NOTE 11 – LONG TERM INCENTIVE PLANS

6 Months Ended

Jun. 30, 2022

Retirement Benefits [Abstract]

NOTE 11 – LONG TERM INCENTIVE PLANS

NOTE 11 – LONG TERM INCENTIVE PLANS

Restricted stock

Restricted stock expense was $243 thousand and $168 thousand, respectively; for the three-month periods ended June 30, 2022 and 2021, and $431 thousand and $300 thousand, respectively, for the six-month periods ended June 30, 2022 and 2021. The second quarter of 2022 and 2021 included an expense of $17 thousand and $32 thousand, respectively for the accelerated vesting of restricted stock awards previously granted to certain Directors, who retired from Salisbury’s Board of Directors during the quarter. The tax benefit from restricted stock expense was $44 thousand and $30 thousand, respectively, for the three-month periods ended June 30, 2022 and 2021, and $78 thousand and $54 thousand, respectively; for the six-month periods ended June 30, 2022 and 2021.

In second quarter 2022, Salisbury granted a total of 18,340 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 $1.0 million dollars. The restricted stock will vest three years from the grant date. Unrecognized compensation cost relating to the awards as of June 30, 2022 and 2021 totaled $1.5 million and $1.2 million, respectively. There were no forfeitures in the second quarter or year to date for 2022 and 2021.

Performance-based restricted stock units

On March 29, 2019, the Compensation Committee granted 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 paid out the final tranche of these awards in January 2021. The performance goal for awards granted under the RSU plan in 2019 was based on the increase in the Bank’s tangible book value by $3.50 per share over the performance period for threshold performance. The vesting ranged 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 This tranche of awards vested in second quarter 2022 at 150% for achieving tangible book value per share growth in excess of target payout performance. The vesting of these awards occurred prior to June 30, 2022 and was not affected by the two-for-one forward stock split.

On July 29, 2020, the Compensation Committee granted an additional 14,500 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, vesting will occur no later than March 15, 2023. The number of units awarded for this tranche has been adjusted to reflect the two-for-one forward stock split, which was effective on June 30, 2022.

On June 23, 2021, the Compensation Committee granted an additional 14,800 units under the RSU plan. The performance goal for this tranche 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 ($4.50 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, vesting will occur no later than March 15, 2024. The number of units awarded and the performance goals for this tranche have been adjusted to reflect the two-for-one forward stock split, which was effective on June 30, 2022.

On February 28, 2022, the Compensation Committee granted an additional 13,900 units under the RSU plan. The performance goal for this tranche 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 ($4.50 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, vesting will occur no later than March 15, 2025. The number of units awarded and the performance goals for this tranche have been adjusted to reflect the two-for-one forward stock split, which was effective on June 30, 2022.

The fair value of the awards granted under the RSU plan at the grant date was $394 thousand and $354 thousand, respectively, for those grants awarded in 2022 and 2021. Compensation expense of $96 thousand and $103 thousand was recorded with respect to these RSUs for the three months ended June 2022 and 2021, and $193 thousand and $174 thousand for the six months ended June 30, 2022 and 2021, respectively. No performance-based restricted stock units were awarded prior to 2019. The shares noted above are contingently issuable only upon attainment of the minimum performance goal.

Short Term Incentive Plan (STIP)

Salisbury offers a short-term discretionary compensation plan to eligible employees on an annual basis. Under this incentive plan, Salisbury may reward employees with cash compensation if certain pre-determined Bank and individual performance goals have been achieved. The STIP expense, which is included in compensation expenses, totaled $271 thousand and $310 thousand for the three months ended June 30, 2022 and 2021, and year to date expenses of $538 thousand and $548 thousand for 2022 and 2021, respectively.

Options

Salisbury issued stock options in conjunction with its acquisition of Riverside Bank in 2014. In second quarter 2022, a former Riverside employee exercised 4,050 stock options at $8.52 per share and in the second quarter 2021, no stock options were exercised. A former Riverside Bank executive exercised 7,020 and 3,510 stock options at $8.52 per share in second quarter 2022 and 2021, respectively.