Benefit Plans

401(k) Plan

We have a 401(k) plan in which substantially all employees are eligible to participate. Employees may contribute up to 100% of their compensation subject to certain limits based on federal tax laws. The plan was amended in 2013 to provide a matching safe harbor contribution for all eligible employees equal to 100% of the first 5.0% of an employee's compensation contributed to the Plan during the year. Employees are 100% vested in the safe harbor matching contributions.

For 2018, 2017 and 2016, expenses attributable to the Plan were $743, $713, and $686, respectively.

Defined Benefit Pension Plan

We maintain a noncontributory defined benefit pension plan, which was curtailed effective March 1, 2007. As a result of the curtailment, future salary increases are no longer considered (the projected benefit obligation is equal to the accumulated benefit obligation), and plan benefits are based on years of service and the individual employee’s five highest consecutive years of compensation out of the last ten years of service through March 1, 2007.

Changes in the projected benefit obligation and plan assets during each year, the funded status of the plan, and the net amount recognized in our consolidated balance sheets using an actuarial measurement date of December 31, are summarized as follows during the years ended December 31:



	2018			2017
Change in benefit obligation
Benefit obligation, January 1	$	11,381		$	11,448
Interest cost	388			444
Actuarial (gain) loss	(1,194		)	578
Benefits paid, including plan expenses	(1,163		)	(1,089		)
Benefit obligation, December 31	9,412			11,381
Change in plan assets
Fair value of plan assets, January 1	9,469			9,325
Investment (loss) return	(541		)	1,033
Contributions	—			200
Benefits paid, including plan expenses	(1,163		)	(1,089		)
Fair value of plan assets, December 31	7,765			9,469
Deficiency in funded status at December 31, included on the consolidated balance sheets in accrued interest payable and other liabilities	$	(1,647	)	$	(1,912	)



	2018			2017
Change in accrued pension benefit costs
Accrued benefit cost at January 1	$	(1,912	)	$	(2,123	)
Contributions	—			200
Net periodic benefit cost	(345		)	(412		)
Net change in unrecognized actuarial loss and prior service cost	610			423
Accrued pension benefit cost at December 31	$	(1,647	)	$	(1,912	)

We have recorded the funded status of the plan in our consolidated balance sheets. We adjust the underfunded status in a liability account to reflect the current funded status of the plan. Any gains or losses that arise during the year but are not recognized as components of net periodic benefit cost are recognized as a component of other comprehensive income (loss). The components of net periodic benefit cost are as follows for the years ended December 31:



	2018			2017			2016
Interest cost on benefit obligation	$	388		$	444		$	485
Expected return on plan assets	(554		)	(546		)	(560		)
Amortization of unrecognized actuarial net loss	242			279			313
Settlement loss	269			235			—
Net periodic benefit cost	$	345		$	412		$	238

During 2018, 2017 and 2016, additional settlement losses of $269, $235 and $0 were recognized in connection with lump-sum benefit distributions. Many plan participants elect to receive their retirement benefit payments in the form of lump-sum settlements. Pro rata settlement losses, which can occasionally occur as a result of these lump-sum distributions, are recognized only in years when the total of such distributions exceed the sum of the service and interest expense components of net periodic benefit cost.

Accumulated other comprehensive income at December 31, 2018 includes net unrecognized pension costs before income taxes of $3,470, of which $140 is expected to be amortized into benefit cost during 2019.

The actuarial assumptions used in determining the benefit obligation are as follows for the years ended December 31:



	2018		2017		2016
Discount rate	4.11	%	3.48	%	3.96	%
Expected long-term rate of return on plan assets	6.00	%	6.00	%	6.00	%

The actuarial weighted average assumptions used in determining the net periodic pension costs are as follows for the years ended December 31:



	2018		2017		2016
Discount rate	3.48	%	3.96	%	4.13	%
Expected long-term rate of return on plan assets	6.00	%	6.00	%	6.00	%

As a result of the curtailment of the Plan, there is no rate of compensation increase considered in the above assumptions.

The expected long-term rate of return is an estimate of anticipated future long-term rates of return on plan assets as measured on a market value basis. Factors considered in arriving at this assumption include:


•	Historical long-term rates of return for broad asset classes.


•	Actual past rates of return achieved by the plan.


•	The general mix of assets held by the plan.


•	The stated investment policy for the plan.

The selected rate of return is net of anticipated investment related expenses.

Pension Plan Assets

Our overall investment strategy is to moderately grow the portfolio by investing 50% of the portfolio in equity securities and 50% in fixed income securities. This strategy is designed to generate a long-term rate of return of 6.00%. Equity securities primarily consist of the S&P 500 Index with a smaller allocation to the Small Cap and International Index. Fixed income securities are invested in the Bond Market Index. The Plan has appropriate assets invested in short-term investments to meet near term benefit payments.

The asset mix and the sector weighting of the investments are determined by our pension committee, which is comprised of members of our management. To manage the Plan, we retain a third party investment advisor to conduct consultations. We review the performance of the advisor at least annually.

