Pursuant to the terms of the City Holding Company 2013 Incentive Plan (the "2013 Plan"), the Compensation Committee of the Board of Directors, or its delegate, may, from time-to-time, grant stock options, stock appreciation rights (“SARs”), or stock awards to employees, directors and individuals who provide service to the Company (collectively, "Plan Participants"). The 2013 Plan was approved by the shareholders in April 2013. A maximum of 750,000 shares of the Company’s common stock may be issued under the 2013 Plan upon the exercise of stock options, SARs and stock awards, subject to certain limitations. These limitations may be adjusted in the event of a change in the number of outstanding shares of common stock by reason of a stock dividend, stock split or other similar event. Specific terms of options and SARs awarded, including vesting periods, exercise prices (stock price at date of grant) and expiration dates are determined at the date of grant and are evidenced by agreements between the Company and the awardee. The exercise price of the option grants equals the market price of the Company’s stock on the date of grant. All incentive stock options and SARs will be exercisable up to 10 years from the date granted and all options and SARs are exercisable for the period specified in the individual agreement. As of December 31, 2019, approximately 451,000 shares were still available to be issued under the 2013 Plan.

Each award from the 2013 Plan is evidenced by an award agreement that specifies the option price, the duration of the option, the number of shares to which the option pertains, and such other provisions as the Compensation Committee, or its delegate, determines. Upon a change-in-control of the Company, as defined in the 2013 Plan, all outstanding options and awards shall immediately vest.

Certain stock options and restricted stock awards granted pursuant to the 2013 Plan have performance-based vesting requirements. These shares will vest in three separate annual installments of approximately 33.33% per installment on the third, fourth and fifth anniversaries of the grant date, subject further to performance-based vesting requirements. To meet the performance-based vesting requirement, the Company's mean return on average assets of the three, four and five year period prior to the respective vesting date must meet or exceed the median return on average assets over the 20 year period immediately preceding the vesting date of all FDIC insured depository institutions. The mean return on average assets excludes merger and acquisition expenses and other nonrecurring items as determined by the Board of Directors of the Company.

In 2018, the Board of Directors granted the named executive officers ("NEOs") of the Company restricted stock units ("RSUs") and performance share units ("PSUs"). The RSUs will vest in three separate annual installments of approximately 33.33% per installment on the first, second and third anniversaries of the grant date, subject to a two-year holding period. The PSUs will vest on the third anniversary of the grant date. The payout for the PSUs will be determined based on two factors: (1) the Company's three-year average return on assets ("ROA") during the three-year performance period relative to the ROA for the selected peer companies and (2) the Company's total shareholder return ("TSR") during the three-year performance period relative to the TSR of the selected peer companies.



	2019				2018				2017
	Options		Weighted-Average Exercise Price		Options		Weighted-Average Exercise Price		Options		Weighted-Average Exercise Price
Outstanding at January 1	57,972		$	51.15	87,605		$	47.15	86,613		$	41.08
Granted	—		—		—		—		17,631		66.32
Exercised	(11,721	)	44.87		(29,633	)	39.31		(16,639	)	35.91
Forfeited	—		—		—		—		—		—
Outstanding at December 31	46,251		$	52.74	57,972		$	51.15	87,605		$	47.15

Exercisable at end of year	8,063		$	44.48	2,697		$	45.13	7,887		$	37.37

Nonvested at beginning of year	55,275		51.40		79,718		48.08		83,613		41.47
Granted during the year	—		—		—		—		17,631		66.32
Vested during the year	(17,087	)	44.65		(24,443	)	40.58		(21,526	)	37.31
Forfeited during the year	—		—		—		—		—		—
Nonvested at end of year	38,188		$	54.42	55,275		$	51.40	79,718		$	48.08

Information regarding stock option exercises and stock-based compensation expense associated with stock options is provided in the following table (in thousands):



	For the year ended December 31,
	2019		2018		2017
Proceeds from stock option exercises	$	526	$	1,164	$	597
Intrinsic value of stock options exercised	368		944		481

Stock-based compensation expense associated with stock options	$	119	$	178	$	246
Income tax benefit recognized related to stock-based compensation	12		19		42

At period-end:	2019
Unrecognized stock-based compensation expense	$	84
Weighted average period in which the above amount is expected to be recognized	1.5		years

Shares issued in connection with stock option exercises are issued from available treasury shares. If no treasury shares are available, new shares would be issued from available authorized shares. During 2019, 2018 and 2017, all shares issued in connection with stock option exercises and restricted stock awards were issued from available treasury stock. For the stock options that have performance-based criteria, management has evaluated those criteria and has determined that, as of December 31, 2019, the criteria were probable of being met.

