12.

Pension and Other Postretirement Benefit Plans

The amounts recognized in accumulated other comprehensive loss, on a pre-tax basis, consist of the following, as of

December

31:

	Net Actuarial									Prior Service
	loss (gain)									cost (credit)									Total
	2016			2015			2014			2016			2015			2014			2016			2015			2014
	(In thousands)
Employee Retirement Plan	$	8,055		$	8,589		$	9,938		$	-		$	-		$	-		$	8,055		$	8,589		$	9,938
Other Postretirement Benefit Plans		636			1,296			2,130			(453	)		(538	)		(623	)		183			758			1,507
Outside Directors Plan		(540	)		(562	)		(488	)		52			91			131			(488	)		(471	)		(357	)
Total	$	8,151		$	9,323		$	11,580		$	(401	)	$	(447	)	$	(492	)	$	7,750		$	8,876		$	11,088

Amounts in accumulated other comprehensive loss to be recognized as components of net periodic expense for these plans in

2017

are as follows:

	Net Actuarial			Prior Service
	loss (gain)			cost (credit)			Total
	(In thousands)
Employee Retirement Plan	$	697		$	-		$	697
Other Postretirement Benefit Plans		-			(85	)		(85	)
Outside Directors Plan		(92	)		40			(52	)
Total	$	605		$	(45	)	$	560

Employee Retirement Plan:

The Bank has a funded noncontributory defined benefit retirement plan covering substantially all of its salaried employees who were hired before

September

2005

(the “Retirement Plan”). The benefits are based on years of service and the employee’s compensation during the

three

consecutive years out of the final

ten

years of service, which was completed prior to

September

30,

2006,

the date the Retirement Plan was frozen, that produces the highest average. The Bank’s funding policy is to contribute annually the amount recommended by the Retirement Plan’s actuary. The Bank’s Retirement Plan invests in diversified equity and fixed-income funds, which are independently managed by a

third

party. The Company did

not

make a contribution to the Retirement Plan during the years ended

December

31,

2016,

2015

and

2014.

The Company uses a

December

measurement date for the Retirement Plan.

The following table sets forth, for the Retirement Plan, the change in benefit obligation and assets, and for the Company, the amounts recognized in the Consolidated Statements of Financial Condition at

December

31:

	2016			2015
	(In thousands)
Change in benefit obligation:
Projected benefit obligation at beginning of year	$	22,764		$	24,097
Interest cost		902			889
Actuarial (gain) loss		130			(1,208	)
Benefits paid		(1,027	)		(1,014	)
Projected benefit obligation at end of year		22,769			22,764

Change in plan assets:
Market value of assets at beginning of year		19,924			20,509
Actual return on plan assets		1,249			429
Benefits paid		(1,027	)		(1,014	)
Market value of plan assets at end of year		20,146			19,924

Accrued pension liability included in other liabilities	$	(2,623	)	$	(2,840	)

The accumulated benefit obligation for the Retirement Plan was

$22.8

million at

December

31,

2016

and

2015.

Assumptions used to determine the Retirement Plan’s benefit obligations are as follows at

December

31:

	2016			2015
Weighted average discount rate		3.88	%		4.06	%
Rate of increase in future compensation levels		n/a			n/a

The mortality assumptions for

2016

were based on the RP-

2014

Adjusted to

2006

Total Dataset with Scale MP-

2016

and the mortality assumptions for

2015

were based on the RP-

2014

Adjusted to

2006

Total Dataset with Scale MP-

2015.

