RETIREMENT PLANS

Defined Benefit Plans

Pension – This qualified noncontributory defined benefit plan is frozen to new participation. No service-related benefits have been since July 1, 2013. All participants in the Plan are currently 100% vested in their benefits. 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. Although there was no minimum regulatory contribution required in 2016, we elected to contribute $4 million to the pension plan. Currently, it is expected that no minimum regulatory contributions will be required in 2017.

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:



(In thousands)	Pension						Supplemental Retirement						Postretirement
(In thousands)	2016			2015			2016			2015			2016			2015
Change in benefit obligation:
Benefit obligation at beginning of year	$	173,208		$	185,944		$	9,994		$	10,595		$	954		$	1,067
Service cost	—			—			—			—			21			33
Interest cost	6,995			7,094			402			403			38			40
Actuarial (gain) loss	(2,097		)	(8,085		)	110			(226		)	7			(121		)
Benefits paid	(12,977		)	(11,745		)	(786		)	(778		)	(81		)	(65		)
Benefit obligation at end of year	165,129			173,208			9,720			9,994			939			954
Change in fair value of plan assets:
Fair value of plan assets at beginning of year	157,318			170,199			—			—			—			—
Actual return on plan assets	13,326			(1,136		)	—			—			—			—
Employer contributions	4,000			—			786			778			81			65
Benefits paid	(12,977		)	(11,745		)	(786		)	(778		)	(81		)	(65		)
Fair value of plan assets at end of year	161,667			157,318			—			—			—			—
Funded status	$	(3,462	)	$	(15,890	)	$	(9,720	)	$	(9,994	)	$	(939	)	$	(954	)
Amounts recognized in balance sheet:
Liability for pension/postretirement benefits	$	(3,462	)	$	(15,890	)	$	(9,720	)	$	(9,994	)	$	(939	)	$	(954	)
Accumulated other comprehensive income (loss)	(47,658		)	(60,067		)	(2,281		)	(2,288		)	258			332
Accumulated other comprehensive income (loss) consists of:
Net gain (loss)	$	(47,658	)	$	(60,067	)	$	(2,281	)	$	(2,288	)	$	258		$	332

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 AOCI (loss) at December 31, 2016 expected to be recognized as an expense component of net periodic benefit cost in 2017 for the plans are estimated as follows:



(In thousands)	Pension			Supplemental Retirement				Postretirement

Net gain (loss)	$	(4,866	)		$	(123	)		$	52

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



	Pension									Supplemental Retirement						Postretirement
(In thousands)	2016			2015			2014			2016		2015		2014		2016			2015			2014

Service cost	$	—		$	—		$	—		$	—	$	—	$	—	$	21		$	33		$	31
Interest cost	6,995			7,094			7,468			402		403		454		38			40			47
Expected return on plan assets	(11,397		)	(12,360		)	(13,305		)
Amortization of net actuarial (gain) loss	6,149			5,926			2,895			117		123		19		(67		)	(53		)	(71		)
Amortization of prior service cost										—		—		50		—			—			—
Settlement loss	2,235			—			—			—		—		—
Net periodic benefit cost (credit)	$	3,982		$	660		$	(2,942	)	$	519	$	526	$	523	$	(8	)	$	20		$	7

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



	2016		2015		2014
Used to determine benefit obligation at year-end:
Discount rate	4.10	%	4.20	%	3.95	%
Used to determine net periodic benefit cost for the years ended December 31:
Discount rate	4.20		3.95		4.60
Expected long-term return on plan assets	7.50		7.50		8.00

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.

Benefit payments to the plans’ participants are estimated as follows for the years succeeding December 31, 2016:



(In thousands)	Pension		Supplemental Retirement			Postretirement

2017	$	9,988		$	1,911		$	94
2018	10,051			855			99
2019	9,821			882			100
2020	10,181			834			103
2021	10,268			766			98
Years 2022 - 2026	50,166			3,309			419

We are also obligated under other supplemental retirement plans for certain current and former employees. Our liability for these plans was $6.4 million and $6.9 million at December 31, 2016 and 2015, 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, 2016 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 20, and the weighted average allocations:



(In thousands)	December 31, 2016							December 31, 2015
(In thousands)	Level 1		Level 2	Level 3		Total		Level 1		Level 2	Level 3		Total

Company common stock	$	10,170				$	10,170	$	6,482				$	6,482
Mutual funds:
Debt	5,810					5,810		5,250					5,250
Guaranteed deposit account				$	11,082	11,082					$	9,484	9,484

In addition to the investments listed in the previous table, as of December 31, 2016, pension plan investments valued using NAV as the practical expedient for fair value consist of $91.9 million in equity investments, $28.8 million in debt investments, and $8.1 million in real estate investments, which are in pooled separate accounts, as well as $5.1 million in limited partnerships. As of December 31, 2015, pension plan investments valued using NAV as the practical expedient for fair value consist of $88.4 million in equity investments, $31.7 million in debt instruments, and $9.9 million in real estate investments, which are in pooled separate accounts, as well as $6.2 million in limited partnerships.

No transfers of assets occurred among Levels 1, 2 or 3 during 2016 or 2015.

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 NAVs 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 NAV as the practical expedient for fair value as determined by the insurance company.

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 is as 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	At December 31,
	Composite market value factor	2016	0.979009 - 1.036866 (actual = 1.021418)
		2015	0.995927 - 1.049539 (actual = 1.042254)

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 PEIs 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 valued by the limited partnerships at NAV as the practical expedient for fair value. The estimation process takes into account the plan’s proportional interests credited with realized and unrealized earnings from the underlying investments and charged for operating expenses and distributions. Investments are increased by capital calls and are part of an overall capital commitment by the plan of up to approximately $8.75 million at December 31, 2016.

The following presents additional information as of December 31, 2016 and 2015 for the pooled separate accounts and limited partnerships whose fair values under Levels 2 and 3 are based on NAV per share:



Investment	Unfunded commitments (in thousands, approximately)			Redemption
Investment	Unfunded commitments (in thousands, approximately)			Frequency	Notice period

Pooled separate accounts		na		Daily	< $1 million, 1 day >= $1 million, 3 days
					< $1 million, 1 day >= $1 million, 3 days
Limited partnerships		$	1,600	Investments in these limited partnerships are illiquid and voluntary withdrawal is prohibited.

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
	Year Ended December 31,
	2016				2015
(In thousands)	Guaranteed deposit account				Guaranteed deposit account

Balance at beginning of year		$	9,484			$	11,515
Net decreases included in plan statement of change in net assets available for benefits:
Net operating fees and expenses		(481		)		(376		)
Net depreciation in fair value of investments:
Unrealized		(151		)		(628		)
Interest and dividends		232				284
Purchases		14,974				10,428
Sales		(12,976		)		(11,739		)
Balance at end of year		$	11,082			$	9,484

Shares of Company common stock were 233,849 and at both December 31, 2016 and 2015. Dividends received by the plan were approximately $65 thousand in 2016 and $56 thousand in 2015.

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 $26.1 million in 2016, $25.5 million in 2015, and $24.3 million in 2014.

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. The profit sharing expense was computed at a contribution rate of 1% for both 2016 and 2015 decreasing from a 2% rate in 2014. The profit sharing expense amounted to $6.3 million for 2016, $6.1 million for 2015 and $12.0 million for 2014. The profit sharing contribution to participants consisted of shares of the Company’s common stock purchased in the open market.