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,
	2015			2014
	(Dollars in thousands)
Change in benefit obligation
Benefit obligation at beginning of year	$	36,330		$	32,183
Interest cost	1,383			1,485
Actuarial (gains) losses	(2,228		)	5,709
Benefits paid	(2,418		)	(3,047		)
Benefit obligation at end of the year	33,067			36,330

Change in plan assets
Fair value of plan assets at beginning of year	27,891			27,782
Actual return on plan assets	(152		)	1,813
Employer contributions	1,000			1,343
Benefits paid	(2,418		)	(3,047		)
Fair value of plan assets at end of year	26,321			27,891

Funded status at end of year	$	(6,746	)	$	(8,439	)

Amounts recognized in AOCI
Net actuarial losses	$	(13,887	)	$	(15,647	)

Benefit obligation actuarial assumptions
Weighted average discount rate	4.3		%	4.0		%



	Year Ended December 31,
	2015			2014			2013
	(Dollars in thousands)
Components of net periodic benefit cost
Interest cost	$	1,383		$	1,485		$	1,370
Expected return on plan assets	(1,893		)	(1,924		)	(1,762		)
Amortization of net actuarial losses	1,577			1,068			2,390
Net periodic benefit cost	$	1,067		$	629		$	1,998

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

The unrecognized net actuarial losses included in AOCI expected to be recognized in net periodic benefit cost during 2016 is approximately $1.4 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,
	2015		2014
Equity securities	40.6	%	56.1	%
Debt securities	41.6		41.8
Other	17.8		2.1
Total	100.0	%	100.0	%

Equity securities included the Company’s common stock in the amount of $0.1 million at December 31, 2015 and 2014.

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, 2015 and 2014 by asset category were as follows:



	Level 1		Level 2		Level 3		Total
	(Dollars in thousands)
December 31, 2015
Money market accounts	$	4,672	$	—	$	—	$	4,672
Mutual funds	9,140		—		—		9,140
Government obligations	—		4,117		—		4,117
Common stocks	5,552		—		—		5,552
Preferred stocks	187		—		—		187
Corporate bonds and debentures	—		2,653		—		2,653
	$	19,551	$	6,770	$	—	$	26,321

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

We do not expect to make any contributions to our defined benefit retirement plan in 2016.

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



Year Ending December 31:
2016	$	2,531
2017	2,494
2018	2,479
2019	2,435
2020	2,390
2021-2025	11,131
Total	$	23,460

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,
	2015			2014
	(Dollars in thousands)
Change in benefit obligation
Benefit obligation at beginning of year	$	10,930		$	9,107
Interest cost	440			450
Actuarial (gains) losses	(504		)	1,588
Benefits paid	(215		)	(215		)
Benefit obligation at end of year	10,651			10,930

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	$	10,651		$	10,930

Amounts recognized in AOCI
Net transition obligation	$	(129	)	$	(147	)
Prior service cost	(84		)	(101		)
Net actuarial losses	(1,353		)	(1,965		)
Total amounts recognized in AOCI	$	(1,566	)	$	(2,213	)

Benefit obligation actuarial assumptions
Weighted average discount rate	4.4		%	4.1		%



	Year Ended December 31,
	2015			2014			2013
	(Dollars in thousands)
Components of net periodic benefit cost
Interest cost	$	440		$	450		$	411
Amortization of net transition obligation	16			17			17
Amortization of prior service cost	18			18			18
Amortization of net actuarial (gains) losses	111			2			71
Net periodic benefit cost	$	585		$	487		$	517

Net periodic cost actuarial assumptions
Weighted average discount rate	4.1		%	5.0		%	4.2		%

The estimated amortization of components included in AOCI that will be recognized into net periodic cost for 2016 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 2016.

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



Year Ending December 31:
2016	$	232
2017	423
2018	419
2019	415
2020	407
2021-2025	3,116
Total	$	5,012