Bancorp 34 Inc

Compensation of Executive Officers

In this Annual Report on Form 10-K, we refer to the individuals who served as our principal executive officer and our two other most highly compensated executive officers, as the “named executive officers.” Our named executive officers as of December 31, 2024, were:

Summary Compensation Table

The following table sets forth information concerning all compensation awarded to, earned by or paid to our named executive officers for all services rendered in all capacities to us and our subsidiaries for the fiscal year ended December 31, 2024.

Narrative to Summary Compensation Table

Employment Agreements with Named Executive Officers

We currently have employment agreements with each of our named executive officers. We have included below descriptions of the current employment agreements for each of these officers.

Employment Agreement with Ciaran McMullan

The Bank has entered into an employment agreement (the “employment agreement”) with Mr. McMullan. Mr. McMullan has agreed to serve as the Chief Executive Officer of the Bank and Bancorp 34 for a two-year term, beginning on April 1, 2024, and ending on April 1, 2026, may be extended for additional one-year periods upon each anniversary of the agreement unless either Mr. McMullan or the Bank gives 30 days’ prior notice of his or its intent not to renew the agreement. Mr. McMullan’s initial base salary will be $350,000. In addition to his base salary, Mr. McMullan will be entitled to receive cash bonuses equaling up to 40% of his annual base salary if Mr. McMullan achieves certain performance levels established from time to time by the board of directors or its authorized designee. The employment agreement also provides for three annual grants of equity incentive awards equal to 110,000, 39,000 and 26,000 shares of the Company’s common stock. After such time Mr. McMullan would continue to be eligible for additional grants of equity or equity-based incentive compensation.

The employment agreement provides that Mr. McMullan will be reimbursed for reasonable and necessary travel, mobile cellular and data plans, and other business expenses up to a maximum of $24,000 per year. Mr. McMullan will participate in the Bank’s retirement, welfare, health, and other benefit programs. Mr. McMullan will be prohibited from disclosing our trade secrets or confidential information.

The employment agreement provides that, if the Bank terminates Mr. McMullan’s employment without cause or Mr. McMullan terminates his employment for good reason at any time outside the 12 months following the occurrence a change in control (a “change in control period”), the Bank will, subject to Mr. McMullan’s execution and non-revocation of a release, pay Mr. McMullan an amount equal to 100% of his then-current base salary in 12 equal monthly installments, plus any vested unpaid bonus earned or accrued through the date of termination.

In addition, if the Bank terminates Mr. McMullan without cause or Mr. McMullan terminates his employment for good reason during a change in control period, Mr. McMullan will, subject to his execution and non-revocation of a release, be entitled to severance equal to the sum of his then-current base salary plus the average of his last two years’ cash bonuses multiplied by two, plus any vested and bonuses awarded for previous years which have not been paid. While we believe that the amounts that could be paid to Mr. McMullan upon termination are reasonable compensation for services, if the Bank’s independent accounting firm or independent tax counsel were to determine that payments to Mr. McMullan would constitute “excess parachute payments,” the payments to Mr. McMullan would be either delivered in full or reduced such that no portion would be subject to any additional tax liability applicable to Mr. McMullan as a result of such payments, whichever results in the greatest amount of benefits to Mr. McMullan, as determined by the Bank’s independent accounting firm or independent tax counsel. Please see “Potential Payments Upon Termination or Change in Control.”

Finally, during his employment and for a period of 12 months thereafter (other than when his employment has been terminated during a change in control period), Mr. McMullan may not, subject to limited exceptions, compete with the Company or the Bank by forming, serving as an organizer, director, or officer of, or consultant to, or acquiring or maintaining more than a 2% passive investment in, a depository financial institution or holding company of a depository financial institution, if the depository institution or holding company has one or more offices or branches within our territory. In addition, during his employment and for a period of 12 months thereafter, Mr. McMullan may not, (i) subject to limited exceptions, solicit the Bank’s customers for a competing business, or (ii) solicit the Bank’s employees for a competing business.

Employment Agreement with Chris Webster

The Bank has entered into an employment agreement (the “Webster employment agreement”) with Mr. Webster. Mr. Webster has agreed to serve as the President of the Bank for a term beginning May 1, 2024, and ending April 30, 2025, that may be extended for additional one-year periods upon each anniversary of the agreement. Mr. Webster’s initial base salary will be $275,000. In addition to his base salary, Mr. Webster will be entitled to receive cash bonuses equaling up to 40% of his annual base salary if Mr. Webster achieves certain performance levels established from time to time by the board of directors or its authorized designee.

