NOTE 14. EMPLOYEE BENEFIT PLANS

401(k) Plan

The Company offers a 401(k) Plan to employees. Employees may contribute a percentage of their compensation subject to certain limits based on federal tax laws. The Company makes 401(k) Plan matching contributions equal to 100% of the first 5% of an employee’s compensation contributed to the Plan. For the years ended December 31, 2025 and 2024, expense attributable to the 401(k) Plan amounted to $1.3 million and $1.0 million, respectively.

Director and Executive Retirement Plans

The Company has adopted retirement benefit plans for the benefit of all members of the Board of Directors of the Company and certain senior executives. Benefits are being accrued over the directors’ and executives’ required service periods. At December 31, 2025 and 2024, the Company has accrued $8.9 million and $7.6 million, respectively, related to these plans. For the years ended December 31, 2025 and December 31, 2024, expenses related to these plans amounted to $1.2 million and $211 thousand, respectively.

Incentive Compensation Plan

The Company has an Employee Bonus and Management Incentive Compensation Plan (the “Bonus Plan”) in which employees are eligible to participate. The Bonus Plan provides for awards based on a combination of Company and individual performance objectives being met subject to the approval of the Board of Directors. The amount charged to expense under the Bonus Plan amounted to $3.4 million and $3.6 million for the years ended December 31, 2025 and 2024, respectively.

Phantom Stock Plan

The Company maintained a Long-term Incentive Plan (the “Plan”) that was terminated in 2025. The Plan allowed for the awarding of phantom stock appreciation shares which increased in value based on the Company’s Tier 1 capital. Shares were granted at the discretion of the Board of Directors and vested over four years, with expenses recognized annually over the vesting period based on the increase in phantom share value as defined in the Plan. For the year ended December 31, 2025, expense related to this plan amounted to $1.1 million and included the cost to terminate this plan. For the year ended December 31, 2024, expense related to this plan amounted to $660 thousand.

Employee Stock Ownership Plan

As part of the Initial Public Offering ("IPO") completed on July 31, 2025, the Bank established a tax-qualified ESOP to provide eligible employees the opportunity to own Company shares. The ESOP borrowed $16.1 million from the Company to purchase 1,606,100 common shares in the IPO. The loan is payable in annual installments over 20 years. As the loan is repaid to the Company, shares are released and allocated proportionally to eligible participants on the basis of each participant’s proportional share of compensation relative to the compensation of all participants. The unallocated ESOP shares are pledged as collateral on the loan.

The Company accounts for its ESOP in accordance with Accounting Standards Codification ("ASC") FASB ASC 718-40, Compensation – Stock Compensation. Under this guidance, unreleased shares are deducted from shareholders’ equity as unearned ESOP shares in the accompanying consolidated balance sheets.

The Company recognizes compensation expense equal to the fair value of the ESOP shares during the periods in which they are committed to be released. To the extent that the fair value of the Company’s ESOP shares differs from the cost of such shares, the difference will be credited or debited to shareholders' equity. As the loan is internally leveraged, the loan receivable from the ESOP to the Company is not reported as an asset nor is the debt of the ESOP shown as a liability on the Company’s consolidated balance sheets.

For the year ended December 31, 2025, the Company recognized $1.1 million of compensation expense related to the ESOP. The following table presents share information held by the ESOP: