EMPLOYEE BENEFIT PLANS

BancShares sponsors benefit plans for its qualifying employees and legacy Bancorporation employees including noncontributory defined benefit pension plans, a 401(k) savings plan and an enhanced 401(k) savings plan. 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

Employees who were hired prior to April 1, 2007 and qualified under length of service and other requirements are covered by a noncontributory defined benefit pension plan (BancShares Plan). The BancShares plan was closed to new participants as of April 1, 2007. Retirement benefits are based on years of service and average earnings. Covered employees fully vested in the BancShares Plan after five years of service. BancShares makes contributions to the pension plan in amounts between the minimum required for funding and the maximum amount deductible for federal income tax purposes. A $30.0 million discretionary contribution was made to the BancShares Plan during 2015. No contributions were made during 2014 and BancShares does not anticipate making any contributions during 2016.

Certain legacy Bancorporation employees who qualified under length of service and other requirements are covered by a noncontributory defined benefit pension plan (Bancorporation Plan). The Bancorporation plan was closed to new participants as of September 1, 2007. Retirement benefits are based on years of service and highest average annual compensation for five consecutive years during the last ten years of employment. Covered employees fully vested in the Bancorporation Plan after five years of service. BancShares makes contributions to the Bancorporation Plan in amounts between the minimum required for funding and the maximum amount deductible for federal income tax purposes. No contributions were made to the Bancorporation Plan for 2015 and 2014 and none are anticipated for 2016.

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, 2015 and 2014.



(Dollars in thousands)	2015			2014
Change in benefit obligation
Projected benefit obligation at January 1	$	627,645		$	530,678
Service cost	14,083			12,332
Interest cost	26,975			25,615
Actuarial (gain) loss	(39,002		)	76,122
Benefits paid	(18,199		)	(17,102		)
Projected benefit obligation at December 31	611,502			627,645
Change in plan assets
Fair value of plan assets at January 1	544,956			524,017
Actual return on plan assets	(6,732		)	38,041
Employer contributions	30,000			—
Benefits paid	(18,199		)	(17,102		)
Fair value of plan assets at December 31	550,025			544,956
Funded status at December 31	$	(61,477	)	$	(82,689	)

The amounts recognized in the consolidated balance sheets at December 31, 2015 and 2014 consist of:



(Dollars in thousands)	2015			2014
Other assets	$	—		$	—
Other liabilities	(61,477		)	(82,689		)
Net asset (liability) recognized	$	(61,477	)	$	(82,689	)

The following table details the amounts recognized in accumulated other comprehensive income at December 31, 2015 and 2014.



(Dollars in thousands)	2015		2014
Net loss	$	70,358	$	80,806
Less prior service cost	556		767
Accumulated other comprehensive loss, excluding income taxes	$	70,914	$	81,573

The following table provides expected amortization amounts for 2016.



(Dollars in thousands)
Actuarial loss	$	6,398
Prior service cost	210
Total	$	6,608

The accumulated benefit obligation for the plan at December 31, 2015 and 2014 was $533.1 million and $537.0 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, 2015 and 2014. The fair value of plan assets exceeded the accumulated benefit obligation as of December 31, 2015 and 2014.

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, 2015, 2014 and 2013.



	Year ended December 31
(Dollars in thousands)	2015			2014			2013
Service cost	$	14,083		$	12,332		$	16,332
Interest cost	26,975			25,615			23,686
Expected return on assets	(33,198		)	(31,269		)	(27,733		)
Amortization of prior service cost	210			210			210
Amortization of net actuarial loss	11,376			5,148			16,985
Total net periodic benefit cost	19,446			12,036			29,480
Current year actuarial loss (gain)	927			69,349			(123,557		)
Amortization of actuarial loss	(11,376		)	(5,148		)	(16,985		)
Amortization of prior service cost	(210		)	(210		)	(210		)
Total recognized in other comprehensive income	(10,659		)	63,991			(140,752		)
Total recognized in net periodic benefit cost and other comprehensive income	$	8,787		$	76,027		$	(111,272	)

The assumptions used to determine the benefit obligations at December 31, 2015 and 2014 are as follows:



