The Company provides a qualified defined contribution retirement plan under Section 401(k) of the Internal Revenue Code. The 401(k) Plan qualifies under the Internal Revenue Service safe harbor provisions, as defined. Employees are eligible to participate in the 401(k) Plan at the beginning of each quarter (January 1, April 1, July 1, or October 1). The 401(k) Plan provides for elective employee/participant deferrals of income. Discretionary matching, profit-sharing, and safe harbor contributions, not to exceed 4% of employee compensation and profit-sharing contributions may be provided. The Company is currently making a safe harbor contribution of 3%. The 401(k) expenses recorded in the consolidated statements of income amounted to $103 and $89 for the three months ended September 30, 2020 and 2019, and $474 and $256 for the nine months ended September 30, 2020 and 2019, respectively.

In connection with the reorganization, the Company established an ESOP for the exclusive benefit of eligible employees. The ESOP borrowed $7,238 from the Company sufficient to purchase 723,751 shares (approximately 3.92% of the common stock sold in the Company’s initial stock offering). The loan is secured by the shares purchased and will be repaid by the ESOP with funds from contributions made by the Company and dividends received by the ESOP. Contributions will be applied to repay interest on the loan first, and then the remainder will be applied to principal. The loan is expected to be repaid over a period of 15 years. Shares purchased with the loan proceeds are held by the trustee in a suspense account for allocation among participants as the loan is repaid. Contributions to the ESOP and shares released from the suspense account are allocated among participants in proportion to their compensation, relative to total compensation of all active participants, subject to applicable regulations.

Contributions to the ESOP are to be sufficient to pay principal and interest currently due under the loan agreement. As shares are committed to be released from collateral, compensation expense equal to the average market price of the shares for the respective periods are recognized, and the shares become outstanding for earnings per share computations (see Note 11).

A summary of the ESOP shares as of September 30, 2020 and December 31, 2019 are as follows:

	September 30, 2020		December 31, 2019
Shares committed-to-be released		36,189		48,250
Shares to be allocated to participants		144,750		96,500
Unallocated shares		542,812		579,001
Total		723,751		723,751
Fair value of unearned shares	$	4,788	$	8,511

The Company recognized ESOP related compensation expense, including ESOP equalization expense, of $115 and $184 for the three months ended September 30, 2020 and 2019, respectively, and $402 and $574 for the nine months ended September 30, 2020 and 2019, respectively.

The Bank maintains a non-qualified supplemental executive retirement plan (“SERP”) for the benefit of one key executive officer. The SERP expense recognized for the three months ended September 30, 2020 and 2019 was $15 and $12, respectively, and $45 for both the nine months ended September 30, 2020 and 2019.

The Company’s stockholders approved the PDL Community Bancorp 2018 Long-Term Incentive Plan (the “2018 Incentive Plan”) at the Special Meeting of Stockholders on October 30, 2018. The maximum number of shares of common stock which can be issued under the 2018 Incentive Plan is 1,248,469. Of the 1,248,469 shares, the maximum number of shares that may be awarded under the 2018 Incentive Plan pursuant to the exercise of stock options or stock appreciation rights (“SARs”) is 891,764 shares (all of which may be granted as incentive stock options), and the number of shares of common stock that may be issued as restricted stock awards or restricted stock units is 356,705 shares. However, the 2018 Incentive Plan contains a flex feature that provides that awards of restricted stock and restricted stock units in excess of the 356,705 share limitation may be granted but each share of stock covered by such excess award shall reduce the 891,764 share limitation for awards of stock options and SARs by 3.0 shares of common stock. The Company converted 462,522 awards of stock options into 154,174 restricted stock units in 2018 and 45,000 awards of stock options into 15,000 restricted stock units in 2020.

Under the 2018 Incentive Plan, the Company made grants equal to 674,645 shares on December 4, 2018 which include 119,176 incentive options to executive officers, 44,590 non-qualified options to outside directors, 322,254 restricted stock units to executive officers, 40,000 restricted stock units to non-executive officers and 148,625 restricted stock units to outside directors. During the nine months ended September 30, 2020, the Company awarded 40,000 incentive options and 15,000 restricted stock units to non-executive officers under the 2018 Incentive Plan. Awards to directors generally vest 20% annually beginning with the first anniversary of the date of grant. Awards to a director with fewer than five years of service at the time of grant vest over a longer period and will not become fully vested until the director has completed ten years of service. Awards to the executive officer who is not a director vest 20% annually beginning on December 4, 2020. As of September 30, 2020 and December 31, 2019, the maximum number of stock options and SARs remaining to be awarded under the Incentive Plan was 180,476 and 265,476, respectively. As of September 30, 2020 and December 31, 2019, the maximum number of shares of common stock that may be issued as restricted stock or restricted stock units remaining to be awarded under the Incentive Plan was 0, for both periods. If the 2018 Incentive Plan’s flex feature described above were fully utilized, the maximum number of shares of common stock that may be awarded as restricted stock or restricted stock units would be 60,159 and 88,492 as of September 30, 2020 and December 31, 2019, respectively, but would eliminate the availability of stock options and SARs available for award.

