11. Stock compensation

PSB has a 2003 Stock Option and Incentive Plan (the “2003 Plan”) covering 1.5 million shares of PSB’s common stock. PSB has a 2012 Equity and Performance-Based Incentive Compensation Plan (the “2012 Plan”) covering 1.0 million shares of PSB’s common stock. Under the 2003 Plan and 2012 Plan, PSB has granted non-qualified options to certain directors, officers and key employees to purchase shares of PSB’s common stock at a price not less than the fair market value of the common stock at the date of grant. Additionally, under the 2003 Plan and 2012 Plan, PSB has granted restricted shares of common stock to certain directors and restricted stock units to officers and key employees.

No options or restricted stock units were granted for the three months ended March 31, 2014 and 2013.

At March 31, 2014, there was a combined total of 946,000 options and restricted stock units authorized to be granted. Information with respect to outstanding options and nonvested restricted stock units granted under the 2003 Plan and 2012 Plan is as follows:



				Weighted		Aggregate
		Weighted		Average		Intrinsic
	Number of	Average		Remaining		Value
Options:	Options	Exercise Price		Contract Life		(in thousands)
Outstanding at December 31, 2013	380,773	$	56.45
Granted	—	$	—
Exercised	(40,973)	$	49.63
Forfeited	—	$	—
Outstanding at March 31, 2014	339,800	$	57.27	5.81 Years	$	8,954
Exercisable at March 31, 2014	220,000	$	54.70	5.42 Years	$	6,363



		Weighted
	Number of	Average Grant
Restricted Stock Units:	Units	Date Fair Value
Nonvested at December 31, 2013	45,100	$	60.07
Granted	—	$	—
Vested	(8,430)	$	51.73
Forfeited	(1,100)	$	71.93
Nonvested at March 31, 2014	35,570	$	61.67

Effective March, 2014, the Company entered into a performance-based restricted stock unit program, the Senior Management Long-Term Equity Incentive Program for 2014-2017 (“LTEIP”), with selected employees of the Company. Under the LTEIP, the Company established three levels of targeted restricted stock unit awards for selected employees, which would be earned only if the Company achieved one of three defined targets during 2014 to 2017. The first type of award is 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 one of three defined targets during the previous year. The second type of award is an award based on achieving one of three defined targets during the cumulative four-year period 2014-2017. In the event the minimum defined target is not achieved for an annual award, the shares allocated to be awarded for such year are added to the shares that may be received if the four-year target is achieved. Both types of restricted stock unit awards vest in four equal annual installments beginning from the date of award. Up to approximately 103,600 restricted stock units would be granted for each of the four years assuming achievement was met and up to approximately 103,600 restricted stock units would be granted for the cumulative four-year period assuming achievement was met. Compensation expense is recognized based on the shares expected to be awarded based on the target level that is expected to be achieved. Net compensation expense of $858,000, representing one month of amortization related to the LTEIP was recognized during the three months ended March 31, 2014.

Effective January 1, 2012, the Company entered into a performance-based restricted stock unit program, the Senior Management Long-Term Equity Incentive Program for 2012-2015 (“2012 LTEIP”), with selected employees of the Company. The targets for 2012 and 2013 were not achieved and management determined in 2013 that it was not probable that the targets under the 2012 LTEIP will be met. As such, the Company stopped recording amortization as of September 30, 2013. Net compensation of $1.0 million related to the 2012 LTEIP was recognized during the three months ended March 31, 2013 and was reversed during the three months ended December 31, 2013.

Included in the Company’s consolidated statements of income for the three months ended March 31, 2014 and 2013, was $122,000 and $115,000, respectively, in net compensation expense related to stock options. Excluding the LTEIP amortization of $858,000 and $1.0 million, respectively, net compensation expense of $175,000 and $195,000 related to restricted stock units was recognized during the three months ended March 31, 2014 and 2013, respectively.

As of March 31, 2014, there was $652,000 of unamortized compensation expense related to stock options expected to be recognized over a weighted average period of 2.4 years. As of March 31, 2014, there was $38.9 million (includes $37.1 million from the LTEIP) of unamortized compensation expense related to restricted stock units expected to be recognized over a weighted average period of 5.6 years.

Cash received from 40,973 stock options exercised during the three months ended March 31, 2014 was $2.0 million. Cash received from 31,000 stock options exercised during the three months ended March 31, 2013 was $1.6 million. The aggregate intrinsic value of the stock options exercised was $1.4 million and $735,000 during the three months ended March 31, 2014 and 2013, respectively.

During the three months ended March 31, 2014, 8,430 restricted stock units vested; in settlement of these units, 5,341 shares were issued, net of shares applied to payroll taxes. The aggregate fair value of the shares vested for the three months ended March 31, 2014 was $708,000. During the three months ended March 31, 2013, 8,910 restricted stock units vested; in settlement of these units, 5,661 shares were issued, net of shares applied to payroll taxes. The aggregate fair value of the shares vested for the three months ended March 31, 2013 was $679,000.

In May of 2004, the shareholders of the Company approved the issuance of up to 70,000 shares of common stock under the Retirement Plan for Non-Employee Directors (the “Director Plan”). Under the Director Plan, the Company grants 1,000 shares of common stock for each year served as a director up to a maximum of 5,000 shares issued upon retirement. In December of 2011, the Director Plan was amended to increase the maximum shares from 5,000 shares to 7,000 shares, 1,000 shares of common stock for each year served as a director. The Company recognizes compensation expense with regards to grants to be issued in the future under the Director Plan. As a result, included in the Company’s consolidated statements of income was $75,000 and $67,000 in compensation expense for the three months ended March 31, 2014 and 2013, respectively. As of March 31, 2014 and 2013, there was $1.4 million and $1.1 million, respectively, of unamortized compensation expense related to these shares. No shares were issued during the three months ended March 31, 2014 and 2013.