Note

. Employment Benefit and Retirement Plans

Employee stock ownership plan

May 6, 2005,

the Company adopted an employee stock ownership plan (ESOP) for the benefit of substantially all employees. On

July 8, 2005,

the ESOP borrowed

$763,140

from the Company and used those funds to acquire

76,314

shares of the Company’s stock in the initial public offering at a price of

$10.00

per share. On

October 11, 2016,

the ESOP borrowed

$1,907,160

from the Company and used those funds to acquire

190,716

shares of the Company’s stock in its conversion to a fully-public stock holding company at a price of

$10.00

per share.

Shares purchased by the ESOP with the loan proceeds are held in a suspense account and are allocated to ESOP participants on a pro rata basis as principal and interest payments are made by the ESOP to the Company. The loan is secured by shares purchased with the loan proceeds and will be repaid by the ESOP with funds from the Company’s discretionary contributions to the ESOP and earnings on the ESOP assets. Annual principal and interest payments of approximately

$239,000

are to be made by the ESOP.

As shares are released from collateral, the Company will report compensation expense equal to the current market price of the shares, and the shares will become outstanding for earnings-per-share (EPS) computations. Dividends on allocated ESOP shares reduce retained earnings; dividends on unallocated ESOP shares reduce accrued interest. During

2017,

18,779

shares, with an average fair value of

$13.68

per share were committed to be released, resulting in ESOP compensation expense of

$256,849,

as compared to

18,779

shares, with an average fair value of

$10.86

per share were committed to be released, resulting in ESOP compensation expense of

$195,949

for

2016.

A terminated participant or the beneficiary of a deceased participant who received a distribution of employer stock from the ESOP has the right to require the Company to purchase such shares at their fair market value any time within

days of the distribution date. If this right is

not

exercised, an additional

-day exercise period is available in the year following the year in which the distribution is made and begins after a new valuation of the stock has been determined and communicated to the participant or beneficiary. At

December 31, 2017

and

2016,

respectively,

83,242

shares at a fair value of

$14.44,

and

63,443

shares at a fair value of

$12.73,

have been classified as mezzanine capital.

	December 31,
	2017			2016
Shares allocated		104,272			85,493
Shares withdrawn from the plan		(21,030	)		(22,050	)
Unallocated shares		177,418			196,197
Total ESOP shares		260,660			259,640
Fair value of unallocated shares	$	2,561,916		$	2,497,588

Supplemental executive retirement plan (SERP)

September 19, 2007,

the Bank entered into salary continuation agreements with certain of its executive officers to provide additional benefits upon retirement. The present value of the estimated liability under the agreement is being accrued using a discount rate of

4.5

percent ratably over the remaining years to the date when each executive is

first

eligible for benefits. The recorded SERP liability included in other liabilities on the consolidated balance sheets was

$580,896

and

$501,852

for the years ended

December 31, 2017

and

2016,

respectively. The SERP compensation charged to expense totaled

$97,082

and

$86,365

for the years ended

December 31, 2017

and

2016,

respectively.

401

(k) plan

The Bank maintains a voluntary

401

(k) plan for substantially all employees. Employees

may

contribute a percentage of their compensation to the plan subject to certain limits based on federal tax laws. The Bank makes matching contributions to the

401

(k) plan of

percent of the

first

percent of an employee’s compensation contributed to the plan. The Bank also makes Safe Harbor contributions, in addition to any matching contributions, equal to

percent of an eligible employee’s compensation to the

401

(k) plan each pay period. Employer contributions vest to the employee ratably over a

six

-year period. Employer contribution expense was

$173,916

and

$146,920

for the years ended

December 31, 2017

and

2016,

respectively.

Deferred compensation

The Bank has deferred compensation agreements with certain directors. Contributions to the plan for the years ended

December 31, 2017

and

2016

were

$86,472

and

$85,882,

respectively. The deferred compensation liability included on the balance sheet in other liabilities was

$1,519,993

and

$1,361,190

December 31, 2017

and

2016,

respectively.

