Note 15 - Employee Benefits and Retirement Plans

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Pension and Other Postretirement Benefits Disclosure [Text Block]

NOTE

15

. EMPLOYEE BENEFITS AND RETIREMENT PLANS

401

(k) plan

–

In

1985,

we adopted a profit sharing

401

(k) plan for eligible employees to be funded out of the earnings of the Company. The employees’ contributions are limited to the maximum amount allowable under IRS Section

402

(G). The Company’s safe harbor contributions include a matching contribution of

100%

of the

first

3%

of salary deferred and

50%

of the next

2%

of salary deferred. We made matching contributions aggregating

$627

thousand and

$549

thousand for the years ended

December 31, 2019

and

2018,

respectively. Discretionary contributions are also permitted however, there were

no

discretionary contributions were made over the

two

year reporting period.

Salary continuation plan

– The Board of Directors has approved the implementation of the Supplemental Executive Retirement Plan (SERP), which is a non-qualified executive benefit plan under which we agree to pay certain executives covered by the SERP plan additional benefits in the future in return for continued satisfactory performance.

Benefits under the salary continuation plan differ by participating executive and include a benefit generally payable commencing upon a designated retirement date for a fixed period of

ten

years, disability or termination of employment, and a death benefit for the participants’ designated beneficiaries. Whole life insurance policies were purchased as an investment to provide for our contractual obligation to pay pre-retirement death benefits and to recover our cost of providing benefits. The executive is the insured under the policy, while we are the owner and beneficiary.

The Company accrues for these future benefits from the effective date of the agreements until the executives’ expected final payment date. The amount of accrued benefits approximates the present value of the benefits expected to be provided at retirement. Compensation expense under the salary continuation plan totaled

$547

thousand and

$532

thousand for the years ended

December 31, 2019

and

2018,

respectively. As of

December 31, 2019,

and

2018,

the vested benefit payable was

$4.7

million and

$3.5

million, respectively. We use the FTSE Pension Liability Index as a guideline to establish the discount rate used to present value the benefits under the salary continuation plan.

During the

first

quarter of

2019

as part of our acquisition of Merchants we recorded an additional salary continuation liability of

$968

thousand.

Directors deferred fee compensation –

On

December 19, 2013,

the Board of Directors adopted a Directors Deferred Compensation Plan, which was amended and restated on

February 20, 2018, (

the

“2013

Plan”) to replace the Directors Deferred Compensation Plan dated

January 1, 1993

as amended (the

“1993

Plan”). Both plans allow the eligible Director to voluntarily elect to defer some or all of his or her current fees in exchange for the Company’s promise to pay a deferred benefit. The deferred fees are credited with interest and the accrued liability is paid to the Director following retirement. Directors must stop the deferral of compensation once their total deferred benefit reaches

$500

thousand.

The interest rate in the

2013

Plan is equal to the Bloomberg

20

-year Investment Grade Financial Institutions Index (IGFII) rate (or a similar reference rate we select if that rate is

not

published) in effect on the interest accrual date, plus

two

percent. The

2013

Plan is only available to independent directors and, as a nonqualified deferred compensation plan, is

not

subject to nondiscrimination requirements applicable to qualified plans.

No

deferred compensation is payable to a director until separation from service, whereupon all such compensation, together with interest thereon shall be provided to such Director, or his beneficiary within

thirty

(

30

) days. The Director

may

designate payments to be made in a lump sum or in monthly installments over a period

not

to exceed

120

months.

Although deferrals under the

1993

Plan have ceased, the

1993

Plan remains in effect for all amounts previously deferred in the plan. The interest rate in the

1993

Plan is equal to the Wall Street Journal prime plus

3.00%

or at a fixed rate of

10%.

Under the

1993

Plan, at retirement, Directors are granted the option of continuing to accrue interest on deferred fees. The Director

may

designate payments to be made in a lump sum or in monthly installments over a period

not

to exceed

120

months.

Deferred compensation expense recorded in other noninterest expense totaled

$324

thousand and

$309

thousand for the years ended

December 31, 2019

and

2018,

respectively. As of

December 31, 2019,

and

2018,

the vested benefit payable recorded in

Other Liabilities

in the

Consolidated Balance Sheets

was

$3.9

million.