The Bank has a 401(k) plan and a defined benefit pension plan (“Pension Plan” or “Plan”). Employees are immediately eligible to participate in the 401(k) plan provided they are at least 18 years of age. Participants may elect to contribute up to 100% of gross compensation, as defined, subject to the limitations of Section 401(k) of the Internal Revenue Code. The Bank may, at its sole discretion, make matching contributions to each participant's account based on the amount of the participant's contributions. Participants are fully vested in their elective contributions and, after five years of participation in the 401(k) plan, are fully vested (20% vesting per year) in the matching contributions, if any, made by the Bank. The Bank’s expense for matching contributions was $530,000, $519,000 and $524,000 for 2022, 2021 and 2020, respectively.

An internal management committee (the “Committee”) oversees the affairs of the Pension Plan and acts as named fiduciary. The Committee has retained Vanguard Group, Inc., including its subsidiaries and affiliates (“Vanguard”), to act as discretionary investment agent, trustee and custodian for the Plan. Vanguard has formulated investment recommendations customized to meet the Committee’s objectives and, after approval by the Committee, such investment recommendations are incorporated into the investment guidelines and policies contained in the investment management agreement between the Bank and Vanguard (the “Investment Management Agreement”). The Committee utilizes a formal Investment Policy Statement which includes the investment guidelines and policies contained in the Investment Management Agreement. The Investment Policy Statement is periodically revised by the Committee as deemed appropriate.

Employees are eligible to participate in the Pension Plan after attaining 21 years of age and completing 12 full months of service. Pension benefits are generally based on a percentage of average annual compensation during the period of creditable service. The Bank makes contributions to the Pension Plan which, when taken together with participant contributions equal to 2% of their compensation, will be sufficient to fund these benefits. The Bank’s funding method, the unit credit actuarial cost method, is consistent with the funding requirements of applicable federal laws and regulations which set forth both minimum required and maximum tax deductible contributions. Employees become fully vested after four years of participation in the Pension Plan (no vesting occurs during the four year period).

Significant Actuarial Assumptions. The following table sets forth the significant actuarial assumptions used to determine the benefit obligation at December 31, 2022, 2021 and 2020 and the benefit cost for each of the Plan years then ended.



	2022		2021		2020
Weighted average assumptions used to determine the
benefit obligation at year end:
Discount rate		5.44%		2.97%		2.67%
Rate of increase in compensation levels		3.50%		3.50%		3.50%

Weighted average assumptions used to determine net pension cost:
Discount rate		2.97%		2.67%		3.55%
Rate of increase in compensation levels		3.50%		3.50%		3.50%
Expected long-term rate of return on plan assets		5.25%		5.25%		5.50%

The increase in the discount rate from 2.97% in 2021 to 5.44% in 2022 decreased the projected benefit obligation at December 31, 2022 by approximately $15.3 million. Changes due to experience, including changes in participant demographics, resulted in a net actuarial loss of approximately $1.6 million during 2022.

The increase in the discount rate from 2.67% in 2020 to 2.97% in 2021 decreased the projected benefit obligation at December 31, 2021 by approximately $2.4 million. In calculating the benefit obligation at December 31, 2021, the mortality table previously utilized, RP-2014 Healthy Annuitant/Employee Mortality Table with Projection Scale MP-2020, was adjusted to reflect Scale MP-2021. The updated mortality table increased the projected benefit obligation at December 31, 2021 by approximately $177,000.

Net Pension Cost. The following table sets forth the components of net periodic pension cost.



(in thousands)	2022		2021		2020
Service cost plus expected expenses and net of expected plan
participant contributions	$	2,133	$	2,131	$	1,647
Interest cost		1,641		1,454		1,647
Expected return on plan assets		(3,903)		(3,914)		(3,557)
Net pension cost (credit)	$	(129)	$	(329)	$	(263)

The components of net pension credit other than the service cost component were included in the line item “Other noninterest income” in the consolidated statements of income. The service cost component was included in the line item “Salaries and employee benefits” in the consolidated statements of income.

Funded Status of the Plan. The following table sets forth the change in the projected benefit obligation and Plan assets for each year and, as of the end of each year, the funded status of the Plan and accumulated benefit obligation.



