EMPLOYEE BENEFIT PLANS

12 Months Ended

Dec. 31, 2022

EMPLOYEE BENEFIT PLANS

EMPLOYEE BENEFIT PLANS

NOTE 8.           EMPLOYEE BENEFIT PLANS

Pension Plans

We maintain a legacy, employer-sponsored defined benefit pension plan (the “Plan”) for which participation and benefit accruals were frozen on January 13, 2017. Accordingly, no employees are permitted to commence participation in the Plan and future salary increases and years of credited service are not considered when computing an employee’s benefits under the Plan. As of December 31, 2022, all minimum Employee Retirement Income Security Act (“ERISA”) funding requirements have been met.

The following tables set forth information about the plan for the year ended December 31, 2022 and 2021:

(in thousands)	2022		2021
Change in projected benefit obligation:
Projected benefit obligation at beginning of year	$	8,601	$	9,650
Interest cost		236		233
Actuarial loss		(2,114)		(406)
Benefits paid		(326)		(326)
Settlements		(152)		(550)
Projected benefit obligation at end of year		6,245		8,601
Change in fair value of plan assets:
Fair value of plan assets at beginning of year		12,422		12,040
Expected return on plan assets		(2,900)		1,258
Benefits paid		(326)		(326)
Settlements		(152)		(550)
Fair value of plan assets at end of year		9,044		12,422
Overfunded status	$	(2,799)	$	(3,821)
Amounts recognized in consolidated balance sheet:
Other assets	$	2,799	$	3,821

Net periodic pension cost/(benefit) is comprised of the following for the years ended December 31, 2022 and 2021:

(in thousands)	2022		2021
Interest cost	$	236	$	233
Expected return on plan assets		(612)		(712)
Net periodic pension benefit	$	(376)	$	(479)

Amounts recognized in other comprehensive income for the years ended December 31, 2022 and 2021 included:

(in thousands)	2022		2021
Net actuarial loss (gain)	$	1,391	$	(953)
Net period pension benefit (credit)		(376)		(479)
Total recognized in other comprehensive income	$	1,015	$	(1,432)

Change in plan assets and benefit obligations recognized in accumulated other comprehensive income as of December 31, 2022 and 2021 are as follows:

(in thousands)	2022		2021
Net actuarial loss (gain)	$	1,391	$	(953)
Prior service cost		119		1,072
Total accumulated other comprehensive loss (pre-tax)	$	1,510	$	119

The after tax components of accumulated other comprehensive loss, which have not yet been recognized in net periodic pension cost, related to the Plan are a net loss of $1.2 million. We expect to make no cash contributions to the pension trust during the 2023 fiscal year. The amount expected to be amortized from accumulated other comprehensive loss into net periodic pension cost over the next fiscal year is zero.

The principal actuarial assumptions used at December 31, 2022 and 2021 were as follows:

	2022		2021
Projected benefit obligation
Discount rate	5.23	%	2.80	%
Net periodic pension cost
Discount rate	2.80	%	2.46	%
Long-term rate of return on plan assets	5.00		6.00

The discount rate that is used in the measurement of the pension obligation is determined by comparing the expected future retirement payment cash flows of the plan to the Citigroup Above Median Double-A Curve as of the measurement date. The expected long-term rate of return on Plan assets reflects expectations of future returns as applied to the plan’s target allocation of asset classes. In estimating that rate, appropriate consideration was given to historical returns earned by equities and fixed income securities.

Our overall investment strategy with respect to the Plan’s assets is to maintain assets at a level that will sufficiently cover future beneficiary obligations while achieving long term growth in assets. The Plan’s targeted asset allocation is 20% equity securities and 80% fixed-income securities primarily consisting of long-term products.

The fair values for investment securities are determined by quoted prices in active markets, if available (Level 1). For securities where quoted prices are not available, fair values are calculated based on market prices of similar securities (Level 2). For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators (Level 3).

The fair value of the Plan’s assets by category and level within fair value hierarchy are as follows at December 31, 2022 and 2021:

	2022
(in thousands)	Total		Level 1		Level 2
Equity mutual funds:
Large-cap	$	660	$	660	$	—
Mid-cap		210		210		—
Small-cap		214		214		—
International		420		420		—
Fixed income funds:
Fixed-income - core plus		—		—		—
Intermediate duration		—		—		—
Long duration		6,294		6,294		—
Common stock		724		724		—
Common/collective trusts - large-cap		206		—		206
Cash equivalents - money market		316		316		—
Total	$	9,044	$	8,838	$	206

	2021
(in thousands)	Total		Level 1		Level 2
Equity mutual funds:
Large-cap	$	952	$	952	$	—
Mid-cap		296		296		—
Small-cap		302		302		—
International		573		573		—
Fixed income funds:
Long duration		9,042		9,042		—
Common stock		653		653		—
Common/collective trusts - large-cap		244		—		244
Cash equivalents - money market		360		360		—
Total	$	12,422		12,178	$	244

The Plan did not hold any assets classified as Level 3, and there were no transfers between levels during 2022 and 2021.

