Stock-Based Compensation

12 Months Ended

Dec. 31, 2023

13.STOCK-BASED COMPENSATION

At December 31, 2023, the Company had two stock-based compensation plans, which are described below. The compensation cost charged against income for those plans was $0.9 million in each of 2023 and 2022, and $0.7 million in 2021, and is included in “Salaries and Employee Benefits” in the Company’s Consolidated Statements of Income. All stock option and restricted stock expense is recorded on a straight-line basis over the requisite service period. In addition, expenses for director stock-based compensation were recognized to reflect $0.3 million in 2023 and $0.2 million in each of 2022 and 2021, as part of “Other” expense in the Company’s Consolidated Statements of Income.

2019 Long-Term Equity Incentive Plan

Under the Company’s 2019 Long-Term Equity Incentive Plan (the “2019 Plan”) and, prior to the adoption of the 2019 Plan by shareholders in April 2019, under the Company’s 2009 Long-Term Incentive Plan (the “2009 Plan” and together with the 2019 Plan, the “Equity Plans”), the Company has granted options or restricted stock to officers, directors and key employees of the Company and its subsidiaries. Under the Equity Plans, the Company was authorized to issue up to 603,883 shares of common stock. Under the Equity Plans, the exercise price of each option is not to be less than 100% of the market price of the Company’s stock on the date of grant and an option’s maximum term is ten years. If available, the Company normally issues shares out of its treasury for any options exercised or restricted shares issued. The options have vesting schedules from 12 months through 5 years. At December 31, 2023, there were a total of 184,300 shares available for grant under the 2019 Plan. The Company may no longer make grants under the 2009 Plan.

There were no options granted as part of the 2023 and 2022 compensation plan. The fair value of 2021 option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:


	2021
Dividend Yield		3.07	%
Expected Life (years)		7.18
Expected Volatility		27.54	%
Risk-free Interest Rate		1.51	%
Weighted Average Fair Value	$	7.80

The Company used historical volatility calculated using daily closing prices for its common stock over periods that match the expected term of the option granted to estimate the expected volatility. The risk-free interest rate assumption was based upon U.S. Treasury yields appropriate for the expected term of the Company's stock options based upon the date of grant. The expected dividend yield was

based upon the Company's recent history of paying dividends. The expected life was based upon the options’ expected vesting schedule and historical exercise patterns.

Stock options activity for 2023 was as follows:



	Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value ‎(in thousands)
Balance, December 31, 2022		193,644	$	31.21
Granted		-		-
Exercised		(22,689)		21.20
Expired		(11,151)		37.38
Forfeited		(4,444)		30.63
Balance, December 31, 2023		155,360	$	32.25		4.30	$	504

Exercisable, December 31, 2023		136,583	$	32.46		3.89	$	435

Future compensation cost expected to be expensed over the weighted average remaining contractual term for remaining outstanding options is $0.1 million. The unrecognized compensation cost is scheduled to be recognized as follows:



	(in thousands)
2024	$	29
2025		26

Restricted stock award, unit, and performance unit activity for 2023 was as follows:



	Shares	Weighted Average Grant Date Fair Value
Balance, December 31, 2022	50,544	$	36.62
Granted	38,684		35.50
Vested	(25,561)		36.94
Forfeited	(6,409)		35.44
Balance, December 31, 2023	57,258	$	35.85

As of December 31, 2023, there was $1.4 million in unrecognized compensation cost related to restricted share-based compensation arrangements granted under the Equity Plans. The unrecognized compensation cost is scheduled to be recognized as follows:



	(in thousands)
2024	$	837
2025		418
2026		147
2027		21

During fiscal years 2023, 2022, and 2021, the following activity occurred under the Company’s plans:




	2023		2022		2021
	(in thousands)
Total intrinsic value of stock options exercised	$	378	$	621	$	488
Total fair value of restricted stock awards vested	$	825	$	828	$	701

Employee Stock Purchase Plan

The Company also maintains the Evans Bancorp, Inc. Employee Stock Purchase Plan (the “Purchase Plan”). As of December 31, 2023, there were 34,175 shares of common stock available to issue to full-time employees of the Company and its subsidiaries, nearly all of whom are eligible to participate. Under the terms of the Purchase Plan, employees can choose each year to have up to 15% of their annual base earnings withheld to purchase the Company’s common stock. Employees can purchase stock only on June 30 and December 31 each year during the term of the Purchase Plan for 85% of the price on the purchase date. Under the Purchase Plan, the Company issued 13,906, 12,731 and 12,166 shares to employees in 2023, 2022, and 2021, respectively. Compensation cost is calculated by the value of the 15% discount only. The compensation cost that was charged against income for the Purchase Plan was less than $0.1 million in 2023, 2022, and 2021.