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 Loss (Gain)									Prior Service Cost (Credit)									Total
	2017			2016			2015			2017			2016			2015			2017			2016			2015
	(In thousands)
Employee Retirement Plan	$	6,166		$	8,055		$	8,589		$	-		$	-		$	-		$	6,166		$	8,055		$	8,589
Other Postretirement Benefit Plans		1,223			636			1,296			(368	)		(453	)		(538	)		855			183			758
Outside Directors Plan		(472	)		(540	)		(562	)		12			52			91			(460	)		(488	)		(471	)
Total	$	6,917		$	8,151		$	9,323		$	(356	)	$	(401	)	$	(447	)	$	6,561		$	7,750		$	8,876

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

2018

are as follows:

	Net Actuarial Loss (Gain)			Prior Service Cost (Credit)			Expense (Benefit)
	(In thousands)
Employee Retirement Plan	$	621		$	-		$	621
Other Postretirement Benefit Plans		33			(85	)		(52	)
Outside Directors Plan		(91	)		12			(79	)
Total	$	563		$	(73	)	$	490

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 1, 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, 2017,

2016

and

2015.

The Company uses a

December 31

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:

	2017			2016
	(In thousands)
Change in benefit obligation:
Projected benefit obligation at beginning of year	$	22,769		$	22,764
Interest cost		864			902
Actuarial loss		962			130
Benefits paid		(990	)		(1,027	)
Projected benefit obligation at end of year		23,605			22,769

Change in plan assets:
Market value of assets at beginning of year		20,146			19,924
Actual return on plan assets		3,546			1,249
Benefits paid		(990	)		(1,027	)
Market value of plan assets at end of year		22,702			20,146

Accrued pension liability included in other liabilities	$	(903	)	$	(2,623	)

The accumulated benefit obligation for the Retirement Plan was

$23.6

million and

$22.8

million at

December 31, 2017

and

2016,

respectively.

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

December 31:

	2017			2016
Weighted average discount rate		3.42	%		3.88	%
Rate of increase in future compensation levels		n/a			n/a

The mortality assumptions for

2017

were based on the RP-

2014

Adjusted to

2006

Total Dataset with Scale MP-

2017

and the mortality assumptions for

2016

were based on the RP-

2014

Adjusted to

2006

Total Dataset with Scale MP-

2016.

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

December 31:

	2017			2016			2015
	(In thousands)
Interest cost	$	864		$	902		$	889
Amortization of unrecognized loss		697			809			1,112
Expected return on plan assets		(1,392	)		(1,394	)		(1,400	)
Net pension expense		169			317			601

Current year actuarial (gain) loss		(1,192	)		275			(237	)
Amortization of actuarial loss		(697	)		(809	)		(1,112	)
Total recognized in other comprehensive income		(1,889	)		(534	)		(1,349	)
Total recognized in net pension cost (benefit) and other comprehensive loss	$	(1,720	)	$	(217	)	$	(748	)

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

December 31:

	2017			2016			2015
Weighted average discount rate		3.88	%		4.06	%		3.76	%
Rate of increase in future compensation levels		n/a			n/a			n/a
Expected long-term rate of return on assets		7.00	%		7.25	%		7.50	%

The following benefit payments are expected to be paid by the Retirement Plan:

For the years ending December 31:	Future Benefit Payments
	(In thousands)
2018	$	1,421
2019		1,202
2020		1,199
2021		1,238
2022		1,306
2023 – 2027		6,490

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 by asset category at

December 31:

	2017			2016
Equity securities		72	%		69	%
Debt securities		28	%		31	%

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

2018.

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, 2017

and

2016.

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 ASU

No.

2015

“Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent)”.

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

	At December 31,
	2017		2016
	(In thousands)
Pooled Separate Accounts
U.S. large-cap growth (a)	$	5,822	$	4,702
U.S. large-cap value (b)		5,164		4,789
U.S. small-cap blend (c)		2,735		2,362
International blend (d)		2,566		2,017
Bond fund (e)		6,338		5,950
Prudential short term (f)		77		326

Total	$	22,702	$	20,146

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, corporate bonds, U.S. government bonds and high yield 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 1, 2011,

the Postretirement Plans are

longer available for new hires. One plan provides medical benefits through a

50%

cost sharing arrangement. Effective

January 1, 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 1, 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, 2017,

the Company has

not

funded these plans. The Company used a

December 31

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:

	2017			2016
	(In thousands)
Change in benefit obligation:
Projected benefit obligation at beginning of year	$	7,978		$	7,977
Service cost		316			359
Interest cost		305			320
Actuarial loss (gain)		588			(613	)
Benefits paid		(83	)		(65	)
Projected benefit obligation at end of year		9,104			7,978

Change in plan assets:
Market value of assets at beginning of year		-			-
Employer contributions		83			65
Benefits paid		(83	)		(65	)
Market value of plan assets at end of year		-			-

Accrued pension cost included in other liabilities	$	(9,104	)	$	(7,978	)

The accumulated benefit obligation for the Postretirement Plans was

$9.1

million and

$8.0

million at

December 31, 2017

and

2016,

respectively.

