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PENSION PLANS | 12 Months Ended
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Dec. 31, 2012
PENSION PLANS |
PENSION PLANS | 17. PENSION PLANS Defined Benefit Retirement Plan The bank has a defined benefit retirement plan that covered substantially all of its employees who were employed during the period that the plan was in effect. The plan was initially curtailed in 1986, and accordingly, plan benefits were fixed as of that date. Effective January 1, 1991, the bank reactivated its defined benefit retirement plan. As a result of the reactivation, employees for whom benefits were fixed in 1986 began to accrue additional benefits under a new formula that became effective January 1, 1991. Employees who were not participants at curtailment, but who were subsequently eligible to join, became participants effective January 1, 1991. Under the reactivated plan, benefits are based upon the employees’ years of service and their highest average annual salaries in a 60-consecutive-month period of service, reduced by benefits provided from the bank’s terminated money purchase pension plan. The reactivation of the defined benefit retirement plan resulted in an increase of $5.9 million in the unrecognized prior service cost, which was amortized over a period of 13 years. Effective December 31, 2002, the bank curtailed its defined benefit retirement plan, and accordingly, plan benefits were fixed as of that date. The following tables set forth information pertaining to the defined benefit retirement plan:
|  | December 31, |
|  | 2012 |  | 2011 |
|  | (Dollars in thousands) |
Change in benefit obligation |  |  |  |  |
Benefit obligation at January 1 |  | $ | 34,091 |  | $ | 33,633 |
Interest cost |  | 1,585 |  | 1,668 |
Actuarial loss |  | 2,923 |  | 1,014 |
Benefits paid |  | (2,460 | ) | (2,224 | )
Benefit obligation at December 31 |  | 36,139 |  | 34,091 |
Change in plan assets |  |  |  |  |
Fair value of assets at January 1 |  | 22,559 |  | 23,220 |
Actual return on plan assets |  | 2,235 |  | 168 |
Employer contributions |  | 1,446 |  | 1,395 |
Benefits paid |  | (2,460 | ) | (2,224 | )
Fair value of assets at December 31 |  | 23,780 |  | 22,559 |
Funded status |  | $ | (12,359 | ) | $ | (11,532 | )
Amounts recognized in the consolidated balance sheets |  |  |  |  |
Accrued benefit liability |  | $ | (12,359 | ) | $ | (11,532 | )
Components of accumulated other comprehensive income: |  |  |  |  |
Unrecognized net actuarial loss |  | (19,205 | ) | (19,111 | )
Net amount recognized |  | $ | 6,846 |  | $ | 7,579 |
Benefit obligation actuarial assumptions |  |  |  |  |
Weighted average discount rate |  | 4.0 | % | 4.8 | %
|  | Year Ended December 31, |
|  | 2012 |  | 2011 |  | 2010 |
|  | (Dollars in thousands) |
Components of net periodic cost |  |  |  |  |  |  |
Interest cost |  | $ | 1,585 |  | $ | 1,668 |  | $ | 1,790 |
Expected return on plan assets |  | (1,791 | ) | (1,821 | ) | (1,710 | )
Recognized net loss |  | 2,385 |  | 2,263 |  | 1,962 |
Net periodic cost |  | 2,179 |  | 2,110 |  | 2,042 |
Other changes in plan assets and benefit obligations recognized in other comprehensive income |  |  |  |  |  |  |
Net loss |  | (93 | ) | (404 | ) | (414 | )
Total recognized in other comprehensive income |  | (93 | ) | (404 | ) | (414 | )
Total recognized in net periodic cost and other comprehensive income |  | $ | 2,272 |  | $ | 2,514 |  | $ | 2,456 |
Net periodic cost actuarial assumptions |  |  |  |  |  |  |
Weighted average discount rate |  | 4.8 | % | 5.1 | % | 5.9 | %
Expected long-term rate of return on plan assets |  | 8.0 | % | 8.0 | % | 8.0 | %
