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Share-Based Compensation | 9 Months Ended
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Sep. 30, 2020
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] |
Share-Based Compensation | Note 17 – 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 for issuance under the Omnibus Plan. As of September 30, 2020, there were 1,001,731 shares available for future grants 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. These shares fully vested on July 6, 2020. 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 ratably over a four year period. During 2018, the Company granted 131,157 shares of restricted common stock, par value $0.01 per share. Of this total, 101,559 restricted shares will vest ratably over four years on each anniversary of the grant date and 14,380 restricted shares will vest ratably over three years on each anniversary of the grant date, all subject to continued employment. A total of 4,053 restricted shares have vested. In addition, 11,165 performance-based restricted shares were included in the 2018 grant. The number of shares which may be earned under the award is dependent upon the Company’s return on average assets over a three-year period ending December 31, 2020, measured in 2018 against the Company’s internal targets and for 2019 and 2020 against a peer group consisting of publicly-traded bank holding companies ranging in asset size from 50% to 200% of the Company’s total assets. Under the 2018 award, 25% of the shares will be earned at threshold performance, 100% will be earned at target and 50th percentile performance, and up to 125% of the shares with above target and 75th percentile performance. Any earned performance shares will vest on the third anniversary of the grant date. During 2019, the Company granted 210,622 shares of restricted common stock, par value $0.01 per share. Of this total, 111,823 restricted shares will vest ratably over four years on each anniversary of the grant date, and 72,570 restricted shares will vest ratably over three years on each anniversary of the grant date, all subject to continued employment. A total of 5,254 share have vested. In addition, 20,975 performance-based restricted shares were included in the 2019 grants. The number of shares which may be earned under the award is dependent upon the Company’s return on average assets, weighted equally, over a three-year period ending December 31, 2021, measured against a peer group consisting of publicly-traded bank holding companies. Results will be measured cumulatively at the end of the three years. Any earned shares will vest on the third anniversary of the grant date. During 2020, the Company granted 175,493 shares of restricted common stock, par value $0.01 per share. Of this total, 104,779 restricted shares will vest ratably over four years on each anniversary of the grant date and 38,786 restricted shares will vest ratably over three years on each anniversary of the grant date, all subject to continued employment. In addition, 31,928 performance-based restricted shares were included in the February 2020 grant. The number of shares which may be earned under the award is dependent upon the Company’s return on average assets, weighted equally, over a three-year period ending December 31, 2022, measured against a peer group consisting of publicly-traded bank holding companies. Results will be measured cumulatively at the end of the three years. Any earned shares will vest on the third anniversary of the grant date The following table discloses the changes in restricted shares for the nine months ended September 30, 2020:
|  | Omnibus Plan |
|  | Number of Shares |  |  | Weighted Average Grant Date Fair Value |
Beginning balance, January 1, 2020 |  |  | 328,653 |  |  | $ | 19.94 |
Granted |  |  | 175,493 |  |  |  | 17.52 |
Vested |  |  | (104,364 | ) |  |  | 20.38 |
Forfeited |  |  | (7,343 | ) |  |  | 18.21 |
Ending balance outstanding at September 30, 2020 |  |  | 392,439 |  |  | $ | 18.77 |
A total of 104,364 restricted shares vested during the nine months ended September 30, 2020. A total of 48,491 restricted shares vested during the year ended December 31, 2019. The fair value of restricted shares that vested during the nine months ended September 30, 2020 was $1.2 million. The fair value of restricted shares that vested during the year ended December 31, 2019 was $900,000. 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. The following table summarizes restricted stock compensation expense for the nine months ended September 30, 2020 and 2019:
|  | Nine Months Ended September 30, |
|  | 2020 |  |  | 2019 |
Total share-based compensation |  | $ | 2,019 |  |  | $ | 1,357 |
Income tax benefit |  |  | 562 |  |  |  | 378 |
Unrecognized compensation expense |  |  | 5,566 |  |  |  | 4,917 |
Weighted-average amortization period remaining |  | 2.4 years |  |  | 2.8 years |
