Annual report pursuant to Section 13 and 15(d)

EMPLOYEE BENEFIT PLANS

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EMPLOYEE BENEFIT PLANS
12 Months Ended
Dec. 31, 2019
Compensation and Retirement Disclosure [Abstract]  
EMPLOYEE BENEFIT PLANS

Note 13

EMPLOYEE BENEFIT PLANS

Pension Plan

The Company sponsors a noncontributory pension plan covering substantially all of its associates.  Benefits under this plan generally are based on the associate's total years of service and average of the five highest years of compensation during the ten years immediately preceding their departure.  The Company’s general funding policy is to contribute amounts sufficient to meet minimum funding requirements as set by law and to ensure deductibility for federal income tax purposes. On December 30, 2019, the plan was amended to remove plan eligibility for new associates hired after December 31, 2019.

The following table details on a consolidated basis the changes in benefit obligation, changes in plan assets, the funded status of the plan, components of pension expense, amounts recognized in the Company's consolidated statements of financial condition, and major assumptions used to determine these amounts.

(Dollars in Thousands) 2019 2018 2017
Change in Projected Benefit Obligation:
Benefit Obligation at Beginning of Year $ 149,347 $ 165,084 $ 152,585
Service Cost 6,114 6,884 6,752
Interest Cost 6,178 5,661 5,750
Actuarial Loss (Gain) 25,715 (16,349) 10,877
Benefits Paid (6,255) (11,686) (10,541)
Expenses Paid (269) (247) (339)
Projected Benefit Obligation at End of Year $ 180,830 $ 149,347 $ 165,084
Change in Plan Assets:
Fair Value of Plan Assets at Beginning of Year $ 134,535 $ 129,719 $ 113,813
Actual Return (Loss) on Plan Assets 28,635 (6,251) 16,786
Employer Contributions 5,000 23,000 10,000
Benefits Paid (6,255) (11,686) (10,541)
Expenses Paid (269) (247) (339)
Fair Value of Plan Assets at End of Year $ 161,646 $ 134,535 $ 129,719
Funded Status of Plan and Accrued Liability Recognized at End of Year:
Other Liabilities $ 19,184 $ 14,812 $ 35,365
Accumulated Benefit Obligation at End of Year $ 156,327 $ 130,477 $ 144,139
Components of Net Periodic Benefit Costs:
Service Cost $ 6,114 $ 6,884 $ 6,752
Interest Cost 6,178 5,661 5,750
Expected Return on Plan Assets (9,527) (9,564) (8,026)
Amortization of Prior Service Costs 15 199 223
Net Loss Amortization 3,862 3,673 3,812
Net Periodic Benefit Cost $ 6,642 $ 6,853 $ 8,511
Weighted-Average Assumptions Used to Determine Benefit Obligation:
Discount Rate 3.53% 4.43% 3.71%
Rate of Compensation Increase(1) 4.00% 4.00% 3.25%
Measurement Date 12/31/19 12/31/18 12/31/17
Weighted-Average Assumptions Used to Determine Benefit Cost:
Discount Rate 4.43% 3.71% 4.21%
Expected Return on Plan Assets 7.25% 7.25% 7.25%
Rate of Compensation Increase(1) 4.00% 3.25% 3.25%
Amortization Amounts from Accumulated Other Comprehensive Income:
Net Actuarial Loss (Gain) $ 6,606 $ (533) $ 2,117
Prior Service Cost (15) (199) (223)
Net Loss (3,862) (3,673) (3,812)
Deferred Tax (Benefit) Expense (694) 1,118 5,898
Other Comprehensive Loss (Gain), net of tax $ 2,035 $ (3,287) $ 3,980
Amounts Recognized in Accumulated Other Comprehensive Income:
Net Actuarial Losses $ 37,235 $ 34,491 $ 38,698
Prior Service Cost 50 66 265
Deferred Tax Benefit (9,451) (8,757) (9,876)
Accumulated Other Comprehensive Loss, net of tax $ 27,834 $ 25,800 $ 29,087
(1) Effective 12/31/18, the Company utilized an age-graded approach that varies the rate based on the age of the participants.

The service cost component of net periodic benefit cost is reflected in compensation expense in the accompanying statements of income. The other components of net periodic cost are included in “other” within the noninterest expense category in the statements of income. See Note 1 – Significant Accounting Policies for additional information.

The Company expects to recognize $4.1 million of the net actuarial loss reflected in accumulated other comprehensive income at December 31, 2019 as a component of net periodic benefit cost during 2020.

Plan Assets. The Company’s pension plan asset allocation at December 31, 2019 and 2018, and the target asset allocation for 2020 are as follows:

Target Percentage of Plan
Allocation Assets at December 31(1)
2020 2019 2018
Equity Securities 65 % 72 % 67 %
Debt Securities 30 % 19 % 21 %
Cash and Cash Equivalents 5 % 9 % 12 %
Total 100 % 100 % 100 %

(1) Represents asset allocation at December 31 which may differ from the average target allocation for the year due to the year-end cash contribution to the plan.

The Company’s pension plan assets are overseen by the CCBG Retirement Committee.  Capital City Trust Company acts as the investment manager for the plan.  The investment strategy is to maximize return on investments while minimizing risk.  The Company believes the best way to accomplish this goal is to take a conservative approach to its investment strategy by investing in mutual funds that include various high-grade equity securities and investment-grade debt issuances with varying investment strategies. The target asset allocation will periodically be adjusted based on market conditions and will operate within the following investment policy statement allocation ranges: equity securities ranging from 55% and 81%, debt securities ranging from 17% and 37%, and cash and cash equivalents ranging from 0% and 10%. The overall expected long-term rate of return on assets is a weighted-average expectation for the return on plan assets.  The Company considers historical performance data and economic/financial data to arrive at expected long-term rates of return for each asset category.

