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Stock Option Plans
 12 Months Ended
Dec. 31, 2012
Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract]  
Disclosure of Compensation Related Costs, Share-based Payments [Text Block]
Note 15.Stock Option Plans

 

Cornerstone has stock option plans which are more fully described below. For the years ended December 31, 2012, 2011 and 2010, Cornerstone recognized $74,048, $79,140 and $74,612, respectively, in compensation expense for all stock options.

 

No options were issued during 2010. For the years ended December 31, 2012 and 2011, the fair value of each option granted is estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions:

 

  Years Ended December 31, 
  2012  2011 
       
Dividend yield  0.0%  0.0%
Expected life  7.0 years   7.0 years 
Expected volatility  44.62%  43.11%
Risk-free interest rate  1.44%  2.81%

  

The expected volatility is based upon historical volatility. The risk-free interest rates for periods within the contractual life of the awards are based on the U.S. Treasury yield curve in effect at the time of the grant. The expected life is based on historical exercise experience. The dividend yield assumption is based on Cornerstone’s history and expectation of dividend payouts.

 

Board of Directors plan:

 

Cornerstone has a stock option plan under which members of the Board of Directors, at the formation of the Bank, were granted options to purchase a total of up to 600,000 shares of common stock. Only non-qualified stock options may be granted under the Plan. In addition, members of the Board of Directors can be issued options under the Cornerstone 2002 Long-Term Incentive Plan to purchase up to 1,200,000 shares of Cornerstone stock. The options available for issuance to Board members under the 2002 Long-Term Incentive Plan are shared with officers and employees of Cornerstone. The exercise price of each option equals the market price of Cornerstone’s stock on the date of grant and the option’s maximum term is ten years, at which point they expire. Vesting for options granted during 2012 are 50% on each of the first and second anniversary of the grant date with full vesting occurring at the second anniversary date. At December 31, 2012, the total remaining compensation cost to be recognized on non-vested options is approximately $70,000. An analysis of this stock option plan is presented in the following table:

 

  Years Ended December 31, 
  2012  2011  2010 
     Average  Aggregate     Average     Average 
     Exercise  Intrinsic     Exercise     Exercise 
  Shares  Price  Value(1)  Shares  Price  Shares  Price 
Outstanding at beginning of year  55,250  $5.98      100,250  $9.42   100,250  $9.42 
                             
Granted  90,000  $1.65      -   -   -   - 
                             
Exercised  -   -      -   -   -   - 
                             
Forfeited  -   -     45,000  $13.65   -   - 
                             
Outstanding at end of year  145,250  $3.30  $57,600   55,250  $5.98   100,250  $9.42 
                             
Options exercisable at year-end  55,250  $5.98  $-   55,250  $5.98   91,025  $10.01 
                             
Weighted-average fair value of options granted during the year $0.78      $-      $-     

 

(1)The aggregate intrinsic value of a stock option in the table above represents the total pre-tax intrinsic value (the amount by which the current market value of the underlying stock exceeds the exercise price of the option) that would have been received by the option holders had all option holders exercised their options on December 31, 2012. This amount changes based on changes in the market value of Cornerstone's stock.

 

Information pertaining to options outstanding at December 31, 2012, is as follows:

 

     Options Outstanding  Options Exercisable 
     Weighted  Weighted     Weighted 
     Average  Average     Average 
Exercise Number  Remaining  Exercise  Number  Exercise 
Prices Outstanding  Life  Price  Exercisable  Price 
                
$5.44  16,000   1.2 Years  $5.44   16,000  $5.44 
9.23  8,000   2.2 Years   9.23   8,000   9.23 
7.99  12,800   5.2 Years   7.99   12,800   7.99 
3.60  18,450   6.2 Years   3.60   18,450   3.60 
1.65  90,000   9.2 Years   1.65   -   - 
                     
Outstanding at end of year  145,250   7.2 Years  $3.30   55,250  $5.98 

  

Board of Directors plan: (continued)

 

Information pertaining to non-vested options for the year ended December 31, 2012, is as follows:

 

     Weighted Average 
  Number  Grant Date 
  of Shares  Fair Value 
       
Non-vested options, December 31, 2011  -  $- 
Granted  90,000   1.65 
Vested  -   - 
Forfeited  -   - 
         
Non-vested options, December 31, 2012  90,000  $1.65 

 

The total fair value of shares that vested during 2011 and 2010 was approximately $11,900 and $34,000, respectively.

