PENSION PLAN

12 Months Ended

Dec. 31, 2019

The Company participates in a trusteed pension plan known as the Allegheny Group Retirement Plan covering virtually all full-time employees. Benefits are based on years of service and the employee’s compensation. Accruals under this plan were frozen as of May 31, 2014. Freezing the plan resulted in a re-measurement of the pension obligations and plan assets as of the freeze date. The pension obligation was re-measured using the discount rate based on the Citigroup Above Median Pension Discount Curve in effect on May 31, 2014 of 4.46%.

On June 19, 2017, the Company and MVB Mortgage approved a Supplemental Executive Retirement Plan (“SERP”), pursuant to which the Chief Executive Office of MVB Mortgage is entitled to receive certain supplemental nonqualified retirement benefits. The SERP took effect on December 31, 2017. If the executive completes three years of continuous employment with MVB Mortgage prior to retirement date (which shall be no earlier than the date he attains age 55) he will, upon retirement, be entitled to receive $1.8 million payable in 180 equal consecutive installments of $10 thousand. The liability is calculated by discounting the anticipated future cash flows at 4.0%. The liability accrued for this obligation was $783 thousand and $377 thousand as of December 31, 2019 and 2018, respectively. Service cost was $406 thousand and $376 thousand in 2019 and 2018, respectively.

Pension expense was $256 thousand, $286 thousand and $256 thousand in 2019, 2018 and 2017, respectively.

Information pertaining to the activity in the Company’s defined benefit plan, using the latest available actuarial valuations with a measurement date of December 31, 2019 and 2018 is as follows:


(Dollars in thousands)	2019		2018
Change in benefit obligation
Benefit obligation at beginning of year	$	9,416	$	10,058
Service cost	—		—
Interest cost	392		352
Actuarial loss	99		348
Assumption changes	1,769		(1,127)
Curtailment impact	—		—
Benefits paid	(241)		(215)
Benefit obligation at end of year	$	11,435	$	9,416

Change in plan assets:
Fair value of plan assets at beginning of year	$	5,238	$	5,166
Actual return on plan assets	808		(429)
Employer contribution	360		716
Benefits paid	(241)		(215)
Fair value of plan assets at end of year	$	6,165	$	5,238

Funded status	$	(5,270)	$	(4,179)
Unrecognized net actuarial loss	5,883		4,687
Unrecognized prior service cost	—		—
Prepaid pension cost recognized	$	613	$	508

Accumulated benefit obligation	$	11,435	$	9,416

At December 31, 2019, 2018 and 2017, the weighted average assumptions used to determine the benefit obligation are as follows:


	2019		2018		2017
Discount rate	3.24	%	4.23	%	3.55	%
Rate of compensation increase	N/A		N/A		N/A

The components of net periodic pension cost are as follows:


(Dollars in thousands)	2019		2018		2017
Service cost	$	—	$	—	$	—
Interest cost	392		352		360
Expected return on plan assets	(407)		(372)		(345)
Amortization of prior service costs	—		—		—
Amortization of net actuarial loss	271		306		241
Net periodic pension cost	$	256	$	286	$	256

For the years December 31, 2019, 2018 and 2017, the weighted average assumptions used to determine net periodic pension cost are as follows:


	2019		2018		2017
Discount rate	3.24	%	3.55	%	4.05	%
Expected long-term rate of return on plan assets	6.75	%	6.75	%	6.75	%
Rate of compensation increase	N/A		N/A		N/A

The Company’s pension plan asset allocations at December 31, 2019 and 2018 are as follows:


	12/31/2019		12/31/2018
Plan Assets
Cash	4	%	5	%
Fixed income	23	%	24	%
Alternative investments	15	%	17	%
Domestic equities	33	%	31	%
Foreign equities	24	%	23	%
Real estate investment trusts	1	%	—	%
Total	100	%	100	%

The estimated net loss for the plan that is expected to be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year is $460 thousand.

The following table sets forth by level, within the fair value hierarchy, as defined in Note 17, “Fair Value Measurements,” the Pension Plan’s assets at fair value as of December 31, 2019.


(Dollars in thousands)	Level I		Level II		Level III		Total
Assets:
Cash	$	247	$	—	$	—	$	247
Fixed income	1,418		—		—		1,418
Alternative investments	—		—		925		925
Domestic equities	2,034		—		—		2,034
Foreign equities	1,480		—		—		1,480
Real estate investment trusts	—		—		61		61

Total assets at fair value	$	5,179	$	—	$	986	$	6,165

The following table sets forth by level, within the fair value hierarchy, as defined in Note 17, “Fair Value Measurements,” the Pension Plan’s assets at fair value as of December 31, 2018.


(Dollars in thousands)	Level I		Level II		Level III		Total
Assets:
Cash	$	262	$	—	$	—	$	262
Fixed income	1,257		—		—		1,257
Alternative investments	—		—		890		890
Domestic equities	1,624		—		—		1,624
Foreign equities	1,205		—		—		1,205

Total assets at fair value	$	4,348	$	—	$	890	$	5,238

Investment in government securities and short-term investments are valued at the closing price reported on the active market on which the individual securities are traded. Alternative investments and investment in debt securities are valued at quoted prices which are available but traded less frequently, and items that are fair valued using other financial instruments, the parameters of which can be directly observed. The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while this plan believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

Below we show the best estimate of the plan contribution for next fiscal year. We also show the benefits expected to be paid in each of the next five fiscal years, and in the aggregate for the five fiscal years thereafter.


(Dollars in thousands)	Cash Flow
Contributions for the period of January 1, 2019 through December 31, 2019	$	360

Estimated future benefit payments reflecting expected future service
2020	$	323
2021	$	331
2022	$	386
2023	$	429
2024	$	450
2025 through 2028	$	2,652