

NOTE 13 – EMPLOYEE BENEFIT PLANS

The following summarizes the Corporation’s expense under its retirement plans for the years ended December 31:



	2015		2014		2013
	(in thousands)
401(k) Retirement Plan	$	6,423	$	8,643	$	11,807
Pension Plan	4,102		1,514		2,477
	$	10,525	$	10,157	$	14,284

The 401(k) Retirement Plan is a defined contribution plan under which eligible employees may defer a portion of their pre-tax covered compensation on an annual basis, with employer matches of up to 5% of employee compensation. Employee and employer contributions under these features are 100% vested. Prior to January 1, 2015, this plan also included a profit sharing component whereby additional employer contributions not to exceed 5% of each eligible employee’s covered compensation, were provided for certain employees.

Contributions to the Defined Benefit Pension Plan (Pension Plan) are actuarially determined and funded annually, if necessary. The Corporation recognizes the funded status of its Pension Plan on the consolidated balance sheets and recognizes the changes in that funded status through other comprehensive income. The Pension Plan has been curtailed, with no additional benefits accruing to participants.

Pension Plan

The net periodic pension cost for the Pension Plan, as determined by consulting actuaries, consisted of the following components for the years ended December 31:



	2015			2014			2013
	(in thousands)
Service cost (1)	$	579		$	367		$	202
Interest cost	3,405			3,413			3,087
Expected return on assets	(3,009		)	(3,240		)	(3,194		)
Net amortization and deferral	3,127			974			2,382
Net periodic pension cost	$	4,102		$	1,514		$	2,477


(1)	The Pension Plan was curtailed effective January 1, 2008. Pension plan service cost for all years presented was related to administrative costs associated with the plan and not due to the accrual of additional participant benefits.

The following table summarizes the changes in the projected benefit obligation and fair value of plan assets for the plan years ended December 31:



	2015			2014
	(in thousands)
Projected benefit obligation at beginning of year	$	93,079		$	73,362
Service cost	579			367
Interest cost	3,405			3,413
Benefit payments	(3,904		)	(5,164		)
Change due to change in assumptions	(7,722		)	22,055
Experience gain	(701		)	(954		)
Projected benefit obligation at end of year	$	84,736		$	93,079

Fair value of plan assets at beginning of year	$	51,730		$	55,448
Actual return on assets	(855		)	1,446
Benefit payments	(3,904		)	(5,164		)
Fair value of plan assets at end of year	$	46,971		$	51,730

The following table presents the funded status of the Pension Plan, included in other liabilities on the consolidated balance sheets, as of December 31:



	2015			2014
	(in thousands)
Projected benefit obligation	$	(84,736	)	$	(93,079	)
Fair value of plan assets	46,971			51,730
Funded status	$	(37,765	)	$	(41,349	)

The following table summarizes the changes in the unrecognized net loss included as a component of accumulated other comprehensive loss:



	Unrecognized Net Loss
	Gross of tax			Net of tax
	(in thousands)
Balance as of December 31, 2013	$	16,161		$	10,505
Recognized as a component of 2014 periodic pension cost	(974		)	(633		)
Unrecognized losses arising in 2014	22,895			14,882
Balance as of December 31, 2014	38,082			24,754
Recognized as a component of 2015 periodic pension cost	(3,127		)	(2,033		)
Unrecognized gains arising in 2015	(4,559		)	(2,963		)
Balance as of December 31, 2015	$	30,396		$	19,758

The total amount of unrecognized net loss that will be amortized as a component of net periodic pension cost in 2016 is expected to be $2.4 million.

The following rates were used to calculate net periodic pension cost and the present value of benefit obligations as of December 31:



	2015		2014		2013
Discount rate-projected benefit obligation	4.25	%	3.75	%	4.75	%
Expected long-term rate of return on plan assets	6.00	%	6.00	%	6.00	%

As of December 31, 2015 and 2014, the discount rate used was determined using the Citigroup Average Life discount rate table, as adjusted based on the Pension Plan's expected benefit payments and rounded to the nearest 0.25%.

The 6.00% long-term rate of return on plan assets used to calculate the net periodic pension cost was based on historical returns, adjusted for expectations of long-term asset returns based on the December 31, 2015 weighted average asset allocations. The expected long-term return is considered to be appropriate based on the asset mix and the historical returns realized.

The following table presents a summary of the fair values of the Pension Plan’s assets as of December 31:



	2015				2014
	Estimated Fair Value		% of Total Assets		Estimated Fair Value		% of Total Assets
	(dollars in thousands)
Equity mutual funds	$	8,269			$	8,503
Equity common trust funds	6,350				6,018
Equity securities	14,619		31.1	%	14,521		28.1	%
Cash and money market funds	8,196				8,957
Fixed income mutual funds	9,578				9,845
Corporate debt securities	3,749				4,971
U.S. Government agency securities	2,881				3,856
Fixed income securities and cash	24,404		52.0	%	27,629		53.4	%
Other alternative investment funds	7,948		16.9	%	9,580		18.5	%
	$	46,971	100.0	%	$	51,730	100.0	%

Investment allocation decisions are made by a retirement plan committee. The goal of the investment allocation strategy is to match certain benefit obligations with maturities of fixed income securities. Pension Plan assets are invested with a conservative growth objective, with target asset allocations of approximately 25% in equities, 55% in fixed income securities and cash and 20% in alternative investments. Alternative investments may include managed futures, commodities, real estate investment trusts, master limited partnerships, and long-short strategies with traditional stocks and bonds. All alternative investments are in the form of mutual funds, not individual contracts, to enable daily liquidity.