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

December 31

are as follows:

	2017			2016

Discount rate		3.42	%		3.88	%
Rate of increase in health care costs
Initial		7.00	%		8.00	%
Ultimate (year 2023)		5.00	%		5.00	%
Annual rate of salary increase for life insurance		n/a			n/a

The mortality assumptions for

2017

were based on the RP-

2014

Adjusted to

2006

White Collar Mortality Table with Scale MP-

2017

and the mortality assumptions for

2016

were based on the RP-

2014

Adjusted to

2006

White Collar Mortality Table with Scale MP-

2016.

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

December 31:

	2017			2016			2015
	(In thousands)
Service cost	$	316		$	359		$	382
Interest cost		305			320			300
Amortization of unrecognized loss		-			47			119
Amortization of past service credit		(85	)		(85	)		(85	)
Net postretirement benefit expense		536			641			716

Current year actuarial loss (gain)		587			(613	)		(715	)
Amortization of actuarial loss		-			(47	)		(119	)
Amortization of prior service credit		85			85			85
Total recognized in other comprehensive income		672			(575	)		(749	)
Total recognized in net postretirement expense and other comprehensive loss	$	1,208		$	66		$	(33	)

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

December 31:

	2017			2016			2015
Rate of return on plan assets		n/a			n/a			n/a
Discount rate		3.88	%		4.06	%		3.76	%
Rate of increase in health care costs
Initial		8.00	%		7.00	%		8.00	%
Ultimate (year 2023)		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	$	1,949	$	(1,481	)
Effect on total service and interest cost		175		(130	)

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)
2018	$	236
2019		251
2020		256
2021		270
2022		294
2023 – 2027		1,561

Defined Contribution Plans:

The Bank 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

$3.4

million,

$3.3

million and

$3.0

million for the years ended

December 31, 2017,

2016

and

2015,

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 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

$11.5

million and

$10.4

million at

December 31, 2017

and

2016,

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, 2017,

2016

and

2015.

Employee Benefit Trust:

An Employee Benefit Trust (“EBT”) has been established to assist the Company in funding its benefit plan obligations. Dividend payments received 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, 2017,

2016

and

2015,

the Company funded

$3.2

million,

$2.8

million and

$2.8

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:

	2017			2016

Shares owned by Employee Benefit Trust, beginning balance		551,762			675,436
Shares purchased		11,631			18,391
Shares released and allocated		(118,371	)		(142,065	)
Shares owned by Employee Benefit Trust, ending balance		445,022			551,762

Market value of unallocated shares	$	12,238,105		$	16,216,285

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 1, 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 1, 2004

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.

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

$4.4

million and

$4.2

million at

December 31, 2017

and

2016,

respectively. The Bank uses a

December 31

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:

	2017			2016
	(In thousands)
Change in benefit obligation:
Projected benefit obligation at beginning of year	$	2,462		$	2,530
Service cost		42			42
Interest cost		89			97
Actuarial gain		(24	)		(63	)
Benefits paid		(144	)		(144	)
Projected benefit obligation at end of year		2,425			2,462

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	$	(2,425	)	$	(2,462	)

The accumulated benefit obligation for the Directors’ Plan was

$2.4

million at

December 31, 2017

and

$2.5

million at

December 31, 2016.

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

December 31:

	2017			2016			2015
	(In thousands)
Service cost	$	42		$	42		$	45
Interest cost		89			97			95
Amortization of unrecognized gain		(92	)		(86	)		(56	)
Amortization of past service liability		40			40			40
Net pension expense		79			93			124

Current actuarial gain		(24	)		(63	)		(130	)
Amortization of actuarial gain		92			86			56
Amortization of prior service cost		(40	)		(40	)		(40	)
Total recognized in other comprehensive income		28			(17	)		(114	)
Total recognized in net pension expense and other comprehensive income	$	107		$	76		$	10

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

December 31:

	2017			2016			2015
Weighted average discount rate for the benefit obligation		3.42	%		3.88	%		4.06	%
Weighted average discount rate for periodic pension benefit expense		3.88	%		4.06	%		3.76	%
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)
2018	$	248
2019		288
2020		288
2021		288
2022		288
2023 – 2027		1,052

The Company expects to make payments of

$0.2

million under its Directors’ Plan in

2017.