Retirement Plans and Other Postretirement Benefits

Substantially all employees who were hired before December 8, 2009 are covered by a noncontributory retirement plan. Employees hired on or after December 8, 2009 are not eligible to participate in the noncontributory retirement plan. The Corporation also provides supplemental retirement benefits to certain former executives, a portion of which is in excess of limits imposed on qualified plans by federal tax law. These plans are non-qualified benefit plans. Information on these plans are aggregated and reported under “Retirement Plans” within this footnote.

The Corporation also provides certain postretirement healthcare and life insurance benefits for retired employees. Information on these benefits is reported under “Other Postretirement Benefits” within this footnote.

The Corporation sponsors a 401(k) deferred salary savings plan, which is a qualified defined contribution plan, and which covers all employees of the Corporation and its subsidiaries, and provides that the Corporation makes matching contributions as defined by the plan. Expense recorded by the Corporation for the 401(k) deferred salary savings plan for the years ended December 31, 2014, 2013 and 2012 was $836 thousand, $765 thousand, and $667 thousand, respectively.

The Corporation sponsors a Supplemental Non-Qualified Pension Plan (SNQPP) which was established in 1981 prior to the existence of a 401(k) deferred salary savings plan, employee stock purchase plan and long-term incentive plans and therefore is not offered to new participants. Expense recorded by the Corporation for the SNQPP for the years ended December 31, 2013 and 2012 was $661 thousand and $531 thousand, respectively. The Corporation recognized income in 2014 of $44 thousand primarily due to an increase in the weighted average discount rate from 4.0% for 2013 to 4.9% for 2014.

Information with respect to the Retirement Plans and Other Postretirement Benefits follows:



	Retirement Plans						Other Postretirement Benefits
(Dollars in thousands)	2014			2013			2014			2013
Change in benefit obligation:
Benefit obligation at beginning of year	$	39,593		$	42,879		$	2,330		$	2,518
Service cost	528			621			75			86
Interest cost	1,900			1,712			128			118
Actuarial loss (gain)	11,462			(3,818		)	455			(313		)
Benefits paid	(2,093		)	(1,801		)	(92		)	(79		)
Benefit obligation at end of year	$	51,390		$	39,593		$	2,896		$	2,330

Change in plan assets:
Fair value of plan assets at beginning of year	$	40,547		$	34,420		$	—		$	—
Actual return on plan assets	2,821			5,764			—			—
Benefits paid	(2,093		)	(1,801		)	(92		)	(79		)
Employer contribution and non-qualified benefit payments	162			2,164			92			79
Fair value of plan assets at end of year	$	41,437		$	40,547		$	—		$	—
Funded status	(9,953		)	954			(2,896		)	(2,330		)
Unrecognized net actuarial loss	25,010			14,138			950			510
Unrecognized prior service costs	(1,309		)	(1,590		)	—			(7		)
Net amount recognized	$	13,748		$	13,502		$	(1,946	)	$	(1,827	)

Information for the pension plans with an accumulated benefit obligation in excess of the fair value of plan assets is shown below. The accumulated benefit obligation did not exceed the fair value of plan assets at December 31, 2013 but is shown for comparative purposes.



	At December 31,
(Dollars in thousands)	2014		2013
Projected benefit obligation	$	48,928	$	37,912
Accumulated benefit obligation	45,003		36,683
Fair value of plan assets	41,437		40,547

Components of net periodic benefit cost (income) were as follows:



	Retirement Plans									Other Post Retirement Benefits
(Dollars in thousands)	2014			2013			2012			2014			2013			2012
Service cost	$	528		$	621		$	622		$	75		$	86		$	82
Interest cost	1,900			1,712			1,726			128			118			116
Expected return on plan assets	(2,929		)	(2,527		)	(2,254		)	—			—			—
Amortization of net actuarial loss	649			1,259			1,147			17			23			23
Accretion of prior service cost	(281		)	(235		)	(235		)	(7		)	(20		)	(20		)
Net periodic benefit (income) cost	$	(133	)	$	830		$	1,006		$	213		$	207		$	201



(Dollars in thousands)	Retirement Plans			Other Postretirement Benefits
Expected amortization expense for 2015:
Amortization of net actuarial loss	$	1,308		$	54
Accretion of prior service cost	(280		)	—

During 2015, the Corporation expects to contribute approximately $166 thousand to the Retirement Plans and approximately $113 thousand to Other Postretirement Benefits.

The following benefits payments, which reflect expected future service, as appropriate, are expected to be paid:



(Dollars in thousands)	Retirement Plans		Other Postretirement Benefits
For the fiscal year ending:
2015	$	2,390	$	113
2016	2,429		116
2017	2,463		121
2018	2,514		126
2019	2,572		130
Years 2020-2024	13,533		700

Weighted-average assumptions used to determine benefit obligations at December 31, 2014 and 2013 were as follows:



	Retirement Plans				Other Postretirement Benefits
	2014		2013		2014		2013
Assumed discount rate	3.9	%	4.9	%	3.9	%	4.9	%
Assumed salary increase rate	3.0		3.0		—		—

The benefit obligation for all plans at December 31, 2014 included the application of a new mortality assumption based on the most recent study by the Society of Actuaries. The adoption of the new RP-2014 mortality table increased the average life expectancy of plan participants by 2 years. The decrease in the discount rate and the adoption of the new mortality assumption increased the benefit obligation for all plans at December 31, 2014.

