Note 25 – 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 $776,000, $678,000, and $300,000, of salaries & benefits expense attributable to the 401(k) Plan matching contribution during the years 2017, 2016, and 2015, respectively. The Company made $767,000, $811,000, and $0, of 401(k) Plan matching contributions during the years 2017, 2016, and 2015, respectively.

Employee Stock Ownership Plan

Substantially all employees with at least one year of service are covered by a discretionary employee stock ownership plan (ESOP). Contributions are made to the plan at the discretion of the Board of Directors. Contributions to the plan totaling $2,073,000, $1,368,000, and $2,651,000 were made during 2017, 2016, and 2015, respectively. Expenses related to the Company’s ESOP, are included in benefits and other compensation costs under salaries and benefits expense, and were $2,149,000, $1,831,000, and $2,282,000 during 2017, 2016, and 2015, respectively. Company shares owned by the ESOP are paid dividends and included in the calculation of earnings per share exactly as other common shares outstanding.

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 the participants and intends to hold these policies until death as a cost recovery of the Company’s deferred compensation obligations of $6,605,000, and $6,525,000 at December 31, 2017 and 2016, respectively. Earnings credits on deferred balances totaling $478,000 in 2017, $487,000 in 2016, and $538,000 in 2015 are included in noninterest expense.

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 $97,783,000 and $95,912,000 at December 31, 2017 and 2016, respectively.

The Company recorded in other liabilities the unfunded status of the supplemental retirement plans of $5,352,000 and $4,714,000 related to the supplemental retirement plans as of December 31, 2017 and 2016, 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, 2017 and 2016, the unfunded status of the supplemental retirement plans of $5,352,000 and $4,714,000 were offset by a reduction of shareholders’ equity accumulated other comprehensive loss of $3,102,000 and $2,732,000, respectively, representing the after-tax impact of the unfunded status of the supplemental retirement plans, and the related deferred tax asset of $2,250,000 and $1,982,000, 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 $509,000 of the net actuarial loss reported in the following table as of December 31, 2017 as a component of net periodic benefit cost during 2018.


	December 31,
(in thousands)	2017			2016
Transition obligation	$	4		$	7
Prior service cost		(248	)		(75	)
Net actuarial loss		5,596			4,782

Amount included in accumulated other comprehensive loss		5,352			4,714
Deferred tax benefit		(2,250	)		(1,982	)

Amount included in accumulated other comprehensive loss, net of tax	$	3,102		$	2,732

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


	December 31,
	2017			2016
	(in thousands)
Change in benefit obligation:
Benefit obligation at beginning of year	$	(26,645	)	$	(26,184	)
Acquisition		—			—
Service cost		(941	)		(1,042	)
Interest cost		(991	)		(1,025	)
Actuarial (loss)/gain		(1,203	)		511
Plan amendments		185			—
Benefits paid		1,123			1,095

Benefit obligation at end of year	$	(28,472	)	$	(26,645	)

Change in plan assets:
Fair value of plan assets at beginning of year	$	—		$	—

Fair value of plan assets at end of year	$	—		$	—

Funded status	$	(28,472	)	$	(26,645	)
Unrecognized net obligation existing at January 1, 1986		4			7
Unrecognized net actuarial loss		5,596			4,782
Unrecognized prior service cost		(248	)		(75	)
Accumulated other comprehensive income		(5,352	)		(4,714	)

Accrued benefit cost	$	(28,472	)	$	(26,645	)

Accumulated benefit obligation	$	(26,432	)	$	(25,241	)

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


	Years Ended December 31,
	2017			2016			2015
	(in thousands)
Net pension cost included the following components:
Service cost-benefits earned during the period	$	941		$	1,042		$	1,023
Interest cost on projected benefit obligation		991			1,025			957
Amortization of net obligation at transition		2			2			2
Amortization of prior service cost		(12	)		(41	)		(57	)
Recognized net actuarial loss		390			549			823

Net periodic pension cost	$	2,312		$	2,577		$	2,748

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


	Years Ended December 31,
	2017			2016			2015
Discount rate used to calculate benefit obligation		3.40	%		3.80	%		4.00	%
Discount rate used to calculate net periodic pension cost		3.84	%		4.00	%		3.65	%
Average annual increase in executive compensation		3.25	%		2.50	%		2.50	%
Average annual increase in director compensation		0.00	%		2.50	%		2.50	%

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:


Years Ended	Expected Benefit Payments to Participants		Estimated Company Contributions
	(in thousands)
2018	$	1,106	$	1,106
2019		1,067		1,067
2020		1,233		1,233
2021		1,859		1,859
2022		2,008		2,008
2023-2027	$	10,169	$	10,169