Employee Benefit Plans

12 Months Ended

Dec. 31, 2012

Compensation and Retirement Disclosure [Abstract]

Employee Benefit Plans

Note 12. Employee Benefit Plans 

401(k) Plan. The Company sponsors a retirement savings plan pursuant to Section 401(k) of the Internal Revenue Code. Through December 31, 2012, employees who have completed one year of service are eligible to participate in the plan. Subsequent to December 31, 2012, the waiting period has been reduced to three months. New employees, who have met the service requirement, are automatically enrolled in the plan at a 2% deferral rate, which can be modified by the employee at any time. An eligible employee may contribute up to 15% of annual salary to the plan. The Company contributes an amount equal to the sum of 1) 100% of the employee’s salary contributed up to 3% and 2) 50% of the employee’s salary contributed between 3% and 5%. Company contributions are 100% vested immediately. The Company’s matching contribution expense was $1.2 million, $1.2 million, and $1.1 million, for the years ended December 31, 2012, 2011, and 2010, respectively. Although discretionary contributions by the Company are permitted by the plan, the Company did not make any such contributions in 2012, 2011 or 2010. The Company’s matching and discretionary contributions are made in the form of Company stock, which can be transferred by the employee into other investment options offered by the plan at any time. Employees are not permitted to invest their own contributions in Company stock.

Pension Plan. Historically, the Company offered a noncontributory defined benefit retirement plan (the “Pension Plan”) that qualified under Section 401(a) of the Internal Revenue Code. The Pension Plan provided for a monthly payment, at normal retirement age of 65, equal to one-twelfth of the sum of (i) 0.75% of Final Average Annual Compensation (5 highest consecutive calendar years’ earnings out of the last 10 years of employment) multiplied by the employee’s years of service not in excess of 40 years, and (ii) 0.65% of Final Average Annual Compensation in excess of the average social security wage base multiplied by years of service not in excess of 35 years. Benefits were fully vested after five years of service.

During the second quarter of 2009, the Company amended the Pension Plan to limit eligibility to employees hired prior to June 19, 2009. During the fourth quarter of 2012, the Company notified employees that the Pension Plan would be frozen for all participants on December 31, 2012. Although no previously accrued benefits will be lost, employees will no longer accrue benefits for service subsequent to 2012. The Company made the decision to freeze the Pension Plan because of the uncertainty of future costs and to have a uniform set of benefits for all employees. The freezing of the Pension Plan resulted in an immediate $6.6 million reduction in its benefit obligation, which is referred to as a “curtailment gain” in the table below. The curtailment gain reduced the difference between the assets of the Pension Plan and its benefit obligation, and therefore had the effect of lowering the corresponding liability of the plan and lowering the amount of accumulated other comprehensive loss, which results in an increase in shareholders’ equity.

The Company’s contributions to the Pension Plan are based on computations by independent actuarial consultants and are intended to be deductible for income tax purposes. As discussed below, the contributions are invested to provide for benefits under the Pension Plan. The Company contributed $2,500,000 to the Pension Plan in each of the years ended December 31, 2012, 2011 and 2010. The Company expects that it will contribute $1,500,000 to the Pension Plan in 2013.

The following table reconciles the beginning and ending balances of the Pension Plan’s benefit obligation, as computed by the Company’s independent actuarial consultants, and its plan assets, with the difference between the two amounts representing the funded status of the Pension Plan as of the end of the respective year.

($ in thousands)	2012			2011			2010
Change in benefit obligation
Benefit obligation at beginning of year	$	40,084			31,140			25,395
Service cost		1,835			1,782			1,754
Interest cost		1,451			1,638			1,555
Actuarial (gain) loss		(4,006	)		6,004			2,830
Benefits paid		(503	)		(480	)		(394	)
Curtailment gain		(6,589	)		—			—
Benefit obligation at end of year		32,272			40,084			31,140
Change in plan assets
Plan assets at beginning of year		24,466			22,431			17,793
Actual return on plan assets		3,661			15			2,532
Employer contributions		2,500			2,500			2,500
Benefits paid		(503	)		(480	)		(394	)
Plan assets at end of year		30,124			24,466			22,431
Funded status at end of year	$	(2,148	)		(15,618	)		(8,709	)

The accumulated benefit obligation related to the Pension Plan was $32,272,000, $29,641,000, and $22,124,000 at December 31, 2012, 2011, and 2010, respectively. 

The following table presents information regarding the amounts recognized in the consolidated balance sheets at December 31, 2012 and 2011 as it relates to the Pension Plan, excluding the related deferred tax assets.

