EAGLE FINANCIAL SERVICES INC Stock Compensation Disclosure

NOTE 10. Stock-Based Compensation

On May 16, 2023, the Company's shareholders approved the 2023 Stock Incentive Plan ("the 2023 Plan") which allows key employees and directors to increase their personal financial interest in the Company. The 2023 Plan permits the issuance of incentive stock options and non-qualified stock options and the award of common stock, restricted stock, and stock units. The plan authorizes the issuance of up to 250,000 shares of common stock. The 2023 Plan replaced the 2014 Stock Incentive Plan. To date, equity awards have only been issued in the form of restricted stock.

The Company periodically grants restricted stock to its directors, executive officers and certain non-executive officers. Restricted stock provides grantees with rights to shares of common stock upon completion of a service period or achievement of Company performance measures. During the restriction period, all shares are considered outstanding and dividends are paid to the grantee. Outside directors are periodically granted restricted shares which vest over a period of one year. Executive officers have been granted restricted shares which generally vest over a three year service period and restricted shares which vest based on meeting performance measures. Beginning in 2024, performance-based restricted shares are granted with a three year cliff vesting period, while previously granted performance-based restricted shares vested over a two year period. Restricted shares are also granted to certain non-executive officers and generally vest over a three year service period.

The Company recognizes compensation expense over the vesting period based on the fair value of the Company's stock on the grant date. Compensation expense was $912 thousand and $1.2 million during December 31, 2024 and 2023, respectively. The total grant date fair value of restricted stock which vested was $1.0 million and $579 thousand for the years ended December 31, 2024 and 2023, respectively. The total vest date fair value of restricted stock which vested was $883 thousand and $609 thousand for the years ended December 31, 2024 and 2023, respectively. Unrecognized compensation cost related to unvested restricted stock was $583 thousand at December 31, 2024. This amount is expected to be recognized over a weighted average period of two years. The Company's policy is to recognize forfeitures as they occur.