Quarterly report pursuant to Section 13 or 15(d)

Stock compensation

v3.22.2
Stock compensation
6 Months Ended
Jun. 30, 2022
Retirement Benefits [Abstract]  
Stock compensation 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 separation agreement with our former President and Chief Executive Officer (“CEO”), who stepped down from his positions with the Company for health reasons effective March 23, 2022,     the Company paid a lump sum payment of $6.6 million in exchange for 41,186 restricted stock units owned by the former CEO, which represents the market value of the Company common stock underlying such units as of March 18, 2022.
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.
For the three and six months ended June 30, 2022, we recorded $0.1 million and $0.2 million, respectively, in compensation expense related to stock options as compared to $0.2 million and $0.4 million for the same periods in 2021.
During the six months ended June 30, 2022, no stock options were granted, 27,403 options were exercised and no options were forfeited. A total of 132,167 and 159,570 options were outstanding at June 30, 2022 and December 31, 2021, respectively.
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 withholding 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% to 125% of the target award based on 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 2022 performance year will be awarded on or around March 1, 2023 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.
For the three and six months ended June 30, 2022, respectively, we recorded $1.7 million and $2.2 million in compensation expense related to RSUs as compared to $1.8 million and $3.2 million for the same periods in 2021.
During the six months ended June 30, 2022, 38,151 RSUs were granted, 22,209 RSUs vested, and 55,976 RSUs were forfeited.
Tax withholding totaling $1.3 million were made on behalf of employees in exchange for 7,920 shares of common stock withheld upon vesting for the six months ended June 30, 2022, resulting in the issuance of 12,528 shares of common stock.
Tax withholding totaling $3.2 million were made on behalf of employees in exchange for 20,824 shares of common stock withheld upon vesting for the six months ended June 30, 2021, resulting in the issuance of 28,439 shares of common stock. A total of 78,557 and 118,591 RSUs were outstanding at June 30, 2022 and December 31, 2021, respectively.
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. For the three and six months ended June 30, 2022, we recorded $0.3 million and $0.5 million, respectively, in compensation expense related to these shares as compared to $0.3 million and $0.5 million for the same periods in 2021.
No director retirement shares were issued during the six months ended June 30, 2022.
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. Compensation expense for these shares was previously recognized.