Employee Benefits

12 Months Ended

Jun. 30, 2022

Employee Benefits

Employee Benefits

NOTE 8: Employee Benefits

401(k) Retirement Plan. The Bank has a 401(k) retirement plan that covers substantially all eligible employees. The Bank makes “safe harbor” matching contributions of up to 4% of eligible compensation, depending upon the percentage of eligible pay deferred into the plan by the employee. Additional profit-sharing contributions of 5% of eligible salary have been accrued for the plan year ended June 30, 2022, which the board of directors authorizes based on management recommendations and financial performance for fiscal 2022. Total 401(k) expense for fiscal 2022, 2021, and 2020, was $1.9 million, $1.7 million, and $1.5 million, respectively. At June 30, 2022, 401(k) plan participants held approximately 398,000 shares of the Company’s stock in the plan. Employee deferrals and safe harbor contributions are fully vested. Profit-sharing or other contributions vest over a period of five years.

2008 Equity Incentive Plan. The Company adopted an Equity Incentive Plan (the EIP) in 2008, reserving for award 132,000 shares (split-adjusted). EIP shares were available for award to directors, officers, and employees of the Company and its affiliates by a committee of outside directors. The committee held the power to set vesting requirements for each award under the EIP. At the 2017 annual meeting, shareholders approved the 2017 Omnibus Incentive Plan, which provided that no further awards would be made under the EIP. From fiscal 2012 through fiscal

2017, the Company awarded 122,803 shares, and no awards were made under the plan since fiscal 2017. All EIP awards were in the form of either restricted stock vesting at the rate of 20% of such shares per year, or performance-based restricted stock vesting at up to of 20% of such shares per year, contingent on the achievement of specified profitability targets over a three-year period. During fiscal 2022, 2021, and 2020, there were 2,250, 2,700, and 2,825 EIP shares (split-adjusted) vested each year, respectively. Compensation expense, in the amount of the fair market value of the common stock at the date of grant, is recognized pro-rata over the five years during which the shares vest. The EIP expense for fiscal 2022, 2021, and 2020 was $46,000, $84,000, and $88,000, respectively. At June 30, 2022, no awards remained outstanding, and there was no unvested compensation expense related to the EIP.

2003 Stock Option Plan. The Company adopted a stock option plan in October 2003 (the 2003 Plan). Under the plan, the Company granted options to purchase 242,000 shares (split-adjusted) to employees and directors, of which, options to purchase 187,000 shares (split-adjusted) have been exercised, options to purchase 45,000 shares (split-adjusted) have been forfeited, and 10,000 remain outstanding. Under the 2003 Plan, exercised options may be issued from either authorized but unissued shares, or treasury shares. At the 2017 annual meeting, shareholders approved the 2017 Omnibus Incentive Plan, which provided that no further awards would be made under the 2003 Plan.

As of June 30, 2022, there was no remaining unrecognized compensation expense related to unvested stock options under the 2003 Plan. The aggregate intrinsic value of stock options outstanding, all of which were exercisable, at June 30, 2022, was $277,000. During fiscal 2020, options to purchase 10,000 shares were exercised; no options to purchase shares were exercised in fiscal 2022 or 2021. The intrinsic value of options vested in fiscal 2020 was $14,000, and no options vested in fiscal 2022 or 2021.

2017 Omnibus Incentive Plan. The Company adopted an equity-based incentive plan in October 2017 (the 2017 Plan). Under the 2017 plan, the Company reserved for issuance 500,000 shares of common stock for awards to employees and directors, against which full value awards (stock-based awards other than stock options and stock appreciation rights) are to be counted on a 2.5-for-1 basis. The 2017 Plan authorized awards to be made to employees, officers, and directors by a committee of outside directors. The committee held the power to set vesting requirements for each award under the 2017 Plan. Under the 2017 Plan, stock awards and shares issued pursuant to exercised options may be issued from either authorized but unissued shares, or treasury shares.

Under the 2017 Plan, options to purchase 94,000 shares have been issued to employees, of which none have been exercised or forfeited, and 94,000 remain outstanding. As of June 30, 2022, there was $561,000 in remaining unrecognized compensation expense related to unvested stock options under the 2017 Plan, which will be recognized over the remaining weighted average vesting period. The aggregate intrinsic value of in-the-money stock options outstanding under the 2017 Plan at June 30, 2022, was $752,000, and no options were exercisable at June 30, 2022, at a strike price in excess of the market price. The intrinsic value of options vested in fiscal 2022 and 2021 was $150,000, and $87,000, respectively. No in-the-money options were vested in fiscal 2020.

Full value awards totaling 22,350, 18,925, and 15,525 shares, respectively, were issued to employees and directors in fiscal 2022, 2021, and 2020. All full value awards were in the form of either:

● restricted stock vesting at the rate of 20% of such shares per year,

● performance-based restricted stock vesting at up to 20% of such shares per year, contingent on the achievement of specified profitability targets over a trailing three-year period, or

● restricted stock vesting after a three-year service requirement.

During fiscal 2022, 2021, and 2020, full value awards of 12,860, 9,770, and 7,080 shares were vested, respectively. Compensation expense, in the amount of the fair market value of the common stock at the date of grant, is recognized pro-rata over the  vesting period. Compensation expense for full value awards under the 2017 Plan for fiscal 2022, 2021, and 2020 was $548,000, $351,000, and $293,000, respectively. At June 30, 2022, unvested compensation expense related to full value awards under the 2017 Plan was approximately $1.9 million.

Changes in options outstanding under the 2003 Plan and the 2017 Plan were as follows:

	2022			2021			2020
	Weighted			Weighted			Weighted
	Average			Average			Average
	Price		Number	Price		Number	Price		Number
Outstanding at beginning of year	$	33.77	89,500	$	33.22	60,500	$	26.35	51,000
Granted		53.82	14,500		34.91	29,000		37.40	19,500
Exercised		—	—		—	—		6.38	(10,000)
Forfeited		—	—		—	—		—	—
Outstanding at year-end	$	36.56	104,000	$	33.77	89,500	$	33.22	60,500
Options exercisable at year-end	$	31.92	44,900	$	29.79	29,000	$	26.31	18,900

The following is a summary of the assumptions used in the Black-Scholes pricing model in determining the fair values of options granted during fiscal years 2022, 2021, and 2020:

	2022			2021			2020
Assumptions:
Expected dividend yield		1.49	%		1.83	%		1.60	%
Expected volatility		28.02	%		27.72	%		22.55	%
Risk-free interest rate		1.82	%		1.14	%		1.55	%
Weighted-average expected life (years)		10.00			10.00			10.00
Weighted-average fair value of options granted during the year	$	16.38		$	9.19		$	8.81

The table below summarizes information about stock options outstanding under the 2003 Plan and 2017 Plan at June 30, 2022:

Weighted	Options Outstanding			Options Exercisable
Average		Weighted			Weighted
Remaining		Average			Average
Contractual	Number	Exercise		Number	Exercise
Life	Outstanding	Price		Exercisable	Price
26 mo.	10,000	$	17.55	10,000	$	17.55
67 mo.	13,500		37.31	10,800		37.31
78 mo.	17,500		34.35	10,500		34.35
92 mo.	19,500		37.40	7,800		37.40
103 mo.	29,000		34.91	5,800		34.91
115 mo.	14,500		53.82	—		53.82