Employee Benefit Plans

Defined Benefit Plan

The Company previously maintained a non-contributory defined benefit pension plan which covered substantially all employees who were 21 years of age or older and who had at least one year of service. The Company froze its pension plan to new participants and converted its pension plan to a cash balance plan effective December 31, 2009. Each year, existing participants will receive, with some adjustments, income based on the yield of the 10 year U.S. Treasury Note in December of the preceding year. Information pertaining to the activity in the plan is as follows (dollars in thousands):



	As of and for the Years Ended December 31,
	2019			2018			2017
Change in Benefit Obligation:
Projected benefit obligation at beginning of year	$	5,812		$	8,313		$	7,932
Service cost	—			—			—
Interest cost	209			235			237
Actuarial (gain) loss	489			(782		)	611
Settlement gain	(236		)	(120		)	(3		)
Benefits paid	(12		)	(1,834		)	(464		)
Projected benefit obligation at end of year	6,262			5,812			8,313

Change in Plan Assets:
Fair value of plan assets at beginning of year	5,653			7,556			7,647
Actual return (loss) on plan assets	498			(69		)	373
Benefits paid	(236		)	(1,834		)	(464		)
Fair value of plan assets at end of year	5,915			5,653			7,556

Funded Status at End of Year	$	(347	)	$	(159	)	$	(757	)

Amounts Recognized in the Consolidated Balance Sheets
Other liabilities	$	(347	)	$	(159	)	$	(757	)

Amounts Recognized in Accumulated Other Comprehensive Loss
Net actuarial loss	$	1,658		$	1,594		$	2,886
Deferred income taxes	(358		)	(357		)	(606		)
Amount recognized	$	1,300		$	1,237		$	2,280

	As of and for the Years Ended December 31,
	2019			2018			2017
Components of Net Periodic Benefit Cost
Service cost	$	—		$	—		$	—
Interest cost	209			235			237
Expected return on plan assets	(269		)	(353		)	(353		)
Recognized net loss due to settlement	52			540			135
Recognized net actuarial loss	133			272			218
Net periodic benefit cost	$	125		$	694		$	237



Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive (Income) Loss
Net actuarial (gain) loss	$	64	$	(1,291	)	$	234
Amortization of prior service cost	—		—			—
Total recognized in other comprehensive (income) loss	$	64	$	(1,291	)	$	234

Total Recognized in Net Periodic Benefit Cost and Other Comprehensive (Income) Loss	$	189	$	(597	)	$	471

The accumulated benefit obligation as of December 31, 2019, 2018, and 2017 was $6,262,000, $5,812,000, and $8,313,000, respectively. The rate of compensation increase is no longer applicable since the defined benefit plan was frozen and converted to a cash balance plan.

The plan sponsor selected the expected long-term rate-of-return-on-assets assumption in consultation with their investment advisors and actuary. This rate was intended to reflect the average rate of earnings expected to be earned on the funds invested or to be invested to provide plan benefits. Historical performance is reviewed, especially with respect to real rates of return (net of inflation), for the major asset classes held or anticipated to be held by the trust, and for the trust itself. Undue weight is not given to recent experience that may not continue over the measurement period, with higher significance placed on current forecasts of future long-term economic conditions.

Because assets are held in a qualified trust, anticipated returns are not reduced for taxes. Further, solely for this purpose, the plan is assumed to continue in force and not terminate during the period in which assets are invested. However, consideration is given to the potential impact of current and future investment policy, cash flow into and out of the trust, and expenses (both investment and non-investment) typically paid from plan assets (to the extent such expenses are not explicitly estimated within periodic cost).

