RETIREMENT PLANS

12 Months Ended

Dec. 31, 2011

RETIREMENT PLANS

13. RETIREMENT PLANS

The Company has a defined benefit retirement plan that covers the majority of employees hired prior to February 1, 2007. The benefits are based on years of service and the employee’s five-year final average salary. 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 accumulated benefit information is as of December 31:

($ in thousands)	2011			2010
Change in benefit obligation
Benefit obligation at beginning of year	$	7,110		$	5,896
Service cost		251			239
Interest cost		384			316
Actuarial gain/assumption changes		1,591			877
Benefits paid		(635	)		(218	)
Benefit obligation at end of year	$	8,701		$	7,110
Accumulated benefit obligation at end of year	$	7,659		$	6,324
Change in Plan Assets
Fair value of plan assets at beginning of year	$	5,591		$	4,442
Actual return on plan assets		26			528
Employer contribution		791			880
Benefits/expenses paid		(686	)		(259	)
Fair value of plan assets at end of year	$	5,722		$	5,591
Funded status - liability	$	(2,979	)	$	(1,519	)
	2011			2010
Amounts recorded in equity
Net actuarial (gain)	$	(3,236	)	$	(3,470	)
Prior service cost		205			234
Total amount recorded	$	(3,031	)	$	(3,236	)
Amount recorded, net taxes	$	(1,819	)	$	(1,922	)

Other changes in plan assets and benefit obligations recognized in other comprehensive income for 2011 and 2010 include the following components:

	2011			2010
Net (gain) loss	$	(537	)	$	(691	)
Recognition of net actuarial gain or (loss)		249			215
Recognized prior service cost		(29	)		(29	)
Total changes	$	(317	)	$	(505	)
Changes, net of taxes	$	(127	)	$	(299	)

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)	$	249
Amortization prior service cost	$	(29	)

At December 31, 2011 and 2010 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 FASB 158 for fiscal years ending after December 15, 2008. For 2012, the Company is estimating that contributions to the pension plan will be approximately $750,000. Based on actuarial estimates, it is expected that annual benefit payments will be $150,000 in 2012, $201,000 in 2013, $217,000 in 2014, $274,000 in 2015, $376,000 in 2016, and $2,064,000 for years 2017 through 2020.

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 target to take advantage of market conditions. At December 31, 2011, the investment mix was 66% equity, 29% debt, and 5% money markets. 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 actuarial present value of projected benefits obligation was 4.4% and 3.5% for 2011, 5.5% and 3% for 2010, and 6% and 3% in 2009. The expected long-term rate of return on plan assets was 7.5% for all years. The long-term rate of return on plan assets is based on the historical returns within the plan and expectations for future returns. The fair value of plan assets is determined using level one and level two indicators, which are determined based on quoted market prices in active markets for the securities or from quoted prices for similar assets in active markets. See the following table for fair value hierarchy by investment type at December 31:

($ in thousands)	Fair Value Hierarchy		2011		2010
Pension Plan Assets:
Cash and Cash Equivalents		Level 1	$	190	$	400
Collective Funds		Level 2		2,619		3,098
Treasury/Corporate Notes		Level 2		1,263		785
Corporate Equities		Level 1		1,650		1,308
			$	5,722	$	5,591

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

($ in thousands)	2011			2010			2009
Cost components:
Service cost	$	(251	)	$	(239	)	$	(260	)
Interest cost		(384	)		(316	)		(273	)
Expected return on plan assets		446			342			266
Net amortization and deferral		(220	)		(186	)		(140	)
Total net periodic pension cost	$	(409	)	$	(399	)	$	(407	)

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)	2011			2010
Change in benefit obligation - SERP
Benefit obligation at beginning of year	$	3,196		$	3,325
Service cost		172			223
Interest cost		215			226
Actuarial gain/assumption changes		1,891			(578	)
Benefit obligation at end of year	$	5,474		$	3,196
Accumulated benefit obligation at end of year	$	5,317		$	3,747
Funded status - liability		(5,474	)		(3,196	)

	2011		2010
Amounts recorded in stockholders’ equity
Net actuarial (gain)	$	1,825	$	(578	)
Prior service cost		—		—
Total amount recorded	$	1,825	$	(578	)
Amount recorded, net taxes	$	1,098	$	(330	)

Other changes in benefit obligations recognized in other comprehensive income for 2011 and 2010 include the following components:

	2011			2010
Net (gain) loss	$	1,170		$	(578	)
Recognition of net actuarial gain or (loss)		(66	)		—
Recognized prior service cost		—			—
Total changes	$	1,104		$	(578	)
Changes, net of taxes	$	662		$	(330	)

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) $ 66

Based on actuarial estimates, it is expected that annual benefit payments will be $411,000 in 2012, $406,000 in 2013, $401,000 in 2014, $396,000 in 2015, $390,000 in 2016, and $1,845,152 for years 2017 through 2020.

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 3.95% and 3.5% for 2011, 5.5% and 3% for 2010, and 6% and 3% in 2009.

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

($ in thousands)	2011			2010			2009
Cost components:
Service cost	$	(172	)	$	(223	)	$	(280	)
Interest cost		(215	)		(226	)		(299	)
Net amortization and deferral		(66	)		—			—
Total net periodic pension cost	$	(453	)	$	(449	)	$	(579	)

The Company also provides a 401(k) plan to its employees and contributed $75,000 to the plan for 2011 and $84,000 to the plan for 2010.