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 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 2017 and 2016. 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 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 2017 and 2016. 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.

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, 2017 and 2016.



(Dollars in thousands)	2017			2016
Change in benefit obligation
Projected benefit obligation at January 1	$	673,227		$	611,502
Service cost	12,638			12,618
Interest cost	28,940			28,892
Actuarial loss	57,041			40,571
Benefits paid	(21,898		)	(20,356		)
Projected benefit obligation at December 31	749,948			673,227
Change in plan assets
Fair value of plan assets at January 1	600,616			550,025
Actual return on plan assets	84,281			20,947
Employer contributions	50,000			50,000
Benefits paid	(21,898		)	(20,356		)
Fair value of plan assets at December 31	712,999			600,616
Funded status at December 31	$	(36,949	)	$	(72,611	)

The amounts recognized in the consolidated balance sheets at December 31, 2017 and 2016 consist of:



(Dollars in thousands)	2017			2016
Other assets	$	—		$	—
Other liabilities	(36,949		)	(72,611		)
Net liability recognized	$	(36,949	)	$	(72,611	)

The following table details the amounts recognized in accumulated other comprehensive income at December 31, 2017 and 2016.



(Dollars in thousands)	2017		2016
Net loss	$	125,745	$	119,766
Less prior service cost	137		347
Accumulated other comprehensive loss, excluding income taxes	$	125,882	$	120,113

The following table provides expected amortization amounts for 2018.



(Dollars in thousands)
Actuarial loss	$	12,998
Prior service cost	79
Total	$	13,077

The accumulated benefit obligation for the plan at December 31, 2017 and 2016 was $659.0 million and $587.3 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, 2017 and 2016. The fair value of plan assets exceeded the accumulated benefit obligation as of December 31, 2017 and 2016.

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, 2017, 2016 and 2015.



	Year ended December 31
(Dollars in thousands)	2017			2016			2015
Service cost	$	12,638		$	12,618		$	14,083
Interest cost	28,940			28,892			26,975
Expected return on assets	(42,074		)	(36,643		)	(33,198		)
Amortization of prior service cost	210			210			210
Amortization of net actuarial loss	8,855			6,859			11,376
Total net periodic benefit cost	8,569			11,936			19,446
Current year actuarial loss	14,834			56,268			927
Amortization of actuarial loss	(8,855		)	(6,859		)	(11,376		)
Amortization of prior service cost	(210		)	(210		)	(210		)
Total recognized in other comprehensive income	5,769			49,199			(10,659		)
Total recognized in net periodic benefit cost and other comprehensive income	$	14,338		$	61,135		$	8,787

The assumptions used to determine the benefit obligations at December 31, 2017 and 2016 are as follows:



(Dollars in thousands)	2017		2016
Discount rate	3.76	%	4.30	%
Rate of compensation increase	4.00		4.00

The assumptions used to determine the net periodic benefit cost for the years ended December 31, 2017, 2016 and 2015, are as follows:



(Dollars in thousands)	2017		2016		2015
Discount rate	4.30	%	4.68	%	4.27	%
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, 2017 and 2016.



(Dollars in thousands)	2017			2016
Change in benefit obligation
Projected benefit obligation at January 1	$	156,831		$	143,241
Service cost	2,548			2,567
Interest cost	6,653			6,775
Actuarial loss	9,168			9,682
Benefits paid	(5,720		)	(5,434		)
Projected benefit obligation at December 31	169,480			156,831
Change in plan assets
Fair value of plan assets at January 1	152,084			150,893
Actual return on plan assets	22,227			6,625
Benefits paid	(5,720		)	(5,434		)
Fair value of plan assets at December 31	168,591			152,084
Funded status at December 31	$	(889	)	$	(4,747	)

The amounts recognized in the consolidated balance sheets at December 31, 2017 and 2016 consist of:



(Dollars in thousands)	2017			2016
Other assets	$	—		$	—
Other liabilities	(889		)	(4,747		)
Net liability recognized	$	(889	)	$	(4,747	)

The following table details the amounts recognized in accumulated other comprehensive loss at December 31, 2017 and 2016.



