ETIREMENT PLANS

Defined Benefit Plans

Pension – This qualified noncontributory defined benefit plan has been frozen to new participation. No service-related benefits accrued for existing participants except for those with certain grandfathering provisions. Effective July 1, 2013, the plan was amended to remove the exception for grandfathered participants. The effect of this change was not significant to the plan. Benefits vest under the plan upon completion of five years of vesting service. Plan assets consist principally of corporate equity securities, mutual fund investments, real estate, and fixed income investments. Plan benefits are paid as a lump-sum cash value or an annuity at retirement age. Contributions to the plan are based on actuarial recommendation and pension regulations. Currently, it is expected that no minimum regulatory contributions will be required in 2014 or 2015.

Supplemental Retirement – These unfunded nonqualified plans are for certain current and former employees. Each year, Company contributions to these plans are made in amounts sufficient to meet benefit payments to plan participants.

Postretirement Medical/Life – This unfunded health care and life insurance plan provides postretirement medical benefits to certain full-time employees who meet minimum age and service requirements. The plan also provides specified life insurance benefits to certain employees. The plan is contributory with retiree contributions adjusted annually, and contains other cost-sharing features such as deductibles and coinsurance. Plan coverage is provided by self-funding or health maintenance organization options. Our contribution towards the retiree medical premium has been permanently frozen at an amount that does not increase in any future year. Retirees pay the difference between the full premium rates and our capped contribution.

Because our contribution rate is capped, there is no effect on the postretirement plan from assumed increases or decreases in health care cost trends. Each year, Company contributions to the plan are made in amounts sufficient to meet the portion of the premiums that are the Company’s responsibility.

The following presents the change in benefit obligation, change in fair value of plan assets, and funded status, of the plans and amounts recognized in the balance sheet as of the measurement date of December 31.



	Pension						Supplemental Retirement						Postretirement
(In thousands)	2013			2012			2013			2012			2013			2012
Change in benefit obligation:
Benefit obligation at beginning of year	$	191,208		$	184,141		$	11,234		$	11,357		$	1,129		$	1,149
Service cost	—			29			—			—			32			36
Interest cost	6,885			7,558			404			460			41			47
Actuarial (gain) loss	(16,341		)	9,693			(426		)	481			(53		)	(27		)
Settlements	96			—			—			—			—			—
Benefits paid	(12,756		)	(10,213		)	(936		)	(1,064		)	(87		)	(76		)
Benefit obligation at end of year	169,092			191,208			10,276			11,234			1,062			1,129

Change in fair value of plan assets:
Fair value of plan assets at beginning of year	157,082			147,444			—			—			—			—
Actual return on plan assets	27,579			19,851			—			—			—			—
Employer contributions	—			—			936			1,064			87			76
Benefits paid	(12,756		)	(10,213		)	(936		)	(1,064		)	(87		)	(76		)
Fair value of plan assets at end of year	171,905			157,082			—			—			—			—
Funded status	$	2,813		$	(34,126	)	$	(10,276	)	$	(11,234	)	$	(1,062	)	$	(1,129	)

Amounts recognized in balance sheet:
Asset (liability) for pension/postretirement benefits	$	2,813		$	(34,126	)	$	(10,276	)	$	(11,234	)	$	(1,062	)	$	(1,129	)
Accumulated other comprehensive income (loss)	(39,082		)	(80,743		)	(1,968		)	(2,587		)	354			526

Accumulated other comprehensive income (loss) consists of:
Net gain (loss)	$	(39,082	)	$	(80,743	)	$	(1,918	)	$	(2,412	)	$	354		$	376
Prior service credit (cost)	—			—			(50		)	(175		)	—			150
	$	(39,082	)	$	(80,743	)	$	(1,968	)	$	(2,587	)	$	354		$	526

The liability for pension/postretirement benefits is included in other liabilities in the balance sheet. The accumulated benefit obligation is the same as the benefit obligation shown in the preceding schedule.

The amounts in accumulated other comprehensive income (loss) at December 31, 2013 expected to be recognized as an expense component of net periodic benefit cost in 2014 for the plans are estimated as follows:



(In thousands)	Pension			Supplemental Retirement				Postretirement

Net gain (loss)	$	(3,187	)		$	(33	)		$	71
Prior service credit (cost)	—				(50		)		—
	$	(3,187	)		$	(83	)		$	71

The following presents the components of net periodic benefit cost (credit) for the plans:



	Pension									Supplemental Retirement								Postretirement
(In thousands)	2013			2012			2011			2013		2012			2011			2013			2012			2011

