The Company has a non-contributory, cash balance defined benefit pension plan (the “Pension Plan”) for employees who were vested in the plan as of December 31, 2012, the date the plan was frozen (i.e., curtailed). Each participant’s account balance grows based on monthly interest credits. The Pension Plan is partially funded by assets invested for the benefit of the plan participants. The Pension Plan assets are held by a third-party qualified trust and are not included in the Company’s consolidated balance sheets. The Company made no contributions to the Pension Plan for the 2018 plan year. The accumulated benefit obligation for the Pension Plan was $1.6 million and $3.3 million as of December 31, 2018 and 2017, respectively. The unfunded liability for the Pension Plan, included in other liabilities in the Company’s consolidated balance sheets, was $483 thousand and $808 thousand as of December 31, 2018 and 2017, respectively.

The Pension Plan sponsor selects the assumption for the expected long-term rate of return on assets held by the qualified trust in consultation with its investment advisors and actuary. This rate is intended to reflect the average rate of earnings expected to be earned on the funds invested or to be invested to provide plan benefits. Historical performance is reviewed, especially with respect to real rates of return (i.e., net of inflation), for the major asset classes held or anticipated to be held by the qualified trust and for the qualified trust itself. Undue weight is not given to recent experience that may not continue over the measurement period, with higher significance placed on current forecasts of future long-term economic conditions.

Because assets are held in a qualified trust, anticipated returns are not reduced for taxes. Further, solely for this purpose, the Pension Plan is assumed to continue in force and not terminate during the period during which assets are invested. However, consideration is given to the potential impact of current and future investment policy, cash flow into and out of the qualified trust, and expenses (both investment and non-investment) typically paid from the Pension Plan’s assets (to the extent such expenses are not explicitly estimated within periodic cost).

The qualified trust assets are sufficiently diversified to maintain a reasonable level of risk without imprudently sacrificing return. The investment manager of the qualified trust selects investment fund managers with demonstrated experience and expertise and funds with demonstrated historical performance for the implementation of the plan’s investment strategy. The qualified trust assets are not included in the Company’s consolidated balance sheets as of December 31, 2018 and 2017 and are considered Level 1 from a fair value hierarchy perspective.

The Company also sponsored a post-retirement benefit plan (the “PRB Plan”) covering retirees who were age 55 with 10 years of service or age 65 with five years of service prior to March 1, 2018, when the plan was curtailed. The Company recognized a gain on the curtailment of the post-retirement benefit plan of $352 thousand on March 1, 2018, which is included in the Company’s consolidated statements of operations for the year ended December 31, 2018. The PRB Plan provides coverage toward a retiree’s eligible medical and life insurance benefits. The PRB Plan is unfunded and benefits are expensed as incurred. The Company expects to make no contributions to the PRB Plan in future periods. The accumulated (unfunded) benefit obligation for the PRB Plan was $71 thousand and $457 thousand as of December 31, 2018 and 2017, respectively.

The following table provides a reconciliation of changes in the accumulated benefit obligations and fair value of qualified trust assets (Pension Plan only) and a statement of funded (unfunded) status for the Pension Plan and the PRB Plan as of and for the periods stated.

	Pension Plan						PRB Plan
	2018			2017			2018			2017
Change in benefit obligation
Benefit obligation, beginning of year	$	3,273		$	3,398		$	457		$	540
Service cost		—			—			3			22
Interest cost		94			121			5			21
Actuarial (gain) loss		(694	)		323			(36	)		(120	)
Benefit payments		(1,295	)		(581	)		(6	)		(6	)
Curtailment/termination (gain)		—			—			(352	)		—
Settlement loss		221			12			—			—
Benefit obligation, end of year		1,599			3,273			71			457
Change in plan assets
Fair value of plan assets, beginning of year		2,465			2,690			—			—
Actual (loss) return on plan assets		(54	)		356			—			—
Employer contributions		—			—			6			6
Benefits payments		(1,295	)		(581	)		(6	)		(6	)
Fair value of plan assets, end of year		1,116			2,465			—			—
(Unfunded) funded status, end of year	$	(483	)	$	(808	)	$	(71	)	$	(457	)

The following table provides details regarding amounts included in the consolidated financial statements for the years ended December 31, 2018 and 2017 pertaining to the Pension Plan and the PRB Plan.

	Pension Plan				PRB Plan
	Year Ended December 31,				Year Ended December 31,
	2018		2017		2018			2017
Amounts recognized in accumulated other comprehensive loss (income)
Net loss (gain)	$	447	$	1,187	$	(354	)	$	(344	)
Prior service cost		—		—		—			—
Net obligation at transition		—		—		—			—
Amount recognized	$	447	$	1,187	$	(354	)	$	(344	)

Components of net periodic benefit cost (gain)
Service cost	$	—		$	—		$	3		$	22
Interest cost		94			121			5			21
Expected return on plan assets		(153	)		(167	)		—			—
Amortization of prior service cost		—			—			—			—
Amortization of net obligation at transition		—			—			(26	)		(11	)
Curtailment/termination gain		—			—			(352	)		—
Recognized net loss due to settlement		422			195			—			—
Recognized net actuarial loss		51			81			—			—
Net periodic benefit cost (gain)		414			230			(370	)		32

Other changes in plan assets and benefit obligations recognized in accumulated other comprehensive (income) loss
Net gain		(739	)		(130	)		(10	)		(109	)
Amortization of prior service cost		—			—			—			—
Amortization of net obligation at transition		—			—			—			—
Total recognized in other comprehensive loss (income)		(739	)		(130	)		(10	)		(109	)
Total recognized in net periodic benefit cost and other comprehensive loss (income)	$	(325	)	$	100		$	(380	)	$	(77	)

The following table provides the actuarial assumptions used to derive the information reported in the consolidated financial statements as of and for the years ended December 31, 2018 and 2017.

