Employee Benefit Plans

12 Months Ended

Dec. 31, 2013

Employee Benefit Plans

Employee Benefit Plans

Note 14: Employee Benefit Plans

Pension and Other Post-Retirement Benefit Plans

The Company has a frozen noncontributory defined benefit pension plan covering all employees who met the eligibility requirements prior to December 31, 2003. Compensation and service accruals were frozen at the same date. The Company’s funding policy is to make the minimum annual contribution that is required by applicable regulations, plus such amounts as the Company may determine to be appropriate from time to time.

The Company expects to contribute approximately $175,000 to the plan in fiscal 2014.

The Company uses a December 31 measurement date for the plan. Information about the plan’s funded status and pension cost follows:

	2013			2012
	(In thousands)
Change in benefit obligation
Beginning of year	$	1,912		$	1,697
Interest cost		77			74
Actuarial (gain) loss		(258	)		162
Benefits paid		(34	)		(21	)
Settlements		(109	)		—
End of year		1,588			1,912
Change in fair value of plan assets
Beginning of year		1,192			1,020
Actuarial return on plan assets		192			91
Employer contribution		190			102
Benefits paid		(34	)		(21	)
Settlements		(109	)		—
End of year		1,431			1,192
Funded status at end of year	$	(157	)	$	(720	)

Amounts recognized in accumulated other comprehensive income not yet recognized as components of net periodic benefit cost consist of the following at December 31, 2013 and 2012:

	2013			2012
	(In thousands)
Net loss	$	(609	)	$	(1,096	)

The estimated net loss for the defined benefit pension plan that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year is approximately $44,000.

The accumulated benefit obligation for the defined benefit pension plan was $1.6 million and $1.9 million at December 31, 2013 and 2012, respectively.

	2013			2012
	(In thousands)
Components of net periodic benefit cost
Interest cost	$	77		$	74
Expected return on plan assets		(73	)		(60	)
Settlement charge		31
Amortization of net loss		78			62
Net periodic benefit cost	$	113		$	76

Plan assets are held by a bank-administered trust fund, which invests the plan assets in accordance with the provisions of the plan agreement. The plan agreement permits investment in mutual funds that may invest in common stocks, corporate bonds and debentures, U.S. Government securities, certain insurance contracts, real estate and other specified investments, based on certain target allocation percentages.

Asset allocation is primarily based on a strategy to provide stable earnings while still permitting the plan to recognize potentially higher returns through an investment in equity securities. The target asset allocation percentages for 2013 are as follows:

SMID-Cap stocks	30-70%
Fixed income investments	30-70%
Cash	0-15%

At December 31, 2013 and 2012, the fair value of plan assets as a percentage of the total was invested in the following:

	2013			2012
Equity securities		64	%		64	%
Debt securities		31			19
Cash and cash equivalents		5			17
		100	%		100	%

The cash composition exceeded the target allocation caused by a cash contribution late in December 2013.

Benefit payments expected to be paid from the plan as of December 31, 2013 are as follows:

	(In thousands)
2014	$	53
2015		56
2016		64
2017		71
2018		81
Thereafter		523
	$	848

Significant assumptions include the following as of December 31, 2013 and 2012:

	Pension Benefits
	2013		2012
Weighted-average assumptions used to determine benefit obligation:
Discount rate		4.95%		4.05%
Rate of compensation increase (frozen)		N/A		N/A
Weighted-average assumptions used to determine benefit cost:
Discount rate		4.05%		4.40%
Expected return on plan assets		6.00%		6.00%
Rate of compensation increase (frozen)		N/A		N/A

The Company has estimated the long-term rate of return on plan assets based primarily on historical returns on plan assets, adjusted for changes in target portfolio allocations and recent changes in long-term interest rates based on publicly available information.

