UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(MARK ONE)

X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: June 30, 2016

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to_________

Commission file number: 000-23322

CASCADE BANCORP

(Exact name of registrant as specified in its charter)

Oregon	93-1034484
(State or other jurisdiction of incorporation)	(IRS Employer Identification No.)

1100 N.W. Wall Street

Bend, Oregon 97703

(Address of principal executive offices)

(Zip Code)

(877) 617-3400

(Registrant’s telephone number, including area code) 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x  No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x  No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:

¨ Large accelerated filer   x Accelerated filer   ¨ Non-accelerated filer   ¨ Smaller reporting company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨  No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. 76,242,859 shares of common stock, no par value, as of August 3, 2016.

CASCADE BANCORP & SUBSIDIARY

FORM 10-Q

QUARTERLY REPORT

June 30, 2016

	INDEX
		Page
PART I:  FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets:	3
	June 30, 2016 and December 31, 2015
	Condensed Consolidated Statements of Operations:	5
	Three and six months ended June 30, 2016 and 2015
	Condensed Consolidated Statements of Comprehensive Income:	6
	Three and six months ended June 30, 2016 and 2015
	Condensed Consolidated Statements of Cash Flows:	7
	Six months ended June 30, 2016 and 2015
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	40
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	57
Item 4.	Controls and Procedures	57
PART II:  OTHER INFORMATION
Item 1.	Legal Proceedings	58
Item 1A.	Risk Factors	58
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	58
Item 3.	Defaults Upon Senior Securities	58
Item 4.	Mine Safety Disclosures	58
Item 5	Other Information	58
Item 6.	Exhibits	58
SIGNATURES		60

2

PART I – FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

Cascade Bancorp & Subsidiary

Condensed Consolidated Balance Sheets

June 30, 2016 and December 31, 2015

(Dollars in thousands)

(unaudited) 

	June 30,   2016			December 31, 2015
ASSETS
Cash and cash equivalents:
Cash and due from banks	$	59,453		$	46,354
Interest bearing deposits	119,088			31,178
Federal funds sold	273			273
Total cash and cash equivalents	178,814			77,805
Investment securities available-for-sale	462,013			310,262
Investment securities held-to-maturity, estimated fair value of $148,627 at June 30, 2016; $142,260 at December 31, 2015	142,211			139,424
Federal Home Loan Bank (FHLB) stock	3,130			3,000
Loans held for sale	3,732			3,621
Loans, net	1,876,237			1,662,095
Premises and equipment, net	45,238			42,031
Bank-owned life insurance (BOLI)	54,957			54,450
Other real estate owned (OREO), net	2,993			3,274
Deferred tax asset (DTA), net	46,538			50,673
Core deposit intangible (CDI)	12,720			6,863
Goodwill	82,594			78,610
Other assets	55,397			35,921
Total assets	$	2,966,574		$	2,468,029
LIABILITIES & STOCKHOLDERS’ EQUITY
Liabilities:
Deposits:
Demand	$	876,880		$	727,730
Interest bearing demand	1,306,164			1,044,134
Savings	173,012			135,527
Time	203,898			175,697
Total deposits	2,559,954			2,083,088
Other liabilities	61,360			48,167
Total liabilities	2,621,314			2,131,255
Stockholders’ equity:
Preferred stock, no par value; 5,000,000 shares authorized; none issued or outstanding	—			—
Common stock, no par value; 100,000,000 shares authorized; 73,255,171 issued and outstanding as of June 30, 2016; 72,792,570 issued and outstanding as of December 31, 2015	453,970			452,925
Accumulated deficit	(111,008		)	(117,772		)
Accumulated other comprehensive income	2,298			1,621
Total stockholders’ equity	345,260			336,774
Total liabilities and stockholders’ equity	$	2,966,574		$	2,468,029

3

See accompanying notes to condensed consolidated financial statements.

4

Cascade Bancorp & Subsidiary

Condensed Consolidated Statements of Operations

Three and Six Months Ended June 30, 2016 and 2015

(Dollars in thousands, except per share amounts)

(unaudited)

	Three months ended    June 30,						Six months ended    June 30,
	2016			2015			2016			2015
Interest income:
Interest and fees on loans	$	19,037		$	16,987		$	36,957		$	33,481
Interest on investments	3,429			2,805			8,047			5,788
Other interest income	273			27			429			60
Total interest income	22,739			19,819			45,433			39,329
Interest expense:
Deposits:
Interest bearing demand	458			315			871			628
Savings	13			10			24			20
Time	52			136			137			359
Other borrowings	—			6			26			6
Total interest expense	523			467			1,058			1,013
Net interest income	22,216			19,352			44,375			38,316
Loan loss recovery	—			—			—			(2,000		)
Net interest income after loan loss recovery	22,216			19,352			44,375			40,316
Non-interest income:
Service charges on deposit accounts	1,729			1,249			3,101			2,510
Card issuer and merchant services fees, net	2,700			1,856			4,535			3,499
Earnings on BOLI	249			242			507			484
Mortgage banking income, net	899			677			1,394			1,465
Swap fee income	466			785			1,132			1,300
SBA gain on sales and fee income	386			144			560			506
Other income	1,342			1,742			1,998			3,053
Total non-interest income	7,771			6,695			13,227			12,817
Non-interest expense:
Salaries and employee benefits	13,089			10,588			26,118			21,718
Occupancy	1,647			1,417			4,327			2,783
Information technology	1,182			1,046			2,579			1,984
Equipment	310			395			758			752
Communications	683			484			1,293			1,025
Federal Deposit Insurance Corporation (FDIC) insurance	455			306			832			704
OREO (income) expense	(119		)	(168		)	93			(111		)
Professional services	1,060			1,289			2,658			2,246
Card issuer	1,044			643			1,953			1,506
Insurance	158			191			333			400
Other expenses	2,826			2,200			5,909			4,204
Total non-interest expense	22,335			18,391			46,853			37,211
Income before income taxes	7,652			7,656			10,749			15,922
Income tax provision	(2,828		)	(2,861		)	(3,985		)	(6,009		)
Net income	$	4,824		$	4,795		$	6,764		$	9,913
Basic and diluted income per share:
Net income per common share	$	0.07		$	0.07		$	0.09		$	0.14
Net income per common share (diluted)	$	0.07		$	0.07		$	0.09		$	0.14

See accompanying notes to condensed consolidated financial statements.

5

Cascade Bancorp & Subsidiary

Condensed Consolidated Statements of Comprehensive Income

Three and Six Months Ended June 30, 2016 and 2015

(Dollars in thousands)

(unaudited)

	Three months ended    June 30,						Six months ended    June 30,
	2016			2015			2016			2015
Net income	$	4,824		$	4,795		$	6,764		$	9,913
Other comprehensive income:
Change in unrealized gains on investment securities available-for-sale	592			(2,256		)	1,092			(727		)
Tax effect on securities	(225		)	786			(415		)	205
Total other comprehensive income	367			(1,470		)	677			(522		)
Comprehensive income	$	5,191		$	3,325		$	7,441		$	9,391

See accompanying notes to condensed consolidated financial statements.

6

Cascade Bancorp & Subsidiary

Condensed Consolidated Statements of Cash Flows

Six Months EndedJune 30, 2016 and 2015

(Dollars in thousands)

(unaudited)

	Six Months Ended June 30,
	2016			2015
Net cash provided by operating activities	$	5,412		$	25,241
Investing activities:
Purchases of investment securities available-for-sale	(217,847		)	(34,902		)
Purchases of investment securities held to maturity	(5,116		)	—
Proceeds from maturities, calls, sales and prepayments of investment securities available-for-sale	67,992			42,316
Proceeds from maturities and calls of investment securities held-to-maturity	2,170			4,572
Proceeds from redemption of FHLB stock	(130		)	22,620
Loan originations, net of collections	(213,818		)	(131,832		)
Purchases of premises and equipment	(1,244		)	144
Proceeds from sales of premises and equipment	76			26
Proceeds from sales of other assets	—			1,855
Proceeds from sales of OREO	360			865
Net cash assumed in Bank of America branch acquisition	456,611			—
Net cash provided by (used in) investing activities	89,054			(94,336		)
Financing activities:
Net increase in deposits	6,977			66,365
Tax effect of non-vested restricted stock	(434		)	(575		)
FHLB advance borrowings	257,000			95,000
Repayment of FHLB advances	(257,000		)	(95,000		)
Net cash provided by financing activities	6,543			65,790
Net increase (decrease) in cash and cash equivalents	101,009			(3,305		)
Cash and cash equivalents at beginning of period	77,805			83,089
Cash and cash equivalents at end of period	$	178,814		$	79,784
Supplemental disclosures of cash flow information:
Interest paid	$	12,608		$	2,282
Taxes paid	$	298		$	—
Loans transferred to OREO	$	—		$	1,558

See accompanying notes to condensed consolidated financial statements.

7

Cascade Bancorp & Subsidiary

Notes to Condensed Consolidated Financial Statements

 June 30, 2016

(unaudited)

1.    Basis of Presentation

The accompanying interim condensed consolidated financial statements include the accounts of Cascade Bancorp (“Bancorp”), an Oregon-chartered single bank holding company, and its wholly-owned subsidiary, Bank of the Cascades (the “Bank”) (collectively, the “Company” or “Cascade”). All significant inter-company accounts and transactions have been eliminated in consolidation.

The interim condensed consolidated financial statements have been prepared by the Company without audit and in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. Accordingly, certain financial information and footnotes have been omitted or condensed. In the opinion of management, the condensed consolidated financial statements include all adjustments (all of which are of a normal and recurring nature) necessary for the fair presentation of the results of the interim periods presented. In preparing the condensed consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the dates of the balance sheets and income and expenses for the reporting periods. Actual results could differ from those estimates. Operating results for the interim periods disclosed herein are not necessarily indicative of the results that may be expected for a full year or any future period.

The condensed consolidated financial statements as of and for the year ended December 31, 2015 were derived from the Company’s audited consolidated financial statements, but do not include all disclosures contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 (the “2015 Annual Report”). The interim condensed consolidated financial statements should be read in conjunction with the December 31, 2015 consolidated financial statements, including the notes thereto, included in the 2015 Annual Report.

2.    Business Combinations

On March 4, 2016, the Bank completed the acquisition of 12 Oregon branch locations and three Washington branch locations from Bank of America, National Association (the “branch acquisition”). This transaction allows Cascade the opportunity to enhance and strengthen its footprint in Oregon, while providing entry into the Washington market. The Bank assumed approximately $469.9 million of branch deposits, paying a 2.00% premium on the average balance of deposits assumed, for a cash purchase price of $9.7 million.

The following is a condensed balance sheet disclosing the estimated fair value amounts of the branches acquired in the branch acquisition assigned to the major consolidated asset and liability captions at the acquisition date (dollars in thousands):

ASSETS
Cash and cash equivalents	$	456,611
Premises and equipment, net	3,113
Core deposit intangibles	6,427
Goodwill	3,984
Other assets	463
Total assets	$	470,598
LIABILITIES
Deposits	$	469,889
Other liabilities	709
Total liabilities	$	470,598

The core deposit intangible asset recognized as part of the branch acquisition will be amortized over its estimated useful life of approximately 10 years.

8

Cascade Bancorp & Subsidiary

Notes to Condensed Consolidated Financial Statements

 June 30, 2016

(unaudited)

The fair value of deposit accounts assumed from the branch acquisition approximated the carrying value as checking and savings accounts have no stated maturity and are payable on demand.  Certificates of deposit were valued by comparing the contractual cost of the portfolio to a similar portfolio bearing current market rates.

Direct costs related to the branch acquisition were expensed as incurred in the quarter ended March 31, 2016. Such expenses primarily related to professional and legal services, human resource costs and information system charges. For the quarter ended March 31, 2016, the Company incurred $2.3 million of expenses related to the branch acquisition.

Pro forma income statements are not being presented as the information is not practicable to produce.

3.    Investment Securities

The following table presents investment securities at June 30, 2016 and December 31, 2015, showing that available-for-sale and held-to-maturity securities increased from December 31, 2015 primarily due to redeployment of cash assumed in the branch acquisition into securities (dollars in thousands):

	Amortized cost		Gross unrealized gains		Gross unrealized losses			Estimated fair value
June 30, 2016
Available-for-sale
U.S. Agency mortgage-backed securities (MBS)	$	186,317	$	3,165	$	(149	)	$	189,333
Non-agency MBS	229,512		916		(426		)	230,002
Corporate securities	41,947		197		(1		)	42,143
Mutual fund	531		4		—			535
	$	458,307	$	4,282	$	(576	)	$	462,013
Held-to-maturity
U.S. Agency MBS	$	102,729	$	4,399	$	(3	)	$	107,125
Obligations of state and political subdivisions	39,061		2,020		—			41,081
Tax credit investments	421		—		—			421
	$	142,211	$	6,419	$	(3	)	$	148,627
December 31, 2015
Available-for-sale
U.S. Agency MBS	$	154,691	$	2,698	$	(455	)	$	156,934
Non-agency MBS	118,765		477		(1,016		)	118,226
U.S. Agency asset-backed securities	7,468		800		(23		)	8,245
Corporate securities	26,199		121		—			26,320
Mutual fund	525		12		—			537
	$	307,648	$	4,108	$	(1,494	)	$	310,262
Held-to-maturity
U.S. Agency MBS	$	98,800	$	1,875	$	(5	)	$	100,670
Obligations of state and political subdivisions	421		—		—			421
Tax credit investments	40,203		968		(2		)	41,169
	$	139,424	$	2,843	$	(7	)	$	142,260

9

Cascade Bancorp & Subsidiary

Notes to Condensed Consolidated Financial Statements

 June 30, 2016

(unaudited)

The following table presents the contractual maturities of investment securities at June 30, 2016 (dollars in thousands):

	Available-for-sale				Held-to-maturity
	Amortized cost		Estimated fair value		Amortized cost		Estimated fair value
Due in one year or less	$	9,506	$	9,566	$	—	$	—
Due after one year through five years	45,779		46,016		30,531		31,294
Due after five years through ten years	36,761		37,004		88,812		93,726
Due after ten years	365,730		368,892		22,447		23,186
Mutual fund	531		535		—		—
Tax credit investments	—		—		421		421
	$	458,307	$	462,013	$	142,211	$	148,627

The following table presents the fair value and gross unrealized losses of the Bank’s investment securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at June 30, 2016 and December 31, 2015 (dollars in thousands):

	Less than 12 months					12 months or more					Total
	Estimated  fair value		Unrealized losses			Estimated  fair value		Unrealized losses			Estimated  fair value		Unrealized losses
June 30, 2016
Available-for-sale
U.S. Agency MBS	$	50,351	$	(145	)	$	269	$	(4	)	$	50,620	$	(149	)
Non-Agency MBS	74,564		(426		)	—		—			74,564		(426		)
Corporate Securities	1,986		(1		)	—		—			1,986		(1		)
	$	126,901	$	(572	)	$	269	$	(4	)	$	127,170	$	(576	)
Held-to-maturity
U.S. Agency MBS	$	5,070	$	(3	)	$	—	$	—		$	5,070	$	(3	)
	$	5,070	$	(3	)	$	—	$	—		$	5,070	$	(3	)
December 31, 2015
Available-for-sale
U.S. Agency MBS	$	23,630	$	(123	)	$	34,576	$	(332	)	$	58,206	$	(455	)
Non-Agency MBS	66,412		(765		)	12,225		(251		)	78,637		(1,016		)
U.S. Agency asset-backed securities	—		—			1,521		(23		)	1,521		(23		)
	$	90,042	$	(888	)	$	48,322	$	(606	)	$	138,364	$	(1,494	)
Held-to-maturity
U.S. Agency MBS	2,063		(5		)	—		—			$	2,063	$	(5	)
Obligations of state and political subdivisions	725		(2		)	—		—			725		(2		)
	$	2,788	$	(7	)	$	—	$	—		$	2,788	$	(7	)

The unrealized losses on investments in U.S. Agency and non-agency MBS and U.S. Agency asset-backed securities are primarily due to changes in market yield/rate spreads at June 30, 2016 and December 31, 2015 as compared to yield/rate spread relationships prevailing at the time specific investment securities were purchased. Management expects the fair value of these investment

10

Cascade Bancorp & Subsidiary

Notes to Condensed Consolidated Financial Statements

 June 30, 2016

(unaudited)

securities to recover as securities approach their maturity dates. Management does not believe that the above gross unrealized losses on investment securities are other-than-temporary. Accordingly, no impairment adjustments have been recorded.

Management intends to hold the investment securities classified as held-to-maturity until they mature, at which time the Company will receive full amortized cost value for such investment securities. Furthermore, as of June 30, 2016, management did not have the intent to sell any of the securities classified as held-to-maturity in the table above and believes that it is more likely than not that the Company will not have to sell any such securities before a recovery of cost.

