Finward Bancorp Stock Compensation Disclosure
Note 10 – Stock Based Compensation
The Company’s 2015 Stock Option and Incentive Plan (the “Incentive Plan”), permits the grant of equity awards for up to 250,000 shares of common stock. Awards granted under the Incentive Plan may be in the form of incentive stock options, non-qualified stock options, restricted stock, unrestricted stock, performance shares, or performance units. The purposes of the Plan are (i) to align the personal interests of plan participants with those of the shareholders of the Company, (ii) to encourage key individuals to accept or continue employment or service with the Company and its subsidiaries, and (iii) to furnish incentives to such key individuals to improve operations and increase profits by providing such key individuals the opportunity to acquire common stock of the Company or to receive monetary payments based on the value of such common stock.
Restricted stock awards are generally granted with an award price equal to the market price of the Company’s common stock on the award date. Restricted stock awards have been issued with a year cliff-vesting period. Forfeiture provisions exist for personnel that separate employment before the vesting period expires. Compensation expense related to restricted stock awards is recognized over the vesting period. Total compensation cost that has been charged to expense for those plans was approximately $565 thousand and $719 thousand for the years ended December 31, 2024 and 2023, respectively.
When awarded restricted shares vest, employees of the Bank can elect to surrender a portion of their vested shares back to the Company to cover the tax liability of their awards. Shares were surrendered with a total value of $86 thousand and $196 thousand for the years ended December 31, 2024 and 2023, respectively.
A summary of changes in the Company’s non-vested restricted stock for the year ended December 31, 2024, follows:
| Non-vested Shares | Shares | Weighted Date | ||||||
| Non-vested at January 1, 2024 | 41,649 | $ | 43.86 | |||||
| Granted | 19,137 | 24.31 | ||||||
| Vested | (15,174 | ) | 40.84 | |||||
| Forfeited | (1,042 | ) | 33.55 | |||||
| Non-vested at December 31, 2024 | 44,570 | $ | 36.74 | |||||
As of December 31, 2024, there was approximately $515 thousand of total unrecognized compensation cost related to non-vested restricted shares granted under the Incentive Plan. The cost is expected to be recognized over a weighted-average period of 1.7 years.
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.