(17)	STOCK BASED COMPENSATION PLANS

2010 Equity Incentive Plan

In December 2009, the Company adopted the 2010 Equity Incentive Plan (“2010 Plan”), which the Company’s shareholders approved in February 2010. The 2010 Plan provided for the award of stock options, restricted shares and performance shares. The aggregate number of shares of the Company’s common stock available for issuance under the 2010 Plan could not exceed 355,885 shares. The Company could grant both non-statutory and statutory (i.e., incentive) stock options with terms not exceeding ten years. An award of a performance share is a grant of a right to receive shares of the Company’s common stock contingent upon the achievement of specific performance criteria or other objectives set at the grant date. Awards granted under the 2010 Plan could be granted either alone, in addition to, or in tandem with any other award granted under the 2010 Plan. The terms of the 2010 Plan included a provision whereby all unearned options and shares became immediately exercisable and fully vested upon a change in control.

In April 2010, the Company funded a trust, administered by an independent trustee, which acquired 101,681 common shares in the open market at a price per share of $13.60 for a total cost of $1.4 million. These acquired common shares were granted to directors, officers and key employees in the form of restricted stock in May 2010 at a price per share of $13.25 for a total of $1.3 million. The difference between the purchase price and grant price of the common shares issued as restricted stock, totaling $41,000, was recognized by the Company as a reduction of additional paid in capital. The vesting period of the restricted stock was five years beginning one year after the date of grant of the awards. Compensation expense is measured based on the fair market value of the restricted stock at the grant date and is recognized ratably over the period during which the shares are earned (the vesting period). Compensation expense related to restricted stock recognized for the year ended September 30, 2015 amounted to $162,000. The restricted stock fully vested in May 2015. Therefore, no compensation expense related to restricted stock was recognized for the year ended September 30, 2016.

There were no restricted shares granted during the years ended September 30, 2016 and 2015. The total fair value of restricted shares that vested during the year ended September 30, 2015 was $575,000. At September 30, 2016, there was no unrecognized compensation expense related to nonvested restricted shares.

In May 2010, the Company granted 177,549 incentive and 76,655 non-statutory stock options to directors, officers and key employees. The options granted vested ratably over five years and are exercisable in whole or in part for a period up to ten years from the date of the grant. Compensation expense was measured based on the fair market value of the options at the grant date and was recognized ratably over the period during which the shares were earned (the vesting period). The fair market value of stock options granted was estimated at the date of grant using a binomial option pricing model. Expected volatilities were based on historical volatility of the Company’s stock and that of peer institutions located in its geographic market area. The expected term of options granted represents the period of time that options are expected to be outstanding. The risk free rate for the expected life of the options was based on the U.S. Treasury yield curve in effect at the grant date.

The fair value of options granted under the 2010 Plan was determined using the following assumptions:

Expected dividend yield		4.53	%
Risk-free interest rate		2.82	%
Expected volatility		30.00	%
Expected life of options		7.0 years
Weighted average fair value at grant date	$	3.09

A summary of stock option activity under the 2010 Plan as of September 30, 2016, and changes during the year then ended, is presented below.

					Weighted
			Weighted		Average
	Number		Average		Remaining		Aggregate
	of		Exercise		Contractual		Intrinsic
	Shares		Price		Term		Value

Outstanding at beginning of year		213,260	$	13.25		4.6	$	4,425,000
Granted		--
Exercised		(26,210)	$	13.25			$	580,000
Forfeited or expired		-		-

Outstanding at end of year		187,050	$	13.25		3.6	$	4,285,000

Exercisable at end of year		187,050	$	13.25		3.6	$	4,285,000

There were no stock options granted during the years ended September 30, 2016 and 2015. The Company did not recognize any compensation expense related to stock options for the year ended September 30, 2016. The Company recognized compensation expense related to stock options for the year ended September 30, 2015 of $95,000. At September 30, 2016, there was no unrecognized compensation expense related to nonvested stock options.

2016 Equity Incentive Plan

In December 2015 the Company adopted the 2016 Equity Incentive Plan (“2016 Plan”), which the Company’s shareholders approved in February 2016. The 2016 Plan provides for the award of stock options and restricted stock. The aggregate number of shares of the Company’s common stock available for issuance under the Plan may not exceed 88,000 shares, consisting of 66,000 stock options and 22,000 shares of restricted stock. In addition, the maximum number of shares of stock, in the aggregate, that may be subject to stock options granted to any one employee under the 2016 Plan is 16,500. The Company may grant both non-statutory and incentive stock options which may not have a term exceeding ten years. In the case of incentive stock options, the aggregate fair value of the stock (determined at the time the incentive stock option is granted) for which any optionee may be granted incentive options which are first exercisable during any calendar year shall not exceed $100,000. Option prices generally may not be less than the fair market value of the underlying stock at the date of the grant. The terms of the 2016 Plan also include a provision whereby all unearned options and shares became immediately exercisable and fully vested upon a change in control.

As of September 30, 2016, no restricted shares and no stock options had been granted under the 2016 Plan. In November 2016, the Company granted 17,265 restricted shares, 42,895 incentive stock options and 8,400 non-statutory stock options to directors, officers and key employees. The restricted shares and stock options granted will vest ratably over five years and, once vested, the stock options are exercisable in whole or in part for a period up to ten years from the date of the award.