Employee Stock Ownership Plan

12 Months Ended

Dec. 31, 2014

Compensation and Retirement Disclosure [Abstract]

Employee Stock Ownership Plan

(11) Employee Stock Ownership Plan

As part of its mutual to stock conversion, the Bank established an Employee Stock Ownership Plan and in 2006 the Bank established a Matching Contribution Employee Stock Ownership Plan (collectively the “ESOP”) to provide retirement benefits for eligible employees. All full-time employees are eligible to participate in the ESOP after they attain age 21 and complete one year of service during which they work at least 1,000 hours. ESOP shares are allocated among participants on the basis of compensation earned during the year. Employees are fully vested in their ESOP account after the completion of five years of credited service or completely if service was terminated due to death, retirement, disability or change in control of the Company. ESOP participants are entitled to receive distributions from the ESOP account only upon termination of service, which includes retirement and death except that a participant may elect to have dividends distributed as a cash payment on a quarterly basis.

The ESOP originally borrowed $13,421,000 from the Company to purchase 2,013,137 shares of common stock issued in the conversion. On May 12, 1998, the initial loan agreement was amended to allow the ESOP to borrow an additional $8,200,000 in order to fund the purchase of 633,750 shares of common stock. At the same time the term of the loan was extended from the initial twelve years to thirty years. As part of the establishment of the Matching Contribution Employee Stock Ownership Plan the term of the loan was reduced by one year and now expires in 2026. The amended loan is to be repaid from contributions by the Bank to the ESOP trust. The Bank is required to make contributions to the ESOP in amounts at least equal to the principal and interest requirement of the debt, assuming a fixed interest rate of 8.25%.

The Bank’s obligation to make such contributions is reduced to the extent of any dividends paid by the Company on unallocated shares and any investment earnings realized on such dividends. As of December 31, 2014 and 2013, contributions to the ESOP, which were used to fund principal and interest payments on the ESOP debt, totaled $512,000 and $515,000, respectively. During 2014 and 2013, $209,000 and $221,000, respectively, of dividends paid on unallocated ESOP shares were used for debt service. At December 31, 2014 and 2013, the loan had an outstanding balance of $3,707,000 and $3,897,000, respectively, and the ESOP had unallocated shares of 394,816 and 428,749, respectively. At December 31, 2014, the unallocated shares had a fair value of $6,767,000. The unamortized balance of the ESOP is shown as unallocated common stock held by the ESOP and is reflected as a reduction of stockholders’ equity.

For the years ended December 31, 2014, 2013 and 2012, the Bank recorded compensation expense related to the ESOP of $570,000, $538,000 and $480,000, respectively, including $284,000, $250,000 and $191,000, respectively, representing additional compensation expense to reflect the increase in the average fair value of committed to be released and allocated shares in excess of the Bank’s cost. As of December 31, 2014, 2,218,138 shares had been allocated to participants and 33,932 shares were committed to be released.