NOTE 10 - BENEFITS

9 Months Ended

Sep. 30, 2020

Retirement Benefits [Abstract]

NOTE 10 - BENEFITS

NOTE 10 - BENEFITS

Salisbury's 401(k) Plan expense was $229 thousand and $231 thousand, respectively, for the three month periods ended September 30, 2020 and 2019, and $667 thousand and $662 thousand, respectively, for the nine month periods ended September 30, 2020 and 2019. Other post-retirement benefit obligation (credit) expense for endorsement split-dollar life insurance arrangements was $(32) thousand and $21 thousand, respectively, for the three month periods ended September 30, 2020 and 2019, and $7 thousand and $69 thousand, respectively, for the nine month periods ended September 30, 2020 and 2019. A credit was recognized in third quarter 2020 to reflect the payout of insurance proceeds and the corresponding reduction in liability due to the death of a covered former employee.

ESOP

Salisbury offers an ESOP to eligible employees.  Under the ESOP, Salisbury may make discretionary contributions to the ESOP. Discretionary contributions vest in full upon six years and reflect the following schedule of qualified service: 20% after the second year, 20% per year thereafter, vesting at 100% after six full years of service. Salisbury's ESOP expense was $56 thousand and $105 thousand, respectively, for the three month periods ended September 30, 2020 and 2019, and $170 thousand and $207 thousand, respectively, for the nine month periods ended September 30, 2020 and 2019.

Other Retirement Plans

A Non-Qualified Deferred Compensation Plan (the "Plan") was adopted effective January 1, 2013. This Plan was adopted by the Bank for the benefit of certain key employees ("Executive" or "Executives") who have been selected and approved by the Bank to participate in this Plan and have evidenced their participation by execution of a Non-Qualified Deferred Compensation Plan Participation Agreement ("Participation Agreement") in a form provided by the Bank. This Plan is intended to comply with Internal Revenue Code ("Code") Section 409A and any regulatory or other guidance issued under such Section. Salisbury's expense for this plan was $33 thousand and $29 thousand, respectively, for the three month periods ended September 30, 2020 and 2019, and $100 thousand and $87 thousand, respectively, for the nine month periods ended September 30, 2020 and 2019.

Grants of Restricted Stock and Options

Restricted stock

Restricted stock expense was $122 thousand and $131 thousand, respectively, for the three month periods ended September 30, 2020 and 2019, and $393 thousand and $348 thousand, respectively for the nine month periods ended September 30, 2020 and 2019. The tax benefit from restricted stock expense was $22 thousand and $24 thousand, respectively for the three month periods ended September 30, 2020 and 2019; and $71 thousand and $63 thousand, respectively for the nine month periods ended September 30, 2020 and 2019. In second quarter 2020, Salisbury granted a total of 14,975 shares of restricted stock to certain employees and Directors pursuant to its 2017 Long Term Incentive Plan. The fair value of the stock at grant date was approximately $536 thousand. In third quarter 2020, Salisbury granted 500 restricted shares with a fair value of approximately $18 thousand at grant date. The restricted stock will vest three years from the grant date. Unrecognized compensation cost relating to the awards as of September 30, 2020 and 2019 totaled $906 thousand and $887 thousand, respectively. There were forfeitures of $21 thousand or 500 shares in the third quarter of 2020 and forfeitures of $50 thousand or 1,200 shares for year to date 2020. There were forfeitures of $10 thousand or 250 shares in the third quarter of 2019 and forfeitures of $31 thousand or 710 shares for year to date 2019.

Performance-based restricted stock units

On March 29, 2019, the Compensation Committee granted 6,800 performance-based restricted stock units (RSU) pursuant to the 2017 Long-Term Incentive Plan to further align compensation with the Bank's performance. This RSU plan replaced the Bank's Phantom Stock Appreciation Units plan (Phantom). Salisbury will continue to record an expense for the Phantom plan until the final tranche of awards is paid out in January 2021. Salisbury's expense for the Phantom plan was $18 thousand and $84 thousand, respectively, for the three month periods ended September 30, 2020 and 2019, and $101 thousand and $203 thousand, respectively, for the nine month periods ended September 30, 2020 and 2019.

The performance goal for the March 2019 grant under the RSU plan is based on the increase in the Bank's tangible book value by $3.50 per share over the performance period for threshold performance. Vesting will range from 75% of target for achieving threshold performance, to 100% of target for achieving target payout performance ($5.00 increase in tangible book value per share) to 150% of target for achieving in excess of target payout performance and if the performance goals are achieved. In July 2020, the Compensation Committee granted an additional 7,250 units under the RSU plan. The performance goal for this tranche is based on the relative increase in the Bank's tangible book value compared with a pre-determined group of peer banks over the performance period for threshold performance. Vesting will range from 50% of target for achieving threshold performance, to 100% of target for achieving tangible book value growth of at least 50% but less than 55% of the peer group, to 150% of target for achieving in excess of target payout performance and, if the performance goal is achieved. Compensation expense of $80 and $23 thousand was recorded with respect to both tranches of RSUs in the three months ended September 30, 2020 and 2019, respectively, and $127 and $46 thousand for the nine months ended September 30, 2020 and 2019. No performance-based restricted stock units were awarded prior to March 29, 2019.

Options

Salisbury issued stock options in conjunction with its acquisition of Riverside Bank in 2014. In the second and third quarters 2020, there were no stock options exercised and year to date 2020, 1,755 stock options were exercised at $17.04 per share by one former Riverside Bank executive, who is currently a Named Executive Officer of Salisbury. Also, in the first quarter of 2020, a former Riverside employee exercised 1,350 stock options at $17.04 per share. In the first and third quarters of 2019 there were no stock options exercised. In the second quarter 2019, there were 2,025 stock options exercised at $17.04, by one employee. In the first quarter 2018, 1,350 stock options were exercised at $31.11 per share by one former Riverside Bank executive, who is currently a Named Executive Officer of Salisbury.