EMPLOYEE RETIREMENT PLANS

12 Months Ended

Dec. 31, 2018

Pension and Other Postretirement Benefits Disclosure [Text Block]

11. EMPLOYEE RETIREMENT PLANS

The Company has a defined benefit pension plan covering substantially all employees, as well as an unfunded supplemental pension plan for key executives. Retirement benefits are provided based on employees’ years of credited service and average earnings or stated amounts for years of service. Normal retirement age is 65 with provisions for earlier retirement. The plan also has provisions for disability and death benefits. The plan closed to new participants as of August 1, 2011, and benefit accruals under the plan were frozen effective December 31, 2016.

The Company’s funding policy for the defined benefit pension plan is to make contributions to the plan such that all employees’ benefits will be fully provided by the time they retire. Plan assets are stated at market value and consist primarily of equity securities and fixed income securities, mainly U.S. government and corporate obligations.

The Company follows ASC 715,

Compensation – Retirement Benefits

which requires employers to recognize the funded status of defined benefit pension and other postretirement benefit plans as an asset or liability in their statements of financial position and to recognize changes in the funded status in the year in which the changes occur as a component of comprehensive income. In addition, ASC 715 requires employers to measure the funded status of their plans as of the date of their year-end statements of financial position. ASC 715 also requires additional disclosures regarding amounts included in accumulated other comprehensive loss.

The Company’s pension plan’s weighted average asset allocation at December 31, 2018 and 2017, by asset category, was as follows:

	Plan Assets at December 31,
	2018			2017
Asset Category:
Equity Securities		53	%		55	%
Fixed Income Securities		40	%		39	%
Other		7	%		6	%
Total		100	%		100	%

The Company has a Retirement Plan Committee, consisting of the Chief Executive Officer, Chief Operating Officer and Chief Financial Officer, to manage the operations and administration of all benefit plans and related trusts. The committee has an investment policy for the pension plan assets that establishes target asset allocation ranges for the above listed asset classes as follows: equity securities: 20% - 80%; fixed income securities: 20% - 80%; and other, principally cash: 0% - 20%. On a semi-annual basis, the committee reviews progress towards achieving the pension plan’s performance objectives.

To develop the expected long-term rate of return on assets assumption, the Company considered the historical returns and the future expectations for returns for each asset class, as well as the target asset allocation of the pension portfolio. This resulted in the selection of the 7.00% long-term rate of return on assets assumption for both 2018 and 2017.

To determine the funded status of the Plan at December 31, 2018 and 2017, the Company used a weighted average discount rate of 4.39% and 3.71% in 2018 and 2017, respectively.

The following is a reconciliation of the change in benefit obligation and plan assets of both the defined benefit pension plan and the unfunded supplemental pension plan for the years ended December 31, 2018 and 2017:

	Defined Benefit Pension Plan						Supplemental Pension Plan
	2018			2017			2018			2017
	(Dollars in thousands)
Change in projected benefit obligation
Projected benefit obligation, beginning of year	$	49,375		$	45,079		$	17,176		$	15,409
Service cost		360			378			209			185
Interest cost		1,608			1,616			595			591
Actuarial (gain) loss		(4,039	)		4,423			(1,601	)		1,519
Benefits paid		(2,294	)		(2,121	)		(488	)		(528	)
Projected benefit obligation, end of year	$	45,010		$	49,375		$	15,891		$	17,176

Change in plan assets
Fair value of plan assets, beginning of year		38,369			32,278			-			-
Actual return on plan assets		(1,362	)		4,590			-			-
Administrative expenses		(360	)		(378	)		-			-
Contributions		3,000			4,000			488			528
Benefits paid		(2,294	)		(2,121	)		(488	)		(528	)
Fair value of plan assets, end of year	$	37,353		$	38,369		$	-		$	-
Funded status of plan	$	(7,657	)	$	(11,006	)	$	(15,891	)	$	(17,176	)

Amounts recognized in the consolidated balance sheets consist of:
Accrued liabilities - other	$	-		$	-		$	(436	)	$	(416	)
Long-term pension liability		(7,657	)		(11,006	)		(15,455	)		(16,760	)
Net amount recognized	$	(7,657	)	$	(11,006	)	$	(15,891	)	$	(17,176	)

Amounts recognized in accumulated other comprehensive loss consist of:
Accumulated loss, net of income tax benefit of $4,082, $5,904, $1,102 and $2,166, respectively	$	11,616		$	9,916		$	3,136		$	3,854
Prior service cost, net of income tax liability of $0, $0, ($28) and ($75), respectively		-			-			(81	)		(97	)
Net amount recognized	$	11,616		$	9,916		$	3,055		$	3,757

As noted above, benefit accruals under the plan were frozen, effective December 31, 2016. Therefore, the accumulated benefit obligation of the defined benefit pension plan and supplemental pension plan were equal to the respective plans’ projected benefit obligations, as shown in the above table, at December 31, 2018 and 2017.

