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Note 12. Share-based Compensation
 9 Months Ended
Sep. 30, 2015
Notes  
Note 12. Share-based Compensation

Note 12.          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 are generally five years; and vesting periods are generally three years. 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 plans. 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 September 30, 2015, there were 369,861 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

 

 

Nine Months Ended

 

 

September 30,

 

 

September 30,

 

 

2015

 

2014

 

 

2015

 

2014

IHC’s Share-based Compensation Plan:

 

 

 

 

 

 

 

 

 

Stock options

$

            - 

$

          66 

 

$

          55 

$

     603 

Restricted stock units

 

         23 

 

          22 

 

 

          67 

 

        64 

SARs

 

       (23)

 

      (190)

 

 

        (80)

 

    (113)

 

 

 

 

 

 

 

 

 

 

Share-based compensation expense, pre-tax

 

            - 

 

      (102)

 

 

          42 

 

     554 

Tax benefits

 

            - 

 

         (41)

 

 

          17 

 

     221 

 

 

 

 

 

 

 

 

 

 

Share-based compensation expense, net

$

            - 

$

         (61)

 

$

          25 

$

     333 

 

Stock Options

 

The IHC’s stock option activity during 2015 was as follows:

 

 

 

Shares

 

Weighted- Average

 

 

Under Option

 

Exercise Price

 

 

 

 

 

December 31, 2014

 

614,680 

 

$

9.33

Exercised

 

(17,100)

 

 

9.09

September 30, 2015

 

597,580 

 

$

9.34

 

In 2015, IHC received $155,000 in cash from the exercise of stock options with an aggregate intrinsic value of $72,000 and realized $11,000 of tax benefits.

 

The following table summarizes information regarding IHC’s outstanding and exercisable options:

 

 

 

September 30, 2015

 

 

Outstanding

 

Exercisable

 

 

 

 

 

Number of options

 

597,580

 

597,580

Weighted average exercise price per share

$

9.34

$

9.34

Aggregate intrinsic value for all options (in thousands)

$

2,164

$

2,164

Weighted average contractual term remaining

 

1.6 years

 

1.6 years

 

At September 30, 2015, all of IHC’s outstanding stock options are fully vested and all of the related compensation costs have been recognized.

 

Restricted Stock

 

The following table summarizes restricted stock activity for the nine months ended September 30, 2015:

 

 

 

No. of

 

Weighted-Average

 

 

Non-vested

 

   Grant-Date

 

 

Shares

 

Fair Value

 

 

 

 

 

December 31, 2014

 

             14,850 

 

$

12.09

 

Granted

 

               7,425 

 

 

11.78

 

Vested

 

             (7,425)

 

 

11.44

 

 

 

 

 

 

 

 

September 30, 2015

 

             14,850 

 

$

12.26

 

 

IHC granted 7,425 shares of restricted stock awards during each of the nine months ended September 30, 2015 and 2014 with weighted average grant-date fair values of $11.78 and $13.27, respectively, per share. The total fair value of restricted stock that vested during each of the first nine months of 2015 and 2014 was $89,000 and $103,000, respectively.

 

As of September 30, 2015, the total unrecognized compensation expense related to non-vested restricted stock unit awards was $152,000 which is expected to be recognized over the remaining requisite weighted-average service period of 2.0 years.

 

SARs

 

IHC had 129,150 and 136,850 of SAR awards outstanding at September 30, 2015 and December 31, 2014, respectively. In 2015, 7,700 SARs were exercised with an aggregate intrinsic value of $38,000.  Included in Other Liabilities in the Company’s Condensed Consolidated Balance Sheets at September 30, 2015 and December 31, 2014 are liabilities of $673,000 and $791,000, respectively, pertaining to SARs.

 

B)  AMIC Share-Based Compensation Plans

 

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.  The Company may also grant shares of restricted stock, stock appreciation rights and share-based performance awards.

 

 

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

 

Nine Months Ended

 

 

 

September 30,

 

September 30,

 

 

 

2015

 

2014

 

2015

 

2014

AMIC’s Share-based Compensation Plans:

 

 

 

 

 

 

 

 

 

Stock options

 

$

           11

$

13

$

       32

$

40

 

 

 

 

 

 

 

 

 

 

Share-based compensation expense, pre-tax

 

 

           11

 

13

 

       32

 

40

Tax benefits

 

 

              4

 

4

 

       11

 

14

 

 

 

 

 

 

 

 

 

 

Share-based compensation expense, net

 

$

              7

$

9

$

       21

$

26

 

Stock Options

 

AMIC’s stock option activity for the nine months ended September 30, 2015 is as follows:

 

 

 

Shares

 

Weighted- Average

 

 

Under Option

 

Exercise Price

 

 

 

 

 

 

December 31, 2014

 

                166,616 

 

$

10.50

Exercised

 

                   (8,890)

 

 

5.81

Forfeited

 

                 (26,001)

 

 

8.90

Expired

 

                 (60,167)

 

 

13.82

September 30, 2015

 

                  71,558 

 

$

8.88

 

The following table summarizes information regarding AMIC’s outstanding and exercisable options as of September 30, 2015:

 

 

 

September 30, 2015

 

 

Outstanding

 

Exercisable

 

 

 

 

 

Number of options

 

71,558

 

58,224

Weighted average exercise price per share

$

8.88

$

8.73

Aggregate intrinsic value for all options (in thousands)

$

109

$

96

Weighted average contractual term remaining

 

4.44 years

 

3.55 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 in 2015. The weighted average grant-date fair-value of options granted during the nine months ended September 30, 2014 was $5.70 per share.  The assumptions set forth in the table below were used to value the stock options granted for the nine months ended September 30, 2014:

 

 

 

September 30,

 

 

2014

 

 

 

Weighted-average risk-free interest rate

 

2.72%

Annual dividend rate per share

$

- 

Weighted-average volatility factor of the Company's common stock

 

38.27% 

Weighted-average expected term of options

 

5 years

 

As of September 30, 2015, the total unrecognized compensation expense related to AMIC’s non-vested options was $51,000 which will be recognized over the remaining requisite service periods.