EMPLOYEE BENEFIT PLANS

12 Months Ended

Dec. 31, 2022

(12) EMPLOYEE BENEFIT PLANS

Defined Contribution Plan:

The Company has a qualified defined contribution plan available to all eligible employees. The plan allows participating employees to make tax-deferred contributions under Internal Revenue Code Section 401(k). The Company contributed $67,000 and $61,000 to the plan for the years ended December 31, 2022 and 2021, respectively.

Employee Stock Ownership Plan:

In connection with the Conversion, the Bank established a leveraged ESOP for eligible employees of the Company and the Bank. The ESOP trust purchased 204,789 shares of Company common stock at the initial public offering price of $10.00 per share financed by a 20-year term loan with the Company. The loan is secured by shares purchased with the loan proceeds and will be repaid by the ESOP with funds from the Company’s discretionary contributions to the ESOP and earnings on ESOP assets. The employer loan and the related interest income are not recognized in the consolidated financial statements as the debt is serviced by employer contributions. Dividends payable on allocated shares are charged to retained earnings and are satisfied by the allocation of cash dividends to participant accounts. Dividends payable on unallocated shares are not considered dividends for financial reporting purposes. Shares held by the ESOP trust are held in a suspense account and allocated to participant accounts as principal and interest payments are made by the ESOP to the Company. Payments of principal and interest are due annually on December 31, the Company’s fiscal year end.

As shares are committed to be released for allocation to participant accounts from collateral, the Company reports compensation expense equal to the average fair value of shares committed to be released during the year with a corresponding credit to stockholders’ equity and the shares become outstanding for earnings per share computations. The compensation expense is accrued throughout the year.

Compensation expense recognized for the years ended December 31, 2022 and 2021 was $173,000 and $184,000, respectively. Company common stock held by the ESOP trust at December 31, 2022 and 2021 was as follows:


	2022		2021

Allocated shares		52,430		39,847
Unallocated shares		152,359		164,942

Total ESOP shares		204,789		204,789

Fair value of unallocated shares	$	1,982,000	$	2,474,000

Mid-Southern Bancorp, Inc. 10-K