Note 10, Benefit Plans:

We have a defined benefit pension plan (the "pension plan") covering substantially all employees hired on or before December 31, 2005. The pension plan was closed to any employees hired after that date. The benefits are based on years of service and the employee's final average compensation. Effective January 1, 2007, there are no new benefits earned under the pension plan for additional years of service after December 31, 2006. All current participants in the pension plan keep any and all benefits that they had accrued up until December 31, 2006.

We also have a non-qualified, non-contributory supplemental executive retirement plan (the "SERP") for employees whose retirement benefits are reduced due to their annual compensation levels. The SERP provides annual benefits amounting to 55% of final average earnings less benefits payable from our pension plan and Social Security benefits. The SERP limits the total amount of annual retirement benefits that may be paid to a participant from all sources (Retirement Plan, Social Security and the SERP) to $125,000. The SERP is not funded so we pay benefits directly to participants.

The following table summarizes information about our pension plan and SERP.

	Pension Plan						SERP
(In thousands)	2012			2011			2012			2011
Change in benefit obligation:
Benefit obligation at beginning of the year	$	77,677		$	69,643		$	6,175		$	5,531
Service cost					—			97			102
Interest cost		3,506			3,686			262			286
Actuarial losses		5,172			7,610			31			461
Benefits paid		(5,745	)		(3,262	)		(197	)		(205	)
Benefit obligation at end of year		80,610			77,677			6,368			6,175
Change in plan assets:
Fair value of plan assets at beginning of year		66,571			59,846			—			—
Employer contribution		3,000			8,000			197			205
Actual return on plan assets		10,016			1,987			—			—
Benefits paid		(5,745	)		(3,262	)		(197	)		(205	)
Fair value of plan assets at end of year		73,842			66,571			—			—
Funded status of the plan – underfunded	$	(6,768	)	$	(11,106	)	$	6,368		$	(6,175	)

Accumulated benefit obligations	$	80,610		$	77,677		$	6,309		$	5,829

Amounts recognized in the consolidated balance sheets consist of:

	Pension Plan						SERP
(In thousands)	2012			2011			2012			2011
Current liabilities		$	—		$	—		$	222		$	221
Noncurrent liabilities			6,768			11,106			6,146			5,954
		$	6,768		$	11,106		$	6,368		$	6,175

Amounts recognized in accumulated other comprehensive income(loss) before the effect of income taxes consist of:

	Pension Plan								SERP
(In thousands)	2012				2011				2012				2011
Prior service cost		$	—			$	—			$	(851	)		$	(1,061	)
Net actuarial loss			(23,150	)			(25,367	)			(1,232	)			(1,227	)
		$	(23,150	)		$	(25,367	)		$	(2,083	)		$	(2,288	)

Net pension cost included the following components:

	Pension Plan									SERP
(In thousands)	2012			2011			2010			2012		2011		2010
Service cost-benefits earned during the period	$	—		$	—		$	—		$	97	$	102	$	90
Interest cost on projected benefit obligation		3,506			3,686			3,721			262		286		282
Expected return on plan assets		(4,474	)		(4,230	)		(3,779	)		—		—		—
Amortization of prior service cost		—			—			—			210		210		209
Amortization of actuarial loss		1,847			941			766			26		6		—
Net pension costs	$	879		$	397		$	708		$	595	$	604	$	581

The estimated amount that will be amortized from accumulated other comprehensive loss into net periodic cost in 2013 is approximately $1,653,000 for the pension plan and $268,000 for the SERP.

Assumptions

We use a measurement date of December 31 for our pension and other benefit plan. Weighted-average assumptions used to determine benefit obligations at December 31 are as follows:

	2012			2011
Discount rate		4.13	%		4.60	%
Rate of compensation increase		3.50	%		3.50	%

Weighted-average assumptions used to determine net periodic benefit cost for years ended December 31 are as follows:

	2012	2011	2010
Discount rate	4.60%	5.45%	6.00%
Expected long-term return on plan assets	6.75%	7.10%	7.10%
Rate of compensation increase	3.50%	3.50%	3.50%

Plan Assets

The Board of Director's Executive Compensation and Employee Benefits Committee (the "Compensation Committee") is responsible for administering our pension plan. The primary investment objective of the pension plan is to ensure, over its long-term life, an adequate pool of assets to support the benefit obligations to participants, retirees and beneficiaries. An important secondary objective is to be able to improve the pension plan's funded status which reduces employer contributions. In meeting these objectives, the Compensation Committee seeks to achieve a high level of investment return consistent with a prudent level of portfolio risks.

