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Employee Benefit Plans | 12 Months Ended
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Dec. 31, 2023
Share-Based Payment Arrangement, Noncash Expense [Abstract] |
Employee Benefit Plans | EMPLOYEE BENEFIT PLANS Pursuant to the terms of the City Holding Company 2023 Incentive Plan (the "2023 Plan"), the Compensation Committee of the Board of Directors, or its delegate, may, from time-to-time, grant stock options, stock appreciation rights, ("SARs"), restricted stock units, or stock awards (collectively, the "awards") to employees, directors and individuals who provide service to the Company (collectively, "Plan Participants"). The 2023 Plan was approved by the shareholders in April 2023 and replaced the City Holding Holding 2013 Incentive Plan (the "2013 Plan") that expired in April 2023. A maximum of 600,000 shares of the Company’s common stock may be issued under the 2023 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, combination, reclassification, recapitalization 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 fair market value 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 2023 Plan, all outstanding awards shall immediately vest. As of December 31, 2023, approximately 578,000 shares were still available to be issued under the 2023 Plan. Stock Options During the year ended December 31, 2023, no stock options were exercised. The Company had 11,586 outstanding and exercisable options issued as of December 31, 2023 at a weighted average exercise price of $62.83 per share. All previously issued stock options granted under the 2013 Plan that was replaced by the 2023 Plan were fully vested prior to December 31, 2022. 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 2022 and 2021, 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, 2023, the criteria were probable of being met. Restricted Shares, Restricted Stock Units (“RSUs”) and Performance Stock Units (“PSUs”) 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, 2023, the criteria were probable of being met. The Board of Directors, annually, grants 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. A summary of the Company’s restricted shares activity and related information is presented below:
| 2023 | 2022 | 2021
| 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 | 140,606 |  | 146,755 |  | 158,554 |
Granted | 35,358 | $ | 91.46 |  | 33,327 | $ | 77.21 |  | 34,762 | $ | 76.38 |
Forfeited/Vested | (57,328) |  |  | (39,476) |  |  | (46,561) |  |
Outstanding at December 31 | 118,636 |  | 140,606 |  | 146,755 |
Information regarding stock-based compensation associated with restricted shares is provided in the following table (in thousands):
| For the year ended December 31,
| 2023 | 2022 | 2021
Stock-based compensation expense associated with restricted shares, RSUs and PSUs | $ | 3,047 |  | $ | 2,817 |  | $ | 2,949 |
At period-end: | 2023 |  |
Unrecognized stock-based compensation expense | $ | 4,912 |  |  |
Weighted average period in which the above amount is expected to be recognized | 3.0 | years |
401(k) Plan 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):
| For the year ended December 31,
| 2023 | 2022 | 2021
Expense associated with the Company's 401(k) Plan | $ | 1,246 |  | $ | 1,138 |  | $ | 1,075 |
At period-end: |  |  |
Number of shares of the Company's common stock held by the 401(k) Plan | 165,489 |  | 168,332 |  | 178,936 |
Defined Benefit Plan 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, 2023 and at December 31, 2022. The following table summarizes activity within the Company's Defined Benefit Plan (dollars in thousands):
| Pension Benefits
| 2023 | 2022
Change in fair value of plan assets: |  |
Fair value at beginning of measurement period | $ | 11,460 |  | $ | 14,704 |
Actual (loss) gain on plan assets | 1,839 |  | (2,253) |
Benefits paid | (948) |  | (991) |
Fair value at end of measurement period | 12,351 |  | 11,460 |
Change in benefit obligation: |  |
Benefit obligation at beginning of measurement period | (11,229) |  | (14,295) |
Interest cost | (549) |  | (362) |
Actuarial (loss) gain | (43) |  | (260) |
Assumption changes | (178) |  | 2,697 |
Benefits paid | 948 |  | 991 |
Benefit obligation at end of measurement period | (11,051) |  | (11,229) |
Funded status | $ | 1,300 |  | $ | 231 |
Weighted-average assumptions for benefit obligation: |  |
Discount rate | 4.93 | % | 5.14 | %
Expected long-term rate of return | 6.75 | % | 6.75 | %
Weighted-average assumptions for net periodic pension cost: |  |
Discount rate | 5.14 | % | 2.63 | %
Expected long-term rate of return | 6.75 | % | 6.75 | %
Based on the funding status of the Horizon Defined Benefit Plan, no contributions were required during the years ended December 31, 2023 and 2022. However, the Company made voluntary contributions during 2021. The following table presents the components of the net periodic pension cost of the Company's Defined Benefit Plan, which is recognized in Other Expenses in the Consolidated Statements of Income (in thousands). Since the Company's Defined Benefit Plan is frozen, there is no service cost component.
