STOCK-BASED COMPENSATION PLANS

The Company operates the following stock-based compensation plans as approved by its shareholders:


•	2001 Stock Option Plan (the SOP).


•	2012 Restricted Stock and Incentive Bonus Plan.


•	2014 Omnibus Incentive Plan.

The purpose of these plans is to promote the success and enhance the value of the Company by providing a means for attracting and retaining highly skilled employees, officers and directors of Banner Corporation and its affiliates and linking their personal interests with those of the Company's shareholders. Under these plans the Company currently has outstanding restricted stock share grants, restricted stock unit grants, and stock options.

Stock Options

Under the SOP, Banner reserved 68,571 shares for issuance pursuant to the exercise of stock options to be granted to directors and employees. 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, 2016, 2015 and 2014, the Company did not grant any stock options and there were no stock options forfeited. 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. For the years ended December 31, 2016, 2015 and 2014 there were no stock option compensation expenses recorded.

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

At December 31, 2016, 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
$	216.16	$	216.16	5,000	5,000	$	216.16	7 months

During the year ended December 31, 2016, 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 SOP.

2012 Restricted Stock and Incentive Bonus Plan

Under the 2012 Restricted Stock and Incentive Bonus Plan (2012 Restricted Stock Plan), which was initially approved on April 24, 2012, the Company is authorized to issue up to 300,000 shares of its common stock to provide a means for attracting and retaining highly skilled officers of Banner Corporation and its affiliates. Shares granted under the 2012 Restricted Stock Plan have a minimum vesting period of three years. The 2012 Restricted Stock Plan will continue in effect for a term of ten years, after which no further awards may be granted.

The 2012 Restricted Stock Plan was amended on April 23, 2013 to provide for the ability to grant (1) cash-denominated incentive-based awards payable in cash or common stock, including those that are eligible to qualify as qualified performance-based compensation for the purposes of Section 162(m) of the Code and (2) restricted stock awards that qualify as qualified performance-based compensation for the purposes of Section 162(m) of the Code. Vesting requirements may include time-based conditions, performance-based conditions, and/or market-based conditions.

As of December 31, 2016, the Company had granted 297,157 shares of restricted stock from the 2012 Restricted Stock Plan (as amended and restated), of which 207,338 shares had vested and 89,819 shares remain unvested.

2014 Omnibus Incentive Plan

The 2014 Omnibus Incentive Plan (the 2014 Plan) was approved by shareholders on April 22, 2014. The 2014 Plan provides for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, other stock-based awards and other cash awards, and provides for vesting requirements which may include time-based or performance-based conditions. The Company has reserved 900,000 shares of its common stock for issuance under the 2014 Plan in connection with the exercise of awards. As of December 31, 2016, 239,088 restricted stock shares and 26,154 restricted stock units have been granted under the 2014 Plan of which 46,011 restricted stock shares and 18,331 restricted stock units have vested.

The expense associated with all restricted stock grants was $4.5 million, $3.5 million and $2.7 million respectively, for the years ended December 31, 2016, 2015 and 2014. Unrecognized compensation expense for these awards as of December 31, 2016 was $6.8 million and will be amortized over the next 36 months.

A summary of the Company's Restricted Stock/Unit award activity during the years ended December 31, 2014, 2015 and 2016 follows:



	Shares/Units		Weighted Average Grant-Date Fair Value
Unvested at December 31, 2013	164,492		$	26.94
Granted	90,181		40.07
Vested	(56,307	)	24.81
Forfeited	(3,260	)	31.00
Unvested at December 31, 2014	195,106		32.83
Granted	155,183		45.59
Vested	(109,416	)	30.28
Forfeited	(9,311	)	39.07
Unvested at December 31, 2015	231,562		42.33
Granted	177,775		41.74
Vested	(104,297	)	41.47
Forfeited	(14,321	)	42.54
Unvested at December 31, 2016	290,719		42.26