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Note 8 - Employee Benefit Plans
 12 Months Ended
Dec. 31, 2021
Notes to Financial Statements  
Retirement Benefits [Text Block]

Note 8: Employee Benefit Plans

401(k) Plan

The Company has a Retirement Accumulation Plan qualifying under Internal Revenue Code Section 401(k), in which NBB and NBFS are participating employers. Eligible participants may contribute up to 100% of their total annual compensation to the plan, subject to certain limits based on federal tax laws. Employee contributions are matched by the employer based on a percentage of an employee’s total annual compensation contributed to the plan. For the years ended December 31, 2021 and 2020, the Company contributed to the plan $402 and $394 respectively.

 

Employee Stock Ownership Plan         

The Company has a non-leveraged Employee Stock Ownership Plan (“ESOP”) which enables employees of NBI and its subsidiaries who have one year of service and who have attained the age of 21 prior to the plan’s January 1 and July 1 enrollment dates to own NBI common stock. Contributions to the ESOP, which are not mandatory, are determined annually by the NBI Board of Directors. Contribution expense amounted to $360 for the year ended December 31, 2021 and $300 for the year ended December 31, 2020. Dividends on ESOP shares are charged to retained earnings. As of December 31, 2021, the number of shares held by the ESOP was 184,054. All shares held by the ESOP are treated as outstanding in computing the Company’s basic net income per share. Upon reaching age 55 with 10 years of plan participation, a vested participant has the right to diversify 50% of his or her allocated ESOP shares, and NBI or the ESOP, with the agreement of the trustee, is obligated to purchase those shares. The ESOP contains a put option which allows a withdrawing participant to require the Company or the ESOP, if the plan administrator agrees, to purchase his or her allocated shares if the shares are not readily tradable on an established market at the time of distribution.

 

Salary Continuation Plan

The Company has a non-qualified Salary Continuation Plan for certain key officers. The plan provides the participating officers with supplemental retirement income, payable for the greater of 15 years after retirement or the officer’s lifetime. The expense accrued for the plans in 2021 and 2020, based on the present value of the retirement benefits, amounted to $296 and $304 respectively. The plan is unfunded. However bank-owned life insurance has been acquired on the life of the key employees in amounts sufficient to discharge the obligations of the agreement.

 

Defined Benefit Plan         

The Company’s defined benefit pension plan covers substantially all employees. The plan benefit formula is based upon the length of service of retired employees and a percentage of qualified W-2 compensation during their final years of employment. Information pertaining to activity in the plan during the years indicated, is as follows:

 

  

December 31,

  

2021

  

2020

 

Change in benefit obligation

        

Projected benefit obligation at beginning of year

 $34,852  $29,641 

Service cost (1)

  1,445   1,080 

Interest cost

  736   820 

Actuarial loss (gain) (2)

  (786

)

  4,621 

Benefits paid

  (935

)

  (1,310

)

Projected benefit obligation at end of year

 $35,312  $34,852 
         

Change in plan assets

        

Fair value of plan assets at beginning of year

 $32,415  $25,007 

Actual return on plan assets

  4,707   3,718 

Employer contribution

  -   5,000 

Benefits paid

  (935

)

  (1,310

)

Fair value of plan assets at end of year

 $36,187  $32,415 
         

Funded status at the end of the year

 $875  $(2,437

)

 

(continued)

 

Amounts recognized in the Consolidated Balance Sheet

        

Deferred tax (liability) asset

 $(184

)

 $512 

Other assets (liabilities)

  875   (2,437

)

Total amounts recognized in the Consolidated Balance Sheet

 $691  $(1,925

)

         

Amounts recognized in accumulated other comprehensive (loss) income, net

        

Net loss

 $(8,749

)

 $(12,855

)

Prior service cost

  -   11 

Deferred tax asset

  1,837   2,697 

Amount recognized

 $(6,912

)

 $(10,147

)

         

Accrued/Prepaid benefit cost, net

        

Benefit obligation

 $(35,312

)

 $(34,852

)

Fair value of assets

  36,187   32,415 

Unrecognized net actuarial loss

  8,749   12,855 

Unrecognized prior service cost

  -   (11

)

Deferred tax liability

  (2,021

)

  (2,185

)

Prepaid benefit cost included in other assets

 $7,603  $8,222 
         

Components of net periodic benefit cost

        

Service cost

 $1,445  $1,080 

Interest cost

  736   820 

Expected return on plan assets

  (2,220

)

  (1,679

)

Amortization of prior service cost

  (11

)

  (110

)

Recognized net actuarial loss

  833   710 

Net periodic benefit cost

 $783  $821 
         

Other changes in plan assets and benefit obligations recognized in other comprehensive (loss) income