	Pension Plan						PRB Plan
	As of and for the year ended December 31,						As of and for the year ended December 31,
	2018			2017			2018			2017
Discount rate used for net periodic pension cost		3.50	%		4.00	%		4.25	%		4.00	%
Discount rate used for disclosure		4.25	%		3.50	%		4.25	%		3.50	%
Expected return on plan assets		7.25	%		7.25	%	N/A			N/A
Rate of compensation increase	N/A			N/A			N/A			N/A
Rate of compensation increase for net periodic pension cost	N/A			N/A			N/A			N/A
Expected future interest crediting rate		3.00	%		3.00	%	N/A			N/A

The following table provides estimated future benefit payments (cash) for the Pension Plan and PRB Plan for the periods presented.

	Pension Plan		PRB Plan
2019	$	298	$	7
2020		139		7
2021		103		7
2022		107		7
2023		365		6
2024 - 2028		854		27

The Company sponsors a nonqualified deferred compensation plan for certain eligible executive officers and directors, which allows executive officers to defer up to 100% of their base salary and/or bonus on an annual basis and allows directors to defer all or a portion of their board fees and/or annual cash retainer payments. Amounts deferred pursuant to the plan can be invested in various mutual funds, with the portfolio composition up to the discretion of the respective executive officer or director. The assets in the plan, which are held in a nonqualified deferred compensation rabbi trust and the associated deferred compensation liability are included in other assets and other liabilities, respectively, in the Company’s consolidated balance sheets and total $972 thousand and $901 thousand as of December 31, 2018 and 2017, respectively.

Amounts under the plan will be paid following a distributable event. A distributable event includes termination of service as an executive officer or director on a specific date without regard to continued service as an executive officer or director. Distributions can be received either as a lump-sum payment or in substantially equal payments over a period of not more than 20 years.

A total of $179 thousand and $107 thousand of deferred compensation payments were made by the Company for executive officers and $61 thousand and $53 thousand of directors fees were deferred, during the years ended December 31, 2018 and 2017, respectively.

The Company sponsors a 401(k) defined contribution retirement plan (“401(k) Plan”) for the benefit of all eligible employees of the Company, including its subsidiaries. Employees are eligible to participate on the first of the month following an employee’s hire date. There is no age requirement. Participants can elect to defer between 1% and 15% of their base compensation, which will be contributed to the 401(k) Plan, providing the amount deferred does not exceed the federal dollar maximum election deferral for each year. The Company’s subsidiaries match 100% up to a 3% deferral, then 50% of the next 3% of deferrals. Employees become 100% vested in the subsidiary’s match after two years of service.

For the years ended December 31, 2018 and 2017, the Company made matching contributions to the 401(k) Plan of $401 thousand and $491 thousand, respectively.

Prior to January 1, 2018, the Company had two ESOPs, one for legacy Bank of Lancaster and one for legacy Virginia Commonwealth Bank. As of January 1, 2018, the two plans were combined into one plan, the Bay Banks of Virginia, Inc. Employee Stock Ownership Plan.

Employees of the Company, including its subsidiaries, who have completed twelve months of service and who have attained the age of 21 years are eligible to participate in the ESOP. Contributions to the plan are at the discretion of the Company’s board of directors. Contributions are allocated proportionately based on the covered compensation of each participant compared to the aggregate covered compensation of all participants for the plan year. Allocations are limited to 25% of eligible participant compensation. Participant accounts are 30% vested after two years, 40% vested after three years with vesting increasing 20% each year thereafter, until 100% vested. The ESOP had 532,240 shares allocated to participant accounts as of December 31, 2018. The Company recorded ESOP contribution expense of $0 and $223 thousand in 2018 and 2017, respectively. Shares allocated to participants of the Company’s ESOP and unallocated shares, which collateralize ESOP borrowings but that are committed to be released are also included in basic and diluted average shares outstanding. However, shares held by the ESOP, which collateralize ESOP borrowings and that are not committed to be released, are excluded from both basic and diluted average shares outstanding. Unallocated shares are not considered outstanding for computing earnings per share.

To assist with providing liquidity to the ESOP when participants retire and elect to receive cash distributions in lieu of shares, the Company, as the sponsor of the ESOP, or the ESOP may take out a loan with a third-party financial institution and use the unallocated shares as collateral. As of December 31, 2018, the ESOP had six outstanding loans totaling $1.8 million, with 225,930 unallocated shares pledged as collateral for these loans. The ESOP loans are included in other liabilities on the Company’s consolidated balance sheets.