        (57)
                                             ------      ------      ------

                                             $1,428      $1,375      $1,360
                                             ======      ======      ======

A reconciliation of the statutory income tax expense computed at 34% to the
income tax expense included in the statements of income is as follows:

                                                 Years Ended December 31,
                                                 ------------------------
                                              2001        2000        1999
                                              ----        ----        ----
                                                     (In Thousands)

   Federal income tax at statutory rate      $2,064      $1,959      $1,917
   Tax-exempt interest                         (583)       (656)       (775)
   Disallowance of interest expense              96         110         123
   Income on life insurance                    (128)        (41)        (33)
   Other                                        (21)          3         128
                                             ------      ------      ------

                                             $1,428      $1,375      $1,360
                                             ======      ======      ======

The income tax provision includes $-0-, $2,000, and $15,000 in 2001, 2000 and
1999, respectively, of income tax related to realized gains on sales of
securities.

The net deferred tax asset in the accompanying balance sheets includes the
following amounts of deferred tax assets and liabilities:


                                                                December 31,
                                                                ------------
                                                              2001        2000
                                                              ----        ----
                                                                (In Thousands)

   Deferred tax assets:
      Allowance for loan losses                              $  732      $  722
      Deferred directors' fees                                  601         571
      Pension liabilities                                       588         536
                                                             ------      ------
         Total deferred tax assets                            1,921       1,829
                                                             ------      ------
   Deferred tax liabilities:
      Bank premises and equipment                              (104)       (105)
      Securities accretion                                      (17)        (27)
      Unrealized gains on securities available for sale        (348)       (187)
                                                             ------      ------

         Total deferred tax liabilities                        (469)       (319)
                                                             ------      ------

         Net deferred tax asset                              $1,452      $1,510
                                                             ======      ======


TRANSACTIONS WITH EXECUTIVE OFFICERS AND DIRECTORS

The Bank has had banking transactions in the ordinary course of business with
its executive officers, directors, and their related interests on the same
terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with others. At December 31, 2001 and 2000, these
persons were indebted to the Bank for loans totaling $1,887,000 and $1,335,000
respectively. During 2001, loans totaling $1,886,000 were disbursed and loan
repayments totaled $1,334,000.

-50-

<PAGE>

         JUNIATA VALLEY FINANCIAL CORP. AND ITS WHOLLY-OWNED SUBSIDIARY,
                             THE JUNIATA VALLEY BANK
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

COMMITMENTS

The Bank rents equipment and branch offices under operating leases that expire
through 2007. Equipment and servicing fees were $654,000, $484,000 and $485,000
for the years ended December 31, 2001, 2000 and 1999, respectively. Rent
expense, including the license fee for the branch offices was $55,000, $53,000
and $53,000 in 2001, 2000 and 1999, respectively.

Minimum future payments under all noncancellable lease and service agreements as
of December 31, 2001 are as follows (in thousands):

   2002                                                             $  264
   2003                                                                265
   2004                                                                266
   2005                                                                266
   2006                                                                262
   Thereafter                                                           33
                                                                    ------

                                                                    $1,356
                                                                    ======


FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

The Bank 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 include commitments to extend credit and letters of
credit. Those instruments involve, to varying degrees, elements of credit risk
in excess of the amount recognized in the balance sheet.

The Bank's exposure to credit loss in the event of nonperformance 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 commitments and conditional
obligations as it does for on-balance sheet instruments.

A summary of the Bank's financial instrument commitments is as follows:


                                                                December 31,
                                                                ------------
                                                              2001        2000
                                                              ----        ----
                                                                (In Thousands)

   Commitments to grant loans                               $ 2,915     $ 2,514
   Unfunded commitments under lines of credit                31,230      22,994
   Outstanding letters of credit                                765         610

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. Since many
of the commitments are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash requirements.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. The Bank evaluates each customer's credit
worthiness on a case-by-case basis. The amount of collateral obtained, if deemed
necessary by the Bank upon extension of credit, is based on management's credit
evaluation. Collateral held varies but may include personal or commercial real
estate, accounts receivable, inventory and equipment.

Outstanding letters of credit written are conditional commitments issued by the
Bank to guarantee the performance of a customer to a third party. The credit
risk involved in issuing letters of credit is essentially the same as that
involved in extending loan facilities to customers.


