Plans

Pension Plan, Retirement Income Maintenance Plan (the "RIM Plan") and Post-retirement Plan

The Company maintains a single employer, tax-qualified defined benefit pension plan ( the "Pension Plan") which covers full-time employees that satisfy the plan eligibility requirements. The benefits are based on years of service and the employee's compensation during the last five years of employment. During the year ended December 31, 2018, the pension plan was amended. Effective October 1, 2018, employees hired by the Bank are not eligible to participate in the Bank's pension plan as the plan has been closed to new employees as of that date, and effective January 1, 2019, the Post-retirement Plan has also been closed to new hires.

The Company's policy is to fund at least the minimum contribution required by the Employee Retirement Income Security Act of 1974. GAAP requires an employer to: (a) recognize in its statement of financial position the over-funded or under-funded status of a defined benefit post-retirement plan measured as the difference between the fair value of plan assets and the benefit obligation; (b) measure a plan’s assets and its obligations that determine its funded status at the end of the employer’s fiscal year (with limited exceptions); and (c) recognize as a component of other comprehensive income (loss), net of tax, the actuarial gains and losses and the prior service costs and credits that arise during the period. The assets of the plan are primarily invested in fixed income and equity funds.

The Company also has a RIM Plan, which is a non-qualified defined benefit plan which provides benefits to all employees of the Company if their benefits under the Pension Plan are limited by Internal Revenue Code 415 and 401(a)(17).

In addition, the Company provides certain health care and life insurance benefits to eligible retired employees under a Post-retirement Plan. The Company accrues the cost of retiree health care and other benefits during the employees’ period of active service.

The following table sets forth information regarding the Pension, RIM and Post-retirement Plans at December 31, 2018 and 2017:



	December 31,
	2018			2017			2018			2017			2018			2017
	Pension						RIM						Post-retirement
	(In thousands)
Change in benefit obligation:
Benefit obligation at beginning of year	$	229,156		$	216,992		$	12,243		$	11,032		$	22,078		$	22,133
Service cost	7,805			7,496			282			238			417			445
Interest cost	8,489			8,461			443			433			796			762
Actuarial (gain) loss	(30,703		)	4,543			(1,355		)	874			(1,845		)	(726		)
Benefits paid	(5,542		)	(8,336		)	(328		)	(334		)	(482		)	(536		)
Benefit obligation at end of year	209,205			229,156			11,285			12,243			20,964			22,078

Change in plan assets:
Fair value of plan assets at beginning of year	289,390			257,513			—			—			—			—
Actuarial return on plan assets	(10,874		)	27,213			—			—			—			—
Employer contributions	—			13,000			328			334			482			536
Benefits paid	(5,542		)	(8,336		)	(328		)	(334		)	(482		)	(536		)
Fair value of plan assets at end of year	272,974			289,390			—			—			—			—
Funded status at end of year	$	63,769		$	60,234		$	(11,285	)	$	(12,243	)	$	(20,964	)	$	(22,078	)

(11) Employee Benefit Plans (continued)

At December 31, 2018 and 2017, the unfunded liability for the RIM and Post-retirement Plans of $11.3 million and $21.0 million, and $12.2 million and $22.1 million, respectively, were included in other liabilities in the Consolidated Statements of Financial Condition, and the over-funded pension benefits associated with the Pension Plan totaling $63.8 million and $60.2 million, respectively, were included in other assets.

The components of accumulated other comprehensive income (loss) related to the Pension, RIM , and Post-retirement Plans on a pre-tax basis, at December 31, 2018 and 2017, and September 30, 2017 and 2016 are summarized in the following table:



	At December 31,						At December 31,
	2018						2017
	Pension		RIM		Post-retirement		Pension		RIM		Post-retirement
	(In thousands)

Unrecognized prior service costs	$	—	$	—	$	—	$	—	$	—	$	(106	)
Unrecognized net actuarial income	59,579		3,748		4,226		61,731		5,515		6,395
Total accumulated other comprehensive income	$	59,579	$	3,748	$	4,226	$	61,731	$	5,515	$	6,289



	At September 30,
	2017		2016		2017		2016		2017			2016
	Pension				RIM				Post-retirement
	(In thousands)

