21. EMPLOYEE BENEFIT PLANS

Long-Term Incentive Plan

The Company maintains the 2016 Long-Term Incentive Plan (the “Plan”), that amended and restated the former 2011 Stock Option Plan (the “2011 Plan”). The Plan continues in effect for any outstanding awards under the 2011 Plan in accordance with the terms and conditions governing such awards immediately prior to the effective date of the Plan but expanded the types of awards authorized to include, among others, restricted stock. Under the provisions of the Plan, while active, awards may consist of grants of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock and performance shares to officers and key employees of the Company, as well as Directors.

Compensation expense for stock options granted and restricted stock awarded is measured using the fair value of the award on the grant date and is recognized over the vesting period. The Company recognized $113,000 and $82,000 of expense for the years ended December 31, 2019 and 2018, respectively, for stock-based compensation.

The Plan is administered by a committee of the Board of Directors. The Committee determines, among other things, which officers and key employees receive stock compensation, the number of shares to be subject to each award, the option price, the duration of the option and the restricted period, as appropriate. A recipient of the restricted shares will forfeit those shares in their entirety if employment is terminated prior to the vesting date for reasons other than retirement, death or disability. The maximum number of shares of common stock that may be issued under the Plan is 300,000 shares, and 158,455 shares were available for grant as of December 31, 2019. Shares of common stock issued under the Plan may be treasury shares or authorized but unissued shares.

During 2019 and 2018, certain officers and key employees were issued restricted stock awards of 7,500 and 5,220 shares, respectively. Each of the awards vest after three-years, with no interim vesting.

The following table presents compensation expense and related tax benefits for restricted stock awards recognized on the consolidated statement of income.


(Dollars in thousands)
	2019		2018
Compensation expense	$	109	$	77
Tax benefit		(23)		(16)
Net income effect	$	86	$	61

At December 31, 2019, there was $133,000 of unrecognized compensation cost related to all non-vested restricted stock awards. This cost is expected to be recognized through February 2022.

The following table presents a summary of non-vested restricted shares activity for 2019.


		Weighted
		Average
		Grant Date
	Shares	Fair Value
Non-vested at January 1, 2019	13,020	$	18.78
Vested	(4,360)		18.05
Cancelled	—		—
Forfeited	(800)		19.62
Granted	7,500		20.00
Non-vested at December 31, 2019	15,360		19.54

No stock options were awarded in 2019. Options granted prior to 2019 vest over three to five years and are exercisable at the grant price, which is at least the fair market value of the stock on the grant date. The Plan provides that the option price per share is not to be less than the fair market value of the stock on the day the option was granted, but in no event less than the par value of such stock. Options granted under the Plan are exercisable no earlier than one year after the date of grant and expire ten years after the date of the grant. All options previously granted under the Plans are scheduled to expire through February 17, 2025.

Total options outstanding at December 31, 2019 have exercise prices between $17.65 and $18.00, with a weighted average exercise price of $17.78 and a weighted average remaining contractual life of 3.79 years.

As of December 31, 2019, there was less than $1,000 of total unrecognized compensation cost related to non-vested options granted under the Plan. That cost is expected to be recognized through 2020.

Cash received from option exercises under the Plans for the year ended December 31, 2019 was $364,000 and $90,000 for the year ended December 31, 2018.

A summary of the status of the outstanding stock options as of December 31, 2019 and 2018, and changes during the years ending on those dates is presented below:


	2019			2018
		Weighted			Weighted
		Average			Average
		Exercise			Exercise
	Shares	Price		Shares	Price
Outstanding at beginning of year	113,756	$	17.76	125,026	$	17.91
Granted	—		—	—		—
Exercised	(20,609)		17.66	(5,170)		17.47
Forfeited	—		—	(6,100)		21.10
Outstanding at end of year	93,147	$	17.78	113,756	$	17.76