Below is a description of the plan's assets. The plan's weighted-average asset allocations by asset category are as follows as of December 31, 2019 and 2018:



Asset Category	December 31,
	2019		2018
Fixed Income	61.8	%	68.0	%
Equity	27.5	%	25.2	%
Cash and Accrued Income	10.7	%	6.8	%
Total	100.0	%	100.0	%

The investment policy and strategy for plan assets can best be described as a growth and income strategy. Diversification is accomplished by limiting the holding of any one equity issuer to no more than 5% of total equities. Exchange traded funds are used to provide diversified exposure to the small capitalization and international equity markets. All fixed income investments are rated as investment grade, with the majority of these assets invested in corporate issues. The assets are managed by the Company's Trust and Investment Services Division. No derivatives are used to manage the assets. Equity securities do not include holdings in the Company.

The fair value of the Company's pension plan assets at December 31, 2019 and 2018, by asset category are as follows (dollars in thousands):



			Fair Value Measurements at December 31, 2019 Using
	Balance at December 31,		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
Asset Category	2019		Level 1		Level 2		Level 3
Cash	$	636	$	636	$	—	$	—
Fixed income securities
Government sponsored entities	1,648		—		1,648		—
Municipal bonds and notes	1,792		—		1,792		—
Corporate bonds and notes	212		—		212		—
Equity securities
U.S. companies	1,385		1,385		—		—
Foreign companies	242		242		—		—
	$	5,915	$	2,263	$	3,652	$	—



			Fair Value Measurements at December 31, 2018 Using
	Balance at December 31,		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
Asset Category	2018		Level 1		Level 2		Level 3
Cash	$	359	$	359	$	—	$	—
Fixed income securities
Government sponsored entities	2,119		—		2,119		—
Municipal bonds and notes	1,513		—		1,513		—
Corporate bonds and notes	237		—		237		—
Equity securities
U.S. companies	1,227		1,227		—		—
Foreign companies	198		198		—		—
	$	5,653	$	1,784	$	3,869	$	—

Projected benefit payments for the years 2020 to 2029 are as follows (dollars in thousands):



Year	Amount
2020	$	496
2021	637
2022	346
2023	960
2024	242
2025 - 2029	3,031

401(k) Plan

The Company maintains a 401(k) plan that covers substantially all full-time employees of the Company. The Company matches a portion of the contribution made by employee participants after at least one year of service. The Company contributed $932,000, $778,000, and $763,000 to the 401(k) plan in 2019, 2018, and 2017, respectively. These amounts are included in employee benefits expense for the respective years.

Deferred Compensation Arrangements

Prior to 2015, the Company maintained deferred compensation agreements with former employees providing for annual payments to each ranging from $25,000 to $50,000 per year for ten years upon their retirement. The liabilities under these agreements are being accrued over the officers' remaining periods of employment so that, on the date of their retirement, the then-present value of the annual payments would have been accrued. As of December 31, 2019, the Company only had one remaining agreement under which payments are being made to a former officer. The liabilities were $250,000 and $300,000 at December 31, 2019 and 2018, respectively. The expense for these agreements was $0, $0, and $3,000 for the years ended December 31, 2019, 2018, and 2017, respectively. As a result of acquisitions, the Company has various agreements with current and former employees and executives with balances of $5,235,000 and $3,412,000 at December 31, 2019 and 2018, respectively that accrue through eligibility and are payable upon retirement.

Beginning in 2015, certain named executive officers became eligible to participate in a voluntary, nonqualified deferred compensation plan pursuant to which the officers may defer any portion of their annual cash incentive payments. In addition, the Company may make discretionary cash bonus contributions to the deferred compensation plan. Such contributions, if any, are made on an annual basis after the Committee assesses the performance of each of the named executive officers and the Company during the most recently completed fiscal year. The contributions charged to salary expense were $158,000, $141,000 and $135,000 for the years ended December 31, 2019, 2018 and 2017, respectively.

Incentive Arrangements

The Company maintains a cash incentive compensation plan for officers based on the Company's performance and individual officer goals. The total amount charged to salary expense for this plan was $1,217,000, $1,643,000, and $1,108,000 for the years ended December 31, 2019, 2018, and 2017, respectively.