Note 10: Incentive Plans: Stock Option Plan Policy (Policies)

12 Months Ended

Sep. 30, 2012

Policies

Stock Option Plan Policy

Stock Option Plans.  The Corporation established the 2003 Stock Option Plan and the 1996 Stock Option Plan (collectively, the “Stock Option Plans”) for key employees and eligible directors under which options to acquire up to 352,500 shares and 1.15 million  shares of common stock, respectively, may be granted.  Under the Stock Option Plans, stock options may not be granted at a price less than the fair market value at the date of the grant.  Stock options typically vest over a five-year period on a pro-rata basis as long as the employee or director remains in service to the Corporation.  The stock options are exercisable after vesting for up to the remaining term of the original grant.  The maximum term of the stock options granted is 10 years.  As of September 30, 2012 and 2011, the number of stock options available for future grants under the 2003 Stock Option Plan was 14,900 stock options.  No stock options remain available for future grant under the 1996 Stock Option Plan, which expired in January 2007.

The fair value of each stock 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.

For the first quarter of fiscal 2013 and 2012, there was no activity in the Stock Option Plans, except forfeitures of 7,500 shares in the first quarter of fiscal 2013.

The following is a summary of the activity in the Stock Option Plans for the quarter ended September 30, 2012.

				Weighted-
			Weighted-	Average	Aggregate
			Average	Remaining	Intrinsic
			Exercise	Contractual	Value
	Shares		Price	Term (Years)	($000)
Options
Outstanding at July 1, 2012	420,200		$24.11
Granted	-		$-
Exercised	-		$-
Forfeited	(7,500	)	$13.67
Outstanding at September 30, 2012	412,700		$24.30	2.26	$-
Vested and expected to vest at September 30, 2012	412,700		$24.30	2.26	$-
Exercisable at September 30, 2012	412,700		$24.30	2.26	$-

As of September 30, 2012, there was no unrecognized compensation expense. This compares to unrecognized compensation expense of $34,000 at September 30, 2011, related to unvested share-based compensation arrangements under the Stock Option Plans.  This expense is expected to be recognized over a weighted-average period of 0.8 years.  The forfeiture rate during the first three months of fiscal 2012 was 20 percent, and was calculated by using the historical forfeiture experience of all fully vested stock option grants and is reviewed annually.