SR Bancorp, Inc. Stock Compensation Disclosure
12. Stock- Based Compensation
On November 20, 2024, the Company adopted the SR Bancorp, Inc. 2024 Equity Incentive Plan ("2024 Equity Plan”). The 2024 Equity Plan authorizes 1,331,110 shares of common stock for equity-based compensation awards including restricted stock awards, restricted stock units, non-qualified stock options, and incentive stock options. As of June 30, 2025, there were 266,286 shares available for future grants.
Stock Options
On November 21, 2024, the Company granted 237,695 stock options to non-employee directors. On January 29, 2025 and February 5, 2025, the Company granted 465,889 and 57,009, respectively, of stock options to certain officers and employees of the Company. The stock options have a contractual term of 10 years. The stock options vest in equal annual installments over a five-year period beginning on the first anniversary of the date of grant. The
fair value of each option grant was estimated on the date of grant using the Black-Scholes option pricing model. The following table sets forth information regarding the grants:
Date of grant |
|
November 21, 2024 |
|
|
January 29, 2025 |
|
|
February 5, 2025 |
|
|||
Options granted |
|
|
237,695 |
|
|
|
465,889 |
|
|
|
57,009 |
|
Exercise price |
|
$ |
11.04 |
|
|
$ |
12.50 |
|
|
$ |
12.36 |
|
Vesting period (years) |
|
|
5.00 |
|
|
|
5.00 |
|
|
|
5.00 |
|
Expiration date |
|
November 21, 2034 |
|
|
January 29, 2035 |
|
|
February 5, 2035 |
|
|||
Expected Volatility(1) |
|
|
27.90 |
% |
|
|
27.87 |
% |
|
|
27.87 |
% |
Expected term (years)(2) |
|
|
6.50 |
|
|
|
6.50 |
|
|
|
6.50 |
|
Expected dividend yield(3) |
|
|
0.00 |
% |
|
|
0.00 |
% |
|
|
0.00 |
% |
Forfeiture rate |
|
|
0.00 |
% |
|
|
0.00 |
% |
|
|
0.00 |
% |
Risk free rate of return(4) |
|
|
4.36 |
% |
|
|
4.44 |
% |
|
|
4.33 |
% |
Fair value per option |
|
$ |
4.24 |
|
|
$ |
4.82 |
|
|
$ |
4.73 |
|
The following table represents stock option activities for the period indicated:
|
|
Year Ended June 30, 2025 |
|
|||||||||||||
|
|
Shares |
|
|
Weighted- |
|
|
Weighted- |
|
|
Aggregate |
|
||||
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
||||
Balance at beginning of period |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
Granted |
|
|
760,593 |
|
|
|
12.03 |
|
|
|
9.77 |
|
|
|
— |
|
Exercised |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Vested |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Forfeited or expired |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Balance at end of period |
|
|
760,593 |
|
|
$ |
12.03 |
|
|
|
9.77 |
|
|
$ |
1,116 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Exercisable at end of period |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
The aggregate intrinsic value is calculated by multiplying the number of in-the-money shares by the difference between the Company’s closing price on the last trading day of the period and the exercise price.
Restricted Stock Awards
On November 21, 2024, the Company granted 95,075 restricted stock awards to non-employee directors. On January 29, 2025 and February 5, 2025, the Company granted 186,356 and 22,800, respectively, of restricted stock awards to certain officers and employees. The restricted stock awards vest in equal annual installments over a five-year period. The restricted stock awards are measured based on grant-date fair value, which reflects the closing price of the Company’s stock on the date of grant.
The following table represents information regarding restricted stock award activities for the periods indicated:
|
|
Year Ended |
|
|||||
|
|
Number |
|
|
Weighted- |
|
||
Balance at beginning of period |
|
|
— |
|
|
$ |
— |
|
Granted |
|
|
304,231 |
|
|
|
12.03 |
|
Vested |
|
|
— |
|
|
|
— |
|
Forfeited |
|
|
— |
|
|
|
— |
|
Balance at end of period |
|
|
304,231 |
|
|
$ |
12.03 |
|
The following table represents the compensation expense and income tax benefit recognized for stock options and restricted stock awards for the period indicated:
|
|
Year Ended |
|
|
|
|
(In thousands) |
|
|
Stock-based compensation expense |
|
|
|
|
Stock options |
|
$ |
327 |
|
Restricted stock awards |
|
|
340 |
|
Total stock-based compensation expense |
|
$ |
667 |
|
Related tax benefits recognized in earnings |
|
$ |
188 |
|
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 June 30, 2025:
|
|
Amount |
|
|
Weighted |
|
||
|
|
(In thousands) |
|
|
|
|
||
Stock options |
|
$ |
3,196 |
|
|
|
4.53 |
|
Restricted stock awards |
|
|
3,321 |
|
|
|
4.53 |
|
Total |
|
$ |
6,517 |
|
|
|
|
|
ESOP
The Company maintains the Somerset Regal Bank Employee Stock Ownership Plan (the "ESOP"). Coincident with its conversion on September 19, 2023, the Company loaned the ESOP $7.6 million and the ESOP trust purchased 760,634 shares of the Company's common stock at $10.00 per share. The loan is secured by the shares purchased, which are held until allocated to participants. Shares are released for allocation to participants as loan payments are made. Loan payments are principally funded by discretionary cash contributions by the Bank, as well as dividends, if any, paid to the ESOP on unallocated shares. Shares are allocated to eligible participants at the end of the plan year (December 31) on the basis of compensation, subject to federal limits.
Under applicable accounting requirements, the Company records compensation expense for the ESOP equal to the fair market value of shares when they are earned and committed to be released to participants' accounts under the plan. The principal outstanding of the ESOP loan was $6.9 and $7.0 million at June 30, 2025, and 2024, respectively. Total compensation expense recognized in connection with the ESOP was $438,000 and $515,000 for the years ended June 30, 2025, and 2024, respectively.
Shares held by the ESOP were as follows:
|
|
June 30, 2025 |
|
June 30, 2024 |
|
||
|
|
(In thousands) |
|
||||
Allocated to participants |
|
|
76,064 |
|
|
38,032 |
|
Committed to be allocated |
|
|
19,016 |
|
|
19,016 |
|
Unallocated |
|
|
665,554 |
|
|
703,586 |
|
Total ESOP shares |
|
|
760,634 |
|
|
760,634 |
|
|
|
|
|
|
|
||
Fair value of unearned shares |
|
$ |
8,985 |
|
$ |
6,508 |
|
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.