The Webster employment agreement provides that Mr. Webster will be reimbursed for reasonable and necessary travel, mobile cellular and data plans, and other business expenses. Mr. Webster will participate in the Bank’s retirement, welfare, health, and other benefit programs. Mr. Webster will be prohibited from disclosing our trade secrets or confidential information.

The Webster employment agreement provides that, if the Bank terminates the executive’s employment without cause prior to a change in control or more than 12 months following a change in control, we will pay Mr. Webster on the first day of the month following the date of termination, and thereafter on the first day of the month for the next 11 months, compensation in an amount equal to 100% of his then current monthly base salary, plus any bonus earned or accrued through the date of termination.

We may terminate Mr. Webster’s employment with or without cause, and Mr. Webster may terminate his employment with or without good reason. Mr. Webster is eligible for certain severance benefits upon termination, as described below under “Potential Payments Upon Termination or Change in Control.” If within 12 months following a change in control the Bank terminates Mr. Webster without cause or Mr. Webster terminates his employment for good reason, Mr. Webster will be entitled to severance equal to the sum of Mr. Webster’s then current base salary plus the average of his last two years’ bonuses multiplied by two, plus any bonuses awarded for previous years but which have not been paid.

Finally, during his employment and for a period of 12 months thereafter (other than a termination within one year following a change in control), Mr. Webster may not, subject to limited exceptions, (i) compete with us by forming, serving as an organizer, director, or officer of, or consultant to, or acquiring or maintaining more than a 1% passive investment in, a depository financial institution or holding company of a depository financial institution, if the depository institution or holding company has one or more offices or branches within our territory, (ii) solicit our customers for a competing business, or (iii) solicit our employees for a competing business.

Employment Agreement with Paul Tees

The Bank has entered into an employment agreement (the “Tees employment agreement”) with Mr. Tees. Mr. Tees has agreed to serve as the Executive Vice President and Chief Credit Officer of the Bank for a term beginning May 1, 2024, and ending April 30, 2025, that may be extended for additional one-year periods upon each anniversary of the agreement. Mr. Tees’ initial base salary will be $247,500. In addition to his base salary, Mr. Tees will be entitled to receive cash bonuses equaling up to 40% of his annual base salary if Mr. Tees achieves certain performance levels established from time to time by the board of directors or its authorized designee.

The Tees employment agreement provides that Mr. Tees will be reimbursed for reasonable and necessary travel, mobile cellular and data plans, and other business expenses. Mr. Tees will participate in the Bank’s retirement, welfare, health, and other benefit programs. Mr. Tees will be prohibited from disclosing our trade secrets or confidential information.

The Tees employment agreement provides that, if the Bank terminates the executive’s employment without cause prior to a change in control or more than 12 months following a change in control, we will pay Mr. Tees on the first day of the month following the date of termination, and thereafter on the first day of the month for the next 11 months, compensation in an amount equal to 100% of his then current monthly base salary, plus any bonus earned or accrued through the date of termination.

We may terminate Mr. Tees’ employment with or without cause, and Mr. Tees may terminate his employment with or without good reason. Mr. Tees is eligible for certain severance benefits upon termination, as described below under “Potential Payments Upon Termination or Change in Control.” If within 12 months following a change in control the Bank terminates Mr. Tees without cause or Mr. Tees terminates his employment for good reason, Mr. Tees will be entitled to severance equal to the sum of Mr. Tees’ then current base salary plus the average of his last two years’ bonuses, plus any bonuses awarded for previous years but which have not been paid.

Finally, during his employment and for a period of 12 months thereafter (other than a termination within one year following a change in control), Mr. Tees may not, subject to limited exceptions, (i) compete with us by forming, serving as an organizer, director, or officer of, or consultant to, or acquiring or maintaining more than a 2% passive investment in, a depository financial institution or holding company of a depository financial institution, if the depository institution or holding company has one or more offices or branches within our territory, (ii) solicit our customers for a competing business, or (iii) solicit our employees for a competing business.

Annual Bonus Payments

Annual bonus compensation is an integral component of our total compensation program that links executive decision-making and performance with our annual strategic objectives. Our named executive officers were eligible for bonus payments based on 2024 performance.

