Pension Plan

6 Months Ended

Jun. 30, 2019

Retirement Benefits [Abstract]

Pension Plan

Note 11 – Pension Plan

The Company’s defined benefit pension plan was frozen effective January 1, 2004, whereby no new participants were added to the plan and no additional years of service were accrued to participants. The pension plan covered substantially all of the Company’s employees at the time. The benefits for each employee were based on years of service and a percentage of the employee’s qualifying compensation during the final years of employment. The Company’s funding policy was and is to contribute annually the amount necessary to satisfy the Internal Revenue Service’s funding standards. As a result of its evaluation of its funding status, the Company made no contribution in 2018, and has not made a contribution through June 30, 2019.

In December 2018, due to the rising interest rate environment, the Company determined it was in the best of interest of its shareholders to settle its pension obligation to its retiree group in payout, approximately 53% of the pension benefit obligation on that date, and recorded a loss on settlement totaling $1,546,000 for the year ended December 31, 2018. In 2019, the Company made a decision to terminate and settle the remaining obligation in its pension plan with an effective termination date of June 30, 2019, following which date the Company is obligated to settle the Company’s remaining obligations of the plan upon receipt of regulatory approval. Final settlement of the Company’s remaining obligation under the plan is expected to be made in the fourth quarter of 2019 or first or second quarter of 2020, subject to regulatory approval.

In addition, the Company had a multiple employer pension plan related to its acquisition of Orange Savings Bank in 2013. This plan was likewise frozen. During the first quarter of 2019, the Company made a decision to remove this plan from the multiple employer plan and merge it into the Company’s existing pension plan. The Company recorded $900,000 in pension merger expense for the three months ended March 31, 2019 in connection with this merger of the Orange pension plan. In May 2019, the Company assumed the Orange pension obligation of $2,740,000 and received related assets totaling $1,829,000.

Net periodic benefit costs totaling $19,000 and $56,000 were recorded for the three months ended June 30, 2019 and 2018, respectively. Net periodic benefit costs totaling $942,000 and $111,000 were recorded for the six months ended June 30, 2019 and 2018, respectively, which includes the Orange pension merger costs discussed above.