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

Under the terms of IHC’s stock-based compensation plan, 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 and share appreciation rights (“SARs”) under the 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 September 30, 2016, there were no 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,
		2016		2015		2016		2015
IHC’s Share-based Compensation Plan:
Stock options	$	-	$	-	$	170	$	55
Restricted stock units		16		23		60		67
SARs		(57)		(23)		410		(80)

Share-based compensation expense, pre-tax		(41)		-		640		42
Tax benefits		(16)		-		255		17

Share-based compensation expense, net	$	(25)	$	-	$	385	$	25

In 2016, option agreements affecting 13 employees were modified to extend the expirations of their terms from 2017 to 2019 and as a result, the Company recorded incremental compensation costs of $170,000. In 2016, IHC received $84,000 in cash from the exercise of stock options with an aggregate intrinsic value of $67,000 and realized $15,000 of tax benefits.

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

As of September 30, 2016, all of IHC’s outstanding stock options are fully vested and all of the related compensation costs have been recognized.

The following table summarizes restricted stock activity for the nine months ended September 30, 2016:

The total fair value of restricted stock that vested during the first nine months of 2016 and 2015 was $120,000 and $89,000, respectively. No restricted stock awards were granted in 2016. In 2015, IHC granted 7,425 restricted stock awards during the nine months ended September 30 with weighted average grant-date fair values of $11.78.

As of September 30, 2016, the total unrecognized compensation expense related to non-vested restricted stock unit awards was $69,000 which is expected to be recognized over the remaining requisite weighted-average service period of 1.3 years.

IHC had 73,150 and 125,850 of SAR awards outstanding at September 30, 2016 and December 31, 2015, respectively. In 2016, 52,700 SARs were exercised with an aggregate intrinsic value of $436,000. Included in Other Liabilities in the Company’s Condensed Consolidated Balance Sheets at September 30, 2016 and December 31, 2015 are liabilities of $718,000 and $743,000, respectively, pertaining to SARs.

As a result of a short-form merger discussed in Note 1 (B), the existing stock-based compensation plan of AMIC was terminated. Under the terms of AMIC’s stock-based compensation plan prior to its termination, option exercise prices were equal to the quoted market price of the shares at the date of grant; option terms were ten years; and vesting periods ranged from three to four years.

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 AMIC’s share-based compensation plan prior to its termination, by award type for each of the periods indicated (in thousands):

		Three Months Ended				Nine Months Ended
		September 30,				September 30,
		2016		2015		2016		2015
AMIC’s Share-based Compensation Plans:
Stock options	$	11	$	11	$	21	$	32

Share-based compensation expense, pre-tax		11		11		21		32
Tax benefits		4		4		7		11

Share-based compensation expense, net	$	7	$	7	$	14	$	21

AMIC’s stock option activity for the nine months ended September 30, 2016 is as follows:

In 2016, AMIC received $262,000 in cash from the exercise of stock options with an aggregate intrinsic value of $212,000. In connection with the short-form merger transaction discussed in Note 1 (B), option agreements affecting 7 employees and directors were cancelled and as a result, the Company recorded incremental compensation costs of $646,000. These costs were accounted for as part of the equity transaction to take AMIC private.