Stock-Based Compensation

At September 30, 2016, 1,621,245 shares reserved under the Company’s stock-based compensation plans were available for future grants.

During the nine months ended September 30, 2016, 678,051 shares of restricted stock, which vest between 2016 and 2021, were granted with a weighted-average grant date fair value of $5.69. During the same period, the Company converted existing PPFS stock options into 14,222 Cascade Bancorp stock options with a weighted-average exercise price of $3.71 per share, of which 100% were vested upon conversion. During the nine months ended September 30, 2015, the Company granted 397,472 shares of restricted stock, which vest between 2016 and 2020, with a weighted-average grant date fair value of $4.98 per share. During the same period, 3,300,000 stock options, which vest over a three to five year period, were granted. The Company used the Black-Scholes option-pricing model with the following weighted-average assumptions to value options that were granted in 2015:



	2015
Dividend yield	0	%
Expected volatility	36.6	%
Risk-free interest rate	1.3	%
Expected option lives	5.0 years

The dividend yield was based on historical dividend information. The Company has not paid dividends since the third quarter of 2008 resulting in the dividend yield of 0.0%. The expected volatility was based on the historical volatility of the Company’s common stock price as adjusted for certain historical periods of extraordinary volatility in order to provide a basis for a reasonable estimate of fair value. Periods that were determined to be extraordinary were replaced with the mean volatility of like publicly-traded community banks in the western U.S. Over time, identified periods of extraordinary volatility will recede and will be replaced with the Company’s actual historical volatility. The risk-free interest rate was based on the U.S. Treasury yield curve in effect at the date of grant for periods corresponding with the expected lives of the options granted. The expected option lives represent the period of time that options are expected to be outstanding, giving consideration to vesting schedules and historical exercise and forfeiture patterns.

The Black-Scholes option-pricing model was developed for use in estimating the fair value of publicly-traded options that have no vesting restrictions and are fully transferable. The Black-Scholes model is affected by subjective assumptions, including historical volatility of the Company’s common stock price.

The following table presents the activity related to stock options for the nine months ended September 30, 2016 and 2015:



	Options		Weighted- average exercise price		Weighted- average remaining contractual term (years)	Aggregate intrinsic value (000)
Options outstanding at January 1, 2016	3,375,909		$	5.44	9.0	$	4,243.7
Granted	14,222		3.71		8.4	29.9
Canceled / forfeited	(234	)	78.08		N/A	N/A
Exercised	(1,449	)	3.61		N/A	N/A
Expired	(1,697	)	209.87		N/A	N/A
Options outstanding at September 30, 2016	3,386,751		$	5.33	8.3	$	4,240.0
Options exercisable at September 30, 2016	86,751		$	25.78	4.7	$	49.0

Options outstanding at January 1, 2015	85,901		$	34.86	5.7	$	—
Granted	3,300,000		4.79		9.3	2,046.0
Canceled / forfeited	(8,011	)	19.52		N/A	N/A
Expired	(1,691	)	$	151.20	N/A	N/A
Options outstanding at September 30, 2015	3,376,199		$	5.45	9.2	$	2,046.0
Options exercisable at September 30, 2015	63,212		39.72		4.5	$	—

Stock-based compensation expense related to stock options for the nine months ended September 30, 2016 and 2015 was $0.8 million and $0.7 million, respectively. As of September 30, 2016, there was approximately $3.6 million of unrecognized compensation cost related to non-vested stock options that will be recognized over the remaining vesting periods of the stock options.

The following table presents the activity related to non-vested restricted stock for the nine months ended September 30, 2016:



	Number of shares		Weighted- average grant date fair value per share
Non-vested as of January 1, 2016	909,410		$	6.37
Granted	678,051		5.69
Vested	(333,688	)	5.24
Canceled / forfeited	(42,317	)	4.94
Non-vested as of September 30, 2016	1,211,456		$	6.35

Non-vested restricted stock is scheduled to vest over a three to five year period. The unearned compensation on restricted stock is being amortized to expense on a straight-line basis over the estimated applicable service or vesting periods. As of September 30, 2016, unrecognized compensation cost related to non-vested restricted stock totaled approximately $5.5 million, which is expected to be recognized over the next five years. Total expense recognized by the Company for non-vested restricted stock for the nine months ended September 30, 2016 and 2015 was $1.5 million and $1.0 million, respectively. There was $0.3 million unrecognized compensation cost related to restricted stock units (“RSUs”) at September 30, 2016 and no unrecognized compensation cost related to RSUs at December 31, 2015.