Employee Benefit Plans

Defined Benefit Pension Plan: Union sponsors a noncontributory defined benefit pension plan covering all eligible employees employed prior to October 5, 2012. On that date, the Company closed the Plan to new participants and froze the accrual of retirement benefits for current participants. Union continues to maintain the frozen Plan and related trust and continues to distribute benefits to participants at such time and in such manner as provided under the terms of the Plan. The Company will continue to recognize pension expense/benefit and cash funding obligations for the remaining life of the associated liability for the frozen benefits under the Plan. The Plan provides defined benefits based on years of service and final average salary prior to October 5, 2012, as defined by the Plan.

There was no minimum required contribution under the ERISA guidelines for 2016 or 2015. Union measures defined benefit plan assets and obligations as of December 31, its fiscal year-end.

Union's policy is to accrue annually an amount equal to the actuarially calculated expense for future benefits. Information pertaining to the activity in the Plan is as follows:

Obligations and funded status at December 31:



	2016			2015
	(Dollars in thousands)
Change in projected benefit obligation
Projected benefit obligation at beginning of year	$	17,177		$	18,103
Interest cost	701			680
Actuarial loss (gain)	544			(809		)
Benefits paid	(735		)	(797		)
Projected benefit obligation at end of year	17,687			17,177

Change in fair value of plan assets
Fair value of plan assets at beginning of year	15,717			17,300
Actuarial gain (loss) on plan assets	899			(786		)
Employer contributions	750			—
Benefits paid	(735		)	(797		)
Fair value of plan assets at end of year	16,631			15,717
Net liability for pension benefits	$	(1,056	)	$	(1,460	)

	2016			2015
	(Dollars in thousands)
Accumulated benefit obligation at December 31	$	17,687		$	17,177

The impact of the Plan activity for 2016 and 2015 on OCI is detailed in Note 23.

The expected pension adjustment to Accumulated OCI in the upcoming fiscal year is an increase of $203 thousand, reflecting recognition of actuarial gain.

The Company uses the alternate amortization method for prior service costs, as provided in FASB ASC Topic 715, Employers' Accounting for Pensions.

Net periodic pension benefit for 2016, 2015 and 2014 consisted of the following components:



	2016			2015			2014
	(Dollars in thousands)
Interest cost on projected benefit obligation	$	701		$	680		$	757
Expected return on plan assets	(1,036		)	(1,144		)	(1,193		)
Amortization of net actuarial loss	165			56			—
Net periodic pension benefit	$	(170	)	$	(408	)	$	(436	)

The estimated net periodic pension benefit for 2017 is $202 thousand.

Weighted average assumptions used to determine pension benefit obligation were a discount rate of 3.99%, 4.17% and 3.83% at December 31, 2016, 2015 and 2014, respectively. There was no assumed rate of compensation increase for 2016, 2015 or 2014 due to the freeze on benefit accruals in 2012.

Weighted average assumptions used to determine net periodic pension benefit for the years ended December 31, 2016, 2015 and 2014 were a discount rate of 4.17%, 3.83% and 4.84%, respectively, no rate of compensation increase for 2016, 2015 or 2014, and an expected long-term rate of return on plan assets of 6.75% for all three years.

The overall expected long-term rate of return on assets is consistent with future expected long-term rate of inflation assumptions as well as consideration of historical asset returns and the current financial marketplace. The return is more conservative than the Plan's long-term actual results and is at a level that management believes is sustainable. The 2016 pension benefit obligation discount rate is based on the Plan's expected benefit payment stream utilizing December 2016 benchmark pension liability index yield curve spot rates and a review of published high quality bond indices.

Union's Plan asset allocations at December 31, 2016 and 2015, by asset category based on their fair values, were as follows:



Asset Category	2016		2015
Cash and cash equivalents	3.4	%	3.5	%
Interest bearing deposits in banks	—	%	0.8	%
Debt securities	49.7	%	31.2	%
Equity securities	46.9	%	64.3	%
Mutual and exchange traded funds	—	%	0.2	%
Total	100.0	%	100.0	%

The investment philosophy for the Plan is to prudently invest Plan assets and future contributions received in a diversified manner that will ensure that sufficient assets are available to fund the future pension benefits due to participants and beneficiaries over a long-term horizon as well as provide liquidity to pay current benefits. The Trustees of the Plan seek to protect the Plan assets through prudent asset allocation, FDIC insurance on a portion of plan assets, utilization of professional asset management and periodic reviews. Investments in stocks and fixed income investments are diversified in a way which is consistent with risk tolerance, investment objectives and current financial market risks.

In order to achieve this goal the investment objective is to maintain a mix of growth and income investments allocated as follows, with no more than 5% of the equity portion of the portfolio invested in one company and no fewer than 30 securities diversified by industry and sector:



Equity securities and international mutual funds	38-58%
Debt securities	40-60%
Cash and cash equivalents	0-5%

There are no securities of the Company or Union held by the Plan. The equity securities of the Plan are managed by Union's Asset Management Group with the advice of the registered investment adviser engaged by Union's Asset Management Group, under the guidance of the Plan's Trustees. There is no minimum required employer contribution for 2017, however the Company may decide to make a discretionary contribution.

