Note 18 – Employee Benefit Plans

Defined Benefit Plan

At December 31, 2009, the Company maintained a non-contributory defined benefit pension plan which covered substantially all employees who were 21 years of age or older and who had at least one year of service. The Company froze its pension plan to new participants and converted its pension plan to a cash balance plan effective December 31, 2009. Each year existing participants will receive, with some adjustments, income based on the yield of the 10 year U.S. Treasury Note in December of the preceding year.

Information pertaining to the activity in the plan is as follows:

(in thousands)	As of and for the Years Ended December 31,
	2011			2010			2009
Change in Benefit Obligation:
Projected benefit obligation at beginning of year	$	9,279		$	8,814		$	9,582
Service cost		111			92			737
Interest cost		403			468			585
Actuarial loss (gain)		725			653			1,004
Benefits paid		(749	)		(748	)		(964	)
Decrease in obligations due to curtailment		-			-			(2,130	)
Projected benefit obligation at end of year		9,769			9,279			8,814

Change in Plan Assets:
Fair value of plan assets at beginning of year		11,674			11,218			10,184
Actual return on plan assets		219			1,204			1,998
Employer contributions		-			-			-
Benefits paid		(749	)		(748	)		(964	)
Fair value of plan assets at end of year		11,144			11,674			11,218

Funded Status at End of Year	$	1,375		$	2,395		$	2,404

Amounts Recognized in the Consolidated Balance Sheets
Other assets	$	1,375		$	2,395		$	2,404
Amounts Recognized in Accumulated Other Comprehensive Loss
Net actuarial loss	$	3,080		$	2,209		$	2,448
Deferred income tax benefit		(1,078	)		(773	)		(857	)
Amount recognized	$	2,002		$	1,436		$	1,591


	As of and for the Years Ended December 31,
		2011			2010			2009
Components of Net Periodic Benefit Cost
Service cost	$	111		$	92		$	737
Interest cost		403			468			585
Expected return on plan assets		(525	)		(538	)		(812	)
Amortization of prior service cost		-			-			13
Recognized net actuarial loss		160			227			445
Net periodic benefit cost	$	149		$	249		$	968


Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive (Income) Loss
Net actuarial (gain) loss	$	871	$	(239	)	$	(2,757	)
Amortization of prior service cost		-		-			(13	)
Total recognized in other comprehensive (income) loss	$	871	$	(239	)	$	(2,770	)


Total Recognized in Net Periodic Benefit Cost, Retained Earnings and Other Comprehensive (Income) Loss	$	1,020	$	9		$	(1,802	)

	As of and for the Years Ended December 31,
	2011			2010			2009
Weighted-Average Assumptions at End of Year
Discount rate used for net periodic pension cost		4.75	%		5.00	%		6.00	%
Discount rate used for disclosure		3.75	%		4.75	%		6.00	%
Expected return on plan assets		8.00	%		8.00	%		8.00	%
Rate of compensation increase		N/A			4.00	%		4.00	%

N/A – not applicable

The accumulated benefit obligation as of December 31, 2011, 2010, and 2009 was $9,769,000, $9,279,000, and $8,814,000, respectively. The rate of compensation increase is no longer applicable since the defnined benefit plan was converted to a cash balance plan.

The plan sponsor selected the expected long-term rate-of-return-on-assets assumption in consultation with their investment advisors and actuary. This rate was intended to reflect the average rate of earnings expected to be earned on the funds invested or to be invested to provide plan benefits. Historical performance is reviewed, especially with respect to real rates of return (net of inflation), for the major asset classes held or anticipated to be held by the trust, and for the trust itself. Undue weight is not given to recent experience that may not continue over the measurement period, with higher significance placed on current forecasts of future long-term economic conditions.

Because assets are held in a qualified trust, anticipated returns are not reduced for taxes. Further, solely for this purpose, the plan is assumed to continue in force and not terminate during the period in which assets are invested. However, consideration is given to the potential impact of current and future investment policy, cash flow into and out of the trust, and expenses (both investment and non-investment) typically paid from plan assets (to the extent such expenses are not explicitly estimated within periodic cost).

Below is a description of the plan's assets. The plan's weighted-average asset allocations by asset category are as follows:

Asset Category	December 31,
	2011			2010

Fixed Income		43.1	%		35.4	%
Equity		45.5			49.8
Mutual Funds		5.0			5.3
Cash and Accrued Income		6.4			9.5
Total		100.0	%		100.0	%

The investment policy and strategy for plan assets can best be described as a growth and income strategy. Diversification is accomplished by limiting the holding of any one equity issuer to no more than 5% of total equities. Exchange traded funds are used to provide diversified exposure to the small capitalization and international equity markets. All fixed income investments are rated as investment grade, with the majority of these assets invested in corporate issues. The assets are managed by the Company's Trust and Investment Services Division. No derivatives are used to manage the assets. Equity securities do not include holdings in the Company.

The fair value of the Company's pension plan assets at December 31, 2011 and 2010, by asset category are as follows (in thousands):

			Fair Value Measurements at December 31, 2011 Using
	Balance as of December 31,		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
Asset Category	2011		Level 1		Level 2		Level 3

Cash	$	713	$	713	$	-	$	-
Fixed income securities
Government sponsored entities		653		-		653		-
Corporate bonds and notes		4,147		-		4,147		-
Mutual funds		559		-		559		-
Equity securities
U.S. companies		4,741		4,741		-		-
Foreign companies		318		318		-
Exchange traded funds		13		-		13		-
	$	11,144	$	5,772	$	5,372	$	-

			Fair Value Measurements at December 31, 2010 Using
	Balance as of December 31,		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
Asset Category	2010		Level 1		Level 2		Level 3

Cash	$	1,078	$	1,078	$	-	$	-
Fixed income securities
Government sponsored entities		1,179		-		1,179		-
Corporate bonds and notes		2,953		-		2,953		-
Mutual funds		617		-		617		-
Equity securities
U.S. companies		5,396		5,396		-		-
Foreign companies		405		405		-		-
Exchange traded funds		12		-		12		-
Accrued interest and dividends		34		34		-		-
	$	11,674	$	6,913	$	4,761	$	-

Projected benefit payments for the years 2012 to 2021 are as follows (in thousands):

Year	Amount
2012	$	653
2013		701
2014		1,254
2015		191
2016		278
2017-2021		2,960

401(k) Plan

The Company maintains a 401(k) plan that covers substantially all full-time employees of the Company. The Company matches a portion of the contribution made by employee participants after at least one year of service. The Company contributed $469,000, $375,000, and $258,000 to the 401(k) plan in 2011, 2010, and 2009, respectively. These amounts are included employee benefits expense for the respective years.

Deferred Compensation Arrangements

The Company maintains deferred compensation agreements with certain current and former employees providing for annual payments to each ranging from $25,000 to $50,000 per year for ten years upon their retirement. The liabilities under these agreements are being accrued over the officers' remaining periods of employment so that, on the date of their retirement, the then-present value of the annual payments would have been accrued. The expense for these agreements was $17,000, $23,000, and $28,000 for years 2011, 2010, and 2009, respectively.

Profit Sharing and Incentive Arrangements

The Company maintains a cash profit sharing plan for full-time employees based on the Company's performance and a cash incentive compensation plan for officers based on the Company's performance and individual officer goals. The total amount charged to salary expense for these plans was $301,000, $418,000, and $176,000 for the years 2011, 2010, and 2009, respectively.