Director

etirement

lan

The Bank has, as a result of the Twin Oaks merger, a director retirement plan for

six

of the former members of the Twin Oak’s Board of Directors. The plan provides monthly retirement benefits equal to

one

twelfth

of the annual Board fees. Payments are based on years of service on the Twin Oaks Board of Directors prior to the merger, with

ten

years of payments guaranteed. Four of the former members are retired and collecting benefit payments.

Two

former members became part of the Bank’s board as of the merger date and will

not

commence their benefit until they retire. As of the merger date, the Plan was frozen as to benefit accruals and years of service. The compensation liability included on the balance sheet in other liabilities was

$296,903

and

$315,503

as of

December 31, 2017

and

2016,

respectively. This is an unfunded plan.

Director retirement plan valuation

	December 31,
	2017		2016
Number of participants:
Retirees		4		4
Active directors - not yet eligible		2		2
Total		6		6

Obligations

and funded status:

	Years ended December 31,
	2017			2016
	(Amounts in thousands)
Change in benefit obligation
Benefit obligation at beginning of year	$	318		$	335
Service cost		-			-
Interest cost		10			11
Actuarial loss		14			3
Benefits paid		(31	)		(31	)
Assumed liability		-			-
Benefit obligation at end of year		311			318

Change in plan assets
Employer contributions		31			31
Benefits paid		(31	)		(31	)
Fair value of plan assets at year end		-			-

Funded status		(311	)		(318	)
Actuarial loss		14			3
Net amount recognized	$	(297	)	$	(315	)

Amounts recognized in the statement of financial position consist of:

	December 31,
	2017			2016
Accumulated post-retirement benefit obligation:
Active participants	$	(116,478	)	$	(113,270	)
Retired participants including beneficiaries		(194,805	)		(205,196	)
Total		(311,283	)		(318,466	)
Plan assets at fair value		-			-
Funded status		(311,283	)		(318,466	)
Actuarial loss		14,380			2,963
(Accrued) cost included in other liabilities	$	(296,903	)	$	(315,503	)

Components of Net Periodic Benefit Cost:

	Years ended December 31,
	2017		2016
Service cost	$	-	$	-
Interest cost		10,116		11,346
Amortization net gain		14,380		2,963
Net cost (benefit)	$	24,496	$	14,309

Post-retirement health benefit plan

The Bank has a contributory post-retirement health benefit plan for officers that meet eligibility requirements outlined in the employee handbook. The accounting for the health care plan anticipates future cost-sharing changes that are consistent with the Bank’s expressed intent to increase retiree contributions.

Post-retirement health benefits valuation

	December 31,
	2017		2016
Number of participants:
Retirees		3		3
Active employees - fully eligible		-		-
Active employees - not yet eligible		3		3
Total		6		6

Obligations and funded status:

	Years ended December 31,
	2017			2016
	(Amounts in thousands)
Change in benefit obligation
Benefit obligation at beginning of year	$	287		$	277
Service cost		6			7
Interest cost		9			11
Actuarial loss (gain)		(6	)		(5	)
Plan amendments		-			-
Benefits paid		(8	)		(8	)
Retiree contributions		5			5
Benefit obligation at end of year		293			287

Change in plan assets
Employer contributions		4			3
Retiree contributions		5			5
Benefits paid		(9	)		(8	)
Fair value of plan assets at year end		-			-

Funded status		(293	)		(287	)
Actuarial loss (gain)		(119	)		(125	)
Net amount recognized	$	(412	)	$	(412	)

Amounts recognized in the statement of financial position consist of:

	December 31,
	2017			2016
Accumulated post-retirement benefit obligation:
Retirees	$	(82,675	)	$	(78,426	)
Active employees - fully eligible		-			-
Active employees - not yet eligible		(210,774	)		(208,265	)
Total		(293,449	)		(286,691	)
Plan assets at fair value		-			-
Funded status		(293,449	)		(286,691	)
Actuarial (gain)		(118,270	)		(125,028	)
(Accrued) cost included in other liabilities	$	(411,719	)	$	(411,719	)

Components of Net Periodic Benefit Cost:

	Years ended December 31,
	2017			2016
Service cost	$	6,319		$	6,537
Interest cost		8,993			11,363
Amortization net gain		(30,083	)		(20,070	)
Net cost (benefit)	$	(14,771	)	$	(2,170	)