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Retirement Plans
12 Months Ended
Dec. 31, 2016
Retirement Plans  
Retirement Plans

Note 17—Retirement Plans

The Company and its subsidiary have a non‑contributory defined benefit pension plan covering all employees hired on or before December 31, 2005, who have attained age 21, and who have completed one year of eligible service. The Company’s funding policy is based principally, among other considerations, on contributing an amount necessary to satisfy the Internal Revenue Service’s funding standards.

Effective July 1, 2009, the Company suspended the accrual of benefits for pension plan participants under the non‑contributory defined benefit plan. The pension plan remained suspended as of December 31, 2016.

The following sets forth the pension plan’s funded status and amounts recognized in the Company’s accompanying consolidated financial statements:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

(Dollars in thousands)

 

2016

 

2015

 

2014

 

Change in benefit obligation:

    

 

    

    

 

    

    

 

    

 

Benefit obligation at beginning of year

 

$

28,260

 

$

28,002

 

$

24,608

 

Service cost

 

 

112

 

 

 —

 

 

 —

 

Interest cost

 

 

1,132

 

 

1,017

 

 

1,111

 

Actuarial loss

 

 

435

 

 

132

 

 

3,057

 

Benefits paid

 

 

(1,015)

 

 

(891)

 

 

(774)

 

Expenses

 

 

(124)

 

 

 —

 

 

 —

 

Benefit obligation at end of year

 

 

28,800

 

 

28,260

 

 

28,002

 

Change in plan assets:

 

 

 

 

 

 

 

 

 

 

Fair value of plan assets at beginning of year

 

 

27,444

 

 

28,451

 

 

27,033

 

Actual return on plan assets

 

 

1,911

 

 

(116)

 

 

1,592

 

Employer contribution

 

 

 —

 

 

 —

 

 

600

 

Benefits paid

 

 

(1,015)

 

 

(891)

 

 

(774)

 

Expenses

 

 

(124)

 

 

 —

 

 

 —

 

Fair value of plan assets at end of year

 

 

28,216

 

 

27,444

 

 

28,451

 

Funded (unfunded) status

 

$

(584)

 

$

(816)

 

$

449

 

 

 

At December 31, 2016 and 2015, the net losses recognized in accumulated other comprehensive income excluding related income tax effects were $9.5 million and $9.6 million, respectively.

The components of net periodic pension cost and other amounts recognized in other comprehensive income are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

(Dollars in thousands)

 

 

2016

 

2015

 

2014

Interest cost

 

    

$

1,132

    

$

1,017

    

$

1,110

Service cost

 

 

 

112

 

 

 —

 

 

 —

Expected return on plan assets

 

 

 

(2,131)

 

 

(2,067)

 

 

(1,938)

Recognized net actuarial loss

 

 

 

816

 

 

898

 

 

659

Net periodic pension benefit

 

 

 

(71)

 

 

(152)

 

 

(169)

Net loss

 

 

 

655

 

 

2,315

 

 

3,404

Amortization of net loss

 

 

 

(816)

 

 

(898)

 

 

(659)

Total amount recognized in other comprehensive income

 

 

 

(161)

 

 

1,417

 

 

2,745

Total recognized in net periodic benefit cost and other comprehensive income

 

 

$

(232)

 

$

1,265

 

$

2,576

 

 

The amount of estimated net loss for the defined benefit pension plan that will be amortized from accumulated other comprehensive income into periodic benefit cost over the next fiscal year is $910,000.

The following is information as of the measurement date:

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

(Dollars in thousands)

 

2016

 

2015

 

Projected benefit obligation

    

$

28,800

    

$

28,260

 

Accumulated benefit obligation

 

 

28,800

 

 

28,260

 

Fair value of plan assets

 

 

28,216

 

 

27,444

 

 

 

The Company used a 4.00% and 4.10% discount rate in its weighted‑average assumptions used to determine the benefit obligation at December 31, 2016, and 2015, respectively. The rate of compensation increase was not applicable in the Company’s weighted‑average assumptions because of the plan curtailment at June 30, 2009. The weighted‑average assumptions used to determine net periodic pension cost are as follows:

 

 

 

 

 

 

 

 

 

 

 

Year ended

 

 

 

December 31,

 

 

 

2016

 

2015

 

2014

 

Discount rate

    

4.10

%      

3.70

%      

4.60

Expected long-term return on plan assets

 

7.75

%  

7.75

%  

7.75

%

 

 

For the years ended December 31, 2016, 2015, and 2014, the discount rate of 4.10%,  3.70%, and 4.60%, respectively, was determined by matching the projected benefit obligation cash flows of the plan to an independently derived yield curve, to arrive at the single equivalent rate.

The expected rate of return for the pension plan’s assets represents the average rate of return to be earned on plan assets over the period the benefits included in the benefit obligation are to be paid. In developing the expected rate of return, the Company considered long‑term compound annualized returns of historical market data as well as historical actual returns on the Company’s plan assets. Using this reference information, the Company developed forward‑looking return expectations for each asset category and a weighted average expected long‑term rate of return for a targeted portfolio allocated across these investment categories. In developing the long‑term rate of return assumption for the pension plan, the Company utilized the following long‑term rate of return and standard deviation assumptions:

 

 

 

 

 

 

 

 

    

Rate of

    

Standard

 

 

 

Return

 

Deviation

 

Asset Class

 

Assumption

 

Assumption

 

Cash Equivalents

 

3.00

%  

0.48

%

High Grade Fixed Income

 

6.19

%  

3.48

%

High Yield Fixed Income

 

8.35

%  

8.71

%

International Fixed Income

 

6.34

%  

8.37

%

Large Cap Equity

 

10.00

%  

14.35

%

Mid Cap Equity

 

11.33

%  

16.54

%

Mid/Small Cap Equity

 

10.20

%  

17.70

%

Small Cap Equity

 

9.06

%  

18.86

%

Foreign Equity

 

5.82

%  

17.13

%

 

 

The portfolio’s equity weighting is consistent with the long‑term nature of the Plan’s benefit obligation, and the expected annual return on the portfolio of 7.75%.

