The finally block is executed. The local variable is incremented. But the value of that local variable has already been copied for the return value.
From the Java Language Specification, 14.17: The return statement:
A return statement with an Expression attempts to transfer control to the invoker
of the method that contains it; the value of the Expression becomes the value of
the method invocation.
...
The preceding descriptions say "attempts to transfer control" rather than just "transfers
control" because if there are any try statements (§14.20) within the method or constructor
whose try blocks or catch clauses contain the return statement, then any finally
clauses of those try statements will be executed, in order, innermost to outermost, before
control is transferred to the invoker of the method or constructor. Abrupt completion of a
finally clause can disrupt the transfer of control initiated by a return statement