The unrecognized net actuarial loss included in AOCI expected to be recognized in net periodic pension cost during 2013 is approximately $2.4 million. The long-term rate of return on plan assets reflects the weighted-average long-term rates of return for the various categories of investments held in the plan. The expected long-term rate of return is adjusted when there are fundamental changes in expected returns on the plan investments. The defined benefit retirement plan assets consist primarily of equity and debt securities. Our asset allocations by asset category were as follows:
|  | December 31, |
|  | 2012 |  | 2011 |
Equity securities |  | 65 | % | 62 | %
Debt securities |  | 32 |  | 32 |
Other |  | 3 |  | 6 |
Total |  | 100 | % | 100 | %
Equity securities included the Company’s common stock in the amounts of $59 thousand and $49 thousand at December 31, 2012 and 2011, respectively. Our investment strategy for the defined benefit retirement plan is to maximize the long-term rate of return on plan assets while maintaining an acceptable level of risk. The investment policy establishes a target allocation for each asset class that is reviewed periodically and rebalanced when considered appropriate. The fair values of the defined benefit retirement plan as of December 31, 2012 and 2011 by asset category were as follows:
|  | Level 1 |  | Level 2 |  | Level 3 |  | Total |
|  | (Dollars in thousands) |
December 31, 2012 |  |  |  |  |  |  |  |  |
Money market accounts |  | $ | 1,022 |  | $ | — |  | $ | — |  | $ | 1,022 |
Mutual funds |  | 9,524 |  | — |  | — |  | 9,524 |
Government obligations |  | — |  | 3,317 |  | — |  | 3,317 |
Common stocks |  | 6,213 |  | — |  | — |  | 6,213 |
Preferred stocks |  | 279 |  | — |  | — |  | 279 |
Corporate bonds and debentures |  | — |  | 3,425 |  | — |  | 3,425 |
|  | $ | 17,038 |  | $ | 6,742 |  | $ | — |  | $ | 23,780 |
December 31, 2011 |  |  |  |  |  |  |  |  |
Money market accounts |  | $ | 1,869 |  | $ | — |  | $ | — |  | $ | 1,869 |
Mutual funds |  | 439 |  | — |  | — |  | 439 |
Government obligations |  | — |  | 3,264 |  | — |  | 3,264 |
Common stocks |  | 5,376 |  | — |  | — |  | 5,376 |
Exchange traded funds |  | 8,494 |  | — |  | — |  | 8,494 |
Preferred stocks |  | 226 |  | — |  | — |  | 226 |
Corporate bonds and debentures |  | — |  | 2,891 |  | — |  | 2,891 |
|  | $ | 16,404 |  | $ | 6,155 |  | $ | — |  | $ | 22,559 |
We expect to contribute approximately $1.7 million to our defined benefit retirement plan in 2013. Estimated future benefit payments are as follows (in thousands):
Year ending December 31: |  |  |
2013 |  | $ | 2,342 |
2014 |  | 2,372 |
2015 |  | 2,360 |
2016 |  | 2,384 |
2017 |  | 2,362 |
2018-2022 |  | 11,518 |
Total |  | $ | 23,338 |
Supplemental Executive Retirement Plans In 1995, 2001, 2004 and 2006, our bank established Supplemental Executive Retirement Plans (“SERP”) that provide certain officers of the Company with supplemental retirement benefits. On December 31, 2002, the 1995 and 2001 SERP were curtailed. In conjunction with the merger with CB Bancshares, Inc. (“CBBI”), we assumed CBBI’s SERP obligation. The following tables set forth information pertaining to the SERP:
|  | December 31, |
|  | 2012 |  | 2011 |
|  | (Dollars in thousands) |
Change in benefit obligation |  |  |  |  |
Benefit obligation at January 1 |  | $ | 8,558 |  | $ | 7,755 |
Interest cost |  | 426 |  | 412 |
Actuarial loss |  | 1,175 |  | 606 |
Benefits paid |  | (215 | ) | (215 | )
Benefit obligation at December 31 |  | 9,944 |  | 8,558 |
Change in plan assets |  |  |  |  |
Fair value of assets at January 1 |  | — |  | — |
Employer contributions |  | 215 |  | 215 |
Benefits paid |  | (215 | ) | (215 | )
Fair value of assets at December 31 |  | — |  | — |
Funded status |  | $ | (9,944 | ) | $ | (8,558 | )
Amounts recognized in the consolidated balance sheets |  |  |  |  |
Accrued benefit liability |  | $ | (9,944 | ) | $ | (8,558 | )