In 2024, the board of directors established a specific set of corporate metrics or measures to determine annual bonuses for our named executive officers. The short term incentive program had a target bonus of 40% of the executive’s base salary and were subject to the following performance measures measured from the second quarter of 2024 to the fourth quarter of 2024:

In addition to these performance measures, two triggers relating to asset quality and regulatory standing are required to be met prior to payment of the bonuses.

In 2024, based on their performance, Mr. McMullan received an annual bonus equal to 26% of his base salary, Mr. Webster received an annual bonus equal to 31% of his base salary, and Mr. Tees received an annual bonus equal to 31% of his base salary. The bonuses were paid in the first quarter of 2025.

2017 Equity Incentive Plan

The Bancorp 34, Inc. 2017 Equity Incentive Plan, which we refer to as the “2017 Equity Plan,” was adopted by the Bancorp 34 board of directors and approved by our stockholders on November 17, 2017. The 2017 Equity Plan was terminated in connection with the adoption of the 2024 Equity Incentive Plan, described below.

2022 Equity Incentive Plan

The Bancorp 34, Inc. 2022 Equity Incentive Plan, which we refer to as the “2022 Equity Plan,” was adopted by the Bancorp 34 board of directors and approved by our stockholders on May 25, 2022. The 2022 Equity Plan was terminated in connection with the adoption of the 2024 Equity Incentive Plan, described below.

2024 Equity Incentive Plan

The Bancorp 34, Inc. 2024 Equity Incentive Plan, which we refer to as the “2024 Equity Plan,” was adopted by the Bancorp 34 board of directors and approved by our stockholders on November 14, 2024. The 2024 Equity Plan remains effective as long as any awards are existing under the plan, provided that no awards may be granted under the plan after the ten-year anniversary date of the of plan. The Equity Plan was designed to enable us to attract, retain and reward individuals who contribute to the further success and to further align the participant’s interest with those of the company’s stockholders.

Shares Subject to the Equity Plan. The shares issuable under the 2024 Equity Plan are 525,000 shares of Bancorp 34 common stock that are authorized but unissued or reacquired common stock. The board of directors of Bancorp 34 acting as Administrator (as defined in the plan) must equitably adjust awards and the shares available under the 2024 Equity Plan in the event of certain corporate restructurings and corporate events, such as recapitalization, reorganization, stock split, or stock dividend.

Types of Awards and Eligibility. There are multiple types of awards that may be made under the 2024 Equity Plan including options (both incentive stock options (“ISOs”) and non-statutory stock options (“NSSOs”), restricted stock awards, restricted stock units (“RSUs”), performance stock awards, stock appreciation rights (“SARs”), other equity-based awards and performance bonuses. Awards are memorialized in an award agreement and are subject to the conditions, restrictions and contingencies specified by the board of directors in such an agreement (and the 2024 Equity Plan). The board of directors of Bancorp 34, in its capacity as Administrator, in its sole discretion, will determine who receives awards under the 2024 Equity Plan. Except for incentive stock options, awards under the 2024 Equity Plan may be granted to employees of Bancorp 34 and its affiliates, nonemployee directors of Bancorp 34 and consultants who provide bona fide services for Bancorp 34 or an affiliate as a consultant or advisor and who are not employees or non-employee directors. Incentive stock options may be granted only to employees of Bancorp 34 or its affiliates.

Stock Options. Options can be issued as ISOs or NSSOs. ISOs are options to purchase our common stock that receive tax benefits under Section 422 of the Code. NSSOs are options to purchase our common stock that do not meet those requirements. As a general rule, the exercise price of each option must be at least 100% (or, in the case of an ISO granted to a 10% or more stockholder, 110%) of the fair market value of a share on the date of grant. A higher or lower exercise price may be permissible in connection with a merger or other corporate transaction if it would not violate Section 409A of the Code. The maximum term of any option is ten years from the date of grant (or five years, for ISOs granted to a 10% or more stockholder).

Unless otherwise provided in an option award agreement, all of a participant’s outstanding options (whether or not vested) will immediately terminate and cease to be exercisable if an executive engages in a “detrimental activity” under the Plan. For purposes of the Plan, “detrimental activity” means any conduct or act determined to be materially injurious, detrimental or prejudicial to the reputation or financial position of the Company or any of its affiliates, as determined by the Administrator.

Restricted Stock. A restricted stock award can be issued as a restricted stock award or restricted stock unit. A restricted stock award and a restricted stock unit is a grant of shares subject to restrictions specified by the Administrator that generally lapse upon vesting.

