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Share-Based Compensation Plans
 12 Months Ended
Dec. 31, 2024
Share-Based Payment Arrangement [Abstract]  
Share-Based Compensation Plans SHARE-BASED COMPENSATION PLANS
Summary
During 2019, the shareholders of Customers Bancorp approved the 2019 Plan, during 2010, the shareholders of Customers Bancorp approved the 2010 Plan, and during 2012, the shareholders of Customers Bancorp approved the 2004 Plan. The purpose of these plans is to promote the success and enhance the value of Customers Bancorp by linking the personal interests of the members of the Board of Directors, team members, officers and executives of Customers to those of the shareholders of Customers and by providing such individuals with an incentive for outstanding performance in order to generate superior returns to shareholders of Customers. The 2019 Plan, 2010 Plan and 2004 Plan are intended to provide flexibility to Customers in its ability to motivate, attract and retain the services of members of the Board of Directors, team members, officers and executives of Customers. Stock options and restricted stock units normally vest on the third or fifth anniversary of the grant date provided the grantee remains employed by Customers or continues to serve on the Board. With respect to certain stock options granted under the 2010 Plan, vested options shall be exercisable only when Customers’ fully diluted tangible book value will have increased by 50% from the date of grant. Share-based awards generally provide for accelerated vesting if there is a change in control (as defined in the respective plan agreements). No stock options may be exercisable for more than 10 years from the date of grant, except as permitted under the plans.
The 2019, 2010 and 2004 Plans are administered by the Leadership Development and Compensation Committee of the Board of Directors. The 2019 Plan provides for the grant of options, some or all of which may be structured to qualify as Incentive Stock Options if granted to team members, stock appreciation rights, restricted stock, restricted stock units and unrestricted stock to team members, officers, executives, members of the Board of Directors, consultants, and advisors. During the years ended December 31, 2024, 2023 and 2022, the shareholders of Customers Bancorp approved amendments to the 2019 Plan increasing the number of shares of common stock to be issued by additional 750,000 shares, 740,325 shares and 330,000 shares, respectively. The maximum number of shares of common stock which may be issued under the 2019 Plan, as amended, is 3,320,325 shares. The 2010 Plan provided exclusively for the grant of stock options, some or all of which might be structured to qualify as Incentive Stock Options, to team members, officers and executives. The maximum number of shares of common stock which might be issued under the 2010 Plan was 3,666,667 shares. The 2004 Plan provided for the grant of options, some or all of which might be structured to qualify as Incentive Stock Options if granted to team members, stock appreciation rights, restricted stock, restricted stock units and unrestricted stock to team members, officers, executives and members of the Board of Directors. The maximum number of shares of common stock which might be issued under the 2004 Plan was 2,750,000 shares. The 2010 and 2004 Plans were terminated by December 31, 2021 in accordance with the respective plan agreements. At December 31, 2024, the aggregate number of shares of common stock available for grant under the 2019 Plan was 841,513 shares. During the year ended December 31, 2020, Customers granted an initial inducement award of 300,000 restricted stock units in connection with an executive appointment, outside of the 2019 and 2004 Plans and approved by the independent members of the Board of Directors including all of the members of its Leadership Development and Compensation Committee. These restricted stock units vested on January 22, 2025. During the year ended December 31, 2023, Customers granted one-time employment inducement awards under the New York Stock Exchange listing rules of 22,300 restricted stock units in connection with the onboarding of the venture banking team, outside of the 2019 Plan and approved by Customers Board of Directors, including all of its independent directors present at the meeting, comprising a majority of the independent directors.
Share-based compensation expense relating to stock options and restricted stock units is recognized on a straight-line basis over the vesting periods of the awards and is a component of salaries and employee benefits expense. Total share-based compensation expense for the years ended December 31, 2024, 2023 and 2022 was $13.2 million, $11.2 million and $11.0 million, respectively. At December 31, 2024, there was $22.5 million of unrecognized compensation cost related to all non-vested share-based compensation awards. This cost is expected to be recognized through 2029.
Employee Stock Purchase Plan
In 2014, the shareholders of Customers Bancorp approved an Employee Stock Purchase Plan (“ESPP”). The ESPP is intended to encourage team member participation in the ownership and economic progress of Customers. This plan is intended to qualify as an ESPP within the meaning of the Internal Revenue Code (“Code”), as amended, and is administered by the Leadership Development and Compensation Committee of Customers Board of Directors.
Under the ESPP, team members may elect to purchase shares of Customers’ common stock through payroll deductions. Because the purchase price under the plan is 85% of the fair market value of a share of common stock on the first day of each quarterly subscription period (a 15% discount to the market price), Customers’ ESPP is considered to be a compensatory plan under current accounting guidance. Therefore, the entire amount of the discount is recognizable compensation expense. ESPP expense for the years ended December 31, 2024, 2023 and 2022 was $170 thousand, $172 thousand, and $192 thousand, respectively.
