Share-based Compensation

12 Months Ended

Dec. 31, 2019

Share-based Compensation

Share-based Compensation

Note 14. Share-based Compensation

Overview

During the first quarter of 2010, the Company adopted the 2010 Equity Plan, which was approved at the annual stockholders meeting on May 19, 2010. During the second quarter of 2015, the Company adopted an amendment to the 2010 Equity Plan, which was approved at the annual stockholders meeting on May 20, 2015.

Subject to permitted adjustments for certain corporate transactions, the maximum number of shares that may be delivered to participants, or their beneficiaries, under the 2010 Equity Plan is 1,333,333 shares of First Busey common stock. To the extent that any shares of stock covered by an award (including non-vested stock awards) under the 2010 Equity Plan, or the prior plans, are not delivered for any reason, including because the award is forfeited, canceled, settled in cash or shares are withheld to satisfy tax withholding requirements, such shares will not be deemed to have been delivered for purposes of determining the maximum number of shares of stock available for delivery and will again become available for usage under the 2010 Equity Plan. If any option granted under the 2010 Equity Plan is exercised by tendering shares of stock, only the number of shares of stock issued net of the shares of stock tendered shall be counted for purposes of these limitations. Any shares covered under the terms of a prior First Busey plan award that would otherwise become available for reuse under the terms of the prior plan will become available for issuance under the 2010 Equity Plan.

The 2010 Equity Plan's effective date was May 19, 2010. The 2010 Equity Plan will continue in effect until terminated by the board of directors; provided that no awards may be granted under the 2010 Equity Plan after the ten-year anniversary of the effective date. Any awards that are outstanding after the tenth anniversary of the effective date will remain subject to the terms of the 2010 Equity Plan.

The following additional limits apply to awards under the 2010 Equity Plan. However, due to changes imposed by the TCJA, “performance-based compensation” only applies to arrangements subject to a written binding contract in effect on November 2, 2017, that have not subsequently been materially modified:

● the maximum number of shares of stock that may be covered by options that are intended to be "performance-based compensation" which are granted to any one participant during any calendar year is 133,333 shares;

● the maximum number of shares of stock that may be covered by stock awards that are intended to be "performance-based compensation" which are granted to any one participant during any calendar year is 66,667 shares; and

● the maximum dollar amount of cash incentive awards or cash-settled stock awards intended to be "performance-based compensation" payable to any one participant with respect to any calendar year is $1,000,000.

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 Plan. Further, in 2017, the Company registered 443,619 shares of its common stock issuable in the future pursuant to First Community 2016 Equity Incentive Plan to legacy employees and directors of First Community and its subsidiaries and upon the exercise of currently outstanding equity awards under the First Community 2016 Equity Incentive Plan and the First Community Amended and Restated 2008 Equity Incentive Plan held by former employees of First Community and its subsidiaries. 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, including but 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 and deferred stock units. The Company grants restricted stock units to members of management periodically throughout the year. Each restricted stock unit 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 deferred stock units, which are restricted stock units with a deferred settlement date, to its board of directors. Each deferred stock unit is equivalent to one share of the Company’s common stock. The deferred stock units vest over a 12 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 restricted stock units 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.

Under the terms of the Company’s 2010 Equity Plan and First Community 2016 Equity Incentive Plan, the Company is allowed, but not required, to source stock option exercises and grants of restricted stock units and deferred stock units from its inventory of treasury stock. As of December 31, 2019, the Company held 1,121,961 shares in treasury. On February 3, 2015, First Busey’s board of directors authorized the Company 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. On May 22, 2019, First Busey’s board of directors approved an amendment to increase the authorized shares under the repurchase program by 1,000,000 shares. At December 31, 2019, the Company had 389,938 shares that may still be purchased under the plan. Subsequent to year end, on February 5, 2020, First Busey’s board of directors approved an amendment to increase the authorized shares under the repurchase program by 2,000,000 shares.