4.Loans and reserve for credit losses

 The composition of the loan portfolio at June 30, 2016 and December 31, 2015 was as follows (dollars in thousands):

11

Cascade Bancorp & Subsidiary

Notes to Condensed Consolidated Financial Statements

 June 30, 2016

(unaudited)

	June 30, 2016					December 31, 2015
	Amount			Percent		Amount			Percent
Originated loans (a):
Commercial real estate:
Owner occupied	$	280,421		16.5	%	$	263,095		18.1	%
Non-owner occupied	462,163			27.3	%	431,379			29.7	%
Total commercial real estate loans	742,584			43.8	%	694,474			47.8	%
Construction	151,914			9.0	%	119,723			8.2	%
Residential real estate	369,802			21.8	%	237,084			16.3	%
Commercial and industrial	389,319			23.0	%	363,335			25.0	%
Consumer	40,231			2.4	%	38,362			2.7	%
Total loans	1,693,850			100.0	%	1,452,978			100.0	%
Less:
Deferred loan fees	(1,808		)			(1,419		)
Reserve for loan losses	(24,666		)			(24,415		)
Loans, net	$	1,667,376				$	1,427,144
Acquired loans (b):
Commercial real estate:
Owner occupied	$	40,354		19.2	%	$	45,236		19.3	%
Non-owner occupied	85,144			40.8	%	95,183			40.5	%
Total commercial real estate loans	125,498			60.0	%	140,419			59.8	%
Construction	9,967			4.8	%	10,629			4.5	%
Residential real estate	51,532			24.7	%	61,306			26.1	%
Commercial and industrial	20,713			9.9	%	21,109			9.0	%
Consumer	1,151			0.6	%	1,488			0.6	%
Total loans	$	208,861		100.0	%	$	234,951		100.0	%
Total loans:
Commercial real estate:
Owner occupied	$	320,775		16.9	%	$	308,331		18.3	%
Non-owner occupied	547,307			28.8	%	526,562			31.2	%
Total commercial real estate loans	868,082			45.7	%	834,893			49.5	%
Construction	161,881			8.5	%	130,352			7.7	%
Residential real estate	421,334			22.1	%	298,390			17.7	%
Commercial and industrial	410,032			21.5	%	384,444			22.8	%
Consumer	41,382			2.2	%	39,850			2.3	%
Total loans	1,902,711			100.0	%	1,687,929			100.0	%
Less:
Deferred loan fees	(1,808		)			(1,419		)
Reserve for loan losses	(24,666		)			(24,415		)
Loans, net	$	1,876,237				$	1,662,095
(a) Originated loans are loans organically made through the Company’s normal and customary origination process, including adjustable rate mortgage ("ARM") purchases.
(b) Acquired loans are loans acquired in the acquisition of Home Federal Bancorp, Inc.

The following describes the distinction between originated and acquired loan portfolios and certain significant accounting policies relevant to each of these portfolios.

12

Cascade Bancorp & Subsidiary

Notes to Condensed Consolidated Financial Statements

 June 30, 2016

(unaudited)

Originated loans

Loans originated for investment are stated at their principal amount outstanding adjusted for partial charge-offs, the reserve for loan losses and net deferred loan fees and costs. Interest income on loans is accrued over the term of the loans. Interest is not accrued on loans where collectability is uncertain. Accrued interest on loans is presented in “Other assets” on the condensed consolidated balance sheet. Loan origination fees and certain direct costs incurred to extend credit are deferred and amortized over the term of the loan as an adjustment to the related loan yield.

Approximately 74.6% of the Bank’s originated loan portfolio at June 30, 2016 consisted of real estate-related loans, including construction and development loans, residential mortgage loans, and commercial loans secured by commercial real estate. At June 30, 2016, approximately 76.3% of the Bank’s total portfolio (inclusive of acquired loans) consisted of real estate-related loans as described above. The Bank’s results of operations and financial condition are affected by general economic trends and in particular, the strength of the local residential and commercial real estate markets in Central, Southern and Northwest Oregon, as well as the greater Boise/Treasure Valley, Idaho and Seattle, Washington metro areas. Real estate values could be affected by, among other things, a worsening of national and local economic conditions, an increase in foreclosures, a decline in home sale volumes, and an increase in interest rates. Furthermore, the Bank may experience an increase in the number of borrowers who become delinquent, file for protection under bankruptcy laws, or default on their loans or other obligations to the Bank in the event of a sustained downturn in business and economic conditions generally or specifically in the principal markets in which the Bank does business. An increase in the number of delinquencies, bankruptcies, or defaults could result in a higher level of non-performing assets, net charge-offs, and loan loss provision. Management expects to diversify its commercial real estate (“CRE”) concentration over time, but real estate-related loans will remain a significant portfolio component due to the nature of the economies, businesses, and markets the Bank serves.

In the normal course of business, the Bank may participate portions of loans to third parties in order to extend the Bank’s lending capability or to mitigate risk. At June 30, 2016 and December 31, 2015, the portion of loans participated to third parties (which are not included in the accompanying condensed consolidated financial statements) totaled $48.9 million and $44.2 million, respectively.

Acquired loans

Acquired loans are those purchased in the Company’s acquisition of Home Federal Bancorp, Inc. (“Home”), which was completed on May 16, 2014 (the “Acquisition Date”). These loans were recorded at estimated fair value at the Acquisition Date. The fair value estimates for acquired loans are based on expected prepayments, charge-offs and the amount and timing of undiscounted expected principal, interest and other cash flows. The net fair value adjustment to the acquired loans at acquisition was a reduction of $6.0 million, representing a valuation adjustment for interest rate and credit which will be accreted over the life of the loans (approximately 10 years). As of June 30, 2016, the remaining net fair value adjustment was $2.1 million.

Of the loans acquired on the Acquisition Date and still held at June 30, 2016, $7.0 million, or 3.4%, were graded substandard. With the amount of classified loans acquired being nominal, all loans acquired are treated in a manner consistent with originated loans for credit risk management and accounting purposes.

As of June 30, 2016, $24.0 million, or 11.5% of the $208.9 million in acquired loans were covered under loss sharing agreements with the FDIC (“covered loans”). The agreements were entered into in September 2009 and September 2010 between the FDIC and Home. The loss sharing agreements have limited terms (10 years for net losses on single-family residential real estate loans, as defined by the FDIC, five years for losses on non-residential real estate loans, as defined by the FDIC, and an additional three years with respect to recoveries on non-residential real estate loans). After the expiration of the loss sharing agreements, the Company will not be indemnified for losses and related expenses on covered loans. When the loss sharing agreements expire, the Company’s and the Bank’s risk-based capital ratios will be reduced. While the agreements are in place, the covered loans receive a 20% risk-weighting. When the agreements expire, the risk-weighting for previously covered loans will most likely increase to 100%, based on current regulatory capital definitions. Nearly all of the assets remaining in the covered loans portfolios are non-single family covered loans. Therefore, most of the covered loans were no longer indemnified after September 30, 2014 or were no longer indemnified after September 30, 2015. With the amount of classified loans covered under these agreements being nominal, amounts that may be due to or due from the FDIC under loss sharing agreements will be accounted for on a cash basis.

A net loss share payable was recorded at the Acquisition Date which represents the estimated value of reimbursement the Company

13

Cascade Bancorp & Subsidiary

Notes to Condensed Consolidated Financial Statements

 June 30, 2016

(unaudited)

expects to pay to the FDIC for recoveries net of incurred losses on covered loans. These expected reimbursements are recorded as part of covered loans in the accompanying consolidated balance sheets. Upon the determination of an incurred loss or recovery, the loss share receivable/payable will be changed by the amount due to or due from the FDIC.

Changes in the loss share payable associated with covered loans for the three and six months ended June 30, 2016 were as follows (dollars in thousands):

	Three months ended			Six months ended
	June 30, 2016
Balance at beginning of period	$	367		$	289
Paid to FDIC	(367		)	(656		)
Increase due to impairment	(53		)	(53		)
FDIC reimbursement	252			680
Shared loss expenses	(2		)	(63		)
Adjustments from prior periods	4			4
Balance at end of period	$	201		$	201

Reserve for loan losses

The reserve for loan losses represents management’s estimate of known and inherent losses in the loan portfolio as of the condensed consolidated balance sheet date and is recorded as a reduction to loans. The reserve for loan losses is increased by charges to operating expense through the loan loss provision, and decreased by loans charged-off, net of recoveries. The reserve for loan losses requires complex subjective judgments as a result of the need to make estimates about matters that are uncertain. The reserve for loan losses is maintained at a level currently considered adequate to provide for potential loan losses based on management’s assessment of various factors affecting the loan portfolio.

However, the reserve for loan losses is based on estimates and actual losses may vary from the current estimates. These estimates are reviewed periodically, and, as adjustments become necessary, they are reported in earnings in the periods in which they become known. Therefore, management cannot provide assurance that, in any particular period, the Company will not have significant losses in relation to the amount reserved. The level of the reserve for loan losses is also determined after consideration of bank regulatory guidance and recommendations and is subject to review by such regulatory authorities who may require increases or decreases to the reserve based on their evaluation of the information available to them at the time of their examinations of the Bank.

For purposes of assessing the appropriate level of the reserve for loan losses, the Company analyzes loans and commitments to loan, and the amount of reserves allocated to loans and commitments to loan in each of the following reserve categories: pooled reserves, specifically identified reserves for impaired loans, and the unallocated reserve. Also, for purposes of analyzing loan portfolio credit quality and determining the appropriate level of reserve for loan losses, the Company identifies loan portfolio segments and classes based on the nature of the underlying loan collateral.

Risk ratings for individual shared national credits ("SNCs") are estimated using analysis of both public debt ratings and internal ratings. Expected loss rates are determined based upon historical published specific loss data for similar loans based on average losses and losses stratified by public debt ratings. Public ratings combined with internal risk rates are used to determine a minimum historical loss factor for each SNC loan. This amount may be increased for qualitative conditions including macroeconomic environment and observations by the Company’s SNC management group. The SNC lending strategy is intended to diversify the Company’s credit risk profile geographically and by industry. Additionally, such loans enhance the Company’s interest rate risk profile as they float with LIBOR rates.

The increase in the reserve for loan losses from December 31, 2015 to June 30, 2016 was related to net recoveries during the period. The unallocated reserve for loan losses at June 30, 2016 has increased $0.9 million from the balance at December 31, 2015. Management believes that the amount of unallocated reserve for loan losses is appropriate and will continue to evaluate the amount going forward.

14

Cascade Bancorp & Subsidiary

Notes to Condensed Consolidated Financial Statements

 June 30, 2016

(unaudited)

Acquired reserve for loan losses

The fair value estimates for acquired loans are based on expected prepayments, charge-offs, and the amount and timing of undiscounted expected principal, interest and other cash flows. The net fair value adjustment to the acquired loans was $6.0 million, representing a valuation adjustment for interest rate and credit quality. The credit portion of the fair value adjustment not accreted at any point in time represents the estimated reserve for loan losses for acquired loans. If the Company determines that this amount is insufficient, a provision to the reserve for loan losses will be made. As of June 30, 2016, the remaining net fair value adjustment was $2.1 million, and no additional reserve for acquired loans was required.

Transactions and allocations in the reserve for loan losses and unfunded loan commitments, by portfolio segment, for the three and six months ended June 30, 2016 and 2015 were as follows (dollars in thousands):

	Commercial real estate			Construction		Residential real estate			Commercial  and  industrial			Consumer			Unallocated			Total
For the three months ended June 30, 2016
Allowance for Loan Losses
Balance at March 31, 2016	$	3,846		$	1,098	$	2,392		$	12,497		$	959		$	3,638		$	24,430
Loan loss provision (credit)	556			120		281			(917		)	216			(256		)	—
Recoveries	(11		)	41		47			603			243			—			923
Loans charged off	—			—		(46		)	(201		)	(440		)	—			(687		)
Balance at end of period	$	4,391		$	1,259	$	2,674		$	11,982		$	978		$	3,382		$	24,666
Reserve for unfunded lending commitments
Balance at March 31, 2016	$	48		$	268	$	25		$	75		$	24		$	—		$	440
Provision for unfunded loan commitments	—			—		—			—			—			—			—
Balance at end of period	$	48		$	268	$	25		$	75		$	24		$	—		$	440
Reserve for credit losses
Reserve for loan losses	$	4,391		$	1,259	$	2,674		$	11,982		$	978		$	3,382		$	24,666
Reserve for unfunded lending commitments	48			268		25			75			24			—			440
Total reserve for credit losses	$	4,439		$	1,527	$	2,699		$	12,057		$	1,002		$	3,382		$	25,106

15

Cascade Bancorp & Subsidiary

Notes to Condensed Consolidated Financial Statements

 June 30, 2016

(unaudited)

	Commercial real estate			Construction		Residential real estate			Commercial  and  industrial			Consumer			Unallocated		Total
For the six months ended June 30, 2016
Allowance for Loan Losses
Balance at December 31, 2015	$	3,934		$	1,044	$	2,075		$	13,969		$	917		$	2,476	$	24,415
Loan loss provision (credit)	(2,221		)	136		486			212			481			906		—
Recoveries	2,718			79		177			762			507			—		4,243
Loans charged off	(40		)	—		(64		)	(2,961		)	(927		)	—		(3,992		)
Balance at end of period	$	4,391		$	1,259	$	2,674		$	11,982		$	978		$	3,382	$	24,666
Reserve for unfunded lending commitments
Balance at December 31, 2015	$	48		$	268	$	25		$	75		$	24		$	—	$	440
Provision for unfunded loan commitments	—			—		—			—			—			—		—
Balance at end of period	$	48		$	268	$	25		$	75		$	24		$	—	$	440
Reserve for credit losses
Reserve for loan losses	$	4,391		$	1,259	$	2,674		$	11,982		$	978		$	3,382	$	24,666
Reserve for unfunded lending commitments	48			268		25			75			24			—		440
Total reserve for credit losses	$	4,439		$	1,527	$	2,699		$	12,057		$	1,002		$	3,382	$	25,106

16

Cascade Bancorp & Subsidiary

Notes to Condensed Consolidated Financial Statements

 June 30, 2016

(unaudited)

	Commercial real estate			Construction		Residential real estate			Commercial  and  industrial			Consumer			Unallocated			Total
For the three months ended June 30, 2015
Allowance for Loan Losses
Balance at March 31, 2015	$	4,781		$	1,255	$	2,512		$	11,359		$	978		$	2,359		$	23,244
Loan loss provision (credit)	38			78		(175		)	(166		)	290			(65		)	—
Recoveries	216			23		260			344			162			—			1,005
Loans charged off	(3		)	—		(134		)	(182		)	(429		)	—			(748		)
Balance at end of period	$	5,032		$	1,356	$	2,463		$	11,355		$	1,001		$	2,294		$	23,501
Reserve for unfunded lending commitments
Balance at March 31, 2015	$	48		$	268	$	25		$	75		$	24		$	—		$	440
Provision for unfunded loan commitments	—			—		—			—			—			—			—
Balance at end of period	$	48		$	268	$	25		$	75		$	24		$	—		$	440
Reserve for credit losses
Reserve for loan losses	$	5,032		$	1,356	$	2,463		$	11,355		$	1,001		$	2,294		$	23,501
Reserve for unfunded lending commitments	48			268		25			75			24			—			440
Total reserve for credit losses	$	5,080		$	1,624	$	2,488		$	11,430		$	1,025		$	2,294		$	23,941

	Commercial real estate			Construction		Residential real estate			Commercial  and  industrial			Consumer			Unallocated			Total
For the six months ended June 30, 2015
Allowance for Loan Losses
Balance at December 31, 2014	$	5,614		$	1,133	$	2,121		$	6,844		$	1,047		$	5,294		$	22,053
Loan loss provision (credit)	(3,909		)	101		101			4,270			437			(3,000		)	(2,000		)
Recoveries	3,606			122		585			555			277			—			5,145
Loans charged off	(279		)	—		(344		)	(314		)	(760		)	—			(1,697		)
Balance at end of period	$	5,032		$	1,356	$	2,463		$	11,355		$	1,001		$	2,294		$	23,501
Reserve for unfunded lending commitments
Balance at December 31, 2014	$	48		$	268	$	25		$	75		$	24		$	—		$	440
Provision for unfunded loan commitments	—			—		—			—			—			—			—
Balance at end of period	$	48		$	268	$	25		$	75		$	24		$	—		$	440
Reserve for credit losses
Reserve for loan losses	$	5,032		$	1,356	$	2,463		$	11,355		$	1,001		$	2,294		$	23,501
Reserve for unfunded lending commitments	48			268		25			75			24			—			440
Total reserve for credit losses	$	5,080		$	1,624	$	2,488		$	11,430		$	1,025		$	2,294		$	23,941

17

Cascade Bancorp & Subsidiary

Notes to Condensed Consolidated Financial Statements

 June 30, 2016

(unaudited)

An individual loan is impaired when, based on current information and events, management believes that it is probable that the Bank will be unable to collect all amounts due according to the contractual terms of the loan agreement. The following table presents the reserve for loan losses and the recorded investment in loans by portfolio segment and impairment evaluation method at June 30, 2016 and December 31, 2015 (dollars in thousands):

	Reserve for loan losses						Recorded investment in loans
	Individually evaluated for impairment		Collectively evaluated for impairment		Total		Individually evaluated for impairment		Collectively evaluated for impairment		Total
June 30, 2016
Commercial real estate	$	74	$	4,317	$	4,391	$	4,547	$	863,535	$	868,082
Construction	—		1,259		1,259		—		161,881		161,881
Residential real estate	—		2,674		2,674		—		421,334		421,334
Commercial and industrial	78		11,904		11,982		7,453		402,579		410,032
Consumer	—		978		978		—		41,382		41,382
	$	152	$	21,132	21,284		$	12,000	$	1,890,711	$	1,902,711
Unallocated					3,382
					$	24,666
December 31, 2015
Commercial real estate	$	78	$	3,856	$	3,934	$	3,835	$	831,058	$	834,893
Construction	—		1,044		1,044		365		129,987		130,352
Residential real estate	—		2,075		2,075		18		298,372		298,390
Commercial and industrial	164		13,805		13,969		2,724		381,720		384,444
Consumer	—		917		917		—		39,850		39,850
	$	242	$	21,697	21,939		$	6,942	$	1,680,987	$	1,687,929
Unallocated					2,476
					$	24,415

The above reserve for loan losses includes an unallocated allowance of $3.4 million at June 30, 2016 and $2.5 million at December 31, 2015. The change in the unallocated allowance is mainly due to uncertainty associated with risk inherent in entering new loan markets and/or geographies, as well as, general uncertainty related to growth and economic conditions.

