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Employee Benefit Plans

12 Months Ended

Dec. 31, 2013

Compensation and Retirement Disclosure [Abstract]

Note 12. Employee Benefit Plans

401(k) Plan. The Company sponsors a retirement savings plan pursuant to Section 401(k) of the Internal Revenue Code. Employees who have completed three months service are eligible to participate in the plan. New employees, who have met the service requirement, are automatically enrolled in the plan at a 2% deferral rate, which can be modified by the employee at any time. An eligible employee may contribute up to 15% of annual salary to the plan. The Company contributes an amount equal to the sum of 1) 100% of the employee’s salary contributed up to 3% and 2) 50% of the employee’s salary contributed between 3% and 5%. Company contributions are 100% vested immediately. The Company’s matching contribution expense was $1.4 million, $1.2 million, and $1.2 million, for the years ended December 31, 2013, 2012, and 2011, respectively. Although discretionary contributions by the Company are permitted by the plan, the Company did not make any such contributions in 2013, 2012 or 2011. The Company’s matching and discretionary contributions are made in the form of Company stock, which can be transferred by the employee into other investment options offered by the plan at any time. Employees are not permitted to invest their own contributions in Company stock.

Pension Plan. Historically, the Company offered a noncontributory defined benefit retirement plan (the “Pension Plan”) that qualified under Section 401(a) of the Internal Revenue Code. The Pension Plan provided for a monthly payment, at normal retirement age of 65, equal to one-twelfth of the sum of (i) 0.75% of Final Average Annual Compensation (5 highest consecutive calendar years’ earnings out of the last 10 years of employment) multiplied by the employee’s years of service not in excess of 40 years, and (ii) 0.65% of Final Average Annual Compensation in excess of the average social security wage base multiplied by years of service not in excess of 35 years. Benefits were fully vested after five years of service.

During the second quarter of 2009, the Company amended the Pension Plan to limit eligibility to employees hired prior to June 19, 2009. Effective December 31, 2012, the Company froze the Pension Plan for all participants. Although no previously accrued benefits were lost, employees no longer accrue benefits for service subsequent to 2012. The Company made the decision to freeze the Pension Plan because of the uncertainty of future costs and to have a uniform set of benefits for all employees. The freezing of the Pension Plan resulted in an immediate $6.6 million reduction in its benefit obligation, which is referred to as a “curtailment gain” in the table below. The curtailment gain reduced the difference between the assets of the Pension Plan and its benefit obligation, and therefore had the effect of lowering the corresponding liability of the plan and lowering the amount of accumulated other comprehensive loss, which resulted in an increase in shareholders’ equity.

The Company’s contributions to the Pension Plan are based on computations by independent actuarial consultants and are intended to be deductible for income tax purposes. As discussed below, the contributions are invested to provide for benefits under the Pension Plan. The Company did not make any contributions to the Pension Plan in 2013 and contributed $2,500,000 to the Plan in both of the years ended December 31, 2012 and 2011. The Company expects that it will contribute $2,000,000 to the Pension Plan in 2014.

The following table reconciles the beginning and ending balances of the Pension Plan’s benefit obligation, as computed by the Company’s independent actuarial consultants, and its plan assets, with the difference between the two amounts representing the funded status of the Pension Plan as of the end of the respective year.

($ in thousands)	2013			2012			2011
Change in benefit obligation
Benefit obligation at beginning of year	$	32,272			40,084			31,140
Service cost		—			1,835			1,782
Interest cost		1,284			1,451			1,638
Actuarial (gain) loss		(2,343	)		(4,006	)		6,004
Benefits paid		(665	)		(503	)		(480	)
Curtailment gain		—			(6,589	)		—
Benefit obligation at end of year		30,548			32,272			40,084
Change in plan assets
Plan assets at beginning of year		30,124			24,466			22,431
Actual return on plan assets		6,874			3,661			15
Employer contributions		—			2,500			2,500
Benefits paid		(665	)		(503	)		(480	)
Plan assets at end of year		36,333			30,124			24,466

Funded status at end of year	$	5,785			(2,148	)		(15,618	)

The accumulated benefit obligation related to the Pension Plan was $30,548,000, $32,272,000, and $29,641,000 at December 31, 2013, 2012, and 2011, respectively.

The following table presents information regarding the amounts recognized in the consolidated balance sheets at December 31, 2013 and 2012 as it relates to the Pension Plan, excluding the related deferred tax assets.

