EMPLOYEE BENEFIT PLANS

BancShares sponsors benefit plans for its qualifying employees and legacy Bancorporation employees including noncontributory defined benefit pension plans, 401(k) savings plans and enhanced 401(k) savings plans. These plans are qualified under the Internal Revenue Code. BancShares also maintains agreements with certain executives that provide supplemental benefits that are paid upon death or separation from service at an agreed-upon age.

Defined Benefit Pension Plans

Legacy BancShares employees who were hired prior to April 1, 2007 and who qualify under length of service and other requirements may participate in a noncontributory defined benefit pension plan (BancShares Plan). Under the BancShares Plan, benefits are based on years of service and average earnings. BancShares made no contributions to the BancShares Plan during 2014 or 2013 and does not anticipate making any contribution during 2015.

Certain legacy Bancorporation employees are covered by a noncontributory defined benefit pension plan (Bancorporation Plan). Retirement benefits under the Bancorporation Plan are based on an employee’s length of service and highest average annual compensation for five consecutive years during the last ten years of employment. Contributions to the Bancorporation Plan are based upon the projected unit credit actuarial funding method and are limited to the amounts that are currently deductible for tax reporting purposes. Employees had to be employed for at least one year to participate in the Bancorporation Plan. The employees fully vest in the Bancorporation Plan after five years of service. The Bancorporation plan was closed to new participants as of September 1, 2007. No contributions were made to the Bancorporation Plan since the October 1, 2014 acquisition date and none are anticipated for 2015.

Obligations and Funded Status

BancShares Plan

The following table provides the changes in benefit obligation and plan assets and the funded status of the plan at December 31, 2014 and 2013.



(Dollars in thousands)	2014			2013
Change in benefit obligation
Projected benefit obligation at January 1	$	530,678		$	580,938
Service cost	12,332			16,332
Interest cost	25,615			23,686
Actuarial (gain) loss	76,122			(74,060		)
Benefits paid	(17,102		)	(16,218		)
Projected benefit obligation at December 31	627,645			530,678
Change in plan assets
Fair value of plan assets at January 1	524,017			463,005
Actual return on plan assets	38,041			77,230
Employer contributions	—			—
Benefits paid	(17,102		)	(16,218		)
Fair value of plan assets at December 31	544,956			524,017
Funded status at December 31	$	(82,689	)	$	(6,661	)

The amounts recognized in the consolidated balance sheets as of December 31, 2014 and 2013 consist of:



(Dollars in thousands)	2014			2013
Other assets	$	—		$	—
Other liabilities	(82,689		)	(6,661		)
Net asset (liability) recognized	$	(82,689	)	$	(6,661	)

The following table details the amounts recognized in accumulated other comprehensive income at December 31, 2014 and 2013.



(Dollars in thousands)	2014		2013
Net loss (gain)	$	80,806	$	16,605
Less prior service cost	767		977
Accumulated other comprehensive loss, excluding income taxes	$	81,573	$	17,582

The following table provides expected amortization amounts for 2015.



(Dollars in thousands)
Actuarial loss	$	11,335
Prior service cost	210
Total	$	11,545

The accumulated benefit obligation for the plan at December 31, 2014 and 2013, equaled $537.0 million and $448.7 million, respectively. The BancShares Plan uses a measurement date of December 31.

The projected benefit obligation exceeded the fair value of plan assets as of December 31, 2014 and 2013. The fair value of plan assets exceeded the accumulated benefit obligation as of December 31, 2014 and 2013.

The following table shows the components of periodic benefit cost related to the pension plan and changes in plan assets and benefit obligations recognized in other comprehensive income for the years ended December 31, 2014, 2013 and 2012.



