Retirement Pension Plan (Notes)

12 Months Ended

Dec. 31, 2012

Compensation and Retirement Disclosure [Abstract]

Retirement Pension Plan

Retirement Pension Plan

The Corporation’s non-contributory defined benefit pension plan (the Plan) covers a portion of its employees. In general, benefits are based on years of service and the employee’s level of compensation. The Corporation’s funding policy is to contribute annually an actuarially determined amount to cover current service cost plus amortization of prior service costs. Effective December 31, 2002, the benefits under the Plan were frozen and no additional benefits have been accrued under the Plan after December 31, 2002.

The net periodic pension costs charged to expense amounted to $16 in 2012, $11 in 2011 and $148 in 2010. The following table sets forth the defined benefit pension plan’s Change in Projected Benefit Obligation, Change in Plan Assets and Funded Status, including the Prepaid Asset or Accrued Liability for the years ended December 31, 2012, 2011, and 2010. There were no losses recognized due to settlement in 2012, 2011and 2010.

	Year ended December 31,
	2012			2011			2010
	(Dollars in thousands)
Change in projected benefit obligation
Projected benefit obligation at the beginning of the year	$	(5,641	)	$	(5,610	)	$	(5,716	)
Interest Cost	(254		)	(322		)	(314		)
Actuarial gain (loss)	(359		)	(312		)	(35		)
Benefits paid	310			603			455
Projected benefit obligation at the end of the year	$	(5,944	)	$	(5,641	)	$	(5,610	)
Change in plan assets
Fair value of plan assets at beginning of year	$	5,251		$	5,756		$	4,221
Actual gain on plan assets	237			98			590
Employer contributions	500			—			1,400
Benefits paid	(310		)	(603		)	(455		)
Fair value of plan assets at end of year	$	5,678		$	5,251		$	5,756
Funded status (included in accrued liabilities or prepaid assets)	$	(265	)	$	(390	)	$	146
Unrecognized actuarial loss in accumulated other comprehensive income	$	3,114		$	2,754		$	2,230

Amounts recognized in the consolidated statements of income consist of:

	Year ended December 31,
	2012			2011			2010
	(Dollars in thousands)
Net Periodic Pension Cost
Interest cost on projected benefit obligation	$	254		$	322		$	314
Expected return on plan benefits	(383		)	(442		)	(308		)
Amortization of loss	145			131			142
Net Periodic Pension Cost	$	16		$	11		$	148

Pension liability adjustments recognized in other comprehensive income include:

	Year ended December 31,
	2012			2011			2010
	(Dollars in thousands)
Amortization of unrecognized actuarial loss	$	145		$	131		$	142
Current deferral of gains	214			392			247
Pension liability adjustments recognized in comprehensive income	359			524			389
Tax effect	(122		)	(178		)	(132		)
Net pension liability adjustments	$	237		$	346		$	257

Weighted-average assumptions used to determine net periodic benefit cost for years ended December 31, 2012, 2011 and 2010:

	2012		2011		2010
Weighted average discount rate	4.50	%	5.75	%	5.75	%
Expected long-term rate of return on plan assets	7.50	%	7.50	%	7.50	%
Assumed rate of future compensation increases	—	%	—	%	—	%

The actuarial assumptions used in the pension plan valuation are reviewed annually. The plan reviews Moody’s Aaa and Aa corporate bond yields as of each plan year-end to determine the appropriate discount rate to calculate the year-end benefit plan obligation and the following year’s net periodic pension cost.

Plan Assets

The Bank’s Retirement Pension Plan’s weighted-average assets allocations at December 31, 2012, 2011 and 2010 by asset category are as follows:

	Plan Assets at December 31,
	2012		2011		2010
Asset Category:
Equity securities	70.1	%	63.5	%	62.6	%
Debt securities	27.6	%	34.9	%	35.5	%
Cash and cash equivalents	2.3	%	1.6	%	1.9	%
Total	100.0	%	100.0	%	100.0	%
LNB Bancorp, Inc. common stock to total plan assets	—	%	—	%	—	%

The allocation of assets in the Bank’s Retirement Pension Plan is an important determinant of their investment performance. The investment strategy for 2013 will concentrate on allocating funds traditionally with a 60% equity security position and a 40% debt security position. This strategy will be employed in order to position more assets to benefit from the anticipated increase in the equities market in the future.

The following estimated future benefit payments, which reflect no expected future service as the plan is frozen, are expected to be paid as follows:

	Amount
	(Dollars in thousands)
2013	$	285
2014	273
2015	263
2016	249
2017	240
2018 and thereafter	1,080