Stock-Based Compensation Plans

12 Months Ended

Sep. 30, 2023

Share-Based Payment Arrangement [Abstract]

Stock-Based Compensation Plans

6. Stock-Based Compensation Plans.

Participation in FRP Plans

Prior to the Company’s spin-off from FRP Holdings, Inc. (FRP) in January 2015, the Company's directors, officers and key employees previously were eligible to participate in FRP's 2000 Stock Option Plan and the 2006 Stock Option Plan under which options for shares of common stock were granted to directors, officers and key employees.

Post Spin-Off Patriot Incentive Stock Plan

As part of the spin-off transaction, the Board of Directors of the Company adopted the Patriot Transportation Holding, Inc. Incentive Stock Plan. (“Patriot Plan”) in January 2015. In exchange for all outstanding FRP options held on January 30, 2015, existing Company directors, officers and key employees holding option grants in the FRP Stock Option Plan(s) were issued new grants in the Patriot and FRP Plans based upon the relative value of Patriot and FRP immediately following the completion of the spin-off with the same remaining terms. All related compensation expense has been allocated to the Company (rather than FRP) and included in corporate expenses. The number of common shares available for future issuance in the Patriot Plan was 10,611 at September 30, 2023.

On November 15, 2021, the Company paid an extraordinary dividend of $3.75 per share to all shareholders of record. In accordance with Section 4.2 of the 2006 Stock Incentive Plan, Section 11 of the 2014 Equity Incentive Plan, and Section 409A of the Internal Revenue Code, the Company has adjusted the terms of all stock option grants outstanding and the stock appreciation rights as of the close of business on November 15, 2021.

On December 30, 2020, the Company paid an extraordinary dividend of $3.00 per share to all shareholders of record. In accordance with Section 4.2 of the 2006 Stock Incentive Plan, Section 11 of the 2014 Equity Incentive Plan, and Section 409A of the Internal Revenue Code, the Company has adjusted the terms of all stock option grants outstanding and the stock appreciation rights as of the close of business on December 30, 2020.

Patriot utilizes the Black-Scholes valuation model for estimating fair value of stock compensation for options awarded to officers and employees. Each grant is evaluated based upon assumptions at the time of grant or modification. The revised assumptions due to the revaluation are dividend yield of 0%, expected volatility between 38% and 53%, risk-free interest rate of .54 to 1.4% and expected life of 1.8 to 6.0 years.

The dividend yield of 0% was based on no anticipated regular quarterly dividend at the date of modification for the extraordinary dividend. Expected volatility is estimated based on historical experience over a period equivalent to the expected life in years. The risk-free interest rate is based on the U.S. Treasury constant maturity interest rate at the date of grant or modification with a term consistent with the expected life of the options granted. The expected life calculation is based on the observed and expected time to exercise options by the employees.

In December 2016, the Company approved and issued a long-term performance incentive to an officer in the form of stock appreciation rights. As adjusted for the extraordinary dividend the Company granted 257,009 stock appreciation rights. The adjusted market price of the grant was $8.66, and the executive will get a cash award at age 65 based upon the stock price at that date compared to the adjusted market price of $8.66 but in no event will the award be less than $500,000. The Company is expensing the fair value of the award over the 9.1-year vesting period to the officer’s attainment of age 65, with periodic adjustments to the liability estimate based upon changes in the assumptions used to calculate the liability. The accrued liability under this plan as of September 30, 2023 and 2022 was $431,000 and $402,000, respectively.

The annual director stock grant was 25,200 shares at $7.82 in fiscal 2023, 18,900 shares at $8.24 and 3,084 shares at $8.00 in fiscal 2022, and 24,867 shares at $8.80 in fiscal 2021, based on the market prices indicated on the date of the grants.

The Company recorded the following Stock compensation expense in its consolidated statements of income (in thousands):

	Years Ended September 30
	2023		2022		2021
Stock option grants	$	163		212		248
Annual director stock award		197		180		219
	$	360		392		467

A summary of Company stock options is presented below (in thousands, except share and per share amounts):

				Weighted		Weighted		Weighted
	Number			Average		Average		Average
	Of			Exercise		Remaining		Grant Date
Options	Shares			Price		Term (yrs)		Fair Value
Outstanding at October 1, 2020 (a)		400,722		$	14.96		6.6	$	1,749
Dividend Adjustment		148,067
Granted		78,345			10.00				275
Exercised		(13,497	)		9.17				(45	)
Forfeited		(9,632	)		13.88				(48	)
Outstanding at September 30, 2021 (b)		604,005		$	10.80		6.5	$	1,931
Dividend Adjustment		288,099
Exercised		(46,377	)		6.81				(88	)
Forfeited		(67,975	)		6.19				(112	)
Outstanding at September 30, 2022 (c)		777,752		$	7.44		5.3	$	1,731
Expired		(10,174	)		7.31				(22	)
Exercised		(17,285	)		7.31				(50	)
Outstanding at September 30, 2023		750,293		$	7.44		4.4	$	1,659
Exercisable at September 30, 2023		599,867		$	7.77		3.9	$	1,413
Vested during twelve months ended   September 30, 2023		92,797						$	171

(a) The Company stock option intrinsic values were adjusted as of January 30, 2020, the date of the extraordinary dividend. Stock option activity, including the weighted average exercise price, was not retroactively adjusted.

(b) The Company stock option intrinsic values were adjusted as of December 30, 2020, the date of the extraordinary dividend. Stock option activity, including the weighted average exercise price, was not retroactively adjusted.

(c) The Company stock option intrinsic values were adjusted as of November 15, 2021, the date of the extraordinary dividend. Stock option activity, including the weighted average exercise price, was not retroactively adjusted.

The following table summarizes information concerning stock options outstanding at September 30, 2023:

	Shares	Weighted			Weighted
Range of Exercise	Under	Average			Average
Prices per Share	Option	Exercise Price			Remaining Life
Non-exercisable:
$5.14 – $6.94	134,285			5.99		6.7
$6.95 - $9.38	16,141			7.52		5.2
	150,426		$	6.15		6.5	Years
Exercisable:
$5.14 - $6.94	219,800			6.49		5.7
$6.95 - $9.38	321,183			8.10		3.3
$9.39 - $12.68	58,884			10.72		.7
	599,867		$	7.77		3.9	Years
Total (a)	750,293		$	7.44		4.4	Years

(a) The Company stock option intrinsic values were adjusted as of November 15, 2021, the date of the extraordinary dividend. Stock option activity, including the weighted average exercise price, was not retroactively adjusted.

The aggregate intrinsic value of exercisable Company options was $537,000 and the aggregate intrinsic value of all outstanding in-the-money options was $843,000 based on the Company’s market closing price of $8.18 on

September 29, 2023 less exercise prices.

The realized tax benefit from option exercises during fiscal 2023 was $4,000. The unrecognized compensation expense of Patriot options granted as of September 30, 2023 was $191,000, which is expected to be recognized over a weighted-average period of 1.8 years.