Note 14 - Equity Compensation

9 Months Ended

Sep. 30, 2020

Notes to Financial Statements

Share-based Payment Arrangement [Text Block]

14.) Equity Compensation:

The Omnibus Equity Plan permits the award of up to 340,000 shares to the Company’s employees to promote the long-term financial success of the Company, increasing shareholder value by providing employees the opportunity to acquire an ownership interest in the Company and enabling the Company and its related entities to attract and retain the services of those upon whom the successful conduct of business depends. In the first nine months of 2020, 47,567 shares were granted to employees under the plan, compared to 30,156 shares being granted under the plan in the first nine months of 2019. The Company is expensing the grant date fair value of all share-based compensation over the requisite vesting periods on a prorated straight-line basis.  In the first nine months of 2020 and 2019, compensation expense of $318,000 and $626,000, respectively, was recorded in the Consolidated Statements of Income. As of September 30, 2020, there was $643,000 of total unrecognized compensation expense related to the non-vested shares granted under the Plan. Shares awarded under this plan can vest immediately and/or on the anniversary of the award date from one to three years out if the employee remains employed with Cortland Bancorp. The remaining cost is expected to be recognized over a weighted average period of 11.8 months.

Granted shares are awarded upon a combination of service and achievement of performance objectives derived from one or more of the performance criteria. The main performance metrics used for the periods presented were three-year earnings per share growth and three-year return on equity ranked versus a peer group.

The following is the activity under the Omnibus Equity Plan during the nine months ended September 30, 2020:

				Weighted Average
				Grant Date Fair
	Shares			Value
Nonvested at January 1, 2020		26,025		$	21.78
Granted		47,567			15.82
Vested		(22,136	)		21.74
Forfeited		—			—
Nonvested at September 30, 2020		51,456		$	16.29

The Director Equity Plan permits the award of up to 113,000 shares to nonemployee directors to promote the long-term financial success of the Company, increasing shareholder value by enabling the Company and its related entities to attract and retain the services of those directors upon whom the successful conduct of business depends.  There were 2,684 Board approved shares granted in the first nine months of 2020, and there were 1,525 Board approved shares granted under the plan in the first nine months of 2019. In the first nine months of 2020, there was $43,000 of expense recorded in the Consolidated Statements of Income, and $34,000 of expense recorded in the first nine months of 2019.