Service cost	$	—		$	29		$	100		$	—	$	—		$	—		$	32		$	36		$	32
Interest cost	6,885			7,558			8,336			404		460			558			41			47			54
Expected return on plan assets	(12,109		)	(11,308		)	(12,443		)
Amortization of net actuarial (gain) loss	8,132			9,184			5,290			70		(114		)	(16		)	(75		)	(87		)	(125		)
Amortization of prior service (credit) cost										124		124			124			(151		)	(244		)	(244		)
Settlement loss	1,814									—		—			—
Net periodic benefit cost (credit)	$	4,722		$	5,463		$	1,283		$	598	$	470		$	666		$	(153	)	$	(248	)	$	(283	)

Weighted average assumptions based on the pension plan are the same where applicable for each of the plans and are as follows:



	2013		2012		2011
Used to determine benefit obligation at year-end:
Discount rate	4.60	%	3.75	%	4.25	%
Rate of compensation increase ¹	na		3.50		3.50
Used to determine net periodic benefit cost for the years ended December 31:
Discount rate	3.75		4.25		5.20
Expected long-term return on plan assets	8.00		8.00		8.00
Rate of compensation increase	3.50		3.50		3.50


¹	As previously discussed, the pension plan became fully frozen effective July 1, 2013 by a plan amendment that eliminated the remaining grandfather provisions. This action eliminated the need to continue using the rate of compensation increase assumption as of December 31, 2013.

The discount rate reflects the yields available on long-term, high-quality fixed income debt instruments with cash flows similar to the obligations of the pension plan, and is reset annually on the measurement date. The expected long-term rate of return on plan assets is based on a review of the target asset allocation of the plan. This rate is intended to approximate the long-term rate of return that we anticipate receiving on the plan’s investments, considering the mix of the assets that the plan holds as investments, the expected return on these underlying investments, the diversification of these investments, and the rebalancing strategies employed. An expected long-term rate of return is assumed for each asset class and an underlying inflation rate assumption is determined. The projected rate of compensation increases is management’s estimate of future pay increases that the remaining eligible employees will receive until their retirement.

Benefit payments to the plans’ participants, which reflect expected future service as appropriate, are estimated as follows for the years succeeding December 31, 2013:



(In thousands)	Pension		Supplemental Retirement			Postretirement

2014	$	10,338		$	2,056		$	96
2015	9,822			833			100
2016	9,547			1,073			105
2017	10,133			799			109
2018	10,543			794			106
Years 2019 - 2023	53,674			3,642			451

We are also obligated under other supplemental retirement plans for certain current and former employees. Our liability for these plans was $6.0 million and $6.3 million at December 31, 2013 and 2012, respectively.

For the pension plan, the investment strategy is predicated on its investment objectives and the risk and return expectations of asset classes appropriate for the plan. Investment objectives have been established by considering the plan’s liquidity needs and time horizon and the fiduciary standards under the Employee Retirement Income Security Act of 1974. The asset allocation strategy is developed to meet the plan’s long-term needs in a manner designed to control volatility and to reflect risk tolerance. Target investment allocation percentages as of December 31, 2013 are 65% in equity, 30% in fixed income and cash, and 5% in real estate assets.

The following presents the fair values of pension plan investments according to the fair value hierarchy described in Note 21, and the weighted average allocations:



(Amounts in thousands)	December 31, 2013									December 31, 2012
(Amounts in thousands)	Level 1		Level 2		Level 3		Total		%	Level 1		Level 2		Level 3		Total		%

Company common stock	$	8,098					$	8,098	5	$	6,890					$	6,890	4
Mutual funds:
Equity	—						—		—	4,407						4,407		3
Debt	6,559						6,559		4	6,848						6,848		4
Insurance company pooled separate accounts:
Equity investments			$	102,603			102,603		60			$	85,938			85,938		55
Debt investments			29,091				29,091		17			27,566				27,566		18
Real estate			7,680				7,680		4			6,875				6,875		4
Guaranteed deposit account					$	12,582	12,582		7					$	13,869	13,869		9
Limited partnerships					5,292		5,292		3					4,689		4,689		3
	$	14,657	$	139,374	$	17,874	$	171,905	100	$	18,145	$	120,379	$	18,558	$	157,082	100

No transfers of assets occurred among Levels 1, 2 or 3 during 2013 or 2012.

The following describes the pension plan investments and the valuation methodologies used to measure their fair value:

Company common stock – Shares of the Company’s common stock are valued at the last reported sales price on the last business day of the plan year in the active market where individual securities are traded.

Mutual funds – These funds are valued at quoted market prices which represent the net asset values of shares held by the plan at year-end.

Insurance company pooled separate accounts – These funds are invested in by more than one investor. They are offered through separate accounts of the trustee’s insurance company and managed by internal and professional advisors. Participation units in these accounts are valued at the net asset value as the practical expedient for fair value as determined by the insurance company. Generally, there are no redemption restrictions for these funds. The redemption frequency is daily with a required notice period of one day for amounts less than $1 million and three days for amounts equal to or greater than $1 million.

