In 2008 upon shareholder approval, the Bank adopted the 2008 Stock Option Plan. In 2013 upon formation of Third Coast Bancshares, Inc., the Company adopted the 2013 Stock Option Plan (the “2013 Plan”). All outstanding options from the 2008 Stock Option Plan were grandfathered into the 2013 Plan. The 2013 Plan permits the grant of stock options for up to 500,000 shares of common stock from time to time during the term of the plan, subject to adjustment upon changes in capitalization. Under the 2013 Plan, the Bank may grant either incentive stock options or nonqualified stock options to eligible directors, executive officers, key employees and non-employee shareholders of the Bank. At June 30, 2024, there were no shares remaining available for grant for future awards as all outstanding options under the 2013 Plan were grandfathered into the 2019 Omnibus Incentive Plan (see 2019 Omnibus Incentive Plan). Awards outstanding under the 2013 Plan remain in full force and effect, according to their respective terms.

On May 29, 2019, the Company’s shareholders approved the Third Coast Bancshares, Inc. 2019 Omnibus Incentive Plan (the “2019 Plan”), which was previously approved by the Company’s board of directors. Under the 2019 Plan, the Company may issue stock options, stock appreciation rights, restricted stock, restricted stock units, stock bonuses, other stock-based awards, cash awards, and dividend equivalents. On May 20, 2021, the Company’s shareholders approved an amendment to the 2019 Plan such that the maximum number of shares reserved for issuance under the 2019 Plan was increased by an additional 500,000 shares. The maximum aggregate number of shares of common stock that may be issued under the 2019 Plan is equal to the sum of (i) 800,000 shares of common stock,

(ii) the total number of shares remaining available for new awards under the 2013 Plan as of May 29, 2019, which was 152,750 shares of common stock, and (iii) any shares subject to outstanding stock options issued under the 2013 Plan to the extent that (A) any such award is forfeited or otherwise terminates or is cancelled without the delivery of shares of common stock, or (B) shares of common stock are withheld from any such award to satisfy any tax or withholding obligation, in which case the shares of common stock covered by such forfeited, terminated or cancelled award or which are equal to the number of shares of common stock withheld, will become available for issuance under the 2019 Plan. At June 30, 2024, there were 57,722 shares remaining available for grant for future awards under the 2019 Plan.

In December 2017, the Bank adopted the 2017 Non-Employee Director Stock Option Plan (the “Director Plan”). The Director Plan originally authorized the grant of stock options for up to 100,000 shares of common stock to non-employee directors of the Company pursuant to the terms of the Director Plan. During July 2018, the Company's board of directors approved the grant of stock options for 50,000 additional shares of common stock under the Director Plan, such that the Director Plan permitted the grant of stock options for up to 150,000 shares of common stock. On January 1, 2021, the Director Plan was amended and subsequently approved by the Company’s board of directors such that the aggregate number of shares of common stock to be issued pursuant to options shall not exceed 187,000 shares. Options are generally granted with an exercise price equal to the market price of the Company’s stock at the date of the grant. Option awards generally vest based on five years of continuous service and have 10-year contractual terms for non-controlling participants as defined by the Director Plan. Other grant terms can vary for controlling participants as defined by the Director Plan. At June 30, 2024, there were 13,806 shares remaining available for grant for future awards under the Director Plan.

During the six months ended June 30, 2024, the Company granted stock options under the 2019 Plan to certain directors, executive officers and other key employees of the Company. These stock options vest ratably over five years and have a 10-year contractual term. Options granted during the six months ended June 30, 2024 were granted with an exercise price ranging from $19.38 to $21.20. Options granted during the six months ended June 30, 2023 were granted with an exercise price ranging from $13.95 to $18.99.

The fair value of each option award is estimated on the grant date using the Black-Scholes option-pricing model with the following assumptions used for the options granted in the six months ended June 30, 2024: risk-free interest rate ranging from 3.84% to 4.64%, dividend yield of 0.00%; estimated volatility ranging from 23.42% to 23.56%; and expected lives of options of 7.5 years. The following assumptions were used for options granted in the six months ended June 30, 2023: risk-free interest rate ranging from 3.42% to 4.14%, dividend yield of 0.00%; estimated volatility ranging from 17.81% to 20.08%; and expected lives of options of 7.5 years. Expected volatilities are based on historical volatilities of the Company’s common stock and similar peer group averages.

For the six months ended June 30, 2024 and 2023, the Company recognized share-based compensation expense of $253,000 and $255,000, respectively, associated with stock options. For the three months ended June 30, 2024 and 2023, the Company recognized share-based compensation expense of $129,000 and $113,000, respectively, associated with stock options. As of June 30, 2024, there was approximately $1.4 million of unrecognized compensation costs related to non-vested stock options that is expected to be recognized over the remaining vesting periods. Forfeitures are recognized as they occur.