(Dollars in thousands)	2015		2014
Discount rate	4.68	%	4.27	%
Rate of compensation increase	4.00		4.00

The assumptions used to determine the net periodic benefit cost for the years ended December 31, 2015, 2014 and 2013, are as follows:



(Dollars in thousands)	2015		2014		2013
Discount rate	4.27	%	4.90	%	4.00	%
Rate of compensation increase	4.00		4.00		4.00
Expected long-term return on plan assets	7.50		7.50		7.25

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 weighted average expected long-term rate of return on BancShares Plan assets represents the average rate of return expected to be earned on BancShares Plan assets over the period the benefits included in the benefit obligation are to be paid. In developing the expected rate of return, historical and current returns, as well as investment allocation strategies, on BancShares Plan assets are considered.

Bancorporation Plan

The following table provides the changes in benefit obligation and plan assets and the funded status of the plan at December 31, 2015 and 2014.



(Dollars in thousands)	2015			2014
Change in benefit obligation
Projected benefit obligation at January 1	$	151,332		$	—
Projected benefit obligation at October 1 acquisition date	—			137,452
Service cost	3,341			832
Interest cost	6,393			1,488
Actuarial (gain) loss	(10,937		)	12,802
Benefits paid	(4,812		)	(1,242		)
Curtailments	(2,076		)	—
Projected benefit obligation at December 31	143,241			151,332
Change in plan assets
Fair value of plan assets at January 1	155,618			—
Fair value of plan assets at October 1 acquisition date	—			150,374
Actual return on plan assets	87			6,486
Benefits paid	(4,812		)	(1,242		)
Fair value of plan assets at December 31	150,893			155,618
Funded status at December 31	$	7,652		$	4,286

During 2015, there were plan curtailments of $2.1 million related to a decrease in the number of employees covered by the Bancorporation plan.

The amounts recognized in the consolidated balance sheets at December 31, 2015 and 2014 consist of:



(Dollars in thousands)	2015		2014
Other assets	$	—	$	—
Other liabilities	7,652		4,286
Net asset (liability) recognized	$	7,652	$	4,286

The following table details the amounts recognized in accumulated other comprehensive income at December 31, 2015 and 2014.



(Dollars in thousands)	2015		2014
Net loss	$	7,505	$	9,123
Less prior service cost	—		—
Accumulated other comprehensive loss, excluding income taxes	$	7,505	$	9,123

There are no expected amortization amounts for 2016. The accumulated benefit obligation for the plan at December 31, 2015 and 2014 was $131.9 million and $136.4 million, respectively. 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, 2015 and 2014.



	Year ended December 31
(Dollars in thousands)	2015			2014
Service cost	$	3,341		$	832
Interest cost	6,393			1,488
Expected return on assets	(11,482		)	(2,807		)
Total net periodic benefit cost	(1,748		)	(487		)
Current year actuarial loss	458			9,123
Curtailments	(2,076		)	—
Total recognized in other comprehensive income	(1,618		)	9,123
Total recognized in net periodic benefit cost and other comprehensive income	$	(3,366	)	$	8,636

The assumptions used to determine the benefit obligations at December 31, 2015 and 2014 are as follows:



(Dollars in thousands)	2015		2014
Discount rate	4.68	%	4.27	%
Rate of compensation increase	4.00		4.00

The assumptions used to determine the net periodic benefit cost for the years ended December 31, 2015 and 2014 are as follows:



(Dollars in thousands)	2015		2014
Discount rate	4.27	%	4.35	%
Rate of compensation increase	4.00		4.00
Expected long-term return on plan assets	7.50		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, historical and current returns, as well as investment allocation strategies, on Bancorporation Plan assets are considered.

