Stock Based Compensation

12 Months Ended

Jun. 30, 2023

Stock Based Compensation

Stock Based Compensation

Note 12 – Stock Based Compensation

Stock-based compensation is accounted for in accordance with FASB ASC Topic 718 for Compensation — Stock Compensation. The Company establishes fair value for its equity awards to determine their cost. The Company recognizes the related expense for employees over the appropriate vesting period, or when applicable, service period, using the straight-line method. However, consistent with the guidance, the amount of stock-based compensation recognized at any date must at least equal the portion of the grant date value of the award that is vested at that date. As a result, it may be necessary to recognize the expense using a ratable method.

On May 10, 2022, the shareholders of the Company approved the William Penn Bancorporation 2022 Equity Incentive Plan (the “Plan”). The Plan provides for the issuance of up to 1,769,604 shares (505,601 restricted stock awards and 1,264,003 stock options) of William Penn Bancorporation common stock.

During the year ended June 30, 2022, the Company granted 492,960 shares of restricted stock, with a weighted average grant date fair value of $11.67 per share. To fund the grant of restricted common stock, the Company issued shares from authorized but unissued shares. Restricted shares granted under the Plan vest in equal installments over a five year period. Compensation expense related to the restricted shares is recognized ratably over the vesting period in an amount which totals the market price of the Company’s stock at the grant date. The expense recognized for the restricted shares for the years ended June 30, 2023 and 2022 was $1.1 million and $147 thousand, respectively. The expected future compensation expense related to the 383,258 non-vested restricted shares outstanding at June 30, 2023 was $4.3 million over a weighted average period of 3.88 years. The expected future compensation expense related to the 492,960 non-vested restricted shares outstanding at June 30, 2022 was $5.6 million over a weighted average period of 4.88 years.

The following is a summary of the Company's restricted stock activity during the year ended June 30, 2023:

	Number of		Average
Summary of Non-vested Restricted Stock Award Activity	Shares		Grant Price
Non-vested Restricted Stock Awards outstanding July 1, 2022		492,960	$	11.67
Issued		—		—
Vested		(95,798)		11.66
Forfeited		(13,904)		11.82
Non-vested Restricted Stock Awards outstanding June 30, 2023		383,258	$	11.66

The following is a summary of the Company's restricted stock activity during the year ended June 30, 2022:

	Number of		Average
Summary of Non-vested Restricted Stock Award Activity	Shares		Grant Price
Non-vested Restricted Stock Awards outstanding July 1, 2021		—	$	—
Issued		492,960		11.67
Vested		—		—
Forfeited		—		—
Non-vested Restricted Stock Awards outstanding June 30, 2022		492,960	$	11.67

The fair value of the 95,798 shares that vested during the year ended June 30, 2023 was $914 thousand.

During the year ended June 30, 2022, the Company granted 1,232,400 stock options, with a weighted average grant date fair value of $3.24 per share. Stock options granted under the Plan vest in equal installments over a five year period. Stock options were granted at a weighted average exercise price of $11.67, which represents the fair value of the Company's common stock price on the grant date based on the closing market price, and have an expiration period of 10 years. The fair value of stock options granted was valued using the Black-Scholes option pricing model using the following weighted average assumptions: expected life of 6.5 years, risk-free rate of return

of 2.92%, volatility of 24.85%, and a dividend yield of 1.03%. Compensation expense recognized for the stock options for the years ended June 30, 2023 and 2022 was $771 thousand and $102 thousand, respectively. The expected future compensation expense related to the 1,197,640 stock options outstanding at June 30, 2023 was $3.0 million over a weighted average period of 3.88 years. The expected future compensation expense related to the 1,232,400 stock options outstanding at June 30, 2022 was $3.9 million over a weighted average period of 4.88 years.

The following is a summary of the Company's stock option activity during the year ended June 30, 2023:

	Number of		Exercise Price
Summary of Stock Option Activity	Options		per Shares
Beginning balance July 1, 2022		1,232,400	$	11.67
Granted		—		—
Exercised		—		—
Forfeited		(34,760)		11.82
Expired		—		—
Ending balance June 30, 2023		1,197,640	$	11.66

The following is a summary of the Company's stock option activity during the year ended June 30, 2022:

	Number of		Exercise Price
Summary of Stock Option Activity	Options		per Shares
Beginning balance July 1, 2021		—	$	—
Granted		1,232,400		11.67
Exercised		—		—
Forfeited		—		—
Expired		—		—
Ending balance June 30, 2022		1,232,400	$	11.67

The weighted average remaining contractual term was approximately 8.88 years and there was no aggregate intrinsic value for options outstanding as of June 30, 2023. As of June 30, 2023, exercisable options totaled 239,528 with an average weighted exercise of price of $11.66 per share, a weighted average remaining contractual term of approximately 8.88 years, and no aggregate intrinsic value. The weighted average remaining contractual term was approximately 9.88 years and the aggregate intrinsic value was $80 thousand for options outstanding as of June 30, 2022. There were no exercisable options as of June 30, 2022.