SHARE-BASED COMPENSATION

12 Months Ended

Dec. 31, 2021

Share-based Payment Arrangement [Abstract]

NOTE 18 - SHARE-BASED COMPENSATION

Citizens has share-based employee compensation plans as outlined below, pursuant to which stock awards are granted to employees and non-employee directors.

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.

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 3-year period and performance-based restricted stock units granted generally become vested in a single installment at the end of a 3-year performance period, depending on the level of performance achieved during such period relative to established targets. 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. 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. 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. If a dividend is paid on the shares underlying awards prior to the date such shares are distributed, they are reinvested into additional restricted stock units.

Citizens Financial Group, Inc. 2014 Employee Stock Purchase Plan. Citizens 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. Participants may contribute up to 10% of eligible compensation to the ESPP and may purchase up to $25,000 worth of stock in any calendar year. Offering periods under the ESPP are quarterly, with shares of CFG common stock purchased 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.

Stock Option Activity

Under the terms of the merger agreement with JMP, Citizens granted stock option awards to replace awards previously granted by JMP that were outstanding as of November 15, 2021. A share conversion ratio of 6:1 was applied to convert JMP’s outstanding equity awards into CFG awards and the strike prices of replacement stock options were also adjusted to reflect this exchange ratio, in accordance with the merger agreement. Converted awards retain the same terms and conditions they had prior to the merger, except that Citizens shares will be issued upon the settlement or exercise.

The fair value of the awards being replaced and replacement awards were measured using a simple lattice model as of the date of the merger. The portion of the fair value of the awards being replaced which was attributable to pre-combination service was included as a component of the consideration paid in the merger. The portion attributable to post-combination service, in addition to any increased value of replacement awards over the awards being replaced, was recognized as stock-based compensation expense over each award’s remaining service period.

There were no stock options granted during the years ended December 31, 2021, 2020 and 2019, except for stock option awards that were converted into Citizens awards in conjunction with the JMP acquisition on November 15, 2021.

The following table presents a summary of the Company’s outstanding and exercisable stock option activity:


	Number of Options	Weighted-Average Exercise Price	Weighted-Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value (in millions)














Outstanding at January 1. 2021	—	$—	—	$—
Assumed	249,861	19.45	—	—
Granted	—	—	—	—
Exercised	(4,000)	19.45	—	—
Forfeited or expired	—	—	—	—
Outstanding at December 31, 2021	245,861	19.45	3.1	7
Exercisable at December 31, 2021	34,856	$19.45	3.1	$1

As of December 31, 2021, the aggregate intrinsic value of both outstanding and exercisable stock options was $7 million and $1 million, respectively.

Summary of Share-Based Plans Activity

The following table presents the activity related to the Company’s share-based plans (excluding the ESPP):


	Year Ended December 31,
	2021		2020		2019
	Units	Weighted-Average Grant Price	Units	Weighted-Average Grant Price	Units	Weighted-Average Grant Price
Outstanding, January 1	3,496,231	$34.37	3,000,224	$36.71	2,893,281	$34.04
Assumed	82,013	49.95	—	—	—	—
Granted	1,417,370	44.97	1,947,902	32.64	1,677,167	36.21
Vested & Distributed	(1,400,722)	38.88	(1,384,091)	38.59	(1,518,836)	32.21
Forfeited	(91,936)	35.00	(67,804)	35.89	(51,388)	38.29
Outstanding, December 31	3,502,956	$38.23	3,496,231	$34.37	3,000,224	$36.71

There are 44,911,455 shares of Company common stock available for awards to be granted under the Omnibus Plan and Directors Plan. In addition, there are 4,547,955 shares available for awards under the ESPP. Upon settlement of share-based awards, the Company generally issues new shares, but may also issue shares from treasury stock.

Citizens 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.

Share-based compensation expense (including ESPP) was $59 million, $48 million, and $55 million for the years ended December 31, 2021, 2020 and 2019, respectively. At December 31, 2021, the total unrecognized compensation expense for nonvested equity awards granted was $53 million. This expense is expected to be recognized over a weighted-average period of approximately two years. No share-based compensation costs were capitalized during the years ended December 31, 2021, 2020 and 2019.

Citizens recognized income tax benefits related to share-based compensation arrangements of $12 million, $8 million and $1 million for the years ended December 31, 2021, 2020 and 2019, respectively.