Unrecognized prior service costs	$	—	$	—	$	—	$	—	$	(140	)	$	(276	)
Unrecognized net actuarial income	55,438		74,768		4,725		5,154		4,611			8,374
Total accumulated other comprehensive income	$	55,438	$	74,768	$	4,725	$	5,154	$	4,471		$	8,098

Net periodic benefit (income) cost for Pension, RIM and Post-retirement plans for the years ended December 31, 2018, September 30, 2017 and 2016 and the three months ended December 31, 2017, includes the following components:



	For the Year Ended December 31,								For the Three Months Ended December 31,
	2018								2017
	Pension			RIM		Post-retirement			Pension			RIM		Post-retirement
	(In thousands)

Service cost	$	7,805		$	282	$	417		$	1,780		$	60	$	92
Interest cost	8,489			443		796			2,128			111		205
Expected return on plan assets	(20,794		)	—		—			(4,814		)	—		—
Amortization:
Prior service credit	—			—		(106		)	—			—		(34		)
Net loss	3,117			413		323			707			103		70
Net periodic (income) cost	$	(1,383	)	$	1,138	$	1,430		$	(199	)	$	274	$	333

(11) Employee Benefit Plans (continued)



	For the Years Ended September 30,
	2017			2016			2017		2016		2017			2016
	Pension						RIM				Post-retirement
	(In thousands)
Service cost	$	7,621		$	6,188		$	237	$	140	$	471		$	447
Interest cost	8,444			8,096			429		385		742			854
Expected return on plan assets	(24,809		)	(22,706		)	—		—		—			—
Amortization:
Prior service credit	—			—			—		—		(136		)	(136		)
Net loss	10,998			8,490			453		283		325			339
Net periodic cost	$	2,254		$	68		$	1,119	$	808	$	1,402		$	1,504

The weighted average actuarial assumptions used in the plan determinations at and for the years ended December 31, 2018, September 30, 2017 and 2016 and the three months ended December 31, 2017 were as follows:



	At and For the Year Ended December 31,						At and For the Three Months Ended December 31,
	2018						2017
	Pension		RIM		Post-retirement		Pension		RIM		Post-retirement
Weighted average assumptions used to determine benefit obligation:
Discount rate	4.570	%	4.470	%	4.410	%	3.750	%	3.625	%	3.625	%
Rate of compensation increase	3.500	%	3.500	%	N/A		3.500	%	3.500	%	N/A
Weighted average assumptions used to determine net periodic benefit cost:
Discount rate	3.750	%	4.470	%	3.625	%	4.000	%	3.875	%	3.875	%
Expected rate of return on plan assets	7.250	%	N/A		N/A		7.250	%	N/A		N/A
Rate of compensation increase	3.500	%	3.500	%	N/A		3.500	%	3.500	%	N/A



	At and For the Years Ended September 30,
	2018		2017		2018		2017		2018		2017
	Pension				RIM				Post-retirement
Weighted average assumptions used to determine benefit obligation:
Discount rate	4.000	%	3.875	%	3.875	%	3.625	%	3.875	%	3.625	%
Rate of compensation increase	3.500		3.500		3.500		3.500		N/A		N/A
Weighted average assumptions used to determine net periodic benefit cost:
Discount rate	3.875	%	4.500	%	3.625	%	4.375	%	3.625	%	4.375	%
Expected rate of return on plan assets	7.500		7.500		N/A		N/A		N/A		N/A
Rate of compensation increase	3.500		3.500		3.500		3.500		N/A		N/A

The Company provides its actuaries with certain rate assumptions used in measuring the respective benefit obligations. The most significant of these is the discount rate used to calculate the period-end present value of the benefit obligations, and the expense to be included in the following year's financial statements. A lower discount rate will result in a higher benefit obligation and expense, while a higher discount rate will result in a lower benefit obligation and expense. The discount rate assumption was determined based on a cash flow-yield curve model specific to the Company's pension and post-retirement plans.