	Year ended December 31
(Dollars in thousands)	2014			2013			2012
Service cost	$	12,332		$	16,332		$	14,241
Interest cost	25,615			23,686			23,711
Expected return on assets	(31,269		)	(27,733		)	(28,478		)
Amortization of prior service cost	210			210			210
Amortization of net actuarial loss	5,148			16,985			11,026
Total net periodic benefit cost	12,036			29,480			20,710
Current year actuarial loss (gain)	69,349			(123,557		)	44,315
Amortization of actuarial loss	(5,148		)	(16,985		)	(11,026		)
Amortization of prior service cost	(210		)	(210		)	(210		)
Total recognized in other comprehensive income	63,991			(140,752		)	33,079
Total recognized in net periodic benefit cost and other comprehensive income	$	76,027		$	(111,272	)	$	53,789

The assumptions used to determine the benefit obligations as of December 31, 2014 and 2013, are as follows:



(Dollars in thousands)	2014		2013
Discount rate	4.27	%	4.90	%
Rate of compensation increase	4.00		4.00

The assumptions used to determine the net periodic benefit cost for the years ended December 31, 2014, 2013 and 2012, are as follows:



(Dollars in thousands)	2014		2013		2012
Discount rate	4.90	%	4.00	%	4.75	%
Rate of compensation increase	4.00		4.00		4.00
Expected long-term return on plan assets	7.50		7.25		7.50

The estimated discount rate, which represents the interest rate that could be obtained for a suitable investment used to fund the benefit obligations, is based on a yield curve developed from high-quality corporate bonds across a full maturity spectrum. The projected cash flows of the pension plan are discounted based on this yield curve and a single discount rate is calculated to achieve the same present value.

The estimated long-term rate of return on plan assets is used to calculate the value of plan assets over time. The methodology utilized to establish the estimated long-term rate of return on plan assets considers the actual return on plan assets for various time horizons since 1999 as a predictor of probable future returns. Historical returns are modified as appropriate by estimates of future market conditions that may positively or negatively affect estimated future returns. The return on plan assets for the 15-year, 10-year and 5-year periods ended December 31, 2014 equaled 7.16 percent, 8.24 percent and 10.48 percent, respectively. Based on expectations of modest returns over the next several years, the assumed rate of return for 2014 was 7.50 percent compared to 7.25 percent in 2013.

Bancorporation Plan

The following table provides the changes in benefit obligation and plan assets and the funded status of the plan at December 31, 2014.



(Dollars in thousands)	2014
Change in benefit obligation
Projected benefit obligation at October 1 acquisition date	$	137,452
Service cost	832
Interest cost	1,488
Actuarial (gain) loss	12,802
Benefits paid	(1,242		)
Projected benefit obligation at December 31	151,332
Change in plan assets
Fair value of plan assets at October 1 acquisition date	150,374
Actual return on plan assets	6,486
Employer contributions	—
Benefits paid	(1,242		)
Fair value of plan assets at December 31	155,618
Funded status at December 31	$	4,286

The amounts recognized in the consolidated balance sheets as of December 31, 2014 consist of:



(Dollars in thousands)	2014
Other assets	$	—
Other liabilities	4,286
Net asset (liability) recognized	$	4,286

The following table details the amounts recognized in accumulated other comprehensive income at December 31, 2014.



(Dollars in thousands)	2014
Net loss (gain)	$	9,123
Less prior service cost	—
Accumulated other comprehensive loss, excluding income taxes	$	9,123

There are no expected amortization amounts for 2015. The accumulated benefit obligation for the plan at December 31, 2014 equaled $136.4 million. The Bancorporation Plan uses a measurement date of December 31.

The fair value of plan assets exceeded the projected benefit obligation and accumulated benefit obligation as of December 31, 2014.



	Year ended December 31
(Dollars in thousands)	2014
Service cost	$	832
Interest cost	1,488
Expected return on assets	(2,807		)
Amortization of prior service cost	—
Amortization of net actuarial loss	—
Total net periodic benefit cost	(487		)
Current year actuarial loss (gain)	9,123
Amortization of actuarial loss	—
Amortization of prior service cost	—
Total recognized in other comprehensive income	9,123
Total recognized in net periodic benefit cost and other comprehensive income	$	8,636

The assumptions used to determine the benefit obligations as of December 31, 2014 are as follows:



(Dollars in thousands)	2014
Discount rate	4.27	%
Rate of compensation increase	4.00

The assumptions used to determine the net periodic benefit cost for the year ended December 31, 2014 are as follows:



(Dollars in thousands)	2014
Discount rate	4.35	%
Rate of compensation increase	4.00
Expected long-term return on plan assets	7.50

The weighted average expected long-term rate of return on Bancorporation Plan assets represents the average rate of return expected to be earned on Bancorporation Plan assets over the period the benefits included in the benefit obligation are to be paid. In developing the expected rate of return, the actual historical and current returns on Bancorporation Plan assets are considered.