The Company measures compensation expense with respect to restricted shares in an amount equal to the fair value of the common stock covered by each award on the date of grant. The restricted shares awarded become fully vested after various periods of continued employment from the respective dates of grant. The Company is entitled to an income tax deduction in an amount equal to the taxable income reported by the holders of the restricted shares when the restrictions are released and the shares are issued. Compensation is charged to expense over the respective vesting periods.

Restricted shares are generally forfeited if officers and employees terminate employment with the Company prior to the lapsing of restrictions. The Company records forfeitures of restricted stock as treasury share repurchases and any compensation cost previously recognized is reversed in the period of forfeiture. Recipients of restricted shares do not pay any cash consideration to the Company for the shares, and have the right to vote all shares subject to such grant and receive all dividends with respect to such shares, whether or not the shares have vested. For the restricted shares that have performance-based criteria, management has evaluated those criteria and has determined that, as of December 31, 2019, the criteria were probable of being met.



	2019				2018				2017
	Restricted Awards		Average Market Price at Grant		Restricted Awards		Average Market Price at Grant		Restricted Awards		Average Market Price at Grant

Outstanding at January 1	149,692				170,033				180,622
Granted	44,598		$	77.78	28,363		$	69.94	28,839		$	64.42
Forfeited/Vested	(46,207	)			(48,704	)			(39,428	)
Outstanding at December 31	148,083				149,692				170,033



	For the year ended December 31,
	2019		2018		2017
Stock-based compensation expense associated with restricted shares	$	2,022	$	1,609	$	1,507

At period-end:	2019
Unrecognized stock-based compensation expense	$	5,018
Weighted average period in which the above amount is expected to be recognized	2.9		years

The Company provides retirement benefits to its employees through the City Holding Company 401(k) Plan and Trust (the "401(k) Plan"), which is intended to be compliant with Employee Retirement Income Security Act (ERISA) section 404(c). Information regarding the Company’s 401(k) plan is provided in the following table (dollars in thousands):

The Company maintains two defined benefit pension plans (the "Defined Benefit Plans"), which were inherited from the Company's acquisition of the plan sponsors (Horizon Bancorp, Inc. and Community Financial Corporation). The Horizon Defined Benefit Plan was frozen in 1999 and maintains a December 31st year-end for purposes of computing its benefit obligations. The Community Defined Benefit Plan was frozen in 2012 and was terminated during the year-ended December 31, 2018.

Primarily as a result of the interest rate environment over the past several years and mortality table revisions, the benefit obligation exceeded the estimated fair value of plan assets as of December 31, 2019 and December 31, 2018. The following table summarizes activity within the Company's Defined Benefit Plans (dollars in thousands):



	Pension Benefits
	2019			2018

Change in fair value of plan assets:
Fair value at beginning of measurement period	$	12,041		$	16,360
Actual gain (loss) on plan assets	880			(434		)
Contributions	—			1,509
Benefits paid	(1,037		)	(5,394		)
Fair value at end of measurement period	11,884			12,041

Change in benefit obligation:
Benefit obligation at beginning of measurement period	(14,222		)	(18,488		)
Interest cost	(561		)	(590		)
Actuarial (loss) gain	(21		)	(1,488		)
Assumption changes	(1,452		)	825
Benefits paid	1,037			5,394
Settlement loss	—			125
Benefit obligation at end of measurement period	(15,219		)	(14,222		)

Funded status	$	(3,335	)	$	(2,181	)

Weighted-average assumptions for benefit obligation:
Discount rate	3.05		%	4.10		%
Expected long-term rate of return	6.75		%	6.75		%

Weighted-average assumptions for net periodic pension cost:
Discount rate	4.10		%	3.38		%
Expected long-term rate of return	6.75		%	6.56		%

The major categories of assets in the Company’s Defined Benefit Plans as of year-end are presented in the following table (in thousands). Assets are segregated by the level of the valuation inputs within the fair value hierarchy established by ASC Topic 820 utilized to measure fair value (See Note Twenty).



