Employee Benefit Plans

12 Months Ended

Dec. 31, 2022

Note 15 – Employee Benefit Plans

401(k) Plans

As of December 31, 2021, the Company was operating under two different 401(k) plans.

In July of 2022, the Broadway Federal Bank 401(k) benefit plan and the City First Bank 401(k) benefit plan were combined into one plan called “the City First Bank 401(k) benefit plan” (the “401(k) Plan”). The 401(k) Plan allows employee contributions for substantially all employees up to 15% of their compensation, which are matched at a rate equal to 50% of the first 6% of compensation contributed. In addition, the 401(k) Plan makes a non-elective safe harbor contribution of 3% of each eligible employee’s compensation. Expenses related to the 401(k) plans totaled $309 thousand in 2022 and $316 thousand for 2021.

ESOP Plan

Employees participate in an Employee Stock Option Plan (“ESOP”) after attaining certain age and service requirements. During 2022, the ESOP purchased 466,955 shares of the Company’s common stock at a cost of $1.07 per share for a total cost of $500 thousand which was funded with a $5 million line of credit from the Company. During the first quarter of 2023, the ESOP purchased 1,156,076 additional shares of the Company’s common stock at a cost of $1.30 per share for a total cost of $1.5 million which was funded with the line of credit. Any loans or borrowings under the line of credit will be repaid from the Bank’s discretionary contributions to the ESOP, net of dividends paid, over a period of 20 years. Shares of the Company’s common stock purchased by the ESOP are held in a suspense account until released for allocation to participants. When loan payments are made, shares are allocated to each eligible participant based on the ratio of each such participant’s compensation, as defined in the ESOP, to the total compensation of all eligible plan participants. As the unearned shares are released from the suspense account, the Company recognizes compensation expense equal to the fair value of the ESOP shares during the periods in which they become committed to be released. To the extent that the fair value of the ESOP shares released differs from the cost of such shares, the difference is charged or credited to equity as additional paid‑in capital. Dividends on allocated shares increase participant accounts. Dividends on unallocated shares will be used to repay the loan. At the end of employment, participants will receive shares for their vested balance. Compensation expense related to the ESOP was $66 thousand for 2022 and $109 thousand for 2021.

Shares held by the ESOP were as follows:

	December 31, 2022		December 31, 2021
	(Dollars in thousands)
Allocated to participants		1,057,504		1,087,216
Committed to be released		9,892		10,064
Suspense shares		948,488		521,618
Total ESOP shares		2,015,884		1,618,898
Fair value of unearned shares	$	1,015	$	1,454

During 2022 and 2021, 40,257 and 40,945 of ESOP shares were released for allocation to participants, respectively. The outstanding balance of unearned ESOP shares at December 31, 2022 and 2021 were $1.3 million and $829 thousand, respectively, which are shown as unearned ESOP shares in the equity section of the consolidated statements of financial condition.

During December of 2022, the Company issued a $5 million line of credit to the ESOP Plan for the purchase of additional shares. As of December 31, 2022, the trustee for the ESOP had purchased 466,955 shares at a total cost of $500 thousand.