The fair value of the Company’s pension plan assets at December 31, 2013, and 2012 by asset category are as follows:

December 31, 2013			Fair Value Measurements Using
Asset Category	Total Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Mutual funds-Equity	(In thousands)
Large Cap Value (a)	$	84	$	84	$	—	$	—
Large Cap Core (b)		112		112		—		—
Mid Cap Core (c)		105		105		—		—
Small-Cap Core (d)		53		53		—		—
Int’l Core (e)		253		253		—		—
Large Cap Growth (f)		169		169		—		—
Small/Midcap Growth (g)		52		52		—		—
Mutual funds-Fixed Income
Fixed Income- US Core (h)		149		149		—		—
Intermediate Duration (i)		297		297		—		—
Common/Collective Trusts-Equity
Large Cap Value (j)		84		—		84		—
Cash
Money Market		73		73		—		—
Total	$	1,431	$	1,347	$	84	$	—

(a)This category consists of a mutual fund holding 100 - 160 stocks, designed to track and outperform the Russell 1000 Value Index.

(b)This category contains stocks of the S&P 500 Index. The Stocks are maintained in approximately the same weightings as the index.

(c)This category contains stocks of the MSCI U. S. Mid Cap 450 Index. The stocks are maintained in approximately the same weightings as the index.

(d) This category consists of 400 or more small and micro-cap companies, with as much as 25% invested in non-U.S. equities.

(e) This category consists of investments with long-term growth potential located primarily in Europe, the Pacific Basin, and other developed and emerging countries.

(f)This category consists of two mutual funds, one of which invests primarily of large U.S. – based growth companies, the other in fast-growing large cap growth companies with sustainable franchises and positive price momentum.

(g)This category seeks capital appreciation through investments in common stock of small capitalization companies, defined as those with a total market value of no more than $2 billion at the time the fund first invests in them.

(h)This category consists of a passively managed portfolio modeled after the Barclays Capital US Aggregate Float Adjusted Index. The fund invests in Treasury, Agency, corporate, mortgage-backed securities, maintaining a dollar-weighted maturity ranging between 5 and 10 years.

(i)This category consists of a pair of mutual funds which invest in diversified high quality bonds and other fixed income securities, including U.S. Government obligations, mortgage- related and asset-backed securities, corporate and municipal bonds, CMOs, and other securities mostly rated A or better.

(j)This category contains large-cap stocks with above-average yield. The portfolio typically holds between 60-70 stocks.

December 31, 2012			Fair Value Measurements Using
Asset Category	Total Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In thousands)
Mutual funds-Equity
Mid Cap Blend (a)	$	38	$	38	$	—	$	—
Large Cap Value (b)		25		25		—		—
Int’l Large Cap Blend (c)		106		106		—		—
Huntington Disciplined
Equity Fd Tr Shrs II (d)		64		64		—		—
Alernative Stability (e)		24		24		—		—
Mid Cap Blend (f)		56		56		—		—
Natural Resources  (g)		41		41		—		—
Mutual funds-Fixed Income
Short-Term Bond (h)		63		63		—		—
Cash
Cash Mgm’t Funds-Taxable		198		198		—		—
Cash Receivable		3		3		—		—
Fixed Income Securities
US Government Obligations		65		65		—		—
Corporate Obligations		159		159		—		—
Equity Securities
Common Stock		331		331		—		—
Common Stock-Foreign		19		19		—		—
Total	$	1,192	$	1,192	$	—	$	—

(a)This category seeks long-term capital appreciation by investing primarily in equity securities of mid-cap companies.

(b)This category contains primarily companies which seek total return on investment, with dividend income as an important component of that return.

(c)This category seeks total return by investing in equities of large cap international companies. The focus of the category’s investments is in companies that have demonstrated the ability to grow the value of the enterprise at a higher rate than the cost of capital.

(d) This category contains primarily companies which seek total return on investment, investing in equity securities, which include put and call options on individual securities and stock indices.

(e) This category seeks total return on investment by investing in equities of companies domiciled in emerging markets.

(f)This category pursues primarily mid cap companies with goals of long-term capital appreciation. It invests in a strategic combination of U.S. and foreign companies whose situs, or geographical locations, gives them a competitive advantage and the potential to outperform.

