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PENSION AND OTHER POSTRETIREMENT PLANS | 12 Months Ended
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Dec. 31, 2018
Retirement Benefits [Abstract] |
PENSION AND OTHER POSTRETIREMENT PLANS | NOTE 11 – PENSION AND OTHER POSTRETIREMENT PLANS In April 2000, the Lakeland Financial Corporation Pension Plan was frozen. The Company also maintains a Supplemental Executive Retirement Plan (“SERP”) for select officers that was established as a funded, non-qualified deferred compensation plan. Currently, six retired officers are the only participants in the SERP. The measurement date for both the pension plan and SERP is December 31, 2018 and 2017. Information as to the Company’s employee benefit plans at December 31, 2018 and 2017 is as follows:
| Pension Benefits |  | SERP Benefits
(dollars in thousands) | 2018 |  | 2017 |  | 2018 |  | 2017
Change in benefit obligation: |  |  |  |  |  |  |
Beginning benefit obligation | $2,862 |  | $2,841 |  | $1,086 |  | $1,163
Interest cost | 93 |  | 104 |  | 34 |  | 40
Actuarial (gain)/loss | (325) |  | 134 |  | (62) |  | 20
Benefits paid | (512) |  | (217) |  | (134) |  | (137)
Ending benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 2,118 |  | 2,862 |  | 924 |  | 1,086
Change in plan assets (primarily equity and fixed |  |  |  |  |  |  |
income investments and money market funds), |  |  |  |  |  |  |
at fair value: |  |  |  |  |  |  |
Beginning plan assets | 2,356 |  | 2,063 |  | 1,047 |  | 1,000
Actual return | (61) |  | 313 |  | (28) |  | 144
Employer contribution | 368 |  | 197 |  | 0 |  | 40
Benefits paid | (512) |  | (217) |  | (134) |  | (137)
Ending plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 2,151 |  | 2,356 |  | 885 |  | 1,047
Funded status at end of year | $33 |  | $(506) |  | $(39) |  | $(39)
Amounts recognized in the consolidated balance sheets consist of:
| Pension Benefits |  | SERP Benefits
(dollars in thousands) | 2018 |  | 2017 |  | 2018 |  | 2017
Funded status included in other liabilities | $33 |  | $(506) |  | $(39) |  | $(39)
Amounts recognized in accumulated other comprehensive income consist of:
| Pension Benefits |  | SERP Benefits
(dollars in thousands) | 2018 |  | 2017 |  | 2018 |  | 2017
Net actuarial loss | $1,242 |  | $1,731 |  | $615 |  | $661
The accumulated benefit obligation for the pension plan was $2.1 million and $2.9 million for December 31, 2018 and 2017, respectively. The accumulated benefit obligation for the SERP was $900,000 and $1.1 million for December 31, 2018 and 2017, respectively. Net pension expense and other amounts recognized in other comprehensive income include the following:
| Pension Benefits |  | SERP Benefits
(dollars in thousands) | 2018 |  | 2017 |  | 2016 |  | 2018 |  | 2017 |  | 2016
Net pension expense: |  |  |  |  |  |  |  |  |  |  |
Service cost | $0 |  | $0 |  | $0 |  | $0 |  | $0 |  | $0
Interest cost | 93 |  | 104 |  | 105 |  | 34 |  | 40 |  | 45
Expected return on plan assets | (138) |  | (143) |  | (139) |  | (61) |  | (63) |  | (70)
Recognized net actuarial loss | 193 |  | 185 |  | 135 |  | 73 |  | 80 |  | 80
Settlement cost | 224 |  | 0 |  | 128 |  | 0 |  | 0 |  | 0
Net pension expense | $372 |  | $146 |  | $229 |  | $46 |  | $57 |  | $55
Net (gain)/loss | $(296) |  | $(36) |  | $122 |  | $27 |  | $(61) |  | $29
Amortization of net loss | (193) |  | (185) |  | (135) |  | (73) |  | (80) |  | (80)
Total recognized in other comprehensive |  |  |  |  |  |  |  |  |  |  |
income | (489) |  | (221) |  | (13) |  | (46) |  | (141) |  | (51)
Total recognized in net pension expense |  |  |  |  |  |  |  |  |  |  |
and other comprehensive income | $(117) |  | $(75) |  | $216 |  | $0 |  | $(84) |  | $4
