SAUL CENTERS, INC.BFS
SAUL CENTERS, INC. Stock Compensation Disclosure
Stock-based Employee Compensation, Stock Option Plans, and Deferred Compensation Plan for Directors
In 2004, the Company established a stock incentive plan (the “Options Plan”), as amended. Under the Options Plan, options were granted at an exercise price not less than the market value of the common stock on the date of grant and expire ten years from the date of grant. Officer options vest ratably over four years following the grant and are charged to expense using the straight-line method over the vesting period. Director options vest immediately and are charged to expense as of the date of grant. The Options Plan was replaced with the Incentive Plan (discussed below) during May 2024.
The Company uses the fair value method to value and account for employee stock options. The fair value of options granted is determined at the time of each award using the Black-Scholes model, a widely used method for valuing stock-based employee compensation, and the following assumptions: (1) Expected Volatility determined using the most recent trading history of the Company’s common stock (month-end closing prices) corresponding to the average expected term of the options; (2) Average Expected Term of the options is based on prior exercise history, scheduled vesting and the expiration date; (3) Expected Dividend Yield determined by management after considering the Company’s current and historic dividend yield rates, the Company’s yield in relation to other retail REITs and the Company’s market yield at the grant date; and (4) a Risk-free Interest Rate based upon the market yields of U.S. Treasury obligations with maturities corresponding to the average expected term of the options at the grant date. The Company amortizes the value of options granted ratably over the vesting period and includes the amounts as compensation expense in general and administrative expenses.
Effective May 12, 2023, the Compensation Committee granted options to purchase 253,500 shares (31,509 incentive stock options and 221,991 nonqualified stock options) to 18 Company officers and 12 Company Directors (the “2023 Options”), which expire on May 11, 2033. The officers’ 2023 Options vest 25% per year over four years and are subject to early expiration upon termination of employment. The directors’ 2023 Options were immediately exercisable. The exercise price of $33.79 per share was the closing market price of the Company’s common stock on the date of award. Using the Black-Scholes model, the Company determined the total fair value of the 2023 Options to be $1.4 million, of which $1.2 million and $195,900 were assigned to the officer options and director options, respectively. Because the directors’ options vested immediately, the entire $195,900 was charged to expense as of the date of grant. The expense for the officers’ options is being recognized as compensation expense monthly during the four years the options vest.
The following table summarizes the assumptions used in the valuation of the 2023 option grants. During the years ended December 31, 2025, 2024, and 2023 stock option expense totaling $0.5 million, $0.7 million, and $1.0 million, respectively, was included in general and administrative expense in the Consolidated Statements of Operations. As of December 31, 2025, the estimated future expense related to unvested stock options was $0.4 million.
| Directors | Officers | ||||||||||
| Grant date | May 12, 2023 | May 12, 2023 | |||||||||
| Exercise price | $33.79 | $33.79 | |||||||||
| Fair value per option | $6.53 | $6.06 | |||||||||
| Volatility | 0.319 | 0.288 | |||||||||
| Expected life (years) | 5.0 | 7.0 | |||||||||
| Assumed yield | 4.94 | % | 4.96 | % | |||||||
| Risk-free rate | 3.45 | % | 3.45 | % | |||||||
The table below summarizes the option activity for the years 2025, 2024, and 2023:
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||
| Shares | Weighted Average Exercise Price | Shares | Weighted Average Exercise Price | Shares | Weighted Average Exercise Price | ||||||||||||||||||||||||||||||
| Outstanding at January 1 | 1,183,000 | $ | 48.55 | 1,820,000 | $ | 49.41 | 1,768,375 | $ | 51.28 | ||||||||||||||||||||||||||
| Granted | — | — | — | — | 253,500 | 33.79 | |||||||||||||||||||||||||||||
| Exercised | — | — | (10,625) | 33.79 | — | — | |||||||||||||||||||||||||||||
| Expired/Forfeited | (87,500) | 51.07 | (626,375) | 51.29 | (201,875) | 46.20 | |||||||||||||||||||||||||||||
| Outstanding December 31 | 1,095,500 | 48.35 | 1,183,000 | 48.55 | 1,820,000 | 49.41 | |||||||||||||||||||||||||||||
| Exercisable at December 31 | 966,375 | 49.56 | 943,250 | 50.64 | 1,370,125 | 52.02 | |||||||||||||||||||||||||||||
The intrinsic value of stock options outstanding or exercisable measures the price difference between the options' exercise price and the closing share price quoted by the New York Stock Exchange as of the date of measurement. There were no options exercised in 2025 and 2023. There were 10,625 options exercised in 2024. The intrinsic value of options exercised in 2024 was $58,200. The intrinsic value of options outstanding and exercisable at year end 2025 were both zero. The intrinsic value of options outstanding and exercisable at year end 2024 was $0.9 million and $0.3 million, respectively. At December 31, 2025, the final trading day of calendar 2025, the closing price of $31.53 per share was used for the calculation of aggregate intrinsic value of options outstanding and exercisable at that date. The weighted average remaining contractual life of the Company’s exercisable and outstanding options at December 31, 2025 are 4.0 and 4.3 years, respectively.
On May 17, 2024, following shareholder approval, the Company established the Saul Centers, Inc. 2024 Stock Incentive Plan (the “Incentive Plan”), under which various equity incentives may be granted. Grants are split between time-vested and performance-based depending on to whom they are granted. Grants of time-vested restricted stock awards to officers will vest on an annual basis over five years. The performance-based restricted stock awards granted to officers will vest on the fifth anniversary of the award’s grant date. The performance measurement for the performance-based awards is the Company’s annual actual funds from operations compared to the annual funds from operations target established by the Board. Performance-based awards are earned on a sliding scale from 50% to 150% of the number of shares granted as the Company’s actual funds from operations scales from 90% to 110% of the Board’s established target, with a minimum result of 90% of the target required for the award to vest. Grants of time-vested restricted stock awards to non-employee directors vest on an annual basis over three years.
The Company uses the fair value method to value and account for restricted stock awards. The fair value of granted restricted stock is determined at the time of the grant using a discounted cash flow analysis, and the following assumptions: (1) Expected Dividend Yield determined by management after considering the Company’s current and historic dividend yield, the Company’s yield in relation to other retail REITs and the Company’s market yield at the grant date; (2) the closing price of the Company’s common stock on the date of the grant; (3) estimated forfeitures; and (4) a present value discount rate equal to the Expected Dividend Yield. The Company amortizes the value of granted restricted stock ratably over the vesting period and includes the amounts as compensation expense in general and administrative expenses. For accounting purposes, (a) time-vested restricted stock awards are granted on the date the Board authorizes the grant and (b) performance-based restricted stock awards are granted on the date the Board establishes the performance target.
Dividends on restricted stock awards will accrue commencing on the grant date and will be paid when the underlying shares vest. Restricted stock awards are measured at fair value, adjusted for estimated forfeitures and estimated or actual results of the Company compared to the Board-established targets. The cost of restricted stock compensation is charged to expense ratably from the grant date through the vesting date and will be adjusted periodically for changes in forfeiture estimates and, for performance-based awards, estimated or actual results of the Company compared to the Board-established targets.
The following table summarizes the 2025 restricted stock awards:
| Directors | Officers | |||||||||||||
| Grant date | May 9, 2025 | May 9, 2025 | December 4, 2025 | |||||||||||
Target shares of restricted stock | 16,000 | 71,400 | 11,900 | |||||||||||
Change in awards based on performance | — | 5,950 | — | |||||||||||
| Closing price per share | $ | 33.03 | $ | 33.03 | $ | 29.92 | ||||||||
Grant-date fair value per share | 30.38 | 30.37 | 26.35 | |||||||||||
The following table summarizes the 2024 restricted stock awards:
| Directors | Officers | ||||||||||||||||
| Grant date | May 20, 2024 | May 17, 2024 | December 5, 2024 | December 4, 2025 | |||||||||||||
Target shares of restricted stock | 18,000 | 70,200 | 11,700 | 11,700 | |||||||||||||
Change in awards based on performance | — | 5,850 | 5,850 | — | |||||||||||||
| Closing price per share | $ | 37.52 | $ | 38.10 | $ | 40.35 | $ | 29.92 | |||||||||
Grant-date fair value per share | 34.63 | 35.27 | 36.13 | 26.82 | |||||||||||||
During the years ended December 31, 2025 and 2024, restricted stock compensation expense totaled $1.3 million and $0.5 million, respectively, which was included in general and administrative expense in the Consolidated Statement of Operations. As of December 31, 2025, the estimated future expense related to unvested restricted stock awards that are granted for accounting purposes was approximately $5.5 million.
The table below summarizes the restricted stock activity for the year ended December 31, 2025:
| Number of Shares | Weighted Average Grant - Date Fair Value Per Share | ||||||||||
| Outstanding at January 1 | 105,750 | $ | 35.20 | ||||||||
| Granted | 111,000 | 29.57 | |||||||||
| Vested | (17,036) | 35.07 | |||||||||
| Change in awards based on performance | 11,800 | 33.23 | |||||||||
| Forfeited | (5,333) | 33.04 | |||||||||
Outstanding at December 31 | 206,181 | 32.12 | |||||||||
| Authorized future grants | 59,100 | ||||||||||
The total vesting date fair value of restricted stock that vested during year ended December 31, 2025 was $0.6 million.
During the years ended December 31, 2025 and 2024, the Company recognized approximately $1.8 million and $1.2 million, respectively, of stock-based compensation expense, inclusive of both stock options and restricted stock. As of December 31, 2025, estimated future stock-based compensation expense related to unvested awards that are granted for accounting purposes under both plans is approximately $5.9 million. On a weighted-average basis, this expense is expected to be recognized over the next 3.5 years.
Pursuant to the Incentive Plan, the Compensation Committee established a Deferred Compensation Plan for Directors for the benefit of the Company’s directors and their beneficiaries, which replaced a previous Deferred Compensation and Stock Plan for Directors. Annually, directors are given the ability to make an election to defer all or part of their fees and have the option to have their fees paid in cash, in shares of common stock or in a combination of cash and shares of common stock upon separation from the Board of Directors. If a director elects to their have fees paid in stock, fees earned during a calendar quarter are aggregated and divided by the closing market price of the Company’s common stock on the last trading day of the current quarter to determine the number of shares to be credited to the director. During the twelve months ended December 31, 2025, 13,661 shares were credited to director's deferred fee accounts and 39,086 shares were issued. As of December 31, 2025, the director's deferred fee accounts total 100,492 shares.
The Company has adopted insider trading policies and procedures governing the purchase, sale, and/or other dispositions of the Company’s securities by directors, officers, and employees, or the Company itself, that are reasonably designed to promote compliance with insider trading laws, rules and regulations, and the listing standards applicable to the Company (the “Insider Trading Policy”).About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.