XML 19 R25.htm IDEA: XBRL DOCUMENT

Stock-Based Compensation Plans

12 Months Ended

Dec. 31, 2011

Note 16: STOCK-BASED COMPENSATION PLANS

The Company operates the following stock-based compensation plans as approved by the shareholders: the 1996 Management Recognition and Development Plan (MRP), a restricted stock plan, the 1996 Stock Option Plan, the 1998 Stock Option Plan and the 2001 Stock Option Plan (collectively, SOPs). In addition, during 2006 the Board of Directors approved the Banner Corporation Long-Term Incentive Plan, an account-based benefit plan which for reporting is considered a stock appreciation rights plan.

MRP and Restricted Stock Grants. Under the MRP, the Company was authorized to grant up to 528,075 shares of restricted stock to its directors, officers and employees. On July 26, 2006, this plan expired with 522,660 shares having been granted and no additional shares eligible to be granted. Shares granted under the MRP vested ratably over a five-year period from the date of grant. In the Consolidated Statement of Operations there was no expense accrual for the year ended December 31, 2011 and the Consolidated Statements of Operations for the years ended December 31, 2010 and 2009 reflected expense accruals of $2,000, and $40,000, respectively, for these grant awards. The fair values of the MRP stock grants were equal to their intrinsic value on the date of grant. As of December 31, 2011, there was no unrecognized compensation expense related to the MRP.

A summary of the Company’s unvested MRP shares activity during the years ended December 31, 2009, 2010 and 2011 follows:

	Shares		Weighted Average Grant- Date Fair Value

Unvested at December 31, 2008	2,920		$	26.76

Granted	--			--
Vested	(2,315	)		27.15
Forfeited	--	)		--

Unvested at December 31, 2009	605			25.25

Granted	--			--
Vested	(605	)		25.25
Forfeited	--			--

Unvested at December 31, 2010	--			--

Granted	--			--
Vested	--			--
Forfeited	--			--

Unvested at December 31, 2011	--			--

The Company granted shares of restricted common stock to Mark J. Grescovich, President and CEO of Banner Bank and the Company on August 22, 2010 and again on August 23, 2011. The restricted shares were granted to Mr. Grescovich in accordance with his employment agreement, which, as an inducement material to his joining the Company and the Bank, provided for the granting of restricted shares on the six-month and the 18-month anniversaries of the effective date of the agreement. The shares vest in one-third annual increments over the subsequent three-year periods following the grants. The expense associated with this restricted stock was $111,000 for the year ended December 31, 2011 and was $28,000 for the year ended December 31, 2010. Unrecognized compensation expense for this award as of December 31, 2011 was $361,000 and will be amortized over the next 32 months.

Stock Options. Under the SOPs, Banner reserved 2,284,186 shares for issuance pursuant to the exercise of stock options to be granted to directors and employees. Authority to grant additional options under the 1996 Stock Option Plan terminated on July 26, 2006. Authority to grant additional options under the 1998 Stock Option Plan terminated on July 24, 2008 with all options having been granted. Authority to grant additional options under the 2001 Stock Option Plan terminated on April 20, 2011. The exercise price of the stock options is set at 100% of the fair market value of the stock price on the date of grant. Options granted vest at a rate of 20% per year from the date of grant and any unexercised incentive stock options will expire ten years after date of grant or 90 days after employment or service ends.

During the years ended December 31, 2011, 2010 and 2009, the Company did not grant any stock options. Additionally, there were no significant modifications made to any stock option grants during the period. The fair values of stock options granted are amortized as compensation expense on a straight-line basis over the vesting period of the grant.

Stock-based compensation costs related to the SOPs were $25,000, $53,000, and $122,000 for the years ended December 31, 2011, 2010 and 2009, respectively. The SOPs’ stock option grant compensation costs are generally based on the fair value calculated from the Black-Scholes option pricing on the date of the grant award. Assumptions used in the Black-Scholes model are an expected volatility based on the historical volatility at the date of the grant. The expected term is based on the remaining contractual life of the vesting period. The Company bases the estimate of risk-free interest rate on the U.S. Treasury Constant Maturities Indices in effect at the time of the grant. The dividend yield is based on the current quarterly dividend in effect at the time of the grant.

The Company is required to estimate potential forfeitures of stock option grants and adjust compensation cost recorded accordingly. The estimate of forfeitures is adjusted over the requisite service period to the extent that actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated forfeitures are recognized through a cumulative catch-up adjustment in the period of change and also impact the amount of stock compensation expense to be recognized in future periods.