	Total		Level 1		Level 2		Level 3
2019
Cash and cash equivalents	$	79	$	79	$	—	$	—
Common stocks	6,787		6,787		—		—
Corporate bonds	5,018		—		5,018		—
Total	$	11,884	$	6,866	$	5,018	$	—

2018
Cash and cash equivalents	$	12,041	$	12,041	$	—	$	—
Total	$	12,041	$	12,041	$	—	$	—

During the fourth quarter of 2018, the Company changed the administrator of The Horizon Defined Benefit Plan to its trust department. The Company's pension committee has revised the plan's investment strategy and set a target allocation of 50% equity securities and 50% fixed income securities. The assets will be reallocated periodically to meet the above target allocations. A range is developed around each of these target allocations such that at any given time the actual allocation may be higher or lower than stated above (+ or - 10%). The overall investment return goal is to achieve a rate of return greater than a blended index of the S&P 500 and the Barclay's Capital Aggregate Bond Index, which is tailored to the same asset mix of the retirement plans assets, by 1/2 or 1% annualized after fees over a rolling five year moving average basis. At December 31, 2019, the plan assets were invested in equity securities (57%), fixed income securities (42%), and cash and cash equivalents (1%), which are in the allowable allocation range under the policy.

The Company and its subsidiary participate in the Pentegra Defined Benefit Plan for Financial Institutions ("The Pentegra DB Plan"), a tax-qualified defined benefit pension plan. The Pentegra DB Plan operates as a multi-employer plan for accounting purposes and as a multiple-employer plan under the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code. There are no collective bargaining agreements in place that require contributions to the Pentegra DB Plan. The Pentegra DB Plan is a single plan under Internal Revenue Code Section 413(c) and, as a result, all of the assets stand behind all of the liabilities. Accordingly, under the Pentegra DB Plan, contributions made by a participating employer may be used to provide benefits to participants of other participating employers. The funded statuses below are as of July 1, 2019 (the latest available valuation report). It is the policy of the Company to fund the normal cost of the Pentegra DB Plan on an annual basis. Other than for normal plan expenses, no contributions were required for the years ended December 31, 2019, 2018 and 2017. The benefits of the original Pentegra Defined Benefit Plan were frozen prior to the acquisition of Classic Bancshares ("Classic") in 2005, and the benefits of the Poage Pentegra Defined Benefit Plan were frozen prior to the acquisition of Poage in 2018. It is the intention of the Company to fund benefit amounts when assets of the plan are not sufficient.

The Company has entered into employment contracts with certain of its current executive officers. The employment contracts provide for, among other things, the payment of termination compensation in the event an executive officer either voluntarily or involuntarily terminates his employment with the Company for other than "Just Cause" as defined in the applicable employment contract. Certain of the employment contracts provide for a termination benefit that became fully vested in 2005 and is payable if and when the executive officer terminates his employment with the Company. The termination benefit grows each year at an amount equal to the one-year constant maturity treasury rate and cannot be forfeited except where the executive officer personally profits from willful fraudulent activity that materially and adversely affects the Company. The costs of this vested termination benefit have been fully accrued and expensed by the Company as of December 31, 2019. The liability was $2.1 million at December 31, 2019 and 2018.

Certain entities previously acquired by the Company had entered into individual deferred compensation and supplemental retirement agreements with certain current and former directors and officers. The Company has assumed the liabilities associated with these agreements, the cost of which is being accrued over the period of active service from the date of the respective agreement. To assist in funding these liabilities, the acquired entities had insured the lives of certain current and former directors and officers. The Company is the current owner and beneficiary of those insurance policies. The following table presents a summary of the Company's other post-retirement benefit plans (in thousands).



	For the year ended December 31
	2019		2018		2017
Cost of other post-retirement benefits	$	304	$	280	$	278

At period-end:
Other post-retirement benefit liability (included in Other Liabilities)	6,570		6,923		5,695
Cash surrender value of insurance policies (included in Other Assets)	6,544		6,807		6,954