Options exercisable at year-end	92,147			110,911
Weighted-average fair value of options granted during the year		$	—		$	—
Intrinsic value of options exercised during the year		$	43,135		$	15,240
Intrinsic value of options outstanding and exercisable at December 31, 2019		$	144,656

Defined Benefit Retirement Plans

The Company sponsored defined benefit retirement plan, JVB Plan, which covered substantially all its employees employed prior to December 31, 2007 was amended, January 1, 2008 to close the plan to new entrants. All active participants as of December 31, 2007 became 100% vested in their accrued benefit and, as long as they remained eligible, continued to accrue benefits until December 31, 2012. The benefits were based on years of service and the employee’s compensation. Effective December 31, 2012, the JVB Plan was amended to cease future service accruals after that date (i.e., it was frozen).

As a result of the FNBPA acquisition, the Company assumed sponsorship of a second defined benefit retirement plan, the Retirement Plan for the First National Bank of Port Allegany (“FNB Plan”), as of November 30, 2015, which covered substantially all former FNBPA employees that were employed prior to September 30, 2008. The FNBPA Plan was amended as of December 31, 2015 to cease future service accruals to previously unfrozen participants and was considered to be “frozen”. Effective December 31, 2016, the FNB Plan was merged into the JVB Plan, which was amended to provide the same benefits to the class of participants previously included in the FNB Plan.

In 2018, Juniata completed the second step of the strategy to reduce the liability associated with its defined benefit pension plan by making a lump sum payment offer to a small group of terminated vested participants in Juniata’s defined benefit plan. This step further reduced Juniata’s remaining pension liability by approximately 9%, which resulted in a pre-tax charge to earnings of $210,000 in the twelve months ended December 31, 2018. The pre-tax charge represented a further acceleration of pension expenses that would otherwise have impacted Juniata’s future earnings. The Company also made a $1,350,000 contribution to the defined benefit pension plan during the third quarter of 2018.

Juniata’s Board of Directors resolved to terminate the JVB Plan, effective November 30, 2018. All participants were properly notified. During the second quarter of 2019, JVB Plan participants elected preferences for receiving their vested benefit in the form of either lump sum payments or annuities. Those electing lump sums received payment in the second quarter of 2019, resulting in a pre-tax settlement charge of $278,000. In the third quarter of 2019, annuities were purchased to provide vested benefits to all remaining recipients, resulting in a pre-tax charge of $943,000. As of December 31, 2019, all obligations were satisfied and The JVB Plan was liquidated. Excess funds of $431,000 were transferred to fund the Company’s 401(k) Safe Harbor Plan.

The following table illustrates the equity instruments, by fair value hierarchy, included in the JVB Plan’s assets at fair value as of December 31, 2018. Due to the liquidation of the JVB Plan in the third quarter of 2019, no assets remained at December 31, 2019.


			(Level 1)		(Level 2)		(Level 3)
			Quoted Prices in		Significant Other		Significant Other
(Dollars in thousands)	December 31,		Active Markets for		Observable		Unobservable
	2018		Identical Assets		Inputs		Inputs
Measured at fair value on a recurring basis:
Mutual funds	$	11,891	$	11,891	$	—	$	—
Money market funds		241		241		—		—
	$	12,132	$	12,132	$	—	$	—

The measurement date for the JVB Plan is December 31. Information pertaining to the activity in the defined benefit plan was as follows:


(Dollars in thousands)	Years ended December 31,
	2019		2018
Change in projected benefit obligation ("PBO")
PBO at beginning of year	$	12,555	$	15,554
Interest cost		299		521
Change in assumptions		1,477		(1,208)
Actuarial loss		(1,326)		(244)
Group annuity purchase		(9,021)		—
Settlement payments		(3,569)		(1,485)
Benefits paid		(415)		(583)
PBO at end of period	$	—	$	12,555
Change in plan assets
Fair value of plan assets at beginning of year	$	12,182	$	13,117
Actual return on plan assets, net of expenses		1,254		(217)
Employer contribution		—		1,350
Group annuity purchase		(9,021)		—
Settlement payments		(3,569)		(1,485)
Benefits paid		(415)		(583)
Benefits transferred to 401(k) Plan		(431)		—
Fair value of plan assets at end of period	$	—	$	12,182
Funded status, included in other (liabilities) assets	$	—	$	(373)

