14. 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”), and an Employees’ Pension Plan, which is currently frozen.

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.

The Company contributed $156, $144 and $294 to the Peoples Security Bank and Trust Company Employee Stock Ownership Plan in 2016, 2015 and 2014. In addition, the Company contribution of $786, $778 and $872 to the Peoples Security Bank and Trust Company Retirement Profit Sharing Plan in 2016, 2015 and 2014, comprised of a Safe Harbor contribution of $446, $430 and $464 and a discretionary match of $340, $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 $76 and $63 at December 31, 2016 and 2015, respectively. The expense associated with the plan was $13, $15 and $5 for 2016, 2015 and 2014 respectively.

The Company has SERPs for the benefit of certain officers of the Company. At December 31, 2016 and 2015, other liabilities include $ 1,416 and $ 1,244 accrued under the Plans. Compensation expense includes approximately $254, $157, and $176 relating to these SERPS for the years ended December 31, 2016, 2015 and 2014, 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.

Information related to the pension plan is as follows:



	Pension Benefits
December 31	2016		2015
Change in benefit obligation:
Benefit obligation, beginning	$	17,380	$	17,869
Interest cost		665		696
Change in experience gain		(322)		(41)
Change in assumptions gain		(256)		(367)
Benefits paid		(764)		(777)
Benefit obligation, ending		16,703		17,380
Change in plan assets:
Fair value of plan assets, beginning		12,331		12,839
Actual return on plan assets		1,023		29
Employer contributions		54		240
Benefits paid		(764)		(777)
Fair value of plan assets, ending		12,644		12,331
Funded status at end of year	$	(4,059)	$	(5,049)

The Society of Actuaries released new mortality tables in 2016 and 2015 which the Company utilized in its pension plan remeasurements at December 31, 2016 and 2015. The change in mortality assumption resulted in a decrease to the pension plan’s accumulated benefit obligation of $256 in 2016 and a decrease of $352 in 2015.

Amounts recognized in the consolidated balance sheets are as follows:



	Pension Benefits
December 31	2016		2015

Liabilities	$	4,059	$	5,049
Amounts recognized in the accumulated other comprehensive loss consist of:
Net actuarial gain		(6,946)		(7,863)
Deferred taxes		2,431		2,752

Net amount recognized	$	(4,515)	$	(5,111)

The accumulated benefit obligation for the defined benefit pension plan was $16,703 and $17,380 at December 31, 2016 and 2015, respectively.

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


	Pension Benefits
Years Ended December 31,	2016		2015		2014
Net periodic pension income:
Interest cost	$	665	$	696	$	678
Expected return on plan assets		(893)		(931)		(910)
Amortization of unrecognized net loss		209		198		92
Net periodic pension income:		(19)		(37)		(140)
Other changes in plan assets and benefit obligations recognized in other comprehensive income (loss):
Net loss (gain)		917		296		3,684
Deferred tax		(321)		(104)		(1,289)
Total recognized in other comprehensive income		596		192		2,395
Total recognized in net period pension cost and other comprehensive income	$	577	$	155	$	2,255

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 $195.

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



	Pension Benefits
December 31,	2016		2015		2014
Discount rate:
Obligation	4.00	%	4.00	%	4.00	%
Expense	4.00		4.00		5.00
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, 2016 and 2015, by asset category are as follows:


December 31,	2016		2015
Asset Category:
Cash and cash equivalents	4.2	%	5.9	%
Equity securities	58.0		57.0
Corporate bonds	26.2		23.0
U.S. Government securities	11.6		14.1
	100.0	%	100.0	%

Fair Value Measurement of pension plan assets at December 31, 2016 and 2015 is as follows:


			Quoted Prices in
			Active Markets		Significant		Significant
			for Identical		Observable		Observable
			Assets		Inputs		Inputs
December 31, 2016	Total		(Level 1)		(Level 2)		(Level 3)
Cash	$	529	$	529			$
Equity securities:
U.S. large cap		7,046		7,046
International		282		282
Fixed income securities:
U.S. Treasuries		498			$	498
U.S. Government agencies		977				977
Corporate bonds		3,312				3,312
Total	$	12,644	$	7,857	$	4,787	$


			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	$	4,553	$

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, 2016 or 2015. The Company has not determined the amount of the expected contribution to the Employees’ Pension Plan for 2017.

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
2017	$	791
2018		796
2019		793
2020		838
2021		851
Thereafter	$	4,784