The fair value of the unvested restricted stock awards at September 30, 2020 was $4.4 million. 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; the Company did not grant any stock options during 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 1,390,579 shares remain outstanding under the BYB Plan at September 30, 2020. 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 one to five 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. 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 following table discloses the activity in shares subject to options and the weighted average exercise prices, in actual dollars, for the nine months ended September 30, 2020:
|  | BYB Plan |
|  | Number of Shares |  |  | Weighted Average Exercise Price |  |  | Intrinsic Value |  |  | Weighted Average Remaining Contractual Term (in Years) |
Beginning balance, January 1, 2020 |  |  | 1,410,075 |  |  | $ | 11.38 |  |  | $ | 11,542 |  |  |  | 5.4 |
Exercised |  |  | (19,496 | ) |  |  | 13.00 |  |  | $ | 139 |  |  |  |  |
Expired |  |  | — |  |  |  |  |  |  |  |  |  |  |  |  |
Ending balance outstanding at September 30, 2020 |  |  | 1,390,579 |  |  | $ | 11.36 |  |  | $ | 134 |  |  |  | 4.7 |
Exercisable at September 30, 2020 |  |  | 1,390,579 |  |  | $ | 11.36 |  |  | $ | 134 |  |  |  | 4.7 |
A total of 19,496 stock options were exercised during the nine months ended September 30, 2020. During the nine months ended September 30, 2020, proceeds from the exercise of stock options were $253,000 and related tax benefit was $39,000. A total of 127,997 stock options were exercised during the year ended December 31, 2019. During the year ended December 31, 2019, proceeds from the exercise of stock options were $1.9 million and related tax benefit was $145,000. A total of 20,000 stock options vested during the nine months ended September 30, 2020. 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 nine months ended September 30, 2020 and 2019:
|  | Nine Months Ended September 30, |
|  | 2020 |  |  | 2019 |
Total share-based compensation (benefit) - stock options |  | $ | 7 |  |  | $ | (119 | )
Income tax benefit (expense) |  |  | 2 |  |  |  | (33 | )
Unrecognized compensation expense - stock options |  |  | — |  |  |  | 21 |
Weighted-average amortization period remaining |  | 0.0 years |  |  | 0.5 years |
Pursuant to the terms of the Merger Agreement, upon the Effective Time, each outstanding First Evanston Option held by a participant in the First Evanston Bancorp, Inc. Stock Incentive Plan (the “FEB Plan”) ceased to represent a right to acquire shares of First Evanston common stock and was assumed and converted automatically into a fully vested and exercisable adjusted option to purchase shares of Byline common stock (each an “Adjusted Option”). In accordance with the Merger Agreement, the number of shares of Byline common stock to which each such Adjusted Option relates is equal to the product (rounded down to the nearest whole share of Byline common stock) of: (a) the number of shares of First Evanston common stock subject to the First Evanston Option immediately prior to May 31, 2018, multiplied by (ii) 4.725. Each Adjusted Option has an exercise price per share of Byline common stock equal to the quotient (rounded up to the nearest whole cent) of (x) the per share exercise price of such First Evanston Option immediately prior to May 31, 2018, divided by (y) 4.725. The description of the conversion process is based on, and qualified by, the Merger Agreement. The following table discloses the activity in shares subject to options under the FEB Plan and the weighted average exercise prices, in actual dollars, for the nine months ended September 30, 2020:
|  | FEB Plan |
|  | Number of Shares |  |  | Weighted Average Exercise Price |  |  | Intrinsic Value |  |  | Weighted Average Remaining Contractual Term (in Years) |
Beginning balance, January 1, 2020 |  |  | 511,169 |  |  | $ | 11.35 |  |  | $ | 4,204 |  |  |  | 4.4 |
Exercised |  |  | (206,477 | ) |  | $ | 11.12 |  |  | $ | 591 |  |  |  |  |
Expired |  |  | (18,900 | ) |  | $ | 12.70 |  |  |  |  |  |  |  |  |
Ending balance outstanding at September 30, 2020 |  |  | 285,792 |  |  | $ | 11.42 |  |  | $ | 80 |  |  |  | 3.8 |
Exercisable at September 30, 2020 |  |  | 285,792 |  |  | $ | 11.42 |  |  | $ | 80 |  |  |  | 3.8 |
A total of 206,477 stock options were exercised during the nine months ended September 30, 2020. During the nine months ended September 30, 2020, proceeds from the exercise of stock options were $2.3 million and related tax benefit was $165,000. A total of 113,214 stock options were exercised during the year ended December 31, 2019. During the year ended December 31, 2019, proceeds from the exercise of stock options were $1.3 million and related tax benefit was $253,000. On April 30, 2019, the Company completed the acquisition of Oak Park River Forest. On May 15, 2019, the Company made a cash payment of $4.2 million for 35,870 outstanding Oak Park River Forest options to participants who elected to receive a cash payment in lieu of converting the options to the Omnibus plan.

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