Note 10 Share-based Compensation

3 Months Ended

Mar. 31, 2012

Note 10 Share-based Compensation

Note 10 Share-based Compensation

Note 10.          Share-Based Compensation

IHC and AMIC each have share-based compensation plans. The following is a summary of the activity pertaining to each of these plans.

A)  IHC Share-Based Compensation Plans

Total share-based compensation was $470,000 and $122,000 for the three months ended March 31, 2012 and 2011, respectively. Related tax benefits of $188,000 and $49,000 were recognized for the three months ended March 31, 2012 and 2011, respectively.

Under the terms of IHC’s stock-based compensation plans, option exercise prices are more than or equal to the quoted market price of the shares at the date of grant; option terms range from five to ten years; and vesting periods are three years for employee options.  The Company may also grant shares of restricted stock, share appreciation rights (“SARs”) and share-based performance awards. Restricted shares are valued at the quoted market price of the shares at the date of grant and have a three year vesting period. Exercise prices of SARs are more than or equal to the quoted market price of IHC shares at the date of the grant and have three year vesting periods. At March 31, 2012, there were 387,867 shares available for future stock-based compensation grants under IHC’s stock incentive plans.

Stock Options

The Company’s stock option activity for the three months ended March 31, 2012 is as follows:

	Shares	Weighted- Average
	Under Option	Exercise Price
December 31, 2011	758,714	$	9.71
Expired	(24,200)	19.54
March 31, 2012	734,514	$	9.39

The following table summarizes information regarding outstanding and exercisable options as of March 31, 2012:

		Outstanding		Exercisable
Number of options		734,514		565,187
Weighted average exercise price per share	$	9.39	$	9.48
Aggregate intrinsic value for all options	$	441	$	294
Weighted average contractual term remaining		2.2 years		2.0 years

The fair value of an option award is estimated on the date of grant using the Black-Scholes option valuation model. No options were granted during the three months ended March 31, 2012 or 2011.

Compensation expense of $61,000 and $110,000 was recognized in the three months ended March 31, 2012 and 2011, respectively, for the portion of the grant-date fair value of stock options vesting during that period.

No options were exercised during the three months ended March 31, 2012 or 2011.

As of March 31, 2012, the total unrecognized compensation expense related to non-vested stock options was $182,000 which is expected to be recognized over the remaining requisite weighted-average service period of .75 years.

Restricted Stock

At March 31, 2012 and December 31, 2011, there were 9,900 unvested shares of restricted stock outstanding with a weighted average grant-date fair value of $8.95 per share. Restricted stock expense was $9,000 and $5,000, respectively, for the three months ended March 31, 2012 and 2011, respectively. No shares of restricted stock were issued by the Company, or vested, during the first three months of 2012 or 2011.

As of March 31, 2012, the total unrecognized compensation expense related to non-vested restricted stock awards was $62,000 which is expected to be recognized over the remaining requisite weighted-average service period of 2.0 years.

SARs and Share-Based Performance Awards

IHC had 274,450 and 230,450 SAR awards outstanding at March 31, 2012 and December 31, 2011, respectively. During the first quarters of 2012 and 2011, the Company granted 44,000 and 96,800 SARs, respectively. The fair value of SARs is calculated using the Black-Scholes valuation model at the grant date and each subsequent reporting period until settlement. Compensation cost is based on the proportionate amount of the requisite service that has been rendered to date. Once fully vested, changes in fair value of the SARs continue to be recognized as compensation expense in the period of the change until settlement. For the three months ended March 31, 2012 and 2011, IHC recorded $393,000 and $16,000, respectively, of compensation costs for these awards.  No SARs were exercised during the three months ended March 31, 2012 or 2011. Included in Other Liabilities in the Company’s Condensed Consolidated Balance Sheets at March 31, 2012 and December 31, 2011 are liabilities of $680,000 and $288,000, respectively, pertaining to SARs.

 Other outstanding awards include share-based performance awards. Compensation costs for these awards are recognized and accrued as performance conditions are met, based on the current share price. For the three months ended March 31, 2012 and 2011, IHC recorded $9,000 and $(9,000), respectively, of compensation costs for these awards.  The intrinsic value of share-based performance awards issued during the first quarter of 2012 was $52,000. There were no payments related to these awards in the first quarter of 2011. Included in the other liabilities on the Company’s Condensed Consolidated Balance Sheets at March 31, 2012 and December 31, 2011 are liabilities of $21,000 and $65,000, respectively, pertaining to share-based performance awards.

B)        AMIC Share-Based Compensation Plans

Total AMIC share-based compensation expense was $8,000 and $16,000 for the three months ended March 31, 2012 and 2011, respectively.  Related tax benefits of $3,000 and $5,000 were recognized for the three months ended March 31, 2012 and 2011, respectively.

Under the terms of the AMIC’s stock-based compensation plan, option exercise prices are equal to the quoted market price of the shares at the date of grant; option terms are ten years; and vesting periods range from three to four years.  AMIC may also grant shares of restricted stock, stock appreciation rights and share-based performance awards.  Restricted shares are valued at the quoted market price of the shares at the date of grant, and have a three year vesting period.

Stock Options

The following table summarizes information regarding AMIC’s outstanding and exercisable options for the three months ended March 31, 2012:

	Shares	Weighted- Average
	Under Option	Exercise Price
December 31, 2011	333,956	$	10.43
Expired	-	-
Exercised	-	-
March 31, 2012	333,956	$	10.43

The following table summarizes information regarding AMIC’s outstanding and exercisable options as of March 31, 2012:

		Outstanding		Exercisable
Number of options		333,956		311,733
Weighted average exercise price per share	$	10.43	$	10.80
Aggregate intrinsic value for all options	$	-	$	-
Weighted average contractual term remaining		2.87 years		2.44 years

The fair value of an option award is estimated on the date of grant using the Black-Scholes option valuation model. No options were granted during the three months ended March 31, 2012 or 2011.

Compensation expense of $8,000 and $12,000 was recognized for the three months ended March 31, 2012 and 2011, respectively, for the portion of the grant-date fair value of AMIC’s stock options vesting during the period.

No options were exercised during the three months ended March 31, 2012. AMIC received cash proceeds of $21,000 upon the exercise of 4,722 options with an intrinsic value of $2,000 during the three months ended March 31, 2011.

As of March 31, 2012, the total unrecognized compensation expense related to AMIC’s non-vested options was $72,000 which will be recognized over the remaining requisite service periods.

Restricted Stock

AMIC issued 12,000 restricted stock awards in the second quarter of 2008, with a weighted average grant-date fair value of $6.92 per share.  No restricted stock awards have been issued since then. AMIC had no unvested restricted stock awards outstanding at March 31, 2012 and December 31, 2011. Restricted stock expense was $4,000 for the three months ended March 31, 2011.