SHARE-BASED COMPENSATION

The Company has share-based employee compensation plans as outlined below, pursuant to which stock awards are granted to employees and non-employee directors. The Company measures compensation expense related to stock awards based upon the fair value of the awards on the grant date, adjusted for forfeitures as they occur. The related expense is charged to earnings on a straight-line basis over the requisite service period (e.g., vesting period) of the award. With respect to performance-based stock awards, compensation expense is adjusted upward or downward based upon the probability of achievement of performance. Awards that continue to vest after retirement are expensed over the shorter of the period of time from grant date to the final vesting date or from the grant date to the date when an employee is retirement eligible. Awards granted to employees who are retirement eligible at the grant date are generally expensed immediately upon grant.

Employees of the Company hold time-based restricted stock units and performance-based restricted stock units. A restricted stock unit is the right to receive shares of stock on a future date, which may be subject to time-based vesting conditions and/or performance-based vesting conditions. If a dividend is paid on shares underlying the awards prior to the date such shares are distributed, those dividends will be distributed following vesting in the same form as the dividend that has been paid to common stockholders generally.

Citizens Financial Group, Inc. Converted Equity 2010 Long Term Incentive Plan. In March 2014, The Royal Bank of Scotland Group plc granted special IPO awards to certain Citizens employees pursuant to this plan. These awards were granted half in the form of restricted stock units in respect of The Royal Bank of Scotland Group plc shares and half as a fixed convertible bond. Pursuant to their terms, upon the closing of the Company’s IPO, these awards were converted into Company restricted stock units and the performance condition was met. These awards remained subject to the original vesting schedule and terms following the IPO, with half becoming vested in March 2016 and the remaining portion becoming vested in March 2017. No additional awards have been granted under this plan.

Citizens Financial Group, Inc. Converted Equity 2010 Deferral Plan. Prior to the Company’s IPO, The Royal Bank of Scotland Group plc granted time-based restricted stock units to certain Citizens employees pursuant to this plan. Pursuant to their terms, upon the closing of the Company’s IPO these awards were converted into Company restricted stock units and remained subject to the original vesting schedules and terms. No additional awards have been granted under this plan.

Citizens Financial Group, Inc. 2014 Omnibus Incentive Plan. Certain employees of the Company hold time-based restricted stock units and performance-based restricted stock units granted under this plan. Time-based restricted stock units granted generally become vested ratably over a three-year period and performance-based restricted stock units granted generally become vested at the end of a three-year performance period, depending on the level of performance achieved during such period.

Citizens Financial Group, Inc. 2014 Non-Employee Directors Compensation Plan. Non-employee directors receive grants of time-based restricted stock units under this plan as compensation for their services pursuant to the Citizens Financial Group, Inc. Directors Compensation Policy. Starting with grants made in August 2017, restricted stock units granted to directors are fully vested on the grant date, with settlement of the awards deferred until a director’s cessation of service.

Citizens Financial Group, Inc. 2014 Employee Stock Purchase Plan. The Company also maintains the Citizens Financial Group, Inc. Employee Stock Purchase Plan (the “ESPP”), which provides eligible employees an opportunity to purchase its common stock at a 10% discount, through accumulated payroll deductions. Eligible employees may contribute up to 10% of eligible compensation to the ESPP, up to a maximum purchase of $25,000 worth of stock in any calendar year. Offering periods under the ESPP are quarterly. Shares of CFG common stock are purchased for a participant on the last day of each quarter at a 10% discount from the fair market value (fair market value under the plan is defined as the closing price on the day of purchase). Prior to the date the shares are purchased, participants do not have any rights or privileges as a stockholder with respect to shares to be purchased at the end of the offering period.

Summary of Share-Based Plans Activity

The following table presents the activity related to the Company’s share-based plans (excluding the ESPP) for the year ended December 31, 2017:



CFG Share Awards	Shares Underlying Awards		Weighted-Average Grant Price
Outstanding, January 1	2,909,029			$23.92
Granted	1,256,816		39.09
Vested & Distributed	(1,426,850	)	21.91
Forfeited	(117,481	)	32.12
Outstanding, December 31	2,621,514			$33.30

During the years ended December 31, 2017, 2016 and 2015, the following number of CFG share awards were granted: 2017: (1,256,816 granted with a weighted-average grant price of $39.09); 2016 (1,552,416 granted with weighted-average grant price of $24.53); and 2015 (1,315,572 granted with weighted-average grant price of $25.18).

In addition, the following number of CFG share awards became vested and distributed: 2017 (1,426,850 vested and distributed with a weighted-average grant price of $21.91); 2016 (1,762,655 vested with weighted-average grant price of $22.14); and 2015 (2,496,092 vested with weighted-average grant price of $22.15).

There are 57,543,638 shares of Company common stock available for awards to be granted under its employee share plans (including the “ESPP”). Upon settlement of share-based awards, the Company generally issues new shares, but may also issue shares from treasury stock.

Compensation Expense

The Company measures compensation expense related to stock awards based upon the fair value of the awards on the grant date. Compensation expense is adjusted for forfeitures as they occur. The related expense is charged to earnings on a straight-line basis over the requisite service period (e.g., vesting period) of the award. With respect to performance-based stock awards, compensation expense is adjusted upward or downward based upon the probability of achievement of performance. Awards that continue to vest after retirement are expensed over the shorter of the period of time from grant date to the final vesting date or from the grant date to the date when an employee is retirement eligible. Awards granted to employees who are retirement eligible at the grant date are generally expensed immediately upon grant.

Compensation expense related to the above share plans (including the ESPP) was $39 million, $23 million, and $24 million for the years ended December 31, 2017, 2016, and 2015, respectively. At December 31, 2017, the total unrecognized compensation expense for nonvested equity awards granted was $47 million. This expense is expected to be recognized over a weighted-average period of two years. No share-based compensation costs were capitalized during the years ended December 31, 2017, 2016, and 2015.

The income tax benefit recognized in earnings based on the compensation expense recognized for all share-based compensation arrangements amounted to $9 million, $8 million and $5 million for the years ended December 31, 2017, 2016, and 2015, respectively.