Plan Assets

BancShares Plan

Our 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 across global, economic and market risk factors in an attempt to reduce volatility and target multiple return sources. 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, 2015 and 2014, by asset class are as follows:



	December 31, 2015
(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	$	26,613	$	26,613	$	—	$	—	0 - 1%	5	%
Equity securities									55 - 65%	63	%
Common and preferred stock	267,037		267,037		—		—
Mutual funds	78,645		78,645		—		—
Fixed income									25 - 40%	26	%
U.S. government and government agency securities	58,526		48,957		9,569		—
Corporate bonds	70,809		—		70,809		—
Mutual funds	17,351		17,351		—		—
Alternative investments									0 - 10%	6	%
Mutual funds	31,044		31,044		—		—
Total pension assets	$	550,025	$	469,647	$	80,378	$	—		100	%

	December 31, 2014
	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	%
Common and preferred stock	284,656		284,656		—		—
Mutual funds	52,379		52,379		—		—
Fixed income									25 - 40%	28	%
Mutual funds	153,928		—		153,928		—
Alternative investments									0 - 10%	9	%
Mutual funds	50,139		50,139		—		—
Total pension assets	$	544,956	$	391,028	$	153,928	$	—		100	%

Cash and equivalents comprise approximately 5 percent of BancShares actual plan assets at December 31, 2015, exceeding the target allocation range due to the $30.0 million contribution to the plan in December 2015.

Bancorporation Plan

Our 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 Bancorporation 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 across global, economic and market risk factors in an attempt to reduce volatility and target multiple return sources. 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.



	December 31, 2015
(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
Cash and equivalents	$	13,437	$	13,437	—		—	9	%
Equity securities								63	%
Common and preferred stock	80,676		80,676		—		—
Mutual funds	15,005		15,005		—		—
Fixed income								22	%
U.S. government and government agency securities	20,476		3,986		16,490		—
Corporate bonds	8,011		—		8,011		—
Mutual funds	4,198		4,198		—		—
Alternative investments								6	%
Mutual funds	9,090		9,090		—		—
Total pension assets	$	150,893	$	126,392	$	24,501	—

	December 31, 2014
	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
Cash and equivalents	$	13,077	$	13,077	—		—	8	%
Equity securities								69	%
Common and preferred stock	101,540		101,540		—		—
Mutual funds	5,793		5,793		—		—
Fixed income								23	%
U.S. government and government agency securities	23,528		23,528		—		—
Corporate bonds	11,680		—		11,680		—
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 percent of Bancorporation Plan assets and whereby equity securities should not exceed 60 percent of Bancorporation Plan assets. Because the investment policy grants a 10 percent market value variance within the Bancorporation Plan when assessing overall asset allocation percentage, equity securities can comprise up to 70 percent of Bancorporation Plan assets before action is required. Alternative investments may also comprise up to 5 percent of the Bancorporation Plan assets.

Cash Flows

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



(Dollars in thousands)	BancShares Plan		Bancorporation Plan
2016	$	21,607	$	5,463
2017	23,268		5,969
2018	24,895		6,420
2019	26,450		6,791
2020	28,207		7,209
2021-2025	166,567		43,671

401(k) Savings Plans

Effective January 1, 2015, BancShares merged the legacy Bancorporation 401(k) savings plan and enhanced 401(k) savings plan into the existing BancShares 401(k) savings plan and enhanced 401(k) savings plan. 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 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.

BancShares made participating contributions to the BancShares 401(k) plans of $22.6 million, $16.4 million and $14.9 million during 2015, 2014 and 2013, respectively.

Legacy 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. This plan was merged into the existing BancShares 401(k) savings plan as of January 1, 2015 and ceased to exist.

Legacy Bancorporation also had 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. This plan was merged into the existing BancShares enhanced 401(k) savings plan as of January 1, 2015 and ceased to exist.

BancShares made participating contributions to the legacy Bancorporation plans of $1.1 million for 2014.

Additional Benefits for Executives and Directors and Officers of Acquired Entities

FCB has entered into contractual agreements with certain executives that provide payments for a period of no more than fifteen 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, 2015 and 2014, and the changes in the accrued liability during the years then ended:



(Dollars in thousands)	2015			2014
Present value of accrued liability as of January 1	$	43,211		$	23,960
Benefits acquired in the 1st Financial merger	—			1,455
Benefits acquired in the Bancorporation merger	—			17,333
Benefit expense and interest cost	1,386			2,682
Benefits paid	(4,485		)	(2,219		)
Benefits forfeited	(234		)	—
Present value of accrued liability as of December 31	$	39,878		$	43,211
Discount rate at December 31	4.68		%	4.27		%