Pension and Other Benefits

12 Months Ended

Dec. 31, 2011

Pension and Other Benefits

Pension and Other Benefits

Note 15 — 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, which has been in effect since March 15, 1950, generally covers employees of Union Center National Bank and the Parent Corporation who have 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 is 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, 2011 and 2010.

	2011			2010
	(Dollars in Thousands)
Change in Benefit Obligation:
Projected benefit obligation at beginning of year	$	11,032		$	10,660
Service cost		—			—
Interest cost		589			601
Actuarial loss		1,335			393
Benefits paid		(611	)		(622	)
Projected benefit obligation at end of year	$	12,345		$	11,032
Change in Plan Assets:
Fair value of plan assets at beginning year	$	6,993		$	6,652
Actual return on plan assets		(111	)		663
Employer contributions		491			300
Benefits paid		(611	)		(622	)
Fair value of plan assets at end of year	$	6,762		$	6,993
Funded status	$	(5,583	)	$	(4,039	)

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 $5,563,000 and $3,914,000 at December 31, 2011 and 2010, respectively.

The net periodic pension cost for 2011, 2010 and 2009 includes the following components:

	2011			2010			2009
	(Dollars in Thousands)
Service cost	$	—		$	—		$	—
Interest cost		589			601			606
Expected return on plan assets		(381	)		(413	)		(288	)
Net amortization and deferral		179			130			—
Net periodic pension expense	$	387		$	318		$	318

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

	2011			2010			2009
Discount rate		4.64	%		5.25	%		5.75	%
Rate of compensation increase		N/A			N/A			N/A
Expected long-term rate of return on plan assets		5.50	%		6.25	%		5.00	%

The following information is provided at December 31:

	2011			2010			2009
	(Dollars in Thousands)
Information for Plans With a Benefit Obligation in Excess of Plan Assets
Weighted average assumptions used to determine net periodic benefit cost for years ended December 31
Discount rate		5.25	%		5.75	%		6.25	%
Expected long-term return on plan assets		5.50	%		6.25	%		5.00	%
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, 2011, 2010 and 2009, by asset category, is as follows:

Asset Category	2011			2010			2009
Equity securities		47	%		44	%		44	%
Debt and/or fixed income securities		41	%		37	%		46	%
Alternative investments, including commodities, foreign currency and real estate		4	%		—	%		5	%
Cash and other alternative investments, including hedge funds, equity structured notes		8	%		19	%		5	%
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		21 – 32	%		26	%
Debt and/or fixed income securities		33 – 49	%		41	%
International equity		18 – 27	%		22	%
Short term		N/A			N/A
Other		8 – 13	%		11	%

The fair values of the Corporation's pension plan assets at December 31, 2011 and 2010, by asset category, are as follows:

	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	$	—	$	—

	December 31, 2010		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	$	1,379	$	1,379	$	—	$	—
Equity Securities:
U.S. companies		1,522		1,522		—		—
International companies		1,534		1,534		—		—
U.S. Treasury securities		2,378		2,378		—		—
Corporate bonds		180		180		—		—
Total	$	6,993	$	6,993	$	—	$	—

The following table presents the changes in pension plan asset with significant unobservable inputs (Level 3) for the year ended December 31:

	2011		2010
	(Dollars in Thousands)
Beginning balance, January 1,	$	—	$	331
Actual return on plan assets:
Relating to assets still held at the reporting date		—		—
Relating to assets sold during the period		—		8
Purchases, sales and settlements		—		(339	)
Transfers out of Level 3		—		—
Ending balance, December 31,	$	—	$	—

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 $453,000 to its Pension Trust in 2012.

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 Bank has elected to apply the Pension Relief Act Fifteen Year amortization of the Shortfall Amortization Base for its 2012 minimum funding requirement. The minimum amount to be funded is $453,000, as noted above, by December 31, 2012 with the understanding that fully funding the plan earlier than this date will lower this amount and that funding the plan after this date will increase this amount. As noted, this amount is the minimum required funding amount. The Bank does have the option of funding above this amount but has contributed the minimum historically.

Estimated Future Benefit Payments

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid in each year 2012, 2013, 2014, 2015, 2016 and years 2017-2021, respectively: $701,241, $717,192, $775,137, $767,674, $772,132 and $3,980,680.

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 provides a dollar-for-dollar matching contribution up to six percent of salary deferrals. For 2011, 2010 and 2009, employer contributions amounted to $358,000, $294,000 and $266,000, respectively.