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Stock-Based Compensation | 9 Months Ended
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Sep. 30, 2022
Share-Based Payment Arrangement [Abstract] |
Stock-Based Compensation | Stock-Based Compensation PNMR has various stock-based compensation programs, which provide restricted stock awards under the Performance Equity Plan (“PEP”). Although certain PNM and TNMP employees participate in the PNMR plans, PNM and TNMP do not have separate employee stock-based compensation plans. Certain restricted stock awards are subject to achieving performance or market targets. Other awards of restricted stock are only subject to time vesting requirements. Restricted stock expected to be awarded under the PEP for performance periods ending after 2023 no longer have market targets. Additional information concerning stock-based compensation under the PEP is contained in Note 12 of the Notes to Consolidated Financial Statements in the 2021 Annual Reports on Form 10-K. Restricted stock under the PEP refers to awards of stock subject to vesting, performance, or market conditions rather than to shares with contractual post-vesting restrictions. Generally, the awards vest ratably over three years from the grant date of the award. However, awards with performance or market conditions vest upon satisfaction of those conditions. In addition, plan provisions provide that upon retirement, participants become 100% vested in certain stock awards. The vesting period for awards of restricted stock to non-employee members of the Board is one-year. The stock-based compensation expense related to restricted stock awards without performance or market conditions to participants that are retirement eligible on the grant date is recognized immediately at the grant date and is not amortized. Compensation expense for other such awards is amortized over the shorter of the requisite vesting period or the period until the participant becomes retirement eligible. Compensation expense for performance-based shares is recognized ratably over the performance period as required service is provided and is adjusted periodically to reflect the level of achievement expected to be attained. Compensation expense related to market-based shares is recognized ratably over the measurement period, regardless of the actual level of achievement, provided the employees meet their service requirements. At September 30, 2022, PNMR had unrecognized expense related to stock awards of $5.6 million, which is expected to be recognized over an average of 1.7 years. The grant date fair value for restricted stock and stock awards with internal PNMR performance targets is determined based on the market price of PNMR common stock on the date of the agreements reduced by the present value of future dividends that will not be received prior to vesting. The grant date fair value is applied to the total number of shares that are anticipated to vest, although the number of performance shares that ultimately vest cannot be determined until after the performance periods end. The grant date fair value of stock awards with market targets were determined using Monte Carlo simulation models, which provide grant date fair values that include an expectation of the number of shares to vest at the end of the measurement period. The following table summarizes the weighted-average assumptions used to determine the awards grant date fair value:
|  | Nine Months Ended September 30,
Restricted Shares and Performance Based Shares |  | 2022 |  | 2021
Expected quarterly dividends per share |  | $ | 0.3475 |  |  | $ | 0.3275 |
Risk-free interest rate |  | 1.46 | % |  | 0.32 | %
Market-Based Shares |  |  |  |
Dividend yield |  | — | % |  | 2.76 | %
Expected volatility |  | — | % |  | 33.69 | %
Risk-free interest rate |  | — | % |  | 0.29 | %
The following table summarizes activity in restricted stock awards, including performance-based and market-based shares for the nine months ended September 30, 2022:
| Restricted Stock |  |
| Shares |  | Weighted- Average Grant Date Fair Value |  |  |  |
Outstanding at December 31, 2021 | 167,270 |  |  | $ | 43.71 |  |  |  |  |
Granted | 193,943 |  |  | 41.04 |  |  |  |  |
Released | (172,409) |  |  | 42.48 |  |  |  |  |
Forfeited | (2,709) |  |  | 42.48 |  |  |  |  |
Outstanding at September 30, 2022 | 186,095 |  |  | $ | 42.09 |  |  |  |  |
PNMR’s current stock-based compensation program provides for performance targets through 2024 and market targets through 2023. Included, as granted and released, in the table above are 92,343 previously awarded shares that were earned for the 2019 - 2021 performance measurement period and ratified by the Board in February 2022 (based upon achieving targets at below "maximum" levels). Excluded from the table above are 143,553, 144,175, and 150,050 shares for the three-year performance periods ending in 2022, 2023 and 2024 that will be awarded if all performance and market criteria are achieved at maximum levels and all executives remain eligible. The following table provides additional information concerning restricted stock activity, including performance-based and market-based shares:
|  | Nine Months Ended September 30,
Restricted Stock |  | 2022 |  | 2021
Weighted-average grant date fair value |  | $ | 41.04 |  |  | $ | 43.48 |
Total fair value of restricted shares that vested (in thousands) |  | $ | 7,804 |  |  | $ | 10,018 |

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