Pension and Postretirement Benefit Plans

Effective December 31, 2006, the pension plan was amended and frozen so that no further benefits will accrue under the plan and no additional employees may become participants. The pension plan was terminated effective September 30, 2011 and after receiving final approval from the Internal Revenue Service, distributions in the form of lump-sum cash payments to plan participants, rollovers and purchasing annuity contracts were completed on December 19, 2011. The Company recognized a loss of $589,000 on the distribution of the plan’s assets during 2011. The loss is included in salaries and employee benefits expense on the consolidated statements of income. An additional $141,000 in expense was incurred during 2011 for the purchase of employee retirement annuities. The expense is included in outside service fees on the consolidated statements of income. There were no expenses related to the pension plan recognized during 2012 or 2013.

The Company provides certain health care and life insurance benefits for nine retired employees who have met certain eligibility requirements. All other employees retiring after reaching age 65 and having at least 15 years of service with the Company will be allowed to stay on the Company’s group life and health insurance policies, but will be required to pay premiums. The Company’s share of the estimated costs that will be paid after retirement is generally being accrued by charges to expense over the employees’ active service periods to the dates they are fully eligible for benefits, except that the Company’s unfunded cost that existed at January 1, 1993 is being accrued primarily in a straight-line manner that will result in its full accrual by December 31, 2013.

Generally Accepted Accounting Principles (“GAAP”) requires the Company to recognize the funded status (i.e. the difference between the fair value of plan assets and the projected benefit obligations) of its postretirement benefit plans in the consolidated balance sheet, with a corresponding adjustment to accumulated other comprehensive income, net of taxes.

The following amounts that have not been recognized in the net periodic benefit cost of the postretirement benefit plan for the year ended December 31, 2013 but are included in other comprehensive income: unrecognized net actuarial gain of $44 thousand. The transition obligation included in other comprehensive income and expected to be recognized in the net periodic benefit cost of the postretirement benefit plan during 2014 is $4 thousand.

The following tables provide a reconciliation of the changes in the benefit obligations and fair value of assets for 2013, 2012, and 2011 and a statement of the funded status at December 31, 2013, 2012 and 2011 for the pension and postretirement benefit plans of the Company. The Company uses a December 31st measurement date for its plans.



	Pension Plan							Postretirement Benefits Plan
	2013		2012		2011			2013			2012			2011
	(in thousands)
Change in Benefit Obligation:
Benefit obligation, beginning	$	—	$	—	$	3,684		$	150		$	150		$	144
Service cost	—		—		—			—			—			—
Interest cost	—		—		101			4			5			6
Actuarial loss (gain)	—		—		143			(9		)	2			6
Benefits paid	—		—		(4,069		)	(7		)	(7		)	(6		)
Settlement loss	—		—		141			—			—			—
Benefit obligation, ending	$	—	$	—	$	—		$	138		$	150		$	150
Change in Plan Assets:
Fair value of plan assets, beginning	$	—	$	—	$	3,252		$	—		$	—		$	—
Actual return on plan assets	—		—		87			—			—			—
Employer contributions	—		—		730			7			7			6
Benefits paid	—		—		(4,069		)	(7		)	(7		)	(6		)
Fair value of plan assets, ending	$	—	$	—	$	—		$	—		$	—		$	—

	Pension Plan							Postretirement Benefits Plan
	2013		2012		2011			2013			2012			2011
	(in thousands)
Funded Status:
Funded status	$	—	$	—	$	—		$	(138	)	$	(150	)	$	(150	)
Unrecognized net actuarial loss	—		—		—			—			—			—
Unrecognized net transition obligation	—		—		—			—			—			—
Unrecognized prior service cost	—		—		—			—			—			—
Accrued benefits	$	—	$	—	$	—		$	(138	)	$	(150	)	$	(150	)
Amounts Recognized in Consolidated Balance Sheets:
Prepaid benefit cost	$	—	$	—	$	—		$	—		$	—		$	—
Accrued liability	—		—		—			(138		)	(150		)	(150		)
	$	—	$	—	$	—		$	(138	)	$	(150	)	$	(150	)
Amounts Recognized in Accumulated Other Comprehensive Income:
Net actuarial loss (gain)	$	—	$	—	$	—		$	(65	)	$	(65	)	$	(76	)
Net transition obligation	—		—		—			—			—			—
Deferred tax (benefit)/liability	—		—		—			21			21			25
	$	—	$	—	$	—		$	(44	)	$	(44	)	$	(51	)

The accumulated benefit obligation for the pension plan was distributed during 2011, and as a result, there was no accumulated benefit obligation at December 31, 2013, 2012 and 2011.

The following tables provide the components of net periodic benefit cost of the pension plan and postretirement benefit plan for the years ended December 31, 2013, 2012, and 2011:



	Pension Plan							Postretirement Benefits Plan
	2013		2012		2011			2013			2012			2011
	(in thousands)
Components of Net Periodic Benefit Cost:
Service cost	$	—	$	—	$	—		$	—		$	—		$	—
Interest cost	—		—		101			4			5			6
Expected return on plan assets	—		—		(83		)	—			—			—
Amortization of prior service costs	—		—		—			—			—			—
Amortization of transition obligation	—		—		—			—			—			—
Recognized net loss due to settlement	—		—		141			—			—			—
Amortization of net actuarial loss	—		—		572			(7		)	(8		)	(11		)
Net periodic benefit cost	$	—	$	—	$	731		$	(3	)	$	(3	)	$	(5	)

The net periodic benefit cost for the pension plan was calculated using the following assumptions; weighted average discount rate of 6.10% for 2011 and expected long-term return on plan assets of 5.00% for 2011. Due to the amendment of the pension plan, no rate of compensation increase was assumed.

The benefit obligation for the postretirement benefit plan was calculated using a weighted average discount rate of 2.75% for 2013, 3.50% for 2012, and 4.25% for 2011. For measurement purposes, a 10.00% annual rate of increase in the per capita cost of covered health care benefits was assumed for 2014, 10.00% for 2015, 8.00% for 2016, 8.00% for 2017, and 6.00% for 2018 and thereafter. If these rates were increased by 1.00% in each year, the benefit obligation at December 31, 2013 would have increased by $5 thousand and the net periodic benefit cost for 2013 would have increased by less than $1 thousand. If these rates were decreased by 1.00% in each year, the benefit obligation at December 31, 2013 would have decreased by $4 thousand and the net periodic benefit cost for 2013 would have decreased by less than $1 thousand.

All plan assets were distributed to pension plan beneficiaries during 2011 and no future payments are expected.

Estimated future benefit payments at December 31, 2013, which reflect expected future service, as appropriate, were as follows:



	Postretirement Benefits
	(in thousands)
2014	$	15
2015	15
2016	15
2017	14
2018	14
2019 - 2023	54