15. Employee benefit plans:

The Company had separate Employee Stock Ownership Plans (“ESOP”) and Retirement Profit Sharing 401(k) Plans for Penn Security Bank and Trust and Peoples Neighborhood Bank prior to 2014. The plans were merged at year end 2014 into the Peoples Security Bank and Trust Employee Stock Ownership Plan and the Peoples Security Bank and Trust Retirement Profit Sharing Plan. The Company also maintains Supplemental Executive Retirement Plans (“SERP”), an Employees’ Pension Plan, which is currently frozen, and a Postretirement Plan Life Insurance plan which was curtailed in 2013.

Under the Peoples Security Bank and Trust Company ESOP, amounts voted by the Company’s Board of Directors are paid into the ESOP and each employee is credited with a share in proportion to their annual compensation. All contributions to the ESOP are invested in or will be invested primarily in Company stock. Distribution of a participant’s ESOP account occurs upon retirement, death or termination in accordance with the plan provisions.

Under the Peoples Security Bank and Trust Company Retirement Profit Sharing Plan, amounts approved by the Board of Directors have been paid into a fund and each employee was credited with a share in proportion to their annual compensation. Upon retirement, death or termination, each employee is paid the total amount of their credits in the fund in one of a number of optional ways in accordance with the plan provisions. Eligible employees may elect deferrals of up to the maximum amounts permitted by law.

At December 31, 2013, the Penn Security Bank and Trust Company ESOP held 104,964 shares of the Company’s stock, all of which were allocated to specific participant accounts. These shares were treated the same for dividend purposes and earnings per share calculations as are any other outstanding shares of the Company’s stock. The Company contributed $218 to the ESOP plan during the year ended December 31, 2013.

The Penn Security Bank and Trust Company Retirement Profit Sharing Plan’s contributions included a Safe Harbor contribution of $310 during the year ended December 31, 2013 and a discretionary match of $234 during the year ended December 31, 2013, equal to one-half of employee deferrals, up to a maximum match of 3%.

Peoples Neighborhood Bank had an Employee Stock Ownership and Profit-Sharing Plan (“Plan”) with 401(k) provisions. The Plan was for the benefit of all employees who met the eligibility requirements set forth in the Plan. The amount of contributions to the Plan, including 401(k) matching contributions, was at the discretion of the Board of Directors. Company contributions to the employee stock ownership plan were allocated to participant accounts based on their percentage of total compensation for the Plan year. At December 31, 2013, 263,559 shares of the Company’s common stock were held in the Plan. In the event a terminated Plan participant desired to sell his or her shares of the Company’s stock, or for certain employees who elected to diversify their account balances, the Company was required to purchase the shares from the participant at their fair market value. There was no expense associated with the plan during 2015 and 2014.

The Company contributed $144 and $294 to the Peoples Security Bank and Trust Company Employee Stock Ownership Plan in 2015 and 2014. In addition, the Company contribution of $778 and $872 to the Peoples Security Bank and Trust Company Retirement Profit Sharing Plan in 2015 and 2014, comprised of a Safe Harbor contribution of $430 and $464 and a discretionary match of $348 and $408.

Peoples Security Bank and Trust Company established a Supplemental Executive Defined Contribution Plan to replace 401(k) plan benefits lost due to compensation limits imposed on qualified plans by Federal tax law. The annual benefit is a maximum of 6% of the executive compensation in excess of Federal limits. The total liability associated with this plan was $63 and $48 at December 31, 2015 and 2014, respectively. The expense associated with the plan was $15, $5 and $7 for 2015, 2014 and 2013 respectively.

The Company has SERPs for the benefit of certain officers of the Company. At December 31, 2015 and 2014, other liabilities include $ 1,244 and $ 1,167 accrued under the Plans. Compensation expense includes approximately $88, $80, and $164 relating to these SERPS for the years ended December 31, 2015, 2014 and 2013, respectively.

Under the Penn Security Bank and Trust Company Employees’ Pension Plan, currently under curtailment, amounts computed on an actuarial basis were being paid by the Company into a trust fund. The plan provided for fixed benefits payable for life upon retirement at the age of 65, based on length of service and compensation levels as defined in the plan. As of June 22, 2008 no further benefits are being accrued in this plan. Plan assets of the trust fund are invested and administered by the Trust Department of Peoples Security Bank and Trust Company.

The Postretirement Life Insurance Plan was an unfunded, non-vesting defined benefit plan for employees of Penn Security Bank and Trust Company hired after July 1, 1995; which provided postretirement life insurance benefit of $50,000 at retirement, then decreasing to $5,000 at age 75. Employees hired prior to July 1, 1995 were entitled to three times their salary at retirement. During 2013 the company entered into an agreement with an insurance company to transfer all risk and obligation for benefits payable as to the current retiree group in exchange for a one time fixed payment, additionally the company eliminated retiree life insurance for current employees.

