Stock Option Plans

12 Months Ended

Dec. 31, 2014

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

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

Note 14. Stock Option Plans

Cornerstone has stock option plans which are more fully described below. For the years ended December 31, 2014, 2013 and 2012, Cornerstone recognized $160,500, $129,056 and $74,048, respectively, in compensation expense for all stock options.

For the years ended December 31, 2014, 2013, and 2012, 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,
	2014		2013		2012

Dividend yield	0.0	%	0.0	%	0.0	%
Expected life	8.5 years		7.0 years		7.0 years
Expected volatility	45.73	%	47.60	%	44.62	%
Risk-free interest rate	2.32	%	1.23	%	1.44	%

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 could be granted under the Plan. In addition, members of the Board of Directors could 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 2014, 2013, and 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, 2014, the total remaining compensation cost to be recognized on non-vested options is approximately $130,000. An analysis of this stock option plan is presented in the following table:

	Years Ended December 31,
	2014						2013				2012
			Average		Aggregate				Average				Average
			Exercise		Intrinsic				Exercise				Exercise
	Shares		Price		Value(1)		Shares		Price		Shares		Price

Outstanding at beginning of year		190,250	$	3.07		145,250	$	3.30		55,250	$	5.98

Granted		80,000		2.40		45,000	$	2.37		90,000	$	1.65

Exercised		-		-		-		-		-		-

Forfeited		16,000		5.44		-		-		-		-

Outstanding at end of year		254,250	$	2.71	$	264,500		190,250	$	3.07		145,250	$	3.30

Options exercisable at year-end		151,750	$	2.93	$	170,550		100,250	$	4.03		55,250	$	5.98

Weighted-average fair value of options granted during the year	$	1.30					$	1.17			$	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, 2014. This amount changes based on changes in the market value of Cornerstone's stock.

Information pertaining to options outstanding at December 31, 2014, 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

$	9.23	8,000	0.2 Years	$	9.23	8,000	$	9.23
	7.99	12,800	3.2 Years		7.99	12,800		7.99
	3.60	18,450	4.2 Years		3.60	18,450		3.60
	2.40	80,000	9.2 Years		2.40	-		2.40
	2.37	45,000	8.2 Years		2.37	22,500		2.37
	1.65	90,000	7.2 Years		1.65	90,000		1.65

Outstanding at end of year		254,250	7.4 Years	$	2.71	151,750	$	2.93

Information pertaining to non-vested options for the year ended December 31, 2014, is as follows:

		Weighted Average
	Number	Grant Date
	of Shares	Fair Value

Non-vested options, December 31, 2013	90,000	$	0.98
Granted	80,000		1.30
Vested	(67,500)		0.91
Forfeited	-		-

Non-vested options, December 31, 2014	102,500	$	1.27

The total fair value of shares that vested during 2014 and 2013 was approximately $179,000 and $102,600, 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 could 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, 2014, the total remaining compensation cost to be recognized on non-vested options is approximately $658,000. An analysis of the activity for each of the years ended December 31, 2014, 2013 and 2012, for this stock option plan follows:

	Years Ended December 31,
	2014						2013				2012
			Average		Aggregate				Average				Average
			Exercise		Intrinsic				Exercise				Exercise
	Shares		Price		Value(1)		Shares		Price		Shares		Price

Outstanding at beginning of year		810,825	$	3.51		670,300	$	3.86		572,600	$	4.63

Granted		207,000	$	2.40		203,000	$	2.37		202,000	$	1.65

Exercised		-		-		-		-		-		-

Forfeited		(77,990)	$	4.89		(62,475)	$	3.40		(104,300)	$	3.89

Outstanding at end of year		939,835	$	3.15	$	953,940		810,825	$	3.51		670,300	$	3.86

Options exercisable at year-end		345,735	$	4.88	$	264,144		307,025	$	6.10		274,680	$	6.82

Weighted-average fair value of options granted during the year	$	1.30					$	1.17			$	0.78

(1)

Information pertaining to options outstanding at December 31, 2014, 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

$	9.23	39,910	0.2 Years	$	9.23	39,910	$	9.23
	13.25	16,800	1.2 Years		13.25	16,800		13.25
	15.25	11,825	2.2 Years		15.25	11,825		15.25
	15.20	2,750	2.3 Years		15.20	2,750		15.20
	7.99	45,000	3.2 Years		7.99	45,000		7.99
	3.60	69,550	4.2 Years		3.60	69,550		3.60
	1.70	167,000	6.2 Years		1.70	100,200		1.70
	1.55	3,000	6.3 Years		1.55	1,800		1.55
	1.10	5,000	6.6 Years		1.10	3,000		1.10
	1.02	5,000	6.8 Years		1.02	3,000		1.02
	1.65	173,000	7.2 Years		1.65	51,900		1.65
	2.37	190,000	8.2 Years		2.37	-		-
	2.40	206,000	9.2 Years		2.40	-		-
	2.50	5,000	8.6 Years		2.50	-		-

Outstanding at end of year		939,835	6.8 Years	$	3.15	345,735	$	4.88

Information pertaining to non-vested options for the year ended December 31, 2014, is as follows:

		Weighted Average
	Number	Grant Date
	of Shares	Fair Value

Non-vested options, December 31, 2013	503,800	$	0.98
Granted	207,000		1.30
Vested	(107,400)		0.87
Forfeited	(9,300)		1.01

Non-vested options, December 31, 2014	594,100	$	1.11

The total fair value of shares that vested during 2014, 2013 and 2012, was approximately $281,000, $190,000, and $73,000, respectively.

- Definition

The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.

+ References+ Details