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Note 8 - Employee Benefit Plans
 12 Months Ended
Dec. 31, 2023
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, 2023 and 2022, the Company contributed $446 and $392 respectively, included in salaries and employee benefits in the Consolidated Statements of Income.

 

 

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 $300 for the year ended December 31, 2023 and $400 for the year ended December 31, 2022. Dividends on ESOP shares are charged to retained earnings. As of December 31, 2023, the number of shares held by the ESOP was 189,869. 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 associated liability, included in other liabilities in the Consolidated Balance Sheets, was $3,371 as of December 31, 2023 and $3,339 as of December 31, 2022. The expense accrued for the plans in 2023 and 2022, based on the present value of the retirement benefits, amounted to $317 and $326 respectively, included in salaries and employee benefits on the Consolidated Statements of Income. 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,

 
  

2023

  

2022

 

Change in benefit obligation

        

Projected benefit obligation at beginning of year

 $23,128  $35,312 

Service cost (1)

  813   1,297 

Interest cost (2)

  1,091   817 

Actuarial loss (gain) (3)

  1,542   (11,566)

Benefits paid

  (824)  (2,732)

Projected benefit obligation at end of year

 $25,750  $23,128 
         

Change in plan assets

        

Fair value of plan assets at beginning of year

 $29,746  $36,187 

Actual return on plan assets

  3,587   (3,709)

Benefits paid

  (824)  (2,732)

Fair value of plan assets at end of year

 $32,509  $29,746 
         

Funded status at the end of the year

 $6,759  $6,618 

Amounts recognized in the Consolidated Balance Sheet

        

Deferred tax liabilities

 $(1,419) $(1,390)

Other assets

  6,759   6,618 

Total amounts recognized in the Consolidated Balance Sheet

 $5,340  $5,228 
         

Amounts recognized in accumulated other comprehensive loss, net

        

Net loss

 $(2,924) $(2,968)

Deferred tax asset

  614   623 

Amount recognized

 $(2,310) $(2,345)
      

(continued

)

 

 

Accrued/Prepaid benefit cost, net

        

Benefit obligation

 $(25,750) $(23,128)

Fair value of assets

  32,509   29,746 

Unrecognized net actuarial loss

  2,924   2,968 

Deferred tax liability

  (2,033)  (2,013)

Prepaid benefit cost included in other assets

 $7,650  $7,573 

Components of net periodic benefit cost

        

Service cost(1)

 $813  $1,297 

Interest cost(2)

  1,091   817 

Expected return on plan assets(2)

  (2,070)  (2,517)

Recognized net actuarial loss(2)

  69   441 

Net periodic benefit cost

 $(97) $38 
         

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

        

Net gain

 $(44) $(5,781)

Deferred income tax expense

  9   1,214 

Total recognized

 $(35) $(4,567)
         

Total recognized in net periodic benefit cost and other comprehensive loss

 $(141) $(5,743)
         

Weighted average assumptions at end of the year

        

Discount rate used for net periodic pension cost

  5.00%  2.50%

Discount rate used for disclosure

  4.75%  5.00%

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 on the Consolidated Statements of Income.

 

(2)

Cost is included in other operating expense on the Consolidated Statements of Income.

 

(3)

Please see table below for detail on the components of actuarial loss (gain).

 

The following table presents the components of actuarial loss (gain):

 

  

For the Year Ended December 31,

 

Components of actuarial loss (gain)

 

2023

  

2022

 

Loss due to demographic changes

 $934  $66 

Gain due to change in mortality table

  (291)  - 

Loss (gain) due to change in discount rate

  899   (11,632)

Actuarial loss (gain)

  1,542   (11,566)

(Gain) loss due to asset return

  (1,517)  6,226 

Actuarial loss (gain) with asset return

  25   (5,340)

 

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’s Pension Administrative Committee Policy (the “Policy”) sets requirements 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 2024 has not yet been determined. Fair value measurements of the pension plan’s assets as of the dates indicated are presented below:

 

  

Fair Value Measurements as of December 31, 2023

 

Asset Category

 

Total

  

Level 1

  

Level 2

  

Level 3

 

Cash

 $867  $867  $-  $- 

Equity securities:

                

U. S. companies

  17,540   17,540   -   - 

International companies

  400   400   -   - 

Equities mutual funds (1)

  6,098   6,098   -   - 

State and political subdivisions

  51   -   51   - 

Corporate bonds – investment grade (2)

  7,553   -   7,553   - 

Total pension plan assets

 $32,509  $24,905  $7,604  $- 

 

  

Fair Value Measurements as of December 31, 2022

 

Asset Category

 

Total

  

Level 1

  

Level 2

  

Level 3)

 

Cash

 $415  $415  $-  $- 

Equity securities:

                

U. S. companies

  15,459   15,459   -   - 

International companies

  770   770   -   - 

Equities mutual funds (1)

  6,090   6,090   -   - 

State and political subdivisions

  51   -   51   - 

Corporate bonds – investment grade (2)

  6,961   -   6,961   - 

Total pension plan assets

 $29,746  $22,734  $7,012  $- 

 

 

(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, as of December 31, 2023 are as follows:

 

Year   Estimated Benefit Payment 

2024

  $4,971 

2025

  $783 

2026

  $1,824 

2027

  $1,746 

2028

  $1,817 
2029 - 2033  $11,559