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Employee Benefit Plans
12 Months Ended
Dec. 31, 2019
Retirement Benefits [Abstract]  
Employee Benefit Plans
EMPLOYEE BENEFIT PLANS
The Company has an Employee Stock Ownership Plan (“ESOP”) that covers substantially all its employees. Employees qualify to participate after one year of service and vest in allocated shares after three years of service. The ESOP acquires stock of the Company by purchasing shares. Dividends on ESOP shares are recorded as a reduction of retained earnings. Contributions are made at the discretion of the Board of Directors. ESOP contributions recognized for the years ended December 31, 2019, 2018 and 2017 totaled $229,000, $124,000 and $242,000, respectively. As of December 31, 2019 and 2018, the ESOP held 156,451 and 161,173 allocated shares and 17,581 and 21,091 unallocated shares. The approximate market values of the shares were $6.2 million and $5.3 million, respectively as of December 31, 2019 and 2018. The estimated value was determined using the Company’s closing stock price of $35.57 and $29.24 per share as of December 31, 2019 and 2018, respectively. In addition, salary and employee benefit expense for the years ended December 31, 2019 and December 31, 2018 included an increase of $3,000 and a decrease of $33,000 for the net change of fair market value of leveraged ESOP shares allocated.
The ESOP has promissory notes with the Company for the purchase of TCFC common stock for the benefit of the participants in the Plan of $602,000 and $718,000 at December 31, 2019 and 2018, respectively. Loan terms are at prime rate plus one-percentage point and amortize over seven (7) years. As principal is repaid, common shares are allocated to participants based on the participant account allocation rules described in the Plan. The Bank is a guarantor of the ESOP debt with the Company. During the year ended December 31, 2019, $155,000 or 4,815 ESOP shares were allocated with the payment of promissory notes. This was offset by the purchase of 3,271 shares of the Company’s common shares for $39,000 with promissory notes by the ESOP and $63,000 in cash during the first and third quarters of 2019, respectively. During the year ended December 31, 2018, $174,000 or 6,061 ESOP shares were allocated with the payment of promissory notes. This was offset by the purchase of 4,244 shares of the Company’s common shares for $137,000 with promissory notes by the ESOP during the third and fourth quarters of 2018.
The Company also has a 401(k) plan. The Company matches a portion of the employee contributions. This ratio is determined annually by the Board of Directors. In 2019, 2018 and 2017, the Company matched one-half of the first 8% of the employee’s contribution. Employees who have completed six months of service are covered under this defined contribution plan. Employee’s vest in the Company’s matching contributions after three years of service. For the years ended December 31, 2019, 2018 and 2017, the expense recorded for this plan totaled $488,000, $405,000 and $298,000, respectively.
The Company maintains a nonqualified deferred compensation plan for the Board of Directors and certain key employees under which each participant may elect to defer all or any portion of board fees or salary otherwise payable. Deferred amounts under this plan will be distributed to participants following termination of service or on a specified date in either lump sum or over a period of one to ten years, as elected by the participant. As of December 31, 2019, and 2018, the liability related to this plan was $2.2 million and $2.1 million, respectively.
The Company has a separate nonqualified retirement plan for non-employee directors. Directors are eligible for a maximum benefit of $3,500 a year for ten years following retirement from the Board of Community Bank of the Chesapeake. The maximum benefit is earned at 15 years of service as a non-employee director. Full vesting occurs after two years of service. Expense recorded for this plan was $26,000, $35,000 and $29,000 for the years ended December 31, 2019, 2018 and 2017, respectively.
In addition, the Company has established individual supplemental retirement plans and life insurance benefits for certain key executives and officers of the Bank. The retirement plans provide retirement income payments for 15 years from the date of the employee’s expected retirement at age 65. The retirement benefit amount for each agreement is set at the discretion of the Board of Directors and vests from the date of the agreement until the expected retirement date. Expense recorded for the plans totaled $885,000, $1,109,000 and $637,000 for 2019, 2018 and 2017, respectively.