Employee Benefit Plans

9 Months Ended

Sep. 30, 2020

Defined Benefit Plan [Abstract]

Employee Benefit Plans

Note 8. Employee Benefit Plans

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 90 days 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 contribution to the Plan for the three and nine month periods ending September 30, 2020, was $282 thousand and $840 thousand, respectively.  The Company’s contribution to the Plan for the three and nine months periods ending September 30, 2019, was $187 thousand and $602 thousand, respectively.

Equity Incentive 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 September 30, 2020, the Company had one active equity incentive plan available for future grants, the 2015 Stock Incentive Plan, which had 28,549 rights issued and 1,878,894 Rights available for future grants or awards.

In addition, the Company has 33,250 Rights issued from the Cornerstone Bancshares, Inc. 2002 Long Term Incentive Plan, 41,250 Rights issued from the Cornerstone Non-Qualified Plan Options, and 2,266 Rights issued from the Capstone Stock Option Plan. These plans do not have any Rights available for future grants or awards.

Stock Options:

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

		Weighted
		Average
		Exercisable
	Number	Price
Outstanding at December 31, 2019	136,658	$	10.29
Granted	—		—
Exercised	(27,858)		10.13
Forfeited	(3,485)		15.05
Outstanding at September 30, 2020	105,315	$	10.18

Information pertaining to stock options outstanding at September 30, 2020, is as follows:

		Options Outstanding				Options Exercisable
			Weighted-
			Average	Weighted-			Weighted-
			Remaining	Average			Average
Exercise		Number	Contractual	Exercise		Number	Exercise
Prices		Outstanding	Life	Price		Exercisable	Price
$	6.60	20,000	1.45 years	$	6.60	20,000	$	6.60
	6.80	13,250	0.42 years		6.80	13,250		6.80
	9.48	18,500	2.45 years		9.48	18,500		9.48
	9.60	22,750	3.25 years		9.60	22,750		9.60
	11.76	2,266	1.75 years		11.76	2,266		11.76
	15.05	28,549	4.83 years		15.05	28,549		15.05
Outstanding, end of period		105,315	2.81 years	$	10.18	105,315	$	10.18

The Company did not recognize any stock option-based compensation expense during the three and nine months ended September 30, 2020, as all stock options issued are fully vested. During the three and nine month periods ended September 30, 2019, stock option-based compensation expense was $58 thousand and $122 thousand, respectively.

The intrinsic value of options exercised during the three and nine month periods ended September 30, 2020 was $75 thousand and $141 thousand, respectively. The intrinsic value of options exercised during the three and nine month periods ended September 30, 2019 was $53 thousand and $165 thousand, respectively. The aggregate intrinsic value of total options outstanding and exercisable options at September 30, 2020, was $401 thousand. Cash received from options exercised under all share-based payment arrangements for the nine month period ended September 30, 2020 was $282 thousand.

No options vested during the periods ended September 30, 2020, and 2019, respectively. The income tax expense/benefit recognized for the exercise of options during the three and nine months ended September 30, 2020, was an expense of $3 thousand and a benefit of $19 thousand, respectively, and for the three and nine months ended September 30, 2019, a benefit of $10 thousand and $37 thousand, respectively.

As of September 30, 2020, all options were fully vested and currently no future compensation cost will be recognized related to nonvested stock-based compensation arrangements granted under the Plans.

Stock Appreciation Rights ("SARs"):

A summary of the status of SARs plans is presented in the following table:

		Weighted
		Average
	Number	Exercisable Price
Outstanding at December 31, 2019	67,000	$	20.54
Granted	18,000		15.19
Exercised	—		—
Forfeited	—		—
Outstanding at September 30, 2020	85,000	$	19.40

Information pertaining to SARs outstanding at September 30, 2020, is as follows:

		SARs Outstanding				SARs Exercisable
			Weighted-
			Average	Weighted-
			Remaining	Average			Weighted- Average
Exercise		Number	Contractual	Exercise		Number	Exercise
Prices		Outstanding	Life		Price	Exercisable	Price
$	15.19	18,000	3.25 years	$	15.19	—	$	—
	18.12	21,000	2.25 years		18.12	—		—
	21.61	34,000	1.25 years		21.61	—		—
	21.72	12,000	0.25 years		21.72	12,000		21.72
	Outstanding, end of period	85,000	1.78 years	$	19.40	12,000	$	21.72

SARs compensation expense of ($63) thousand and ($89) thousand was recognized for the three and nine month periods ended September 30, 2020, respectively, and ($7) thousand and $73 thousand for three and nine month periods ended September 30, 2019, respectively. The credit in expense for the three and nine month period ended September 30, 2020, and the three month period ended September 30, 2019, was due to adjustments related to the fair value evaluation of SARs.

Restricted Stock Awards:

A summary of the activity of the Company’s unvested restricted stock awards for the period ended September 30, 2020 is presented below:

		Weighted
		Average
		Grant-Date
	Number	Fair Value
Balance at December 31, 2019	65,400	$	21.04
Granted	41,613		16.04
Vested	(7,295)		18.32
Forfeited/expired	(1,500)		18.12
Balance at September 30, 2020	98,218	$	19.17

The Company measures the fair value of restricted stock awards based on the price of the Company’s common stock on the grant date, and compensation expense is recorded over the vesting period. The compensation expense for restricted stock awards during the three and nine months ended September 30, 2020, was $142 thousand and $365 thousand, respectively, and was $95 thousand and $310 thousand, during the three and nine month periods ended September 30, 2019, respectively. As of September 30, 2020, there was $1.1 million, respectively, 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 3.10 years. The grant-date fair value of restricted stock awards vested was $134 thousand for the period ended September 30, 2020.