Guaranteed deposit account – This account is a group annuity product issued by the trustee’s insurance company with guaranteed crediting rates established at the beginning of each calendar year. The account balance is stated at fair value as estimated by the trustee. The account is credited with deposits made, plus earnings at guaranteed crediting rates, less withdrawals and administrative expenses. The underlying investments generally include investment grade public and privately traded debt securities, mortgage loans and, to a lesser extent, real estate and other equity investments. Market value adjustments are applied at the time of redemption if certain withdrawal limits are exceeded.

Additional fair value quantitative information for the guaranteed deposit account, as measured under Level 3, is a follows:



Principal valuation techniques	Significant unobservable inputs	Range (weighted average) of significant input values

For the underlying investments – reported fair values when available for market traded investments; when not applicable, discounted cash flows under an income approach using U.S. Treasury rates and spreads based on cash flow timing and quality of assets.	Earnings at guaranteed crediting rate	Gross guaranteed crediting rate must be greater than or equal to contractual minimum crediting rate
	Composite market value factor	December 31,
	Composite market value factor	2013	0.988035 - 1.073235 (actual = 1.05329)
		2012	1.029720 - 1.119776 (actual = 1.08063)

The Company’s Benefits Committee evaluates the methodology and factors used, including review of the contract, economic conditions, industry and market developments, and overall credit ratings of the underlying investments.

Limited partnerships – These partnerships invest in limited partnerships, limited liability companies, or similar investment vehicles that consist of private equity investments in a wide variety of investment types, including venture and growth capital, real estate, energy and natural resources, and other private investments. The plan’s investments are estimated at fair value and determined from the partnerships’ capital account balances for the plan’s proportional interests. The capital accounts are credited with realized and unrealized earnings from the underlying investments and charged for operating expenses and distributions. Investments in these partnerships are illiquid and voluntary withdrawal is prohibited.

Fair value for these partnerships is also measured under Level 3. However, the plan does not have additional fair value quantitative information similar to the guaranteed deposit account. A variety of methodologies under Level 3 are used to estimate the fair value of underlying investments. These include best estimates of fair value by the general partner, results of any meaningful third party market transactions, consideration of financial condition and operating results of the issuer, estimates of amounts expected to be realized upon sale, and any other factors considered relevant by the general partner. The information that is provided by the limited partnerships is included in the annual review process of the Company’s Benefits Committee, which has concluded that the fair values were developed in accordance with GAAP.

Shares of Company common stock were 270,305 and 321,964 at December 31, 2013 and 2012, respectively. Dividends received by the plan were approximately $41 thousand in 2013 and $15 thousand in 2012.

The following reconciles the beginning and ending balances of assets measured at fair value on a recurring basis using Level 3 inputs:



	Level 3 Instruments ¹
	Year Ended December 31,
	2013								2012
(In thousands)	Guaranteed deposit account				Limited partnerships				Guaranteed deposit account				Limited partnerships

Balance at beginning of year		$	13,869			$	4,689			$	12,476			$	4,149
Net increases (decreases) included in plan statement of change in net assets available for benefits:
Net operating fees and expenses		(346		)		(83		)		(362		)		(59		)
Net appreciation (depreciation) in fair value of investments:
Realized		—				(74		)		—				(98		)
Unrealized		(398		)		732				372				542
Interest and dividends		486				—				525				—
Purchases		11,722				760				11,070				1,005
Sales		(12,751		)		—				(10,212		)		—
Settlements		—				(732		)		—				(850		)
Balance at end of year		$	12,582			$	5,292			$	13,869			$	4,689

¹Certain 2012 amounts have been reclassified, including disclosure on a gross basis, to conform with the presentation in 2013.

Defined Contribution Plan

The Company offers a 401(k) and employee stock ownership plan under which employees select from several investment alternatives. Employees can contribute up to 80% of their earnings subject to the annual maximum allowed contribution. The Company matches 100% of the first 3% of employee contributions and 50% of the next 2% of employee contributions. Matching contributions to participants, which were shares of the Company’s common stock purchased in the open market, amounted to $22.7 million in 2013, $21.6 million in 2012, and $21.0 million in 2011.

The 401(k) plan also has a noncontributory profit sharing feature which is discretionary and may range from 0% to 6% of eligible compensation based upon the Company’s return on average common equity for the year. For all years presented, the profit sharing expense was computed at a contribution rate of 2%, and amounted to $11.8 million for both 2013 and 2012, and $11.7 million for 2011. The profit sharing contribution to participants consisted of shares of the Company’s common stock purchased in the open market.