        

Net (gain) loss

 $(4,106

)

 $1,871 

Amortization of prior service cost

  11   110 

Deferred income tax expense (benefit)

  860   (416

)

Total recognized

 $(3,235

)

 $1,565 
         

Total recognized in net periodic benefit cost and other comprehensive (loss) income

 $(3,312

)

 $2,802 
         

Weighted average assumptions at end of the year

        

Discount rate used for net periodic pension cost

  2.25

%

  3.00

%

Discount rate used for disclosure

  2.50

%

  2.25

%

Expected return on plan assets

  7.50

%

  7.50

%

Rate of compensation increase

  3.00

%

  3.00

%

 

 

(1)

Cost is included in Salaries and Employee Benefits expense.

 

(2)

Actuarial loss (gain) in 2021 is composed of loss due to demographic changes of $764, loss due to change in mortality table of $40 and gain due to change in discount rate of ($1,590).

 

Long Term Rate of Return

The Company, as plan sponsor, selects the expected long term rate-of-return-on-assets assumption in consultation with its investment advisors and actuary. This rate is intended to reflect the average rate of earnings expected to be earned on the funds invested or to be invested to provide plan benefits. Historical performance is reviewed, especially with respect to real rates of return (net of inflation), for the major asset classes held or anticipated to be held by the trust, and for the trust itself. Undue weight is not given to recent experience, which may not continue over the measurement period, but higher significance is placed on current forecasts of future long term economic conditions.

 

Because assets are held in a qualified trust, anticipated returns are not reduced for taxes. Further, and solely for this purpose, the plan is assumed to continue in force and not terminate during the period during which assets are invested. However, consideration is given to the potential impact of current and future investment policy, cash flow into and out of the trust, and expenses (both investment and non-investment) typically paid from plan assets (to the extent such expenses are not explicitly estimated within periodic cost).

The Company, as plan sponsor, has adopted a Pension Administrative Committee Policy (the “Policy”) for monitoring the investment management of its qualified plans. The Policy includes a statement of general investment principles and a listing of specific investment guidelines, to which the committee may make documented exceptions. The guidelines state that, unless otherwise indicated, all investments that are permitted under the prudent investor rule shall be permissible investments for the defined benefit pension plan. All plan assets are to be invested in marketable securities. Certain investments are prohibited, including commodities and future contracts, private placements, repurchase agreements, options and derivatives. The Policy establishes quality standards for fixed income investments and mutual funds included in the pension plan trust. The Policy also outlines diversification standards.

The preferred target allocation for the assets of the defined benefit pension plan is 65% in equity securities and 35% in fixed income securities. Equity securities include investments in large-cap and mid-cap companies primarily located in the United States, although a small number of international large-cap companies are included. There are also investments in mutual funds holding the equities of large-cap and mid-cap U.S. companies. Fixed income securities include U.S. government agency securities and corporate bonds from companies representing diversified industries. There are no investments in hedge funds, private equity funds or real estate. The Company’s required minimum pension contribution for 2022 has not yet been determined. Fair value measurements of the pension plan’s assets at December 31, 2021 and December 31, 2020 are presented below:

 

  

Fair Value Measurements at December 31, 2021

 

Asset Category

 

Total

  

Level 1

  

Level 2

  

Level 3)

 

Cash

 $1,390  $1,390  $-  $- 

Equity securities:

                

U. S. companies

  19,758   19,758   -   - 

International companies

  2,722   2,722   -   - 

Equities mutual funds (1)

  5,257   5,257   -   - 

State and political subdivisions

  57   -   57   - 

Corporate bonds – investment grade (2)

  7,003   -   7,003   - 

Total pension plan assets

 $36,187  $29,127  $7,060  $- 

 

  

Fair Value Measurements at December 31, 2020

 

Asset Category

 

Total

  

Level 1

  

Level 2

  

Level 3

 

Cash

 $4,336  $4,336  $-  $- 

Equity securities:

                

U. S. companies

  15,129   15,129   -   - 

International companies

  2,735   2,735   -   - 

Equities mutual funds (1)

  3,840   3,840   -   - 

State and political subdivisions

  152   -   152   - 

Corporate bonds – investment grade (2)

  6,223   -   6,223   - 

Total pension plan assets

 $32,415  $26,040  $6,375  $- 

 

 

(1)

This category comprises actively managed equity funds invested in large-cap and mid-cap U.S. companies.

 

(2)

This category represents investment grade bonds of U.S. issuers from diverse industries.

 

Estimated future benefit payments, which reflect expected future service, as appropriate, are as follows:

 

2022

  $6,049 

2023

  $984 

2024

  $1,649 

2025

  $830 

2026

  $2,093 
2027 - 2031  $11,352