Since 1996, we have maintained an Equity Incentive Plan for Employees. During 2024, we adopted a plan that made a total of 4,500,000 shares of Class A common stock available for issuance to employees of our subsidiaries and affiliates. The plan provides for the granting of awards by our board of directors in the form of stock options, restricted stock, restricted stock units, other stock-based awards or any combination of the above. The plan provides that stock options may become exercisable up to ten years from their date of grant, with an option price not less than fair market value on the date preceding the date of grant.

Since 1996, we have maintained an Equity Incentive Plan for Directors. During 2024, we adopted a new plan that made 500,000 shares of Class A common stock available for issuance to our directors and the directors of our subsidiaries and affiliates. We may make awards under this plan in the form of stock options, restricted stock, restricted stock units, other stock-based awards or any combination of the above. The plan also provides for the issuance of 500 shares of restricted stock on the first business day of January in each year to each of our directors and each director of Donegal Mutual who does not serve as one of our directors. We issued 8,000 shares of restricted stock on January 2, 2025 under our director plan. We issued 8,500 shares of restricted stock on January 2, 2024 and January 3, 2023 under our prior director plan.

We measure all share-based payments to employees, including grants of employee stock options, using a fair-value-based method and record such expense in our results of operations. In determining the expense we record for stock options granted to directors and employees of our subsidiaries and affiliates, we estimate the fair value of each option award on the date of grant using the Black-Scholes option pricing model. The significant assumptions we utilize in applying the Black-Scholes option pricing model are the risk-free interest rate, expected term, dividend yield and expected volatility. The risk-free interest rate is the implied yield currently available on U.S. Treasury zero coupon issues with a remaining term equal to the expected term used as the assumption in the model. We base the expected term of an option award on our historical experience for similar awards. We determine the dividend yield by dividing the per share dividend by the grant date stock price. We base the expected volatility on the volatility of our stock price over a historical period comparable to the expected term.

We historically granted stock options on an annual basis at our December board meeting, which occurs in the middle of December. At its December 18, 2025 board meeting, our board of directors approved the recommendation of the compensation committee to change the form of equity awards we issue on an annual basis from stock options to restricted stock units and to delay issuance until the first day of the next calendar year. Accordingly, we did not grant any restricted stock units during 2025. On January 1, 2026, we granted restricted stock unit awards to our officers and the officers of Donegal Mutual that will vest in three equal annual installments. We plan to grant restricted stock units on January 1 of each year. This practice will allow for vesting under each grant to occur on the same date and for the value of shares our named executive officers receive upon vesting of multiple grants to be calculated consistently using the closing price of Class A common stock on the last trading day of the preceding year.

The weighted-average grant date fair value of options we granted during 2024 was $1.41. We calculated this fair value based upon a risk-free interest rate of 4.35%, an expected life of three years, an expected volatility of 16% and an expected dividend yield of 4.4%.

The weighted-average grant date fair value of options we granted during 2023 was $1.51. We calculated this fair value based upon a risk-free interest rate of 4.12%, an expected life of three years, an expected volatility of 20% and an expected dividend yield of 5%.

We charged compensation expense for our stock compensation plans against income before income taxes of $1.0 million, $980,911 and $876,569 for the years ended December 31, 2025, 2024 and 2023, respectively, with a corresponding income tax benefit of $210,355, $205,991 and $184,079. At December 31, 2025 and 2024, our total unrecognized compensation cost related to non-vested share-based compensation granted under our stock compensation plans was $794,210 and $1.8 million, respectively. We expect to recognize this cost over a weighted average period of 1.2 years.

During 2025, we received cash from option exercises under all stock compensation plans of $18.9 million. We realized actual tax benefits for the tax deductions from option exercises of share-based compensation of $1.3 million for 2025. During 2024, we received cash from option exercises under all stock compensation plans of $30.7 million. We realized actual tax benefits for the tax deductions from option exercises of share-based compensation of $370,644 for 2024. During 2023, we received cash from option exercises under all stock compensation plans of $6.8 million. We realized actual tax benefits for the tax deductions from option exercises of share-based compensation of $139,135 for 2023.

Since 1996, we have maintained an Employee Stock Purchase Plan. During 2021, we adopted a plan that made 500,000 shares of our Class A common stock available for issuance and extends over a 10-year period. The plan provides for shares to be offered to all eligible employees at a purchase price equal to the lesser of 85% of the fair market value of our Class A common stock on the last day before the first day of each enrollment period (June 1 and December 1 of each year) under the plan or 85% of the fair market value of our Class A common stock on the last day of each subscription period (June 30 and December 31 of each year).

Since 1996, we have maintained an Agency Stock Purchase Plan. During 2021, we adopted a plan that made 500,000 shares of our Class A common stock available for issuance to agents of our insurance subsidiaries and Donegal Mutual. During 2024, we adopted a new plan that made 500,000 shares of our Class A common stock available for issuance to agents of our insurance subsidiaries and Donegal Mutual. The plan permits an agent to invest up to $12,000 per subscription period (April 1 to September 30 and October 1 to March 31 of each year) under various methods. We issue stock at the end of each subscription period at a price equal to 90% of the average market price during the last ten trading days of each subscription period. During 2025, we issued 49,200 shares under the 2024 plan. Following this issuance, we had 450,800 shares available for issuance under the 2024 plan. During 2024 and 2023, we issued 81,180 and 86,469 shares, respectively, under the 2021 plan. The expense we recognized under this plan was not material.