BENEFIT PLANS

Employee stock options. As of September 30, 2012, the Company has four employee stock plans: the 1997 Plan, the 1999 Plan, the 2002 Plan and the 2005 Plan. Equity awards from these plans generally become exercisable 25% per year after the date of grant but may vest immediately at management’s discretion and expire no later than ten years from the date of grant.

The employee stock plans allow for grants of the Company’s common stock in the form of incentive stock options (“ISOs”), non-qualified stock options, and stock appreciation rights. Under the 2005 Plan, the Company may also grant restricted stock, stock units, performance shares, stock awards, dividend equivalents and other stock-based awards. The Company does not record a tax benefit for option awards at the grant date since the options it issues are generally ISOs and employees have typically held the stock received on exercise for the requisite holding period.

The Company did not grant any options during fiscal 2012, 2011 or 2010.

At September 30, 2011 and 2010, the Company had unamortized compensation expense related to nonvested stock options of $45,000 and $202,000, respectively. The balance of the unamortized compensation at September 30, 2011 was fully expensed during fiscal 2012. For fiscal 2012, 2011 and 2010, the Company recorded option compensation expense of $45,000, $165,000 and $226,000, respectively.

Restricted stock. During fiscal 2012, 2011 and 2010, the Company awarded a total of 33,143, 214,568 and 399,156 shares of restricted stock, respectively, valued at $214,000, $1.4 million and $1.7 million, respectively, and recorded compensation expense for outstanding restricted stock of $1.2 million, $1.9 million and $2.7 million (of which $38,000, $33,000 and $232,000 related to the accelerated vesting of awards for certain terminated employees), respectively.

In January 2011, in connection with the formation of LEAF, all of the outstanding restricted stock of LEAF Financial held by its senior management were exchanged for 1,000 shares of restricted stock of LEAF. The Company recorded equity-based compensation expense related to the LEAF and LEAF Financial restricted stock of $94,000 and $57,000 for fiscal 2011 and 2010, respectively. No compensation expense was recorded for these shares for fiscal 2012.

Performance-based awards. The Company issues performance-based awards which are earned based on the achievement of specified goals as of a designated measurement date. The goals typically include such measures as earnings per share, return on equity, revenues and assets under management. During fiscal 2012, 2011 and 2010, the Company awarded 0, 36,000, and 0 shares of performance-based restricted stock, respectively, and recorded compensation expense of $38,000, $0 and $96,000 during fiscal 2012, 2011 and 2010, respectively, related to performance awards that had been earned. There were 6,000 nonvested earned performance-based restricted shares outstanding as of September 30, 2012 (none at September 30, 2011).



Unearned Performance-based Restricted Stock	Shares
Outstanding, beginning of year	136,000
Awarded	—
Earned	(12,000	)
Forfeited	(100,000	)
Outstanding, end of year	24,000

Aggregate information regarding the Company’s employee stock options as of September 30, 2012 is as follows:



Stock Options Outstanding	Shares			Weighted Average Exercise Price			Weighted Average Contractual Life	Aggregate Intrinsic Value
Balance, beginning of year	2,083,215			$	9.90		2.5	$	1,636,000
Granted	—			$	—
Exercised	(1,034,738	)		$	(3.58	)
Forfeited and/or expired	(3,251	)		$	(19.06	)
Balance, end of year	1,045,226			$	16.12		3	$	21,594

Exercisable, September 30, 2012	1,045,226			$	—
Available for grant	861,296		⁽¹⁾


(1)	At the Company’s 2011 Annual Meeting, shareholders approved an 800,000 increase in the shares authorized for grant under the Company’s 2005 Plan. The shares available for grant reflect this increase, as reduced by restricted stock award grants, net of forfeitures.

The following table summarizes the activity for nonvested employee stock options and restricted stock (excluding performance-based awards) during fiscal 2012:



	Shares		Weighted Average Grant Date Fair Value
Nonvested Stock Options
Outstanding, beginning of year	22,687		$	3.48
Granted	—		$	—
Vested	(22,687	)	$	(3.48	)
Forfeited and/or expired	—		$	—
Outstanding, end of year	—		$	—

Nonvested Restricted Stock
Outstanding, beginning of year	649,007		$	5.85
Granted	45,143		$	6.42
Vested and issued	(278,125	)	$	(6.86	)
Forfeited	(12,830	)	$	(4.77	)
Outstanding, end of year	403,195		$	5.23

Deferred stock and deferred compensation plans. In addition to the employee stock plans, the Company has three plans for its non-employee directors (“Eligible Directors”), the 1997 Director Plan, the 2002 Director Plan, and the 2012 Director Plan. Each unit granted under these plans represents the right to receive one share of the Company’s common stock.

The 1997 Director Plan has issued all of its authorized 173,450 units. As of September 30, 2012 and 2011, there were 104,070 units vested and outstanding under this plan.

Eligible Directors are eligible to participate in the 2002 and 2012 Director Plans. Upon becoming a director, each Eligible Director receives units equal to a share compensation amount divided by the closing price of the Company’s common stock on the date of grant. Eligible Directors receive an additional unit award on each anniversary of the date of initial grant equal to their share compensation divided by the closing price of the Company’s common stock on the date of grant. Units vest on the later of: (i) the fifth anniversary of the date the recipient became an Eligible Director and (ii) the first anniversary of the grant of those units, except that units will vest sooner upon a change in control or death or disability of an Eligible Director, provided the Eligible Director has completed at least six months of service. Upon termination of service by an Eligible Director, shares of common stock are issued for vested units and all nonvested units are forfeited.

The 2002 Director Plan provides for the issuance of 173,450 units and terminated on April 29, 2012, such that the plan can no longer make any additional grants (grants outstanding remain unaffected). As of September 30, 2012, there were 130,956 units outstanding (of which 115,052 were vested) under the 2002 Director Plan.

