On April 30, 2018, the Company’s shareholders approved the Coastal Financial Corporation 2018 Omnibus Incentive Plan (“2018 Plan”). The 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. The 2018 Plan replaces both the Company’s 2006 Stock Option and Equity Compensation Plan (“2006 Plan”) and its Directors’ Stock Bonus Plan. Existing awards under the previous plans will vest under the terms granted and no further awards will be made under these plans. Shares available to be granted under the 2018 Plan totaled 275,323 at September 30, 2020.

In January 2019, the Company granted 26,737 nonqualified stock options under the 2018 Plan to an employee, which vest ratably over 10 years. In January 2019, the Company also granted 99,100 qualified stock options under the 2018 Plan to employees, which vest ratably over 10 years.

The fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing model that uses the assumptions noted in the following table. 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.

The following assumptions were used to estimate the value of options granted under the 2018 Plan as applicable in the period indicated. There were no new stock options granted in the nine months ended September 30, 2020:

A summary of stock option activity under the 2018 Plan and 2006 Plan during the nine months ended September 30, 2020:

Options	Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
(dollars in thousands, except per share amounts)
Outstanding at December 31, 2019		784,217		$	7.73		5.95	$	6,587
Granted		-			-		-
Exercised		(13,610	)		6.07		-
Forfeited or expired		(1,000	)		14.91		-
Outstanding at September 30, 2020		769,607		$	7.75		5.21	$	3,825
Vested or expected to vest at September 30, 2020		769,607		$	7.75		5.21	$	3,825
Exercisable at September 30, 2020		333,933		$	6.43		3.89	$	1,984

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, 2020 was $28,000 and $121,000, respectively, and was $35,000 and $170,000 for the three and nine months ended September 30, 2019, respectively.

As of September 30, 2020, there was $2.0 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 weighted-average period of approximately 6.8 years. Compensation expense recorded related to stock options was $94,000 and $281,000 for the three and nine months ended September 30, 2020, respectively, and $101,000 and $295,000 for the three and nine months ended September 30, 2019, respectively.

In February 2020, the Company granted 78,756 restricted stock units under the 2018 Plan to employees, which vest ratably over 10 years. In April 2020, the Company granted 1,490 restricted stock units under the 2018 Plan to an employee, which vest ratably over 10 years. In July 2020, the Company granted 6,902 restricted stock units under the 2018 Plan to employees, which cliff vest after 5 years.

The fair value of restricted stock units 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 units are nonparticipating securities.

As of September 30, 2020, there was $1.3 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 9.2 years. Compensation expense recorded related to restricted stock units was $39,000 and $96,000 for the three and nine months ended September 30, 2020, respectively. There were no restricted stock units and no compensation expense recorded related to restricted stock units for the three and nine months ended September 30, 2019.

A summary of the Company’s nonvested shares at September 30, 2020 and changes during the nine-month period is presented below:

Nonvested shares	Shares			Weighted- Average Grant Date Fair Value		Total or Aggregate Intrinsic Value
(dollars in thousands, except per share amounts)
Nonvested shares at December 31, 2019		-		$	-	$	-
Granted		87,148			17.47
Forfeited		(2,808	)		17.81
Vested		-			-
Nonvested shares at September 30, 2020		84,340		$	17.47	$	-

In February 2020, there were 4,000 shares granted to an employee at an estimated fair value of $17.81 per share, vesting over eight years.

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, 2020, there was $65,000 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 7.3 years. Compensation expense recorded related to restricted stock awards was $2,000 and $5,000 for the three and nine months ended September 30, 2020, respectively, and was $2,000 and $5,000 for the three and nine months ended September 30, 2019, respectively.

The Company adopted and subsequently amended the Director’s Stock Bonus Plan (“Bonus Plan”). The Bonus Plan would have expired on May 31, 2018 but was replaced on April 30, 2018, when the shareholders approved the 2018 Plan.

Stock is granted to directors who attended at least 75% of the scheduled board meetings during the prior year. Grants cliff vest over two years from date awarded, contingent on the director still being a director of the Company. During the vesting period, the grants are considered participating securities.

Awards previously granted under the Bonus Plan will vest under the term granted. Under the 2018 Plan, eligible directors are granted stock with a total market value of $5,000. Directors unable to receive stock will receive cash in lieu upon completion of the vesting period. Cash awards are recognized over the vesting period and recorded in other liabilities until paid.

In February 2020, there were 2,248 shares granted to eight directors at an estimated fair value of $17.81 per share. In January 2019, there were 2,352 shares granted to seven directors at an estimated fair value of $14.91 per share. Compensation expense recorded related to the 2018 Plan totaled $8,000 and $26,000 for the three and nine months ended September 30, 2020, respectively, and $8,000 and $25,000 for the three and nine months ended September 30, 2019, respectively.

A summary of the Company’s nonvested shares at September 30, 2020 and changes during the nine-month period is presented below:

Nonvested shares	Shares			Weighted- Average Grant Date Fair Value		Total or Aggregate Intrinsic Value
(dollars in thousands, except per share amounts)
Nonvested shares at December 31, 2019		10,257		$	11.71	$	48,864
Granted		6,248			17.81
Forfeited		(3,500	)		15.35
Vested		(5,022	)		7.23
Nonvested shares at September 30, 2020		7,983		$	17.08	$	-