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STOCK-BASED COMPENSATION
 12 Months Ended
Sep. 30, 2017
Share-based Compensation [Abstract]  
STOCK-BASED COMPENSATION

NOTE C – STOCK-BASED COMPENSATION

 

The Company follows FASB Accounting Standards Codification (“ASC”) Section 718, Compensation-Stock Compensation, which covers a wide range of share-based compensation arrangements including share options, restricted share plans, performance-based awards, share appreciation rights, and employee share purchase plans. ASC 718 requires that compensation cost relating to share-based payment transactions be recognized in financial statements. The cost is measured based on the fair value of the equity or liability instruments issued.

 

ASC 718 also requires the Company to realize as a financing cash flow rather than an operating cash flow, as previously required, the benefits of realized tax deductions in excess of previously recognized tax benefits on compensation expense. In accordance with SEC Staff Accounting Bulletin (“SAB”) No. 107, the Company classified share-based compensation for employees and outside directors within “compensation and employee benefits” in the Consolidated Statements of Operations to correspond with the same line item as the cash compensation paid.

 

Stock options generally vest over a five-year service period and expire ten years from issuance. Management recognizes compensation expense for all option grants over the awards’ respective requisite service periods. The fair values of all option grants were estimated using the Black-Scholes option-pricing model. Since there was limited historical information on the volatility of the Company’s stock, management also considered the average volatilities of similar entities for an appropriate period in determining the assumed volatility rate used in the estimation of fair value. Management estimated the expected life of the options using the simplified method allowed under SAB No. 107. The 7-year Treasury yield in effect at the time of the grant provided the risk-free rate for periods within the contractual life of the option. Management recognizes compensation expense for the fair values of these awards, which have graded vesting, on a straight-line basis over the requisite service period of the awards. Once vested, these awards are irrevocable. Shares will be obtained from either the open market or treasury stock upon share option exercise.

 

Restricted shares generally vest over a five-year service period on the anniversary of the grant date. Once vested, these awards are irrevocable. The product of the number of shares granted and the grant date market price of the Company’s common stock determine the fair value of restricted shares under the Company’s restricted stock plans. Management recognizes compensation expense for the fair value of restricted shares on a straight-line basis over the requisite service period.

 

The following is a summary of the status of the Company’s stock option activity and related information for its option plan for the two-year period ended September 30, 2017:

 

           Weighted     
       Weighted   Average   Aggregate 
   Number of   Average   Remaining   Intrinsic 
   Stock Options   Exercise Price   Contractual Life   Value 
                 
Balance at September 30, 2015   188,276   $14.61     1.4 years    $— 
Granted   —    —           
Exercised   —    —           
Forfeited   —    —           
Balance at September 30, 2016   188,276    14.61     0.4 years    $— 
Granted   —    —           
Exercised   —    —           
Forfeited   —    —           
Expired   (188,276)   14.61           
Balance at September 30, 2017   —   $—   $—   $— 
                     
Exercisable at September 30, 2017   —   $—   $—   $— 

 

No stock options were granted or exercised during the years ended September 30, 2017 and 2016.

 

The following is a summary of the status of the Company’s non-vested restricted shares as of September 30, 2017 and 2016, and changes during those years:

 

       Weighted 
       Average 
   Number of   Grant Date 
   Stock Awards   Fair Value 
Balance at September 30, 2015   1,252   $4.30 
Granted   —    — 
Vested   (1,252)   4.30 
Forfeited   —    — 
Balance at September 30, 2016   —    — 
Granted   —    — 
Vested   —    — 
Forfeited   —    — 
Balance at September 30, 2017   —   $— 

 

There were no stock option expenses for the year ended September 30, 2017, and 2016. Stock award expenses included with compensation expense were $0 and $3,000 for the years ended September 30, 2017, and 2016, respectively. The Company had no other stock-based compensation plans as of September 30, 2017 except as disclosed below.

 

On April 27, 2007 the Company announced its first stock repurchase program and authorized the repurchase of up to 5% of its publicly-held outstanding shares of common stock, or approximately 130,927 shares. The Company completed its first stock repurchase program of 130,927 shares in November 2007 and announced a second repurchase program of up to 5% of its publicly-held outstanding shares of common stock, or 129,924 shares in November 2007. Pursuant to the second repurchase program, the Company had repurchased 81,000 shares of its common stock at an average cost of $8.33 per share through September 30, 2017, leaving 48,924 shares available for repurchase.

 

The Company has an Employee Stock Ownership Plan ("ESOP") for the benefit of employees who meet the eligibility requirements as defined in the plan. The ESOP trust purchased 217,863 shares of common stock in the open market using proceeds of a loan from the Company. The total cost of shares purchased by the ESOP trust was $2.3 million, reflecting an average cost per share of $10.58. The Bank will make cash contributions to the ESOP on an annual basis sufficient to enable the ESOP to make the required loan payments to the Company. The loan bears a variable interest rate that adjusts annually to Prime Rate (3.75% at January 1, 2017) with principal and interest payable annually in equal installments over thirty years. The loan is secured by shares of the Company’s stock.

 

As the debt is repaid, shares are released as collateral and allocated to qualified employees. Accordingly, the shares pledged as collateral are reported as unearned ESOP shares in the Consolidated Balance Sheets. The Company accounts for its ESOP in accordance with FASB ASC Topic 718, “Employer’s Accounting for Employee Stock Ownership Plans”. As shares are released from collateral, the Company reports compensation expense equal to the current market price of the shares, and the shares become outstanding for earnings per share computations. The Company's contribution expense for the ESOP was $154,000 and $122,000 for years ended September 30, 2017 and 2016, respectively.

 

The following table presents the components of the ESOP shares as of September 30, 2017:

 

Unreleased shares at September 30, 2016   64,537 
Shares released for allocation during the year ended September 30, 2017   (12,445)
Unreleased shares at September 30, 2017   52,092 
Total released shares   165,771 
      
Total ESOP shares   217,863 

 

The aggregate fair value of the unreleased shares at September 30, 2017 was approximately $638,000.