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EMPLOYEE BENEFIT PLANS

12 Months Ended

Dec. 31, 2021

EMPLOYEE BENEFIT PLANS

EMPLOYEE BENEFIT PLANS

NOTE 8. EMPLOYEE BENEFIT PLANS

Pension Plans

The Company maintains a legacy, employer-sponsored defined benefit pension plan (the “Plan”) for which participation and benefit accruals were frozen on January 13, 2017. The Plan was assumed in connection with a business combination in 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, 2021, all minimum Employee Retirement Income Security Act (“ERISA”) funding requirements have been met. The Company did not have any defined benefit pension plans prior to 2017.

The following tables set forth information about the plan for the year ended December 31, 2021 and 2020:


(in thousands)		2021			2020
Change in projected benefit obligation:
Projected benefit obligation at beginning of year		$	9,650		$	8,926
Service cost			—			—
Interest cost			233			282
Actuarial loss			(406)			913
Benefits paid			(326)			(319)
Settlements			(550)			(152)
Projected benefit obligation at end of year			8,601			9,650

Change in fair value of plan assets:
Fair value of plan assets at beginning of year			12,040			11,078
Expected return on plan assets			1,258			1,433
Contributions by employer			—			—
Benefits paid			(326)			(319)
Settlements			(550)			(152)
Fair value of plan assets at end of year			12,422			12,040

Overfunded status		$	(3,821)		$	(2,390)

Amounts recognized in consolidated balance sheet:
Other assets		$	3,821		$	2,390

Net periodic pension cost is comprised of the following for the year ended December 31, 2021 and 2020:


(in thousands)		2021			2020
Interest cost		$	233		$	282
Expected return on plan assets			(712)			(708)
Settlement Charge			—			—
Net periodic pension benefit credit		$	(479)		$	(426)


(in thousands)		2021			2020
Net actuarial (gain) loss		$	(953)		$	178
Settlement charge			—			—
Net period pension benefit (credit)			(479)			(426)
Total recognized in net periodic benefit (credit) and other comprehensive income		$	(1,432)		$	(248)

Change in plan assets and benefit obligations recognized in accumulated other comprehensive income as of December 31, 2021 and 2020 are as follows:


(in thousands)		2021			2020
Net actuarial (gain) loss		$	(953)		$	178
Settlement charge			—			—
Prior service cost			1,072			893
Total accumulated other comprehensive loss (pre-tax)		$	119		$	1,071

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 $91 thousand. The Company expects to make no cash contributions to the pension trust during the 2022 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, 2021 and 2020 were as follows:


		2021			2020
Projected benefit obligation
Discount rate		2.80	%		2.46	%
Net periodic pension cost
Discount rate		2.46	%		3.23	%
Long-term rate of return on plan assets		6.00			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.

The Company’s 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, 2021 and 2020:


		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:
Fixed-income - core plus			—			—			—
Intermediate duration			—			—			—
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


		2020
(in thousands)		Total			Level 1			Level 2
Equity mutual funds:
Large-cap		$	2,364		$	2,364		$	—
Mid-cap			744			744			—
Small-cap			765			765			—
International			1,499			1,499
Fixed income funds:
Fixed-income - core plus			3,880			3,880			—
Intermediate duration			1,338			1,338			—
Common stock			510			510			—
Common/collective trusts - large-cap			620			—			620
Cash equivalents - money market			320			320			—
Total		$	12,040		$	11,420		$	620

The Plan did not hold any assets classified as Level 3, and there were no transfers between levels during 2021 and 2020.

Estimated benefit payments under the Company’s pension plan over the next 10 years at December 31, 2021 are as follows:


(in thousands)		Payments
2022		$	350
2023			346
2024			353
2025			348
2026			412
2027-2031			2,192
Total		$	4,001

Non-qualified Supplemental Executive Retirement Plan

The Company has 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, 2021 and December 31, 2020:


(in thousands)		2021			2020
Change in benefit obligation:
Projected benefit obligation at beginning of year		$	2,969		$	2,979
Service cost			—			—
Interest cost			44			81
Actuarial (gain) loss			(147)			202
Benefits paid			(260)			(293)
Projected benefit obligation at end of year		$	2,606		$	2,969

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			293
Benefits paid			(260)			(293)
Fair value of plan assets at end of year		$	—		$	—

Underfunded status		$	2,606		$	2,969

Amounts recognized in consolidated balance sheet
Other liabilities		$	2,606		$	2,969

Net periodic benefit cost is comprised of the following for the years ended December 31, 2021 and 2020:


(in thousands)		2021			2020
Interest cost		$	44		$	81
Expected return on plan assets			—			—
Amortization of unrecognized actuarial loss			43			42
Net periodic benefit cost		$	87		$	123


(in thousands)		2021			2020
Net actuarial (gain) loss		$	(137)		$	202
Amortization of unrecognized actuarial loss			(43)			(42)
Total recognized in net periodic benefit cost and other comprehensive loss		$	(180)		$	160

Change in plan assets and benefit obligations recognized in accumulated other comprehensive income in 2021 and 2020 are as follows:


(in thousands)		2021			2020
Accumulated other comprehensive loss at beginning of the year (pre-tax)		$	779		$	619
Actuarial (gain) loss			(137)			202
Amortization of actuarial loss			(43)			(42)
Accumulated other comprehensive loss at end of year (pre-tax)		$	599		$	779

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 $461 thousand. The amount expected to be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year is $37 thousand.

The principal actuarial assumptions used at December 31, 2021 and December 31, 2020 were as follows:


		2021		2020
Discount rate beginning of year		1.56	%	2.65	%
Discount rate end of year		2.12		1.56

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.

The Company expects to contribute the following amounts to fund benefit payments under the supplemental executive retirement plans:


(in thousands)		Payments
2022		$	260
2023			260
2024			260
2025			260
2026			231
2027-2031			2,027
Total		$	3,298

401(k) Plan

The Company maintains 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, the Company makes 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 the Company, at its discretion, for the benefit of participating employees. The total expense for this plan in 2021, 2020, and 2019 was $1.2 million, $1.2 million, and $1.1 million, respectively.

Other Plans

As a result of the acquisition of a business combination in 2017, the Company 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 $8.0 million at December 31, 2021 and $8.8 million at December 31, 2020. Income recorded in 2021 was $312 thousand and expense recorded in 2020 and 2019 under these agreements was $793 thousand and $779 thousand, respectively.

The Company also assumed split-dollar life insurance agreements from the 2017 business combination with an accrued liability of $876 thousand at December 31, 2021 and $919 thousand at December 31, 2020. The Company recorded income for the split-dollar life insurance agreements of $22 thousand in 2021 and expense of $65 thousand and $163 thousand in 2020 and 2019, respectively.