Retirement Plans and Other Postretirement Benefits

12 Months Ended

Dec. 31, 2019

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. This plan is a non-qualified benefit plan. This non-qualified benefit plan is 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, 2019, 2018 and 2017 was $1.5 million, $1.4 million, and $1.4 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, 2019, 2018 and 2017 was $134 thousand, $215 thousand and $222 thousand, respectively.

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


	Retirement Plans						Other Postretirement Benefits
(Dollars in thousands)	2019		2018		2019		2018
Change in benefit obligation:
Benefit obligation at beginning of year	$	46,868	$	50,364	$	2,283	$	2,611
Service cost	436		560		67		88
Interest cost	1,905		1,760		94		92
Actuarial loss (gain)	7,104		(3,205)		731		(404)
Benefits paid	(2,628)		(2,611)		(106)		(104)
Benefit obligation at end of year	$	53,685	$	46,868	$	3,069	$	2,283

Change in plan assets:
Fair value of plan assets at beginning of year	$	45,379	$	46,753	$	—	$	—
Actual return (loss) on plan assets	8,696		(1,923)		—		—
Benefits paid	(2,628)		(2,611)		(106)		(104)
Employer contribution and non-qualified benefit payments	160		3,160		106		104
Fair value of plan assets at end of year	$	51,607	$	45,379	$	—	$	—
Funded status	(2,078)		(1,489)		(3,069)		(2,283)
Unrecognized net actuarial loss (gain)	22,433		22,141		638		(92)
Unrecognized prior service costs	—		(181)		—		—
Net amount recognized	$	20,355	$	20,471	$	(2,431)	$	(2,375)

The fair value of pension plan assets exceeded the accumulated benefit obligation at December 31, 2019 and 2018.

Components of net periodic benefit cost were as follows:


	Retirement Plans										Other Postretirement Benefits
(Dollars in thousands)	2019		2018		2017		2019		2018		2017
Service cost	$	436	$	560	$	524	$	67	$	88	$	48
Interest cost	1,905		1,760		1,927		94		92		118
Expected loss on plan assets	(3,061)		(3,287)		(3,074)		—		—		—
Amortization of net actuarial loss	1,176		1,120		1,185		—		4		42
Accretion of prior service cost	(181)		(283)		(282)		—		—		—

Net periodic benefit cost (income)	$	275	$	(130)	$	280	$	161	$	184	$	208

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.


(Dollars in thousands)	Retirement Plans		Other Postretirement Benefits
Expected amortization expense for 2020:
Amortization of net actuarial loss	$	1,156	$	25
Accretion of prior service cost	—		—

During 2020, the Corporation expects to contribute approximately $159 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:
2020	$	2,845	$	89
2021	2,920		92
2022	2,930		94
2023	2,996		97
2024	3,013		102
Years 2025-2029	15,122		557

Weighted-average assumptions used to determine benefit obligations at December 31, 2019 and 2018 were as follows:


	Retirement Plans						Other Postretirement Benefits
	2019		2018		2019		2018
Assumed discount rate	3.2	%	4.2	%	3.2	%	4.2	%
Assumed salary increase rate (based on age)	3% - 6%		3% - 6%		—		—

The benefit obligation for all plans at December 31, 2019 was based on the Pri-2012 White Collar Mortality Table projected to 2029 using scale MP-2019 published by the Society of Actuaries.

Weighted-average assumptions used to determine net periodic costs for the years ended December 31, 2019 and 2018 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
	2019		2018		2019		2018
Assumed discount rate	4.2	%	3.6	%	4.2	%	3.6	%
Assumed long-term rate of investment return	7.0	%	7.0	%	—		—
Assumed salary increase rate (based on age)	3% - 6%		3% - 6%		—		—

The Corporation's pension plan asset allocation at December 31, 2019 and 2018, by asset category was as follows:


	Percentage of Plan Assets at December 31,
	2019		2018
Asset Category:
Equity securities	61	%	60	%
Debt securities	38		39
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 18, “Fair Value Disclosures.”


	Fair Value Measurements at December 31,
(Dollars in thousands)	2019		2018
Level 1:

Mutual funds	$	34,332	$	28,360
Short-term investments	1,068		666
Level 2:
U.S. government obligations	6,167		6,167
Corporate bonds	6,540		6,031
Level 3:
Certificates of deposit	3,500		4,155
Total fair value of plan assets	$	51,607	$	45,379

The following table provides a reconciliation of the beginning and ending balances for measurements in hierarchy Level 3 at December 31, 2019 and 2018:


(Dollars in thousands)	Balance at December 31, 2018		Total Unrealized (Losses) or Gains		Total Realized Gains or (Losses)		Purchases		Maturities/ Redemptions		Balance at December 31, 2019
Certificates of deposit	$	4,155	$	110	$	—	$	600	$	(1,365)	$	3,500
Total Level 3 assets	$	4,155	$	110	$	—	$	600	$	(1,365)	$	3,500

(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