EMPLOYEE BENEFIT PLANS

12 Months Ended

Dec. 31, 2012

EMPLOYEE BENEFIT PLANS

EMPLOYEE BENEFIT PLANS

14. EMPLOYEE BENEFIT PLANS

The Company accounts for its pension and postretirement plans by recognizing in the financial statements an asset for a plan’s overfunded status or a liability for a plan’s underfunded status. The Company reports changes in the funded status of its pension and postretirement plan as a component of other comprehensive income, net of applicable taxes, in the year in which changes occur.

Pension Plans

The Company maintains a legacy employer sponsored defined benefit pension plan (the “Plan”) for which participation and benefit accruals were frozen in 2011. Accordingly, no employees are permitted to commence participation in the Plan and future salary increases and years of credited service are not considered when computing an employee’s benefits under the Plan. As of December 31, 2012, all minimum Employee Retirement Income Security Act (“ERISA”) funding requirements have been met.

Information regarding the pension plan at December 31, 2012 and 2011 is as follows:

(In thousands)	2012			2011
Change in projected benefit obligation:
Projected benefit obligation at plan acquisition date	$	6,040		$	5,744
Interest cost	273			223
Actuarial loss	498			451
Benefits paid	(353		)	(258		)
Settlements	(95		)	(120		)
Projected benefit obligation at end of year	6,363			6,040
Change in fair value of plan assets:
Fair value of plan assets at plan acquisition date	4,456			4,915
Actual return on plan assets	396			(267		)
Contributions by employer	191			186
Benefits paid	(353		)	(258		)
Settlements	(95		)	(120		)
Fair value of plan assets at end of year	4,595			4,456
Underfunded status	$	1,768		$	1,584
Amounts Recognized in Statement of Financial Position
Current Liabilities	—			—
Noncurrent Liabilities	$	(1,768	)	$	(1,584	)

Net pension cost is comprised of the following for the year ended December 31, 2012 and 2011:

(In thousands)	2012			2011
Interest Cost	$	273		$	223
Expected return on plan assets	(350		)	(319		)
Amortization of unrecognized actuarial loss	47			—
Net periodic pension costs	$	(30	)	$	(96	)

Changes in plan assets and benefit obligations recognized in accumulated other comprehensive income during 2012 and 2011 are as follows:

(In thousands)	2012			2011
Amortization of actuarial loss	$	(47	)	$	—
Actuarial loss	451			1,037
Total loss recognized in accumulated other comprehensive income	404			1,037
Total loss recognized in net periodic pension cost recognized and other comprehensive income	$	374		$	941

The Company expects to make cash contributions of $360 thousand to the pension trust during the 2013 fiscal year.

The amount expected to be amortized from other comprehensive income into net periodic pension cost over the next fiscal year is $101 thousand.

The principal actuarial assumptions used at December 31, 2012 and 2011 were as follows:

	2012		2011
Projected benefit obligation
Discount rate	4.050	%	4.660	%
Net periodic pension cost
Discount rate	4.660	%	5.360	%
Long term rate of return on plan assets	8.000	%	9.000	%

The discount rate that is used in the measurement of the pension obligation is determined by comparing the expected future retirement payment cash flows of the pension plan to the Citigroup Above Median Pension Liability Index as of the measurement date. The expected long-term rate of return on Plan assets reflects long-term earnings expectations on existing Plan assets and those contributions expected to be received during the current plan year. In estimating that rate, appropriate consideration was given to historical returns earned by Plan assets in the fund and the rates of return expected to be available for reinvestment. The rates of return were adjusted to reflect current capital market assumptions and changes in investment allocations.

The Company’s overall investment strategy with respect to the Plan’s assets is primarily for preservation of capital and to provide regular dividend and interest payments. The Plan’s targeted asset allocation is 65% equity securities and 35% fixed-income securities. Equity securities primarily include investments in large cap core, value, and growth stocks. The fixed income portion of the Plan assets is invested in one index fund which is an investment grade, intermediate term index. Equity securities are expected to earn a return in the range of 5% to 9% and fixed income securities are expected to earn a return in the range of 2% to 6%. The long-term inflation rate was estimated to be 3%. When these overall return expectations are applied to the Plan’s target allocation, we expect a future rate of return of 7% to 11%.

The fair values for investment securities are determined by quoted prices in active markets, if available (Level 1). For securities where quoted prices are not available, fair values are calculated based on market prices of similar securities (Level 2). For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators (Level 3).  The Plan did not hold any assets classified as Level 3 during 2012.

