Share-Based Compensation

Our non-employee directors and key employees are granted share-based awards through our SICP. We record these share-based awards as compensation costs over the respective service period for which services are received in exchange for an award of equity or equity-based compensation. The compensation cost is based primarily on the fair value of the shares awarded, using the estimated fair value of each share on the date it was granted and the number of shares to be issued at the end of the service period.

The table below presents the amounts included in net income related to share-based compensation expense for the three and nine months ended September 30, 2017 and 2016:



	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2017			2016			2017			2016
(in thousands)
Awards to non-employee directors	$	134		$	135		$	406		$	445
Awards to key employees	662			488			1,202			1,442
Total compensation expense	796			623			1,608			1,887
Less: tax benefit	(320		)	(251		)	(647		)	(760		)
Share-based compensation amounts included in net income	$	476		$	372		$	961		$	1,127

Non-employee Directors

Shares granted to non-employee directors are issued in advance of the directors’ service periods and are fully vested as of the grant date. We record a prepaid expense equal to the fair value of the shares issued and amortize the expense equally over a service period of one year. In May 2017, each of our non-employee directors received an annual retainer of 835 shares of common stock under the SICP for service as a director through the 2018 Annual Meeting of Stockholders.

A summary of the stock activity for our non-employee directors during the nine months ended September 30, 2017 is presented below:



	Number of Shares		Weighted Average Fair Value
Outstanding— December 31, 2016	—		$	—
Granted	7,515		$	71.80
Vested	(7,515	)	$	71.80
Outstanding— September 30, 2017	—		$	—

At September 30, 2017, there was approximately $314,000 of unrecognized compensation expense related to these awards. This expense will be recognized over the directors' remaining service periods ending April 30, 2018.

Key Employees

The table below presents the summary of the stock activity for awards to key employees for the nine months ended September 30, 2017:



	Number of Shares		Weighted Average Fair Value
Outstanding— December 31, 2016	115,091		$	51.85
Granted	52,355		$	63.42
Vested	(32,926	)	$	38.88
Expired	(1,878	)	$	39.97
Outstanding— September 30, 2017	132,642		$	52.42

In February and May 2017, our Board of Directors granted awards of 52,355 shares of common stock to key employees under the SICP. The shares granted in February and May 2017 are multi-year awards that will vest at the end of the three-year service period ending December 31, 2019. All of these stock awards are earned based upon the successful achievement of long-term goals, growth and financial results, which comprise both market-based and performance-based conditions or targets. The fair value of each performance-based condition or target is equal to the market price of our common stock on the grant date of each award. For the market-based conditions, we used the Black-Scholes pricing model to estimate the fair value of each market-based award granted.

At the election of certain of our executives, in March 2017, for shares that were awarded for the performance period ending December 31, 2016, we withheld shares with a value at least equivalent to each such executive’s minimum statutory obligation for applicable income and other employment taxes, remitted the cash to the appropriate taxing authorities, and paid the balance of such shares to each such executive. We withheld 10,269 shares, based on the value of the shares on their award date, determined by the average of the high and low prices of our common stock. Total combined payments for the employees’ tax obligations to the taxing authorities were approximately $692,000.

At September 30, 2017, the aggregate intrinsic value of the SICP awards granted to key employees was approximately $10.4 million. At September 30, 2017, there was approximately $2.7 million of unrecognized compensation cost related to these awards, which is expected to be recognized from 2017 through 2019.

Stock Options

We did not have any stock options outstanding at September 30, 2017 or 2016, nor were any stock options issued during these periods.