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ESPEY MFG & ELECTRONICS CORP
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The Company sponsors a leveraged employee stock ownership plan (the ESOP) that covers all nonunion employees who work 1,000 or more hours per year and are employed on June 30.
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Note 1. Basis of Presentation</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">In the opinion of management the accompanying
unaudited financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary for a fair presentation
of the results for such periods. The results for any interim period are not necessarily indicative of the results to be expected
for the full fiscal year. Certain information and footnote disclosures normally included in financial statements prepared in accordance
with United States generally accepted accounting principles have been condensed or omitted. The preparation of these financial
statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses,
and related disclosure of assets and liabilities. On an ongoing basis, we evaluate our estimates and judgments, including those
related to revenue recognition, inventories, income taxes, and stock-based compensation. Management bases its estimates on historical
experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates under different assumptions or conditions. These financial statements should be
read in conjunction with the Company's most recent audited financial statements included in its report on Form 10-K for the year
ended June 30, 2012. Certain reclassifications may have been made to the prior year financial statements to conform to the current
year presentation.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Note 2. Net Income per Share</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Basic net income per share excludes dilution
and is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding
for the period. Diluted net income per share reflects the potential dilution that could occur if securities or other contracts
to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared
in the income of the Company. As Unearned ESOP shares are released or committed-to-be-released the shares become outstanding for
net income-per-share computations.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">The table below outlines the weighted average assumptions that the Company used to calculate
the fair value of each option award for the nine months ended March 31, 2012</p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom; font: 10pt Times New Roman, Times, Serif">
<td nowrap="nowrap" style="font: 10pt Times New Roman, Times, Serif"> </td><td nowrap="nowrap" style="padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif"> </td>
<td nowrap="nowrap" style="text-align: right; border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif">March 31, 2012</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255); font: 10pt Times New Roman, Times, Serif">
<td nowrap="nowrap" style="width: 90%; text-align: justify; padding-left: 5.4pt; font: 10pt Times New Roman, Times, Serif">Dividend yield</td><td nowrap="nowrap" style="width: 1%; font: 10pt Times New Roman, Times, Serif"> </td>
<td nowrap="nowrap" style="width: 9%; text-align: right; font: 10pt Times New Roman, Times, Serif">3.59%</td></tr>
<tr style="vertical-align: bottom; background-color: White; font: 10pt Times New Roman, Times, Serif">
<td nowrap="nowrap" style="text-align: justify; padding-left: 5.4pt; font: 10pt Times New Roman, Times, Serif">Expected stock price volatility</td><td nowrap="nowrap" style="font: 10pt Times New Roman, Times, Serif"> </td>
<td nowrap="nowrap" style="text-align: right; font: 10pt Times New Roman, Times, Serif">33.82%</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255); font: 10pt Times New Roman, Times, Serif">
<td nowrap="nowrap" style="text-align: justify; padding-left: 5.4pt; font: 10pt Times New Roman, Times, Serif">Risk-free interest rate</td><td nowrap="nowrap" style="font: 10pt Times New Roman, Times, Serif"> </td>
<td nowrap="nowrap" style="text-align: right; font: 10pt Times New Roman, Times, Serif">0.64%</td></tr>
<tr style="vertical-align: bottom; background-color: White; font: 10pt Times New Roman, Times, Serif">
<td nowrap="nowrap" style="text-align: justify; padding-left: 5.4pt; font: 10pt Times New Roman, Times, Serif">Expected option life (in years)</td><td nowrap="nowrap" style="font: 10pt Times New Roman, Times, Serif"> </td>
<td nowrap="nowrap" style="text-align: right; font: 10pt Times New Roman, Times, Serif">3.7yrs</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255); font: 10pt Times New Roman, Times, Serif">
<td nowrap="nowrap" style="text-align: justify; padding-left: 5.4pt; font: 10pt Times New Roman, Times, Serif">Weighted average fair value per share of options granted during the period</td><td nowrap="nowrap" style="font: 10pt Times New Roman, Times, Serif"> </td>
<td nowrap="nowrap" style="text-align: right; font: 10pt Times New Roman, Times, Serif">$4.757</td></tr></table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">The following table summarizes stock
option activity during the nine months ended March 31, 2013:</p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td style="text-align: justify"> </td><td style="border-bottom: Black 1pt solid"> </td>
<td colspan="15" style="text-align: center; border-bottom: Black 1pt solid">Employee Stock Options Plan</td></tr>
<tr style="vertical-align: bottom">
<td> </td><td> </td>
<td colspan="3" style="text-align: center"> </td><td> </td>
<td colspan="3" style="text-align: center"> </td><td> </td>
<td colspan="3" style="text-align: center">Weighted</td><td> </td>
<td colspan="3" style="text-align: center"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td> </td>
<td colspan="3" style="text-align: center">Number of</td><td> </td>
<td colspan="3" style="text-align: center">Weighted</td><td> </td>
<td colspan="3" style="text-align: center">Average</td><td> </td>
<td colspan="3" style="text-align: center"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td> </td>
<td colspan="3" style="text-align: center">Shares</td><td> </td>
<td colspan="3" style="text-align: center">Average</td><td> </td>
<td colspan="3" style="text-align: center">Remaining</td><td> </td>
<td colspan="3" style="text-align: center">Aggregate</td></tr>
<tr style="vertical-align: bottom">
<td> </td><td> </td>
<td colspan="3" style="text-align: center">Subject</td><td> </td>
<td colspan="3" style="text-align: center">Exercise</td><td> </td>
<td colspan="3" style="text-align: center">Contractual</td><td> </td>
<td colspan="3" style="text-align: center">Intrinsic</td></tr>
<tr style="vertical-align: bottom">
<td> </td><td style="border-bottom: Black 1pt solid"> </td>
<td colspan="3" style="text-align: center; border-bottom: Black 1pt solid">To Option</td><td style="border-bottom: Black 1pt solid"> </td>
<td colspan="3" style="text-align: center; border-bottom: Black 1pt solid">Price</td><td style="border-bottom: Black 1pt solid"> </td>
<td colspan="3" style="text-align: center; border-bottom: Black 1pt solid">Term</td><td style="border-bottom: Black 1pt solid"> </td>
<td colspan="3" style="text-align: center; border-bottom: Black 1pt solid">Value</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 56%; padding-left: 5.4pt">Balance at July 1, 2012</td><td style="width: 1%"> </td>
<td style="width: 3%; text-align: left"> </td><td style="width: 4%; text-align: right">187,050</td><td style="width: 3%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 3%; text-align: right; vertical-align: bottom">$</td><td style="width: 4%; text-align: right">20.69</td><td style="width: 3%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 3%; text-align: left"> </td><td style="width: 4%; text-align: right">6.96</td><td style="width: 3%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 3%; text-align: right; vertical-align: bottom"> </td><td style="width: 4%; text-align: right"> </td><td style="width: 3%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-left: 5.4pt">Granted</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">—</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: right; vertical-align: bottom"> </td><td style="text-align: right">—</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">—</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: right; vertical-align: bottom"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-left: 5.4pt">Exercised</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(23,400</td><td style="text-align: left">)</td><td> </td>
<td style="text-align: right; vertical-align: bottom">$</td><td style="text-align: right">17.85</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">—</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: right; vertical-align: bottom"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 1pt; padding-left: 5.4pt">Forfeited or expired</td><td style="border-bottom: Black 1pt solid"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">(500</td><td style="border-bottom: Black 1pt solid; text-align: left">)</td><td style="border-bottom: Black 1pt solid"> </td>
<td style="border-bottom: Black 1pt solid; text-align: right; vertical-align: bottom">$</td><td style="border-bottom: Black 1pt solid; text-align: right">25.14</td><td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">—</td><td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid"> </td>
<td style="border-bottom: Black 1pt solid; text-align: right; vertical-align: bottom"> </td><td style="border-bottom: Black 1pt solid; text-align: right"> </td><td style="border-bottom: Black 1pt solid; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-bottom: 2.5pt; padding-left: 5.4pt">Outstanding at March 31, 2013</td><td style="border-bottom: Black 2.5pt double"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">163,150</td><td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: right; vertical-align: bottom">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">21.08</td><td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">6.49</td><td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: right; vertical-align: bottom">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">788,211</td><td style="border-bottom: Black 2.5pt double; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 2.5pt; padding-left: 5.4pt">Vested or expected to vest at March 31, 2013</td><td style="border-bottom: Black 2.5pt double"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">155,295</td><td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: right; vertical-align: bottom">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">20.87</td><td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">6.37</td><td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: right; vertical-align: bottom">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">782,167</td><td style="border-bottom: Black 2.5pt double; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-bottom: 2.5pt; padding-left: 5.4pt">Exercisable at March 31, 2013</td><td style="border-bottom: Black 2.5pt double"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">105,200</td><td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: right; vertical-align: bottom">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">18.84</td><td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">5.22</td><td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: right; vertical-align: bottom">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">743,619</td><td style="border-bottom: Black 2.5pt double; text-align: left"> </td></tr></table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt">Note 4. Commitments and Contingencies</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">The Company at certain times enters into
standby letters of credit agreements with financial institutions primarily relating to the guarantee of future performance on certain
contracts. Contingent liabilities on outstanding standby letters of credit agreements aggregated to zero at March 31, 2013 and
2012. The Company, as a U.S. Government contractor, is subject to audits, reviews, and investigations by the U.S. government related
to its negotiation and performance of government contracts and its accounting for such contracts. Failure to comply with applicable
U.S. Government standards by a contractor may result in suspension from eligibility for award of any new government contract and
a guilty plea or conviction may result in debarment from eligibility for awards. The government may, in certain cases, also terminate
existing contracts, recover damages, and impose other sanctions and penalties. As a result of a pending U.S. government audit the
Company has determined a range of possible outcomes none of which the Company believes would have a materially adverse effect on
the Company's financial position or results of operations.  In accordance with ASC 450 “Contingencies” the Company
has accrued the amount within the range that appears to be its best estimate of a possible outcome.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt">Note 3. Stock Based Compensation</p>
<p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify"><font style="font-weight: normal; font-style: normal">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. </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Total stock-based compensation expense
recognized in the Statement of Comprehensive Income for the three month period ended March 31, 2013 and 2012, was $27,406 and $26,074,
respectively, before income taxes. The related total deferred tax benefit was approximately $3,116 and $2,726 for the three month
period ended March 31, 2013 and 2012, respectively. Total stock-based compensation expense recognized in the Statement of Comprehensive
Income for the nine month period ended March 31, 2013 and 2012, was $87,777 and $68,499, respectively, before income taxes. The
related total deferred tax benefit was approximately $9,852 and $7,036 for the nine month period ended March 31, 2013 and 2012,
respectively. 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 on a prospective basis
upon adoption.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">As of March 31, 2013, there was approximately
$83,028 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 approximately $9,408.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">The Company has one employee stock option
plan under which options may be granted, the 2007 Stock Option and Restricted Stock Plan (the "2007 Plan"). The Board
of Directors may grant options to acquire shares of common stock to employees of the Company at the fair market value of the common
stock on the date of grant. Generally, options granted have a two-year vesting period based on two years of continuous service
and have a ten-year contractual life. Option grants provide for accelerated vesting if there is a change in control. Shares issued
upon the exercise of options are from those held in Treasury. The 2007 Plan was approved by the Company's shareholders at the Company's
Annual Meeting on November 30, 2007 and supersedes the Company's 2000 Stock Option Plan (the "2000 Plan"). Options covering
400,000 shares were authorized for issuance under the 2007 Plan, of which 158,500 have been granted and 124,950 are outstanding
as of March 31, 2013. While no further grants of options may be made under the 2000 Plan, as of March 31, 2013, 38,200 options
remain outstanding, vested and exercisable from the 2000 Plan.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">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.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">There were no options awarded for the
nine months ended March 31, 2013. The table below outlines the weighted average assumptions that the Company used to calculate
the fair value of each option award for the nine months ended March 31, 2012</p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom; font: 10pt Times New Roman, Times, Serif">
<td nowrap="nowrap" style="font: 10pt Times New Roman, Times, Serif"> </td><td nowrap="nowrap" style="padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif"> </td>
<td nowrap="nowrap" style="text-align: right; border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif">March 31, 2012</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255); font: 10pt Times New Roman, Times, Serif">
<td nowrap="nowrap" style="width: 90%; text-align: justify; padding-left: 5.4pt; font: 10pt Times New Roman, Times, Serif">Dividend yield</td><td nowrap="nowrap" style="width: 1%; font: 10pt Times New Roman, Times, Serif"> </td>
<td nowrap="nowrap" style="width: 9%; text-align: right; font: 10pt Times New Roman, Times, Serif">3.59%</td></tr>
<tr style="vertical-align: bottom; background-color: White; font: 10pt Times New Roman, Times, Serif">
<td nowrap="nowrap" style="text-align: justify; padding-left: 5.4pt; font: 10pt Times New Roman, Times, Serif">Expected stock price volatility</td><td nowrap="nowrap" style="font: 10pt Times New Roman, Times, Serif"> </td>
<td nowrap="nowrap" style="text-align: right; font: 10pt Times New Roman, Times, Serif">33.82%</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255); font: 10pt Times New Roman, Times, Serif">
<td nowrap="nowrap" style="text-align: justify; padding-left: 5.4pt; font: 10pt Times New Roman, Times, Serif">Risk-free interest rate</td><td nowrap="nowrap" style="font: 10pt Times New Roman, Times, Serif"> </td>
<td nowrap="nowrap" style="text-align: right; font: 10pt Times New Roman, Times, Serif">0.64%</td></tr>
<tr style="vertical-align: bottom; background-color: White; font: 10pt Times New Roman, Times, Serif">
<td nowrap="nowrap" style="text-align: justify; padding-left: 5.4pt; font: 10pt Times New Roman, Times, Serif">Expected option life (in years)</td><td nowrap="nowrap" style="font: 10pt Times New Roman, Times, Serif"> </td>
<td nowrap="nowrap" style="text-align: right; font: 10pt Times New Roman, Times, Serif">3.7yrs</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255); font: 10pt Times New Roman, Times, Serif">
<td nowrap="nowrap" style="text-align: justify; padding-left: 5.4pt; font: 10pt Times New Roman, Times, Serif">Weighted average fair value per share of options granted during the period</td><td nowrap="nowrap" style="font: 10pt Times New Roman, Times, Serif"> </td>
<td nowrap="nowrap" style="text-align: right; font: 10pt Times New Roman, Times, Serif">$4.757</td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 6pt 0; text-align: justify">The Company pays dividends quarterly.
Our Board of Directors assesses the Company’s dividend policy periodically and we anticipate that regular quarterly dividends
will be paid for the foreseeable future. While the Company has paid a special cash dividend of $1.00 per share in each of fiscal
years 2013 and 2012, there is no assurance that the Board of Directors will declare a comparable special dividend during the fiscal
year ending June 30, 2014 or any future years. 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.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">The following table summarizes stock
option activity during the nine months ended March 31, 2013:</p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td style="text-align: justify"> </td><td style="border-bottom: Black 1pt solid"> </td>
<td colspan="15" style="text-align: center; border-bottom: Black 1pt solid">Employee Stock Options Plan</td></tr>
<tr style="vertical-align: bottom">
<td> </td><td> </td>
<td colspan="3" style="text-align: center"> </td><td> </td>
<td colspan="3" style="text-align: center"> </td><td> </td>
<td colspan="3" style="text-align: center">Weighted</td><td> </td>
<td colspan="3" style="text-align: center"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td> </td>
<td colspan="3" style="text-align: center">Number of</td><td> </td>
<td colspan="3" style="text-align: center">Weighted</td><td> </td>
<td colspan="3" style="text-align: center">Average</td><td> </td>
<td colspan="3" style="text-align: center"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td> </td>
<td colspan="3" style="text-align: center">Shares</td><td> </td>
<td colspan="3" style="text-align: center">Average</td><td> </td>
<td colspan="3" style="text-align: center">Remaining</td><td> </td>
<td colspan="3" style="text-align: center">Aggregate</td></tr>
<tr style="vertical-align: bottom">
<td> </td><td> </td>
<td colspan="3" style="text-align: center">Subject</td><td> </td>
<td colspan="3" style="text-align: center">Exercise</td><td> </td>
<td colspan="3" style="text-align: center">Contractual</td><td> </td>
<td colspan="3" style="text-align: center">Intrinsic</td></tr>
<tr style="vertical-align: bottom">
<td> </td><td style="border-bottom: Black 1pt solid"> </td>
<td colspan="3" style="text-align: center; border-bottom: Black 1pt solid">To Option</td><td style="border-bottom: Black 1pt solid"> </td>
<td colspan="3" style="text-align: center; border-bottom: Black 1pt solid">Price</td><td style="border-bottom: Black 1pt solid"> </td>
<td colspan="3" style="text-align: center; border-bottom: Black 1pt solid">Term</td><td style="border-bottom: Black 1pt solid"> </td>
<td colspan="3" style="text-align: center; border-bottom: Black 1pt solid">Value</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 56%; padding-left: 5.4pt">Balance at July 1, 2012</td><td style="width: 1%"> </td>
<td style="width: 3%; text-align: left"> </td><td style="width: 4%; text-align: right">187,050</td><td style="width: 3%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 3%; text-align: right; vertical-align: bottom">$</td><td style="width: 4%; text-align: right">20.69</td><td style="width: 3%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 3%; text-align: left"> </td><td style="width: 4%; text-align: right">6.96</td><td style="width: 3%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 3%; text-align: right; vertical-align: bottom"> </td><td style="width: 4%; text-align: right"> </td><td style="width: 3%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-left: 5.4pt">Granted</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">—</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: right; vertical-align: bottom"> </td><td style="text-align: right">—</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">—</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: right; vertical-align: bottom"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-left: 5.4pt">Exercised</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(23,400</td><td style="text-align: left">)</td><td> </td>
<td style="text-align: right; vertical-align: bottom">$</td><td style="text-align: right">17.85</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">—</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: right; vertical-align: bottom"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 1pt; padding-left: 5.4pt">Forfeited or expired</td><td style="border-bottom: Black 1pt solid"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">(500</td><td style="border-bottom: Black 1pt solid; text-align: left">)</td><td style="border-bottom: Black 1pt solid"> </td>
<td style="border-bottom: Black 1pt solid; text-align: right; vertical-align: bottom">$</td><td style="border-bottom: Black 1pt solid; text-align: right">25.14</td><td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">—</td><td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid"> </td>
<td style="border-bottom: Black 1pt solid; text-align: right; vertical-align: bottom"> </td><td style="border-bottom: Black 1pt solid; text-align: right"> </td><td style="border-bottom: Black 1pt solid; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-bottom: 2.5pt; padding-left: 5.4pt">Outstanding at March 31, 2013</td><td style="border-bottom: Black 2.5pt double"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">163,150</td><td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: right; vertical-align: bottom">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">21.08</td><td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">6.49</td><td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: right; vertical-align: bottom">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">788,211</td><td style="border-bottom: Black 2.5pt double; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 2.5pt; padding-left: 5.4pt">Vested or expected to vest at March 31, 2013</td><td style="border-bottom: Black 2.5pt double"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">155,295</td><td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: right; vertical-align: bottom">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">20.87</td><td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">6.37</td><td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: right; vertical-align: bottom">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">782,167</td><td style="border-bottom: Black 2.5pt double; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-bottom: 2.5pt; padding-left: 5.4pt">Exercisable at March 31, 2013</td><td style="border-bottom: Black 2.5pt double"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">105,200</td><td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: right; vertical-align: bottom">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">18.84</td><td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">5.22</td><td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: right; vertical-align: bottom">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">743,619</td><td style="border-bottom: Black 2.5pt double; text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 6pt 0; text-align: justify">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 March 31, 2013 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 March 31, 2013. This amount
changes based on the fair market value of the company’s common stock. The total intrinsic values of the options exercised
during the nine months ended March 31, 2013 and 2012 was $52,999 and $21,089, respectively.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt 0.75in; text-align: justify; text-indent: -0.75in">Note 6.
Employee Stock Ownership Plan</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify; text-indent: 0in">The Company sponsors
a leveraged employee stock ownership plan (the "ESOP") that covers all nonunion employees who work 1,000 or more hours
per year and are employed on June 30. The Company makes annual contributions to the ESOP equal to the ESOP's debt service less
dividends on unallocated shares received by the ESOP. All dividends on unallocated shares received by the ESOP are used to pay
debt service. Dividends on allocated ESOP shares are recorded as a reduction of retained earnings. As the debt is repaid, shares
are released and allocated to active employees, based on the proportion of debt service paid in the year. The Company accounts
for its ESOP in accordance with FASB ASC 718-40. Accordingly, the shares purchased by the ESOP are reported as Unearned ESOP Shares
in the statement of financial position. As shares are released or committed-to-be-released, the Company reports compensation expense
equal to the current average market price of the shares, and the shares become outstanding for earnings-per-share (EPS) computations.
ESOP compensation expense was $129,101 and $124,896 for the three month periods ended March 31, 2013 and 2012, respectively. ESOP
compensation expense was $401,554 and $376,251 for the nine month periods ended March 31, 2013 and 2012, respectively. The ESOP
shares as of March 31, 2013 and 2012 were as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom; font: 10pt Times New Roman, Times, Serif">
<td nowrap="nowrap" style="font: 10pt Times New Roman, Times, Serif"> </td><td nowrap="nowrap" style="color: black; padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif"> </td>
<td colspan="2" nowrap="nowrap" style="color: black; text-align: right; border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif">March  31, 2013</td><td nowrap="nowrap" style="padding-bottom: 1pt; color: black; font: 10pt Times New Roman, Times, Serif"> </td><td nowrap="nowrap" style="color: black; padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif"> </td>
<td colspan="2" nowrap="nowrap" style="color: black; text-align: right; border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif">March 31, 2012</td><td nowrap="nowrap" style="padding-bottom: 1pt; color: black; font: 10pt Times New Roman, Times, Serif"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255); font: 10pt Times New Roman, Times, Serif">
<td nowrap="nowrap" style="width: 76%; text-indent: 0in; font: 10pt Times New Roman, Times, Serif">Allocated Shares</td><td nowrap="nowrap" style="width: 1%; font: 10pt Times New Roman, Times, Serif"> </td>
<td nowrap="nowrap" style="width: 1%; text-align: left; font: 10pt Times New Roman, Times, Serif"> </td><td nowrap="nowrap" style="width: 9%; text-align: right; font: 10pt Times New Roman, Times, Serif">449,338</td><td nowrap="nowrap" style="width: 1%; text-align: left; font: 10pt Times New Roman, Times, Serif"> </td><td nowrap="nowrap" style="width: 1%; font: 10pt Times New Roman, Times, Serif"> </td>
<td nowrap="nowrap" style="width: 1%; text-align: left; font: 10pt Times New Roman, Times, Serif"> </td><td nowrap="nowrap" style="width: 9%; text-align: right; font: 10pt Times New Roman, Times, Serif">433,754</td><td nowrap="nowrap" style="width: 1%; text-align: left; font: 10pt Times New Roman, Times, Serif"> </td></tr>
<tr style="vertical-align: bottom; background-color: White; font: 10pt Times New Roman, Times, Serif">
<td nowrap="nowrap" style="font: 10pt Times New Roman, Times, Serif">Committed-to-be-released shares</td><td nowrap="nowrap" style="font: 10pt Times New Roman, Times, Serif"> </td>
<td nowrap="nowrap" style="text-align: left; font: 10pt Times New Roman, Times, Serif"> </td><td nowrap="nowrap" style="text-align: right; font: 10pt Times New Roman, Times, Serif">15,000</td><td nowrap="nowrap" style="text-align: left; font: 10pt Times New Roman, Times, Serif"> </td><td nowrap="nowrap" style="font: 10pt Times New Roman, Times, Serif"> </td>
<td nowrap="nowrap" style="text-align: left; font: 10pt Times New Roman, Times, Serif"> </td><td nowrap="nowrap" style="text-align: right; font: 10pt Times New Roman, Times, Serif">15,625</td><td nowrap="nowrap" style="text-align: left; font: 10pt Times New Roman, Times, Serif"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255); font: 10pt Times New Roman, Times, Serif">
<td nowrap="nowrap" style="padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif">Unreleased shares</td><td nowrap="nowrap" style="padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif"> </td>
<td nowrap="nowrap" style="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td nowrap="nowrap" style="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: right">121,666</td><td nowrap="nowrap" style="padding-bottom: 1pt; text-align: left; font: 10pt Times New Roman, Times, Serif"> </td><td nowrap="nowrap" style="padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif"> </td>
<td nowrap="nowrap" style="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td nowrap="nowrap" style="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: right">141,875</td><td nowrap="nowrap" style="padding-bottom: 1pt; text-align: left; font: 10pt Times New Roman, Times, Serif"> </td></tr>
<tr style="vertical-align: bottom; background-color: White; font: 10pt Times New Roman, Times, Serif">
<td nowrap="nowrap" style="text-align: left; padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif">Total shares held by the ESOP</td><td nowrap="nowrap" style="padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif"> </td>
<td nowrap="nowrap" style="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right">586,004</td><td nowrap="nowrap" style="padding-bottom: 2.5pt; text-align: left; font: 10pt Times New Roman, Times, Serif"> </td><td nowrap="nowrap" style="padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif"> </td>
<td nowrap="nowrap" style="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right">591,254</td><td nowrap="nowrap" style="padding-bottom: 2.5pt; text-align: left; font: 10pt Times New Roman, Times, Serif"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255); font: 10pt Times New Roman, Times, Serif">
<td nowrap="nowrap" style="padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif">Fair value of unreleased shares</td><td nowrap="nowrap" style="padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif"> </td>
<td nowrap="nowrap" style="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left">$</td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right">3,152,366</td><td nowrap="nowrap" style="padding-bottom: 2.5pt; text-align: left; font: 10pt Times New Roman, Times, Serif"> </td><td nowrap="nowrap" style="padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif"> </td>
<td nowrap="nowrap" style="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left">$</td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right">3,511,406</td><td nowrap="nowrap" style="padding-bottom: 2.5pt; text-align: left; font: 10pt Times New Roman, Times, Serif"> </td></tr></table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify; text-indent: 0in">The ESOP
shares as of March 31, 2013 and 2012 were as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom; font: 10pt Times New Roman, Times, Serif">
<td nowrap="nowrap" style="font: 10pt Times New Roman, Times, Serif"> </td><td nowrap="nowrap" style="color: black; padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif"> </td>
<td colspan="2" nowrap="nowrap" style="color: black; text-align: right; border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif">March  31, 2013</td><td nowrap="nowrap" style="padding-bottom: 1pt; color: black; font: 10pt Times New Roman, Times, Serif"> </td><td nowrap="nowrap" style="color: black; padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif"> </td>
<td colspan="2" nowrap="nowrap" style="color: black; text-align: right; border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif">March 31, 2012</td><td nowrap="nowrap" style="padding-bottom: 1pt; color: black; font: 10pt Times New Roman, Times, Serif"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255); font: 10pt Times New Roman, Times, Serif">
<td nowrap="nowrap" style="width: 76%; text-indent: 0in; font: 10pt Times New Roman, Times, Serif">Allocated Shares</td><td nowrap="nowrap" style="width: 1%; font: 10pt Times New Roman, Times, Serif"> </td>
<td nowrap="nowrap" style="width: 1%; text-align: left; font: 10pt Times New Roman, Times, Serif"> </td><td nowrap="nowrap" style="width: 9%; text-align: right; font: 10pt Times New Roman, Times, Serif">449,338</td><td nowrap="nowrap" style="width: 1%; text-align: left; font: 10pt Times New Roman, Times, Serif"> </td><td nowrap="nowrap" style="width: 1%; font: 10pt Times New Roman, Times, Serif"> </td>
<td nowrap="nowrap" style="width: 1%; text-align: left; font: 10pt Times New Roman, Times, Serif"> </td><td nowrap="nowrap" style="width: 9%; text-align: right; font: 10pt Times New Roman, Times, Serif">433,754</td><td nowrap="nowrap" style="width: 1%; text-align: left; font: 10pt Times New Roman, Times, Serif"> </td></tr>
<tr style="vertical-align: bottom; background-color: White; font: 10pt Times New Roman, Times, Serif">
<td nowrap="nowrap" style="font: 10pt Times New Roman, Times, Serif">Committed-to-be-released shares</td><td nowrap="nowrap" style="font: 10pt Times New Roman, Times, Serif"> </td>
<td nowrap="nowrap" style="text-align: left; font: 10pt Times New Roman, Times, Serif"> </td><td nowrap="nowrap" style="text-align: right; font: 10pt Times New Roman, Times, Serif">15,000</td><td nowrap="nowrap" style="text-align: left; font: 10pt Times New Roman, Times, Serif"> </td><td nowrap="nowrap" style="font: 10pt Times New Roman, Times, Serif"> </td>
<td nowrap="nowrap" style="text-align: left; font: 10pt Times New Roman, Times, Serif"> </td><td nowrap="nowrap" style="text-align: right; font: 10pt Times New Roman, Times, Serif">15,625</td><td nowrap="nowrap" style="text-align: left; font: 10pt Times New Roman, Times, Serif"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255); font: 10pt Times New Roman, Times, Serif">
<td nowrap="nowrap" style="padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif">Unreleased shares</td><td nowrap="nowrap" style="padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif"> </td>
<td nowrap="nowrap" style="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td nowrap="nowrap" style="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: right">121,666</td><td nowrap="nowrap" style="padding-bottom: 1pt; text-align: left; font: 10pt Times New Roman, Times, Serif"> </td><td nowrap="nowrap" style="padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif"> </td>
<td nowrap="nowrap" style="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td nowrap="nowrap" style="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: right">141,875</td><td nowrap="nowrap" style="padding-bottom: 1pt; text-align: left; font: 10pt Times New Roman, Times, Serif"> </td></tr>
<tr style="vertical-align: bottom; background-color: White; font: 10pt Times New Roman, Times, Serif">
<td nowrap="nowrap" style="text-align: left; padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif">Total shares held by the ESOP</td><td nowrap="nowrap" style="padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif"> </td>
