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Stock-Based Compensation | 12 Months Ended
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Dec. 31, 2022
Share-Based Payment Arrangement [Abstract] |
Stock-Based Compensation | Stock-Based Compensation PNMR has various stock-based compensation programs, including stock options, restricted stock, and performance shares granted 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. The Company has not awarded stock options since 2010 and all employee stock options expired or were exercised in February 2020. 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. Performance Equity Plan The PEP provides for the granting of non-qualified stock options, restricted stock rights, performance shares, performance units, and stock appreciation rights to officers, key employees, and non-employee members of the Board. 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 total number of shares of PNMR common stock subject to all awards under the PEP, as approved by PNMR’s shareholders in May 2014, may not exceed 13.5 million shares, subject to adjustment and certain share counting rules set forth in the PEP. This current share pool is charged five shares for each share subject to restricted stock or other full value award. Source of Shares The source of shares for exercised stock options and vested restricted stock is shares acquired on the open market by an independent agent, rather than newly issued shares. Accounting for Stock Awards 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 to compensation expense 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. Total compensation expense for stock-based payment arrangements recognized by PNMR for the years ended December 31, 2022, 2021, and 2020 was $7.9 million, $9.4 million, and $8.1 million. Stock compensation expense of $5.3 million, $6.4 million, and $5.5 million was charged to PNM and $2.6 million, $3.0 million, and $2.6 million was charged to TNMP. At December 31, 2022, PNMR had unrecognized compensation expense related to stock awards of $4.6 million, which is expected to be recognized over an average of 1.54 years. PNMR receives a tax deduction for the value of restricted stock at the vesting date. To the extent the tax deduction exceeds the Company’s cumulative expense related to a stock award, an excess tax benefit is recorded. When the cumulative expense exceeds the tax deduction, a tax deficiency is recorded. All excess tax benefits and deficiencies are recorded to tax expense and classified as operating cash flows when used to reduce taxes payable.
|  | Year Ended December 31,
Excess Tax Benefits (Deficiencies) |  | 2022 |  | 2021 |  | 2020 |  |
|  | (In thousands) |  |
PNM |  | $ | (65) |  |  | $ | 564 |  |  | $ | 279 |  |  |
TNMP |  | (26) |  |  | 224 |  |  | 112 |  |  |
PNMR |  | (91) |  |  | 788 |  |  | 391 |  |  |
TNMP used excess tax benefits to reduce income taxes payable and the benefit was reflected in cash flows from operating activities. The benefit of excess tax benefits at PNM and PNMR will be reflected in operating cash flows when they reduce income taxes payable. The grant date fair value for restricted stock and stock awards with Company internal 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 is 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:
|  | Year Ended December 31,
Restricted Shares and Performance-Based Shares |  | 2022 |  | 2021 |  | 2020 |  |
Expected quarterly dividends per share |  | $ | 0.3475 |  |  | $ | 0.3275 |  |  | $ | 0.3075 |  |  |
Risk-free interest rate |  | 1.46 | % |  | 0.32 | % |  | 0.72 % |  |
Market-Based Shares (1) |  |  |  |  |  |  |  |
Dividend yield |  | N/A |  | 2.76 | % |  | 2.51 | % |  |
Expected volatility |  | N/A |  | 33.69 | % |  | 19.41 | % |  |
Risk-free interest rate |  | N/A |  | 0.29 | % |  | 0.72 | % |  |
(1) Restricted stock expected to be awarded under the PEP for performance periods ending after 2023 no longer have market targets. The following table summarizes activity in restricted stock awards including performance-based and market-based shares:
|  | Restricted Stock |
|  | Shares |  | Weighted-Average Grant Date Fair Value |  |  |
Outstanding at December 31, 2021 |  | 167,270 |  |  | $ | 43.71 |  |  |  |
Granted |  | 193,943 |  |  | 41.04 |  |  |  |
Released |  | (173,474) |  |  | 42.47 |  |  |  |
Forfeited |  | (5,293) |  |  | 42.31 |  |  |  |
Outstanding at December 31, 2022 |  | 182,446 |  |  | $ | 42.09 |  |  |  |
PNMR’s current stock-based compensation program provides for performance and market targets through 2023 and performance targets through 2024. 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 market targets at below “maximum” levels). Excluded from the above table are 100,991 previously awarded shares that were earned for the 2020 - 2022 performance measurement period and ratified by the Board in February 2023 (based upon achieving market targets at above “target”, below “maximum” levels). Also excluded from the table above are 144,175 and 150,050 shares for the three-year performance periods ending in 2023 and 2024 that will be awarded if all performance and/or 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, and stock options:
|  | Year Ended December 31,
Restricted Stock |  | 2022 |  | 2021 |  | 2020
Weighted-average grant date fair value |  | $ | 41.04 |  |  | $ | 43.48 |  |  | $ | 36.73 |
Total fair value of restricted shares that vested (in thousands) |  | $ | 7,368 |  |  | $ | 8,617 |  |  | $ | 8,299 |
Stock Options |  |  |  |  |  |
Total intrinsic value of options exercised (in thousands) |  | $ | — |  |  | $ | — |  |  | $ | 84 |
At December 31, 2019, the aggregate intrinsic value of stock options outstanding, all of which were exercisable, was less than $0.1 million. All the outstanding options were exercised or expired in February 2020.

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