Restricted Stock Awards. Unless otherwise provided in the award agreement, a participant of a restricted stock award has stockholder rights, such as voting and dividend rights, provided that dividends payable with respect to restricted stock awards will be subject to the same vesting conditions appliable to the restricted stock award and will be paid when any vesting conditions lapse.

Restricted Stock Units. Unless otherwise provided in the award agreement, a participant of a RSU has no stockholder rights, such as voting or dividend rights, until vesting of the restricted stock.

Performance Awards. A performance award means an award that vests in whole or in part upon the achievement of one or more specified performance measures as determined by the Administrator. Performance measures may be based on our performance as a whole or on any one or more of our subsidiaries, or our or our subsidiary’s business units, may provide that partial achievement of performance measures may result in the partial payment or vesting of the award or that the achievement of a performance measure may be measured over more than one period in a fiscal year. The number of performance shares earned by the participant depends on the extent to which the performance goals are attained as determined by the Administrator.

Stock Appreciation Rights. SARs are linked to the success of Bancorp 34’s stock during a predetermined period. The participant can receive proceeds from the stock price increases without having to buy stock. No SAR will have a term in excess of ten years measured from the date of grant of such SAR.

Other Stock-Based Awards. Other stock-based incentives valued in whole or in part by reference to, or otherwise based on, shares (such as restricted stock units) may be granted under the Equity Plan, with such restrictions and other conditions as the board determines.

Administration. The 2024 Equity Plan is administered by the Company’s board of directors or one of its committees. The board of directors may, in its discretion, in its capacity as the Administrator, (i) exercise all of the powers granted to it under the under the 2024 Equity Plan; (ii) determine the fair market value of Bank common stock pursuant to the terms of the 2024 Equity Plan; (iii) select the service providers to whom awards may be granted under the 2024 Equity Plan; (iv) determine whether and to what extent awards are granted under the 2024 Equity Plan; (v) determine the number of shares of Bank common stock that pertain to each award; (vi) approve the terms of option agreements, stock award agreements and SAR agreements; (vii) determine the terms and conditions, not inconsistent with the terms of the 2024 Equity Plan, of any award, including the exercise price and the status of an option (non-statutory stock option or incentive stock option), the time or times when awards may be exercised, and any restriction or limitation regarding any award or the shares of Company common stock relating thereto, based in each case on such factors as the Administrator may determine; (viii) determine the method of payment of the exercise price; (ix) delegate to others responsibilities to assist in administering the 2024 Equity Plan; (x) construe and interpret the terms of the 2024 Equity Plan, option agreements, stock award agreements, SAR agreements and any other documents related to awards granted under the 2024 Equity Plan; (xi) interpret and administer the terms of the 2024 Equity Plan to comply with tax law or any other applicable law and to cause any award that is intended to be exempt from Code Section 409A to continue to be so exempt; and (xii) adopt, alter and repeal such administrative rules, guidelines and practices governing the operation of the 2024 Equity Plans it will from time to time deem advisable.

*Recapitalization and Vesting Events.*The 2024 Equity Plan provides that in the event of certain corporate events or changes affecting Bancorp 34’s common stock, the number of shares of common stock that pertain to each outstanding award, and the exercise price of each option and the maximum number of shares subject to all awards under the 2024 Equity Plan will be adjusted to reflect the event. In the event of: (i) a change in control; or (ii) to the extent determined by the administrator in the applicable award agreement a participant’s death or disability, a participant’s unvested awards under the 2024 Equity Plan will automatically vest, become exercisable or be deemed fully earned, as applicable.

Amendment & Termination. Bancorp 34’s board of directors may amend, suspend, terminate or discontinue the 2024 Equity Plan at any time, provided that no amendment, alteration, suspension or discontinuation will be made which would impair the rights of any participant under any grant previously made under the Plan without that participant’s consent. In addition, to the extent necessary and desirable to comply with Code Section 422 (or other applicable law or regulation), Bancorp 34 will obtain stockholder approval of any amendment to the 2024 Equity Plan in such a manner and to such a degree as required. The Administrator may generally amend, alter, suspend, discontinue or terminate any award and any award agreement; provided that, without the consent of an affected participant, no such action by the administrator may impair the rights of any participant with respect to the award.

