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, 2017,

2016

and

2015,

the Company contributed

$340,

$315

and

$294,

respectively, to the plan.

Employee Stock Ownership Plan

The Company has a non-leveraged 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 1

and

July 1

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

$200,

$150

and

$200

in the years ended

December 31, 2017,

2016

and

2015,

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

December 31, 2017,

the number of shares held by the ESOP was

236,221.

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 non-qualified 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

2017,

2016,

and

2015,

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

$272,

$242,

and

$396,

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:

	December 31 ,
	201 7			201 6			201 5
Change in benefit obligatio n
Projected benefit obligation at beginning of year	$	21,059		$	20,427		$	19,324
Service cost		692			694			620
Interest cost		743			757			669
Actuarial loss		1,417			198			798
Benefits paid		(419	)		(1,017	)		(984	)
Projected benefit obligation at end of year	$	23,492		$	21,059		$	20,427

Change in plan asset s
Fair value of plan assets at beginning of year	$	17,038		$	16,131		$	17,130
Actual return on plan assets		2,302			1,113			(155	)
Employer contribution		4,507			811			140
Benefits paid		(419	)		(1,017	)		(984	)
Fair value of plan assets at end of year	$	23,428		$	17,038		$	16,131

Funded status at the end of the yea r	$	(64	)	$	(4,021	)	$	(4,296	)

Amounts recognized in the Consolidated Balance Shee t
Deferred tax asset	$	13		$	1,407		$	1,504
Other liabilities		(64	)		(4,021	)		(4,296	)
Total amounts recognized in the Consolidated Balance Sheet	$	(51	)	$	(2,614	)	$	(2,792	)

Amounts recognized in accumulated other comprehensive (loss), ne t
Net gain (loss)	$	(7,923	)	$	(8,250	)	$	(8,627	)
Prior service cost		340			449			559
Deferred tax asset		1,592			2,730			2,798
Amount recognized	$	(5,991	)	$	(5,071	)	$	(5,270	)

Accrued/Prepaid benefit cost, ne t
Benefit obligation	$	(23,492	)	$	(21,059	)	$	(20,427	)
Fair value of assets		23,428			17,038			16,131
Unrecognized net actuarial loss		7,923			8,250			8,627
Unrecognized prior service cost		(340	)		(449	)		(559	)
Deferred tax liability		(1,579	)		(1,323	)		(1,294	)
Prepaid benefit cost included in other assets	$	5,940		$	2,457		$	2,478

Components of net periodic benefit cos t
Service cost	$	692		$	694		$	620
Interest cost		743			757			669
Expected return on plan assets		(1,097	)		(1,110	)		(1,166	)
Amortization of prior service cost		(110	)		(110	)		(110	)
Recognized net actuarial loss		540			572			414
Net periodic benefit cost	$	768		$	803		$	427

Other changes in plan assets and benefit obligations recognized in other comprehensive los s
Net (gain) loss	$	(328	)	$	(377	)	$	1,705
Amortization of prior service cost		110			110			110
Deferred income tax expense (benefit)		46			93			(635	)
Total recognized	$	(172	)	$	(174	)	$	1,180

Total recognized in net periodic benefit cost and other comprehensive loss	$	550		$	536		$	2,242

Weighted average assumptions at end of the yea r
Discount rate used for net periodic pension cost		4.00	%		4.00	%		3.75	%
Discount rate used for disclosure		3.50	%		4.00	%		4.00	%
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, 2017

follow:

	Fair Value Measurements at December 31, 20 1 7
Asset Category	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash	$	4,454	$	4,454	$	---	$	---
Equity securities:
U. S. companies		9,892		9,892		---		---
International companies		106		106		---		---
Equities mutual funds (1)		1,962		1,962		---		---
U. S. government agencies and corporations		51		---		51		---
State and political subdivisions		231		---		231		---
Corporate bonds – investment grade (2)		6,732		---		6,732		---
Total pension plan assets	$	23,428	$	16,414	$	7,014	$	---

(

)

This category comprises actively managed equity funds invested in large-

cap and mid-cap U.S. companies.

(

)

This category represents investment grade bonds of U.S. issue

rs from diverse industries.

	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	$	---

(

)

This category comprises actively managed equity funds invested in large-cap and mid-cap U.S. companies.

(

)

This category represents investment grade bonds of U.S. issuers from diverse industries.

The Company’s required minimum pension contribution for

2018

has

not

yet been determined.

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

201 8			$	4,229
201 9			$	1,060
2020			$	1,630
202 1			$	738
20 22			$	1,277
2023	-	2027	$	6,546