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STOCK-BASED COMPENSATION AND STOCK REPURCHASE PROGRAM

6 Months Ended

Mar. 31, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

STOCK-BASED COMPENSATION AND STOCK REPURCHASE PROGRAM

NOTE E – STOCK-BASED COMPENSATION AND STOCK REPURCHASE PROGRAM

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 consolidated financial statements. The cost is measured based on the fair value of the equity or liability instruments issued.

Stock options generally vest over a five-year service period and expire ten years from issuance. 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 vesting 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 vesting period of the awards.

The following is a summary of the status of the Company’s stock option activity and related information for its option plan for the six months ended March 31, 2017 and 2016, respectively:


										Weighted
						Weighted				Average				Aggregate
		Number of				Average				Remaining				Intrinsic
		Stock Options				Exercise Price				Contractual Life				Value

Balance at September 30, 2016			188,276			$	14.61				0.4 years			$	—
Granted			—				—
Exercised			—				—
Expired			(188,276	)			14.61
Forfeited			—				—
Balance at March 31, 2017			—			$	—				—			$	—

Exercisable at March 31, 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 March 31, 2016			188,276			$	14.61			0.9 years		$	—

Exercisable at March 31, 2016			188,276			$	14.61			0.9 years		$	—

The following is a summary of the Company’s non-vested restricted stock awards as of March 31, 2017 and 2016 and changes during the six months ended March 31, 2017 and 2016:

						Weighted
						Average
		Number of				Grant Date
		Stock Awards				Fair Value
Balance at September 30, 2016			—			$	—
Granted			—				—
Vested			—				—
Forfeited			—				—
Balance at March 31, 2017			—			$	—

						Weighted
						Average
		Number of				Grant Date
		Stock Awards				Fair Value
Balance at September 30, 2015			1,252			$	4.30
Granted			—				—
Vested			—				—
Forfeited			—				—
Balance at March 31, 2016			1,252			$	4.30

There were no stock option and stock award expenses included with compensation expense for the six months ended March 31, 2017.

The Company announced in November 2007 its second stock repurchase program of up to 5% of its publicly-held outstanding shares of common stock, or 129,924 shares. Through March 31, 2017, the Company had repurchased a total of 81,000 shares of its common stock at an average cost of $8.33 per share under this program. No shares were repurchased during the six months ended March 31, 2017 and 2016, respectively. Under the stock repurchase program, 48,924 shares of the 129,924 shares authorized remained available for repurchase as of March 31, 2017. The Company’s intended use of the repurchased shares is for general corporate purposes. The Company held 102,996 total treasury stock shares at March 31, 2017, of which 81,000 were from repurchases under this program.

The Company has an Employee Stock Ownership Plan ("ESOP") for the benefit of employees of the Company and the Bank 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 every January 1^st to the then published 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. As shares are released from collateral, the Company reports compensation expense equal to the then current market price of the shares, and the shares become outstanding for earnings per share computations.

At March 31, 2017, shares allocated to participants totaled 153,326. Unallocated ESOP shares held in suspense totaled 64,537 at March 31, 2017 and had a fair market value of $838,981. The Company's contribution expense for the ESOP was $75,000 and $61,000 for the six months ended March 31, 2017 and 2016, respectively.