FRANKLIN FINANCIAL SERVICES CORP /PA/ Stock Compensation Disclosure
In 2004, the Corporation adopted the Employee Stock Purchase Plan of 2004 (ESPP). Under the ESPP, options for 250,000 shares of stock can be issued to eligible employees. The number of shares that can be purchased by each participant is defined by the plan and the Board of Directors sets the option price. However, the option price cannot be less than 90% of the fair market value of a share of the Corporation’s common stock on the date the option is granted. The Board of Directors also determines the expiration date of the options; however, no option may have a term that exceeds one year from the grant date. ESPP options are exercisable immediately upon grant. Any shares related to unexercised options are available for future grant. The Board of Directors may amend, suspend or terminate the ESPP at any time. The exercise price of the 2024 ESPP options was set at 95% of the stock’s fair value at the time of the award.
In 2019, the Corporation approved the 2019 Omnibus Stock Incentive Plan (Stock Plan), replacing the Incentive Stock Option Plan of 2013 (ISOP). No new awards will be made under the 2013 plan; however, any awards made under the 2013 plan remain outstanding under the terms they were issued. Under the Stock Plan, 400,000 shares have been authorized to be issued, inclusive of the remaining shares available under the 2013 plan that were rolled into the Stock Plan and forfeited awards are available for future grants. The Stock Plan allows for various types of awards including incentive stock options, restricted stock and stock appreciation rights.
The ESPP options and the incentive stock options (ISO) awarded under the Stock Plan and outstanding at December 31, 2024 are all exercisable. The ESPP options expire on June 30, 2025 and the ISO options expire 10 years from the grant date. The following table summarizes the activity in the ESPP:
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Employee Stock Purchase Plan |
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| ESPP |
| Weighted Average |
| Aggregate | ||
(Dollars in thousands except share and per share data) | Options |
| Price Per Share |
| Intrinsic Value | ||
Balance Outstanding at December 31, 2022 | 25,943 |
| $ | 28.73 |
| $ | - |
Granted | 34,894 |
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| 26.35 |
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Exercised | (1,607) |
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| 27.21 |
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Expired | (27,306) |
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| 27.77 |
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Balance Outstanding at December 31, 2023 | 31,924 |
| $ | 26.35 |
| $ | 166 |
Granted | 37,700 |
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| 26.87 |
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Exercised | (1,159) |
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| 26.61 |
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Expired | (33,188) |
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| 26.38 |
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Balance Outstanding at December 31, 2024 | 35,277 |
| $ | 26.87 |
| $ | 107 |
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Shares available for future grants under the ESPP at December 31, 2024 | 167,509 |
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The following tables summarize the activity in the Stock Plan:
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Incentive Stock Options |
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| Weighted Average |
| Aggregate | ||
(Dollars in thousands except share and per share data) | ISOP |
| Price Per Share |
| Intrinsic Value | ||
Balance Outstanding at December 31, 2022 | 70,454 |
| $ | 28.84 |
| $ | 511 |
Granted |
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Exercised |
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Forfeited |
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Balance Outstanding at December 31, 2023 | 70,454 |
| $ | 28.84 |
| $ | 191 |
Granted |
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Exercised | (6,375) |
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| 22.05 |
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Forfeited |
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Balance Outstanding at December 31, 2024 | 64,079 |
| $ | 29.51 |
| $ | 25 |
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Restricted Shares |
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| Weighted Average | |
| Restricted |
| Grant Date | |
| Shares |
| Fair Value | |
Nonvested as of December 31, 2022 | 20,504 |
| $ | 32.40 |
Granted | 15,734 |
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| 31.64 |
Vested | (17,183) |
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| 31.56 |
Forfeited | (548) |
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| 32.48 |
Nonvested as of December 31, 2023 | 18,507 |
| $ | 32.53 |
Granted | 26,001 |
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| 27.03 |
Vested | (16,652) |
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| 31.18 |
Forfeited | — |
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Nonvested as of December 31, 2024 | 27,856 |
| $ | 28.21 |
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Shares available for future grants under the Stock Plan at December 31, 2024 | 227,540 |
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Restricted shares awarded under the Stock Plan fully vest in one year for awards to Directors and ratably over three years for awards to other eligible employees. Compensation expense is based on the grant date fair value and was $634 thousand in 2024 and $483 in 2023. The amount of unrecognized compensation expense for restricted shares was $405 thousand at December 31, 2024.
The following table provides information about the options outstanding at December 31, 2024:
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| Options |
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| Weighted |
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| Outstanding |
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| Exercise Price |
| Average Remaining |
Stock Option Plan |
| and Exercisable |
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| per share |
| Life (years) |
Employee Stock Purchase Plan |
| 35,277 |
| $ | 26.87 |
| 0.5 |
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Incentive Stock Options |
| 625 |
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| 22.05 |
| 0.2 |
Incentive Stock Options |
| 14,650 |
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| 21.27 |
| 1.2 |
Incentive Stock Options |
| 24,050 |
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| 30.00 |
| 2.2 |
Incentive Stock Options |
| 24,754 |
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| 34.10 |
| 3.2 |
ISO Total/Average |
| 64,079 |
| $ | 28.84 |
| 2.3 |
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.