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Share-based Compensation

9 Months Ended

Sep. 30, 2019

Note 10: Share-based Compensation

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 and advisory directors. Each DSU is equivalent to one share of the Company’s common stock. The DSUs vest over a twelve-month period following 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 Plan or the First Community 2016 Equity 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.

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 nine months ended September 30, 2019 follows:


		Weighted-		Weighted-
		Average		Average
		Exercise		Remaining Contractual
	Shares	Price		Term
Outstanding at beginning of period	87,600	$	20.58
Exercised	(23,561)		17.69
Forfeited	(3,003)		23.53
Expired	(5,767)		17.38
Outstanding at end of period	55,269	$	21.99	6.11
Exercisable at end of period	39,825	$	21.39	5.71

The Company recorded an insignificant amount and $0.1 million in stock option compensation expense for the three and nine months ended September 30, 2019, related to the converted options from First Community. The Company recorded $0.1 million and $0.2 million in stock option compensation expense for the three and nine months ended September 30, 2018, respectively. As of September 30, 2019, the Company had an insignificant amount of unrecognized stock option expense. This cost is expected to be recognized the fourth quarter of 2019.

Restricted Stock Unit Plan

A summary of the changes in the Company’s stock unit awards for the nine months ended September 30, 2019, 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 period	690,495	$	26.14	20,449	$	27.93
Granted	216,411		26.73	20,984		26.78
Dividend equivalents earned	17,559		26.07	1,961		26.07
Vested	(104,760)		18.40	(20,723)		31.18
Forfeited	(4,712)		30.47	(1,523)		31.62
Non-vested at end of period	814,993	$	27.26	21,148	$	23.17
Outstanding at end of period	814,993	$	27.26	89,831	$	23.36

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.

On July 5, 2019, under the terms of the 2010 Equity Incentive Plan, the Company granted 185,400 RSUs to members of management, and under the terms of the First Community 2016 Equity Incentive Plan, granted 10,644 RSUs to members of management who were legacy First Community employees. As the stock price on the grant date of July 5, 2019 was $26.78, total compensation cost to be recognized is $5.3 million. This cost will be recognized over a period of five years. Subsequent to the requisite service period, the awards will become 100% vested. Further, the Company granted 8,775 RSUs, under the terms of the 2010 Equity Incentive Plan, to the Chairman of the Board. As the stock price on the grant date of July 5, 2019 was $26.78, total compensation cost to be recognized is $0.2 million. This cost will be recognized over a period of five years. Subsequent to the requisite service period, the awards will become 100% vested. Finally, on September 25, 2019, under the terms of the 2010 Equity Incentive Plan, the Company granted 11,592 RSUs to a member of management. As the stock price on the grant date of September 25, 2019 was $25.88, total compensation

cost to be recognized is $0.3 million. This cost will be recognized over a period of three years. Subsequent to the requisite service period, the awards will become 100% vested.

On July 5, 2019, under the terms of the 2010 Equity Incentive Plan, the Company granted 17,549 DSUs to directors, and under the terms of the First Community 2016 Equity Incentive Plan, granted 1,867 DSUs to a director who was a legacy First Community director. In addition, under the terms of the 2010 Equity Incentive Plan, the Company granted 1,568 advisory DSUs to advisory directors. As the stock price on the grant date of July 5, 2019 was $26.78, total compensation cost to be recognized is $0.6 million. These costs will be recognized over the requisite service period of one year from the date of grant or the next Annual Meeting of Stockholders, whichever is earlier.

The Company recognized $1.2 million and $0.9 million of compensation expense related to both non-vested RSUs and DSUs for the three months ended September 30, 2019 and 2018, respectively. The Company recognized $3.1 million and $2.5 million of compensation expense related to both non-vested RSUs and DSUs for the nine months ended September 30, 2019 and 2018, respectively. As of September 30, 2019, there was $14.0 million of total unrecognized compensation cost related to these non-vested stock awards. This cost is expected to be recognized over a period of 3.6 years.

As of September 30, 2019, 535,377 shares remain available for issuance pursuant to the Company’s 2010 Equity Incentive Plan, 50,463 shares remain available for issuance pursuant to the Company’s Employee Stock Purchase Plan and 297,216 shares remain available for issuance pursuant to the First Community 2016 Equity Incentive Plan.