STOCK-BASED COMPENSATION

12 Months Ended

Dec. 31, 2023

Share-Based Payment Arrangement [Abstract]

Employee Stock Ownership Plan

The Company maintains the Blue Foundry Bank ESOP, a tax-qualified plan for the benefit of all Company employees designed to invest primarily in the Company’s common stock. The ESOP provides employees with the opportunity to receive a funded retirement benefit from the Bank, based primarily on the value of the Company’s common stock.

The ESOP borrowed funds from the Company to purchase 2,281,800 shares of stock at $10 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. When loan payments are made, ESOP shares are allocated to participants at the end of the plan year (December 31) based on relative compensation, subject to federal tax law limits. Participants receive the shares at the end of employment. Dividends on allocated shares, if any, increase participants’ accounts.

At December 31, 2023 and 2022, the principal balance on the ESOP loan was $20.6 million and $21.2 million, respectively. Contributions to the ESOP during the years ended December 31, 2023 and 2022, totaled $635 thousand and $615 thousand, respectively. ESOP compensation expense is recognized over the service period and represents the fair value of shares allocated during the year. For the years ended December 31, 2023 and 2022, ESOP compensation expense was $895 thousand and $1.2 million respectively.

Shares held by the ESOP were as follows:


	December 31, 2023		December 31, 2022
	(Dollars in thousands)
Shares allocated to participants	273,816		182,544
Unallocated shares	2,007,984		2,099,256
Total ESOP shares	2,281,800		2,281,800

Fair value of unallocated shares	$	19,400	$	26,975

The fair value of the unallocated shares was computed using the closing trading price of the Company’s common stock on each date.

Equity Incentive Plan

At the annual meeting held on August 25, 2022, stockholders of the Company approved the Blue Foundry Bancorp 2022 Equity Incentive Plan (“Equity Plan”) which provides for the granting of up to 3,993,150 shares (1,140,900 restricted stock awards and 2,852,250 stock options) of the Company’s common stock.

Restricted shares granted under the Equity Plan generally vest in equal installments, over a service period between five and seven years beginning one year from the date of grant. Additionally, certain restricted shares awarded can be performance vesting awards, which may or may not vest depending upon the attainment of certain corporate financial targets. The vesting of the awards accelerate upon death, disability or an involuntary termination at or following a change in control. The product of the number of shares granted and the grant date closing market price of the Company’s common stock determine the fair value of restricted shares under the Equity Plan. Management recognizes compensation expense for the fair value of restricted shares on a straight-line basis over the requisite service period.

Stock options granted under the Equity Plan generally vest in equal installments, over a service period between five and seven years beginning one year from the date of grant. The vesting of the options accelerate upon death, disability or an involuntary termination at or following a change in control. Stock options were 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 and have an expiration period of ten years.

There were no stock options granted during the year ended December 31, 2023. The fair value of stock options granted are estimated utilizing the Black-Scholes option pricing model. The weighted average assumptions used for the options granted during the year ended December 31, 2022 are: expected life of 6.9 years years, risk-free rate of 3.94%, volatility of 29.41% and a dividend yield of 0.88%. Due to the limited historical information of the Company’s stock, management considered the weighted historical volatility of the Company and similar entities for an appropriate period in determining the volatility rate used in the estimation of fair value. The expected life of the stock option was estimated using the simplified method. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. 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 draw on treasury stock as the source for shares.

The following table presents the share-based compensation expense for the years ended December 31, 2023 and 2022.


	2023		2022
	(In thousands)
Stock option expense	$	1,598	$	422
Restricted stock expense	1,281		242
Total share-based compensation expense	$	2,879	$	664

The following is a summary of the Company’s stock option activity and related information for the year ended December 31, 2023:


	Number of Stock Options	Weighted Average Grant Date Fair Value		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (years)
Outstanding -December 31, 2022	2,591,063	$	4.12	$	11.65	9.8


Forfeited	(115,700)	4.25		11.69		8.8

Outstanding -December 31, 2023	2,475,363	$	4.12	$	11.65	8.8
Exercisable - December 31, 2023	396,419

Expected future expense relating to the non-vested options outstanding as of December 31, 2023 is $8.2 million over a weighted average period of 5.3 years.

The following is a summary of the Company’s restricted stock shares activity and related information for the year ended December 31, 2023:


	Number of Shares Awarded	Weighted Average Grant Date Fair Value
Outstanding - December 31, 2022	299,481	$	11.54
Granted	732,780	12.00
Vested	(59,899)	11.54
Forfeited	(28,100)	12.00
Outstanding - December 31, 2023	944,262	$	11.88

Expected future expense relating to the non-vested restricted shares outstanding as of December 31, 2023 is $6.2 million over a weighted average period of 5.1 years.