LONG TERM INCENTIVE PLANS

12 Months Ended

Dec. 31, 2018

Retirement Benefits [Abstract]

LONG TERM INCENTIVE PLANS

NOTE 15 - 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 84,000 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 30,000 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 42,000 and the total number of shares of Common Stock that may be issued as Directors Stock Retainer Awards to 15,000. The Directors stock retainer awards were increased from 120 shares per year to 240 shares per year effective January 25, 2013. Effective January 29, 2016, the Directors stock retainer award was increased from 240 shares to 340 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 200,000 shares of Common Stock, which represents approximately 7% of Salisbury’s 2,770,036 outstanding shares of Common Stock as of March 20, 2017. Of the maximum shares available under the 2017 LTIP, 200,000 shares may be issued upon the exercise of stock options (all of which may be granted as incentive stock options) and 150,000 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.

In 2018, 2017 and 2016 Salisbury granted a total of 13,210, 13,824 and 15,800 shares of restricted stock pursuant to its 2011 and 2017 LTIP to certain employees and Directors. The fair value of the stock at grant date was determined to be $585,000, $547,000 and $466,000, 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:

Year Ended December 31	2018			Weighted Average Grant Price
Beginning of year		27,024		$	34.62
Granted		13,210			44.30
Vested		0			0.00
Forfeited		(800	)		40.99
End of year		39,434		$	37.73

The fair value of the restricted shares that vested during 2018 and 2017 was $0 and $222,000, respectively. Compensation expense for restricted stock awards in 2018, 2017, and 2016 was $412,000, $259,000 and $215,000, respectively. Unrecognized compensation cost relating to the restricted stock awards was $711,000 and $606,000 as of December 31, 2018 and 2017, respectively. The remaining weighted average vesting period on restricted shares as of December 31, 2018, over which unrecognized compensation cost is expected to be recognized, is 1.3 years. In 2017, Salisbury recorded a $105,000 benefit to the tax provision for the adoption of ASU 2016-09 as discussed in Note 1 - Summary of Significant Accounting Policies. The tax benefit associated with restricted stock awards, which was recognized in earnings for 2018, 2017 and 2016, was approximately $870, $88,000 and $73,000, respectively.

Additionally in 2018, 2017 and 2016 the Compensation Committee granted a total of 53,500, 56,600, and 47,470 Phantom Stock Appreciation Units (“PSUs” pursuant to the 2013 Phantom Stock Appreciation Unit and Long-Term Incentive Plan (the “Plan”) to certain employees, including the four Named Executive Officers. The units will vest on the third anniversary of the grant date. Salisbury’s compensation expense related to the PSUs was $171,000, $135,000 and $178,000 for 2018, 2017, and 2016 respectively.