Community lender Farmington Bank, which went public a year and a half ago, is freezing its defined benefit pension plan in February as the company looks to cut expenses, according to regulatory filings.
The bank, which has $1.8 billion in assets and about 20 branches in Central Connecticut, said in a regulatory filing with the U.S. Securities and Exchange Commission that it will be “hard freezing” its defined benefit pension plan on Feb. 28. The move will mean employees currently enrolled in the pension plan will no longer be able accrue additional benefits after the February deadline. However, employees’ current benefits will not be impacted.
Farmington Bank President and CEO John J. Patrick Jr. did not return an email seeking comment.
Under a typical defined benefit pension plan, employers contribute some type of monthly or annual payment to an employee’s retirement savings.
Farmington Bank’s pension plan currently provides benefits for full-time employees hired before Jan. 1, 2007. That is when the bank “soft froze” its pension plan, which disallowed new employees from receiving the benefits, regulatory filings said.
The move is a cost cutting measure, the bank said in its regulatory filing. It will allow the bank to limit future growth in its pension liabilities and incrementally decrease its pension expenses, including providing a savings of $860,000 this year.
Through the first nine months of 2012, Farmington Bank contributed about $1 million to its pension plan, regulatory filings show.
Meanwhile, Farmington Bank said it has enhanced its 401 (k) plan and recently introduced an Employee Stock Ownership Plan (ESOP) in conjunction with its initial public offering. All eligible bank employees are able to participate in the 401 (k) and ESOP still, regulatory filings said.
The move by Farmington Bank comes about a year and a half after the lender went public. The bank raised $172 million in its June 2011 IPO and has seen its stock price increase about 25 percent since that time, from $11 to $13.75.
Farmington Bank’s decision to freeze its pension plan is not unique. U.S. companies for years have been moving away from defined benefit pension plans to less costly 401(k) contributions instead, which create significant savings and reduce funding uncertainty.
According to a 2012 survey by Massachusetts consulting firm Towers Watson, only 36 percent of the 424 mid-size and large employers surveyed said they still offer defined benefit plans to new employees.
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Bank adds clawback
In an effort to keep risk-taking in check, the board of directors at Salisbury Bancorp has adopted a new compensation claw back policy for its senior executives.
The new policy, which was outlined in a regulatory filing with the U.S. Securities and Exchange Commission, aims to “increase incentives for senior management to take full account of risks to the company and its stockholders in its decision-making, and to reduce such risks wherever practicable.”
Under the new policy, which applies to all named executive officers including CEO Richard J. Cantele Jr., Salisbury Bancorp’s board of director’s compensation committee will have the authority to recommend repayment of any performance-based compensation if senior executives engage in misconduct that forces the company to restate its financial statements.
Misconduct can include fraud, material error, gross negligence, or intentional illegal conduct, the policy said. Ultimately, the full board of directors will decide on any repayment of “performance-based compensation,” which can include all bonuses and other incentive and equity compensation awarded to a senior executive, the policy states.
The board of directors said the new policy is in the “best interests of the company and its stockholders to keep current with best practices in compensation matters and risk management.”
Salisbury Bancorp is the parent company of Lakeville-based Salisbury Bank with $611 million in assets.
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New job for Cicchetti
Connecticut’s former deputy banking commissioner has a new job.
Alan J. Cicchetti, who served as deputy commissioner of the Connecticut Banking Department from 1999 to 2011, has been named director of agency relations at New York mortgage risk management firm Lenders Compliance Group Inc.
In his new role, Cicchetti will assist Lenders Compliance Group’s clients who need guidance with government agencies and help facilitate best policy, procedure, and compliance practices.
During his tenure as deputy commissioner, Cicchetti also served as the Connecticut banking department’s acting director of the consumer credit division, where he was responsible for regulation, examination, licensing and enforcement activities relating to non-depository licensees, including mortgage brokers, lenders, originators, and check cashers.
Greg Bordonaro writes the Financial Sense column every other week. Reach him at gbordonaro@HartfordBusiness.com.
