Stock-based compensation

The Company has historically maintained certain stock-based compensation plans, approved by the Company’s shareholders that are administered by the Board or the Compensation Committee of the Board (the “Compensation Committee”). In April 2008, the shareholders of the Company approved the 2008 Cascade Bancorp Performance Incentive Plan (the “2008 Plan”). The 2008 Plan authorized the Board to issue up to an additional 1,000,000 shares of common stock related to the grant or settlement of stock-based compensation awards, expanded the types of stock-based compensation awards that may be granted, and expanded the parties eligible to receive such awards. In addition, in April 2011, the shareholders approved an increase in the common stock reserved under the 2008 Plan from 1,000,000 shares to 6,000,000 shares. Under the Company’s stock-based compensation plans, the Board (or the Compensation Committee) may grant stock options (including incentive stock options (“ISOs”) as defined in Section 422 of the Internal Revenue Code and non-qualified stock options (“NSOs”)), restricted stock, restricted stock units, stock appreciation rights, and other similar types of equity awards intended to qualify as “performance-based” compensation under applicable tax rules. The stock-based compensation plans were established to allow for the granting of compensation awards to attract, motivate, and retain employees, executive officers, non-employee directors, and other service providers who contribute to the success and profitability of the Company and to give such persons a proprietary interest in the Company, thereby enhancing their personal interest in the Company’s success.

The Board or Compensation Committee may establish and prescribe grant guidelines including various terms and conditions for the granting of stock-based compensation and the total number of shares authorized for this purpose. Under the 2008 Plan, for ISOs and NSOs, the option strike price must be no less than 100% of the stock price at the grant date. Prior to the approval of the 2008 Plan, the option strike price for NSOs could be no less than 85% of the stock price at the grant date. Generally, options become exercisable in varying amounts based on years of employee service and vesting schedules. All options expire after a period of ten years from the date of grant. Other permissible stock awards include restricted stock grants, restricted stock units, stock appreciation rights or other similar stock awards (including awards that do not require the grantee to pay any amount in connection with receiving the shares or that have a purchase price that is less than the grant date fair market value of the Company’s stock).

At December 31, 2013, 4,569,295 shares reserved under the stock-based compensation plans were available for future grants.

During the year ended December 31, 2013, the Company granted 5,507 stock options with a weighted-average grant date fair value of approximately $6.80 per option. These stock options vest in 2016. During the year ended December 31, 2012, the Company granted 32,399 stock options with a weighted-average grant date fair value of approximately $4.77 per option. These stock options vest in 2014. The Company did not grant any stock options in 2011. The Company used the Black-Scholes option-pricing model with the following weighted-average assumptions to value options granted in 2013 and 2012:



	2013	2012
Dividend yield	—%	—%
Expected volatility	77.2%	85.0%
Risk-free interest rate	1.1%	1.4%
Expected option lives	6 years	6 years

The dividend yield was based on historical dividend information. The expected volatility was based on the historical volatility of the Company’s common stock price. 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, historical exercise and forfeiture patterns.

The Black-Scholes option-pricing model was developed for use in estimating the fair value of publicly-traded options that have no vesting restrictions and are fully transferable. The Black-Scholes model is affected by subjective assumptions including historical volatility of the Company’s common stock price. Because the Company has relatively low average trading volume in its common stock, its estimated volatility may be higher than publicly-traded companies with greater trading volumes.

The following table presents the activity related to options under all plans for the years ended December 31, 2013, 2012, and 2011.



	2013				2012				2011
	Options outstanding		Weighted-average exercise price		Options outstanding		Weighted-average exercise price		Options outstanding		Weighted-average exercise price
Balance at beginning of year	139,446		$	53.66	144,370		$	68.90	156,522		$	68.26
Granted	5,507		6.80		32,399		4.77		—		—
Exercised/Released	(5,250	)	5.70		—		—		—		—
Cancelled / forfeited	(17,326	)	124.87		(29,213	)	71.78		(5,715	)	74.78
Expired	(10,806	)	90.72		(8,110	)	68.97		(6,437	)	48.00
Balance at end of year	111,571		$	38.92	139,446		$	53.66	144,370		$	68.90
Exercisable at end of year	73,665				50,997				73,345

Stock-based compensation expense related to stock options for the years ended December 31, 2013, 2012, and 2011 was approximately $0.1 million, $0.2 million, and $0.1 million, respectively. As of December 31, 2013, unrecognized compensation cost related to nonvested stock options totaled $0.1 million, which is expected to be recognized in 2014, 2015 and 2016.

Information regarding the number, weighted-average exercise price, and weighted-average remaining contractual life of options by range of exercise price at December 31, 2013 is as follows:



	Options outstanding				Exercisable options
Exercise price range	Number of options	Weighted-average exercise price		Weighted-average remaining contractual life (years)	Number of options	Weighted-average exercise price
Under $50.00	85,756	$	5.81	7.2	47,850	$	5.71
$50.01 - $80.00	—	—		n/a	—	—
$80.01 - $120.00	12,200	101.30		4.2	12,200	101.30
$120.01 - $160.00	6,882	136.86		0.4	6,882	136.86
$160.01 - $220.00	2,362	207.50		2.1	2,362	207.50
$220.01 - $279.00	4,371	269.01		3.1	4,371	269.01
	111,571	$	38.92	6.2	73,665	$	55.89

The Company has also granted awards of nonvested restricted stock. During the year ended December 31, 2013, the Company granted 262,325 additional shares of restricted stock with a weighted-average grant date fair value of $5.82 per share, which vest during 2013, 2014, 2015 and 2016. The following table presents the activity for nonvested restricted stock for the year ended December 31, 2013:



	Number of shares		Weighted- average grant date fair value per share
Nonvested as of January 1, 2013	157,191		$	14.11
Granted	262,325		5.82
Exercised / Released	(49,416	)	6.12
Canceled / forfeited	(15,830	)	6.73
Nonvested as of December 31, 2013	354,270		$	9.41

Nonvested restricted stock is scheduled to vest over a three year period. The unearned compensation on restricted stock is being amortized to expense on a straight-line basis over the applicable vesting periods. As of December 31, 2013, unrecognized compensation cost related to nonvested restricted stock totaled approximately $1.3 million, which is expected to be recognized over the next three years. Total expense recognized by the Company for nonvested restricted stock for the years ended December 31, 2013, 2012, and 2011 was $0.8 million, $0.9 million, and $0.5 million, respectively.

The Company has also granted awards of restricted stock units (“RSUs”). A RSU represents the unfunded, unsecured right to require the Company to deliver to the participant one share of common stock for each RSU. Total expense recognized by the Company related to RSUs was insignificant for the years ended December 31, 2013, 2012, and 2011. There was no unrecognized compensation cost related to RSUs at December 31, 2013, 2012, and 2011, as all RSUs were fully-vested. There were 4,498 RSUs granted during the year ended December 31, 2013 and there were no RSUs cancelled. There were 9,386 RSUs granted during the year ended December 31, 2012 and there were no RSUs cancelled. There were 5,695 RSUs granted or during the year ended December 31, 2011 and there were no RSUs cancelled. At December 31, 2013 there were 16,067 fully-vested RSUs outstanding, with a weighted-average grant date fair value of $9.22 per share. At December 31, 2012 there were 16,262 fully-vested RSUs outstanding with a weighted-average grant date fair value of $6.45 per share. At December 31, 2011 there were 6,876 fully vested RSUs outstanding with a weighted-average grant date fair value of $8.45 per share.