Stock Option Plan

In relation to the First Community acquisition, the Company assumed stock options that were previously issued under First Community incentive plans. The First Community Amended and Restated 2008 Equity Incentive Plan was approved by First Community shareholders. This plan was subsequently amended without approval by First Community shareholders to increase the number of shares available for issuance. The First Community 2016 Equity Incentive Plan was approved by First Community shareholders. At the effective time of the merger, each outstanding and unexercised option to purchase shares of First Community common stock held by an employee, whether vested or unvested, was converted into an option to purchase First Busey common stock. The converted option is equal to the number of shares of such First Community stock option multiplied by the option exchange ratio (rounded down to the nearest whole share), at an exercise price per share equal to the exercise price for each share of First Community common stock subject to such First Community stock option divided by the option exchange ratio (rounded up to the nearest whole cent). The option exchange ratio is the sum of the exchange ratio (0.396) multiplied by the closing sales price of a share of First Busey common stock on the Nasdaq Global Select Market on June 30, 2017, plus the cash consideration ($1.35), divided by the closing sales price of a share of First Busey common stock on the Nasdaq Global Select Market on June 30, 2017. Each First Community stock option assumed and converted continues to be subject to the same terms and conditions (including vesting periods), as applicable immediately prior to the effective time of the merger.

A summary of the status of the Company's stock option awards for the year ended December 31, 2019, and the changes during the year ended, is as follows:

	2019
		Weighted-
		Average
		Exercise
	Shares	Price
Outstanding at beginning of year	87,600	$	20.58
Converted options from First Community	—		—
Exercised	(25,351)		17.94
Forfeited	(3,297)		23.53
Expired	(5,767)		17.38
Outstanding at end of year	53,185	$	22.00
Exercisable at end of year	53,185	$	22.00

The following table summarizes information about stock options outstanding at December 31, 2019:

								Options
		Options Outstanding						Exercisable
					Weighted-
			Weighted-		Average
Range of			Average		Remaining
Exercise			Exercise		Contractual	Intrinsic			Intrinsic
Prices		Number	Price		Life	Value		Number	Value
$	12.57-13.47	7,852	$	13.43	0.49			7,852
	17.05	308		17.05	0.05			308
	23.53	45,025		23.53	6.88			45,025
		53,185	$	22.00	5.90	$	292	53,185	$	292

The Company recorded $0.1 million for the 12 months ended December 31, 2019 and $0.2 million for the 12 months ended December 31, 2018 and 2017 in stock option compensation expense related to the converted options from First Community. As of December 31, 2019, the Company did not have any unrecognized stock option expense.

Restricted Stock Unit Plan

A summary of the changes in the Company’s restricted stock units for the year ended December 31, 2019 is as follows:

	2019
		Weighted-
		Average
		Grant Date
	Shares	Fair Value
Outstanding at beginning of year	690,495	$	26.14
Granted	216,411		26.73
Dividend equivalents earned	24,127		26.07
Vested	(107,537)		18.54
Forfeited	(45,179)		27.48
Outstanding at end of year	778,317	$	27.27

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 restricted stock units to members of management, and under the terms of the First Community 2016 Equity Incentive Plan, granted 10,644 restricted stock units 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 restricted stock units, 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 restricted stock units 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.

A description of restricted stock units granted in 2018 and 2017 under the terms of the 2010 Equity Plan or the First Community 2016 Equity Incentive Plan can be found in the Company’s Annual Reports on Form 10-K for the years ended December 31, 2018 and 2017.

Deferred Stock Unit Plan

A summary of the changes in the Company’s deferred stock units for the year ended December 31, 2019 is as follows:

	2019
		Weighted-
		Average
		Grant Date
	Shares	Fair Value
Non-vested at beginning of year	20,449	$	27.93
Granted	20,984		26.78
Dividend equivalents earned	2,685		26.06
Vested	(21,277)		31.05
Forfeited	(1,580)		31.44
Non-vested at end of year	21,261	$	23.18
Outstanding at end of year	90,497	$	23.38

On July 5, 2019, under the terms of the 2010 Equity Incentive Plan, the Company granted 17,549 deferred stock units to directors, and under the terms of the First Community 2016 Equity Incentive Plan, granted 1,867 deferred stock units 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 deferred stock units 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.

A description of deferred stock units granted in 2018 and 2017 under the terms of the 2010 Equity Plan or First Community 2016 Equity Incentive Plan can be found in the Company’s Annual Reports on Form 10-K for the years ended December 31, 2018 and 2017.

The Company issued 92,996 treasury shares in conjunction with the vesting of restricted stock units and settlement of deferred stock units in 2019. The difference between the number of shares issued and the number of vested units is due to shares issued under a net share settlement option.

The Company recognized $3.8 million, $3.5 million and $2.6 million of compensation expense related to both non-vested restricted stock units and deferred stock units for the years ended December 31, 2019, 2018 and 2017, respectively. As of December 31, 2019, there was $12.2 million of total unrecognized compensation cost related to these non-vested stock awards. This cost is expected to be recognized over a period of 3.5 years.