Note

Employee Benefit Plans

401

(k) Plan

The Company has a Retirement Accumulation Plan qualifying under IRS Code Section

401

(k), in which NBI, NBB and NBFS are participating employers. Eligible participants

may

contribute up to

100%

of their total annual compensation to the plan, subject to certain limits based on federal tax laws. Employee contributions are matched by the employer based on a percentage of an employee’s total annual compensation contributed to the plan. For the years ended

December 31, 2019,

2018

and

2017,

the Company contributed

$379,

$364

and

$340,

respectively, to the plan.

Employee Stock Ownership Plan

The Company has a non-leveraged Employee Stock Ownership Plan (ESOP) which enables employees of NBI and its subsidiaries who have

one

year of service and who have attained the age of

prior to the plan’s

January 1

and

July 1

enrollment dates to own NBI common stock. Contributions to the ESOP, which are

not

mandatory, are determined annually by the NBI Board of Directors. Contribution expense amounted to

$300,

$300

and

$200

in the years ended

December 31, 2019,

2018

and

2017,

respectively. Dividends on ESOP shares are charged to retained earnings. As of

December 31, 2019,

the number of shares held by the ESOP was

190,343.

All shares held by the ESOP are treated as outstanding in computing the Company’s basic net income per share. Upon reaching age

with

years of plan participation, a vested participant has the right to diversify

50%

of his or her allocated ESOP shares and NBI or the ESOP, with the agreement of the trustee, is obligated to purchase those shares. The ESOP contains a put option which allows a withdrawing participant to require the Company or the ESOP, if the plan administrator agrees, to purchase his or her allocated shares if the shares are

not

readily tradable on an established market at the time of distribution.

Salary Continuation Plan

The Company has a non-qualified Salary Continuation Plan for certain key officers. The plan provides the participating officers with supplemental retirement income, payable for the greater of

years after retirement or the officer’s lifetime. The expense accrued for the plans in

2019,

2018,

and

2017,

based on the present value of the retirement benefits, amounted to

$270,

$255,

and

$272,

respectively. The plan is unfunded. However bank-owned life insurance has been acquired on the life of the key employees in amounts sufficient to discharge the obligations of the agreement.

Defined Benefit Plan

The Company’s defined benefit pension plan covers substantially all employees. The plan benefit formula is based upon the length of service of retired employees and a percentage of qualified W-

compensation during their final years of employment. Information pertaining to activity in the plan during the years indicated is as follows:

	December 31,
	2019			2018			2017
Change in benefit obligation
Projected benefit obligation at beginning of year	$	23,688		$	23,492		$	21,059
Service cost		801			868			692
Interest cost		884			802			743
Actuarial loss (gain)		5,162			(423	)		1,417
Benefits paid		(894	)		(1,051	)		(419	)
Projected benefit obligation at end of year	$	29,641		$	23,688		$	23,492

Change in plan assets
Fair value of plan assets at beginning of year	$	21,786		$	23,428		$	17,038
Actual return on plan assets		4,115			(591	)		2,302
Employer contribution		---			---			4,507
Benefits paid		(894	)		(1,051	)		(419	)
Fair value of plan assets at end of year	$	25,007		$	21,786		$	23,428

Funded status at the end of the year	$	(4,634	)	$	(1,902	)	$	(64	)

Amounts recognized in the Consolidated Balance Sheet
Deferred tax asset	$	973		$	399		$	13
Other liabilities		(4,634	)		(1,902	)		(64	)
Total amounts recognized in the Consolidated Balance Sheet	$	(3,661	)	$	(1,503	)	$	(51	)

Amounts recognized in accumulated other comprehensive (loss), net
Net loss	$	(10,983	)	$	(9,107	)	$	(7,923	)
Prior service cost		120			230			340
Deferred tax asset		2,281			1,864			1,592
Amount recognized	$	(8,582	)	$	(7,013	)	$	(5,991	)

Accrued/Prepaid benefit c ost, net
Benefit obligation	$	(29,641	)	$	(23,688	)	$	(23,492	)
Fair value of assets		25,007			21,786			23,428
Unrecognized net actuarial loss		10,983			9,107			7,923
Unrecognized prior service cost		(120	)		(230	)		(340	)
Deferred tax liability		(1,308	)		(1,465	)		(1,579	)
Prepaid benefit cost included in other assets	$	4,921		$	5,510		$	5,940

Components of net periodic benefit cost
Service cost	$	801		$	868		$	692
Interest cost		884			802			743
Expected return on plan assets		(1,461	)		(1,601	)		(1,097	)
Amortization of prior service cost		(110	)		(110	)		(110	)
Recognized net actuarial loss		632			585			540
Net periodic benefit cost	$	746		$	544		$	768

