RETIREMENT PLANS

The Company sponsors a defined benefit retirement plan that covers eligible employees hired prior to February 1, 2007. The benefits are based on years of service and the employee’s five-year final average salary. The accounting for the defined benefit plan requires the use of assumptions and estimates in order to calculate periodic benefit cost and the value of the plan's assets and benefit obligation. These assumptions include discount rates, investment returns, and project salary increases, amongst others. The discount rates used in valuing the plan's benefits obligations was determined with reference to high quality corporate and government bonds that are appropriately matched to the duration of the plan's obligation.

Contributions are intended to provide for benefits attributable to service both to date and expected to be provided in the future. The Company funds the plan in accordance with the Employee Retirement Income Security Act of 1974, or ERISA. The following table sets forth changes in the plan's net benefit obligation and accumulated benefit information as of December 31:



($ in thousands)	2014			2013
Change in benefit obligation - Pension
Benefit obligation at beginning of year	$	9,326		$	10,215
Service cost	248			359
Interest cost	392			402
Actuarial gain/assumption changes	2,804			(1,379		)
Benefits paid	(1,719		)	(271		)
Benefit obligation at end of year	$	11,051		$	9,326
Accumulated benefit obligation at end of year	$	9,473		$	8,427
Change in Plan Assets
Fair value of plan assets at beginning of year	$	8,633		$	6,799
Actual return on plan assets	407			1,105
Employer contribution	650			1,000
Benefits/expenses paid	(1,718		)	(271		)
Fair value of plan assets at end of year	$	7,972		$	8,633
Funded status - liability	$	(3,079	)	$	(693	)

Amounts recorded in equity
Net actuarial loss	$	4,453		$	1,961
Prior service cost	(119		)	(148		)
Total amount recorded	$	4,334		$	1,813
Amount recorded, net taxes	$	2,600		$	1,088

Other changes in plan assets and benefit obligations recognized in other comprehensive income for 2014 and 2013 include the following components:



($ in thousands)	2014			2013
Net (gain)/loss	$	2,973		$	(1,867	)
Recognition of net actuarial gain or (loss)	(481		)	(282		)
Recognized prior service cost	29			28
Total changes	$	2,521		$	(2,121	)
Changes, net of taxes	$	1,511		$	(1,271	)

The Company expects to recognize the following amounts as a component of net periodic pension costs during the next fiscal year:



($ in thousands)
Amortization net actuarial gain or (loss)	$	312
Amortization prior service cost	$	(29	)

At December 31, 2014 and 2013 the Company has a long-term pension liability. The Company has always valued its plan assets as of December 31 each year so there were no additional transition impacts upon implementation of a year-end measurement date for plan assets as required by ASC 715 "Compensation - Retirement Benefits." For 2015, the Company is estimating that contributions to the pension plan will be approximately $600,000.

Based on actuarial estimates, it is expected that annual benefit payments from the pension trust will be as follows ($ in thousands):



2015		2016		2017		2018		2019		2020 - 2022
$	175	$	197	$	288	$	338	$	358	$	2,121

Plan assets consist of equity, debt and short-term money market investment funds. The plan’s current investment policy targets 65% equities, 25% debt and 10% money market funds. Equity and debt investment percentages are allowed to fluctuate plus or minus 20% around the respective targets to take advantage of market conditions. As an example, equities can fluctuate from 78% to 52% of plan assets. At December 31, 2014, the investment mix was approximately 59% equity, 30% debt, and 11% money market funds. At December 31, 2013, the investment mix was approximately 54% equity, 30% debt and 16% money market funds. Equity investments consist of a combination of individual equity securities plus value funds, growth funds, large cap funds and international stock funds. Debt investments consist of U.S. Treasury securities and investment grade corporate debt. The weighted-average discount rate and rate of increase in future compensation levels used in determining the periodic pension cost is 4.3% in 2014 and 5.0% in 2013. The expected long-term rate of return on plan assets is 7.5% in 2014 and 2013. The long-term rate of return on plan assets is based on the historical returns within the plan and expectations for future returns. See the following table for fair value hierarchy by investment type at December 31:



($ in thousands)	Fair Value Hierarchy	2014		2013
Pension Plan Assets:
Cash and Cash Equivalents	Level 1	$	858	$	1,336
Collective Funds	Level 2	3,575		3,851
Treasury/Corporate Notes	Level 2	1,372		1,357
Corporate Equities	Level 1	2,167		2,089
		$	7,972	$	8,633

Total pension and retirement expense was as follows for each of the years ended December 31:



($ in thousands)	2014			2013			2012
Cost components:
Service cost	$	(248	)	$	(359	)	$	(284	)
Interest cost	(392		)	(402		)	(375		)
Expected return on plan assets	576			542			454
Net amortization and deferral	(452		)	(253		)	(190		)
Total net periodic pension cost	$	(516	)	$	(472	)	$	(395	)

The Company has a Supplemental Executive Retirement Plan, or SERP, to restore to executives designated by the Compensation Committee of the Board of Directors the full benefits under the pension plan that would otherwise be restricted by certain limitations now imposed under the Internal Revenue Code. The SERP is currently unfunded. The following SERP benefit information is as of December 31:



($ in thousands)	2014			2013
Change in benefit obligation - SERP
Benefit obligation at beginning of year	$	6,131		$	6,507
Service cost	26			318
Interest cost	258			219
Actuarial gain/assumption changes	1,399			(913		)
Benefits paid	$	(383	)	$	—
Benefit obligation at end of year	$	7,431		$	6,131
Accumulated benefit obligation at end of year	$	6,937		$	6,099
Funded status - liability	$	(7,431	)	$	(6,131	)



($ in thousands)	2014		2013
Amounts recorded in stockholders’ equity
Net actuarial (gain)	$	2,072	$	696
Prior service cost	—		—
Total amount recorded	$	2,072	$	696
Amount recorded, net taxes	$	1,243	$	418

Other changes in benefit obligations recognized in other comprehensive income for 2014 and 2013 include the following components:



($ in thousands)	2014			2013
Net (gain) loss	$	1,399		$	(745	)
Recognition of net actuarial gain or (loss)	(23		)	(229		)
Total changes	$	1,376		$	(974	)
Changes, net of taxes	$	826		$	(584	)

The Company expects to recognize the following amounts as a component of net periodic pension costs during the next fiscal year ($ in thousands):



Amortization net actuarial gain or (loss)	$	337

Based on actuarial estimates, it is expected that annual SERP benefit payments will be as follows ($ in thousands):



2015		2016		2017		2018		2019		2020 - 2022
$	438	$	434	$	448	$	444	$	440	$	2,116

The weighted-average discount rate and rate of increase in future compensation levels used in determining the actuarial present value of projected benefits obligation was 3.85% and 3.5% for 2014, 4.35% and 3.5% for 2013, and 3.45% and 3.5% for 2012. Total pension and retirement expense was as follows for each of the years ended December 31:



($ in thousands)	2014		2013		2012
Cost components:
Service cost	$	26	$	318	$	525
Interest cost	258		219		208
Net amortization and deferral	23		229		287
Total net periodic pension cost	$	307	$	766	$	1,020

The Company also provides a 401(k) plan to its employees and contributed $122,000 to the plan for 2014 and $98,000 to the plan for 2013.