($ in thousands)	2012			2011
Other assets – prepaid pension asset	$	1,232			671
Other liabilities		(3,380	)		(16,289	)
	$	(2,148	)		(15,618	)

The following table presents information regarding the amounts recognized in accumulated other comprehensive income (AOCI) at December 31, 2012 and 2011, as it relates to the Pension Plan.

($ in thousands)	2012			2011
Net loss	$	3,380			16,213
Net transition obligation		—			32
Prior service cost		—			44
Amount recognized in AOCI before tax effect		3,380			16,289
Tax benefit		(1,317	)		(6,434	)
Net amount recognized as reduction to AOCI	$	2,063			9,855

The following table reconciles the beginning and ending balances of accumulated other comprehensive income (AOCI) at December 31, 2012 and 2011, as it relates to the Pension Plan:

($ in thousands)	2012			2011
Accumulated other comprehensive loss at beginning of fiscal year	$	9,855			5,432
Net (gain) loss arising during period		(12,288	)		7,707
Prior service cost		(32	)		—
Transition Obligation		(30	)		—
Amortization of unrecognized actuarial loss		(545	)		(382	)
Amortization of prior service cost and transition obligation		(14	)		(13	)
Tax expense (benefit) of changes during the year, net		5,117			(2,889	)
Accumulated other comprehensive loss at end of fiscal year	$	2,063			9,855

The following table reconciles the beginning and ending balances of the prepaid pension cost related to the Pension Plan:

($ in thousands)	2012			2011
Prepaid pension cost as of beginning of fiscal year	$	671			270
Net periodic pension cost for fiscal year		(1,876	)		(2,099	)
Actual employer contributions		2,500			2,500
Effect of curtailment		(63	)		—
Prepaid pension asset as of end of fiscal year	$	1,232			671

Net pension cost for the Pension Plan included the following components for the years ended December 31, 2012, 2011, and 2010:

($ in thousands)	2012			2011			2010
Service cost – benefits earned during the period	$	1,835			1,782			1,754
Interest cost on projected benefit obligation		1,451			1,638			1,555
Expected return on plan assets		(1,969	)		(1,716	)		(1,479	)
Net amortization and deferral		559			395			465
Net periodic pension cost	$	1,876			2,099			2,295

The estimated net loss that will be amortized from accumulated other comprehensive income into net periodic pension cost over the next fiscal year is $14,000.

The following table is an estimate of the benefits that will be paid in accordance with the Pension Plan during the indicated time periods:

($ in thousands)	Estimated benefit payments
Year ending December 31, 2013	$	723
Year ending December 31, 2014		860
Year ending December 31, 2015		968
Year ending December 31, 2016		1,160
Year ending December 31, 2017		1,302
Years ending December 31, 2018-2022		9,013

For each of the years ended December 31, 2012, 2011, and 2010, the Company used an expected long-term rate-of-return-on-assets assumption of 7.75%. The Company arrived at this rate based primarily on a third-party investment consulting firm’s historical analysis of investment returns, which indicated that the mix of the Pension Plan’s assets (generally 75% equities and 25% fixed income) can be expected to return approximately 7.75% on a long term basis.

Funds in the Pension Plan are invested in a mix of investment types in accordance with the Pension Plan’s investment policy, which is intended to provide an average annual rate of return of 7% to 10%, while maintaining proper diversification. Except for Company stock, all of the Pension Plan’s assets are invested in an unaffiliated bank money market account or mutual funds. The investment policy of the Pension Plan does not permit the use of derivatives, except to the extent that derivatives are used by any of the mutual funds invested in by the Pension Plan. The following table presents the targeted mix of the Pension Plan’s assets as of December 31, 2012, as set out by the Plan’s investment policy:

Investment type	Targeted % of Total Assets		Acceptable Range % of Total Assets
Fixed income investments
Cash/money market account		2%	1%-5%
US government bond fund		10%	10%-20%
US corporate bond fund		10%	5%-15%
US corporate high yield bond fund		5%	0%-10%
Equity investments
Large cap value fund		20%	20%-30%
Large cap growth fund		20%	20%-30%
Mid cap equity fund		10%	5%-15%
Small cap growth fund		8%	5%-15%
Foreign equity fund		10%	5%-15%
Company stock		5%	0%-10%

The Pension Plan’s investment strategy contains certain investment objectives and risks for each permitted investment category. To ensure that risk and return characteristics are consistently followed, the Pension Plan’s investments are reviewed at least semi-annually and rebalanced within the acceptable range. Performance measurement of the investments employs the use of certain investment category and peer group benchmarks. The investment category benchmarks as of December 31, 2012 are as follows:

Investment Category	Investment Category Benchmark	Range of Acceptable Deviation from Investment Category Benchmark
Fixed income investments
Cash/money market account	Citigroup Treasury Bill Index – 3 month	0-50 basis points
US government bond fund	Barclays Intermediate Government Bond Index	0-200 basis points
US corporate bond fund	Barclays Aggregate Index	0-200 basis points
US corporate high yield bond fund	Barclays High Yield Index	0-200 basis points
Equity investments
Large cap value fund	Russell 1000 Value Index	0-300 basis points
Large cap growth fund	Russell 1000 Growth Index	0-300 basis points
Mid cap equity fund	Russell Mid Cap Index	0-300 basis points
Small cap growth fund	Russell 2000 Growth Index	0-300 basis points
Foreign equity fund	MSCI EAFE Index	0-300 basis points
Company stock	Russell 2000 Index	0-300 basis points

Each of the investment fund’s average annualized return over a three-year period should be within the range of acceptable deviation from the benchmarked index shown above. In addition to the investment category benchmarks, the Pension Plan also utilizes certain Peer Group benchmarks, based on Morningstar percentile rankings for each investment category. Funds are generally considered to be underperformers if their category ranking is below the 75^th percentile for the trailing one-year period; the 50^th percentile for the trailing three-year period; and the 25^th percentile for the trailing five-year period.

The Pension Plan invests in various investment securities which are exposed to various risks such as interest rate, market, and credit risks. All of these risks are monitored and managed by the Company. No significant concentration of risk exists within the plan assets at December 31, 2012. 

The fair values of the Company’s pension plan assets at December 31, 2012, by asset category, are as follows:

($ in thousands)
	Total Fair Value at December 31, 2012		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Fixed income investments
Money market funds	$	441		—		441		—
US government bond fund		2,995		2,995		—		—
US corporate bond fund		3,008		3,008		—		—
US corporate high yield bond fund		1,563		1,563		—		—
Equity investments
Large cap value fund		6,101		6,101		—		—
Large cap growth fund		6,020		6,020		—		—
Small cap growth fund		2,514		2,514		—		—
Mid cap growth fund		3,153		3,153		—		—
Foreign equity fund		3,147		3,147		—		—
Company stock		1,182		1,182		—		—
Total	$	30,124		29,683		441		—

The fair values of the Company’s pension plan assets at December 31, 2011, by asset category, are as follows:

($ in thousands)
	Total Fair Value at December 31, 2011		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Fixed income investments
Money market funds	$	831		—		831		—
US government bond fund		2,356		2,356		—		—
US corporate bond fund		2,331		2,331		—		—
US corporate high yield bond fund		1,195		1,195		—		—
Equity investments
Large cap value fund		5,194		5,194		—		—
Large cap growth fund		4,883		4,883		—		—
Small cap growth fund		2,030		2,030		—		—
Mid cap growth fund		2,491		2,491		—		—
Foreign equity fund		2,328		2,328		—		—
Company stock		827		827		—		—
Total	$	24,466		23,635		831		—

The following is a description of the valuation methodologies used for assets measured at fair value. There have been no changes in the methodologies used at December 31, 2012 and 2011.

- Money market fund: valued on the active market on which it is traded; at amortized cost, which approximates fair value.

- Mutual funds, common stocks: valued at the closing price reported on the active market on which the individual securities are traded.

Supplemental Executive Retirement Plan. Historically, the Company sponsored a Supplemental Executive Retirement Plan (the “SERP”) for the benefit of certain senior management executives of the Company. The purpose of the SERP was to provide additional monthly pension benefits to ensure that each such senior management executive would receive lifetime monthly pension benefits equal to 3% of his or her final average compensation multiplied by his or her years of service (maximum of 20 years) to the Company or its subsidiaries, subject to a maximum of 60% of his or her final average compensation. The amount of a participant’s monthly SERP benefit is reduced by (i) the amount payable under the Company’s qualified Pension Plan (described above), and (ii) 50% of the participant’s primary social security benefit. Final average compensation means the average of the 5 highest consecutive calendar years of earnings during the last 10 years of service prior to termination of employment. The SERP is an unfunded plan. Payments are made from the general assets of the Company. 

