Note 12 - Stock Based Compensation

 On May 24, 2022, the stockholders of Marathon Bancorp, Inc. approved the Company’s 2022 Equity Incentive Plan (the “Plan”), which provides for the grant of stock-based awards to officers, employees and directors of the Company and Marathon Bank. Under provisions of the Plan, while active, awards may consist of grants of incentive stock options, nonqualified stock options, restricted stock and restricted stock units.  Incentive stock options totaling 149,972 and restricted stock awards totaling 59,989 were authorized for award under the Plan. As a result of the Conversion, all existing stock options and restricted stock awards outstanding on April 21, 2025 were adjusted based on the exchange ratio of 1.3728-to-1 including those described below. The grant date exercise prices for stock options and fair values of restricted stock at grant date were adjusted downward based on the exchange ratio.

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Stock Options

On June 28, 2022, a total of 100,481 stock option awards were granted to the Bank’s directors, executive officers, senior officers and other officers (25,496 and 74,985 options were awarded to directors and employees, respectively). Director awards are considered non-qualified stock options while employee awards are considered incentive stock options. An additional 3,996 of options were forfeited by an employee during the year ended June 30, 2025. The awards vest ratably over five years (20% per year for each year of the participant’s service with the Company) and will expire ten years from the date of the grant, or June 2032.  The fair value of each option grant was established at the date of grant using the Black-Scholes option pricing model. The Black-Scholes model used the following weighted average assumptions: risk-free interest rate of 3.27%; volatility factors of the expected market price of the Company's common stock of 20.76%; weighted average expected lives of the options of 6.5 years; cash dividend yield of 0%. The expected term of the options is derived by using the simplified method as the Company has no relevant exercise experience from other stock-based compensation plans. Based upon these assumptions, the weighted average fair value of options granted was $3.33.  

On May 16, 2023, a total of 53,992 stock option awards were granted to the Bank’s directors, executive officers, senior officers and other officers (5,996 and 47,996 options were awarded to directors and employees, respectively). The fair value of each option grant was established at the date of grant using the Black-Scholes option pricing model. The Black-Scholes model used the following weighted average assumptions: risk-free interest rate of 3.53%; volatility factors of the expected market price of the Company's common stock of 20.71%; weighted average expected lives of the options of 6.5 years; cash dividend yield of 0%. The expected term of the options is derived by using the simplified method as the Company has no relevant exercise experience from other stock-based compensation plans. Based upon these assumptions, the weighted average fair value of options granted was $2.72.

Stock option expense amortized to expense for the six months ended December 31, 2025 and 2024 was $31,653 and $32,235, respectively. At December 31, 2025, total unrecognized compensation expense related to stock options was $117,438, and will be amortized to expense over a period of 2.3 years. On June 28, 2025, there were 5,996 stock option awards granted to two employees. As of December 31, 2025, no future stock option awards remain under the Plan.

The aggregate intrinsic value of a stock option represents the total pre-tax intrinsic value (the amount by which the current market value of the underlying stock exceeds the exercise price of the option) that would have been received by the option holders had all option holders exercised their options prior to the expiration date.  The intrinsic value can change based on fluctuations in the market value of the Company’s stock.

A summary of stock option activity and related information for the six months ended December 31, 2025 is as follows.

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Restricted Stock 

On June 28, 2022, a total of 55,191 restricted stock awards were granted to the Bank’s directors, executive officers, senior officers and other officers under the Plan (13,198 and 41,993 shares were granted to directors and employees, respectively). On May 16, 2023, a total of 8,595 restricted stock awards were granted to the Bank’s directors, executive officers, senior officers and other officers under the Plan (1,800 and 6,795 shares were granted to directors and employees, respectively). An additional 1,296 of restricted stock awards were forfeited by an employee during the year ended June 30, 2025 and finally, an additional 481 of restricted stock awards were forfeited by an employee during the six months ended December 31, 2025.  The restricted stock awards vest ratably over five years (20% per year for each year of the participant’s service with the Company).  Restricted stock expense was $45,815 and $46,711 for the six months ended December 31, 2025 and 2024, respectively. At December 31, 2025, future compensation expense related to non-vested restricted stock outstanding was $152,828 which will be amortized over a remaining period of 2.3 years. On June 28, 2025, there were 402 shares of restricted stock granted to two employees. As of December 31, 2025, no restricted stock awards remain under the Plan.

A summary of restricted stock activity and related information for the six months ended December 31, 2025, is as follows:

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