The components of the net pension expense for the Retirement Plan are as follows for the years ended

December

31:

	2016			2015			2014
	(In thousands)
Interest cost	$	902		$	889		$	891
Amortization of unrecognized loss		809			1,112			759
Expected return on plan assets		(1,394	)		(1,400	)		(1,344	)
Net pension expense		317			601			306

Current year actuarial (gain) loss		275			(237	)		4,798
Amortization of actuarial loss		(809	)		(1,112	)		(759	)
Total recognized in other comprehensive income		(534	)		(1,349	)		4,039
Total recognized in net pension cost (benefit) and other comprehensive income	$	(217	)	$	(748	)	$	4,345

Assumptions used to develop periodic pension cost for the Retirement Plan for the years ended

December

31:

	2016			2015			2014
Weighted average discount rate		4.06	%		3.76	%		4.60	%
Rate of increase in future compensation levels		n/a			n/a			n/a
Expected long-term rate of return on assets		7.25	%		7.50	%		7.50	%

The following benefit payments, which reflect expected future service, are expected to be paid by the Retirement Plan:

For the years ending December 31:	Future Benefit Payments
	(In thousands)
2017	$	1,190
2018		1,183
2019		1,197
2020		1,197
2021		1,239
2022 – 2026		6,561

The long-term rate-of-return-on-assets assumption was set based on historical returns earned by equities and fixed income securities, adjusted to reflect expectations of future returns as applied to the plan's target allocation of asset classes. Equities and fixed income securities were assumed to earn real rates of return in the ranges of

10%

and

5%,

respectively. When these overall return expectations are applied to the plans target allocation, the result is an expected rate return of

7.00%

for

2017.

The Retirement Plan’s weighted average asset allocations at

December

31,

by asset category, were:

	2016			2015
Equity securities		69	%		70	%
Debt securities		31	%		30	%

Plan assets are invested in a diversified mix of stock and bond investment funds on the pooled account, group annuity platform of Prudential Retirement Services. Each fund has its own investment objectives, investment strategies and risks as detailed in its prospectus.

The long-term investment objectives are to maintain plan assets at a level that will sufficiently cover long-term obligations and to generate a return on plan assets that will meet or exceed the rate at which long-term obligations will grow. A combination of equity and fixed income portfolios are used to help achieve these objectives based on a long-term, liability based strategic mix of

60%

equities and

40%

fixed income. Adjustments to this mix are made periodically based on current capital market conditions and plan funding levels. Performance of the investment fund managers is monitored on an ongoing basis using modern portfolio risk analysis and appropriate index benchmarks.

The Bank does not expect to make a contribution to the Retirement Plan in

2017.

The fair value of the pooled separate accounts is determined by the investment manager and is based on the value of the underlying assets held at

December

31,

2016

and

2015.

These are measured at net asset value under the practical expedient with future redemption dates.

The fair values of the Plan’s investments in pooled separate accounts are calculated each business day. All investments can be redeemed on a daily basis without restriction. The investments in pooled separate accounts, which are valued at net asset value, have not been classified in the fair value hierarchy in accordance with Accounting Standards Update No.

2015

07.

The following table sets forth the Retirement Plan’s assets at the periods indicated:

	At December 31,
	2016		2015
	(In thousands)
Pooled Separate Accounts
U.S. large-cap growth (a)	$	4,702	$	5,114
U.S. large-cap value (b)		4,789		4,619
U.S. small-cap blend (c)		2,362		2,094
International blend (d)		2,017		2,079
Bond fund (e)		5,950		5,671
Prudential short term (f)		326		347

Total	$	20,146	$	19,924

Comprised of large-cap stocks seeking to outperform, over the long term, the Russell

1000

Growth Index. The portfolio will typically hold between

and

stocks.

Comprised of large-cap stocks seeking to outperform the Russell

1000

Value benchmark over the rolling

three

and

five

year periods, or a full market cycle, whichever is longer.

Comprised of stocks with market capitalization of between

$100

million and the market capitalization of the largest stock in the Russell

2000

index at the time of purchase. The portfolio will typically hold between

and

100

stocks.

Comprised of non-U.S. domiciled stocks. The portfolio will typically hold between

and

stocks.

Comprised of a portfolio of fixed income securities including U.S agency mortgage-backed securities and investment grade bonds.

