Retirement Plans

12 Months Ended

Dec. 31, 2019

Note 22 – Retirement Plans

401(k) Plan

The Company sponsors a 401(k) Plan whereby substantially all employees age 21 and over with 90 days of service may participate. Participants may contribute a portion of their compensation subject to certain limits based on federal tax laws. Prior to July 1, 2015, the Company did not contribute to the 401(k) Plan. Effective July 1, 2015, the Company initiated a discretionary matching contribution equal to 50% of participant’s elective deferrals each quarter, up to 4% of eligible compensation. The Company recorded salaries & benefits expense attributable to the 401(k) Plan matching contributions and 401(k) Plan matching contributions for the years ended:


	Year Ended December 31,
(in thousands)	2019		2018		2017
401(k) Plan benefits expense	$	1,119	$	879	$	776
401(k) Plan contributions made by the Company	$	1,003	$	872	$	767

Employee Stock Ownership Plan

Substantially all employees with at least one year of service are covered by a discretionary employee stock ownership plan (ESOP). Company shares owned by the ESOP are paid dividends and included in the calculation of earnings per share as common shares outstanding. Contributions are made to the plan at the discretion of the Board of Directors. Expenses related to the Company’s ESOP, included in benefits and other compensation costs under salaries and benefits expense, and contributions to the plan for the years ended were:


	Year Ended December 31,
(in thousands)	2019		2018		2017
ESOP benefits expense	$	2,500	$	1,887	$	2,149
ESOP contributions made by the Company	$	1,875	$	1,952	$	2,073

Deferred Compensation Plans

The Company has deferred compensation plans for certain directors and key executives, which allow certain directors and key executives designated by the Board of Directors of the Company to defer a portion of their compensation. The Company has purchased insurance on the lives of certain of the participants and intends to hold these policies until death as a cost recovery of the Company’s deferred compensation obligations of $7,923,000 and $9,402,000 at December 31, 2019 and 2018, respectively. Earnings credits on deferred balances included in non-interest expense are included in the following table:


	Year Ended December 31,
(in thousands)	2019		2018		2017
Deferred compensation earnings credits included in non-interest expense	$	363	$	462	$	478

Supplemental Retirement Plans

The Company has supplemental retirement plans for certain directors and key executives. These plans are non-qualified defined benefit plans and are unsecured and unfunded. The Company has purchased insurance on the lives of the participants and intends to hold these policies until death as a cost recovery of the Company’s retirement obligations. The cash values of the insurance policies purchased to fund the deferred compensation obligations and the supplemental retirement obligations were $117,823,000 and $117,318,000 at December 31, 2019 and 2018, respectively.

The Company recorded in other liabilities the additional unfunded status of the supplemental retirement plans of $11,193,000 and $4,802,000 related to the supplemental retirement plans as of December 31, 2019 and 2018, respectively. These amounts represent the amount by which the projected benefit obligations for these retirement plans exceeded the fair value of plan assets plus amounts previously accrued related to the plans. The projected benefit obligation is recorded in other liabilities.

At December 31, 2019 and 2018, the additional unfunded status of the supplemental retirement plans of $11,193,000 and $4,802,000 were offset by a reduction of shareholders’ equity accumulated other comprehensive loss of $7,884,000 and $3,382,000, respectively, representing the after-tax impact of the additional unfunded status of the supplemental retirement plans, and the related deferred tax asset of $3,309,000 and $1,420,000, respectively. Amounts recognized as a component of accumulated other comprehensive loss as of year-end that have not been recognized as a component of the combined net period benefit cost of the Company’s defined benefit pension plans are presented in the following table. The Company expects to recognize approximately $2,984,000 of the net actuarial loss reported in the following table as of December 31, 2019 as a component of net periodic benefit cost during 2020.


	December 31,
(in thousands)	2019		2018
Transition obligation	$	1	$	3
Prior service cost	(141)		(194)
Net actuarial loss	11,333		4,993
Amount included in accumulated other comprehensive loss	11,193		4,802
Deferred tax benefit	(3,309)		(1,420)
Amount included in accumulated other comprehensive loss, net of tax	$	7,884	$	3,382

Information pertaining to the activity in the supplemental retirement plans, using a measurement date of December 31, is as follows:


	December 31,
(in thousands)	2019		2018
Change in benefit obligation:
Benefit obligation at beginning of year	$	(29,196)	$	(28,472)
Service cost	(879)		(973)
Interest cost	(1,131)		(949)
Actuarial (loss)/gain	(6,747)		92
Plan amendments	—		—
Benefits paid	1,216		1,106
Benefit obligation at end of year	$	(36,737)	$	(29,196)
Change in plan assets:
Fair value of plan assets at beginning of year	$	—	$	—
Fair value of plan assets at end of year	$	—	$	—
Funded status	$	(36,737)	$	(29,196)
Unrecognized net obligation existing at January 1, 1986	1		3
Unrecognized net actuarial loss	11,333		4,993
Unrecognized prior service cost	(141)		(194)
Accumulated other comprehensive income	(11,193)		(4,802)
Accrued benefit cost	$	(36,737)	$	(29,196)
Accumulated benefit obligation	$	(35,981)	$	(27,544)

The following table sets forth the net periodic benefit cost recognized for the supplemental retirement plans:


	Year Ended December 31,
(in thousands)	2019		2018		2017
Net pension cost included the following components:
Service cost-benefits earned during the period	$	879	$	973	$	941
Interest cost on projected benefit obligation	1,131		949		991
Amortization of net obligation at transition	2		2		2
Amortization of prior service cost	(54)		(54)		(12)
Recognized net actuarial loss	408		510		390
Net periodic pension cost	$	2,366	$	2,380	$	2,312

The following table sets forth assumptions used in accounting for the plans:


	Year Ended December 31,
	2019		2018		2017
Discount rate used to calculate benefit obligation	2.82	%	3.96	%	3.40	%
Discount rate used to calculate net periodic pension cost	3.96	%	3.40	%	3.80	%
Average annual increase in executive compensation	3.25	%	3.25	%	3.25	%
Average annual increase in director compensation	—	%	—	%	—	%

The following table sets forth the expected benefit payments to participants and estimated contributions to be made by the Company under the supplemental retirement plans for the years indicated:


	Expected Benefit Payments to Participants		Estimated Company Contributions
	(in thousands)
2020	$	1,555	$	1,555
2021	2,128		2,128
2022	2,179		2,179
2023	2,179		2,179
2024	2,191		2,193
2025-2029	10,956		10,956