Annual report pursuant to Section 13 and 15(d)

Stock Compensation

v3.22.0.1
Stock Compensation
12 Months Ended
Dec. 31, 2021
Stock Compensation [Abstract]  
Stock Compensation 10. Stock compensation Under various share-based compensation plans, PSB grants non-qualified options to purchase the Company’s common stock at a price not less than fair value on the date of grant, as well as RSUs, to certain directors, officers, and key employees. The service period for stock options and RSUs begins when (i) the Company and the recipient reach a mutual understanding of the key terms of the award, (ii) the award has been authorized, (iii) the recipient is affected by changes in the market price of our stock and (iv) it is probable that any performance conditions will be met, and ends when the stock options or RSUs vest. ‎ We amortize the fair value of awards starting at the beginning of the service period as compensation expense. For awards that are earned solely upon the passage of time and continued service, the entire cost of the award is amortized on a straight-line basis over the service period. For awards with performance conditions, the individual cost of each vesting is amortized separately over each individual service period (the “accelerated attribution” method). In connection with the appointment of our President and Chief Executive Officer (“CEO”) effective April 5, 2021, the Company granted a one-time RSU sign-on award with a grant date fair value of $3.7 million and a retention RSU award with a grant date fair value of $2.9 million. These RSUs will vest ratably over five years. Effective September 1, 2020, Maria Hawthorne retired from her role as President and CEO and continues to serve as a director of the Company. Due to Ms. Hawthorne’s continued service as a director of the Company, her unvested stock options and restricted stock units will continue to vest on their original vesting schedule in accordance with the Company’s 2012 Equity and Performance-Based Incentive Compensation Plan and related award agreements. For financial reporting purposes, the end of the service periods for these stock option and restricted stock unit grants have changed from the various respective vesting dates to September 1, 2020, the date of her retirement as President and CEO. Accordingly, all remaining stock compensation expense for Ms. Hawthorne, which totaled $1.7 million, was amortized, and included in general and administrative expense during the year ended December 31, 2020. We account for forfeitures of share-based payments as they occur by reversing previously amortized share-based compensation expense with respect to unvested grants that are forfeited in the period the employee terminates employment. Stock Options Stock options expire 10 years after the grant date and the exercise price is equal to the closing trading price of our common stock on the grant date. Stock option holders cannot require the Company to settle their award in cash. We use the Black-Scholes option valuation model to estimate the fair value of our stock options on the date of grant. 2021 2020 2019Stock option expense for the year ( in 000's) $ 712  $ 412  $ 299 Aggregate exercise date intrinsic value of options exercised during the year (in 000's) $ 4,559  $ 305  $ 1,567  Average assumptions used in valuing options with the Black-Scholes method: Expected life of options in years, based upon historical experience 5  5  5 Risk-free interest rate 0.8% 0.4% 2.0%Expected volatility, based upon historical volatility 15.4% 22.3% 22.2%Expected dividend yield 2.6% 3.3% 2.6% Average estimated value of options granted during the year $ 14.40  $ 15.27  $ 26.85  Included in 2021 compensation expense related to stock options was $0.1 million of expense resulting from modifications made to outstanding stock options because of the Special Cash Dividend paid in December 31, 2021. As of December 31, 2021, there was $0.9 million of unamortized compensation expense related to stock options expected to be recognize over a weighted average period of 3.0 years. Cash received from 55,546 stock options exercised during the year ended December 31, 2021 was $5.0 million. Cash received from 4,136 stock options exercised during the year ended December 31, 2020 was $0.3 million. Cash received from 15,585 stock options exercised during the year ended December 31, 2019 was $1.0 million. In connection with the Special Cash Dividend discussed in Note 9, the number of options and exercise prices of all outstanding options were adjusted pursuant to the anti-dilution provisions of the applicable plans so that the option holders would be neither advantaged nor disadvantaged because of the Special Cash Dividend.