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PENSION PLAN

12 Months Ended

Sep. 30, 2019

NOTE M - PENSION PLAN

The Company had a noncontributory defined benefit pension plan (the “Plan”) covering all eligible employees. On January 26, 2006, the Plan was frozen and amended to eliminate future benefit accruals after February 15, 2006.

Plan assets are invested in six diversified investment funds of the Pentegra Retirement Trust (the “Trust”), a no load series open-ended mutual fund. The Trust has been given discretion by the Plan Sponsor to determine the appropriate strategic asset allocation versus plan liabilities, as governed by the Trust’s Statement of Investment Objectives and Guidelines. The long-term investment objective is to be invested 65% in equity securities (equity mutual funds) and 35% in debt securities (bond mutual funds). Asset rebalancing is performed at least annually, with interim adjustments made when the investment mix varies more than 5% from the target (i.e., a 10% target range). Risk/volatility is further managed by the distinct investment objectives of each of the Trust funds and the diversification within each fund.

The following table sets forth the Plan’s funded status and amounts recognized in the Company’s Consolidated Balance Sheets at September 30, 2019 and September 30, 2018.

	September 30,
	2019			2018
	(In thousands)

Actuarial present value of benefit obligations	$	4,990		$	4,390

Change in benefit obligations
Projected benefit obligation, beginning	$	4,390		$	4,550
Interest cost		182			178
Actuarial (gain) loss		614			(149	)
Annuity payments and lump sum distributions		(196	)		(189	)

Projected benefit obligation, end	$	4,990		$	4,390

Change in plan assets
Fair value of assets, beginning	$	3,403		$	3,237
Actual return on plan assets		124			155
Employer contributions		250			200
Annuity payments and lump sum distributions		(196	)		(189	)

Fair value of assets, end	$	3,581		$	3,403

Funded status included with other liabilities	$	(1,409	)	$	(987	)

Net pension cost for the years ended September 30, 2019 and 2018 included the following components:

	September 30,
	2019			2018
	(In thousands)

Service cost benefits earned during the year	$	—		$	—
Interest cost on projected benefit obligation		182			178
Expected return on plan assets		(233	)		(222	)
Amortization of unrecognized net loss		105			119
Net pension cost	$	54		$	75

For the year ended September 30, 2019 and 2018, the weighted average discount rate used in determining the actuarial net periodic pension cost was 4.25% and 4.00%, respectively. For the year ended September 30, 2019 and 2018, the weighted average discount rate used in determining the actuarial present value of the projected benefit obligation was 3.25% and 4.25%, respectively.

The long-term rate-of-return-on-assets assumption was set based on historical returns earned by equities and fixed income securities, adjusted to reflect expectations of future returns as applied to the plan’s target allocation of asset classes. Equities and fixed income securities were assumed to earn rates of return in the ranges of 6-8% and 3-5%, respectively, with an assumed long-term inflation rate of 2.5% reflected within these ranges for the year ended September 30, 2019. When these overall return expectations are applied to the plan’s target allocation, the result is an expected rate of return of 5.0% to 7.0%. Accordingly, the expected long-term rate of return on assets were 7.00% for 2019 and 7.00% for 2018.

Current Asset Allocation

The Plan’s weighted-average asset allocations at September 30, 2019 and 2018, by asset category are as follows:

	September 30,
	2019		2018

Equity securities		61%		64%
Debt securities (bond mutual funds)		36%		36%
Other (money market fund)		3%		0%
Total		100%		100%

The target asset allocation set for the assets of the Plan are in equity securities ranging from 40 percent to 70 percent and in debt securities ranging from 30 percent to 60 percent. In general, the Plan assets are investment securities that are well-diversified in terms of industry, capitalization and asset class. The Plan assets are mostly a mix of mutual funds indexed to the performance of Fortune 500 U.S. companies, debt securities held in bond funds, domestic and foreign common equity funds, and a money market fund. The Plan’s exposure to a concentration of credit risk is limited by the diversification of the investments into various investment options with multiple asset managers.

Expected Contributions

For the fiscal year ending September 30, 2020, the Company expects to contribute $0 to the Plan.

Estimated Future Benefit Payments

The following benefit payments are expected to be paid as follows (in thousands):

October 1, 2019 through September 30, 2020	$	222
October 1, 2020 through September 30, 2021		223
October 1, 2021 through September 30, 2022		224
October 1, 2022 through September 30, 2023		228
October 1, 2023 through September 30, 2024		243
October 1, 2024 through September 30, 2029		1,269
Total	$	2,409

Included in the funded status of the Plan at September 30, 2019 and 2018, are actuarial losses of $1,910,000 and $1,292,000, respectively. These amounts are included, net of related income tax effects of $537,000 and $363,000, respectively, in the accumulated other comprehensive loss component of stockholders’ equity. During the year ending September 30, 2020, approximately $181,000 of the actuarial losses is expected to be amortized into net periodic pension expense.

The following table presents the Plan assets that are measured at fair value on a recurring basis by level within the fair value hierarchy under ASC Topic 820. Financial assets are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. See Note R for further detail regarding fair value hierarchy.

			Fair Value Measurements at Reporting Date Using:
			Quoted Prices		Significant
			in Active Markets		Other		Significant
			for Identical		Observable		Unobservable
	Total		Assets (Level 1)		Inputs (Level 2)		Inputs (Level 3)
	(In thousands)
At September 30, 2019
Investment Type
Mutual Funds- Equity
Large-Cap Value	$	484	$	484	$	—	$	—
Large-Cap Core		500		500		—		—
Mid-Cap Core		205		205		—		—
Small-Cap Core		193		193		—		—
Non-U.S. Core		802		802		—		—
Mutual Funds- Fixed Income
Intermediate-Term Core		1,304		1,304		—		—
Cash Equivalents
Money Market		93		93		—		—
Total Investment	$	3,581	$	3,581	$	—	$	—

			Fair Value Measurements at Reporting Date Using:
			Quoted Prices		Significant
			in Active Markets		Other		Significant
			for Identical		Observable		Unobservable
	Total		Assets (Level 1)		Inputs (Level 2)		Inputs (Level 3)
	(In thousands)
At September 30, 2018
Investment Type
Mutual Funds- Equity
Large-Cap Value	$	468	$	468	$	—	$	—
Large-Cap Core		480		480		—		—
Mid-Cap Core		198		198		—		—
Small-Cap Core		201		201		—		—
Non-U.S. Core		815		815		—		—
Mutual Funds- Fixed Income
Intermediate-Term Core		1,241		1,241		—		—
Cash Equivalents
Money Market		—		—		—		—
Total Investment	$	3,403	$	3,403	$	—	$	—

Equity and debt securities are reported at fair value in the table above utilizing exchange quoted prices in active markets for identical instruments (Level 1 inputs).