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. These non-qualified benefit plans are not offered to new participants; all current participants are now retired. 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. This plan provides a fixed cost subsidy that is not dependent on medical inflation. Therefore, health care cost trend rates do not have an effect on the amounts reported for this plan. 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, 2015, 2014 and 2013 was $1.0 million, $836 thousand, and $765 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; all current participants are now retired. Expense recorded by the Corporation for the SNQPP for the years ended December 31, 2015 and 2013 was $285 thousand and $661 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)	2015			2014			2015			2014
Change in benefit obligation:
Benefit obligation at beginning of year	$	51,390		$	39,593		$	2,896		$	2,330
Service cost	756			528			59			75
Interest cost	1,953			1,900			110			128
Actuarial loss (gain)	(1,915		)	11,462			(141		)	455
Benefits paid	(2,374		)	(2,093		)	(90		)	(92		)
Benefit obligation at end of year	$	49,810		$	51,390		$	2,834		$	2,896

Change in plan assets:
Fair value of plan assets at beginning of year	$	41,437		$	40,547		$	—		$	—
Actual return on plan assets	246			2,821			—			—
Benefits paid	(2,374		)	(2,093		)	(90		)	(92		)
Employer contribution and non-qualified benefit payments	2,181			162			90			92
Fair value of plan assets at end of year	$	41,490		$	41,437		$	—		$	—
Funded status	(8,320		)	(9,953		)	(2,834		)	(2,896		)
Unrecognized net actuarial loss	24,628			25,010			756			950
Unrecognized prior service costs	(1,029		)	(1,309		)	—			—
Net amount recognized	$	15,279		$	13,748		$	(2,078	)	$	(1,946	)

Information for the pension plan with an accumulated benefit obligation in excess of the fair value of plan assets is shown below.



	At December 31,
(Dollars in thousands)	2015		2014
Projected benefit obligation	$	47,543	$	48,928
Accumulated benefit obligation	44,125		45,003
Fair value of plan assets	41,490		41,437

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



	Retirement Plans									Other Post Retirement Benefits
(Dollars in thousands)	2015			2014			2013			2015		2014			2013
Service cost	$	756		$	528		$	621		$	59	$	75		$	86
Interest cost	1,953			1,900			1,712			110		128			118
Expected return on plan assets	(3,100		)	(2,929		)	(2,527		)	—		—			—
Amortization of net actuarial loss	1,308			649			1,259			54		17			23
Accretion of prior service cost	(280		)	(281		)	(235		)	—		(7		)	(20		)
Net periodic benefit cost (income)	$	637		$	(133	)	$	830		$	223	$	213		$	207



(Dollars in thousands)	Retirement Plans			Other Postretirement Benefits
Expected amortization expense for 2016:
Amortization of net actuarial loss	$	1,389		$	204
Accretion of prior service cost	(282		)	—

During 2016, the Corporation expects to contribute approximately $160 thousand to the Retirement Plans and approximately $117 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:
2016	$	2,470	$	117
2017	2,512		119
2018	2,543		122
2019	2,589		127
2020	2,590		132
Years 2021-2025	13,859		746

Weighted-average assumptions used to determine benefit obligations at December 31, 2015 and 2014 were as follows:



	Retirement Plans				Other Postretirement Benefits
	2015		2014		2015		2014
Assumed discount rate	4.3	%	3.9	%	4.3	%	3.9	%
Assumed salary increase rate	3.0		3.0		—		—

The benefit obligation for all plans at December 31, 2015 and 2014 was based on the RP-2014 mortality table using the most recent projection scales published by the Society of Actuaries. The adoption of the updated projection scale for 2015 and the increase in the discount rate decreased the benefit obligation for all plans at December 31, 2015.

Weighted-average assumptions used to determine net periodic costs for the years ended December 31, 2015 and 2014 were as follows. 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.



	Retirement Plans				Other Postretirement Benefits
	2015		2014		2015		2014
Assumed discount rate	3.9	%	4.9	%	3.9	%	4.9	%
Assumed long-term rate of investment return	7.5		7.5		—		—
Assumed salary increase rate	3.0		3.0		—		—

The Corporation's pension plan asset allocation at December 31, 2015 and 2014, by asset category was as follows:



	Percentage of Plan Assets at December 31,
	2015		2014
Asset Category:
Equity securities	59	%	65	%
Debt securities	40		34
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)	2015		2014
Level 1:
Mutual funds:
U.S. Large Cap	$	15,901	$	17,482
U.S. Mid Cap	1,865		2,218
U.S. Small Cap	1,876		2,290
International	4,499		4,961
Income	1,409		972
Short-term investments	622		585
Level 2:
U.S. government obligations	4,811		3,273
Corporate bonds	5,752		5,621
Level 3:
Certificates of deposit	4,755		4,035
Total fair value of plan assets	$	41,490	$	41,437

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, 2015 and 2014:



(Dollars in thousands)	Balance at December 31, 2014		Total Unrealized (Losses) or Gains		Total Realized Gains or (Losses)		Purchases		Maturities/ Redemptions			Balance at December 31, 2015
Certificates of deposit	$	4,035	$	—	$	—	$	1,805	$	(1,085	)	$	4,755
Total Level 3 assets	$	4,035	$	—	$	—	$	1,805	$	(1,085	)	$	4,755

(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