Stock Based Compensation Plans

9 Months Ended

Jun. 30, 2018

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock Based Compensation Plans

11. Stock Based Compensation Plans

The Company maintains two equity incentive plans under which stock options and restricted stock have or can be granted, the 2010 Equity Incentive Plan (“2010 Plan”) approved by the Company’s shareholders in February 2010 and the 2016 Equity Incentive Plan (“2016 Plan”) approved by the Company’s shareholders in February 2016. The aggregate number of shares of the Company’s common stock available for issuance under the 2016 Plan may not exceed 88,000 shares, consisting of 66,000 stock options and 22,000 shares of restricted stock. At June 30, 2018, 13,458 shares of the Company’s common stock were available for issuance under the 2010 Plan as stock options and 11,140 shares of the Company’s common stock were available for issuance under the 2016 Plan, consisting of 7,405 stock options and 3,735 shares of restricted stock.

Stock Options

Under the plans, the Company may grant both non-statutory and incentive stock options that may not have a term exceeding ten years. In the case of incentive stock options, the aggregate fair value (determined at the time the incentive stock options are granted) which are first exercisable during any calendar year shall not exceed $100,000. Exercise prices generally may not be less than the fair market value of the underlying stock at the date of the grant. The terms of the plans also include provisions whereby all unearned options and restricted shares become immediately exercisable and fully vested upon a change in control.

Stock options granted generally vest ratably over five years and are exercisable in whole or in part for a period up to ten years from the date of the grant. Compensation expense is measured based on the fair market value of the options at the grant date and is recognized ratably over the period during which the shares are earned (the vesting period). The fair market value of stock options granted is estimated at the date of grant using a binomial option pricing model. Expected volatilities are based on historical volatility of the Company’s stock. The expected term of options granted represents the period of time that options are expected to be outstanding. The risk free rate for the expected life of the options is based on the U.S. Treasury yield curve in effect at the grant date.

The fair value of options granted during the nine-month period ended June 30, 2018 was determined using the following assumptions:

Expected dividend yield		1.75	%
Risk-free interest rate		2.13	%
Expected volatility		14.6	%
Expected life of options		7.5 years
Weighted average fair value at grant date	$	6.13

A summary of stock option activity as of June 30, 2018, and changes during the nine-month period then ended is presented below.

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
	(Dollars in thousands, except per share data)
Outstanding at beginning of period		197,529		$	20.15
Granted		9,000			63.23
Exercised		(55,296	)		13.54
Forfeited or expired		(1,200	)		56.56
Outstanding at end of period		150,033		$	24.88		4.5	$	7,293
Vested and expected to vest		150,033		$	24.88		4.5	$	7,293
Exercisable at end of period		101,597		$	15.78		2.5	$	5,864

The intrinsic value of stock options exercised during the nine-month period ended June 30, 2018 was $2.8 million. The Company recognized compensation expense related to stock options of $17,000 and $50,000 for the three- and nine-month periods ended June 30, 2018, respectively. The company recognized compensation expense related to stock options of $16,000 and $39,000 for the three- and nine-month periods ended June 30, 2017, respectively. At June 30, 2018, there was $255,000 of unrecognized compensation expense related to nonvested stock options. The compensation expense is expected to be recognized over the remaining vesting period of 4.9 years.

Restricted Stock

The vesting period of restricted stock granted under the plans is generally five years beginning one year after the date of grant of the awards. Compensation expense is measured based on the fair market value of the restricted stock at the grant date and is recognized ratably over the vesting period. Compensation expense related to restricted stock recognized for the three- and nine-month periods ended June 30, 2018 was $37,000 and $111,000, respectively. Compensation expense related to restricted stock recognized for the three- and nine-month periods ended June 30, 2017 was $35,000 and $87,000, respectively.

A summary of the Company’s nonvested restricted shares activity as of June 30, 2018 and changes during the nine-month period then ended is presented below.

				Weighted
	Number			Average
	of			Grant Date
	Shares			Fair Value
Nonvested at October 1, 2017		17,265		$	40.09
Granted		1,500		$	56.56
Vested		(3,453	)	$	40.09
Forfeited		(500	)	$	56.56
Nonvested at June 30, 2018		14,812		$	41.20

There were 3,453 restricted shares vested during the nine-month period ended June 30, 2018 and the total fair value that vested during the nine-month period ended June 30, 2018 was $195,000. There were no restricted shares that vested during the three-month period ended June 30, 2018 or the three- and nine-month periods ended June 30, 2017. At June 30, 2018 there was $517,000 of unrecognized compensation expense related to nonvested restricted shares. The compensation expense is expected to be recognized over the remaining vesting period of 4.4 years.