The fair values of our pension plan assets by asset category were as follows as of December 31:



	2018				2017
	Total		(Level 2)		Total		(Level 2)
Short-term investments	$	98	$	98	$	300	$	300
Common collective trusts
Fixed income	2,924		2,924		3,815		3,815
Equity investments	4,743		4,743		5,354		5,354
Total	$	7,765	$	7,765	$	9,469	$	9,469

The following is a description of the valuation methodologies used for assets measured at fair value. There have been no changes in the methodologies used at December 31, 2018 and 2017:


•	Short-term investments: Shares of a money market portfolio valued at amortized cost, which approximates fair value.


•	Common collective trusts: These investments are public investment securities valued using the NAV provided by a third party investment advisor. The NAV is quoted on a private market that is not active; however, the unit price is based on underlying investments which are traded on an active market.

We anticipate contributions to the Plan in 2019 to approximate net contribution costs.

The components of projected net periodic benefit cost are as follows for the year ending:



	December 31, 2019
Interest cost on projected benefit obligation	$	378
Expected return on plan assets	(452		)
Amortization of unrecognized actuarial net loss	214
Net periodic benefit cost	$	140

Estimated future benefit payments are as follows for the next ten years:



	Estimated Benefit Payments
2019	$	450
2020	486
2021	479
2022	481
2023	481
2024 - 2028	2,540

Directors Plan

Pursuant to the terms of the Directors Plan, our directors are required to invest at least 25% of their board fees in our common stock. These stock investments can be made either through deferred fees or through the purchase of shares through the Dividend Reinvestment Plan. Deferred fees, under the Directors Plan, are converted on a quarterly basis into stock units of our common stock based on the fair value of a share of our common stock as of the relevant valuation date. Stock units credited to a participant’s account are eligible for stock and cash dividends as declared. Dividend Reinvestment Plan shares are purchased pursuant to the Dividend Reinvestment Plan.

Distribution of deferred fees from the Directors Plan occurs when the participant retires from the Board or upon the occurrence of certain other events. The participant is eligible to receive a distribution in the form of shares of our common stock of all of the stock units that are then in his or her account, and any unconverted cash will be converted to and rounded up to whole shares of stock and distributed, as well. The Directors Plan does not allow for cash settlement, and therefore, such share-based payment awards qualify for classification as equity. We may use authorized but unissued shares or purchase shares of common stock on the open market to meet our obligations under the Directors Plan.

We maintain the Rabbi Trust to fund the Directors Plan. The Rabbi Trust is an irrevocable grantor trust to which we may contribute assets for the limited purpose of funding a nonqualified deferred compensation plan. Although we may not reach the assets of the Rabbi Trust for any purpose other than meeting our obligations under the Directors Plan, the assets of the Rabbi Trust remain subject to the claims of our creditors and are included in the consolidated financial statements. We may contribute cash or common stock to the Rabbi Trust from time-to-time for the sole purpose of funding the Directors Plan. The Rabbi Trust will use any cash that we contributed to purchase shares of our common stock on the open market through our Investment and Trust Services department. Shares held in the Rabbi Trust are included in the calculation of earnings per share.

The components of shares eligible to be issued under the Directors Plan were as follows as of December 31:



	2018			2017
	Eligible Shares	Market Value		Eligible Shares	Market Value
Unissued	203,498	$	4,591	195,140	$	5,513
Shares held in Rabbi Trust	16,673	376		31,769	897
Total	220,171	$	4,967	226,909	$	6,410

Stock Award Incentive Plan

We maintain an equity incentive plan for the purpose of promoting growth and profitability, as well as attracting and retaining executive officers of outstanding competence, through ownership of equity. Stock may be granted to specified individuals subject to certain conditions, and transfer of shares granted under the plan is restricted. Expenses related to this plan for 2018, 2017 and 2016 were $45, $38, and $70, respectively.

Other Employee Benefit Plans

We maintain nonqualified defined contribution retirement plans to provide supplemental retirement benefits to specified participants. Expenses related to these programs for 2018, 2017 and 2016 were $356, $473, and $440, respectively. Expenses are recognized over the participants’ expected years of service.

We maintained a non-leveraged ESOP which was frozen to new participants on December 31, 2006. Contributions to the plan were discretionary and were approved by the Board of Directors and recorded as compensation expense. We made no contributions to the ESOP in 2018, 2017 and 2016. Compensation costs related to the plan for 2018, 2017 and 2016 were $21, $23, and $33, respectively. Total allocated shares outstanding related to the ESOP at December 31, 2018, 2017, and 2016 were 0, 166,833, and 204,669, respectively. Such shares are included in the computation of dividends and earnings per share in each of the respective years. On December 21, 2016, the Board approved the termination of the ESOP effective December 31, 2016. Actual dissolution of the ESOP occurred in 2018.

We maintain a self-funded medical plan under which we are responsible for the first $75 per year of claims made by a covered family. Expenses are accrued based on estimates of the aggregate liability for claims incurred and our experience. Expenses were $2,695 in 2018, $2,324 in 2017 and $2,150 in 2016.