CONCENTRATION OF CREDIT RISK

The Bank grants commercial, residential and consumer loans to customers
primarily located in the counties of Juniata, Mifflin, Perry, Huntingdon,
Centre, Franklin and Snyder, Pennsylvania. The concentrations of credit by type
of loan are set forth in the note, "Loans Receivable and Allowance for Loan
Losses". Although the Bank has a diversified loan portfolio, its debtors'
ability to honor their contracts is influenced by the region's economy.

                                                                            -51-

<PAGE>


         JUNIATA VALLEY FINANCIAL CORP. AND ITS WHOLLY-OWNED SUBSIDIARY,
                             THE JUNIATA VALLEY BANK
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

Management uses its best judgment in estimating the fair value of the
Corporation'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 Corporation could have realized in a
sales transaction 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 following information should not be interpreted as an estimate of the fair
value of the entire Corporation since a fair value calculation is only provided
for a limited portion of the Corporation's assets. Due to a wide range of
valuation techniques and the degree of subjectivity used in making the
estimates, comparisons between the Corporation's disclosures and those of other
companies may not be meaningful. The following methods and assumptions were used
to estimate the fair values of the Bank's financial instruments at December 31,
2001 and 2000:

o    For cash, cash equivalents, interest bearing demand deposits in other banks
     and federal funds sold, the carrying amount is a reasonable estimate of
     fair value.

o    For interest bearing time deposits with banks, the carrying amount is a
     reasonable estimate of face value.

o    For securities, fair values are based on quoted market prices, where
     available. If quoted market prices are not available, fair values are based
     on quoted market prices of comparable securities.

o    For Federal Home Loan Bank stock, the carrying amount is a reasonable
     estimate of fair value.

o    For variable-rate loans that reprice frequently and which entail no
     significant changes in credit risk, fair values are based on carrying
     values. All commercial loans and substantially all 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 using discounted
     cash flow analyses, at interest rates currently offered for loans with
     similar terms to borrowers of similar credit quality.

o    Fair values for demand deposits, savings accounts and certain money market
     deposits are, by definition, equal to the amount payable on demand at the
     reporting date (i.e., their carrying amounts). Fair values of
     fixed-maturity certificates of deposit are estimated using a discounted
     cash flow calculation that applies interest rates currently being offered
     on certificates to a schedule of aggregated expected monthly maturity of
     deposits.

o    For short-term borrowings, the carrying amount is a reasonable estimate of
     fair value.

o    For accrued interest receivable and accrued interest payable, the carrying
     amount is a reasonable estimate of fair value.

o    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.

-52-

<PAGE>


         JUNIATA VALLEY FINANCIAL CORP. AND ITS WHOLLY-OWNED SUBSIDIARY,
                             THE JUNIATA VALLEY BANK
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

The estimated fair values of the Corporation's financial instruments are as
follows:

<TABLE>
<CAPTION>

                                                                                   December 31,
                                                                            2001                       2000
                                                                            ----                       ----
                                                                   CARRYING       FAIR        Carrying       Fair
                                                                    AMOUNT        VALUE        Amount        Value
                                                                    ------        -----        ------        -----
                                                                                  (In Thousands)
   <S>                                                             <C>           <C>          <C>          <C>
   Financial assets:
      Cash and due from banks                                      $ 11,571      $ 11,571     $ 10,621     $ 10,621
      Interest bearing deposits with banks                               87            87          676          676
      Interest bearing time deposits with banks                       3,590         3,590           --           --
      Federal funds sold                                                 --            --        4,400        4,400
      Securities                                                     93,275        94,098       84,386       84,113
      Federal Home Loan Bank stock                                    1,208         1,208        1,185        1,185
      Loans receivable, net of allowance                            227,998       228,451      219,819      218,695
      Accrued interest receivable                                     2,047         2,047        2,177        2,177

   Financial liabilities:
      Deposits                                                      305,468       308,981      287,220      287,960
      Short-term borrowings                                           1,275         1,275           --           --
      Accrued interest payable                                          950           950          988          988

   Off-balance sheet financial instruments:
      Commitments to extend credit                                       --            --           --           --
      Standby letters of credit                                          --            --           --           --

</TABLE>


                                                                            -53-

<PAGE>


         JUNIATA VALLEY FINANCIAL CORP. AND ITS WHOLLY-OWNED SUBSIDIARY,
                             THE JUNIATA VALLEY BANK
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

PARENT COMPANY ONLY FINANCIAL INFORMATION

                                 BALANCE SHEETS



                                                            December 31,
                                                            ------------
                                                        2001            2000
                                                        ----            ----
      ASSETS                                               (In Thousands)

