Employee Benefits

9 Months Ended

Sep. 30, 2018

Employee Benefits and Share-based Compensation, Noncash [Abstract]

Employee Benefits

11. Employee Benefits

Pension Plan

The Bank maintains a noncontributory defined benefit pension plan covering substantially all of its employees 21 years of age or older who have completed at least one year of service. On April 24, 2012, the Board of Directors of Rhinebeck Bank voted to freeze the Bank’s defined benefit plan as of June 30, 2012.

The following table sets forth the plan’s funded status and amounts recognized in the Company’s consolidated statements of financial condition:

	Nine months ended September 30,			Year ended December 31,
	2018			2017
		(unaudited)
Projected and accumulated benefit obligation	$	(18,304	)	$	(19,777	)
Plan assets at fair value		18,281			18,166
Funded status included in other liabilities	$	(23	)	$	(1,611	)

Amounts recognized in accumulated other comprehensive loss consisted of the following:

	Nine months ended September 30,		Year ended December 31,
	2018		2017
	(unaudited)
Net actuarial loss	$	4,855	$	5,865

The net periodic pension (benefit) cost and amounts recognized in other comprehensive income (loss) are as follows:

	Three months ended September 30,				Nine months ended September 30,
	2018		2017		2018			2017
	(unaudited)				(unaudited)
Net periodic pension (income) cost	$	-	$	19	$	(2	)	$	57
Net actuarial pension (gain) loss		-		-		(1,010	)		-
Total	$	-	$	19	$	(1,012	)	$	57

In 2018 and 2017, net actuarial (gain) loss resulted primarily from changes in the discount rate.

Estimated net actuarial loss of $374 will be amortized from accumulated other comprehensive loss into net periodic pension cost in 2018. Weighted-average assumptions used by the Company to determine the pension benefit obligation consisted of the following:

	September 30,			December 31,
	2018			2017
	(unaudited)
Discount rate		4.11	%		3.53	%

Weighted-average assumptions used by the Company to determine the net periodic pension cost consisted of the following:

	September 30,			December 31,
	2018			2017
	(unaudited)
Discount rate		4.11	%		4.06	%
Rate of increase in compensation		-			-
Expected long-term rate of retun on assets		6.00	%		6.00	%

The expected long-term rate of return on plan assets has been determined by applying historical average investment returns from published indexes relating to the current allocation of assets in the plan. Plan assets are invested in pooled separate accounts consisting of underlying investments in nine diversified investment funds.

As of September 30, 2018, the investment funds include six equity funds, three bond funds and a real estate fund, each with its own investment objectives, investment strategies and risks, as detailed in the Company’s investment policy statement. At December 31, 2017 and 2016 the investment funds included five equity funds, three bond funds and a taxable money market fund, each with its own investment objectives, investment strategies and risks, as detailed in the Company’s investment policy statement. The Company determines the appropriate strategic asset allocation versus plan liabilities, as governed by the investment policy statement.

The assets of the plan are invested under the supervision of the Company’s investment committee in accordance with the investment policy statement. The investment options of the plan are chosen in a manner consistent with generally accepted standards of fiduciary responsibility. The investment performance of the Company’s individual investment managers, with the assistance of the Company’s investment consultant, is monitored on a quarterly basis and is reviewed at least annually relative to the objectives and guidelines as stated in the Company’s investment policy statement.

The fair value of the Company’s pension plan assets, by fair value hierarchy, are as follows:

	Balance		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Observable Inputs (Level 3)
	September 30, 2018
	(unaudited)
Pooled separate accounts	$	18,281	$	-	$	18,281	$	-
	December 31, 2017
Pooled separate accounts	$	18,166	$	-	$	18,166	$	-

The pooled separate accounts are valued at the net asset per unit based on either the observable net asset value of the underlying investment or the net asset value of the underlying pool of securities. Net asset value is based on the value of the underlying assets owned by the fund, minus its liabilities and then divided by the number of shares outstanding. Pooled separate accounts are classified within level 2 of the valuation hierarchy described in Note 1.

Employer contributions and benefit payments are as follows:

	Three months ended September 30,						Nine months ended September 30,
	2018			2017			2018			2017
	(unaudited)						(unaudited)
Employer contribution	$	570		$	-		$	570		$	-
Benefits paid	$	(110	)	$	(100	)	$	(331	)	$	(300	)

As of December 31, 2018 and 2017, the following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:

Years ended December 31,	2018		2017
2018	$	540	$	538
2019		567		564
2020		636		633
2021		667		666
2022		711		708
2023 - 2027		4,206		4,284

On August 14, 2018, the Company made a contribution to the plan in the amount of $570. The contribution was made to reduce the underfunded status of the plan and realize a higher tax deduction due to the decrease of the federal tax rate in 2018.

