Employee Benefit Plans
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Dec. 31, 2013
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EMPLOYEE BENEFIT PLANS | 20. Employee Benefit Plans
Stock Option Plan The 2000 Incentive Stock Option Plan expired in May 2010 and was replaced with the 2011 Stock Option Plan in May 2011 (collectively, the “Plans”). The 2011 Stock Option Plan has essentially the same structure as the 2000 plan. Under the provisions of the Plans, while active, options can be granted to officers and key employees of the Company. The Plans provide that the option price per share is not to be less than the fair market value of the stock on the day the option was granted, but in no event less than the par value of such stock. Options granted under the Plans are exercisable no earlier than one year after the date of grant and expire ten years after the date of the grant.
The Plans are administered by a committee of the Board of Directors, whose members are not eligible to receive options under the Plans. The Committee determines, among other things, which officers and key employees receive options, the number of shares to be subject to each option, the option price and the duration of the option. Options vest over three to five years and are exercisable at the grant price, which is at least the fair market value of the stock on the grant date. All options previously granted under the Plans are scheduled to expire through February 20, 2023. The aggregate number of shares that may be issued upon the exercise of options under the 2011 Stock Option Plan is set at 300,000 shares, and 247,300 shares were available for grant as of December 31, 2013. Total options outstanding at December 31, 2013 have exercise prices between $17.22 and $24.00, with a weighted average exercise price of $18.50 and a weighted average remaining contractual life of 6.7 years.
As of December 31, 2013, there was $57,000 of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the Plans. That cost is expected to be recognized through 2018.
Cash received from option exercises under the Plans for the years ended December 31, 2013, 2012 and 2011 was $0, $104,000, and $27,000, respectively.
A summary of the status of the Plans as of December 31, 2013, 2012 and 2011, and changes during the years ending on those dates is presented below:
The following table summarizes characteristics of stock options as of December 31, 2013:
Defined Benefit Retirement Plan The Company sponsors a defined benefit retirement plan which covers substantially all of its employees employed prior to December 31, 2007. As of January 1, 2008, the plan was amended to close the plan to new entrants. All active participants as of December 31, 2007 became 100% vested in their accrued benefit and, as long as they remained eligible, continued to accrue benefits until December 31, 2012. The benefits are based on years of service and the employee’s compensation. Effective December 31, 2012, the defined benefit retirement plan was amended to cease future service accruals after that date (frozen). The Company’s funding policy is to contribute annually no more than the maximum amount that can be deducted for federal income tax purposes. Contributions are intended to provide for benefits attributed to service through December 31, 2012. The Company does not expect to contribute to the defined benefit plan in 2014.
Management expects no expense to be recorded as net periodic expense in 2014 for the defined benefit plan, which includes expected amortization out of accumulated other comprehensive loss. The following table sets forth by level, within the fair value hierarchy, debt and equity instruments included in the defined benefit retirement’s plan assets at fair value as of December 31, 2013 and December 31, 2012 (in thousands). Assets included in the plan that are not valued in the hierarchy table consist of cash and cash equivalents, totaling $703,000 and $738,000, at December 31, 2013 and 2012, respectively.
The measurement date for the defined benefit plan is December 31. Information pertaining to the activity in the defined benefit plan is as follows (in thousands):
Pension expense included the following components for the years ended December 31 (in thousands):
Assumptions used to determine benefit obligations were:
Assumptions used to determine the net periodic benefit cost were:
The investment strategy and investment policy for the retirement plan is to target the plan assets to contain 50% equity and 50% fixed income securities. The asset allocation as of December 31, 2013 was approximately 43% fixed income securities, 55% equities and 2% cash equivalents.
Future expected benefit payments (in thousands):
Defined Contribution Plan The Company has a Defined Contribution Plan under which employees, through payroll deductions, are able to defer portions of their compensation. The Company makes an annual non-elective fully vested contribution equal to 3% of compensation to each eligible participant. As of December 31, 2013, a liability of $172,000 was recorded to satisfy this obligation, and was credited to employees’ accounts by January 31, 2014. This liability at December 31, 2012 totaled $161,000 and was credited to employee accounts during 2013. Expense incurred under this plan was $175,000, $157,000 and $151,000 in 2013, 2012 and 2011, respectively. Effective January 1, 2013, the Company amended the Defined Contribution Plan to include an employer matching contribution for employees that elect to defer compensation into this program. The matching contribution in 2013 was $123,000.
Employee Stock Purchase Plan The Company has an Employee Stock Purchase Plan under which employees, through payroll deductions, are able to purchase shares of Company stock annually. The option price of the stock purchases is between 95% and 100% of the fair market value of the stock on the offering termination date as determined annually by the Board of Directors. The maximum number of shares which employees may purchase under the Plan is 250,000; however, the annual issuance of shares may not exceed 5,000 shares plus any unissued shares from prior offerings. There were 2,823 shares issued in 2013, 2,729 shares issued in 2012 and 2,413 shares issued in 2011 under this plan. At December 31, 2013, there were 187,557 shares reserved for issuance under the Employee Stock Purchase Plan.
Supplemental Retirement Plans The Company has non-qualified supplemental retirement plans for directors and key employees. At December 31, 2013 and 2012, the present value of the future liability was $533,000 and $627,000, respectively. For the years ended December 31, 2013, 2012 and 2011, $47,000, $56,000 and $73,000, respectively, was charged to expense in connection with these plans. The Company offsets the cost of these plans through the purchase of bank-owned life insurance and annuities. See Note 8.
Deferred Compensation Plans The Company has entered into deferred compensation agreements with certain directors to provide each director an additional retirement benefit, or to provide their beneficiary a benefit, in the event of pre-retirement death. At December 31, 2013 and 2012, the present value of the future liability was $1,591,000 and $1,661,000, respectively. For the years ended December 31, 2013, 2012 and 2011, $47,000, $66,000 and $83,000, respectively, was charged to expense in connection with these plans. The Company offsets the cost of these plans through the purchase of bank-owned life insurance. See Note 8.
Salary Continuation Plans The Company has non-qualified salary continuation plans for key employees. At December 31, 2013 and 2012, the present value of the future liability was $1,154,000 and $1,151,000, respectively. For the years ended December 31, 2013, 2012 and 2011, $97,000, $132,000 and $136,000, respectively, was charged to expense in connection with these plans. The Company offsets the cost of these plans through the purchase of bank-owned life insurance. See Note 8.
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