A summary of stock option activity for the six months ended June 30, 2024 and 2023 is presented below:


	June 30, 2024					June 30, 2023
	Shares Underlying Options			Weighted Average Exercise Price		Shares Underlying Options			Weighted Average Exercise Price
Outstanding at beginning of period		1,126,023		$	17.72		1,203,928		$	18.05
Granted during the period		28,500			20.17		22,500			16.77
Forfeited during the period		(48,770	)		16.57		(64,600	)		21.57
Exercised during the period		(16,908	)		11.27		—			—
Outstanding at the end of period		1,088,845		$	17.93		1,161,828		$	17.83
Options exercisable at end of period		720,685		$	16.86		654,758		$	16.06
Weighted-average grant date fair value of options granted during the period				$	7.71				$	5.43

A summary of weighted average remaining life is presented below:


	June 30, 2024						June 30, 2023
Exercise Price	Options Outstanding		Weighted Average Remaining Life (years)		Options Exercisable		Options Outstanding		Weighted Average Remaining Life (years)		Options Exercisable
$10.00 - $12.99		116,800		0.54		116,800		146,553		1.46		146,553
$13.00 - $16.99		414,495		5.10		355,285		440,275		5.99		344,905
$17.00 - $26.99		557,550		7.41		248,600		575,000		8.23		163,300
		1,088,845		5.79		720,685		1,161,828		6.52		654,758

Shares issued in connection with stock compensation awards are issued from available authorized shares.

The total intrinsic value of outstanding in-the-money stock options and outstanding in-the-money exercisable stock options were $4.8 million and $2.6 million, respectively, at June 30, 2024. The total intrinsic value of outstanding in-the-money stock options and outstanding in-the-money exercisable stock options were $843,000 and $829,000, respectively, at June 30, 2023.

The intrinsic value of stock options exercised during the six months ended June 30, 2024 was approximately $169,000. There were no stock options exercised during the six months ended June 30, 2023.

A summary of the activity in the Company’s nonvested shares for the six months ended June 30, 2024 and 2023 is as follows:


	June 30, 2024					June 30, 2023
	Shares			Weighted Average Grant Date Fair Value		Shares			Weighted Average Grant Date Fair Value
Nonvested at January 1,		447,970		$	3.94		676,270		$	3.82
Granted during the period		28,500			7.71		22,500			5.43
Vested during the period		(98,310	)		3.33		(140,900	)		3.05
Forfeited during the period		(10,000	)		3.09		(50,800	)		3.43
Nonvested at end of period		368,160		$	4.41		507,070		$	3.89

The Company had fully vested stock warrants issued in connection with the organization of the Company during 2013, which were exercisable over a ten-year period to purchase one share of common stock for each warrant held. As of December 31, 2023, all stock warrants issued in connection with the organization of the Company were exercised prior to their expiration date of July 1, 2023.

In connection with the preferred stock private placement on September 30, 2022, the Company issued warrants to purchase an aggregate of 175,000 shares of the Company's common stock (or, at the election of the warrant holder in accordance with the terms of the warrant agreement, Series B Convertible Perpetual Preferred Stock, par value $1.00 per share, or non-voting common stock, par value $1.00 per share, of the Company) (the “Preferred Warrants”) to certain investors. The Preferred Warrants have an exercise price of $22.50 per share, are fully vested, and are exercisable over a seven-year period that expires on September 30, 2029. The fair value of the warrants was approximately $380,000 on grant date and is included in additional paid in capital. The weighted average remaining contractual life of these outstanding Preferred Warrants was 5.25 years as of June 30, 2024.

A summary of the Company’s stock warrant activity for the six months ended June 30, 2024 and 2023 is presented below:


	June 30, 2024				June 30, 2023
	Shares Underlying Warrants		Weighted Average Exercise Price		Shares Underlying Warrants			Weighted Average Exercise Price
Outstanding at beginning of period		175,000	$	22.50		179,285		$	22.23
Exercised during the period		—		—		(4,285	)		11.00
Outstanding at end of period		175,000	$	22.50		175,000		$	22.50
Exercisable at end of period		175,000	$	22.50		175,000		$	22.50

The Company granted restricted stock awards (“RSAs”) to certain directors, executive officers and employees of the Company. Restricted stock is common stock with certain restrictions that relate to trading and the possibility of forfeiture. Holders of restricted stock have full voting rights. Generally, the awards vest ratably over a two-to-four year period but vesting periods may vary. The RSAs have a 10-year contractual term.

A summary of the activity for non-vested RSAs for the six months ended June 30, 2024 and 2023 is presented below:


	June 30, 2024					June 30, 2023
	Shares			Weighted Average Grant Date Fair Value		Shares			Weighted Average Grant Date Fair Value
Nonvested at beginning of period		110,224		$	17.44		76,094		$	22.35
Granted during the period		44,659			20.08		73,676			16.07
Vested during the period		(48,291	)		17.28		(6,536	)		24.70
Forfeited during the period		—			—		—			—
Nonvested at the end of period		106,592		$	19.36		143,234		$	19.01

Compensation expense for RSAs is recorded over the vesting period and is determined based on the number of restricted shares granted and the market price of our common stock at issue date. The Company recognized share-based compensation expense associated with RSAs of approximately $535,000 and $512,000 during the six months ended June 30, 2024 and 2023, respectively. For the three months ended June 30, 2024 and 2023, the Company recognized share-based compensation expense associated with RSAs of approximately $303,000 and $289,000, respectively. As of June 30, 2024, there was approximately $1.7 million of unrecognized compensation costs related to non-vested RSAs that is expected to be recognized over the remaining vesting periods.