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PENSION PLANS | 12 Months Ended
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Dec. 31, 2013
PENSION PLANS |
PENSION PLANS | 16. 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:
|  | 2013 |  | 2012 |
|  | (Dollars in thousands) |
Change in benefit obligation |  |  |  |  |
Benefit obligation at beginning of year |  | $ | 36,139 |  | $ | 34,091 |
Interest cost |  | 1,370 |  | 1,585 |
Actuarial (gains) losses |  | (2,969 | ) | 2,923 |
Benefits paid |  | (2,357 | ) | (2,460 | )
Benefit obligation at end of the year |  | 32,183 |  | 36,139 |
Change in plan assets |  |  |  |  |
Fair value of plan assets at beginning of year |  | 23,780 |  | 22,559 |
Actual return on plan assets |  | 4,712 |  | 2,235 |
Employer contributions |  | 1,647 |  | 1,446 |
Benefits paid |  | (2,357 | ) | (2,460 | )
Fair value of plan assets at end of year |  | 27,782 |  | 23,780 |
Funded status at end of year |  | $ | (4,401 | ) | $ | (12,359 | )
Amounts recognized in AOCI |  |  |  |  |
Net actuarial losses |  | $ | (10,895 | ) | $ | (19,205 | )
Benefit obligation actuarial assumptions |  |  |  |  |
Weighted average discount rate |  | 4.7 | % | 4.0 | %
|  | 2013 |  | 2012 |  | 2011 |
|  | (Dollars in thousands) |
Components of net periodic benefit cost |  |  |  |  |  |  |
Interest cost |  | $ | 1,370 |  | $ | 1,585 |  | $ | 1,668 |
Expected return on plan assets |  | (1,762 | ) | (1,791 | ) | (1,821 | )
Amortization of net actuarial losses |  | 2,390 |  | 2,385 |  | 2,263 |
Net periodic benefit cost |  | $ | 1,998 |  | $ | 2,179 |  | $ | 2,110 |
Net periodic cost actuarial assumptions |  |  |  |  |  |  |
Weighted average discount rate |  | 4.0 | % | 4.8 | % | 5.1 | %
Expected long-term rate of return on plan assets |  | 7.5 | % | 8.0 | % | 8.0 | %
The unrecognized net actuarial losses included in AOCI expected to be recognized in net periodic benefit cost during 2014 is approximately $1.2 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, |
|  | 2013 |  | 2012 |
Equity securities |  | 59.9 | % | 64.7 | %
Debt securities |  | 34.6 |  | 32.6 |
Other |  | 5.5 |  | 2.7 |
Total |  | 100 | % | 100 | %
Equity securities included the Company’s common stock in the amounts of $76 thousand and $59 thousand at December 31, 2013 and 2012, 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, 2013 and 2012 by asset category were as follows:
|  | Level 1 |  | Level 2 |  | Level 3 |  | Total |
|  | (Dollars in thousands) |
December 31, 2013 |  |  |  |  |  |  |  |  |
Money market accounts |  | $ | 1,841 |  | $ | — |  | $ | — |  | $ | 1,841 |
Mutual funds |  | 9,795 |  | — |  | — |  | 9,795 |
Government obligations |  | — |  | 3,450 |  | — |  | 3,450 |
Common stocks |  | 8,744 |  | — |  | — |  | 8,744 |
Preferred stocks |  | 255 |  | — |  | — |  | 255 |
Corporate bonds and debentures |  | — |  | 3,697 |  | — |  | 3,697 |
|  | $ | 20,635 |  | $ | 7,147 |  | $ | — |  | $ | 27,782 |
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 |
We expect to contribute approximately $1.8 million to our defined benefit retirement plan in 2014. Estimated future benefit payments are as follows (in thousands):
Year ending December 31: |  |  |
2014 |  | $ | 2,427 |
2015 |  | 2,413 |
2016 |  | 2,432 |
2017 |  | 2,411 |
2018 |  | 2,401 |
2019-2023 |  | 11,393 |
Total |  | $ | 23,477 |
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:
|  | 2013 |  | 2012 |
|  | (Dollars in thousands) |
Change in benefit obligation |  |  |  |  |
Benefit obligation at beginning of year |  | $ | 9,944 |  | $ | 8,558 |
Interest cost |  | 411 |  | 426 |
Actuarial (gains) losses |  | (1,033 | ) | 1,175 |
Benefits paid |  | (215 | ) | (215 | )
Benefit obligation at end of year |  | 9,107 |  | 9,944 |
Change in plan assets |  |  |  |  |
Fair value of plan assets at beginning of year |  | — |  | — |
Employer contributions |  | 215 |  | 215 |
Benefits paid |  | (215 | ) | (215 | )
Fair value of plan assets at end of year |  | — |  | — |
Funded status at end of year |  | $ | (9,107 | ) | $ | (9,944 | )
Amounts recognized in AOCI |  |  |  |  |
Net transition obligation |  | $ | (164 | ) | $ | (181 | )
Prior service cost |  | (119 | ) | (137 | )
Net actuarial losses |  | (379 | ) | (1,482 | )
Total amounts recognized in AOCI |  | $ | (662 | ) | $ | (1,800 | )
Benefit obligation actuarial assumptions |  |  |  |  |
Weighted average discount rate |  | 5.0 | % | 4.2 | %
|  | 2013 |  | 2012 |  | 2011 |
|  | (Dollars in thousands) |
Components of net periodic benefit cost |  |  |  |  |  |  |
Interest cost |  | $ | 411 |  | $ | 426 |  | $ | 412 |
Amortization of net transition obligation |  | 17 |  | 17 |  | 17 |
Amortization of prior service cost |  | 18 |  | 18 |  | 18 |
Amortization of net actuarial (gains) losses |  | 71 |  | (4 | ) | (17 | )
Net periodic benefit cost |  | $ | 517 |  | $ | 457 |  | $ | 430 |
Net periodic cost actuarial assumptions |  |  |  |  |  |  |
Weighted average discount rate |  | 4.2 | % | 5.0 | % | 5.0 | %
The estimated amortization of components included in AOCI that will be recognized into net periodic cost for 2014 is as follows (in thousands):
Amortization of net transition obligation |  | $ | 17 |
Amortization of prior service cost |  | 18 |
Amortization of net actuarial losses |  | 2 |
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 2014. Estimated future benefit payments reflecting expected future service for the SERP are as follows (in thousands):
Year ending December 31: |  |  |
2014 |  | $ | 215 |
2015 |  | 211 |
2016 |  | 225 |
2017 |  | 415 |
2018 |  | 411 |
2019-2023 |  | 2,425 |
Total |  | $ | 3,902 |

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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 Accounting Standards Codification -Topic 715 -URI http://asc.fasb.org/topic&trid=2235017 + Details
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