The estimated net loss (gain) for the defined benefit pension plan and SERP that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year is $132,000 for the pension plan and $73,000 for the SERP. The settlement costs in 2018 and 2016 were related to participants taking lump sum distributions from the pension plan during those years. For 2018, 2017 and 2016, the assumed form of payment elected by active participants upon retirement was a lump sum to reflect participant trends. The lump sum assumed interest rates below for December 31, 2018, 2017 and 2016 reflect the mortality table in effect for 2018, 2017 and 2016, respectively. For 2018, the mortality assumption was changed to the RP-2014 Mortality Table, adjusted to 2006, with full generational Projection Scale MP-2018 as of December 31, 2018 to reflect improved mortality expectations. For 2017, the mortality assumption was changed to the RP-2014 Mortality Table, adjusted to 2006, with full generational Projection Scale MP-2017 as of December 31, 2017 to reflect improved mortality expectations. For 2016, the mortality assumption was changed to the RP-2014 Mortality Table, adjusted to 2006, with full generational Projection Scale MP-2016 as of December 31, 2016 to reflect improved mortality expectations.
| Pension Benefits |  | SERP Benefits
| 2018 |  | 2017 |  | 2016 |  | 2018 |  | 2017 |  | 2016
The following assumptions were used in calculating the net benefit obligation: |  |  |  |  |  |  |  |  |  |  |
Weighted average discount rate | 4.08% |  | 3.46% |  | 3.86% |  | 4.08% |  | 3.46% |  | 3.86%
Rate of increase in future compensation | N/A |  | N/A |  | N/A |  | N/A |  | N/A |  | N/A
Lump sum assumed interest rates |  |  |  |  |  |  |  |  |  |  |
First 5 years | 3.33% |  | 2.05% |  | 1.57% |  | N/A |  | N/A |  | N/A
Next 15 years | 4.39% |  | 3.61% |  | 3.45% |  | N/A |  | N/A |  | N/A
All future years | 4.72% |  | 4.27% |  | 4.39% |  | N/A |  | N/A |  | N/A
The following assumptions were used in calculating the net pension expense: |  |  |  |  |  |  |  |  |  |  |
Weighted average discount rate | 3.46% |  | 3.86% |  | 3.96% |  | 3.46% |  | 3.86% |  | 3.96%
Rate of increase in future compensation | N/A |  | N/A |  | N/A |  | N/A |  | N/A |  | N/A
Expected long-term rate of return | 6.50% |  | 6.50% |  | 7.00% |  | 6.50% |  | 6.50% |  | 7.00%
Pension Plan and SERP Assets The Company's investment strategies are to invest in a prudent manner for the purpose of providing benefits to participants in the pension plan and the SERP. The investment strategies are targeted to maximize the total return of the portfolio net of inflation, spending and expenses. Risk is controlled through diversification of asset types and investments in domestic and international equities and fixed income securities. The target allocations for plan assets are shown in the tables below. Equity securities primarily include investments in common stocks. Debt securities include government agency and commercial bonds. Other investments consist of money market mutual funds. The weighted average expected long-term rate of return on pension plan and SERP assets is developed in consultation with the plans actuary. It is primarily based upon industry trends and consensus rates of return which are then adjusted to reflect the specific asset allocations and historical rates of return of the Company's plan assets. The following assumptions were used in determining the total long term rate of return: equity securities were assumed to have a long-term rate of return of approximately 8.70% and debt securities were assumed to have a long-term rate of return of approximately 3.0%. These rates of return were adjusted to reflect an approximate target allocation of 60% equity securities and 40% debt securities with a small downward adjustment due to investments in the “Other” category, which consist of low yielding money market mutual funds. Certain asset types and investment strategies are prohibited including, the investment in commodities, options, futures, short sales, margin transactions and non-marketable securities. The Company's pension plan asset allocation at year-end 2018 and 2017, target allocation for 2019, and expected long-term rate of return by asset category are as follows:
|  |  | Percentage of Plan |  | Weighted
| Target |  | Assets |  | Average Expected
| Allocation |  | at Year End |  | Long-Term Rate
Asset Category | 2019 |  | 2018 |  | 2017 |  | of Return
Equity securities | 55-65% |  | 59% |  | 63% |  | 8.69%
Debt securities | 35-45% |  | 40% |  | 33% |  | 3.00%
Other | 5-10% |  | 1% |  | 4% |  | 0.10%
Total |  |  | 100% |  | 100% |  | 6.50%
The Company's SERP plan asset allocation at year-end 2018 and 2017, target allocation for 2019, and expected long-term rate of return by asset category are as follows:
|  |  | Percentage of Plan |  | Weighted
| Target |  | Assets |  | Average Expected
| Allocation |  | at Year End |  | Long-Term Rate
Asset Category | 2019 |  | 2018 |  | 2017 |  | of Return
Equity securities | 55-65% |  | 58% |  | 66% |  | 8.69%
Debt securities | 35-45% |  | 40% |  | 32% |  | 3.00%
Other | 5-10% |  | 2% |  | 2% |  | 0.10%
Total |  |  | 100% |  | 100% |  | 6.50%
Fair Value of Pension Plan and SERP Assets Fair value is the exchange price that would be received for an asset in the principal or most advantageous market for the asset in an orderly transaction between market participants on the measurement date. Also a fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The Company used the following methods and significant assumptions to estimate the fair value of each type of financial instrument: Equity and debt securities: The fair values of securities are determined on a recurring basis by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs) or pricing models, which utilize significant observable inputs such as matrix pricing. This is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs). The fair values of the Company's pension plan assets at December 31, 2018, by asset category are as follows:
|  |  | Quoted Prices |  |  |  |
|  |  | in Active |  | Significant |  | Significant
|  |  | Markets for |  | Observable |  | Unobservable
|  |  | Identical Assets |  | Inputs |  | Inputs
Asset Category | Total |  | (Level 1) |  | (Level 2 ) |  | (Level 3)
(dollars in thousands) |
Equity securities - US large cap common stocks | $784 |  | $784 |  | $0 |  | $0
Equity securities - US mid cap stock mutual funds | 107 |  | 107 |  | 0 |  | 0
Equity securities - US small cap stock mutual funds | 114 |  | 114 |  | 0 |  | 0
Equity securities - international stock mutual funds | 225 |  | 225 |  | 0 |  | 0
Equity securities - emerging markets stock mutual funds | 49 |  | 49 |  | 0 |  | 0
Debt securities - intermediate term bond mutual funds | 309 |  | 309 |  | 0 |  | 0
Debt securities - short term bond mutual funds | 543 |  | 543 |  | 0 |  | 0
Cash - money market account | 17 |  | 17 |  | 0 |  | 0
Total | $2,148 |  | $2,148 |  | $0 |  | $0
Total pension plan assets available for benefits also include $3,000 in accrued interest and dividend income. The fair values of the Company's pension plan assets at December 31, 2017, by asset category are as follows:
|  |  | Quoted Prices |  |  |  |
|  |  | in Active |  | Significant |  | Significant
|  |  | Markets for |  | Observable |  | Unobservable
|  |  | Identical Assets |  | Inputs |  | Inputs
Asset Category | Total |  | (Level 1) |  | (Level 2 ) |  | (Level 3)
(dollars in thousands) |
Equity securities - US large cap common stocks | $911 |  | $911 |  | $0 |  | $0
Equity securities - US mid cap stock mutual funds | 119 |  | 119 |  | 0 |  | 0
