Note 19— Share-Based Compensation

In June 2017, the Company adopted the 2017 Omnibus Incentive Compensation Plan (the “Omnibus Plan”) in connection with our IPO. The Omnibus Plan provides for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalent rights and other equity-based, equity-related or cash-based awards. A total of 1,550,000 shares of our common stock have been reserved and are available for issuance under the Omnibus Plan.

On July 6, 2017, in conjunction with the completion of the IPO, the Company granted 58,900 restricted shares of the Company’s common stock to certain key employees, pursuant to the Omnibus Plan. The restricted shares will cliff vest on the third anniversary of the grant date, subject to continued employment. Subsequent to the grant date, 400 restricted shares were forfeited. A total of 11,898 restricted shares were also granted during the year ended December 31, 2017 in connection with the recruitment of employees. These restricted shares vest over a four year period. As of December 31, 2017, there were 1,479,602 shares available for future grants under the Omnibus Plan.

Note 19— Share-Based Compensation (continued)

The following table discloses the changes in restricted shares for the year ended December 31, 2017:

	Omnibus Plan
	Number of Shares			Weighted Average Grant Date Fair Value
Beginning balance		—		$	—
Granted		70,798			20.31
Vested		—			—
Forfeited		(400	)		20.18
Ending balance outstanding at December 31, 2017		70,398		$	20.31

No restricted shares vested during the year ended December 31, 2017.

The Company recognizes share-based compensation based on the estimated fair value of the restricted stock at the grant date. Share-based compensation expense is included in non-interest expense in the Consolidated Statements of Operations. No restricted shares were outstanding in 2016.

The following table summarizes restricted stock compensation expense for the year ended December 31, 2017:

	Year Ended December 31
	2017
Total share-based compensation - restricted stock	$	203
Income tax benefit		83
Unrecognized compensation expense		1,227
Weighted-average amortization period remaining	2.8 years

The fair value of the unvested restricted stock awards at December 31, 2017 was $1.6 million.

The Company maintained a nonqualified, share-based, stock option plan adopted prior to recapitalization (“MBG Plan”). There were no options granted or exercised under this plan during the year ended December 31, 2016 through the termination date (June 30, 2017). At the time of the Company’s reincorporation in Delaware, in June 2017, the Board of Directors cancelled the MBG Plan and all outstanding options were cancelled.

In October 2014, the Company adopted the Byline Bancorp, Inc. Equity Incentive Plan (“BYB Plan”). The maximum number of shares available for grants under this Plan was 2,476,122 shares. During 2016 and 2015, the Company granted options to purchase 212,400 and 1,634,568 shares, respectively, under this plan. The Company did not grant any stock options during the year ended December 31, 2017. In June 2017, the Board of Directors terminated the BYB Plan and no future grants can be made under this plan. Options to purchase a total of 1,783,020 shares remain outstanding under the BYB Plan.

The types of stock options granted under the BYB Plan were Time Options and Performance Options. The exercise price of each option is equal to the fair value of the stock as of the date of grant. These option awards have vesting periods ranging from 1 to 5 years and have 10-year contractual terms. Stock volatility was computed as the average of the volatilities of peer group companies.

The vesting of Time Options is conditional based on completion of service. Performance Options have conditional vesting based on either performance targets or market performance. Certain Performance Options’ performance goals will be satisfied (in whole or in part) if the Bank achieves various performance targets such as profitability, asset quality, and conditional based on market performance, as outlined in the BYB Plan. Each of the performance goals identified are measured for achievement (or failure to achieve) independent of each other. In October 2017, the Board of Directors determined that the Performance Option goals were satisfied, in whole, and these Performance Options converted to Time Options. As a result of the previous completion of service, 414,894 performance options vested on October 3, 2017.

Note 19— Share-Based Compensation (continued)

The fair values of the stock options were determined using the Black-Scholes-Merton model for Time Options and a Monte Carlo simulation model for Performance Options. The fair values of options under the BYB Plan were determined using the following assumptions as of the grant dates:

	Time Options Grants
	2016			2015
Risk-free interest rate	1.34% - 1.40%			1.68% - 1.85%
Expected term (years)	5.2 - 5.6			5.7 - 6.3
Expected stock price volatility		20.39	%	16.18% - 16.55%
Expected dividend yield		0.00	%		0.00	%
Weighted average grant date fair value	$	3.55		$	2.25

	Performance Options Grants
	2016			2015
Risk-free interest rate	Implied forward rates			Implied forward rates
Expected term (years)	Variable			Variable
Expected stock price volatility	20.34% - 20.39%			16.18% - 16.55%
Expected dividend yield		0.00	%		0.00	%
Weighted average grant date fair value	$	3.75		$	1.65

The following table discloses the activity in shares subject to options and the weighted average exercise prices, in actual dollars, for the year ended December 31, 2017:

	BYB Plan
	Number of Shares			Weighted Average Exercise Price		Intrinsic Value		Weighted Average Remaining Contractual Term (in Years)
Beginning balance		1,798,220		$	11.95	$	15,788		8.6
Granted		—
Expired		—
Exercised		—
Forfeited		(15,200	)	16.25
Ending balance outstanding at December 31, 2017		1,783,020		$	11.91	$	19,718		7.6
Exercisable at December 31, 2017		1,304,257		$	11.51	$	14,953		7.5

There were no stock options exercised during the year ended December 31, 2017.

The Company recognizes share-based compensation based on the estimated fair value of the option at the grant date. Forfeitures are estimated based upon industry standards. Share-based compensation expense is included in non-interest expense in the Consolidated Statements of Operations. The following table summarizes stock option compensation expense for the years ended December 31, 2017 and 2016:

	Years Ended December 31,
	2017		2016
Total share-based compensation - stock options	$	1,294	$	899
Income tax benefit		521		360
Unrecognized compensation expense		729		1,752
Weighted-average amortization period remaining	1.2 years		1.8 years