‎ Information with respect to stock options during 2021, 2020, and 2019 is as follows: Weighted Aggregate Weighted Average Intrinsic Number of Average Remaining ValueOptions:Options Exercise Price Contract Life (in thousands) Outstanding at December 31, 2018 143,415  $ 86.42  Granted 34,000  $ 163.95  Exercised (15,585) $ 62.15  Forfeited (4,000) $ 110.04  Outstanding at December 31, 2019 157,830  $ 104.92  Granted 18,000  $ 127.22  Exercised (4,136) $ 62.69  Forfeited — $— Outstanding at December 31, 2020 171,694  $ 108.29  Granted 38,000  $ 162.63  Exercised (55,546) $ 90.24  Forfeited — $— Special cash dividend adjustment (1) 5,422  $ 124.13  Outstanding at December 31, 2021 159,570  $ 123.87  6.21 Years $ 9,622 Exercisable at December 31, 2021 (1) 79,651  $ 99.71  3.98 Years $ 6,727 ____________________________ (1)In accordance with the applicable equity award plan documents, the number and exercise price of outstanding options have been adjusted because of the Special Cash Dividend so that the option holder maintains their economic position with respect to the stockholders. Restricted Stock Units RSUs granted prior to 2016 are subject to a six-year vesting, with 20% vesting after year two, and 20% vesting after each of the next four years. RSUs granted during and subsequent to 2016 are subject to a five-year vesting at the rate of 20% per year or a three-year vesting at the rate of one-third per year. Grantees receive dividends for each outstanding RSU equal to the per share dividend received by common stockholders, which are recorded in paid-in capital. We expense any dividends previously paid upon forfeiture of the related RSU. Upon vesting, the grantee receives shares of common stock equal to the number of vested RSUs, less shares of common stock withheld in exchange for tax withholdings made by the Company to satisfy the grantee’s statutory tax liabilities arising from the vesting. The fair value of our RSUs is determined based upon the applicable closing trading price of our common stock on the date of grant. In March 2020, the Compensation Committee of the Board approved an annual performance-based equity incentive program (“Annual Equity Incentive Program”) under the Company’s 2012 Equity and Performance-Based Incentive Compensation Plan. Under the program, certain employees will be eligible on an annual basis to receive RSUs based on the Company’s achievement of pre-established targets for (i) growth in net asset value per share, and (ii) stockholder value creation, each as computed pursuant to the terms of the Annual Equity Incentive Program. In the event the pre-established targets are achieved, eligible employees will receive the target award, except that the Compensation Committee of the Board may adjust the actual award to 75%-125% of the target award based on the its assessment of whether certain strategic and operational goals were accomplished in the performance period. RSUs awarded under the Annual Equity Incentive Program for the 2021 performance year will be awarded on or around March 1, 2022 and will vest in five equal installments, with the first installment vesting on the award date. RSU holders will earn dividend equivalent rights during the vesting period. In connection with the Annual Equity Incentive Program for the 2021 performance year, targets for 2021 were achieved at the threshold total return level. As such, subsequent to December 31, 2021, 25,140 restricted stock units were awarded with a March 1, 2021 grant date fair value of $3.6 million. Information with respect to RSUs during 2021, 2020, and 2019 is as follows (dollar amounts in thousands): Weighted Number of Average GrantRestricted Stock Units:RSUs Date Fair Value Nonvested at December 31, 2018 243,290  $ 23,386 Granted 6,400  1,137 Vested (95,500) (8,753)Forfeited (3,342) (345)Nonvested at December 31, 2019 150,848  15,425 Granted 46,036  5,562 Vested (73,256) (6,991)Forfeited (2,120) (290)Nonvested at December 31, 2020 121,508  $ 13,706 Granted 76,266  11,948 Vested (61,243) (6,255)Forfeited (17,940) (2,107)Nonvested at December 31, 2021 118,591  $ 17,292  Of the 76,266 RSUs the Company granted during the year ended December 31, 2021, 41,186 RSUs were granted to our President and CEO in April 2021 (discussed above), 10,955 were granted to our former Chief Financial Officer (“CFO”), 3,053 were granted to our Chief Accounting Officer and 16,970 RSUs in aggregate to our Divisional Vice Presidents. Subsequent to December 31, 2021, 14,070 RSUs previously awarded to our former CFO were forfeited. As of December 31, 2021, there was $12.6 million of unamortized compensation expense related to RSUs expected to be recognized over a weighted average period of 3.3 years. (In thousands, except number of shares) 2021 2020 2019Restricted stock unit expense $ 6,685  $ 4,475  $ 3,196 Shares of common stock issued upon vesting 35,714  43,458  55,267 Fair value of vested common stock on vesting date $ 9,474  $ 10,350  $ 15,078 Cash paid for taxes in lieu of shares of common stock withheld upon vesting of RSUs $ 3,940  $ 4,216  $ 6,350  Under the Retirement Plan for Non-Employee Directors (the “Director Retirement Plan”), the Company grants 1,000 shares of common stock for each year served as a director up to a maximum of 10,000 shares issued upon retirement. The Company recognizes compensation expense with regard to grants to be issued in the future under the Director Retirement Plan over the requisite service period. The Company recorded compensation expense related to these shares of $1.1 million, $0.8 million, and $1.5 million for the years ended December 31, 2021, 2020, and 2019, respectively. In April 2021, we issued 10,000 shares of common stock to a director upon retirement with an aggregate fair value of $1.6 million. No director retirement shares were issued during the year ended December 31, 2020. In April 2019, we issued 8,000 shares of common stock to a director upon retirement with an aggregate fair value of $1.2 million. Compensation expense for such shares issued in 2021 and 2019 was previously recognized.