EQUITY COMPENSATION PLANS

3 Months Ended

Dec. 31, 2021

EQUITY COMPENSATION PLANS [Abstract]

6. EQUITY COMPENSATION PLANS

The Company’s 2021 and 2018 Equity Compensation Plans (“the 2021 Plan” and “the 2018 Plan,” respectively), provide for the grant of stock-based compensation awards to members of management, including employees and management officials, and members of the Board. Under the 2021 Plan, a total of 427,500 shares of the Company’s common stock or equivalents were approved for issuance, of which 427,500 shares remain available for issuance at December 31, 2021. Of the total 346,000 shares of common stock approved for issuance under the 2018 Plan, 198,735 shares remain available for issuance at December 31, 2021. Hanover assumed the 2013 Savoy Bank Stock Option Plan solely in connection with options to purchase Savoy common stock held by the former Chief Executive Officer of Savoy and which, under the terms of the Agreement and Plan of Merger between the Company and Savoy, were converted into options to purchase 71,900 shares of Hanover common stock.

Stock Options

Stock options are granted with an exercise price equal to the fair market value of the Company’s common stock at the date of grant, and generally with vesting periods of three years and contractual terms of ten years. All stock options fully vest upon a change in control.

The fair value of stock options is estimated on the date of grant using a closed form option valuation (Black-Scholes) model. Expected volatilities are based on historical volatilities of the common stock of the Company's peers. The Company uses historical data to estimate option exercise and post-vesting termination behavior. Expected terms are based on historical data and represent the periods in which the options are expected to be outstanding. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

No stock options were exercised during the three months ended December 31, 2021 and 2020.

A summary of stock option activity follows (aggregate intrinsic value in thousands):

	Number of Options		Weighted- Average Exercise Price		Aggregate Intrinsic Value		Weighted- Average Remaining Contractual Term
Outstanding, October 1, 2021		227,406	$	9.50	$	2,043	3.51 years
Granted		-		-
Exercised		-		-
Forfeited		-		-
Outstanding, December 31, 2021 ⁽¹⁾		227,406	$	9.50	$	2,043	3.20 years

⁽¹⁾ All outstanding options are fully vested and exercisable.

There was no compensation expense attributable to stock options for the three months ended December 31, 2021 and 2020.

Restricted Stock

No restricted stock awards were granted during the three months ended December 31, 2021. During the three months ended December 31, 2020, restricted stock awards of 7,500 shares were granted with a three-year vesting period. Compensation expense is recognized over the vesting period of the awards based on the fair value of the stock at issue date. Since there is no active market for the Company’s stock, the fair value of the restricted stock awards was estimated on the date of grant based on the prices of the most recent transactions in the Company’s common stock.

A summary of restricted stock activity follows:

	Number of Shares			Weighted- Average Grant Date Fair Value
Unvested, October 1, 2021		75,833		$	19.87
Granted		-			-
Vested		(2,666	)		21.49
Forfeited		(2,887	)		19.07
Unvested, December 31, 2021		70,280		$	19.84

Compensation expense attributable to restricted stock was $217 thousand and $229 thousand for the three months ended December 31, 2021 and 2020, respectively. As of December 31, 2021, there was $0.8 million of total unrealized compensation cost related to unvested restricted stock, expected to be recognized over a weighted-average term of 1.62 years. The total fair value of shares vested during the three months ended December 31, 2021 and 2020 was $49 thousand and $7 thousand, respectively.