JUNIATA VALLEY FINANCIAL CORP

Shareholders and the Board of Directors of Juniata Valley Financial Corp.

Mifflintown, Pennsylvania

Opinion on the Financial Statements

We have audited the accompanying consolidated statements of financial condition of Juniata Valley Financial Corp. (the "Company") as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

Change in Accounting Principle

As discussed in Note 1 and 6 to the financial statements, the Company has changed its method of accounting for credit losses effective January 1, 2023 due to the adoption of Accounting Standards Update (“ASU”) 2016-13 Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The Company adopted the new credit loss standard using the modified retrospective method such that prior period amounts are not adjusted and continue to be reported in accordance with previously applicable generally accepted accounting principles. The adoption of the new credit loss standard and its subsequent application is also communicated as a critical audit matter below.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex

judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Allowance for Credit Losses on Loans – Initial Adoption of Allowance for Credit Losses Model

As described in Note 1 and 6 to the financial statements, effective January 1, 2023, the Company adopted ASU 2016-13 “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” See also the change in accounting principle explanatory paragraph above. At the time of adoption, the Company reported a gross loan portfolio of $484.5 million and a related allowance for credit losses (ACL) on loans of $5.1 million. As it relates to the allowance for credit losses for loans, the impact of adoption of this standard on January 1, 2023, was a $1.1 million increase to the allowance for credit losses, with a corresponding net decrease to retained earnings for the cumulative effect adjustment recorded upon adoption. The Company employed various methodologies to estimate expected credit losses for their loan segments, including a discounted cash flow (“DCF”) method for the Real Estate and Commercial loan portfolios and a Weighted Average Remaining Maturity (“WARM”) method for the Personal loan portfolio. The Company’s discounted cash flow methodology has two key components; a loss driver analysis combined with a cash flow forecast. The contractual cash flow is adjusted for probability of default/loss given default (“PD/LGD”) and prepayment speed to establish a reserve level. The Company’s methodology employs certain current condition or loan-specific qualitative factors that are based on management’s assessment of differences in underwriting standards, portfolio mix, lending personnel, delinquency trends, credit concentrations, loan review results, changes in collateral values, as well as the impact of changes in regulatory and business environment. The application of these qualitative adjustments requires significant judgment, including management’s analysis to determine the quantitative impact of the qualitative factors on the reserve.

We consider the auditing of Company’s implementation of Current Expected Credit Losses (CECL) for the portion of the portfolio using the DCF model as a critical audit matter, due to the significant management judgments employed in development of the DCF model and application of qualitative factors. This resulted in a high degree of auditor judgment, a high degree of auditor subjectivity and significant effort in performing audit procedures over the DCF model and qualitative factors, including the need to involve firm valuation specialists.

The primary procedures we performed to address this critical audit matter included:

/s/Crowe LLP

We have served as the Company's auditor since 2019.

Cleveland, Ohio

March 20, 2024