Benefits Plans

12 Months Ended

Dec. 31, 2020

Note 12- Benefits Plans

Pension Plan

The Company acquired, through the merger with Pamrapo Bancorp, Inc. a non-contributory defined benefit pension plan (“Pension Plan”) covering all eligible employees of Pamrapo Savings Bank. Effective January 1, 2010, the Pension Plan was frozen by Pamrapo Savings Bank. All benefits for eligible participants accrued in the Pension Plan to the freeze date have been retained. The benefits are based on years of service and employee’s compensation. The Pension Plan is funded in conformity with funding requirements of applicable government regulations. Prior service costs for the Pension Plan generally are amortized over the estimated remaining service periods of employees.

The following tables set forth the Pension Plan's funded status at December 31, 2020 and 2019 and components of net periodic pension cost for the years ended December 31, 2020 and 2019:


Change in Benefit Obligation:		December 31,
		2020		2019
		(In Thousands)
Benefit obligation, beginning of year	$	7,834	$	7,581
Interest cost		245		310
Actuarial gain		773		689
Benefits paid		(459)		(479)
Lump sum distributions		(199)		(267)
Benefit obligation, ending	$	8,194	$	7,834
Change in Plan Assets:
Fair value of assets, beginning of year	$	7,576	$	6,964
Actual return (loss) on plan assets		194		1,358
Benefits paid		(459)		(479)
Lump sum distributions		(199)		(267)
Fair value of assets, ending	$	7,112	$	7,576
Reconciliation of Funded Status:
Projected benefit obligation	$	8,194	$	7,834
Fair value of assets		7,112		7,576
Unfunded status, included in other liabilities, net	$	(1,082)	$	(258)
Valuation assumptions used to determine benefit obligation at period end:
Discount rate		2.52%		3.22%
Salary increase rate		N/A		N/A


Net Periodic Pension Expense:		December 31,
		2020		2019
		(In Thousands)
Interest cost	$	245	$	310
Expected return on assets		(441)		(404)
Amortization of net loss		316		312
Net Periodic Pension Cost (Credit)	$	120	$	218
Valuation assumptions used to determine net periodic benefit cost for the year:
Discount rate		3.22%		4.22%
Long term rate of return on plan assets		6.00%		6.00%
Salary increase rate		N/A		N/A

At December 31, 2020 and December 31, 2019, unrecognized net losses of $(3,069,000) and $(2,365,000), respectively, were included, net of deferred income tax, in accumulated other comprehensive loss in accordance with ASC 715-20 and ASC 715-30.

‎

Note 12 - Benefits Plan (continued)

Plan Assets

Investment Policies and Strategies

The primary long-term objective for the Pension Plan is to maintain assets at a level that will sufficiently cover future beneficiary obligations. The Pension Plan will be structured to include a volatility reducing component (the fixed income commitment) and a growth component (the equity commitment).

To achieve the Bank’s long-term investment objectives, the trustee will invest the assets of the Pension Plan in a diversified combination of asset classes, investment strategies, and pooled vehicles. The asset allocation guidelines in the table below reflect the Bank’s risk tolerance and long-term objectives for the Pension Plan. These parameters will be reviewed on a regular basis and subject to change following discussions between the Bank and the trustee.

Initially, the following asset allocation targets and ranges will guide the trustee in structuring the overall allocation in the Pension Plan’s investment portfolio. The Bank or the trustee may amend these allocations to reflect the most appropriate standards consistent with changing circumstances. Any such fundamental amendments in strategy will be discussed between the Bank and the trustee prior to implementation.

Based on the above considerations, the following asset allocation ranges will be implemented:



Asset Allocation Parameters by Asset Class
	Minimum	Target	Maximum
Equity
Large-Cap U.S.		36%
Mid/Small-Cap U.S.		12%
Non-U.S.		5%
Total-Equity	40%	53%	60%

Fixed Income
Long/Short Duration		44%
Money Market/Certificates of Deposit		3%
Total-Fixed Income	40%	47%	60%

The parameters for each asset class provide the trustee with the latitude for managing the Pension Plan within a minimum and maximum range. The trustee will have full discretion to buy, sell, invest and reinvest in these asset segments based on these guidelines which includes allowing the underlying investments to fluctuate within the stated policy ranges. The Pension Plan will maintain a cash equivalents component (not to exceed 3 percent under normal circumstances) within the fixed income allocation for liquidity purposes.

