NOTE

– EMPLOYEE RETIREMENT BENEFIT PLANS

Profit Sharing Plan

– The Company has established a profit-sharing

401

(k) type salary reduction plan (Plan) for all employees that meet the necessary eligibility requirements and participants are fully vested after

six

years of service. For Company matching contributions made for plan years prior to

2014,

annual Company contributions were at the discretion of the Board of Directors. Effective

January 1, 2014,

the Company adopted a Safe Harbor matching contribution provision, whereby it agreed to match

100%

of participant’s contributions up to the

first

of salary and

50%

of the next

2%,

for a total maximum Company matching contribution of

of participant salary, as defined by the Plan. The Safe Harbor matching contribution is guaranteed.

Profit sharing plan expense

was

$381,000

and

$251,000

for the years ended

December 31, 2017

and

2016,

respectively.

Employee Stock Ownership Plan

– The ESOP covers substantially all employees that meet certain age and service requirements. Under the plan, annual retirement expense is generally defined as a percentage of employee compensation, net of forfeitures from employees who have terminated employment.

October 2016,

the ESOP borrowed

$1.5

million from the Company

to purchase

150,358

shares of common stock from the Company at

$10

per share. Bancorp

accepted a

$1.8

million note from the ESOP secured by all unallocated shares in the plan with a

-year repayment term. The principal balance includes

$1.5

million used to purchase stock in

2016

and

$266,000

used to pay off already outstanding ESOP loans used to purchase shares in

2012

and

2014.

Principal and interest payments on the note are made every

December 31

and the interest rate on the loan adjusts annually on

January 1

to the prime rate of interest as published in the Wall Street Journal. The Bank makes at least annual discretionary contributions to the ESOP and the ESOP uses all funds it receives to repay the loan. When loan payments are made, ESOP shares are allocated to participants based on relative compensation for that plan year. At the discretion of the employer, participants

may

receive the shares, cash, or a combination of stock and cash at the end of employment.

the

twelve

months ended

December 31, 2014

and the fiscal year ended

June 30, 2014,

the Company sold

13,948

treasury shares to the ESOP.

Shares held by the ESOP at

December 31, 2017

and

2016

were as follows:

	At December 31,
	2017		2016

Allocated and committed to be allocated to participants		31,578		26,956
Unallocated/unearned		176,102		181,887

Total ESOP shares		207,680		208,843

Fair value of unallocated/unearned shares	$	2,597,501	$	2,289,957

ESOP expense was

$77,000

and

$59,000

for the years ended

December 31, 2017

and

2016,

respectively.

Defined Benefit Plan

– The Company contributes to a multiemployer defined benefit pension plan, the Pentegra Defined Benefit Plan for Financial Institutions (“Pentegra DB Plan”, EIN

5645888

and, Plan

No.

333

). On

June 1, 2006,

the Company froze the benefits available under the defined benefit pension plan. The risk of participating in the Pentegra DB Plan is different from single-employer plans in the following aspects:

●	Assets contributed to the Pentegra DB Plan may be used to provide benefits to employees of other participating employers.

●	If a participating employer stops contributing to the Pentegra DB Plan, the unfunded obligations may be borne by the remaining participating employers.

●	If the Company chooses to stop participating in the Pentegra DB Plan, it may be required to pay a withdrawal liability.

The Company

’s cash contributions to the Pentegra DB Plan were

$110,000

and

$130,000

during the years ended

December 31, 2017

and

2016,

respectively, all of which represented less than

of the total plan contributions. As of

July 1, 2017 (

the most recent valuation report available), the unfunded pension liability was approximately

$218,000

(

95%

funded). Pension plan expense (benefit) for the years ended

December 31, 2017

and

2016

was

$202,000

and

$215,000,

respectively. There are

funding improvement or rehabilitation plans pending, and

future minimum contributions required by collective-bargaining or other contractual agreements. Under U.S. legislation regarding multiemployer pension plans, a company is required to pay an amount that represents its proportionate share of a plan’s unfunded vested benefits in the event of withdrawal (as defined by the legislation) from a plan or upon plan termination.