Retirement Plans and Other Postretirement Benefits

12 Months Ended

Dec. 31, 2012

Retirement Plans and Other Postretirement Benefits [Abstract]

Retirement Plans and Other Postretirement Benefits

Note 10. Retirement Plans and Other Postretirement Benefits

Substantially all employees who were hired before December 8, 2009 are covered by a noncontributory retirement plan. Employees hired on or after December 8, 2009 are not eligible to participate in the noncontributory retirement plan. The Corporation also provides supplemental executive retirement benefits, a portion of which is in excess of limits imposed on qualified plans by federal tax law. These plans are non-qualified benefit plans. Information on these plans are aggregated and reported under “Retirement Plans” within this footnote.

The Corporation also provides certain postretirement healthcare and life insurance benefits for retired employees. Information on these benefits is reported under “Other Postretirement Benefits” within this footnote.

The Corporation sponsors a 401(k) deferred salary savings plan, which is a qualified defined contribution plan, and which covers all employees of the Corporation and its subsidiaries, and provides that the Corporation makes matching contributions as defined by the plan. Expense recorded by the Corporation for the 401(k) deferred salary savings plan for the years ended December 31, 2012, 2011 and 2010 was $667 thousand, $639 thousand and $588 thousand, respectively.

The Corporation sponsors a Supplemental non-Qualified Pension Plan (SNQPP) which was established in 1981 prior to the existence of a 401(k) deferred salary savings, employee stock purchase and long-term incentive plans and therefore is not actively offered to new participants. Expense recorded by the Corporation for the SNQPP for the year ended December 31, 2012 was $531 thousand. The expense for 2012 was estimated using a weighted-average discount rate of 3.96%. Expense recorded by the Corporation for the SNQPP for the year ended December 31, 2011 of $463 thousand was more than offset be a reversal in the accrual of $467 thousand related to the passing of one of the participants. Expense recorded by the Corporation for the SNQPP for the year ended December 31, 2010 was $88 thousand.

Information with respect to the Retirement Plans and Other Postretirement Benefits follows:

	Retirement Plans						Other  Postretirement Benefits
(Dollars in thousands)	2012			2011			2012			2011
Change in benefit obligation:
Benefit obligation at beginning of year	$	38,374		$	32,250		$	2,344		$	1,974
Service cost		622			556			82			66
Interest cost		1,726			1,725			116			117
Actuarial loss		3,755			5,368			55			267
Benefits paid		(1,598	)		(1,525	)		(79	)		(80	)
Benefit obligation at end of year	$	42,879		$	38,374		$	2,518		$	2,344
Change in plan assets:
Fair value of plan assets at beginning of year	$	25,213		$	24,366		$	—		$	—
Actual return on plan assets		2,669			127			—			—
Benefits paid		(1,598	)		(1,525	)		(79	)		(80	)
Employer contribution and non-qualified benefit payments		8,136			2,245			79			80
Fair value of plan assets at end of year		34,420			25,213			—			—
Funded status		(8,459	)		(13,161	)		(2,518	)		(2,344	)
Unrecognized net actuarial loss		22,576			20,482			850			819
Unrecognized prior service costs		(1,825	)		(2,061	)		(27	)		(48	)
Net amount recognized	$	12,292		$	5,260		$	(1,695	)	$	(1,573	)

Information for the pension plans with an accumulated benefit obligation in excess of the fair value of plan assets:

	At December 31,
(Dollars in thousands)	2012		2011
Projected benefit obligation	$	41,459	$	37,307
Accumulated benefit obligation		39,912		35,286
Fair value of plan assets		34,420		25,213

The retirement benefit cost includes the following components:

	Retirement Plans									Other Postretirement Benefits
(Dollars in thousands)	2012			2011			2010			2012			2011			2010
Service cost	$	622		$	556		$	362		$	82		$	66		$	76
Interest cost		1,726			1,725			1,708			116			117			115
Expected return on plan assets		(2,254	)		(1,895	)		(1,670	)		—			—			—
Amortization of net loss		1,147			728			686			23			15			7
Accretion of prior service cost		(235	)		(235	)		(236	)		(20	)		(20	)		(20	)
Net periodic benefit cost	$	1,006		$	879		$	850		$	201		$	178		$	178

(Dollars in thousands)	Retirement Plans			Other Postretirement Benefits
Expected amortization expense for 2013:
Amortization (accretion) of net loss	$	1,247		$	(24	)
(Accretion) amortization of prior service cost		(241	)		20

During 2013, the Corporation expects to contribute approximately $40 thousand to the Retirement Plans and approximately $82 thousand to Other Postretirement Benefits.