($ in thousands)	2013		2012

Other assets	$	5,785		1,232
Other liabilities		—		(3,380	)
	$	5,785		(2,148	)

The following table presents information regarding the amounts recognized in accumulated other comprehensive income (AOCI) at December 31, 2013 and 2012, as it relates to the Pension Plan.

($ in thousands)	2013			2012

Net gain (loss)	$	3,579			(3,380	)
Prior service cost		—			—
Amount recognized in AOCI before tax effect		3,579			(3,380	)
Tax (expense) benefit		(1,396	)		1,317
Net amount recognized as increase (decrease) to AOCI	$	2,183			(2,063	)

The following table reconciles the beginning and ending balances of accumulated other comprehensive income (AOCI) at December 31, 2013 and 2012, as it relates to the Pension Plan:

($ in thousands)	2013			2012

Accumulated other comprehensive loss at beginning of fiscal year	$	(2,063	)		(9,855	)
Net gain (loss) arising during period		6,910			12,288
Prior service cost		—			32
Transition Obligation		—			30
Amortization of unrecognized actuarial loss		49			545
Amortization of prior service cost and transition obligation		—			14
Tax (expense) benefit of changes during the year, net		(2,713	)		(5,117	)
Accumulated other comprehensive gain (loss) at end of fiscal year	$	2,183			(2,063	)

The following table reconciles the beginning and ending balances of the prepaid pension cost related to the Pension Plan:

($ in thousands)	2013		2012

Prepaid pension cost as of beginning of fiscal year	$	1,232		671
Net periodic pension income (cost) for fiscal year		974		(1,876	)
Actual employer contributions		—		2,500
Effect of curtailment		—		(63	)
Prepaid pension asset as of end of fiscal year	$	2,206		1,232

Net pension (income) cost for the Pension Plan included the following components for the years ended December 31, 2013, 2012, and 2011:

($ in thousands)	2013			2012			2011

Service cost – benefits earned during the period	$	—			1,835			1,782
Interest cost on projected benefit obligation		1,284			1,451			1,638
Expected return on plan assets		(2,307	)		(1,969	)		(1,716	)
Net amortization and deferral		49			559			395
Net periodic pension (income) cost	$	(974	)		1,876			2,099

The following table is an estimate of the benefits that will be paid in accordance with the Pension Plan during the indicated time periods:

($ in thousands)	Estimated benefit payments
Year ending December 31, 2014	$	866
Year ending December 31, 2015		966
Year ending December 31, 2016		1,127
Year ending December 31, 2017		1,225
Year ending December 31, 2018		1,350
Years ending December 31, 2019-2023		8,248

For each of the years ended December 31, 2013, 2012, and 2011, the Company used an expected long-term rate-of-return-on-assets assumption of 7.75%. The Company arrived at this rate based primarily on a third-party investment consulting firm’s historical analysis of investment returns, which indicated that the mix of the Pension Plan’s assets (generally 75% equities and 25% fixed income) can be expected to return approximately 7.75% on a long term basis.

Funds in the Pension Plan are invested in a mix of investment types in accordance with the Pension Plan’s investment policy, which is intended to provide an average annual rate of return of 7% to 10%, while maintaining proper diversification. Except for Company stock, all of the Pension Plan’s assets are invested in an unaffiliated bank money market account or mutual funds. The investment policy of the Pension Plan does not permit the use of derivatives, except to the extent that derivatives are used by any of the mutual funds invested in by the Pension Plan. The following table presents the targeted mix of the Pension Plan’s assets as of December 31, 2013, as set out by the Plan’s investment policy:

Investment type	Targeted % of Total Assets	Acceptable Range % of Total Assets

Fixed income investments
Cash/money market account	2%	1%-5%
US government bond fund	10%	10%-20%
US corporate bond fund	10%	5%-15%
US corporate high yield bond fund	5%	0%-10%
Equity investments
Large cap value fund	20%	20%-30%
Large cap growth fund	20%	20%-30%
Mid cap equity fund	10%	5%-15%
Small cap growth fund	8%	5%-15%
Foreign equity fund	10%	5%-15%
Company stock	5%	0%-10%

The Pension Plan’s investment strategy contains certain investment objectives and risks for each permitted investment category. To ensure that risk and return characteristics are consistently followed, the Pension Plan’s investments are reviewed at least semi-annually and rebalanced within the acceptable range. Performance measurement of the investments employs the use of certain investment category and peer group benchmarks. The investment category benchmarks as of December 31, 2013 are as follows:

