EMPLOYEE BENEFITS

12 Months Ended

Dec. 31, 2011

EMPLOYEE BENEFITS

EMPLOYEE BENEFITS

8. EMPLOYEE BENEFITS

        Defined Contribution Plan—The Company sponsors a defined contribution 401(k) plan covering substantially all full-time employees. Employee contributions are voluntary. The Company matches 50% of the employee contributions up to a maximum of 6% of compensation. During the years ended December 31, 2011, 2010 and 2009, the Company recognized $105,000, $93,000 and $93,000, respectively, in expenses related to this plan. The Bank previously had Post Retirement Benefit Plans that provide retirement benefits to certain officers, board members, certain former officers and former board members. The Bank also has a Life Insurance Endorsement Method Split Dollar Plan ("Split Dollar Life Insurance Plan") for the same participants which provide death benefits for their designated beneficiaries through an endorsement of a portion of the death benefit otherwise payable to the Bank. Under the Post Retirement Benefit and Split Dollar Life Insurance Plans ("The Plans"), the Board purchased life insurance contracts on certain participants. During 2008, the Bank discontinued participation in The Plans and converted certain key officers and active board members into a defined Supplemental Retirement Benefit Plans ("SERP") and certain key officers into a Life Insurance Bonus Plan. Certain other participants were paid-out with eight participants remaining in The Plans.

        The increase in cash surrender value for the contracts on those participants remaining in the Post Retirement Benefit Plan, less the Bank's premiums, constitutes the Bank's contribution to the Post Retirement Benefit Plans each year. In the event the insurance contracts fail to produce positive returns, the Bank has no obligation to contribute to the Post Retirement Benefit Plan. At December 31, 2011 and 2010, the cash surrender value of these insurance contracts was $11,217,000 and $10,848,000, respectively.

        During 2009, the Company converted the Post Retirement Benefit Plan for its key officers and active Board members into the SERP. For the SERP and the Post Retirement Benefit Plans, the Company recognized $376,000, $606,000, and $723,000 in 2011, 2010 and 2009, respectively, in noninterest expenses. The Company recognized $366,000, $379,000 and $385,000 in 2011, 2010 and 2009, respectively, in noninterest income related to the insurance contracts. Upon completion of the conversion, most key officers and active Board members participating in the Split Dollar Life Insurance Plan surrendered their interest in the death benefit portion of the plan. In exchange for relinquishing the postretirement death benefit, the Company implemented a Life Insurance Bonus Plan ("The Bonus Plan") for most key officers to provide death benefits for their designated beneficiaries. The Company pays the participating officers an annual compensation amount, which, in the past has been grossed-up for income tax purposes, to pay the annual premiums on the insurance policies. However, as of 2009, under stipulations of TARP, the Company did not gross-up the annual amount for income tax purposes. The Company incurred $78,000 and $75,000 in expenses related to the Bonus Plan in 2011 and 2010, respectively. In 2009, the Company incurred $75,000 in expenses related to the Bonus Plan.