<td nowrap="nowrap" style="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right">586,004</td><td nowrap="nowrap" style="padding-bottom: 2.5pt; text-align: left; font: 10pt Times New Roman, Times, Serif"> </td><td nowrap="nowrap" style="padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif"> </td>
<td nowrap="nowrap" style="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left"> </td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right">591,254</td><td nowrap="nowrap" style="padding-bottom: 2.5pt; text-align: left; font: 10pt Times New Roman, Times, Serif"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255); font: 10pt Times New Roman, Times, Serif">
<td nowrap="nowrap" style="padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif">Fair value of unreleased shares</td><td nowrap="nowrap" style="padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif"> </td>
<td nowrap="nowrap" style="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left">$</td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right">3,152,366</td><td nowrap="nowrap" style="padding-bottom: 2.5pt; text-align: left; font: 10pt Times New Roman, Times, Serif"> </td><td nowrap="nowrap" style="padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif"> </td>
<td nowrap="nowrap" style="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left">$</td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right">3,511,406</td><td nowrap="nowrap" style="padding-bottom: 2.5pt; text-align: left; font: 10pt Times New Roman, Times, Serif"> </td></tr></table>
P1Y3M
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Note 5. Recently Issued Accounting
Standards</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">FASB Accounting Standards Update
2011-05, “Presentation of Comprehensive Income,” was issued in June 2011 to be effective for fiscal years beginning
after December 15, 2011. Comprehensive income includes certain items that are recognized as “other comprehensive
income” (“OCI”) and are excluded from net income. Examples include unrealized gains/losses on certain
investments and gains/losses on derivative instruments designated as hedges. Under provisions of the update, the components
of OCI must be presented in one of two formats: either (i) together with net income in a continuous statement of
comprehensive income or (ii) in a second statement of comprehensive income to immediately follow the income statement. An
existing option to present the components of OCI as part of the statement of changes in shareholders’ equity is being
eliminated. The Company’s compliance with the update has had a minimal effect on its financial statements.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify; background-color: White; color: Black">In
February 2013, The FASB amended Accounting Standards No. 2013-02, “Comprehensive Income (Topic 220): Reporting of
Amounts Reclassified Out of Accumulated Other Comprehensive Income,” to improve the transparency of reporting
reclassifications out of accumulated other comprehensive income. Other comprehensive income includes gains and losses that
are initially excluded from net income for an accounting period. Those gains and losses are later reclassified out of
accumulated other comprehensive income into net income.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify; background-color: White; color: Black">The
amendments in the Update do not change the current requirements for reporting net income or other comprehensive income in financial
statements. All of the information that this Update requires already is required to be disclosed elsewhere in the financial statements
under U.S. Generally Accepted Accounting Principles (U.S. GAAP).</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify; background-color: White; color: Black">The
new amendments will require:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify; background-color: White; color: Black">Present
(either on the face of the statement where net income is presented or in the notes) the effects on the line items of net income
of significant amounts reclassified out of accumulated other comprehensive income–but only if the item reclassified is required
under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify; background-color: White; color: Black">Cross-reference
to other disclosures currently required under U.S. GAAP for other reclassification items (that are not required under U.S. GAAP)
to be reclassified directly to net income in their entirety in the same reporting period. This would be the case when a portion
of the amount reclassified out of accumulated other comprehensive income is initially transferred to a balance sheet account (e.g.,
inventory for pension-related amounts) instead of directly to income or expense.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify; background-color: White; color: Black">The
amendments are effective for reporting periods beginning after December 15, 2012.  The adoption of this guidance did not have
a material impact on the Company’s financial statements.</p>