Assumptions used in determining net periodic pension cost for the years ended December 31, 2018 and 2017 were:

	Defined Benefit Pension Plan						Supplemental Pension Plan
	2018			2017			2018			2017
Discount rate for determining projected benefit obligation		3.70	%		4.33	%		3.75	%		4.41	%
Discount rate in effect for determining service cost		-			-			3.83	%		4.62	%
Discount rate in effect for determining interest cost		3.33	%		3.63	%		3.51	%		3.92	%
Long-term rate of return on plan assets		7.00	%		7.00	%		-			-

The components of net periodic pension cost for the years ended December 31, 2018 and 2017, were:

	2018			2017
	(Dollars in thousands)
Service cost	$	569		$	563
Interest cost		2,204			2,207
Expected return on plan assets		(2,711	)		(2,301	)
Net amortization and deferral		634			526
Net periodic pension cost	$	696		$	995

The components of net periodic pension cost other than the service cost component were included in “other expense, net” in the Consolidated Statements of Earnings.

The Company expects to recognize expense of $647,000 due to the amortization of unrecognized loss and income of $63,000 due to the amortization of prior service credit as components of net periodic pension cost in 2019 which are included in accumulated other comprehensive loss at December 31, 2018.

It is the Company’s intention to satisfy the minimum funding requirements and maintain at least an 80% funding percentage in its defined benefit retirement plan in future years. At this time, the Company expects that any cash contributions necessary to satisfy these requirements would not be material in 2018.

Projected benefit payments for the plans at December 31, 2018, were estimated as follows:

	Defined Benefit Pension Plan		Supplemental Pension Plan
	(Dollars in thousands)
2019	$	2,698	$	436
2020	$	2,713	$	470
2021	$	2,726	$	504
2022	$	2,714	$	551
2023	$	2,755	$	702
2024 - 2028	$	14,016	$	4,750

The following table summarizes the fair value of the Company’s pension plan assets at December 31, 2018, by asset category within the fair value hierarchy (for further level information, see Note 4):

	December 31, 2018
	Quoted Prices		Significant		Significant
	in Active Markets		Observable Inputs		Unobservable Inputs
	Level 1		Level 2		Level 3		Total
	(Dollars in thousands)
Common stocks	$	13,556	$	1,604	$	-	$	15,160
Preferred stocks		279		28		-		307
Exchange traded funds		4,454		-		-		4,454
Corporate obligations		-		4,568		-		4,568
State and municipal obligations		-		1,046		-		1,046
Pooled fixed income funds		7,767		-		-		7,767
U.S. government securities		-		286		-		286
Marketable CD's		-		911		-		911
Cash and cash equivalents		2,748		-		-		2,748
Subtotal	$	28,804	$	8,443	$	-	$	37,247
Other assets (1)								106
Total							$	37,353

(1)

This category represents trust receivables that are not leveled.

The following table summarizes the fair value of the Company’s pension plan assets at December 31, 2017, by asset category within the fair value hierarchy (for further level information, see Note 4):

	December 31, 2017
	Quoted Prices		Significant		Significant
	in Active Markets		Observable Inputs		Unobservable Inputs
	Level 1		Level 2		Level 3		Total
	(Dollars in thousands)
Common stocks	$	13,855	$	1,628	$	-	$	15,483
Preferred stocks		290		57		-		347
Exchange traded funds		5,546		-		-		5,546
Corporate obligations		-		5,867		-		5,867
State and municipal obligations		-		1,313		-		1,313
Pooled fixed income funds		6,895		-		-		6,895
U.S. government securities		-		381		-		381
Cash and cash equivalents		2,444		-		-		2,444
Subtotal	$	29,030	$	9,246	$	-	$	38,276
Other assets (1)								93
Total							$	38,369

(1)

This category represents trust receivables that are not leveled.

The Company also has a defined contribution plan covering substantially all employees. The Company contributed $835,000 and $786,000 to the plan in 2018 and 2017, respectively.