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Note 9 - Supplemental Executive Retirement Plan
6 Months Ended
Jun. 30, 2013
Compensation and Retirement Disclosure [Abstract]  
Pension and Other Postretirement Benefits Disclosure [Text Block]

Note 9.  Supplemental Executive Retirement Plan


In February 2013, the Compensation Committee authorized Supplemental Executive Retirement and Death Benefit Agreements (the “SERP Agreements”) with each of the Bank's executive officers other than Mr. Paul, which upon the executive’s retirement, will provide for a stated monthly payment for such executive’s lifetime. The retirement benefit is computed as a percentage of each executive’s projected average base salary over the five years preceding retirement, assuming retirement at age 67. The SERP Agreement provides that (a) the benefits vest ratably over six years of service to the Bank, with the executive receiving credit for years of service prior to entering into the SERP Agreement (b) death, disability and change-in-control shall result in immediate vesting, and (c) the monthly amount will be reduced if retirement occurs earlier than age 67 for any reason other than death, disability or change-in-control. The SERP Agreement further provides for a death benefit in the event the retired executive dies prior to receiving 180 monthly installments, paid either in a lump sum payment or continued monthly installment payments, such that the executive’s beneficiary has received payment(s) sufficient to equate to a cumulative 180 monthly installments.


The SERP Agreements are unfunded arrangements maintained primarily to provide supplemental retirement benefits and comply with Section 409A of the Internal Revenue Code. The Bank has elected to finance the retirement benefits by purchasing fixed annuity contracts with three insurance carriers totaling $10.4 million that have been designed to provide a future source of funds for the lifetime retirement benefits of the SERP Agreements. The primary impetus for utilizing fixed annuities is a substantial savings in compensation expenses for the Bank as opposed to a traditional SERP Agreement. The annuity contracts accrued $452 thousand of income through June 30, 2013 which is included in other noninterest income on the Consolidated Statement of Operations. The cash surrender value of the annuity contracts is $10.9 million at June 30, 2013 and is included in Other assets on the Consolidated Balance Sheet. The retirement benefit is derived from the annuities during the participant’s employment. For the six and three months periods ending June 30, 2013 and March 31, 2013 respectively, the Company recorded salary and employee benefit expense of $705 thousand and $432 thousand for this post retirement benefit.


Upon death of an executive, the annuity contract related to such executive terminates. The Bank has purchased $15.0 million of additional Bank Owned Life Insurance contracts which would effectively fund payments to the executives’ named beneficiaries.