Note 12. ESOP

In connection with the Conversion, the Company established an ESOP for the exclusive benefit of eligible employees. The Company makes quarterly contributions to the ESOP in amounts as defined by the plan document. The contributions are used to pay debt services. Certain ESOP shares are pledged as collateral for debt. As the debt is repaid, shares are released from collateral and allocated to active employees, based on the proportion of debt service paid during the year.

In connection with the Company’s initial public offering, the ESOP borrowed $4,447,580 payable to the Company for the purpose of purchasing shares of the Company’s common stock. A total of 444,758 shares were purchased with loan proceeds. Common stock acquired by the ESOP is shown as a reduction of stockholders’ equity. The loan is expected to be repaid over a period of up to 20 years and bears interest at 8.5%. Principal and interest payments totaling approximately $112,000 are due quarterly.

Contributions to the ESOP totaled $449,000 during the year ended December 31, 2025. Compensation expense is recognized over the service period based on the average fair value of the shares and totaled $287,000 and $246,000, respectively, for the years ended December 31, 2025 and 2024.

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The fair value of unallocated ESOP shares totaled $6,008,000 and $4,497,000 at December 31, 2025 and 2024, respectively.