The fair values for all assets held by the Pension Plan, excluding equity common trust funds, are based on quoted prices for identical instruments and would be categorized as Level 1 assets under FASB ASC Topic 810. Equity common trust funds would be categorized as Level 2 assets under FASB ASC Topic 810.

Estimated future benefit payments are as follows (in thousands):



Year
2016	$	3,125
2017	3,367
2018	3,727
2019	3,838
2020	4,227
2021 – 2025	23,903
	$	42,187

Postretirement Benefits

The Corporation provides medical benefits and life insurance benefits under a postretirement benefits plan (Postretirement Plan) to certain retired full-time employees who were employees of the Corporation prior to January 1, 1998. Prior to February 1, 2014, certain full-time employees became eligible for these discretionary benefits if they reached retirement age while working for the Corporation. The Corporation recognizes the funded status of the postretirement plan on the consolidated balance sheets and recognizes the changes in that funded status through other comprehensive income.

Effective February 1, 2014, the Corporation amended the Postretirement Plan, making all active full-time employees ineligible for benefits under this plan. As a result of this amendment, the Corporation recorded a $1.5 million curtailment gain as a reduction to salaries and employee benefits expense in 2014. The curtailment gain resulted from the recognition of the remaining pre-curtailment prior service cost as of December 31, 2013. In addition, this amendment resulted in a $3.4 million decrease in the accumulated postretirement benefit obligation and a corresponding increase in unrecognized prior service cost credits.

In 2015, the Corporation amended the postretirement plan to eliminate a death benefit provision and to fix the cost of health insurance premiums paid for by each participant. This amendment resulted in a $2.5 million decrease in the postretirement benefit obligation that will be amortized to income over the estimated average remaining life of plan participants, or approximately 14 years.

The components of the expense for postretirement benefits other than pensions are as follows:



	2015			2014			2013
	(in thousands)
Service cost	$	—		$	15		$	228
Interest cost	206			206			322
Expected return on plan assets	—			—			(1		)
Net amortization and deferral	(258		)	(347		)	(363		)
Net postretirement benefit cost	$	(52	)	$	(126	)	$	186

The following table summarizes the changes in the accumulated postretirement benefit obligation and fair value of plan assets for the years ended December 31:



	2015			2014
	(in thousands)
Accumulated postretirement benefit obligation at beginning of year	$	5,552		$	8,169
Service cost	—			15
Interest cost	206			206
Benefit payments	(251		)	(209		)
Experience gain	189			(532		)
Change due to change in assumptions	(2,821		)	1,261
Effect of curtailment	—			(3,358		)
Accumulated postretirement benefit obligation at end of year	$	2,875		$	5,552

Fair value of plan assets at beginning of year	$	8		$	23
Employer contributions	258			194
Benefit payments	(251		)	(209		)
Fair value of plan assets at end of year	$	15		$	8

The following table presents the funded status of the Postretirement Plan, included in other liabilities on the consolidated balance sheets as of December 31:



	2015			2014
	(in thousands)
Accumulated postretirement benefit obligation	$	(2,875	)	$	(5,552	)
Fair value of plan assets	15			8
Funded status	$	(2,860	)	$	(5,544	)

The following table summarizes the changes in items recognized as a component of accumulated other comprehensive loss:



	Gross of tax
	Unrecognized Prior Service Cost			Unrecognized Net Loss (Gain)			Total			Net of tax
	(in thousands)
Balance as of December 31, 2013	$	(1,484	)	$	(1,137	)	$	(2,621	)	$	(1,704	)
Recognized as a component of 2014 postretirement benefit cost, prior to curtailment	32			10			42			26
Unrecognized gains arising in 2014, prior to curtailment	—			(313		)	(313		)	(203		)
Curtailment gain	1,452			—			1,452			944
Recognized as a component of 2014 postretirement benefit cost, after curtailment	235			70			305			199
Unrecognized gains arising in 2014, after curtailment	(3,358		)	1,034			(2,324		)	(1,511		)
Balance as of December 31, 2014	(3,123		)	(336		)	(3,459		)	(2,249		)
Recognized as a component of 2015 postretirement benefit cost	258			—			258			168
Unrecognized gains arising in 2015	(2,469		)	(172		)	(2,641		)	(1,717		)
Balance as of December 31, 2015	$	(5,334	)	$	(508	)	$	(5,842	)	$	(3,798	)

For measuring the postretirement benefit obligation, the annual increase in the per capita cost of health care benefits was assumed to be 6.5% in year one, declining to an ultimate rate of 6.0% by year two. Assuming a 1.0% increase in the health care cost trend rate above the assumed annual increase, the accumulated postretirement benefit obligation would increase by approximately $385,000 and the current period expense would increase by approximately $15,000. Conversely, a 1.0% decrease in the health care cost trend rate would decrease the accumulated postretirement benefit obligation by approximately $340,000 and the current period expense by approximately $15,000.

The following rates were used to calculate net periodic postretirement benefit cost and the present value of benefit obligations as of December 31:



	2015		2014		2013
Discount rate-projected benefit obligation	4.25	%	3.75	%	4.75	%
Expected long-term rate of return on plan assets	3.00	%	3.00	%	3.00	%

As of December 31, 2015 and 2014, the discount rate used to calculate the accumulated postretirement benefit obligation was determined using the Citigroup Average Life discount rate table, as adjusted based on the Postretirement Plan's expected benefit payments and rounded to the nearest 0.25%.

Estimated future benefit payments under the Postretirement Plan are as follows (in thousands):



Year
2016	$	342
2017	317
2018	296
2019	275
2020	255
2021 – 2025	995
	$	2,480