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Note 8 - Employee Benefit Plans
12 Months Ended
Dec. 31, 2022
Notes to Financial Statements  
Retirement Benefits [Text Block]

Note 8: Employee Benefit Plans

401(k) Plan

The Company has a Retirement Accumulation Plan qualifying under Internal Revenue Code Section 401(k), in which 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, 2022 and 2021, the Company contributed $392 and $402 respectively.

 

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 21 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 NBI Board of Directors. Contribution expense amounted to $400 for the year ended December 31, 2022 and $360 for the year ended December 31, 2021. Dividends on ESOP shares are charged to retained earnings. As of December 31, 2022, the number of shares held by the ESOP was 181,365. All shares held by the ESOP are treated as outstanding in computing the Company’s basic net income per share. Upon reaching age 55 with 10 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 15 years after retirement or the officer’s lifetime. The expense accrued for the plans in 2022 and 2021, based on the present value of the retirement benefits, amounted to $326 and $296 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-2 compensation during their final years of employment. Information pertaining to activity in the plan during the years indicated, is as follows:

  

December 31,

 
  

2022

  

2021

 

Change in benefit obligation

        

Projected benefit obligation at beginning of year

 $35,312  $34,852 

Service cost (1)

  1,297   1,445 

Interest cost

  817   736 

Actuarial gain (2)

  (11,566

)

  (786

)

Benefits paid

  (2,732

)

  (935

)

Projected benefit obligation at end of year

 $23,128  $35,312 
         

Change in plan assets

        

Fair value of plan assets at beginning of year

 $36,187  $32,415 

Actual return on plan assets

  (3,709

)

  4,707 

Benefits paid

  (2,732

)

  (935

)

Fair value of plan assets at end of year

 $29,746  $36,187 
         

Funded status at the end of the year

 $6,618  $875 

Amounts recognized in the Consolidated Balance Sheet

        

Deferred tax liabilities

 $(1,390

)

 $(184

)

Other assets

  6,618   875 

Total amounts recognized in the Consolidated Balance Sheet

 $5,228  $691 
         

Amounts recognized in accumulated other comprehensive loss, net

        

Net loss

 $(2,968

)

 $(8,749

)

Deferred tax asset

  623   1,837 

Amount recognized

 $(2,345

)

 $(6,912

)

         

Accrued/Prepaid benefit cost, net

        

Benefit obligation

 $(23,128

)

 $(35,312

)

Fair value of assets

  29,746   36,187 

Unrecognized net actuarial loss

  2,968   8,749 

Deferred tax liability

  (2,013

)

  (2,021

)

Prepaid benefit cost included in other assets

 $7,573  $7,603 
      

 

 

Components of net periodic benefit cost

        

Service cost (1)

 $1,297  $1,445 

Interest cost (3)

  817   736 

Expected return on plan assets (3)

  (2,517

)

  (2,220

)

Amortization of prior service cost (3)

  -   (11

)

Recognized net actuarial loss (3)

  441   833 

Net periodic benefit cost

 $38  $783 
         

Other changes in plan assets and benefit obligations recognized in other comprehensive loss

        

Net gain

 $(5,781

)

 $(4,106

)

Amortization of prior service cost

  -   11 

Deferred income tax expense 

  1,214   860 

Total recognized

 $(4,567

)

 $(3,235

)

         

Total recognized in net periodic benefit cost and other comprehensive loss

 $(5,743

)

 $(3,312

)

         

Weighted average assumptions at end of the year

        

Discount rate used for net periodic pension cost

  2.50

%

  2.25

%

Discount rate used for disclosure

  5.00

%

  2.50

%

Expected return on plan assets

  7.50

%

  7.50

%

Rate of compensation increase

  3.00

%

  3.00

%

 

 

(1)

Cost is included in Salaries and Employee Benefits expense on the Consolidates Statements of Income.

 

(2)

Actuarial gain in 2022 is composed of loss due to demographic changes of $66 and gain due to change in discount rate of ($11,632). Actuarial gain in 2021 is composed of loss due to demographic changes of $764, loss due to change in mortality table of $40 and gain due to change in discount rate of ($1,590).

 (3)Cost is included in other operating expense on the Consolidated Statements of Income.

 

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’s Pension Administrative Committee Policy (the “Policy”) sets requirements 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 no investments in hedge funds, private equity funds or real estate. The Company’s required minimum pension contribution for 2023 has not yet been determined. Fair value measurements of the pension plan’s assets are presented below:

 

  

Fair Value Measurements at December 31, 2022

 

Asset Category

 

Total

  

Level 1

  

Level 2

  

Level 3

 

Cash

 $415  $415  $-  $- 

Equity securities:

                

U. S. companies

  15,459   15,459   -   - 

International companies

  770   770   -   - 

Equities mutual funds (1)

  6,090   6,090   -   - 

State and political subdivisions

  51   -   51   - 

Corporate bonds – investment grade (2)

  6,961   -   6,961   - 

Total pension plan assets

 $29,746  $22,734  $7,012  $- 

 

  

Fair Value Measurements at December 31, 2021

 

Asset Category

 

Total

  

Level 1

  

Level 2

  

Level 3)

 

Cash

 $1,390  $1,390  $-  $- 

Equity securities:

                

U. S. companies

  19,758   19,758   -   - 

International companies

  2,722   2,722   -   - 

Equities mutual funds (1)

  5,257   5,257   -   - 

State and political subdivisions

  57   -   57   - 

Corporate bonds – investment grade (2)

  7,003   -   7,003   - 

Total pension plan assets

 $36,187  $29,127  $7,060  $- 

 

 

(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.

 

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

 

2023

  $2,802 

2024

  $1,494 

2025

  $861 

2026

  $1,877 

2027

  $1,801 
2028 - 2032  $11,054