Amounts recognized in accumulated comprehensive loss before income taxes consist of:
Unrecognized actual loss	$	—	$	(884)
Accumulated benefit obligation	$	—	$	12,555

For the year ended December 31, 2018, the mortality assumptions were derived using the Adjusted RP‑2014 White Collar Mortality Table. Incorporated into the most recent table are rates projected generationally using Scale MP‑2018 to reflect mortality improvement.

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


	Year Ended
(Dollars in thousands)	December 31,
	2019		2018
Components of net periodic pension cost:
Interest cost	$	299	$	521
Expected return on plan assets		(182)		(690)
Recognized net actuarial loss		1,277		339
Net periodic pension cost		1,394		170
Total recognized in other comprehensive income		(2,197)		(884)
Total recognized in net periodic pension benefit and other comprehensive income	$	(803)	$	(714)

Assumptions used to determine benefit obligations were:


	2019		2018
Discount rate	—	%	4.10	%
Rate of compensation increase	N/A		N/A

Assumptions used to determine the net periodic benefit cost were:


	2019		2018
Discount rate	—	%	3.50	%
Expected long-term return on plan assets	—		4.20
Rate of compensation increase	N/A		N/A

Defined Contribution Plan

The Company has a Defined Contribution Plan under which employees, through payroll deductions, are able to defer portions of their compensation. The Company makes an annual non-elective fully vested contribution equal to 3% of compensation to each eligible participant. For the year ended December 31, 2019, the contribution amount totaled $250,000, which was credited to employee’s accounts by January 31, 2020. This liability at December 31, 2018 totaled $238,000 and was credited to employee accounts by January 31, 2019. Expense incurred under this plan was $248,000 and $234,000 in 2019 and 2018, respectively. The Defined Contribution Plan also includes an employer matching contribution for employees that elect to defer compensation into this program. The matching contribution in 2019 and 2018 was $212,000 and $199,000, respectively.

Employee Stock Purchase Plan

The Company has an Employee Stock Purchase Plan under which employees, through payroll deductions, are able to purchase shares of Company stock annually. The option price of the stock purchases is between 95% and 100% of the fair market value of the stock on the offering termination date as determined annually by the Board of Directors. The maximum number of shares which employees may purchase under the Plan is 250,000; however, the annual issuance of shares may not exceed 5,000 shares plus any unissued shares from prior offerings. There were 1,880 shares issued in 2019 and 2,134 shares issued in 2018 under this plan. At December 31, 2019, there were 171,079 shares reserved for issuance under the Employee Stock Purchase Plan.

Supplemental Retirement Plans

The Company has non-qualified supplemental retirement plans for directors and key employees. At December 31, 2019 and 2018, the present value of the future liability associated with these plans was $166,000 and $215,000, respectively. For the years ended December 31, 2019 and 2018, $16,000 and $20,000, respectively, was charged to expense in connection with these plans. The Company offsets the cost of these plans through the purchase of bank-owned life insurance and annuities. See Note 9.

Deferred Compensation Plans

The Company 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, 2019 and 2018, the present value of the future liability was $1,603,000 and $1,602,000, respectively. For the years ended December 31, 2019 and 2018, $42,000 and $40,000, respectively, was charged to expense in connection with these plans. The Company offsets the cost of these plans through the purchase of bank-owned life insurance. See Note 9.

Salary Continuation Plans

The Company has non-qualified salary continuation plans for key employees. At December 31, 2019 and 2018, the present value of the future liability was $1,209,000 and $1,256,000, respectively. For the years ended December 31, 2019 and 2018 $57,000 and $103,000, respectively, was charged to expense in connection with these plans. The Company offsets the cost of these plans through the purchase of bank-owned life insurance. See Note 9.