(4) Share-Based Compensation

Share-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as an expense over the requisite service period (generally the vesting period of the equity grant).

The Company issues share-based payments through several plans that are described in detail in the notes to the consolidated financial statements for the year ended December 31, 2013. The compensation cost charged against income for those plans is included in selling, general & administrative expenses as follows (in thousands):

	Three Months Ended
	March 31,
	2014		2013
Total share-based compensation expense	$	265	$	179

Share-based compensation for the three-month periods ended March 31, 2014, includes approximately $5,000 representing the fair value of the Company’s common stock granted during the quarter to a member of the Board of Directors.

The total income tax benefit recognized in the condensed consolidated statements of income for share-based compensation arrangements was approximately $70,000 and $55,000 for the three-month periods ended March 31, 2014 and 2013, respectively.

The following is a summary of stock option activity under all plans for the three-month period ended March 31, 2014:

	Shares Under Options		Weighted Average Exercise Price (per share)		Weighted Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2013	467,500		$	9.00
Granted	577		25.48
Exercised	(100,678	)	2.82
Cancelled or expired	—		—
Outstanding at March 31, 2014	367,399		$	10.72	3.84	$	5,013
Exercisable at March 31, 2014	286,150		$	8.53	3.87	$	4,532
Vested and expected to vest at March 31, 2014	367,399		$	10.72	3.84	$	5,013

On March 12, 2014, the Company granted one of its directors, options to purchase 577 shares of its common stock at that day’s closing price of $25.48. The compensation expense related to this grant was determined as the fair value of the options using the Black Scholes option pricing model based on the following assumptions:

Expected volatility		38.0%
Expected dividends		none
Risk free interest rate		0.7%
Expected term		5.0 years

The stock volatility for each grant is determined based on a review of the experience of the weighted average of historical daily price changes of the Company’s common stock over the expected option term, and the risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the option. The weighted average grant date fair value of options granted during the three-month period ended March 31, 2014 was $8.67.

During the three-month periods ended March 31, 2014 and 2013, the total intrinsic value of all options exercised (i.e., the difference between the market price on the exercise date and the price paid by the employees to exercise the options) was approximately $2.3 million and $100,000, respectively, and the total amount of consideration received by the Company from the exercised options was approximately $284,000 and $31,000, respectively. At its discretion, the Company allows option holders to surrender previously owned common stock in lieu of paying the exercise price and withholding taxes. During the three-months ended March 31, 2014, 25,094 shares (7,861 for options and 17,233 for taxes) were surrendered at an average market price of $25.84.

During the three-month periods ended March 31, 2014, and 2013, the Company recognized compensation expenses related to stock options granted to directors and employees of approximately $94,000 and $25,000, respectively.

On February 18, 2014, the Company’s Compensation Committee approved the award of $400,000 payable in shares of common stock to the Company’s Chairman, Chief Executive Officer, and President under the 2003 Incentive Plan. The shares will be issued on or before December 31, 2014. The Company recorded compensation expense associated with the award of $100,000 during the three-month period ended March 31, 2014. In the three-month period ended March 31, 2013, the Company recorded $100,000 of compensation expense for a similar award.

The following table summarizes information about Restricted Stock Units (“RSUs”) activity during the three-month period ended March 31, 2014:

	Restricted Stock Units		Weighted Average Award Date Fair Value
Unvested at December 31, 2013	50,900		$	11.94
Awarded	21,660		25.97
Shares vested	(30,253	)	10.11
Forfeited / cancelled	—		—
Unvested at March 31, 2014	42,307		$	12.04

During the three-month periods ended March 31, 2014, and 2013, the Company recorded compensation expense related to RSUs of approximately $66,000 and $54,000, respectively.

At the Company’s discretion, RSU holders are given the option to net-share settle to cover the required minimum withholding tax, and the remaining amount is converted into the equivalent number of common shares. During the three-months ended March 31, 2014; 9,878 shares were redeemed for this purpose at an average market price of $25.88. During the three-months ended March 31, 2013, 22,089 shares were redeemed for this purpose at an average market price of $19.29.

At March 31, 2014, the Company had approximately $911,000 of unrecognized compensation expense which is expected to be recognized over a period of 4.0 years.