Investment Category	Investment Category Benchmark	Range of Acceptable Deviation from Investment Category Benchmark

Fixed income investments
Cash/money market account	Citigroup Treasury Bill Index – 3 month	0-50 basis points
US government bond fund	Barclays Intermediate Government Bond Index	0-200 basis points
US corporate bond fund	Barclays Aggregate Index	0-200 basis points
US corporate high yield bond fund	Barclays High Yield Index	0-200 basis points
Equity investments
Large cap value fund	Russell 1000 Value Index	0-300 basis points
Large cap growth fund	Russell 1000 Growth Index	0-300 basis points
Mid cap equity fund	Russell Mid Cap Index	0-300 basis points
Small cap growth fund	Russell 2000 Growth Index	0-300 basis points
Foreign equity fund	MSCI EAFE Index	0-300 basis points
Company stock	Russell 2000 Index	0-300 basis points

Each of the investment fund’s average annualized return over a three-year period should be within the range of acceptable deviation from the benchmarked index shown above. In addition to the investment category benchmarks, the Pension Plan also utilizes certain Peer Group benchmarks, based on Morningstar percentile rankings for each investment category. Funds are generally considered to be underperformers if their category ranking is below the 75^th percentile for the trailing one-year period; the 50^thpercentile for the trailing three-year period; and the 25^th percentile for the trailing five-year period.

The Pension Plan invests in various investment securities which are exposed to various risks such as interest rate, market, and credit risks. All of these risks are monitored and managed by the Company. No significant concentration of risk exists within the plan assets at December 31, 2013.

The fair values of the Company’s pension plan assets at December 31, 2013, by asset category, are as follows:

($ in thousands)
	Total Fair Value at December 31, 2013		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)

Fixed income investments
Money market funds	$	292		—		292		—
US government bond fund		3,257		3,257		—		—
US corporate bond fund		3,231		3,231		—		—
US corporate high yield bond fund		1,688		1,688		—		—

Equity investments
Large cap value fund		7,512		7,512		—		—
Large cap growth fund		7,740		7,740		—		—
Small cap growth fund		3,142		3,142		—		—
Mid cap growth fund		3,783		3,783		—		—
Foreign equity fund		3,696		3,696		—		—
Company stock		1,992		1,992		—		—
Total	$	36,333		36,041		292		—

The fair values of the Company’s pension plan assets at December 31, 2012, by asset category, are as follows:

($ in thousands)
	Total Fair Value at December 31, 2012		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)

Fixed income investments
Money market funds	$	441		—		441		—
US government bond fund		2,995		2,995		—		—
US corporate bond fund		3,008		3,008		—		—
US corporate high yield bond fund		1,563		1,563		—		—

Equity investments
Large cap value fund		6,101		6,101		—		—
Large cap growth fund		6,020		6,020		—		—
Small cap growth fund		2,514		2,514		—		—
Mid cap growth fund		3,153		3,153		—		—
Foreign equity fund		3,147		3,147		—		—
Company stock		1,182		1,182		—		—
Total	$	30,124		29,683		441		—

The following is a description of the valuation methodologies used for assets measured at fair value. There have been no changes in the methodologies used at December 31, 2013 and 2012.

Money market fund: valued on the active market on which it is traded; at amortized cost, which approximates fair value.

Mutual funds, common stocks: valued at the closing price reported on the active market on which the individual securities are traded.

Supplemental Executive Retirement Plan. Historically, the Company sponsored a Supplemental Executive Retirement Plan (the “SERP”) for the benefit of certain senior management executives of the Company.

The purpose of the SERP was to provide additional monthly pension benefits to ensure that each such senior management executive would receive lifetime monthly pension benefits equal to 3% of his or her final average compensation multiplied by his or her years of service (maximum of 20 years) to the Company or its subsidiaries, subject to a maximum of 60% of his or her final average compensation. The amount of a participant’s monthly SERP benefit is reduced by (i) the amount payable under the Company’s qualified Pension Plan (described above), and (ii) 50% of the participant’s primary social security benefit. Final average compensation means the average of the 5 highest consecutive calendar years of earnings during the last 10 years of service prior to termination of employment. The SERP is an unfunded plan. Payments are made from the general assets of the Company.

