STOCK PLANS AND STOCK BASED COMPENSATION

Stock Option Plans

Under the Company’s stock option plans (the 1999 Stock Option Plan and the 2003 Stock Option Plan), the Company was able to grant options for up to a combined total of 1,622,500 shares of common stock to employees, officers and directors. Shares issued may be purchased in the open market or may be issued from authorized and unissued shares. The exercise price of each option equals the fair market value of the Company’s common stock on the date of grant. Generally, options vest in 20% annual installments on each of the five anniversaries from the date of the grant. At December 31, 2014, there were no options for shares available for future grant under the 2003 Stock Option Plan or the 1999 Stock Option Plan.

Activity under the plans for the three months ended December 31, 2014 and 2013 is as follows:



	Three Months Ended December 31, 2014				Three Months Ended December 31, 2013
	Shares		Weighted Average Exercise Price		Shares		Weighted Average Exercise Price
Options outstanding, beginning of period	221,400		$	7.49	162,946		$	6.96
Exercised	(5,300	)	4.62		(2,600	)	4.59
Granted	—		—		106,000		9.00
Forfeited	(200	)	4.55		—		—
Options outstanding, end of period	215,900		$	7.57	266,346		$	7.10

Options exercisable, end of period	69,500		$	6.18	83,946		$	8.09

The aggregate intrinsic value of options outstanding at December 31, 2014 was $655,000.

At December 31, 2014, there were 146,400 unvested options with an aggregate grant date fair value of $363,000, all of which the Company assumes will vest. The aggregate intrinsic value of unvested options at December 31, 2014 was $348,000. There were 37,700 options with an aggregate grant date fair value of $86,000 that vested during the three months ended December 31, 2014.

At December 31, 2013, there were 182,400 unvested options with an aggregate grant date fair value of $429,000. There were 14,600 options with an aggregate grant date fair value of $26,000 that vested during the three months ended December 31, 2013.

The Company uses the Black-Scholes option pricing model to estimate the fair value of stock-based awards with the weighted average assumptions noted in the following table. The risk-free interest rate is based on the U.S. Treasury rate of a similar term as the stock option at the particular grant date. The expected life is based on historical data, vesting terms and estimated exercise dates. The expected dividend yield is based on the most recent quarterly dividend on an annualized basis in effect at the time the options were granted, adjusted, if appropriate for management's expectations regarding future dividends. The expected volatility is based on historical volatility of the Company’s stock price. There were no options granted during the three months ended December 31, 2014. There were 106,000 options granted during the three months ended December 31, 2013 with an aggregate grant date fair value of $267,000.

The weighted average assumptions used for options granted during the three months ended December 31, 2013 were:



	2013
Expected volatility	39		%
Expected term (in years)	5
Expected dividend yield	2.56		%
Risk free interest rate	1.35		%
Grant date fair value per share	$	2.52

Stock Grant Plan

The Company adopted the MRDP in 1998 for the benefit of employees, officers and directors of the Company. The objective of the MRDP was to retain personnel of experience and ability in key positions by providing them with a proprietary interest in the Company.

The MRDP allowed for the issuance to participants of up to 529,000 shares of the Company’s common stock. Awards under the MRDP were made in the form of shares of common stock that are subject to restrictions on the transfer of ownership and are subject to a five-year vesting period. Compensation expense is the amount of the fair value of the common stock at the date of the grant to the plan participants and is recognized over a five-year vesting period, with 20% vesting on each of the five anniversaries from the date of the grant.

No MRDP shares were granted during the three months ended December 31, 2014 or 2013. At December 31, 2014, no shares were available for future awards under the MRDP.

At December 31, 2014, there were no unvested MRDP shares. There were no MRDP shares that vested during the three months ended December 31, 2014.

At December 31, 2013, there were no unvested MRDP shares. There were 3,254 MRDP shares that vested during the three months ended December 31, 2013 with an aggregated grant date fair value of $23,000. At December 31, 2013, no shares were available for future awards under the MRDP.

Expense for Stock Compensation Plans

Compensation expense during the three months ended December 31, 2014 and 2013 for all stock-based plans were as follows:



	Three Months Ended December 31,
	2014				2013
	(in thousands)
	Stock Options		Stock Grants		Stock Options		Stock Grants
Compensation expense	$	28	$	—	$	22	$	2
Related tax benefit recognized	$	2	$	—	$	—	$	—

As of December 31, 2014, the compensation expense yet to be recognized for stock options that have been awarded but not vested for the years ending September 30 is as follows (in thousands):



	Stock Options
Remainder of 2015	$	79
2016	106
2017	98
2018	67
2019	9
Total	$	359