Weighted-average assumptions used to determine net periodic costs for the years ended December 31, 2014 and 2013 were as follows:



	Retirement Plans				Other Postretirement Benefits
	2014		2013		2014		2013
Assumed discount rate	4.9	%	4.0	%	4.9	%	4.0	%
Assumed long-term rate of investment return	7.5		7.5		—		—
Assumed salary increase rate	3.0		3.0		—		—

The discount rate was determined utilizing the Citigroup Pension Discount Curve. Historical investment returns is the basis used to determine the overall expected long-term rate of return on assets.



Assumed Health Care Cost Trend Rates	2014		2013		2012
Health care cost trend rate assumed for next year	6.0	%	6.5	%	6.5	%
Rate to which the cost trend rate is assumed to decline	5.0		5.0		5.0
Year that the rate reaches the ultimate rate	2016		2015		2014

Assumed health care cost trend rates have a significant effect on the amounts reported for health care plans. A one-percentage-point change in the assumed health care cost trend rates would have the following effects:



	One Percentage Point
(Dollars in thousands)	Increase		Decrease
Effect on total of service and interest cost components	$	10	$	(10	)
Effect on postretirement benefit obligation	114		(101		)

The Corporation's pension plan asset allocation at December 31, 2014 and 2013, by asset category was as follows:



	Percentage of Plan Assets at December 31,
	2014		2013
Asset Category:
Equity securities	65	%	64	%
Debt securities	34		35
Other	1		1
Total	100	%	100	%

Plan assets include marketable equity securities, corporate and government debt securities, and certificates of deposit. The investment strategy is to keep a 60%-equity-to-40%-fixed-income mix to achieve the overall expected long-term rate of return of 7.5%. Equity securities do not include any common stock of the Corporation.

The major categories of assets in the Corporation’s pension plan at year-end are presented in the following table. Assets are segregated by the level of the valuation inputs within the fair value hierarchy described in Note 18, “Fair Value Disclosures.”



	Fair Value Measurements at December 31,
(Dollars in thousands)	2014		2013
Level 1:
Mutual funds:
U.S. Large Cap	17,482		16,710
U.S. Mid Cap	2,218		2,169
U.S. Small Cap	2,290		2,341
International	4,961		4,634
Income	972		686
Short-term investments	585		650
Level 2:
U.S. governement obligations	3,273		3,790
Corporate bonds	5,621		5,228
Level 3:
Certificates of deposit	4,035		4,339
Total fair value of plan assets	$	41,437	$	40,547

Mutual fund investments in U.S. large cap funds are comprised primarily of common stock funds which are diversified amongst various industries including basic materials (oil, gas, and other), financial services, healthcare, technology and other industries with some foreign exposure in the companies’ markets. The primary objective is long-term capital appreciation with a secondary objective of current income. Mutual fund investments in U.S. mid cap and small cap funds are comprised mainly of growth and value equity funds with some foreign exposure in the companies’ markets. Mutual fund investments in international funds consist mainly of equity funds that invest in diverse companies mostly based in Europe and the Pacific Basin with the primary objective to provide long-term growth of capital with a secondary objective of current income. Mutual fund investments in income funds are comprised of short-term and intermediate-term bond funds. Corporate bonds are fixed income investment grade bonds of primarily U.S. issuers from diverse industries. Other fixed-income investments include U.S. government agency securities and bank certificates of deposits. The fixed income investments have varying maturities ranging from one to ten years with the objective to maximize investment return while preserving investment principal. Short-term investments are comprised of an interest-bearing money market deposit account with the Bank.

The following table provides a reconciliation of the beginning and ending balances for measurements in hierarchy Level 3 at December 31, 2014 and 2013:



(Dollars in thousands)	Balance at December 31, 2013		Total Unrealized (Losses) or Gains		Total Realized Gains or (Losses)		Purchases		Maturities/ Redemptions			Balance at December 31, 2014
Certificates of deposit	$	4,339	$	—	$	—	$	595	$	(899	)	$	4,035
Total Level 3 assets	$	4,339	$	—	$	—	$	595	$	(899	)	$	4,035

(Dollars in thousands)	Balance at December 31, 2012		Total Unrealized (Losses) or Gains		Total Realized Gains or (Losses)		Purchases		Maturities/ Redemptions			Balance at December 31, 2013
Certificates of deposit	$	4,503	$	—	$	—	$	280	$	(444	)	$	4,339
Total Level 3 assets	$	4,503	$	—	$	—	$	280	$	(444	)	$	4,339