NOTE 14.EMPLOYEE BENEFIT PLANS

Pension Plans

The Company maintains a legacy employer sponsored defined benefit pension plan (the “Plan”) for which participation and benefit accruals were frozen on January 1, 2003. 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, 2014, all minimum Employee Retirement Income Security Act (“ERISA”) funding requirements have been met.

Information regarding the pension plan at December 31, 2014 and 2013 is as follows:

(In thousands)	2014			2013
Change in projected benefit obligation:
Projected benefit obligation at beginning of year	$	5,666		$	6,363
Interest cost	271			250
Actuarial loss/gain	1,607			(504		)
Benefits paid	(334		)	(356		)
Settlements	(17		)	(87		)
Projected benefit obligation at end of year	7,193			5,666
Accumulated beenfit obligation	7,193			5,666

Change in fair value of plan assets:
Fair value of plan assets at plan beginning of year	5,520			4,595
Actual return on plan assets	331			883
Contributions by employer	256			485
Benefits paid	(334		)	(356		)
Settlements	(17		)	(87		)
Fair value of plan assets at end of year	5,756			5,520

Underfunded status	$	1,437		$	146

Amounts Recognized in Consolidated Balance Sheet

Other Liabilities	$	(1,437	)	$	(146	)

Net periodic pension cost is comprised of the following for the years ended December 31, 2014 and 2013:

(In thousands)	2014			2013
Interest Cost	$	271		$	250
Expected return on plan assets	(437		)	(367		)
Amortization of unrecognized actuarial loss	—			101
Net periodic pension costs	$	(166	)	$	(16	)

Changes in plan assets and benefit obligations recognized in accumulated other comprehensive income during 2014 and 2013 are as follows:

(In thousands)	2014		2013
Amortization of actuarial loss	$	—	$	(101	)
Actuarial loss (gain)	1,713		(1,019		)
Total loss (gain) recognized in accumulated other comprehensive income	1,713		(1,120		)
Total loss (gain) recognized in net periodic pension cost recognized and other comprehensive income	$	1,547	$	(1,136	)

The amounts in accumulated other comprehensive income that have not yet been recognized as components of net periodic benefit cost are a net loss of $2.0 million and $321 thousand in 2014 and 2013, respectively.

The Company expects to make cash contributions of $245 thousand to the pension trust during the 2014 fiscal year.

The amount expected to be amortized from other comprehensive income into net periodic pension cost over the next fiscal year is $176 thousand.

The principal actuarial assumptions used at December 31, 2014 and 2013 were as follows:

	2014		2013
Projected benefit obligation
Discount rate	3.820	%	4.950	%
Net periodic pension cost
Discount rate	4.950	%	4.050	%
Long term rate of return on plan assets	8.000	%	8.000	%

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 Double-A Curve 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 via investment in the Long-Term Growth - Equity Portfolio (‘LTGE’), 34% intermediate-term investment grade bonds via investment in the Long-Term Growth - Fixed-Income Portfolio (‘LTGFI’), and 1% in cash equivalents portfolio (for liquidity). Equity securities include investments in a diverse mix of equity funds to gain exposure in the US and international markets. The fixed income portion of the Plan assets is a diversified portfolio that primarily invests in intermediate-term bond funds. The overall rate of return is based on the historical performance of the assets applied against the Plan’s target allocation, and is adjusted for the long-term inflation rate.

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 fair values of the Plan’s assets by asset category and level within the fair value hierarchy are as follows at December 31, 2014:

Asset Category (In thousands)	Total		Level 1		Level 2
Equity Mutual Funds:
Large-Cap	$	1,847	$	—	$	1,847
Small-Cap	488		—		488
International	461		—		461
Equity Trusts	926		—		926
Large-Cap
Fixed Income Trusts	1,822		—		1,822
Fixed Income Mutual Funds	212		99		113
Total	$	5,756	$	99	$	5,657

The fair values of the Plan’s assets by asset category and level within the fair value hierarchy are as follows at December 31, 2013:

Asset Category (In thousands)	Total		Level 1		Level 2
Equity Mutual Funds:
Large-Cap	$	1,515	$	1,515	$	—
Small-Cap	792		792		—
International	637		637		—
Equity Trusts
Large-Cap	1,015		—		1,015
Fixed Income Trusts	1,030		—		1,030
Fixed Income Mutual Funds	531		531		—
Total	$	5,520	$	3,475	$	2,045

The Plan did not hold any assets classified as Level 3, and there were no transfers between levels during 2014 or 2013.

