Note 12. Retirement Benefit Plans

Pension Plans - Defined Benefit

Effective January 1, 2013, the Company adopted one qualified defined benefit pension plan covering all eligible associates. Eligibility is based on minimum age and service-related requirements. The consolidated plan replaced the separate qualified plans covering legacy Hancock associates (Hancock Plan) and legacy Whitney associates (Whitney Plan). The new qualified plan terms are substantially the same for legacy Hancock associates as those in effect at December 31, 2012 under the Hancock Plan. Retirement benefits for eligible legacy Whitney associates under the new plan will be based on the employee’s accrued benefit under the Whitney Plan as of December 31, 2012 plus any benefit accrued under the new plan based on years of service and compensation beginning in 2013. The Whitney Plan had been closed to new participants since 2008, and benefit accruals had been frozen for all participants other than those meeting certain vesting, age and years of service criteria as of December 31, 2008.

Certain legacy Whitney associates were also covered by an unfunded nonqualified defined benefit pension plan that provides retirement benefits to designated executive officers. Accrued benefits under the nonqualified plan covering certain legacy Whitney associates were frozen as of December 31, 2012 and no future benefits will be accrued under this plan. These benefits are calculated using the qualified plan’s formula, but without applying the restrictions imposed on qualified plans by certain provisions of the Internal Revenue Code. Benefits that become payable under the nonqualified plan supplement amounts paid from the qualified plan. The Whitney plan has been closed to new participants since 2008, and benefit accruals have been frozen for all participants other than those who met certain vesting, age and years of service criteria as of December 31, 2008.

The Company makes contributions to the qualified pension plans in amounts sufficient to meet funding requirements set forth in federal employee benefit and tax laws, plus such additional amounts as the Company may determine to be appropriate. Based on currently available information, Hancock does not anticipate making a contribution to the pension plan during 2014.

The following tables detail the changes in the benefit obligations and plan assets of the combined qualified plans and for the nonqualified plan for the years ended December 31, 2013 and 2012 as well as the funded status of the plans at each year end and the amounts recognized in the Company’s balance sheets (in thousands). The Company uses a December 31 measurement date for all defined benefit pension plans and other postretirement benefit plans.


	Years Ended December 31,
	2013						2012
	Qualified			Non- qualified			Qualified			Non- qualified
Change in benefit obligation
Benefit obligation at beginning of year	$	420,239		$	16,865		$	399,508		$	15,934
Service cost		16,118			—			12,940			49
Interest cost		16,057			621			16,518			688
Actuarial loss		(40,551	)		(1,040	)		4,131			1,401
Benefits paid		(14,578	)		(1,123	)		(12,858	)		(1,207	)

Benefit obligation, end of year		397,285			15,323			420,239			16,865

Change in plan assets
Fair value of plan assets at beginning of year		379,133			—			328,060			—
Actual return on plan assets		63,695			—			38,464			—
Employer contributions		10,000			1,123			26,000			1,207
Benefit payments		(14,578	)		(1,123	)		(12,858	)		(1,207	)
Expenses		(421	)		—			(533	)		—

Fair value of plan assets, end of year		437,829			—			379,133			—

Funded status at end of year - net asset/(liability)	$	40,544		$	(15,323	)	$	(41,106	)	$	(16,865	)

Amounts recognized in accumulated other comprehensive loss
Unrecognized loss at beginning of year:	$	108,852		$	2,942		$	123,780		$	1,597
Amount of (loss)/gain recognized during the year		(6,516	)		(54	)		(6,526	)		(56	)
Net actuarial (gain)/loss		(75,898	)		(1,041	)		(8,402	)		1,401

Unrecognized loss at end of year	$	26,438		$	1,847		$	108,852		$	2,942


	December 31
	2013		2012
Projected benefit obligation	$	412,608	$	437,104
Accumulated benefit obligation		379,607		395,543
Fair value of plan assets		437,829		379,133

The following table shows net periodic benefit cost included in expense and the changes in the amounts recognized in accumulated other comprehensive income during 2013 and 2012 (in thousands). Recognition of the net actuarial loss included in accumulated other comprehensive income is not required when the loss is less than ten percent of the projected benefit obligation or fair value of plan assets. Accordingly, Hancock will not recognize a material amount of the losses at December 31, 2013 as a component of net pension expense in 2014.


