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:

	Year Ended December 31,
	2014			2013
	(Dollars in thousands)
Change in benefit obligation
Benefit obligation at beginning of year	$	32,183		$	36,139
Interest cost	1,485			1,370
Actuarial (gains) losses	5,709			(2,969		)
Benefits paid	(3,047		)	(2,357		)
Benefit obligation at end of the year	36,330			32,183

Change in plan assets
Fair value of plan assets at beginning of year	27,782			23,780
Actual return on plan assets	1,813			4,712
Employer contributions	1,343			1,647
Benefits paid	(3,047		)	(2,357		)
Fair value of plan assets at end of year	27,891			27,782

Funded status at end of year	$	(8,439	)	$	(4,401	)

Amounts recognized in AOCI
Net actuarial losses	$	(15,647	)	$	(10,895	)

Benefit obligation actuarial assumptions
Weighted average discount rate	4.0		%	4.7		%

	Year Ended December 31,
	2014			2013			2012
	(Dollars in thousands)
Components of net periodic benefit cost
Interest cost	$	1,485		$	1,370		$	1,585
Expected return on plan assets	(1,924		)	(1,762		)	(1,791		)
Amortization of net actuarial losses	1,068			2,390			2,385
Net periodic benefit cost	$	629		$	1,998		$	2,179

Net periodic cost actuarial assumptions
Weighted average discount rate	4.7		%	4.0		%	4.8		%
Expected long-term rate of return on plan assets	7.0		%	7.5		%	8.0		%

The unrecognized net actuarial losses included in AOCI expected to be recognized in net periodic benefit cost during 2015 is approximately $1.6 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,
	2014		2013

Equity securities	56.1	%	59.9	%
Debt securities	41.8		34.6
Other	2.1		5.5
Total	100.0	%	100.0	%

Equity securities included the Company’s common stock in the amount of $0.1 million at December 31, 2014 and 2013.

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, 2014 and 2013 by asset category were as follows:

	Level 1		Level 2		Level 3		Total
	(Dollars in thousands)
December 31, 2014
Money market accounts	$	958	$	—	$	—	$	958
Mutual funds	9,946		—		—		9,946
Government obligations	—		3,900		—		3,900
Common stocks	9,765		—		—		9,765
Preferred stocks	250		—		—		250
Corporate bonds and debentures	—		3,072		—		3,072
	$	20,919	$	6,972	$	—	$	27,891

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

We expect to contribute approximately $1.0 million to our defined benefit retirement plan in 2015.

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

Year ending December 31:
2015	$	2,498
2016	2,525
2017	2,508
2018	2,495
2019	2,467
2020-2024	11,663
Total	$	24,156

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:

	Year Ended December 31,
	2014			2013
	(Dollars in thousands)
Change in benefit obligation
Benefit obligation at beginning of year	$	9,107		$	9,944
Interest cost	450			411
Actuarial (gains) losses	1,588			(1,033		)
Benefits paid	(215		)	(215		)
Benefit obligation at end of year	10,930			9,107

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	$	(10,930	)	$	(9,107	)

Amounts recognized in AOCI
Net transition obligation	$	(147	)	$	(164	)
Prior service cost	(101		)	(119		)
Net actuarial losses	(1,965		)	(379		)
Total amounts recognized in AOCI	$	(2,213	)	$	(662	)

Benefit obligation actuarial assumptions
Weighted average discount rate	4.1		%	5.0		%

	Year Ended December 31,
	2014			2013			2012
	(Dollars in thousands)
Components of net periodic benefit cost
Interest cost	$	450		$	411		$	426
Amortization of net transition obligation	17			17			17
Amortization of prior service cost	18			18			18
Amortization of net actuarial (gains) losses	2			71			(4		)
Net periodic benefit cost	$	487		$	517		$	457

Net periodic cost actuarial assumptions
Weighted average discount rate	5.0		%	4.2		%	5.0		%

The estimated amortization of components included in AOCI that will be recognized into net periodic cost for 2015 is as follows (in thousands):

Amortization of net transition obligation	$	17
Amortization of prior service cost	18
Amortization of net actuarial losses	111

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 2015.

Estimated future benefit payments reflecting expected future service for the SERP are as follows (in thousands):

Year ending December 31:
2015	$	215
2016	231
2017	422
2018	418
2019	415
2020-2024	2,801
Total	$	4,502