XML 78 R21.htm IDEA: XBRL DOCUMENT

14. Employee Benefits

12 Months Ended

Dec. 31, 2013

We sponsor a pretax savings and profit sharing plan (the “401(k) Plan”) qualified under Section 401(k) of the Internal Revenue Code. Under the 401(k) Plan, eligible employees are able to contribute up to 15% of their compensation (subject to stricter limitation in the case of highly compensated employees). We may, at our discretion, match 100% of employees’ contributions up to $1,500 per employee per calendar year. Our contributions to the 401(k) Plan were $471,000 for the year ended December 31, 2013. We did not make any matching contributions in 2012.

We also sponsor a defined benefit plan, the MFN Financial Corporation Pension Plan (the “Plan”). The Plan benefits were frozen on June 30, 2001.

The following tables represents a reconciliation of the change in the plan’s benefit obligations, fair value of plan assets, and funded status at December 31, 2013 and 2012:

	December 31,
	2013			2012
	(In thousands)
Change in Projected Benefit Obligation
Projected benefit obligation, beginning of year	$	21,792		$	19,443
Service cost		–			–
Interest cost		823			875
Assumption changes		(2,420	)		2,332
Actuarial (gain) loss		(113	)		2
Settlements		–			–
Benefits paid		(1,241	)		(860	)
Projected benefit obligation, end of year	$	18,841		$	21,792

Change in Plan Assets
Fair value of plan assets, beginning of year	$	16,612		$	10,613
Return on assets		6,009			5,439
Employer contribution		389			1,473
Expenses		(105	)		(53	)
Settlements		–			–
Benefits paid		(1,241	)		(860	)
Fair value of plan assets, end of year	$	21,664		$	16,612

Funded Status at end of year	$	2,823		$	(5,180	)

Additional Information

Weighted average assumptions used to determine benefit obligations and cost at December 31, 2013 and 2012 were as follows:

	December, 31
	2013		2012
Weighted average assumptions used to determine benefit obligations
Discount rate		4.75%		3.91%

Weighted average assumptions used to determine net periodic benefit cost
Discount rate		3.91%		4.60%
Expected return on plan assets		8.25%		8.50%

Our overall expected long-term rate of return on assets is 8.25% per annum as of December 31, 2013. The expected long-term rate of return is based on the weighted average of historical returns on individual asset categories, which are described in more detail below.

	December 31,
	2013			2012
	(In thousands)
Amounts recognized on Consolidated Balance Sheet
Other assets	$	2,823		$	–
Other liabilities		–			(5,180	)
Net amount recognized	$	2,823		$	(5,180	)

Amounts recognized in accumulated other comprehensive income consists of:
Net gain	$	1,367		$	8,953
Unrecognized transition asset		–			–
Net amount recognized	$	1,367		$	8,953

Components of net periodic benefit cost
Interest cost	$	823		$	875
Expected return on assets		(1,335	)		(928	)
Amortization of transition asset		–			–
Amortization of net loss		484			680
Net periodic benefit cost		(28	)		627
Settlement (gain)/loss		–			–
Total	$	(28	)	$	627

Benefit Obligation Recognized in Other Comprehensive Income
Net gain	$	(7,586	)	$	(2,748	)
Prior service cost (credit)		–			–
Amortization of prior service cost		–			–
Net amount recognized in other comprehensive income	$	(7,586	)	$	(2,748	)

Accumulated Pension Benefit Obligation	$	(1,095	)	$	(5,637	)

There is no estimated net loss that will be amortized from accumulated other comprehensive income into net periodic benefit cost in 2014.

The weighted average asset allocation of our pension benefits at December 31, 2013 and 2012 were as follows:

	December 31,
	2013		2012
Weighted Average Asset Allocation at Year-End
Asset Category
Equity securities		87%		83%
Debt securities		13%		16%
Cash and cash equivalents		0%		1%
Total		100%		100%

Our investment policies and strategies for the pension benefits plan utilize a target allocation of 75% equity securities and 25% fixed income securities (excluding Company stock). Our investment goals are to maximize returns subject to specific risk management policies. We address risk management and diversification by the use of a professional investment advisor and several sub-advisors which invest in domestic and international equity securities and domestic fixed income securities. Each sub-advisor focuses its investments within a specific sector of the equity or fixed income market. For the sub-advisors focused on the equity markets, the sectors are differentiated by the market capitalization, the relative valuation and the location of the underlying issuer. For the sub-advisors focused on the fixed income markets, the sectors are differentiated by the credit quality and the maturity of the underlying fixed income investment. The investments made by the sub-advisors are readily marketable and can be sold to fund benefit payment obligations as they become payable.

Cash Flows

Estimated Future Benefit Payments (In thousands)
2014	$	722
2015		816
2016		828
2017		862
2018		894
Years 2019 - 2023		5,075

Anticipated Contributions in 2014	$	562

The fair value of plan assets at December 31, 2013 and 2012, by asset category, is as follows:

	December 31, 2013
	Level 1 (1)		Level 2 (2)		Level 3 (3)		Total
Investment Name:		(in thousands)
Company Common Stock	$	8,319	$	–	$	–	$	8,319
Fundamental Value		–		2,384		–		2,384
Mid Cap Growth		–		709		–		709
Focus Value		–		692		–		692
Small Co. Value		–		693		–		693
Growth		–		3,237		–		3,237
International Growth		–		2,855		–		2,855
Core Bond		–		1,870		–		1,870
High Yield		–		387		–		387
Inflation Protected Bond		–		487		–		487
Money Market		–		31		–		31
Total	$	8,319	$	13,345	$	–	$	21,664

	December 31, 2012
	Level 1 (1)		Level 2 (2)		Level 3 (3)		Total
Investment Name:		(in thousands)
Company Common Stock	$	4,791	$	–	$	–	$	4,791
Fundamental Value		–		2,049		–		2,049
Mid Cap Growth		–		596		–		596
Focus Value		–		607		–		607
Small Co. Value		–		604		–		604
Growth		–		2,681		–		2,681
International Growth		–		2,431		–		2,431
Core Bond		–		1,780		–		1,780
Income		–		363		–		363
Inflation Protected Bond		–		472		–		472
Money Market		–		238		–		238
Total	$	4,791	$	11,821	$	–	$	16,612

________________________

(1)

Company common stock is classified as level 1 and valued using quoted prices in active markets for identical assets.

(2)

All other plan assets in stock, bond and money market funds are classified as level 2 and valued using significant observable inputs.

(3)

There are no plan assets classified as level 3 in the fair value hierarchy as a result of having significant unobservable inputs.