Retirement Plans and Other Postretirement Benefits

Substantially all employees who were hired before December 8, 2009 are covered by a noncontributory retirement plan. Employees hired on or after December 8, 2009 are not eligible to participate in the noncontributory retirement plan. The Corporation also provides supplemental executive retirement benefits to certain former executives, a portion of which is in excess of limits imposed on qualified plans by federal tax law. These plans are non-qualified benefit plans. These non-qualified benefit plans are not offered to new participants and all current participants are now retired. Information on these plans are aggregated and reported under “Retirement Plans” within this footnote.

The Corporation also provides certain postretirement healthcare and life insurance benefits for retired employees. Information on these benefits is reported under “Other Postretirement Benefits” within this footnote.

The Corporation sponsors a 401(k) deferred salary savings plan, which is a qualified defined contribution plan, and which covers all employees of the Corporation and its subsidiaries, and provides that the Corporation makes matching contributions as defined by the plan. Expense recorded by the Corporation for the 401(k) deferred salary savings plan for the years ended December 31, 2018, 2017 and 2016 was $1.4 million, $1.4 million, and $1.2 million, respectively.

The Corporation sponsors a Supplemental Non-Qualified Pension Plan (SNQPP), which was established in 1981 prior to the existence of the 401(k) deferred salary savings plan, employee stock purchase plan and long-term incentive plans and therefore is not offered to new participants. All current participants are now retired. Expense recorded by the Corporation for the SNQPP for the years ended December 31, 2018, 2017 and 2016 was $215 thousand, $222 thousand and $52 thousand, respectively.

Information with respect to the Retirement Plans and Other Postretirement Benefits follows:



	Retirement Plans						Other Postretirement Benefits
(Dollars in thousands)	2018			2017			2018			2017
Change in benefit obligation:
Benefit obligation at beginning of year	$	50,364		$	47,389		$	2,611		$	2,968
Service cost	560			524			88			48
Interest cost	1,760			1,927			92			118
Actuarial (gain) loss	(3,205		)	3,169			(404		)	(409		)
Benefits paid	(2,611		)	(2,645		)	(104		)	(114		)
Benefit obligation at end of year	$	46,868		$	50,364		$	2,283		$	2,611

Change in plan assets:
Fair value of plan assets at beginning of year	$	46,753		$	41,418		$	—		$	—
Actual (loss) return on plan assets	(1,923		)	5,799			—			—
Benefits paid	(2,611		)	(2,645		)	(104		)	(114		)
Employer contribution and non-qualified benefit payments	3,160			2,181			104			114
Fair value of plan assets at end of year	$	45,379		$	46,753		$	—		$	—
Funded status	(1,489		)	(3,611		)	(2,283		)	(2,611		)
Unrecognized net actuarial loss (gain)	22,141			21,256			(92		)	316
Unrecognized prior service costs	(181		)	(464		)	—			—
Net amount recognized	$	20,471		$	17,181		$	(2,375	)	$	(2,295	)

The fair value of pension plan assets exceeded the accumulated benefit obligation at December 31, 2018 and 2017.

Components of net periodic benefit cost were as follows:



	Retirement Plans									Other Post Retirement Benefits
(Dollars in thousands)	2018			2017			2016			2018		2017		2016
Service cost	$	560		$	524		$	661		$	88	$	48	$	46
Interest cost	1,760			1,927			2,071			92		118		133
Expected (loss) return on plan assets	(3,287		)	(3,074		)	(3,041		)	—		—		—
Amortization of net actuarial loss	1,120			1,185			1,296			4		42		25
Accretion of prior service cost	(283		)	(282		)	(283		)	—		—		—
Settlement cost	—			—			1,434			—		—		—
Net periodic benefit (income) cost	$	(130	)	$	280		$	2,138		$	184	$	208	$	204

The components of net periodic benefit cost other than the service cost component are included in other noninterest expense in the consolidated statements of income.