The product of the number of units granted and the grant date market price of the Company’s common stock determine the fair value of restricted stock units under the Company’s 2018 Incentive Plan. Management recognizes compensation expense for the fair value of restricted stock units on a straight-line basis over the requisite service period for the entire award.

A summary of the Company’s restricted stock unit awards activity and related information for the nine months ended September 30, 2020 and year ended December 31, 2019 are as follows:

	September 30, 2020
	Number of Shares			Weighted- Average Grant Date Fair Value Per Share
Non-vested, beginning of year		420,744		$	12.78
Granted		15,000			10.05
Forfeited		—			—
Vested		—			—
Non-vested at September 30		435,744		$	12.69

	December 31, 2019
	Number of Shares			Weighted- Average Grant Date Fair Value Per Share
Non-vested, beginning of year		510,879		$	12.77
Granted		29,725			12.93
Forfeited		(29,725	)		12.77
Vested		(90,135	)		12.77
Non-vested at December 31		420,744		$	12.78

Compensation expense related to restricted stock units was $319 and $314 for the three months ended September 30, 2020 and 2019, respectively, and $956 and $923 for the nine months ended September 30, 2020 and 2019, respectively. As of September 30, 2020, the total remaining unrecognized compensation cost related to restricted stock units was $4,477, which is expected to be recognized over the next 29 quarters.

A summary of the Company’s stock option awards activity and related information for the nine months ended September 30, 2020 and year ended December 31, 2019 are as follows:

	September 30, 2020
	Options		Weighted- Average Exercise Price Per Share
Outstanding, beginning of year		163,766	$	12.78
Granted		40,000		8.93
Exercised		—		—
Forfeited		—		—
Outstanding at September 30 (1)		203,766	$	12.02
Exercisable at September 30 (1)		24,788	$	12.77

Note 10. Compensation and Benefit Plans (Continued)

	December 31, 2019
	Options			Weighted- Average Exercise Price Per Share
Outstanding, beginning of year		163,766		$	12.77
Granted		8,918			12.93
Exercised		—			—
Forfeited		(8,918	)		12.77
Outstanding at December 31 (1)		163,766		$	12.78
Exercisable at December 31 (1)		24,788		$	12.77

(1)

The aggregate intrinsic value, which represents the difference between the price of the Company’s common stock at respective periods and the stated exercise price of the underlying options, was $0 and $315 for outstanding options and $0 and $48 for exercisable options at September 30, 2020 and December 31, 2019, respectively.

The weighted-average exercise price for the options as of September 30, 2020 was $12.02 per share and the weighted average remaining contractual life is 8.1 years. The weighted average period over which compensation expenses are expected to be recognized is 5.0 years. There were 24,788 shares exercisable as of September 30, 2020 and December 31, 2019, respectively. Total compensation cost related to stock options recognized was $33 and $29 for the three months ended September 30, 2020 and 2019, respectively, and $93 and $77 for the nine months ended September 30, 2020 and 2019, respectively. As of September 30, 2020, the total remaining unrecognized compensation cost related to unvested stock options was $519, which is expected to be recognized over the next 29 quarters.

The fair value of each option grant is estimated on the date of grant using Black-Scholes option pricing model with the following weighted average assumptions:

	For the Nine Months Ended September 30,
	2020			2019
Dividend yield		0.00	%		0.00	%
Expected life	6.5 years			6.5 years
Expected volatility		38.51	%		16.94	%
Risk-free interest rate		0.48	%		2.51	%
Weighted average grant date fair value		$ 3.77			$ 4.01

The expected volatility is based on the Company’s historical volatility. The expected life is an estimate based on management’s review of the various factors and calculated using the simplified method for plain vanilla options. The dividend yield assumption is based on the Company’s history and expectation of dividend payouts.

The Company adopted a share repurchase program effective March 25, 2019 which expired on September 24, 2019. Under the repurchase program, the Company was permitted to repurchase up to 923,151 shares of the Company’s stock, or approximately 5% of the Company’s then current issued and outstanding shares. On November 13, 2019, the Company adopted a second share repurchase program. Under this second program, the Company was permitted to repurchase up to 878,835 shares of the Company’s stock, or approximately 5% of the Company’s then current issued and outstanding shares. The Company’s share repurchase program was terminated on March 27, 2020. On June 1, 2020, the Company adopted a third share repurchase program. Under this third program, the Company was permitted to repurchase up to 864,987 shares of the Company’s stock, or approximately 5% of the Company’s then current issued and outstanding shares. The repurchase program may be suspended or terminated at any time without prior notice, and it will expire no later than November 30, 2020.

As of September 30, 2020, the Company had repurchased a total of 1,436,814 shares under the repurchase programs at a weighted average price of $13.62 per share, of which 1,346,679 shares are reported as treasury stock on the consolidated statements of financial condition. Of the 1,436,814 shares repurchased, 90,135 shares have been granted to directors and executive officers under the Company’s 2018 Long-Term Incentive Plan pursuant to restricted stock units which vested on December 4, 2019.