Stock-Based Compensation

On February 6, 2009, Essent Group adopted the 2009 Restricted Share Plan. In connection with the IPO in 2013, Essent Group's Board of Directors amended and restated the 2009 Restricted Share Plan, effective immediately prior to the initial public offering. In addition, Essent Group's Board of Directors adopted, and Essent Group's shareholders approved, the Essent Group Ltd. 2013 Long-Term Incentive Plan (the "2013 Plan"), which was effective upon completion of the initial public offering. The types of awards available under the 2013 Plan include nonvested shares, nonvested share units, non-qualified share options, incentive stock options, share appreciation rights, and other share-based or cash-based awards. The 2013 Plan authorized a total of 14.7 million Common Shares, which will be increased on the first day of each of the Company's fiscal years beginning with fiscal year 2014, in an amount equal to the lesser of (i) 1.5 million Common Shares, (ii) 2% of the Company's outstanding Common Shares on the last day of the immediately preceding fiscal year, or (iii) such number of Common Shares as determined by the Company's Board of Directors. The maximum number of common shares that may be issued in respect of incentive share options is 14.7 million. As of December 31, 2016, there were 14.1 million Common Shares available for future grant under the 2013 Plan.

In September 2013 and February 2014, certain members of senior management were granted nonvested Common Shares under the 2013 Plan that were subject to time-based and performance-based vesting. The time-based share awards granted in September 2013 vest in four equal installments on January 1, 2015, 2016, 2017 and 2018. The time-based share awards granted in February 2014 vest in three equal installments on March 1, 2015, 2016 and 2017. The performance-based share awards vest based upon our compounded annual book value per share growth percentage during a three-year performance period that commenced on January 1, 2014. The September 2013 performance-based share awards vest on the one-year anniversary of the completion of the performance period, and the February 2014 performance-based share awards vest on March 1, 2017.

In February 2015, certain members of senior management were granted nonvested Common Shares under the 2013 Plan that were subject to time-based and performance-based vesting. The time-based share awards granted in February 2015 vest in three equal installments on March 1, 2016, 2017 and 2018. The performance-based share awards granted in February 2015 vest based upon our compounded annual book value per share growth percentage during a three-year performance period that commenced on January 1, 2015 and vest on March 1, 2018.

In May 2015, nonvested Common Shares were granted to an employee in connection with an employment agreement that are subject to time-based and performance-based vesting. The time-based share award vests in four equal installments on July 1, 2016, 2017, 2018 and 2019. The performance-based share award vests based upon our compounded annual book value per share growth percentage during a three-year performance period that commenced on January 1, 2015 and vests on July 1, 2019.

In February 2016, certain members of senior management were granted nonvested common shares under the 2013 Plan that are subject to time-based and performance-based vesting. The time-based share awards granted in February 2016 vest in three equal installments on March 1, 2017, 2018 and 2019. The performance-based share awards granted in February 2016 vest based upon our compounded annual book value per share growth percentage during a three-year performance period that commenced on January 1, 2016 and vest on March 1, 2019.

The portion of the nonvested performance-based share awards that will be earned based upon the achievement of compounded annual book value per share growth is as follows:



	2016 Performance-Based Grants				2013, 2014 and 2015 Performance-Based Grants
Performance level	Compounded Annual Book Value Per Share Growth		Nonvested Common Shares Earned		Compounded Annual Book Value Per Share Growth		Nonvested Common Shares Earned
	<13	%	0	%	<11	%	0	%
Threshold	13	%	25	%	11	%	10	%
	14	%	50	%	12	%	36	%
	15	%	75	%	13	%	61	%
					14	%	87	%
Maximum	≥16	%	100	%	≥15	%	100	%

In the event that the compounded annual book value per share growth falls between the performance levels shown above, the nonvested Common Shares earned will be determined on a straight-line basis between the respective levels shown.

In connection with our incentive program covering bonus awards for performance year 2013, in February 2014, time-based share awards and share units were issued to certain employees that vest in three equal installments on January 1, 2015, 2016 and 2017. In connection with our incentive program covering bonus awards for performance year 2014, in February 2015, time-based share awards and share units were issued to certain employees that vest in three equal installments on March 1, 2016, 2017 and 2018. In connection with our incentive program covering bonus awards for performance year 2015, in February 2016, time-based share awards and share units were issued to certain employees that vest in three equal installments on March 1, 2017, 2018 and 2019.