Factors such as asset class allocations, long-term rates of return (expected and actual), and results of periodic asset liability modeling studies are considered when constructing the long-term rate of return assumptions for our pension plan. While historical rates of return are an important factor in the analysis, we also take into consideration data points from other external sources.

The assets of the plan, excluding Haverty stock, are being invested according to the following asset allocation guidelines, established to reflect the growth expectations and risk tolerance of the Compensation Committee. Haverty stock has a target weight of 5% of total plan assets with a tactical range of zero to 10%.

Security Class	Strategic Target			Tactical Range
Equity:
International Equity		20	%		10% - 30	%
Domestic Equity		30	%		20% - 40	%
Total Equity		50	%		40% - 60	%
U.S. Fixed Income		50	%		40% - 60	%
Cash		0	%		0% - 10	%
Total Fund		100	%

Our pension plan assets are valued based on observable inputs obtained from independent sources. Most of the assets are held in audited institutional mutual funds and collective trusts. Since the net asset values of these funds are not quoted on actively traded markets, they are classified in a Level 2 valuation category. Some of the holdings in these funds are valued using quoted market prices for similar instruments in active markets, a Level 2 valuation technique. The remaining assets are valued using quoted market prices, a Level 1 valuation technique. The fair values by asset category are as follows (in thousands):

	Fair Value Measurements
		December 31, 2012						December 31, 2011
		Total		Level 1		Level 2		Total		Level 1		Level 2
Money Market Funds	$	518		518			$	355	$	355	$
Equity Securities:
Haverty Class A Common Stock		3,348		3,348				2,212		2,212
U.S. Large Cap Passive(a)		16,927				16,927		17,061				17,061
U.S. Small/Mid Cap Growth		2,162				2,162		2,071				2,071
U.S. Small/Mid Cap Value		2,052				2,052		2,021				2,021
International Equity		11,276				11,276		14,064				14,064
Emerging Markets Equity		2,891				2,891
		38,656		3,348		35,308		37,429		2,212		35,217

Fixed Income:
Opportunistic(b)		5,125				5,125		4,020				4,020
Passive		2,641				2,641		2,138				2,138
Long Duration Active(c)		10,278				10,278		8,554				8,554
Long Duration Passive		3,150				3,150		3,154				3,154
Long Duration Investment Grade(d)		13,474				13,474		10,921				10,921
		34,668		—		34,668		28,787		—		28,787
Total	$	73,842	$	3,866	$	69,976	$	66,571	$	2,567	$	64,004

(a)	This category comprises low-cost equity index funds not actively managed that track the S&P 500.

(b)

This fund invests primarily in U.S. dollar-denominated, investment grade bonds, including government securities, corporate bonds, and mortgage and asset-backed securities. This fund may also invest a significant portion of its assets in any combination of non-investment grade bonds, non-U.S. dollar denominated bonds, and bonds issued by issuers in emerging capital markets.

(c)	This category invests primarily in U.S. dollar-denominated, investment grade bonds, including government securities, corporate bonds, and mortgage and asset-backed securities, among others.

(d)	This category invests primarily in U.S. dollar-denominated, investment grade corporate bonds as well as U.S. Treasury bonds.

Cash Flows

There were no minimum funding requirements to the pension plan in 2012. We contributed $3,000,000 to the pension plan in 2012 and expect to contribute $6,600,000 in 2013. The following schedule outlines the expected benefit payments:

(In thousands)	Pension Plan		SERP
2013	$	3,729	$	222
2014		3,808		225
2015		3,947		235
2016		4,124		266
2017		4,363		376
2018-2022		23,357		2,015

Other Plans

We have an employee savings/retirement (401(k)) plan to which substantially all our employees may contribute. We match employee contributions 100% of the first 1% of eligible pay and 50% of the next 5% contributed by participants. We expensed matching employer contributions of approximately $2,907,000, $2,666,000 and $2,578,000 in 2012, 2011 and 2010, respectively.

We offer no post-retirement benefits other than the plans discussed above and no significant post-employment benefits.