EMPLOYEE BENEFIT PLANS

FCB sponsors benefit plans for its qualifying employees and former First Citizens Bancorporation, Inc. employees (legacy Bancorporation) 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. FCB 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 highest annual compensation for five consecutive years during the last ten years of employment. Covered employees were fully vested in the BancShares Plan after five years of service. FCB makes contributions to the pension plan in amounts between the minimum required for funding and the maximum amount deductible for federal income tax purposes. Discretionary contributions of $50.0 million were made to the BancShares Plan during both 2018 and 2017. Management evaluates the need for its pension plan contributions on a periodic basis based upon numerous factors including, but not limited to, the funded status of and returns on the BancShares Plan, discount rates and the current economic environment.

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 were fully vested in the Bancorporation Plan after five years of service. FCB 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 2018 and 2017. Management evaluates the need for its pension plan contributions on a periodic basis based upon numerous factors including, but not limited to, the funded status of and returns on the Bancorporation Plan, discount rates and the current economic environment.

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, 2018 and 2017.



(Dollars in thousands)	2018			2017
Change in benefit obligation
Projected benefit obligation at January 1	$	749,948		$	673,227
Service cost	13,582			12,638
Interest cost	28,376			28,940
Actuarial (gain) loss	(77,484		)	57,041
Benefits paid	(23,507		)	(21,898		)
Projected benefit obligation at December 31	690,915			749,948
Change in plan assets
Fair value of plan assets at January 1	712,999			600,616
Actual return on plan assets	(48,025		)	84,281
Employer contributions	50,000			50,000
Benefits paid	(23,507		)	(21,898		)
Fair value of plan assets at December 31	691,467			712,999
Funded status at December 31	$	552		$	(36,949	)

The amounts recognized in the consolidated balance sheets at December 31, 2018 and 2017 consist of:



(Dollars in thousands)	2018		2017
Other assets	$	552	$	—
Other liabilities	—		(36,949		)
Net asset (liability) recognized	$	552	$	(36,949	)

The following table details the amounts recognized in accumulated other comprehensive income at December 31, 2018 and 2017.



(Dollars in thousands)	2018		2017
Net loss	$	130,564	$	125,745
Prior service cost	57		137
Accumulated other comprehensive loss, excluding income taxes	$	130,621	$	125,882

The following table provides expected amortization amounts for 2019.



(Dollars in thousands)
Actuarial loss	$	8,455
Prior service cost	57
Total	$	8,512

The accumulated benefit obligation for the plan at December 31, 2018 and 2017, was $626.7 million and $659.0 million, respectively. The BancShares Plan uses a measurement date of December 31.

The fair value of plan assets exceeded the projected benefit obligation as of December 31, 2018 and the projected benefit obligation exceeded the fair value of plan assets as of December 31, 2017. The fair value of plan assets exceeded the accumulated benefit obligation as of December 31, 2018 and 2017.

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 OCI for the years ended December 31, 2018, 2017 and 2016.



	Year ended December 31
(Dollars in thousands)	2018			2017			2016
Service cost	$	13,582		$	12,638		$	12,618
Interest cost	28,376			28,940			28,892
Expected return on assets	(47,867		)	(42,074		)	(36,643		)
Amortization of prior service cost	79			210			210
Amortization of net actuarial loss	13,589			8,855			6,859
Total net periodic benefit cost	7,759			8,569			11,936
Current year actuarial loss	18,407			14,834			56,268
Amortization of actuarial loss	(13,589		)	(8,855		)	(6,859		)
Amortization of prior service cost	(79		)	(210		)	(210		)
Total recognized in other comprehensive income	4,739			5,769			49,199
Total recognized in net periodic benefit cost and other comprehensive income	$	12,498		$	14,338		$	61,135

The assumptions used to determine the benefit obligations at December 31, 2018 and 2017 are as follows:



(Dollars in thousands)	2018		2017
Discount rate	4.38	%	3.76	%
Rate of compensation increase	5.60		4.00

The assumptions used to determine the net periodic benefit cost for the years ended December 31, 2018, 2017 and 2016, are as follows:



(Dollars in thousands)	2018		2017		2016
Discount rate	3.76	%	4.30	%	4.68	%
Rate of compensation increase	4.00		4.00		4.00
Expected long-term return on plan assets	7.50		7.50		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 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, 2018 and 2017.