The fair values of the Plan’s assets by asset category and level within the fair value hierarchy are as follows at December 31, 2012 (in thousands):

Asset Category	Total		Level 1		Level 2
Equity Mutual Funds:
Large-Cap	$	754	$	754	$	—
Small-Cap	570		570		—
Small-Cap	529		529		—
Equity Trusts
Large-Cap	1,102		—		1,102
Fixed Income Trusts	1,640		—		1,640
Total	$	4,595	$	1,853	$	2,742

The fair values of the Plan’s assets by asset category and level within the fair value hierarchy are as follows at December 31, 2011 (in thousands):

Asset Category	Total		Level 1		Level 2
Equity Mutual Funds:
Large-Cap	$	399	$	399	$	—
Small-Cap	527		527		—
Equity Trusts
Large-Cap	1,346		—		1,346
International	491		—		491
Fixed Income Trusts	1,693		—		1,693
Total	$	4,456	$	926	$	3,530

The Plan did not hold any assets classified as Level 3 during 2012 or 2011.

Estimated benefit payments under our pension plans over the next ten years at December 31, 2012 are as follows (in thousands):

Year	Payments
2013	$	377
2014	378
2015	383
2016	375
2017	371
2018 - 2022	1,972

Postretirement Benefits

The Company has an unfunded post-retirement medical plan which was assumed in connection with the Rome Bancorp acquisition in 2011.  The postretirement plan has been modified so that participation is closed to those employees who did not meet the retirement eligibility requirements by March 31, 2011. The Company contributes partially to medical benefits and life insurance coverage for retirees. Such  retirees and their surviving spouses are responsible for the remainder of the medical benefits, including increases in premiums levels, between the total premium and the Company’s contribution. Information regarding the postretirement plan at December 31, 2012 and 2011 is as follows:

(In thousands)	2012			2011
Change in accumulated post retirement benefit obligation:
Accumulated postretirement benefit obligation at plan acquisition date	$	1,083		$	1,468
Interest cost	44			53
Participand contributions	51			30
Actuarial loss	150			44
Benefits paid	(144		)	(107		)
Amendments	—			(405		)
Accumulated postretirement benefit obligation at end of year	$	1,184		$	1,083
Change in plan assets:
Fair value of plan assets at plan acquisition date	$	—		$	—
Contributions by employer	93			77
Contributions by participant	51			30
Benefits paid	(144		)	(107		)
Fair value of plan assets at end of year	$	—		$	—
Amounts Recognized in Statement of Financial Position
Current Liabilities	$	(99	)	$	(93	)
Noncurrent Liabilities	$	(1,085	)	$	(990	)

The postretirement benefit obligation recognized in accumulated other comprehensive income and the accrued liability for the years ended December 31, 2012 and 2011 are as follows:

(In thousands)	2012			2011
Prior service cost	$	(371	)	$	(405	)
Net actuarial loss	194			44
Total recognized in accumulated other comprehensive income	(177		)	(361		)
Accrued postretirement liability recognized	$	(1,361	)	$	(1,444	)

The Company expects to contribute $99 thousand to the postretirement benefit plan during the next fiscal year. This amount is equal to the expected benefit payments in this unfunded plan.

The amount expected to be amortized from other comprehensive income into net periodic postretirement cost over the next fiscal year is $27 thousand.

Discount rates of 3.25% and 4.25% respectively were utilized as of December 31, 2012 and December 31, 2011, to calculate the future postretirement obligation related to the medial plan. The assumed health care cost trend rate used in measuring the accumulated post-retirement benefit obligation is expected to be 8% for 2013, and is gradually expected to decrease to 5% by 2017. This assumption may have a significant effect on the amounts reported.  However, as noted above, increases in premium levels are the financial responsibility of the plan beneficiary.  Thus an increase or decrease in 1% of the health care cost trend rates utilized would have had an immaterial effect on the service and interest cost as well as the accumulated post-retirement benefit obligation for the postretirement plan as of December 31, 2012.

Estimated benefit payments under the postretirement benefit plan over the next ten years at December 31, 2012 are as follows (in thousands):

Year	Payments
2013	$	99
2014	97
2015	94
2016	92
2017	90
2018 - 2022	411

401(k) Plan

The Company provides a 401(k) Plan in which most employees participate. The Company contributes a non-elective 3% of gross annual wages for each participant, regardless of the participant’s deferral, in addition to a 100% match up to 4% of gross annual wages. The Company’s contributions vest immediately. Expense related to the plan was $2.5 million in 2012, $1.9 million in 2011, and $1.5 million in 2010.

Employee Stock Ownership Plan (“ESOP”)

As part of the acquisition of Beacon during 2012, along with two acquisitions during 2011, the Company acquired ESOP plans that were frozen and terminated prior to the completion of those transactions. On the acquisition dates, all amounts in the plans were vested and the loans under the plans were repaid from the sale proceeds of unallocated shares.