Quarterly report pursuant to Section 13 or 15(d)

Stock Compensation

v3.19.3
Stock Compensation
9 Months Ended
Sep. 30, 2019
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 shares 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 option or RSUs vests.

We account for forfeitures of share-based payments as they occur by reversing previously amortized share-based compensation expense with respect to grants that are forfeited in the period the employee terminates employment.

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).

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 shares on the grant date. Employees 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 nine months ended September 30, 2019, respectively, we recorded $90,000 and $209,000 in compensation expense related to stock options as compared to $62,000 and $179,000 for the same periods in 2018.

During the nine months ended September 30, 2019, 34,000 stock options were granted, 11,179 options were exercised and 4,000 options were forfeited. A total of 162,236 and 143,415 options were outstanding at September 30, 2019 and December 31, 2018, 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. The grantee receives dividends for each outstanding RSU equal to the per share dividend received by common shareholders. We expense any dividends previously paid upon forfeiture of the related RSU. Upon vesting, the grantee receives common shares equal to the number of vested RSUs, less common shares 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 shares on the date of grant.

Effective March, 2014, the Company entered into a performance-based RSU program, the Senior Management Long-Term Equity Incentive Program for 2014-2017 (“LTEIP”), with certain employees of the Company. Under the LTEIP, the Company established three levels of targeted RSU awards, which would be earned only if the Company achieved one of three defined targets during 2014 to 2017. Under the LTEIP there was an annual award following the end of each of the four years in the program, with the award subject to and based on the achievement of total return targets during the previous year, as well as an award based on achieving total return targets during the cumulative four-year period 2014-2017. In the event the minimum defined target was not achieved for an annual award, the RSUs allocated to be awarded for such year were added to the RSUs that may be received if the four-year target was achieved. All RSU awards under the LTEIP vest in four equal annual installments beginning from the date of award. Compensation expense is recognized based on the RSUs expected to be awarded based on the target level that is expected to be achieved. The compensation expense and RSU counts with respect to the LTEIP are included in the aggregate RSU amounts disclosed above. Senior management earned 145,350 shares of RSUs granted in March, 2018 as the maximum targets were achieved for both the year ended December 31, 2017 and for the cumulative four-year period.

For the three and nine months ended September 30, 2019, respectively, we recorded $813,000 and $2.5 million in compensation expense related to RSUs as compared to $1.0 million and $2.6 million for the same periods in 2018.

During the nine months ended September 30, 2019, 6,400 RSUs were granted, 92,820 RSUs vested and 1,460 RSUs were forfeited. Tax withholdings totaling $6.1 million were made on behalf of employees in exchange for 38,961 common shares withheld upon vesting for the nine months ended September 30, 2019 resulting in the issuance of 53,859 common shares. Tax withholdings totaling $5.0 million were made on behalf of employees in exchange for 43,393 common shares withheld upon vesting for the nine months ended September 30, 2018 resulting in the issuance of 62,030 common shares. A total of 155,410 and 243,290 RSUs were outstanding at September 30, 2019 and December 31, 2018, respectively.

In July, 2019, the Company amended the Retirement Plan for Non-Employee Directors (the “Director Plan”), to increase the maximum shares issued upon retirement for each year served as a director from 8,000 shares to 10,000 shares of common stock. The Company recognizes compensation expense with regard to grants to be issued in the future under the Director Plan over the requisite service period. For the three and nine months ended September 30, 2019, respectively, we recorded $1.2 million and $1.3 million in compensation expense related to these shares as compared to $51,000 and $160,000 for the same periods in 2018.

In April, 2019, we issued 8,000 shares to a director upon retirement with an aggregate fair value of $1.2 million. No shares were issued during the nine months ended September 30, 2018.