13. Employee Benefit Plans

Defined Benefit Post-Retirement Plans

The Company has a qualified, noncontributory, defined benefit pension plan (“the Plan”) covering substantially all of its employees at December 31, 2018. Benefits paid from the plan are based on age, years of service, compensation, social security benefits and are determined in accordance with defined formulas. The Company’s policy is to fund the Plan in accordance with Employee Retirement Income Security Act of 1974 standards. Assets of the Plan are invested in publicly traded stocks and mutual funds. Prior to January 1, 2000, the Plan was a traditional defined benefit plan based on final average compensation. On January 1, 2000, the Plan was converted to a cash balance plan with grandfathering provisions for existing participants. Effective March 1, 2013, the Plan was amended. Benefit accruals for participants who, as of January 1, 2000, elected to continue participating in the traditional defined benefit plan design were frozen as of March 1, 2013. In May 2013, the noncontributory, frozen, defined benefit pension plan assumed from Alliance in the acquisition was merged into the Plan.

In addition to the Plan, the Company provides supplemental employee retirement plans to certain current and former executives. The Company also assumed supplemental retirement plans for certain former executives in the Alliance acquisition.

The supplemental employee retirement plans and the Plan are collectively referred to herein as “Pension Benefits.”

In addition, the Company provides certain health care benefits for retired employees. Benefits were accrued over the employees’ active service period. Only employees that were employed by the Company on or before January 1, 2000 are eligible to receive post-retirement health care benefits. The Plan is contributory for participating retirees, requiring participants to absorb certain deductibles and coinsurance amounts with contributions adjusted annually to reflect cost sharing provisions and benefit limitations called for in the Plan. Employees become eligible for these benefits if they reach normal retirement age while working for the Company. For eligible employees described above, the Company funds the cost of post-retirement health care as benefits are paid. The Company elected to recognize the transition obligation on a delayed basis over twenty years. In addition, the Company assumed post-retirement medical life insurance benefits for certain Alliance employees, retirees and their spouses, if applicable, in the Alliance acquisition. These post-retirement benefits are referred to herein as “Other Benefits.”

Accounting standards require an employer to: (1) recognize the overfunded or underfunded status of defined benefit post-retirement plans, which is measured as the difference between plan assets at fair value and the benefit obligation, as an asset or liability in its balance sheet; (2) recognize changes in that funded status in the year in which the changes occur through comprehensive income; and (3) measure the defined benefit plan assets and obligations as of the date of its year-end balance sheet.

The components of AOCI, which have not yet been recognized as components of net periodic benefit cost, related to pensions and other post-retirement benefits are summarized below:

	Pension Benefits				Other Benefits
(In thousands)	2018		2017		2018		2017
Net actuarial loss	$	35,538	$	23,585	$	844	$	1,731
Prior service cost		570		94		145		196
Total amounts recognized in AOCI (pre-tax)	$	36,108	$	23,679	$	989	$	1,927

A December 31 measurement date is used for the pension, supplemental pension and post-retirement benefit plans. The following table sets forth changes in benefit obligations, changes in plan assets and the funded status of the pension plans and other post-retirement benefits:

	Pension Benefits						Other Benefits
(In thousands)	2018			2017			2018			2017
Change in benefit obligation:
Benefit obligation at beginning of year	$	90,950		$	90,477		$	8,050		$	7,478
Service cost		1,659			1,511			10			12
Interest cost		3,645			4,168			327			357
Plan participants' contributions		-			-			209			218
Actuarial (gain) loss		(3,977	)		4,028			(762	)		388
Acquisition		337			-			-			-
Curtailment/ settlement		-			-			-			286
Benefits paid		(7,480	)		(9,234	)		(800	)		(689	)
Projected benefit obligation at end of year	$	85,134		$	90,950		$	7,034		$	8,050
Change in plan assets:
Fair value of plan assets at beginning of year	$	124,226		$	116,216		$	-		$	-
Actual return on plan assets		(8,381	)		15,032			-			-
Employer contributions		1,381			2,212			591			471
Plan participants' contributions		-			-			209			218
Benefits paid		(7,480	)		(9,234	)		(800	)		(689	)
Fair value of plan assets at end of year	$	109,746		$	124,226		$	-		$	-