The trustee will monitor the actual asset segment exposures of the Pension Plan on a regular basis and, periodically, may adjust the asset allocation within the ranges set forth above as it deems appropriate. Periodic reallocations of assets will be based on the trustee’s perception of the changing risk/return opportunities of the respective asset classes.

Determination of Long-Term Rate of Return

The long-term rate-of-return-on assets assumption was set based on historical returns earned by equities and fixed income securities, adjusted to reflect expectations of future returns as applied to the Pension Plan’s target allocation of asset classes. Equities and fixed income securities were assumed to earn real rates of return in the ranges of 5-9 percent and 2-6 percent, respectively. The long-term inflation rate was estimated to be 3 percent. When these overall return expectations are applied to the Pension Plan’s target allocation, the result is an expected rate of return of 6 percent to 10 percent.

‎

Note 12 - Benefits Plan (continued)

The fair values of the Pension Plan assets at December 31, 2020, by asset category (see Note 2 for the definitions of levels), are as follows (In Thousands):



Asset Category		Total		(Level 1)		(Level 2)		(Level 3)
Mutual funds-Equity
Large-Cap Value (a)	$	954	$	954	$	-	$	-
Diversified Emerging Markets (g)		323		323		-		-
Large Blend (e)		1,592		1,592		-		-
Technology (h)		314		314		-		-
Mutual Funds-Fixed Income
Long Government (i)		252		252		-		-
Multi-Sector Bond (d)		1,192		1,192		-		-
High Yield Bond (f)		818		818		-		-
Intermediate Core Bond (j)		878		878
BCB Common Stock		574		574		-		-
Cash Equivalents
Money Market	$	215	$	215	$	-	$	-
Total	$	7,112	$	7,112	$	-	$	-

The fair values of the Company’s pension plan assets at December 31, 2019, by asset category (see Note 2 for the definitions of levels), are as follows (In Thousands):

s


Asset Category		Total		(Level 1)		(Level 2)		(Level 3)
Mutual funds-Equity
Large-Cap Value (a)	$	2,109	$	2,109	$	-	$	-
Mid-Cap Value (b)		325		325		-		-
Large Blend (e)		1,641		1,641		-		-
Mutual Funds-Fixed Income
World Bond (c)		787		787		-		-
Multi-Sector Bond (d)		880		880		-		-
High Yield Bond (f)		933		933		-		-
Stock
BCB Common Stock		715		715		-		-
Cash Equivalents
Money Market	$	186	$	186	$	-	$	-
Total	$	7,576	$	7,576	$	-	$	-

a)Large-value portfolios invest primarily in big U.S. companies that are less expensive or growing more slowly than other large-cap stocks. Stocks in the top 70 percent of the capitalization of the U.S. equity market are defined as large cap. Value is defined based on low valuations (low price ratios and high dividend yields) and slow growth (low growth rates for earnings, sales, book value, and cash flow).

b)Some mid-cap value portfolios focus on medium-size companies while others land here because they own a mix of small-, mid-, and large-cap stocks. All look for U.S. stocks that are less expensive or growing more slowly than the market. The U.S. mid-cap range for market capitalization typically falls between $1 billion and $8 billion and represents 20 percent of the total capitalization of the U.S. equity market. Value is defined based on low valuations (low price ratios and high dividend yields) and slow growth (low growth rates for earnings, sales, book value, and cash flow).

c)World-bond portfolios invest 40 percent or more of their assets in foreign bonds. Some world-bond portfolios follow a conservative approach, favoring high-quality bonds from developed markets. Others are more adventurous and own some lower-quality bonds from developed or emerging markets. Some portfolios invest exclusively outside the U.S., while others regularly invest in both U.S. and non- U.S. bonds.

d)Multi Sector portfolios seek income by diversifying their assets among several fixed-income sectors, usually U.S. government obligations, foreign bonds, and high-yield domestic debt securities.

e)This fund invests in 500 of the largest U.S. companies, which span many different industries and account for about three-fourths of the U.S. Stock Markets value.

f)High Yield Bond funds invest at least 65 percent of assets in bonds rated below BBB. This fund seeks to provide shareholders with a high level of current income with capital growth as a secondary objective.

g)The fund invests at least 80% of the value of its assets in equity securities and equity related instruments that are tied economically to emerging markets.

h)The fund normally invests at least 80% of the fund’s net assets in securities of issuers principally engaged in offering, using or developing products, processes or services that will provide or benefit significantly from technological advances and improvements.

i)The fund normally invests at least 80% of assets in securities included in the Bloomberg Barclays U.S. Long Treasury Bond Index.

j)Intermediate term core bond portfolios invest primarily in investment grade U.S. fixed-income issues including government, corporate, and securitized debt, and hold less than 5% in below-investment grade exposures.