Comprised of money market instruments with an emphasis on safety and liquidity.

Other Postretirement Benefit Plans:

The Company sponsors

two

unfunded postretirement benefit plans (the “Postretirement Plans”) that cover all retirees who were full-time permanent employees with at least

five

years of service, and their spouses. Effective

January

2011,

the Postretirement Plans are no longer available for new hires. One plan provides medical benefits through a

50%

cost sharing arrangement. Effective

January

2000,

the spouses of future retirees were required to pay

100%

of the premiums for their coverage. The other plan provides life insurance benefits and is noncontributory. Effective

January

2010,

life insurance benefits are not available for future retirees. Under these programs, eligible retirees receive lifetime medical and life insurance coverage for themselves and lifetime medical coverage for their spouses. The Company reserves the right to amend or terminate these plans at its discretion.

Comprehensive medical plan benefits equal the lesser of the normal plan benefit or the total amount not paid by Medicare. Life insurance benefits for retirees are based on annual compensation and age at retirement. As of

December

31,

2016,

the Company has not funded these plans. The Company used a

December

measurement date for these plans.

The following table sets forth, for the Postretirement Plans, the change in benefit obligation and assets, and for the Company, the amounts recognized in the Consolidated Statements of Financial Condition at

December

31:

	2016			2015
	(In thousands)
Change in benefit obligation:
Projected benefit obligation at beginning of year	$	7,977		$	8,073
Service cost		359			382
Interest cost		320			300
Actuarial gain		(613	)		(715	)
Benefits paid		(65	)		(63	)
Projected benefit obligation at end of year		7,978			7,977

Change in plan assets:
Market value of assets at beginning of year		-			-
Employer contributions		65			63
Benefits paid		(65	)		(63	)
Market value of plan assets at end of year		-			-

Accrued pension cost included in other liabilities	$	(7,978	)	$	(7,977	)

The accumulated benefit obligation for the Postretirement Plans was

$8.0

million at

December

31,

2016

and

2015.

Assumptions used in determining the actuarial present value of the accumulated postretirement benefit obligations at

December

are as follows:

	2016			2015
Discount rate		3.88	%		4.06	%
Rate of increase in health care costs
Initial		8.00	%		7.00	%
Ultimate (year 2018)		5.00	%		5.00	%
Annual rate of salary increase for life insurance		n/a			n/a

The mortality assumptions for

2016

were based on the RP-

2014

Adjusted to

2006

White Collar Mortality Table with Scale MP-

2016

and the mortality assumptions for

2015

were based on the RP-

2014

Adjusted to

2006

White Collar Mortality Table with Scale MP-

2015.

The resulting net periodic postretirement expense consisted of the following components for the years ended

December

31:

	2016			2015			2014
	(In thousands)
Service cost	$	359		$	382		$	358
Interest cost		320			300			253
Amortization of unrecognized loss		47			119			-
Amortization of past service credit		(85	)		(85	)		(85	)
Net postretirement benefit expense		641			716			526

Current year actuarial (gain) loss		(613	)		(715	)		1,925
Amortization of actuarial loss		(47	)		(119	)		-
Amortization of prior service credit		85			85			85
Total recognized in other comprehensive income		(575	)		(749	)		2,010
Total recognized in net postretirement expense and other comprehensive income	$	66		$	(33	)	$	2,536

Assumptions used to develop periodic postretirement expense for the Postretirement Plans for the years ended

December

were:

	2016			2015			2014
Rate of return on plan assets		n/a			n/a			n/a
Discount rate		4.06	%		3.76	%		4.60	%
Rate of increase in health care costs
Initial		7.00	%		8.00	%		9.00	%
Ultimate (year 2018)		5.00	%		5.00	%		5.00	%
Annual rate of salary increase for life insurance		n/a			n/a			n/a

The health care cost trend rate assumptions have a significant effect on the amounts reported. A

one

percentage point change in assumed health care trend rates would have the following effects:

	Increase		Decrease
	(In thousands)
Effect on postretirement benefit obligation	$	1,614	$	(1,230	)
Effect on total service and interest cost		159		(118	)

The Company expects to pay benefits of

$0.2

million under its Postretirement Plans in

2017.

