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 were 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)	2016			2015
Change in benefit obligation - Pension
Benefit obligation at beginning of year	$	8,970		$	11,051
Service cost	223			265
Interest cost	406			466
Actuarial gain/assumption changes	378			(1,239		)
Benefits paid	(50		)	(33		)
Settlements paid	(22		)	(1,540		)
Benefit obligation at end of year	$	9,905		$	8,970
Accumulated benefit obligation at end of year	$	8,475		$	7,661
Change in Plan Assets
Fair value of plan assets at beginning of year	$	6,707		$	7,972
Actual return on plan assets	339			(142		)
Employer contribution	—			450
Benefits/expenses paid	(50		)	(33		)
Settlements paid	(22		)	(1,540		)
Fair value of plan assets at end of year	$	6,974		$	6,707
Funded status - liability	$	(2,931	)	$	(2,263	)

Amounts recorded in equity
Net actuarial loss	$	3,465		$	3,123
Prior service cost	(61		)	(90		)
Total amount recorded	$	3,404		$	3,033
Amount recorded, net taxes	$	2,042		$	1,820

Other changes in plan assets and benefit obligations recognized in other comprehensive income include the following as of December 31:



($ in thousands)	2016			2015
Net loss (gain)	$	556		$	(482	)
Recognition of net actuarial loss	(213		)	(849		)
Recognized prior service cost	29			29
Total changes	$	372		$	(1,302	)
Changes, net of taxes	$	188		$	(781	)

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



Amortization net actuarial gain	$	230
Amortization prior service cost	$	(29	)

At December 31, 2016 and 2015 the Company had 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 2017, the Company is estimating that contributions to the pension plan will be approximately $0.

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



2017		2018		2019		2020		2021		Thereafter
$	181	$	179	$	245	$	257	$	269	$	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, 2016, the investment mix was approximately 60% equity, 29% debt, and 11% money market funds. At December 31, 2015, the investment mix was approximately 61% equity, 33% debt and 6% 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 2016 and 4.6% in 2015. The expected long-term rate of return on plan assets is 7.5% in 2016 and 2015. 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	2016		2015
Pension Plan Assets:
Cash and Cash Equivalents	Level 1	$	776	$	459
Collective Funds	Level 2	3,423		2,726
Treasury/Corporate Notes	Level 2	1,181		1,181
Corporate Equities	Level 1	1,594		2,341
Fair value of plan assets		$	6,974	$	6,707

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



($ in thousands)	2016			2015			2014
Cost components:
Service cost	$	(223	)	$	(265	)	$	(248	)
Interest cost	(406		)	(466		)	(392		)
Expected return on plan assets	517			615			576
Net amortization and deferral	(184		)	(284		)	(45		)
Settlement recognition	—			(536		)	(407		)
Total net periodic pension cost	$	(296	)	$	(936	)	$	(516	)

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)	2016			2015
Change in benefit obligation - SERP
Benefit obligation at beginning of year	$	7,999		$	7,431
Service cost	—			—
Interest cost	323			278
Actuarial gain/assumption changes	129			726
Benefits paid	(436		)	(436		)
Benefit obligation at end of year	$	8,015		$	7,999
Accumulated benefit obligation at end of year	$	7,482		$	7,117
Funded status - liability	$	(8,015	)	$	(7,999	)



($ in thousands)	2016		2015
Amounts recorded in stockholders’ equity
Net actuarial loss (gain)	$	2,248	$	2,462
Prior service cost	—		—
Total amount recorded	$	2,248	$	2,462
Amount recorded, net taxes	$	1,349	$	1,477

Other changes in benefit obligations recognized in other comprehensive income for 2016 and 2015 include the following components:



($ in thousands)	2016			2015
Net (gain) loss	$	129		$	726
Recognition of net actuarial gain or (loss)	(343		)	(337		)
Total changes	$	(214	)	$	389
Changes, net of taxes	$	638		$	233

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)	$	372

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



2017		2018		2019		2020		2021		Thereafter
$	503	$	498	$	493	$	488	$	482	$	2,559

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 3.90% and 3.5% for 2016, 4.15% and 3.5% for 2015, and 3.85% and 3.5% for 2014. Total pension and retirement expense was as follows for each of the years ended December 31:



($ in thousands)	2016		2015		2014
Cost components:
Service cost	$	—	$	—	$	26
Interest cost	323		278		258
Net amortization and deferral	343		337		23
Total net periodic pension cost	$	666	$	615	$	307