Stock Based Compensation

6 Months Ended

Dec. 31, 2023

Stock Based Compensation

Stock Based Compensation

Note 11 – 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 Company 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 three and six months ended December 31, 2023 was $281 thousand and $563 thousand, respectively, and $269 thousand and $558 thousand for the three and six months ended December 31, 2022, respectively. The expected future compensation expense related to the 383,258 non-vested restricted shares outstanding at December 31, 2023 was $3.8 million over a weighted average period of 3.37 years. The expected future compensation expense related to the 479,056 non-vested restricted shares outstanding at December 31, 2022 was $4.9 million over a weighted average period of 4.37 years.

The following is a summary of the Company's restricted stock activity during the six months ended December 31, 2023:

			Weighted
	Number of		Average
Summary of Non-vested Restricted Stock Award Activity	Shares		Grant Price
Non-vested Restricted Stock Awards outstanding July 1, 2023		383,258	$	11.66
Issued		—		—
Vested		—		—
Forfeited		—		—
Non-vested Restricted Stock Awards outstanding December 31, 2023		383,258	$	11.66

The following is a summary of the Company's restricted stock activity during the six months ended December 31, 2022:

			Weighted
	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		—		—
Forfeited		(13,904)		11.82
Non-vested Restricted Stock Awards outstanding December 31, 2022		479,056	$	11.66

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 three and six months ended December 31, 2023 was $195 thousand and $390 thousand, respectively. Compensation expense recognized for the stock options for the three and six months ended December 31, 2022 was $186 thousand and $387 thousand, respectively. The expected future compensation expense related to the 1,197,640 stock options outstanding at December 31, 2023 was $2.6 million over a weighted average period of 3.37 years. The expected future compensation expense related to the 1,197,640 stock options outstanding at December 31, 2022 was $3.4 million over a weighted average period of 4.37 years.

The following is a summary of the Company's stock option activity during the six months ended December 31, 2023:

	Number of		Exercise Price
Summary of Stock Option Activity	Options		per Shares
Beginning balance July 1, 2023		1,197,640	$	11.66
Granted		—		—
Exercised		—		—
Forfeited		—		—
Expired		—		—
Ending balance December 31, 2023		1,197,640	$	11.66

The following is a summary of the Company's stock option activity during the six months ended December 31, 2022:

			Weighted
	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 December 31, 2022		1,197,640	$	11.66

The weighted average remaining contractual term was approximately 8.38 years and the aggregate intrinsic value was $653 thousand for options outstanding as of December 31, 2023. As of December 31, 2023, exercisable options totaled 239,528 with a weighted average exercise of price of $11.66 per share, a weighted average remaining contractual term of approximately 8.38 years, and the aggregate intrinsic value was $131 thousand. The weighted average remaining contractual term was approximately 9.38 years and the aggregate intrinsic value was $545 thousand for options outstanding as of December 31, 2022. There were no exercisable options as of December 31, 2022.