Note 12 - Benefits Plan (continued)

The Company expects to contribute, based upon actuarial estimates, approximately $0 to the Pension Plan in 2021.

Benefit payments are expected to be paid for the years ended December 31 as follows (In thousands):



2021	$	521
2022		513
2023		505
2024		489
2025		491
2026-2030		2,354

Equity Incentive Plans

The Company, under the plan approved by its shareholders on April 26, 2018 (“2018 Equity Incentive Plan”), authorized the issuance of up to 1,000,000 shares of common stock of the Company pursuant to grants of stock options and restricted stock units. Employees and directors of the Company and the Bank are eligible to participate in the 2018 Stock Plan. All stock options will be granted in the form of either "incentive" stock options or "non-qualified" stock options. Incentive stock options have certain tax advantages that must comply with the requirements of Section 422 of the Internal Revenue Code. Only employees are permitted to receive incentive stock options.

On June 14, 2019, a grant of 68,750 options was declared for members of the Board of Directors of the Bank and the Company, which vest over a 2-year period, commencing on the anniversary of the award date. On June 14, 2019, a grant of 30,125 options was declared for the Chief Executive Officer of the Bank and the Company, which vest over a 2-year period, commencing on the anniversary of the award date. On June 14, 2019, a grant of 47,618 shares of restricted stock was declared for members of the Board of Directors of the Bank and the Company, which vest over a 2-year period, commencing on the anniversary of the award date.

The Company, under the plan approved by its shareholders on April 28, 2011 (“2011 Stock Plan”), authorized the issuance of up to 900,000 shares of common stock of the Company pursuant to grants of stock options. Employees and directors of the Company and the Bank are eligible to participate in the 2011 Stock Plan. All stock options will be granted in the form of either "incentive" stock options or "non-qualified" stock options. Incentive stock options have certain tax advantages that must comply with the requirements of Section 422 of the Internal Revenue Code. Only employees are permitted to receive incentive stock options.

The following table presents the share-based compensation expense for the years ended December 31, 2020 and 2019 (Dollars in Thousands).



		Years Ended December 31,
		2020		2019
Stock Option Expense	$	558	$	466
Restricted Stock Expense		636		521
Total share-based compensation expense	$	1,194	$	987

The following is a summary of the status of the Company’s restricted shares as of December 31, 2020.



	Number of Shares Awarded	Weighted Average Grant Date Fair Value
Non-vested at December 31, 2019	81,278	$ 11.96
Granted	-	-
Vested	(56,642)	11.77
Forfeited	(2,332)	11.97
Non-vested at December 31, 2020	22,304	$ 12.46

The remaining non-vested restricted shares outstanding as of December 31, 2020 will be charged to expense in 2021, totaling $131,113.

Note 12 - Benefits Plan (continued)

A summary of stock option activity, follows:


	Number of Options		Range of Exercise Price		Weighted Average Exercise Price	Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value (000's)
Outstanding at January 1, 2019	1,104,600	$	8.93-13.32	$	11.36	7.84	$	194
Options forfeited	(1,000)		10.55		10.55
Options exercised	(1,500)		10.55		10.55
Options granted	98,875		12.46		12.46
Options expired	-		-		-
Outstanding at December 31, 2019	1,200,975	$	8.93-13.32	$	11.45	7.05	$	2,806
Options forfeited	(8,127)		11.26-12.46		11.68
Options exercised	(500)		10.55		10.55
Options granted	-		-		-
Options expired	-		-		-
Outstanding at December 31, 2020	1,192,348	$	8.93-13.32	$	11.45	6.04	$	333
Exercisable at December 31, 2020	817,536

It is Company policy to issue new shares upon share option exercise. Expected future compensation expense relating to the 374,812 shares of unvested options outstanding as of December 31, 2020, is $805,000 and will be recognized over a weighted average period of 5.08 years.

There were no options granted during the twelve months ended December 31, 2020.



The key valuation assumptions and fair value of stock options granted during the twelve months ended December 31, 2019 were:
	Directors
Expected life	7.49	years
Risk-free interest rate	1.97	%
Volatility	22.3	%
Dividend yield	4.49	%
Fair value	$1.54