Estimated benefit payments under our pension plan over the next 10 years at December 31, 2022 are as follows:

(in thousands)	Payments
2023	$	347
2024		345
2025		341
2026		405
2027		407
2028-2032		2,206
Total	$	4,051

Non-qualified Supplemental Executive Retirement Plan

We have non-qualified supplemental executive retirement agreements with certain retired officers. The agreements provide supplemental retirement benefits payable in installments over a period of years upon retirement or death. This agreement provides a stream of future payments in accordance with individually defined vesting schedules upon retirement, termination, or in the event that the participating executive leaves the Company following a change of control event.

The following table sets forth changes in benefit obligation, changes in plan assets, and the funded status of the plan as of and for the years ended December 31, 2022 and December 31, 2021:

(in thousands)	2022		2021
Change in benefit obligation:
Projected benefit obligation at beginning of year	$	2,606	$	2,969
Service cost		—		—
Interest cost		54		44
Actuarial (gain) loss		(307)		(147)
Benefits paid		(260)		(260)
Projected benefit obligation at end of year	$	2,093	$	2,606
Change in fair value of plan assets:
Fair value of plan assets at beginning of year	$	—	$	—
Expected return on plan assets		—		—
Contributions by employer		260		260
Benefits paid		(260)		(260)
Fair value of plan assets at end of year	$	—	$	—
Underfunded status	$	2,093	$	2,606
Amounts recognized in consolidated balance sheet
Other liabilities	$	2,093	$	2,606

Net periodic benefit cost is comprised of the following for the years ended December 31, 2022 and 2021:

(in thousands)	2022		2021
Interest cost	$	54	$	44
Expected return on plan assets		—		—
Amortization of unrecognized actuarial loss		37		43
Net periodic benefit cost	$	91	$	87

Amounts recognized in other comprehensive income for the years ended December 31, 2022 and 2021 included:

(in thousands)	2022		2021
Net actuarial (gain) loss	$	(382)	$	(137)
Amortization of unrecognized actuarial loss		(37)		(43)
Total recognized in other comprehensive loss	$	(419)	$	(180)

Change in plan assets and benefit obligations recognized in accumulated other comprehensive income in 2022 and 2021 are as follows:

(in thousands)	2022		2021
Accumulated other comprehensive loss at beginning of the year (pre-tax)	$	599	$	779
Actuarial (gain) loss		(382)		(137)
Amortization of actuarial loss		(37)		(43)
Accumulated other comprehensive loss at end of year (pre-tax)	$	180	$	599

The after tax components of accumulated other comprehensive loss, which have not yet been recognized in net periodic benefit cost, related to the non-qualified supplemental executive retirement agreements are a net loss of $139 thousand. The amount expected to be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year is $8 thousand.

The principal actuarial assumptions used at December 31, 2022 and December 31, 2021 were as follows:

	2022		2021
Discount rate beginning of year	2.12	%	1.56	%
Discount rate end of year	4.92		2.12

The discount rate used in the measurement of the non-qualified supplemental executive retirement plan obligation is determined by comparing the expected future retirement payment cash flows to the Citigroup Above Median Double- A Curve as of the measurement date.

We expect to contribute the following amounts to fund benefit payments under the supplemental executive retirement plans:

(in thousands)	Payments
2023	$	260
2024		260
2025		231
2026		221
2027		221
2028-2032		1,106
Total	$	2,299

401(k) Plan

We maintain a Section 401(k) savings plan for substantially all of its employees. Employees are eligible to participate in the 401(k) Plan on the first day of any quarter following their date of hire and attainment of age 21½ . Under the plan, we make a matching contribution of a portion of the amount contributed by each participating employee, up to a percentage of the employee’s annual salary. The plan allows for supplementary profit sharing contributions by Bar Harbor, at its discretion, for the benefit of participating employees. The total expense for this plan in 2022, 2021, and 2020 was $1.2 million.

Other Plans

As a result of the acquisition of a business combination in 2017, we assumed salary continuation agreements for supplemental retirement income with certain prior executives and senior officers along with an executive indexed supplemental retirement plan for one prior executive. The total liability for these agreements included in other liabilities was $6.0 million at December 31, 2022 and $8.0 million at December 31, 2021. Income recorded in 2022 and 2021 was $1.2 million and $312 thousand, respectively.  We recorded expense in 2020 under these agreements of $793 thousand.

We also assumed split-dollar life insurance agreements from the 2017 business combination with an accrued liability of $679 thousand at December 31, 2022 and $876 thousand at December 31, 2021. We recorded income for the split-dollar life insurance agreements of $197 thousand in 2022 and $22 thousand in 2021. We recorded expense of $65 thousand in 2020.