Plan Assets

BancShares Plan

BancShares' primary total return objective is to achieve returns that, over the long term, will fund retirement liabilities and provide for the desired plan benefits in a manner that satisfies the fiduciary requirements of the Employee Retirement Income Security Act. The plan assets have a long-term time horizon that runs concurrent with the average life expectancy of the participants. As such, the BancShares Plan can assume a time horizon that extends well beyond a full market cycle and can assume a reasonable level of risk. It is expected, however, that both professional investment management and sufficient portfolio diversification will smooth volatility and help to generate a reasonable consistency of return. The investments are broadly diversified among economic sector, industry, quality and size in order to reduce risk and to produce incremental return. Within approved guidelines and restrictions, the investment manager has discretion over the timing and selection of individual investments. Plan assets are currently held by FCB Trust Department.

The fair values of pension plan assets at December 31, 2014 and 2013, by asset class are as follows:



	December 31, 2014
(Dollars in thousands)	Market Value		Quoted prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Nonobservable Inputs (Level 3)		Target Allocation	Actual % of Plan Assets
Cash and equivalents	$	3,854	$	3,854	$	—	$	—	0 - 1%	1	%
Equity securities									55 - 65%	62	%
Large cap	229,315		229,315		—		—
Mid cap	10,796		10,796		—		—
Small cap	44,734		44,734		—		—
International equity (developed)	10,706		10,706		—		—
International equity (emerging)	41,484		41,484		—		—
Fixed income					—		—		25 - 40%	28	%
Investment grade bonds	81,050		—		81,050		—
Intermediate bonds	53,806		—		53,806		—
High-yield corporate bonds	6,592		—		6,592		—
TIPS	2,550		2,550		—		—
International emerging bond	9,930		—		9,930		—
Alternative investments									0 - 10%	9	%
Commodities	17,671		17,671		—		—
Hedge fund composite	32,468		32,468				—
Total pension assets	$	544,956	$	393,578	$	151,378	$	—		100	%

	December 31, 2013
	Market Value		Quoted prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Nonobservable Inputs (Level 3)		Target Allocation	Actual % of Plan Assets
Cash and equivalents	$	2,517	$	2,517	—		—		0 - 1%	1	%
Equity securities									55 - 65%	62	%
Large cap	218,023		218,023		—		—
Mid cap	10,724		10,724		—		—
Small cap	43,928		43,928		—		—
International equity (developed)	10,535		10,535		—		—
International equity (emerging)	40,643		40,643		—		—
Fixed income									25 - 40%	28	%
Investment grade bonds	74,501		—		74,501		—
Intermediate bonds	48,746		—		48,746		—
High-yield corporate bonds	10,111		—		10,111		—
TIPS	4,395		4,395		—		—
International emerging bond	10,119		—		10,119		—
Alternative investments			—		—		—		0 - 10%	9	%
Commodities	19,014		19,014		—		—
Hedge fund composite	30,761		30,761				—
Total pension assets	$	524,017	$	380,540	$	143,477	$	—		100	%

Bancorporation Plan

The investment strategy of the Bancorporation Plan with respect to pension assets is to invest the assets in accordance with the Employee Retirement Security Act and fiduciary standards. The long-term primary objectives for the Plan are to provide for a reasonable amount of long-term growth of capital, without undue exposure to risk, and to provide investment results that meet or exceed the Plan’s expected long-term rate of return.



	December 31, 2014
(Dollars in thousands)	Market Value		Quoted prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Nonobservable Inputs (Level 3)		Actual % of Plan Assets
Equity securities	$	107,333	$	107,333	—		—		68.97	%
Debt securities	35,208		23,528		11,680		—		22.62	%
Cash and equivalents	13,077		13,077		—		—		8.40	%
Total pension assets	$	155,618	$	143,938	$	11,680	$	—

The investment policy for the Bancorporation Plan establishes an asset allocation whereby fixed income securities including cash and cash equivalents should comprise no less than 35% of Bancorporation Plan assets and whereby equity securities should not exceed 60% of Bancorporation Plan assets. Because the investment policy grants a 10% market value variance within the Bancorporation Plan when assessing overall asset allocation percentage, equity securities can comprise up to 70% of Bancorporation Plan assets before action is required.