Cash                                                 $     7          $     2
Interest-bearing deposits with banks                     490              490
                                                     -------          -------
      Cash and cash equivalents                          497              492

Investment in Bank subsidiary                         43,138           41,348
Securities available for sale                          1,692            1,235
Other                                                     26               16
                                                     -------          -------

                                                     $45,353          $43,091
                                                     =======          =======

   LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities, other                                   $    27          $     9

Stockholders' equity                                  45,326           43,082
                                                     -------          -------

                                                     $45,353          $43,091
                                                     =======          =======


                              STATEMENTS OF INCOME

<TABLE>
<CAPTION>

                                                                                       Years Ended December 31,
                                                                                       ------------------------
                                                                                2001            2000            1999
                                                                                ----            ----            ----
                                                                                          (In Thousands)
<S>                                                                           <C>              <C>             <C>
Dividends from Bank subsidiary                                                $ 3,090          $ 5,212         $6,758
Interest income                                                                   102               74             51
Other expenses                                                                    (66)             (72)           (30)
                                                                              -------          -------         ------

   Income before equity in undistributed net income of subsidiary               3,126            5,214          6,779

Equity in (excess of) undistributed net income of Bank subsidiary               1,516             (827)        (2,501)
                                                                              -------          -------         ------

      Net income                                                              $ 4,642          $ 4,387         $4,278
                                                                              =======          =======         ======
</TABLE>

-54-

<PAGE>


<TABLE>
<CAPTION>


         JUNIATA VALLEY FINANCIAL CORP. AND ITS WHOLLY-OWNED SUBSIDIARY,
                             THE JUNIATA VALLEY BANK
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

PARENT COMPANY ONLY FINANCIAL INFORMATION (CONTINUED)

                            STATEMENTS OF CASH FLOWS


                                                                                       Years Ended December 31,
                                                                                       ------------------------
                                                                                2001            2000            1999
                                                                                ----            ----            ----
                                                                                          (In Thousands)
<S>                                                                           <C>              <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES
   Net income                                                                 $ 4,642          $ 4,387         $4,278
   Adjustments to reconcile net income to net cash
      provided by operating activities:
      Distributions in excess of (undistributed) net income
           of Bank subsidiary                                                  (1,516)             827          2,501
      (Increase) decrease in other assets                                         (10)              42            (22)
      Increase (decrease) in other liabilities                                     18                7             --
                                                                              -------          -------         ------

         Net cash provided by operating activities                              3,134            5,263          6,757
                                                                              -------          -------         ------

CASH FLOWS FROM INVESTING ACTIVITIES
   Purchases of available for sale securities                                    (622)            (640)          (470)
   Proceeds from maturities of available for sale securities                      200              200             --
                                                                              -------          -------         ------

         Net cash used in investing activities                                   (422)            (440)          (470)
                                                                              -------          -------         ------

CASH FLOWS FROM FINANCING ACTIVITIES
   Dividends paid and cash paid in lieu of fractional shares                   (1,904)          (2,935)        (2,935)
   Purchase of treasury stock                                                  (1,189)          (2,276)        (3,823)
   Treasury stock issued                                                          181              386            469
   Stock issued under employee stock purchase plan                                 32               --             --
   Stock issued under dividend reinvestment plan                                  173               --             --
                                                                              -------          -------         ------

         Net cash used in financing activities                                 (2,707)          (4,825)        (6,289)
                                                                              -------          -------         ------

         Increase (decrease) in cash and cash equivalents                           5               (2)            (2)

Cash and cash equivalents:
   Beginning                                                                      492              494            496
                                                                              -------          -------         ------

   Ending                                                                     $   497          $   492         $  494
                                                                              =======          =======         ======

</TABLE>


                                                                            -55-

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                            AVAILABILITY OF FORM 10-K

     A copy of the Corporation's Annual Report on Form 10-K as filed with the
Securities and Exchange Commission will be available without charge upon written
request. This request should be addressed to:

                                 Ms. Linda Engle
                         Juniata Valley Financial Corp.
                                   P.O. Box 66
                              Mifflintown, PA 17059

     Pursuant to Part 350 to FDIC's Annual Disclosure Regulation, Juniata Valley
Financial Corp. will make available to you upon request, financial information
about this Bank. The purpose of this regulation is to facilitate more informed
decision making by you, our shareholders, by providing statements containing
financial information for the last two years.

     Please contact:

                                Ms. Judy Robinson
                             The Juniata Valley Bank
                                   P.O. Box 66
                             Mifflintown, PA 17059


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