15.

Employee Benefit Plans

Defined Benefit Plan

The Corporation provides pension benefits for eligible employees through a defined benefit pension plan. Substantially all employees participate in the retirement plan on a non-contributing basis, and are fully vested after three years of service. Effective January 1, 2009, the plan was closed to new participants. The Corporation provided the requisite notice to plan participants on March 12, 2013 of the determination to freeze the plan (curtailment). While the freeze was not effective until April 30, 2013, management determined that participants would not satisfy, within the provisions of the plan, 2013 eligibility requirements based on minimum hours worked for 2013. Therefore, employees ceased to earn benefits as of January 1, 2013. This amendment to the plan will not affect benefits earned by the participant prior to the date of the freeze. The Corporation measures the funded status of the plan as of December 31.

Information pertaining to changes in obligations and funded status of the defined benefit pension plan for the years ended December 31 is as follows:

(Dollar amounts in thousands)	2015		2014
Change in plan assets:
Fair value of plan assets at beginning of year	$	6,851	$	6,386
Actual return on plan assets		(120)		309
Employer contribution		3,000		500
Benefits paid		(363)		(344)
Fair value of plan assets at end of year		9,368		6,851

Change in benefit obligation:
Benefit obligation at beginning of year		10,249		7,643
Service cost		-		-
Interest cost		403		380
Actuarial loss		254		355
Effect of change in assumptions		(369)		2,215
Benefits paid		(363)		(344)
Benefit obligation at end of year		10,174		10,249
Funded status (plan assets less benefit obligation)	$	(806)	$	(3,398)

Amounts recognized in accumulated other comprehensive loss, net of tax, consists of:
Accumulated net actuarial loss	$	3,529	$	3,232
Accumulated prior service benefit		(15)		(36)
Amount recognized, end of year	$	3,514	$	3,196

The following table presents the Corporation’s pension plan assets measured and recorded at estimated fair value on a recurring basis and their level within the estimated fair value hierarchy as described in Note 17:

(Dollar amounts in thousands)			(Level 1)		(Level 2)
			Quoted Prices in		Significant		(Level 3)
			Active Markets		Other		Significant
			for Identical		Observable		Unobservable
Description	Total		Assets		Inputs		Inputs

December 31, 2015:
Money markets	$	757	$	757	$	-	$	-
Mutual funds - debt		4,127		-		4,127		-
Mutual funds - equity		3,812		-		3,812		-
Emclaire stock		672		672		-		-
	$	9,368	$	1,429	$	7,939	$	-
December 31, 2014:
Money markets	$	565	$	565	$	-	$	-
Mutual funds - debt		3,313		-		3,313		-
Mutual funds - equity		2,273		-		2,273		-
Emclaire stock		700		700		-		-
	$	6,851	$	1,265	$	5,586	$	-

There were no significant transfers between Level 1 and Level 2 during 2015.

The accumulated benefit obligation for the defined benefit pension plan was $10.2 million and $10.2 million at December 31, 2015 and 2014, respectively.

The components of the periodic pension costs and other amounts recognized in other comprehensive income for the years ended December 31 are as follows:

(Dollar amounts in thousands)	2015		2014
Interest cost	$	403	$	380
Expected return on plan assets		(652)		(502)
Amortization of prior service beneft and net loss		174		58
Net periodic pension benefit		(75)		(64)
Amortization of prior service benefit and net loss		(174)		(58)
Net loss		657		2,764
Total recognized in other comprehensive loss		483		2,706
Total recognized in net periodic benefit and other comprehensive loss	$	408	$	2,642

The estimated net loss and prior service benefit 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 $193,000 as of December 31, 2015.

Weighted-average actuarial assumptions for the years ended December 31 include the following:

	2015			2014
Discount rate for net periodic benefit cost		3.91	%		4.86	%
Discount rate for benefit obligations		4.41	%		3.91	%
Expected rate of return on plan assets		7.75	%		7.75	%

The Corporation’s pension plan asset allocation at December 31, 2015 and 2014, target allocation for 2016, and expected long-term rate of return by asset category are as follows:

	Target			Percentage of Plan Assets at						Weighted-Average Expected
	Allocation			Year End						Long-Term Rate of Return
Asset Category	2016			2015			2014			2015
Equity securities		45	%		44	%		39	%		4.47	%
Debt securities		45	%		48	%		53	%		3.25	%
Money markets		10	%		8	%		8	%		0.03	%
		100	%		100	%		100	%		7.75	%

Investment Strategy

The intent of the pension plan is to provide a range of investment options for building a diversified asset allocation strategy that will provide the highest likelihood of meeting the aggregate actuarial projections. In selecting the options and asset allocation strategy, the Corporation has determined that the benefits of reduced portfolio risk are best achieved through diversification. The following asset classes or investment categories are utilized to meet the Pension plan’s objectives: Small company stock, International stock, Mid-cap stock, Large company stock, Diversified bond, Money Market/Stable Value and Cash. The pension plan does not prohibit any certain investments.

The Corporation does currently not expect to make a contribution to its pension plan in 2016.

Estimated future benefit payments, which reflect expected future service, as appropriate, are as follows:

(Dollar amounts in thousands)	Pension
For year ended December 31,	Benefits

2016	$	354
2017		352
2018		345
2019		369
2020		395
2021-2025		2,261
Thereafter		6,098
Benefit Obligation	$	10,174

Defined Contribution Plan

The Corporation maintains a defined contribution 401(k) Plan. Employees are eligible to participate by providing tax-deferred contributions up to 20% of qualified compensation. Employee contributions are vested at all times. The Corporation provides a matching contribution of up to 4% of the participant’s salary. For the years ended 2015 and 2014, matching contributions were $178,000 and $171,000, respectively. The Corporation may also make, at the sole discretion of its Board of Directors, a profit sharing contribution. For the years ended 2015 and 2014, the Corporation made profit sharing contributions of $108,000 and $100,000, respectively.

Supplemental Executive Retirement Plan

The Corporation maintains a Supplemental Executive Retirement Plan (SERP) to provide certain additional retirement benefits to participating officers. The SERP is subject to certain vesting provisions and provides that the officers shall receive a supplemental retirement benefit if the officer’s employment is terminated after reaching the normal retirement age of 65, with benefits also payable upon death, disability, a change of control or a termination of employment prior to normal retirement age. As of December 31, 2015 and 2014, the Corporation’s SERP liability was $1.1 million and $974,000, respectively. For the years ended December 31, 2015 and 2014, the Corporation recognized expense of $162,000 and $150,000, respectively, related to the SERP.