(11) Employee Benefit Plans (continued)

The Company compares this rate to certain market indices, such as long-term treasury bonds, or pension liability indices, for reasonableness. The Company's expected return on plan assets assumption is based on historical investment return rate experience and evaluation of input from the trustee managing the pension plan's assets and the Bank's Pension Committee which has responsibility for managing these assets. The expected return on pension plan assets is also impacted by the target allocation of assets, which is based on the Company's goal of earning the highest rate of return while maintaining risk at acceptable levels.

Assumed health care cost trend rates have a significant effect on the amounts reported for health care plans. A 1% change in the assumed health care cost trend rate would have the following effects on post-retirement benefits at December 31, 2018:



	1% increase		1% decrease
	(In thousands)

Effect on total service cost and interest cost	$	14	$	(12	)
Effect on post-retirement benefit obligations	130		(120		)

Estimated future benefit payments, which reflect expected future service, as appropriate for the next five years are as follows:



	Pension		RIM		Post-retirement
	(In thousands)

2019	$	5,791	$	329	$	1,079
2020	6,301		341		1,114
2021	6,892		377		1,171
2022	7,471		416		1,212
2023	8,167		458		1,249
Years 2024 - 2028	52,675		3,318		6,840

The Company does not anticipate making a discretionary cash contribution to the pension plan for the year ended December 31, 2019.

The weighted average asset allocation of pension assets at December 31, 2018 and 2017 were as follows:



	December 31,
	2018		2017
	(In thousands)

Domestic equities	35.20	%	38.10	%
Foreign equities	10.80		13.90
Fixed income	42.30		36.90
Real estate	10.50		9.30
Cash	1.20		1.80
Total	100.00	%	100.00	%

Management, under the direction of the Pension Committee, strives to have pension assets sufficiently diversified so that adverse or unexpected results from one security class will not have a significant detrimental impact on the entire portfolio. The target allocation of assets and acceptable ranges around the targets are as follows:

(11) Employee Benefit Plans (continued)



	Allowable Range

Equities	40-60%
Fixed income	40-60%
Real estate	0-10%
Cash	0-15%

The Pension Committee engages an investment management advisory firm to regularly monitor the performance of the asset managers and ensure they are within compliance with policy. The maximum and minimum of the range for each class is based on the fair value of the assets in the fund. If changes in fair value should lead to allocations outside these boundaries, management shall adjust exposure back to the established guidelines within 90 days or reevaluate the guidelines.

The following tables present the assets that are measured at fair value on a recurring basis by level within the U.S. GAAP fair value hierarchy as reported on the Statements of Net Assets Available for Plan benefits at December 31, 2018 and 2017, respectively. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.



	December 31, 2018
			Fair value measurements
	Fair value		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
	(In thousands)

Money market mutual funds	$	3,459	$	3,459	$	—	$	—
Mutual funds - value stock fund	22,533		22,533		—		—
Mutual funds - fixed income	115,500		115,500		—		—
Mutual funds - international stock	29,441		29,441		—		—
Mutual funds - institutional stock index	73,450		73,450		—		—
Commingled real estate funds	28,591		—		28,591		—
	$	272,974	$	244,383	$	28,591	$	—

(11) Employee Benefit Plans (continued)



	December 31, 2017
			Fair value measurements
	Fair value		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
	(In thousands)

Money market mutual funds	$	5,236	$	5,236	$	—	$	—
Mutual funds - value stock fund	27,364		27,364		—		—
Mutual funds - fixed income	106,726		106,726		—		—
Mutual funds - international stock	40,388		40,388		—		—
Mutual funds - institutional stock index	82,831		82,831		—		—
Commingled real estate funds	26,845		—		26,845		—
	$	289,390	$	262,545	$	26,845	$	—

Money market and other mutual funds are reported at fair value in the table above utilizing exchange quoted prices in active markets for identical instruments (Level 1 inputs). The commingled trust funds are reported at their respective net asset values (Level 2).

BOLI and Split-Dollar Life Insurance

The Company has Bank-owned life insurance ("BOLI") which is a tax-advantaged transaction that is used to partially fund obligations associated with employee compensation and benefit programs. Policies are purchased insuring officers of the Company using a single premium method of payment. BOLI is accounted for using the cash surrender value and the increase in cash surrender value is included in non-interest income in the Company's Statements of Income. At December 31, 2018 and 2017, the Company had $184.5 million and $150.5 million, respectively, in BOLI. BOLI income for the years ended December 31, 2018, September 30, 2017 and 2016, and the three months ended December 31, 2017, was $5.2 million, $4.9 million, $4.4 million, and $1.1 million, respectively.