The Company uses credit risk ratings, which reflect the Bank’s assessment of a loan’s risk or loss potential, for purposes of assessing the appropriate level of reserve for loan losses. The Bank’s credit risk rating definitions along with applicable borrower characteristics for each credit risk rating are as follows:

Acceptable

The borrower is a reasonable credit risk and demonstrates the ability to repay the loan from normal business operations. Loans are generally made to companies operating in an economy and/or industry that is generally sound. The borrower tends to operate in regional or local markets and has achieved sufficient revenues for the business to be financially viable. The borrowers financial performance has been consistent in normal economic times and has been average or better than average for its industry.

A loan can also be considered Acceptable even though the borrower may have some vulnerability to downturns in the economy due to marginally satisfactory working capital and debt service cushion. Availability of alternate financing sources may be limited or nonexistent. In some cases, the borrower’s management may have limited depth or continuity but is still considered capable. An adequate primary source of repayment is identified while secondary sources may be illiquid, more speculative, less readily identified, or reliant upon collateral liquidation. Loan agreements will be well defined, including several financial performance

18

Cascade Bancorp & Subsidiary

Notes to Condensed Consolidated Financial Statements

 June 30, 2016

(unaudited)

covenants and detailed operating covenants. This category also includes commercial loans to individuals with average or better than average capacity to repay.

Pass-Watch

Loans are graded Pass-Watch when temporary situations increase the level of the Bank’s risk associated with the loan, and remain graded Pass-Watch until the situation has been corrected. These situations may involve one or more weaknesses in cash flow, collateral value or indebtedness that could, if not corrected within a reasonable period of time, jeopardize the full repayment of the debt. In general, loans in this category remain adequately protected by the borrower’s net worth and paying capacity, or pledged collateral.

Special Mention

A Special Mention credit has potential weaknesses that may, if not checked or corrected, weaken the loan or leave the Bank inadequately protected at some future date. Loans in this category are deemed by management of the Bank to be currently protected but reflect potential problems that warrant more than the usual management attention but do not justify a Substandard classification.

Substandard

Substandard loans are those inadequately protected by the net worth and paying capacity of the obligor and/or by the value of the pledged collateral, if any. Substandard loans have a high probability of payment default or they have other well-defined weaknesses. They require more intensive supervision and borrowers are generally characterized by current or expected unprofitable operations, inadequate debt service coverage, inadequate liquidity, or marginal capitalization. Repayment may depend on collateral or other credit risk mitigants.

CRE and construction loans are classified Substandard when well-defined weaknesses are present which jeopardize the orderly liquidation of the loan. Well-defined weaknesses include a project’s lack of marketability, inadequate cash flow or collateral support, failure to complete construction on time, and/or the project’s failure to fulfill economic expectations. These loans are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.

Substandard loans also include impaired loans. Impaired loans bear the characteristics of Substandard loans as described above, and the Company has determined it does not expect timely payment of all contractually due interest and principal. Impaired loans may be adequately secured by collateral.

During the six months ended June 30, 2016, the Bank saw relatively steady credit quality metrics. An improvement in Special Mention loans was partially offset by an increase in the Substandard portfolio. Increases in the Substandard loan balances were largely due to certain energy/mining sector shared national credits included in commercial and industrial ("C&I") loans. Aggregate portfolio exposure to the energy/mining sector is less than 1% of total loans outstanding.

19

Cascade Bancorp & Subsidiary

Notes to Condensed Consolidated Financial Statements

 June 30, 2016

(unaudited)

The following table presents, by portfolio class, the recorded investment in loans by internally assigned grades at June 30, 2016 and December 31, 2015 (dollars in thousands):

	Loan grades
	Acceptable		Pass-Watch		Special Mention		Substandard		Total
June 30, 2016
Originated loans (a):
Commercial real estate:
Owner occupied	$	266,099	$	6,884	$	975	$	6,463	$	280,421
Non-owner occupied	449,614		3,745		4,863		3,941		462,163
Total commercial real estate loans	715,713		10,629		5,838		10,404		742,584
Construction	151,914		—		—		—		151,914
Residential real estate	369,300		—		—		502		369,802
Commercial and industrial	347,274		13,338		5,422		23,285		389,319
Consumer	40,229		—		—		2		40,231
	$	1,624,430	$	23,967	$	11,260	$	34,193	$	1,693,850
Acquired loans (b):
Commercial real estate:
Owner occupied	$	34,862	$	3,445	$	1,213	$	834	$	40,354
Non-owner occupied	71,307		881		8,351		4,605		85,144
Total commercial real estate loans	106,169		4,326		9,564		5,439		125,498
Construction	9,899		—		—		68		9,967
Residential real estate	50,690		—		—		842		51,532
Commercial and industrial	19,958		92		—		663		20,713
Consumer	1,151		—		—		—		1,151
	$	187,867	$	4,418	$	9,564	$	7,012	$	208,861
Total loans:
Commercial real estate:
Owner occupied	$	300,961	$	10,329	$	2,188	$	7,297	$	320,775
Non-owner occupied	520,921		4,626		13,214		8,546		547,307
Total commercial real estate loans	821,882		14,955		15,402		15,843		868,082
Construction	161,813		—		—		68		161,881
Residential real estate	419,990		—		—		1,344		421,334
Commercial and industrial	367,232		13,430		5,422		23,948		410,032
Consumer	41,380		—		—		2		41,382
	$	1,812,297	$	28,385	$	20,824	$	41,205	$	1,902,711
(a) Originated loans are loans organically made through the Company’s normal and customary origination process, including ARM purchases.
(b) Acquired loans are loans acquired in the acquisition of Home.

20

Cascade Bancorp & Subsidiary

Notes to Condensed Consolidated Financial Statements

 June 30, 2016

(unaudited)

	Loan grades
	Acceptable		Pass-Watch		Special Mention		Substandard		Total
December 31, 2015
Originated loans (a):
Commercial real estate:
Owner occupied	$	243,113	$	8,623	$	1,426	$	9,933	$	263,095
Non-owner occupied	411,137		9,825		4,522		5,895		431,379
Total commercial real estate loans	654,250		18,448		5,948		15,828		694,474
Construction	118,752		—		971		—		119,723
Residential real estate	236,574		—		—		510		237,084
Commercial and industrial	328,934		11,220		13,729		9,452		363,335
Consumer	38,350		—		—		12		38,362
	$	1,376,860	$	29,668	$	20,648	$	25,802	$	1,452,978
Acquired loans (b):
Commercial real estate:
Owner occupied	$	34,081	$	3,480	$	7,341	$	334	$	45,236
Non-owner occupied	71,334		2,751		9,386		11,712		95,183
Total commercial real estate loans	105,415		6,231		16,727		12,046		140,419
Construction	10,597		—		—		32		10,629
Residential real estate	60,151		—		—		1,155		61,306
Commercial and industrial	17,034		153		3,461		461		21,109
Consumer	1,485		—		—		3		1,488
	$	194,682	$	6,384	$	20,188	$	13,697	$	234,951
Total loans:
Commercial real estate:
Owner occupied	$	277,194	$	12,103	$	8,767	$	10,267	$	308,331
Non-owner occupied	482,471		12,576		13,908		17,607		526,562
Total commercial real estate loans	759,665		24,679		22,675		27,874		834,893
Construction	129,349		—		971		32		130,352
Residential real estate	296,725		—		—		1,665		298,390
Commercial and industrial	345,968		11,373		17,190		9,913		384,444
Consumer	39,835		—		—		15		39,850
	$	1,571,542	$	36,052	$	40,836	$	39,499	$	1,687,929
(a) Originated loans are loans organically made through the Company’s normal and customary origination process, including ARM purchases.
(b) Acquired loans are loans acquired in the acquisition of Home.

The following table presents, by portfolio class, an age analysis of past due loans, including loans placed on non-accrual at June 30, 2016 and December 31, 2015 (dollars in thousands):

21

Cascade Bancorp & Subsidiary

Notes to Condensed Consolidated Financial Statements

 June 30, 2016

(unaudited)

	30-89 days past due		90 days or more past due		Total past due		Current		Total loans
June 30, 2016
Originated loans (a):
Commercial real estate:
Owner occupied	$	211	$	719	$	930	$	279,491	$	280,421
Non-owner occupied	—		—		—		462,163		462,163
Total commercial real estate loans	211		719		930		741,654		742,584
Construction	72		—		72		151,842		151,914
Residential real estate	1,494		—		1,494		368,308		369,802
Commercial and industrial	396		170		566		388,753		389,319
Consumer	145		2		147		40,084		40,231
	$	2,318	$	891	$	3,209	$	1,690,641	$	1,693,850
Acquired loans (b):
Commercial real estate:
Owner occupied	$	13	$	—	$	13	$	40,341	$	40,354
Non-owner occupied	—		—		—		85,144		85,144
Total commercial real estate loans	13		—		13		125,485		125,498
Construction	—		26		26		9,941		9,967
Residential real estate	1,275		280		1,555		49,977		51,532
Commercial and industrial	228		9		237		20,476		20,713
Consumer	64		—		64		1,087		1,151
	$	1,580	$	315	$	1,895	$	206,966	$	208,861
Total loans:
Commercial real estate:
Owner occupied	$	224	$	719	$	943	$	319,832	$	320,775
Non-owner occupied	—		—		—		547,307		547,307
Total commercial real estate loans	224		719		943		867,139		868,082
Construction	72		26		98		161,783		161,881
Residential real estate	2,769		280		3,049		418,285		421,334
Commercial and industrial	624		179		803		409,229		410,032
Consumer	209		2		211		41,171		41,382
	$	3,898	$	1,206	$	5,104	$	1,897,607	$	1,902,711
December 31, 2015
Originated loans (a):
Commercial real estate:
Owner occupied	$	1,020	$	719	$	1,739	$	261,356	$	263,095
Non-owner occupied	593		—		593		430,786		431,379
Total commercial real estate loans	1,613		719		2,332		692,142		694,474
Construction	—		—		—		119,723		119,723
Residential real estate	196		—		196		236,888		237,084
Commercial and industrial	346		239		585		362,750		363,335
Consumer	209		12		221		38,141		38,362
	$	2,364	$	970	$	3,334	$	1,449,644	$	1,452,978

22

Cascade Bancorp & Subsidiary

Notes to Condensed Consolidated Financial Statements

 June 30, 2016

(unaudited)

Acquired loans (b):
Commercial real estate:
Owner occupied	$	—	$	—	$	—	$	45,236	$	45,236
Non-owner occupied	2,049		—		2,049		93,134		95,183
Total commercial real estate loans	2,049		—		2,049		138,370		140,419
Construction	46		—		46		10,583		10,629
Residential real estate	748		534		1,282		60,024		61,306
Commercial and industrial	6		5		11		21,098		21,109
Consumer	53		—		53		1,435		1,488
	$	2,902	$	539	$	3,441	$	231,510	$	234,951
Total loans:
Commercial real estate:
Owner occupied	$	1,020	$	719	$	1,739	$	306,592	$	308,331
Non-owner occupied	2,642		—		2,642		523,920		526,562
Total commercial real estate loans	3,662		719		4,381		830,512		834,893
Construction	46		—		46		130,306		130,352
Residential real estate	944		534		1,478		296,912		298,390
Commercial and industrial	352		244		596		383,848		384,444
Consumer	262		12		274		39,576		39,850
	$	5,266	$	1,509	$	6,775	$	1,681,154	$	1,687,929
(a) Originated loans are loans organically made through the Company’s normal and customary origination process, including ARM purchases.
(b) Acquired loans are loans acquired in the acquisition of Home.

Loans contractually past due 90 days or more on which the Company continued to accrue interest were $0.05 million and $0.07 million at June 30, 2016 and December 31, 2015, respectively.

23

Cascade Bancorp & Subsidiary

Notes to Condensed Consolidated Financial Statements

 June 30, 2016

(unaudited)

The following table presents information related to impaired loans, by portfolio class, at June 30, 2016 and December 31, 2015 (dollars in thousands):

	Impaired loans
	With a related allowance		Without a related allowance		Total recorded balance		Unpaid principal balance		Related allowance
June 30, 2016
Commercial real estate:
Owner occupied	$	848	$	1,159	$	2,007	$	3,067	$	54
Non-owner occupied	636		1,904		2,540		2,540		20
Total commercial real estate loans	1,484		3,063		4,547		5,607		74
Construction	—		—		—		—		—
Residential real estate	—		—		—		—		—
Commercial and industrial	246		7,207		7,453		10,893		78
Consumer	—		—		—		—		—
	$	1,730	$	10,270	$	12,000	$	16,500	$	152
December 31, 2015
Commercial real estate:
Owner occupied	$	1,032	$	2,157	$	3,189	$	4,285	$	73
Non-owner occupied	646		—		646		646		5
Total commercial real estate loans	1,678		2,157		3,835		4,931		78
Construction	—		365		365		365		—
Residential real estate	—		18		18		18		—
Commercial and industrial	2,539		185		2,724		3,366		164
Consumer	—		—		—		—		—
	$	4,217	$	2,725	$	6,942	$	8,680	$	242

The increase in impaired C&I loans relates to energy/mining shared national credits. Aggregate portfolio exposure to the energy/mining sector is less than 1% of total loans outstanding. At June 30, 2016 and December 31, 2015, the total recorded balance of impaired loans in the above table included $0.6 million and $0.8 million, respectively, of troubled debt restructuring (“TDR”) loans which were not on non-accrual status.

The following table presents, by portfolio class, the average recorded investment in impaired loans for the three and six months ended June 30, 2016 and 2015 (dollars in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Commercial real estate:
Owner occupied	$	2,285	$	3,323	$	2,586	$	4,235
Non-owner occupied	2,554		12,121		1,918		15,709
Total commercial real estate loans	4,839		15,444		4,504		19,944
Construction	—		632		122		742
Residential real estate	—		99		6		171
Commercial and industrial	7,565		2,942		5,952		3,127
Consumer	—		—		—		—
	$	12,404	$	19,117	$	10,584	$	23,984

24

Cascade Bancorp & Subsidiary

Notes to Condensed Consolidated Financial Statements

 June 30, 2016

(unaudited)

Interest income recognized for cash payments received on impaired loans for the three and six months ended June 30, 2016 was $0.4 million and $0.6 million, respectively.

Information with respect to the Company’s non-performing loans, by portfolio class, at June 30, 2016 and December 31, 2015 is as follows (dollars in thousands):

	June 30, 2016		December 31, 2015
Commercial real estate:
Owner occupied	$	892	$	2,742
Non-owner occupied	2,763		434
Total commercial real estate loans	3,655		3,176
Construction	42		—
Residential real estate	1,254		1,427
Commercial and industrial	7,224		447
Consumer	—		3
Total non-accrual loans	$	12,175	$	5,053
Accruing loans which are contractually past due 90 days or more:
Construction	26		—
Commercial and industrial	24		56
Consumer	2		12
Total accruing loans which are contractually past due 90 days or more	$	52	$	68

TDRs

The Company allocated no specific reserves to customers whose loan terms have been modified in TDRs as of June 30, 2016 and December 31, 2015. TDRs involve the restructuring of loan terms to allow customers to mitigate the risk of foreclosure by meeting a lower loan payment requirement based upon their current cash flow. As indicated above, TDRs may also include loans to borrowers experiencing financial distress that renewed at existing contractual rates, but below market rates for comparable credit quality. The Company has been actively utilizing these programs and working with its customers to improve obligor cash flow and related prospects for repayment. Concessions may include, but are not limited to, interest rate reductions, principal forgiveness, deferral of interest payments, extension of the maturity date, and other actions intended to minimize potential losses to the Company. For each commercial loan restructuring, a comprehensive credit underwriting analysis of the borrower’s financial condition and prospects of repayment under the revised terms is performed to assess whether the new structure can be successful and whether cash flows will be sufficient to support the restructured debt. Generally, if the loan is on accrual status at the time of restructuring, it will remain on accrual status after the restructuring. After six consecutive payments under the restructured terms, a non-accrual restructured loan is reviewed for possible upgrade to accrual status.

Typically, once a loan is identified as a TDR it will retain that designation until it is paid off, because restructured loans generally are not at market rates following restructuring. Under certain circumstances, a TDR may be removed from TDR status if it is determined to no longer be impaired and the loan is at a competitive interest rate. Under such circumstances, allowance allocations for loans removed from TDR status would be based on the historical allocation for the applicable loan grade and loan class.

There were no loans modified and recorded as TDRs during the three months ended June 30, 2016 and 2015.

The following table presents, by portfolio segment, the information with respect to the Company’s loans that were modified and recorded as TDRs during the six months ended June 30, 2016 and 2015 (dollars in thousands).

