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. New employees who have met the age requirement are automatically enrolled in the plan at a 5% deferral rate on the next plan Entry Date. The automatic deferral 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, $1.4 million, and $1.2 million, for the years ended December 31, 2014, 2013, and 2012, respectively. Although discretionary contributions by the Company are permitted by the plan, the Company did not make any such contributions in 2014, 2013 or 2012. The Company's matching and discretionary contributions are made according to the same investment elections each participant has established for their deferral contributions. Effective July 1, 2014, employees are 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 at the time of the freeze.

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 2014 or 2013 and contributed $2,500,000 to the Plan for the year ended December 31, 2012. The Company does not expect to contribute to the Pension Plan in 2015.

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)	2014			2013			2012
Change in benefit obligation
Benefit obligation at beginning of year	$	30,548			32,272			40,084
Service cost		−			−			1,835
Interest cost		1,461			1,284			1,451
Actuarial (gain) loss		5,320			(2,343	)		(4,006	)
Benefits paid		(1,714	)		(665	)		(503	)
Curtailment gain		−			−			(6,589	)
Benefit obligation at end of year		35,615			30,548			32,272
Change in plan assets
Plan assets at beginning of year		36,333			30,124			24,466
Actual return on plan assets		2,663			6,874			3,661
Employer contributions		−			−			2,500
Benefits paid		(1,714	)		(665	)		(503	)
Plan assets at end of year		37,282			36,333			30,124

Funded status at end of year	$	1,667			5,785			(2,148	)

The accumulated benefit obligation related to the Pension Plan was $35,615,000, $30,548,000,, and $32,272,000 at December 31, 2014, 2013, and 2012, respectively.

The following table presents information regarding the amounts recognized in the consolidated balance sheets at December 31, 2014 and 2013 as it relates to the Pension Plan, excluding the related deferred tax assets.

($ in thousands)	2014		2013

Other assets	$	1,667		5,785
Other liabilities		−		−
	$	1,667		5,785

The following table presents information regarding the amounts recognized in accumulated other comprehensive income (AOCI) at December 31, 2014 and 2013, as it relates to the Pension Plan.

($ in thousands)	2014			2013

Net gain (loss)	$	(1,857	)		3,579
Prior service cost		−			−
Amount recognized in AOCI before tax effect		(1,857	)		3,579
Tax (expense) benefit		724			(1,396	)
Net amount recognized as increase (decrease) to AOCI	$	(1,133	)		2,183

The following table reconciles the beginning and ending balances of accumulated other comprehensive income (AOCI) at December 31, 2014 and 2013, as it relates to the Pension Plan:

($ in thousands)	2014		2013

Accumulated other comprehensive loss at beginning of fiscal year	$	2,183		(2,063	)
Net gain (loss) arising during period		(5,436)		6,910
Prior service cost		-		-
Transition Obligation		-		-
Amortization of unrecognized actuarial loss		-		49
Amortization of prior service cost and transition obligation		-		-
Tax (expense) benefit of changes during the year, net		2,120		(2,713	)
Accumulated other comprehensive gain (loss) at end of fiscal year	$	(1,133)		2,183

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

($ in thousands)	2014		2013

Prepaid pension cost as of beginning of fiscal year	$	2,206		1,232
Net periodic pension income (cost) for fiscal year		1,318		974
Actual employer contributions		-		-
Prepaid pension asset as of end of fiscal year	$	3,524		2,206

Net pension (income) cost for the Pension Plan included the following components for the years ended December 31, 2014, 2013, and 2012:

($ in thousands)	2014			2013			2012

Service cost – benefits earned during the period	$	-			-			1,835
Interest cost on projected benefit obligation		1,461			1,284			1,451
Expected return on plan assets		(2,779	)		(2,307	)		(1,969	)
Net amortization and deferral		-			49			559
Net periodic pension (income) cost	$	(1,318			(974	)		1,876

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, 2015	$	1,035
Year ending December 31, 2016		1,198
Year ending December 31, 2017		1,285
Year ending December 31, 2018		1,428
Year ending December 31, 2019		1,524
Years ending December 31, 2020-2024		8,925

For each of the years ended December 31, 2014, 2013, and 2012, 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, 2014, 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, 2014 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 75th percentile for the trailing one-year period; the 50th percentile for the trailing three-year period; and the 25th 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, 2014.

