Stock Compensation and Share Repurchase Plan

On April 18, 2014, the Company completed the Merger with Sterling. The details of the conversion of Sterling common stock, stock options, and restricted stock units are included in Note 2. The conversion resulted in the issuance of 104,385,087 shares of common stock, 994,214 restricted stock units, and 439,921 stock options granted. Additionally, the 2,960,238 outstanding Sterling warrants were converted into warrants exercisable to receive 1.671 shares of Umpqua stock per warrant, with an exercise price of $12.88 as of the merger date. In November 2014, the warrants were net exercised in full for 2,889,896 shares and $6.6 million. As of December 31, 2014, the warrants were no longer outstanding.

At a special meeting on February 25, 2014, the Company's shareholders approved an amendment to the Company's articles of incorporation, effective on April 18, 2014, increasing the number of authorized shares of common stock to 400,000,000.

At the annual meeting on April 16, 2013, shareholders approved the Company's 2013 Incentive Plan (the "2013 Plan"), which, among other things, authorizes the issuance of equity awards to directors and employees and reserves 4,000,000 shares of the Company's common stock for issuance under the plan. With the adoption of the 2013 Plan, no additional awards will be issued from the 2003 Stock Incentive Plan or the 2007 Long Term Incentive Plan.

Stock-Based Compensation

The compensation cost related to stock options, restricted stock and restricted stock units (included in salaries and employee benefits) was $13.6 million, $12.5 million and $5.0 million for the years ended December 31, 2015, 2014, and 2013, respectively. The total income tax benefit recognized related to stock-based compensation was $5.2 million, $4.8 million and $1.9 million for the years ended December 31, 2015, 2014, and 2013, respectively. During the year ended December 31, 2014, vesting was accelerated for certain restricted stock units and stock options issued in connection with the Sterling Merger, resulting in $2.8 million of accelerated compensation expense which was recorded in merger related expense.

As of December 31, 2015, there was $111,000 of total unrecognized compensation cost related to nonvested stock options which is expected to be recognized over a weighted-average period of 1.40 years. As of December 31, 2015, there was $8.7 million of total unrecognized compensation cost related to nonvested restricted stock awards which is expected to be recognized over a weighted-average period of 1.13 years. As of December 31, 2015, there was $3.9 million of total unrecognized compensation cost related to nonvested restricted stock units which is expected to be recognized over a weighted-average period of 1.50 years, assuming the current expectation of performance conditions are met.

Stock Options

The following table summarizes information about stock option activity for the years ended December 31, 2015, 2014 and 2013:



(shares in thousands)	2015				2014				2013
	Options Outstanding		Weighted-Avg Exercise Price		Options Outstanding		Weighted-Avg Exercise Price		Options Outstanding		Weighted-Avg Exercise Price
Balance, beginning of period	807		$	16.80	981		$	16.17	1,850		$	15.37
Granted/assumed	—		$	—	440		$	12.12	—		$	—
Exercised	(83	)	$	11.06	(572	)	$	11.93	(515	)	$	12.42
Forfeited/expired	(252	)	$	22.88	(42	)	$	19.28	(354	)	$	17.46
Balance, end of period	472		$	14.58	807		$	16.80	981		$	16.17
Options exercisable, end of period	437		$	14.78	676		$	17.71	627		$	18.86

The following table summarizes information about outstanding stock options issued under all plans as of December 31, 2015:



(shares in thousands)	Options Outstanding				Options Exercisable
Range of Exercise Prices	Options Outstanding	Weighted Avg. Remaining Contractual Life (Years)	Weighted Avg. Exercise Price		Options Exercisable	Weighted Avg. Exercise Price
$9.23 to $11.89	217	4.27	$	11.18	217	$	11.18
$11.98 to $15.50	180	4.78	$	13.54	145	$	13.90
$26.12 to $28.43	75	0.80	$	26.89	75	$	26.89
	472	3.91	$	14.58	437	$	14.78

The total intrinsic value (which is the amount by which the stock price exceeds the exercise price) as of December 31, 2015, was $1.4 million for options outstanding and $1.3 million options exercisable.

The weighted average remaining contractual term of options exercisable was 3.7 years as of December 31, 2015.

The total intrinsic value of options exercised was $535,000, $3.1 million, and $2.3 million, in the years ended December 31, 2015, 2014 and 2013, respectively.

During the years ended December 31, 2015, 2014 and 2013, the amount of cash received from the exercise of stock options was $195,000, $4.6 million, and $159,000 and total consideration was $925,000, $6.8 million, and $6.4 million, respectively.

