Note 11.

Employee Benefits

Employee Stock Ownership and Savings Plan

The Company maintains an Employee Stock Ownership and Savings Plan (“KSOP”). Coverage under the plan is provided to all employees meeting minimum eligibility requirements.

Employer Stock Fund. Annual contributions to the stock portion of the plan were made through 2006 at the discretion of the Board of Directors, and allocated to plan participants on the basis of relative compensation. The plan was frozen to future contributions for periods after 2006. Substantially all plan assets are invested in Common Stock of the Company. The Company reports the contributions to the plan as a component of salaries and benefits. All contributions made after 2006 have been made to the employee savings feature of the plan. Accordingly, there were no contributions to the Employer Stock Fund in 2012, 2011, or 2010. The Employer Stock Fund held 561,551, 588,656, and 583,256 shares of the Company’s Common Stock at December 31, 2012, 2011, and 2010, respectively.

Employee Savings Plan. The Company provides a 401(k) savings feature within the KSOP that is available to substantially all employees meeting minimum eligibility requirements. Under the 401(k) feature, the Company makes matching contributions to employee deferrals at levels determined by the board on an annual basis. The cost of the Company’s 100% matching contributions to qualified deferrals under the 401(k) savings component of the KSOP was $1.27 million, $1.34 million, and $1.12 million in 2012, 2011, and 2010, respectively. In 2012, the Company made its matching contribution in cash and Common Stock. In 2011 and 2010 the Company made its matching contribution in Common Stock.

Employee Welfare Plan

The Company provides various medical, dental, vision, life, accidental death and dismemberment, and long-term disability insurance benefits to all full-time employees who elect coverage under this program. The health plan is managed by a third party administrator. Monthly employer and employee contributions are made to a tax-exempt employer benefits trust against which the third party administrator processes and pays claims. Stop-loss insurance coverage limits the Company’s risk of loss to $85 thousand and $3.89 million for individual and aggregate claims, respectively. Total Company expenses under the health plan were $2.25 million, $3.49 million, and $2.98 million in 2012, 2011, and 2010, respectively.

Deferred Compensation Plan

The Company has deferred compensation agreements with certain current and former officers providing for benefit payments over various periods commencing at retirement or death. The liability as of year-end 2012 and 2011 was $459 thousand and $463 thousand, respectively. The annual expenses associated with these agreements were $60 thousand in 2012, 2011, and 2010. The obligation is based upon the present value of the expected payments and estimated life expectancies of the individuals.

Supplemental Executive Retention Plan

The Company maintains a Supplemental Executive Retention Plan (the “SERP”) for key members of senior management. The SERP provides for a defined benefit at normal retirement age targeted at 35% of projected final base salary. Benefits under the SERP become payable at age 62. The associated benefit accrued as of year-end 2012 and 2011 was $5.62 million and $5.11 million, respectively, while the associated expense incurred in connection with the Executive Retention Plan was $535 thousand, $519 thousand, and $424 thousand for 2012, 2011, and 2010, respectively.

Projected benefit payments for the SERP are expected to be paid as follows:


	Amount
(Amounts in thousands)
2013	$	214
2014		214
2015		214
2016		214
2017		345
2018 through 2022		1,924

The following sets forth the components of the net periodic pension cost of the Company’s domestic non-contributory, non-qualified defined SERP for years ended December 31, 2012 and 2011:


	2102		2011
(Amounts in thousands)
Service cost	$	153	$	161
Interest cost		203		224
Amortization of losses (gains)		45		—
Amortization of prior service cost		134		134

Net periodic cost	$	535	$	519

The discount rates assumed as of December 31, 2012, were lowered from 4.40% to 4.20%. The SERP is an unfunded plan, and as such there are no plan assets. At December 31, 2012, the actuarial benefit plan obligation was $5.62 million.

Directors’ Supplemental Retirement Plan

The Company maintains a Directors’ Supplemental Retirement Plan (the “Directors’ Plan”) for its non-management directors. The Directors’ Plan provides for a benefit upon retirement from service on the Board. The Directors’ Plan was amended in December 2010 to substitute a defined benefit in lieu of the previous indexed benefit. Effective January 1, 2011, the Directors’ Plan provides for a defined benefit at normal retirement age targeted at 100% of the highest consecutive three years average compensation. Benefits under the Directors’ Plan become payable at age 70. The associated benefit accrued as of year-end 2012 and 2011 was $981 thousand and $943 thousand, respectively, while the associated expense incurred in connection with the Directors’ Plan was $156 thousand, $162 thousand, and $259 thousand for 2012, 2011, and 2010, respectively.

Projected benefit payments for the Directors’ Plan are expected to be paid as follows:


	Amount
(Amounts in thousands)
2013	$	83
2014		81
2015		80
2016		79
2017		111
2018 through 2022		544

The following sets forth the components of the net periodic pension cost of the Company’s domestic non-contributory, non-qualified Directors’ Plan for years ended December 31, 2012 and 2011:


	2102		2011
(Amounts in thousands)
Service cost	$	27	$	29
Interest cost		39		43
Amortization of prior service cost		90		90

Net periodic cost	$	156	$	162

The discount rates assumed as of December 31, 2012, were lowered from 4.40% to 4.20%. The Directors’ Plan is an unfunded plan, and as such there are no plan assets. At December 31, 2012, the actuarial benefit plan obligation was $981 thousand.