Stock-Based Compensation Plans

12 Months Ended

Sep. 30, 2014

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

Stock-Based Compensation Plans

7. Stock-Based Compensation Plans.

The Company has two Stock Option Plans (the 2000 Stock Option Plan and the 2006 Stock Option Plan) under which options for shares of common stock were granted to directors, officers and key employees. The 2006 plan permits the grant of stock options, stock appreciation rights, restricted stock awards, restricted stock units, or stock awards. The options awarded under the plans have similar characteristics. All stock options are non-qualified and expire ten years from the date of grant. Stock based compensation awarded to directors, officers and employees are exercisable immediately or become exercisable in cumulative installments of 20% or 25% at the end of each year following the date of grant. When stock options are exercised the Company issues new shares after receipt of exercise proceeds and taxes due, if any, from the grantee. The number of common shares available for future issuance was 486,590 at September 30, 2014.

The Company utilizes the Black-Scholes valuation model for estimating fair value of stock compensation for options awarded to officers and employees. Each grant is evaluated based upon assumptions at the time of grant. The assumptions were no dividend yield, expected volatility between 37% and 46%, risk-free interest rate of .3% to 4.2% and expected life of 3.0 to 7.0 years.

The dividend yield of zero is based on the fact that the Company does not pay cash dividends and has no present intention to pay cash dividends. Expected volatility is estimated based on the Company’s historical experience over a period equivalent to the expected life in years. The risk-free interest rate is based on the U.S. Treasury constant maturity interest rate at the date of grant with a term consistent with the expected life of the options granted. The expected life calculation is based on the observed and expected time to exercise options by the employees.

The Company recorded the following stock compensation expense in its consolidated statement of income (in thousands):

	Years Ended September 30
	2014		2013		2012
Stock option grants	$	441		376		381
Annual non-employee Director stock award		698		507		320
	$	1,139		883		701

A summary of changes in outstanding options is presented below:

				Weighted		Weighted		Weighted
	Number			Average		Average		Average
	of			Exercise		Remaining		Grant Date
Options	Shares			Price		Term (yrs)		Fair Value(000's)
Outstanding at
October 1, 2011		606,025		$	14.96		3.5	$	4,216
Granted		31,690		$	22.25			$	281
Exercised		(153,505	)	$	8.62			$	(705	)
Forfeited		(3,000	)	$	5.78			$	(10	)
Outstanding at
September 30, 2012		481,210		$	17.52		3.8	$	3,782
Granted		46,180		$	26.20			$	489
Exercised		(112,800	)	$	10.52			$	(603	)
Forfeited		—		$	—			$	—
Outstanding at
September 30, 2013		414,590		$	20.40		4.2	$	3,668
Granted		31,790		$	41.39			$	545
Exercised		(119,550	)	$	12.23			$	(732	)
Forfeited		—		$	—			$	—
Outstanding at
September 30, 2014		326,830		$	25.43		5.0	$	3,481
Exercisable at
September 30, 2014		244,476		$	23.82		4.0	$	2,398
Vested during
twelve months ended
September 30, 2014		33,148						$	372

The following table summarizes information concerning stock options outstanding at September 30, 2014:

	Shares	Weighted			Weighted
Range of Exercise	under	Average			Average
Prices per Share	Option	Exercise Price			Remaining Life
Non-exercisable:
$16.51 – $24.75	14,514			22.25		7.2
$24.76 - $37.25	43,550			26.62		7.5
$37.26 - $41.39	24,290			41.39		9.2
	82,354		$	30.21		8.0	years
Exercisable:
$11.00 - $16.50	55,800			14.92		0.4
$16.51 - $24.75	68,176			22.57		4.1
$24.76 - $37.25	113,000			27.79		5.3
$37.26 - $41.39	7,500			41.39		9.2
	244,476		$	23.82		4.0	years
Total	326,830		$	25.43		5.0	years

The aggregate intrinsic value of exercisable in-the-money options was $2,526,000 and the aggregate intrinsic value of outstanding in-the-money options was $3,014,000 based on the market closing price of $33.92 on September 30, 2014 less exercise prices. Gains of $2,918,000 were realized by option holders during the twelve months ended September 30, 2014. The realized tax benefit from options exercised for the twelve months ended September 30, 2014 was $1,129,000. Total compensation cost of options granted but not yet vested as of September 30, 2014 was $814,000, which is expected to be recognized over a weighted-average period of 3.3 years.