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Pension and Other Benefits
 12 Months Ended
Dec. 31, 2012
Pension and Other Benefits [Abstract]  
PENSION AND OTHER BENEFITS

Note 16 — Pension and Other Benefits

Defined Benefit Plans

The Corporation maintained a non-contributory pension plan for substantially all of its employees until September 30, 2007, at which time the Corporation froze its defined benefit pension plan. The benefits are based on years of service and the employee's compensation over the prior five-year period. The plan's benefits are payable in the form of a ten year certain and life annuity. The plan is intended to be a tax-qualified defined benefit plan under Section 401(a) of the Internal Revenue Code. The pension plan generally covers employees of Union Center National Bank and the Parent Corporation who had attained age 21 and completed one year of service prior to September 30, 2007. Payments may be made under the Pension Plan once attaining the normal retirement age of 65 and are generally equal to 44 percent of a participant's highest average compensation over a 5-year period.

The following table sets forth changes in projected benefit obligation, changes in fair value of plan assets, funded status, and amounts recognized in the consolidated statements of condition for the Corporation's pension plans at December 31, 2012 and 2011.

 

 

                 

 

 

 

 

 

 

 

2012

 

2011

 

 

(Dollars in Thousands)

Change in Benefit Obligation:

 

 

 

 

 

 

 

 

Projected benefit obligation at beginning of year

 

$

12,345

 

 

$

11,032

 

Interest cost

 

 

555

 

 

 

589

 

Actuarial loss

 

 

1,389

 

 

 

1,335

 

Benefits paid

 

 

(756

)   

 

 

(611

)   

Projected benefit obligation at end of year

 

$

13,533

 

 

$

12,345

 

Change in Plan Assets:

 

 

 

 

 

 

 

 

Fair value of plan assets at beginning year

 

$

6,762

 

 

$

6,993

 

Actual return on plan assets

 

 

681

 

 

 

(111

)   

Employer contributions

 

 

347

 

 

 

491

 

Benefits paid

 

 

(756

)   

 

 

(611

)   

Fair value of plan assets at end of year

 

$

7,034

 

 

$

6,762

 

Funded status

 

$

(6,499

)   

 

$

(5,583

)   

Amounts related to unrecognized actuarial losses for the plan, on a pre-tax basis, that have been recognized in accumulated other comprehensive loss amounted to $6,354,000 and $5,563,000 at December 31, 2012 and 2011, respectively.

The net periodic pension cost for 2012, 2011 and 2010 includes the following components:

 

 

                         

 

 

 

 

 

 

 

 

 

2012

 

2011

 

2010

 

 

(Dollars in Thousands)

Interest cost

 

$

555

 

 

$

589

 

 

$

601

 

Expected return on plan assets

 

 

(377

)   

 

 

(381

)   

 

 

(413

)   

Net amortization

 

 

294

 

 

 

179

 

 

 

130

 

Net periodic pension expense

 

$

472

 

 

$

387

 

 

$

318

 

The following table presents the assumptions used to calculate the projected benefit obligation in each of the last three years.

 

 

                         

 

 

 

 

 

 

 

 

 

2012

 

2011

 

2010

Discount rate

 

 

4.03

%   

 

 

4.64

%   

 

 

5.25

%   

Rate of compensation increase

 

 

N/A

 

 

 

N/A

 

 

 

N/A

 

Expected long-term rate of return on plan assets

 

 

5.50

%   

 

 

5.50

%   

 

 

6.25

%   

The following information is provided for the year ended December 31:

 

 

                         

 

 

 

 

 

 

 

 

 

2012

 

2011

 

2010

 

 

(Dollars in Thousands)

Weighted average assumptions used to determine net periodic benefit cost for years ended December 31

 

 

 

 

 

 

 

 

 

 

 

 

Discount rate

 

 

4.64

%  

 

 

5.25

%  

 

 

5.75

%  

Expected long-term return on plan assets

 

 

5.50

%  

 

 

5.50

%  

 

 

6.25

%  

Rate of compensation increase

 

 

N/A

 

 

 

N/A

 

 

 

N/A

 

The process of determining the overall expected long-term rate of return on plan assets begins with a review of appropriate investment data, including current yields on fixed income securities, historical investment data, historical plan performance and forecasts of inflation and future total returns for the various asset classes. This data forms the basis for the construction of a best-estimate range of real investment return for each asset class. An average, weighted real-return range is computed reflecting the plan's expected asset mix, and that range, when combined with an expected inflation range, produces an overall best-estimate expected return range. Specific factors such as the plan's investment policy, reinvestment risk and investment volatility are taken into consideration during the construction of the best estimate real return range, as well as in the selection of the final return assumption from within the range.