Information related to the pension and postretirement life insurance plans is as follows:



	Pension Benefits
December 31	2015		2014
Change in benefit obligation:
Benefit obligation, beginning	$	17,869	$	14,211
Interest cost		696		678
Change in experience loss (gain)		(41)		(250)
Change in assumptions loss (gain)		(367)		3,944
Benefits paid		(777)		(714)
Benefit obligation, ending		17,380		17,869
Change in plan assets:
Fair value of plan assets, beginning		12,839		12,417
Actual return on plan assets		29		895
Employer contributions		240		241
Benefits paid		(777)		(714)
Fair value of plan assets, ending		12,331		12,839
Funded status at end of year	$	(5,049)	$	(5,030)

The Society of Actuaries released new mortality tables in 2015 and 2014 which the Company utilized in its pension plan remeasurements at December 31, 2015 and 2014. The change in mortality assumption resulted in a decrease to the pension plan’s accumulated benefit obligation of $352 in 2015 and an increase of $2,138 in 2014.

Amounts recognized in the balance sheet are as follows:



	Pension Benefits
December 31	2015		2014

Liabilities	$	5,049	$	5,030
Amounts recognized in the accumulated other comprehensive loss consist of:
Net actuarial gain		(7,863)		(7,567)
Deferred taxes		2,752		2,648

Net amount recognized	$	(5,111)	$	(4,919)

The accumulated benefit obligation for the defined benefit pension plan was $17,380 and $17,869 at December 31, 2015 and 2014, respectively.

Components of net periodic pension expense (income) and other amounts recognized in other comprehensive income are as follows:


	Pension Benefits
Years Ended December 31,	2015		2014		2013
Net periodic pension expense (income):
Interest cost	$	696	$	678	$	646
Expected return on plan assets		(931)		(910)		(825)
Amortization of unrecognized net loss		198		92		180
Net periodic pension expense (income):		(37)		(140)		1
Other changes in plan assets and benefit obligations recognized in other comprehensive income (loss):
Net loss (gain)		296		3,684		(2,369)
Deferred tax		(104)		(1,289)		805
Total recognized in other comprehensive income		192		2,395		(1,564)
Total recognized in net period pension cost and other comprehensive income	$	155	$	2,255	$	(1,563)


	Postretirement Life
	Insurance Benefits
Year Ended December 31,	2015	2014	2013
Components of net periodic pension cost:
Service cost	$	$	$	35
Interest cost				111
Amortization of unrecognized net gain				96
Net periodic other benefit cost	$	$		242
Changes in plan assets and benefit obligations recognized in other comprehensive income:
Net loss (gain)				(1,273)
Deferred tax				620
Total recognized in other comprehensive income				(653)
Total recognized in net period pension cost and other comprehensive income	$	$	$	(411)

The estimated net loss for the defined benefit pension plan that will be amortized from accumulated other comprehensive loss into net periodic benefit cost over the next fiscal year is $219.

Weighted-average assumptions used to determine benefit obligations and related expenses were as follows:



	Pension Benefits
December 31,	2015		2014		2013
Discount rate:
Obligation	4.00	%	4.00	%	5.00	%
Expense	4.00		5.00		4.25
Expected long-term return on plan assets	7.50	%	7.50	%	7.50	%

The expected long-term return on plan assets was determined using average historical returns of the Company’s plan assets.

The Company’s pension plan weighted-average asset allocations at December 31, 2015 and 2014, by asset category are as follows:


December 31,	2015		2014
Asset Category:
Cash and cash equivalents	5.9	%	2.4	%
Equity securities	57.0		59.3
Corporate bonds	23.0		14.9
U.S. Government securities	14.1		23.4
	100.0	%	100.0	%

Fair Value Measurement of pension plan assets at December 31, 2015 and 2014 is as follows:


			Quoted Prices in
			Active Markets		Significant		Significant
			for Identical		Observable		Observable
			Assets		Inputs		Inputs
December 31, 2015	Total		(Level 1)		(Level 2)		(Level 3)
Cash	$	781	$	781			$
Equity securities:
U.S. large cap		6,772		6,772
International		225		225
Fixed income securities:
U.S. Treasuries		760			$	760
U.S. Government agencies		971				971
Corporate bonds		2,822				2,822
Total	$	12,331	$	7,778	$	4,533	$


			Quoted Prices in
			Active Markets		Significant		Significant
			for Identical		Observable		Observable
			Assets		Inputs		Inputs
December 31, 2014	Total		(Level 1)		(Level 2)		(Level 3)
Cash	$	308	$	308			$
Equity securities:
U.S. large cap		7,369		7,369
International		241		241
Fixed income securities:
U.S. Treasuries		1,073			$	1,073
U.S. Government agencies		1,931				1,931
Corporate bonds		1,917				1,917
Total	$	12,839	$	7,918	$	4,921	$

The Company investment policies and strategies with respect to the pension plan include: (i) the Trust and Investment Division’s equity philosophy is Large-Cap Core with a value bias. We invest in individual high-grade common stocks that are selected from our approved list; (ii) diversification is maintained by having no more than 20% in any industry sector and no individual equity representing more than 10% of the portfolio; and (iii) the fixed income style is conservative but also responsive to the various needs of our individual clients. Fixed income securities consist of U.S. Government Agencies or corporate bonds rated “A” or better. The Company targets the following allocation percentages: (i) cash equivalents 10%; (ii) fixed income 40% ; and (iii) equities 50%.

There is no Company stock included in equity securities at December 31, 2015 or 2014. The Company has not determined the amount of the expected contribution to the Employees’ Pension Plan for 2016.

The following benefit payments are expected to be paid in the next five years and in the aggregate for the five years thereafter:


	Pension Benefits
2016	$	791
2017		801
2018		840
2019		836
2020		878
Thereafter	$	4,776