Employee Benefit Plans

12 Months Ended

Dec. 31, 2019

401(k) Plan:

The Company provides a deferred salary reduction plan (“Plan”) under Section 401 (k) of the Internal Revenue Code covering substantially all employees. After one year of service the Company matches 100% of employee contributions up to 3% of compensation and 50% of employee contributions on the next 2% of compensation. The Company's expense related to the Plan was $818 thousand in 2019 and $716 thousand in 2018.

Stock Option Plans:

The Compensation Committee of the Company’s Board of Directors may grant or award eligible participants stock options, restricted stock, restricted stock units, stock appreciation rights, and other stock-based awards or any combination of awards (collectively referred to herein as ‘Rights”). At December 31, 2019, the Company had one active equity incentive plan administered by the Board of Directors, the 2015 Stock Incentive Plan. The Company had 33,059 Rights issued and 1,916,507 Rights available for grants or awards under this plan.

In addition to the 2015 Stock Incentive Plan, the Company has 38,250 Rights issued from the Cornerstone Bancshares, Inc. 2002 Long Term Incentive Plan, 51,750 Rights issued from the Cornerstone Non-Qualified Plan Options, and 13,599 Rights issued from the Capstone Stock Option Plan. These plans do not have any Rights available for future grants or awards.

A summary of the status of these stock option plans is presented in the following table:


	Number	Weighted Average Exercisable Price
Outstanding at December 31, 2018	170,625	$	10.61
Granted	—	—
Exercised	(31,931)	11.85
Forfeited	(2,036)	12.20
Outstanding at December 31, 2019	136,658	$	10.29
Exercisable at December 31, 2019	136,658	$	10.29


	Number	Weighted Average Exercisable Price
Outstanding at December 31, 2017	316,574	$	11.82
Granted	—	—
Exercised	(132,783)	11.39
Forfeited	(13,166)	31.96
Outstanding at December 31, 2018	170,625	$	10.61
Exercisable at December 31, 2018	157,218	$	11.78

Stock Option Plans (continued):

Information pertaining to options outstanding at December 31, 2019, is as follows:


		Options Outstanding							Options Exercisable
			Weighted- Average Remaining	Weighted- Average			Weighted- Average
Exercise		Number	Contractual	Exercise		Number	Exercise
Prices		Outstanding	Life	Price		Exercisable	Price
$	6.60	25,000	1.9 years	$	6.60	25,000	$	6.60
6.80		13,250	1.2 years	6.80		13,250	6.80
9.48		21,000	2.9 years	9.48		21,000	9.48
9.60		30,750	3.2 years	9.60		30,750	9.60
11.76		13,599	0.7 years	11.76		13,599	11.76
15.05		33,059	5.5 years	15.05		33,059	15.05

Outstanding, end of year		136,658	3.01 years	$	10.29	136,658	$	10.29

The Company recognized stock option compensation expense of $121 thousand and $134 thousand for the periods ended December 31, 2019 and 2018, respectively. Stock appreciation rights compensation expense of $134 thousand and $34 thousand was recognized for the period ended December 31, 2019 and 2018, respectively. Direct stock grant expense issued to local advisory board members of $65 thousand and $9 thousand was included in salary and benefit expense for the period ended December 31, 2019 and 2018, respectively. The total fair value of shares underlying the options which vested during the periods ended December 31, 2019 and 2018, was $317 thousand and $244 thousand, respectively. The income tax benefit recognized for the exercise of options for the periods ended December 31, 2019 and 2018 was $61 thousand and $319 thousand respectively.

The intrinsic value of options exercised during the periods ended December 31, 2019 and 2018 was $372 thousand and $1.5 million, respectively. The aggregate intrinsic value of total options outstanding and exercisable options at December 31, 2019 was $1.8 million. Cash received from options exercised under all share-based payment arrangements for the period ended December 31, 2019 was $374 thousand.

Information related to non-vested options for the period ended December 31, 2019, is as follows:


	Number	Weighted Average Grant-Date Fair Value
Nonvested at December 31, 2018	13,407	$	15.05
Granted	—	—
Vested	(13,407)	15.05
Forfeited/expired	—	—
Nonvested at December 31, 2019	—	$	—

As of December 31, 2019, all options are fully vested and currently no future compensation cost will be recognized related to nonvested stock-based compensation arrangements granted under the Plans. There were no stock options granted during the twelve months period ended December 31, 2019 and December 31, 2018.

Restricted Stock Awards:

A summary of the activity of the Company's unvested restricted stock awards for the year ended December 31, 2019 is presented below:

The following table summarizes activity relating to non-vested restricted stock awards:


	Number	Weighted Average Grant-Date Fair Value
Nonvested at December 31, 2018	29,500	$	24.38
Granted	40,400	18.49
Vested	(3,000)	20.90
Forfeited/expired	(1,500)	18.12
Nonvested at December 31, 2019	65,400	$	21.04

The Company measures the fair value of restricted shares based on the price of the Company’s common stock on the grant date, and compensation expense is recorded over the vesting period. For the years ended December 31, 2019 and 2018, compensation expense was $396 thousand and $263 thousand, respectively, for restricted stock awards. As of December 31, 2019, there was$844 thousand of unrecognized compensation cost related to non-vested restricted stock awards granted under the plan. The cost is expected to be recognized over a weighted average period of 3.18 years. The grant-date fair value of restricted stock grants vested was $63 thousand for the year ended December 31, 2019, no restricted stock vested during the year ended December 31, 2018.