Outstanding Equity Awards at 2024 Fiscal Year-End

The following table provides a summary of equity awards outstanding as of December 31, 2024, for the named executive officers.

Potential Payments Upon Termination or Change in Control

Employment Agreements

Employment Agreement with Ciaran McMullan

Mr. McMullan’s employment agreement provides for certain change in control benefits to Mr. McMullan. If, within 12 months following a change in control the Bank terminates Mr. McMullan without cause or Mr. McMullan terminates his employment for good reason, Mr. McMullan will be entitled to severance equal to the sum of Mr. McMullan’s current annual base salary and the average of the cash bonuses received over the last two years, multiplied by two. In addition to the payment, we will also pay Mr. McMullan any vested and earned bonuses from previous years that have not yet been paid. While we believe the amounts to be paid to Mr. McMullan upon termination are reasonable compensation for services under the applicable provisions of the Internal Revenue Code, if the Bank’s independent accounting firm or independent tax counsel determine that payments to the executive would constitute “excess parachute payments,” the payments to Mr. McMullan will be either delivered in full or reduced such that no portion would be subject to any additional tax liability applicable to the executive as a result of such payments, whichever results in the greatest amount of benefits to Mr. McMullan, as determined by the Bank’s independent accounting firm or independent tax counsel.

Employment Agreement with Chris Webster

Mr. Webster’s employment agreement provides for certain change in control benefits to Mr. Webster. If, within 12 months following a change in control the Bank terminates Mr. Webster without cause or Mr. Webster terminates his employment for good reason, Mr. Webster will be entitled to severance equal to cash compensation in a single lump sum payment in an amount equal to the sum of his then current annual base salary plus the average of his last two years’ bonuses, such amount multiplied by two, plus any bonus awarded for previous years but which were not yet paid. While we believe the amounts to be paid to Mr. Webster upon termination are reasonable compensation for services under the applicable provisions of the Internal Revenue Code, if the Bank’s independent accounting firm or independent tax counsel determine that payments to the executive would constitute “excess parachute payments,” the payments to the executive will be either delivered in full or reduced such that no portion would be subject to any additional tax liability applicable to the executive as a result of such payments, whichever results in the greatest amount of benefits to the executive, as determined by the Bank’s independent accounting firm or independent tax counsel.

Change in Control Agreement with Paul Tees

Mr. Tees’ employment agreement provides for certain change in control benefits to Mr. Tees. If, within 12 months following a change in control the Bank terminates Mr. Tees without cause or Mr. Tees terminates his employment for good reason, Mr. Tees will be entitled to severance equal to cash compensation in a single lump sum payment in an amount equal to the sum of his then current annual base salary plus the average of his last two years’ bonuses, plus any bonus awarded for previous years but which were not yet paid. While we believe the amounts to be paid to Mr. Tees upon termination are reasonable compensation for services under the applicable provisions of the Internal Revenue Code, if the Bank’s independent accounting firm or independent tax counsel determine that payments to the executive would constitute “excess parachute payments,” the payments to the executive will be either delivered in full or reduced such that no portion would be subject to any additional tax liability applicable to the executive as a result of such payments, whichever results in the greatest amount of benefits to the executive, as determined by the Bank’s independent accounting firm or independent tax counsel.

Equity Incentive Plans

Restricted Stock Units

Each restricted stock unit award granted to our named executive officers was granted under the 2024 Equity Plan. Under our restricted stock unit award agreements with our named executive officers, stock is earned upon the achievement of specified tangible book value per share and return on average assets targets and, once earned, vests in three equal annual installments. Under all awards, if there is a change in control, the grantee will become 100% vested in those restricted stock units that are still subject to a risk of forfeiture and that are outstanding on the date of the change in control.

Compensation of Directors for Fiscal Year 2024

We do not pay our “inside” employee-directors any additional compensation for their service as directors. For 2024, we provided the following annual compensation to our non-employee directors for their service as directors, which consists of a monthly cash retainer of $3,000.

The following table sets forth, for the fiscal year ended December 31, 2024, certain information regarding the compensation of each non-employee director of Bancorp 34.

Compensation Committee Interlocks and Insider Participation

None of the members of our Compensation Committee is or has been an officer or employee of Bancorp 34 or any of our subsidiaries. In addition, none of our executive officers serves or has served as a member of the board of directors, compensation committee or other board committee performing equivalent functions of any entity that has one or more executive officers serving as one of our directors or on our Compensation Committee.