The 2018 Coastal Financial Corporation Omnibus Plan (2018 Plan) authorizes the Company to grant awards, including but not limited to, stock options, restricted stock units, and restricted stock awards, to eligible employees, directors or individuals that provide service to the Company, up to an aggregate of 500,000 shares of common stock. On May 24, 2021, the Company’s shareholders approved the First Amendment to the 2018 Plan, which increased the authorized plan shares by 600,000. The 2018 Plan replaces both the 2006 Plan and the Directors’ Stock Bonus Plan (2006 Plan). Existing awards will vest under the terms granted and no further awards will be granted under these prior plans. Shares available to be granted under the 2018 plan were 522,378 at September 30, 2022.

The fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing model. Expected volatilities are based on historical volatility of the Company’s stock and other factors. The Company uses the vesting term and contractual life to determine the expected life. The risk-free interest rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. Compensation expense related to unvested stock option awards is reversed at date of forfeiture.


Options	Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
	(dollars in thousands, except per share amounts; unaudited)
Outstanding at December 31, 2021	694,519	$	7.79	4.0	$	29,744
Granted	—	—
Exercised	(41,725)	$	7.46
Forfeited or expired	(8,460)	9.92
Outstanding at September 30, 2022	644,334	$	7.79	3.2	$	20,589
Vested or expected to vest at September 30, 2022	644,334	$	7.79	3.2	$	20,589
Exercisable at September 30, 2022	397,553	$	6.77	2.2	$	13,108

The total or aggregate intrinsic value (which is the amount by which the stock price exceeds the exercise price) of options exercised during the three and nine months ended September 30, 2022 was $186,000 and $1.6 million, respectively. The total or aggregate intrinsic value of options exercised during the three and nine months ended September 30, 2021 was $101,000 and $775,000, respectively.

As of September 30, 2022, there was $1.2 million of total unrecognized compensation cost related to nonvested stock options granted under the 2018 Plan and 2006 Plan. Total unrecognized compensation costs are adjusted for unvested forfeitures. The Company expects to recognize that cost over a remaining weighted-average period of approximately 4.7 years. Compensation expense recorded related to stock options was $65,000 and $253,000 for the three and nine months ended September 30, 2022, respectively and $92,000 and $273,000 for the three and nine months ended September 30, 2021, respectively.

In the first quarter of 2022, the Company granted 53,721 restricted stock units under the 2018 Plan to employees, which vest ratably over 4 years and 150 restricted stock units which vest ratably over 10 years. In the second quarter of 2022, the Company granted 9,831 restricted stock units under the 2018 Plan to employees, which vest ratably over 5 years and 7,000 restricted stock units that vest ratably over 3 years. Additionally, the Company granted 53,000 performance-based restricted stock units under the 2018 Plan to an employee, that vest on June 1, 2028, the quantity of which is dependent upon achievement of specified performance goals. In the third quarter of 2022, the Company granted 20,000 restricted stock units under the 2018 Plan to employees, which vest in two blocks: 10,000 vest after 5 years and the remaining 10,000 vest after 7.5 years.

Restricted stock units provide for an interest in Company common stock to the recipient, the underlying stock is not issued until certain conditions are met. Vesting requirements include time-based, performance-based, or market-based conditions. Recipients of restricted stock units do not pay any cash consideration to the Company for the units and the holders of the restricted units do not have voting rights. The fair value of time-based and performance-based units is equal to the fair market value of the Company’s common stock on the grant date. The fair value of market-based units is estimated on the grant date using the Monte Carlo simulation model. Compensation expense is recognized over the vesting period that the awards are based. Restricted stock units are nonparticipating securities.

As of September 30, 2022, there was $9.4 million of total unrecognized compensation cost related to nonvested restricted stock units. The Company expects to recognize that cost over the remaining weighted-average vesting period of approximately 3.6 years. Compensation expense recorded related to restricted stock units was $518,000 and $1.3 million for the three and nine months ended September 30, 2022, respectively and $133,000 and $367,000 for the three and nine months ended September 30, 2021, respectively.


Nonvested shares - RSUs	Shares	Weighted- Average Grant Date Fair Value		Total or Aggregate Intrinsic Value
	(dollars in thousands, except per share amounts; unaudited)
Nonvested shares at December 31, 2021	269,844	$	21.70	$	7,803
Granted	143,702	$	39.61
Forfeited	(5,716)	$	24.66
Vested	(26,137)	$	19.79
Nonvested shares at September 30, 2022	381,693	$	28.52	$	4,268

There were no new restricted stock awards granted in the three or nine months ended September 30, 2022. The fair value of restricted stock awards is equal to the fair value of the Company’s stock at the date of grant. Compensation expense is recognized over the vesting period that the awards are based. Restricted stock awards are participating securities.

As of September 30, 2022, there was $48,000 of total unrecognized compensation cost related to nonvested restricted stock awards. The Company expects to recognize that cost over the remaining weighted-average vesting period of approximately 5.4 years. Compensation expense recorded related to restricted stock awards was $2,000 and $7,000 for the three and nine months ended September 30, 2022, respectively and $3,000 and $132,000 for the three and nine months ended September 30, 2021, respectively.

Under the 2018 Plan, eligible directors are granted stock with a total market value of $35,000, and the Board Chair is granted stock with a total market value of $55,000. Committee chairs will receive additional stock with a market value of $2,500 for each committee chaired. Stock is granted as of each annual meeting date and will cliff vest one day prior to the next annual meeting date. During the vesting period, the grants are considered participating securities.

There were 10,396 new shares granted during the three and nine months ended September 30, 2022. As of September 30, 2022, there was $249,000 of total unrecognized compensation expense related to director restricted stock awards which the Company expects to recognize over the remaining average vesting period of approximately 0.6 years. Director compensation expense recorded related to the 2018 Plan totaled $98,000 and $196,000 for the three and nine months ended September 30, 2022, respectively, and $43,000 and $133,000 for the three and nine months ended September 30, 2021, respectively.


Nonvested shares - RSAs	Shares	Weighted- Average Grant Date Fair Value		Total or Aggregate Intrinsic Value
	(dollars in thousands, except per share amounts; unaudited)
Nonvested shares at December 31, 2021	10,203	$	23.78	$	274
Granted	10,396	$	37.30
Forfeited	—	$	—
Vested	(7,203)	$	26.27
Nonvested shares at September 30, 2022	13,396	$	32.94	$	91