(Dollars in thousands)	2018			2017
Change in benefit obligation
Projected benefit obligation at January 1	$	169,480		$	156,831
Service cost	2,572			2,548
Interest cost	6,357			6,653
Actuarial (gain) loss	(10,268		)	9,168
Benefits paid	(6,081		)	(5,720		)
Projected benefit obligation at December 31	162,060			169,480
Change in plan assets
Fair value of plan assets at January 1	168,591			152,084
Actual return on plan assets	(11,443		)	22,227
Benefits paid	(6,081		)	(5,720		)
Fair value of plan assets at December 31	151,067			168,591
Funded status at December 31	$	(10,993	)	$	(889	)

The amounts recognized in the Consolidated Balance Sheets at December 31, 2018 and 2017 consist of:



(Dollars in thousands)	2018			2017
Other assets	$	—		$	—
Other liabilities	(10,993		)	(889		)
Net liability recognized	$	(10,993	)	$	(889	)

The following table details the amounts recognized in accumulated other comprehensive loss at December 31, 2018 and 2017.



(Dollars in thousands)	2018		2017
Net loss	$	32,409	$	19,117
Prior service cost	—		—
Accumulated other comprehensive loss, excluding income taxes	$	32,409	$	19,117

The following table provides expected amortization amounts for 2019.



(Dollars in thousands)
Actuarial loss	$	2,505
Prior service cost	—
Total	$	2,505

The accumulated benefit obligation for the plan at December 31, 2018 and 2017, was $152.3 million and $157.6 million, respectively. The Bancorporation Plan uses a measurement date of December 31.

The projected benefit obligation exceeded the fair value of plan assets as of December 31, 2018 and 2017. The accumulated benefit obligation exceeded the fair value of plan assets as of December 31, 2018 and the fair value of plan assets exceeded the accumulated benefit obligation as of December 31, 2017.



	Year ended December 31
(Dollars in thousands)	2018			2017			2016
Service cost	$	2,572		$	2,548		$	2,567
Interest cost	6,357			6,653			6,775
Expected return on assets	(12,429		)	(11,170		)	(11,101		)
Amortization of net actuarial loss	313			655			—
Total net periodic benefit income	(3,187		)	(1,314		)	(1,759		)
Current year actuarial gain (loss)	13,605			(1,889		)	14,157
Amortization of actuarial loss	(313		)	(655		)	—
Total recognized in other comprehensive income	13,292			(2,544		)	14,157
Total recognized in net periodic benefit cost and other comprehensive income	$	10,105		$	(3,858	)	$	12,398

The assumptions used to determine the benefit obligations at December 31, 2018 and 2017 are as follows:



(Dollars in thousands)	2018		2017
Discount rate	4.38	%	3.76	%
Rate of compensation increase	5.60		4.00

The assumptions used to determine the net periodic benefit cost for the years ended December 31, 2018, 2017 and 2016 are as follows:



(Dollars in thousands)	2018		2017		2016
Discount rate	3.76	%	4.30	%	4.68	%
Rate of compensation increase	4.00		4.00		4.00
Expected long-term return on plan assets	7.50		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

For the BancShares Plan and 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 Plans 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 The FCB Trust Department.

BancShares Plan

The fair values of pension plan assets at December 31, 2018 and 2017, by asset class are as follows:



	December 31, 2018
(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	$	16,236	$	16,236	—		—		0 - 5%	2	%
Equity securities									30 - 70%	64	%
Common and preferred stock	117,300		117,300		—		—
Mutual funds	321,023		319,254		1,769		—
Fixed income									15 - 45%	30	%
U.S. government and government agency securities	65,545		—		65,545		—
Corporate bonds	119,469		—		119,469		—
Mutual funds	23,813		23,813		—		—
Alternative investments									0 - 30%	4	%
Mutual funds	28,081		28,081		—		—
Total pension assets	$	691,467	$	504,684	$	186,783	$	—		100	%

