Stock Based Compensation

6 Months Ended

Dec. 31, 2017

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

Stock Based Compensation

Note 4. Stock Based Compensation

The Company follows ASC 718 in establishing standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services, as well as transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. ASC 718 requires that the cost resulting from all share-based payment transactions be recognized in the financial statements based on the fair value of the share-based payment. ASC 718 establishes fair value as the measurement objective in accounting for share-based payment transactions with employees, except for equity instruments held by employee share ownership plans.

Total stock-based compensation expense recognized in the statements of comprehensive income for the three-month periods ended December 31, 2017 and 2016 was $29,048 and $29,715, respectively, before income taxes. The related total deferred tax benefits were approximately $1,602 and $2,359 for the same periods. Total stock-based compensation expense recognized in the statements of comprehensive income for the six-month periods ended December 31, 2017 and 2016, was $50,470 and $53,048, respectively, before income taxes. The related total deferred tax benefit was approximately $2,771 and $4,124 for the same periods. ASC 718 requires the tax benefits resulting from tax deductions in excess of the compensation cost recognized for those options to be classified and reported as both an operating cash outflow and a financing cash inflow.

As of December 31, 2017, there was approximately $189,343 of unrecognized compensation cost related to stock option awards that is expected to be recognized as expense over the next 2.00 years. The total deferred tax benefit related to these awards is expected to be approximately $10,772.

The Company has one employee stock option plan under which options or stock awards may be granted, the 2017 Stock Options and Restricted Stock Plan (the "2017 Plan"), approved by the Company's shareholders at the Company's Annual Meeting on December 1, 2017. The Board of Directors may grant options to acquire shares of common stock to employees and non-employee directors of the Company at the fair market value of the common stock on the date of grant. The maximum aggregate number of shares of Common Stock subject to options or awards to non-employee directors is 133,000 and the maximum aggregate number of shares of Common Stock subject to options or awards granted to non-employee directors during any single fiscal year is the lesser of 13,300 and 33 1/3% of the total number of shares subject to options or awards granted in such fiscal year. The maximum number of shares subject to options or awards granted to any individual employee may not exceed 15,000 in a fiscal year. Generally, options granted have a two-year vesting period based on two years of continuous service and have a ten-year contractual life. Option grants provide for accelerated vesting if there is a change in control. Shares issued upon the exercise of options are from those held in Treasury. Options covering 400,000 shares are authorized for issuance under the 2017 plan, of which 51,515 have been granted as of December 31, 2017. While no further grants of options may be made under the Company’s 2007 Stock Options and Restricted Stock Plan which expired on August 16, 2017, as of December 31, 2017, 196,550 options were outstanding under such plan of which 154,650 are vested and exercisable.

ASC 718 requires the use of a valuation model to calculate the fair value of stock-based awards. The Company has elected to use the Black-Scholes option valuation model, which incorporates various assumptions including those for dividend yield, volatility, expected life and interest rates.

The table below outlines the weighted average assumptions that the Company used to calculate the fair value of each option award for the six months ended December 31, 2017 and 2016.

	December 31, 2017		December 31, 2016
Dividend yield		4.60%		3.85%
Company’s expected volatility		23.97%		29.70%
Risk-free interest rate		1.95%		1.84%
Expected term		4.7 yrs		4.6 yrs
Weighted average fair value per share
of options granted during the period	$	2.790	$	4.640

The Company declares dividends quarterly and paid cash dividends totaling $0.50 per share for the six months ended December 31, 2017 and 2016. Our Board of Directors assesses the Company’s dividend policy periodically. There is no assurance that the Board of Directors will maintain the amount of the regular cash dividend. Expected stock price volatility is based on the historical volatility of the Company’s stock. The risk-free interest rate is based on the implied yield available on U.S. Treasury issues with an equivalent term approximating the expected life of the options. The expected option life (in years) represents the estimated period of time until exercise and is based on actual historical experience.

The following table summarizes stock option activity during the six months ended December 31, 2017:

	Employee Stock Options Plan
						Weighted
	Number of			Weighted		Average
	Shares			Average		Remaining		Aggregate
	Subject			Exercise		Contractual		Intrinsic
	To Options			Price		Term		Value
Balance at July 1, 2017		197,800		$	24.57		5.86
Granted		51,515		$	21.75		9.81
Exercised		—			—		—
Forfeited or expired		(1,250	)	$	26.00		—
Outstanding at December 31, 2017		248,065		$	23.98		6.28	$	309,072
Vested or expected to vest at December 31, 2017		233,886		$	23.99		6.09	$	291,851
Exercisable at December 31, 2017		154,650		$	24.13		4.40	$	195,224

The aggregate intrinsic value in the table above represents the total pretax intrinsic value (the difference between the closing sale price of the Company’s common stock as reported on the NYSE MKT on December 31, 2017 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders if all option holders had exercised their options on December 31, 2017. This amount changes based on the fair market value of the Company’s common stock. The total intrinsic values of the options exercised during the six months ended December 31, 2017 and 2016 were $0 and $15,189, respectively.

The following table summarizes changes in non-vested stock options during the six months ended December 31, 2017:

	Number			Weighted Average
	of Shares			Grant Date Fair
	Subject to Option			Value (per Option)
Non-vested at July 1, 2017		42,900		$	4.586
Granted		51,515		$	2.790
Vested		(500	)	$	4.431
Forfeited or expired		(500	)	$	4.640
Non-vested at December 31, 2017		93,415		$	3.596