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Stock-Based Compensation | 3 Months Ended
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Mar. 31, 2024
Share-Based Payment Arrangement [Abstract] |
Stock-Based Compensation | Stock-Based Compensation PNMR has various stock-based compensation programs, which provide restricted stock awards, that are performance based and time based, under the Performance Equity Plan (“PEP”). Although certain PNM and TNMP employees are eligible to participate in the PNMR plans, PNM and TNMP do not have separate employee stock-based compensation plans. Performance stock awards awarded under the PEP are awarded for a three-year, overlapping performance period. Performance stock awards with performance periods ending before 2024 or after 2025 are subject to achieving both performance and market targets. Performance stock awards with performance periods ending from 2024 through 2025 do not include market targets. Other awards of restricted stock are only subject to time-based vesting requirements. Additional information concerning stock-based compensation under the PEP is contained in Note 12 of the Notes to Consolidated Financial Statements in the 2023 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 March 31, 2024, PNMR had unrecognized expense related to stock awards of $8.4 million, which is expected to be recognized over an average of 2.2 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:
|  | Three Months Ended March 31,
Restricted Shares and Performance Based Shares |  | 2024 |  | 2023
Expected quarterly dividends per share |  | $ | 0.3875 |  |  | $ | 0.3675 |
Risk-free interest rate |  | 4.27 | % |  | 4.46 | %
Market-Based Shares |  |  |  |
Dividend yield |  | 4.21 | % |  | N/A
Expected volatility |  | 13.09 | % |  | N/A
Risk-free interest rate |  | 4.31 | % |  | N/A
The following table summarizes activity in restricted stock awards, including performance-based and market-based shares for the three months ended March 31, 2024:
| Restricted Stock |  |
| Shares |  | Weighted- Average Grant Date Fair Value |  |  |  |
Outstanding at December 31, 2023 | 212,080 |  |  | $ | 40.33 |  |  |  |  |
Granted | 188,019 |  |  | 32.43 |  |  |  |  |
Released | (145,020) |  |  | 37.18 |  |  |  |  |
Forfeited | — |  |  | — |  |  |  |  |
Outstanding at March 31, 2024 | 255,079 |  |  | $ | 36.30 |  |  |  |  |
Included, as granted and released, in the table above are 80,492 previously awarded shares that were earned for the 2021 - 2023 performance measurement period and ratified by the Board in February 2024 (based upon achieving targets at above “target”, below “maximum” levels). Excluded from the table above are 138,978, 133,960, and 186,951 shares for the three-year performance periods ending in 2024, 2025 and 2026 that will be awarded if all performance and market criteria are achieved at maximum levels and all executives remain eligible. On December 4, 2023, the Company entered into a retention agreements with its Chairman and Chief Executive Officer and its Senior Vice President and General Counsel under which they would be awarded a total of 26,766 and 8,922 respectively of restricted stock rights if they remained employed through the award’s vesting date which is the earliest of 24 months from the grant date, the closing of the Merger, or six months following the termination of the Merger. As of December 31, 2023, upon the notice from Avangrid regarding the termination of the Merger Agreement, these awards will vest on June 30, 2024. On December 4, 2023, the Company entered into a retention agreement with its President and Chief Operating Officer under which he would receive a retention bonus of $1.0 million to be paid in increments beginning in December 2023 and continuing each December until 2025. On April 8, 2024, pursuant to the retention agreement, the Board elected to convert the unvested portion of the retention bonus into restricted stock rights equal to $0.8 million of the fair value of one share of Company stock as of the first trading day after expiration of the current black-out period. The following table provides additional information concerning restricted stock activity, including performance-based and market-based shares:
|  | Three Months Ended March 31,
Restricted Stock |  | 2024 |  | 2023
Weighted-average grant date fair value |  | $ | 32.43 |  |  | $ | 44.78 |
Total fair value of restricted shares that vested (in thousands) |  | $ | 5,395 |  |  | $ | 8,394 |

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