Stock Compensation Plans

Under the Company’s 2003 Stock Option Plan, the Company was able to grant options for up to 300,000 shares of common stock to employees, officers, directors and directors emeriti. Under the Company's 2014 Equity Incentive Plan, the Company is able to grant options and awards of restricted stock (with or without performance measures) for up to 352,366 shares of common stock to employees, officers, directors and directors emeriti. 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 and restricted stock vest in 20% annual installments on each of the five anniversaries from the date of the grant, and options generally have a maximum contractual term of ten years. At September 30, 2016, there were 171,116 shares of common stock available which may be awarded as options or restricted stock pursuant to future grants under the 2014 Equity Incentive Plan. At September 30, 2016, there were no options available for future grants under the 2003 Stock Option Plan.

At both September 30, 2016 and 2015 there were no unvested restricted stock awards. There were no restricted stock grants awarded during the years ended September 30, 2016, 2015 and 2014.

Stock option activity for the years ended September 30, 2016, 2015 and 2014 is summarized as follows:



	Number of Shares		Weighted Average Exercise Price
Outstanding September 30, 2013	162,946		$	6.96
Options granted	135,000		9.29
Options exercised	(5,000	)	4.66
Options forfeited	(71,546	)	9.87
Outstanding September 30, 2014	221,400		7.49

Options granted	128,000		10.62
Options exercised	(6,300	)	4.84
Options forfeited	(1,800	)	4.55
Outstanding September 30, 2015	341,300		8.73

Options granted	55,750		15.67
Options exercised	(21,020	)	7.56
Options forfeited	(2,900	)	9.96
Outstanding September 30, 2016	373,130		$	9.82

The aggregate intrinsic value of options exercised during the years ended September 30, 2016 and 2015 was $124,000 and $36,000, respectively.

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 rate of a U.S. Treasury security with a similar term as the expected life of 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 135,000 options granted during the year ended September 30, 2014 with an aggregate grant date fair value of $349,000. There were 128,000 options granted during the year ended September 30, 2015 with an aggregate grant date fair value of $241,000. There were 55,750 options granted during the year ended September 30, 2016 with an aggregate grant date fair value of $81,000.

The weighted average assumptions for options granted during the years ended September 30, 2016, 2015 and 2014 were as follows:



	2016			2015			2014
Expected volatility	16		%	28		%	39		%
Expected life (in years)	5			5			5
Expected dividend yield	3.00		%	3.31		%	2.51		%
Risk free interest rate	1.12		%	1.43		%	1.41		%
Grant date fair value per share	$	1.46		$	1.88		$	2.59

There were 65,100 options that vested during the year ended September 30, 2016 with a total fair value of $144,000. There were 42,900 options that vested during the year ended September 30, 2015 with a total fair value of $100,000. There were 43,800 options that vested during the year ended September 30, 2014 with a total fair value of $80,000.

At September 30, 2016 there were 250,450 unvested options with an aggregate grant date fair value of $506,000, all of which the Company assumes will vest. The unvested options had an aggregate intrinsic value of $1,207,000 at September 30, 2016. At September 30, 2015 there were 262,700 unvested options with an aggregate grant date fair value of $574,000.

Additional information regarding options outstanding at September 30, 2016 is as follows:



	Options Outstanding				Options Exercisable
Range of Exercise Prices ($)	Number	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)	Number	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)
$ 4.01 - 4.55	26,700	$	4.20	4.4	22,900	$	4.23	4.3
5.86 - 6.00	54,500	5.92		6.0	37,200	5.91		6.0
9.00	89,600	9.00		7.1	32,000	9.00		7.1
10.26 - 10.71	146,580	10.57		8.5	30,580	10.56		8.3
15.67	55,750	15.67		10.0	—	N/A		N/A
	373,130	$	9.82	7.7	122,680	$	7.56	6.6

The aggregate intrinsic value of options outstanding at September 30, 2016, 2015 and 2014 was $2,212,000, $738,000, and $675,000, respectively.

Compensation expense recorded in the consolidated financial statements for all stock-based plans was as follows for the years ended September 30, 2016, 2015 and 2014 (dollars in thousands):



	2016			2015			2014
Stock options	$	190		$	127		$	112
Restricted stock grants	—			—			2
Less: related tax benefit recognized	(37		)	(2		)	(10		)
	$	153		$	125		$	104

As of September 30, 2016, unrecognized compensation cost related to non-vested stock options was $424,000, which is expected to be recognized over a weighted average 2.16 years.