(in thousands)	2022		2021		2020
Change in projected benefit obligation:
Projected benefit obligation at beginning of year	$	56,587	$	55,642	$	47,471
Service cost		2,357		2,340		1,844
Interest cost		1,641		1,454		1,647
Benefits paid		(2,361)		(2,264)		(1,919)
Assumption changes		(15,343)		(2,173)		5,771
Experience loss and other		1,579		1,588		828
Projected benefit obligation at end of year		44,460		56,587		55,642

Change in fair value of plan assets:
Fair value of plan assets at beginning of year		75,684		75,751		65,746
Actual return on plan assets		(18,113)		1,906		11,657
Plan participant contributions		425		413		383
Benefits paid		(2,361)		(2,264)		(1,919)
Expenses		(126)		(122)		(116)
Fair value of plan assets at end of year		55,509		75,684		75,751
Funded status at end of year	$	11,049	$	19,097	$	20,109
Accumulated benefit obligation	$	41,551	$	52,362	$	51,541

During 2022, the Bank did not make a contribution to the Plan and the Bank has no minimum required pension contribution for the Plan year ending September 30, 2023. Its maximum tax-deductible contribution for the tax year beginning January 1, 2023 is $33.3 million. The Bank does not expect to make a contribution in 2023.

Plan Assets. The objective for the Plan’s assets is to generate long-term investment returns from both income and capital appreciation which outpaces the rate of inflation, while maintaining sufficient liquidity to ensure the Plan’s ability to pay all anticipated benefit and expense obligations when due. The Plan will maintain a de minimis amount of cash equivalents, with the remaining assets allocated across two broadly-defined financial asset categories: (1) equity, both domestic and international; and (2) fixed income of various durations and issuer type. The goal of the equity allocation is to supplement the Bank’s contributions to the Plan when the Plan is underfunded and increase surplus when the Plan is overfunded. The fixed income component will include longer-duration bonds designed to match and hedge the characteristics of the Plan’s liabilities. Cash equivalents, under normal circumstances, will be temporary holdings for the purpose of paying expenses and monthly benefits.

For fixed income investments: (1) the minimum average credit quality shall be investment grade (Standard & Poor’s BBB or Moody’s Baa) or higher; and (2) no more than 5% of the portfolio may be invested in securities with ratings below investment grade, and none may be rated below investment grade at the time of purchase.

Reasonable precautions are taken to avoid excessive concentrations to protect the portfolio against unfavorable outcomes within an asset class. Specifically, the following guidelines are in place:

With the exception of fixed income investments explicitly guaranteed by the U.S. government, no single investment security shall represent more than 5% of total Plan assets; and

With the exception of passively managed investment vehicles seeking to match the returns of broadly diversified market indices or diversified investment vehicles chosen specifically to hedge the interest rate risk embedded in Plan liabilities, no single investment pool or investment company (mutual fund) shall comprise more than 10% of total plan assets.

The portfolio will be rebalanced to the target asset allocation, if needed, no less often than quarterly. Unless expressly authorized in writing by the Committee, the following investing activities are prohibited:

Purchasing securities on margin;

Pledging or hypothecating securities, except for loans of securities that are fully collateralized;

Purchasing or selling derivative securities for speculation or leverage; and

Engaging in investment strategies that have the potential to amplify or distort the risk of loss beyond a level that is reasonably expected given the objectives of the portfolio.

The Plan’s actual asset allocations, target allocations and expected long-term rates of return by asset category are set forth in the following tables.



	December 31, 2022
		Target ‎Allocation	Percentage of ‎Plan Assets	Weighted ‎Average Expected ‎Long-term ‎Rates of Return
Cash equivalents		0% - 1%	0.3%	<1.00%
Equity mutual funds		20% - 30%	24.8%	6.3% to 8.8%
Fixed income mutual funds		70% - 80%	74.9%	4.3% to 5.6%
			100.0%	4.8% to 6.3%

	December 31, 2021
Cash equivalents		0% - 1%	0.3%	<1.00%
Equity mutual funds		20% - 30%	28.2%	5.3% to 7.7%
Fixed income mutual funds		70% - 80%	71.5%	2.5% to 3.7%
			100.0%	3.3% to 4.8%

The ranges for the weighted average expected long-term rates of return for equity funds, bond funds and total plan assets set forth in the preceding table represent expected 25^th to 75^th percentile returns provided by Vanguard. For these purposes Vanguard utilizes a proprietary capital markets model (the “model”) developed and maintained by Vanguard’s primary investment research and advice teams. The model forecasts distributions of future returns for a wide array of broad asset classes. The theoretical and empirical foundation of the model is that the returns of various asset classes reflect the compensation investors require for bearing different types of systematic risk. At the core of the model are estimates of the dynamic statistical relationship between risk factors and asset returns, obtained from statistical analysis based on available historical monthly financial and economic data.