The fair values of the Plan's investments at December 31, 2016 and 2015 , segregated by fair value hierarchy level, are summarized below:



			Fair Value Measurement
			December 31, 2016
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(Dollars in thousands)
U.S. Government	$	1,826	$	—	$	1,826	$	—
Common trust funds	5,207		5,207		—		—
Marketable equity securities:
Information technology	976		976		—		—
Financial	813		813		—		—
Industrials	1,212		1,212		—		—
Healthcare	1,393		1,393		—		—
Consumer	2,131		2,131		—		—
Energy	1,275		1,275		—		—
Mutual and exchange traded funds	1,798		1,798		—		—
Total	$	16,631	$	14,805	$	1,826	$	—



			Fair Value Measurement
			December 31, 2015
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(Dollars in thousands)
Interest bearing deposits in banks	$	131	$	—	$	131	$	—
U.S. Government	341		341		—		—
Corporate bonds	4,569		2,003		2,566		—
Marketable equity securities:
Information technology	1,544		1,544		—		—
Financial	1,368		1,368		—		—
Industrials	945		945		—		—
Healthcare	1,746		1,746		—		—
Consumer	3,346		3,346		—		—
Energy	1,154		1,154		—		—
Mutual and exchange traded funds	573		573		—		—
Total	$	15,717	$	13,020	$	2,697	$	—

The fair values of the Plan assets are determined by an independent pricing service which, given the nature of the assets within the portfolio, is able to utilize quoted prices in an active market to value the majority of the assets held. The market inputs sought for assets without a specific quote listed, in approximate order of priority, include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data including market research publications that vary by asset class. For certain security types, additional inputs may be used, or some standard inputs may not be applicable. There were no significant transfers in or out of Levels 1 and 2 for the year ended December 31, 2016, nor were there any Level 3 assets held at any time during the year.

The following table summarizes the estimated future benefit payments expected to be paid under the Plan:



	(Dollars in thousands)
2017	$	738
2018	762
2019	769
2020	797
2021	863
Years 2022 to 2026	4,485

Nonqualified Deferred Compensation Plans: The Company and Union have two nonqualified deferred compensation plans for directors and certain key officers. The 2008 Plan replaced a 1990 Plan that was not compliant with section 409A of the Internal Revenue Code. The Company accrued an expense of $9 thousand in 2016, and $8 thousand in 2015 and 2014 under the 2008 Plan. The benefit obligations under the 2008 Plan represent general unsecured obligations of the Company and no assets are segregated for such payments. However, the Company and Union have purchased life insurance contracts on the lives of each participant in order to recoup the funding costs of these benefits. The benefits accrued under the 2008 Plan aggregated $613 thousand and $699 thousand at December 31, 2016 and 2015, respectively, and are included in Accrued interest and other liabilities. The cash surrender value of the life insurance policies purchased to recoup the funding costs under the 2008 Plan aggregated $945 thousand and $1.3 million at December 31, 2016 and 2015, respectively, and are included in Company-owned life insurance in the Company's consolidated balance sheets.

The 2006 Plan was adopted for directors and certain key officers. The 2006 Plan is a defined contribution plan that provides a means by which participants may elect to defer receipt of current compensation from the Company or its subsidiary in order to provide retirement or other benefits as selected in the individual adoption agreements. Participants may select among designated reference investments consisting of investment funds, with the performance of the participant's account mirroring the selected reference investment. Distributions are made only upon a qualifying distribution event, which may include a separation from service, death, disability or unforeseeable emergency, or upon a date specified in the participant's deferral election form. The 2006 Plan is intended to comply with the provisions of Section 409A of the Internal Revenue Code. The 2006 Plan is unfunded, representing a general unsecured obligation of the Company of $353 thousand and $295 thousand as of December 31, 2016 and 2015, respectively.

401(k) Plan: Union maintains a defined contribution 401(k) plan under which employees may elect to make tax deferred contributions of up to the IRS maximum from their annual salary. All employees meeting service requirements are eligible to participate in the plan. Union may make employer matching and profit-sharing contributions to the 401(k) plan at the discretion of the Board. Company contributions are fully vested after three years of service. Union amended its 401(k) plan effective January 1, 2013, to include "Safe Harbor" provisions requiring annual nondiscretionary minimum contributions to the plan for all eligible plan participants in an amount equal to 3% of eligible earnings of each eligible plan participant. Additionally, in 2016, 2015, and 2014 a discretionary profit-sharing contribution was made to the plan in an amount equal to 3% percent of each employee's eligible earnings as defined by the plan. The following table summarizes employer contributions for the years ended December 31, 2016, 2015 and 2014:



	2016		2015		2014
	(Dollars in thousands)
Employer matching	$	221	$	200	$	195
Profit sharing	301		274		236
Safe harbor	294		264		262
Total	$	816	$	738	$	693