EMPLOYEE RETIREMENT PLANS

12 Months Ended

Dec. 31, 2011

EMPLOYEE RETIREMENT PLANS

12. EMPLOYEE RETIREMENT PLANS

The Company has a defined benefit pension plan covering substantially all employees, as well as an unfunded supplemental pension plan for key executives. Retirement benefits are provided based on employees’ years of credited service and average earnings or stated amounts for years of service. Normal retirement age is 65 with provisions for earlier retirement. The plan also has provisions for disability and death benefits. The Company’s funding policy for the defined benefit pension plan is to make contributions to the plan such that all employees’ benefits will be fully provided by the time they retire. Plan assets are stated at market value and consist primarily of equity securities and fixed income securities, mainly U.S. government and corporate obligations.

The Company follows ASC 715, Compensation — Retirement Benefits (“ASC 715”) which requires employers to recognize the funded status of defined benefit pension and other postretirement benefit plans as an asset or liability in their statements of financial position and to recognize changes in the funded status in the year in which the changes occur as a component of comprehensive income. In addition, ASC 715 requires employers to measure the funded status of their plans as of the date of their year-end statements of financial position. ASC 715 also requires additional disclosures regarding amounts included in accumulated other comprehensive loss.

The Company’s pension plan’s weighted average asset allocation at December 31, 2011 and 2010, by asset category, was as follows:

	Plan Assets at December 31,
	2011		2010
Asset Category:
Equity Securities		42%		48	%
Fixed Income Securities		49%		44	%
Other		9%		8	%
Total		100%		100	%

The Company has a Retirement Plan Committee, consisting of the Chief Executive Officer, Chief Operating Officer and Chief Financial Officer, to manage the operations and administration of all benefit plans and related trusts. The committee has an investment policy for the pension plan assets that establishes target asset allocation ranges for the above listed asset classes as follows: equity securities: 20% – 80%; fixed income securities: 20% – 80%; and other, principally cash: 0% – 20%. On a semi-annual basis, the committee reviews progress towards achieving the pension plan’s performance objectives.

To develop the expected long-term rate of return on assets assumption, the Company considered the historical returns and the future expectations for returns for each asset class, as well as the target asset allocation of the pension portfolio. This resulted in the selection of the 8% long-term rate of return on assets assumption.

Assumptions used in determining the funded status at December 31, 2011 and 2010 were:

	2011		2010
Discount rate		4.60%		5.40	%
Rate of compensation increase		4.50%		4.50	%

The following is a reconciliation of the change in benefit obligation and plan assets of both the defined benefit pension plan and the unfunded supplemental pension plan for the years ended December 31, 2011 and 2010:

	Defined Benefit Pension Plan					Supplemental Pension Plan
	2011		2010			2011		2010
	(Dollars in thousands)
Change in projected benefit obligation
Projected benefit obligation, beginning of year	$	34,407	$	31,958		$	10,754	$	10,240
Service cost		977		998			235		189
Interest cost		1,807		1,852			566		597
Actuarial loss (gain)		3,776		1,076			2,494		(93	)
Benefits paid		(1,444)		(1,477	)		(179)		(179	)
Projected benefit obligation, end of year	$	39,523	$	34,407		$	13,870	$	10,754
Change in plan assets
Fair value of plan assets, beginning of year		26,193		23,258			—		—
Actual return on plan assets		400		2,962			—		—
Administrative expenses		(94)		(50	)		—		—
Contributions		1,600		1,500			179		179
Benefits paid		(1,444)		(1,477	)		(179)		(179	)
Fair value of plan assets, end of year	$	26,655	$	26,193		$	—	$	—
Funded status of plan	$	(12,868)	$	(8,214	)	$	(13,870)	$	(10,754	)
Amounts recognized in the consolidated balance sheets consist of:
Accrued liabilities – other	$	—	$	—		$	(394)	$	(396	)
Long-term pension liability		(12,868)		(8,214	)		(13,476)		(10,358	)
Net amount recognized	$	(12,868)	$	(8,214	)	$	(13,870)	$	(10,754	)
Amounts recognized in accumulated other comprehensive loss consist of:
Accumulated loss, net of income tax benefit of $6,575, $4,782, $2,487 and $1,636, respectively	$	10,283	$	7,480		$	3,891	$	2,560
Prior service cost, net of income tax benefit of $1, $2, $106 and $131, respectively		2		3			166		204
Net amount recognized	$	10,285	$	7,483		$	4,057	$	2,764

The accumulated benefit obligation for the defined benefit pension plan and the supplemental pension plan was $35.3 million and $12.0 million, respectively, at December 31, 2011 and $31.2 million and $9.2 million, respectively, at December 31, 2010.

