Note

: Employee Benefit Plans

401(k)

Plan

The Company has a Retirement Accumulation Plan qualifying under IRS Code Section

401(k),

in which NBI, 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,

2016,

2015

and

2014,

the Company contributed

$315,

$294

and

$273,

respectively, to the plan.

Employee Stock Ownership Plan

The Company has a nonleveraged 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

prior to the plan’s

January

and

July

enrollment dates to own NBI common stock. Contributions to the ESOP, which are not mandatory, are determined annually by the Board of Directors. Contribution expense amounted to

$150,

$200

and

$100

in the years ended

December

31,

2016,

2015

and

2014,

respectively. Dividends on ESOP shares are charged to retained earnings. As of

December

31,

2016,

the number of shares held by the ESOP was

249,256.

All shares held by the ESOP are treated as outstanding in computing the Company’s basic net income per share. Upon reaching age

with

ten

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 Salary Continuation Plan for certain key officers. The plan provides the participating officers with supplemental retirement income, payable for the greater of

years after retirement or the officer’s lifetime. The expense accrued for the plans in

2016,

2015,

and

2014,

based on the present value of the retirement benefits, amounted to

$242,

$396,

and

$246,

respectively. 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-

compensation during their final years of employment. Information pertaining to activity in the plan is as follows:

	Dec ember 31,
	20 16			20 15			20 14
Change in benefit obligation
Projected benefit obligation at beginning of year	$	20,427		$	19,324		$	17,185
Service cost		694			620			524
Interest cost		757			669			663
Actuarial loss		198			798			1,674
Benefits paid		(1,017	)		(984	)		(722	)
Projected benefit obligation at end of year	$	21,059		$	20,427		$	19,324

Change in plan assets
Fair value of plan assets at beginning of year	$	16,131		$	17,130		$	16,605
Actual return on plan assets		1,113			(155	)		884
Employer contribution		811			140			363
Benefits paid		(1,017	)		(984	)		(722	)
Fair value of plan assets at end of year	$	17,038		$	16,131		$	17,130

Funded status at the end of the year	$	(4,021	)	$	(4,296	)	$	(2,194	)

Amounts recognized in the Consolidated Balance Sheet
Deferred tax asset	$	1,407		$	1,504		$	768
Other liabilities		(4,021	)		(4,296	)		(2,194	)
Total amounts recognized in the Consolidated Balance Sheet	$	(2,614	)	$	(2,792	)	$	(1,426	)

Amounts recognized in acc umulated other comprehensive (loss), net
Net loss	$	(8,250	)	$	(8,627	)	$	(6,922	)
Prior service cost		449			559			669
Deferred tax asset		2,730			2,798			2,163
Amount recognized	$	(5,071	)	$	(5,270	)	$	(4,090	)

Accrued/Prepaid benefit c ost, net
Benefit obligation	$	(21,059	)	$	(20,427	)	$	(19,324	)
Fair value of assets		17,038			16,131			17,130
Unrecognized net actuarial loss		8,250			8,627			6,922
Unrecognized prior service cost		(449	)		(559	)		(669	)
Deferred tax liability		(1,323	)		(1,294	)		(1,395	)
Prepaid benefit cost included in other assets	$	2,457		$	2,478		$	2,664

Components of net periodic benefit cost
Service cost	$	694		$	620		$	524
Interest cost		757			669			663
Expected return on plan assets		(1,110	)		(1,166	)		(1,112	)
Amortization of prior service cost		(110	)		(110	)		(110	)
Recognized net actuarial loss		572			414			262
Net periodic benefit cost	$	803		$	427		$	227

Other changes in plan assets and benefit obligations recognized in other comprehensive loss
Net (gain) loss	$	(377	)	$	1,705		$	1,640
Amortization of prior service cost		110			110			110
Deferred income tax expense (benefit)		93			(635	)		(612	)
Total recognized	$	(174	)	$	1,180		$	1,138

Total recognized in net periodic benefit cost and other comprehensive loss	$	536		$	2,242		$	1,977

Weighted average assumptions at end of the year
Discount rate used for net periodic pension cost		4.00	%		3.75	%		4.50	%
Discount rate used for disclosure		4.00	%		4.00	%		3.75	%
Expected return on plan assets		7.50	%		7.50	%		7.50	%
Rate of compensation increase		3.00	%		3.00	%		3.00	%

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, as plan sponsor, has adopted a Pension Administrative Committee Policy (the Policy) 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

investments in hedge funds, private equity funds or real estate.

Fair value measurements of the pension plan’s assets at

December

31,

2016

follow:

	Fair Value Measurements at December 31, 20 1 6
Asset Category	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash	$	207	$	207	$	---	$	---
Equity securities:
U. S. companies		9,195		9,195		---		---
International companies		116		116		---		---
Equities mutual funds (1)		966		966		---		---
U. S. government agencies and corporations		53		---		53		---
State and political subdivisions		230		---		230		---
Corporate bonds – investment grade (2)		6,271		---		6,271		---
Total pension plan assets	$	17,038	$	10,484	$	6,554	$	---

(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. issue

rs from diverse industries.

	Fair Value Measurements at December 31, 20 1 5
Asset Category	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash	$	876	$	876	$	---	$	---
Equity securities:
U. S. companies		9,600		9,600		---		---
International companies		404		404		---		---
Equities mutual funds (1)		195		195		---		---
U. S. government agencies and corporations		104		---		104		---
State and political subdivisions		233		---		233		---
Corporate bonds – investment grade (2)		4,719		---		4,719		---
Total pension plan assets	$	16,131	$	11,075	$	5,056	$	---

(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.

The Company’s required minimum pension contribution for

2017

has not yet been determined.

Estimated future benefit payments, which reflect expected future service, as appropriate, are as follows:

2017	$	5,666
2018	$	1,067
2019	$	786
2020	$	1,350
20 21	$	472
2022 - 2026	$	4,833