NOTE 5 — STOCK BASED COMPENSATION

The 2010 Equity Incentive Plan (the "2010 Plan") replaced the 2008 Equity Incentive Plan and all remaining available shares from the 2008 Equity Incentive Plan were available for distribution under the 2010 Plan. Generally, the Company can issue incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock and other stock-based compensation under the 2010 Plan; however, as detailed in Note 10 – Regulatory Matters, the Company currently cannot issue awards under the 2010 Plan without receiving prior approval from the Office of the Comptroller of the Currency (the "OCC"). Grants made during the current period received prior approval from the OCC. Generally, for incentive stock options, a percentage of the options awarded become exercisable on the date of grant and on each anniversary date of grant. The option period expires ten years from the date of grant, except for awards to individuals who own more than 10% of the Company's outstanding common shares. Incentive stock options awarded to individuals owning more than 10% of the Company's outstanding common shares may only be granted if the exercise price of such incentive stock options is at least 110% of the fair market value on the date of grant and the term of such options must expire not later than five years from the date of grant.

Previously, nonqualified stock options have been granted to directors, which vest immediately. The option period expires ten years from the date of grant and the exercise price is the market price at the date of grant.

For the six months ended December 31, 2011, and 2010, compensation expense of $66,974 and $45,252, respectively, was recognized in the income statement related to the vesting of awards.

As of December 31, 2011, there was $314,298 of compensation expense related to unvested awards not yet recognized in the consolidated financial statements. The weighted-average period over which this expense is to be recognized is 1.9 years.

The aggregate intrinsic value of all options outstanding at December 31, 2011 was $0. The aggregate intrinsic value of all options that were exercisable at December 31, 2011 was $0. The Company has not issued any stock option awards to directors of the Company since the institution of the regulatory orders. Subsequent to December 31, 2011, the Company issued restricted stock awards to the directors of the Company in connection with the reinstitution of a directors' compensation plan. This plan received prior approval from the OCC.

Options outstanding at December 31, 2011 were as follows:


	Outstanding				Exercisable
Range of Exercise Price	Number		Weighted Average Remaining Life		Number		Weighted Average Exercise Price
$1.79 to $4.42		560,200		8.73		239,870		2.37
$6.75 to $7.76		2,928		0.08		2,928		7.59
$8.32 to $13.64		195,332		2.97		171,999		10.75

Total		758,460		7.22		414,797		5.88

A summary of stock-based compensation activity for the current fiscal year is as follows:


	Three months ended December 31,2011 Total options outstanding					Six months ended December 31,2011 Total options outstanding
	Shares			Weighted- Average Exercise Price		Shares			Weighted- Average Exercise Price
Options outstanding, beginning of period		623,338		$	5.01		613,338		$	5.07
Forfeited		(300	)		4.02		(300	)		4.02
Expired		(15,078	)		7.05		(15,078	)		7.05
Exercised		—			—		—			—
Granted		150,500			1.58		160,500			1.58

Options outstanding, end of period		758,460		$	4.29		758,460		$	4.29

Options exercisable, end of period		414,797		$	5.88		414,797		$	5.88

The weighted-average remaining contractual life of options outstanding as of December 31, 2011 was 7.2 years. The weighted-average remaining contractual life of vested options outstanding as of December 31 2011 was 5.8 years.

No options were exercised in the three-month periods ended December 31, 2011 and 2010, respectively.

The fair value for stock options granted during the three and six months ended December 31, 2011, which consisted of individual grants in July, August, and December 2011 and a group grant in November 2011, were determined at the date of grant using a Black-Scholes options-pricing model and the following assumptions:


	December 31, 2011
Expected weighted average risk-free interest rate		2.43	%
Expected weighted average life (in years)		6.00
Expected volatility		34.00	%
Expected dividend yield		0.00	%

The weighted-average fair value of these grants was $0.78 per option. The expected average risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the life of the option. The expected average life represents the weighted-average period of time that options granted are expected to be outstanding giving consideration to vesting schedules, historical exercise and forfeiture patterns. Expected volatility is based on historical volatilities of the Company's common shares. The expected dividend yield is based on historical information.

There were 267,500 restricted shares issued to executive officers and certain other employees with a weighted average fair value of $1.87 per share at December 31, 2011. The total fair value of restricted shares issued at June 30, 2011 was $500,425. As of December 31, 2011, there was $303,537 of compensation expense related to unvested awards not yet recognized in the consolidated financial statements. The weighted-average period of time over which this expense is to be recognized was 3.3 years at December 31, 2011.

A summary of changes in the Company's restricted shares for the six months ended December 31, 2011 is as follows:


Nonvested Shares	Shares			Weighted- Average Grant-Date Fair Value
Nonvested at July 1, 2011		219,500		$	410,185
Granted		—			—
Vested		(57,167	)		(106,648	)
Forfeited		—			—

Nonvested at December 31, 2011		162,333		$	303,537

There were 2,405,500 shares available for future issuance under the 2010 Plan at December 31, 2011.