Stock Based Compensation

At the annual meeting held on June 6, 2019, stockholders of the Company approved the Columbia Financial, Inc. 2019 Equity Incentive Plan ("2019 Plan") which provides for the issuance of up to 7,949,996 shares (2,271,427 restricted stock awards and 5,678,569 stock options) of Columbia Financial Inc. common stock.

On July 23, 2019, 1,389,570 shares of restricted stock were awarded, with a grant date fair value of $15.60 per share. To fund the grant of restricted common stock, the Company issued shares from authorized unissued shares. Restricted shares granted under the 2019 Plan vest in equal installments, over the performance or service periods ranging from three to five years, beginning one year from the date of grant. A portion of restricted shares awarded are performance vesting awards, which may or may not vest depending upon the attainment of certain corporate financial targets. Management recognizes compensation expense for the fair value of restricted shares on a straight line basis over the requisite performance or service period. During the three and nine months ended September 30, 2019, approximately $1.0 million in expense was recognized in regard to these awards. There was no restricted stock expense recorded for the three and nine months ended September 30, 2018. The expected future compensation expense related to the 1,389,570 non-vested restricted shares outstanding at September 30, 2019 is approximately $20.6 million over a weighted average period of 4.0 years.

The following is a summary of the Company's restricted stock activity during the nine months ended September 30, 2019:



	Number of Restricted Shares	Weighted Average Grant Date Fair Value

Outstanding, January 1, 2019	—	$	—
Granted	1,389,570	15.60
Outstanding, September 30, 2019	1,389,570	$	15.60

On July 23, 2019, options to purchase 3,707,901 shares of Company common stock were awarded, with a grant date fair value of $4.25 per option. Stock options granted under the 2019 Plan vest in equal installments over the service period of five years beginning one year from the date of grant. Stock options were granted at an exercise price of $15.60, which represents the fair value of the Company's common stock price on the grant date based on the closing market price, and have an expiration period of 10 years.

The fair value of stock options granted was estimated utilizing the Black-Scholes option pricing model using the following assumptions: expected life of 6.5 years, risk-free rate of return of 1.90%, volatility of 22.12%, and a dividend yield of 0.00%.

10. Stock Based Compensation (continued)

The expected life of the options represents the period of time that stock options are expected to be outstanding and is estimated using the simplified approach, which assumes that all outstanding options will be exercised at the midpoint of the vesting date and full contractual

term. The risk-free rate of return is based on the rates on the grant date of a U.S. Treasury Note with a term equal to the expected option life. Since the Company recently converted to a public Company and does not have sufficient historical price data, the expected volatility is based on the historical daily stock prices of a peer group of similar entities based on factors such as industry, stage of life cycle, size and financial leverage. The Company has not paid any cash dividends on its common stock.

Management recognizes expense for the fair value of these awards on a straight line basis over the requisite service period. During the three and nine months ended September 30, 2019, approximately $601,000 in expense was recognized in regard to these awards. There was no stock option expense recorded for the three and nine months ended September 30, 2018. The expected future compensation expense related to the 3,707,901 non-vested options outstanding at September 30, 2019 is $15.2 million over a weighted average period of 4.8 years.

The following is a summary of the Company's option activity during the nine months ended September 30, 2019:



	Number of Stock Options	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value

Outstanding, January 1, 2019	—	$	—	—	$	—
Granted	3,707,901	$	15.6	9.8	$	704,501
Outstanding, September 30, 2019	3,707,901	$	15.6	9.8	$	704,501
Options exercisable at September 30, 2019	—	$	—	—	$	—

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value, the difference between the Company's closing stock price on the last trading day of the period and the exercise price, multiplied by the number of in-the-money options.