In the fourth quarter of 2016, the Corporation offered to vested participants in the pension plan, who were no longer employees, the option of a one-time lump-sum payment in lieu of any future benefits that would have been payable from the plan. As a result, lump-sum payments from the plan were $3.2 million and exceeded the service cost and interest cost for the year triggering a settlement. The settlement was measured as of December 31, 2016 because the majority of lump sum payments occurred during December 2016. The settlement cost was $1.4 million. The amount represents a reclassification of accumulated other comprehensive income to pension expense (included in other noninterest expense in the statement of income) and had no impact on shareholders' equity.



(Dollars in thousands)	Retirement Plans			Other Postretirement Benefits
Expected amortization expense for 2019:
Amortization of net actuarial loss	$	1,175		$	—
Accretion of prior service cost	(181		)	—

During 2019, the Corporation expects to contribute approximately $157 thousand to the Retirement Plans and approximately $89 thousand to Other Postretirement Benefits.

The following benefits payments, which reflect expected future service, as appropriate, are expected to be paid:



(Dollars in thousands)	Retirement Plans		Other Postretirement Benefits
For the fiscal year ending:
2019	$	2,836	$	89
2020	2,839		90
2021	2,892		92
2022	2,898		94
2023	2,964		97
Years 2024-2028	14,946		540

Weighted-average assumptions used to determine benefit obligations at December 31, 2018 and 2017 were as follows:



	Retirement Plans				Other Postretirement Benefits
	2018		2017		2018		2017
Assumed discount rate	4.2	%	3.6	%	4.2	%	3.6	%
Assumed salary increase rate	3.0		3.0		—		—

The benefit obligation for all plans at December 31, 2018 was based on the RP-2014 mortality table using the projection scale MP-2018 published by the Society of Actuaries.

Weighted-average assumptions used to determine net periodic costs for the years ended December 31, 2018 and 2017 were as follows. The discount rate was determined utilizing the FTSE Pension Discount Curve. Historical investment returns is the basis used to determine the overall expected long-term rate of return on assets.



	Retirement Plans				Other Postretirement Benefits
	2018		2017		2018		2017
Assumed discount rate	3.6	%	4.0	%	3.6	%	4.0	%
Assumed long-term rate of investment return	7.0		7.5		—		—
Assumed salary increase rate	3.0		3.0		—		—

The Corporation's pension plan asset allocation at December 31, 2018 and 2017, by asset category was as follows:



	Percentage of Plan Assets at December 31,
	2018		2017
Asset Category:
Equity securities	60	%	64	%
Debt securities	39		35
Other	1		1
Total	100	%	100	%

Plan assets include marketable equity securities, corporate and government debt securities, and certificates of deposit. The investment strategy is to keep a 60% equity to 40% fixed income mix to achieve the overall expected long-term rate of return of 7.0%. Equity securities do not include any common stock of the Corporation.

The major categories of assets in the Corporation’s pension plan at year-end are presented in the following table. Assets are segregated by the level of the valuation inputs within the fair value hierarchy described in Note 17, “Fair Value Disclosures.”



	Fair Value Measurements at December 31,
(Dollars in thousands)	2018		2017
Level 1:
Mutual funds	$	28,360	$	31,144
Short-term investments	666		515
Level 2:
U.S. government obligations	6,167		4,910
Corporate bonds	6,031		5,974
Level 3:
Certificates of deposit	4,155		4,210
Total fair value of plan assets	$	45,379	$	46,753

The following table provides a reconciliation of the beginning and ending balances for measurements in hierarchy Level 3 at December 31, 2018 and 2017:



(Dollars in thousands)	Balance at December 31, 2017		Total Unrealized (Losses) or Gains		Total Realized Gains or (Losses)		Purchases		Maturities/ Redemptions			Balance at December 31, 2018
Certificates of deposit	$	4,210	$	—	$	—	$	845	$	(900	)	$	4,155
Total Level 3 assets	$	4,210	$	—	$	—	$	845	$	(900	)	$	4,155

(Dollars in thousands)	Balance at December 31, 2016		Total Unrealized (Losses) or Gains		Total Realized Gains or (Losses)		Purchases		Maturities/ Redemptions			Balance at December 31, 2017
Certificates of deposit	$	4,565	$	—	$	—	$	535	$	(890	)	$	4,210
Total Level 3 assets	$	4,565	$	—	$	—	$	535	$	(890	)	$	4,210