Stock Options
Customers estimated the fair value of each option on the date of grant generally using the Black-Scholes option pricing model. The risk-free interest rate was based upon the zero-coupon Treasury rates in effect on the grant date of the options based on the expected life of the option. Expected volatility was based on historical information. Expected life was management’s estimate which took into consideration the vesting requirement, generally three or five years.
The exercise price for the options granted was equal to the closing price of Customers Bancorp’s common stock on the date of grant. The options issued are subject to a three or five-year waterfall or cliff vesting and expire after ten years, except as permitted under the plans. 19,164 options were granted to certain officers and team members to purchase shares of Customers Bancorp common stock during the year ended December 31, 2024. The exercise price for the options granted was equal to the closing price of Customers Bancorp’s voting common stock on the date of grant. The options issued are subject to a five-year cliff vesting and expire after ten years, except as permitted under the plans. No options were granted to officers and team members to purchase shares of Customers Bancorp common stock during the years ended December 31, 2023 and 2022.
The following table presents the weighted-average assumptions used and the resulting weighted-average fair value of each option granted for the years ended December 31, 2024, 2023 and 2022.
For the Years Ended December 31,
202420232022
Weighted-average risk-free interest rate4.46 %— %— %
Expected dividend yield— %— %— %
Weighted-average expected volatility54.71 %— %— %
Weighted-average expected life (in years)700
Weighted-average fair value of each option granted$28.31 $— $— 
The following table summarizes stock option activity for the year ended December 31, 2024:
(dollars in thousands, except weighted-average exercise price)Number
of Options
Weighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual
Term
in Years
Aggregate
Intrinsic
Value
Outstanding, December 31, 20231,339,396 $27.56 
Granted19,164 46.98 
Exercised(40,392)19.06 $1,526 
Forfeited(26,153)27.97 
Outstanding, December 31, 20241,292,015 $28.10 4.5$26,588 
Exercisable at December 31, 2024722,851 $25.87 3.1$16,487 
Cash received from the exercise of the stock options during the year ended December 31, 2024 was $0.8 million. The tax benefit resulting from option exercises was $0.1 million in 2024.
A summary of the status of Customers’ non-vested options at December 31, 2024, and changes during the year ended December 31, 2024 was as follows:
Number
of Options
Weighted-
Average
exercise price
Non-vested at December 31, 2023605,741 $29.73 
Granted19,164 46.98 
Vested(30,741)19.28 
Forfeited(25,000)28.37 
Non-vested at December 31, 2024569,164 30.93 
Restricted Stock Units
The fair value of restricted stock units granted under the 2019 and 2004 Plans is determined based on the closing market price of Customers’ common stock on the date of grant, except for the performance based restricted stock units with market conditions under a long-term incentive compensation plan discussed below. The fair value of the performance based restricted stock units with market conditions is determined using the Monte-Carlo simulation model as of the date of grant.
Beginning in 2018, the Leadership Development and Compensation Committee recommended and the Board of Directors approved a long-term incentive compensation plan which incorporates performance metrics into the restricted stock awards for certain of Customers’ key officers. Specifically, 40% of the restricted stock units granted as long term incentive compensation will vest ratably over three years. The number of restricted stock units that will vest for the remaining 60% is dependent upon Customers meeting certain performance metrics, including total shareholder return, return on average common equity, and average non-performing assets (“NPAs”) to total assets over a three-year period relative to the performance of its peer group. The performance conditions are considered probable.
There were 364,899 restricted stock units granted during the year ended December 31, 2024. The 364,899 units were granted under the 2019 Plan and are mostly subject to either a three-year waterfall vesting (with one third of the amount vesting annually) or a three-year cliff vesting, with 39,555 of those units also subject to the performance metrics described above.
The table below presents the status of the restricted stock units at December 31, 2024, and changes during the year ended December 31, 2024:
Restricted
Stock Units
Weighted-
Average Grant-
Date Fair Value
Outstanding and unvested at December 31, 20231,159,782 $26.78 
Granted364,899 48.46 
Vested(316,088)29.43 
Forfeited(98,471)32.85 
Outstanding and unvested at December 31, 20241,110,122 32.61 
Customers has a policy that permits its directors to elect to receive shares of common stock in lieu of their cash retainers. During the year ended December 31, 2024, Customers issued 26,791 shares of common stock with a fair value of $1.3 million to the directors as compensation for their services. The fair values were generally determined based on the closing price of the common stock the day before the shares were issued.