Benefits Plans

12 Months Ended

Dec. 31, 2022

Benefits Plans

Benefits Plans

Note 17 - Benefits Plans

Outside Director Retirement Plan (“DRP”)

The DRP is an unfunded non-contributory defined benefit pension plan covering all non-employee directors meeting eligibility requirements as specified in the plan document.  The following table sets forth the funded status of the DRP and components of net pension periodic expense measured as of December 31:

	Years Ended December 31,
	2022			2021
	(Dollars In Thousands)
Projected benefit obligation – beginning	$	2,087		$	2,046
Service cost		97			124
Interest cost		81			48
Actuarial gain		(353)			(27)
Benefits Paid		(104)			(104)
Projected benefit obligation – ending	$	1,808		$	2,087
Funded status – accrued liability included in accounts payable and accrued expenses	$	1,808		$	2,087
Accumulated benefit obligation	$	1,712		$	1,947
Discount rate		4.83	%		2.45	%
Rate of increase in future compensation levels		2.00	%		2.00	%

	Years Ended December 31,
	2022			2021
	(Dollars In Thousands)
Net periodic pension expense:
Service cost	$	97		$	124
Interest cost		81			48
Actuarial loss amortized		27			31
Total net periodic pension expense included in other non-interest expenses	$	205		$	203
Discount rate		4.83	%		2.45	%
Rate of increase in future compensation levels		2.00	%		2.00	%

Benefit payments, which reflect expected future service as appropriate, are expected to be paid for the years ending December 31 as follows (in thousands):

2023	$	104
2024		204
2025		190
2026		204
2027		232
2028 to 2032		959

At December 31, 2022 and 2021, unrecognized net gain of $353,000 and $27,000, respectively, were included in accumulated other comprehensive income.

Supplemental Executive Retirement Plan (“SERP”)

The SERP is a non-contributory defined benefit plan that covers certain officers of the Company.  Under the SERP, each of these individuals will be entitled to receive upon retirement an annual benefit paid in monthly installments equal to 50% of his average base salary in the three-year period preceding retirement.  Each individual may also retire

Note 17 - Benefits Plans (continued)

Supplemental Executive Retirement Plan (“SERP”)(continued)

early and receive a reduced benefit upon the attainment of certain age and years of service combination.  Additional terms related to death while employed, death after retirement, disability before retirement and termination of employment are fully described within the plan document.  The benefit payment term is the greater of 15 years or the executives remaining life.  No benefits are expected to be paid during the next five years.

During the years ended December 31, 2022 and 2021, expenses of $239,000 and $455,000, respectively, were recorded for this plan and are reflected in the Consolidated Statements of Income under Salaries and Employee Benefits.  At December 31, 2022 and 2021, a liability for this plan of $4,017,000 and $3,778,000, respectively, is included in the Consolidated Statements of Financial Condition under Accounts Payable and Accrued Expenses.

401(k) Plan

The Company maintains a 401(k) plan for all eligible employees.  Participants are permitted to contribute from 1% to 15% or 60% of their annual compensation up to the maximum permitted under the Internal Revenue Code.  The Company provided no matching contribution in 2022 and 2021.

Stock-Based Deferral Plan

In June 2021, the Company established a stock-based deferral plan for eligible key executives and members of the Board of Directors of the Company to elect to defer compensation received from the Company for their services and make deemed investments of that deferred compensation in shares of the Company’s common stock. At December 31, 2022 and 2021, the Company did not have any obligations under the plan.

Employee Stock Ownership Plan (“ESOP”)

In conjunction with the Mid-Tier Holding Company’s public stock offering in 2006, the Bank established an ESOP for all eligible employees (substantially all full-time employees).  The ESOP borrowed $5,184,200 from the Mid-Tier Holding Company and used those funds to acquire 518,420 shares of the Mid-Tier Holding Company common stock at $10.00 per share.  The loan from the Mid-Tier Holding Company, which has been assumed by the Company, carries an interest rate of 8.25% and is repayable in twenty annual installments through 2025.

In conjunction with the Company’s second-step conversion offering, on July 12, 2021, the ESOP borrowed $7,827,260 from the Company and used those funds to acquire 782,726 shares of Company common stock at $10.00 per share.  The loan from the Company carries an interest rate equal to 3.25% and is repayable in fifteen annual installments through 2035.

Each year, the Bank makes discretionary contributions to the ESOP equal to the principal and interest payment required on the loan from the Company. The ESOP may further pay down the principal balance of the loans by using dividends paid, if any, on the shares of Company common stock it owns. The balance remaining on the first ESOP loan was $1,327,000 and $1,703,000 at December 31, 2022 and 2021. The balance remaining on the second ESOP loan was $6,850,000 and $7,270,000 at December 31, 2022 and 2021.

Shares purchased with the loan proceeds serve as collateral for the loan and are held in a suspense account for future allocation among ESOP participants.  As the loan principal is repaid, shares will be released from the suspense account and become eligible for allocation.  The allocation among plan participants will be as described in the ESOP governing document.

ESOP shares initially pledged as collateral were recorded as unearned ESOP shares in the stockholders’ equity section of the consolidated statement of financial condition.  Thereafter, on a monthly basis over the terms of the ESOP loans, approximately 2,894 shares for the ESOP established in 2006 and approximately 4,348 shares for the ESOP

Note 17 - Benefits Plans (continued)

Employee Stock Ownership Plan (“ESOP”)(continued)

established in 2022 are committed to be released respectively. Compensation expense is recorded equal to the shares committed to be released multiplied by the average closing price of the Company’s stock during that month.  ESOP expense during the years ended December 31, 2022 and 2021, totaled approximately $1,075,000 and $931,000, respectively.  Dividends on unallocated shares, which totaled approximately $365,000 and $115,000 during 2022 and 2021, respectively, are recorded as a reduction of the ESOP loan.  Dividends on allocated shares, which totaled approximately $255,000 and $63,000 during 2022 and 2021, respectively, are charged to retained earnings.

ESOP shares are summarized as follows:

	December 31,
		2022		2021
Allocated shares		607,922		521,012
Shares committed to be released		86,920		86,910
Unearned shares		782,567		869,487
Total ESOP Shares		1,477,409		1,477,409
Less allocated shares distributed to former or retired employees		(122,280)		(106,369)
Total ESOP Shares Held by Trustee		1,355,129		1,371,040
Fair value of unearned shares	$	11,675,897	$	9,677,390