Note 11: Share-based Compensation

The Company grants share-based compensation awards to its employees and members of its board of directors as provided for under the Company’s 2010 Equity Incentive Plan. In addition, pursuant to the terms of the First Community 2016 Equity Incentive Plan, the Company may grant awards with respect to First Busey common stock to legacy employees and directors of First Community or its subsidiaries. Permissible awards under the plan include, but are not limited to, non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock and restricted stock units.

The Company currently grants share-based compensation in the form of restricted stock units (“RSUs”) and deferred stock units (“DSUs”). The Company grants RSUs to members of management periodically throughout the year. Each RSU is equivalent to one share of the Company’s common stock. These units have requisite service periods ranging from one to five years. The Company annually grants share-based awards in the form of DSUs, which are RSUs with a deferred settlement date, to its board of directors. Each DSU is equivalent to one share of the Company’s common stock. The DSUs vest on the first anniversary of the grant date or on the date of the next Annual Meeting of Stockholders, whichever is earlier. These units generally are subject to the same terms as RSUs under the Company’s 2010 Equity Incentive Plan or the First Community 2016 Equity Incentive Plan, except that, following vesting, settlement occurs within 30 days following the earlier of separation from the board or a change in control of the Company. Subsequent to vesting and prior to delivery, these units will continue to earn dividend equivalents. The Company also has outstanding stock options granted prior to 2011 and stock options assumed from acquisitions.

Under the terms of the Company’s 2010 Equity Incentive Plan and the First Community 2016 Equity Incentive Plan, the Company is allowed, but not required, to source stock option exercises and grants of RSUs and DSUs from its inventory of treasury stock. As of June 30, 2018, the Company held 409,177 shares in treasury. On February 3, 2015, First Busey announced that its board of directors approved a repurchase plan under which the Company is authorized to repurchase up to an aggregate of 666,667 shares of its common stock. The repurchase plan has no expiration date and replaced the prior repurchase plan originally approved in 2008. During 2015, the Company purchased 333,333 shares under this repurchase plan. At June 30, 2018 the Company had 333,334 shares that may still be purchased under the plan.

The Company’s 2010 Equity Incentive Plan is designed to encourage ownership of its common stock by its employees and directors, to provide additional incentive for them to promote the success of the Company’s business, and to attract and retain talented personnel. All of the Company’s employees and directors, and those of its subsidiaries, are eligible to receive awards under the plan.

A description of the 2010 Equity Incentive Plan, which was amended in 2015, can be found in the Company’s Proxy Statement for the 2015 Annual Meeting of Stockholders. A description of the First Community 2016 Equity Incentive Plan can be found in the Proxy Statement of First Community Financial Partners, Inc. for the 2016 Annual Meeting of Stockholders.

Stock Option Plan

A summary of the status of and changes in the Company’s stock option awards for the six months ended June 30, 2018 follows:

	Shares		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term
Outstanding at beginning of year	213,428		$	16.97
Exercised	(70,817	)	14.20
Forfeited	(12,627	)	21.66
Expired	(2,565	)	16.41

Outstanding at end of period	127,419		$	18.06	4.49

Exercisable at end of period	88,750		$	15.68	2.80

The Company recorded an insignificant amount and $0.1 million in stock option compensation expense for the three and six months ended June 30, 2018, respectively, related to the converted options from First Community. The Company did not record any stock option compensation expense for the three and six months ended June 30, 2017. As of June 30, 2018, the Company had $0.3 million of unrecognized stock option expense. This cost is expected to be recognized over a period of 1.4 years.

Restricted Stock Unit Plan

A summary of the changes in the Company’s stock unit awards for the six months ended June 30, 2018, is as follows:

			Weighted-		Director		Weighted-
	Restricted		Average		Deferred		Average
	Stock		Grant Date		Stock		Grant Date
	Units		Fair Value		Units		Fair Value
Non-vested at beginning of year	587,763		$	22.68	42,411		$	25.47
Granted	—		—		—		—
Dividend equivalents earned	7,657		30.76		1,565		30.76
Vested	(994	)	19.70		(19,686	)	29.69
Forfeited	(1,494	)	26.19		—		—

Non-vested at end of period	592,932		$	22.78	24,290		$	22.39

Outstanding at end of period	592,932		$	22.78	90,337		$	21.10

Recipients earn quarterly dividend equivalents on their respective units which entitle the recipients to additional units. Therefore, dividends earned each quarter compound based upon the updated unit balances. Upon vesting/delivery, shares are expected (though not required) to be issued from treasury.

The Company recognized $0.8 million and $0.6 million of compensation expense related to non-vested RSUs and DSUs for the three months ended June 30, 2018 and 2017, respectively. The Company recognized $1.6 million and $1.1 million of compensation expense related to non-vested RSUs and DSUs for the six months ended June 30, 2018 and 2017, respectively. As of June 30, 2018, there was $6.8 million of total unrecognized compensation cost related to these non-vested RSUs and DSUs. This cost is expected to be recognized over a period of 3.3 years.

As of June 30, 2018, 888,097 shares remain available for issuance pursuant to the Company’s 2010 Equity Incentive Plan, 75,636 shares remain available for issuance pursuant to the Company’s Employee Stock Purchase Plan and 318,701 shares remain available for issuance pursuant to the First Community 2016 Equity Incentive Plan.