The major categories of assets in the Company’s pension plan at December 31 are presented in the following table. Assets are segregated by the level of the valuation inputs within the fair value hierarchy established by ASC Topic 820 utilized to measure fair value (see Note 20 – Fair Value Measurements).

(Dollars in Thousands) 2019 2018
Level 1:
U.S. Treasury Securities $ 907 $ 398
Mutual Funds 142,127 $ 112,131
Cash and Cash Equivalents 13,943 16,788
Level 2:
U.S. Government Agency 2,078 2,822
Corporate Notes/Bonds 2,591 2,396
Total Fair Value of Plan Assets $ 161,646 $ 134,535

Expected Benefit Payments. At December 31, expected benefit payments related to the defined benefit pension plan were as follows:
(Dollars in Thousands) 2019
2020 $ 14,230
2021 13,551
2022 13,268
2023 13,089
2024 13,216
2025 through 2029 57,999
Total $ 125,353

Contributions.  The following table details the amounts contributed to the pension plan in 2019 and 2018, and the expected amount to be contributed in 2020.

Expected
Contribution
(Dollars in Thousands) 2018 2019 2020(1)
Actual Contributions $ 23,000 $ 5,000 $ 5,000

(1) For 2020, the Company will have the option to make a cash contribution to the plan or utilize pre-funding balances.

Supplemental Executive Retirement Plan

The Company has a Supplemental Executive Retirement Plan (“SERP) covering selected executive officers.  Benefits under this plan generally are based on the same service and compensation as used for the pension plan, except the benefits are calculated without regard to the limits set by the Internal Revenue Code on compensation and benefits.  The net benefit payable from the SERP is the difference between this gross benefit and the benefit payable by the pension plan.

The following table details on a consolidated basis the changes in benefit obligation, the funded status of the plan, components of pension expense, amounts recognized in the Company's consolidated statements of financial condition, and major assumptions used to determine these amounts.

(Dollars in Thousands) 2019 2018 2017
Change in Projected Benefit Obligation:
Benefit Obligation at Beginning of Year $ 8,860 $ 7,285 $ 5,741
Interest Cost 349 227 191
Actuarial Loss 1,035 1,348 1,353
Projected Benefit Obligation at End of Year $ 10,244 $ 8,860 $ 7,285
Funded Status of Plan and Accrued Liability Recognized at End of Year:
Other Liabilities $ 10,244 $ 8,860 $ 7,285
Accumulated Benefit Obligation at End of Year $ 8,778 $ 7,557 $ 6,485
Components of Net Periodic Benefit Costs:
Interest Cost 349 227 191
Net Loss Amortization 761 1,626 597
Net Periodic Benefit Cost $ 1,110 $ 1,853 $ 788
Weighted-Average Assumptions Used to Determine Benefit Obligation:
Discount Rate 3.16% 4.23% 3.53%
Rate of Compensation Increase(1) 4.00% 4.00% 3.25%
Measurement Date 12/31/19 12/31/18 12/31/17
Weighted-Average Assumptions Used to Determine Benefit Cost:
Discount Rate 4.23% 3.53% 3.92%
Rate of Compensation Increase(1) 3.50% 3.25% 3.25%
Amortization Amounts from Accumulated Other Comprehensive Income:
Net Actuarial Loss $ 1,035 $ 1,348 $ 1,353
Net Loss (761) (1,626) (597)
Deferred Tax (Benefit) Expense (70) 71 (77)
Other Comprehensive Loss (Gain), net of tax $ 204 $ (207) $ 679
Amounts Recognized in Accumulated Other Comprehensive Income:
Net Actuarial Loss $ 1,622 $ 1,348 $ 1,626
Deferred Tax Benefit (411) (341) (412)
Accumulated Other Comprehensive Loss, net of tax $ 1,211 $ 1,007 $ 1,214
(1) Effective 12/31/2018, the Company utilized an age-graded approach that varies the rate based on the age of the participants.

The Company expects to recognize approximately $1.0 million of the net actuarial loss reflected in accumulated other comprehensive income at December 31, 2019 as a component of net periodic benefit cost during 2020.

Expected Benefit Payments. As of December 31, expected benefit payments related to the SERP were as follows:

(Dollars in Thousands) 2019
2020 $ 4,059
2021 2,618
2022 2,478
2023 1,419
2024 211
2025 through 2029 -
Total $ 10,785

401(k) Plan

The Company has a 401(k) Plan which enables associates to defer a portion of their salary on a pre-tax basis.  The plan covers substantially all associates of the Company who meet minimum age requirements.  The plan is designed to enable participants to contribute any amount, up to the maximum annual limit allowed by the IRS, of their compensation withheld in any plan year placed in the 401(k) Plan trust account. Matching contributions of 50% from the Company are made up to 6% of the participant's compensation for eligible associates. Further, in addition to the 50% match, all associates hired after December 31, 2019 will receive annually a contribution by the Company equal to 3% of their compensation. For 2019, the Company made annual matching contributions of $0.7 million. For 2017 and 2018, the Company made annual matching contributions of $0.6 million. The participant may choose to invest their contributions into thirty-three investment options available to 401(k) participants, including the Company’s common stock.  A total of 50,000 shares of CCBG common stock have been reserved for issuance.  Shares issued to participants have historically been purchased in the open market.

Other Plans

The Company has a Dividend Reinvestment and Optional Stock Purchase Plan.  A total of 250,000 shares have been reserved for issuance.  In recent years, shares for the Dividend Reinvestment and Optional Stock Purchase Plan have been acquired in the open market and, thus, the Company did not issue any shares under this plan in 2019, 2018 and 2017.