25

Cascade Bancorp & Subsidiary

Notes to Condensed Consolidated Financial Statements

 June 30, 2016

(unaudited)

	Six months ended June 30,
	2016			2015
	Number of loans	TDR outstanding recorded investment		Number of loans	TDR outstanding recorded investment
Commercial real estate	—	$	—	—	$	—
Construction	—	—		—	—
Residential real estate	—	—		—	—
Commercial and industrial	1	22		—	—
Consumer	—	—		—	—
	1	$	22	—	$	—

At both June 30, 2016 and 2015, the Company had no remaining commitments to lend on loans accounted for as TDRs.

The following table presents, by portfolio segment, the post modification recorded investment for TDRs restructured during the six months ended June 30, 2016.

Six Months Ended   June 30, 2016	Rate reduction		Term extension		Rate reduction and term extension		Total
Commercial real estate	$	—	$	—	$	—	$	—
Construction	—		—		—		—
Residential real estate	—		—		—		—
Commercial and industrial	—		22		—		22
Consumer	—		—		—		—
	$	—	$	22	$	—	$	22

There were no TDRs which had payment defaults during the six months endedJune 30, 2016 or 2015 that had been previously restructured within the twelve months prior to June 30, 2016 or 2015.

5.    Other Real Estate Owned (“OREO”), net

The following table presents activity related to OREO for the periods shown (dollars in thousands):

	Three months ended    June 30,						Six months ended    June 30,
	2016			2015			2016			2015
Balance at beginning of period	$	3,274		$	4,830		$	3,274		$	3,309
Additions	—			—			—			1,558
Dispositions	(281		)	(2,339		)	(281		)	(2,379		)
Change in valuation allowance	—			1,549			—			1,552
Balances at end of period	$	2,993		$	4,040		$	2,993		$	4,040

The following table summarizes activity in the OREO valuation allowance for the periods shown (dollars in thousands):

26

Cascade Bancorp & Subsidiary

Notes to Condensed Consolidated Financial Statements

 June 30, 2016

(unaudited)

	Three months ended    June 30,					Six months ended    June 30,
	2016		2015			2016		2015
Balance at beginning of period	$	776	$	2,320		$	776	$	2,323
Additions to the valuation allowance	—		—			—		5
Reductions due to sales	—		(1,549		)	—		(1,557		)
Balance at end of period	$	776	$	771		$	776	$	771

The following table summarizes OREO (income) expenses for the periods shown (dollars in thousands):

	Three months ended    June 30,						Six months ended    June 30,
	2016			2015			2016			2015
Operating costs	$	121		$	54		$	166		$	106
Net gains on dispositions	(240		)	(222		)	(240		)	(222		)
Increases in valuation allowance	—			—			167			5
Total	$	(119	)	$	(168	)	$	93		$	(111	)

6.    Mortgage Servicing Rights (“MSRs”)

The Bank sells a predominant share of the fixed rate mortgage loans it originates into the secondary market while retaining servicing of such loans. MSRs, included in other assets in the condensed consolidated financial statements as of June 30, 2016 and December 31, 2015, are accounted for at the lower of origination value less accumulated amortization or current fair value. The net carrying value of MSRs at June 30, 2016 and December 31, 2015 was $2.2 million. There was no valuation allowance at June 30, 2016 or December 31, 2015.

The following table presents activity in MSRs for the periods shown (dollars in thousands):

	Three months ended    June 30,						Six months ended    June 30,
	2016			2015			2016			2015
Balance at beginning of period	$	2,151		$	2,287		$	2,186		$	2,248
Additions	254			150			382			376
Amortization	(176		)	(161		)	(339		)	(348		)
Balances at end of period	$	2,229		$	2,276		$	2,229		$	2,276

27

Cascade Bancorp & Subsidiary

Notes to Condensed Consolidated Financial Statements

 June 30, 2016

(unaudited)

Mortgage banking income, net, consisted of the following for the periods shown (dollars in thousands):

	Three months ended    June 30,						Six months ended    June 30,
	2016			2015			2016			2015
Origination and processing fees	$	122		$	186		$	180		$	444
Gain on sales of mortgage loans, net	813			479			1,252			1,031
Servicing fees	140			173			301			338
Amortization	(176		)	(161		)	(339		)	(348		)
Mortgage banking income, net	$	899		$	677		$	1,394		$	1,465

7.     Goodwill and other intangible assets

On March 4, 2016, the Bank completed its acquisition of 15 branches from Bank of America, National Association. The Company recorded $4.0 million of goodwill in connection with the branch acquisition.

The Company recorded $78.6 million of goodwill in connection with the acquisition of Home in 2014. In accordance with the Intangibles - Goodwill and Other topic of the Financial Accounting Standards Board (“FASB”) ASC, goodwill is not amortized but is reviewed for potential impairment at the reporting unit level. Management analyzes its goodwill for impairment on an annual basis and between annual tests in certain circumstances, such as upon material adverse changes in legal, business, regulatory and economic factors. An impairment loss is recorded to the extent that the carrying amount of goodwill exceeds its implied fair value. The Company performed an impairment assessment as of December 31, 2015 and concluded that there was no impairment to goodwill.

Core deposit intangibles (“CDI”) are evaluated for impairment if events and circumstances indicate a possible impairment. The CDI are amortized on a straight-line basis over an estimated life of 10 years. The following table sets forth activity for CDI for the three and six months ended June 30, 2016 and 2015 (dollars in thousands).

	Three months ended June 30,						Six months ended    June 30,
	2016			2015			2016			2015
Gross core deposit intangibles balance, beginning of period	$	14,623		$	8,196		$	8,196		$	8,196
Accumulated amortization, beginning of period	(1,538		)	(718		)	(1,333		)	(513		)
Core deposit intangible, net, beginning of period	13,085			7,478			6,863			7,683
Established through acquisitions	—			—			6,427			—
CDI current period amortization	(365		)	(205		)	(570		)	(410		)
Total core deposit intangible, end of period	$	12,720		$	7,273		$	12,720		$	7,273

The following table provides the estimated future amortization expense of core deposit intangibles for the remaining period ending December 31, 2016 and the succeeding four years (dollars in thousands):

Years Ending December 31,
2016	$	731
2017	1,462
2018	1,462
2019	1,462
2020	1,462

8.    Basic and Diluted Net Income per Share

28

Cascade Bancorp & Subsidiary

Notes to Condensed Consolidated Financial Statements

 June 30, 2016

(unaudited)

The Company’s basic net income per share is computed by dividing net income by the weighted-average number of common shares outstanding during the period. The Company’s diluted net income per share is computed by dividing net income by the weighted-average number of common shares outstanding plus any incremental shares arising from the dilutive effect of stock-based compensation.

The numerators and denominators used in computing basic and diluted net income per common share for the three and six months ended June 30, 2016 and 2015 can be reconciled as follows (dollars in thousands, except per share data):

	Three months ended    June 30,				Six months ended    June 30,
	2016		2015		2016		2015
Net income	$	4,824	$	4,795	$	6,764	$	9,913
Weighted-average shares outstanding - basic	71,945,089		71,689,313		71,914,417		71,681,341
Dilutive securities	287,747		38,068		615,069		108,091
Weighted-average shares outstanding - diluted	72,232,836		71,727,381		72,529,486		71,789,432
Common stock equivalent shares excluded due to antidilutive effect	3,348,537		3,367,931		3,348,537		3,367,931
Basic and diluted:
Net income per common share	$	0.07	$	0.07	$	0.09	$	0.14
Net income per common share (diluted)	$	0.07	$	0.07	$	0.09	$	0.14

9.    Stock-Based Compensation

At June 30, 2016, 1,631,833 shares reserved under the Company’s stock-based compensation plans were available for future grants.

During the six months ended June 30, 2016, 672,288 shares of restricted stock were granted with a weighted-average grant date fair value of $5.69, which vest between 2016 and 2019. During the same period, no stock options were granted. During the six months ended June 30, 2015, the Company granted 395,512 shares of restricted stock with a weighted-average grant date fair value of $4.98 per share, which vest between 2016 and 2020. During the same period, 3,300,000 stock options 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.

29

Cascade Bancorp & Subsidiary

Notes to Condensed Consolidated Financial Statements

 June 30, 2016

(unaudited)

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 six months ended June 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	—		—		N/A	N/A
Canceled / forfeited	(234	)	78.08		N/A	N/A
Expired	(1,634	)	207.20		N/A	N/A
Options outstanding at June 30, 2016	3,374,041		$	5.34	8.5	$	2,475.0
Options exercisable at June 30, 2016	74,041		$	29.80	4.3	$	—
Options outstanding at January 1, 2015	85,901		$	34.85	5.7	$	—
Granted	3,300,000		4.79		9.6	1,287.0
Canceled / forfeited	(1,744	)	59.69		N/A	N/A
Expired	(1,691	)	$	151.20	N/A	N/A
Options outstanding at June 30, 2015	3,382,466		$	5.45	9.5	$	1,287.0
Options exercisable at June 30, 2015	63,972		39.48		4.7	$	—

Stock-based compensation expense related to stock options for the six months ended June 30, 2016 and 2015 was $0.5 million. As of June 30, 2016, there was approximately $3.9 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 six months endedJune 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	672,288		5.69
Vested	(287,336	)	5.30
Canceled / forfeited	(32,983	)	4.87
Non-vested as of June 30, 2016	1,261,379		$	6.29

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 June 30, 2016, unrecognized compensation cost related to non-vested restricted stock totaled approximately $5.9 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 six months endedJune 30, 2016 and 2015 was $0.9 million and $0.6 million, respectively. There was $0.3 million unrecognized compensation cost related to restricted stock units (“RSUs”) at June 30, 2016 and no unrecognized compensation cost related RSUs at December 31, 2015.

10.      Interest Rate Swap Derivatives

Derivative instruments are contracts between two or more parties that have a notional amount and an underlying variable, require no net investment and allow for the net settlement of positions. The notional amount serves as the basis for the payment provision

30

Cascade Bancorp & Subsidiary

Notes to Condensed Consolidated Financial Statements

 June 30, 2016

(unaudited)

of the contract and takes the form of units, such as shares or dollars. The underlying variable represents a specified interest rate, index, or other component. The interaction between the notional amount and the underlying variable determines the number of units to be exchanged between the parties and influences the market value of the derivative contract. The Company obtains dealer quotation to value its derivative contracts.

The Company periodically enters into certain commercial loan interest rate swap agreements in order to provide commercial loan customers the ability to convert from variable to fixed interest rates. Under these agreements, the Company provides the customer with a variable rate loan and enters into an interest rate swap in which the customer receives a variable rate payment in exchange for a fixed rate payment. The Company offsets its risk exposure by entering into an offsetting interest rate swap with a dealer counterparty for the same notional amount and length of term as the customer interest rate swap providing the dealer counterparty with a fixed rate payment in exchange for a variable rate payment. Generally, these instruments help the Company manage exposure to market risk and meet customer financing needs. Market risk represents the possibility that economic value or net interest income will be adversely affected by fluctuations in external factors such as market-driven interest rates and prices or other economic factors.

The Company is exposed to credit-related losses in the event of non-performance by the counterparty to these agreements. Credit risk of the financial contract is controlled through the credit approval, limits, and monitoring procedures and management does not expect the counterparties to fail their obligations.

In connection with the interest rate swaps between the Company and the dealer counterparties, the agreements contain a provision that if the Company fails to maintain its status as a well-capitalized institution, then the counterparty could terminate the derivative positions and the Company would be required to settle its obligations. Similarly, the Company could be required to settle its obligations under certain of its agreements if certain credit ratings fall below specified standards or if specific regulatory events occur, such as a publicly issued memorandum of understanding, cease and desist order, or a termination of insurance coverage by the FDIC.

As of June 30, 2016 and December 31, 2015, the notional values or contractual amounts and fair values of the Company’s derivatives not designated in hedge relationships were as follows (dollars in thousands):

	Asset Derivatives								Liability Derivatives
	June 30, 2016				December 31, 2015				June 30, 2016				December 31, 2015
	Notional/ Contract Amount		Fair Value (1)		Notional/ Contract Amount		Fair Value (1)		Notional/ Contract Amount		Fair Value (2)		Notional/ Contract Amount		Fair Value (2)
Interest rate swaps	$	204,827	$	18,769	$	169,720	$	8,646	$	204,827	$	18,769	$	169,720	$	8,646
(1) Included in Other Assets on the condensed consolidated balance sheet.
(2) Included in Other Liabilities on the condensed consolidated balance sheet.

Swap fee income, as included in non-interest income, was $0.5 million and $1.1 million for the three and six months ended June 30, 2016, respectively, and $0.8 million and $1.3 million for the three and six months ended June 30, 2015, respectively.

The Company generally posts collateral against derivative liabilities in the form of cash. Collateral posted against derivative liabilities was $18.9 million and $8.6 million as of June 30, 2016 and December 31, 2015, respectively.

Derivative assets and liabilities are recorded at fair value on the balance sheet and do not take into account the effects of master netting agreements. Master netting agreements allow the Company to settle all derivative contracts held with a single counterparty on a net basis and to offset net derivative position with related collateral where applicable.

The following table illustrates the potential effect of the Company’s derivative master netting arrangements, by type of financial instrument, on the Company’s condensed consolidated balance sheet as of June 30, 2016 and December 31, 2015 (dollars in thousands):

31

Cascade Bancorp & Subsidiary

Notes to Condensed Consolidated Financial Statements

 June 30, 2016

(unaudited)

	June 30, 2016
							Gross Amounts of Financial Instruments Not Offset in the Balance Sheet
	Gross Amounts Recognized		Amounts offset in the Balance Sheet		Net Amounts in the Balance Sheet		Netting Adjustment Per Applicable Master Netting Agreements		Fair Value of Financial Collateral in the Balance Sheet		Net Amount
Asset Derivatives
Interest rate swaps	$	18,769	$	—	$	18,769	$	—	$	—	$	18,769
Liability Derivatives
Interest rate swaps	$	18,769	$	—	$	18,769	$	—	$	18,865	$	(96	)
	December 31, 2015
							Gross Amounts of Financial Instruments Not Offset in the Balance Sheet
	Gross Amounts Recognized		Amounts offset in the Balance Sheet		Net Amounts in the Balance Sheet		Netting Adjustment Per Applicable Master Netting Agreements		Fair Value of Financial Collateral in the Balance Sheet		Net Amount
Asset Derivatives
Interest rate swaps	$	8,646	$	—	$	8,646	$	—	$	—	$	8,646
Liability Derivatives
Interest rate swaps	$	8,646	$	—	$	8,646	$	—	$	8,595	$	51

11.    Income Taxes

In assessing the realizability of deferred tax assets (“DTA”), management considers whether it is more likely than not that some portion or all of the DTA will or will not be realized. The Company’s ultimate realization of the DTA is dependent upon the generation of future taxable income during the periods in which temporary differences become deductible. Management considers the nature and amount of historical and projected future taxable income, the scheduled reversal of deferred tax assets and liabilities, and available tax planning strategies in making this assessment. The amount of deferred taxes recognized could be impacted by changes to any of these variables.

During the three and six months ended June 30, 2016, the Company recorded a $2.8 million and $4.0 million income tax provision, respectively. During the three and six months ended June 30, 2015, the Company recorded a $2.9 million and $6.0 million income tax provision, respectively. As of June 30, 2016, the net DTA was $46.5 million compared with a net DTA of $50.7 million as of December 31, 2015. During the second quarter and first half of 2016 and 2015, the Company’s current taxes consisted of federal and state alternative minimum taxes and other state minimum taxes. The Company’s estimated effective income tax rate differs from the statutory income tax rate primarily due to the exclusion of certain BOLI and municipal bond interest income from taxable income. 

There are a number of tax issues that impact the deferred tax asset balance, including changes in temporary differences between the financial statement recognition of revenue and expenses, estimates as to the deductibility of prior losses and potential consequence of Section 382 of the Internal Revenue Code. See also “Critical Accounting Policies and Accounting Estimates - Deferred Income Taxes” included in Part II, Item 7 of the 2015 Annual Report.

12.    Fair Value Measurements

32

Cascade Bancorp & Subsidiary

Notes to Condensed Consolidated Financial Statements

 June 30, 2016

(unaudited)

GAAP establishes a hierarchy for determining fair value measurements which includes three levels and is based upon the valuation techniques used to measure assets and liabilities. The three levels are as follows:

• Level 1: Inputs that are quoted unadjusted prices in active markets - that the Company has the ability to access at the measurement date - for identical assets or liabilities.

• Level 2: Inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity including quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets, and inputs derived principally from, or corroborated by, observable market data by correlation or other means.

• Level 3: Inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.

A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. These valuation methodologies were applied to all of the Company’s assets and liabilities carried at fair value. Where available, fair value is based upon quoted market prices. Significant balances of the Bank's financial assets and liabilities do not have quoted market prices. In such circumstances, fair value is based upon internal or third party models that primarily use, as inputs, observable market-based parameters, such as yields and discount rates of comparable instruments of like duration or credit quality. Valuation adjustments may be made to model results with respect to various assets or liabilities. These adjustments may include amounts to reflect counterparty credit quality and the Company’s creditworthiness, among other things, as well as unobservable parameters. Any such valuation adjustments are applied consistently over time. The Company’s valuation methodologies may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. While management believes that the Company’s valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain assets and liabilities could result in a different estimate of fair value at the reporting date. Furthermore, the reported fair value amounts have not been comprehensively revalued since the presentation dates, and, therefore, estimates of fair value after the condensed consolidated balance sheet date may differ significantly from the amounts presented herein.