The following benefit payments under the Postretirement Plan, which reflect expected future service, are expected to be paid:

For the years ending December 31:	Future Benefit Payments
	(In thousands)
2017	$	215
2018		248
2019		268
2020		265
2021		274
2022 – 2026		1,519

Defined Contribution Plans:

The Company maintains a tax qualified

401(k)

plan which covers substantially all salaried employees who have completed

one

year of service. Currently, annual matching contributions under the Bank’s

401(k)

plan equal

50%

of the employee’s contributions, up to a maximum of

of the employee’s base salary. In addition, the

401(k)

plan includes the Defined Contribution Retirement Plan (“DCRP”), under which the Bank contributes an amount equal to

of an employee’s eligible compensation as defined in the plan, and the Profit Sharing Plan (“PSP”), under which at the discretion of the Company’s Board of Directors a contribution is made. Contributions for the DCRP and PSP are made in the form of Company common stock at or after the end of each year. Annual contributions under these plans are subject to the limits imposed under the Internal Revenue Code. Contributions by the Company into the

401(k)

plan vest

20%

per year over the employee's

first

five

years of service. Contributions to these plans are

100%

vested upon a change of control (as defined in the applicable plan). Compensation expense recorded by the Company for these plans amounted to

$3.3

million,

$3.0

million and

$3.1

million for the years ended

December

31,

2016,

2015

and

2014,

respectively.

The Bank provides a non-qualified deferred compensation plan as an incentive for officers who have achieved the designated level and completed

one

year of service. However, certain officers who have not reached the designated level but were already participants remain eligible to participate in the Plan. In addition to the amounts deferred by the officers, the Bank matches

50%

of their contributions, generally up to a maximum of

of the officers’ base salary. Matching contributions under this plan vest

20%

per year for

five

years. The non-qualified deferred compensation plan assets are held in a rabbi trust totaling

$10.4

million and

$10.6

million at

December

31,

2016

and

2015,

respectively. Contributions become

100%

vested upon a change of control (as defined in the plan). Compensation expense recorded by the Company for this plan amounted to

$0.4

million for each of the years ended

December

31,

2016,

2015

and

2014.

Employee Benefit Trust:

An Employee Benefit Trust (“EBT”) has been established to assist the Company in funding its benefit plan obligations. In connection with the Bank’s conversion to a federal stock savings bank in

1995,

the EBT borrowed

$7.9

million from the Company and used

$7,000

of cash received from the Bank to purchase

2,328,750

shares of the common stock of the Company. The loan was repaid from the Company’s discretionary contributions to the EBT and dividend payments received on common stock held by the EBT. During the year ended

December

31,

2010,

the loan was fully repaid. Dividend payments received subsequent

2010

are used to purchase additional shares of common stock. Shares released are used solely for funding matching contributions under the Bank’s

401(k)

plan, contributions to the

401(k)

plan for the DCRP, and contributions to the PSP. For the years ended

December

31,

2016,

2015

and

2014,

the Company funded

$2.8

million,

$2.8

million and

$2.7

million, respectively, of employer contributions to the

401(k),

DCRP and profit sharing plans from the EBT.

Upon a change of control (as defined in the EBT), the EBT will terminate and any trust assets remaining after certain benefit plan contributions will be distributed to all full-time employees of the Company with at least

one

year of service, in proportion to their compensation over the

four

most recently completed calendar years plus the portion of the current year prior to the termination of the EBT.

As shares are released from the suspense account, the Company reports compensation expense equal to the current market price of the shares, and the shares become outstanding for earnings per share computations.