Assumptions used in determining net periodic pension cost for the years ended December 31, 2011, 2010 and 2009 were:

	2011		2010			2009
Discount rate		5.40%		5.95	%		6.20	%
Rate of compensation increase		4.50%		4.50	%		4.50	%
Long-term rate of return on plan assets		8.00%		8.00	%		8.00	%

The components of net periodic pension cost for the years ended December 31, 2011, 2010 and 2009, were:

	2011		2010			2009
	(Dollars in thousands)
Benefits earned during the period	$	1,212	$	1,187		$	1,030
Interest cost on projected benefit obligation		2,373		2,449			2,140
Expected return on plan assets		(2,021)		(1,836	)		(1,531	)
Net amortization and deferral		1,272		1,448			1,347
Net pension expense	$	2,836	$	3,248		$	2,986

The Company expects to recognize $1.8 million of amortization of unrecognized loss and $64,000 of amortization of prior service cost as components of net periodic benefit cost in 2012, which are included in accumulated other comprehensive loss at December 31, 2011.

It is the Company’s intention to satisfy the minimum funding requirements and maintain at least an 80% funding percentage in its defined benefit retirement plan. At this time, the Company expects that any cash contributions necessary to satisfy these requirements would not be material in 2012.

Projected benefit payments for the plans as of December 31, 2011 were estimated as follows:

	Defined Benefit Pension Plan		Supplemental Pension Plan
	(Dollars in thousands)
2012	$	1,694	$	394
2013	$	1,841	$	405
2014	$	1,900	$	425
2015	$	1,955	$	435
2016	$	2,030	$	443
2017 – 2021	$	11,334	$	3,226

The following table summarizes the fair value of the Company’s pension plan assets as of December 31, 2011 by asset category within the fair value hierarchy (for further level information, see Note 4):

	December 31, 2011
	Quoted Prices in Active Markets		Significant Observable Inputs		Significant Unobservable Inputs
	Level 1		Level 2		Level 3		Total
	(Dollars in thousands)
Common stocks	$	8,329	$	582	$	—	$	8,911
Preferred stocks		859		—		—		859
Exchange traded funds		2,180		—		—		2,180
Corporate obligations		—		4,747		—		4,747
State and municipal obligations		—		806		—		806
Foreign obligations		—		51		—		51
Pooled fixed income funds		4,378		—		—		4,378
U.S. government securities		—		2,288		—		2,288
Cash and cash equivalents		2,337		—		—		2,337
Subtotal		18,083		8,474		—		26,557
Other assets(1)								98
Total							$	26,655

(1) This category represents trust receivables that are not leveled.

The following table summarizes the fair value of the Company’s pension plan assets as of December 31, 2010 by asset category within the fair value hierarchy (for further level information, see Note 4):

	December 31, 2010
	Quoted Prices in Active Markets		Significant Observable Inputs		Significant Unobservable Inputs
	Level 1		Level 2		Level 3		Total
	(Dollars in thousands)
Common stocks	$	9,534	$	783	$	—	$	10,317
Preferred stocks		930		—		—		930
Exchange traded funds		2,376		—		—		2,376
Corporate obligations		—		4,576		—		4,576
State and municipal obligations		—		976		—		976
Foreign obligations		—		53		—		53
Pooled fixed income funds		2,695		—		—		2,695
U.S. government securities		—		2,207		—		2,207
Cash and cash equivalents		1,964		—		—		1,964
Subtotal		17,499		8,595		—		26,094
Other assets(1)								99
Total							$	26,193

(1) This category represents trust receivables that are not leveled.

The Company also has a defined contribution plan covering substantially all employees. The Company contributed approximately $212,000 in 2011 and approximately $200,000 in each of the years 2010 and 2009.