(g)This category’s objective is to reduce risk related to inflation and diversify into investments which are less correlated to U.S. stocks and bonds.

(h)This category’s objective is to invest in high quality corporate bonds, U.S. Treasuries and government agencies to increase income without assuming a great deal of risk.

Also, the Company provides post-retirement benefits to certain officers of the Company under split-dollar life insurance policies. The Company accounts for the policies in accordance with ASC 715-60, which requires companies to recognize a liability and related compensation costs for endorsement split-dollar life insurance policies that provide a benefit to an employee extending to post-retirement periods. The liability is recognized based on the substantive agreement with the employee.

The Company uses a December 31 measurement date for the plan. Information about the plan’s funded status and pension cost follows:

	2013			2012
	(In thousands)
Change in benefit obligation
Beginning of year	$	693		$	396
Service cost		24			25
Interest cost		32			27
(Gain)/Loss		(53	)		121
Prior service cost		—			137
Benefits Paid		(15	)		(13	)
End of year	$	681		$	693

Amounts recognized in accumulated other comprehensive income not yet recognized as components of net periodic benefit cost consist of:

	2013			2012
	(In thousands)
Prior service cost	$	(14	)	$	(125	)
Net (gain)loss		(44	)		(121	)

The accumulated benefit obligation for the split-dollar benefit plan was $681,000 and $693,000 at December 31, 2013 and 2012, respectively.

The estimated net loss for the split-dollar plan that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year is approximately $(24,000).

	2013		2012
	(In thousands)
Components of net periodic benefit cost
Service cost	$	24	$	24
Interest cost		32		27
(Gain)/Loss recognized		121		—
Prior service cost		14		12
Net periodic benefit cost	$	191	$	63

The retiree accrued liability expected to be reversed from the plan as of December 31, 2013 is as follows:

	(In thousands)
2014	$	17
2015		19
2016		21
2017		28
2018		30
Thereafter		218
	$	333

Significant assumptions for the split-dollar plan liability include the following as of December 31, 2013 and 2012:

	2013			2012
Weighted-average assumptions used todetermine benefit cost obligation:
Discount rate		4.95	%		4.40	%
Rate of compensation increase		1.50			1.50
Weighted-average assumptions used to determine benefit cost:
Discount rate		6.00	%		6.00	%
Rate of compensation increase		1.50			1.50

The Company has an Employee Stock Ownership Plan (“ESOP”) covering substantially all employees of the Company. The ESOP acquired 163,265 shares of Company common stock at $10.00 per share in 2003 with funds provided by a loan from the Company. Accordingly, $1.6 million of common stock acquired by the ESOP was shown as a reduction of stockholders’ equity. Shares are released to participants proportionately as the loan is repaid. Dividends on allocated shares are recorded as dividends and charged to retained earnings. Dividends on unallocated shares, which will be distributed to participants, are treated as compensation expense. Compensation expense is recorded equal to the average fair market value of the stock during the year when contributions, which are determined annually by the Board of Directors of the Company, are made to the ESOP.

ESOP expense for the years ended December 31, 2013 and December 31, 2012, was $99,000 and $97,000, respectively.

Share information for the ESOP is as follows at December 31, 2013 and 2012:

	2013		2012
Allocated shares		114,040		106,088
Unearned shares		49,225		57,177
Total ESOP shares		163,265		163,265
Fair value of unearned shares at end of period	$	536,060	$	529,459

At December 31, 2013, the fair value of the 114,040 allocated shares held by the ESOP was approximately $1.2 million.

In addition to the defined benefit plan and ESOP, the Company has a 401(k) plan covering substantially all employees. The Company’s 401(k) matching percentage was 100% of the first 4% contributed by the employee and 50% of the employees’ next 2% of contributions. Expense related to the 401(k) plan totaled $149,000 and $177,000 for the years ended December 31, 2013 and December 31, 2012, respectively.