	Years Ended December 31,
	2013						2012						2011
	Qualified			Non- qualified			Qualified			Non- qualified			Qualified			Non- qualified
Net periodic benefit cost
Service cost	$	16,118		$	—		$	12,940		$	49		$	8,440		$	27
Interest cost		16,057			621			16,518			688			12,117			438
Expected return on plan assets		(27,928	)		—			(25,398	)		—			(15,118	)		—
Recognized net amortization and deferral		6,516			54			6,526			56			2,343			—

Net periodic benefit cost		10,763			675			10,586			793			7,782			465

Other changes in plan assets and benefit obligations recognized in other comprehensive income, before taxes
Net (loss)/gain recognized during the year		(6,516	)		(54	)		(6,526	)		(56	)		(2,343	)		—
Net actuarial loss/(gain)		(75,898	)		(1,041	)		(8,402	)		1,401			87,313			1,597

Total recognized in other comprehensive income		(82,414	)		(1,095	)		(14,928	)		1,345			84,970			1,597

Total recognized in net periodic benefit cost and other comprehensive income	$	(71,651	)	$	(420	)	$	(4,342	)	$	2,138		$	92,752		$	2,062

Weighted average assumptions as of measurement date
Discount rate for benefit obligations:		4.73	%		4.73	%		3.82	%		3.87	%		4.32	%		4.31	%
Discount rate for net periodic benefit cost:		3.87	%		3.87	%		4.32	%		4.31	%		5.39	%		5.35	%
Expected long-term return on plan assets:		7.50	%		n/a			7.50	%		n/a			7.50	%		n/a
Rate of compensation increase:		4.00	%		4.00	%		3.73	%		3.58	%		3.72	%		3.58	%

The long term rate of return on plan assets is determined by using the weighted-average of historical real returns for major asset classes based on target asset allocations. At December 31, 2013 and 2012, the discount rate was calculated by matching expected future cash flows to the Citigroup Pension Discount Curve Liability Index.

The following shows expected pension plan benefit payments over the next ten years (in thousands):


	Qualified		Nonqualified		Total
2014	$	16,065	$	1,117	$	17,182
2015		16,868		1,117		17,985
2016		17,656		1,128		18,784
2017		18,371		1,149		19,520
2018		19,076		1,144		20,220
2019-2023		105,048		5,586		110,634

	$	193,084	$	11,241	$	204,325

The expected benefit payments are estimated based on the same assumptions used to measure the Company’s benefit obligations at December 31, 2013.

The fair values of pension plan assets at December 31, 2013 and 2012, by asset category, are shown in the following tables (in thousands).


Asset Category / Fund	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Fair Value Measurements at December 31, 2013
Cash and cash-equivalents:
Cash and equivalents	$	5,683	$	5,682	$	—	$	—
Hancock Horizon Government Money Market Fund		9,531		9,531		—		—

Total cash and cash-equivalents		15,214		15,213		—		—

Fixed income:
US government and agency securities		21,485		4,383		17,102		—
Municipal securities		40,476		—		40,476		—
Hancock Horizon Strategic Income Bond Fund		59,674		59,674		—		—
Corporate debt		43,440		6,923		36,517		—

Total fixed income		165,075		70,980		94,095		—

Equity:
Hancock Horizon Quantitative Long/Short Fund		6,593		6,593		—		—
Hancock Horizon Diversified International Fund		26,072		26,072		—		—
Hancock Horizon Burkenroad Small Cap Fund		4,108		4,108		—		—
Hancock Horizon Growth Fund		27,847		27,847		—		—
Hancock Horizon Diversified Value Fund		34,216		34,216		—		—
Hancock Horizon Diversified Income Fund		8,758		8,758		—		—
Equity securities		149,946		149,946		—		—

