Note

. Employee Benefit Plans

Defined Benefit Plans

The Company maintains

two

nonqualified domestic, noncontributory defined benefit plans (the “Benefit Plans”) for key members of senior management and non-management directors. The Company

’s unfunded Benefit Plans include the Supplemental Executive Retention Plan (“SERP”) and the Directors’ Supplemental Retirement Plan (“Directors’ Plan”). The SERP provides for a defined benefit, at normal retirement age, targeted at

35%

of the participant’s projected final average compensation, subject to a defined maximum annual benefit. Benefits under the SERP generally become payable at age

62.

The Directors’ Plan provides for a defined benefit, at normal retirement age, up to

100%

of the participant’s highest consecutive

three

-year average compensation. Benefits under the Directors’ Plan generally become payable at age

70.

The following table presents the

changes in the aggregate actuarial benefit obligation during the periods indicated:

	December 31,
	2017			2016
(Amounts in thousands)
Beginning balance	$	9,181		$	8,390
Plan change		258			69
Service cost		231			184
Interest cost		372			382
Actuarial (gain) loss		(48	)		367
Benefits paid		(359	)		(211	)
Ending balance	$	9,635		$	9,181

The following table presents the components of net periodic pension cost and the assumed discount rate

for the periods indicated:

	Year Ended December 31,
	2017			2016			2015
(Amounts in thousands, except discount rate)
Service cost	$	231		$	184		$	180
Interest cost		372			382			334
Amortization of prior service cost		228			226			260
Amortization of losses		31			47			66
Net periodic cost	$	862		$	839		$	840

Assumed discount rate		3.85	%		4.22	%		4.62	%

The following schedule presents the projected benefit payments to be paid under the Benefit Plans, by year, as of

December 31,

201

(Amounts in thousands)
2018	$	468
2019		462
2020		529
2021		581
2022		586
2023 through 2027		2,924

Deferred Compensation Plan

The Company maintains deferred compensation

agreements with certain current and former officers that provide benefit payments, over various periods, commencing at retirement or death. There were

accrued benefits, which are based on the present values of expected payments and estimated life expectancies, as of

December 31, 2017,

compared to

$458

thousand as of

December 31, 2016.

Expenses related to the deferred compensation plan totaled

$11

thousand in

2017,

$60

thousand in

2016,

and

$60

thousand in

2015.

Employee Welfare Plan

The Company provides various medical, dental, vision, life, accidental death and dismemberment, and long-term disability insurance benefits to all full-time employees who elect coverage under this program. A

third

-party administrator manages the health plan. Monthly employer and employee contributions are made to a tax-exempt employee benefits trust where the

third

-party administrator

processes and pays claims. As of

December 31, 2017,

stop-loss insurance coverage generally limits the Company’s risk of loss to

$150

thousand for individual claims and

$4.41

million for aggregate claims. Expenses related to the health plan totaled

$3.50

million in

2017,

$3.48

million in

2016,

and

$3.06

million in

2015.

Employee Stock Ownership and Savings Plan

The Company maintains the Employee Stock Ownership and Savings Plan (“KSOP”) that

consists of a

401

(k) savings feature that covers all employees that meet minimum eligibility requirements. The Company matches employee contributions at levels determined by the Board of Directors annually. These contributions are made in the

first

quarter following each plan year and employees must be employed on the last day of the plan year to be eligible. Matching contributions to qualified deferrals under the

401

(k) savings component of the KSOP totaled

$1.18

million in

2017,

$1.50

million in

2016,

and

$1.53

million in

2015.

The KSOP held

387,935

shares of the Company’s common stock as of

December 31, 2017,

410,384

shares as of

December 31, 2016,

and

428,785

shares as of

December 31, 2015.

Substantially all plan assets are invested in the Company’s common stock.

Equity-Based Compensation Plans

The Company maintains equity-based compensation plans to promote the long-term success of the Company by encouraging officers, employees, directors, and other individuals performing services for the Company to focus on critical long-range objectives. The Company

’s equity-based compensation plans include the

2012

Omnibus Equity Compensation Plan (

“2012

Plan”),

2004

Omnibus Stock Option Plan,

2001

Director’s Option Plan,

1999

Stock Option Plan, and various other plans obtained through acquisitions. As of

December 31, 2017,

the

2012

Plan was the only plan available for the issuance of future grants. All plans issued or obtained before the

2012

Plan are frozen and

new grants

may

be issued; however, any options or awards unexercised and outstanding under those plans remain in effect per their respective terms. The

2012

Plan authorized

600,000

shares available for potential grants of incentive stock options, nonqualified stock options, performance awards, restricted stock, restricted stock units, stock appreciation rights, bonus stock, and stock awards. Grants issued under the

2012

Plan state the period of time the grant

may

be exercised,

not

to exceed more than

ten

years from the date granted. The Company’s Compensation and Retirement Committee determines the vesting period for each grant; however, if

vesting period is specified the vesting occurs in

25%

increments on the

first

four

anniversaries of the grant date.

The following table presents the pre-tax compensation expense and excess tax benefit recognized in earnings for all equity-based compensation plans

for the periods indicated:

	Year Ended December 31,
	2017		2016		2015
(Amounts in thousands)
Pre-tax compensation expense	$	430	$	209	$	110
Excess tax benefit		17		174		8

Stock Options

The following table presents stock option activity and related information

for the year ended

December 31, 2017:

				Weighted Average		Weighted Average		Aggregate
	Option			Exercise Price		Remaining Contractual		Intrinsic
(Amounts in thousands, except share and per share data)	Shares			Per Share		Term (Years)		Value
Outstanding, January 1, 2017		200,396		$	19.73
Granted		22,849			24.72
Exercised		(16,185	)		23.33
Canceled		(6,356	)		15.83
Outstanding, December 31, 2017		200,704		$	20.14		5.9	$	1,742
Exercisable, December 31, 2017		145,536		$	19.41		4.9	$	1,373

The following table presents the total options granted and the weighted average assumptions used to estimate the fair value of those options during the periods indicated

	Year Ended December 31,
	2017			2016			2015

Stock options granted		22,849			32,768			-
Grant-date fair value per share	$	5.79		$	4.01			-
Volatility		27.86	%		25.04	%		-
Risk-free rate		2.17	%		1.56	%		-
Expected dividend yield		2.99	%		3.09	%		-
Expected term (in years)		6.50			6.50			-

The intrinsic value of options exercised

totaled

$84

thousand in

2017,

$434

thousand in

2016,

and

$20

thousand in

2015.

As of

December 31, 2017,

unrecognized compensation cost related to nonvested stock options was

$156

thousand with an expected weighted average recognition period of

1.10

years. The actual compensation cost recognized might differ from this estimate due to various items, including new grants and changes in estimated forfeitures.

Restricted Stock Awards

The following table presents restricted stock activity and related information

for the year ended

December 31, 2017:

				Weighted Average
	Shares			Grant-Date Fair Value

Nonvested, January 1, 2017		27,803		$	20.59
Granted		38,500			25.69
Vested		(22,697	)		23.66
Canceled		-			-
Nonvested, December 31, 2017		43,606		$	23.49

As of

December 31,

201

unrecognized compensation cost related to nonvested restricted stock awards was

$740

thousand with an expected weighted average recognition period of

1.47

years. The actual compensation cost recognized might differ from this estimate due to various items, including new awards granted and changes in estimated forfeitures.