EMPLOYEE BENEFITS

The Company sponsors a leveraged employee stock ownership plan (“ESOP”) that covers all employees who meet minimum age and service requirements. The Company makes annual contributions to the ESOP in amounts as determined by the Board of Directors. These contributions are used to service the loan and release additional shares, with the shares serving as collateral for the ESOP debt. As the debt is repaid, shares are released and allocated to active employees, based on the proportion of debt service paid in the year. During 2014, the ESOP borrowed $283,000 from the Company for the purpose of purchasing shares of the Company's common stock. The loan proceeds were used to purchase a total of 16,000 shares at an average price per share of $17.71. During 2015, the ESOP borrowed an additional $997,000 from the Company, to purchase an additional 76,526 shares at an average price per share of $13.02. During 2016, the ESOP borrowed an additional $499,000 from the Company to purchase an additional 62,014 shares at an average price per share of $8.05. During 2017, all outstanding ESOP loans were consolidated into one loan that matures on August 5, 2024. The balance of the ESOP loan was $810,000 and $937,000 at December 31, 2018 and December 31, 2017, respectively.

During the fourth quarter of 2018 as part of a strategic decision to enhance contributions to its 401K, the Company decided to permanently discontinue funding contributions to the Company's ESOP, including contributions to repay the loan made by the Company to the ESOP. The Company plans to use the unreleased ESOP shares to repay the ESOP loan. As a result unearned compensation has been reduced to $0 at December 31, 2018.

ESOP compensation expense consisting of both cash contributions and shares committed to be released for 2018 was 2017 was approximately $242,000 and $472,000, respectively. ESOP shares as of December 31, 2018 and 2017 were as follows:



	2018		2017
Allocated shares	519,085		597,663
Shares released for allocation	11,928		25,875
Unreleased shares	64,336		88,192
Total ESOP shares	595,349		711,730

Fair value of unreleased shares at December 31	$	682,000	$	1,169,000

The Company has deferred compensation arrangements with certain officers, which will provide them a fixed benefit after retirement. During 2018 and 2017, distributions related to these agreements totaled $67,000 and $13,000, respectively. The Company recorded a liability of approximately $1.4 million at December 31, 2018 and 2017 in connection with these agreements. Deferred compensation expense recognized in 2018 and 2017 was approximately $82,000 and $74,000, respectively.

The Company sponsors defined contribution post-retirement benefit agreements to provide death benefits for the designated beneficiaries of certain of the Company's executive officers. Under the agreements, split-dollar whole life insurance contracts were purchased on certain executive officers. The increase in the cash surrender value of the contracts, less the Bank's cost of funds, constitutes the Company's contribution to the agreements each year. In the event the insurance contracts fail to produce positive returns, the Company has no obligation to contribute to the agreements. During 2018 and 2017 the Company incurred expenses of $1,000 and $31,000, respectively, related to the agreements.

The Company has a 401(k) retirement plan covering substantially all employees who have been employed for 90 days and meet certain other requirements. Under this plan, employees can contribute a portion of their salary within the limits provided by the Internal Revenue Code into the plan. The Company made contributions to the plan totaling $245,000 and $271,000 in 2018 and 2017, respectively.