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 $180,000 to the plan during 2016.

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

	2015		2014
	(In thousands)
Change in benefit obligation
Beginning of year	$	2,221	$	1,588
Interest cost		86		78
Actuarial (gain) loss		(112)		614
Benefits paid		(38)		(38)
Settlements		(4)		(21)
End of year		2,153		2,221

Change in fair value of plan assets
Beginning of year		1,590		1,431
Actuarial return on plan assets		(11)		80
Employer contribution		185		138
Benefits paid		(38)		(38)
Settlements		(4)		(21)
End of year		1,722		1,590
Funded status at end of year	$	(431)	$	(631)

Amounts recognized in accumulated other comprehensive income not yet recognized as components of net periodic benefit cost consist of the following at December 31, 2015 and 2014:

	2015		2014
	(In thousands)
Net loss	$	(1,083)	$	(1,191)

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 $98,000.

The accumulated benefit obligation for the defined benefit pension plan was $2.2 million at both December 31, 2015 and 2014, respectively.

	2015		2014
	(In thousands)
Components of net periodic benefit cost
Internal cost	$	86	$	77
Expected return on plan assets		(99)		(90)
Amortization of net loss		105		44
Net periodic benefit cost	$	92	$	31

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 2015 are as follows:

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

At December 31, 2015 and 2014, the fair value of plan assets as a percentage of the total was invested in the following:

	2015			2014
Equity Securities		60	%		67	%
Debt securities		39	%		32	%
Cash and cash equivalents		1	%		1	%
		100	%		100	%

Benefit payments expected to be paid from the plan as of December 31, 2015 are as follows:

	(In thousands)
2016	$	74
2017		84
2018		92
2019		109
2020		116
Thereafter		634
	$	1,109

Significant assumptions include the following as of December 31, 2015 and 2014:

	Pension Benefits
	2015			2014
Weighted-average assumptions used to determine benefit obligation:
Discount rate		4.95	%		3.95	%
Rate of compensation increase (frozen)		N/A			N/A
Weighted-average assumptions used to determine benefit cost:
Discount rate		4.95	%		4.95	%
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, and the related investment references, at December 31, 2015, and 2014 by asset category are as follows:

December 31, 2015			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)	$	96	$	96	$	-	$	-
Large Cap Core (b)		132		132		-		-
Mid Cap Core (c)		118		118		-		-
Small-Cap Core (d)		57		57		-		-
International Core (e)		271		271		-		-
Large Cap Growth (f)		205		205		-		-
Small/Midcap Growth (g)		60		60		-		-
Mutual funds-Fixed Income
Fixed Income-Core Plus (h)		501		501		-		-
Intermediate Duration (i)		166		166		-		-
Common/Collective Trusts- Equity
Large Cap Value (j)		91		-		91		-
Cash
Money Market		25		25		-		-
Total	$	1,722	$	1,631	$	91	$	-

(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 contains stocks whose sector weightings are maintained within a narrow band around those of the Russell 2000 Index. The portfolio will typically hold more than 150 stocks.

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

(f)	This category consists of two mutual funds, one 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 currently includes equal investments in three mutual funds, two of which usually hold at least 80% of fund assets in investment grade fixed income securities, seeking to outperform the Barclays US Aggregate Bond Index while maintaining a similar duration to that Index. The third fund targets investments of 50% or more in mortgage--backed securities guaranteed by the US government and its agencies..

(i)

This category consists of a mutual fund which invest in a diversified portfolio of 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 and 70 stocks.

December 31, 2014			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
Large Cap Value (a)	$	103	$	103	$	-	$	-
Large Cap Core (b)		139		139		-		-
Mid Cap Core (c)		131		131		-		-
Small-Cap Core (d)		63		63		-		-
International Core (e)		264		264		-		-
Large Cap Growth (f)		202		202		-		-
Small/Midcap Growth (g)		57		57		-		-
Mutual funds-Fixed Income
Fixed Income-US Core (h)		172		172		-		-
Intermediate Duration (i)		341		341		-		-
Common/Collective Trusts- Equity
Large Cap Value (k)		96		-		96		-
Cash
Money Market		22		22		-		-
Total	$	1,590	$	1,494	$	96	$	-

(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 emerging countries.

(f)	This category consists of two mutual funds, one 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 and asset-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 portfolios of 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 and 70 stocks.

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:

	2015		2014

	(In thousands)
Change in benefit obligation
Beginning of year	$	901	$	681
Service cost		7		41
Interest cost		37		33
(Gain)/Loss		(44)		163
Benefits Paid		(22)		(17)
End of year	$	879	$	901

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

	2015		2014

	(In thousands)
Prior service cost	$	83	$	97
Net loss(gain)		6		147

The accumulated benefit obligation for the split-dollar benefit plan was $866,000 and $901,000 at December 31, 2015 and 2014, respectively.

The estimated net gain 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 $8,000.

	2015		2014

	(In thousands)
Components of net periodic benefit cost
Service cost	$	7	$	41
Interest cost		37		33
(Gain)/Loss recognized		98		(37)
Prior service cost		14		14
Net periodic benefit cost	$	156	$	51

The retiree accrued liability expected to be reversed from the plan as of December 31, 2015 is as follows:

	(In thousands)
2016	$	25
2017		28
2018		31
2019		33
2020		37
Thereafter		269
	$	423

Significant assumptions for the split-dollar plan liability include the following as of December 31, 2015 and 2014:

	2015			2014
Weighted-average assumptions used to determine benefit cost obligation:
Discount rate		4.34	%		3.95	%
Rate of compensation increase		1.50	%		1.50	%
Weighted-average assumptions used to determine benefit cost:
Discount rate		4.34	%		3.95	%
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, 2015 and December 31, 2014, was $109,000 and $112,000, respectively.

Share information for the ESOP is as follows at December 31, 2015 and 2014:

	2015		2014
Allocated shares		128,993		121,675
Unearned shares		34,272		41,590
Total ESOP shares		163,265		163,265

Fair value of unearned shares at end of period	$	452,733	$	557,306

At December 31, 2015, the fair value of the 128,993 allocated shares held by the ESOP was approximately $1.7 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 $148,000 and $161,000 for the years ended December 31, 2015 and December 31, 2014, respectively.