Estimated benefit payments under the Company’s pension plans over the next ten years at December 31, 2014 are as follows:

Year		Payments (In thousands)
2015		377
2016		376
2017		378
2018		374
2019		419
2020 - 2024		2,051

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.

The Company also has an executive long-term care (“LTC”) postretirement benefit plan which started August 1, 2014. The LTC plan reimburses executives for certain costs in the event of a future chronic illness. Funding of the plan comes from Company paid insurance policies or direct payments. At plan’s inception, a $558 thousand benefit obligation was recorded against equity representing the prior service cost of plan participants.

Information regarding the postretirement plan at December 31, 2014 and 2013 is as follows:

(In thousands)	2014			2013
Change in accumulated post retirement benefit obligation:
Accumulated postretirement benefit obligation at beginning of year	$	996		$	1,184
Prior service cost of long-term care plan particpants	558			—
Service Cost	12			—
Interest cost	48			37
Participant contributions	44			40
Actuarial loss/ (gain)	26			(187		)
Benefits paid	(80		)	(78		)
Amendments	—			—
Accumulated postretirement benefit obligation at end of year	$	1,604		$	996

Change in plan assets:
Fair value of plan assets at beginning of year	$	—		$	—
Contributions by employer	36			38
Contributions by participant	44			40
Benefits paid	(80		)	(78		)
Fair value of plan assets at end of year	$	—		$	—

Amounts Recognized in Consolidated Balance Sheet

Other Liabilities	$	(1,604	)	$	(996	)

Net periodic postretirement cost is comprised of the following for the year ended December 31, 2014 and 2013:

(In thousands)	2014			2013
Service cost	$	12		$	—
Interest costs	48			37
Amortization of net prior service credit	(11		)	(34		)
Amortization of net actuarial loss	—			7
Net periodic postretirement costs	$	49		$	10

Changes in benefit obligations recognized in accumulated other comprehensive income during 2014 and 2013 are as follows:

(In thousands)	2014		2013
Amortization of actuarial loss	$	—	$	(9	)
Amortization of prior service credit	11		34
Net actuarial (gain) loss	27		(187		)
Total recognized in accumulated other comprehensive income	38		(162		)
Accrued postretirement liability recognized	$	1,347	$	1,333

The amounts in accumulated other comprehensive income that have not yet been recognized as components of net periodic benefit cost are as follows:

(In thousands)	2014		2013
Net prior service cost (credit)	$	231	$	(338	)
Net actuarial (gain) loss	27		1
Total recognized in accumulated other comprehensive income	258		(337		)

The amount expected to be amortized from other comprehensive income into net periodic postretirement cost over the next fiscal year is $22 thousand.

The discount rates used in the measurement of the postretirement medical and LTC plan obligations are determined by comparing the expected future retirement payment cash flows of the plans to the Citigroup Above Median Double-A Curve as of the measurement date.

The assumed discount rates on a weighted-average basis were 3.75% and 4.00% as of December 31, 2014 and December 31, 2013, respectively. The assumed health care cost trend rate used in measuring the accumulated post-retirement benefit medical obligation is expected to be 7.50% for 2015, and is gradually expected to decrease to 6.38% by 2019. 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, 2014.

For participants in the LTC plan covered by insurance policies, no increase in annual premiums is assumed based on the history of the corresponding insurance provider.

The Company expects to contribute $88 thousand to the postretirement benefit plans during the next fiscal year. This amount is equal to the expected benefit payments in this unfunded plan.

Estimated benefit payments under the postretirement benefit plan over the next ten years at December 31, 2014 are as follows:

Year		Payments (In thousands)
2015		88
2016		88
2017		88
2018		98
2019		97
2020 - 2024		503

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 $3.0 million in 2014, $2.9 million in 2013, and $2.5 million in 2012.

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.

Other Plans

The Company maintains a supplemental executive retirement plan (“SERP”) for a few select executives. Benefits generally commence no earlier than age sixty-two and are payable at the executive’s option, either as an annuity or as a lump sum. Some of these SERPs were assumed in connection with the Beacon acquisition in 2012. At year-end 2014 and 2013, the accrued liability for these SERPs were $4.6 million and $4.2 million, respectively. SERP expense was $583 thousand in 2014, $453 thousand in 2013, and $373 thousand in 2012, and is recognized over the required service period.

The Company has endorsement split-dollar life insurance arrangements pertaining to certain current and prior executives. Under these arrangements, the Company purchased policies insuring the lives of the executives, and separately entered into agreements to split the policy benefits with the executive. There are no post-retirement benefits associated with these policies.