Stock Based Compensation

6 Months Ended

Jun. 30, 2011

Stock Based Compensation [Abstract]

Stock Based Compensation

Note 9 - Stock Based Compensation

LCNB established an Ownership Incentive Plan (the "Plan") during 2002 that allows for stock-based awards to eligible employees, as determined by the Board of Directors.  The awards may be in the form of stock options, share awards, and/or appreciation rights.  The Plan provides for the issuance of up to 200,000 shares.

Options granted to date vest ratably over a five year period and expire ten years after the date of grant. Stock options outstanding at June 30, 2011 were as follows:

		Outstanding Stock Options						Exercisable Stock Options
Exercise Price Range		Number		Weighted Average  Exercise Price		Weighted Average Remaining Contractual Life (Years)		Number		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)
$	9.00 - 10.99		29,110	$	9.00		7.6		11,644	$	9.00		7.6
$	11.00 - 12.99		59,799		11.89		8.6		12,511		12.20		7.3
$	13.00 - 14.99		11,056		13.09		1.6		11,056		13.09		1.6
$	17.00 - 18.99		24,158		18.16		4.3		22,535		18.18		4.2
			124,123		12.54		6.9		57,746		14.06		5.0

The following table summarizes stock option activity for the periods indicated:

	2011				2010
	Options		Weighted Average Exercise  Price		Options		Weighted  Average Exercise Price
Outstanding, January 1		99,040	$	12.71		78,242	$	13.04
Granted		25,083		11.85		20,798		11.50
Exercised		-		-		-		-
Outstanding, June 30		124,123		12.54		99,040		12.71
Exercisable, June 30		57,746		14.06		41,770		14.78

The aggregate intrinsic value (the amount by which the current market value of the underlying stock exceeds the exercise price of the option) for options outstanding at June 30, 2011 that were “in the money” (market price greater than exercise price) was $95,000.  The aggregate intrinsic value at that date for only the options that were exercisable was $36,000.  The intrinsic value changes based on changes in the market value of LCNB's stock.

The fair value of options granted is estimated at the date of grant using the Black-Scholes option-pricing model.  The following table shows the estimated weighted-average fair value and the assumptions used in calculating that value for options granted during the six month periods ended June 30:

	2011			2010
Estimated weighted-average fair value of options granted	$	2.09			2.27
Risk-free interest rate		2.84	%		3.34	%
Average dividend yield		4.43	%		4.31	%
Volatility factor of the expected market price of the Company's common stock		27.37	%		28.32	%
Average life in years		6.5			7.0

Total expense related to options included in salaries and employee benefits in the consolidated statements of income for the three and six months ended June 30, 2011 were $11,000 and $22,000, respectively, and $10,000 and $19,000 for the three and six months ended June 30, 2010, respectively.

A total of 2,511 restricted shares were granted to an executive officer in February 2010 and vested in November 2010.  Until they vested, they were restricted from sale, transfer, or assignment in accordance with the terms of the agreement under which they were issued.  At the date of vesting, the shares were issued from treasury stock and, therefore, did not affect the number of securities remaining available for future issuance in the table above.  No restricted shares were granted prior to February 2010 or during the first six months of 2011.