Employee Stock Ownership Plan

12 Months Ended

Dec. 31, 2023

Retirement Benefits [Abstract]

Employee Stock Ownership Plan

Employee Stock Ownership Plan

The Bank maintains an ESOP which all full-time employees are eligible to participate in after they attain age 21 and complete one year of service during which they work at least 1000 hours. ESOP shares are allocated among participants on the basis of compensation earned during the year. Employees are fully vested in their ESOP account after the completion of five years of credited service or completely, if service was terminated due to death, retirement, disability or change in control of the Company. ESOP participants are entitled to receive distributions from the ESOP account only upon termination of service, which includes retirement and death, except that a participant may elect to have dividends distributed as a cash payment on a quarterly basis.

Over the years, the ESOP has borrowed from the Company to purchase shares of common stock. During 2023, the ESOP had two outstanding loan agreements with the Bank (“the 2018 loan” and “the 2021 loan”).

The 2018 loan originally allowed the ESOP to borrow an additional $8.4 million from the Company at a fixed interest rate of 3.25%, which matures on December 31, 2026, to purchase 292,592 shares of common stock. The 2021 loan originally allowed the ESOP to borrow an additional $3.2 million from the Company at a fixed interest rate of 0.22% to purchase 145,693 shares of common stock, which matured on December 31, 2023.

Both loans are to be repaid from contributions by the Bank to the ESOP trustee. The Bank is required to make contributions to the ESOP in amounts at least equal to the principal and interest requirement of both debts.

The Bank’s obligation to make such contributions is reduced to the extent of any dividends paid by the Company on unallocated shares and any investment earnings realized on such dividends. As of December 31, 2023 and 2022, contributions to the ESOP, which were used to fund principal and interest payments on the ESOP loans, both totaled $2.7 million. During 2023 and 2022, $254,000 and $245,000, respectively, of dividends paid on unallocated ESOP shares were used for debt service. At December 31, 2023 and 2022, the loan had an outstanding balance of $4.2 million and $6.8 million, respectively, and the ESOP had unallocated shares of 197,588 and 317,343, respectively. At December 31, 2023, the unallocated shares had a fair value of $3.4 million. The unamortized balance of the ESOP is shown as unallocated common stock held by the ESOP and is reflected as a reduction of stockholders’ equity.

For the year ended December 31, 2023, the Bank recorded compensation expense related to the ESOP of $2.1 million which included $341,000 related to a decrease in compensation expense to reflect the decrease in the average fair value of shares committed to be released and allocated shares below the Bank’s cost. For the years ended December 31, 2022, and 2021, the Bank recorded compensation expense related to the ESOP of $2.5 million and $2.2 million, respectively, which included $82,000 and $179,000, respectively, of additional compensation expense to reflect the increase in the average fair value of shares committed to be released and allocated shares in excess of the Bank’s cost. As of December 31, 2023, 2,765,724 shares had been allocated to participants and 119,755 shares were committed to be released for services rendered in 2023.