ECB Bancorp, Inc. /MD/ Stock Compensation Disclosure
NOTE 10 – STOCK-BASED COMPENSATION
On September 7, 2023, the Company adopted the ECB Bancorp, Inc. 2023 Equity Incentive Plan ("2023 Equity Plan”). The 2023 Equity Plan authorizes 1,248,133 shares of common stock for equity based compensation awards including restricted stock awards, restricted stock units, stock options, and incentive stock options. As of December 31, 2024, there were 177,207 shares available for future grants.
Stock-Based Compensation - Stock Options
On September 8, 2023, the Company granted 174,960 stock options to non-employee directors with a contractual term of 10 years. On October 31, 2023, the Company granted 589,009 stock options to employees with a contractual term of 10 years. The stock options vest in equal annual installments over a five-year period. The fair value of each option grant was estimated on the date of grant using the Black-Scholes option pricing model. There were no stock options granted for the year ended December 31, 2024. The following table sets forth information regarding the 2023 grants:
Date of grant |
|
9/8/2023 |
|
|
10/31/2023 |
|
||
Options granted |
|
|
174,960 |
|
|
|
589,009 |
|
Vesting period (years) |
|
|
5 |
|
|
|
5 |
|
Expiration date |
|
9/8/2033 |
|
|
10/31/2033 |
|
||
Expected volatility (1) |
|
|
30.17 |
% |
|
|
30.02 |
% |
Expected term (years) (2) |
|
|
6.50 |
|
|
|
6.50 |
|
Expected dividend yield (3) |
|
|
0.00 |
% |
|
|
0.00 |
% |
Risk free rate of return (4) |
|
|
4.31 |
% |
|
|
4.87 |
% |
Fair value per option |
|
$ |
4.74 |
|
|
$ |
4.19 |
|
(1) Expected volatility is based on the standard deviation of the historical volatility of the daily adjusted closing price of a group of peers' shares.
(2) Expected term represents the period of time that the option is expected to be outstanding. The Company determined that expected life using the "Simplified Method."
(3) Expected dividend yield is determined based on management's expectations regarding issuing dividends in the foreseeable future.
(4) The risk-free rate of return is based on the U.S. Treasury yield curve in effect at the time of grant for a period equivalent to the expected term of the option.
The following table represents stock option activities for the periods indicated:
|
|
Year Ended December 31, 2024 |
|
|||||||||||||||||||||||||||||
|
|
Outstanding and exercisable |
|
|
Non-vested |
|
||||||||||||||||||||||||||
|
|
Shares |
|
|
Weighted-Average Exercise Price |
|
|
Weighted-Average Remaining Contractual Term (years) |
|
|
Aggregate Intrinsic Value ($1000) |
|
|
Shares |
|
|
Weighted-Average Exercise Price |
|
|
Weighted-Average Remaining Contractual Term (years) |
|
|
Aggregate Intrinsic Value ($1000) |
|
||||||||
Balance at beginning of period |
|
|
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
763,969 |
|
|
$ |
10.50 |
|
|
|
|
|
|
|
||||
Granted |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
||||
Vested |
|
|
152,794 |
|
|
|
10.50 |
|
|
|
|
|
|
|
|
|
(152,794 |
) |
|
|
10.50 |
|
|
|
|
|
|
|
||||
Exercised |
|
|
(5,832 |
) |
|
|
11.80 |
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
||||
Forfeited or expired |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
||||
Balance at end of period |
|
|
146,962 |
|
|
$ |
10.45 |
|
|
|
8.81 |
|
|
$ |
645 |
|
|
|
611,175 |
|
|
$ |
10.50 |
|
|
|
8.81 |
|
|
$ |
2,650 |
|
|
|
Year Ended December 31, 2023 |
|
|||||||||||||||||||||||||||||
|
|
Outstanding and exercisable |
|
|
Non-vested |
|
||||||||||||||||||||||||||
|
|
Shares |
|
|
Weighted-Average Exercise Price |
|
|
Weighted-Average Remaining Contractual Term (years) |
|
|
Aggregate Intrinsic Value ($1000) |
|
|
Shares |
|
|
Weighted-Average Exercise Price |
|
|
Weighted-Average Remaining Contractual Term (years) |
|
|
Aggregate Intrinsic Value ($1000) |
|
||||||||
Balance at beginning of period |
|
|
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
- |
|
|
$ |
- |
|
|
|
|
|
|
|
||||
Granted |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
763,969 |
|
|
|
10.50 |
|
|
|
|
|
|
|
||||
Exercised |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
||||
Vested |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
||||
Forfeited or expired |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
||||
Balance at end of period |
|
|
- |
|
|
$ |
- |
|
|
|
- |
|
|
$ |
- |
|
|
|
763,969 |
|
|
$ |
10.50 |
|
|
|
9.81 |
|
|
$ |
1,570 |
|
The total intrinsic value is the amount by which the fair value of the underlying stock exceeds the exercise price of an option on the exercise date.
