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 (collectively, the "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, 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 the awards granted, including the number of shares, vesting periods, exercise prices (for stock options) 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 stock 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. Upon a change-in-control of the Company, as defined in the 2013 Plan, all outstanding awards shall immediately vest. As of December 31, 2021, approximately 362,000 shares were still available to be issued under the 2013 Plan.


	2021			2020			2019
	Options	Weighted-Average Exercise Price		Options	Weighted-Average Exercise Price		Options	Weighted-Average Exercise Price
Outstanding at January 1	41,330	$	53.64	46,251	$	52.74	57,972	$	51.15
Granted	—	—		—	—		—	—
Exercised	(14,603)	47.43		(4,921)	45.17		(11,721)	44.87
Forfeited	—	—		—	—		—	—
Outstanding at December 31	26,727	$	57.04	41,330	$	53.64	46,251	$	52.74

Exercisable at end of year	20,848	$	54.42	21,459	$	50.45	8,063	$	44.48

Nonvested at beginning of year	19,871	56.97		38,188	54.42		55,275	51.40
Granted during the year	—	—		—	—		—	—
Vested during the year	(13,992)	53.22		(18,317)	51.66		(17,087)	44.65
Forfeited during the year	—	—		—	—		—	—
Nonvested at end of year	5,879	$	66.32	19,871	$	56.97	38,188	$	54.42

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,
	2021		2020		2019
Proceeds from stock option exercises	$	691	$	223	$	526
Intrinsic value of stock options exercised	474		93		368

Stock-based compensation expense associated with stock options	$	22	$	60	$	119
Income tax benefit recognized related to stock-based compensation	2		5		12

At period-end:	2021
Unrecognized stock-based compensation expense	$	2
Weighted average period in which the above amount is expected to be recognized	0.2		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 2021, 2020 and 2019, 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, 2021, the criteria were probable of being met.

The Company measures compensation expense with respect to restricted shares, RSUs and PSUs (collectively, the "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 generally 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, 2021, the criteria were probable of being met.

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 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 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. Until the time these shares transfer to the participant, the participant does not have the right to vote these shares, nor does the participant receive dividends during the outstanding period (however, dividends are accrued and payable upon transfer). For the restricted shares that have performance-based criteria, management periodically evaluates those criteria and adjusts the number of shares awarded, if necessary.


	2021			2020			2019
	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	158,554			148,083			149,692
Granted	34,762	$	76.38	44,696	$	69.28	44,598	$	77.78
Forfeited/Vested	(46,561)			(34,225)			(46,207)
Outstanding at December 31	146,755			158,554			148,083


	For the year ended December 31,
	2021		2020		2019
Stock-based compensation expense associated with restricted shares, RSUs and PSUs	$	2,949	$	2,836	$	2,022

At period-end:	2021
Unrecognized stock-based compensation expense	$	4,947
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 matching contributions to 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 a defined benefit pension plan (the "Defined Benefit Plan"), which was inherited from the Company's acquisition of the plan sponsor (Horizon Bancorp, Inc.). The Horizon Defined Benefit Plan was frozen in 1999 and maintains a December 31st year-end for purposes of computing its benefit obligations.

Primarily as a result of the interest rate environment and mortality table revisions, the estimated fair value of plan assets exceeded the benefit obligation at December 31, 2021 and at December 31, 2020 the benefit obligation exceeded the estimated fair value of plan assets. The following table summarizes activity within the Company's Defined Benefit Plan (dollars in thousands):


	Pension Benefits
	2021			2020
Change in fair value of plan assets:
Fair value at beginning of measurement period	$	12,629		$	11,884
Actual gain on plan assets	2,165			1,324
Contributions	1,000			450
Benefits paid	(1,090)			(1,029)
Fair value at end of measurement period	14,704			12,629

Change in benefit obligation:
Benefit obligation at beginning of measurement period	(15,499)			(15,219)
Interest cost	(331)			(448)
Actuarial (loss) gain	(174)			83
Assumption changes	619			(944)
Benefits paid	1,090			1,029
Benefit obligation at end of measurement period	(14,295)			(15,499)

Funded status	$	409		$	(2,870)

Weighted-average assumptions for benefit obligation:
Discount rate	2.63		%	2.21		%
Expected long-term rate of return	6.75		%	6.75		%

Weighted-average assumptions for net periodic pension cost:
Discount rate	2.21		%	3.05		%
Expected long-term rate of return	6.75		%	6.75		%

The major categories of assets in the Company’s Defined Benefit Plan 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 Seventeen).


	Total		Level 1		Level 2		Level 3
2021
Cash and cash equivalents	$	39	$	39	$	—	$	—
Common stocks	11,835		11,835		—		—
Corporate bonds	2,830		—		2,830		—
Total	$	14,704	$	11,874	$	2,830	$	—

2020
Cash and cash equivalents	$	146	$	146	$	—	$	—
U.S. government agencies	100		—		100
Common stocks	10,101		10,101		—		—
Corporate bonds	2,282		—		2,282		—
Total	$	12,629	$	10,247	$	2,382	$	—

The Company's pension committee has revised the plan's investment strategy and set a target allocation of 75% equity securities and 25% 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, 2021, the plan assets were invested in equity securities (81%) and fixed income securities (19%), 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, 2021 (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, 2021, 2020 and 2019. 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, 2021. The liability was $1.9 million and $2.2 million at December 31, 2021 and 2020, respectively. During 2021, the payment of termination benefits for a former executive officer commenced.

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).