NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (table dollar amounts in thousands, except share data) NOTE 16 EMPLOYEE BENEFIT PLANS continued The above assumptions used to measure benefit obligations as of the plan’s measurement date were the same assumptions used to determine the net benefit cost. At September 30, 2003, the Corporation based its estimate of the expected long-term rate of return on analysis of the historical returns of the plans and current market information available. The plans’ investment strategies are to provide for preservation of capital with an emphasis on long-term growth without undue exposure to risk. The assets of the plans’ are invested in accordance with the plans’ Investment Policy Statement, subject to strict compliance with ERISA and any other applicable statutes. The plans’ risk management practices include quarterly evaluations of investment managers, including reviews of compliance with investment manager guidelines and restrictions; ability to exceed performance objectives; adherence to the investment philosophy and style; and ability to exceed the performance of other investment managers. The evaluations are reviewed by management with appropriate follow-up and actions taken, as deemed necessary. The Investment Policy Statement generally allows investments in cash and cash equivalents, real estate, fixed income debt securities and equity securities, and specifically prohibits investments in derivatives, options, futures, private placements, short selling, non-marketable securities and purchases of non-investment grade bonds. At December 31, 2003 the maturities of the plans’ debt securities ranged from 59 days to 5.6 years, with a weighted average maturity of 2.5 years. The 1994 Stock Option Plan reserved 546,978 shares of Corporation common stock for the granting of options to certain employees and non- employee directors. The exercise price of the shares may not be less than the fair market value of the shares upon the grant of the option. Options become 100 percent vested when granted and are fully exercisable generally six months after the date of the grant, for a period of ten years. No shares remain available for grant under the 1994 Plan. 50 (1) Lafayette components are included beginning as of April 1, 2002. 2003 2002(1) 2001 ============================================================================================== Pension cost (benefit) includes the following components: Service cost-benefits earned during the year ............ $ 1,564 $ 1,770 $ 926 Interest cost on projected benefit obligation ........... 2,617 2,202 1,269 Actual (return) loss on plan assets ..................... (3,876) 2,654 2,305 Net amortization and deferral ........................... 1,617 (5,674) (4,858) ------- ------- ------- Total pension cost (benefit) ......................... $ 1,922 $ 952 $ (358) ======= ======= ======= 2003 2002 2001 ============================================================================================= Assumptions used in the accounting as of December 31 were: Discount rate ........................................ 6.25% 6.75% 7.11% Rate of increase in compensation ..................... 4.00% 4.00% 4.00% Expected long-term rate of return on assets .......... 8.00% 8.14% 9.00%