The following is a description of the valuation methodologies used for assets measured at fair value on a recurring or nonrecurring basis, as well as the general classification of such assets pursuant to valuation hierarchy:

Investment securities available-for-sale: Where quoted prices for identical assets are available in an active market, investment securities available-for-sale are classified within level 1 of the hierarchy. If quoted market prices for identical securities are not available, then fair values are estimated by independent sources using pricing models and/or quoted prices of investment securities with similar characteristics or discounted cash flows. The Company has categorized its investment securities available-for-sale as level 2, since a majority of such securities are MBS which are mainly priced in this latter manner.

Interest rate swap derivatives: The fair value of the interest rate lock commitments and forward sales commitments are estimated using quoted or published market prices for similar instruments, adjusted for factors such as pull-through rate assumptions based on historical information, where appropriate. The fair value of the interest rate swaps is determined using a discounted cash flow technique with values provided by third party swap dealers or consultants. The Bank has determined that the majority of the inputs used to value its interest rate swap derivatives fall within Level 2.

Impaired loans: In accordance with GAAP, loans are measured for impairment using one of three methods: an observable market price (if available), the present value of expected future cash flows discounted at the loan’s effective interest rate, or at the fair value of the loan’s collateral (if collateral dependent). Estimated fair value of the loan’s collateral is determined by appraisals or independent valuations which are then adjusted for the estimated costs related to liquidation of the collateral. Management’s ongoing review of appraisal information may result in additional discounts or adjustments to valuation based upon more recent market sales activity or more current appraisal information derived from properties of similar type and/or locale. A significant portion of the Bank’s impaired loans are measured using the estimated fair market value of the collateral less the estimated costs to sell. The Company has categorized all its loans impaired during the calendar year utilizing fair value metrics as level 3. Loans that were impaired during the calendar year based on the present value of expected future cash flows discounted at the loans’ effective interest rates are not included in the table below as the loans’ effective interest rates are not based on current market rates.

33

Cascade Bancorp & Subsidiary

Notes to Condensed Consolidated Financial Statements

 June 30, 2016

(unaudited)

OREO: The Company’s OREO is measured at estimated fair value less estimated costs to sell. Fair value is generally determined based on third-party appraisals of fair value in an orderly sale. Historically, appraisals have considered comparable sales of like assets in reaching a conclusion as to fair value. Since many recent real estate sales could be termed “distressed sales”, and since a preponderance have been short-sale or foreclosure related, this has directly impacted appraisal valuation estimates. Estimated costs to sell OREO are based on standard market factors. The valuation of OREO is subject to significant external and internal judgment. Management periodically reviews OREO to determine whether the property continues to be carried at the lower of its recorded book value or estimated fair value, net of estimated costs to sell. The Company has categorized its OREO as level 3.

The Company’s only financial assets measured at fair value on a recurring basis at June 30, 2016 and December 31, 2015 were as follows (dollars in thousands):

	Level 1		Level 2		Level 3
June 30, 2016
Assets:
Investment securities available-for-sale	$	—	$	462,013	$	—
Interest rate swap derivatives	—		18,769		—
Total assets	$	—	$	480,782	$	—
Liabilities:
Interest rate swap derivatives	$	—	$	18,769	$	—
December 31, 2015
Assets:
Investment securities available-for-sale	$	—	$	310,262	$	—
Interest rate swap derivatives	—		8,646		—
Total assets	$	—	$	318,908	$	—
Liabilities:
Interest rate swap derivatives	—		8,646		—

Certain assets are measured at fair value on a nonrecurring basis (e.g., the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments when there is evidence of impairment). During the six months ended June 30, 2016, there were no nonrecurring FV adjustments. The following table represents the assets measured at fair value on a nonrecurring basis by the Company at December 31, 2015 (dollars in thousands):

December 31, 2015
Impaired loans	$	—	$	—	$	50
Other real estate owned	—		—		3,274
	$	—	$	—	$	3,324

The following table presents quantitative information about level 3 fair value measurements for financial instruments measured at fair value on a nonrecurring basis at December 31, 2015 (dollars in thousands):

	December 31, 2015
	Fair Value Estimate		Valuation Techniques	Unobservable Input
Impaired loans	$	50	Market approach	Appraised value less selling costs of 5% to 10% Additional discounts of 5% to 50% to appraised value to reflect liquidation value
Other real estate owned	$	3,274	Market approach	Appraised value less selling costs of 5% to 10%

34

Cascade Bancorp & Subsidiary

Notes to Condensed Consolidated Financial Statements

 June 30, 2016

(unaudited)

The Company did not change the methodology used to determine fair value for any assets or liabilities during 2015, or during the six months ended June 30, 2016. In addition, for any given class of assets, the Company did not have any transfers between level 1, level 2, or level 3 during 2015 or the six months ended June 30, 2016.

The following disclosures are made in accordance with the provisions of GAAP, which requires the disclosure of fair value information about financial instruments where it is practicable to estimate that value.

In cases where quoted market values are not available, the Company primarily uses present value techniques to estimate the fair value of its financial instruments. Valuation methods require considerable judgment, and the resulting estimates of fair value can be significantly affected by the assumptions made and methods used. Accordingly, the estimates provided herein do not necessarily indicate amounts which could be realized in a current market exchange.

In addition, as the Company normally intends to hold the majority of its financial instruments until maturity, it does not expect to realize many of the estimated amounts disclosed. The disclosures also do not include estimated fair value amounts for items which are not defined as financial instruments but which may have significant value. The Company does not believe that it would be practicable to estimate a representational fair value for these types of items as of June 30, 2016 and December 31, 2015.

Because GAAP excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements, any aggregation of the fair value amounts presented would not represent the underlying value of the Company.

The Company uses the following methods and assumptions to estimate the fair value of its financial instruments:

Cash and cash equivalents:  The carrying amount approximates the estimated fair value of these instruments.

Investment securities: See above description.

FHLB stock:  The carrying amount approximates the estimated fair value of this investment.

Loans:  The estimated fair value of non-impaired loans is calculated by discounting the contractual cash flows of the loans using June 30, 2016 and December 31, 2015 origination rates. The resulting amounts are adjusted to estimate the effect of changes in the credit quality of borrowers since the loans were originated. Estimated fair values for impaired loans are determined using an observable market price (if available) or the fair value of the loan’s collateral (if collateral dependent) as described above. Observable market prices for community bank loans are not generally available given the non-homogenous characteristics of such loans.

BOLI: The carrying amount of both the separate and general account BOLI approximates the estimated fair value of these instruments. Fair values of insurance policies owned are based on the insurance contracts' cash surrender values.

MSRs: The estimated fair value of MSRs is calculated by discounting the expected future contractual cash flows. Factors considered in the estimated fair value calculation include prepayment speed forecasts, market discount rates, earning rates, servicing costs, acquisition costs, ancillary income, and borrower rates.

Deposits:  The estimated fair value of demand deposits, consisting of checking, interest bearing demand, and savings deposit accounts, is represented by the amounts payable on demand. At the reporting date, the estimated fair value of time deposits is calculated by discounting the scheduled cash flows using the June 30, 2016 and December 31, 2015 rates offered on those instruments.

Other borrowings: The fair value of other borrowings (including federal funds purchased, if any) is estimated using discounted cash flow analysis based on the Bank's June 30, 2016 and December 31, 2015 incremental borrowing rates for similar types of borrowing arrangements.

Loan commitments and standby letters of credit: The majority of the Bank’s commitments to extend credit have variable interest rates and “escape” clauses if the customer’s credit quality deteriorates. Therefore, the fair values of these items are not significant and are not included in the following table.

35

Cascade Bancorp & Subsidiary

Notes to Condensed Consolidated Financial Statements

 June 30, 2016

(unaudited)

The estimated fair values of the Company’s significant on-balance sheet financial instruments at June 30, 2016 and December 31, 2015 were approximately as follows (dollars in thousands):

		June 30, 2016				December 31, 2015
	Level in Fair Value Hierarchy	Carrying value		Estimated fair value		Carrying value		Estimated fair value
Financial assets:
Cash and cash equivalents	Level 1	$	178,814	$	178,814	$	77,805	$	77,805
Investment securities:
Available-for-sale	Level 2	462,013		462,013		310,262		310,262
Held-to-maturity	Level 2	142,211		148,627		139,424		142,260
FHLB stock	Level 2	3,130		3,130		3,000		3,000
Loans held-for-sale	Level 2	3,732		3,732		3,621		3,621
Loans, net	Level 3	1,876,237		1,896,160		1,662,095		1,656,986
BOLI	Level 3	54,957		54,957		54,450		54,450
MSRs	Level 3	2,229		2,675		2,186		3,027
Interest rate swap derivatives	Level 2	18,769		18,769		8,646		8,646
Financial liabilities:
Deposits	Level 2	2,559,954		2,559,757		2,083,088		2,082,748
Interest rate swap derivatives	Level 2	18,769		18,769		8,646		8,646

13.      Regulatory Matters

Bancorp and the Bank are subject to various regulatory capital requirements administered by the federal and state banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary, actions by regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, Bancorp and the Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. Bancorp’s and the Bank’s capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to provide for capital adequacy require Bancorp and the Bank to maintain minimum amounts and ratios (set forth in the tables below) of Tier 1 capital to average assets, common equity Tier 1 capital, and Tier 1 and total capital to risk-weighted assets (all as defined in the regulations).

Federal banking regulators are required to take prompt corrective action if an insured depository institution fails to satisfy certain minimum capital requirements. Such actions could potentially include a leverage capital limit, a risk-based capital requirement, and any other measure of capital deemed appropriate by the federal banking regulator for measuring the capital adequacy of an insured depository institution. In addition, payment of dividends by Bancorp and the Bank are subject to restriction by state and federal regulators and availability of retained earnings.

In July 2013, the Board of Governors of the Federal Reserve System and the FDIC approved the final rules implementing the Basel Committee on Banking Supervision’s capital guidelines for U.S. banks (“Basel III”). Under the final rules, which became effective for the Bancorp and the Bank on January 1, 2015 and are subject to a phase-in period through January 1, 2019, minimum requirements increased for both the quantity and quality of capital held by the Bancorp and the Bank. The rules include a new common equity Tier 1 capital to risk-weighted assets ratio (“CET1” ratio) of 4.5% and a capital conservation buffer of 2.5% above the regulatory minimum risk-based capital requirements, which when fully phased-in, effectively results in a minimum CET1 ratio of 7.0%. Basel III also (i) raises the minimum ratio of Tier 1 capital to risk-weighted assets from 4.0% to 6.0% (which, with the capital conservation buffer, effectively results in a minimum Tier 1 capital ratio of 8.5% when fully phased-in), (ii) effectively results in a minimum total capital to risk-weighted assets ratio of 10.5% (with the capital

36

Cascade Bancorp & Subsidiary

Notes to Condensed Consolidated Financial Statements

 June 30, 2016

(unaudited)

conservation buffer fully phased-in), and (iii) requires a minimum leverage ratio of 4.0%. Basel III also makes changes to risk weights for certain assets and off-balance-sheet exposures.

Bancorp’s and Bank’s actual capital amounts and ratios and the required capital ratios under the prompt corrective action framework as of June 30, 2016 and December 31, 2015 are presented in the following table (dollars in thousands): 

	Actual				Regulatory minimum to be “adequately capitalized”				Basel III Minimum Capital Adequacy with Capital Conservation Buffer		Regulatory minimum to be “well capitalized”
	Capital Amount		Ratio		Capital Amount		Ratio		Capital Amount	Ratio	Capital Amount		Ratio
June 30, 2016
Tier 1 leverage (to average assets)
Bancorp	$	226,086	7.9	%	$	113,902	4.0	%	N/A	N/A	$	142,377	5.0	%
Bank	222,840		7.8	%	113,723		4.0	%	N/A	N/A	142,154		5.0	%
CET1 capital (to risk weighted assets)
Bancorp	226,086		10.0		101,611		4.5		115,160	5.1	146,772		6.5
Bank	222,840		9.9		101,465		4.5		114,993	5.1	146,560		6.5
Tier 1 capital (to risk-weighted assets)
Bancorp	226,086		10.0		135,482		6.0		149,030	6.6	180,643		8.0
Bank	222,840		9.9		135,286		6.0		148,815	6.6	180,381		8.0
Total capital (to risk-weighted assets)
Bancorp	251,196		11.1		180,643		8.0		194,191	8.6	225,803		10.0
Bank	247,949		11.0		180,381		8.0		193,910	8.6	225,477		10.0
December 31, 2015
Tier 1 leverage (to average assets)
Bancorp	$	227,542	9.4	%	$	96,817	4.0	%	N/A	N/A	$	121,022	5.0	%
Bank	223,533		9.3	%	96,662		4.0	%	N/A	N/A	120,827		5.0	%
CET1 capital (to risk weighted assets)
Bancorp	227,542		11.5		88,818		4.5		N/A	N/A	128,292		6.5
Bank	223,533		11.4		88,663		4.5		N/A	N/A	128,069		6.5
Tier 1 capital (to risk-weighted assets)
Bancorp	227,542		11.5		118,424		6.0		N/A	N/A	157,898		8.0
Bank	223,533		11.4		118,218		6.0		N/A	N/A	157,624		8.0
Total capital (to risk-weighted assets)
Bancorp	252,401		12.8		157,898		8.0		N/A	N/A	197,373		10.0
Bank	248,346		12.6		157,624		8.0		N/A	N/A	197,030		10.0

14.      Commitments and Contingencies

The Company is subject to legal proceedings, claims, and litigation arising in the ordinary course of business.  While the outcome of these matters is currently not determinable, management does not expect that the ultimate costs to resolve these matters will have a material adverse effect on the Company’s consolidated financial position, results of operations, or cash flows.

37

Cascade Bancorp & Subsidiary

Notes to Condensed Consolidated Financial Statements

 June 30, 2016

(unaudited)

15.      Subsequent Event

At close of business on August 1, 2016, the Company acquired Prime Pacific Financial Services, Inc., the holding company of Prime Pacific Bank, National Association, a Snohomish county, national banking association.

The Company received regulatory approval from the Board of Governors of the Federal Reserve System to waive the Federal Reserve's application requirement for the merger, and the approval of the Federal Deposit Insurance Corporation and the Oregon Department of Business and Consumer Services, to consummate the merger of Prime Pacific Bank and Bank of the Cascades, with Bank of the Cascades continuing as the surviving entity.

The Company also received an order from the State of Oregon Department of Consumer and Business Services, Division of Financial Regulation finding that the issuance of shares of Cascade common stock in exchange for shares of Prime Pacific common stock is fair, just and equitable and free from fraud. All regulatory approvals required to be obtained prior to the completion of the Merger have now been obtained.

The Merger was completed following the approval of Prime Pacific's shareholders, as well as the satisfaction of other customary closing conditions.

Prime Pacific Bank had $122.9 million in assets, $100.7 million in net loans, and $101.3 million in total deposits at June 30, 2016.  Based on a $5.79 closing price of Cascade's common stock on July 28, 2016, the aggregated merger consideration is approximately $16.9 million, or $1.77 per share of Prime Pacific common stock.

16.      New Authoritative Accounting Guidance

In June 2016, the FASB issued ASU 2016-13, "Financial Instruments- Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" ("ASU 2016-13"). ASU 2016-13 requires financial assets that are measured at amortized cost to be presented as the net amount expected to be collected. The income statement will reflect the measurement of credit losses for newly recognized financial assets and for the expected increase or decrease of expected credit losses. ASU 2016-13 notes that credit losses related to available-for-sale debt securities should be recorded through an allowance for credit losses. The initial allowance for credit losses, for purchased available-for-sale securities, is added to the purchase price rather than reported as a credit loss expense. Subsequent changes in the allowance are recorded as credit loss expense. Interest income should be recognized based on the effective interest rate, excluding the discount attributed to the assessment of credit loss at acquisition. ASU 2016-13 is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. We are currently evaluating the impact of our pending adoption of the new standard on our consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09, “Compensation- Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting” (“ASU 2016-09”). ASU 2016-09 describes simplifications related to accounting and presenting share-based payment awards. ASU 2016-09 states that excess tax benefits and tax deficiencies are to be recognized as income tax expense or benefit in the income statement; excess tax benefits should be classified with other income tax as an operating activity on the statement of cash flows; an entity may make an entity-wide accounting policy to either estimate the number of awards that are expected to vest or account for forfeitures as they occur; and cash paid by an employer when directly withholding shares for tax-withholding purposes should be classified as a financing activity. ASU 2016-09 is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Adoption of ASU 2016-09 is not expected to have a material impact on our consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, “Leases” (“ASU 2016-02”). ASU 2016-02 establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain

38

Cascade Bancorp & Subsidiary

Notes to Condensed Consolidated Financial Statements

 June 30, 2016

(unaudited)

practical expedients available. We are currently evaluating the impact of our pending adoption of the new standard on our consolidated financial statements.

In January 2016, the FASB issued ASU 2016-01, “Financial Instruments- Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities” (“ASU 2016-01”). ASU 2016-01 simplifies the impairment assessment of equity investments, clarifies reporting disclosure requirements for financial instruments measured at amortized cost, and requires the exit price notion be disclosed when measuring fair value of financial instruments. ASU 2016-01 details the required separate presentation in other comprehensive income for the change in fair value of a liability related to change in instrument specific credit risk and details the required separate presentation of financial assets and liabilities by measurement category, and clarifies the need for a valuation allowance on deferred tax assets related to available-for-sale securities. ASU 2016-01 is effective for annual and interim reporting periods beginning after December 15, 2017. Adoption of ASU 2016-01 is not expected to have a material impact on our consolidated financial statements.