Funded (unfunded) status at year end	$	24,612		$	33,276		$	(7,034	)	$	(8,050	)

An asset is recognized for an overfunded plan and a liability is recognized for an underfunded plan. The accumulated benefit obligation for pension benefits was $85.1 million and $91.0 million at December 31, 2018 and 2017, respectively. The accumulated benefit obligation for other post-retirement benefits was $7.0 million and $8.1 million at December 31, 2018 and 2017, respectively. The funded status of the pension and other post-retirement benefit plans has been recognized as follows in the consolidated balance sheets at December 31, 2018 and 2017.

	Pension Benefits						Other Benefits
(In thousands)	2018			2017			2018			2017
Other assets	$	42,900		$	52,775		$	-		$	-
Other liabilities		(18,288	)		(19,499	)		(7,034	)		(8,050	)
Funded status	$	24,612		$	33,276		$	(7,034	)	$	(8,050	)

The following assumptions were used to determine the benefit obligation and the net periodic pension cost for the years indicated:

	Years ended December 31,
	2018			2017			2016
Weighted average assumptions:
The following assumptions were used to determine benefit obligations:
Discount rate		4.79% - 4.80	%		4.20% - 4.21	%		4.76% - 4.84	%
Expected long-term return on plan assets		7.00	%		7.00	%		7.00	%
Rate of compensation increase		3.00	%		3.00	%		3.00	%

The following assumptions were used to determine net periodic pension cost:
Discount rate		4.20% - 4.21	%		4.76% - 4.84	%		4.69% - 4.71	%
Expected long-term return on plan assets		7.00	%		7.00	%		7.00	%
Rate of compensation increase		3.00	%		3.00	%		3.00	%

Net periodic benefit cost and other amounts recognized in OCI for the years ended December 31 included the following components:

	Pension Benefits									Other Benefits
(In thousands)	2018			2017			2016			2018			2017			2016
Components of net periodic benefit cost:
Service cost	$	1,659		$	1,511		$	2,162		$	10		$	12		$	14
Interest cost		3,645			4,168			4,223			327			357			353
Expected return on plan assets		(8,478	)		(7,929	)		(7,430	)		-			-			-
Amortization of gain due to curtailment		-			-			(768	)		-			-			-
Amortization of prior service cost (credit)		40			46			32			51			51			(57	)
Amortization of unrecognized net loss		930			1,668			2,235			124			87			117
Net periodic pension (benefit) cost	$	(2,204	)	$	(536	)	$	454		$	512		$	507		$	427

Other changes in plan assets and benefit obligations recognized in OCI (pre-tax):
Net loss (gain)	$	12,882		$	(3,075	)	$	(2,464	)	$	(762	)	$	388		$	(786	)
Prior service cost		337			-			96			-			286			-
Amortization of gain due to settlement		-			-			(43	)		-			-			-
Amortization of prior service (cost) credit		(40	)		(46	)		(32	)		(51	)		(51	)		57
Amortization of unrecognized net (loss)		(930	)		(1,668	)		(2,235	)		(124	)		(87	)		(117	)
Total recognized in OCI	$	12,249		$	(4,789	)	$	(4,678	)	$	(937	)	$	536		$	(846	)

Total recognized in net periodic benefit cost and OCI, pre-tax	$	10,045		$	(5,325	)	$	(4,224	)	$	(425	)	$	1,043		$	(419	)

The Company expects that $2.6 million in net actuarial loss and nominal prior service costs will be recognized as components of net periodic benefit cost in 2019.

The following table sets forth estimated future benefit payments for the pension plans and other post-retirement benefit plans as of December 31, 2018:

(In thousands)	Pension Benefits		Other Benefits
2019	$	6,926	$	607
2020		6,705		594
2021		6,683		569
2022		6,646		572
2023		6,577		570
2024 - 2028		38,227		2,686

The Company made no voluntary contributions to the pension and other benefit plans during the year ended December 31, 2018 and 2017.