Total Equity		257,540		257,540		—		—

TOTAL	$	437,829	$	343,733	$	94,095	$	—


Asset Category	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Fair Value Measurements at December 31, 2012
Cash and cash-equivalents:
Cash and equivalents	$	4,850	$	4,850	$	—	$	—
Hancock Horizon Government Money Market Fund		1,596		1,596		—		—

Total cash and cash-equivalents		6,446		6,446		—		—

Fixed income:
US government and agency securities		54,246		10,405		43,841		—
Municipal securities		—		—		—		—
Hancock Horizon Strategic Income Bond Fund		49,192		49,192		—		—
Corporate debt		39,273		—		39,273		—

Total fixed income		142,711		59,597		83,114		—

Equity:
Hancock Horizon Quantitative Long/Short Fund		7,481		7,481		—		—
Hancock Horizon Diversified International Fund		32,984		32,984		—		—
Hancock Horizon Burkenroad Small Cap Fund		3,863		3,863		—		—
Hancock Horizon Growth Fund		27,332		27,332		—		—
Hancock Horizon Diversified Value Fund		28,543		28,543		—		—
Hancock Horizon Diversified Income Fund		—		—		—		—
Equity securities		129,773		129,773		—		—

Total Equity		229,976		229,976		—		—

TOTAL	$	379,133	$	296,019	$	83,114	$	—

The percentage allocations of the plan assets by asset category and corresponding target allocations at December 31, 2013 and 2012 follow:


	Plan Assets at December 31,						Target Allocation at December 31,
	2013			2012			2013			2012
Asset category
Equity securities		59	%		61	%		30 – 70	%		40 – 70	%
Fixed income securities		38	%		37	%		25 – 65	%		30 – 60	%
Real Assets		0	%		0	%		0 – 10	%		—
Cash equivalents		3	%		2	%		0 – 5	%		0 – 10	%

		100	%		100	%

Plan assets are invested in long-term strategies and evaluated within the context of a long-term investment horizon. Plan assets will be diversified across multiple asset classes so as to minimize the risk of large losses. Short-term fluctuations in value will be considered secondary to long-term results. The Company employs a total return approach whereby a diversified mix of asset class investments are used to maximize the long-term return of plan assets for an acceptable level of risk. Risk tolerance is established through careful consideration of the plan liabilities, plan funded status and the Company’s financial condition. The investment performance of the plan is regularly monitored to ensure that appropriate risk levels are being taken and to evaluate returns versus a suitable market benchmark. The pension plan investment committee meets periodically to review the policy, strategy, and performance of the plans.

Pension Plans - Defined Contribution

Effective January 1, 2013, the Company also combined the Hancock and Whitney defined contribution retirement benefit plans (401(k) plans). The combined plan covers substantially all associates who have been employed 60 days and meet certain other requirements and employment classification criteria. Under the combined plan, the Company matches 100% of the first 1% of compensation saved by a participant, and 50% of the next 5% of compensation saved. Under the prior Hancock 401(k) plan, the Company matched 50% of a participant’s savings up to 6% of compensation, while under the prior Whitney 401(k) plan, the Company matched 100% of a participant’s savings up to 4% of compensation. The Company could also make a discretionary profit sharing contribution under the Whitney plan on behalf of participants who were either ineligible to participate in the Whitney qualified defined-benefit pension plan or subject to the freeze in benefit accruals under that plan. With the adoption of the new qualified pension plan discussed above and the combined 401(k) plan, the discretionary profit-sharing contribution is no longer available for plan years beginning in 2013. Newly eligible associates are automatically enrolled at an initial 3% savings rate unless the associate actively opts out of participation in the plan.

The expense of the Company’s matching contributions to the 401(k) plan was $7.0 million in 2013 and $6.1 million in 2012. The discretionary profit-sharing contribution under the legacy Whitney plan was $2.9 million for 2012.