Cash Flows

Following are estimated payments to pension plan participants in the indicated periods for each plan:



(Dollars in thousands)	BancShares Plan		Bancorporation Plan
2015	$	19,648	$	5,270
2016	21,412		5,594
2017	23,133		6,088
2018	24,767		6,679
2019	26,381		7,045
2020-2024	157,292		42,155

401(k) Savings Plans

BancShares Plans

Certain employees enrolled in the defined benefit plan are also eligible to participate in a 401(k) savings plan through deferral of portions of their salary. For employees who participate in the 401(k) savings plan who also continue to accrue additional years of service under the defined benefit plan, based on the employee’s contribution, BancShares matches up to 75 percent of the employee contribution up to 6 percent of compensation which is vested immediately.

At the end of 2007, current employees were given the option to continue to accrue additional years of service under the defined benefit plan or to elect to join an enhanced 401(k) savings plan. Under the enhanced 401(k) savings plan, based on the employee’s contribution, BancShares matches up to 100 percent of the employees' contributions not to exceed 6 percent of compensation which is vested immediately. In addition to the employer match of the employee contributions, the enhanced 401(k) savings plan provides a guaranteed contribution equal to 3 percent of the compensation of a participant who remains employed at the end of the calendar year. Employees who elected to enroll in the enhanced 401(k) savings plan discontinued the accrual of additional years of service under the defined benefit plan and became enrolled in the enhanced 401(k) savings plan effective January 1, 2008. Eligible employees hired after January 1, 2008, are eligible to participate in the enhanced 401(k) savings plan.

Bancorporation Plans

Legacy Bancorporation had a 401(k) savings plan covering employees who elected to participate prior to September 1, 2007. As of October 1, 2014, BancShares assumed the plan requirement of matching 100 percent of the employees’ contribution of up to 3 percent of compensation and 50 percent of the employees’ contribution over 3 percent but not to exceed 6 percent of compensation. The matching funds contributed by the bank are 100 percent vested immediately.

Legacy Bancorporation also has an enhanced 401(k) savings plan covering employees hired or rehired on or after September 1, 2007 and which provided for benefits beginning January 1, 2008. As of October 1, 2014 acquisition date, BancShares assumed the plan requirement of matching up to 100 percent of the employees’ contributions not to 6 percent of compensation. Historically Bancorporation has contributed a profit sharing contribution equal to 3 percent of a participant’s compensation regardless of whether the participant is making contributions. The matching funds and profit sharing contributions contributed by the bank are 100 percent vested immediately.

Effective January 1, 2015, Bancshares merged the four 401(k) savings plans into two comprehensive plans for all employees. The legacy Bancorporation 401(k) savings plan and enhanced 401(k) savings plan were merged into the existing BancShares 401(k) savings plan and enhanced 401(k) savings plan, respectively. Participation in and terms of the BancShares 401(k) plan and enhanced 401(k) plan did not change as a result of the mergers.

BancShares made participating contributions to both the BancShares and legacy Bancorporation 401(k) plans totaling $16.4 million and $1.1 million for 2014, respectively. Contributions for the BancShares plan of $14.9 million and $14.1 million were made during 2013 and 2012, respectively.

Additional Benefits for Executives and Directors and Officers of Acquired Entities

FCB and FCB-SC have entered into contractual agreements with certain executives that provide payments for a period of ten years following separation from service at an agreed-upon age. These agreements also provide a death benefit in the event a participant dies before the term of the agreement ends. FCB has also assumed liability for contractual obligations to directors and officers of previously-acquired entities.

The following table provides the accrued liability as of December 31, 2014 and 2013, and the changes in the accrued liability during the years then ended:



(Dollars in thousands)	2014			2013
Present value of accrued liability as of January 1	$	23,960		$	25,851
Benefits acquired in the 1st Financial merger	1,455			—
Benefits acquired in the Bancorporation merger	10,288			—
Benefit expense and interest cost	2,682			1,151
Benefits paid	(2,431		)	(3,042		)
Benefits forfeited	—			—
Present value of accrued liability as of December 31	$	35,954		$	23,960
Discount rate at December 31	4.27		%	4.90		%