Quarterly report pursuant to Section 13 or 15(d)

Note 11 - Stock Based Compensation

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Note 11 - Stock Based Compensation
 9 Months Ended
Sep. 30, 2024
Notes to Financial Statements  
Equity [Text Block]

Note 11: Stock Based Compensation

 

ESOP

 

Employees participate in an Employee Stock Ownership Plan ("ESOP"). The ESOP borrowed funds from the Company to purchase 431,836 shares of stock at $10 per share. The Bank makes discretionary contributions to the ESOP, as well as paying dividends on unallocated shares to the ESOP, and the ESOP uses funds it receives to repay the loan. When loan payments are made, ESOP shares are allocated to participants based on relative compensation. Participants receive the shares at the end of employment. Dividends on allocated shares increase participants accounts. 

 

There were no contributions to the ESOP during the first nine months of 2024, as the annual loan payment will be made during the fourth quarter. Expense recorded was $154,000 and $152,000 for the nine months ended September 30, 2024 and 2023, respectively, and $52,000 and $50,000 for the three months ended September 30, 2024 and 2023, respectively, and is recognized over the service period. 

 

Shares held by the ESOP were as follows: 

 

   

As of September 30,

  
   

2024

    

2023

  
   

(Dollars in thousands)

  

Shares allocated

     43,624       22,009  

Shares committed for allocation

     15,885       16,212  

Unallocated

     372,327       393,615  

Total ESOP shares

     431,836       431,836  
                 

Fair value of unearned shares as of September 30, 2024 and 2023, respectively

   $ 3,854     $ 3,562  

 

Fair value of unearned shares is based on a stock price of $10.35 and $9.05 as of September 30, 2024 and 2023, respectively. 

 

Equity Incentive Plan

 

At the Company's annual meeting of stockholders held on May 24, 2023, stockholders approved the NSTS Bancorp, Inc. 2023 Equity Incentive Plan (“2023 Equity Plan”), which provides for the granting of up to 755,714 shares (215,918 shares of restricted stock and 539,796 shares available for future grants of stock options) of the Company’s common stock pursuant to equity awards made under the 2023 Equity Plan.

 

Stock options granted under the 2023 Equity Plan generally vest in equal annual installments over a service period of five years beginning on the date of grant. The vesting of the options accelerates upon death, disability or an involuntary termination at or following a change in control of the Company. Stock options are generally granted at an exercise price equal to the fair value of the Company’s common stock on the grant date based on the closing market price of the Company's common stock on the date of grant, and have an expiration period of ten years. As of September 30, 2024, the Company has 74,296 shares available for future grants of stock options under the 2023 Equity Plan.  


The Company recognizes compensation expense for the fair values of these awards, which have graded vesting, on a straight-line basis over the requisite service period of the awards. Upon exercise of vested options, management expects to first draw on treasury stock as the source for shares. 

 

 

The following is a summary of the Company's stock option activity and related information for the periods presented. 

 

Stock Option

  

Shares

    

Weighted Average Exercise Price

    

Aggregate Intrinsic Value (1)

  
                         

Outstanding at June 30, 2023

     465,500     $ 9.36          

Granted

     —       —          

Forfeited

     —       —          

Outstanding at September 30, 2023

     465,500     $ 9.36       N/A  

Exercisable - End of Period

     —                
                         

Outstanding at June 30, 2024

     465,500     $ 9.36          

Granted

     —       —          

Exercised

     23,000       9.36          

Forfeited

     —       —          

Outstanding at September 30, 2024

     442,500     $ 9.36     $ 438  

Exercisable - End of Period

     88,500       9.36       88  

 

Stock Option

  

Shares

    

Weighted Average Exercise Price

    

Aggregate Intrinsic Value (1)

  
                         

Outstanding at December 31, 2022

     —     $ —          

Granted

     465,500       9.36          

Forfeited

     —       —          

Outstanding at September 30, 2023

     465,500     $ 9.36       N/A  

Exercisable - End of Period

     —                
                         

Outstanding at December 31, 2023

     465,500     $ 9.36          

Granted

     —       —          

Exercised

     23,000       9.36          

Forfeited

     —       —          

Outstanding at September 30, 2024

     442,500     $ 9.36     $ 438  

Exercisable - End of Period

     88,500       9.36       88  

(1) Dollars in thousands. The aggregate intrinsic value of outstanding and exercisable options at September 30, 2024 and 2023 were calculated based on the closing market price of the Company's common stock of September 30, 2024 and 2023 of $10.35 and $9.05, respectively, per share less the exercise price. 

 

Expected future expense relating to the non-vested options outstanding as of September 30, 2024 is $1.2 million over a weighted average period of 3.7 years. As of September 30, 2024, the Company had 442,500 in outstanding stock options with a weighted average remaining life of 8.7 years outstanding. 

 

Restricted shares granted under the 2023 Equity Plan generally vest in equal annual installments over a service period of five years beginning on the date of grant. The vesting of the awards accelerates upon death, disability or an involuntary termination at or following a change in control of the Company. The product of the number of shares granted and the grant date closing market price of the Company’s common stock determines the fair value of restricted shares under the 2023 Equity Plan. Management recognizes compensation expense for the fair value of restricted shares on a straight-line basis over the requisite service period.

 

As of September 30, 2024, the Company has 28,718 shares of restricted stock available for future grants under the 2023 Equity Plan. 

 

The following is a summary of the status of the Company's restricted shares as of September 30, 2024 and changes thereto during the periods presented. 

 

Restricted Stock

  

Shares

    

Weighted Average Grant Date Fair Value

  
                 

Nonvested balance as of June 30, 2023

     187,200     $ 9.36  

Granted

     —       —  

Forfeited

     —       —  

Nonvested balance as of September 30, 2023

     187,200     $ 9.36  
                 

Nonvested balance as of June 30, 2024

     142,400     $ 9.36  

Granted

     —       —  

Vested

     —       —  

Forfeited

     —       —  

Nonvested balance as of September 30, 2024

     142,400     $ 9.36  

 

Restricted Stock

  

Shares

    

Weighted Average Grant Date Fair Value

  
                 

Nonvested balance as of December 31, 2022

     —     $ —  

Granted

     187,200       9.36  

Forfeited

     —       —  

Nonvested balance as of September 30, 2023

     187,200     $ 9.36  
                 

Nonvested balance as of December 31, 2023

     178,000     $ 9.36  

Granted

     —       —  

Vested

     35,600       9.36  

Forfeited

     —       —  

Nonvested balance as of September 30, 2024

     142,400     $ 9.36  

 

Expected future expense related to the non-vested restricted shares outstanding as of period end is $1.2 million over a weighted average period of 3.7 years. 

 

The following table presents the stock based compensation expense for the periods presented. 

 

   

Three Months Ended September 30,

    

Nine months ended September 30,

  
   

2024

    

2023

    

2024

    

2023

  
   

(Dollars in thousands)

    

(Dollars in thousands)

  

Stock option expense

   $ 79     $ 82     $ 236     $ 96  

Restricted stock expense

     83       88       250       102  

Total stock based compensation expense

   $ 162     $ 170     $ 486     $ 198