In May 2014, time-based share units were issued to non-employee directors that vest one year from the date of grant. The portion of the grant that related to director compensation for the period from our initial public offering through April 2014 vested on November 1, 2014 and the portion of the grant that related to director compensation from May 2014 through April 2015 vested on May 6, 2015. In May 2015, time-based share units were granted to non-employee directors that vested one year from the date of grant. In May 2016, time-based share units were granted to non-employee directors that vest one year from the date of grant.

The following tables summarize nonvested Common Share and nonvested Common Share unit activity for the year ended December 31:



	2016
	Time and Performance- Based Share Awards			Time-Based Share Awards				Share Units
(Shares in thousands)	Number of Shares	Weighted Average Grant Date Fair Value		Number of Shares		Weighted Average Grant Date Fair Value		Number of Share Units		Weighted Average Grant Date Fair Value
Outstanding at beginning of year	1,294	$	15.15	890		$	12.31	544		$	19.84
Granted	209	17.01		181		17.01		215		18.21
Vested	—	N/A		(461	)	9.04		(254	)	19.71
Forfeited	—	N/A		(5	)	0.23		(12	)	18.12
Outstanding at end of year	1,503	$	15.41	605		$	16.32	493		$	19.24



	2015
	Time and Performance- Based Share Awards				Time-Based Share Awards				Share Units
(Shares in thousands)	Number of Shares		Weighted Average Grant Date Fair Value		Number of Shares		Weighted Average Grant Date Fair Value		Number of Share Units		Weighted Average Grant Date Fair Value
Outstanding at beginning of year	1,290		$	14.83	1,472		$	9.04	664		$	18.32
Granted	50		24.58		109		24.51		129		24.47
Vested	—		N/A		(644	)	6.67		(239	)	18.18
Forfeited	(46	)	16.40		(47	)	15.50		(10	)	17.89
Outstanding at end of year	1,294		$	15.15	890		$	12.31	544		$	19.84



	2014
	Time and Performance- Based Share Awards			Time-Based Share Awards				Share Units
(Shares in thousands)	Number of Shares	Weighted Average Grant Date Fair Value		Number of Shares		Weighted Average Grant Date Fair Value		Number of Share Units		Weighted Average Grant Date Fair Value
Outstanding at beginning of year	1,238	$	14.50	2,839		$	4.82	528		$	17.03
Granted	52	22.68		82		23.47		188		21.95
Vested	—	N/A		(1,434	)	1.57		(26	)	19.00
Forfeited	—	N/A		(15	)	2.70		(26	)	17.83
Outstanding at end of year	1,290	$	14.83	1,472		$	9.04	664		$	18.32

Quoted market prices are used for the valuation of Common Shares granted subsequent to our initial public offering. For nonvested Common Share units granted in October 2013, the initial public offering price of Common Shares was used. For nonvested Common Shares granted in September 2013, prior to our IPO, the valuation estimate was based on analysis provided by the underwriters regarding the estimated fair value of Essent and the estimated IPO price range. Factors considered in determining the IPO price range and Common Share valuation included prevailing market conditions, estimates of the Company's business potential and earnings prospects, the Company's historical operating results, market valuations of companies deemed comparable to the Company and an assessment of risks and opportunities.

The total fair value of nonvested shares or share units that vested was $15.6 million, $22.4 million and $32.7 million for the years ended December 31, 2016, 2015 and 2014, respectively. As of December 31, 2016, there was $16.0 million of total unrecognized compensation expense related to nonvested shares or share units outstanding at December 31, 2016 and we expect to recognize the expense over a weighted average period of 1.6 years.

In January 2017, 290,965 nonvested Common Share units were issued to all vice president and staff level employees and are subject to time-based vesting. In connection with our incentive program covering bonus awards for performance year 2016, in February 2017, 90,508 nonvested Common Shares and 70,862 nonvested Common Share units were issued to certain employees and are subject to time-based vesting. In February 2017, 140,108 nonvested Common Shares were granted to certain members of senior management and are subject to time-based and performance-based vesting.

Employees have the option to tender shares to Essent Group to pay the minimum employee statutory withholding taxes associated with shares upon vesting. Common Shares tendered by employees to pay employee withholding taxes totaled 184,583, 201,553 and 105,317 in 2016, 2015 and 2014, respectively. The tendered shares were recorded at cost and included in treasury stock. All treasury stock has been cancelled as of December 31, 2016 and 2015.

Compensation expense, net of forfeitures, and related tax effects recognized in connection with nonvested shares were as follows for the years ended December 31:



(In thousands)	2016		2015		2014
Compensation expense	$	16,881	$	13,633	$	12,520
Income tax benefit	5,455		4,378		4,382