Plan Assets

The Union Center National Bank Pension Trust's weighted-average asset allocation at December 31, 2012, 2011 and 2010, by asset category, is as follows:

 

 

                         

 

 

 

 

 

 

 

Asset Category

 

2012

 

2011

 

2010

Equity securities

 

 

60

% 

 

 

47

% 

 

 

44

%  

Debt and/or fixed income securities

 

 

39

% 

 

 

41

% 

 

 

37

%  

Alternative investments, including commodities, foreign currency and real estate

 

 

1

%   

 

 

4

%   

 

 

—

%   

Cash and other alternative investments, including hedge funds, equity structured notes

 

 

—

%   

 

 

8

%   

 

 

19

%   

Total

 

 

100

%  

 

 

100

%  

 

 

100

%

The general investment policy of the Pension Trust is for the fund to experience growth in assets that will allow the market value to exceed the value of benefit obligations over time. Appropriate diversification on a total fund basis is achieved by following an allowable range of commitment within asset category, as follows:

 

 

                 

 

 

 

 

 

 

 

Range

 

Target

Equity securities

 

 

42 – 48

%  

 

 

45

%   

Debt and/or fixed income securities

 

 

37 – 43

%  

 

 

40

%   

International equity

 

 

12 – 18

%  

 

 

15

%   

Short term

 

 

N/A

 

 

 

N/A

 

Other

 

 

N/A

 

 

 

N/A

 

The fair values of the Corporation's pension plan assets at December 31, 2012 and 2011, by asset category, are as follows:

 

 

                                 

 

 

 

 

 

 

 

 

 

   

December 31,
2012

 

Fair Value Measurements at Reporting Date Using

 

 

 

 

Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)

 

Significant
Other
Observable
Inputs
(Level 2)

 

Significant
Unobservable
Inputs
(Level 3)

 

 

(Dollars in Thousands)

Cash

 

$

42

 

 

$

42

 

 

$

—

 

 

$

—

 

Equity securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. companies

 

 

3,154

 

 

 

3,154

 

 

 

—

 

 

 

—

 

International companies

 

 

1,051

 

 

 

1,051

 

 

 

—

 

 

 

—

 

Debt and/or fixed income securities

 

 

2,787

 

 

 

2,787

 

 

 

—

 

 

 

—

 

Total

 

$

7,034

 

 

$

7,034

 

 

$

  —

 

 

$

  —

 

 

 

                                 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2011

 

Fair Value Measurements at Reporting Date Using

 

 

 

 

Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)

 

Significant
Other
Observable
Inputs
(Level 2)

 

Significant
Unobservable
Inputs
(Level 3)

 

 

(Dollars in Thousands)

Cash

 

$

512

 

 

$

512

 

 

$

—

 

 

$

—

 

Equity securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. companies

 

 

1,788

 

 

 

1,788

 

 

 

—

 

 

 

—

 

International companies

 

 

1,405

 

 

 

1,405

 

 

 

—

 

 

 

—

 

U.S. Treasury securities

 

 

2,798

 

 

 

2,798

 

 

 

—

 

 

 

—

 

Commodities

 

 

259

 

 

 

259

 

 

 

—

 

 

 

—

 

Total

 

$

 6,762

 

 

$

 6,762

 

 

$

  —

 

 

$

  —

 

 

The investment manager is not authorized to purchase, acquire or otherwise hold certain types of market securities (subordinated bonds, real estate investment trusts, limited partnerships, naked puts, naked calls, stock index futures, oil, gas or mineral exploration ventures or unregistered securities) or to employ certain types of market techniques (margin purchases or short sales) or to mortgage, pledge, hypothecate, or in any manner transfer as security for indebtedness, any security owned or held by the Plan.

Cash Flows

Contributions

The Bank expects to contribute $450,000 to its Pension Trust in 2013.

The Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010, signed into law on June 25, 2010, permits single employer and multiple employer defined benefit plan sponsors to elect to extend the plan's amortization period of a Shortfall Amortization Base over either a nine year period or a fifteen year period, rather than the seven year period required under the Pension Protection Act of 2006. The relief was available for any tow Plan Years 2008 through 2011.

The Bank has elected to apply the Pension Relief Act fifteen year amortization of the Shortfall Amortization Bases established for the 2009 and 2011 Plan Years.

The Moving Ahead for Progress in the 21st Century Act which was enacted on July 6, 2012 contained special rules related to funding stabilization for single employer defined benefit plans. Under these provisions, the interest rates used to calculate the plan's funding percentages and minimum required contribution are adjusted as necessary to fall within a specified range that is determined based on an average of rates for the 25 year period ending on September 30 of the calendar year preceding the first day of the Plan year. For Plan years beginning in 2012, the range is 90% - 110% of the 25 year average. The effect of the application of the adjusted rates was to reduce the 2012 required minimum contribution to the Plan to approximately $300,000. However, the actuary has recommended that the contribution for the 2013 plan year be at least $450,000 in order to continue to make progress toward fully funding Plan liabilities and that amount has been contributed for the 2012 Plan Year.

Estimated Future Benefit Payments

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid in each year 2013, 2014, 2015, 2016, 2017 and years 2018-2022, respectively: $726,983, $746,985, $754,368, $755,657, $739,069 and $3,821,109.

401(k) Benefit Plan

The Corporation maintains a 401(k) employee savings plan to provide for defined contributions which covers substantially all employees of the Corporation. The Corporation's contribution to its 401(k) plan provided a dollar-for-dollar matching contribution up to six percent of salary deferrals for the periods presented. For 2012, 2011 and 2010, employer contributions amounted to $405,000, $358,000 and $294,000, respectively.