Stock-Based Compensation - Restricted Stock Awards
The restricted stock awards are measured based on grant-date fair value, which reflects the closing price of our stock on the date of grant. All of the restricted stock awards which have been granted to date vest over five years in equal portions beginning on the first anniversary date of the restricted stock award.
On September 8, 2023, the Company granted 69,984 restricted stock awards to non-employee directors. On October 31, 2023, the Company granted 235,973 restricted stock awards to employees. On August 6, 2024, the Company granted 1,000 restricted stock awards to employees. All restricted stock awards are vesting ratably over 5 years from grant date. The following table represents information regarding non-vested restricted stock award activities for the periods indicated:
|
|
Year Ended December 31, 2024 |
|
|
Year Ended December 31, 2023 |
|
||||||||||
|
|
Number of Shares |
|
|
Weighted-Average Grant Date Fair Value Per Share |
|
|
Number of Shares |
|
|
Weighted-Average Grant Date Fair Value Per Share |
|
||||
Balance at beginning of period |
|
|
305,957 |
|
|
$ |
10.50 |
|
|
|
- |
|
|
$ |
- |
|
Granted |
|
|
1,000 |
|
|
|
13.00 |
|
|
|
305,957 |
|
|
|
10.50 |
|
Vested |
|
|
(61,191 |
) |
|
|
10.50 |
|
|
|
- |
|
|
|
- |
|
Forfeited |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Balance at end of period |
|
|
245,766 |
|
|
$ |
10.51 |
|
|
|
305,957 |
|
|
$ |
10.50 |
|
The following table represents the compensation expense and income tax benefit recognized for stock options and restricted stock awards for the periods indicated:
|
|
Year Ended December 31, 2024 |
|
|
Year Ended December 31, 2023 |
|
||
|
|
(in thousands) |
|
|||||
Stock-based compensation expense |
|
|
|
|
|
|
||
Stock options |
|
$ |
661 |
|
|
$ |
135 |
|
Restricted stock awards |
|
|
645 |
|
|
|
133 |
|
Total stock-based compensation expense |
|
$ |
1,306 |
|
|
$ |
268 |
|
Related tax benefits recognized in earnings |
|
$ |
280 |
|
|
$ |
47 |
|
The following table sets forth the total compensation cost related to non-vested awards not yet recognized and the weighted average period (in years) over which it is expected to be recognized as of December 31, 2024 and December 31, 2023 (dollars in thousands):
|
|
Year Ended December 31, 2024 |
|
|
Year Ended December 31, 2023 |
|
||||||||||
|
|
Amount |
|
|
Weighted average period |
|
|
Amount |
|
|
Weighted average period |
|
||||
|
|
|
|
|
|
|
||||||||||
Stock options |
|
$ |
2,501 |
|
|
|
3.80 |
|
|
$ |
3,162 |
|
|
|
4.80 |
|
Restricted stock awards |
|
|
2,449 |
|
|
|
3.80 |
|
|
|
3,081 |
|
|
|
4.80 |
|
Total |
|
$ |
4,950 |
|
|
|
|
|
$ |
6,243 |
|
|
|
|
||
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.