NOTE 16 - LONG TERM INCENTIVE PLANS

12 Months Ended

Dec. 31, 2022

Retirement Benefits [Abstract]

NOTE 16 - LONG TERM INCENTIVE PLANS

NOTE 16 - LONG TERM INCENTIVE PLANS

The Board of Directors adopted the 2011 Long Term Incentive Plan (the “Plan”) on March 25, 2011, and the shareholders approved the Plan at the 2011 Annual Meeting. The Plan was amended on January 18, 2013, January 29, 2016 and again on April 28, 2017. The purpose of the Plan is to assist Salisbury and the Bank in attracting, motivating, retaining and rewarding employees, officers and directors by enabling such persons to acquire or increase a proprietary interest in Salisbury in order to strengthen the mutuality of interests between such persons and our shareholders, and providing such persons with stock-based long-term performance incentives to expend their maximum efforts in the creation of shareholder value.

The terms of the Plan provide for grants of Directors Stock Retainer Awards, Stock Options, Stock Appreciation Rights (“SARs”), Restricted Stock, Restricted Stock Units, Performance Awards, Deferred Stock, Dividend Equivalents, and Stock or Other Stock-Based Awards that may be settled in shares of common stock, cash, or other property (collectively, “Awards”). Under the Plan, the total number of shares of Common Stock reserved and available for issuance in the ten years following adoption of the Plan in connection with Awards under the Plan is 168,000 shares of Common Stock, which represented less than 5% of Salisbury’s outstanding shares of Common Stock at the time the Plan was adopted. Shares of Common Stock with respect to Awards previously granted under the Plan that are cancelled, terminate without being exercised, expire, are forfeited or lapse will again be available for issuance as Awards. Also, shares of Common Stock subject to Awards settled in cash and shares of Common Stock that are surrendered in payment of any Award or any tax withholding requirements will again be available for issuance as Awards. No more than 60,000 shares of Common Stock may be issued pursuant to Awards in any one calendar year. In addition, the Plan limits the total number of shares of Common Stock that may be awarded as Incentive Stock Options (“ISOs”) to 84,000 and the total number of shares of Common Stock that may be issued as Directors Stock Retainer Awards to 30,000. The Directors stock retainer awards were increased from 240 shares per year to 480 shares per year effective January 25, 2013. Effective January 29, 2016, the Directors stock retainer award was increased from 480 shares to 680 shares annually.

The Board of Directors adopted the 2017 Long Term Incentive Plan (the “2017 LTIP”) on February 24, 2017, which was approved by shareholders at the 2017 Annual Meeting on May 17, 2017. Pursuant to the 2017 LTIP, as of May 2017, following shareholder approval of the 2017 LTIP, no further awards will be made under the 2011 LTIP, which shall remain in existence solely for purposes of administering outstanding grants. Under the 2017 LTIP, the total number of shares of Common Stock reserved and available for issuance in the next ten years in connection with awards under the 2017 LTIP is 400,000 shares of Common Stock, which represents approximately 7% of Salisbury’s 5,540,072 outstanding shares of Common Stock as of March 20, 2017. Of the maximum shares available under the 2017 LTIP, 400,000 shares may be issued upon the exercise of stock options (all of which may be granted as incentive stock options) and 300,000 shares may be issued as restricted stock or restricted stock units (including deferred stock units), provided that, to the extent that a share is issued as a restricted stock award or a restricted stock unit, the share would no longer be available for award as a stock option, unless the restricted stock award or restricted unit is forfeited or otherwise returned to the 2017 LTIP. On March 9, 2020 the Board of Directors approved an amendment to the Salisbury Bancorp, Inc. 2017 Long Term Incentive Plan (the “Plan”) which allows the Committee, in its sole discretion, to accelerate vesting of all or a portion of an award upon the termination of service of a participant or the occurrence of a change in control. On June 19, 2022 the Board of Directors approved an amendment to the Salisbury Bancorp, Inc. 2017 Long Term Incentive Plan (the “Plan”) to reflect the two-for-one stock split effective on June 1, 2022.

Restricted stock

In 2022, 2021 and 2020 Salisbury granted a total of 36,680, 33,300, and 30,950 shares of restricted stock pursuant to its 2017 LTIP to certain employees and Directors. The fair value of the stock at grant date was determined to be $1.0 million, $750 thousand, and $554 thousand, respectively. The stock will be vested three years from the grant date.

The following table presents the amount of cumulatively granted restricted stock awards under the 2011 and 2017 Long-Term Incentive Plans:

				Weighted Average					Weighted Average					Weighted Average
Year Ended December 31,	2022			Grant Price		2021			Grant Price		2020			Grant Price
Beginning of Year		88,810		$	20.22		80,250		$	19.72		79,252		$	20.52
Granted		36,680			27.77		33,300			22.53		30,950			17.92
Vested		(30,560	)		19.93		(24,740	)		21.73		(27,552	)		19.86
Forfeited		0			0.00		0			0.00		(2,400	)		20.63
End of Year		94,930		$	23.22		88,810		$	20.22		80,250		$	19.72

The fair value of the restricted shares that vested during 2022 and 2021 were $816 thousand and $538 thousand, respectively. Compensation expense for restricted stock awards in 2022, 2021 and 2020 was $799 thousand, $599 thousand and $525, respectively. Unrecognized compensation cost relating to the restricted stock awards was $1,144 thousand and $925 thousand, as of December 31, 2022, and 2021, respectively. The remaining weighted average vesting period on restricted shares as of December 31, 2022, over which unrecognized compensation cost is expected to be recognized, is 1.2 years. The tax benefit associated with restricted stock awards, which was recognized in earnings for 2022, 2021 and 2020, was approximately $144 thousand, $108 thousand and $95 thousand, respectively.

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). The final tranche of awards under the Phantom plan was paid out in January 2021.

The performance goal for awards granted under the RSU plan in 2019 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. This tranche of awards vested in 2022 at 150% because the growth in Salisbury’s tangible book value over the performance period exceeded target performance.

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 July 29, 2023.

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 June 23, 2024.

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 fair value of the awards granted under the RSU plan at the grant date was $394 thousand $354 thousand and $264 thousand, respectively, for those grants awarded in 2022, 2021, and 2020. In 2020, 350 RSUs were forfeited. Compensation expense of $329 thousand, $331 thousand and $221 was recorded with respect to these RSUs in 2022, 2021 and 2020, respectively. No performance-based restricted stock units were awarded prior to 2018. The shares noted above are contingently issuable only upon attainment of the minimum performance goal.

The following table presents the amount of cumulatively granted performance based restricted stock units awarded under the 2017 Long-Term Incentive Plan:

				Weighted Average				Weighted Average
Year Ended December 31,	2022			Grant Price		2021		Grant Price
Beginning of Year		42,200		$	20.92		27,400	$	19.32
Granted		13,900			28.33		14,800		23.90
Vested		(12,900	)		20.60		—		—
End of Year		43,200		$	23.41		42,200	$	20.92

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 $1,297 thousand, $1,166 thousand, and $941 thousand, in 2022, 2021, and 2020, respectively.