For measurement purposes, the annual rates of increase in the per capita cost of covered medical and prescription drug benefits for fiscal year 2018 were assumed to be 5.0 % to 9.5 % percent. The rates were assumed to decrease gradually to 3.8 % for fiscal year 2075 and remain at that level thereafter. Assumed health care cost trend rates have a significant effect on amounts reported for health care plans. A one-percentage point change in the health care trend rates would have the following effects as of and for the year ended December 31, 2018:

(In thousands)	One Percentage Point Increase		One Percentage Point Decrease
Increase (decrease) on total service and interest cost components	$	28	$	(24	)
Increase (decrease) on post-retirement accumulated benefit obligation		573		(499	)

Plan Investment Policy

The Company’s key investment objectives in managing its defined benefit plan assets are to ensure that present and future benefit obligations to all participants and beneficiaries are met as they become due; to provide a total return that, over the long-term, maximizes the ratio of the plan assets to liabilities, while minimizing the present value of required Company contributions, at the appropriate levels of risk; to meet statutory requirements and regulatory agencies’ requirements; and to satisfy applicable accounting standards. The Company periodically evaluates the asset allocations, funded status, rate of return assumption and contribution strategy for satisfaction of our investment objectives.

The target and actual allocations expressed as a percentage of the defined benefit pension plan’s assets are as follows:

	Target 2018			2018			2017
Cash and cash equivalents		0 - 15	%		4	%		3	%
Fixed income securities		30 - 60	%		39	%		45	%
Equities		40 - 70	%		57	%		52	%
Total					100	%		100	%

Only high-quality bonds are to be included in the portfolio. All issues that are rated lower than A by Standard and Poor’s are to be excluded. Equity securities at December 31, 2018 and 2017 do not include any Company common stock.

The following table presents the financial instruments recorded at fair value on a recurring basis by the Plan:

(In thousands)	Level 1		Level 2		December 31, 2018
Cash and cash equivalents	$	4,095	$	-	$	4,095
Foreign equity mutual funds		38,861		-		38,861
Equity mutual funds		24,124		-		24,124
U.S. government bonds		-		76		76
Corporate bonds		-		42,590		42,590
Total	$	67,080	$	42,666	$	109,746

	Level 1		Level 2		December 31, 2017
Cash and cash equivalents	$	3,684	$	-	$	3,684
Foreign equity mutual funds		44,508		-		44,508
Equity mutual funds		26,747		-		26,747
U.S. government bonds		-		99		99
Corporate bonds		-		49,188		49,188
Total	$	74,939	$	49,287	$	124,226

The plan had no financial instruments recorded at fair value on a non-recurring basis as of December 31, 2018 and 2017.

Determination of Assumed Rate of Return

The expected long-term rate-of-return on assets was 7.0% at December 31, 2018 and 2017. This assumption represents the rate of return on plan assets reflecting the average rate of earnings expected on the funds invested or to be invested to provide for the benefits included in the projected benefit obligation. The assumption has been determined by reflecting expectations regarding future rates of return for the portfolio considering the asset distribution and related historical rates of return. The appropriateness of the assumption is reviewed annually.

Employee 401(k) and Employee Stock Ownership Plans

The Company maintains a 401(k) and employee stock ownership plan (the “401(k) Plan”). The Company contributes to the 401(k) Plan based on employees’ contributions out of their annual salaries. In addition, the Company may also make discretionary contributions to the 401(k) Plan based on profitability. Participation in the 401(k) Plan is contingent upon certain age and service requirements. The employer contributions associated with the 401(k) Plan were $3.2 million in 2018, $2.8 million in 2017 and $2.7 million in 2016.

Other Retirement Benefits

Included in other liabilities is $2.0 million and $2.4 million at December 31, 2018 and 2017, respectively, for supplemental retirement benefits for retired executives from legacy plans assumed in acquisitions. The Company recognized $0.1, $0.1 and $0.2 million in expense for the years ended December 31, 2018, 2017 and 2016, respectively, related to these plans.