The policy, as established by the Investment Committee of the Defined Benefit Pension Plan, seeks to maximize return within reasonable and prudent levels of risk. The overall long‑term objective of the Plan is to achieve a rate of return that exceeds the actuarially assumed rate of return. The investment policy is reviewed on a regular basis and revised when appropriate based on the legal or regulatory environment, market trends, or other fundamental factors. In determining the long‑term rate of return for the pension plan, the Company considers historical rates of return and the nature of the plan’s investments. Plan assets are divided among various investment classes with allowable allocation percentages as follows: Equities 55 - 65%, Fixed Income 20 - 40%, Cash Equivalents 0 - 35%. As of December 31, 2016, approximately 59% of pension plan assets were invested with equity managers, approximately 32% of pension plan assets were invested with fixed income managers, and approximately 9% of pension plan assets were held in cash equivalents. The difference between actual and expected returns on plan assets is accumulated and amortized over future periods and, therefore, affects the recognized expenses in such future periods.

Following is a description of valuation methodologies used for assets recorded at fair value.

Money Market Funds

Money Market Funds are public investment vehicles valued using $1 for the Net Asset Value (the “NAV”). The money market funds are classified within level 1 of the valuation hierarchy.

Broad Market Fixed Income, Domestic Equity and Foreign Equity Mutual Funds

Broad Market Fixed Income, Domestic Equity and Foreign Equity mutual funds are public investment vehicles valued using the NAV provided by the administrator of the fund. The NAV is based on the value of the underlying assets owned by the fund, minus its liabilities, and then divided by the number of shares outstanding. The NAV is a quoted price in an active market and classified within level 1 of the valuation hierarchy.

The fair values of the Company’s pension plan assets at December 31, 2016 by asset category are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

Quoted Prices

    

 

 

    

 

 

 

 

 

 

 

 

In Active

 

Significant

 

 

 

 

 

 

 

 

 

Markets

 

Other

 

Significant

 

 

 

Fair Value

 

for Identical

 

Observable

 

Unobservable

 

 

 

December 31,

 

Assets

 

Inputs

 

Inputs

 

(Dollars in thousands)

 

2016

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

Cash and cash equivalents

 

$

6

 

$

6

 

$

 —

 

$

 —

 

Money market funds

 

 

2,611

 

 

2,611

 

 

 —

 

 

 —

 

Broad market fixed income

 

 

8,889

 

 

8,889

 

 

 —

 

 

 —

 

Domestic equity

 

 

14,388

 

 

14,388

 

 

 —

 

 

 —

 

Foreign equity

 

 

2,322

 

 

2,322

 

 

 —

 

 

 —

 

Total assets

 

$

28,216

 

$

28,216

 

$

 —

 

$

 —

 

 

 

As of December 31, 2016 and 2015, the Plan’s domestic equity securities did not include any of the Company’s common stock. The plan made no purchases of the Company’s stock during 2016, 2015 and 2014.

Estimated future benefit payments for the next ten years:

 

 

 

 

 

 

(Dollars in thousands)

    

    

 

 

2017

 

$

1,423

 

2018

 

 

1,480

 

2019

 

 

1,521

 

2020

 

 

1,583

 

2021

 

 

1,596

 

2022-2026

 

 

8,254

 

 

 

$

15,857

 

 

 

Expenses incurred and charged against operations with regard to all of the Company’s retirement plans were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended December 31,

 

(Dollars in thousands)

 

2016

 

2015

 

2014

 

Pension

    

$

(205)

    

$

(152)

    

$

(169)

 

Employee savings plan/ 401(k)

 

 

6,178

 

 

5,873

 

 

4,966

 

Supplemental executive retirement plan

 

 

134

 

 

306

 

 

88

 

Post-retirement benefits

 

 

192

 

 

212

 

 

242

 

 

 

$

6,299

 

$

6,239

 

$

5,127

 

 

 

The Company does not expect to contribute to the pension plan in 2017, but reserves the right to contribute between the minimum required and maximum deductible amounts as determined under applicable federal laws.

The Company and its subsidiaries have a Safe Harbor plan. Under the plan, electing employees are eligible to participate after attaining age 18. Plan participants elect to contribute portions of their annual base compensation in any combination of pre‑tax deferrals or Roth post‑tax deferrals subject to the annual IRS limit. Employer contributions may be made from current or accumulated net profits. Participants may elect to contribute 1% to 50% of annual base compensation as a before tax contribution. Employees participating in the plan receive a 100% matching of their 401(k) plan contribution, up to 5% of salary.  Effective January 1, 2015, employees are eligible for an additional 1% discretionary matching contribution contingent upon achievement of the Company’s annual financial goals and payable the first quarter of the following year.

Employees hired on January 1, 2006 or thereafter will not participate in the defined benefit pension plan, but are eligible to participate in the employees’ savings plan.

Employees can enter the savings plan on or after the first day of each month. The employee may enter into a salary deferral agreement at any time to select an alternative deferral amount or to elect not to defer in the Plan. If the employee does not elect an investment allocation, the plan administrator will select a retirement‑based portfolio according to the employee’s number of years until normal retirement age. The plan’s investment valuations are generally provided on a daily basis.