Employee Benefit Plans

12 Months Ended

Dec. 31, 2022

Employee Benefit Plans

Employee Benefit Plans

Note 14—Employee Benefit Plans

Defined Contribution Retirement Plan

The Company maintains a defined contribution plan under which, prior to 2021, it made quarterly matching contributions in an amount equal to 100% of the lesser of the first 3% of the employee’s contribution or 3% of the employee’s base salary during such quarter. The employee must have been employed by the Company on the date the matching contribution was made in order to have received it. In addition, the Company also could make a contribution of up to 1% of the amount deferred or contributed, based on a tiered scale of its return on assets for the prior year. The matching contributions were made only up to the amount of the employee’s deferrals or contributions to the plan. The Company also has the discretion to make additional contributions.

In 2021, the Company amended the defined contribution plan to provide for an annual matching contribution in an amount equal to 100% of the employee’s contribution up to 6% of the employee’s eligible compensation and also provides that such matching contribution may be made in shares of the Company’s common stock. In this case, an employee’s 401(k) plan account would hold interests in a unitized stock fund instead of a direct interest in the shares of common stock. The employee is not required to be employed by the Company on the date the matching contribution is made in order to receive it.

The Company’s plan expense was $1,463, $935 and $256 for the year ended December 31, 2022, 2021 and 2020, respectively.

Executive Incentive Retirement Plan Agreement

The Bank entered into individual executive incentive retirement plan agreements with certain employees. These agreements provided for payments, if payable in accordance with their respective terms and in accordance with applicable law, upon a separation from service or a change of control (as defined in such agreements) if the individual has met specified vesting requirements. Each of these agreements also provided for death benefits in the event of death in active service to the Bank. During the year ended December 31, 2022 and 2021, there were forfeitures and payments to individuals due to their separation from service. At December 31, 2022, a liability remains for one individual.

The aggregate liability accrued for potential payments under these agreements was $359 and $983 at December 31, 2022 and 2021, respectively. Periodic expense consisted of the Company’s contribution which was made ratably over the build-up period until retirement, adjusted for annual interest cost. The aggregate expense, net of forfeitures, for such agreements was $(405), $(470) and $(141) for the year ended December 31, 2022, 2021 and 2020, respectively.

Split-Dollar Life Insurance Agreement and Company-owned Life Insurance

The Bank entered into a split-dollar life insurance agreement with respect to its controlling shareholder and former Chief Executive Officer of the Bank. Pursuant to the agreement with the Bank, a portion of the death benefits arising from life insurance policies owned by the Company would be paid to beneficiaries designated by the controlling shareholder. The Bank cancelled the split-dollar life insurance agreement in 2022 and surrendered the related split-dollar life insurance policy as well as certain company-owned life insurance policies related to former executives with an aggregate cash surrender value of $24,877. This resulted in a payout in such amount to the Company. Upon the surrender of the policies, the remaining accrued liability of $4,109 was reversed and included as a reduction in salaries and employee benefits expense in the consolidated statement of operations for the year ended December 31, 2022. The estimated present value of the cost of providing these death benefits and the associated accrued liability was $4,216 at December 31, 2021.

The increase in the cash surrender value of $13,142 during the duration of ownership of these policies was previously considered tax-exempt income and became taxable income upon the surrender of the policies. The Company recorded income taxes of $3,614 and additional tax of $1,314, which is included in other expense within non-interest expense, upon the surrender of the policies during the year ended December 31, 2022.