Note 18: ESOP

In connection with the Conversion, the Company established an Employee Stock Ownership Plan (“ESOP”) for the exclusive benefit of eligible employees. The Company will make annual contributions to the ESOP in amounts as defined by the plan document. These contributions are used to pay debt service. Certain ESOP shares are pledged as collateral for debt. As the debt is repaid, shares are released from collateral and allocated to active participants, based on the proportion of debt service paid in the year. Shares allocated to participants are vested by 20% after one year of service (from the formation of PFS Bancorp, Inc.) 40% after 2 years, 60% after 3 years, 80% after 4 year and are fully vested after 5 years. If an employee retires, once meeting retirement age criteria, the shares are 100% vested.

In connection with the Company’s initial public stock offering, the ESOP borrowed $1.38 million from the Company for the purpose of purchasing shares of the Company’s common stock. A total of 138,000 shares were purchased with the loan proceeds. Accordingly, common stock acquired by the ESOP is shown as a reduction of shareholder’s equity. The loan is expected to be repaid over a period of up to 25 years.

The annual contribution to the ESOP was made during the year ended December 31, 2024, as loan payments are made annually on December 31^st of each year. Compensation expense is recognized over the service period based on the average fair value of the shares and totaled $13 and $12 for the three months ended June 30, 2025 and 2024, respectively, and $28 and $25 for six months ended June 30, 2025 and 2024, respectively, and $53 for the year ended December 31, 2024.

At December 31, 2024, there were 11,040 shares allocated to participants. There were 2,760 shares committed to be released to participants and 124,200 unallocated shares as of June 30, 2025. The fair value of unallocated ESOP shares totaled $1.4 million and $1.4 million at June 30, 2025 and December 31, 2024, respectively.