NOTE 20 – Stock Based Compensation

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Stock-Based Compensation Plan

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On May 22, 2025, the Company’s stockholders approved the PFS Bancorp, Inc. 2025 Equity Incentive Plan (the “Plan”). A total of 172,500 stock options and 69,000 restricted shares were approved for award. As of June 30, 2026, 69,000 shares of common stock remained available for grant as stock options, and 27,600 shares of common stock remained available for award of restricted stock under the Plan. The stock options granted to employees and non-employee directors under this plan vest in five installments with the first installment vesting on the first anniversary of the date of grant. The exercise price for all stock options granted is equal to the quoted OTC market close price on the date that the awards were granted and expire ten years after the grant date, if not exercised. The restricted stock awards granted to employees and non-employee directors under this plan vest in five installments with the first installment vesting on the first anniversary of the date of grant.

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Accounting for Stock-Based Compensation Plan

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The fair value of stock options granted is estimated on the grant date using a Black-Scholes pricing model. The fair value of restricted shares is equal to the quoted OTC market closing price on the date of grant. The fair value of stock grants is recognized as compensation expense on a straight-line basis over the vesting period of the grants. Compensation expense is included in salaries and employee benefits in the consolidated statements of income.

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Assumptions are used in estimating the fair value of stock options granted. The weighted average expected life of the stock options represents the period of time that the options are expected to be outstanding. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. The expected volatility is based on the actual volatility of PFS Bancorp, Inc. stock for the weighted average lifetime period prior to issuance date. The following assumptions were used for options issued as of December 31, 2025; no options were granted during the three and six months ended June 30, 2026 and 103,500 options were granted during the three and six months ended June 30, 2025.

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A summary of the Company’s stock option activity for the six months ended June 30, 2026 is presented below.

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The following table summarizes information about the Company’s nonvested stock option activity for the six months ended June 30, 2026:

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The Company amortizes the expense related to stock options as compensation expense over the vesting period. The Company recognized $17 and $0 in stock option expense during the three months ended June 30, 2026 and 2025, respectively and $34 and $0 for the six months ended June 30, 2026 and 2025, respectively.

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At June 30, 2026, the Company had $268 in estimated unrecognized compensation costs related to outstanding stock options that is expected to be recognized over a weighted average period of 4.0 years.

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The following table summarizes information about the Company’s restricted stock activity for the six months ended June 30, 2026:

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The Company amortizes the expense related to restricted stock awards as compensation expense over the vesting period. The Company recognized $23 and $0 in restricted stock expense during the three months ended June 30, 2026 and 2025, respectively and $46 and $0 for the six months ended June 30, 2026 and 2025, respectively. At June 30, 2026, the Company had $359 of unrecognized compensation expense related to restricted stock shares that is expected to be recognized over a weighted average period of 4.0 years.