Share-based Compensation

9 Months Ended

Sep. 30, 2020

Share-based Compensation

Share-based Compensation

Note 9: Share-based Compensation

The First Busey 2020 Equity Incentive Plan (the “2020 Equity Plan”) was approved by stockholders at the 2020 Annual Meeting of Stockholders. A description of the 2020 Equity Plan can be found in the Company’s Proxy Statement for the 2020 Annual Meeting of Stockholders filed on April 9, 2020. The 2020 Equity Plan replaces the 2010 Equity Incentive Plan and the First Community Financial Partners, Inc. 2016 Equity Incentive Plan, which from time to time, the Company used to grant equity awards to legacy employees of First Community Financial Partners, Inc. Under the terms

of the 2020 Equity Plan, the Company has granted restricted stock units, deferred stock units and performance-based restricted stock unit awards.

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, subject to accelerated vesting upon eligible retirement from the Company. 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.

The Company grants deferred stock units, which are restricted stock units with a deferred settlement date, to its directors and advisory directors. Each deferred stock unit is equivalent to one share of the Company’s common stock. The deferred stock units vest over a one-year period following the grant date. These units generally are subject to the same terms as restricted stock units under the Company’s 2020 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. After vesting and prior to delivery, these units will continue to earn dividend equivalents.

The Company also grants performance-based restricted stock unit awards to members of management periodically throughout the year. Each performance-based restricted stock unit is equivalent to one share of the Company’s common stock. The number of units that ultimately vest will be determined based on the achievement of the market performance goal, subject to accelerated vesting upon eligible retirement from the Company.

The Company has outstanding stock options assumed from acquisitions.

Upon vesting/delivery, shares are expected (though not required) to be issued from treasury.

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, 2020 follows:

		Weighted-		Weighted-
		Average		Average
		Exercise		Remaining Contractual
	Shares	Price		Term
Outstanding at beginning of period	53,185	$	22.00
Exercised	(12,956)		22.73
Forfeited	—		—
Expired	(1,144)		21.35
Outstanding at end of period	39,085	$	23.53	6.13
Exercisable at end of period	39,085	$	23.53	6.13

The Company did not record any stock option compensation expense for the three or nine months ended September 30, 2020. The Company recorded an insignificant amount and $0.1 million of stock option compensation expense for the three and nine months ended September 30, 2019, respectively, related to the converted options from First Community Financial Partners, Inc.

Restricted Stock Unit, Deferred Stock Unit and Performance-Based Restricted Stock Unit Awards

A summary of the changes in the Company’s restricted stock unit and deferred stock unit awards for the nine months ended September 30, 2020, 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	778,317	$	27.27	21,261	$	26.78
Granted	384,343		17.26	33,419		17.17
Dividend equivalents earned	29,265		19.21	3,235		19.35
Vested	(117,641)		21.38	(24,066)		25.95
Forfeited	(66,132)		26.42	—		—
Non-vested at end of period	1,008,152	$	23.97	33,849	$	17.17
Outstanding at end of period	1,008,152	$	23.97	70,186	$	24.41

On February 5, 2020, under the terms of the 2010 Equity Incentive Plan, the Company granted 3,808 restricted stock units to a member of management.  The grant date fair value of the award totaled $0.1 million and will be recognized as compensation expense over the three-year requisite service period. Subsequent to the requisite service period, the awards will become 100% vested.

On July 7, 2020, under the terms of the 2020 Equity Incentive Plan, the Company granted 380,535 restricted stock units to members of management, including the Vice-Chairman of the Board. The grant date fair value of the award totaled $6.5 million and will be recognized as compensation expense over the requisite service period ranging from one year to five years. The terms of these awards included an accelerated vesting provision upon eligible retirement from the Company and added the accelerated vesting provision to all previously issued and outstanding awards. Subsequent to the requisite service period, the awards will become 100% vested. Further, the Company granted 33,419 deferred stock units to directors and advisory directors. The grant date fair value of the award totaled $0.6 million and will be recognized as compensation expense over the requisite service period of one year. Subsequent to the requisite service period, the awards will become 100% vested.

The Company recognized $2.2 million and $1.2 million of compensation expense related to non-vested restricted stock units and deferred stock units for the three months ended September 30, 2020 and 2019, respectively. The Company recognized $4.4 million and $3.1 million of compensation expense related to non-vested restricted stock units and deferred stock units for the nine months ended September 30, 2020 and 2019, respectively. The expense for the three and nine months ended September 30, 2020 increased over the same period of 2019, primarily as a result of the addition of the retirement vesting provision which resulted in acceleration of compensation expense related to participants who met the retirement eligibility criteria. As of September 30, 2020, there was $13.4 million of total unrecognized compensation cost related to these non-vested stock awards. This cost is expected to be recognized over a weighted average period of 3.0 years.

During the third quarter of 2020, the Company granted a target of 15,724 performance-based restricted stock units with a maximum of 25,158 units. The actual number of units issued at the vest date could range from 0% to 160% of the initial grant, depending on attaining the market performance goal. The grant date fair value of the award is estimated to be $0.3 million, and will be recognized in compensation expense over the performance period ending December 31, 2022. The Company expects to finalize the grant date fair value of these awards in the fourth quarter of 2020.

As of September 30, 2020, 1,429,696 shares remain available for issuance pursuant to the Company’s 2020 Equity Incentive Plan and 18,711 shares remain available for issuance pursuant to the Company’s Employee Stock Purchase Plan.