Equity securities - US small cap stock mutual funds | 125 |  | 125 |  | 0 |  | 0
Equity securities - international stock mutual funds | 240 |  | 240 |  | 0 |  | 0
Equity securities - emerging markets stock mutual funds | 95 |  | 95 |  | 0 |  | 0
Debt securities - intermediate term bond mutual funds | 344 |  | 344 |  | 0 |  | 0
Debt securities - short term bond mutual funds | 387 |  | 387 |  | 0 |  | 0
Debt securities - commercial | 50 |  | 0 |  | 50 |  | 0
Cash - money market account | 82 |  | 82 |  | 0 |  | 0
Total | $2,353 |  | $2,303 |  | $50 |  | $0
Total pension plan assets available for benefits also include $3,000 in accrued interest and dividend income. There were no significant transfers between Level 1 and Level 2 during 2018 and 2017. The fair values of the Company's SERP assets at December 31, 2018, by asset category are as follows:
|  |  | Quoted Prices |  |  |  |
|  |  | in Active |  | Significant |  | Significant
|  |  | Markets for |  | Observable |  | Unobservable
|  |  | Identical Assets |  | Inputs |  | Inputs
Asset Category | Total |  | (Level 1) |  | (Level 2 ) |  | (Level 3)
(dollars in thousands) |
Equity securities - US large cap common stocks | $322 |  | $322 |  | $0 |  | $0
Equity securities - US mid cap stock mutual funds | 43 |  | 43 |  | 0 |  | 0
Equity securities - US small cap stock mutual funds | 43 |  | 43 |  | 0 |  | 0
Equity securities - emerging markets stock mutual funds | 18 |  | 18 |  | 0 |  | 0
Equity securities - international stock mutual funds | 89 |  | 89 |  | 0 |  | 0
Debt securities - intermediate term bond mutual funds | 123 |  | 123 |  | 0 |  | 0
Debt securities - short term bond mutual funds | 231 |  | 231 |  | 0 |  | 0
Cash - money market account | 15 |  | 15 |  | 0 |  | 0
Total | $884 |  | $884 |  | $0 |  | $0
Total SERP plan assets available for benefits also include $1,000 in accrued interest and dividend income. The fair values of the Company's SERP assets at December 31, 2017, by asset category are as follows:
|  |  | Quoted Prices |  |  |  |
|  |  | in Active |  | Significant |  | Significant
|  |  | Markets for |  | Observable |  | Unobservable
|  |  | Identical Assets |  | Inputs |  | Inputs
Asset Category | Total |  | (Level 1) |  | (Level 2 ) |  | (Level 3)
(dollars in thousands) |
Equity securities - US large cap common stocks | $422 |  | $422 |  | $0 |  | $0
Equity securities - US mid cap stock mutual funds | 58 |  | 58 |  | 0 |  | 0
Equity securities - US small cap stock mutual funds | 60 |  | 60 |  | 0 |  | 0
Equity securities - emerging markets stock mutual funds | 42 |  | 42 |  | 0 |  | 0
Equity securities - international stock mutual funds | 115 |  | 115 |  | 0 |  | 0
Debt securities - intermediate term bond mutual funds | 146 |  | 146 |  | 0 |  | 0
Debt securities - short term bond mutual funds | 158 |  | 158 |  | 0 |  | 0
Debt securities - commercial | 30 |  | 0 |  | 30 |  | 0
Cash - money market account | 15 |  | 15 |  | 0 |  | 0
Total | $1,046 |  | $1,016 |  | $30 |  | $0
Total SERP plan assets available for benefits also include $2,000 in accrued interest and dividend income. There were no significant transfers between Level 1 and Level 2 during 2018 and 2017. Contributions The Company expects to contribute $0 to its pension plan and $0 to its SERP plan in 2019. Estimated Future Benefit Payments The following benefit payments are expected to be paid over the next ten years:
|  |  |  |  | Pension |  | SERP
Plan Year |  |  |  |  | Benefits |  | Benefits
(dollars in thousands) |  |  |  |  |  |  |
2019 |  |  |  |  | $223 |  | $133
2020 |  |  |  |  | 183 |  | 127
2021 |  |  |  |  | 195 |  | 121
2022 |  |  |  |  | 194 |  | 114
2023 |  |  |  |  | 180 |  | 106
2024-2028 |  |  |  |  | 829 |  | 392

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