Stock Based Compensation

6 Months Ended

Jun. 30, 2012

Stock Based Compensation [Abstract]

Stock Based Compensation

Note 10 - 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, 2012 are 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	5.8	18,964	$	9.00		5.3
$11.00 - $12.99	74,290			12.03	7.2	29,159		12.01		5.0
$13.00 - $14.99	8,912			13.09	0.5	8,912		13.09		0.5
$17.00 - $18.99	24,158			18.16	2.7	24,158		18.16		2.7
	136,470			12.54	5.6	81,193		13.25		3.9

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

	2012			2011
	Options	Weighted Average Exercise Price		Options	Weighted Average Exercise Price
Outstanding, January 1	124,123	$	12.54	99,040	$	12.71
Granted	14,491		12.60	25,083		11.85
Exercised	(2,144)		13.09	-		-
Outstanding, June 30	136,470		12.54	124,123		12.54
Exercisable, June 30	81,193		13.25	57,746		14.06

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, 2012 that were "in the money" (market price greater than exercise price) was $225,000.  The aggregate intrinsic value at that date for only the options that were exercisable was $123,000.  The aggregate intrinsic value for options outstanding at June 30, 2011 that were in the money was $95,000 and 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 of options granted and the assumptions used in calculating that value for the years indicated:

	2012	2011
Estimated weighted-average fair value   of options granted	$2.80	$2.09
Risk-free interest rate	0.84%	2.84%
Average dividend	$0.64	$0.64
Volatility factor of the expected market   price of LCNB's common stock	39.56%	27.37%
Average life in years	6.5	6.5

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, 2012 were $11,000 and $20,000, respectively, and $11,000 and $22,000 for the three and six months ended June 30, 2011, respectively.