Shareholders' Equity and Share-Based Payment

Performance Stock Units

During the nine months ended September 30, 2016, the Company issued performance share units (“PSUs”) to certain employees. These awards were made under the Aircastle Limited 2014 Omnibus Incentive Plan. The PSUs are denominated in share units without dividend rights, each of which is equivalent to one common share, and are subject to performance conditions and time vesting.

The PSUs vest at the end of a three year period which ends on December 31, 2018. Half of the PSUs vest on achieving relative total stockholder return goals (the "TSR PSUs") while the other half vest on attaining annual Adjusted Return on Equity goals (the "AROE PSUs"). The table below shows the PSU awards granted during the nine months ended September 30, 2016, including the number of common shares underlying the awards at the time of grant:



	Minimum	Target	Maximum
TSR PSUs	—	143,414	286,828
AROE PSUs	—	143,409	286,818
Total	—	286,823	573,646

The fair value of the time based TSR PSUs was determined at the grant date using a Monte Carlo simulation model. Included in the Monte Carlo simulation model were certain assumptions regarding a number of highly complex and subjective variables, such as expected volatility, risk-free interest rate and dividend yield. To appropriately value the award, the risk-free interest rate is estimated for the time period from the valuation date until the vesting date and the historical volatilities were estimated based on a historical time frame equal to the time from the valuation date until the end date of the performance period. The number of TSR PSUs that will ultimately vest is based on the percentile ranking of the Company’s TSR among the S&P 400 Index. The number of shares that will ultimately vest will range from 0% to 200% of the target TSR PSUs.

The number of shares vesting from the AROE PSUs at the end of the three-year performance period will depend on the Company’s Adjusted Return on Equity as measured against the targets set by the Compensation Committee annually during the performance period, consistent with the business plan approved by the Board. The maximum number of AROE PSUs for 2016 is 95,607. The fair value of the 2016 AROE PSUs was determined based on the closing market price of the Company’s common shares on the date of grant reduced by the present value of expected dividends to be paid. The number of shares that will ultimately vest will range from 0% to 200% of the target AROE PSUs.

During the nine months ended September 30, 2016, the Company granted a target of 191,216 PSUs of which 143,414 are TSR PSUs and 47,802 are AROE PSUs. The remaining 95,607 of target AROE PSUs will be considered granted upon the Compensation Committee’s setting the target AROE for the respective period. The following table summarizes the activities for our unvested PSUs for the nine months ended September 30, 2016:



	Unvested Performance Stock Units
	Target Number of Shares of TSR PSUs	Target Number of Shares of AROE PSUs	TSR PSUs Weighted Fair Value at Grant Date Using a Monte Carlo Simulation Model ($)		AROE PSUs Weighted Fair Value Equal to Adjusted Closing Stock Price on Date of Grant ($)
Unvested at December 31, 2015	—	—	$	—	$	—
Granted	143,414	47,802	25.07		19.18
Unvested as of September 30, 2016	143,414	47,802	$	25.07	$	19.18
Expected to vest after September 30, 2016	143,414	47,802	$	25.07	$	19.18

The Company incurred share-based compensation expense related to PSUs of $852 for the nine months ended September 30, 2016. As of September 30, 2016, there was $3,660 of unrecognized compensation cost related to unvested stock-based payments granted to certain employees that is expected to be recognized over a weighted-average remaining period of 2.3 years.

During the first nine months of 2016, we acquired 1,827,352 common shares at an aggregate cost of $34,423, including commissions, under the repurchase program approved by the Company’s Board of Directors on February 9, 2016. As of September 30, 2016, the dollar value of common shares remaining under this program is $96,656. We also repurchased 102,927 shares totaling $2,150 from our employees and directors to settle tax obligations related to share vesting.