The 2012 Director Plan provides for the issuance of up to a maximum of 200,000 units and will terminate on March 8, 2022, except with respect to previously awarded grants. As of September 30, 2012, there were 9,654 units outstanding (none of which were vested) under the 2012 Director Plan.

Aggregate information regarding the Company’s three director plans at September 30, 2012 was as follows:



	Shares		Weighted Average Grant Date Fair Value
Director Units
Outstanding, beginning of year	238,737		$	6.56
Granted	30,255		$	5.95
Issued	(19,612	)	$	(6.88	)
Forfeited	(4,697	)	$	(4.79	)
Outstanding, end of year	244,683		$	6.38

Vested units	219,125		$	6.41
Available for grant	190,346

The following table summarizes the activity for outstanding nonvested director units during fiscal 2012:



	Shares		Weighted Average Grant Date Fair Value
Nonvested Director Units
Outstanding, beginning of year	34,115		$	6.38
Granted	30,255		$	5.95
Vested	(34,115	)	$	(6.38	)
Forfeited	(4,697	)	$	(4.79	)
Outstanding, end of year	25,558		$	6.16

Employee Stock Ownership Plan. The Company had sponsored an Employee Stock Ownership Plan (“ESOP”) which was a qualified non-contributory retirement plan established to acquire shares of the Company’s common stock for the benefit of its employees who are 21 years of age or older, completed 1000 hours of service and were employed by the Company for one year. Contributions to the ESOP were funded by the Company. Vested shares held by the plan were distributed upon the termination of the participant’s employment with the Company. The Company has terminated the ESOP and, in connection with this termination, distributed the remaining plan assets to participants and liquidated the ESOP trust in the fourth quarter of fiscal 2012. There was no compensation expense recorded related to this plan during fiscal 2012, 2011 or 2010.

Employee 401(k) Plan. The Company sponsors a qualified 401(k) Plan to enable employees to save for their retirement on a tax deferred basis. Employees are eligible to make elective deferrals commencing on the first day of the month after their date of hire. Prior to January 1, 2012, the Company matched 50% of such deferrals, limited to 10% of an employee’s annual compensation, after the completion of 1000 hours of service and having been employed by the Company for one year. The match earned prior to January 1, 2012 vests over a period of five years. On January 1, 2012, the Plan was amended to become a Safe Harbor Plan and the match was changed to equal (1) 100% of participant contributions up to the first 3% of participant compensation, plus (2) 50% of participant contributions on the next 2% of participant compensation. In addition, matching contributions made after January 1, 2012 are 100% vested. The Company has recorded compensation expense of $465,000, $712,000 and $1.1 million for matching contributions during fiscal 2012, 2011 and 2010, respectively.

SERP. The Company established a SERP, which has Rabbi and Secular Trust components, for Mr. Edward E. Cohen (“Mr. E. Cohen”), while he was the Company’s Chief Executive Officer. The Company pays an annual benefit equal to $838,000 during his lifetime or for a period of 10 years from June 2004, whichever is longer. The 1999 Trust, a secular trust, purchased and holds 100,000 shares of the common stock of TBBK ($1.0 million fair value at September 30, 2012). The Company held 33,509 shares of TBBK as of September 30, 2011 which were all sold during fiscal 2012 to fund SERP distribution payments to Mr. E. Cohen. The Company anticipates funding $838,000 to the Plan during fiscal 2013 in order for the Plan to pay the annual benefit.

The components of net periodic benefit costs for the SERP were as follows (in thousands):



	Fiscal Years Ended September 30,
	2012			2011			2010
Interest cost	$	325		$	366		$	430
Less: expected return on plan assets	(70		)	(66		)	(59		)
Plus: Amortization of unrecognized loss	378			298			263
Net cost	$	633		$	598		$	634

The reconciliation of the beginning and ending balances for the SERP benefit obligation and fair value of plan assets, comprised entirely of equity securities, as well as the funded status of the Company’s SERP liability, is as follows (in thousands):



	September 30,
	2012				2011
Projected benefit obligation, beginning of year	$	8,216			$	7,626
Interest cost	325				366
Actuarial loss	847				1,062
Benefit payments	(838		)		(838		)
Projected benefit obligation, end of year	$	8,550			$	8,216

Fair value of plan assets, beginning of year	$	1,167			$	1,106
Actual gain on plan assets	407				61
Fair value of plan assets, end of year	$	1,574			$	1,167

Unfunded status	$	(6,976	)		$	(7,049	)
Unrecognized net actuarial loss	5,373				5,241
Net accrued cost	$	(1,603	)		$	(1,808	)

Amounts recognized in the consolidated balance sheets consist of:
Accrued benefit liability	$	(6,976	)		$	(7,049	)
Accumulated other comprehensive loss	3,044			⁽¹⁾	2,970
Deferred tax asset	2,329				2,271
Net liability recognized	$	(1,603	)		$	(1,808	)


(1)	The estimated net loss for the plan that is expected to be amortized from accumulated other comprehensive loss into net periodic pension benefit cost over the next fiscal year is $399,000.

As of September 30, 2012, the fair value of the SERP plan asset by level within the fair value hierarchy was as follows (in thousands):



	Level 1		Level 2		Level 3		Total
Asset:
Equity securities - TBBK	$	1,574	$	—	$	—	$	1,574

The SERP is expected to make benefit payments based on the same assumptions used to measure the Company’s benefit obligation at September 30, 2012 (2.9% discount rate, 6% expected return on assets) over the next five fiscal years ending September 30, and thereafter, as follows (in thousands):



2013	$	838
2014	827
2015	782
2016	757
2017	729
Thereafter	3,131
	$	7,064