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:

(Dollars in thousands) For the fiscal year ending:	Retirement Plans		Other Postretirement Benefits
2013	$	1,905	$	82
2014		1,955		111
2015		2,142		122
2016		2,268		128
2017		2,310		135
Years 2018-2022		11,068		750

Weighted-average assumptions used to determine benefit obligations at December 31, 2012 and 2011 were as follows:

	Retirement Plans						Other  Postretirement Benefits
	2012			2011			2012			2011
Assumed discount rate		4.0	%		4.5	%		4.0	%		4.5	%
Assumed salary increase rate		3.0			3.0			—			—

Weighted-average assumptions used to determine net periodic costs for the years ended December 31, 2012 and 2011 were as follows:

	Retirement Plans						Other  Postretirement Benefits
	2012			2011			2012			2011
Assumed discount rate		4.5	%		5.5	%		4.5	%		5.5	%
Assumed long-term rate of investment return		8.0			8.0			—			—
Assumed salary increase rate		3.0			3.0			—			—

The discount rate was determined utilizing the Citigroup Pension Discount Curve. Historical investment returns is the basis used to determine the overall expected long-term rate of return on assets.

Assumed Health Care Cost Trend Rates	2012			2011			2010
Health care cost trend rate assumed for next year		6.5	%		6.5	%		6.5	%
Rate to which the cost trend rate is assumed to decline		5.0			5.0			5.0
Year that the rate reaches the ultimate rate		2014			2013			2012

Assumed health care cost trend rates have a significant effect on the amounts reported for health care plans. A one-percentage-point change in the assumed health care cost trend rates would have the following effects:

	One Percentage Point
(Dollars in thousands)	Increase		Decrease
Effect on total of service and interest cost components	$	8	$	(7	)
Effect on postretirement benefit obligation		97		(86	)

The Corporation’s pension plan asset allocation at December 31, 2012 and 2011, by asset category was as follows:

	Percentage of Plan Assets at December 31,
	2012			2011
Asset Category:
Equity securities		59	%		49	%
Debt securities		38			47
Other		3			4
Total		100	%		100	%

Plan assets include marketable equity securities, corporate and government debt securities, and certificates of deposit. The investment strategy was changed in 2012 and going forward to keep a 60%-equity-to-40%-fixed-income mix to achieve the overall expected long-term rate of return of 8.0%. Equity securities do not include any common stock of the Corporation.

The major categories of assets in the Corporation’s pension plan at year-end are presented in the following table. Assets are segregated by the level of the valuation inputs within the fair value hierarchy described in Note 18, “Fair Value Disclosures.”

(Dollars in thousands)	Fair Value  Measurements at December 31,
	2012		2011
Level 1:
Common stocks	$	—	$	8,056
Mutual funds:
U.S. Large Cap		12,880		—
U.S. Mid Cap		1,649		986
U.S. Small Cap		1,675		991
International		4,164		2,202
Income		899		1,577
Short-term investments		916		1,250
Level 2:
U.S. government obligations		2,834		2,359
Corporate bonds		4,900		4,203
Level 3:
Certificates of deposit		4,503		3,589
Total fair value of plan assets	$	34,420	$	25,213

Mutual fund investments in U.S. large cap funds are comprised primarily of common stock funds which are diversified amongst various industries including basic materials (oil, gas, and other), financial services, healthcare, technology and other industries with some foreign exposure in the companies’ markets. The primary objective is long-term capital appreciation and a secondary objective of current income. Mutual fund investments in U.S. mid cap and small cap funds are comprised mainly of growth and value equity funds with some foreign exposure in the companies’ markets. Mutual fund investments in international funds consist mainly of equity funds that invest in diverse companies mostly based in Europe and the Pacific Basin with the primary objective to provide long-term growth of capital and a secondary objective of current income. Mutual fund investments in income funds are comprised of short-term and intermediate-term bond funds. Corporate bonds are fixed income investment grade bonds of primarily U.S. issuers from diverse industries. Other fixed-income investments include U.S. government agency securities and bank certificates of deposits. The fixed income investments have varying maturities ranging from one to ten years with the objective to maximize investment return while preserving investment principal. Short-term investments are comprised of an interest-bearing money market deposit account with the Bank.

The following table provides a reconciliation of the beginning and ending balances for measurements in hierarchy Level 3 at December 31, 2012 and 2011.

(Dollars in thousands)	Balance at December 31, 2011		Total Unrealized Gains or (Losses)		Total Realized Gains or (Losses)		Purchases		Maturities/ Redemptions			Balance at December 31, 2012
Certificates of deposit	$	3,589	$	—	$	—	$	1,509	$	(595	)	$	4,503
Total Level 3 assets	$	3,589	$	—	$	—	$	1,509	$	(595	)	$	4,503

(Dollars in thousands)	Balance at December 31, 2010		Total Unrealized Gains or (Losses)		Total Realized Gains or (Losses)		Purchases		Maturities/ Redemptions			Balance at December 31, 2011
Certificates of deposit	$	2,898	$	—	$	—	$	1,305	$	(614	)	$	3,589
Total Level 3 assets	$	2,898	$	—	$	—	$	1,305	$	(614	)	$	3,589