Components of accumulated other comprehensive income: |  |  |  |  |
Unrecognized transition obligation |  | (181 | ) | (198 | )
Unamortized prior service cost |  | (137 | ) | (154 | )
Unrecognized net actuarial loss |  | (1,482 | ) | (304 | )
Net amount recognized |  | $ | (8,144 | ) | $ | (7,902 | )
Benefit obligation actuarial assumptions |  |  |  |  |
Weighted average discount rate |  | 4.2 | % | 5.0 | %
Weighted average rate of compensation increase |  | 5.0 | % | 5.0 | %
|  | Year Ended December 31, |
|  | 2012 |  | 2011 |  | 2010 |
|  | (Dollars in thousands) |
Components of net periodic cost |  |  |  |  |  |  |
Service cost |  | $ | — |  | $ | — |  | $ | 42 |
Interest cost |  | 426 |  | 412 |  | 435 |
Amortization of unrecognized transition obligation |  | 17 |  | 17 |  | 17 |
Recognized prior service cost |  | 18 |  | 18 |  | 17 |
Recognized net gain |  | (4 | ) | (17 | ) | (29 | )
Net periodic cost |  | 457 |  | 430 |  | 482 |
Other changes in plan assets and benefit obligations recognized in other comprehensive income |  |  |  |  |  |  |
Net loss |  | (1,179 | ) | (624 | ) | (307 | )
Amortization of prior service cost |  | 17 |  | 18 |  | 17 |
Amortization of transition obligation |  | 17 |  | 18 |  | 17 |
Total recognized in other comprehensive income |  | (1,145 | ) | (588 | ) | (273 | )
Total recognized in net periodic cost and other comprehensive income |  | $ | 1,602 |  | $ | 1,018 |  | $ | 755 |
Net periodic cost actuarial assumptions |  |  |  |  |  |  |
Weighted average discount rate |  | 5.0 | % | 5.0 | % | 6.1 | %
Weighted average rate of compensation increase |  | 5.0 | % | 5.0 | % | 5.0 | %
The estimated amortization of components included in AOCI that will be recognized into net periodic cost for 2013 is as follows (in thousands):
Amortization of transition obligation |  | $ | 17 |
Amortization of prior service cost |  | 18 |
Amortization of net actuarial gain |  | 71 |
The SERP holds no plan assets other than employer contributions that are paid as benefits during the year. We expect to contribute $0.2 million to the SERP in 2013. Estimated future benefit payments reflecting expected future service for the SERP are as follows (in thousands):
Year ending December 31: |  |  |
2013 |  | $ | 215 |
2014 |  | 211 |
2015 |  | 208 |
2016 |  | 223 |
2017 |  | 413 |
2018-2022 |  | 2,109 |
Total |  | $ | 3,379 |

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- Definition The entire disclosure for pension and other postretirement benefits. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 158 -Paragraph 7, 21, 22 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name FASB Staff Position (FSP) -Number FAS106-2 -Paragraph 20, 21, 22 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Implementation Guide (Q and A) -Number FAS88 -Paragraph 63 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 106 -Paragraph 518 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 715 -URI http://asc.fasb.org/topic&trid=2235017 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 132R -Paragraph 5, 6, 7, 8 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. 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Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 87 -Paragraph 264 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Principles Board Opinion (APB) -Number 30 -Paragraph 26 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Emerging Issues Task Force (EITF) -Number 03-2 -Paragraph 8 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 132R -Paragraph 5 -Subparagraph h -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 132R -Paragraph 5 -Subparagraph a -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 132R -Paragraph 5 -Subparagraph q -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. + Details
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