The fair value of each option grant is estimated as of the grant date using the Black-Scholes option-pricing model. In 2014, there were stock options assumed in the Sterling Merger, however, no additional stock options were granted. There were no stock options granted in 2015 and 2013. The following weighted average assumptions were used to determine the fair value at the acquisition date of stock option grants assumed from the Sterling Merger during the year ended December 31, 2014:



	2014
Dividend yield	3.25		%
Expected life (years)	6.8
Expected volatility	31		%
Risk-free rate	0.91		%
Weighted average fair value of options on date of grant	$	3.22

The above items for 2015 and 2013 are not applicable as no stock options were granted in 2015 or 2013.

Restricted Shares

The Company grants restricted stock periodically for the benefit of employees and directors. Restricted shares generally vest over a three years period, subject to time or time plus performance vesting conditions. The following table summarizes information about nonvested restricted share activity for the year ended December 31:



(shares in thousands)	2015				2014				2013
	Restricted Shares Outstanding		Weighted Average Grant Date Fair Value		Restricted Shares Outstanding		Weighted Average Grant Date Fair Value		Restricted Shares Outstanding		Weighted Average Grant Date Fair Value
Balance, beginning of period	1,386		$	15.39	992		$	12.79	763		$	12.39
Granted	639		$	15.83	839		$	17.33	467		$	13.04
Vested/released	(516	)	$	14.58	(399	)	$	12.42	(153	)	$	12.17
Forfeited/expired	(133	)	$	15.22	(46	)	$	12.99	(85	)	$	11.74
Balance, end of period	1,376		$	16.18	1,386		$	15.39	992		$	12.79

The total fair value of restricted shares vested was $8.6 million, $7.1 million, and $2.0 million, for the years ended December 31, 2015, 2014 and 2013, respectively.

Restricted Stock Units

The Company granted restricted stock units as a part of the 2007 Long Term Incentive Plan for the benefit of certain executive officers. Restricted stock unit grants are subject to performance-based vesting as well as other approved vesting conditions. The total number of restricted stock units granted represents the maximum number of restricted stock units eligible to vest based upon the performance and service conditions set forth in the grant agreements.

The following table summarizes information about nonvested restricted shares outstanding at December 31:



(shares in thousands)	2015				2014				2013
	Restricted Stock Units Outstanding		Weighted Average Grant Date Fair Value		Restricted Stock Units Outstanding		Weighted Average Grant Date Fair Value		Restricted Stock Units Outstanding		Weighted Average Grant Date Fair Value
Balance, beginning of period	675		$	18.03	95		$	10.41	130		$	10.41
Assumed	—		$	—	994		$	18.58	—		$	—
Released	(254	)	$	17.99	(342	)	$	16.91	—		$	—
Forfeited/expired	(158	)	$	18.48	(72	)	$	18.58	(35	)	$	10.42
Balance, end of period	263		$	18.58	675		$	18.03	95		$	10.41

The total fair value of restricted stock units vested and released was $4.4 million and $4.8 million for the years ended December 31, 2015 and 2014, respectively, and none for the year ended December 31, 2013.

For the years ended December 31, 2015, 2014 and 2013, the Company received income tax benefits of $5.2 million, $6.3 million, and $1.7 million, respectively, related to the exercise of non-qualified employee stock options, disqualifying dispositions in the exercise of incentive stock options, the vesting of restricted shares and the vesting of restricted stock units.

For the years ended December 31, 2015, 2014 and 2013, the Company had a net excess tax benefit resulting from tax deductions greater than the compensation cost recognized of $552,000, $1.2 million and $148,000, respectively. Only cash flows from gross excess tax benefits are classified as financing cash flows.

Share Repurchase Plan- The Company's share repurchase plan, which was first approved by the Board and announced in August 2003, and amended in September 2011 authorized the repurchase of up to 15 million shares of common stock. In 2015, the Board extended the plan to run through July 31, 2017. As of December 31, 2015, a total of 11.4 million shares remained available for repurchase. The Company repurchased 571,000 shares under the repurchase plan in 2015, repurchased no shares under the repurchase plan in 2014, and repurchased 98,027 shares under the repurchase plan in 2013. The timing and amount of future repurchases will depend upon the market price for our common stock, securities laws restricting repurchases, asset growth, earnings, and our capital plan.

We also have certain stock option and restricted stock plans which provide for the payment of the option exercise price or withholding taxes by tendering previously owned or recently vested shares. During the years ended December 31, 2015 and 2014, there were 51,693 and 161,568 shares tendered in connection with option exercises, respectively. Restricted shares cancelled to pay withholding taxes totaled 135,474 and 107,131 shares during the years ended December 31, 2015 and 2014, respectively. There were 86,048 restricted stock units cancelled to pay withholding taxes for the years ended December 31, 2015 and 129,766 in 2014.