During the fourth quarter of 2012, the Company notified participants that the SERP would be frozen on December 31, 2012. Although no previously accrued benefits will be lost, participants will no longer accrue benefits for service subsequent to 2012. The freezing of the SERP resulted in an immediate $0.5 million reduction in its benefit obligation, which is referred to as a “curtailment gain” in the table below. The curtailment gain reduced the liability of the plan and lowered the amount of accumulated other comprehensive loss, which results in an increase in shareholders’ equity.

The following table reconciles the beginning and ending balances of the SERP’s benefit obligation, as computed by the Company’s independent actuarial consultants:

($ in thousands)	2012			2011			2010
Change in benefit obligation
Projected benefit obligation at beginning of year	$	8,064			7,433			6,222
Service cost		303			292			408
Interest cost		280			351			377
Actuarial (gain) loss		(1,201	)		93			531
Benefits paid		(146	)		(105	)		(105	)
Curtailment gain		(487	)		—			—
Projected benefit obligation at end of year		6,813			8,064			7,433
Plan assets		—			—			—
Funded status at end of year	$	(6,813	)		(8,064	)		(7,433	)

The accumulated benefit obligation related to the SERP was $6,813,000, $7,199,000, and $5,623,000 at December 31, 2012, 2011, and 2010, respectively. 

The following table presents information regarding the amounts recognized in the consolidated balance sheets at December 31, 2012 and 2011 as it relates to the SERP, excluding the related deferred tax assets.

($ in thousands)	2012			2011
Other assets – prepaid pension asset (liability)	$	(6,614	)		(6,075	)
Other liabilities		(199	)		(1,989	)
	$	(6,813	)		(8,064	)

The following table presents information regarding the amounts recognized in AOCI at December 31, 2012 and 2011.

($ in thousands)	2012			2011
Net (gain) loss	$	199			1,887
Prior service cost		—			102
Amount recognized in AOCI before tax effect		199			1,989
Tax benefit		(79	)		(786	)
Net amount recognized as reduction to AOCI	$	120			1,203

The following table reconciles the beginning and ending balances of accumulated other comprehensive income (AOCI) at December 31, 2012 and 2011, as it relates to the SERP:

($ in thousands)	2012			2011
Accumulated other comprehensive loss at beginning of fiscal year	$	1,203			1,165
Net (gain) loss arising during period		(1,687	)		93
Prior service cost		(83	)		—
Amortization of unrecognized actuarial loss		—			(12	)
Amortization of prior service cost and transition obligation		(19	)		(19	)
Tax expense (benefit) of changes during the year, net		706			(24	)
Accumulated other comprehensive loss at end of fiscal year	$	120			1,203

The following table reconciles the beginning and ending balances of the prepaid pension cost related to the SERP:

($ in thousands)	2012			2011
Prepaid pension cost (liability) as of beginning of fiscal year	$	(6,075	)		(5,507	)
Net periodic pension cost for fiscal year		(602	)		(673	)
Benefits paid		146			105
Effect of curtailment		(83	)		—
Prepaid pension cost (liability) as of end of fiscal year	$	(6,614	)		(6,075	)

Net pension cost for the SERP included the following components for the years ended December 31, 2012, 2011, and 2010:

($ in thousands)	2012		2011		2010
Service cost – benefits earned during the period	$	303		292		408
Interest cost on projected benefit obligation		280		351		377
Net amortization and deferral		19		30		100
Net periodic pension cost	$	602		673		885

The following table is an estimate of the benefits that will be paid in accordance with the SERP during the indicated time periods:

($ in thousands)	Estimated benefit payments
Year ending December 31, 2013	$	215
Year ending December 31, 2014		220
Year ending December 31, 2015		263
Year ending December 31, 2016		330
Year ending December 31, 2017		357
Years ending December 31, 2018-2022		2,309

The following assumptions were used in determining the actuarial information for the Pension Plan and the SERP for the years ended December 31, 2012, 2011, and 2010:

	2012				2011				2010
	Pension Plan		SERP		Pension Plan		SERP		Pension Plan		SERP
Discount rate used to determine net periodic pension cost		4.39%		4.39%		5.59%		5.59%		6.00%		6.00%
Discount rate used to calculate end of year liability disclosures		3.97%		3.97%		4.39%		4.39%		5.59%		5.59%
Expected long-term rate of return on assets		7.75%		n/a		7.75%		n/a		7.75%		n/a
Rate of compensation increase		3.50%		3.50%		5.00%		5.00%		5.00%		5.00%

The Company’s discount rate policy is based on a calculation of the Company’s expected pension payments, with those payments discounted using the Citigroup Pension Index yield curve.