| 2023 | 2022 | 2021
Interest cost | $ | 549 |  | $ | 362 |  | $ | 331 |
Expected return on plan assets | (840) |  | (886) |  | (884) |
Net amortization and deferral | 343 |  | 780 |  | 1,122 |
Net Periodic Pension Cost | $ | 52 |  | $ | 256 |  | $ | 569 |
Amounts related to the Company's Defined Benefit Pension Plan recognized as a component of other comprehensive (loss) income were as follows (in thousands):
| 2023 | 2022 | 2021
Net actuarial gain | $ | 1,121 |  | $ | 83 |  | $ | 2,848 |
Deferred tax expense | (280) |  | (20) |  | (672) |
Other comprehensive income, net of tax | $ | 841 |  | $ | 63 |  | $ | 2,176 |
Amounts recognized as a component of accumulated other comprehensive (loss) income as of December 31, 2023 and 2022 were as follows (in thousands):
| 2023 | 2022
Net actuarial loss | $ | 3,398 |  | $ | 4,519 |
Deferred tax benefit | (817) |  | (1,097) |
Amounts included in accumulated other comprehensive (loss) income, net of tax | $ | 2,581 |  | $ | 3,422 |
The following table summarizes the expected benefits to be paid in each of the next five years and in the aggregate for the five years thereafter (in thousands):
Plan Year Ending December 31, | Expected Benefits to be Paid
2024 | $ | 1,014 |
2025 | 1,014 |
2026 | 998 |
2027 | 977 |
2028 | 960 |
2029 through 2033 | 4,344 |
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 ar e seg regated by the level of the valuation inputs within the fair value hierarchy established by ASC Topic 820 utilized to measure fair value (See Note Eighteen).
| Total | Level 1 | Level 2 | Level 3
2023 |  |  |  |
Cash and cash equivalents | $ | 62 |  | $ | 62 |  | $ | — |  | $ | — |
Common stocks | 9,487 |  | 9,487 |  | — |  | — |
Corporate bonds | 2,802 |  | — |  | 2,802 |  | — |
Total | $ | 12,351 |  | $ | 9,549 |  | $ | 2,802 |  | $ | — |
2022 |  |  |  |
Cash and cash equivalents | $ | 15 |  | $ | 15 |  | $ | — |  | $ | — |
Common stocks | 8,751 |  | 8,751 |  | — |  | — |
Corporate bonds | 2,694 |  | — |  | 2,694 |  | — |
Total | $ | 11,460 |  | $ | 8,766 |  | $ | 2,694 |  | $ | — |
Horizon Defined Benefit Plan (Investment Strategy) 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, 2023, the plan assets were invested in equity securities (77%) and fixed income securities (23%), which are in the allowable allocation range under the policy. Pentegra Defined Benefit Plan 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, 2023 (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, 2023, 2022 and 2021. 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.
Pentegra DB Plan's Employer Identification Number | 13-5645888
Plan Number | 333
Funded status for plan inherited with Classic acquisition | 88.26%
Funded status for plan inherited with Poage acquisition | 86.39%
Employment Contracts The Company has entered into employment contracts with certain of its current and former 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, 2023. The liability was $1.4 million and $1.6 million at December 31, 2023 and 2022, respectively. During 2021, the payment of termination benefits for a former executive officer commenced and fully paid as of December 31, 2023. Other Post-Retirement Benefit Plans 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
| 2023 | 2022 | 2021
Cost of other post-retirement benefits | $ | 231 |  | $ | 251 |  | $ | 277 |
At period-end: |  |  |
Other post-retirement benefit liability (included in Other Liabilities) | 5,175 |  | 5,527 |  | 5,995 |
Cash surrender value of insurance policies (included in Other Assets) | 4,841 |  | 4,787 |  | 5,071 |

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- Definition The entire disclosure for an entity's employee compensation and benefit plans, including, but not limited to, postemployment and postretirement benefit plans, defined benefit pension plans, defined contribution plans, non-qualified and supplemental benefit plans, deferred compensation, share-based compensation, life insurance, severance, health care, unemployment and other benefit plans. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 710 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//710/tableOfContent Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 712 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//712/tableOfContent Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 715 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//715/tableOfContent Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 718 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//718/tableOfContent + Details
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