Effective December 31, 2012, the Company froze the SERP to all participants. Although no previously accrued benefits were lost, participants no longer accrue benefits for service subsequent to 2012. The freezing of the SERP resulted in an immediate $0.5 million reduction in its benefit obligation, which is referred to as a “curtailment gain” in the table below. The curtailment gain reduced the liability of the plan and lowered the amount of accumulated other comprehensive loss, which resulted in an increase in shareholders’ equity.

The following table reconciles the beginning and ending balances of the SERP’s benefit obligation, as computed by the Company’s independent actuarial consultants:

($ in thousands)	2013			2012			2011
Change in benefit obligation
Projected benefit obligation at beginning of year	$	6,813			8,064			7,433
Service cost		304			303			292
Interest cost		203			280			351
Actuarial (gain) loss		(1,856	)		(1,201	)		93
Benefits paid		(172	)		(146	)		(105	)
Curtailment gain		—			(487	)		—
Projected benefit obligation at end of year		5,292			6,813			8,064
Plan assets		—			—			—
Funded status at end of year	$	(5,292	)		(6,813	)		(8,064	)

The accumulated benefit obligation related to the SERP was $5,292,000, $6,813,000, and $7,199,000 at December 31, 2013, 2012, and 2011, respectively.

The following table presents information regarding the amounts recognized in the consolidated balance sheets at December 31, 2013 and 2012 as it relates to the SERP, excluding the related deferred tax assets.

($ in thousands)	2013			2012

Other assets – prepaid pension asset (liability)	$	(6,848	)		(6,614	)
Other assets (liabilities)		1,556			(199	)
	$	(5,292	)		(6,813	)

The following table presents information regarding the amounts recognized in AOCI at December 31, 2013 and 2012.

($ in thousands)	2013			2012

Net gain (loss)	$	1,556			(199	)
Prior service cost		—			—
Amount recognized in AOCI before tax effect		1,556			(199	)
Tax (expense) benefit		(607	)		79
Net amount recognized as increase (decrease) to AOCI	$	949			(120	)

The following table reconciles the beginning and ending balances of accumulated other comprehensive income (AOCI) at December 31, 2013 and 2012, as it relates to the SERP:

($ in thousands)	2013			2012

Accumulated other comprehensive loss at beginning of fiscal year	$	(120	)		(1,203	)
Net gain (loss) arising during period		1,856			1,687
Prior service cost		—			83
Amortization of unrecognized actuarial loss		(101	)		—
Amortization of prior service cost and transition obligation		—			19
Tax expense related to changes during the year, net		(686	)		(706	)
Accumulated other comprehensive income (loss) at end of fiscal year	$	949			(120	)

The following table reconciles the beginning and ending balances of the prepaid pension cost related to the SERP:

($ in thousands)	2013			2012

Prepaid pension cost (liability) as of beginning of fiscal year	$	(6,614	)		(6,075	)
Net periodic pension cost for fiscal year		(406	)		(602	)
Benefits paid		172			146
Effect of curtailment		—			(83	)
Prepaid pension cost (liability) as of end of fiscal year	$	(6,848	)		(6,614	)

Net pension cost for the SERP included the following components for the years ended December 31, 2013, 2012, and 2011:

($ in thousands)	2013			2012		2011

Service cost – benefits earned during the period	$	304			303		292
Interest cost on projected benefit obligation		203			280		351
Net amortization and deferral		(101	)		19		30
Net periodic pension cost	$	406			602		673

The following table is an estimate of the benefits that will be paid in accordance with the SERP during the indicated time periods:

($ in thousands)	Estimated benefit payments
Year ending December 31, 2014	$	237
Year ending December 31, 2015		288
Year ending December 31, 2016		341
Year ending December 31, 2017		350
Year ending December 31, 2018		397
Years ending December 31, 2019-2023		2,140

The following assumptions were used in determining the actuarial information for the Pension Plan and the SERP for the years ended December 31, 2013, 2012, and 2011:

	2013		2012		2011
	Pension Plan	SERP	Pension Plan	SERP	Pension Plan	SERP
Discount rate used to determine net periodic pension cost	3.97%	3.97%	4.39%	4.39%	5.59%	5.59%
Discount rate used to calculate end of year liability disclosures	4.78%	4.78%	3.97%	3.97%	4.39%	4.39%
Expected long-term rate of return on assets	7.75%	n/a	7.75%	n/a	7.75%	n/a
Rate of compensation increase	n/a	n/a	3.50%	3.50%	5.00%	5.00%

The Company’s discount rate policy is based on a calculation of the Company’s expected pension payments, with those payments discounted using the Citigroup Pension Index yield curve.