	December 31, 2017
	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	$	67,084	$	67,084	$	—	$	—	0 - 5%	9	%
Equity securities									30 - 70%	65	%
Common and preferred stock	76,920		76,920		—		—
Mutual funds	381,747		360,175		21,572		—
Fixed income									15 - 45%	23	%
U.S. government and government agency securities	60,663		—		60,663		—
Corporate bonds	83,571		—		83,571		—
Mutual funds	20,497		20,497		—		—
Alternative investments									0 - 30%	3	%
Mutual funds	22,517		22,517		—		—
Total pension assets	$	712,999	$	547,193	$	165,806	$	—		100	%

Cash and equivalents comprise approximately 9 percent of BancShares actual plan assets at December 31, 2017, exceeding the target allocation range due to the $50.0 million contribution to the plan in December 2017.

Bancorporation Plan



	December 31, 2018
(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	$	2,793	$	2,793	$	—	$	—	0 - 5%	2	%
Equity securities									30 - 70%	66	%
Common and preferred stock	26,639		26,639		—		—
Mutual funds	74,305		73,850		455		—
Fixed income									15 - 45%	27	%
U.S. government and government agency securities	13,749		—		13,749		—
Corporate bonds	20,889		—		20,889		—
Mutual funds	5,748		5,748		—		—
Alternative investments									0 - 30%	5	%
Mutual funds	6,944		6,944		—		—
Total pension assets	$	151,067	$	115,974	$	35,093	—			100	%

	December 31, 2017
	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	$	3,941	$	3,941	$	—	$	—	0 - 5%	2	%
Equity securities									30 - 70%	70	%
Common and preferred stock	26,892		26,892		—		—
Mutual funds	90,466		84,954		5,512		—
Fixed income									15 - 45%	25	%
U.S. government and government agency securities	15,798		—		15,798		—
Corporate bonds	20,572		—		20,572		—
Mutual funds	5,163		5,163		—		—
Alternative investments									0 - 30%	3	%
Mutual funds	5,759		5,759		—		—
Total pension assets	$	168,591	$	126,709	$	41,882	—			100	%

Cash Flows

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



(Dollars in thousands)	BancShares Plan		Bancorporation Plan
2019	$	27,050	$	7,044
2020	29,137		7,473
2021	31,260		7,863
2022	33,168		8,284
2023	35,031		8,685
2024-2028	201,126		48,868

401(k) Savings Plans

Effective January 1, 2015, FCB merged the legacy Bancorporation 401(k) savings plan and Bancorporation enhanced 401(k) savings plan into the existing BancShares 401(k) savings plan and BancShares enhanced 401(k) savings plan. Participation in and terms of the FCB 401(k) plan and enhanced 401(k) plan did not change as a result of the mergers.

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, FCB makes a matching contribution equal to 100 percent of the first 3 percent and 50 percent of the next 3 percent of the participant's deferral up to and including a maximum contribution of 4.5 percent of the participant's eligible compensation. The matching contribution immediately vests.

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, FCB matches up to 100 percent of the participant's deferrals not to exceed 6 percent of the participant's eligible compensation. The matching contribution immediately vests. 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.

FCB made participating contributions to the 401(k) plans of $28.6 million, $25.3 million and $23.5 million during 2018, 2017 and 2016, respectively.

Additional Benefits for Executives, 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 ten years following separation from service that occurs no earlier than an agreed-upon age. These agreements also provide a death benefit in the event a participant dies prior to separation from service or during the payment period following separation from service. 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, 2018 and 2017, and the changes in the accrued liability during the years then ended:



(Dollars in thousands)	2018			2017
Present value of accrued liability as of January 1	$	37,299		$	38,597
Liability assumed in the Capital Commerce merger	808			—
Benefit expense and interest cost	535			3,262
Benefits paid	(4,579		)	(4,560		)
Present value of accrued liability as of December 31	$	34,063		$	37,299
Discount rate at December 31	4.38		%	3.76		%

Other Compensation Plans

FCB offers various short-term and long-term incentive plans for certain employees. Compensation awarded under these plans may be based on defined formulas or other performance criteria, or it may be at the discretion of management. The incentive compensation programs were designed to motivate employees through a balanced approach of risk and reward for their contributions toward FCB's success. As of December 31, 2018 and 2017, the accrued liability for incentive compensation was $46.4 million and $33.4 million, respectively.