In April 2015, the FASB issued ASU 2015-03, “Interest- Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs” (“ASU 2015-03”). ASU 2015-03 simplifies the presentation of debt issuance costs and requires that the debt issuance costs related to a recognized debt liability be presented in the balance sheet as direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance of debt issuance costs are not affected by the amendments in this update. ASU 2015-03 is effective for annual and interim reporting periods beginning after December 15, 2015. Adoption of ASU 2015-03 is not expected to have a material impact on our consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”). ASU 2014-09 establishes a comprehensive revenue recognition standard for virtually all industries under U.S. GAAP, including those that previously followed industry-specific guidance such as the real estate, construction and software industries. The revenue standard’s core principle is built on the contract between a vendor and a customer for the provision of goods and services. It attempts to depict the exchange of rights and obligations between the parties in the pattern of revenue recognition based on the consideration to which the vendor is entitled. To accomplish this objective, the standard requires five basic steps: i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation. ASU 2014-09 is effective for annual and interim periods beginning after December 15, 2016 with three transition methods available - full retrospective, retrospective and cumulative effect approach. In August 2015, the FASB issued ASU 2015-14, “Revenue from Contracts with Customers: Deferral of the Effective Date” (“ASU 2015-14”). ASU 2015-14 amended the effective date to December 15, 2017. In March 2016, the FASB issued ASU 2016-08, “Revenue from Contracts with Customers: Principal Versus Agent Considerations” (“ASU 2016-08”). ASU 2016-08 defines the roles of a principal and agent in revenue recognition and determines when control of the good or service is transferred to the customer. In April 2016, the FASB issued ASU 2016-10, “Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing” (“ASU 2016-10”). ASU 2016-10 establishes guidance on identifying performance obligations and licensing implementation. In May 2016, the FASB issued ASU 2016-12, "Revenue from Contracts with Customers: Narrow- Scope Improvements and Practical Expedients" ("ASU 2016-12"). ASU 2016-12 clarifies the objective of the collectability criteria and notes the differences in applying the update at transition and on an ongoing basis. Adoption of ASU 2014-09, ASU 2015-14, ASU 2016-08, ASU 2016-10, and ASU 2016-12 is not expected to have a material effect on our consolidated financial statements.

39

ITEM 2.       MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the Company’s unaudited condensed consolidated financial statements and the notes thereto, included elsewhere in this Quarterly Report on Form 10-Q (“Form 10-Q”). This discussion highlights key information as determined by management but may not contain all of the information that is important to you. For a more complete understanding, the following should be read in conjunction with the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 4, 2016 (the “2015 Annual Report”), including its audited 2015 consolidated financial statements and the notes thereto as of December 31, 2015 and 2014 and for each of the years in the three-year period ended December 31, 2015.

In this Form 10-Q, please note that “we,” “our,” “us,” “Cascade” or the “Company” refer collectively to Cascade Bancorp (“Bancorp”), an Oregon chartered single bank holding company, and its wholly-owned subsidiary, Bank of the Cascades (the “Bank”).

Cautionary Information Concerning Forward-Looking Statements

This Form 10-Q contains forward-looking statements about the Company’s plans and anticipated results of operations and financial condition. These statements include, but are not limited to, our plans, objectives, expectations and intentions and are not statements of historical fact. When used in this report, the words “expects,” “believes,” “anticipates,” “could,” “may,” “will,” “should,” “plan,” “predicts,” “projections,” “continue” and other similar expressions constitute forward-looking statements, as do any other statements that expressly or implicitly predict future events, results or performance, and such statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to various risks and uncertainties that may cause our actual results to differ materially and adversely from our expectations as indicated in the forward-looking statements. These risks and uncertainties include: the general condition of, and changes in, the economy of the States of Oregon, Idaho and Washington generally, and Central, Southern, Coastal and Northwest Oregon, as well as the greater Boise/Treasure Valley, Idaho and greater Seattle, Washington areas; our ability to maintain asset quality and expand our market share or net interest margin; our ability to integrate future branch acquisitions; and expected cost savings, synergies and other related benefits of our acquisitions of Home Federal Bancorp, Inc. (“Home”), Prime Pacific Financial Services, Inc. and Bank of America, National Association branches might not be realized within the expected timeframe and costs or difficulties relating to the integration might be greater than expected. Further, actual results may be affected by competition with other financial institutions; customer acceptance of new products and services; the regulatory environment in which we operate; and general trends in the local, regional and national banking industry and economy. Certain risks and uncertainties, and the Company’s success in managing such risks and uncertainties, could cause actual results to differ materially from those projected, including, among others, the risk factors disclosed in Part I - Item 1A of the 2015 Annual Report. However, you should be aware that these factors are not an exhaustive list, and you should not assume these are the only factors that may cause our actual results to differ from our expectations.

These forward-looking statements speak only as of the date of this Form 10-Q. The Company undertakes no obligation to publish revised forward-looking statements to reflect the occurrence of unanticipated events or circumstances after the date hereof, except as required by applicable law. Readers should carefully review all disclosures filed by the Company from time to time with the SEC.

 Critical Accounting Policies and Accounting Estimates

Our significant accounting policies are described in Note 1 to the Consolidated Financial Statements for the year ended December 31, 2015 included in our 2015 Annual Report. Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and could potentially result in materially different results under different assumptions and conditions. We believe that our most critical accounting policies upon which our financial condition depends, and which involve the most complex or subjective decisions or assessments are as follows.

Reserve for Credit Losses

The Company’s reserve for credit losses provides for estimated losses based upon evaluations of known and inherent risks in the loan portfolio and related loan commitments. Arriving at an estimate of the appropriate level of reserve for credit losses (which consists of the Company’s reserve for loan losses and reserve for loan commitments) involves a high degree of judgment and assessment of multiple variables that result in a methodology with relatively complex calculations and analysis. Management uses historical information to assess the adequacy of the reserve for loan losses and considers qualitative factors, including national and local macroeconomic conditions, real estate market behavior and a range of other factors, in its determination of the reserve.

40

On an ongoing basis, the Company seeks to enhance and refine its methodology such that the reserve is at an appropriate level and responsive to changing conditions. The Company is currently working to refine a subset of its methodology with respect to certain components within its qualitative factor analysis.

The reserve for loan losses is increased by provisions for loan losses and by recoveries of loans previously charged-off and reduced by loans charged-off. The reserve for loan commitments is increased and decreased through non-interest expense. For a full discussion of the Company’s methodology of assessing the adequacy of the reserve for credit losses, see “Loan Portfolio and Credit Quality” in Item 7 of our 2015 Annual Report.

Deferred Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are reflected at currently enacted income tax rates applicable to the period in which the deferred tax assets or liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision (credit) for income taxes. A valuation allowance, if needed, reduces deferred tax assets to the expected amount to be realized.

Deferred tax assets are recognized subject to management’s judgment that realization is “more likely than not.” Uncertain tax positions that meet the more likely than not recognition threshold are measured to determine the amount of benefit to recognize. An uncertain tax position is measured at the amount of benefit that management believes has a greater than 50% likelihood of realization upon settlement. Tax benefits not meeting our realization criteria represent unrecognized tax benefits. We account for interest and penalties as a component of income tax expense.

The Company reversed its deferred tax asset (“DTA”) valuation allowance as of June 30, 2013 due to management’s determination that it was more likely than not that a significant portion of the Company’s DTA would be realized. Management’s determination resulted from consideration of both the positive and negative evidence available that can be objectively verified.

As of June 30, 2016 and December 31, 2015, the Company had a net DTA of $46.5 million and $50.7 million, respectively, with the decrease from the prior period due primarily to current period net income. There are a number of tax issues that impact the DTA balance, including changes in temporary differences between the financial statement and tax recognition of revenue and expenses and estimates as to the deductibility of prior losses.

Other Real Estate Owned (“OREO”) and Foreclosed Assets

OREO and other foreclosed assets acquired through loan foreclosure are initially recorded at estimated fair value less costs to sell when acquired, establishing a new cost basis. The adjustment at the time of foreclosure is recorded through the reserve for loan losses. Due to the subjective nature of establishing the asset’s fair value when it is acquired, the actual fair value of the OREO or foreclosed asset could differ from the original estimate. If it is determined that fair value declines subsequent to foreclosure, a valuation allowance is recorded through non-interest expense. Operating costs associated with the assets after acquisition are also recorded as non-interest expense. Gains and losses on the disposition of OREO and foreclosed assets are netted and posted to other non-interest expenses.

Goodwill

Goodwill from an acquisition is the value attributable to unidentifiable intangible elements acquired. At a minimum, annual evaluation of the value of goodwill is required.

An entity may assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. Factors assessed include all relevant events and circumstances including macroeconomic conditions, industry and market conditions, cost factors that have a negative effect on earnings and cash flows, overall financial performance, other relevant entity or reporting unit specific events and, if applicable, a sustained decrease in share price. If after assessing the totality of events or circumstances, such as those described above, an entity determines that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then the entity shall perform a two-step impairment test.

The first step of the impairment test compares the fair value of a reporting unit with its carrying amount, including goodwill. If the carrying amount of a reporting unit exceeds its fair value, the second step of the impairment test shall be performed to measure the amount of impairment loss, if any, when it is more likely than not that goodwill impairment exists.

The second step of the impairment test compares the implied fair value of reporting unit goodwill with the carrying amount of that goodwill. If the carrying amount of the reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss shall be recognized in an amount equal to that excess.

In relation to the goodwill recognized with the Bank of America branch acquisition and Home acquisition, management concluded as of June 30, 2016 and December 31, 2015 that there have been no material events or circumstances that have changed since the initial recognition of goodwill on March 4, 2016 and May 16, 2014, respectively, the date the Bank of America branch acquisition

41

and Home acquisition were completed that lead management to believe it is more likely than not that the fair value of the Bank is less than its carrying amount. Therefore, no further testing is deemed necessary.

Economic Conditions

The Company’s banking business is closely tied to the economies of Idaho, Oregon and Washington, which in turn are influenced by regional and national economic trends and conditions. Idaho, Oregon and Washington have recently been experiencing improved economic trends, including population in-migration, gains in employment and increased commercial business and real estate activity. National and regional economies and real estate prices have stabilized, as has business and consumer confidence. The Company’s markets, however, continue to be sensitive to general economic trends and conditions, including real estate values, and an unforeseen economic shock or a return of adverse economic conditions could cause deterioration of local economies and adversely affect the Company’s business, financial condition and results of operations.

Financial Highlights

Net income for the second quarter of 2016 was $4.8 million, or $0.07 per share. Net income for the first quarter of 2016 ("linked quarter") was $1.9 million, or $0.03 per share, which included non-recurring net expense items of $3.1 million (pretax), or $0.03 per share (after tax).

The acquisition of Prime Pacific Financial Services, Inc. ("PPF") was completed on August 1, 2016, with customer system conversion expected in the fourth quarter. PPF is headquartered in Lynnwood, Washington at the convenient intersection of the I-5 and I-405 traffic corridors. This location complements Cascade Bancorp's existing downtown Seattle commercial banking location. During the third quarter, Cascade expects to record one time transaction costs of approximately $3.5 million in connection with the transaction. The transaction is expected to be accretive to tangible book value and earnings.

On March 4, 2016, the Bank completed the acquisition of 12 Oregon branch locations and three Washington branch locations from Bank of America, National Association (the “branch acquisition”). This transaction allows Cascade the opportunity to enhance and strengthen its footprint in Oregon, while providing entry into the Washington market. The Bank assumed approximately $469.9 million of branch deposits, paying a 2.00% premium on the average balance of deposits assumed, for a cash purchase price of $9.7 million. Assets and liabilities assumed in the branch acquisition were recorded at fair value. As a result of the branch acquisition, the Company recorded $4.0 million of goodwill.

The financial statements as of June 30, 2016 and 2015 are inclusive of the effects of the combined results of operations following the branch acquisition and the Home acquisition. Due to the timing of the acquisitions, certain comparisons between periods are significantly affected by the transactions.

• Net income for the second quarter of 2016 was $4.8 million, or $0.07 per share, compared to net income for the first quarter of 2016 ("linked quarter") was $1.9 million, or $0.03 per share, which included non-recurring net expense items of $3.1 million (pretax), or $0.03 per share (after tax).

• At June 30, 2016, gross loans were $1.9 billion compared to $1.8 billion as of March 31, 2016. Second quarter organic loan growth¹ was $75.0 million, or 20.6% annualized.

• At June 30, 2016, total deposits were $2.6 billion, consistent with the linked quarter, with 97.8% retention of the deposits assumed in the branch acquisition.

• The cost of funds remained stable at just 0.08% for the quarter, which includes $469.9 million in deposits assumed in the branch acquisition.

• Net interest income was $22.2 million for the current and linked quarter, but up 7.6% from the linked quarter after adjusting for $1.5 million in non-recurring interest on called securities from the prior quarter². Stronger interest income is a result of growth in earning assets funded by the deposits of the 15 branches recently acquired from Bank of America.

• Net interest margin ("NIM") was 3.40% for the second quarter of 2016, compared to 3.80% in the linked quarter. As adjusted to exclude the aforementioned interest income on called securities, the NIM for the prior quarter would have been 3.54%³. The NIM for the second quarter a year ago was 3.70%.

• Net loan recoveries for the second quarter were $0.2 million. The allowance for loan losses (“ALLL”) at quarter end

42

was 1.30% of gross loans. No provision or credit for loan losses was recorded in the current quarter. Credit metrics improved with lower classified loans.

• At June 30, 2016, stockholders’ equity was $345.3 million, with book value per share of $4.71 and tangible book value per share⁴ of $3.41.

• Return on average assets and return on average tangible assets⁵ was 0.65% and 0.68%, respectively, compared to 0.30% and 0.31% in the linked quarter, respectively.

• Return on average stockholders' equity and return on average tangible stockholders’ equity⁶ in the current quarter was 5.65% and 7.85%, respectively, compared to 2.30% and 3.07% in the linked quarter, respectively.

Non-GAAP Financial Measures

This Form 10-Q contains certain financial measures that are not calculated in accordance with GAAP. The Company’s management uses these non-GAAP financial measures, specifically efficiency ratio, adjusted net interest margin, return on average tangible assets, return on average tangible stockholders equity, organic loan growth, tangible book value per common share, tangible common equity ratio to total assets and tangible stockholders’ equity, as important measures of the strength of the Company’s capital and its ability to generate earnings on its tangible capital invested by its shareholders. Management believes presentation of these non-GAAP financial measures provides useful supplemental information to our investors and others that contributes to a proper understanding of the financial results and capital levels of the Company. Management also uses these non-GAAP financial measures in making financial, operating and planning decisions and in evaluating the Company’s performance. These non-GAAP disclosures should not be viewed as a substitute for financial results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the tables below.

¹Organic loan growth is a non-GAAP measure defined as total loan growth less acquired loans during the period. See below for a reconciliation of organic loan growth.

²Adjusted net interest income growth is a non-GAAP measure calculated as Q2 2016 net interest income less Q1 2016 net interest income reduced for $1.5 million related to non-recurring interest on called securities. See below for a reconciliation of adjusted net interest income growth.

³Adjusted NIM is a non-GAAP measure. See reconciliation below.

⁴Tangible book value per common share is a non-GAAP measure defined as total stockholders’ equity, less the sum of core deposit intangible (“CDI”) and goodwill, divided by total number of shares outstanding. See below for a reconciliation of tangible book value per common share.

⁵ Return on average tangible assets is a non-GAAP measure defined as net income divided by average total assets, less the sum of average CDI and goodwill. See below for a reconciliation of return on average tangible assets.

⁶Return on average tangible stockholders' equity is a non-GAAP measure defined as net income divided by average total stockholders' equity, less the sum of average CDI and goodwill. See below for a reconciliation of return on average tangible stockholders' equity.

