LCNB CORP Stock Compensation Disclosure
NOTE 18 - STOCK-BASED COMPENSATION
The 2015 Ownership Incentive Plan (the "2015 Plan") was approved by LCNB's shareholders at the annual meeting on April 28, 2015 and allows for stock-based awards to eligible employees, as determined by the Compensation Committee of LCNB's Board of Directors ("Compensation Committee"). Awards may be made in the form of stock options, appreciation rights, restricted shares, and/or restricted share units. The 2015 Plan provides for the issuance of up to 450,000 shares of common stock. The 2015 Plan will terminate on April 28, 2025 and is subject to earlier termination by the Compensation Committee.
Stock-based awards may be in the form of treasury shares or newly issued shares.
LCNB has granted stock options since 2012.
Restricted stock awards granted under the 2015 Plan were as follows:
| 2024 | 2023 | 2022 | ||||||||||||||||||||||
| Weighted | Weighted | Weighted | ||||||||||||||||||||||
| Average | Average | Average | ||||||||||||||||||||||
| Grant Date | Grant Date | Grant Date | ||||||||||||||||||||||
| Shares | Fair Value | Shares | Fair Value | Shares | Fair Value | |||||||||||||||||||
| Nonvested at January 1, | 79,017 | $ | 17.94 | 58,314 | $ | 17.99 | 44,512 | $ | 17.08 | |||||||||||||||
| Granted | 41,703 | 13.87 | 44,150 | 17.84 | 32,554 | 19.25 | ||||||||||||||||||
| Vested | (36,127 | ) | 16.39 | (23,447 | ) | 17.89 | (18,752 | ) | 18.01 | |||||||||||||||
| Forfeited | — | — | — | — | — | |||||||||||||||||||
| Nonvested at December 31, | 84,593 | $ | 16.59 | 79,017 | $ | 17.94 | 58,314 | $ | 17.99 | |||||||||||||||
At December 31, 2024, there were 84,593 restricted stock awards outstanding with an approximate stock value of $1,280,000 based on that day's closing stock price. At December 31, 2023, there were 79,017 restricted stock awards outstanding with an approximate stock value of $1,246,000 based on that day's closing stock price. The grant date fair value of restricted stock awards was $578,000 and $788,000 in 2024 and 2023, respectively. Grants to officers of LCNB vest over a period of years while grants to members of the board of directors vest immediately. The grant date fair value is recognized ratably into income over the vesting period.
Total expense related to restricted stock awards included in salaries and wages in the Consolidated Statements of Income for the years ended December 31, 2024, 2023, and 2022 was $588,000, $563,000, and $531,000 respectively. The related tax benefit for the years ended December 31, 2024, 2023, and 2022 was $124,000, $118,000, and $111,000, respectively.
Unrecognized compensation expense for restricted stock awards was $900,000 at December 31, 2024 and is expected to be recognized over a period of 4.2 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.