Stock Based Compensation

3 Months Ended

Sep. 30, 2017

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

Stock Based Compensation

Note 4. Stock Based Compensation

The Company follows ASC 718 in establishing standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services, as well as transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. ASC 718 requires that the cost resulting from all share-based payment transactions be recognized in the financial statements based on the fair value of the share-based payment. ASC 718 establishes fair value as the measurement objective in accounting for share-based payment transactions with employees, except for equity instruments held by employee share ownership plans.

Total stock-based compensation expense recognized in the statements of comprehensive income for the three-month periods ended September 30, 2017 and 2016 was $21,423 and $23,333, respectively, before income taxes. The related total deferred tax benefits were approximately $1,893 and $1,765 for the same periods. ASC 718 requires the tax benefits resulting from tax deductions in excess of the compensation cost recognized for those options to be classified and reported as both an operating cash outflow and a financing cash inflow.

As of September 30, 2017, there was approximately $96,404 of unrecognized compensation cost related to stock option awards that is expected to be recognized as expense over the next 1.25 years. The total deferred tax benefit related to these awards is expected to be approximately $8,835.

The Company's 2007 Stock Option and Restricted Stock Plan (the "2007 Plan") expired on August 16, 2017. No further grants of options will be made under this plan. Of the 400,000 shares registered under the 2007 Plan Registration Statement, 156,550 shares (the “Unutilized Shares”) are not subject to outstanding grants of stock options or stock awards or were not issued pursuant to options granted or stock awards made under the 2007 plan, remain available for issuance and have been deregistered. The 2007 Plan Registration Statement otherwise continues in effect as to the balance of the shares of Common Stock remaining available for issuance, offer or sale following the exercise of options previously granted under the 2007 Plan.

The Board of Directors adopted the 2017 Stock Options and Restricted Stock Plan (the "2017 Plan") subject to shareholder approval at the Company’s annual meeting scheduled on December 1, 2017. If the 2017 Plan is approved, a total of 400,000 shares of Common Stock will be reserved for issuance under the plan. The maximum aggregate number of shares of Common Stock subject to options or awards to non-employee directors is 133,000 and the maximum aggregate number of shares of Common Stock subject to options or awards granted to non-employee directors during any single fiscal year is the lesser of 13,300 and 33 1/3% of the total number of shares subject to options or awards granted in such fiscal year. The maximum number of shares subject to options or awards granted to any individual employee may not exceed 15,000 in a fiscal year.

ASC 718 requires the use of a valuation model to calculate the fair value of stock-based awards. The Company has elected to use the Black-Scholes option valuation model, which incorporates various assumptions including those for volatility, expected life and interest rates.

 There were no options awarded for the three-month periods ended September 30, 2017 and 2016.

The Company declares dividends quarterly and paid cash dividends totaling $0.25 for the three months ended September 30, 2017 and 2016. Our Board of Directors assesses the Company’s dividend policy periodically. There is no assurance that the Board of Directors will maintain the amount of the regular cash dividend. Expected stock price volatility is based on the historical volatility of the Company’s stock. The risk-free interest rate is based on the implied yield available on U.S. Treasury issues with an equivalent term approximating the expected life of the options. The expected option life (in years) represents the estimated period of time until exercise and is based on actual historical experience.

The following table summarizes stock option activity during the three months ended September 30, 2017:

	Employee Stock Options Plan
						Weighted
	Number of			Weighted		Average
	Shares			Average		Remaining		Aggregate
	Subject			Exercise		Contractual		Intrinsic
	To Options			Price		Term		Value
Balance at July 1, 2017		197,800		$	24.57		5.86
Granted		—			—		—
Exercised		—			—		—
Forfeited or expired		(1,100	)	$	25.97		—
Outstanding at September 30, 2017		196,700		$	24.56		5.61	$	128,064
Vested or expected to vest at September 30, 2017		190,196		$	24.51		5.49	$	128,064
Exercisable at September 30, 2017		154,150		$	24.12		4.64	$	128,064

The aggregate intrinsic value in the table above represents the total pretax intrinsic value (the difference between the closing sale price of the Company’s common stock as reported on the NYSE MKT on September 30, 2017 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders if all option holders had exercised their options on September 30, 2017. This amount changes based on the fair market value of the Company’s common stock. There were no options exercised during the three months ended September 30, 2017 and 2016.

The following table summarizes changes in non-vested stock options during the three months ended September 30, 2017:

	Number			Weighted Average
	of Shares			Grant Date Fair
	Subject to Option			Value (per Option)
Non-vested at July 1, 2017		42,900		$	4.586
Granted		—			—
Vested		—			—
Forfeited or expired		(350	)	$	4.640
Non-vested at September 30, 2017		42,550		$	4.585