43

Reconciliation of Non-GAAP Measures (unaudited)

Reconciliation of Non-GAAP Measures (unaudited):
Reconciliation of period end stockholders’ equity to period end tangible stockholders’ equity:	June 30, 2016			March 31, 2016			December 31, 2015			June 30, 2015
Total stockholders’ equity	$	345,260		$	339,725		$	336,774		$	325,356
Core deposit intangible	12,720			13,085			6,863			7,273
Goodwill	82,594			82,594			78,610			78,610
Tangible stockholders’ equity	$	249,946		$	244,046		$	251,301		$	239,473
Reconciliation of period end common stockholders’ equity ratio to period end tangible common stockholders’ equity ratio:	June 30, 2016			March 31, 2016			December 31, 2015			June 30, 2015
Total stockholders’ equity	$	345,260		$	339,725		$	336,774		$	325,356
Total assets	$	2,966,574		$	2,982,005		$	2,468,029		$	2,418,487
Common stockholders’ equity ratio	11.64		%	11.39		%	13.65		%	13.45		%
Tangible stockholders’ equity	$	249,946		$	244,046		$	251,301		$	239,473
Total assets	$	2,966,574		$	2,982,005		$	2,468,029		$	2,418,487
Tangible common stockholders’ equity ratio	8.43		%	8.18		%	10.18		%	9.90		%
Reconciliation of period end total stockholders' equity to period end tangible book value per common share:	June 30, 2016			March 31, 2016			December 31, 2015			June 30, 2015
Total stockholders’ equity	$	345,260		$	339,725		$	336,774		$	325,356
Core deposit intangible	12,720			13,085			6,863			7,273
Goodwill	82,594			82,594			78,610			78,610
Tangible stockholders equity	$	249,946		$	244,046		$	251,301		$	239,473
Common shares outstanding	73,255,171			72,774,980			72,792,570			72,848,611
Tangible book value per common share	$	3.41		$	3.35		$	3.45		$	3.29

44

	Three Months Ended												Six Months Ended
Reconciliation of return on average tangible stockholders' equity:	June 30, 2016			March 31, 2016			December 31, 2015			June 30, 2015			June 30, 2016			June 30, 2015
Average stockholders' equity	$	342,591		$	339,236		$	334,472		$	324,622		$	340,913		$	321,564
Average core deposit intangible	12,865			6,800			6,935			7,344			9,833			7,446
Average goodwill	82,594			78,653			78,610			78,610			80,624			79,277
Average tangible stockholders' equity	$	247,132		$	253,783		$	248,927		$	238,668		$	250,456		$	234,841
Net income	4,824			1,940			5,567			4,795			6,764			9,913
Return on average tangible stockholders' equity (annualized)	7.85		%	3.07		%	8.87		%	8.06		%	5.43		%	8.51		%
	Three Months Ended												Six Months Ended
Reconciliation of return on average tangible assets:	June 30, 2016			March 31, 2016			December 31, 2015			June 30, 2015			June 30, 2016			June 30, 2015
Average total assets	$	2,961,853		$	2,638,568		$	2,525,708		$	2,399,322		$	2,800,210		$	2,379,161
Average core deposit intangible	12,865			6,800			6,935			7,344			9,833			7,446
Average goodwill	82,594			78,653			78,610			78,610			80,624			79,277
Average tangible assets	$	2,866,394		$	2,553,115		$	2,440,163		$	2,313,368		$	2,709,753		$	2,292,438
Net income	4,824			1,940			5,567			4,795			6,764			9,913
Return on average tangible assets (annualized)	0.68		%	0.31		%	0.91		%	0.83		%	0.50		%	0.87		%

Reconciliation of adjusted net interest income growth:	March 31, 2016
Q2 2016 net interest income	$	22,216
Q1 2016 net interest income	22,159
Impact to net interest margin of interest income on called securities	1,510
Adjusted Q1 2016 net interest income	20,649
Adjusted net interest income growth (dollars)	$	1,567
Adjusted net interest income growth (percent)	7.6		%

Reconciliation of adjusted net interest margin:	March 31, 2016
Net interest margin	3.80	%
Impact to net interest margin of $1.5 million interest income on called securities	0.26	%
Adjusted net interest margin	3.54	%

Reconciliation of year-over-year total loan growth to organic loan growth (from June 30, 2015):	Year over year June 30, 2016
Total loan growth	$	276,343
Acquired loan growth	95,676
Organic loan growth	$	180,667
Reconciliation of quarterly total loan growth to organic loan growth (from March 31, 2016):	QTD June 30, 2016
Total loan growth	$	117,874
Acquired loan growth	42,842
Organic loan growth	$	75,032

45

46

RESULTS OF OPERATIONS –Three and Six Months Ended June 30, 2016 and 2015

Income Statement

Net Income

Net income for the second quarter of 2016 was $4.8 million, or $0.07 per share, compared to $1.9 million, or $0.03 per share, for the linked quarter and $4.8 million, or $0.07 per share, for the second quarter of 2015. Net income for the six months ended June 30, 2016 was $6.8 million, or $0.09 per share, compared to $9.9 million, or $0.14 per share for the six months ended June 30, 2015.

The linked quarter included approximately $3.1 million in net pretax non-recurring items, mainly related to costs incurred in connection with the branch acquisition, such as customer integration and IT conversion expenses, as well as certain branch consolidation costs. These costs were partially offset by $1.5 million in earnings on investment securities called during the period.

Net Interest Income

Net interest income was $22.2 million for the second quarter of 2016, as compared to $19.4 million in the second quarter of 2015. Net interest income was $44.4 million and $40.3 million for the six months ended June 30, 2016 and 2015, respectively.

Total interest income increased $2.9 million from $19.8 million in the second quarter of 2015 to $22.7 million in the second quarter of 2016. This increase was due primarily to loan growth over the past year. Total interest income was $45.4 million and $39.3 million for the six months ended June 30, 2016 and 2015, respectively.

Total interest expense for the second quarter of 2016 and the year ago period was $0.5 million. The cost of funds for the current quarter was 0.08% compared to 0.09% for the linked quarter and the year ago period. The year ago period did not include the $469.9 million in deposits acquired from Bank of America in March of 2016. The current period saw a reduction in time deposit expense owing to a strategic run-off of higher priced CDs, partially offset by an increase in interest bearing demand and savings costs related to higher volumes.

The NIM for the second quarter of 2016 was 3.40%, compared to NIM of 3.70% in the second quarter of 2015. The NIM for the six months ended June 30, 2016 was 3.58%, compared to NIM of 3.72% for the six months ended June 30, 2015. The NIM declined from prior periods because of the deployment of funds assumed in the branch acquisition into lower yielding securities and wholesale loans. The Company's goal is to replace these wholesale assets with originated loans over time.

Components of Net Interest Margin

The following tables set forth the components of the Company’s NIM for the three and six months ended June 30, 2016 and 2015. The tables present average balance sheet information, interest income and yields on average interest-earning assets, interest expense and rates paid on average interest-bearing liabilities, net interest income, net interest spread and NIM for the Company (dollars in thousands):

47

	Three Months Ended June 30,
	2016							2015
	Average Balance			Interest Income/ Expense		Average Yield or Rates		Average Balance			Interest Income/ Expense		Average Yield or Rates
Assets
Investment securities	$	584,492		$	3,429	2.36	%	$	460,295		$	2,805	2.44	%
Interest bearing balances due from other banks	214,483			273		0.51	%	39,725			27		0.27	%
Federal funds sold	273			—		—	%	273			—		—	%
Federal Home Loan Bank stock	3,133			—		—	%	18,011			—		—	%
Loans (1)(2)(3)	1,828,096			19,037		4.19	%	1,581,056			16,987		4.31	%
Total earning assets/interest income	2,630,477			22,739		3.48	%	2,099,360			19,819		3.79	%
Reserve for loan losses	(24,761		)					(23,427		)
Cash and due from banks	54,441							42,109
Premises and equipment, net	45,268							43,187
Bank-owned life insurance	54,809							53,787
Deferred tax asset	48,463							61,310
Goodwill	82,594							78,610
Core deposit intangibles	12,865							7,344
Accrued interest and other assets	57,697							37,042
Total assets	$	2,961,853						$	2,399,322
Liabilities and Stockholders’ Equity
Interest bearing demand deposits	$	1,316,077		458		0.14	%	$	999,416		315		0.13	%
Savings deposits	171,691			13		0.03	%	132,548			10		0.03	%
Time deposits	212,057			52		0.10	%	207,817			136		0.26	%
Other borrowings	—			—		—	%	6,484			6		0.37	%
Total interest bearing liabilities/interest expense	1,699,825			523		0.12	%	1,346,265			467		0.14	%
Demand deposits	864,419							683,141
Other liabilities	55,018							45,294
Total liabilities	2,619,262							2,074,700
Stockholders’ equity	342,591							324,622
Total liabilities and stockholders’ equity	$	2,961,853						$	2,399,322
Net interest income				$	22,216						$	19,352
Net interest spread						3.35	%						3.65	%
Net interest income to earning assets						3.40	%						3.70	%

(1) Average non-performing loans included in the computation of average loans for the three months ended June 30, 2016 and 2015 was approximately $11.1 million and $5.1 million, respectively.

(2) Loan related fees, including prepayment penalties, recognized during the period and included in the yield calculation totaled approximately $0.5 million in three months ended June 30, 2016 and 2015.

(3) Includes loans held for sale.

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	Six Months Ended June 30,
(dollars in thousands)	2016							2015
	Average Balance			Interest Income/ Expense		Average Yield or Rates		Average Balance			Interest Income/ Expense		Average Yield or Rates
Assets
Investment securities	$	546,513		$	8,047	2.96	%	$	463,703		$	5,788	2.52	%
Interest bearing balances due from other banks	165,048			429		0.52	%	44,319			60		0.27	%
Federal funds sold	273			—		—	%	273			—		—	%
Federal Home Loan Bank stock	3,516			—		—	%	21,774			—		—	%
Loans (1)(2)(3)	1,774,091			36,957		4.19	%	1,547,101			33,481		4.36	%
Total earning assets/interest income	2,489,441			45,433		3.67	%	2,077,170			39,329		3.82	%
Reserve for loan losses	(25,676		)					(23,491		)
Cash and due from banks	51,846							41,592
Premises and equipment, net	43,679							43,360
Bank-owned life insurance	54,684							53,669
Deferred tax asset	49,122							63,800
Goodwill	80,624							79,277
Core deposit intangibles	9,833							7,446
Accrued interest and other assets	46,657							36,338
Total assets	$	2,800,210						$	2,379,161
Liabilities and Stockholders' Equity
Interest bearing demand deposits	1,222,834			871		0.14	%	997,850			628		0.13	%
Savings deposits	158,974			24		0.03	%	132,029			20		0.03	%
Time deposits	199,186			137		0.14	%	216,258			359		0.33	%
Other borrowings	11,423			26		0.46	%	3,398			6		0.36	%
Total interest bearing liabilities/interest expense	1,592,417			1,058		0.13	%	1,349,535			1,013		0.15	%
Demand deposits	813,958							662,879
Other liabilities	52,922							45,183
Total liabilities	2,459,297							2,057,597
Stockholders' equity	340,913							321,564
Total liabilities and stockholders' equity	2,800,210							2,379,161
Net interest income				44,375							38,316
Net interest spread						3.54	%						3.67	%
Net interest income to earning assets						3.58	%						3.72	%

(1) Average non-performing loans included in the computation of average loans for the six months ended June 30, 2016 and 2015 was approximately $8.7 million and $6.7 million, respectively.

(2) Loan related fees, including prepayment penalties, recognized during the period and included in the yield calculation totaled approximately $0.9 million and $1.3 million in the six months ended June 30, 2016 and 2015, respectively.

(3) Includes loans held for sale.

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Analysis of Changes in Interest Income and Expense

The following table shows the dollar amount of increase (decrease) in the Company’s consolidated interest income and expense for the three and six months ended June 30, 2016, and attributes such variance to “volume” or “rate” changes (dollars in thousands). The changes in net interest income due to changes in both average volume and average interest rate have been allocated to the average volume change or the average interest rate change in proportion to the absolute amounts of the change in each.

	Three Months Ended June 30,
	2016 over 2015
	Total Increase			Amount of Change Attributed to
	(Decrease)			Volume			Rate
Interest income:
Interest and fees on loans	$	2,050		$	2,624		$	(574	)
Interest on investment securities	624			751			(127		)
Other investment income	246			118			128
Total interest income	2,920			3,493			(573		)
Interest expense:
Interest on deposits:
Interest bearing demand	143			99			44
Savings	3			3			—
Time deposits	(84		)	3			(87		)
Other borrowings	(6		)	(6		)	—
Total interest expense	56			99			(43		)
Net interest income	$	2,864		$	3,394		$	(530	)

	Six Months Ended June 30,
	2016 over 2015
	Total Increase			Amount of Change Attributed to
	(Decrease)			Volume			Rate
Interest income:
Interest and fees on loans	$	3,476		$	4,973		$	(1,497	)
Interest on investment securities	2,259			1,045			1,214
Other investment income	369			164			205
Total interest income	6,104			6,182			(78		)
Interest expense:
Interest on deposits:
Interest bearing demand	243			143			100
Savings	4			4			—
Time deposits	(222		)	(27		)	(195		)
Other borrowings	20			14			6
Total interest expense	45			134			(89		)
Net interest income	$	6,059		$	6,048		$	11

50

Loan Loss Provision and Reserve for Loan Losses

There was no provision for loan loss in the current quarter, linked quarter or second quarter of 2015.

The Bank maintains pooled and impaired loan reserves with additional consideration of qualitative factors and unallocated reserves in reaching its determination of the total reserve for loan losses. The level of reserves is subject to review by the Bank’s regulatory authorities who may require adjustments to the reserve based on their evaluation and opinion of economic and industry factors as well as specific loans in the portfolio. For further discussion, see “Critical Accounting Policies and Estimates” in this Form 10-Q and “Loan Portfolio and Credit Quality” in Item 7 of our 2015 Annual Report. There can be no assurance that the reserve for credit losses will be sufficient to cover actual loan-related losses.

As of June 30, 2016, the reserve for loan losses was $24.7 million, or 1.30% of outstanding loans, compared to $24.4 million, or 1.45% of outstanding loans, at December 31, 2015. Activity in the reserve during the period includes $4.2 million gross recoveries on loans previously charged off, largely offset by a write-down of a loan in the Bank’s mining and energy shared national credit portfolio. Aggregate portfolio exposure to energy/mining sector is less than 1% of total loans. The unallocated portion of the reserve is subject to refinement as we continue to enhance our qualitative factors and assess uncertainties regarding our entry into new loan markets, new geographies and general uncertainty related to growth and economic conditions.

The reserve for unfunded lending commitments was $0.4 million at June 30, 2016, which remained unchanged from December 31, 2015.

Non-Interest Income

Non-interest income was as follows for the periods presented below (dollars in thousands):

	Three Months Ended    June 30, 2016		Three Months Ended    June 30, 2015		% Change		Six Months Ended   June 30, 2016		Six Months Ended    June 30, 2015		% Change
Service charges on deposit accounts	$	1,729	$	1,249	38.4	%	$	3,101	$	2,510	23.5	%
Card issuer and merchant services fees, net	2,700		1,856		45.5	%	4,535		3,499		29.6	%
Earnings on BOLI	249		242		2.9	%	507		484		4.8	%
Mortgage banking income, net	899		677		32.8	%	1,394		1,465		(4.8	)%
Swap fee income	466		785		(40.6	)%	1,132		1,300		(12.9	)%
SBA gain on sales and fee income	386		144		168.1	%	560		506		10.7	%
Other income	1,342		1,742		(23.0	)%	1,998		3,053		(34.6	)%
Total non-interest income	$	7,771	$	6,695	16.1	%	$	13,227	$	12,817	3.2	%

Non-interest income for the three and six months ended June 30, 2016 was $7.8 million and $13.2 million, respectively, up from $6.7 million and $12.8 million during the three and six months ended June 30, 2015. These increases are primarily a result of higher service fees and card related revenue arising from increased volumes of accounts and transactions arising from the branch acquisition.

For the three and six months ended June 30, 2016, service charges on deposit accounts and card issuer and merchant service fees were up over the three and six months ended June 30, 2015 mainly due to higher transaction volumes including those from acquired branch customers following the branch acquisition.

Earnings on BOLI for the three and six months ended June 30, 2016 were stable compared to the three and six months ended June 30, 2015. The Company has no plans to increase BOLI at this time.

Net mortgage banking increased in the three months ended June 30, 2016 compared to the three months ended June 30, 2015, mainly due to higher origination volumes and changes in the interest rate environment.

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The Bank began to offer its customer interest rate swaps and SBA services in 2013 in order to increase its services to customers and diversify its revenue sources. Changes in customer swap fee income and SBA revenue for the second quarter and year to date periods of 2016 generally relate to the timing of transaction settlement for these services compared to the respective year ago periods.

Other income for the three months ended June 30, 2016 was down $0.4 million compared to the three months ended June 30, 2015, largely due to gains on disposition of branch properties that occurred in the year ago period. Other income for the six months ended June 30, 2016 decreased compared to six months ended June 30, 2015 as the year ago period included a gain on sale of decommissioned branches and a contractual arrangement for future revenue-sharing of merchant services, together totaling $1.3 million.

Non-Interest Expense

Non-interest expense was as follows for the periods presented below (dollars in thousands):

	Three Months Ended    June 30, 2016			Three Months Ended    June 30, 2015			% Change		Six Months Ended   June 30, 2016		Six Months Ended   June 30, 2015			% Change
Salaries and employee benefits	$	13,089		$	10,588		23.6	%	$	26,118	$	21,718		20.3	%
Occupancy	1,647			1,417			16.2	%	4,327		2,783			55.5	%
Information technology	1,182			1,046			13.0	%	2,579		1,984			30.0	%
Equipment	310			395			(21.5	)%	758		752			0.8	%
Communications	683			484			41.1	%	1,293		1,025			26.1	%
FDIC insurance	455			306			48.7	%	832		704			18.2	%
OREO (income) expense	(119		)	(168		)	(29.2	)%	93		(111		)	(183.8	)%
Professional services	1,060			1,289			(17.8	)%	2,658		2,246			18.3	%
Card issuer	1,044			643			62.4	%	1,953		1,506			29.7	%
Insurance	158			191			(17.3	)%	333		400			(16.8	)%
Other expenses	2,826			2,200			28.5	%	5,909		4,204			40.6	%
Total non-interest expense	$	22,335		$	18,391		21.4	%	$	46,853	$	37,211		25.9	%

Non-interest expense for the second quarter of 2016 was $22.3 million compared to $18.4 million for the second quarter of 2015. Non-interest expense for the six months ended June 30, 2016 was $46.9 million compared to $37.2 million for the six months ended June 30, 2015. The year over year increase in non-interest expense was largely a result of $4.6 million in generally non-recurring costs mainly related to the branch acquisition and certain branch consolidations. The run rate of non-interest expense is generally higher due to the addition of the 15 newly acquired Bank of America branches and related servicing of a higher volume of bank customers.

