Stock Based Compensation

3 Months Ended

Mar. 31, 2014

Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract]

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

Note 2. Stock Based Compensation

Accounting Policies- Cornerstone, as required by FASB, applies the fair value recognition provisions of ASC 718, “Compensation –Stock Compensation.” For the three month period ended March 31, 2014, $40,000 in compensation cost was charged to earnings related to the vested incentive stock options.

Officer and Employee Plans-Cornerstone has two stock option plans under which officers and employees can be granted incentive stock options or non-qualified stock options to purchase a total of up to 1,420,000 shares of Cornerstone’s common stock. The exercise price for incentive stock options must be not less than 100 percent of the fair market value of the common stock on the date of the grant. The exercise price of 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 incentive stock options vest 30 percent on the second anniversary of the grant date, 60 percent on the third anniversary of the grant date and 100 percent on the fourth anniversary of the grant date, and the non-qualified stock options vest 50 percent on the first anniversary of the grant date and 100 percent on the second anniversary of the grant date. The options expire ten years from the grant date. At March 31, 2014, the total remaining compensation cost to be recognized on non-vested options is approximately $734,000. A summary of the status of these stock option plans is presented in the following table:

					Weighted-
					Average
			Weighted		Contractual
			Average		Remaining	Aggregate
			Exercisable		Term	Intrinsic
	Number		Price		(in years)	Value
Outstanding at December 31, 2013		810,825	$	3.51	6.5 Years	$	257,570
Granted		207,000		2.40	9.9 Years
Exercised		-		-
Forfeited		(73,640)		5.05
Outstanding at March 31, 2014		944,185	$	3.15	7.5 Years	$	264,320
Options exercisable at March 31, 2014		343,085	$	4.92

The weighted average grant date fair value of stock options granted during the three months ended March 31, 2014 was $1.30. This was determined using the Black-Scholes option-pricing model with the following weighted-average assumptions:

Dividend yield	0.0	%
Expected life	8.5 Years
Expected volatility	45.73	%
Risk-free interest rate	2.32	%

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 are 50% on each of the first and second anniversary of the grant date with full vesting occurring at the second anniversary date. At March 31, 2014, the total remaining compensation cost to be recognized on non-vested options is approximately $176,000. A summary of the status of this stock option plan is presented in the following table:

					Weighted-
					Average
			Weighted		Contractual
			Average		Remaining		Aggregate
			Exercisable		Term		Intrinsic
	Number		Price		(in years)		Value
Outstanding at December 31, 2013		190,250	$	3.07		6.9 Years	$	64,800
Granted		80,000		2.40		9.9 Years
Exercised		-		-
Forfeited		(16,000)		5.44
Outstanding at March 31, 2014		254,250	$	2.71		8.1 Years	$	67,500
Options exercisable at March 31, 2014		151,750	$	2.93

The weighted average grant date fair value of stock options granted during the three months ended March 31, 2014 was $1.30. This was determined using the Black-Scholes option-pricing model with the following weighted-average assumptions:

Dividend yield	0.0	%
Expected life	8.5 Years
Expected volatility	45.73	%
Risk-free interest rate	2.32	%