The Company maintains an Employee Stock Ownership Plan (“ESOP”), a tax-qualified plan 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 allocated vested shares at the end of employment. Dividends on allocated shares, if any, increase participants accounts.

At September 30, 2024, the principal balance on the ESOP loan was $20.6 million. There were no contributions to the ESOP during the three and nine months ended September 30, 2024, as loan payments are made annually during the fourth quarter of each year. ESOP shares are committed to be released from unallocated and compensation expense is recognized over the service period. At September 30, 2024 and December 31, 2023, there were 2,007,984 unallocated shares and 273,816 shares allocated to participants. The fair value of unallocated shares at September 30, 2024 and December 31, 2023 was $20.6 million and $19.4 million, respectively, computed using the closing trading price of the Company’s common stock on each date.

For the three and nine months ended September 30, 2024, ESOP compensation expense for the shares committed to be released from unallocated was $236 thousand and $653 thousand, respectively. Shares committed to be released from unallocated was 22,818 and 68,454 for the three and nine months ended September 30, 2024. For the three and nine months ended September 30, 2023, ESOP compensation expense for the shares committed to be released from unallocated was $216 thousand and $699 thousand, respectively. Shares committed to be released from unallocated total 22,818 and 68,454 for three and nine months ended September 30, 2023.

At the annual meeting held on August 25, 2022, shareholders 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 time-based restricted shares on a straight-line basis over the requisite service period. Performance based awards are expensed based on the fair value of the shares and the probability of achieving the performance goals.

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.

No stock options were granted during the third quarter of 2024. There were 48,133 stock options granted during the first nine months of 2024. The fair value of stock options granted during the first quarter of 2024 were estimated utilizing the Black-Scholes option pricing model: an expected life of 6.50 years, risk-free rate of 3.94%, volatility of 32.26% and a dividend yield of 0.84%. There were no stock options granted during the three and nine months ended September 30, 2023. 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 straight-line 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.


	Number of Stock Options	Weighted Average Grant Date Fair Value		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (years)
Outstanding - December 31, 2023	2,475,363	$	4.12	$	11.65	8.8
Granted	48,133	3.67		9.95		6.5

Forfeited	(227,826)	4.23		11.73
Expired	(37,045)	4.23		11.73
Outstanding - September 30, 2024	2,258,625	$	4.10	$	11.60	8.0
Exercisable - September 30, 2024	509,118

On September 18, 2024 the Company granted to employees, under the 2022 Equity Incentive plan, 10,000 restricted stock awards with a total grant-date fair value of $109 thousand. This grant vest ratably over a three-year period.

In addition, during the first quarter of 2024, the Company granted to directors and employees, under the 2022 Equity Incentive Plan, 184,625 restricted stock awards with a total grant-date fair value of $1.8 million. Of these grants, 2,900 vest one year from the date of grant, 19,255 and 162,470 vest in equal installments over five and six years, respectively, beginning one year from the date of grant. The Company also issued 193,070 performance-based restricted stock awards to its officers with a total grant date fair value of $1.8 million. Vesting of the performance-based restricted stock units will be based on achievement of certain levels of loan growth, deposit growth and net interest margin and will convert to a four-year time vest after the three-year measurement period ending December 31, 2026. At the end of the performance period, the number of actual shares to be awarded may vary between 0% and 100% of target amounts.

During the first quarter of 2024, 347,640 of performance-based restricted stock awards were forfeited when none of the performance target metrics were met. This forfeiture amount of performance shares is included in the total forfeited restricted shares for the nine months ended September 30, 2024, as shown in the table below.


	Number of Shares Awarded	Weighted Average Grant Date Fair Value
Outstanding - December 31, 2023	944,262	$	11.88
Granted	387,695	9.55
Forfeited	(442,347)	11.76
Vested	(115,415)	11.76

Outstanding - September 30, 2024	774,195	$	10.80


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
	(In thousands)
Stock option expense	$	373	$	403	$	1,087	$	1,199
Restricted stock expense	438		290		1,261		938
Total share-based compensation expense	$	811	$	693	$	2,348	$	2,137