Health and Welfare Plans - Defined Benefit

The Company also sponsors defined benefit postretirement plans for both legacy Hancock and legacy Whitney associates. The Hancock plans provide health care and life insurance benefits to retiring associates who participate in medical and/or group life insurance benefit plans for active associates at the time of retirement and have reached 55 years of age with ten years of service or age 65 with five years of service. The postretirement health care plan is contributory, with retiree contributions adjusted annually and subject to certain employer contribution maximums. Neither Hancock plan is available to associates hired on or after January 1, 2000.

The legacy Whitney plans offer health care and life insurance benefit plans for retirees and their eligible dependents. Participant contributions are required under the health plan. Currently, these plans restrict eligibility for postretirement health benefits to retirees already receiving benefits as of the plan amendments in 2007 and to those active participants who were eligible to receive benefits as of December 31, 2007. Life insurance benefits are currently only available to associates who retired before December 31, 2007.

The following table details the changes in the benefit obligation of the postretirement plans for the years ended December 31, 2013 and 2012, as well as the funded status of the plans at each year end and the amounts recognized in the Company’s consolidated balance sheets (in thousands).


	Years Ended December 31,
	2013			2012
Change in postretirement benefit obligation
Projected postretirement benefit at beginning of year	$	37,831		$	34,107
Service cost		215			192
Interest cost		1,317			1,337
Plan participants’ contributions		1,355			1,419
Actuarial loss (gain)		(5,563	)		4,435
Benefit payments		(3,563	)		(3,659	)

Projected postretirement benefit obligation, end of year		31,592			37,831

Change in plan assets
Plan assets, beginning of year		—			—
Employer contributions		2,208			2,240
Plan participants’ contributions		1,355			1,419
Benefit payments		(3,563	)		(3,659	)

Plan assets, end of year		—			—

Funded status at end of year - net liability	$	(31,592	)	$	(37,831	)

Amounts recognized in accumulated other comprehensive loss
Unrecognized loss at beginning of year	$	14,513		$	10,996
Amount of (loss)/gain recognized during the year		(1,761	)		(918	)
Net actuarial loss/(gain)		(5,563	)		4,435

Unrecognized loss at end of year	$	7,189		$	14,513

The weighted average discount rates used for the determination of the projected postretirement benefit obligation were 4.58% in 2013 and 3.69% in 2012.

The following table shows the composition of net periodic postretirement benefit cost (in thousands):


	Years Ended December 31,
	2013			2012			2011
Net periodic postretirement benefit cost
Service cost	$	215		$	192		$	137
Interest costs		1,317			1,337			1,091
Amortization of net loss		1,761			966			538
Amortization of prior service cost		—			(48	)		(48	)

Net periodic postretirement benefit cost		3,293			2,447			1,718

Other changes in plan assets and benefit obligations recognized in other comprehensive income, before taxes
Amount of loss recognized during the year		(1,761	)		(966	)		(538	)
Net actuarial (gain)/loss		(5,563	)		4,435			5,938
Amortization of prior service cost		—			48			48

Total recognized in other comprehensive income		(7,324	)		3,517			5,448

Total recognized in net periodic benefit cost and other comprehensive income	$	(4,031	)	$	5,964		$	7,166

The Company assumed certain trends in health care costs in the determination of the benefit obligations. At December 31, 2013, the plans assumed a 7.0% increase in the pre- and post-Medicare age health costs for 2014, declining over a period of four years to a 5.0% annual rate. At December 31, 2013, the mortality projection scale was changed from Scale AA to Scale BB. Otherwise, the plan assumptions were substantially the same as in 2012.

The following table illustrates the effect on the annual periodic postretirement benefit costs and postretirement benefit obligation of a 1% increase or 1% decrease in the assumed health care cost trend rates from the rates assumed at December 31, 2013:


	1% Decrease in Rates		Assumed Rates		1% Increase in Rates
Aggregated service and interest cost	$	1,325	$	1,531	$	1,785
Postretirement benefit obligation		28,112		31,592		35,791

Expected benefits to be paid over the next ten years are reflected in the following table (in thousands):


2014	$	2,091
2015		1,973
2016		1,918
2017		1,785
2018		1,720
2019-2023		8,680

	$	18,167