(Dollars in thousands)	2017		2016
Net loss	$	19,117	$	21,661
Less prior service cost	—		—
Accumulated other comprehensive loss, excluding income taxes	$	19,117	$	21,661

The following table provides expected amortization amounts for 2018.



(Dollars in thousands)
Actuarial loss	$	329
Prior service cost	—
Total	$	329

The accumulated benefit obligation for the plan at December 31, 2017 and 2016 was $157.6 million and $143.7 million, respectively. The Bancorporation Plan uses a measurement date of December 31.



	Year ended December 31
(Dollars in thousands)	2017			2016			2015
Service cost	$	2,548		$	2,567		$	3,341
Interest cost	6,653			6,775			6,393
Expected return on assets	(11,170		)	(11,101		)	(11,482		)
Amortization of net actuarial loss	655			—			—
Total net periodic benefit cost	(1,314		)	(1,759		)	(1,748		)
Current year actuarial loss	(1,889		)	14,157			458
Amortization of actuarial loss	(655		)	—			—
Curtailments	—			—			(2,076		)
Total recognized in other comprehensive income	(2,544		)	14,157			(1,618		)
Total recognized in net periodic benefit cost and other comprehensive income	$	(3,858	)	$	12,398		$	(3,366	)

The assumptions used to determine the benefit obligations at December 31, 2017 and 2016 are as follows:



(Dollars in thousands)	2017		2016
Discount rate	3.76	%	4.30	%
Rate of compensation increase	4.00		4.00

The assumptions used to determine the net periodic benefit cost for the years ended December 31, 2017, 2016 and 2015 are as follows:



(Dollars in thousands)	2017		2016		2015
Discount rate	4.30	%	4.68	%	4.27	%
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 FCB Trust Department.

BancShares Plan

The fair values of pension plan assets at December 31, 2017 and 2016, by asset class are as follows:



	December 31, 2017
(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	$	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	%

	December 31, 2016
	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	$	60,674	$	60,674	$	—	$	—	0 - 1%	10	%
Equity securities									30 - 70%	54	%
Common and preferred stock	66,015		65,964		51		—
Mutual funds	256,976		252,710		4,266		—
Fixed income									15 - 45%	28	%
U.S. government and government agency securities	57,890		—		57,890		—
Corporate bonds	68,198		—		68,198		—
Mutual funds	42,849		42,849		—		—
Alternative investments									0 - 30%	8	%
Mutual funds	48,014		48,014		—		—
Total pension assets	$	600,616	$	470,211	$	130,405	$	—		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, 2017
(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	$	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	%

	December 31, 2016
	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	$	3,839	$	3,839	$	—	$	—	0 - 1%	2	%
Equity securities									30 - 70%	58	%
Common and preferred stock	18,274		18,260		14		—
Mutual funds	69,978		68,832		1,146		—
Fixed income									15 - 45%	31	%
U.S. government and government agency securities	15,407		—		15,407		—
Corporate bonds	19,496		—		19,496		—
Mutual funds	11,822		11,822		—		—
Alternative investments									0 - 30%	9	%
Mutual funds	13,268		13,268		—		—
Total pension assets	$	152,084	$	116,021	$	36,063	—			100	%

Cash Flows

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



(Dollars in thousands)	BancShares Plan		Bancorporation Plan
2018	$	26,051	$	6,797
2019	27,514		7,099
2020	29,061		7,451
2021	30,634		7,879
2022	32,074		8,364
2023-2027	186,617		47,307

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 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 $25.3 million, $23.5 million and $22.6 million during 2017, 2016 and 2015, respectively.

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 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, 2017 and 2016, and the changes in the accrued liability during the years then ended:



(Dollars in thousands)	2017			2016
Present value of accrued liability as of January 1	$	38,597		$	39,878
Benefit expense and interest cost	3,262			3,232
Benefits paid	(4,560		)	(4,194		)
Benefits forfeited	—			(319		)
Present value of accrued liability as of December 31	$	37,299		$	38,597
Discount rate at December 31	3.76		%	4.30		%

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, 2017 and 2016, the accrued liability for incentive compensation was $33.4 million and $28.4 million, respectively.