At December 31, 2022, the equity and fixed income components of Plan assets consisted of the following Vanguard institutional funds:

Equity

Vanguard Total Stock Market Index Fund (VITSX). This fund seeks to track the performance of the Center for Research in Security Prices (CRSP) U.S. Total Market Index. The fund is passively managed using index sampling and consists of large, small and mid-cap equity securities diversified across growth and value styles.

Vanguard Total International Stock Index Fund (VTSNX). This fund seeks to track the performance of the Financial Times Stock Exchange (FTSE) Global All Cap ex U.S. Index. The fund is passively managed and includes broad exposure across developed and emerging non-U.S. equity markets.

Fixed Income

Vanguard Long-Term Investment-Grade Fund (VWETX). This fund seeks high and sustainable current income. Investments are selected using a fundamental, bottom-up credit selection process and consist of long-term, high-quality bonds broadly diversified by issuer and industry sector.

Vanguard Long-Term Treasury Index Fund (VLGIX). This fund seeks to track the performance of the Bloomberg Barclays U.S. Long Treasury Bond Index. The fund is passively managed using index sampling and includes long-term, fixed income securities issued by the U.S. Treasury.

Fair Value of Plan Assets. The fair value of Plan assets at December 31, 2022 and 2021 is summarized below.



			Fair Value Measurements Using:
(in thousands)	Total		Quoted Prices ‎in Active ‎Markets for ‎Identical Assets ‎(Level 1)		Significant ‎Other ‎Observable ‎Inputs ‎(Level 2)		Significant ‎Unobservable ‎Inputs ‎(Level 3)
December 31, 2022:
Cash equivalents:
Vanguard Prime Money Market Mutual Fund	$	192	$	—	$	192	$	—
Total cash equivalents		192		—		192		—
Equity mutual funds:
Vanguard Total Stock Market Index Fund (VITSX)		8,131		8,131		—		—
Vanguard Total International Stock Index Fund (VTSNX)		5,663		5,663		—		—
Total equity mutual funds		13,794		13,794		—		—
Fixed income mutual funds:
Vanguard Long-Term Investment Grade Fund (VWETX)		30,869		30,869		—		—
Vanguard Long-Term Treasury Index Fund (VLGIX)		10,654		10,654		—		—
Total fixed income mutual funds		41,523		41,523		—		—
Total Plan Assets	$	55,509	$	55,317	$	192	$	—

December 31, 2021:
Cash equivalents:
Vanguard Prime Money Market Mutual Fund	$	195	$	—	$	195	$	—
Total cash equivalents		195		—		195		—
Equity mutual funds:
Vanguard Total Stock Market Index Fund (VITSX)		12,792		12,792		—		—
Vanguard Total International Stock Index Fund (VTSNX)		8,560		8,560		—		—
Total equity mutual funds		21,352		21,352		—		—
Fixed income mutual funds:
Vanguard Long-Term Investment Grade Fund (VWETX)		40,183		40,183		—		—
Vanguard Long-Term Treasury Index Fund (VLGIX)		13,954		13,954		—		—
Total fixed income mutual funds		54,137		54,137		—		—
Total Plan Assets	$	75,684	$	75,489	$	195	$	—

The fair values of the Vanguard mutual funds represent their net asset values (“NAV”) at December 31, 2022 and 2021. On an ongoing basis, the Plan has the ability to readily redeem its investments in these funds at their NAV per share with no advance notification.

An explanation of matrix pricing and the definitions of Level 1, 2 and 3 fair value measurements are included in “Note M – Fair Value of Financial Instruments” to these consolidated financial statements.

At December 31, 2022 and 2021, the Plan’s cash and cash equivalents amounted to 0.3% of the Plan’s total assets and represented investments in the Vanguard Prime Money Market Mutual Fund.

Estimated Future Benefit Payments. The following benefit payments, which reflect expected future service as appropriate, are expected to be made by the Plan.

Retirement plan expense for a discontinued Supplemental Executive Retirement Plan was $157,000 in 2020.