Note 9. Share-based Compensation

3 Months Ended

Mar. 31, 2014

Notes

Note 9. Share-based Compensation

Note 9.                        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

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 generally three years for employee options. The fair value of an option award is estimated on the date of grant using the Black-Scholes option valuation model. In addition to stock options, the Company has also granted restricted stock units, share appreciation rights (“SARs”) and share-based performance awards under the 2006 Plan. Restricted share units are valued at the quoted market price of the shares at the date of grant and have a three year vesting period. Compensation costs for options and restricted share units are recognized over the stated vesting periods on a straight-line basis. 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. 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.

At March 31, 2014, there were 384,139 shares available for future stock-based compensation grants under IHC’s stock incentive plans. The following table summarizes share-based compensation expense, which is included in selling, general and administrative expenses on the Condensed Consolidated Statements of Income, applicable to the IHC plans  by award type for each of the periods indicated (in thousands):

		Three Months Ended
		March 31,
		2014		2013
IHC’s Share-based Compensation Plan:
Stock options	$	66	$	13
Restricted stock units		19		13
SARs		(81)		99
Performance awards		-		(5)
Share-based compensation expense, pre-tax		4		120
Tax benefits		1		48
Share-based compensation expense, net	$	3	$	72

Stock Options

At March 31, 2014 and December 31, 2013, there were 616,858 stock options outstanding with a weighted average exercise price of $9.35 per share.

The following table summarizes information regarding outstanding and exercisable options:

		March 31, 2014
		Outstanding		Exercisable
Number of options		616,858		534,358
Weighted average exercise price per share	$	9.35	$	9.25
Aggregate intrinsic value for all options (in thousands)	$	2,513	$	2,230
Weighted average contractual term remaining		1.6 years		1.2 years

As of March 31, 2014, the total unrecognized compensation expense related to non-vested stock options was $254,000, which is expected to be recognized over the remaining requisite weighted-average service period of 1.0 years.

Restricted Stock

At March 31, 2014 and December 31, 2013, there were 14,850 unvested restricted stock units outstanding with a weighted average grant-date fair value of $10.60 per share.

As of March 31, 2014, the total unrecognized compensation expense related to non-vested restricted stock unit awards was $98,000 which is expected to be recognized over the remaining requisite weighted-average service period of 1.6 years.

SARs

IHC had 251,800 SAR awards outstanding at March 31, 2014 and December 31, 2013. Included in Other Liabilities in the Company’s Condensed Consolidated Balance Sheets at March 31, 2014 and December 31, 2013 are liabilities of $1,226,000 and $1,307,000, respectively, pertaining to SARs.

B)        AMIC Share-Based Compensation Plans

Under the terms of the Company’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.  The Company 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.

The following table summarizes share-based compensation expense, which is included in selling, general and administrative expenses on the Condensed Consolidated Statements of Income, applicable to the AMIC share-based compensation plans, by award type for each of the periods indicated (in thousands):

		Three Months Ended
		March 31,
		2014		2013
AMIC’s Share-based Compensation Plans:
Stock options	$	12	$	8
Share-based compensation expense, pre-tax		12		8
Tax benefits		4		3
Share-based compensation expense, net	$	8	$	5

Stock Options

AMIC’s stock option activity for the three months ended March 31, 2014 is as follows:

	Shares	Weighted- Average
	Under Option	Exercise Price
December 31, 2013	222,285	$	11.46
Expired	(49,002)		14.01
March 31, 2014	173,283	$	10.74

The following table summarizes information regarding AMIC’s outstanding and exercisable options as of March 31, 2014:

		March 31, 2014
		Outstanding		Exercisable
Number of options		173,283		158,838
Weighted average exercise price per share	$	10.74	$	11.11
Aggregate intrinsic value for all options (in thousands)	$	288	$	228
Weighted average contractual term remaining		3.29 years		2.80 years

As of March 31, 2014, the total unrecognized compensation expense related to AMIC’s non-vested options was $47,000 which will be recognized over the remaining requisite service periods.