The EBT shares are as follows at

December

31:

	2016			2015

Shares owned by Employee Benefit Trust, beginning balance		675,436			800,950
Shares purchased		18,391			22,102
Shares released and allocated		(142,065	)		(147,616	)
Shares owned by Employee Benefit Trust, ending balance		551,762			675,436

Market value of unallocated shares.	$	16,216,285		$	14,616,435

Outside Director Retirement Plan:

The Bank has an unfunded noncontributory defined benefit Outside Director Retirement Plan (the “Directors’ Plan”), which provides benefits to each non-employee director who became a non-employee director before

January

2004,

who has at least

five

years of service as a non-employee director and whose years of service as a non-employee director plus age equals or exceeds

55.

Any person who became a non-employee director after

January

2004

is not eligible to participate in the Directors’ Plan. Upon termination an eligible director will be paid an annual retirement benefit equal to

$48,000.

Such benefit will be paid in equal monthly installments for

120

months. In the event of a termination of Board service due to a change of control, a non-employee director will receive a cash lump sum payment equal to

120

months of benefit. In the event of the director’s death, the surviving spouse will receive the equivalent benefit. No benefits will be payable to a director who is removed for cause. The Holding Company has guaranteed the payment of benefits under the Directors’ Plan, for this reason the Bank has assets held in a rabbi trust totaling

$4.2

million at

December

31,

2016

and

2015.

Upon adopting the Directors’ Plan, the Bank elected to immediately recognize the effect of adopting the Directors’ Plan. Subsequent plan amendments are amortized as a past service liability. The Bank uses a

December

measurement date for the Directors’ Plan.

The following table sets forth, for the Directors’ Plan, the change in benefit obligation and assets, and for the Company, the amounts recognized in the Consolidated Statements of Financial Condition at

December

31:

	2016			2015
	(In thousands)
Change in benefit obligation:
Projected benefit obligation at beginning of year	$	2,530		$	2,663
Service cost		42			45
Interest cost		97			95
Actuarial gain		(63	)		(129	)
Benefits paid		(144	)		(144	)
Projected benefit obligation at end of year		2,462			2,530

Change in plan assets:
Market value of assets at beginning of year		-			-
Employer contributions		144			144
Benefits paid		(144	)		(144	)
Market value of plan assets at end of year		-			-

Accrued pension cost included in other liabilities	$	(2,462	)	$	(2,530	)

The accumulated benefit obligation for the Directors’ Plan was

$2.5

million at

December

31,

2016

and

2015,

respectively.

The components of the net pension expense for the Directors’ Plan are as follows for the years ended

December

31:

	2016			2015			2014
	(In thousands)
Service cost	$	42		$	45		$	54
Interest cost		97			95			116
Amortization of unrecognized gain		(86	)		(56	)		(60	)
Amortization of past service liability		40			40			40
Net pension expense		93			124			150

Current actuarial gain		(63	)		(130	)		(52	)
Amortization of actuarial gain		86			56			60
Amortization of prior service cost		(40	)		(40	)		(40	)
Total recognized in other comprehensive income		(17	)		(114	)		(32	)
Total recognized in net pension expense and other comprehensive income	$	76		$	10		$	118

Assumptions used to determine benefit obligations and periodic pension expense for the Directors’ Plan for the years ended

December

31:

	2016			2015			2014
Weighted average discount rate for the benefit obligation		3.88	%		4.06	%		3.76	%
Weighted average discount rate for periodic pension benefit expense		4.06	%		3.76	%		4.60	%
Rate of increase in future compensation levels		n/a			n/a			n/a

The following benefit payments under the Directors’ Plan, which reflect expected future service, are expected to be paid:

For the years ending December 31:	Future Benefit Payments
	(In thousands)
2017	$	288
2018		272
2019		288
2020		288
2021		288
2022 – 2026		1,148

The Company expects to make payments of

$0.3

million under its Directors’ Plan in

2017.