Defined Contribution Plan

The Company sponsors a 401(k) defined contribution plan. Participants are permitted, in accordance with the provisions of Section 401(k) of the Internal Revenue Code, to contribute up to 25% of their earnings (as defined) into the plan with the Company matching up to 6%, subject to Internal Revenue Service limitations. The Company’s contributions charged to operations amounted to $577, $508 and $686 for the nine months ended September 30, 2018 and 2017 and year ended December 31, 2017, respectively.

Bank Owned Life Insurance

The Company has an investment in and is the beneficiary of, life insurance policies on the lives of certain officers and trustees. The purpose of these life insurance policies is to provide income through the appreciation in cash surrender value of the policies, which is expected to offset the cost of the deferred compensation plans. These policies have aggregate cash surrender values of $17,736 and $17,577 at September 30, 2018 and December 31, 2017, respectively. Net earnings on these policies aggregated $345 and $345 for the nine months ended September 30, 2018 and 2017 and $460 for the year ended December 31, 2017, respectively, which are included in noninterest income in the consolidated statements of income.

Deferred Compensation Arrangements

Trustees’ Plan

The Company’s 1991 Plan (the “Trustees’ Plan”) covers Trustees who elect to defer fees earned. Under the terms of the Trustees’ Plan, each participant may elect to defer all or part of their annual director’s fees. Upon resignation, retirement, or death, the participants’ total deferred compensation, including earnings thereon, will be paid out. At September 30, 2018 and December 31, 2017, $1,760 and $1,648, respectively, is included in accrued expenses and other liabilities, which represents cumulative amounts deferred and earnings thereon. Total expense related to the Trustees’ Plan for the nine months ended September 30, 2018 and 2017 were $61 and $44 and year ended December 31, 2017 was $62, respectively, which are included in noninterest expense in the consolidated statements of income.

Executive Long-Term Incentive and Retention Plan

The Company maintains an Executive Long-Term Incentive and Retention Plan (the “Executive Plan”). Participation in the Executive Plan is limited to officers of the Company designated as participants by the Board of Trustees and who filed a properly completed and executed participation agreement in accordance with the terms of the Executive Plan. Under the Executive Plan, the Board of Trustees may grant annual incentive awards equal to a percentage of a participant’s base salary at the rate in effect on the last day of the Plan year, as determined by the Board of Trustees based on the attainment of criteria established annually by the Board of Trustees. Incentive awards under the Executive Plan are credited to the participant’s incentive benefit account as of the last day of the Executive Plan year to which the award relates and earn interest at a rate determined annually by the Board of Trustees. Participants vest in their benefit accounts in accordance with the vesting schedule approved by the Board of Trustees, which ranges from one to five years of service. At September 30, 2018 and December 31, 2017, $840 and $813, respectively, is included in accrued expenses and other liabilities, which represents the cumulative amounts deferred and earnings thereon. The Company recognized expenses of $27 and $23 for the nine months ended September 30, 2018 and 2017, and $76 for the year ended December 31, 2017, respectively, related to this plan and which are included in salaries and employee benefits expense in the consolidated statements of income.

Group Term Replacement Plan

Under the terms of the “Group Term Replacement Plan”, the Company provides postretirement life insurance benefits to certain officers. The liability related to these postretirement benefits is being accrued over the individual participants’ service period and aggregated $1,300 and $1,260, respectively, at September 30, 2018 and December 31, 2017. The Company recognized expenses of $40 and $41 for the nine months ended September 30, 2018 and 2017 and $71 for the year ended December 31, 2017, respectively, related to this plan which are included in salaries and employee benefits expense in the consolidated statements of income.

Other Director and Officer Postretirement Benefits

The Company has individual fee continuation agreements with certain directors and a supplemental retirement agreement with an executive officer which provide for fixed postretirement benefits to be paid to the directors and the officer, or their beneficiaries, for periods ranging from 15 to 20 years. In addition, the Company has agreements with certain directors which provide for certain postretirement life insurance benefits. The liability related to these postretirement benefits is being accrued over the individual participants’ service period and aggregated $2,105 and $2,078, respectively, at September 30, 2018 and December 31, 2017. The Company recognized expenses of $75 and $178 for the nine months ended September 30, 2018 and 2017 and $292 for the year ended December 31, 2017, respectively, related to these benefits which are included in other noninterest expenses in the consolidated statements of income.