Retirement Plans

12 Months Ended

Dec. 31, 2011

Retirement Benefits

RETIREMENT PLANS

NOTE M—RETIREMENT PLANS

        The Corporation's banking subsidiary has a non-contributory, defined benefit pension plan. Retirement benefits are a function of both years of service and compensation. The funding policy is to contribute annually the amount that is sufficient to meet the minimum funding requirements set forth in the Employee Retirement Income Security Act.

        A measurement date of December 31 has been used for the fiscal year ending December 31, 2011 and 2010.

In thousands	2011			2010
Change in benefit obligation:
Benefit obligation at beginning of year	$	17,919		$	18,283
Service cost		570			458
Interest cost		962			1,074
Actuarial (gain) loss		2,303			(1,153	)
Benefits paid		(765	)		(743	)
Benefit obligation at end of year		20,989			17,919
Change in plan assets:
Fair value of plan assets at beginning of year		23,760			15,618
Actual return on plan assets		1			2,335
Employer contribution		2,455			6,550
Benefits paid		(765	)		(743	)
Fair value of plan assets at end of year		25,451			23,760
Funded Status, included in other assets	$	4,462		$	5,841
Amounts recognized in accumulated other comprehensive income:
Total net actuarial loss	$	7,937		$	3,947
Transition obligation		10			22
Prior service cost		144			184
Total included in accumulated other comprehensive income (pretax)	$	8,091		$	4,153

        The estimated costs that will be amortized from accumulated other comprehensive income into net periodic pension cost during the next fiscal year are as follows:

In thousands
Net loss	$	611
Prior service cost		40
Net transition liability		10
	$	661

        The accumulated benefit obligation totaled $20,658,000 and $17,755,000 at December 31, 2011 and 2010, respectively.

        The components of net periodic benefit costs (income) related to the non-contributory, defined benefit pension plan for the years ended December 31 are as follows:

In thousands	2011			2010			2009
Components of net periodic benefit cost (income):
Service cost	$	570		$	458		$	561
Interest cost		962			1,074			989
Expected return on plan assets		(1,829	)		(1,216	)		(964	)
Recognized net actuarial loss		140			436			579
Amortization of transition liability		12			12			12
Amortization of prior service cost		40			39			39
Net Periodic Benefit Cost (Income)	$	(105	)	$	803		$	1,216

        For the years ended December 31, 2011, 2010 and 2009, the assumptions used to determine the benefit obligation are as follows:

	2011			2010			2009
Discount rate		4.50	%		5.50	%		6.00	%
Rate of compensation increase		4.00	%		3.58	%		3.55	%

        For the years ended December 31, 2011, 2010 and 2009, the assumptions used to determine the net periodic benefit cost (income) are as follows:

	2011			2010			2009
Discount rate		5.50	%		6.00	%		6.00	%
Expected long-term rate of return on plan assets		7.50	%		7.75	%		7.75	%
Rate of compensation increase		3.58	%		3.55	%		3.58	%

        The Corporation's pension plan weighted-average assets' allocations at December 31, 2011 and 2010, are as follows:

	2011			2010
Equity securities		44	%		43	%
Debt securities		42	%		35	%
Short-term fixed income		8	%		18	%
Real estate		6	%		4	%
		100	%		100	%

        The Corporation's overall investment strategy is to achieve a mix of investments to meet the long-term rate of return assumption and near-term pension obligations with a diversification of assets types, fund strategies and fund managers. The mix of investments is adjusted periodically by retaining an advisory firm to recommend appropriate allocations after reviewing the Corporation's risk tolerance on contribution levels, funded status and plan expense, and any applicable regulatory requirements. The weighted-average assets' allocation in the above table represents the Corporation's conclusion on the appropriate mix of investments. The specific investment vehicles are institutional separate accounts from a variety of fund managers which are regularly reviewed by the Corporation for acceptable performance.

        Equity securities included Corporation common stock in amounts of $786,000, 3% of total plan assets, and $849,000, 4% of total plan assets, at December 31, 2011 and 2010, respectively.

        Fair value measurements at December 31, 2011, are as follows:

In thousands	Total		Level 1		Level 2		Level 3
Equity securities	$	11,814	$	786	$	11,028	$	—
Debt securities		12,316		—		12,316		—
Real estate		1,320		—		1,320		—

        Fair value measurements at December 31, 2010, are as follows:

In thousands	Total		Level 1		Level 2		Level 3
Equity securities	$	15,012	$	849	$	14,163	$	—
Debt securities		8,217		—		8,217		—
Real estate		531		—		—		531

        The following table summarizes the effect the Level 3 investments had on the plan's current year financial activity:

In thousands	Real Estate
Balance—January 1, 2011	$	531
Total gains		15
Transfer out of Level 3		(546	)
Balance—December 31, 2011	$	—
Balance—January 1, 2010	$	458
Total gains		73
Balance—December 31, 2010	$	531

        It has not yet been determined the amount the Bank plans on contributing to the Plan in 2012. The Corporation reduced the benefit formula for the defined benefit pension plan effective January 1, 2010, in order to manage total benefit costs. The new formula is the earned benefit as of December 31, 2009, plus 0.75% of a participant's average monthly pay multiplied by years of benefit service earned on and after January 1, 2010, but not more than 25 years. The benefit percentage factor and maximum years of service eligible were both reduced.

        Based on current data and assumptions, the following benefit payments, which reflect expected future service, as appropriate, are:

Years Ending	In thousands
2012	$	880
2013		900
2014		970
2015		1,100
2016		1,020
2017-2021		6,620

        The Corporation's banking subsidiary maintains a 401(k) plan for the benefit of eligible employees. Employees may contribute up to 100% of their compensation subject to certain limits based on federal tax laws. The Bank makes matching contributions up to 100% of the first 4% of an employee's compensation contributed to the plan. Matching contributions vest immediately to the employee. Bank contributions to and expenses for the plan were $461,000, $432,000 and $435,000 for 2011, 2010 and 2009, respectively.

        The Corporation's banking subsidiary maintains non-qualified compensation plans for selected senior officers. The estimated present value of future benefits is accrued over the period from the effective date of the agreements until the expected retirement dates of the individuals. The balance accrued for these plans included in other liabilities as of December 31, 2011 and 2010, totaled $1,372,000 and $1,326,000, respectively. The annual expense included in salaries and benefits expense totaled $143,000, $152,000 and $146,000 during the years ended December 31, 2011, 2010 and 2009, respectively. To fund the benefits under these plans, the Bank is the owner of single premium life insurance policies on participants in the non-qualified retirement plans. At December 31, 2011 and 2010, the cash surrender value of these policies was $4,365,000 and $4,226,000, respectively.