 

Officer and Employee plans:

 

Cornerstone has two stock option plans, the 1996 Cornerstone Statutory and Non-statutory Option Plan and the Cornerstone 2002 Long-Term Incentive Plan, under which officers and employees can be granted incentive stock options or non-qualified stock options to purchase a total of up to 220,000 and 1,200,000 shares, respectively, of Cornerstone’s common stock. The option price for incentive stock options shall be not less than 100 percent of the fair market value of the common stock on the date of the grant. The non-qualified stock options may be equal to or more or less than the fair market value of the common stock on the date of the grant. The stock options vest at 30 percent on the second and third anniversaries of the grant date and 40 percent on the fourth anniversary of the grant date. These options expire ten years from the grant date. At December 31, 2012, the total remaining compensation cost to be recognized on non-vested options is approximately $380,000. An analysis of the activity for each of the years ended December 31, 2012, 2011 and 2010, for this stock option plan follows:

 

  Years Ended December 31, 
  2012  2011  2010 
     Average  Aggregate     Average     Average 
     Exercise  Intrinsic     Exercise     Exercise 
  Shares  Price  Value(1)  Shares  Price  Shares  Price 
                      
Outstanding at beginning of year  572,600  $4.63      520,900  $5.79   799,675  $6.18 
                             
Granted  202,000  $1.65       221,000  $1.67   -   - 
                             
Exercised  -   -       -   -   -   - 
                             
Forfeited  (104,300) $3.89       (169,300) $4.31   (278,775) $6.90 
                             
Outstanding at end of year  670,300  $3.86  $232,900   572,600  $4.63   520,900  $5.79 
                             
Options exercisable at year-end  274,680  $6.82  $-   295,415  $6.67   385,270  $5.88 
                             
Weighted-average fair value of options granted during the year $0.78          $0.95      $-     

 

(1)The aggregate intrinsic value of a stock option in the table above represents the total pre-tax intrinsic value (the amount by which the current market value of the underlying stock exceeds the exercise price of the option) that would have been received by the option holders had all option holders exercised their options on December 31, 2012. This amount changes based on changes in the market value of Cornerstone's stock.

 

Officer and Employee plans: (continued)

 

Information pertaining to options outstanding at December 31, 2012, is as follows:

 

   Options Outstanding  Options Exercisable 
      Weighted  Weighted     Weighted 
      Average  Average     Average 
Exercise  Number  Remaining  Exercise  Number  Exercise 
Prices  Outstanding  Life  Price  Exercisable  Price 
                 
$3.63   49,000   0.2 Years  $3.63   49,000  $3.63 
 5.44   65,640   1.2 Years   5.44   65,640   5.44 
 9.23   39,910   2.2 Years   9.23   39,910   9.23 
 13.25   17,000   3.2 Years   13.25   17,000   13.25 
 15.25   11,950   4.2 Years   15.25   11,950   15.25 
 15.20   2,750   4.3 Years   15.20   2,750   15.20 
 7.99   45,500   5.2 Years   7.99   45,500   7.99 
 3.60   71,550   6.2 Years   3.60   42,930   3.60 
 1.70   174,000   8.2 Years   1.70   -   - 
 1.55   3,000   8.3 Years   1.55   -   - 
 1.10   5,000   8.6 Years   1.10   -   - 
 1.02   5,000   8.8 Years   1.02   -   - 
 1.65   180,000   9.2 Years   1.65   -   - 
                       
Outstanding at end of year   670,300   6.2 Years  $3.86   274,680  $6.82 

 

Information pertaining to non-vested options for the year ended December 31, 2012, is as follows:

 

     Weighted Average 
  Number  Grant Date 
  of Shares  Fair Value 
       
Non-vested options, December 31, 2011  277,185  $2.47 
Granted  202,000   1.65 
Vested  (39,665)  5.61 
Forfeited  (43,900)  1.79 
         
Non-vested options, December 31, 2012  395,620  $1.80 

 

The total fair value of shares that vested during 2012, 2011 and 2010 was approximately $73,000, $56,000 and $125,000, respectively.