Annual Report 2018 - Page 35

Retiree Medical Plans: District employers also provide certain health insurance benefits to eligible retired employees according to the terms of the benefit plans. The anticipated costs of these benefits are accrued during the period of the employee’s active status. Retiree Medical Plan Information (in thousands) For the year ended December 31 2018 2017 2016 Postretirement benefit (income) expense Our cash contributions ($45) 143 $109 131 $143 149 The 2018 postretirement benefit income is due to an actuarial gain. Postretirement benefit (income) expense is included in “Salaries and employee benefits” in the Consolidated Statements of Income. Our cash contributions are equal to the benefits paid. Defined Contribution Plans We participate in a District-wide defined contribution plan. For employees hired before January 1, 2007, employee contributions are matched dollar for dollar up to 2.0% and 50 cents on the dollar on the next 4.0% on both pre-tax and post-tax contributions. The maximum employer match is 4.0%. For employees hired after December 31, 2006, we contribute 3.0% of the employee’s compensation and will match employee contributions dollar for dollar up to a maximum of 6.0% on both pre-tax and post-tax contributions. The maximum employer contribution is 9.0%. We also participate in a District-wide Nonqualified Deferred Compensation Plan. Eligible participants must meet one of the following criteria: certain salary thresholds as determined by the IRS, are either a Chief Executive Officer or President of a participating employer, or have previously elected pre- tax deferrals in 2006 under predecessor nonqualified deferred compensation plans. Under this plan the employee may defer a portion of his/her salary, bonus, and other compensation. Additionally, the plan provides for supplemental employer matching contributions related to any compensation deferred by the employee that would have been eligible for a matching contribution under the defined contribution plan if it were not for certain IRS limitations. Employer contribution expenses for the defined contribution plan, included in “Salaries and employee benefits” in the Consolidated Statements of Income, were $1.3 million, $1.3 million, and $1.2 million in 2018, 2017, and 2016, respectively. These expenses were equal to our cash contributions for each year. NOTE 10: RELATED PARTY TRANSACTIONS In the ordinary course of business, we may enter into loan transactions with our officers, directors, their immediate family members, and other organizations with which such persons may be associated. Such transactions may be subject to special approval requirements contained in the FCA Regulations and are made on the same terms, including interest rates, amortization schedules, and collateral, as those prevailing at the time for comparable transactions with other persons. In our opinion, none of these loans outstanding at December 31, 2018, involved more than a normal risk of collectability. Related Party Loans Information (in thousands) As of December 31 Total related party loans For the year ended December 31 Advances to related parties Repayments by related parties 2018 2017 2016 $17,149 $16,061 $13,930 2018 2017 2016 $11,934 10,935 $10,541 8,721 $9,118 8,543 The related parties can be different each year end primarily due to changes in the composition of the Board of Directors and the mix of organizations with which such persons may be associated. Advances and repayments on loans in the preceding chart are related to those considered related parties at year end. As discussed in Note 6, we borrow from AgriBank, in the form of a line of credit, to fund our loan portfolio. All interest expense as shown on the Consolidated Statements of Income was paid to AgriBank. Total patronage received from AgriBank was $20.7 million, $19.2 million, and $13.4 million in 2018, 2017, and 2016, respectively. Refer to Note 3 for information on participations sold to AgriBank and Note 4 for stock investment in AgriBank information. We purchase various services from AgriBank, including SunStream Business Services, a division of AgriBank FCB. The services include certain financial and retail systems, financial reporting services, tax reporting services, technology services, and insurance services. The total cost of services we purchased from AgriBank was $1.3 million, $1.2 million, and $1.2 million in 2018, 2017, and 2016, respectively. We also purchase human resource information systems, benefit, payroll, and workforce management services from Farm Credit Foundations (Foundations). As of December 31, 2018, 2017, and 2016, our investment in Foundations was $32 thousand. The total cost of services purchased from Foundations was $195 thousand, $187 thousand, and $197 thousand in 2018, 2017, and 2016, respectively. NOTE 11: CONTINGENCIES AND COMMITMENTS In the normal course of business, we have various contingent liabilities and commitments outstanding, which may not be reflected in the Consolidated Financial Statements. We do not anticipate any material losses because of these contingencies or commitments. We may be named as a defendant in certain lawsuits or legal actions in the normal course of business. At the date of these Consolidated Financial Statements, our management team was not aware of any material actions. However, management cannot ensure that such actions or other contingencies will not arise in the future. We have commitments to extend credit and letters of credit to satisfy the financing needs of our borrowers. These financial instruments involve, to varying degrees, elements of credit risk that may be recognized in the financial statements. Commitments to extend credit are agreements to lend to a borrower as 32