TXNM has various stock-based compensation programs, which provide restricted stock awards, that are performance-based and time-based, under the PEP. Although certain PNM and TNMP employees are eligible to participate in the TXNM plans, PNM and TNMP do not have separate employee stock-based compensation plans. Performance stock awards granted under the PEP are awarded for a three-year, overlapping performance period. Performance stock awards with performance periods ended or ending in 2028 do not include market targets. Performance stock awards with performance periods ending in 2026 and 2027 are subject to achieving both performance and market targets. Other awards of restricted stock are only subject to time-based vesting requirements. Additional information concerning stock-based compensation under the PEP is contained in Note 12 of the Notes to Consolidated Financial Statements in the 2025 Annual Reports on Form 10-K.

Restricted stock under the PEP refers to awards of stock subject to vesting, performance, or market conditions rather than to shares with contractual post-vesting restrictions. Generally, the awards vest ratably over three years from the grant date of the award. However, awards with performance or market conditions vest upon satisfaction of those conditions. In addition, plan provisions provide that upon retirement, participants become 100% vested in certain stock awards. The vesting period for awards of restricted stock to non-employee members of the Board is one-year.

The stock-based compensation expense related to restricted stock awards without performance or market conditions to participants that are retirement eligible on the grant date is recognized immediately at the grant date and is not amortized. Compensation expense for other such awards is amortized over the shorter of the requisite vesting period or the period until the participant becomes retirement eligible. Compensation expense for performance-based shares is recognized ratably over the performance period as required service is provided and is adjusted periodically to reflect the level of achievement expected to be attained. Compensation expense related to market-based shares is recognized ratably over the measurement period, regardless of the actual level of achievement, provided the employees meet their service requirements. At September 30, 2026, TXNM had unrecognized expense related to stock awards of $7.8 million, which is expected to be recognized over an average of 1.75 years.

The grant date fair value for restricted stock and stock awards with internal TXNM performance targets is determined based on the market price of TXNM common stock on the date of the agreements reduced by the present value of future dividends that will not be received prior to vesting. The grant date fair value is applied to the total number of shares that are anticipated to vest, although the number of performance shares that ultimately vest cannot be determined until after the performance periods end. The grant date fair value of stock awards with market targets were determined using Monte Carlo simulation models, which provide grant date fair values that include an expectation of the number of shares to vest at the end of the measurement period. The following table summarizes the weighted-average assumptions used to determine the awards grant date fair value:


	Nine Months Ended September 30,
Restricted Shares and Performance Based Shares	2026			2025
Expected quarterly dividends per share	$	0.4225		$	0.4075
Risk-free interest rate	3.47		%	4.00		%

Market-Based Shares
Dividend yield	N/A			3.12%
Expected volatility	N/A			15.67%
Risk-free interest rate	N/A			4.12%


	Restricted Stock
	Shares	Weighted- Average Grant Date Fair Value
Outstanding at December 31, 2025	227,804	$	42.30
Granted	117,999	53.80
Released	(109,802)	43.07
Forfeited	(1,828)	47.93

Outstanding at September 30, 2026	234,173	$	47.69

Included, as granted and released, in the table above are 7,015 of restricted stock awards for participants who retired and immediately vested. Excluded from the table above are 241,046, 191,661, and 199,362 shares for the three-year performance periods ending in 2026, 2027, and 2028 that will be awarded if all performance and market criteria are achieved at maximum levels and all executives remain eligible.