The Company also provides life insurance benefits to eligible employees under an endorsement split-dollar life insurance program. The Company recognizes a liability for future benefits applicable to endorsement split-dollar life insurance arrangements that provide death benefits post-retirement. At December 31, 2018 and 2017, $10.5 million and $5.9 million, respectively, related to the liability under this program was recognized in other liabilities in the Company's Consolidated Statements of Financial Condition. The BOLI expense related to the split-dollar benefit for the years ended December 31, 2018, September 30, 2017 and 2016, and the three months ended December 31, 2017, was $1.3 million, $395,000, $356,000 and $159,000, respectively.

Savings Income Maintenance Deferred Compensation Plan (the "SIM Plan")

The Company also maintains a non-qualified defined contribution plan that provides supplemental benefits to certain executives who are prevented from receiving the full benefits contemplated by the 401(k) Plan under tax law limits for tax-qualified plans. The expense for the years ended December 31, 2018, September 30, 2017 and 2016, and the three months ended December 31, 2017, was approximately $86,000, $14,000, $47,000 and $1,000, respectively.

401(k) Plan

The Company has a 401(k) plan covering substantially all employees of the Bank. The Bank may match a percentage of the first 3.00% to 4.50% contributed by participants. The Bank’s matching contribution, if any, is determined by the Board of Directors in its sole discretion. The expense for the years ended December 31, 2018, September 30, 2017 and 2016, and the three months ended December 31, 2017, was approximately $1.3 million, $1.2 million, $1.1 million and $289,000, respectively.

(11) Employee Benefit Plans (continued)

Employee Stock Ownership Plan ("ESOP")

Effective upon the consummation of the Company's reorganization in April 2018, an ESOP was established for all eligible employees. The ESOP used $45.4 million in proceeds from a twenty year term loan obtained from the Company to purchase 4,542,855 shares of Company common stock. The term loan principal is payable in installments through April 2038. Interest on the term loan is fixed at a rate of 4.75%.

Each year, the Bank makes discretionary contributions to the ESOP, which are equal to principal and interest payments required on the term loan. Shares purchased with the loan proceeds were initially pledged as collateral for the term loan and is held in a suspense account for future allocation among participants. Contributions to the ESOP and shares released form the suspense account are allocated among the participants on the basis of compensation, as described by the ESOP, in the year of allocation.

The ESOP shares pledged as collateral are reported as unearned ESOP shares in the Consolidated Statements of Financial Condition. As shares are committed to be released from collateral, the Bank reports compensation expense equal to the average market price of the shares during the year, and the shares become outstanding for basic net income per common share computations. ESOP compensation expense was $2.6 million for the year ended December 31, 2018. There was no ESOP expense recorded for the years ended September 30, 2017 and 2016, or the three months ended December 31, 2017.

The ESOP shares were as follows:



	December 31,
	2018
	(In thousands)

Allocated shares	159
Unearned shares	4,384
Total ESOP shares	4,543
Fair value of unearned shares	$	67,025

Supplemental Executive Retirement Plan ("SERP")

The Company has a SERP, which is a non-qualified plan which provides supplemental retirement benefits to eligible officers (those designated by the Board of Directors) of the Company who are prevented from receiving the full benefits contemplated by the ESOP's benefit formulas under tax law limits for tax-qualified plans. SERP compensation expense was $165,000 for the year ended December 31, 2018. There was no SERP expense recorded for the years ended September 30, 2017 and 2016, and the three months ended December 31, 2017.

Stock Based Deferral Plan and Directors Deferred Compensation Plan

In addition, the Bank maintains a stock based deferral plan for certain executives and directors, and a cash based deferred compensation plan for directors. The Company records a deferred compensation equity instrument and corresponding contra-equity account for the cost of the shares held by the Stock Based Deferral Plan. Periodic adjustments to market are not required as participants do not have the option to take the distribution in cash. The Company records a liability for the amount deferred under the Directors Deferred Compensation Plan. There were no expenses recorded under these plans.