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Incentive Plans

9 Months Ended

Mar. 31, 2019

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

Incentive Plans

Note 9: Incentive Plans

As of March 31, 2019, the Corporation had two active share-based compensation plans, which are described below. These plans are the 2013 Equity Incentive Plan (“2013 Plan”) and the 2010 Equity Incentive Plan (“2010 Plan”). Additionally, the Corporation had one inactive share-based compensation plan - the 2006 Equity Incentive Plan (“2006 Plan”) where no new awards can be granted but outstanding grants remain eligible for exercise.

For the quarters ended March 31, 2019 and 2018, the compensation cost for these plans was $37,000 and $292,000, respectively. The income tax benefit (deficiencies) recognized in the Condensed Consolidated Statements of Operations per adoption of ASU 2016-09 for share-based compensation plans for the quarters ended March 31, 2019 and 2018 was $(10,000) and $186,000, respectively.

For the first nine months ended March 31, 2019 and 2018, the compensation cost for these plans was $767,000 and $816,000, respectively. The income tax benefit recognized in the Condensed Consolidated Statements of Operations per adoption of ASU 2016-09 for share-based compensation plans for the nine months ended March 31, 2019 and 2018 was $114,000 and $206,000, respectively.

Equity Incentive Plans. The Corporation established and the shareholders approved the 2013 Plan, the 2010 Plan and the 2006 Plan (collectively, "the Plans") for directors, advisory directors, directors emeriti, officers and employees of the Corporation and its subsidiary. The 2013 Plan authorizes 300,000 stock options and 300,000 shares of restricted stock. The 2013 Plan also provides that no person may be granted more than 60,000 stock options or 45,000 shares of restricted stock in any one year. The 2010 Plan authorizes 586,250 stock options and 288,750 shares of restricted stock. The 2010 Plan also provides that no person may be granted more than 117,250 stock options or 43,312 shares of restricted stock in any one year. The 2006 Plan authorized 365,000 stock options and 185,000 shares of restricted stock. The 2006 Plan also provided that no person was granted more than 73,000 stock options or 27,750 shares of restricted stock in any one year.

Equity Incentive Plans - Stock Options. Under the Plans, options may not be granted at a price less than the fair market value at the date of the grant. Options typically vest over a five-year or shorter period as long as the director, advisory director, director emeritus, officer or employee remains in service to the Corporation. The options are exercisable after vesting for up to the remaining term of the original grant. The maximum term of the options granted is 10 years.

The fair value of each option grant is estimated on the date of the grant using the Black-Scholes option valuation model with the following assumptions. The expected volatility is based on implied volatility from historical common stock closing prices for the prior 84 months. The expected dividend yield is based on the most recent quarterly dividend on an annualized basis. The expected term is based on the historical experience of all fully vested stock option grants and is reviewed annually. The risk-free interest rate is based on the U.S. Treasury note rate with a term similar to the underlying stock option on the particular grant date.

During the third quarter of fiscal 2019, no options were granted or forfeited, and 11,250 options were exercised. This compares to the third quarter of fiscal 2018 when no options were granted or forfeited, and 56,500 options were exercised. During the first nine months of fiscal 2019, no options were granted or forfeited, and 31,250 options were exercised. This compares to the first nine months of fiscal 2018 when no options were granted, and 83,750 options were exercised and 2,500 options were forfeited. As of March 31, 2019 and 2018, there were 147,500 stock options available for future grants under the Plans at both dates.

The following tables summarize the stock option activity in the Plans for the quarter and nine months ended March 31, 2019.

		For the Quarter Ended March 31, 2019
Options		Shares				Weighted- Average Exercise Price				Weighted- Average Remaining Contractual Term (Years)				Aggregate Intrinsic Value ($000)
Outstanding at December 31, 2018			509,000			$	12.83
Granted			—			$	—
Exercised			(11,250	)		$	14.59
Forfeited			—			$	—
Outstanding at March 31, 2019			497,750			$	12.79				4.53			$	3,551
Vested and expected to vest at March 31, 2019			495,150			$	12.75				4.52			$	3,550
Exercisable at March 31, 2019			484,750			$	12.60				4.45			$	3,546

		For the Nine Months Ended March 31, 2019
Options		Shares				Weighted- Average Exercise Price				Weighted- Average Remaining Contractual Term (Years)				Aggregate Intrinsic Value ($000)
Outstanding at June 30, 2018			529,000			$	12.77
Granted			—			$	—
Exercised			(31,250	)		$	12.49
Forfeited			—			$	—
Outstanding at March 31, 2019			497,750			$	12.79				4.53			$	3,551
Vested and expected to vest at March 31, 2019			495,150			$	12.75				4.52			$	3,550
Exercisable at March 31, 2019			484,750			$	12.60				4.45			$	3,546

As of March 31, 2019 and 2018, there was $68,000 and $503,000 of unrecognized compensation expense, respectively, related to unvested share-based compensation arrangements under the Plans. The expense is expected to be recognized over a weighted-average period of 1.5 years and 1.0 years, respectively. The forfeiture rate during the first nine months of fiscal 2019 and 2018 was 20 percent for both periods, and was calculated by using the historical forfeiture experience of stock option grants and is reviewed annually.

Equity Incentive Plans – Restricted Stock. The Corporation used 300,000 shares, 288,750 shares and 185,000 shares of its treasury stock to fund the 2013 Plan, the 2010 Plan and the 2006 Plan, respectively. Awarded shares typically vest over a five-year or shorter period as long as the director, advisory director, director emeriti, officer or employee remains in service to the Corporation. Once vested, a recipient of restricted stock will have all rights of a shareholder, including the power to vote and the right to receive dividends. The Corporation recognizes compensation expense for the restricted stock awards based on the fair value of the shares at the award date.

There were no restricted stock awards and no forfeitures, while there were 3,000 shares of restricted stock vested in the third quarter of fiscal 2019. This compares to no restricted stock activity in the third quarter of fiscal 2018, other than the vesting of 10,500 shares. For the first nine months of fiscal 2019, there was no restricted stock activity, other than the vesting of 89,500 shares. This compares to no restricted stock activity, other than the vesting of 10,500 shares and the forfeiture of 2,000 shares for the first nine months of fiscal 2018. As of March 31, 2019 and 2018, there were 267,750 shares of restricted stock available for future awards under the Plans at both dates.

The following tables summarize the unvested restricted stock activity for the quarter and nine months ended March 31, 2019.

		For the Quarter Ended March 31, 2019
Unvested Shares		Shares				Weighted- Average Award Date Fair Value
Unvested at December 31, 2018			12,000			$	18.31
Granted			—			$	—
Vested			(3,000	)		$	18.90
Forfeited			—			$	—
Unvested at March 31, 2019			9,000			$	18.11
Expected to vest at March 31, 2019			7,200			$	18.11

		For the Nine Months Ended March 31, 2019
Unvested Shares		Shares				Weighted- Average Award Date Fair Value
Unvested at June 30, 2018			98,500			$	14.35
Granted			—			$	—
Vested			(89,500	)		$	13.97
Forfeited			—			$	—
Unvested at March 31, 2019			9,000			$	18.11
Expected to vest at March 31, 2019			7,200			$	18.11

As of March 31, 2019 and 2018, the unrecognized compensation expense was $131,000 and $687,000, respectively, related to unvested share-based compensation arrangements under the Plans, and reported as a reduction to stockholders’ equity. This expense is expected to be recognized over a weighted-average period of 1.5 years and 1.2 years, respectively. Similar to stock options, a forfeiture rate of 20 percent has been applied for the restricted stock compensation expense calculations in the first nine months of fiscal 2019 and 2018.