Other changes in plan assets and benefit obligations recognized in other comprehensive income (loss)
Net (gain) loss	$	1,876		$	1,184		$	(328	)
Amortization of prior service cost		110			110			110
Deferred income tax expense (benefit)		(417	)		(272	)		46
Total recognized	$	1,569		$	1,022		$	(172	)

Total recognized in net periodic benefit cost and other comprehensive income (loss)	$	2,732		$	1,838		$	550

Weighted average assumptions at end of the year
Discount rate used for net periodic pension cost		4.00	%		3.50	%		4.00	%
Discount rate used for disclosure		3.00	%		4.00	%		3.50	%
Expected return on plan assets		7.50	%		7.50	%		7.50	%
Rate of compensation increase		3.00	%		3.00	%		3.00	%

Long Term Rate of Return

The Company, as plan sponsor, selects the expected long-term rate-of-return-on-assets assumption in consultation with its investment advisors and actuary. This rate is intended to reflect the average rate of earnings expected to be earned on the funds invested or to be invested to provide plan benefits. Historical performance is reviewed, especially with respect to real rates of return (net of inflation), for the major asset classes held or anticipated to be held by the trust, and for the trust itself. Undue weight is

not

given to recent experience, which

may

not

continue over the measurement period, but higher significance is placed on current forecasts of future long-term economic conditions.

Because assets are held in a qualified trust, anticipated returns are

not

reduced for taxes. Further, and solely for this purpose, the plan is assumed to continue in force and

not

terminate during the period during which assets are invested. However, consideration is given to the potential impact of current and future investment policy, cash flow into and out of the trust, and expenses (both investment and non-investment) typically paid from plan assets (to the extent such expenses are

not

explicitly estimated within periodic cost).

The Company, as plan sponsor, has adopted a Pension Administrative Committee Policy (the Policy) for monitoring the investment management of its qualified plans. The Policy includes a statement of general investment principles and a listing of specific investment guidelines, to which the committee

may

make documented exceptions. The guidelines state that, unless otherwise indicated, all investments that are permitted under the prudent investor rule shall be permissible investments for the defined benefit pension plan. All plan assets are to be invested in marketable securities. Certain investments are prohibited, including commodities and future contracts, private placements, repurchase agreements, options and derivatives. The Policy establishes quality standards for fixed income investments and mutual funds included in the pension plan trust. The Policy also outlines diversification standards.

The preferred target allocation for the assets of the defined benefit pension plan is

65%

in equity securities and

35%

in fixed income securities. Equity securities include investments in large-cap and mid-cap companies primarily located in the United States, although a small number of international large-cap companies are included. There are also investments in mutual funds holding the equities of large-cap and mid-cap U.S. companies. Fixed income securities include U.S. government agency securities and corporate bonds from companies representing diversified industries. There are

investments in hedge funds, private equity funds or real estate.

Fair value measurements of the pension plan’s assets at

December 31, 2019

and

December 31, 2018

are as follows:

	Fair Value Measurements at December 31, 201 9
Asset Category	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash	$	4,350	$	4,350	$	---	$	---
Equity securities:
U. S. companies		11,098		11,098		---		---
International companies		2,334		2,334		---		---
Equities mutual funds (1)		1,343		1,343		---		---
State and political subdivisions		202		---		202		---
Corporate bonds – investment grade (2)		5,680		---		5,680		---
Total pension plan assets	$	25,007	$	19,125	$	5,882	$	---

(

)

This category comprises actively managed equity funds invested in large-cap and mid-cap U.S. companies.

(

)

This category represents investment grade bonds of U.S. issuers from diverse industries.

	Fair Value Measurements at December 31, 2018
Asset Category	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash	$	1,917	$	1,917	$	---	$	---
Equity securities:
U. S. companies		8,782		8,782		---		---
International companies		471		471		---		---
Equities mutual funds (1)		2,174		2,174		---		---
U. S. government agencies and corporations		50		---		50		---
State and political subdivisions		202		---		202		---
Corporate bonds – investment grade (2)		8,190		---		8,190		---
Total pension plan assets	$	21,786	$	13,344	$	8,442	$	---

(

)

This category comprises actively managed equity funds invested in large-cap and mid-cap U.S. companies.

(

)

This category represents investment grade bonds of U.S. issuers from diverse industries.

The Company’s required minimum pension contribution for

2020

has

not

yet been determined.

Estimated future benefit payments, which reflect expected future service, as appropriate, are as follows:

2020	$	5,629
2021	$	809
2022	$	1,386
2023	$	913
2024	$	1,644
2025 - 2029	$	9,519