EMPLOYEE BENEFITS

401(k) Plan. The Company’s 401(k) plan is a self-administered savings and incentive plan covering substantially all employees. Employer match contributions are determined annually under the plan by the Company’s Board of Directors. Employee contributions were limited to $17,500 of gross compensation for 2013. Employer contributions under the plan were $2.3 million for the years ended December 31, 2013, 2012 and 2011. The plan assets are held and managed under a trust agreement with First Bank’s trust department.

Nonqualified Deferred Compensation Plan. The Company’s nonqualified deferred compensation plan (the NQDC Plan), which covers a select group of employees, is administered by an independent third party. The NQDC Plan is exempt from the participation, vesting, funding and fiduciary requirements of the Employee Retirement Income Security Act of 1974. Although the NQDC Plan allows the Company to credit the accounts of any participant with discretionary contributions, no such discretionary contributions have been made since the NQDC Plan’s inception. Participants may contribute from 1% to 25% of their salary and up to 100% of their bonuses on a pre-tax basis. The Company elected to suspend the availability of deferrals under the NQDC Plan for the year ended December 31, 2011 but reinstated the availability of such deferrals beginning in January, 2012.

Balances outstanding under the NQDC Plan, which are reflected in accrued and other liabilities in the consolidated balance sheets, were $6.6 million and $6.4 million at December 31, 2013 and 2012, respectively. The Company recognized salaries and employee benefits expense related to the NQDC Plan of $962,000 and $614,000 for the years ended December 31, 2013 and 2012, respectively, resulting from net earnings incurred by participants on the underlying investments in the plan. The Company recognized a decrease in salaries and employee benefits expense related to the NQDC Plan of $64,000 for the year ended December 31, 2011 resulting from net losses incurred by participants on the underlying investments in the plan.

Noncontributory Defined Benefit Pension Plan. The Company has a noncontributory defined benefit pension plan covering certain former employees of a bank holding company acquired by the Company in 1994 and subsequently merged with and into the Company on December 31, 2002. The Company discontinued the accumulation of benefits under the Plan in 1994, and as such, there is no longer any service cost being accrued by Plan participants.

A summary of the Plan’s change in the projected benefit obligation and change in the fair value of Plan assets for the years ended December 31, 2013 and 2012 and amounts recognized in the Company’s consolidated balance sheets as of December 31, 2013 and 2012 is as follows:



	2013			2012
	(dollars expressed in thousands)
Change in Projected Benefit Obligation:
Projected benefit obligation at beginning of year	$	13,987		12,467
Interest cost	449			516
Actuarial loss	(1,100		)	1,765
Benefit payments	(843		)	(761	)
Projected benefit obligation at end of year	$	12,493		13,987
Change in Fair Value of Plan Assets:
Fair value at beginning of year	$	9,419		8,848
Actual return on plan assets	1,014			666
Employer contributions	256			666
Benefit payments	(843		)	(761	)
Fair value at end of year	$	9,846		9,419
Amount Recognized in Consolidated Balance Sheets:
Accrued pension liability	$	2,647		4,568
Amounts Recognized in Accumulated Other Comprehensive Income:
Loss	$	(4,162	)	(5,940	)
Deferred tax liability	1,513			2,396
Loss, net of tax	$	(2,649	)	(3,544	)

The Company’s accrued pension liability of $2.6 million and $4.6 million at December 31, 2013 and 2012, respectively, represents the difference between the fair value of the Plan assets and the projected benefit obligation of the Plan, and is reflected in accrued expenses and other liabilities in the consolidated balance sheets.

The following table reflects the weighted average assumptions used to determine the net periodic benefit cost for the years ended December 31, 2013 and 2012:



	2013		2012
Discount rate	3.31	%	4.28	%
Expected long-term rate of return on Plan assets	6.00		7.00

The discount rate used to determine benefit obligations was 4.24% and 3.31% for the years ended December 31, 2013 and 2012, respectively.

A summary of the components of net periodic benefit cost for the years ended December 31, 2013 and 2012 is as follows:



	2013			2012
	(dollars expressed in thousands)
Interest cost	$	449		516
Expected return on Plan assets	(551		)	(617	)
Amortization of net actuarial loss	216			145
Net periodic benefit cost	$	114		44

Amounts recognized in accumulated other comprehensive income consist of:



	2013			2012
	(dollars expressed in thousands)
Net (gain) loss	$	(1,562	)	1,715
Amortization of net actuarial loss	(216		)	(145	)
Total recognized in accumulated other comprehensive income	$	(1,778	)	1,570

The Plan’s investment strategy is focused on maximizing asset returns. The target allocations for Plan assets are 52% fixed income, 40% equity securities and 8% cash. Asset allocations can fluctuate between acceptable ranges commensurate with market volatility. Debt securities include U.S. Treasuries, investment-grade corporate bonds of companies from diversified industries and mortgage-backed securities. Equity securities primarily include investments in large capitalization companies located in the United States.

The fair value of Plan assets at December 31, 2013 and 2012 was comprised of the following:



	Fair Value Measurements
	Level 1		Level 2	Level 3	Fair Value
	(dollars expressed in thousands)
Plan Assets - December 31, 2013:
Cash and cash equivalents	$	240	—	—	240
Equity securities	—		4,451	—	4,451
Debt securities	—		4,688	—	4,688
Other	—		467	—	467
Total	$	240	9,606	—	9,846
Plan Assets - December 31, 2012:
Cash and cash equivalents	$	361	—	—	361
Equity securities	—		3,959	—	3,959
Debt securities	—		4,603	—	4,603
Other	—		496	—	496
Total	$	361	9,058	—	9,419

Equity and debt securities included in Level 1 are valued using quoted market prices. Where quoted market prices are unavailable, the fair value of equity and debt securities included in Level 2 is based on quoted market prices of comparable instruments obtained from independent pricing vendors based on recent trading activity and other relevant information.

The Company expects to contribute $600,000 to the Plan in 2014. Pension benefit payments are expected to be paid to Plan participants by the Plan as follows:



	(dollars expressed in thousands)
Year ending December 31:
2014	$	843
2015	859
2016	860
2017	856
2018	865
2019 – 2023	4,335