(4)Employee Benefits

Supplemental Retirement Agreements

Effective July 1, 2013, the Bank entered into supplemental retirement agreements (“SERP”) with six executive officers, which provide for payments upon attaining the retirement age specified in the agreements. The present value of these future payments is accrued over the remaining service or vesting term. Supplemental retirement benefits generally vest as they are accrued; however a termination of employment subsequent to a change in control will result in the vesting of all benefits that would have accrued to the officer’s normal retirement date. During the three and nine months ended September 30, 2014, SERP expense totaled $102,000 and $307,000, respectively. During the three and nine months ended September 30, 2013, SERP expense totaled $79,000.

Defined Benefit Pension Plan

The Corporation’s defined benefit pension plan was amended in 1993 to freeze benefits at the amount earned as of April 15, 1993. Pension expense (income) totaled ($5,500) and $12,000 for the three months ended September 30, 2014 and 2013, respectively. Pension expense (income) totaled ($19,000) and $35,000 for the nine months ended September 30, 2014 and 2013, respectively. The Bank does not expect to make a contribution for the plan year ending December 31, 2014.

Employee Stock Ownership Plan

The Corporation maintains an Employee Stock Ownership Plan (“ESOP”) to provide eligible employees the opportunity to own Corporation stock. This plan is a tax-qualified retirement plan for the benefit of all Corporation employees. Contributions are allocated to eligible participants on the basis of compensation, subject to federal tax limits.

The Corporation granted a loan to the ESOP for the purchase of shares of the Corporation’s common stock at the Conversion date. As of September 30, 2014, the ESOP holds 395,934 shares, or 8% of the common stock outstanding on that date. The loan obtained by the ESOP from the Corporation to purchase common stock is payable annually over 25 years at the rate of the prime rate, as published in The Wall Street Journal, which is currently 3.25% per annum. The loan is secured by the shares purchased, which are held in a suspense account for allocation among participants as the loan is repaid. Cash dividends if paid in the future on unallocated shares will be used to repay the outstanding debt of the ESOP then due. If the amount of dividends exceeds the outstanding debt of the ESOP, then, in the sole discretion of the Corporation, cash dividends may be allocated to active participants on a non-discriminatory basis, or be deemed to be general earnings of the ESOP. Shares used as collateral to secure the loan are released and available for allocation to eligible employees as the principal and interest on the loan is paid.

Shares held by the ESOP include the following:

		September 30, 2014

Allocated		—
Committed to be allocated		11,878
Unallocated		384,056
		395,934

The fair value of unallocated shares was approximately $4.1 million at September 30, 2014.

Total compensation expense recognized in connection with the ESOP for the three and nine months ended September 30, 2014 was $44,000 and $125,000, respectively.

Change in Control Severance Plan

The Corporation entered into an Executive Change in Control Severance Plan (“Severance Plan”) effective upon the closing of the conversion and stock offering in January 2014 (see note 1), with certain officers. The participants in the Severance Plan will be paid two times the participants’ base salaries plus their highest bonus in the two calendar years immediately prior to termination, upon a change in control, if the participant is not offered a comparable employment position in a similar geographic location.

Termination Benefits

During the second quarter of 2014, the Corporation offered termination benefits of $103,000 to certain employees who were involuntarily terminated. The expense related to the termination benefits were recorded as a component of salaries and employee benefits expense in accordance with FASB Accounting Standards Codification ASC Topic 420 Exit or Disposal Cost Obligations. The affected employees are not required to render any additional services to receive termination benefits. The benefits are being paid weekly over varying periods up to 20 weeks. During the three months ended September 30, 2014, of the $103,000 of termination expense recorded, $42,000 was paid, and no amount remains unpaid.