The fair values of the Company's pension plan assets at December 31, 2014, by asset category, are as follows:

($ in thousands)

Total Fair Value at December 31, 2014

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

447

−

447

−

US government bond fund

3,385

−

US corporate bond fund

3,377

−

US corporate high yield bond fund

1,741

−

Equity investments

Large cap value fund

7,669

−

Large cap growth fund

7,694

−

Small cap growth fund

3,162

−

Mid cap growth fund

3,983

−

Foreign equity fund

3,611

−

Company stock

2,213

−

Total

37,282

36,835

447

−

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

−

US corporate bond fund

3,231

−

US corporate high yield bond fund

1,688

−

Equity investments

Large cap value fund

7,512

−

Large cap growth fund

7,740

−

Small cap growth fund

3,142

−

Mid cap growth fund

3,783

−

Foreign equity fund

3,696

−

Company stock

1,992

−

Total

36,333

36,041

292

−

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, 2014 and 2013.

- Money market fund: Valued at net asset value (“NAV”), which can be validated with a sufficient level of observable activity (i.e. purchases and sales at NAV), and therefore, the funds were classified within Level 2 of the fair value hierarchy.

- Mutual funds: Valued at the daily closing price as reported by the fund. Mutual funds held by the Plan are open-end mutual funds that are registered with the Securities and Exchange Commission and are deemed to be actively traded.

- Common stock: 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)	2014			2013			2012
Change in benefit obligation
Projected benefit obligation at beginning of year	$	5,292			6,813			8,064
Service cost		272			304			303
Interest cost		212			203			280
Actuarial (gain) loss		(265	)		(1,856	)		(1,201	)
Benefits paid		(295	)		(172	)		(146	)
Curtailment gain		-			-			(487	)
Projected benefit obligation at end of year		5,216			5,292			6,813
Plan assets		-			-			-
Funded status at end of year	$	(5,216	)		(5,292	)		(6,813	)

The accumulated benefit obligation related to the SERP was $5,216,000, $5,292,000, and $6,813,000 at December 31, 2014, 2013, and 2012, respectively.

The following table presents information regarding the amounts recognized in the consolidated balance sheets at December 31, 2014 and 2013 as it relates to the SERP, excluding the related deferred tax assets.

($ in thousands)	2014			2013

Other assets – prepaid pension asset (liability)	$	(6,816	)		(6,848	)
Other assets (liabilities)		1,600			1,556
	$	(5,216	)		(5,292	)

The following table presents information regarding the amounts recognized in AOCI at December 31, 2014 and 2013.

($ in thousands)	2014			2013

Net gain (loss)	$	1,600			1,556
Prior service cost		−			−
Amount recognized in AOCI before tax effect		1,600			1,556
Tax (expense) benefit		(624	)		(607	)
Net amount recognized as increase (decrease) to AOCI	$	976			949

The following table reconciles the beginning and ending balances of accumulated other comprehensive income (AOCI) at December 31, 2014 and 2013, as it relates to the SERP:

($ in thousands)	2014			2013

Accumulated other comprehensive loss at beginning of fiscal year	$	949			(120	)
Net gain (loss) arising during period		265			1,856
Prior service cost		−			−
Amortization of unrecognized actuarial loss		(221	)		(101	)
Amortization of prior service cost and transition obligation		−			−
Tax expense related to changes during the year, net		(17	)		(686	)
Accumulated other comprehensive income (loss) at end of fiscal year	$	976			949

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

($ in thousands)	2014			2013

Prepaid pension cost (liability) as of beginning of fiscal year	$	(6,848	)		(6,614	)
Net periodic pension cost for fiscal year		(263	)		(406	)
Benefits paid		295			172
Prepaid pension cost (liability) as of end of fiscal year	$	(6,816	)		(6,848	)

Net pension cost for the SERP included the following components for the years ended December 31, 2014, 2013, and 2012:

($ in thousands)	2014			2013			2012

Service cost – benefits earned during the period	$	272			304			303
Interest cost on projected benefit obligation		212			203			280
Net amortization and deferral		(221	)		(101	)		19
Net periodic pension cost	$	263			406			602

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, 2015	$	241
Year ending December 31, 2016		301
Year ending December 31, 2017		314
Year ending December 31, 2018		389
Year ending December 31, 2019		385
Years ending December 31, 2020-2024		2,044

The following assumptions were used in determining the actuarial information for the Pension Plan and the SERP for the years ended December 31, 2014, 2013, and 2012:

	2014						2013						2012
	Pension Plan			SERP			Pension Plan			SERP			Pension Plan			SERP
Discount rate used to determine net periodic pension cost		4.78	%		4.78	%		3.97	%		3.97	%		4.39	%		4.39	%
Discount rate used to calculate end of year liability disclosures		3.82	%		3.82	%		4.78	%		4.78	%		3.97	%		3.97	%
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			n/a			n/a			3.50	%		3.50	%

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.