EMPLOYEE BENEFITS

6 Months Ended

Jun. 30, 2019

5.	EMPLOYEE BENEFITS

Non-Qualified Plans - Certain Company executives, as determined by the Company’s Board of Directors from time-to-time, were granted SARs based on grant date values. The SARs have varying vesting provisions. Exercise and payment options for the SARs vary and are governed by the program they were issued under, as well as the specific award agreement. Prior to January 1, 2019, the Company accrued the liabilities for these SARs under the intrinsic value method. The accrual for the liabilities was $10.6 million at December 31, 2018.

As a result of the Company becoming a reporting company with the SEC, the Company is now required to use the fair value method for these SARs. The Company’s calculation of the fair value of the SARs, as of January 1, 2019, exceeded the recorded intrinsic value by $1.6 million. Therefore, the Company recorded a cumulative-effect adjustment to retained earnings for $1.3 million ($1.6 million net of $340,000 in tax) effective January 1, 2019 and applied this change prospectively.

The Company recorded expense of $607,000 for the increase in the intrinsic value of the SARs, prior to the change to the fair value method, and the change in fair value of the SARs at January 1, 2019. The Company also recorded $69,000 of expense related to vesting for the SARs, prior to conversion on May 6, 2019. See next footnote for further discussion of the conversion.