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Stock-Based Compensation Plans
 12 Months Ended
Sep. 30, 2011
Notes to Financial Statements  
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. In February 2006, 15,960 shares of restricted stock were granted subject to forfeiture restrictions, tied to continued employment that lapsed 25% annually beginning on January 1, 2007 and were fully vested on January 1, 2010. The number of common shares available for future issuance was 647,250 at September 30, 2011.

 

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 53%, risk-free interest rate of 1.5% to 4.9% and expected life of 4.0 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
  2011 2010 2009
Stock option grants  $   370     402     381
Restricted stock awards granted in 2006        -      48     193
Annual non-employee Director stock award      334     354     294
   $   704     804     868

 

A summary of changes in outstanding options is presented below:

 

        Weighted
    Weighted Weighted Average
  Number Average Average Grant Date
  of Exercise Remaining Fair Value
Options Shares Price Term (yrs) (000's)
         
Outstanding at        
  October 1, 2008   696,240  $ 11.24       5.0  $  3,900
    Granted    54,000  $ 24.81    $    556
    Exercised   (31,650)  $ 11.73    $    180
    Forfeited    (4,800)  $ 13.28    
Outstanding at        
  September 30, 2009   713,790  $ 12.23       4.5  $  4,246
    Granted    27,210  $ 32.16    $    349
    Exercised  (107,100)  $  6.83    $    389
    Forfeited         -  $   -      $      -  
Outstanding at        
  September 30, 2010   633,900  $ 14.00       4.1  $  4,206
    Granted    29,160  $ 25.60    $    293
    Exercised   (54,035)  $  9.95    $    274
    Forfeited    (3,000)  $  5.84    $      9
Outstanding at        
  September 30, 2011   606,025  $ 14.96       3.5  $  4,216
Exercisable at        
  September 30, 2011   524,197  $ 13.08       2.8  $  3,295
Vested during        
  twelve months ended      
  September 30, 2011    28,242      $    298

 

The following table summarizes information concerning stock options outstanding at September 30, 2011:

 

    Weighted Weighted
  Shares  Average Average
Range of Exercise under Exercise Remaining
Prices per Share Option Price Life (years)
Non-exercisable:      
$18.01 - $27.00   54,060   25.12         8.3
$27.01 - $32.16   27,768   30.16         7.5
    81,828  $27.01         8.1
Exercisable:      
$ 5.75 - $ 8.00  105,605    7.40         1.0
$ 8.01 - $12.00  210,000   10.10         2.0
$12.01 - $18.00  126,050   14.75         3.3
$18.01 - $27.00   53,100   22.81         6.2
$27.01 - $32.16   29,442   30.07         7.3
   524,197  $13.08         2.8
Total  606,025  $14.96         3.5

 

The aggregate intrinsic value of exercisable in-the-money options was $4,167,000 and the aggregate intrinsic value of outstanding in-the-money options was $4,167,000 based on the market closing price of $20.21 on September 30, 2011 less exercise prices. Gains of $869,000 were realized by option holders during the twelve months ended September 30, 2011. The realized tax benefit from options exercised for the twelve months ended September 30, 2011 was $333,000. Total compensation cost of options granted but not yet vested as of September 30, 2011 was $698,000, which is expected to be recognized over a weighted-average period of 2.2 years.

 

A summary of changes in restricted stock awards is presented below:

 

        Weighted
    Weighted Weighted Average
  Number Average Average Grant Date
  of Exercise Remaining Fair Value
Restricted stock Shares Price Term (yrs) (000's)
         
Outstanding at        
  September 30, 2008    18,600  $ 21.22       1.3  $    395
    Granted         -  $     -      $      -  
    Vested    (9,150)  $ 21.22    $    194
    Forfeited    (1,800)  $ 21.18    $     38
Outstanding at        
  September 30, 2009     7,650  $ 21.23       0.3  $    163
    Granted         -  $   -      $      -  
    Vested    (7,530)  $ 21.22    $    160
    Forfeited      (120)  $ 22.03    $      3
Outstanding at        
  September 30, 2010         -  $     -           -  $      -