Total salaries and benefits increased $2.5 million for the three months ended June 30, 2016 compared to the same period in 2015, primarily related to ongoing costs associated with staffing our expanded branch network following the branch acquisition, non-recurring costs of acquired branch employees, including severance, healthcare and other benefit accruals, incentive costs related to a conversion project success, as well as overtime and staff retention. Total salaries and benefits increased $4.4 million for the six months ended June 30, 2016 compared to the same period in 2015, primarily related to ongoing costs associated with the branch acquisition.

Information technology for the three and six months ended June 30, 2016 increased from the same periods in 2015, due primarily to one-time system conversion costs and ongoing service associated with the branch acquisition.

Occupancy and communications expenses for the three and six months ended June 30, 2016 increased an aggregate of $0.4 million and $1.8 million, respectively, compared to the three and six months ended June 30, 2015, primarily related to costs associated with the branch acquisition and certain branch consolidations. In addition, the year ago period included credits to occupancy on the disposition of decommissioned branches. Equipment expenses were stable across periods. The current quarter included a $0.2 million non-recurring credit.

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OREO income decreased over the same periods in 2015 due to timing of sales of OREO properties.

Professional services were relatively stable for the three months ended June 30, 2016 compared to the same period in 2015.Professional services increased for the six months ended June 30, 2016 due mainly to branch acquisition conversion related costs.

Card issuer expenses increased for the three and six month period ended June 30, 2016 related to increased volume and related charges following the branch acquisition.

Insurance expenses decreased 17.3% and 16.8% in the three and six months ended June 30, 2016 compared to the same periods in 2015, largely as a result of lower risk rate on renewal of insurance.

Other expenses increased for the three and six months ended June 30, 2016 as compared to the same periods in 2015, mainly related to costs associated with the branch acquisition.

Income Taxes

The Company recorded an income tax provision of $2.8 million during the three months ended June 30, 2016, as compared to $2.9 million for the three months ended June 30, 2015. The income tax provision for the six months ended June 30, 2016 was $4.0 million compared to $6.0 million for the six months ended June 30, 2015.

As of June 30, 2016, the DTA was $46.5 million. This is compared with a DTA as of December 31, 2015 of $50.7 million. Our estimated effective income tax rate differs from the statutory income tax rate primarily due to the exclusion of certain BOLI and municipal loan and bond interest income from taxable income. 

In assessing the Company’s ability to utilize its DTA, management considers whether it is more likely than not that some portion or all of the DTA will not be realized. The ultimate realization of DTA is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the nature and amount of historical and projected future taxable income, the scheduled reversal of deferred tax assets and liabilities, and available tax planning strategies in making this assessment. The amount of deferred taxes recognized could be impacted by changes to any of these variables.

Financial Condition

Total Assets and Liabilities

Total assets at June 30, 2016 increased to $3.0 billion, compared to $2.5 billion at December 31, 2015, with higher cash and cash equivalents, investments, and loans outstanding.

Cash and cash equivalents at June 30, 2016 were $178.8 million compared to $77.8 million at December 31, 2015 due to an increase in deposits mainly related to deposits assumed in the branch acquisition.

Investment securities classified as available-for-sale and held-to-maturity were $604.2 million at June 30, 2016, compared to $449.7 million at December 31, 2015. The increase is due to a portion of deposits assumed in the branch acquisition deployed into securities.

Total loans at June 30, 2016 were $1.9 billion, compared to $1.7 billion at December 31, 2015. Loan growth was distributed among commercial real estate, construction, consumer residential and commercial and industrial loans. Consumer residential included both retained and acquired mortgages. Strategically, the Bank continued to expand its ARM portfolio to further diversify its overall loan portfolio by geography and loan type. Organic growth was partially offset by a modest decline in the shared national credits (“SNC”) portfolio.

FHLB stock remained steady with $3.0 million at December 31, 2015 and $3.1 million at June 30, 2016.

At June 30, 2016, goodwill increased to $82.6 million, compared to $78.6 million at December 31, 2015 due primarily to the premium paid for $469.9 million in deposits assumed with the branch acquisition.

Total deposits increased to $2.6 billion at June 30, 2016 from $2.1 billion at December 31, 2015 due primarily to deposits assumed in the branch acquisition. Increases from December 31, 2015 were visible across all deposit types, with significant impact in non-

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interest bearing accounts (up $149.2 million, or 20.5%) and interest bearing demand (up $262.0 million, or 25.1%). The overall cost of funds was 0.08% for the quarters ended June 30, 2016 and December 31, 2015, respectively, and 0.09% for the quarter ended June 30, 2015.

From time to time the Company makes commitments to acquire banking properties or to make equipment or technology related investments of capital. At June 30, 2016, the Company had no material capital expenditure commitments apart from those incurred in the ordinary course of business.

Stockholders’ Equity and Capital Resources

Total stockholders’ equity at June 30, 2016 was $345.3 million, as compared to $336.8 million at December 31, 2015. The increase in total stockholders’ equity was due to the interim period net income. At June 30, 2016, the total common equity to total assets ratio was 11.64% and the Company’s basic book value per share was $4.71 as compared to the total common equity to total assets ratio of 13.65% and basic book value per share of $4.63 at December 31, 2015.

At June 30, 2016, the Bancorp’s and Bank’s capital ratios exceeded the requirements to be designated as “well-capitalized” under the Basel III regulatory capital framework. Additional information regarding capital requirements can be found in Note 13 of the notes to the condensed consolidated financial statements included in this Form 10-Q.

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	Actual				Regulatory minimum to be “well capitalized”
	Capital Amount		Ratio		Capital Amount		Ratio
June 30, 2016
Tier 1 leverage (to average assets)
Bancorp	$	226,086	7.9	%	$	142,377	5.0	%
Bank	222,840		7.8	%	142,154		5.0	%
CET1 capital (to risk weighted assets)
Bancorp	226,086		10.0		146,772		6.5
Bank	222,840		9.9		146,560		6.5
Tier 1 capital (to risk-weighted assets)
Bancorp	226,086		10.0		180,643		8.0
Bank	222,840		9.9		180,381		8.0
Total capital (to risk-weighted assets)
Bancorp	251,196		11.1		225,803		10.0
Bank	247,949		11.0		225,477		10.0
December 31, 2015
Tier 1 leverage (to average assets)
Bancorp	$	227,542	9.4	%	$	121,022	5.0	%
Bank	223,533		9.3	%	120,827		5.0	%
CET1 capital (to risk weighted assets)
Bancorp	227,542		11.5		128,292		6.5
Bank	223,533		11.4		128,069		6.5
Tier 1 capital (to risk-weighted assets)
Bancorp	227,542		11.5		157,898		8.0
Bank	223,533		11.4		157,624		8.0
Total capital (to risk-weighted assets)
Bancorp	252,401		12.8		197,373		10.0
Bank	248,346		12.6		197,030		10.0

Asset Quality

For the quarter ended June 30, 2016, net loan recoveries totaled $0.2 million and there was no provision for loan losses during the period. The ratio of loan loss reserve to total loans declined to 1.30% of total loans at June 30, 2016 compared to 1.45% at December 31, 2015 and June 30, 2015. The reduction was due to higher loan balances.

At June 30, 2016, delinquent loans were 0.19% of the loan portfolio. This compares to 0.30% at March 31, 2016 and 0.07% at June 30, 2015.

Non-performing assets as a percentage of total assets was 0.51% at June 30, 2016, as compared to 0.34% at December 31, 2015 and 0.41% at June 30, 2015. The increase relates to risk-rating downgrades in the mining/energy sector of the loan portfolio offset by several upgrades of previously adversely risk rated credits. The Company’s aggregate mining and energy exposure is less than 1.0% of total loans.

At June 30, 2016, $24.0 million of the $208.9 million in acquired loans were covered under loss sharing agreements with the FDIC. These loss sharing agreements will expire five years after the date of the FDIC agreements for non-single family covered assets and 10 years after the acquisitions date for single-family covered assets. The Company has determined it will report on a

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cash basis any potential future benefits and/or costs incurred with respect to the remaining loss share receivables (or payables) under these agreements. The remaining benefit and/or cost of the FDIC loss sharing agreements are not expected to be material to the Company’s financial condition. Estimated future losses on acquired covered loans are included in the fair value purchase accounting mark.

Off-Balance Sheet Arrangements

The following table summarizes the Bank’s off-balance sheet commitments at June 30, 2016 and December 31, 2015 (dollars in thousands):

	June 30, 2016		December 31, 2015
Commitments to extend credit	$	610,133	$	479,353
Commitments under credit card lines of credit	74,985		65,988
Standby letters of credit	5,673		5,090
Total off-balance sheet financial instruments	$	690,791	$	550,431

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the customer contract. Commitments generally have fixed expiration dates or other termination clauses and may require the payment of fees. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.

The Bank applies established credit standards and underwriting practices in evaluating the creditworthiness of such obligors and related collateral requirements, if any. Collateral held for commitments varies but may include accounts receivable, inventory, property and equipment, residential real estate and income-producing commercial properties. The Bank typically does not obtain collateral related to credit card commitments.

Standby letters of credit are written conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. These guarantees are primarily issued to support public and private borrowing arrangements. In the event the customer does not perform in accordance with the terms of the agreement with the third party, the Bank would be required to fund the commitment. The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount of the commitment. If the commitment were funded, the Bank would be entitled to seek recovery from the customer. The Bank’s policies generally require that standby letter of credit arrangements contain security and debt covenants similar to those involved in extending loans to customers. The credit risk involved in issuing standby letters of credit is essentially the same as that involved in extending loan facilities to customers.

The increase in commitments to extend credit from the balance at December 31, 2015 to the balance at June 30, 2016 was primarily related to an increase in commercial real estate and credit card lending commitments.

Other than those commitments discussed above, there are no other obligations or liabilities of the Company arising from its off-balance sheet arrangements that are or are reasonably likely to become material.  In addition, the Company knows of no event, demand, commitment, trend or uncertainty that will result in or is reasonably likely to result in the termination or material reduction in availability of the off-balance sheet arrangements. The Company had no material off-balance sheet derivative financial instruments as of June 30, 2016 and December 31, 2015.

Liquidity and Sources of Funds

The objective of the Bank’s liquidity management is to maintain sufficient cash flows to meet obligations for depositor withdrawals, to fund the borrowing needs of loan customers, and to fund ongoing operations. At June 30, 2016, liquid assets of the Bank were mainly interest bearing balances held at the Federal Reserve Bank of San Francisco (“FRB”) totaling $105.1 million compared to $22.3 million at December 31, 2015. The increase was primarily the result of cash assumed in the branch acquisition.

Core relationship deposits are the Bank’s primary source of funds. As such, the Bank focuses on deposit relationships with local business and consumer clients who maintain multiple accounts and services at the Bank. The Company views such deposits as the foundation of its long-term liquidity because it believes such core deposits are more stable and less sensitive to changing interest rates and other economic factors compared to large time deposits or wholesale purchased funds. The Bank’s customer relationship strategy has resulted in a relatively higher percentage of its deposits being held in checking and money market accounts, and a lesser percentage in time deposits.

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 In March 2016, the Company increased its core deposits with the purchase of branches and customer deposits from Bank of America. As of June 30, 2016, approximately 97.8% of the deposits assumed have remained with the Company. Management believes such deposits have enhanced its liquidity profile.

The Bank augments core deposits with wholesale funds from time to time. The Bank may accept local relationship-based reciprocal Certificate of Deposit Account Registry Service (“CDARS”) and Demand Deposit Marketplace (“DDM”) deposits. Regulators classify such as brokered deposits. At June 30, 2016 and December 31, 2015, the Company had $1.0 million and $10.0 million in reciprocal CDARS, respectively, and $73.4 million and $76.0 million in reciprocal DDM deposits, respectively.

The Bank accepts public fund deposits in Oregon, Idaho and Washington and follows rules imposed by state authorities. Current rules imposed by the Oregon and Washington State Treasuries require that the Bank collateralize no less than 50% of the uninsured public funds of Oregon and Washington entities held by the Bank, respectively. At June 30, 2016, the Bank was in compliance with these requirements. Currently, there are no collateral requirements set on Idaho public deposits.

The Bank also utilizes borrowings and lines of credit as sources of funds. At June 30, 2016, the Federal Home Loan Bank of Des Moines (“FHLB”) had extended the Bank a secured line of credit of $1.0 billion (35.00% of total assets) accessible for short or long-term borrowings given sufficient qualifying collateral. As of June 30, 2016, the Bank had qualifying collateral pledged for FHLB borrowings totaling $530.8 million, of which the Bank had no indebtedness. At June 30, 2016, the Bank also had undrawn borrowing capacity at FRB of $15.9 million supported by specific qualifying collateral. Borrowing capacity from FHLB or FRB may fluctuate based upon the acceptability and risk rating of loan collateral, and counterparties could adjust discount rates applied to such collateral at their discretion. Also, FRB or FHLB could restrict or limit our access to secured borrowings. Correspondent banks have extended $90.0 million in unsecured or collateralized short-term lines of credit for the purchase of federal funds. At June 30, 2016, the Company had no outstanding borrowings under these federal fund borrowing agreements.

Liquidity may be affected by the Bank’s routine commitments to extend credit. At June 30, 2016, the Bank had $690.8 million in total outstanding commitments to extend credit, compared to $550.4 million at year-end 2015. At this time, management believes that the Bank’s available resources will be sufficient to fund its commitments in the normal course of business.

The investment portfolio also provides a secondary source of funds as investments may be pledged for borrowings or sold for cash. This liquidity is limited, however, by counterparties’ willingness to accept securities as collateral and the market value of securities at the time of sale could result in a loss to the Bank. As of June 30, 2016, the book value of unpledged investments totaled $399.2 million compared to $331.7 million at December 31, 2015.

Bancorp is a single bank holding company and its primary ongoing source of liquidity is dividends received from the Bank. Oregon banking laws impose certain limitations on the payment of dividends by Oregon state chartered banks.  The amount of the dividend may not be greater than the Bank’s unreserved retained earnings, deducting from that, to the extent not already charged against earnings or reflected in a reserve, the following: (1) all bad debts, which are debts on which interest is past due and unpaid for at least six months, unless the debt is fully secured and in the process of collection; (2) all other assets charged off as required by the Director of the Department of Consumer and Business Services or a state or federal examiner; and (3) all accrued expenses, interest and taxes of the institution.

Inflation

The effect of changing prices on financial institutions is typically different than on non-banking companies since virtually all of a bank’s assets and liabilities are monetary in nature. In particular, interest rates are significantly affected by inflation, but neither the timing nor magnitude of the changes are directly related to price level indices; therefore, the Company can best counter inflation over the long term by managing net interest income and controlling net increases in noninterest income and expenses.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our assessment of market risk as of June 30, 2016 indicates there are no material changes in the quantitative and qualitative disclosures from those in our Annual Report on Form 10-K for the year ended December 31, 2015.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedure

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As required by Rule 13a-15 under the Securities Exchange Act of 1934 (the “Exchange Act”), the Company carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Exchange Act) as of the end of the period covered by this Form 10-Q. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. This evaluation was carried out under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and the Company’s Chief Financial Officer. Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this Form 10-Q.

Changes in Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company is subject to legal proceedings, claims, and litigation arising in the ordinary course of business.  While the outcome of these matters is currently not determinable, management does not expect that the ultimate costs to resolve these matters will have a material adverse effect on the Company’s condensed consolidated financial position, results of operations or cash flows.

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this Form 10-Q, you should carefully consider the factors previously disclosed in Part I – Item 1A Risk Factors of our 2015 Annual Report. These factors could materially and adversely affect our business, financial condition, liquidity, results of operations and capital position, and could cause our actual results to differ materially from our historical results or the results contemplated by the forward-looking statements contained in this Form 10-Q. There have been no material changes to Cascade’s risk factors described in our 2015 Annual Report.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a)-(b) Not applicable.

(c) During the quarter ended June 30, 2016, the Company did not repurchase any shares.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

(a) Not applicable.

(b) There have been no material changes to the procedures by which shareholders may nominate directors to the Company’s board of directors.

ITEM 6. EXHIBITS

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Exhibit Number	Description
10.1	2008 Cascade Bancorp Performance incentive Plan, as amended (incorporated by reference to Appendix A to the Registrant’s Definitive Proxy Statement on Schedule 14A filed on April 13, 2016 (File No. 000-23322))
31.1	Certification of Principal Executive Officer pursuant to Rule 13a-14(a)/15d-4(a)
31.2	Certification of Principal Financial Officer pursuant to Rule 13a-14(a)/15d-4(a)
32	Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

			CASCADE BANCORP (Registrant)
Date	August 5, 2016	By	/s/ Terry E. Zink
			Terry E. Zink, President & Chief Executive Officer (Principal Executive Officer)
Date	August 5, 2016	By	/s/ Gregory D. Newton
			Gregory D. Newton, EVP & Chief Financial Officer (Principal Financial and Chief Accounting Officer)

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