Note 25 - Retirement Plans

401(k) Plan

The Company sponsors a 401(k) Plan whereby substantially all employees age 21 and over with 90 days of service may participate. Participants may contribute a portion of their compensation subject to certain limits based on federal tax laws. The Company does not contribute to the 401(k) Plan. The Company did not incur any material expenses attributable to the 401(k) Plan during 2013, 2012, and 2011.

Employee Stock Ownership Plan

Substantially all employees with at least one year of service are covered by a discretionary employee stock ownership plan (ESOP). Contributions are made to the plan at the discretion of the Board of Directors. Contributions to the plan totaling $1,648,000 in 2013, $1,229,000 in 2012, and $1,084,000 in 2011, are included in salary expense. Company shares owned by the ESOP are paid dividends and included in the calculation of earnings per share exactly as other common shares outstanding.

Deferred Compensation Plans

The Company has deferred compensation plans for certain directors and key executives, which allow certain directors and key executives designated by the Board of Directors of the Company to defer a portion of their compensation. The Company has purchased insurance on the lives of the participants and intends to hold these policies until death as a cost recovery of the Company’s deferred compensation obligations of $7,357,000 and $7,738,000 at December 31, 2013 and 2012, respectively. Earnings credits on deferred balances totaling $568,000 in 2013, $599,000 in 2012, and $649,000 in 2011, are included in noninterest expense.

Supplemental Retirement Plans

The Company has supplemental retirement plans for certain directors and key executives. These plans are non-qualified defined benefit plans and are unsecured and unfunded. The Company has purchased insurance on the lives of the participants and intends to hold these policies until death as a cost recovery of the Company’s retirement obligations. The cash values of the insurance policies purchased to fund the deferred compensation obligations and the supplemental retirement obligations were $52,309,000 and $50,582,000 at December 31, 2013 and 2012, respectively.

The Company recorded in other liabilities the unfunded status of the supplemental retirement plans of $787,000 and $3,806,000 related to the supplemental retirement plans as of December 31, 2013 and 2012, respectively. These amounts represent the amount by which the projected benefit obligations for these retirement plans exceeded the fair value of plan assets plus amounts previously accrued related to the plans. The projected benefit obligation is recorded in other liabilities.

At December 31, 2013 and 2012, the unfunded status of the supplemental retirement plans of $787,000 and $3,806,000 were offset by a reduction of shareholders’ equity accumulated other comprehensive loss of $456,000 and $2,206,000, respectively, representing the after-tax impact of the unfunded status of the supplemental retirement plans, and the related deferred tax asset of $331,000 and $1,600,000, respectively. Amounts recognized as a component of accumulated other comprehensive loss as of year-end that have not been recognized as a component of the combined net period benefit cost of the Company’s defined benefit pension plans are presented in the following table. The Company expects to recognize approximately $32,000 of the net actuarial loss reported in the following table as of December 31, 2013 as a component of net periodic benefit cost during 2014.


	December 31,
(in thousands)	2013			2012
Transition obligation	$	11		$	13
Prior service cost		(35	)		118
Net actuarial loss		811			3,675

Amount included in accumulated other comprehensive loss		787			3,806
Deferred tax benefit		(331	)		(1,600	)

Amount included in accumulated other comprehensive loss, net of tax	$	456		$	2,206

Information pertaining to the activity in the supplemental retirement plans, using a measurement date of December 31, is as follows:


	December 31,
	2013			2012
	(in thousands)
Change in benefit obligation:
Benefit obligation at beginning of year	$	(16,345	)	$	(15,002	)
Service cost		(742	)		(680	)
Interest cost		(643	)		(687	)
Actuarial (loss)/gain		2,573			(447	)
Benefits paid		523			471

Benefit obligation at end of year	$	(14,634	)	$	(16,345	)

Change in plan assets:
Fair value of plan assets at beginning of year	$	—		$	—

Fair value of plan assets at end of year	$	—		$	—

Funded status	$	(14,634	)	$	(16,345	)
Unrecognized net obligation existing at January 1, 1986		11			13
Unrecognized net actuarial loss		811			3,675
Unrecognized prior service cost		(35	)		118
Accumulated other comprehensive income		(787	)		(3,806	)

Accrued benefit cost	$	(14,634	)	$	(16,345	)

Accumulated benefit obligation	$	(12,954	)	$	(14,285	)

The following table sets forth the net periodic benefit cost recognized for the supplemental retirement plans:


	Years Ended December 31,
	2013		2012		2011
	(in thousands)
Net pension cost included the following components:
Service cost-benefits earned during the period	$	743	$	680	$	657
Interest cost on projected benefit obligation		643		687		840
Amortization of net obligation at transition		2		2		2
Amortization of prior service cost		153		153		153
Recognized net actuarial loss		291		288		386

Net periodic pension cost	$	1,832	$	1,810	$	2,038

The following table sets forth assumptions used in accounting for the plans:


	Years Ended December 31,
	2013			2012			2011
Discount rate used to calculate benefit obligation		4.85	%		4.00	%		4.65	%
Discount rate used to calculate net periodic pension cost		4.85	%		4.00	%		4.65	%
Average annual increase in executive compensation		2.50	%		2.50	%		4.00	%
Average annual increase in director compensation		2.50	%		2.50	%		2.50	%

The following table sets forth the expected benefit payments to participants and estimated contributions to be made by the Company under the supplemental retirement plans for the years indicated:


Years Ended	Expected Benefit Payments to Participants		Estimated Company Contributions
	(in thousands)
2014	$	569	$	569
2015		569		569
2016		583		583
2017		571		571
2018		584		584
2019-2023	$	6,196	$	6,196