A summary of the Company’s stock option award activity (post reverse split) for the years ended December 31, 2009, 2010 and 2011 follows:

	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term, In Years	Aggregate Intrinsic Value

Outstanding at December 31, 2008	80,712		$	151.76	4.4	n/a

Granted	--			--
Exercised	--			--
Forfeited	(9,944	)		118.93

Outstanding at December 31, 2009	70,768			156.38	3.8	n/a

Granted	--			--
Exercised	--			--
Forfeited	(9,044	)		117.39

Outstanding at December 31, 2010	61,725			162.12	3.1	n/a

Granted	--			--
Exercised	--			--
Forfeited	(9,996	)		127.54

Outstanding at December 31, 2011	51,729			168.98	2.4	n/a

Outstanding at December 31, 2011, net of expected forfeitures	51,699			168.98	2.4	n/a

Exercisable at December 31, 2011	50,229			167.58	2.3	n/a

The intrinsic value of stock options is calculated as the amount by which the market price of Banner Corporation common stock exceeds the exercise price at the time of exercise or the end of the period as applicable.

A summary of the Company’s unvested stock option activity for the years ended December 31, 2009, 2010 and 2011 follows:

	Shares			Weighted Average Grant-Date Fair Value
Unvested at December 31, 2008	11,531		$	56.77

Granted	--			--
Vested	(6,284	)		58.45
Forfeited	--			--

Unvested at December 31, 2009	5,247			54.74

Granted	--			--
Vested	(2,247	)		57.47
Forfeited	--			--

Unvested at December 31, 2010	3,000			52.78

Granted	--			--
Vested	(1,500	)		57.12
Forfeited	--			--

Unvested at December 31, 2011	1,500			48.37

At December 31, 2011, financial data pertaining to outstanding stock options was as follows:

Exercise Price	Weighted Average Exercise Price of Option Shares Granted		Number of Option Shares Granted	Weighted Average Option Shares Vested and Exercisable	Weighted Average Exercise Price of Option Shares Exercisable		Remaining Contractual Life

$15.67 to $18.09	$	110.18	14,771	14,771	$	110.18	1.3 years
$18.54 to $22.05		144.62	8,329	8,329		144.62	0.6 years
$25.25 to $27.40		181.51	9,493	9,493		181.51	2.6 years
$29.46 to $31.71		218.75	19,136	17,636		218.96	4.0 years

		168.98	51,729	50,229		167.58

The Company had $7,800 of total unrecognized compensation costs related to stock options at December 31, 2011 that are expected to be recognized over a remaining period of 0.5 years.

During the year ended December 31, 2010, there were no exercises of stock options. Cash was not used to settle any equity instruments previously granted. The Company issues shares from authorized but unissued shares upon the exercise of stock options. The Company does not currently expect to repurchase shares from any source to satisfy such obligations under the SOPs.

The following are the stock-based compensation costs recognized in the Company’s consolidated statements of operations (in thousands):

	Years Ended December 31
		2011			2010			2009

Salary and employee benefits	$	39		$	83		$	162
Decrease in provision for income taxes		(14	)		(30	)		(50	)

Decrease in equity, net	$	25		$	53		$	112

Banner Corporation Long-Term Incentive Plan: In June 2006, the Board of Directors adopted the Banner Corporation Long-Term Incentive Plan effective July 1, 2006. The Plan is an account-based type of benefit, the value of which is directly related to changes in the value of Company stock, dividends declared on the Company stock and changes in Banner Bank’s average earnings rate, and is considered a stock appreciation right (SAR). Each SAR entitles the holder to receive cash, upon vesting, equal to the excess of the fair market value of a share of the Company’s common stock on the date of exercise over the fair market value of such share on the date granted plus for some grants the dividends declared on the stock from the date of grant to the date of vesting. On April 27, 2008, the Board of Directors amended the Plan and also authorized the repricing of certain awards to non-executive officers based upon the price of Banner common stock three business days following the public announcement of the Company’s earnings for the quarter ended March 31, 2008. The primary objective of the Plan is to create a retention incentive by allowing officers who remain with the Company or the Banks for a sufficient period of time to share in the increases in the value of Company stock. Detailed information with respect to the Plan and the amendments to the Plan were disclosed on Forms 8-K filed with SEC on July 19, 2006 and May 6, 2008. The Company re-measures the fair value of SARs each reporting period until the award is settled and compensation expense is recognized each reporting period for changes in fair value and vesting. The Company recognized compensation expense of $148,000, $228,000, and $68,000, respectively, for the years ended December 31, 2011, 2010 and 2009 related to the increase in the fair value of SARs and additional vesting during the period. At December 31, 2011, the aggregate liability related to SARs was $336,000 and is included in deferred compensation.